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60.1% of Canadian small businesses cite increasing revenue as one of their top challenges. 44.7% cite maintaining its profitability.

One easy way to help business owners manage their capital and increase revenue is with accounting software. The best accounting software can provide you with a ton of information to help you make smarter business decisions.

It’s not always easy to know what the best small business accounting software is for your specific needs. We want to help you save time and run your business more efficiently.

Keep reading to read our comprehensive list of accounting software for small businesses.

Why This List of Accounting Software is Important

Accounting software has a wide range. The most basic options allow you to create invoices and track expenses.

The most comprehensive software provides advanced financial reporting along with inventory management. Which software you choose should depend on your goals and which criteria appeals most to your needs.

At a bare minimum, the best online accounting software should provide the following:

If you require more tools, look for accounting software that offers extended functions such as inventory management, eCommerce management, and native CRM.

Intuit Quickbooks Online

One of the best online accounting services available is Intuit Quickbooks. Their online version makes it easy to download your businesses banking and credit card information easily.

They also provide for integrations with PayPal, Shopify, and Square and provide 24/7 chat support. Every plan allows for the following:

  • Tracking income
  • Tracking expenses
  • Sending invoices
  • Receiving payments
  • Running reports
  • Sending estimates
  • Tracking sales
  • Tracking taxes
  • Organizing
Advanced Plans are Available

There are also more advanced plans which let their customers track inventory, manage your 1099 contractors, track time, and you can even run your payroll through Quickbooks.

Pricing ranges from $13 per month to $40 per month depending on the plan you choose to work with.

Xero

Xero is a close second to Quickbooks. They offer similar features and, unlike Quickbooks and most other competitors, Xero doesn’t charge a fee per user nor do they limit the number of users.

Xero is a great choice for business owners who are constantly on the go. Common features include:

  • Custom invoicing
  • Tracking inventory
  • Creating purchase orders
  • Connect with your bank account
  • Financial reports

And you can do all of this using your phone or your tablet. Xero’s downsides are that they do not provide live support and if you require payroll services, you’ll have to use their partner Gusto.

The Downside of Xero

The only type of support Xero offers is via email. While it’s fairly easy to locate a Quickbooks expert to help answer your questions, it’s not as easy to find someone as familiar with Xero.

Pricing starts at $9 per month for standard services and $70 per month for premium services.

FreshBooks

FreshBooks is a great choice if you typically send out recurring invoices, require time tracking capabilities, and own a business that customers subscribe to. FreshBooks even lets you see the precise location when a customer opens your invoice.

That feature lets you avoid customers trying to tell you they never received their invoice. The system even lets you easily apply late fees to those delinquent customers.

You can also integrate with other business applications, and you’ll have a single dashboard to manage your accounting and finances. They also provide regular secure backups so you never have to worry about losing all your information.

The Downside of FreshBooks

Current customers don’t enjoy that you can’t view balance sheets or statement of cash flows.

Pricing starts at $15 per month for five clients up to $50 per month for 500 clients. If you pay for a full year at once, you’ll receive 10% off.

Wave

Use Wave if you’re a freelancer, have only a few employees or you’re on a tight budget. That’s because many of Wave’s services are completely free, including invoice and transaction management.

You can even sync your information with their software.

The Downside of Wave

Since Wave is free, it’s missing a few key features. You can’t pay your bills directly from Wave which means you’ll have to manually enter and pay your bills.

You also can’t run an accounts payable report until you’ve manually entered in all your bills and payments. If you need time tracking, inventory tracking or project management features, look for a different software company.

Pricing is free for accounting, invoicing, and receipt scanning. They do charge for online payments and payroll services.

Zoho Books

Compared to all the other paid services, Zoho is the most economical. Common features include:

  • Connect bank and credit card statements
  • Key financial reports
  • Accept online payments
  • Multi-user access

Zoho is also easy to use and perfect for small companies looking to manage their cash flow and finances. They also provide excellent customer support and their dashboard is easy to read and use.

The Downside of Zoho

Zoho doesn’t offer payroll processing so you would also have to use a payroll service such as Gusto to pay employees.

Pricing begins at $9 per month per organization up to $29 per month. Check out their yearly plans since they offer discounts.

AccountEdge Pro

AccountEdge lets you use double-entry accounting tools such as time billing and reporting to inventory. You can also customize and optimize these tools for your desktop.

The downside is that there’s not a mobile phone app you can use. If you really need a mobile option, they do offer a cloud collaboration option for a fee.

Pricing is either a one-time fee of $149 for basic services or a one-time fee of $399 for more professional services.

Always Work With a Professional

While this list of accounting software can help you run your business more efficiently, you should still use an accounting professional to make sure you’re following the most current tax laws and are making good financial decisions.

We can help. Our team of professionals can make sure your business succeeds year after year. Don’t wait until there’s a problem, click here to contact us.

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If your books are also getting you down, you are not alone.  Roughly 40% of small business owners find bookkeeping and taxes to be the worst part of running a small business.

This is quite understandable, considering that bookkeeping and tax preparation can take a lot of time and resources. And if not done right, it could end you up in hot water with the CRA.  Fortunately, there is an easy, cost-effective and efficient way to solve your bookkeeping problems forever. It is called outsourcing.

Are you already wondering if you need to outsource the bookkeeping of your business? If so, here are 3 major signs which indicate that it is time to outsource your bookkeeping today.  Read on to find out what these are!

1. You Spend Most of Your Time Being a CBO (Chief Bookkeeping Officer)

In the beginning, it is quite normal for most small business owners to start and maintain their business’s books. But as you begin to hire in help, and as your business takes off, doing your own books can place a major strain on a SMB owner’s time and focus.  When polled, business owners in Toronto have reported in the past that managing the accounting and bookkeeping aspects of their businesses took up to 25% of their time. We think this is way too much.

