Every business, whether small or big, needs to have a proper accounting process for the smooth running of finance in the business. With the lack of proper accounting processes, your business can face various problems with handling your finance. To handle your business accounting with care, you can hire an accountant. The accountants will give you proper advice on your business’ financial stability and will handle your accounts properly to keep them updated. Most of the business owners don’t have expertise in the field of accounting, so not hiring an accountant can create a mess for the business. There are some problems that you, as a business owner, will face without the proper accounting process.
1) Delay in Paying Invoices
A problem you would face when you do not manage your accounts properly is delaying in payment of invoices. You may cross the due dates, which will affect the image and reputation of your business. What more threatening is that you will have to pay the fees for late payment. Your credit-worthiness will be decreased and it may lead to losing a supplier. The more complex your payment becomes, it will be more difficult and important for you to manage the accounts. Having accountants for managing the accounting process of your business will make you pay any amount on time.
2) Managing Received Payment Inefficiently
The accounting of your business will not just manage the outgoing amount, but it will also keep a record of the amount received. You will be receiving payments all round the year and you need to manage them with keeping their records. Managing the cash flowing into the company would help you to track the progress of your business. If you don’t manage the cash flow into the business, then the customers who pay late amounts and your invoices can be overlooked. This could have a disastrous effect on your business.
3) Inability to Make Monthly Financial Reports
A monthly financial report is very crucial for a business to perform well. The monthly financial report will help you to track your financial activities more efficiently. You may think that maintaining a financial report yearly or bi-yearly would be enough, but that is not true. Financial reports will have all the financial activities of a month, like the in and out cash flow of your business. You will get the information on monthly activity and you will have an eye on the financial issues like slow payers and over sites that are payable. An expertise accountant will be very helpful in managing the accounting process of your business.
4) Poor Information Management
Well-managed accounting information will help you to know how your business has performed, what are the aspects that you can improve and how the future of your business would take shape. All the business measures and prepare their plan according to the balance sheet that has been prepared. Without the proper information on your accountings, it will be difficult to put out a plan on the business. Not maintaining proper information on the accountings will eventually lead to causing more problems for your business. So better keep an updated accounting process.
5) Typos and Errors
As business owners are not experts in accounting to handle them, and being a business owner, the main focus would be on the growth and maintenance of the business. There are many things that business owners need to take care of, and focusing on finance would not be possible. So it can lead you to put incorrect data or to fail to update data. Such mistakes can lead to unwanted consequences for your business. Wrong data can scare your investors and cause very serious problems. Appoint accountants expert to make sure the data is filled in with correct numbers on time.
6) Lack of Accounting Process
When you have an active review of the financial statement, it becomes very easy for you to pick up on any issue in finance. Not keeping in check with your financial reports can lead from someone in the business to make a fraud. Data monitoring is crucial and needs to be done by an expert that you can rely on. You are not supposed to do everything in the business by yourself. To make sure you don’t have such frauds in your business ensures the consistency, transparency and oversight of your business’ financial reports.
7) Not Making Tax Payments on Time
This is one of the most common problems in the accounting of a business. Sometimes businesses are not able to reach their tax demand and hence, it leads to the closure of their business. The main cause of late tax payment is improper management and planning in the accounting department. Having expert accountants for tax payment will prove very beneficial as they know how to plan for it and there are very few chances that experts may forget to file tax returns.
8) Improper Payroll Management
One of the crucial and complex parts of a business is payroll. The only concern with payroll is not just paying your employees appropriately, but you also want to make sure that the payroll taxes have been taken care of adequately. You don’t want to make a bad impression in front of your employees. At such crucial times, the better way out is to call in expert accountants to manage the payrolls efficiently.
The accounting process of a business needs to be appropriate for smooth and easy workings. If you are not maintaining your accounting process, then be ready to face the above-listed problems. To save yourself from such problems, you can hire the best experts in Edmonton from us. They will provide you with adequate services with significant advice for your business’ financial stability.
Business budgeting is the most essential factor in running a business. Budgeting is the central working system of a business. Creating a business budgeting is not an easy task to be done. To make your business run smooth, a budget needs to be prepared. While creating a business budget, the company’s get fussy on how to improve its new budget plan. An improved budget plan will eventually result in better functioning of the company. To make a good enhanced budget, business firms that are already settled need to make a future budget based on the current trends. And for those whose business is a start-up needs to make assumptions on geographical area, local business, and hours of operation. To help you in improving your business budget, we are providing you with some tips that you can follow.
1) Make the Budget Flexible
The business budget made needs to be flexible. As there are changes that take place frequently in the market, and that changes can affect your business. In such times you should be careful, so your business should not get affected severely. To save yourselves from such a crisis, the budget needs to be flexible, so you can use it at such times. For flexible a business budget, you can’t make decisions on the basis of some guesses made months before. It can lead to faulty decisions. Creating a budget on the basis of outdated information can have backlashes during times of crisis.
2) Try to Get Fundings
At whatever stage your business may be, funding from resources is always helpful, especially for those who have just started their business. Funding is never harmful to any business until you have planned how to utilize it efficiently. For those who are starting a new business can ask their friends or family for funding. Businesses, whether small or large, can always target to grab a big investor for their business. Funding in the business budgeting gives it an additional boost. When you are trying to get fundings from a prominent investor, make sure your financial planning is ready. Because the investor will like to fund their money in a business that is worth investing in. Their belief in investing in your business should not dwindle. A financial plan will show them what you are going to do with their fundings and they will be satisfied too.
3) Have a Clear and Early Communication
When preparing a budget, you should have communication without any barrier with all the departments of a business firm. The communication will ensure about what are the goals being set by a department, and it will help you to further decide about the perfect budgeting. The communication will help to remove any error that may cause afterwards. Communication will also help to ensure the alignment between the companies organizational and operational strategies. Communication is always the key.
4) Involve the Whole Team
Involving the whole team in the making of business budgeting is very significant. When budgeting is a team effort, it helps to make the process of budgeting easier. With everyone on board from the team, it will help to have a clear understanding of the goals of every department. Except for your finance department, involving people from the various department will give you a clear understanding of the needs and goals of every team. This will help you to have accurate data for making perfect predictions and setting a realistic budget for the business. The whole team will also provide different perspectives for the business and budget on where it is now and where you need it to be in the future.
