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Capital budgeting is a multi-step process that is used to determine if a particular business project or plan is worth the investing. It is a long-term planning for financing of a proposed project such as purchase of a new machinery or equipment, investing in new products or projects, etc. Capital budgeting projects are categorized as follows:
1) Considering Potential Project Opportunities
The first step of capital budgeting includes considering various project opportunities available. There can be either one or multiple project opportunities. You will have to identify which project would work the best for your business.
2) Estimating the Investment Costs
Once you have shortlisted some projects, the next step is to estimate the investment cost required to implement them. This stage will require you to conduct some intensive research. If you plan to choose multiple business projects, you can prioritize them based on the investment required. You need to consider the actual investment required and also the cost of financing the investment in the form of interest rates to determine the actual investment cost.
3) Estimating Cash Flow and the Payback Period
Now, it is time to see the bigger picture and consider the profits or benefits the project will provide for your organization in the future. This stage deals with estimating the total cash flow that you will receive once you purchase the machinery or the project is complete. The cash flow that a company receives can last for quite a few years. It is important that the cash flow amount exceeds the actual investment cost and generates a substantial amount of profit for the organization.
Apart from looking at the amount of revenue generated from the project or the purchase of machinery, it is important to know after how many years, you will recover your initial investment. Some projects may generate profits for many years but the time required to cover the initial investment may take too many years. On the other hand, some projects may recover the investment in a shorter period but may not yield sufficient revenue. It depends on the management to decide which project is most suitable to invest based on the profits generated and the amount of time taken to recover the initial investments.
4) Assessing the Risk
This step involves estimating the risk associated with the project that can affect the desired motive and the profitability. Some projects may end before they are completed or further costs may arise all of a sudden. Therefore, it is important for businesses to assess the risks associated with the projects and decide whether it is worth moving forward or not.
5) Implementing the Project
In this stage, you proceed with the particular or multiple business projects. A project plan is created and the project begins. The plan includes means of paying for the project, method of tracking the cost of investment, the timeline of the project, and a process for recording cash flows.
Capital budgeting is a process of selecting the best long term investment decisions. If you need any assistance in capital budgeting for your business plans and investment or don’t know how to get started with capital budgeting, you can contact the small business accountants Edmonton to help you out.
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What if you don’t have the money to pay your taxes? Or, what if you were handling a business crisis and are unable to file your taxes? For one thing, it is not the end of the world. But, on the other hand, the Canadian Revenue Agency (CRA) will start proceedings against your business.
Put every other business management issue aside and make this a priority because if you don’t tackle this tax issue, CRA will create a lot of difficulties for your business.
CRA Contacts You
CRA will take the initiative and contact you. They usually do this by sending you letters asking for the taxes. Further on, CRA won’t stop even if you fail to answer. They will increase their aggression and from mail, they will move to calling you and later on, even set agents on you.
You Contact CRA
The next step for you is to get in touch with CRA before they become more aggressive. Inform them when you will be able to pay the taxes. If you don’t have sufficient funds to pay the required taxes, then submit a repayment plan. CRA will probably negotiate the time period and payment amount, so expect it. CRA will prefer you pay the taxes within 6 to 12 months. You can choose a payment option from cheques to payments directly from the bank.
Refusing CRA is not an Option
If you didn’t pay your business taxes because you are hoping to get out of it, then you are in deep trouble. Not paying taxes to the CRA is not an option for you.
Tax investigations are a big part of what the CRA does. When they investigate a business, they do it with a fine-comb and ensure that your business is not violating any rules. From income tax to excise tax to assessing for any fudging to checking if your business is paying GST or HST (if your business qualifies for them), CRA is very thorough.
- Take you to Court
CRA can take legal action and take you to court. CRA is known to have a high conviction rate. In an annual report to the Parliament, the CRA states, "The rate of conviction is very high due to case selection. Cases are selected for prosecution based on their expected outcome as there is a high cost to this type of compliance intervention ... In this way, Canadians and Canadian businesses are reassured that the most egregious cases are pursued to the fullest extent."