Even if you delegate the bookkeeping of your business, you may still find that this number does not decrease all that much. If this is the case, then you are officially wearing the hat of CBO (Chief Bookkeeping Officer) instead of CFO (Chief Financial Officer).  Starting and running a small business generally involves wearing many hats. But CBO does not have to be one of these.

If you are wondering when to outsource bookkeeping, and you are spending up to 25% of your time being a CBO, then now is the time!  The quicker you get that 25% of your day back, the quicker you can channel it into things that will grow and improve your business.

2. The Thought of a CRA Audit Is Keeping You up at Night

If you are lying awake at night worrying about getting audited by the CRA, then it is definitely time to outsource your small business accounting.  Hiring a small business accounting professional will help you to avoid audits and can reduce your taxes. When you outsource, you get a whole team of professionals, including a tax pro.

There are a number of reasons why having an accounting and tax professional on your side is invaluable when it comes to being tax compliant. Firstly, tax laws are apt to change, and if you or your bookkeeper are not keeping up with the changing tax laws – this could lead to some serious problems.

Secondly, a tax pro will know how to maximize your deductions so that you can pay the minimum in taxes. Something that you or your bookkeeper may not be as adept in.

3. You Feel like You Are Spending Too Much Money on the Financial Function of Your Business

Do you ever get the feeling that the financial function of your business is taking up an inordinate amount of finances? Paying too much for bookkeeping can feel very frustrating. It is also a major sign that it is time for outsourced bookkeeping services for your business.  Many small business owners think that DIYing their books will save them money. Why else would anyone take on this time-consuming task? This is, however, a misnomer.

Say you do your own books, and your time is worth a C$20 an hour (to be very conservative, as your time is probably worth a lot more). If you spend 25% of your time on the books for your business, then this equates to a theoretical expense of C$833 per month.  If you hire an in-house bookkeeper to handle things for you, you will need to pay them a similar amount, as well as the other expenses associated with an extra employee.

In contrast to this, businesses who outsource their bookkeeping spend can spend anywhere between C$100 and C$3 000 depending on the amount and complexity of transactions. Even if your business spends C$3 000 per month on outsourced bookkeeping, this will still be C$4 000 cheaper per year than paying a bookkeeper an average pay of C$41 000 every month (plus employee expenses).

Besides this saving, you will also not have to:

  • Invest in computer equipment
  • Maintain computer equipment
  • Supply office equipment or office space
  • Purchase bookkeeping software
  • Consult outside (additional) accounting professionals

Taking all of this into consideration, no wonder 59% of businesses use outsourcing as a cost-cutting tool!

Scaling Will Only Make It Worse

If you are busy scaling your business, these high costs associated with in-house bookkeeping can be even more difficult to manage. In-house bookkeeping does not scale very well – for example, at what exact point do you hire a second bookkeeper? And when do you bring on board a full-time CPA or tax pro?

Outsourced bookkeeping, on the other hand, has none of these problems. Your books will seamlessly scale along with your business, without you having to give it any thought.

Your Cash Flow May Also Be Suffering

Besides saving you money, outsourced bookkeeping services can also greatly improve your cash flow. Having great cash flow is one of the financial secrets of growing a small business.  Having a pro team handling your books means that you will receive accurate and timely financial reports that will allow you to manage cash flow like a boss.

There are many hidden costs of running a small business. Don’t let bookkeeping be one of these.

Is It Time to Outsource the Bookkeeping of Your Small Business?

Accurate and timely bookkeeping/accounting is vital to maintaining a healthy small business. However, this function of your business can begin to place a massive strain on your time, and your business’s finances. And after these investments into your bookkeeping process, you still aren’t guaranteed compliance and 100% peace of mind.

If any of these 3 signs are true for you, then it is high time you outsource the bookkeeping of your small business.

If you want to gain 100% peace of mind over your books, get back your time, and cut unnecessary expenses, contact us today or check out our services.

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One of the ways that businesses fail is that they don’t see outsourcing as an investment, only as an expense.

That’s a major mistake because there are many reasons why you should look beyond looking at only dollars and cents when you’re outsourcing. They fail to overlook the ROI strategy of outsourcing.

Would you like to know how you can calculate the real ROI of outsourcing your bookkeeping? Read on to find out.

What is ROI?

ROI is simply the return on investment. It’s usually measured in a formula:

(Return ÷ Investment) x 100 = Return on Investment

In most cases, you’ll look at the amount of money you’re getting back, divide that by your investment, and multiply by 100 for the percentage.  For example, if you invested $1000 in a marketing campaign for your business which generated $2000 in revenue, your ROI will be 100%. That’s an outstanding return on investment.

Where many businesses don’t recognize when they’re looking at ROI, they are only looking at the bottom line. They will usually look at a service such as bookkeeping and won’t see the impact on the bottom line that they want to have, so they decide to keep bookkeeping in house.

The Hidden Costs of Running a Business

You know that there are hidden costs of running a business. If you’re like most business owners, you’re looking at the money coming in and money going out.  Your balance sheet might not be telling you the whole story. There are costs of time, risk, expertise, stress, and more.  If you’re just looking at bookkeeping as a red and black service, you’re missing out on a big part of the ROI of outsourcing.

Here are some ROI strategies you should consider when you’re calculating the return on investment for bookkeeping services.

The ROI of Time

What is your time worth to you? This isn’t how much you charge an hour for your services, but a question of what your time is worth to your business.

Now take a close look at how much time you spend on bookkeeping. You may spend hours on tasks like processing payroll, figuring out taxes, invoicing, and accounts payable.

What would be a better use of that time if you outsourced it? You could focus on serving your current customer base, which would create loyalty and repeat purchases. You could also focus your time on marketing and sales, which would generate new business.

