Why is Cloud Accounting for me?

Cloud Accounting is a game changer for the Accounting profession an evolution for the accounting industry. Traditionally when you think of the profession of Accounting you perhaps think of Taxes, Bean Counting and Geeky excel wizards #Stereotypes. Things are changing with Cloud Accounting where Accountants are redeeming themselves as more than just #BeanCounters. Accountants are stepping into the role of Strategic Business Advisor, so much better than just being a Governmental filing agent. So what’s the Cloud hype all about? Well for that we have to go back in time to where it all started. #TimeMachine

In the old days the traditional Accountant and client would both have only half the information during the fiscal period. Consolidating these pieces of information together was complicated, difficult and costly because of the multiple software packages used by the Accountant and Clients. Moreover it was super painful to synchronize these accounting softwares into one accounting system so the business can finally be analyzed and Taxes filed. Since the old way of billing a client was strictly based on “billable hours” the Accounting costs for clients kept increasing. #FixedPricesPlease

With the Cloud things changed. The Client and Accountant are using the same software and General Ledger. No more synchronizing issues and installation of software issues. The Client and Accountant can actively collaborate together strengthening the relationship. The Accountant can now take the position of a Strategic Business Advisor rather than just a Tax Advisor. Imagine making the move from seeing an Accountant once a year for compliance work compared to having the Accountant actively involved by providing you the reports and numbers on a weekly/bi-weekly basis so you constantly have financial information available to make more strategic decisions. #NumbersDontLie

The cloud shines in one particular area which is where Cloud Accounting softwares (Like Quickbooks) directly connect to the client’s Business Bank and Credit card. This speeds up the process because the actual data entry work involved is significantly decreased leading to increased time saving which are re-invested into the Client’s business. The security of Cloud accounting is the same level of security of Banks. If you do any Online Banking your comfort level should be the same using this Accounting software package.

With Cloud accounting you no longer have to pass over that dreaded end of year shoebox. When deciding on an Accountant it’s important to not only concentrate on governmental compliance filings (which everyone can do), but are you also getting the skill-set of a Strategic Business Advisor. I’m sure your business would compete better with a Business Advisor on your side speaking of which, when’s the last time your Accountant talked to you about your Business’ Competitive Advantage?

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Leave the Cash in the Business

Building a business is tough, it takes time and patience and a lot of strategy. With the future Income Tax hikes planned by the Liberal Government your Tax strategy might need to be refined. How do you take the money out of your business without being taxed heavily?

Incorporating a business offers benefits and really does help soften the blow considering the small business deduction for the first $500,000 of your active income is taxed at 15.5%. The rest of the money sitting in your bank account will only be taxed when you withdraw it as a dividend that’s when you get hit with the personal tax #Yikes. However thankfully the small business deduction was spared during the Liberal Federal budget. Close call though since Justin Trudeau has ‘promised’ to increase taxes on the wealthiest of Canadians. #TaxManGrins

Keeping the money inside the corporation is a tax deferral strategy where you defer the personal tax hit to be paid at a later date. You can always use an income splitting strategy which is paying dividends to family members who are in a lower personal tax bracket. Your kids are quite useful #TrustMe so spread the love. New PlayStation Jimmy? No problem! The main reason why a business owner would use a tax deferral or an income splitting strategy is to well…lower the taxes #CaptainObvious and because the Marginal tax rate in Ontario for income over $220,000 is 53.5% (2016 rates).

Now keeping money inside your corporation indefinitely is not feasible #iWish because business people also have cash needs, mortgages to pay, clothes to buy, food, vacations etc. You need to determine what your “cash need” will be and plan accordingly. Considering the low rate of interest given today it might make more sense to carry debt and avoid accelerating the paydown of debt through corporate withdrawals. You can withdrawal these funds sitting in your bank account at a later date maybe during retirement when your tax bracket is ‘likely’ to be lower. That new Tesla you been eyeing well, better to buy a nice car and drive it than to be taxed right? ($800 a month write-off limit by the way).

