Back to Blog
Pension plans are essential for everyone. There are a few things that you should know when it comes to understanding the Canadian pension plan.
The Canadian Pension Plan, or the CPP is the government pension plan which is useful for the individuals who are aged 60 and above. They should also be those who have made their own contributions to this plan whenever they were either employed or they were running a business.
Here are a few more things that you need to know about the Canadian Pension plan.
If you are worried whether you are eligible for CPP when you’re self employed, there’s no need to worry. The Canadian Pension Plan allows self employed to create and manage their own pension fund. In addition, there are other benefits you get as a self employed individual under the Canadian Pension plan are that you have the freedom to purchase any other retirement income investments.
You should also be aware that the lower income floor is set to $3500, while the upper amount is changed annually. Currently, it is about $54,900. The rate for the contributions is set at 9.9% by the Canadian Pension plan. In case you are a self employer, it is your whole and sole responsibility for the entire contribution. However, for employees and employers, the contribution is divided evenly.
According to the Canadian Pension Plan, the contributions for those who are self employed depend on the net income of the business. In this case, the income from the other sources do not count in the contribution.
Now a question arises on how do you find your contributions.
The Canadian Pension plan keeps the contributions filed in a statement which is the record of your overall earnings as pensions, plus your contributions. When you are calculating the retirement earnings from the Canadian Pension plan, this record or the statement can act as your base for the calculations. In case if you are looking for a hard copy of the record, ATS Accounting can be of great help to you.
The interesting point in the Canadian Pension plan is that the years when you were earning low are deducted from the calculations. This keeps your pensionable earnings at a higher value. Also the years that you spent in raising your children till 7 years of his/her age are also exempted. This is done under the child rearing policy.
In all, if you meet with all these requirements, then you are eligible for these provisions that are available to you regardless of you being a self employed person.
The above points are some guidelines that can help you understand the Canadian Pension plan. But it might be a bit difficult for you to understand the inner aspects. ATS Accounting can be of great help when you want to know about Canadian Pension plan.
Back to Blog
Running a small business needs you to run the show completely. You have to look after every single thing and manage each and every part of the company. In this whole rush, you have to look after a very important thing - your business finances. Your business runs on the finances that you have at your disposal. However, it is due to the hard times that you have to look after things too much, the financial matters can cause trouble for you.
Let’s take a look at some tips about how to maintain accounts for your business.
Keep Things Separate
Keep your personal and business account separate. From expenses to earnings to your bank account, ensure they are kept separate. If both accounts were together, it would make your business accounting job more difficult and increase the chance of making a mistake, which could lead to a penalty.
Never do it Alone
Just because you own the business, that does not mean the you have to do everything. Hiring an accountant will help you in maintaining the accounts for your business. In turn, you have more time on your hands to do the things that are more important for your business.
Make Time to Review Your Finances
You may not like it or you might feel that you are bad at it, but you have to reserve some time to review your finances. You should say, reserve 15-30 minutes each week to go over your financial situation. Having a review of your finances can help you keep track of business expenses and the income. You should continuously be aware of where your business stands financially such a profit-loss and financial reserve amount. This is an important aspect of running it.
Labor is more expensive than you think it is. When you know how much you are paying your employees that will be a great info on your expenses. Get to know what is the pay according to the standards set by the government on the minimum pay for specific positions. Once that you have the proper information regarding this, it will be easier for you to maintain accounts for small business.
It is a common sense that you should ask for the payment from your customer. If you are having a track record of the payment that will be a great bonus for you to maintain accounts for small business. Getting paid for your products and services is another way to keep track of the business expenses and income.
The above points are some guidelines which can help you keep track of business expenses and income. But every time, it is not as easy as you think and you might need help from some of the professionals in the field. ATS Accounting can be of great help when you want help to maintain accounts for small business.
Back to Blog
Accounting for your business is required to keep a careful track of your finances and to allow an easy understanding of the cash flows of the business. Keeping up with your small business’s accounting can be quite a complicated task, especially if you do not have help from small business accounting experts or a tax accountant. To make things a little easier for you here is a checklist for you to follow to stay up-to-date with your accounting.
Record all the incoming and outgoing cash flows and maintain separate files for each. Document and save all the receipts from the transactions made by your business. This is an essential task for small business accounting. Save all the records of transactions such as bills, receipts, invoices for tax references and small business bookkeeping purposes.
Pay Vendors and Sign Cheques
Every week, you must settle pending vendor payments and sign cheques. This is important as doing it on a weekly basis ensures that you are not faced with a large heap of pending payments at a later stage.
Prepare and Send Invoices
Just as it is imperative to settle pending payments regularly, it is important to receive payments owed to your business. You need to prepare invoices and send them as and when projects are completed. Doing this once every week ensures that your business has a steady flow of cash influx.