In both cases, you’re using your time to focus on growing your revenue, which will contribute to the bottom line because you now have the time to do so.

Expertise

Do you know the tax law in Canada? It can be a pretty complicated world for small businesses. Mistakes on tax laws can cost time and money to amend those returns.  In some cases, businesses have to pay a penalty or amend their returns because they filed their taxes late. Instead of your lack of expertise and knowledge costing your business money in the long run.

Outsourcing bookkeeping ensures that you have your taxes done right the first time. You also have an accounting professional at your side that can guide you through tax season.

Cost Savings

There are tremendous cost savings by outsourcing bookkeeping beyond helping you on your taxes. Do you have accounts payable and accounts receivable?  You could make sure that your accounting software is set up to automatically generate invoices on schedule. That can help you get paid on time, especially if you have a follow-up system set up to gently remind customers that a payment is due.  You can also make sure that your payments to vendors are paid on time. That step alone can create significant savings since you can take advantage of prepayment discounts and avoid late fees.

Just because a service doesn’t generate revenue, it doesn’t mean that it doesn’t deliver a return on investment.

Less Stress Around Finances

One of the top reasons why businesses close is due to lack of cash flow. Your business doesn’t have to have the same fate.  Outsourcing bookkeeping can help you ensure that you have the systems in place to keep the cash flow consistent.  Instead, you can stress less over the financial situation of your company and focus on generating new clients and maintaining the ones that you have.

Stronger Growth Potential for Your Business

You’re saving money and you have a more reliable cash flow for your business. You can take those cost savings and invest the funds elsewhere in your business.  Investing the funds back into growing your business ensures that you are always ready for the future, instead of constantly putting out fires.

It also looks good to lenders and investors if you’re planning to get outside funding for your business. Investors and lenders are impressed when they see a business put money back into the business, as opposed to funneling the funds to frivolous expenses.

Finding the ROI Strategy of Outsourcing

Outsourcing anything can be a great move for small business owners. Yet, so many don’t do so because they only see outsourcing bookkeeping as an expense because it “doesn’t generate revenue.”

When you adjust your ROI strategy to take into account your time, a bookkeeper’s expertise, and the genuine cost savings you’ll see on your bottom line.  It forces you to look at ROI a little differently, but with this new lens, you can find services that truly bring a return on investment.

Want to know more about how an accountant can make life easier for your business? Check out this guide that details how an accountant can make your life much easier.

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Did you know that over a ten year span, small businesses in Canada have a survival rate of just over 42%?  That’s one sobering stat right there. But we have good news.

If you are reading this, then the chances are that you’re already primed to be in the 42% of SMBs that make it. Why?  Because you are already thinking about one of the key components to maintaining a healthy small business. And that is rock solid bookkeeping.  This is why we are going to share with you the best bookkeeping practices. Ones that you can implement for sustainable growth and success in your business.

Read on to find out what these are.

Use Cloud-Based Accounting Tools

One of the hottest bookkeeping tips is that you should be using cloud-based accounting tools.  Cloud-based accounting has fast become the go-to option for accounting software. According to research, 67% of Canadian organizations use cloud-based accounting for one or more of their financial functions.

Here are some of the reasons why cloud-based bookkeeping is so advantageous for SMBs:

  • Accessibility: You can log in anywhere, any time, from any device. All you need is a web browser.
  • Cost-effectiveness: Cloud accounting expenses come in small monthly payments which are more manageable for small businesses and start-ups than large upfront costs associated with legacy systems. Cloud accounting also negates the need for company servers and their inevitable electricity bill.
  • Security: Cloud accounting tools are uniformly secure and are not vulnerable to data loss through human mismanagement, such as a broken laptop that was not backed up.
  • Scalability: One of the most exciting benefits of cloud-based accounting tools is their scalability. As your business grows, so do your financial needs. There is no need to migrate to larger and upgraded systems.

These key benefits make cloud-based accounting tools a must for any small business.

Separate Business and Personal Expenses

You may have heard this one before, but one of the most important bookkeeping tips is that you must separate the expenses of your business and yourself.  The way to do this is to open a bank account for your business and religiously use it solely for business expenses. The same goes for your personal account. Avoid paying business expenses in cash, as this will result in a pile of receipts that you will need to input into the books.  If you choose to make a capital investment into your business, then this must be documented clearly.  If you wish to withdraw profits from the business for yourself, then you can either set up a monthly salary or make a capital withdrawal.

Come bookkeeping time, you will easily be able to track and input your business expenses into the books. Some software will even allow you to import transactions straight from your bank account. This saves incredible amounts of time, but won’t work out that well if you have personal expenses mixed up in there.

Close Your Books off Monthly

To keep things running smoothly in small business accounting, a best practice is to close your books off every month. This will allow you to analyze performance over the month and help you to plan for the next month.

It will also ensure that your books are 100% up to date on a monthly basis.

Reconcile Promptly

Reconciling your bank account promptly is another small business accounting habit that you should implement. As soon as you receive your statement, you can go in and make sure that the balance reflected is the same as that in your ‘Bank’ account in the chart of accounts in your bookkeeping system.

By doing this every month you will avoid tedious sessions of error hunting through hundreds of entries.

Track Income and Expenses Accurately

To save time and hassle, make sure that your expenses and income are being recorded accurately. If these figures are off, you will not be able to generate accurate reports, and you could even get into trouble with the tax man.

Tracking income and expenses accurately can also increase your chances of maintaining healthy cash flow. And guess what? Cash flow is one of the boring secrets to growing a small business.

Get a Professional on Your Side

There are many reasons why small businesses need to work with an accounting professional.

As the owner of an SMB, you are most likely focussed on growth and innovation for your business. Not on forms, changing tax laws and red tape.

This is why you need to get an accounting professional on your side. One that can advise you, save you time, meet deadlines, maximize your deductions, handle audits, and ensure that you are 100% compliant at all times.