The key take away message is if you’re earning income that you don’t need to live on then its best to keep it in the business. You can re-invest it in the business and if your business doesn’t need that high capital then re-invest into other securities or alternatively into a life insurance policy. This life insurance policy is super useful when the business owner passes away the money paid out through the Capital Dividend Account (CDA) is usually tax free to the beneficiaries. So plan for the future? It’s critical you do and avoid the “Death Tax”. 

Hope you gained some Taxvantage from this blog! It’s in your best interest to hire the right accountant who will create you the right strategy which will save you just the right amount of tax right? #KaChing

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Finding the “Unicorn” Client?

When starting off business you really have to consider how you will be targeting your potential clients. Having a high quantity of clients is great if you’re offering limited services and depending on your industry this strategy might actually make sense. However you get what you pay for and that holds true here. It is critical to anticipate the amount of effort and work every client will take before a pay day comes. Finding Unicorn clients is tough and keeping them is tougher but once you find those clients ensure you hold on to them because these clients are low cost/high profit. Additionally you might feel to genuinely go the extra mile for them. #Dedication

Clients today want the biggest bang for their buck which is understood but it is commonly not acknowledged by a new business person that every client carries a cost. Let’s look at McDonald’s for example each customer that drives into McDonald’s drive-thru carries a cost of $1.68 in advertising costs. If the customer only buys a Junior Chicken, McDonalds just lost money but they know you want a “combo” and their profit margins jump up by 600% #Strategy. In order to maintain healthy profit margins it’s critical to calculate the cost of a client by taking your cost of goods sold, hidden servicing costs plus your margin. Don’t just come up with an arbitrary price based off competitors as all these elements need to be embedded in your total cost of servicing.

The real pickle is when your competitors across town offer the “same” services/goods you are at a lower price. The client poses a valid question being why they should choose you? You need to be prepared to answer this question and no answer is better than explaining the value you bring to the table. Clients who appreciate value are more likely to remain loyal than those that are price sensitive. Learning to build and sell value is the best thing you can do for your business. Value is not tangible and this is when marketing really ramps up to help you stand outside the shadow of the price warriors in the market. Don’t sell yourself short as selling on value is a far better strategy to compete on than on prices.

It might appear that you are generating profits but once you add those hidden costs the story might change. If you think you signed a bad deal that’s okay! It happens just remember to cut your losses short and move on. Remember, Numbers don’t lie so believe what they say and make your decisions to stop the bleeding. Experience is an accumulation of many errors, learn from them and plan your next chess move.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Operating company? Holding company? So Confusing?!?

So you are a seasoned business person and have been making sales ninja style. However what happens if you are sued? How do we eliminate the additional liability from your operations? You made a profit this year and that's awesome but how do we keep this money safe from sticky fingered Lawyers?

The short answer is incorporation of a Holding company. The idea behind such a setup is that you do all your regular operations on your current company that means all your revenues and expenses remain within OpCo however we transfer the "Net Income" or in the accounting world we call "Retained Earnings" directly as a dividend to HoldCo. Tax Free. Yes that's right.

Some associations such as Doctors, Dentists and Engineers are required to have professional corporations where only another Doctor/Dentist/Engineer can be a partner and own shares. The rules are very strict but they do allow a HoldCo to own the building and receive rental income from the OpCo for using the premises. So technically you are paying your own company rent at market price. Yes it gets confusing but it's legit. #LegitAccounting

So once the money is being held in HoldCo you are reasonably protected by any potential law suits. What do you do with the money that's in the HoldCo you ask? Well you can use it for something accountants call "Dividend Sprinkling". If you have a spouse or children the right amount of dividend can be declared to maximize the after tax income you will receive. Setting up your corporate structure is critical to the success of your company. If you plan for the future then this HoldCo can one day evolve into becoming your Estate where you can transfer the entire corporation to your Kin(s) Tax Free upon retirement or death.

