Posts

Save money on your bookkeeping, Wonder Woman-style!

Wonder Woman Super Hero Vancouver

When you are juggling a small business or start up and your life…. every penny counts.

Here are our top four tips for saving money on you  bookkeeping:

 

1. Organize your receipts

 

Keeping your receipts well organized can sometimes be difficult when you are busy running your business. As bookkeepers we are never surprised when a new client brings in bags or boxes of mangled receipts. However, if you are looking to make your bookkeeping as cost effective as possible then the easiest way to save money is to make sure your receipts are well organized so that the bookkeeper does not have to sort them for you.

In addition to sorting them, make sure they aren’t scrunched up into little balls. You may laugh but a lot of people do this and it takes a lot of time to un-scrunch them. Additionally scrunching them up can cause the ink to wear off which means that you are paying us to un-scrunch receipts that turn out to be blank pieces of paper.

Also if you want to claim the GST you paid on a meal as well as the tip (in addition to cutting down the amount of time we spend entering your data) make sure you staple together the original itemized restaurant bill to your credit/debit slip.

Sole Proprietors:

A common mistake a lot of first timers make is arranging their receipts by month instead of by category.

The fastest way for your bookkeeper to enter your bills into Quickbooks is if they are sorted by category. If you want to go one step further and really limit the amount of time a bookkeeper spends on you file, organize your receipts by company eg. Translink.

Corporations:

If you are incorporated then you need to organize your receipts by payment method (eg. Visa account, cash, business savings account) rather than by category so that it makes it faster for your bookkeeper to enter your bills and reconcile your accounts.

2. Keep your receipts/documents in one place

Create a filing system for your receipts/ documents and utilize that system so that you can ensure all paperwork is easily accessible.

Keeping your receipts all over the place can result in two issues.

  1. You will lose some receipts. This means your reporting will be inaccurate and you may miss out on including significant write-offs in your tax return.
  2. You will need to keep contacting your bookkeeper to let them know about additional receipts you have found or to ask them to hunt down important documents for you. This means that you will utilize more of their time and your fees will increase.

3. Save your online receipts to a flash drive, or upload them to LedgerDocs

These days a lot of businesses send email receipts. Although you have the option to forward all of your email receipts to your bookkeeper we recommend that you download your invoices and save them onto a flash drive that you can submit with your paperwork. This saves your bookkeeper time as they do not have to sort through all of your emails, in turn saving you money.

It also means that if your email crashes you have all of your important documents saved elsewhere.

If you’re using LedgerDocs, snap pictures of your receipts and forward them to your unique email address in real time. We’ll take care of the rest! Contact us here if you are interested in signing up!

4. Don’t keep receipts you can’t claim

Know what you can and cannot claim and know your categories. For example: in most cases YOU CANNOT CLAIM CLOTHES as an expense unless they are branded with the company logo or required safety wear.

Additionally, you cannot claim haircuts, facials or any other kind of personal maintenance even if you are a TV personality or the face of your company.

Placing receipts into your file that you can’t claim just means that your bookkeeper spends extra time sorting through receipts, remember time is money.

 

Regardless of what state your bookkeeping is in we are happy to help you. That said, we always recommend that you consider these points because it not only helps you save money it keeps your bookkeeper happy and guarantees that you will be added to their secret list of favorite clients.

If you need help getting organized contact us today.

Employee or Contractor: CRA checklist


Vancouver Bookkeeper(s), Tax Return Service Vancouver, Small Business Bookkeepers in Vancouver, CRA, Canada Revenue Agency, employment, employee, contractor, long weekend

Something to chew on over the long weekend……

Looking to hire additional help for your expanding business? Last week, we outlined key questions to ask yourself before expanding your sales force.

We noted that deciding between hiring a contractor or an employee is not as simple as figuring out your personal preference.  The Canadian Revenue Agency (CRA) has a very comprehensive checklist that they use to determine if you should be paying your new hire as an employee or if it is OK to consider them a contractor.

This week, we are going over the checklist presented by the CRA  in more detail so that you can make sure you are paying people under the correct category to avoid nasty fines.

Tip: If you own a store or run an office and you don’t want to hire a contractor through a temporary  employment agency then you need to hire an employee and pay the applicable payroll taxes.

Determine who has control

Do you want to have control over the worker? Will you determine when, how and where the work will be completed? Do you expect them to complete the work personally?

According the CRA ‘It is the right of the payer to exercise control that is relevant, NOT whether the payer actually exercises this right’ so basically, if you have the option in any way, shape or form to control the employee’s time and how they complete the work then they are not considered a contractor.

Tools & Equipment

Who provides the tools and the equipment to complete the job?