Outsource for Efficiency

What’s even better than getting a professional on your side?  Getting a team of professionals on your side!  Outsourcing your books means that they will be managed by a team, including a bookkeeper, tax pro and a CPA. A bookkeeper can help you grow your business, but outsourcing can make this happen even faster.

With outsourcing, you are freed up to focus on your business’s growth, while at the same time you will receive accurate and timely financial reports to guide you in your decisions.  You also won’t have to lose any sleep over tax season, payroll or compliance issues.

According to research done by Deloitte, outsourcing has the power to make businesses more agile, effective, and efficient. So if you want this for your business – and hate bookkeeping – take the opportunity to outsource.

Now You Know About Some of the Best Bookkeeping Practices for SMBs

Bookkeeping is generally one of the facets of running a business that owners enjoy the least. But, it is also one of the most important areas to maintain and keep on top off.  Fortunately, you now know about these best bookkeeping practices that you can implement to keep your books hassle-free, and up to date.

And if you simply want to hand the whole lot over to a team of pros that will help you in making your business succeed, don’t hesitate to contact us or check out our services.

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More than half of small business owners spend three or more hours per month managing payroll. More than 10 percent spend over 10 hours every month.

What’s clear from these numbers is payroll activities add up. Deduction formulas and confusing tax rules can bog you down.

Our crash course in payroll is here to help. With it, you’ll learn about your choices as well as tips to make processing easier.

If you’ve been wondering how to do payroll, look no further.

Understanding Payroll for Your Business

The first thing to do is understand whether you need to conduct payroll for your business. If you have employees, you must pay them. Hiring your first employee is usually the trigger for setting up an account.

If you’re the business’s sole employee, you don’t need to do payroll. If you hire freelancers or contractors, you’ll treat payments like accounts payable.

When you enter into an employer relationship, you take on new responsibilities. These include collecting payroll taxes and submitting them to the Canada Revenue Agency. You’ll also need to pay attention to factors like overtime and holiday pay.

Payroll itself is the process of paying the people employed by the business.

Setting up Your Account

Once you’ve hired an employee, you need to set up payroll. The first thing you need to do is create a business number with the Canada Revenue Agency.

You may already have a business number. If you collect GST/HST, you likely have a number. If so, you can add a CRA payroll account.

If you don’t have a number yet, register and select the services you’ll need.

You’ll also need to look into provincial requirements. In Ontario, you’ll need to register with the Ministry of Finance to remit the Employer Health Tax. This isn’t a requirement in Alberta.

Next, you’ll want to decide how you’ll do payroll in your business. Some employers pay their employees weekly, while others choose monthly pay periods. A company that pays weekly runs payroll 52 times a year.

Check in with your provincial rules as well. Some provinces have laws about how often you need to pay your employees.

When deciding pay periods, you’ll also want to think about:

  • Your business cashflow
  • Whether employees will be paid in arrears or to-date
  • How easy it will be to follow a consistent schedule

If you’re handling payroll for 10 employees on your own, doing it every week may not be the best plan. You want to stick to the schedule once you create it, so be sure to pick a manageable one.

Choose Your Processing Method

The next decision to make is about how you’ll process payroll.

Many business owners process themselves because they’re not aware of their options. You can work with accounting professionals who offer payroll services. You could also work with a payroll provider.

If you do choose to keep processing in-house, you should think about payroll software. Software often means you’ll spend less time processing. It usually means fewer errors too.

You can even use online payroll services. These are usually cloud-based services you can use for a monthly fee.

Calculating Earnings

Payroll is often time-consuming because there are so many little details to keep track of. Basic payroll is simple enough. You calculate an employee’s earnings, often using one of three methods:

  • Hourly wages, where an employee is paid a set rate for each hour worked
  • Salaries, which is an annual amount broken down over the number of pay periods
  • Commission, which combines a base salary with earnings on performance

Different types of employees may be paid using a different method. You may pay salespeople using the commission model. This usually gives them incentive to sell more, since they’ll earn more.

Senior employees don’t usually need incentive to work harder. You may pay them a salary. In some cases, they may also get performance bonuses, such as when the company does well.

Retail cashiers, factory employees, and many others are often paid by the hour. Their hourly rate is set. The more hours they work, the more they earn.

You may use just one or all three of these models in your business. This can complicate payroll, since you have to be sure you’ve set up each employee’s account correctly. If employees also earn different rates, you’ll need to be sure that’s reflected on their accounts.

The situation becomes even more complex from here. Did an employee work overtime? If so, how many hours and what rate should you use when calculating their wages?

Holiday pay and vacation pay are also concerns for employers. You might offer sick days or other forms of leave to your employees as well.

Deductions and Withholdings

Once you’ve finished calculating employees’ earnings, you’ll face another challenge. As an employer, you’re expected to withhold certain amounts from an employee’s paycheque. There are a variety of payroll deductions:

  • Income tax withholding
  • Canada Pension Plan deductions
  • Employment Insurance deductions
  • Provincial deductions
  • Deductions for benefits

You’ll need to withhold income tax for both the federal and provincial level. Each province and territory sets its own tax rate. Tax rates also change with income level, so the more an employee earns, the more tax they’ll pay.

Every employer must make deductions for CPP and EI. You need to pay both the employer and employee parts. Quebec has its own programs, so check the rates and requirements for this province.

Perks such as the use of a company car might also be a taxable benefit. If you offer a taxable benefit to an employee, you have to add it to their total pay before making deductions.

Remittance Schedules and Penalties

Before you even hired your first employee, you set up your payroll account with the CRA. Once you’ve collected deductions from your employees, you need to send them to the CRA.

You’ll need to determine what kind of remitter you are. You may send the CRA payment once per quarter, or you may need to send the funds four times a month.

