A profit margin is the basic means of small business accounting to gain insight into how much money your business is making, the general health of your business, and the problems within your business. Therefore, all small business owners should consider this metric: the profit margin. Profit margin is calculated on the percentage of sales that have turned into profits, i.e. dividing the net income by sales.
There are times when you don’t meet the profit expectations that you have set for your business. At times like these, you need to know why the profit margin is below expectations and make necessary adjustments in your business functions. If you want to know how to troubleshoot your profit margins, here are some of our tips to consider.
Gather Insights and Analysis from Annual Trends
Let’s start with looking at the income statements from the past years of the business. Look for the things that were driving the profits each year. Were there any seasonal surges or a pause in the statistics? How did the product perform in the respective years? Did increased competition affect your sales? Was there any poor execution of sales strategies? Performing this analysis and getting answers to these questions can help you drill down to the reason for stopping the sales of your products or services. Brainstorm the solutions to reduce the impact if the same circumstances still occur and affect your performance.
Compare Yourself to the Competition
Knowing how to stack up to the competition shows how well you are doing and decide your future strategies. Look up at your competitors and compare the profit margin of your competitor. When you compare your business strategies - such as marketing, targeting, and providing customer services - with your competitors, you re-analyze the root causes of the problems that are becoming an obstacle in your sales. Make a note of all the things that you like about your competitors that are also working well for them, and look for ways to inculcate the same in your business functions.
Consider Re-pricing Your Products
There is a possibility that your business is doing more while maintaining equivalent overhead expenses. To increase your revenue strategy, you need to choose a low-price strategy, i.e. reduce your selling price to increase revenue. By using this strategy, you should see a pick-up revenue assuming that your customers are price-sensitive. For instance, a car manufacturer that produces luxury cars will sell fewer models because of their high price tag. The strategy is to raise the prices and sacrifice the volume and operating costs by making more money on every sale.
On the other hand, the car manufacturer with economy cars will make less profit margin but can sell more cars since their customers can afford the price. Both the strategies are effective, but the execution of these strategies depends on the type of business and your customer’s tolerance level.
Here is how you can determine the price of the product:
For example, if you need to make a 15% profit on a product with the selling price of CAD 18, you need to subtract the profit percentage that you want from 1. Let’s say the factor is 0.85 (1-0.15). To calculate the selling price of the product, divide the original cost (18) by the factor 0.85. Therefore, you need to sell the product for CAD 21.17 to receive a 15% profit margin for your business. You can talk to your business’s financial analyst and small business accounting expert to price the products rightly.
When you know your profit margin, you can uncover your spending practices or make decisions to cut costs in certain areas. It is all about keeping overhead costs as low as possible to produce a quality business product. The formula of the cost of goods sold for small business accounting is:
Beginning inventory + purchases during the period - Ending inventory
You can reduce inventory costs by purchasing in bulk, taking advantage of supplier discounts, and negotiating terms with the suppliers. Try to cut back the cost of goods sold to the extent that it positively affect sales.
Cut Underperforming Products or Services
Making this call is completely yours. If you have certain products that are not doing well in the market, try to pull them out of the market. This might help you trim the cost, and you can use that cost to bring up the profit margin percentage. You can even reduce your staff members if the salary is becoming a considerable expense item in your small business accounting books.
Review Profit Margins as Monthly Practice
As a small business owner, you should always know how your business is spending money. It is important to improve your profit margin to track the expenses. A well-run business looks at the numbers in their small business accounting monthly. All successful companies go through this necessary exercise. If your numbers are different from one or two percent, that is not significant and can be controlled. But when the numbers differ by five percent or more, then it indicates that there are things that need to change. Analyzing the margins is a great diagnostic tool for monitoring the health of your business.
Consult a Professional
Sometimes, you can’t identify the core issues to troubleshoot your profit margins no matter how many strategies you use. If you are still baffled about why profit margins aren’t where you thought they would be, try consulting a professional small business accounting expert. An outsourced small business accounting firm can bring your objective view of the situation and identify the core issues of the problem.
Remember that profits are nice, but the margins are even better. Do your research and make sure you track the numbers down to every last expenditure and revenue source. Knowing where your small business accounting is along with your profit margin will help you determine where to go next.
Businesses, both large and small, face a number of risks. Risks are an inevitable part of the business. The uncertainties in the business can be changed daily depending on your business. Many Canadian business owners should identify the pressing risks their businesses face. For an entrepreneur to identify the risks in the business and equip the enterprise with risk management strategies, it is important to conduct a risk assessment round in your business. So, here is a step-by-step guide for the small and medium businesses to assess the risks in the business.
Identify the Risks
A risk can be internal (risks inside of your operations) and external (outside of your business). Internal risks are only specific to your business and easier to control than the external risks such as:
- Financial risks
- Marketing risks
- Operational risks
- Workforce risks
External risks are usually out of your control such as:
- Changing the economy
- New competitors
- Natural disasters
- Government regulations
- Consumer demand changes
Once you identify the types of risks that your business is financially exposed to, segregate the risks as external and internal risk to know the risks that you can control and the ones that you don’t. You can even identify your financial risks by hiring the right accounting service provider for small business.
Assess the Risks
When you list down the types of risk that your business is exposed to, you need to determine the severity of the uncertainty in the financial aspect. Create a risk rating matrix to identify the risks that can cause severe damage to your business finances and the practical measures to manage the financial risk. Then, create a table as given below:
Risk rating level needed
- Critical - Immediate action is required
- High - Action needed quickly (within 1-2 days)
- Moderate - Action required with a week
- Low - Required action with a reasonable period (2-4 weeks)
- Very low - Risk can be eliminated or lowered easily with time
Control the Risks
Once you rate the risk in your risk rating matrix, understand various risk control measures that can help you control or eliminate the risk. Risk control is a set of methods by which firms evaluate potential losses and take action to reduce or eliminate the risks.
Figure out controls by looking at the patterns over time, assessing their impacts, and also the likelihood of occurring again. Here are some of the risk control techniques:
Eliminate it - You can avoid the risk of eliminating the core problem. For instance, if you discover certain chemicals used in your manufacturing company that is dangerous for your employee's health, as the owner, you substitute the chemical with a safe alternative to protect your worker’s health.
Prevent it - When there is a risk, you try to minimize the risk as eliminating it will cost you a lot. For instance, if you have something in your inventory that is susceptible to theft, you can include patrolling security guards in your security plan, install video cameras or use advanced storage facilities.
Reduce it - Some risks can be avoided, but you can always limit the losses when the threat occurs. For instance, if your company stores hazardous materials in a warehouse, you might install water sprinklers to reduce the damage when there is a fire threat. You may also use insurance as a risk control measure to protect the things that are susceptible to catching fire.
Transfer it - If your business deals with multiple lines of business offering such as a variety of products and services, try to analyze the risks differently. Consult a professional financing firm offering all types of accounting services.
Practice the Risk Control Measures
Once you have decided the risk control measures for the respective risk that you have listed, you need to test the effectiveness of your risk management approach and controls. When you execute your risk control measure strategies, you can determine the best strategy to control that particular risk. Not every risk technique will be the golden bullet to keep your business away from the potential risk. As said earlier, risks in the business change every day, and therefore, you need to find a solution that is flexible and effective enough even when the risks change. You can always depend on the financial accounting service provider to help you tackle the right risk control measures for your business.
Monitor and Review
When you find the right risk control strategy, you need to monitor the performance of your risk control measures periodically. Regular evaluations of the risk by an accounting service provider will help you out in knowing things such as:
- What does the management think of the controls?
- What does your financial team think about the controls?
- Is the control still relevant?
- Did the nature of the financial risk change?
- Are the controls still in place and active as planned?
Prioritize the risk that needs your attention and efforts. You can quickly assess the risk if it has achieved its goals or control the risks in several ways such as:
- Consulting your team involved with the control measures
- Consulting your management who administer the controls
- Checking the performance reports regularly with the accounting service provider
- Physically check the conditions of the controls
It is essential for your team to know about the control measures and the purpose of implementing the risk control measure. When you and your team are on the same page, your company can successfully reduce or eliminate the risk more effectively.