Your risk not only fines, but jail time too.
The good news is that CRA also settles cases outside court.
- Taking Control of your Asset
CRA has the power to freeze your bank account, take your wages as garnishment and put a lien on your house.
Consultant with an Accountant
Not paying the CRA is not an option, which makes your best option – to pay the CRA. To figure out your options, how to deal with CRA and completely know your business’s tax and financial situation, you should talk to a tax accountant.
CRA even has a public conviction page that lists down all wrongdoers.
At times, the reason may be as simple as filing your taxes incorrectly or worse, like not knowing how much tax you owe. At ATS Accounting, we provide effective tax solutions to organizations that need assistance.
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Planning and preparing for tax payment well in advance can help you save both time and money. But, if you haven’t started preparing for the tax season, don’t fret. Experts from the top Edmonton accounting firms suggest the following tax saving tips for business owners.
1) Maintain Books of Account
Hire an accountant to maintain all your transactions in the accounting format. Maintaining books of account or bookkeeping can help you in keeping a track of all the income from different sources and the expenses of your organization. It will also help you to see where you can save taxes and claim returns wherever possible.
2) Keep Personal and Business Finances Separate
A common mistake that business owners often make is mixing their personal and business finances. It’s important to have a separate bank account for your business. Separating business financial statements from personal finances help in getting things organized during filing taxes. Mixing both these finances and their accounts can only create confusion and affect the tax filing procedure.
3) Deduct Home Office Expenses
If you don’t have a proper office space and work from home, you can still save on taxes. As you consume and use parts of your home resources, you can deduct expenses like your mortgage interest, insurance, and utilities and reduce the amount of tax to be paid. Talk to a tax consultancy firm to understand how the deduction amounts can be calculated.
4) Deduct the Vehicle Expenses
Just like the resources you use at home, you can also deduct the vehicle charges to save tax. If you use your car for business purposes, you can claim it as an expense. Other expenses that include in your vehicle expenses are fuel, repairs, maintenance, and the insurance premiums.
5) Categorize Income Under Various Heads
Different interest rates are levied on incomes under different heads. The taxable rate for income under different heads may vary. Some income may be even exempted under certain heads. Therefore, categorize your incomes appropriately so that you don’t end up paying more tax.
As a business owner, there are several taxes that you may have to pay. For more tax saving tips, contact a tax consultancy firm. If you want to reduce your tax expense, then start planning for taxes right away. If you need any assistance in tax planning for your business in Edmonton, then get in touch with professional tax consultancy or top Edmonton accounting firms. The professional firm will not only guide you to plan for your taxes better but also assist you in timely filing your tax returns.
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An accountant is one of the most important people in your organization. Apart from maintaining your financial transactions, you need an accountant for many other purposes. This may include filing your tax returns, systematic recording of books of account, assisting in making financial decisions, and looking after the accounts payable and receivables to name a few. However, if these simple routine operations are not done properly, then you should consider hiring a new accountant or outsourcing your accounting work to one of the professional accounting firms Edmonton. This is because a bad accountant will certainly create multiple problems and affect the smooth functioning of your organization. The following are some signs of a bad accountant and that you need to consider hiring a new one.
1. Takes Time to File Returns
If your accountant is late in filing your annual tax returns, then it is not a good sign. Late filing of tax returns will only attract penalty rates. Although filing income tax returns is a complex procedure, a professional should be prepared with all the necessary work that needs to be done well before the tax due date. Therefore, if you find your accountant is unable to carry out his/her duties in a professional manner, you need to ask him/her to change his approach or consider hiring a new accountant.
2. Lacks Adequate Knowledge
Another important quality that an accountant must possess is the knowledge about various accounting terms, processes, and tax laws. When it comes to tax laws, he/she must be well-versed with the latest changes in the tax policies and the standards set by Canada Revenue Agency (CRA). Plus, a proper knowledge about the tax-free benefits and deductions is essential while filing tax returns. The accountant should know your business operations well so that, the correct tax rates are applied and exemptions are not missed. Inadequate knowledge in these matters indicates that you need to either train your accountant or hire an accountant who has the proper expertise and experience in these matters.