This also determines when the funds you collect are due. For an employer following the regular schedule, the due date is the 15th of the month following pay day.

If you don’t remit on time, you could face some hefty penalties. CRA online payroll options make it easier to pay what you owe on time.

Selecting the Right Processing Method

Deductions, remittances, and more make payroll more complex than you might have guessed.

That makes choosing the right processing method all the more important.

Many business owners feel doing payroll is their only choice though. They’re often most concerned about costs. Working with an experienced accounting professional can actually save you money.

First, you get your time back, so you can focus on other important tasks in the business. Next, your payroll will be done correctly every time. You can avoid penalties from the CRA and spend less time sorting out errors on your end.

Many payroll services are also affordable. If you’re not sure they’re the right fit for your business, you can consider online payroll or payroll software.

Both of these methods help you save time by automating some payroll tasks. You’ll still need to enter information, but the program will carry out the calculations.

An online payroll calculator is programmed with provincial tax tables. You just tell it which province you’re in, and it will do the math.

You can also look to the CRA for guidance. They issue formulas for payroll deductions. More information may also be available from the provincial government.

Experts back many online services. They can help guide you through the process.

Keeping Records

At the end of the year, you’ll need to fill out and submit a T4 or T5, a payroll information return. This year-end summary reports all employee pay and deductions.

You’ll need to have payroll records on file as well. The CRA may ask to see them during an audit. Provincial authorities can also ask to see these records.

You should also keep your employees’ information up to date. If someone’s name changes, this could pose a problem. The address in your payroll records needs to match the employee’s current address.

If you use the right software or service, keeping records is simple. A service provider should be able to supply the documentation you need.

Don’t Struggle on Your Own

Unless you’re a trained payroll professional, you’ll likely find this side of running your business complex. Trying to handle payroll all by yourself can lead to mistakes and penalties.

Whether you do payroll online or by hand, don’t hesitate to get in touch with the experts. We can make payroll a much smoother process for your business.

Until the next time,

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Managing your cash flow is incredibly important for small- and medium-sized business owners. 82% of small businesses fail due to cash flow problems. Small businesses often can’t withstand financial setbacks, like unexpected emergencies or late payments.

Not knowing where your money is coming from or going makes this problem exponentially worse. Considering that 60% of small business owners report not knowing much about accounting, this is a major stumbling block for startups.

To help illuminate your financial well-being, we’re going to show you some unexpected expenses of starting and operating a startup.

Here are some of the unexpected expenses of running a startup.

The Hidden Costs of Running a Startup

It’s never been easier to start a business than it is today. The Internet’s made it possible for regular people with a little business background to come up with an excellent idea, start a website, and begin their journey into the digital economy.

This ease is both a blessing and a curse for startup owners. On the plus side, it gives people without the unlimited cash flow to start their own independently-owned business. This is good for the economy as well as for society as a whole, bringing fresh new ideas and innovations into every industry.

The downside is that a lot of people are also going into business for themselves with little training, experience, or awareness of what it takes to run a successful business.

Everything is a hidden cost if you don’t know what you’re looking for or what to expect. To start, let’s take a look at some common business expenses of creating a startup.

Common Startup Expenses

Before we delve into the fine print of hidden startup costs, let’s take a look at some common costs of creating your own startup.

Some Common Startup Expenses Include:
  • Incorporation Fee: Under $400 CAD
  • Equipment Costs: $13353.95 – $166924.38 CAD
  • Office Space: $133.54 – $1335.40 CAD
  • Inventory: Up to 25% of the budget
  • Marketing: Up to 10% of the budget
  • Website: Around $33.38 CAD/monthly
  • Office Supplies and Furniture: 10% of the total budget
  • Utilities: Around $2.67/per square foot
  • Payroll: 25 – 50% of the total budget
  • Taxes
  • Travel
  • Shipping

While these expenses are going to vary from business to business, you’re already starting to see that expenses can rack up quickly when you’re running a startup.

All too often, small business owners and entrepreneurs don’t think about how to make their businesses scalable, either. They think of doing everything themselves, so they fail to factor in payroll expenses or even rent for an office space!

Now let’s delve into the true hidden costs of running a startup.

Permits and Licenses

Running a startup starts with getting set up as a business. You’re going to need a business license or permit to conduct business in your province. Keep in mind that business licenses often need to be renewed periodically, so factor that into your budget.

Just getting a business permit or license is the bare bones of what it takes to launch a startup. You’re probably going to need help spreading the word on your new business, as well. This could require joining some networking communities in your area.

Joining professional communities usually also requires some form of fee. These expenses could be recurring, as well.

Insurance

As we stated at the beginning of this article, many small businesses and startups can’t afford a financial setback, even a minor one. That makes insurance an important expense. It’s often overlooked when business owners are creating their startup budgets, unfortunately.

There are multiple types of insurance, as well. Your startup may need multiple different types of insurance for complete coverage. This can add up quickly.

At a bare minimum, you should have public liability and employer liability insurance. Property insurance is a good idea to have, also, in case your building is damaged. It’s a good idea to have insurance for negligence, insurance, and illness, as well.

Shrinkage

If you’re working in retail or carry a physical product in any way, you should prepare for losses. Shrinkage is the official name for theft which is, unfortunately, a reality no matter how great your security is.

U.S. retailers report that 1.4% of their annual budgets go towards shrinkage.

Shrinkage doesn’t only include theft, either. It can also include short shipments from your suppliers. Shrinkage can also occur due to mispacked orders or damaged goods.

Late Payments

If your cash flow is limited, which is often the case with startups and small businesses, delayed payments can throw a wrench in your works. Unfortunately, late payments are all-too-common in business, especially during times of economic uncertainty.

Payments can be delayed for all manner of reasons. A customer might forget to pay their bill. Your bank could take longer to process a payment than anticipated. Vendors may forget to pay you what you’re owed.

