Ronika Khanna is a Montreal acccountant who helps startups, small business and self employed individuals with their income tax, accounting and financial needs. Do not hesitate to contact her with any questions or to set up a consultation.


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10 Year End Tax Strategies to help Small Business Owners Improve their Bottom Line

Ready or not, the holiday season is upon us and the end of the year is fast approaching.  While it is quite a nice time of year (cold weather notwithstanding) there are many additional stresses –purchasing the perfect Christmas sweater, managing the logistics of family holiday time, making travel arrangements, all while trying to not to gain a million pounds.  This can be especially trying for the small business owner, who in addition to managing their business and the holidays, must carve out some time to ensure that there are ready for year end and maximizing their tax deductions while also planning for next year.  To help ease the stress I have compiled a list of tax tips to contemplate:

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4 Simple Financial Analyses to Help Measure the Success of Your Small Business 

As the year draws to a close, many small business owners are taking stock of their business, basking in their successes and trying to comprehend their mistakes.  Unfortunately a big picture view does not always immediately reveal itself– a thorough understanding of your business requires at least some analysis and introspection.  You may be tempted to look at cash (or lack thereof) in your bank account or your net profit , however these are not always reliable indicators of success or failure , particularly when taken in isolation.  Every small business owner should identify the specific needs and constraints of their business to determine the optimal analysis  required to assess its financial performance.  Some general analysis that most businesses can benefit from are presented below:

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How to Change Your Personal Tax Return After It Has Been Filed

Despite your best efforts (and/or your accountants’), occasional errors or omissions relating to your personal tax return are unavoidable.  It is possible that you forgot to include a tax slip, overstated your expenses or was unaware of a specific tax credit.  Luckily there is fairly simple mechanism that allows you to change your tax return, which can be done online or by filling out a form and mailing it in.

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What Small Business Owners Need to Know About Income Tax Instalments 

One of the more difficult aspects of the transition from employment to small business ownership is having to cultivate a whole new level of discipline.  You can no longer rely on your employer to take care of business obligations that do not relate to your job ,and must take a much more active role in ensuring that you remain on top of your business obligations whether it is collecting payments from customers, paying bills or ensuring that you do not run afoul of Revenue Canada.  One of these obligations is that you are now responsible for remitting your own, which is done via the mechanism of instalment payments.

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Small Business Survival Statistics and 9 Steps to Improve your Chances of Sticking Around

The temptation to start a small business or venture into self employment can be strong particularly for those who are unhappy with their existing employment situation.    The freedom and flexibility that being your own boss seems to offer can be seductive, as is the potential for growth which you, as the business owner, can have full control over.  You may have an idea or a particular skill that you believe is desirable to a specific target market and you are confident that once this target market is aware of your existence they will all be banging down your door.  Consequently, you start your business by offering an amazing product or services, only to realize that building up a customer base is more challenging than you thought.  Additionally, there are a number of other obstacles for which you do not have the expertise (done by another department when you were an employee) whether it is marketing, website development, legal research and accounting.   Finally, you realize that you actually need a fairly sizable source of cash to maintain the business, deal with growth opportunities, whilst ensuring that you are able to support yourself.

The chart below, published by Statistics Canada available Key Business Statistics – July 2012 (this seems to be the latest data that is available), demonstrates the percentage of small and medium sized enterprises (SMEs) that actually survive over a five year period.

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CJAD Finance Segment with Tommy Schnurmacher – Everything You Want to Know about Small Business

Last Tuesday (August 7th) I was invited to be on Tommy Schnurmacher ‘s weekly finance segment on CJAD. The topic of discussion was “Everything you wanted to know about small business but were afraid to ask”.  It was a lot of fun and although I did not get to cover everything that you would want to know about small business in the 17 minutes that we were on the air, we were able to present some useful information to potential small business owners and fielded a few interesting questions.   Below is a recording of the interview followed by a brief discussion of the points covered and relevant links:

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Are Clothing and Other Personal Attire Costs Tax Deductible?

The fundamental rule for deducting any type of expense from your business income is to determine whether it was incurred for the purpose of earning income:
No deduction shall be made in respect of an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property

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3 Invoicing Options for Small Businesses and Freelancers

If you are running a business of any size, it is essential that you have a system in place that allows you to get paid.   A system can range in sophistication from a handwritten receipt to a software generated invoice which is part of an entity wide CRM system.  To meet this need there are countless invoicing solutions available and many billions of dollars are spent annually on setting up systems to meet each business’ unique needs. 

Almost all accounting software geared to small business owners and freelancers have built-in invoicing modules that integrate with your accounting.  This is very useful when doing your books as you don’t have to worry about entering your invoicing manually and it allows you to track your accounts receivable and deposits into your bank account.  There are also invoicing solutions that are not full-fledged accounting systems; however they usually integrate with the more popular software.

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One Simple Step to Help Streamline your Self Employed Finances

If you are self employed or a small business owner,  you have probably discovered that keeping track of your accounting and finances can be time consuming and occasionally frustrating.  Unless you are an accountant, you’re never really sure if you are doing things correctly.  Consequently, you procrastinate, which really just makes things worse at year end or tax time.  To combat the problem it is important to have tools in place to facilitate the process and make it less painful, which could include  accounting software and/or a bookkeeper as well as a good organization system for your documents, whether it is electronic or paper format.  Another very simple measure that you can take is to have a separate bank account for your business.

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What Happens When You Contribute Excess Amounts to your RRSP

Being able to contribute to an RRSP is one of the great tax saving strategies available to all Individual Canadian Taxpayers who generate “earned income” which is essentially income earned from employment (salaries) or self employment,  (Passive income like dividends and interest is ineligible for consideration when calculating how much you can contribute to an RRSP).  There are .unfortunately limits to how much you can contribute and Revenue Canada (CRA) actually imposes penalties on overcontributions to your RRSP.

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