5) Have a Plan for any Critical Situation
Making a flexible budget is very helpful for any crisis that can be faced by the business. To tackle more effectively with such a crisis, what you can do is predict the negative impacts that can hit your business. Review the market externally and economic trends that can severely affect your business positively or negatively. Forecasting for such events can help you to pivot as per the situation and need with the help of new data. This data forecasting will help for your business budgeting as the data will e on what’s happening in the market and not on what has happened previously.
6) Consider the Profit and Cash Flow Goals
Considering profit and cash flow goals is vital. Goals for both profit and cash flow should be set differently. Because of both the thing, cash flow, and profit are very different in measuring, and both require a different kind of attention to control them. Your business budget will not be useful without profit and cash flow goals. You will have to set realistic targets for both profit and cash flow goals. This would help the business to miss from missing any of its financial objectives.
7) Use the Right Software for Budgeting
New business budgeting software has come into the fore. So no more, you have to rely on Excel or Spreadsheet software to make your budget. New budgeting software provides some amazing tools for budgeting that makes your work easier. Excel and spreadsheets can be irritating at times so you can step back and opt for the right business budgeting software. New Softwares provide you with more flexibility, improved security, and cost savings. Also, current software tools help you to compare your current year budget with your previous year’s budget. The software allows you to make accurate predictions and can make your budget quickly with minimal errors.
Business budgeting is the backbone of a business, and by using such tips, the business budgeting will become firmer. Your business will be able to work efficiently throughout the year. It will also protect you from any critical situation if you follow the above tips. So make sure your business budgeting is improved and is based on such parameters.
If you make instalment payments on your income tax, your payments are due four times throughout the year on the 15th of March, June, September, and December. As November is about to end, we would like to know if you are ready for year-end tax filing or not.
A Canadian tax return consists of reporting the sum of the previous year's (January to December) taxable income, tax credits, and other information relating to those two items. The result of filing a return with the federal government can result in either a refund (money owed to the person or corporation filing the returns) or an amount due to be paid. There is a penalty for not filing a tax return. You have to report your business income on an annual basis. Before focusing on how to get prepared, let us first look at a few other year-end tax filings related information.
Fiscal Year-related Information
In Canada, you have the liberty to choose your deadlines for tax filing and also your year structure. But this provision isn't meant for all. Take a look here:
- For sole proprietorships, professional corporations that are members of a partnership, and partnerships in which at least one member is an individual, professional corporation, or another affected partnership, your business income is generally reported on a calendar-year basis.
- If you are a sole proprietor or if you are in a partnership in which all the members are individuals, you can elect to have a non-calendar-year fiscal period. To make this change, complete form T1139, Reconciliation of Business Income for Tax Purposes.
Approval isn't guaranteed. The Canadian Revenue Agency (CRA) might reject your application if it believes that your request isn't based on "sound business reasons." All partners must choose the same fiscal year-end if you're in a partnership. You can't change the fiscal year-end if one of the partners is a corporation or is in another partnership.
- A corporation's tax year is its fiscal period. A fiscal period cannot be longer than 53 weeks (371 days). A new corporation can choose any tax year-end as long as its first tax year is not more than 53 weeks from the date the corporation was incorporated or formed as a result of an amalgamation. The corporation has to file its income tax return within six months of the end of its fiscal period.
When the fiscal year ends on the last day of the month, the return is due on or before the last day of the sixth month after the end of the tax year. When the fiscal year ends on a day other than the last day of the month, the return is due on or before the same day of the sixth month after the end of the tax year.
If your business fiscal year-end is not December 31st, you must combine parts of the two fiscal years. This might require estimating your income from your fiscal year's end to December 31st. Most sole proprietors and partnerships choose a December 31st fiscal year-end for this reason.
The Rule for Filing Returns
The basic rule for filing your Canadian corporate tax return is that you must file your return no later than six months after the end of each tax year. So when your T2 tax return is due depends on your corporation's fiscal year-end. If, for instance, your corporation has a fiscal year-end of June 30th, your Canadian corporate tax return would be due on December 31st (the last day of the sixth month).
If your corporation's fiscal year-end falls on a date during the month rather than at the end of the month, then your T2 tax return Canada be filed by the same day of the sixth month after the end of the tax year. If, for instance, in the example above, your corporation's fiscal year-end was June 16th rather than June 30th, your Canadian corporate tax return would be due on December 16th of that year.
Checklist for Year-end Tax Filing
Now coming back to the question, "Are you ready for year-end tax filing?" The easiest way to get ready is by following this checklist thoroughly.
- Check the amount that has to be paid. Make sure that you don't have any unpaid installments from the previous three deadlines.
- Check you have all the necessary documentation. The types of records you will need to complete a tax return may vary depending on whether your business operates as a company, a sole proprietor, or as a partnership.
- Make a list of all the business deductions and keep the list ready. Deductions help reduce your taxable income, which generally means a lower tax bill.
- Select your method of filing. Do you want to file your taxes online, or will you do so physically to the CRA? This will help you plan everything in time.
- Ensure that you have enough money in hand or in your bank account to avoid getting rejected.
- File tax at least ten days in advance to avoid any confusion or mistakes.
The CRA sets strict due dates for tax returns and payments, and failure to meet these deadlines can result in owing interest, fees, or penalties. As a taxpayer, it’s important to keep apprised of what the CRA expects and when. If you aren't good with dates and can't manage year-end tax filing, leave it to us. Our experienced tax accountants will not only ensure that all your tax installments are paid on time, and you get the right returns but also ensure that your paperwork is on point.
Financial analysis is essential for all businesses to make quick business decisions and determine the future course of action using relevant and useful data about the strengths and weaknesses. Today, the accounting process has been made convenient, even for people not well-versed in accounting, by the use of accounting software and computer programs. One of the most common programs being used for accounting is the Excel spreadsheet. Many small- and mid-size businesses have been using Excel spreadsheets for calculation of their accounting books. But a lot of in-house accountants in Edmonton don’t know how spreadsheets have limitations that keep them from accurate accounting.
Consider this before praising spreadsheets; Accounting has been here since the beginning of early civilizations. The earliest accounting process or calculation dates back to ancient Mesopotamia (c. 3100 BC). Excel, on the other hand, was released for use on September 30, 1985. Do you feel the gap yet? When Excel came out, it wasn’t even specified that the program was built for proper accounting rules and calculations. Business mathematics is a twisted knot and requires skills of accountants in Edmonton to prepare accurate profit and loss statements. There are issues with the Excel spreadsheets that affect the accounting procedure of your firm and may result in erroneous information.