Even something as simple as a holiday can cause your payments to be late. While we may be flexible and understanding about late payments, our creditors might not be so understanding.

To help account for late payments, you should try and keep a backlog of operating expenses for at least three months. This will help you weather out any unexpected financial shortcomings.

Accounting for hidden expenses helps ensure that your business stays operational while you’re getting established. Small businesses and startups are such an essential component of the economy. It’s in everyone’s best interest that your business flourishes and prospers!

Looking for More Financial Insights?

Knowledge is power! Information technology makes us more powerful than ever, as business owners and entrepreneurs.

Whether you’re looking to unearth the hidden expenses of running a startup or creating social media advertising campaigns, a digital bookkeeper helps your business stay within your budget and operating efficiently.

If you’d like to discover the power of having a small business accountant in your corner, contact us today!

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Do you know one of the major reasons behind small business failure today? Cash flow problems.

Most small business owners know what it’s like to handle business matters on their own. Hence, they often avoid hiring accounting professionals because they don’t think that they need help when it comes to handling their business finances.

As a business owner, you need to reduce your workload so that you can focus on the growth aspect of your business.

Hiring a small business accountant professional is a great way to get the expert help you need when it comes to getting your financial house in order.

Read on to learn why your small business needs an accounting professional.

1. Refining Your Business Plan

As a small business owner, you need a strategic plan to grow fast. Is your current business model the most profitable for you? You need professional advice that will make your business reach its full growth potential.

For your business to realise its maximum growth potential, you must be in a position to calculate the financial consequences of every move you make. You must monitor your business’s budget and cash flow so that you can be sure of the right time to make changes.

A timing mishap that involves changes such as hiring more employees or making a huge office purchase can bring your business to its knees.

An accounting professional can tell you what reports need evaluation, and show you the red flags to look for in specific areas.

Does the business tax liability call for a change of business plan? Is there any change in customer’s transaction habits that could signal problems ahead?

You need to refine your business plan at some point to avoid costly surprises.

2. Managing Business Growth

As much as your small business strives to grow, not all growth is healthy for it. Growth that isn’t well-managed can hurt your business. Your business needs to have structures that can handle growth.

A person who understands the implication of any changes your business may experience is in a better position to manage growth.

If quick growth is not managed, your banner year may end up being the last year for you in business. Managing growth doesn’t mean stopping the business from making progress but rather helping it take the best path to continuity and stability. Prepare a business plan for growth so that you’ll have a road map that helps you navigate new challenges you’ll face.

3. Handling the Payroll

Handling a payroll is one of the most sensitive aspects of managing a small business.

An accounting professional ensures every employee gets classified, and all exemptions apply accordingly. Some mistakes such as ignoring overtime demoralize your employees.

4. Minimizing Your Tax Bill

Finances are a priority for your small business and you need to find ways to minimize your tax bill in a legal way. Matters concerning tax relief, expenses, and allowances can confuse you. How will you know if you’re eligible to claim?

Failure to know your eligibility will make you lose a lot of money every tax year-end. Are you able to carry out tax planning at the beginning of the tax year on your own? You need help from a professional.

Every year, your business will be expected to submit a tax return. You’re also expected to keep accurate and updated business records and accounts.

It’s wearisome and complex to run your business in addition to taking care of all transaction records and preparation of accounts.

You’ll lose balance and your business is likely to suffer. You need to delegate all these responsibilities to a professional so that you may focus on the daily operations of the business.

5. Staying Updated

Federal laws, tax rules, provincial and local regulations that govern your daily operations keep changing with time. Understanding the tax and financial impact of the possible changes is an important part of business accounting.

As a business owner, you must stay informed about all these changes and that means dedicating hours of research every now and then. These are hours you could be spending on running your business had you delegated your accounting responsibilities to a profession.

6. Saving Time

Since you may not have adequate knowledge of accounting, you’re likely to spend a lot of time on reporting and still end up making errors.

As a result, you may not able to make sound financial decisions which depend on the interpretation of the business accounting information.

Most small business owners argue that they’re cash-strapped and they aren’t in a position to afford an accountant, but do you know why they are cash strapped in the first place?

You need an advisor to keep your business on the right path.

7. Avoiding an Audit

There are some entrepreneurs who think that an accounting professional can fix audit issues after they have occurred. Truth is, it’s usually too late to achieve that. The best thing to do is to avoid the audit in the first place.

How do you avoid an audit?

By ensuring you’re making sound financial decisions. When you become too ‘philanthropic’ and make many errors on tax forms among other mistakes, you will definitely get audited.

An accounting professional will help you avoid all these mistakes and avoid auditing.

8. Meeting Deadlines

There are several provincial and federal regulations guiding small business operations.

Depending on the structure and type of your small business, there are several deadlines you have to meet every month. All these regulatory burdens come with deadlines.

If you file any of the reports late, there is a high chance you will face fines.

Having an accounting professional will help your business meet all the deadlines and avoid fines for late filing.

Once the pressure of meeting deadlines is off your back, you can focus on the day-to-day operations of your business.

Small Business Accountant Professional Will Help You Plan for the Future

As an entrepreneur, you’re most likely busy with normal business operations and have no time to plan your business’ future. The entrepreneur has no time to check financial records from past months and evaluate the trend of the business.

Without this knowledge, then you’re not able to tell when is the appropriate time to buy inventory and plan for big returns investments.

You need to hire a small business accounting professional for your company to remain competitive and be able to enjoy growth.

Looking to get your financial house in order? Contact us today.

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While creating a successful business is all about how you manage how your cash comes and goes, the conundrum is in how few companies keep good books. If you fail to manage your money properly, you’re more likely to have to close up shop in just a few years.

The cost of running a business might be in your day to day expenses but also lies in how much time and effort it takes to keep your accounting together.