Risk assessment is a living process, and when it comes to assessing financial risk, you need to seek assistance from a professional accounting service provider. So keep track of your business debts, incomes, expenses, and maintain financial statements and assess the risk accordingly.
When it comes to the success of a business, hard work and dedication do count. But the real responsibility is on the person who takes care of the accounts. Earning money is the real motive of any small businessperson, but running the business efficiently, keeping the money constantly flowing through all the aspects of your business, and maintaining the accounts are the tricky parts.
Do you know Phil Knight? Or his brand, Nike? You surely do. Phil Knight is the co-founder of Nike and its ex-CEO. Phil Knight was an accountant who formed the company and used the income to take the company to the top of the chain.
Warren Buffet, a great financial mind, said that ‘accounting is the language of business.' Business owners can make a lot of money through their hard work and marketing, but being accountable for all the money you earn and spend, gives you control over your business. Proper accounting has many perks for your business, but some businessmen take it lightly and fail to unlock the true potential of their business. Misconceptions about accounting, like the ones mentioned below, force people to take back their steps from hiring a professional accountant.
1) Accountants ONLY Do Taxes
This is a misconception in the minds of more than half of Canadians. People like to believe that accountants earn everything for the whole year in just four months of tax season. It is untrue. Accountants spend a majority of their early adolescence studying different sectors of the business world and learning the rules and regulations to tackle business emergencies and to steer the money flow in the right direction. A small business accountant can be a financial advisor, a problem solver, a bookkeeper, investment tracker, and a lot more.
2) An Accountant and a Client Must Live in the Same Town
Thoughts like these emerge from the minds of simpletons who have failed in keeping up with technology. That is rude but true because the emergence of a fast-paced technological era knows no bounds in connecting people on two different sides of the world. It is true that not all people can be trusted with money, but it does not mean that you cannot find the right accountant. Online measures can always be used to send documents to your accountant through a safe and legal web platform.
3) Small Businesses Don’t Need an Accountant
In economics, there are two terms called ‘macroeconomics' and ‘microeconomics.' Macroeconomics deals with the household finances of common citizens, whereas microeconomics deals with national and governmental expenses. In the same way, accountancy not only deals with rich people problems but also has the small pins of the wheel to make the smallest of businesses highly efficient and fruitful. The benefits of hiring a professional accountant for a small business include - easy tax returns, directing the finances towards the needs of the business, differentiating personal and professional accounts, and problem-solving for your business. Also, most big organizations have an in-house accounting department, something that most small organizations don’t have. Therefore, it becomes even more essential for small business owners to hire an accountant.
4) You Can Co Accounting if You Can Do Math
Accountancy involves the common calculations of mathematics, but that doesn't make it an easy process for anyone with a calculator. Accountancy is a process that includes gaining knowledge about a set of accounting laws and complying with them to make a report of your business. You cannot just add up your money and show it on a sheet. There has to be a proper analysis of the given data after which the accountants break down your transactions into arrays of entries and apply certain calculation methods to show the exact financial position of the business. Mathematics is the language of the universe, but the language for business is accountancy. And if you don’t know this language well, you will have to hire an accountant.
5) Outsourcing Accountancy is Loss of Control
Remember the high school test questions about several men doing a job together to accomplish it faster. Well if not faster, then delegating different tasks to several people leads to more efficiency and decreases the amount of effort on every person. There is a common misconception among people to have an internal accounting team rather than outsourcing it to be in-the-know of your business’s financial status. But outsourcing a company's accounting also provides you with the financial information about your business as the professionals keep you in the loop at every point. When you outsource accounting, there are more important things related to your business that you can add to your priority list. A small business accountant can take care of your balance sheet, while you can balance your work and employees.
6) Outsourcing Your Accounting is a Security Concern
No one wants their business plans to be revealed to a rival. The account-related and financial documents of a company are the most cared for as they contain the premonitions that you can make for the future of the company. Accounting firms are bound to legal privacy policies that forbid them from sharing critical information about their client's business. So, you can rest assured that the secrets of your company are safe with your small business accountant.
Now you know what the myths have in common. It’s ignorance of the facts of accounting and bookkeeping. Accountants are skilled people who can utilize the proper calculation methods and use the laws of accountancy wisely to get you out of trouble — hiring a small business accountant? It’s an easy task. While you take care of the primary transactions and services of your business, your accountant will get you through all the steps necessary to use accounting for the welfare of your business. If you're a small business with a considerable income, you should utilize accountancy to initiate a constant growth cycle.
Being the owner of a small business attracts a bunch of responsibilities. While every activity in your business needs your focus, time, and effort, you can easily fall into the wrong sense about managing your business’s books of accounts on your own. You may think if you do not have a massive list of daily incomes and expenses compared to a large business, why is there a need to hire an accountant and a bookkeeper, especially a full-time one. So here are some reasons that will make you think why your business needs a full-time bookkeeper.
1) Borrow Additional Help for Day-to-day Operations
As an entrepreneur with a lot of responsibilities, you may get pulled away in a dozen different directions every day. If you are slightly knowledgeable about managing your finances, doing it on your own can create a risk for your firm’s growth. As a business leader, you need a constant focus of things that need new strategic directions, execution of major strategic decisions, building your team, and even expanding your business. With your business expansion, you could be bogged with accounting. Having full-time bookkeeper will help you to focus on the growth of the business and taking effective, solid decisions for your business.
2) Provides Consistency in Your Invoice Processing
We all know that invoicing contributes to many significant factors to your company’s cash flow. Having your invoices submitted on time on a consistent level and convenient format, you later get a lot of time to spare for payments. Without following a standard invoice processing, you can easily expose your business to the risk of having your revenue stream to collapse. Not having a consistent follow-up with the cash shortage and other problems in your invoicing system in the early days of your business can create a major issue for your business. Hiring a full-time bookkeeper helps you to regain control when it comes if there is a shortage of cash or addresses any invoice-related issues at the earliest.
3) Manages Your Payroll
Managing payrolls is another critical function that you need to consider by putting it on top of your list. When you work with your employees, you can miss a day or two to send the paycheck or correct an error if your team is small. But procrastinating the payroll issues can damage your team morale severely. To avoid the payroll issues, you need to hire the bookkeeper to establish and maintain control over it.
4) Get Your Finances Straight
You need to know that most of the successful businesses did not stay small forever. Every business needs growth. When you have successfully attracted more customers, invested in more resources, and build your infrastructure, your finance can be much more complicated to handle on your own. Handling the finances even then can make it riskier for anyone. When your business starts getting over your head, you need a bookkeeper who is aware of your business financial condition before your expansion and improves your financial situation in the future.
5) Saves Time
If you are managing your account reporting, it can take you weeks and some time from your work to work on it. On average, an entrepreneur should spend an hour every two weeks to capture and record the information. Doing your books takes your valuable time as you tend to spend more time capturing and recording the accounting information. As a business owner, you cannot afford to spend your valuable time on these things. You are the mastermind for your business, and you need to take care of the operational function and save time for what needs your time the most. A bookkeeper is an expert in its field and focuses on providing you with the best service in a limited time.
6) Helps You Keep Your Passion
Ask yourself - Did you start your business only to do your accounts? Is crunching numbers and composing financial reports what you want to do for your business? Of course not! Many businesses get burned out fast due to the overloading of the things and doing everything on their own. You don't want your business to be one of them. As an entrepreneur, you need to follow the passion that made you start your business. All you need to do is forcing out the things that can make you lose out your interest. Hiring a full-time bookkeeper will help you take over your financial aspect so that you can focus and follow your passion and the growth of the business.