1) Poor Organization
Legitimate organization of transactional data is the first important step of accounting. If the data you have is not organized in proper categories and books, it will get obscure when you are actually trying to put the data to use for decision making. In this matter, spreadsheets are ponderous. For conveying data on the spreadsheet, you have to deliberately make your own grouping of files and information to organize them separately. In that case, accountants in Edmonton would still be better with pen paper where they can have different books for different categories of transactional data. In spreadsheets, sharing of data among different sheets is difficult. So if you’re taking a transaction from the cash book to use it in the profit and loss statement of your firm, you’ll have to re-enter the whole data manually in the other sheet. Spreadsheets make it challenging to transfer information on them from another application storing business data. Also, not all the details can be fit into the spreadsheet, so the data is hard to share with your tax preparer or your accountant for better results.
2) Growth Restrictions
Spreadsheets can be feasible to work on when the business is just starting up, and the calculations on the data are not too complicated or acute to regulations. Simple arithmetic calculations can be easy, but when the company grows, the calculations become complex as business mathematics is different than ordinary arithmetic used in calculating profit on a range of products. Suppose you have to engage in transactional data that has to be calculated between two different currencies. This is going to be troubling for you because the spreadsheet won’t do anything for you in this case. Spreadsheets were not made to be managing complex business data and calculations that require accountants in Edmonton on a register with excellent bookkeeping strategies. Accounting standards and cash flow are not understood by spreadsheet programs, and you will face problems when you try to add a business equation to the mix.
3) Poor Accuracy
Spreadsheets are old codes and require human help to make them work on the data that you provide. On spreadsheets, when you want the sheet to convert raw form data into calculated outputs automatically, you are required to write formulas for the spreadsheet to understand which way the calculation proceeds. It might be easy to come up with formulas for the most basic of calculations, but when your business grows and the equations of accounting become perplexing, it is difficult to come up with formulas that can represent the actual business equation to the spreadsheet. Even if you write a formula, it is highly possible that the formula is taken as something else at some points of the data and the whole calculation has errors that might not be found out until it's too late to rectify them. Not only do the errors make it unsuitable, but spreadsheets also have no idea about the accounting data, unlike human accountants who know about the accounting standards and will point out any errors you have committed in the balance sheet.
4) Storage and Security Concerns
When working on spreadsheets with your accounting data, all the data that you have acquired until now has to be saved on the computer itself and requires saving the data before you shut down the system. Since all the data is on the computer and is being conveyed to the spreadsheet in question, it has to be stored carefully so that no data is lost in the net of different programs. So if the computer suddenly shuts down while the sheet was still under use, all the data that you had accumulated will be lost, and you will have lost vital information to be analyzed for your firm. When you save data on electronic devices, there is always a chance that the data might get stolen if the device is stolen from the premises. Since hacking and malware attacks the prevalent, security concerns are heightened for crucial data about your firm that you wouldn’t want some people to have a look at. Even if you’re saving data on the cloud instead of your hard drive, it is only relevant to the last backup that you have made.
"The word accounting comes from accountability, if you’re going to be rich, you must be accountable for your money"- Robert Kiyosaki
All businesses of any scale require accounting. Accounting is the language of business that develops transparency for the everyday transaction and a properly working system. Every business proprietor must be concerned about his account books. Even if you hire a professional for your business accounting, you must know how accountancy works in order to understand the books that your accountant is creating for you. Accountancy is the process through which the net profit or loss of the organization is determined. It also helps you point out the transactional errors that are causing you to lose money or business. Accountancy is highly proportionate to your financial management. A lot of companies fail in the long run if their books lack clarity or information.
Several business owners restrain themselves from accounting due to incomplete knowledge. Many of them stay away from it just because it includes working with numbers. Accounting is the factor of a business that can never be ignored.
A set of rules used for the documentation of everyday transaction is known as accounting. Accounting gives the analysis of the working conditions of an organization and helps you measure the future opportunities or downfalls so that you can take considerable actions.
Managing your own business accounts can be a tough job if you’re bad with numbers, but at least knowing the skills will help you with the proper rules to begin your bookkeeping.
Economic Entity Assumption
The first thing that you must take care of before beginning to cross-check your books is the economic entity assumption.
Economic entity assumption is a mandatory concept used in business. It requires the business proprietor to separate the data from their business transactions and personal finances. This is legally required by the business standards and must not be ignored. This concept ensures that there is no interface amidst the operations of the business firm and the personal finances of its proprietor. As it would give the proprietor a chance to show expenses and losses that were personal and the law doesn’t allow it due to taxation.
Another factor that economic entity assumption points to is that the bank accounts of the owner and that of the business must be separated into two different accounts. This will keep the personal and business transactions discernible to the accountant. Depending on your business structure, economic entity assumption will be enforced upon you by law if you have a limited liability company. This is to make sure that the transactional data on the ledgers are being created solely by the business which is seen as a separate entity from the proprietor.
Order and organization are what keep the world from spinning into chaos. So one of the essential skills that you must have is organization in your firm. A business makes a tonne of transactions throughout a business accounting cycle, and as a proprietor, you are responsible for being in knowledge of all of them with an eye to discern one transaction from another. There are principles to organization that help you make sure you are in close sync with your transactional info.
The first principle that you must accept to be organized is to avoid cash transactions as much as you can. Cash transactions leave behind very little or no information about the transaction that is required to document the transaction in your books. Business accounting requires categorizing transactions in the books, but the payments made in cash without proper proof or description of the transaction makes it difficult. If you’re gonna have to make immediate transactions, its better you stick to credit or debit cards, bank transfers and checks. This way, you won’t have to rely on your memory or a useless little receipt to define what the transaction was about. You can easily record your transactions from the bank statements you will receive.
The second principle that you must not forget about is to have a timely record of your transactions. Whenever a transaction occurs in your business, make it a habit to record that transaction at the very moment, and on the same day, you must enter the details of the transaction into the proper books of your business. If you’re bringing out the books from 6 months earlier to analyze the current position of your business, the decisions you make would also be bygone. Making perfect decisions for your business requires the transactional data to be regularly updated in your books and the most recent data must be used, which is not more than a month old.
If you want to do your business accounting yourself, bookkeeping is a must. Even a basic idea of bookkeeping is necessary in order to record and store transactions in an orderly manner. Bookkeeping is the process in which all transactional data is documented, categorized and recorded in books for separate transactions.