If you provide your new hire with the tools and equipment they need to complete the job and are responsible for all repairs to that equipment then you need to hire an employee.

Subcontracting Work or Hiring an Assistant

Can the person who is working for you independently hire an assistant or subcontract out the work you have asked them to do?

 If the answer is no, then as you may be assuming by now, you have yourself an employee.

Financial Risk

 Will the worker be financially liable if they do not fulfill the contract? Does the worker actively market themselves? Does the worker perform a substantial amount of the work from their own workspace? Are they responsible for paying their own employees?

If you answered YES to these questions then you may be able to categorize your worker as a sub-contractor, if you answered NO then you guess it, you need to pay them as an employee.

Responsibility for Investment and Management

Does the worker have any capital invested in their business and an established business presence?

If they do then you are pretty safe hiring them as a contractor so long as the also meet majority of the above criteria.

Opportunity for Profit

Can the worker realize a profit or incur a loss? Is the worker paid a flat fee and incurs any expenses as a loss?

If the answer is NO then you need to hire the worker as an employee.

In the end if you are uncertain about your relationship with your new hire or you can’t distinctively answer majority of these questions with a YES or NO response (because the status of your relationship is unclear) then it is best to contact the CRA and get a ruling before you proceed.

This will save you a lot of grey stress hairs, and costs in the long term.

#ThursdayThoughts: Employee or Contractor?

CRA, Vancouver Bookkeeper(s), Tax Return Service Vancouver, Small Business Bookkeepers in Vancouver, subcontractor, contractor, employee

Tear. It’s been a year. Your small business is growing before your eyes. You stare at your Profit and Loss statement for the hundredth time like a kid who’s been fervently measuring their height against the wall fixedly checks in on their progress, and your eyes fill with water. You really made it.

Your email  inbox is flooded with fan mail. It’s wonderful and scary. You want to respond to all of them, even the creepy ones, you want to be Superman/Wonder Woman/the Hulk combined, deliver on your promise of top-notch service but you need help.

You can finally afford it, but who do you hire: an employee or a contractor?

We recommend that before you hire anyone as an employee you start them out as a contractor for a trial period. This way you can test them out and make sure they work well with you, are reliable and will not steal business from you before committing to a long-term agreement.

Once the initial trial period is over, ask yourself the following questions to give some clarity when trying to determine the best way to proceed with your expansion:

What is the nature of the project?

Will you need to control the time of those who help you and the sequence in which they complete tasks?

  • Yes- Then you need an employee
  • No- Then you can consider a contractor

Are you supplying all of the equipment?

  • Yes- Then you need an employee
  • No- Then you can consider a contractor

Do you need a very specific task completed?

  • Specialized tasks are often completed by contractors however if it is an ongoing specialized task then you may want to consider hiring an employee.

How long will I be this busy?

Do you have a higher workload because you have taken on a short term, labour intensive contract?

  • Yes- Then you can hire a contractor
  • No- Then you should consider hiring an employee

Financial responsibility

Will the payment of the person you hire depend on you receiving payment for the overall contract?

  • Yes- Then you can hire a contractor
  • No- Then you should hire an employee

Training

Do you plan on providing training?

  • Yes- Then you should hire an employee
  • No- Then you can hire a contractor as they should already be trained.

What are the Financial differences

If you hire an employee

  • You must match your employee’s CPP which is 5% of their gross earnings.
  • You must pay 1.4 times the EI amount that the employee pays.
  • You must remit taxes on behalf of the employee.
  • You must supply your employee with the equipment necessary to complete the job.

If you hire a contractor

  • They are responsible for paying their own CPP and taxes.
  • They supply their own equipment.
  • You cannot fire them without paying out the contract, they also cannot quit without finishing the contract.

As attractive as it may appear to hire a contractor over an employee you must make sure that your contractor is considered a contractor under the rules set out by the Canada Revenue Agency (CRA) or you risk experiencing heavy fines.

Stayed tuned for next week’s post where we will discuss the CRA employee or contractor checklist in more detail.

Spotlight on Emma- Homeroom’s Quickbooks Queen

Emma 2Emma “the most tattooed bookkeeper in Vancouver” hails from London, England and has been a member of the Homeroom team since 2010. Before finding her true love (Quickbooks) Emma had an extremely varied job history- Wedding Planner, Dreadlock Expert, Apprentice Electrician & Finder of Employment for those with barriers in the DTES.
We felt it was time our clients got to know a little more about Emma.

How would you describe yourself?

Captain Brunhilda- Mighty Warrioress who SLAYS GST returns!!!  Or something like that?  I am cheeky little red-haired princess.  I am a giant nerd.  Yesterday my partner asked me to explain excel and I got OVERLY excited- I raved about all it’s wondrous functions for at least 15 minutes…. I am a nerd.  A BIG nerd.  A nerdy nerdy nerd.