7) Provides Expertise
To handle the financial accounts on your own, you need to have a background in finance. You need to have a working knowledge of accounts and taxes. With constant updating of rules and regulations in terms of taxes by the government, it is difficult to stay updated all the time. As a business owner, you have a limited time in your hands for your business. Whereas, a bookkeeper will always be updated with the tax laws and accounting rules, thus providing expertise for the financial status of your business.
8) Assists You in Your Firm’s Growth
At the start of your business, your business gains some level of stability. Growth requires you to focus on your core business needs. However, when you do all the things on your own, your pace of growth reduces. You need to pull yourself out of the tedious aspects that prevent you from pushing your business forward. Rather than looking after little tasks that can take away your focus from the core activities of your business and prevent you from using your unique business talents, hire a bookkeeper to give your business the best care financially.
Having a bookkeeper has a lot of benefits. The decision of hiring a bookkeeper depends on your firm’s needs and your preference. Book a free consultation with your nearby small business bookkeeping service provider if you live in Edmonton to help you decide and make a right path for your firm.
Financial year has come to an end, and there is tax filing to tend. This is the time where business owners need to scramble down the receipts, bank statements, account books, and other important documents to meet the tax deadline. While you are already in a tearing rush to meet the tax obligations, you are likely to make mistakes that can cost you back. So if you successfully procrastinated the tax planning process during the whole year, we have got you covered. Here are a few mistakes that you can avoid to have an error-free tax filing and returns.
1) Messing up the Calculation
If you are using an old fashioned way (pen and paper) of filing your returns, you are exposed to the risk of calculation errors or even simple mistakes especially when you are pressed for time. You may forget to sign on certain forms or date them on time. On the other hand, using an accounting software can eliminate this risk. When you use a tax software, your chances of having a mistake is lowered. Several e-filers get their returns quickly and easily by using a tax preparation software. If you still prefer to file your taxes on the paper, take your time and at least run your figures through the tax software to make sure that your numbers are tallying.
2) Failing to Double-Check Your Work
You may have made errors while entering numbers which might have gone unnoticed. These errors can be detected while double checking your work. Even if you are in a rush and desperately need to file the taxes, you need to double-check. Any errors in the figures can lead to tax calculation blunders. Software systems are great to catch any errors related to your bank account numbers or Social Insurance Numbers (SIN). These systems are already based on the rules and guidelines for tax planning. Therefore, the moment you enter the details, it is checked by your software giving you the ease to double check during tax planning with a simplified and understandable format.
3) Slipping a Copy of the Returns
It is important to secure the copies of your returns of all the years for audit purposes. If you have lost your copies, you can request a new set of copies from the Canada Revenue Agency (CRA). The copies need to be produced to a money lender if you want a loan or to your financial auditor during an audit. Additionally, when you have a copy of your last year’s returns, tax planning for the following year becomes easier. When you go through the previous copies of your returns, you get an idea of your past transactions or processes - for instance, an account that you have closed or any deductions that you might be missing.
4) Misusing the Money Intended for Taxes
During the tight cash flow, you might use the tax money and the payroll tax money for various business purposes. By using up this money that's meant for paying taxes, you may create mismanagement of funds and end up with the delay in payment of taxes. All of a sudden you find yourself not paying your taxes on time during the deadline. The best way to avoid this situation is to create a business budget that separates the tax amount in a separate bank account well in advance.
5) Failing to Pay Your Estimated Quarterly Tax Payments
Small business owners need to pay tax payments quarterly, but they may fail to do so. When you miss out on paying the quarterly tax payment, you incur a penalty as a huge surprise at the end of the year filling. Moreover, CRA may even seize your assets if you miss out on several tax payments.
6) Mixing Your Business and Personal
According to CRA, personal expenses charged in the business cannot be considered as business expenses. You cannot deduct your personal expenses as business expenses. For instance, if you use a car for personal purposes, you cannot take the expenses for maintaining that car from your business account. When you don’t separate your business and personal account, you tend to get confused while filing taxes. To get tax returns for your business, you then need to dig into files and folders to find various receipts which lengthen the whole tax filing process. Mixing your business and personal taxes can create a huge confusion and wastage of time in identifying the account for each expense. Therefore, keep your personal and business expenses away.
7) Selecting the Wrong Tax Planner
There is no shame in seeking help from a professional tax planner for tax planning. CRA penalties can be strict, and you may end up paying taxes that you may legitimately do not owe. Tax laws change annually, and it is difficult to stay updated when you as business owners should focus on the growth and expansion of your business. When it comes to paying the fees to the expert, it is much less than paying the penalty for your tax mistake. You may get many tax planning professionals who might pretend to know the tax laws and provide the services at a lower price. Instead of falling in that kind of trap, look for a person who is certified and licensed. This will ensure that you file your tax on time, avoid penalties thorough tax mistakes, prevent delays in getting your refund, etc.
It is always the best solution to book a free consult from a reputed accounting firm to help file tax with utmost care and avoiding any kind of chances of an error during the end of the financial year.
Certain things shouldn’t be mixed, no matter what. Business and personal finances are just those things that should be kept distinct. Mixing both of these finances only leads to confusions and potential losses (and disasters). If you use your money interchangeably between personal and business purposes, it will become difficult for you and your small business accountant to determine business expenses.
You ask any small business accountant, and they’ll suggest the same. Why? Because it’s a big NO-NO in the world of business accounting. So how do you keep these two different and unmixed? It’s simple; just follow these seven steps.
1. Set Up Separate Accounts
First things first, open two separate accounts for your personal and business income and expenses. Do you already have a personal account which you are using to look after your business as well? This is a big mistake! You may lose track of your business incomes if you let all your personal and business incomes get accumulated at one place and make all your payments from there. Hence, find out which banks are offering the best business offerings, and open a new business account in that bank. Get a new credit card as well for your business so that you can look after major business expenses separately. Having a separate business credit card means you won't be tempted to use your credit card.
2. Store Receipts Separately
Are you a person who recycles shoeboxes and cereal boxes for storing important documents? Yes? Great! So now, you will have to find one more box and separate all your business and personal receipts and invoices. If you don’t use these boxes, then choose some other boxes, or drawers maybe, as two separate physical places for your business and personal affairs. During the time of financial audit or tax season, your small business accountant will find it easy to look at your business expenses and incomes. If you hand over a file full of mixed documents, it will waste your time as well as theirs.
3. Draw a Line
You have created a separate business account and have a separate credit card as well. What next? Now, it’s time to change the way you spend. Use only the business card for business-related transactions. If you have exceeded your home’s budget for the month, don’t be tempted and use your business credit card to buy groceries and gifts. It will only impact your business accounts. Set separate budgets and stick to them. In case you cross either of your budgets, DON’T touch the other account.
4. Pay Yourself
As you are the boss, you need to pay yourself too. Just like you release salaries for your employees every month, you must do it for yourself as well. Set a realistic salary amount for yourself. On the 1st of every month, transfer that amount from your business account to your account. The same should apply to the months when your business gains profits or when it’s the time for bonuses. Once you get paid, you can create your home budget from that. And then, wait for the next payday!
5. Maintain Books of Accounts
Do it for your business incomes and expenses. Preserving bills, receipts, invoices, and other documents aren’t enough. You need a written overview of all your incomes and expenses so that you don’t miss out on any transaction during tax filing or calculating profit-loss figures. If you only rely on documented proofs, you may miss out on minor expenses that don’t actually have a supporting document. You and your small business accountant will end up wondering where your money went. Hence, create detailed books of accounts for all your business transactions. You can use software like QuickBooks, or let your accountant do it for you.
6. Separate Assets
This is very important! Along with separating your accounts and budgets, you also need to separate assets. If you need a new laptop for your business, pay for it from your business account. If you are buying two laptops together - one for your spouse and one for your employee - get separate bills for each. Likewise, you must have separate bills for other stationery items, electronics, and other inventories. Have separate bills for the electricity and water you use for business purposes. Don’t end up paying these bills from your personal account, or vice versa. Doing so will only disturb your budgets, and again, confuse your small business accountant.