The incorporation costs are relatively minor compared to the peace of mind and additional security of your investments. It can get confusing to manage a HoldCo but remember it's in your “Taxvantage” to do so!

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why Do I need to get my Business Incorporated?

Well the short answer is you don’t need to but it’s in your benefit to do so. In Canada the government wants entrepreneurs to start new companies which generates new jobs and stimulates the economy. If the government stimulates the economy in a positive manner then what do you know you have the same government next election #Liberals. So the government provides tax incentives by offering a special tax deduction called the “Small business deduction”. This deduction in one word is Awesome.

Basically on your first $500,000 of income you make within your business you are going to pay a far less taxable liability compared to if you made the same income under employment taxes. On average a Corporation is taxed much lower and a good rule of thumb is 15%. A average employee would be taxed in the 35-40% bracket. Simply by incorporating and keeping the profits inside the company and only giving yourself a salary/dividend on what cash requirements you personally have will help you in your personal taxes because of the basic salary tax deduction offsetting your income. You can always implement a dividend sprinkling strategy more on this later. #WinWin

Apart from the tax savings there’s a security and peace of mind element to incorporations. In the unfortunate circumstance that you are sued under most circumstances your liability to the corporation is limited to the assets within the corporation. Since you are an employee/shareholder your personal assets are not impacted so you won’t lose your house/car.

Additionally since you have an incorporation you can take your papers to the bank and open a Business Bank account and a Business credit card. When you borrow money under your business it doesn’t show up under your personal liability which in short is a win/win situation for you. Since you legally own the name/company you can have a level of ownership and build your space in the market where no one else can do business using your name. You can now effectively start to brand and build your profile online. #Marketing101

So going back to the original question do you really need to get your business incorporated? Reading the above makes you wonder why wouldn’t you? The costs of sustaining a corporation are offset by the great savings and value of having one. #MakeItOffical

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

SETTING UP YOUR RECORD KEEPING SYSTEM

One of the most frequently asked questions we get is, "How long do I have to keep my business receipts?" Well the short answer is 6 years. 

Not keeping your receipts is the leading reason why people end up paying more tax then required. Keeping lousy records only hurts your business net income. Taming that paper pile is difficult but a necessary evil. Your tax organization and preparation will not only keep you audit proof but will also put you in the driver seat on cost control. 

Save all the receipts and records associated to the business. The CRA require source documents (your receipts) to be available if they ever come to audit. You only need to keep the relevant receipts and can throw the other unnecessary paper. If you like to keep it old school we recommend picking up a file accordion at Staples or any office supply store. If your feeling Techy Evernote or Genius scanner smartphone apps do a great job. Label each section by expense category such as donations, office supplies, repairs, auto-gas, parking, advertising etc. As you go out during the year keep filing all these receipts away. 

When it comes time to filing your taxes simply add all your receipts in Excel or a simple calculator ensuring you are taking calculating that sneaky HST tax. All these summary numbers get reported on the tax return schedules such as statement of real estate rentals, capital gains and losses, GIFI statements and statement of business activities. 

At Capex we want to make record keeping as easy and simple as possible allowing you to focus on growing your business. We digitize your box of receipts by scanning and filing all your receipts and get your accounting/bookkeeping done at the same time. This service is quite popular amongst our clients as they love their accounting to be on cruise control. 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why is Marketing so Important?

As a Chartered Professional Accountant I see many people excited to come see us Accountants with their business idea. They engage my firm for business plans and forecasted financials. During this process of planning I consistently see many of these individuals cutting down marketing budgets. Stretching your dollar is great but completely cutting down on your marketing budget is business suicide.

Now it might seem a little odd that an “Accountant” suggesting the idea of marketing is ironic considering many Accountants don’t really need to market it’s a word of mouth business but hear me out! #Stigma. Word of mouth marketing has lasted the test of time and it holds true even today. The reason word of mouth marketing is so effective is because of one fundamental reason. Trust. Building trust is fundamental and essential to long term growth.

