5 Reasons Your Small Business Needs an Accounting System
So, what exactly is an accounting system? At its core, an accounting system is a method of organizing your financial data. There are various types of accounting systems out there, ranging from complex enterprise solutions to simple small business accounting software like QuickBooks. You can even use a spreadsheet if your business is straightforward with minimal transactions. The key is to have some system in place to manage your finances effectively.
Now, let’s explore the five reasons why every small business, including yours, needs an accounting system.
Essentials for Starting Your Sole Proprietorship
According to Canada Revenue Agency (CRA), the definition of a sole proprietorship is as follows:
A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest kind of business structure. The owner of a sole proprietorship has sole responsibility for making decisions, receives all the profits, claims all losses, and does not have separate legal status from the business. If you are a sole proprietor, you also assume all the risks of the business. The risks extend even to your personal property and assets.
The simple answer is that if you are selling any type of product or service, on an ongoing basis, and you are not employed by another organization where you receive an employment income slip such as a T4, you essentially have a business. If this business in not incorporated or part of a partnership with one or more individuals, then you are a sole proprietorship.
9 Tips For Managing Your Customer Receivables
Any sales that occur within a business where payment is not made up front (eg. retail) or in advance of the sale (eg. down payment for a car), is reflected as an “Accounts Receivable”, which is accounting terminology for amounts owing by customers to a business. It is good to have accounts receivable, as this means you are generating sales. The downside, however, of having accounts receivable is that it represents cash that you don't have now, and along with that comes the possibility that your customers won’t pay you. Luckily a good system to manage your accounts receivable will help to reduce the number of non paying customers thereby avoiding bad debts. Below are some steps to help manage and collect on your accounts receivable:
10 Financial Challenges of Being a Solopreneur
Being a solo entrepreneur or solopreneur (to use the pithier term) can be extremely rewarding but also brings some unique challenges. It can be a lonely existence, as you often work from home, and don’t have a water cooler where you can discuss the latest tv show you are watching. You have to become an expert on subject matters well outside of your subject of expertise, as all of us who have to troubleshoot a computer problem or write our own copy for social media and blogs, can attest to. There is no-one immediately availably to bounce ideas off of. And we have to work much harder at establishing process, routines and accountability since we don’t have a boss breathing down our necks.
In addition to all of this, solopreneurs often face specific accounting, tax, and finance challenges.
20 Essential Tax Facts for Small Business/Self Employed Owners
Probably the most popular question posed to accountants and tax preparers (especially around this time of year) is what types of expenses are deductible. The short answer is that an expense is considered to be deductible if it has been incurred with the ultimate purpose of earning income. For example if you purchase a domain name with the intent of setting up a website to sell your goods or services, this would be a deductible expense. However, if the purpose of your website is simply a place to show pictures of your cat, this would not be considered a business and therefore not a deductible expense. Of course if your cat picture website starts to become popular and you decide that you want to actively build this business by advertising on the site or partnering up with cat product resellers, your non commercial hobby could then be considered a business. Since you now have the intent to build a business the income earned would have to be reported and expenses incurred to earn this income would be deductible.
How to Register your Sole Proprietorship in Each Province
Once you have decided to start a new business and have concluded that the best structure for your business is a Sole Proprietorship, the next step is to determine if you need to register it. If you are using your exact first and last name, and only your exact first and last name, then you are not required to register your business, regardless of which province your are located in. However, if you are using a business name that is anything other than your own name, you are required to register your business in all provinces, with the exception of Newfoundland and Labrador where registration of Sole Proprietorships is not required.
7 Qualities of Highly Desirable Clients
When you are a business owner/freelancer, there is wonderful feeling of gratification when you land a great client. These are clients that ask great questions, respect our work and make us feel happy to have chosen the entrepreneurial route. Then there are the not so great clients who have unrealistic expectations, are unimaginative and often just plain clueless.
It should also go without saying that we must also do what it takes to be provide an excellent experience to our clients and customers. It is not dissimilar from being in a relationship with a partner or spouse and for both sides to get the most out of it, you as the service provider, must also be responsive, respectful, fair and transparent.
Tax Obligations Every Canadian Small Business Should Know
It is therefore prudent for both sole proprietorships and incorporated businesses to keep on top of their tax filings.
In this article I enumerate the tax obligations for most small businesses in Canada along with links to articles to help you understand each one better.
Adopt These 9 Money Habits to Increase Your Net Worth
One way to reinforce habits is to celebrate small wins. If you eat slightly less junk food or exercise a bit more, you can count it as an accomplishment. The positive reinforcement helps to make us feel better, inspire confidence and slowly build habits that makes reaching our goals a bit easier. This is particularly true with financial discipline. It is important to recognize that, like any habit, it is a process that takes time. The good news is that there are tangible metrics to measure your success e.g. when you have more in your investment accounts or a higher net worth.
Essential Facts about Shareholder Loans for Incorporated Small Business Owners
There are three primary ways in which you, as an owner-manager, can withdraw funds from your corporation. You can pay yourself a salary, you can declare a dividend or you can borrow money from the corporation. When you borrow money from your own corporation the Canada Revenue Agency (CRA) has put into place strict rules as to when you have to repay the loan to ensure that the owner-manager does not avoid paying taxes indefinitely.
How to Register a Small Business in Quebec
Budding entrepreneurs wanting to setting up a small business (or becoming self employed), either on a full time or part time basis, are often not sure where to start. The process of registering a business in Quebec, depending on your circumstances, can actually be quite straightforward . Below we look at the questions that you need answer to determine your business registration obligations:
Why and How to Transition from a Sole Proprietorship to a Corporation
When starting your new business, often it makes sense to choose the simplest structure which is the sole proprietorship. This allows you to test the viability of your business idea and to see if the lifestyle and the related stress that goes along with being a business owner suits your personality and is in line with your long term goals. Alternatively, you might want to keep everything simple and not add any unnecessary complexity. Registering and maintaining a sole proprietorship is fairly straightforward ; many business owners don’t put much thought into the financial aspects of it until tax time (when the mad scramble ensues). Once you have a corporation, however, the level of complexity and commitment increases
How To Account for Car Expenses and Reflect Personal Use
If you use your car for business then you will want to track car expenses more granularly to see what you have spent in the current period and to compare with prior periods and also to make it easier to reflect the breakdown on your small business taxes
Deferred Revenue and its Impact on your Small Business
Most small business owners are familiar with the concept of revenues, which is essentially the total sales of their product or service, to customers and clients, prior to deducting any costs. Revenues are a crucial component of business’ profit and loss statement and it is essential that they are accurate so that the business owners may effectively analyze the profitability of their businesses. Additionally there are third parties for which the accuracy of the revenues, and corresponding financial statements, is essential for effective decision making. Third parties include tax authorities, banks, partners and key employees (on which remuneration/bonuses might be based).