Every business requires bookkeeping to help it know what the problem is if an issue occurs. It is important that you always record every transaction into proper bookkeeping records so that when the time comes, you have not lost small but crucial data by ignoring bookkeeping.
Bookkeeping begins with the collection of all the transactional documents like bills, receipts or bank statements. These documents then provide for all the initial data that is supposed to be recorded in proper books. The bookkeeping records are then supposed to be turned into analytical data which take the shape of financial statements like balance sheet, profit/loss statement, cash flow statement or income statement.
The basic principles of business accounting may be taken care of by you. Collection of data from every transaction and recording them into different books can be done easily by the business owner who is present during every transaction. But when it gets to the proper analytical statement creation, the technicalities of business accounting may not be easy to get a grasp of. If you wish to have a professional to have a look at your numbers, contact ATS Accounting for queries.
Many small and midsize businesses get hassled from the time of tax filing season. Many times the business owners are troubled by the amount of taxes they have to pay, along with the expenses that were made for the development of the business and maintenance of machinery in the business. The general thought of any business owner is to save enough from the business transactions that allow them to have financial freedom even after filing the taxes. This is the reason why you should know about the tax deductions that your business is liable to. There are many transactions and purchases that are not supposed to be listed in the tax filings. These expenses are done to run your business with all the machinery and manpower you need. So the business owners must take care that they note down every tax business deduction they can make by law to protect their capital for business operations and development. Such expenses are not considered in the tax reports of a firm. So what are the top business deductions that you can make from your tax filing?
1) Car and Truck Expenses
Almost all businesses have to get raw materials, goods or workers in and out of the workplace or factory. The cost applied in the use of vehicles and gas used for the business as a mode of transport can be deducted from the taxes you pay. Since vehicles used for the transit of raw material or delivery of goods to customers are taken as capital invested in business operations. If you bought a vehicle in a financial year, a percentage of the cost of the vehicle is deducted from the taxes. The amount of gasoline used in the vehicles used by a business can also be deducted from the taxable amount. Apart from this, even if a firm lease a vehicle for certain tasks and deliveries at hand, the cost of transportation can be taken out of the business deductions.
2) Salaries and Wages
When you’re running a business that requires the use of manpower. The salaries and wages that you pay to the employees are not supposed to note in the tax filings. All the payments made to your employees like salaries, incentives, bonuses, commissions and retirement funds can be deducted from the tax. Although the payments that you make to the sole proprietors and business partners are not under the business expenses bracket so you cannot be in your business deductions account.
3) Contractual Labour
Many businesses use freelancers and contractual labour to get some of their work done. The salaries or wages that you pay to the labourers or workers. There has to be some paperwork from the contractor that shows proof of you hiring labour on a contractual basis.
4) Workplace Supplies
The supplies used in operating business every day is a deductible cost. Cleaning supplies, toilet supplies, postage stamps, office stationery, vacuum-cleaning cost, etc. are all deductible from taxes.
This is the most important business deduction from the taxes you pay. Depreciation is an amount deducted from the accounts of machinery, property and other such assets that depreciate in value with time. A piece of machinery in a small factory, for example, is used every day and the parts of the machine go through wear and tear. So when the machine is sold out to attain capital for new machinery, the cost for the machinery won’t be the same as it was bought for. So the depreciation in value of assets and business property can be deducted from taxes as they are business expenses.
6) Rent on Business Property
If your small business uses a place on rent for everyday operations, the rent on the property can be fully deducted from your taxes. Many businesses like boutiques, salons, spas, etc. use the rental property. The yearly rent on the property is paid out of the profit which makes it a business deduction.
The everyday operational activities of a small business or a midsize business require utilities that are charged for by the authorities. Electricity, for example, is fully deductible in the taxes. Another business deduction that can be deducted from the taxes is mobile phone bills used by you or you or your staff for the business. If you have a landline for domestic use you cannot deduct the bill from the tax but in the case of a second line for business use, it can be deducted as business expenses.
8) Other Taxes
Other taxes, like personal taxes that are not income tax or small business taxes, can be deducted from the tax filing list. Licensing and regulatory fees along with taxes on a property in the name of the business are tax-deductible. Your employer taxes and state unemployment taxes are deductible from taxation. Self-employed business owners, however, cannot benefit from tax deduction from half of their self-employment tax. It is a gross deduction on your income tax returns.
Insurances are another important business deduction that you can make from your taxes and save significant amounts from your taxes. All kinds of business insurances like, malpractice coverage, flood insurance, cyber liability insurance, business continuation insurance, and the owners' insurance cover is counted under business deductions. A small business may also claim a deduction of 50% of the health coverages for employees if you provide one.
Common repair jobs in the office building or manufacturing plants are deductible from taxes. Although the depreciation value of the machinery and other assets are accounted for in the business deductions, urgent repairs that might sometimes become fatal accidents can be deducted.
Business owners or staff might require time to time travelling for a meeting with clients or for checking a machinery unit that they have sold. If you or your staff travel out of the state for business, transportation, flight expenses and accommodation are fully deductible from taxes. Although the local commute is non-deductible.
We all love the numbers that get added to our bank accounts every month or every week. If not the numbers, we love the payroll cheques that we receive regularly. As a worker, the payroll matters a lot. But what happens if you can't pay your employees well or there are some issues with your payroll system? Your employees may end up feeling negative in several ways. They may also be demotivated to work. To avoid these issues, you must ensure that you don't make any mistakes when it comes to your payroll system. Make your payroll system a perfect one by avoiding the following mistakes.
The inconsistencies can be anything, right from improper salary payouts to managing garnishment requirements. Whether your company is new or well established, it’s important to be consistent with your payment schedule. The most common schedules are either weekly or biweekly, but some companies choose to pay their employees semi-monthly or monthly. Based on whatever your organization's policies are, make sure you pay your employees on time, every month. Don't let people ask you or the finance department several times to follow up on their money. If you fail to do this, be ready to face the bitter behaviour and attitude of your employees. And you won't be able to blame then for anything then.