What is your favorite thing about working at Homeroom?

My sisters-from-other-misters also known as the delightful ladies I am blessed to work with.

What are your ultimate personal goals?

  •  Marry Bruce Willis
  • Live in a big pink castle
  •  Get a pink winged unicorn (or a pegasus/unicorn?  A pegicorn? a unisus?).
AND most importantly to be happy and for my son to grow up happy and well-adjusted.

Why do you love bookkeeping so much?

I love how there is no grey area with numbers, they either add up or they don’t!! I also really like stamping all the receipts with the ‘Posted’ stamp because it makes me feel important.

What is the funniest item you have had a client attempt to write off?

Once I had a client try to write off hair replacement therapy.

Describe your ultimate bookkeeping client?

Friendly, challenging and organized.   They should also bring me presents.  Especially cupcakes or chocolate.

You can connect with Emma on LinkedIn or find our more about her through her Homeroom Bio.

Employee VS Contractor – CRA Penalties for incorrect worker classification

File:US Navy 080823-N-1328S-003 Steel Worker 3rd Class Michael Featherston and Constructionman Steven Cline, both assigned to Navy Mobile Construction Battalion (NMCB) 133 embarked about the Military Sealift Command hospital ship US.jpg

Over the past month we have been exploring the topic of hiring new staff and how to determine if you should hire your new worker as an employee or as a contractor.

Last weeks post explored, in more detail, the CRA checklist that you need to refer to when determining how your new staff should be classified. Following on from last week, today’s post will outline the CRA penalties that you will incur if you do not abide by this checklist as well as provide you with insight into what might cause the CRA to investigate you.

What you need to know about the CRA

The first thing you need to consider when classifying your workers is that when you are paying them as contractors the CRA is not receiving payroll taxes from your business.

Avoiding payroll taxes may feel like a small WIN. However, you need to remember that the CRA, much like your business, does not like to experience a loss.

The unfortunate difference between the CRA and most small businesses is that when the CRA feels like they may be owed money, they have the power to come after you and make your life very uncomfortable.

Red Flags

The CRA may chose to review your business at anytime however there are some common factors  that usually  trigger an investigation.

  1. When your contractor files their tax return, the CRA may choose to audit them to ensure they have listed the correct income. This will lead to them investigating and interviewing all of the contractors clients which will include you.

  2. The top two expenses for most businesses are rent and payroll. If your return shows that one of your top expenses is contractors then the CRA will more than likely view that as a red flag and investigate you.

  3. Your worker may try to apply for EI and discover they are not eligible due to the fact that you were paying them as a contractor. This could lead to them asking the CRA for a ruling.

  4. Your worker at any point can request a ruling if they feel that you are paying them incorrectly.

  5. Come tax time when you worker discovers they owe money to the CRA for unpaid taxes they may become disgruntled and  request a ruling.

If you are investigated the CRA will interview you and your contractors face-to-face and make a ruling that is based on your answers to the checklist questions that we discussed last week.

Consequences

If the CRA investigates your business and determines that you have incorrectly categorized and paid a worker as a contractor when they should have been paid as an employee, you will experience the following penalties:

  1. You will need to back pay (to the start date of your agreement with the worker) all outstanding payroll taxes INCLUDING  the employee’s portion.

  2. You will also need to pay penalties and interest on the amount that was overdue.

All expenses will be incurred by your business and cannot be passed on to the worker in any circumstances.

The cost associated with the CRA ruling that your contractor should have been an employee can be crippling to your small business. That is why we recommend that you thoroughly read through the checklist and if at any point you are uncertain you contact the CRA and get a ruling.

In addition to affecting your business, the investigation can affect your contractors. If they have claimed a different amount on their return to what your records show, they too will experience penalties.

Lessons

Make sure you encourage your contractors to declare their income correctly. Inform them that you will be declaring the full amount they are going to charge and that you don’t want to see them incur any penalties.

Study the CRA checklist and make sure you are confident that you have categorized your worker correctly. If you are unsure contact the CRA and ask for a ruling, the short term pain will result in long term gain.

Use your common sense, if it walks like a duck and it talks like a duck, chances are it is a duck!!!. So if you hire someone who resembles a standard employee within your industry chances are the CRA will rule that you should be paying them as one.

If you don’t need a full time worker yet the job requires you to hire an employee, hire an on call employee or use a temp agency. Temp agencies include payroll in their fees so you are covered.

We cannot reiterate enough how important it is that you make sure you categorize your workers correctly and that when in doubt you contact the CRA.