The internet as we know it has been changing and evolving just look at the last 10-12 years. The Internet was not readily available and trust me we were all excited about the next flip phone. Many companies have harnessed the power of the internet and almost effectively replaced Television and Radio advertisements with the internet stretching their dollar with targeted marketing such as Facebook, Twitter and Youtube.

I always recommend start-up’s to keep a healthy budget for marketing. The real tangible results come after having an online presence. The old days where we could just open a newspaper or open up Yellow Pages and find someone to do the job are long gone. Future clients/customers want to be engaged they want to be educated and most importantly they need to know you exist. Ultimately the client is voting. Voting with their money. It’s your job to present your candidacy and promote your campaign.

Having a great idea is awesome, getting your governmental filings done gets you an A+ but nothing becomes more important than spending on marketing because here’s the equation. Higher marketing expense suggests higher sales which increases your revenues and given all of you will keep a sharp eye on your expenses your bottom line will only grow.

Which means more money for you. Which means more vacations. Vacations are awesome. Online Accounting Firms like Capex can help you get there.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Help I overpaid on my Payroll Taxes!?!

Switching jobs can be a exciting time. Meeting new people and learning new skills is awesome but what's the tax impact of switching employers? Yes, there is a tax impact.  All employers in Canada are required to collect "source deductions" which are typically your CPP (Canada pension plan), EI (employment insurance) and income taxes from your paycheque. Your employer remits these payroll taxes on your behalf to the CRA in addition to the employer contribution portion. 

If you have worked at one Job for the entire year then it is unlikely your CPP and EI are incorrect. However if you had more than one employer or switched employers in a year then both employers old and new will have to deduct CPP and EI regardless of the fact you have paid them before. This has nothing to do with your old employer's payroll skills its solely because of the way the calculation is done. #IncomeTaxAct

Clear as mud? Ok, let's say Jag worked at company old from Jan 2015 to Sept 2015. Old employer would have deducted the required source deductions between these months and remitted to the CRA. Good job old employer! The new employer will start your CPP and EI deductions from Oct 2015 to Dec 2015 and will not account for your payments to CPP and EI from the old Employer this leads to overpayment on CPP and EI. Assuming you paid your total maximum 2015 CPP amount of $2479.95 and your EI amount of $930.60 any additional dollar paid over this turns magically into a refund.

It sucks to overpay but it's your responsibility to keep both T4 slips so when you file your income taxes the difference of the over payment will be refunded to you. Small business tax accountants can help you with this.

Let's think of it as forced saving *cough* or Vacation money?

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why the name Capex?

Quite recently at a networking event I got asked why did you name your firm Capex? Interesting question because I love explaining this one!

Capex is a finance term that stands for “Capital Expenditure” which is money invested by a company to acquire or upgrade, fixed physical, non-consumable assets such as buildings and equipment or a new business. So how does this all tie into the Capex name?

The driving factors of starting this Firm and choosing this name was to help educate small business owners on the benefits of Capex to the bottom line. Embracing change and making the necessary investment into your business is critical to stay cash flow positive. There are many unique challenges in every industry/business and Capex spending is used to mitigate these risks and gaps for the long term. The goal of this firm is to not only do your Governmental compliance work but also work together to build a more profitable business. We want to project the benefits of positive Capex investment which will lead to solid business performance and profitability.

Almost anyone can hire an Accountant for a business to do the taxes or bookkeeping but finding a CFO styled partner is a bit more rare. Apart from keeping the boat afloat we like to coach on business best practices and provide recommendations to better your business. Capex is helping one business at a time to focus on the big picture by laying down the necessary foundation steps in order for our clients to remain future-proof. We believe strongly in education and technology. Technology is part of the Capex DNA and without the efficiencies realized we would not be able to play the business advisory role we do for our clients.

We adore technology such as cloud accounting and cloud storage but more importantly we encourage our clients to also do so.  So to sum it all up in one word, one mission, one vision. Capex.

p.s. Capex is pronounced as "Cap-X" sort of like FedEx except CapEx :) Easy to remember see! 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team