Not Staying Current
Sometimes, the issue may not be with your internal payroll system. You need to stay in line with the latest laws, rules, and regulations around payroll system in your area to ensure that you don't end up in any problems. Payroll laws and regulations are an ever-changing landscape. It’s important to be aware of new laws that are passed to ensure your company is maintaining compliance. When you miss a new law, you stand to lose invaluable time trying to amend any payments you have made using the previous law or rule. You can ensure compliance by creating a calendar that reminds you to check for updates to all relevant laws. And of course, if your employees find this out, they'll be upset with you and may even sue you for the same.
If your employees are working extra for you, make sure you acknowledge them. That's where the overtime incentives come into the picture. Specific guidelines must be followed when determining overtime pay and miscalculations can be costly. Employee litigation has been a rising trend in recent years where employees have claimed to be misclassified and treated as "exempt" employees and therefore not entitled to overtime. When tracking work hours through our time and attendance platform all hours (including overtime) are recorded and collected on organized time sheets that make calculating hours simple. And with this also, respect your payroll system's calendar. Pay your employees for the overtime in the current month at the end of this month and not after a quadrant. Skipping
When your employees work for you, they are eligible for various benefits and incentives. These benefits vary from organization to organization. However, some basic offers are established by the government that every organization and employer needs to respect. If your employees work better than they are expected to, you have to reward them rightly. And when you do, you need to maintain the right records so that the books of accounts look properly managed.
This is one of the biggest mistakes. Confusing two or more names and paying those people inappropriately is nothing but a blunder. This may happen even more when you have two or more people will have the same or similar names. Moreover, if you recently appointed a new person to look after the payroll system, there are higher chances that they may end up making this mistake. No matter what the scenario is, this mistake should be avoided. When a person is paid incorrectly, it sends out a wrong impression to your employees that your payroll system isn't efficient that you end up making such silly yet massive mistakes. Therefore, be very careful with what you do. When you maintain accurate records, this mistake will likely not happen.
It is 2019, and not everyone is made for the 9 to 5 life today. People seeking to do their minds are everywhere and entrepreneurship seems promising for a life that doesn’t need a boss. Starting up your own business as a source of income is what many of us seek, but things go sideways for some. Reasons could be someone being treacherous or employees not liking the form of your work. A lot of times, the reason is just incomplete for the expenses you make for the business to run smoothly. Sometimes, in putting a business on the tracks and making it run, the capital input of the company dries in the first few years of initiation. This is the result of lack of experience for many young entrepreneurs.
When starting a business, the basic flow of thought of any beginner is towards the work that they will be doing in their business facility. For the financial management of the business, the easiest option would be to outsource your accounting through business services. But, there are some aspects of running a business in which the expenses go unnoticed and the business ends up having more expenditure than its profit. Hidden costs that can mess with the growth of your businesses must be on something you can’t turn a blind eye from.
Licenses and Permits
The days of barter are gone, and everything you earn has a share for the government as taxes. So eventually, the government needs to be informed before you set your foot in the market. Every new business needs permissions from the government and the local business community. Licenses for sale of objects and functioning hours are required for you to legally be on the track. Licensing and permits are seldom one time fees and require renewals as per the nature of your business. Always set aside some money for the renewals. You can join the local business networking organizations for benefits in the market and update of events and dates. Or you can hire a business service for consultation on starting a business.
Facility and Utilities
Running a business comes along with the requirement for a space to formalize your ideas into working for your profit. A start-up with just the founders or partners might not need anything more than a home office if its an online business. But as the nature of the business changes, having a professional space for working away from daily life becomes an obligation. Also, the utilities of such a facility that houses your work staff and other electronic gadgets, like computers, can run heavy on your pockets while they go unnoticed. Before you rent an office space, ask yourself what kind of facility is required for the nature of your business and see if a temporary office space works? Hiring a bookkeeper from business services for the proper calculation of your expenses can save you time and money.
Maintenance of Equipment and Upgrades
Even a small retail shop on the street corner requires equipment for functioning. At the beginning of a business, most entrepreneurs are into the development of their product or services and focus on the apparatus involved in the production and sale. In the enthusiasm of production and management of supplies, the smaller factors of the business, like the office equipment (computers, fax machines, copiers, etc.) and maintenance of the facility, are neglected. Sometimes, even the opportune equipment up-gradation in your workspace can save you future financial troubles on their maintenance. You can buy second-hand products and office equipment like desks and chairs on websites like eBay. However, you should never neglect the computers and laptops in your office and keep upgrading them according to the changing tech in the market.
Employees and Payrolls
Taking care of the people that create the wheels of your business and do their best to keep it rolling must be the most important point of focus. Proper budgeting of the employees who work under you is necessary to keep the running costs under control. The salaries, leaves, health insurance and training costs add up to external expenses. For the proper management of the compensation your employees get, you can hire a business service for payroll management. If you fail to provide the proper work environment, satisfactory salaries or wages and added benefits, you will most likely lose some good workers. Replacing an employee costs a part of the previous worker’s salary and might even require giving away more compensation to the replacement. Provide perks in your office space like refreshments for zoned out staff or allowing casual dressing with flexible timings.
Inventory loss or shrinkage is the loss of goods of sale to things like theft, damage, burglaries or faulty products. Shrinkage costs losses up to CA$ 4 billion every year to an average of Canadian retailers. Shrinkage costs add up over time and come up as a heavy loss on your hand. Inventory loss can be caused by both customer and employee theft. Prevention of shoplifting by employing security measures can decrease the amount of shrinkage. Insuring your warehouses from accidental damage will help you cope with the loss if the goods were lost to an accident like fire. Give allowances to employees to shop at the workplace for leaner rates. It will induce a sense of ownership and prevent internal thefts in your facility.
Running a successful business requires money and most of all, it eats up all of your time. Time is the most important resource for all of us. Tasks that are time-consuming and non-productive at the same time, are going to be an opportunity-killer for you. Tasks like bookkeeping can be outsourced to hired specialists from companies with business services. While the work is on someone else’s timeline, you can use the time to find opportunities for expansion or maintain a work-life balance to keep your happy juices flowing.
Starting a business is not a mammoth task but ensuring its success is. Not having complete information about the obligatory procedures and the risks involved in the earlier stages can lead to the business failing miserably in the market. If you’re someone setting off on a journey of business and entrepreneurship, hire a start-up consultant from a company providing business services in Alberta.
Your business's accounting system is based on the bookkeeping process established to manage your company's funds. Bookkeeping records the financial transactions that are carried out during the course of business. When your business finances are in order, it becomes simpler to equip strategies that would bring success to your business. Here are a few strategies that would assist your business to achieve perpetual success.
