Budgeting is not exactly a word that creates excitement. For many individuals, the term budget creates anxiety and stress. Part of the problem may be that we often correlate budgets with decreased spending, i.e. not eating out as much, or perhaps buying a used vehicle vs. new.
Unfortunately, budgets have gotten a bad rap. Simply put, a budget is your business or organization’s financial plan. It is a list of items that shows what you expect to receive (income) and what expenses you may incur over a period of time.
Here are some benefits to creating a budget for your business:
Already have a budget?
This is a great time of year to take a look at your budge. If your fiscal year end is December 31, then you are half way through the year. Is your revenue on track? Do you need to make any adjustments for the second half of the year? If your financial year ends on June 30, this is a great time to determine if the past year’s budget was effective and what changes should be made for the next year.
Start by making a list of your current income and expenses. Determine your operating costs and make some financial goals for the next 6 months to a year. Then, track your spending and income to see if you can meet those goals.
One area of my work that I love is being a part of a business’ budgeting conversation. Bookkeepers can be an important part of your budget team. They can help you assess if you are on track and offer ideas as to where you may want to make adjustments. Budgets are only effective if someone is managing and tracking them.
Though it may seem like an oxymoron, budgets really can bring joy and freedom, especially when you take control and invest your money in areas that will help your business thrive.
Many business owners may be wondering why they should hire a bookkeeper, instead of trying to do the bookkeeping in house, especially with all of the great software options available today.
If you are unsure of whether or not hiring out bookkeeping services would be a worthwhile investment for your business, consider the following:
1. Most business owners have received training or education that is specific to their profession: i.e. medicine, teaching, construction, law, etc. Perhaps that even includes an accounting class back in college. However, you may be lacking the specific knowledge to classify all of your income and expenses accurately which can create negative financial implications when it comes to tax time.
2. Bookkeepers act as a second set of eyes on your finances. Having someone from the outside looking at your accounts creates the opportunity to catch errors, which in turn can save you money. If you have specific business goals, bookkeepers can help you ensure that your spending is in line with those goals.
3. Bookkeepers will run customized reports (balance sheet, profit & loss statements, statement of cash flow) and explain them to you, so you are able to identify trends, areas needing attention, and opportunities for increasing income.
4. Most importantly, hiring a bookkeeper allows you to have more time doing the things you love. If you are doing your own bookkeeping, that is time spent that you could be working on your business. A bookkeeper will save you valuable hours of trying to keep your receipts organized, entries up to date, taxes filed, and so on. For many businesses, hiring professional bookkeeping services ends up paying for itself in both financial savings and in the freedom it affords you to focus on your clients and growing your business.
Tis the season... tax season!
This can be a daunting time of year for many business owners and frustrations arise because of the big question of what can and cannot be written off. Below are 6 common tax mistakes:
1. Missing deductions, such as car and house expenses.
* Suggestion: Keep a log of how many kilometers you drive for business, so you can write of a portion of your vehicle expenses. A great app for tracking mileage is Everlance. If you work from home, make note of the square footage of your office space and you can write off a portion of property taxes, mortgage interest, hydro and water.
2. Misplacing or losing receipts.
* Suggestion: Use a credit or debit card for business expenses, so you can cross-reference your receipts against the monthly bills, and file receipts in a folder or use an app like Receipt Bank to store all your receipts in the cloud.
3. Forgetting to charge GST / HST.
* Suggestion: Register for your GST / HST number. Registered businesses have important responsibilities including filing returns on time, collecting taxes on taxable supplies (services), and remitting owed taxes to the government.
4. Not being aware of changes to the tax laws.
* Suggestion: Consult with a tax advisor, to make sure you are claiming allowable expenses (and not missing those that you are able to claim).
5. Missing the Big Picture.
* Suggestion: Make sure your company is set up in the most efficient way. If family members are helping out in the business, pay them a wage. This can reduce taxes.
6. Not paying your taxes on time.
* Suggestion: Make sure you always file your taxes on time, even if you don't have the cash to pay the taxes owed. Pay taxes by April 30th, because on May 1st interest will start accruing. Not paying your taxes can result in serious repercussions, such as CRA garnishing your income or seizing your assets.
Here is a useful link that will help you put together your tax checklist:
For many years, the main way of keeping the books for small businesses was on a desktop computer. This probably entailed purchasing accounting software and learning how to use the software yourself, or training an employee to use it. Even though many small businesses are now using cloud-based systems, some small business owners still feel inclined to continue on their desktop versions of accounting software because:
The truth is, companies who created desktop software are moving to cloud based systems. Eventually, desktop programs will be obsolete and technical support won't be available to the businesses that try to continue to use them. However, this isn't bad news. It's actually good news since there are so many advantages to moving to cloud-based accounting:
The leading options for online accounting software currently are Xero and QuickBooks Online. Both have their strengths. Xero has a clear, user-friendly interface. QuickBooks Online has the advantage of being more widely used. Both offer a simple transition when transferring from desktop software. The monthly cost for cloud-based programs is very reasonable and discounts are available through your bookkeeper or accountant. That means you can negotiate for the fee to be included in your bookkeeper or accountant's service fee. This frees up time for you and your employees to complete other important tasks since you no longer need to worry about training them to do accounting.
The benefits of going online are clear and the need to transition is inevitable, so don't wait... you won't regret it!
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