7. Explain It to Your Loved Ones
Well, you have done everything from your end. But your family also needs to understand the importance of separating business and personal finances. Explain everything to your spouse, kids, friends, and relatives. Let them know that they aren’t supposed to use your business credit card at any cost. Also, request them not to ask you to buy something from your business’s account only because you have exceeded your monthly personal budget.
You can ask for more such tips from your small business accountant as they know what can go wrong during important processes such as tax filing and claiming returns.
At first, it may not be easy to keep things separate and tidy. But with time, you will get used to keeping your business and personal finances separate. Talk to your small business accountant as soon as you mix them up by mistake. Doing so will help the professional to separate the finances at the very moment.
One of the biggest worries for business owners today is keeping enough working capital on hand to run their business on a day-to-day basis. ATS Accounting wants to make it easier for you.
Outsourcing your payroll can help you make things easier. Whether you are a small-sized business or an established enterprise, you will surely reap significant benefits from outsourcing the payroll process. As owners and managers of growing businesses, it is worth the effort to find the right service provider and outsource your payroll systems.
If you are doubtful about outsourcing your payroll, you might have a few questions like -
To answer these questions, we have outlined a few reasons how your business can reap benefits by outsourcing payroll.
In-house payroll management is a time-consuming process. Keeping track of business deductions, garnishments, salaries of new hires, full and final settlements on terminations, and paid time off as well as complying with the state and federal regulations are hectic tasks. You need to ensure that you input data accurately and double check for any keying errors. These tasks can take hours, thus affecting the productivity of the business. Outsourcing payroll allows you to concentrate on your core business.
Large businesses can afford to maintain comprehensive payroll departments. But, for small and medium businesses, having an in-house payroll department can be a money burner. If you are an owner of a small or medium business, then you don’t have to worry about your payroll process when you outsource it.
Professional payroll companies employ professionals who know payroll processing inside and out. This can help limit business risk and virtually eliminate costs associated with overpaying employees because of the difference between the employee’s time and the actual time record.
Government rules and regulations change annually. It is often difficult for the small business owners to keep up with these changes, worry about the latest version of the payroll software, and stay updated with the most recent tax tables. If you or your payroll department makes mistakes while complying with these regulations, it could result in costly fines and penalties.
Professionals working in payroll companies are trained in all aspects of the relevant laws and regulations. They are up-to-date with the latest jurisdiction reporting and taxation requirements, which means you never miss out on being compliant.
Produces More Time for Growth
Payroll is one of those critical functions that may not directly increase profits or contribute to your core activities in your business. Entrepreneurs are famous for taking on multiple responsibilities to save money, including handling the payroll. Regardless of the number of employees, payroll is a task that requires time and attention for details. The payroll process involves many factors like calculating payroll, printing documents, signing cheques, remitting taxes and returns, etc., that take a considerable amount of precious time each month.
Outsourcing this necessary function immediately frees up precious time for you and your business. You can eventually focus on the growth of your business and the customer service. A good payroll provider offers capabilities that go beyond what you can do on your own and provides expertise to ensure compliance with current rules and regulations.
Achieves a High Level of Accuracy
Outsourcing to payroll companies and accounting services is quite beneficial when it comes to generating accurate results. This is because the company employs staff that ensures better management of back office functions. The staff is up-to-date, passionate, and provide a smooth and efficient service to customers.
Gives Tax Benefits
Inappropriate payroll management can often lead to inaccurate tax filing which results in tax penalties. When you do payroll on your own, you may have a risk of inaccurate filing which can in turn affect your tax processing. Outsourcing your payroll processing services to payroll companies can save your company from these hassles and ensure accurate payroll processing with some additional tax benefits.
Avoids Reconciliation Worries
Bank reconciliations can be tedious, consuming a lot of effort and time. The process includes keeping track of all payments through the bank during the rolling out of paychecks. This can be avoided by entrusting payroll services to experienced payroll outsourcing companies.
Stay Informed With Up-to-date Accounting
The market keeps changing continuously due to technological advancement. Companies can avail of such progressive technology through systematic outsourced accounting services. All accounting and payroll-related information can be obtained regularly from payroll companies handling outsourced accounting services. Advanced software can help companies look at personalized reports that can often save a lot of time while making important financial decisions.
We are one of Canada’s leading payroll companies having licensed pros who work with all business owners whether they have a small, medium or large business.
So, ready to get started? Book a free consultation today to know more about outsourcing payroll and its impact on your business.
Virtual stores are the emerging trend, as they are an easy way to do business without the need to have a physical store. With a virtual shop, one can reach out to a broad audience beyond the location of the store. However, while chalking out a plan to operate an e-commerce business and sell online, one needs to adhere to tax compliance in Edmonton with the various provincial and territorial regulations.
These regulations enforce even though the store does not have a physical address in other provinces in which it sells. Furthermore, the online business owner needs to be aware of the rules and regulations associated with distributing products in different parts of Canada. Various provisions may apply in regions for e-Commerce, online sales contracts, or other online sale transactions and advertising.
Here is a brief rundown of the points to keep in mind while running an e-Commerce business in Edmonton.
Additional Provincial Registration
If you do business with clients outside your registered province, it's a must to register your business in their land or territory of residence as well.
Like any other physically existing business, an e-commerce business needs to be incorporated to protect the shareholder's assets from facing any liabilities. For this, it is recommended to consult a professional entity regarding the structure and incorporation, federally or provincially.
e-Commerce Sales Tax
One of the significant challenges e-Commerce sellers face is understanding of tax compliance in Edmonton for sales tax regulations. To understand the concept of sales taxes, we need first to know what they are. In layman language, sales taxes are the additional amounts you collect from your customer and remit them to the government.
It is not an additional tax on your income, and it is not a charge either; it is something that could be more of a temporary possession which is returned to the government eventually.
Sales Tax Implications for eCommerce Sellers
Similar to other countries, Canada imposes a sales tax on products shipped to Canadian consumers. Sales taxes levied on a federal and provincial level. It is an amalgamation of state and provincial tax jurisdictions.
Some provinces have harmonized their sales taxes in compliance with federal sales taxes (hence, the name HST – Harmonized Sales Taxes).
In a nutshell, an e-Commerce company will need to register to collect sales taxes from Canadian buyers if all of the following are true:
Canadian Income Tax Implications for e-Commerce Sellers
In general, your business is considered resident for tax purposes in Canada if:
Additionally, if your selling earns income from business carried in Canada, you will have to file a Canadian income tax return regardless if you are a small business supplier or not.
Canadian Controlled Private Corporations (CCPC) is subjected to a low of 14 -17% rate on the first $500,000 income.
The combined federal and provincial tax rates for non-resident companies vary from 25-31% regardless of the amount of income.
Most tax treaties absolve companies from paying taxes if the corporation does not have a permanent establishment (i.e., a fixed place of business) in Canada.
Necessary Tax Returns
If you are a non-Canadian corporation that carried business in Canada, you will be required to file a T2 tax return along with Schedules 91 and 97. If you are claiming protection under one of the treaties, you will need to specify sections of the agreement on those schedules.
Non-resident sole proprietorships will have to apply for an Individual Tax Number (ITN) to file their business income. Forms T1 and T215 will need to be completed and submitted to the CRA by June 15th of every year.
Canada – U.S. Tax Treaty
Those e-Commerce sellers who don't have a permanent establishment in Canada or the U.S. are subject to the protection by the U.S. – Canada Tax Treaty.
Canadian e-Commerce corporations selling in the U.S. with no permanent establishments fill forms 1120-F and 8833. Corporations require an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) to file their returns.
On the north side of the border, U.S. e-Commerce corporations selling in Canada will fill forms T2 and Schedules 91 and 97. A corporation will need a Business Number (BN) to file their tax returns with the Canada Revenue Agency (CRA).