Here are four ways that this hidden cost of running your business matters.

1. Managing Your Cash Flow

When you’re working on building your small business, you need to have someone to look at how your money flows. If you don’t have someone to keep a proper ledger, you’ll have a confused perspective on what kind of money your company has. Every small business needs a ledger to have a handle on the inflow and the outflow of money.

You need several components in your ledger to keep things together.

First, you need to know how much cash you have on hand for the day. Then, you need to know what kind of money you should anticipate to come in based on sales yet to be paid or processed. Lastly, you need to know how much money you can anticipate going out from automatic debits or any payments that have yet to be debited from your account.

Every sale that you make, all of your expenses, as well as any fees related to banking or processing payments. The costs of running a business might require you to also pay for software and tools for managing your money.

2. Filing Invoices

Your invoices and receipts are the paper trail determining the foundation of your business. If you’re selling a physical product, you’ll be giving out receipts with every sale that you make. You should keep your own copy so that you can add everything up later.

If you provide a service or sell to other vendors, you should have a copy of every invoice. Your invoices could get lost when you send them to the people you provide services to. When they’re lost, it’s more likely that it will take longer for them to pay you.

If you sell a high-end product, you need to ensure that you have a constant running flow of the amount of money you’re spending and receiving. When every invoice gets paid, you need another system for ensuring that you’re on top of the payments.

A computer-based system can help you keep a record of your company’s transactions while also creating a base of electronic receipts. You’ll know how much you could potentially make from month to month, on holidays, or on average from a particular product or service.

3. Watching Expenses

Every business has a series of expenses that are required of them to keep running. Your business is going to have daily expenses from staffing costs, running your electricity, or just having a space that you rent out. When you understand your regular expenses, you know what you need to have on hand to sustain your business.

There’s going to be a different benchmark for every company out there. Once that benchmark is breached, you know that you’re spending more than you can bring in. While you don’t want to be pinching pennies, if you’re not watching your spending, you’re going to end up in trouble.

Spending too much on expenses that you don’t need or services that exceed your business’s capacity, are going to end up driving you to lose money. When you’re thinking about your expenses, also consider how hard it is to get a new client. Finding new clients and winning them over costs lots of time and energy.

IF you’re not spending your money wisely, you’re going to struggle.

4. Preparing Your Taxes

Every year, every business is going to be required to pay taxes on what they’ve earned and what they’ve spent. Preparing taxes as a business is far more complicated than preparing taxes as an individual. You’re going to need to start by reconciling all of your finances in advance to ensure that you have an accurate measurement of the flow of cash.

Then, you’re going to need to keep track of your spending throughout the year. This entails insurance, fees, taxes, and all of your staffing expenses. You even need to keep track of what you spend on office supplies and equipment to ensure that you’re not overpaying on taxes. Deductions can keep your doors open.

While you manage your business, you need to have someone around to make sure you’re paying enough in taxes. If you don’t pay the right amount throughout the year, you’re going to have to make up for it all at the end of the year. Preparing taxes takes time and effort, so expect to have someone on staff regularly or else pay for several hours of work when it comes to time to do taxes.

You’ll need to be very organized if you want to ensure that you’re paying the right amount of taxes all year long. Paying too much is a waste of your money and belies other issues with managing finances.

The Hidden Cost of Running a Business Is In The Books

While you might be on top of your products and promotions, the hidden cost of running a business is all in how you’re managing that money. Making money is easy but so is losing it if you’re not careful.

If you don’t realize how an accountant could make your life easier, check out our guide for tips.  AND, if you found this helpful, then SHARE.  Pound that button below and share on social media!

Until the next time,

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When you’re running a small business, you need to know when you have to hire a bookkeeper or an accountant or else you’re going to lose money. Keeping track of your money through bookkeeping and accounting is vital to ensuring that your business stays on track, even in hard times. While it’s not the most glamorous part of owning a business, it’s nonetheless important.

Here are five tips for getting your financial organization started for your small business.

1. Start With a Bank Account

If you want to get work done in a professional context, you need to start off with a business bank account. This does several things for your small business, most importantly protects you from financial liability.

When you keep your business expenses separate from your personal expenses, you ensure that you’re not going to go bankrupt if your business does. Your personal expenses can’t impact your business expenses and vice versa if you want to keep either one afloat. If you fail to pay an invoice and you don’t have any way of protecting yourself, you’ll end up having the money taken out of your personal account.

When you start with a business checking account, you can pay for and receive payment for things under the terms that businesses follow. If you spend money on things that keep your business running, you can write them off as business expenses. If you were to pay for them with personal funds or on a personal credit card, you’d be stuck paying personal taxes.

This also helps to organize your money better. One of the most common problems that business owners face is they forget to pay themselves, which makes it harder to calculate funds altogether. While the business might stay afloat, the owner might be floundering.

2. Organize Your Expenses

Having a bookkeeper means that you’ll be able to keep track of your expenses. When you’re spending a lot of money to keep your business running, you can feel like you’re failing. If you think your business is doing well and you haven’t watched expenses, you could be hit with a surprise bill from the CRA or with problems staying open.

Before you make your first transaction, have a system for keeping your receipts organized. When you organize your records, you ensure that you’re going to process your taxes much more accurately.

Having a bookkeeper means that you don’t have to stress out trying to separate your different types of expenses. You need to separate meals and entertainment from travel expenses of office supplies. They all have their own separate rates of being taxed.

When you work from home, you can keep many of the potential overheads low, but you need to keep records accurately. If you fail to maintain those records, you could find yourself in a sticky situation with our friends in Ottawa.

If expenses are split between business and personal, you’ll have to calculate the portions accurately.

3. Set Up Your Payroll

When you’re opening up your own small business, you’re not going to be able to do it all on your own. It takes a village to run a business. You’re going to need at least some part-time or partial contract help from people around you. When you’re running the business on your own, it doesn’t mean you’re not going to pay for someone else.