Monthly ChecklistBalance Account
At the end of each month, make it a point to balance your company’s bank account. This is the most important part of your small business bookkeeping and needs to be handled promptly.
You can do this at the end of every month, just before it is time to pay the monthly salary of your employees. Review the payroll structure and inform the employees of changes, if any. Maintain detailed logs about changes in the payroll to allow for easy small business bookkeeping.
Settle Tax Payments
Your business cannot afford to take tax payments lightly. You must have a well-qualified and expert tax accountant at your disposal to handle the tax payments and documentation of your firm. Ensure your tax accountant has been provided with all necessary documents required for tax filing and payments.
Yearly ChecklistReview Past Due Receivables
With the year coming to an end, it is time to review past receivables which have still not been received. Evaluate the possibility of obtaining these receivables and take necessary action by either sending them to an external agency to collect or by reducing the amount owed by the defaulter.
Review your current inventory to determine the value of items not sold. If you have a skilled tax accountant you will know that any write-down of inventory translates to a deduction on your year-end taxes. By not writing down unsellable inventory, you are overstating your inventory balance and paying additional taxes that you don’t owe. Instead, write down all the items of your unsold inventory and let your tax accountant handle the taxes you are liable to pay.
Follow this simple basic checklist for small business accounting and make accounting easier for your business. Hire an adept tax accountant to handle the small business bookkeeping for your business and file your tax returns carefully.
Back to Blog
As a start-up cash-strapped business owner, you need to have your expenses in check. This approach will help you combat global economic fluctuations. Let’s look into these cost-cutting tips to keep your cash-strapped business afloat.
Cut down on printing
A standard desk printer ink costs upwards of $20 per cartridge. In the digital age, we have other alternatives to printing on paper. Many businesses share documents through Google Drive and Dropbox. Not to mention, paperless billing is now the norm in today’s society. When you are required print hard copies, make sure your employees share printers. Purchase in bulk and send your old cartridges in for discounted refills.
Save on utility costs
Reduce the cost to heat, cool, and light your workspace. Save on summer air conditioning costs by pre-cooling your space. Set the thermostat to cooler-than-normal temperatures early in the day and to warmer-than-normal in the afternoon and the space stays cooler all day long, reducing energy usage by 25% to 30% during peak electrical demand.
Take inventory of the staff
The payroll is often one of the top costs a cash-strapped business owner has, so make sure the money is well spent. This may involve a thorough internal review to make sure the right people are onboard and doing their jobs effectively. Hire employees based on their long-term value and potential. Hiring a worker who costs 20% more than the average worker but who works 40% more effectively makes sense, particularly during periods of crisis.
Hiring inexperienced employees will reap long-term rewards
Hiring experienced employees comes at a cost. So does this mean that cash-strapped business owners with a shoestring budget have to hire inexperienced employees with high turnover rates? Not necessarily. Hiring smart, diligent inexperienced employees will help you in the long run. It may take some time to train them, but if they are capable, they will learn quickly.
Offer more internships
Investing in quality interns is a great way to cut costs and get more work done. The majority of the interns aren’t expecting to get paid and are on the constant lookout for work experience. To boost up their resume. Not only that, it’s a great way to scout potential future employees for your business.
Hiring multiple employees for all different types of job functions can be costly. You should look to outsourcing your work to oversee employees and freelancers. For instance, need a special tool built for your website? Instead of hiring a full-time developer to work on your project, hire a freelancer instead to develop the tool for you. You may be surprised how much you can save from hiring contracted workers rather than placing them on your regular payroll.
Look into Co-working spaces
Co-work spaces are a great way for small business owners to provide a stable workspace for their employees while also saving tons of money on space. Plus, it’s a great way to network with other startup businesses and entrepreneurs.
Here’s hoping these cost-cutting tips help your cash-strapped business not just survive, but thrive. Get in touch with ATS Accounting to get the business accounting advice your business needs.
Back to Blog
Every entrepreneur should know what their business is worth and business valuation is the most effective way to determine how much your business is worth. Accounting services in Edmonton will conduct a business valuation for you if you are looking to sell your business or merge your company. Here are three most commonly used methods to do a business valuation for your business.
The simplest way to calculate the value of your business is by counting the value of your hard assets. This is the resale value of your equipment, machinery, and other devices. However, this generally gives the lowest value of a company as the real value of your company is significantly higher due to other factors such as market value, liabilities such as debt etc. The difference between the market value of your company, or good will as accounting services generally refer to them as, and the liabilities will give the exact value of the company. Therefore, this method is not the most accurate method for business valuation of a company.
Discounted Cash Flow
This method takes into consideration the cash flow of your company by calculating the projected stream of profits that the company makes in the future. The steadier the cash flows of your business, the higher number of future returns they will be able to add up to. This also helps to calculate how much your business will be worth in the future. Once a buyer has an estimate of how much profit your business will make in the future, they can add a discount rate to calculate the actual worth of your company. This discount rate depends on the future worth of the company, the time value of money, the level of risk the investment is, and the cost of capital. The accuracy of this method relies on two key factors: how much profit your business is expected to make in the future and how precise those estimates are.