For selling items to an out-of-province consumer, it is critical to understand how and when to charge sales taxes (GST, HST, and PST). In an ideal scenario, an e-Commerce platform should be set up in a way that automatically adds the precise amount of tax. Make sure to test the system, ensure that the system is up-to-date and verify that it is accurately set up. Business owners who sell online in other countries are essentially operating a multinational company. The more your company gets involved in the land of destination, the higher tax obligations and complexities arise.
What we have given here describes basic rules and considerations of e-Commerce taxation for Canadian and non-Canadian sellers. Your situation can be different, so consult with the experts to meet tax compliance in Edmonton. Approaching a competent tax professional of your choice is wise.
If you are operating an e-commerce business in Edmonton, run it under the right business structure. Make sure to know your sales and income tax obligations within and outside the country. Also, utilization of technology should stay on top of your business checklist.
We recommend you rely on knowledge, trusted advisors, and your primary business acumen to navigate through tax compliance challenges.
Book a free consultation today to know more about your way with taxes and their impact on your business.
When it comes to operating a restaurant business, there are a lot of factors to consider to keep the business running smoothly.
Managing your restaurant accounts can be one of the hardest parts of running a restaurant as well as the deciding factor between success and failure. From creating cash-flow projections to applying for loans, managing the financial aspect of your restaurant can sometimes feel like a juggling act.
When you are starting a new business or prepping your taxes for the coming year, hiring an accounting service may be on your mind. Even the most business-savvy restaurateur could require an accountant to help handle the ins and outs of his restaurant’s finances.
If you are skeptical of the importance of accounting for your restaurant, this overview will help you understand its benefits for your business to thrive. Read along and find out how!
Ensures Compliance with State and Federal Directives
With constant law changes regarding sick leave, termination of employment, new hire reporting, health insurance, and more, it is nearly impossible to keep up with the federal and state laws for restaurants. ATS Accounting provides back office support in addition to offering payroll services. The company provides accounting and human resources management that offers clients a full suite of services that often intersect.
A full-service accounting firm understands the state rules and regulations regarding payroll services, tax-breaks, insurance, etc. They are also aware of how the latest amendments affect restaurant costs. Assessing for fines and fees due to recent law amendments is one less worry that restaurants need stress about when they outsource their accounting to a restaurant accounting firm.
Creates Cash Flow Projections
A cash-flow projection is a formula that estimates your budgeted revenue after expenses (total revenue – total expenses = projected cash-flow). For new restaurant owners trying to master accounting, creating cash-flow projections can be challenging. Still, this is a necessary part of financial planning and will aid you to keep your restaurant on a budget.
Helps in Processing Payroll Transactions
Your employees are the engines of your restaurant; therefore, it's imperative that you keep them happy and paid. When it comes to payroll services in Edmonton, there's more to consider than just wages and time tracking. You should also ponder over deductions, benefits, overtime payments, payroll taxes, and more.
Applicable deductions might include income tax, your share of your employees' contribution to the Canada Pension Plan, and employment insurance. To accurately calculate each employee's income tax deductions, require all workers to provide their Social Insurance Numbers (SIN), and fill out a separate Personal Tax Credits Return Form, or TD1.
Though paying employees may seem like a simple task, but it is more complicated than you might think. Some of the details you'll need to iron out include:
It can be a lot to keep up with, which is why many restaurant owners outsource these tasks to an accounting firm that offers restaurant bookkeeping services, including payroll services management.
Maintains Accuracy in Holding Accounting Records
It is critical to maintaining up-to-date financial records. Not only it helps monitor how much revenue is flowing in and out, but it also helps your restaurant survive should you ever face a CRA audit. If you aren’t experienced with managing the logs, consider seeking help from an accounting firm. Additionally, most accounting firms also keep track of the inventory, manage payroll services, and run sales reports.
Provides Sound Advice for Your Business
Many restaurateurs have backgrounds in the food industry but may not have experience in finance. It is wise for such entrepreneurs to outsource their accounting tasks to professionals.
Hiring an accounting service in Edmonton is often about bringing a new perspective, one with years of experience that suggests viable paths to business growth. An accounting service helps you plan your target goals and look out for financial tricks that would reduce your expenses. Your accountant offers insurance advice, find ways to trim costs without lessening quality, help you evaluate menu prices, and even research your business potential for expansion.
As you and your employees work hard in the day-to-day aspects of the business, your restaurant accountant can take a step back and see the forest for the trees.
Gives Tax Advice and Help in Auditing
Many restaurant owners approach an accountant when it's the tax time, and indeed, that's a service your restaurant can consider an accounting service for. Not only your accountant makes sure your restaurant is in compliance with federal and state tax laws but helps you plan throughout the year so that your deductibles go smoothly by the time the tax season approaches.
If a restaurant is audited, whether for taxes or during the bank loan process, restaurant accounting services also assure the auditor that the business’ financial documents are precise and up-to-date.
By understanding what an accounting firm does – and knowing what to look for in a restaurant accountant specifically, you can hire a great fit for your business and set your restaurant up for success!
ATS Accounting has licensed agents who work exclusively with all business owners. Our team of dedicated agents knows the specific risks restaurant owners may face and help ensure your business is protected with the right policies and coverage limits.
Ready to get started? Click here and get in touch with us today!
Nearly every small business emerging with a new idea to bring something better for the market has seen a gradual progress. Earlier, it might have been a cakewalk managing accounts of a marginal quantity, but as it grows more significant, accounting becomes exponentially complicated. There are many things an accounting firm offers which not only reduces workload but also saves you a lot of cash with suitable return policies and tax exemptions.
If you are an aspiring solopreneur, an accountant can help you manage your finances efficiently. In some situations, this means the difference between success and failure; while in other conditions accounting in Edmonton keeps you on the right side of the law. It ensures you stay in the best financial position possible.
Hiring an accounting firm in Edmonton shouldn’t be seen as another overhead expense but rather be considered a healthy investment and here’s why!
Nowadays, there are a lot of things you, as the owner of your company, are already burdened with. You may not necessarily have the time or the expertise to look into all matters of the company. With so many tasks to perform and ideally to have a healthy work-life balance, it is a task to find enough hours in the day. However, there is one area of business management that needs and hence consumes more time than most: finance. Accounting is one of the most critical sectors of the company that decides your company's financial status.
Accounting tasks include responsibilities like bookkeeping, recording receipts, tax returns, and settling financial targets. These tasks are imperative to business success and growth but are also time-consuming.
Hiring an accountant for your small business allow you to delegate these time-crunching tasks. It lets you focus on other important matters like growing your business and having an excellent work-life discipline.
Tax Experts That Give Sound Advice
Tax returns seem pretty straightforward, but they aren't. There are multiple ways to reduce your tax bill. Consequently, methods can be utilized on a tax return and run throughout the year. As a small business owner, it is unlikely you have the time or expertise to use these methods, yet their ability to reduce costs can't be underestimated.
An accountant is a professional that knows the ins and outs of the system. If there is something they are good at, it is saving money because that’s what they are meant to do.
Accountants help slash your tax bill and free up money. You may either invest the saved amount in your business or yourself.
Helps You Manage Your Financial Assets
How to manage the assets in your business? Do you know what all the assets are and their worth? Do you efficiently account for your business assets including profits, losses, credits, and debts? If not then hiring an accountant helps you with this.
Keep Costs Down
If you were pondering that an accounting firm rips you off your pockets, you might not be aware that they do the opposite. They not only save tax money but also save money on other aspects of cost-cutting for the company.
An accounting firm also takes care of the unnecessary expenses and keeps track of all payments, thus preventing any discrepancies, mistransactions, or fraud in the company.
An accountant won't forget about expenses such as regular payments to be made to suppliers or lenders. Amounts that you haven't reviewed in a while, but accept as an expenditure. The accounting firm vigilantly monitors these expenses, ensuring you aren't ever overpaying for any resources.
Maintains Punctuality to Avoid Delays
If your business involves numerous transactions with clients, suppliers, lenders, etc., outsourcing to an accounting firm is the best way to manage everything.