There’s a distinct difference between employees, freelancers, and independent contractors. You’ll need to pay each one differently and be taxed separately for each. Your bookkeeper will be able to help keep things organized by having everyone sign the right forms and contracts.

You also need to come up with a payroll schedule that makes sense for you. IF you’re paying on a weekly basis, not only do you need to have the cash flow for such a system, but you also need to process things often. If you pay bi-weekly, you only have to process half as much but you’ll pay out more in each cheque.

Talk to a bookkeeper to ensure that they’ve set up a system for you to send out tax forms to everyone.

4. Pay Yourself

As stated above, many entrepreneurs forget to pay themselves. You need your bookkeeper to put a little bit of money aside to give you a paycheque. You can’t just draw money or resources out of your business or else you’ll be liable to go bankrupt.

If you’re without pay, you might end up sleeping on the floor of your business, which might also be illegal.

5. Calculate Your Margins

With the help of a professional, you will figure out how to earn more income day after day. If you want to calculate your margins, you need to know how much you’re spending to produce your products and services and how much you’re really making.

The cost of what you sell is a major factor in determining how much you could potentially make. If you’re just calculating your profits from what you make in sales, your numbers are going to be off.

Bookkeeping and Accounting is Vital

While bookkeeping and accounting aren’t the same things, they’re both important in keeping your business together. Every small business needs to be smart with their money if they want to thrive.

If you want to send sales soaring, check out our guide for improving sales with social media.  And if you found value, then pound the share button!

Until the next time,

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While it takes a lot of work just to get a business started, much of that work is made moot within the first few years.  Why?  The reason being is that most businesses fold within five years. The real secret to growing a small business is by increasing your cash flow. Did I say that loud enough?  Cash FLOW!

While that might seem like an easy task, meant for your sales department, it’s more complicated than that.  Here are four of the most important secrets to growing your business by increasing your cash flow.

1. Get Your Assessment Together

You need to have a solid grip on where your money is currently sitting, where it’s headed, and where you should put more investment in the future. The best way to do this is by creating a strong forecast of your business with your accounting department. While the cash flow might not be that strong, a powerful forecast is going to offer you the chance to make predictions and get in front of trouble.

Small and medium businesses all want quick growth.  That is a no brainer.  For that to happen, you need to be willing to invest and have the capital to do so. The costs of growing quickly can be massive. More sales are great, but you need people to package product, deliver it, and deal with unsatisfied customers.

All of that money gets invested upfront before you get anything back. While it’s most likely going to come back in spades, if you’re not ready for the initial investment, you don’t get to enjoy the results. Cash flow means that cash goes in both directions, at least for a time in the life of your business.

Your forecast doesn’t need to be an intense and overwrought set of research. It can be as simple as a paper calculation of where your money has been going, where you need to invest in the future, and where you can find increases.

2. Mind the Gap

The gap of time between when you pay a vendor and when a customer pays you might not be ideal. This is personally why I am a proponent of collecting before services are rendered.  If it takes you a month to get paid but you only have two weeks to pay your vendors, you’ll always operate at a kind of deficit. However, you’ll catch up over time and be able to consider the cash flow as more or less even when you account for this gap.

Look at the terms that you offer your customers and perhaps decide you need to close that gap. If you change your customers’ terms to a two-week payment gap instead of leaving it at a month, you could start to settle out sooner. Also, if you’re expected to pay within a two-week window, it’s fair to ask your customers to abide by the same.

You could be missing out on a discount in some cases if you pay your vendors sooner. Some vendors will allow you a month to pay but charge you a fee if you wait a day longer. They might require things by the first of the month but that might not coincide with your pay schedule, so make sure you’re not losing out.

Paying fees and surcharges for no reason can be accounted for just by changing your billing cycle.

3. Enforce Your Rules

If you’re thinking that you need to have a different system in place to ensure that you get paid, then you need to be ready to enforce that system.

So…if you don’t get paid, what kind of collections activity do you take? If you don’t take any at all, you might be missing out on the opportunity to implement a system to improve your cash flow. While you want to be on good terms with your customers, you need to make sure they take you seriously when you bill them.

For companies that don’t have any real way of holding their customers responsible for not paying them on time, it’s time to investigate collections. While you don’t need to implement draconian rules for getting paid or adding fees to customer bills, you should start setting up a system for penalties. When there’s a pay dispute, you need to have a policy for getting the payment resolved quickly.

Most business owners want to have a positive relationship with everyone they work with. It not only makes life easier but also ensures a continually improving relationship. When you get along with all of your vendors and colleagues, they’ll offer you discounts, first dibs on things, and the chance to grow together.

4. Get Everyone On Board

As improving cash flow is good for everyone, make sure everyone on your staff understands the importance. When every employee understands the importance of improving cash flow, that means that they’ll be more likely to hit targets. Let them know that you’re serious when you set collection targets. Teach your team to run through the terms with new clients so that you can grow.

The more you grow, the better the service you can provide. The better your service is, the more you’ll grow. It’s a win-win.

Set revenue goals for all of your sales staff. Integrate their tools and software across departments so that everyone sees when you actually get paid from a sale. Everyone needs to be connected to ensure that you hit the goals that you need to hit.

When people have a target, they’re also more likely to work together to meet their objectives.

Growing a Small Business Is Challenging

While it might seem like it’s easy to increase your cash flow, that is not always the case. You need to be prepared for tough days and days when it seems hard to reach your goals. Those make the good times sweeter, as you remove all of the obstacles that keep your cash flow from moving.

If you haven’t gotten yourself an accounting professional yet, check out our list of reasons why you need one.  Don’t forget to share this blog posts with your fans.  Let everyone benefit!

Until the next time,

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