Maintain Separate Business and Personal Finances
When running a business, it is important to engage organization funds for business use only. Using them for personal purposes not only affects the quantity in your business fund but also can invite legal complications. It could be a reason to pierce through the corporate veil and harm your business finances. Small businesses are managed by limited people, which makes it easier to cause a default whilst accessing the finances for the business. You should make it a point to open separate accounts each for personal and business finances. Using distinct bank accounts and credit cards for your business will not only help during tax filing processes but will also help you distinguish between the nature of your finances, thus uncomplicating the task of bookkeeping.
Hold Internal Control in Place
Having internal control over the company’s bookkeeping procedures and policies can expand your control over various finances and outtakes occurring in the business. When a transaction takes place, it is better to have an employee take down the transaction while another collects the fee. A third person can authorize the dealing. This measure of dividing work amongst the employees would keep more than one person in the loop and maintain accuracy while inputting data.
Plan Your Taxes Through the Year
Keeping in touch with your tax filing dates and requirements will not only save you time but also help you organize your expenses. You can plan the tax filing amounts and strategies well in advance to implement and pay smartly to avoid any costly penalties or burdens.
Follow a Specified Accounting Method
The standard accounting systems comprise of two accounting methods to be used in your business: cash basis accounting and accrual accounting. In the former method, cash is recorded when it is received by the business. This method is usually recommended to be used in businesses that strictly require making cash payments. In the accrual method of accounting, the matching principle of accounts is implemented, where the revenues and expenses are recorded as they occur. This method could be complicated because of the various rules it requires to be followed. Nonetheless, accrual accounting is your best choice while you opt for invoicing to clients. Your bookkeeping strategy should be built with an appropriate method that suits your business.
Track Expenses with Accounting Software
Recording expenses on a timely basis can be effective in many ways. From assisting in tax filing to helping in maintaining the books, a thorough record of the business finances is promising. Different accounting software are available to be used for tracking expenses and managing your accounts. Planning your expenses well in advance and building categories for them will ease the bookkeeping process. Choose to use an accounting software system that will not only help you with your current bookkeeping requirements but extend to a larger scope of work needs.
Focus on Tracking Performance Rather Than Plans
The best bookkeeping strategy to put in place is tracking the performance rather than plans built for the business. Most businesses chart plans or projects to undertake, which are then used to track the company's ongoing progress. When a plan is put in place, the financial budget of the business would be tracked and manufactured accordingly. On the other hand, if more focus is engaged in tracking the overall progress, it gives you a wider scope to compare financial figures compared to previous numbers and conclude strategically. Evaluating financial data monthly assists in building bookkeeping strategies for better results. For example, if growth in a company's finance margin over a period is visible due to a particular product, decisions of investing more into it can increase the annual cash flow.
Access Real-Time Data
Immediate access to the financial data of your business gives a larger scope to planning your company's finances. Your business may require you to deal with various critical information of outstanding account receivables or payables. With access to real-time data, it would be easier to develop strategic decisions and evaluate the current status of the business.
Follow Up on Bank Statements
Your bank statements are a compilation of the balances in your account and information on the complete stack of transactions. Conducting regular follow-ups makes it easier to review business proceedings thoroughly. Ideally, you can compare the information you’ve put in your company's books with the bank statement. This ensures a check over the presence of any discrepancies or any unauthorized transaction that may have taken place during the course of business.
Structure Accounts in Order
Structuring accounts according to categories eases the bookkeeping process. Well-categorized accounts would also make it easier to go back to them in the future if the need arises. The business’s receipts, records and any other information important for the bookkeeping process should be maintained in an orderly manner to suffice any requirements. This ensures efficient bookkeeping and aid in picking out any discrepancies.
The basic strategy your company should follow to is avoiding making bookkeeping mistakes to accomplish continuous success. Having said that, the above-mentioned strategies when implemented with prior consultation can help you achieve greater results. While you consult professional accountants, make sure to give them a true and fair view of your company to achieve the best results.
Accounting and bookkeeping are practices that can be tedious. These functions although increase the efficiency of a company and add to the economic process of the nation. The practice of outsourcing accountants’ service has been in the system for a long time. Outsourcing is the practice of having a certain job function handled outside the company. It is just one means to cut costs and help the daily work of business processing. Managing the accounting processes for a company includes various functions such as updating transactions and maintaining the essential accounts daily. You may wonder if it's the right choice to outsource your bookkeeping services. But rest assured, it is beneficial to outsource the accounting and bookkeeping of your company, and here’s why.
Ease of Availability
Hiring a full-time or part-time accountant may not be an easy task. Accounting and bookkeeping are processes that require to be recorded daily to maintain the right set of accounts. An in-house person may not be available at all times which can stun the ongoing process. Outsourcing an accountant, on the other hand, would be quicker and efficient. There is a guarantee of them being available for 365 days of the year and around the clock. With their expertise and well-equipped team, it would be comparatively easier for them to complete tasks and submit the data and the required accounts and reports on time. In contrast to which, it may be cumbersome to contain the in-house employees and extract necessary accounts on a timely basis. Also, being an employee of the company, the in-house accountant would be entitled to holidays and off-days from the company.
Access to the Latest Tools
Today, accounting is best done when you have access to the best accounting software and tools like QuickBooks. As a small business, getting the paid version of this software can be expensive. Plus, finding people who can efficiently work with these tools can be difficult and time-consuming. Professional accountants are equipped with advanced accounting software to cater to the companies requirement of personalized reports. It would take time for the business to make important financial decisions. It is also easier to obtain any information related to accounting and payroll which the professional accountants would have knowledge of. Outsourcing to the right accountant will not only provide you with expert staff but you will also get access to the latest accounting tools.
Reduced Employee Cost
Outsourcing your accounts to a professional accounting team will reduce your cost dramatically, and allow you to concentrate the limited resources on your core business. You would have to invest zero employee cost on the accountant. With the benefit of paying only their fees, your company would not have to worry about expenses like paid leaves, insurance, payroll taxes, incentives, bonuses, and other employee benefits. You can eliminate overhead costs connected to the services you receive, and thereby deploy the resources at the area where you require to maximize its leverage.