You can always rely on ATS Accounting for your accounting requirements. ATS Accounting serves in Edmonton and surrounding areas. It makes sure each supplier gets paid on time the exact amount. This not only keeps things on track but also maintains professional relations. They also make sure nobody is overpaid, and the collections of payments from clients are done on time and in a professional manner.
Saves You from Legal Anomalies
There are multiple legal hurdles when it comes to managing an organization. An accounting firm keeps track of all your activities and transactions in systematic order in case of a legal dispute. Many times, you are not aware of a specific law that has come into effect; an accounting firm makes sure no such things take place, and the company faces no legal complications.
Offer Financial Counselling
If you thought an accounting firm was all about managing transactions and bookkeeping, it isn’t true at all. A proper accounting firm helps you flourish your business by offering financial advice which is beneficial for your company. The firm helps you with cost-cutting and help surge your growth offering long-term benefit advice.
Help in Business Planning
Whatever goals you are planning to achieve for the growth of your business, there will be financial implications. You can even face regulatory issues, such as employment law or obligations from the Revenue. An accounting firm benefits you by letting you tackle these issues confidently irrespective of whether you are expanding, developing a new product, diversifying, downsizing, selling, or winding up.
An accounting firm lets you do what you do best. It takes care of managing your accounts so that you can focus on other critical areas of your business. The relationship between you and your accountant should not be underestimated either. Your accountant is there to answer your queries, and because they know your business' potential, they give you informed opinions. Also, they are good sounding mediums for business propositions, plans, or financial decisions. Having somebody that you know and trust at the other end of the spectrum is invaluable.
If you would like to find out more about how an accounting firm helps your business grow, contact us or book a free consultation today!
The survey conducted by the software giant Sage reveals some interesting facts about accounting services. Around 71% of businesses outsource their accounting services. A total of 55% decision makers agreed on the necessity of accounting service. Only 10% said that they don’t need the accounting services. The survey was conducted mainly in the SMB (small to medium businesses) sector.
Saves on Effort and Time
As an entrepreneur or a manager, your time is invaluable. You need to focus on your core tasks like- to manage your company’s growth, keep an eye on the cash flow and seek more opportunities. Instead of going through the monotonality of transactional paperwork, you would be better off pursuing your business goals and implementing strategies. The accounting firms would take care of the painstaking task and record each of your business transactions meticulously.
Act as Trusted Business Advisors
When it comes to integrity, accountants undoubtedly have a better reputation than any other business advisors. About 44% of business owners seek the advice of their accountants prior to considering any other advisor. Around 50% of business owners believe that accountants provide them the most valuable advice of all their personal and business acquaintances. To give you a fair comparison, only 2% of the entrepreneurs consider other professionals like bankers and solicitors to provide them with the most valuable business advice. 15% of business owners claim that they are more transparent and honest with their accountants even in comparison to their family and friends.
Maintains the Accuracy Levels
A professional accountant would be more competent and experienced to handle your records. They can detect and prevent fraudulent transactions. You don’t want to bring the ax on your own feet by incurring losses due to inaccuracies in your record keeping. The accounting firms may also have a separate team for audits. The professional approach would minimize inaccuracy, prevent manipulation and fraud. Your financial records would truly reflect your business success.
Let’s You Find Your Work-Life Balance
One may not guarantee success or failure in business. One thing however you can be sure of is that you have to slog like a mule. To maintain your work-life balance, you must learn how to delegate your tasks. By nature, entrepreneurs are poor managers and organizers. No wonder, there are a lot of entrepreneurs who have ADD (attention deficit disorder). These people though being creative and talented are disorganized and have poor management skills.
Entrepreneurs should outsource their accounting requirements similar to the way they delegate managerial tasks to their managers. The accountant firms would take care of the tedious tasks whereas the entrepreneurs would be able to maintain their work-life balance. Proper maintenance of your work-life balance will improve your personal relationships. The improvement in your personal relationship will act as a feedback loop. The positive vibes from your relationships will end up enhancing your morale and inspiring you to achieve even more.
May Help You in Business Networking
The accounting firm you have hired may introduce you to your potential vendors, investors, and clients. They due to their knowledge, experience, and insight may help you to find perfect business associates. Due to their vast network, they might also help you locate and recruit suitable employees.
The accounting firms can analyze the data and provide you insights, which may help you to transform your business. The insight may help you to improve your business in multiple ways. You may come to know about a neglected sector which could potentially increase your profits. Similarly, the analysis reports may shatter a perception about a business segment which in reality might not be as profitable as perceived initially. The analysis may provide you statistics to arm with during your meetings with vendors, prospects, clients, and investors. The data stored in your computers is of no use unless you let it work for you. If you want to build your business, you cannot ignore analysis. Proper usage of the insights provided by the accounting firms may empower to take your business to new heights.
May Help You with a Business Plan
Due to their experience with other entrepreneurs and businesses, they might be able to share stories which are relevant to you. Whether it is a success or failure saga, you can certainly learn from it. Intelligent people don’t just learn from their own mistakes, but they learn from others as well.
Moreover, you can pluck the ideas implemented by other entrepreneurs and use them in your business. If you are getting stuck with your strategies, then it would be a good idea to discuss it with your accountant. Expert professionals from accounting firms may clear the clutter in your plans and build a roadmap for success!
The accounting firms stay up to date with all the relevant tax laws, rules, and regulations. The tax rules and regulations change frequently. You cannot afford to invest time and effort to stay on top of every new regulation. The accounting firms keep your business compliant by ensuring proper actions as prescribed by the rules and regulations. It would be wise to let professional accounting firms tackle your tax issues. They would also suggest you, ways to save on your taxes.
With 21% of small business owners admitting that accounting tasks as one of their most significant challenges, you cannot afford to ignore it. Accounting firms are necessary for your business irrespective of whether you operate as a solopreneur, small business or enterprises. The services provided by accounting firms would remove obstacles and propel your business forward.
You may get in touch with ATS Accounting INC. for any of your accounting and bookkeeping requirements. We are one of the leading accounting firms in Edmonton.
If you are a newbie in the city or just entering the workforce, you may be overwhelmed by the feeling of filing a tax return and whether it is necessary. When it’s that time of the year again when Albertans roll up their sleeves, dig out old receipts, and financial documents from the past year and fill out their tax income forms.
For those who end up with a rebate, the process could be rewarding. Whether you end up owing the government or the government owes you, tax time can be tricky for many.
Most income tax and benefit returns are due on or before 30 April 2018.
We can help you with your tax file and accounting hues. Let us explore the different facets of accounting and tax returns before filing your taxes in Alberta, Edmonton.
You must file a personal tax if:- You owe tax.
- You are self-employed and have pension plan premiums due. Also, you are required to file if you are paying employment insurance premiums on your self-employment earnings.
- You and your partner wish to split your pension income.
- You are participating in the Home Buyer’s Plan or Lifelong Learning Plan with repayments due.
- You disposed of the capital property. If you sold your home, you must file a tax return even if you don't wish to pay capital gains tax on the sale (principal residence exemption).
- Whether you are 9 or 90, age does not influence your requirement to file a personal tax.
- Students are not exempted from filing either. If your 21-year-old child is an entrepreneur who makes over $3,500 (after expenses) running a small business, they must submit a personal tax even if they're still in school.
While filing your taxes is a yearly tradition, the government makes few amendments to tweak its tax policy. Here are a few things the Alberta government has altered for 2016:
- Increased Alberta non-refundable tax credits to counterbalance inflation
- Lower-income families with children under 18 years of age qualify to receive the Alberta child benefit as of July 2016.
- Individual income tax rates have changed for taxable income over $125,000, $150,000, $200,000, and $300,000.
- The Alberta overseas employment tax credit has been obliterated.
- The rate used to calculate dividend tax credit for non-eligible dividends has reformed.
How to File Your Taxes?
You can fill your tax form online, on paper, or by phone.