3. Provides Poor Accounting Solutions
When an accountant provides poor accounting solutions, the financial statements do not reflect the true picture of your organization. Frequent mistakes and errors in accounting statements mean that the accountant is careless in his work and lacks professionalism. Certain errors can lead to huge implications on your finances. Therefore, if you find that your accounts are not up to the mark, then hiring a new accountant is the best option.
4. Unable to Explain Financial Statements
Many small-scale business owners require assistance in understanding their financial statements. If your accountant isn’t trained to do so, he won’t be able to explain you the financial statements of your company. Your accountant should be able to explain different financial ratios and guide you on how to improve your financial position. If he is not able to provide any suggestions or unable to explain the financial statements, then you need to consider hiring a professional accountant.
5. Unavailable When Needed
Does it happen that your accountant is always busy when you call him? It is quite possible that he is busy, but if it happens every time especially, when you need him the most, then this is something unacceptable. You cannot expect to run behind your accountant for doing your work. You have hired him to ease your task and if your accountant doesn’t respond when you need him, it is recommended that you hire a new one.
These are just a few signs of a bad accountant. Hiding important information, manipulating your accounts, rude behavior, etc. are some traits of a bad accountant. If you ever notice any of these signs, it’s time to change your accountant and get a new accountant. In fact, you may even decide to outsource the entire accounting process to a professional accounting firm who will provide accurate and quality bookkeeping and tax services for your firm.
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Accounting allows you to keep a record of all the financial transactions of a business. Each and every expense incurred by the firm and the income received is recorded in a timely manner with the help of accounting. Accounting is a must for all types of businesses irrespective of their size and niche. The objectives of accounting are explained as follows.
Systematic Record of Statements
The most basic objective of accounting is to maintain all the transaction data that includes all the inflow of money and the various expenses incurred by your business on a day-to-day basis. Maintaining these records manually is a tough job and can lead to several miscalculations. Plus, you may miss out on certain transactions if they are not maintained properly. Thus, accounting saves a lot of time and efforts and ensures that there are no errors in your accounting statements.
Monitoring the Performance of the Company
You can easily view the profit and the loss statements whenever you want. This is possible with the help of regular accounting maintained by businesses. As accounting contains details of all the revenues and the expenses of the business, it is possible to see the amount of profits earned or loss suffered. By comparing the previous year’s and current year’s statement, you can analyze the performance and position of your business. If you see that your performance isn’t positive, you can tweak your business plans for better results which and accordingly make proper business decisions in the future.
Communicating to Stakeholders
The stakeholders of your business will be interested in knowing the financial position of your company and what are its future growth prospects. The stakeholders include shareholders, investors, creditors, financial institutions, and even your customers. Your accounting statement gives a clear understanding of your company’s performance and thus, allows the stakeholders to make crucial business decisions such as investing in your company and so forth.
Avoid Manipulation of Data
A lot of manipulation and scams can occur in the process when you run a business. With the help of accounting statements, you can conduct an internal analysis and see if there were any manipulation of resources, scams, false accounting figures, etc. Accordingly, you can take strict action and safeguard your business from these ill-practices.
Helpful for Generating Capital
It may happen that you might need resources and capital for your business operations. But, you don’t have the capital on your hands and need to obtain it from an external source such as an investor or a financial institution. Before they finance your business, they want to know if you are able to pay back the financed amount. In the case of investors, they want to know if they are going to get a good return on their investments. Past accounting recording can help them to determine if it’s worth providing you with the required capital. If your accounting statements provide accurate information in the correct manner, then you do not have to worry about explaining your creditworthiness to the investors. Thus, accounting statements can be beneficial in generating capital for your business.
Accounting is extremely crucial and without proper accounting, a business cannot function effectively. Therefore, consider taking help of a small business accountant Edmonton who can assist and guide you to prepare your books of account as per the established standards.