Focus on Your Core Business
Most businesses don’t have accounting as their core competence. The growth of a business relies on the increase of the sales and service of the company which ultimately would lead to profits. Putting away focus from administrative tasks like accounting and bookkeeping gives you ample time and resources to spend on your core business. A professional outsourced accountant would be able to handle the accounts at the back-end while you work at running your company. It would make it simpler for you to focus on your clients and core processes for the business while they manage the accounting of your company. Spending more time and energy with clients and customers with a high level of service would bring them satisfaction.
Minimized Office Cost
An outsourced accountant would work with his team away from your office. This makes you liable to only pay the fees for the work they deliver to you. When you hire an accountant on your in-house team of technicians or any other business, it would be mandatory for the company to at least provide a decent working space for them. This would affect your company’s opportunity cost of hiring a team member to cater to your core business. Apart from the accumulation of the opportunity cost, it would also save you the extra office expenses that may incur during the in-house accountants work period in the office.
Accounting errors in the payroll or income tax filing can lead to interest charges or penalties which are staggering mistakes for a company’s future. When you hire professional accountants to manage your accounts or take care of these expenses, it reduces the risks that the company would’ve otherwise have to face. It’s not just access to expert advice but also the guarantee that a professional would meet the compliance and regulatory standards in confidence of the financial reports. Outsourced accountants specialize in their work and which make them even dependable for qualified work. These professionals would have reliable information to help make business decisions of improved nature in less time. Outsourcing the accounting work to the perfect resource would give you peace of mind and put you at the advantage of being in pace with today’s hyper-competitive environment.
You can use different cloud-based accounting applications, use similar software as the bookkeeper and share the necessary financial documents with your accountant to integrate outsourced bookkeeping with your existing accounting department. For this, let Canada’s leading accounting firm provides you with its service.Use accounting services that we offer for entrepreneurs, small and medium size business owners.
Running your business is a remarkable journey on its own. Looking after various functions, especially the accounting practices is as interesting as tricky it is. You need to look for different ways to make sure that the valuable numbers of your business don't work against you. And in this process, when you follow the same pattern in accounting, the process starts to stagnant. Thus, you must consider the following accounting diversification tips to ensure that your business moves ahead with a balance of fresh and traditional ideas.
Start From Your Employees
Your business's success starts with your employees. So make sure you have employees who can contribute to accounting diversification. If you don't have enough people in your office, hire new ones. Intentionally seek people with different points of view. Invite people who are collaborative and are not afraid to express their ideas. Their contribution may lead to new streams of revenue that are aligned with your current services. Once you have a good crowd with varied mindsets and ideas, encourage them to brainstorm and think of diversification ideas. As you manage your business, reward team members who think outside the box and offer new perspectives. Acknowledge fresh ideas so that they can continue contributing to the process. Make a list of all these ideas and contemplate. See which ideas can be workable, and start taking actionable steps in those directions.
Use Different Accounting Methods
When it comes to accounting diversification, one thing that you can easily do is diversify the way you account. Today, several options are available for small businesses to opt to complete their daily accounting practices. Rather than choosing just one type and sticking to it, you can try your hand at different alternatives. Firstly, opt for the traditional way of accounting of using Microsoft Excel or Google Sheets. You can manually enter the less confusing parts of the accounting system, such as the payroll and bonuses if you have a small group. For other more tedious tasks like tax calculation and filing, you can use the best accounting software available. Most of these accounting software require you to pay in order to use the complete services. With accounting diversification of accounting methods, you save a lot of money by doing accounting in traditional ways.
Make Different Teams
Rather than appointing one person to look after your organization's accounting practices, you must make different teams or small departments. Let each of these teams handle one accounting process. Different teams can handle tax planning, regular bookkeeping, payroll management, and other processes. When different people are appointed to do a specific task, they tend to focus more on that area. This not only helps in getting innovative ideas of running those processes efficiently but also helps you to know who to talk to for a specific topic. For instance, if you want to know about tax filing and deductions, you can directly get in touch with the tax department. This way, people will be able to work with more freedom and creativity, which will further benefit your organization. Also, diverse teams resolve challenges at a quicker rate than homogenous teams. But keep in mind that creating different avenues will cost you extra as you will have to hire more people.
Hire an Accountant
Although it is an added expense in your overall business budget, the expense will be worth it. Just like when a company needs legal help, the only option is a lawyer, an accountant can guide the company for accounting diversification. This professional will be your assistance at every point and help you with several more ways of accounting diversification. The professional knows how a business should ideally function and what are the best-proven ways to diversify not only accounting but all other business processes so that you can run your business efficiently and within the budget, you outline.
Accounting diversification is a lot more than just a simple idea. It is a master plan that can take your business on the path of success and efficiency. Follow these easy tips and try to cut down on extra costs, and you'll continue being successful. Keep in touch with your accountant so that they can help you at every point in your journey.
Many entrepreneurs use Excel spreadsheets to track and record their finances. Due to the extensive features of Excel spreadsheet, it becomes more manageable to account your funds. Many accounting services providing firms also use this application, making it a default for accounting. However, even the best of the things can end with errors unless you know how to use Excel spreadsheets well. We have listed down a few Excel spreadsheet mistakes you should avoid while accounting.
1) Formatting Errors
Do you know the small window that pops up on your screen after you click Save As, which says ‘Too many different cell formats’ that leaves you no option of keeping your work? Yes, it can give you a panic attack. Besides not being able to save your work, Excel can itself change the formatting of your cells and create confusion. When the Excel spreadsheet software is unable to recognize the format, it pops up a small window saying ‘Excel found unreadable content in the file’.
Additionally, do not try to copy-paste data as doing so increases the size of the file. Even though you have the copied data on your clipboard, sometimes the software will pop up another window that says ‘Microsoft Excel can’t paste data’. To avoid all the pop-up windows from interfering your accounting, try to keep your formatting options to a minimum. It is better to limit your formatting rather than lose all of your accounting work.
2) Data Entry Errors
Using incorrect characters or missing a few ones is a human error. False characters is an error for which you cannot sue someone because it could have happened by you. You probably used a minus instead of plus or decimal points in the wrong places. It does not seem like a big deal, but you could end up losing a significant amount of money. In 1995, Fidelity’s Magellan fund had a loss of $1.3 billion, because instead of using a minus, their accountant had used a plus. The whole scene created confusion and doubled the entire money that made them wonder how there was an unknown gain. There is no real solution here except for hardcore reviewing, but you could leave the job in the hands of accounting services.