Stages of Filing a Personal Tax and Benefit Return
Stage 1- Collect all your information and relevant documents that display your income, and that support any deductions and accounting credits you plan to claim. To fill out your return, you need all your tax information slips that show your income. You should have all your slips and receipts by the end of February. Gather all the receipts or records you will need to support any deductions, credits, amounts, or expenses you will be claiming.
Stage 2- Select the software you wish to use to fill out your details or get the general income tax and benefit package.. For ex- NETFILE is a certified tax preparation software that offers you convenient and secure way to do your taxes online.
Stage 3- Make sure all your details are up to date. Changes to your personal information such as your marital status, the number of children you have, your banking information, and your address directly affect your benefits and accounting payments. If there have been any alterations in any of the aforementioned, let the Canada Revenue Agency (CRA) know as soon as possible to ensure you get the entitled paybacks and returns.
Stage 4- Report the income you have received in the year from all sources, both inside and outside Canada. Find instructions on where to report in Edmonton an amount on the back of your information records.
Stage 5- Calculate the deductions, tax credits, and benefits you can claim. This information is required so that you can claim on your return to reduce the amount of tax you have to pay. This information can also be found on your tax return or a related tax form in Edmonton. If the information is too overwhelming at this step, it is always wise to seek professional help and let our team of experts resolve your queries.
Stage 6- Send your file to the Canada Revenue Agency. With several ways to send your tax file to the CRA, you can file it online using NETFILE-certified software or through an EFILE service provider, such as a tax preparer. ATS accounting helps in preparing and e-filing your individual, corporate, and estate tax returns at the local, state, and national levels.
Stage 7- If you filed your taxes late, your records must be secured for six years from the date the tax was filed. If there are any claimed expenses, deductions or accounting credits, make sure you store all your receipts and related documents in case the CRA asks to see them.
How can I avail maximum tax returns? When do I get the refund?
You can avail maximum reimbursements in the following ways:
- Keep your transit passes
- Use your tuition credits
- Claim your student loan interest
- Claim medical expenses
- Use the dividend tax credit
- Claim utilities such as cell phone and internet expenses
- Claim your work expenses such as conveyance, uniform, costs incurred on purchasing work related items
If you file your return online and choose direct deposit, you get your refund in as little as eight business days. If you send a paper return, it generally takes eight weeks to issue your notice of assessment and any refund.
Do You Need Help with Your Taxes?
With so many steps and procedures involved, filing taxes can be quite daunting. It is one activity; a person must experience to get their hands-on with managing their finances and accounting.
Managing all your tax deadlines, including payroll, corporate, sales tax, and more, can be a big job that diverts you from other things you have to do to run your business. We take pride in staying on top of these deadlines for our clients, so you don’t have to stress about them. We prepare and file the tax returns that are required for your business. We’ll look hard for every deduction possible, discuss with you your options, and perform your tax compliance work accurately and on time.
Are you still indecisive? We have made it risk-free for you. Now you can book a consultation for counselling, controller, taxes, and accounting related queries.
Accounting is a comprehensive process that requires you to maintain a proper track record of all the financial transactions that take place in your business. This process is undertaken in order to keep a track of the profits made by the business, to decide what future financial decisions have to be made and to comply with the tax laws. Since this process of record keeping has multiple transactions, mistakes tend to happen. Some mistakes can be costly and you may even end up paying the wrong amount of tax. Therefore, to avoid such discrepancies, a financial audit is created.
Types of Financial Audit
A financial audit can be defined as the process of analyzing your bookkeeping records to verify if the information provided is valid with regards to the statutory compliance. This process is conducted by professionals and is thoroughly done to find any minute mismatch in the bookkeeping. Before you move on to understand more about the purpose of conducting a financial audit, let us understand the different types of the financial audit that exist in Canada.
1. Statutory Audit
A statutory audit is conducted for a business by an external auditor. A statutory audit is mandatory under the law for a company that earns a certain revenue. The need for a statutory audit is mainly in large firms where the ownership of the company and the financial affairs handling is separate. A statutory audit confirms if proper regulations are being followed not only for the government but also to the higher authorities within the company.
2. Operational Audit
An operational audit is also known as an internal audit. It is an initiative taken by the business itself to monitor if their financial records are proper and compliant. This audit is conducted by the employees of the company. The auditor is decided by the board of directors.
3. Public Sector Audit
Public sector audit, as the name suggests, is an audit that is specifically conducted for business and institutes that are owned by the government. This audit is conducted by the auditor general to ensure that these public companies are following a proper financial affair.
4. Forensic Audit
Forensic audits are external audits with legal implications. These audits are conducted by the legal authorities when a business is supposedly indulging malpractices. Situations that generally cause a forensic audit include money laundering, tax evasion, insurance claim fraud, accounting negligence such as entering incorrect entries, etc.
Types of Auditors
Since an audit is an in-depth analysis of your financial statements, it is essential that an expert performs the task. There are three types of auditors you will come across when performing an audit.
1. Internal Auditor
An internal auditor is an experienced accountant assigned from within the company to perform the task of analyzing the financial records internally from time to time. Internal audits help a business to ensure that their financial records are updated and error-free.
2. Independent Auditor
An independent auditor is also known as an external auditor. These are professionals who only work as auditors for different organizations. They conduct the financial audit for different clients with an unbiased opinion.
3. Government Auditor
Government auditors are of two types, a general government auditor and a forensic auditor. A general government auditor performs an external audit for businesses to identify if the company is following all the tax regulations. Forensic auditor, on the other hand, performs an external audit in order to identify if the company is involved in any financial malpractice.
Purpose of Financial Audits
1. Identification of Miscalculation
A company has several transactions to record every day. Your accountant may take care of making a note of every single transaction. However, there are times when you may miss out on a receipt and end up not adding the record to your transaction list at all. When such miscalculation takes place, the business does not get a clear idea of the profit or loss it is making. With the help of a financial audit, such mistakes are caught and rectified.
2. Prevention of Fraudulent Practices
A business owner never handles their own books of accounts. Either the in-house team of accountants manages it, or an accounting agency to whom the process of accounting has been outsourced. Since the owner does not record every transaction that takes place in the business, there are chances that the owner may get fooled by the person handling the accounts. In the end, if a fraud is committed, the business owner will be penalized. To avoid such situations from happening, internal financial audits are conducted at least once a year.
3. Realization of Company’s Worth
There is a huge difference between a financial audit and general bookkeeping. In bookkeeping, you record the monetary transactions that take place in your business. A financial audit, on the other hand, does the complete analysis of your existing records. Regular recording of transactions does not give you significant information about your business. A financial audit gives you details of how your business is performing, and the report generated works as a good credit rating for your prospective investors.
4. Compliance of Taxes
A financial audit is done with the idea to catch discrepancies that were not noticed the first time. One major discrepancy that businesses can end up making is not complying with the tax rules unknowingly. You may miss out on something forgetfully, but the CRA won’t consider it to be a small mistake. So having a financial audit helps you to double check if you have filed your taxes properly. Sometimes, it also helps you to claim some tax deductions you may have not noticed before.
Financial audits do the job of rectifying some serious mistakes. Not conducting an audit could be the reason why you will end up being flagged by the CRA for the wrong reasons. So do not wait for a notice from the CRA for an audit and take the assistance of an experienced accountant for error-free bookkeeping process.
A business has different seasons just like summer and winter. There is a season when the sales are high, and the profit figures reach its peak. Then there is a season when the business is just doing well enough to break-even. But the one major season that every businessman gets stressed about is the tax filing season. In Canada, businesses have to be prepared with their tax calculations and file them by 30th of April. But planning for your taxes starts months before the actual tax filing season starts. In fact, the reason why you need to save all your documents pertaining to your financial transaction is for filing your taxes appropriately.
A common reason why many businesses fret the tax filing season is that they decide to do tax accounting without the help of a tax accountant. Even if some businesses do hire a tax accountant, they end up hiring an incompetent one that only increases their worry. So for the next tax filing season do not spend half your time worrying about the taxes and find a good tax accountant.