Accounting services in Edmonton utilize either of these business valuation methods and not both of them together. Assets are considered as a subset of profit generation if the discounted cash flow method is used and are not included separately.
Another common business valuation technique is to see the value of similar companies that have been sold recently or if their value is publicly listed. Companies in the same industry should be compared with another keeping in mind the difference in the value of a fortune 500 company and a small business. Annual industry conferences can shed some light on the value of companies in your industry and help you with your business valuation.
Accounting services in Edmonton use these basic valuation techniques to determine the worth of your business. Knowing the difference between them will help you understand the business valuation process better.
Back to Blog
When your small business is running smoothly and your top employees are performing exceptionally well, severance pay can be the last thing on your mind. But, there will come a time when you will need to think about severance pay and if you don’t know how to offer the best severance deal, your small business could end up losing money. Here are 3 things to keep in mind before you draft a severance package for your company.
As a small business owner, if you haven’t considered a severance package well in advance, when it is time to layoff an employee you will be badly hit with the size of the severance package. It is in your business’s best interest to draft a detailed severance package by taking into account a variety of factors. Some of the factors that will influence the amount offered in the severance package are:
Having a well-drafted written employment agreement signed when you hire new employees can help you to achieve lower costs of severance pay and to also attain cost-certainty. This is crucial as not having a predetermined agreement allows the employee to negotiate and increases the scope for leeway which will cost you more money.
When drafting the employment agreement, it is critical to consult professional and legal counsel for help. Use the employment agreement to secure other benefits such as confidentiality clauses as well as retirement and other benefits. With a properly drafted employment agreement the severance pay can be limited to roughly one week per year of service for an employee who has worked for more than 5 years at your company. Without the agreement, however, this number could shoot up drastically as it could be based on one month per year of service which is a lot, especially if you are terminating more than one employee. Ensure you have a well-written employee agreement and review it periodically to ensure that the language used continues to be enforceable in the present as well as for the future.
Termination pay is the amount offered to an employee when a notice of termination has been given. This amount will be significantly less than a severance pay but is dependent on the notice period mentioned in the employee agreement. Not all employees are eligible for severance pay. Only those who have served your company for at least 5 years are. Termination pay, however, is granted to all employees irrespective of the time served by them.
Knowing these 3 crucial points will help you save a lot of money for your business and still permit you to offer the best severance deal to your loyal employees. Be sure to take professional help from your trusted accountants as well as legal counsel while drafting a severance package for your company.
Back to Blog
As a successful business entrepreneur, the thought of retirement could not be further from your mind. Retirement planning, especially for entrepreneurs, is essential from an early stage. Even if your business is wildly successful now, you cannot continue to run it forever. There will come a time when you have to quit working and retire and having a business retirement plan in place will prove to be highly beneficial at that time. Here are a few ways to go about retirement planning.
Your business is your breadwinner and you need to know exactly what it is worth, both in the long and short term. If you are the major stakeholder in your company, knowing how much your share will earn you and for how long is imperative. If your share in your business is the major chunk of your retirement plan, it is necessary for you to know that it will always be successful and earn you high returns. If not, you need to make room for other small business retirement plans and start your retirement planning well in advance.
No matter how successful your business, you cannot keep running it till you are 70 or 80. Retirement is not optional, even for entrepreneurs. Therefore, planning an exit strategy for your business makes a lot of sense. You need to train your employees and your managers to be able to efficiently perform their duties in the company in your absence. This will ensure that your business does not start falling apart when you’re no longer holding the reins. Ensure all your company books are in order and up-to-date to make the transition smooth and to maintain transparency in your operations for potential buyers. Hire a professional accounting services to handle your books and taxes for you.
The other important thing to consider for your exit strategy is to identify potential buyers for the business. This could be a partner, an employee, an external agency or a different business owner altogether. Once you have determined your potential buyers, you can always approach them when it is time to liquidate your business. You also need to decide your future involvement in the company. Whether you want to be involved in a small way or not be involved at all.
The most critical step in retirement planning is to invest in small business retirement plans. If you are the sole owner of the company, you need to develop a lucrative retirement for your employees as well as yourself. Your share in the company should be leveraged wisely in the retirement plan and you need to invest regularly. By the virtue of being the owner, you are not exempt to payments for your retirement fund and should regularly make investments for your retirement. Small business retirement plans are an ideal way to do this. Consult your accounting expert to know more about small business retirement plans.
Lastly, make smart investments that will bring you big rewards in the long-term. The key rule of investments is to start early. Once you start investing for your retirement and stay committed to it, the power of compounding will give you huge returns to ensure a very comfortable retirement.