These errors are similar to character errors, except the numbering becomes a mistake. About ninety percent of accounting is all about numbers, and if you mess up the numbers, you indirectly mess up ninety percent of accounting. Many businesses have ended up in losses due to this kind of error. For the most part, you can review carefully or hire accounting services.
3) Incorrect Formula Range
You input your IFs, Index+Match and Structured References after writing a long and complex formula, but then Excel ends up denying it and shows different errors. Formula errors are #value, ####, #n/a, #name, and #ref. Yes, Excel does love the hashtag trend but you must be tired of it by now. There are a few ways to fix formula errors and get rid of these #errors. An incorrect formula range can sometimes not even show due to whatsoever technical reasons, and this again requires careful reviewing. There was a time when two Harvard professors made this error of inputting a wrong formula range. The hilarious part of the story is that their student working on the assignment thought they made a mistake because two well-known Harvard professors could never make such an error. The example is given only to assure you that anybody is capable of making such mistakes, but you can try to avoid these by knowing before-hand.
4) Lack of Review and Skills
Studies reveal that even when you review your spreadsheet yourself, there is a high possibility that your spreadsheet contains a large magnitude of errors. Take this sentence and remember it every time you complete accounting work, and so that you can review carefully. Allow other people involved to review your spreadsheet. A third party will be more likely to point out mistakes quickly. Besides, not all errors are distinct, and there is no certainty to what extent each error can affect your accounting.
Usually, in your company when you have training taking place for recruits, you overlook the need for spreadsheet training. Not just you, but everyone assumes that Excel is a software that any person would be able to figure it out themselves and get the hang of eventually. You must educate them on the methods and techniques required to operate Excel spreadsheets. With this, you can avoid not only your errors but also possible errors from your employees working on the task. Although, once you appoint any accounting services having the right knowledge, there will be one less thing to worry about in your daily schedule. Besides, there are other ways in which accounting services can benefit your business.
5) Lack of Professional Help
Accounting is a full-time job, and unless you have mastered in accountancy you should avoid trying it yourself. Reading up articles on the internet might not be enough to account the finances of your business. Accountants have ample knowledge, the required software skills, and the skills to fix potential errors as well. Therefore, if you are new to the world of business accounting, consider hiring accounting services rather than experimenting on your own and facing losses.
Running a business is a huge task, especially when it comes to keeping in check the expenses, wages, income, and other money-related items. It becomes exceedingly difficult if the monthly budget has gone overboard and you get drowned by the thought of how to manage other things when this happens. Quite a lot of times, such a situation is unlikely, because you create a cutting-edge plan. Hence, plan in such a way that you have some dollars left even if you go overboard. Here are a few things suggested by most small business accountants that you can try to cut down on expenses and save money.
Spending on Supplies
Your partial monthly expenditure goes into buying supplies for your office, but that does not necessarily have to be the case. Wholesale shops are set up for a reason - for you to purchase supplies in bulk at a reasonable price. Instead of buying stationery only when needed, it is better to buy supplies for at least two-three months all at once. This way you can bargain a lot and buy in bulk at an attractive price. Besides, you will not have to keep commuting repeatedly as well. Keep in mind to buy things in bulk that have a higher expiry duration and buy food in bulk for a month that is the minimum expiration for usual canned foods.
For other resources like furniture and equipment, you can buy those that are second-hand. You do not need to have everything new. All you need to have is tidy furniture and functioning equipment. Thrift stores and second-hand shops are places that should always be your first preferences.
Cut Down the Production Cost
When it comes to production supplies, keep track of every last material. Usually, companies overlook this due to the workload, but in case the suppliers try to increase even 1% in the bill, it later adds up to a lot in your office budget. Renegotiate with suppliers over the expenditure on supplies every month as it is not very time-consuming.
Even though the required software is a one-time investment, but you should still consider opting for free downloads and trial versions. You can access free software from a website called Download, or you could install trial versions if you want them for a limited time. Student versions are also quite cheap than the usual ones.
Master in Marketing
Marketing is one of the most costly investments a company has to make. Marketing is not that difficult and you can do it yourself in case you have more time than money to spend. All you need to do is learn the basics that you can conveniently look up on the internet. A lot of marketers have their websites, podcast lists, webinar channels, and other information resources.
You may have heard about powerstrips - the rectangular box-like structures that have multiple sockets in them that help in distributing power equally to all the outputs. However, a smart power strip does not just distribute equal power but also conserve around 50% of energy. It immediately shuts off the power distribution to the plugs that are on stand-by mode. A smart powerstrip helps a lot when you have multiple desktops working all day in a workspace.
You must have subscriptions that you no longer need, and they add up to a considerable chunk of money when not cancelled. You can easily cancel subscriptions with a few emails rather than paying for something that is not benefiting you. Just cancel those recurring services like newspapers or monthly periodicals.
Post Jobs Locally or on Social Media
You will learn to do this via marketing, but it is better than spending money on job posting sites as they are expensive. Hence, market all the vacancies you have and promote posts on your Instagram or Facebook pages. Post social media job updates and you could even provide employees with a weekly chance to post updates for social media marketing, and in return, they get to learn something new. You can also send your job listings to local university career portals.
Natural Light Location
Natural light has two benefits. Firstly, you reduce your electricity cost, which saves up a lot of money. Secondly, natural light is more recommended for workspaces as they increase the productivity of your employees. Working on computers the entire day can be draining, and every person can have a lifted spirit by getting a little sunshine and an outdoor essence. So open the curtains and blinds and let some natural light in.
Online Over Offline
Try to limit the use of paper. Not only is this eco-friendly but it will also save you money. Use Google apps or other business platforms like Slack. You can instead have documents backed up online in the cloud, making it less likely to be misplaced.
In case you have a meeting outstation, keep your first preference to have the meeting via video call or Skype. Travelling can be extremely time and money consuming, instead save both by going online and you can spend the two factors on other projects. You can talk to your small business accountant to know more of such "go digital" tips.
Not only do all these tips help you save money, but benefit in several other ways. You learn new skills through marketing and increase productivity in your workspace, which is essential for an office. Moreover, once you start saving from your office budget, you will slowly practice this in your personal finances as well. There are more methods in which you can save this money and can consult small business accountants as well. It helps in keeping personal taxes on track. These work great for small businesses as they have more experience in this field. Now that you have learned how to save money, where will you spend this money? Probably in your next monthly budget? You could instead invest the money, something that your small business accountant will generally suggest you do.
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.