Types of Tax Professionals
Before you start your search to find a good tax accountant, it is essential that you understand the different types of tax professionals who can help you with your business tax filing process.
1. Enrolled Agents
Enrolled agents are people having a fair knowledge about tax filing. These enrolled agents need to pass a set of examination before they can start consulting businesses and people about the taxation process. Enrolled agents do a decent job of handling the taxes. However, these agents have their limitations. An enrolled agent may be able to represent their client during a CRA audit, but they cannot prepare the audit reports.
2. Tax Preparers
Tax preparers are unofficial consultants who assist individuals and businesses with their taxes. These tax preparers are people who have a fair knowledge about taxation, who use it for the limited period of taxation season by helping businesses. They charge a very minimal fee, which makes them a cost-effective choice for some small businesses. Since tax preparers are not officially recognized consultants, they cannot represent you during a CRA audit.
3. Certified Public Accountant
A certified public accountant is an accountant who has done an extensive study in the field of accounting and is a certified accountant that is recognized by the CRA. A certified public accountant provided comprehensive accounting services including tax planning. A CPA can not only help you in your complete tax planning and filing but also represent you during CRA audit and prepare audit reports.
4. Tax Attorneys
Tax attorneys are lawyers who also manage taxes and tax-related cases. These professionals may help their clients in preparing tax returns, but they cannot perform audits. However, tax attorneys have the authorization to represent their clients for both audits and tax-related court hearings.
5. Accounting Faculty
A college professor who has himself acquired a degree in accounting and now teaches accounts instead of practice accounting may also consult people on taxes. They may help people prepare their taxes and can also represent individuals for their tax audits. Accounting faculty may help you with your taxes for a nominal fee.
6. Certified Financial Planner
A certified financial planner can only help their clients in tax planning. They cannot take care of audits for their clients.
How to find Tax Accountants
Though you have various options when it comes to hiring a tax consulting professional, choosing a certified accountant is always advisable as they have the appropriate knowledge to help you with your tax filing. But the question is where can you find good tax accountants? Well, here are some places where you can start your search from:
1. Online Directories
The very first and the most hassle-free method of finding accountants is by looking up online. Google search can find you anything, including tax accountants near you. The very first directory to check is the Google My Business suggestions made by the search engine. You should also check out other local directories such as Yelp. These directories not only help you with the contact details of tax accountants but also user reviews of how their service is. This will help you in making the right choice of selecting a tax consultant for your business.
2. Personal Connections
People you know may help you find a good accountant. You should ask your friends, colleagues and other people in your network for recommendations of good tax accountants they have worked with. They will give you a complete feedback of how their experience was and what problems they experienced when they worked with the tax accountant.
3. Government Accounting References
A certified accounting firm that follows the proper practice of accounting will be enlisted with the government accounting referral website. So if you want to find an accounting firm to take care of your taxes who follow proper regulations, you can search on the CPA Canada website.
Things to Check When Hiring
When you shortlist a handful of tax accountants to choose from, there are a few parameters to check before you decide whom you want to hire. These include:
Tax filing season becomes stressful for everyone. Once you file your tax returns, you breathe easy and feel relaxed. But sometimes the relaxation doesn’t last for long when you receive a notice of an audit from the Canada Revenue Agency (CRA). Often business owners go in a panic mode as an audit is not something they want to go through. But an audit is not something to be scared of as it is just a simple process that includes some basic procedures that tax accountants in Edmonton can take care of.
Tax audits conducted by the CRA are generally of three main types. These audit types include:
Audits In-OfficeWhen you receive an audit notice, you will be informed about the type of audit. In an in-office tax audit, you will be asked to visit the local CRA office. This type of audit is conducted by the CRA when they want you to be present to justify your tax documents in detail. When you are called for an in-office audit, make sure you carry all the tax filing documents along with you.
Audits by MailAudits of local and small businesses are a minor task for the CRA and hence a majority of them are conducted through the mail. In a mail audit, you receive a notice about the audit along with a list of documents needed by the CRA to justify the returns filed by you. You can simply mail the documents needed by the CRA and the matter can get resolved.
Field AuditsField audits take place at your business premises. In such an audit, you first receive a notice and then a CRA officer visits your premises for a detailed investigation of your financial documents. Such audits generally take place for businesses that have too many suspicious transactions.
After an Audit is CompletedAfter the audit process is completed, the next step that takes place is the place where the CRA gives a decision based on your documents. This decision-making process includes:
After the CRA scrutinizes your tax returns, the agency verifies that your documents are complete and as per the regulations. Once your documents are verified, you need to sign the report and the returns can be filed.
If there are certain details that were missing initially in your report, the CRA will ask you to make the necessary changes and alterations in your returns and file them.
If in case the CRA found a major discrepancy but you do not agree with the CRA, you can file an appeal for reconsideration.
Though an official audit is a process initiated on discrepancy suspicions, it is not necessary that there will be major issues to worry about. Sometimes an audit can also take place for minor mistakes. So next time you get an audit notice, do not worry and simply take the assistance of trusted tax accountants in Edmonton.
Tax planning is one process that you prepare for from the very beginning of a financial year. The preparation starts from the time when you save the very first receipt of the transaction that takes place in your business. Saving every receipt and other business financial statements is necessary when paying your taxes. However, the common question on the minds of many is that for how long you keep your business tax returns records. Let us find that out through this article.
What Business Returns to Keep?For the taxation process of a business, the Canadian Revenue Agency (CRA) has defined the need for the following document:
There are situations where you might have to hold on to your business tax returns for longer. One such situation is the tax objection appeal. A tax objection appeal is filed by a person when they think that the CRA was unjust with the documented facts and applied a wrong tax law on them. In case you have filed for such an appeal, it is recommended that you hold onto your business tax returns until the appeal and the matter which is raised is cleared.
Another important aspect to keep in mind is that disposing your business tax returns before six years is not a decision to take on your own. As per the CRA, if you wish to dispose your records before six years, you need to get a permission of the tax service director. Also, if you dispose them before six years without a permission, then you can be prosecuted by the CRA. So if you need more clarity on how to go about the process, get in touch with our tax experts.
We go about our daily life managing our personal finances with ease. All we need to worry about is our regular recording of incomes earned and expenses made. But when the time to file our tax returns arrives, we get worried. Taxation is one aspect of financial management that needs extreme accuracy to avoid major discrepancies and avoid attracting penalties from CRA. Therefore, this coming tax season, do not worry and instead hire an accounting firm to take care of your personal tax. But before you do so, consider the following things.
The Consulting FeeSince we are already talking about managing finances, it is best to start with the aspect of money. No accounting firm is going to provide you with personal tax planning services for free, there will be a cost to it. Find out the cost. Is the firm charging by the hour or comprehensively? Generally, the fee differs from firm to firm, based on the level of seniority of the accountant that is assigned to manage your personal taxes. So, find the different fees of different firms and then choose the one that is suitable for you.
Service SpecialtiesAccounting firms generally have various accounting services and personal tax planning will be one of them. Apart from different services, accounting firms also specialize in services for specific domains of business. For example, an accountant who specializes in taxation services for businesses may not be proficient in personal tax or vice versa. So choose a firm that will be able to manage your personal taxes in the right manner.
CredentialsWhen hiring a tax consulting firm, you need to look for specific credentials. Not every accountant is well-versed to handle taxes. Tax management needs adequate knowledge about the tax rules and regulations. In Alberta, an accounting firm needs to have Certified Tax Preparer’s certified accountants. Checking these credentials before hiring an accounting firm is necessary.
ExperienceLastly, you need to know how many personal tax consulting a firm has done before you opt for it. Hiring professionals with prior experience in taking care of personal taxes is always better than hiring someone who is doing it for the first time. When looking for an accounting firm, make sure the firm has at least five years of experience in handling personal taxes.
You may think that this coming tax season would be easy and you can manage on your own. But why takes chances? Hire a good accounting firm to ensure that you do not face any issues this tax season.