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9 Tips from Warren Buffett

One of my most favorite business icons is Warren Buffet. Many like him because he’s so successful, but he’s my favorite because he’s so willing to share and help others achieve their goals. Here’s a recent post that does a great job summarizing his advice into 9 tips. They are:

  1. Invest in yourself before anything else
  2. Change bad habits as soon as you can
  3. Know your own strengths and weaknesses
  4. Never risk something you need to get something you don’t
  5. Find work you love
  6. Surround yourself with people you admire
  7. Face down your fears
  8. Your time is a precious resource. Use it accordingly.
  9. Never ignore a great opportunity

Read the full article here.

Top 5 costs to budget for when starting up your small business

The adage that you need to spend money to make money is entirely accurate, especially for entrepreneurs that endeavor to start up a new small business. Depending on your risk profile, it’s possible to spend a few million dollars to establish a new company, particularly for certain industries like restaurants.

However, most new business owners need to prove their concept with the smallest amount of capital as a first step. So, what is the minimum amount an owner should budget for? Here’s a breakdown of the top 5 cost areas related to starting up a small business.

 

Business setup costs = $700

Once you’ve settled on your product or service concept, it’s time to legitimizing the business. This includes name searches, registering your corporation and getting licenses and permits. If you live in Calgary, then you can go to any Alberta Registry to take care of these requirements. We recommend Registries Plus.

 

Operating costs = $2800

This area can vary significantly depending on the type of business. Some need to lease a vehicle, while others need to lease a retail or kiosk space. In any case, all businesses require a location from which to operate. Most new businesses should budget for a 6 month proof-of-concept period. Based on our experience, it’s prudent to assume $250/month.

The other operating costs will be a computer, a phone and possibly insurance. For the same 6-month period, you can assume these costs to be approximately $1300.

 

Website costs = $120

There was a time when creating a website was a significant cost and undertaking for a new business. Much has changed in the last five years with the introduction of so many user-friendly website building tools. We recommend WordPress; which will give you a website template, a custom URL, web hosting and support for less than $11/month.

 

Marketing collateral costs = $500

At this point, you need to give your business an image. This will require a logo and some basic pieces of marketing collateral. At a minimum you’ll want business cards and brochures, but we also suggesting signage for your vehicle or your storefront. You’ll need to find someone to design your collateral and someone to print the material. The design work can cost about $350 and the printing is about $150.

 

A launch event or advertising costs = $3500

Now that your business is setup, it’s time to start acquiring customers. A small investment is necessary to generate awareness and demand for your business. This can be a radio campaign, a launch event or an online pay-per-click campaign. A standard radio campaign will cost approximately $3000, a launch event with radio support and signage is about $4000 and a standard pay-per-click web campaign is about $3500.

Certainly there are many business that find success with smaller startup costs, like tradespeople who often need little more than a network of friends and a cell phone. However, one of the biggest mistakes we see new business make is to short-change the startup capital. If you budget for $8000 to $10,000 and find success for less, then that’s great. But if you budget for a few thousand only to find customers aren’t knocking on your door, then you might find yourself in a position of not having the resources needed to succeed.

Social Media for Small Business

As any small business owner will tell you, one of the hardest things we face is generating awareness about our companies. The internet is extremely cluttered and advertising seems less and less effective. As a result, I’m always looking out for new services and opportunities for small businesses to spread the word about what they can do.

I recently came across oGoing. It’s a small internet company that’s been making a fair bit of buzz lately. It’s two things:

  1. A social media platform for small business owners to share tips, news, products and services specifically for small business owners. It’s like Twitter, but just for us.
  2. A directory to help expand our reach across the internet and generate effective back-links to our site, which helps our SEO rankings.

Here’s a good little article highlighting it’s services.

To sign up for an account, go here.

What is an Input Tax Credit?

If you’re a business owner in Alberta, then you’re collecting GST from your customers and remitting it to the Canada Revenue Agency (CRA). However, you’re also paying GST to your vendors on legitimate business expenses. The amount your remit to the CRA can be offset by the amount you pay to vendors. This offset is the input tax credit (ITC).

Without input tax credits, many products that we buy every day would be taxed over and over. Think, for example, of a sandwich you buy at our local Calgary corner store – the shop that sells it charges GST, as does the catering company that made the sandwich, the bakery that baked the bread, the cheesemaker who made the cheese, the dairy farm that produced the milk to make the cheese… and so on and so on.

What input tax credits mean for businesses is that while you may collect a large amount of GST, you only actually have to give the government the difference between what you collected and what you paid out. For this reason, solid bookkeeping is very important. This is why our bookkeepers work closely with our clients to keep meticulous records of both the GST that is collected and the GST that is pay out.

Your bookkeeping records have to be extremely clear and detailed because when you make an input tax credit claim to the CRA, you will be required to provide proof that these expenses were incurred legitimately and paid out as reported. The clearer this is, the easier time you’ll have working with CRA in the event you have to undertake a GST audit. While these audits are never any fun, they are also nothing to fear if your records are in good order and you have kept track of receipts.

Here’s a tip: when you receive a receipt from a supplier or service provider, make sure that the amount of GST is itemized on the receipt and that the vendor’s GST number is recorded on the receipt. You can save time and money by breaking out the GST and making a note of it on your cheque stubs so your bookkeeper doesn’t have to rifle through receipts or back it out.

Nobody likes paying tax, so it’s really important to keep on top of those receipts and see your bookkeeper regularly to be sure that you are claiming as many input tax credits as you can and offsetting your GST remittance. Your bookkeeper can also help you to keep on top of your GST remittance schedule, whether it be monthly, quarterly or annual.

If you are thinking about using the services of a professional bookkeeper, give us a call at 403 272-5513 ext 616 ore email bookkeeping@registriesplus.ca  for a free consultation. We are currently offering a Spring Special startup package for $150 and monthly bookkeeping from $99. You may be surprised at how affordable professional bookkeeping can be.

Mother’s Day History

I have four children, so Mother’s day is a really important event for our family. As I write this, my kids are anxiously awaiting our matriarch to come down the stairs so they can shower her with love and gifts. Honoring our mothers should be something we do every day, so I started wondering why it became an official holiday.

Did you know that the celebration of motherhood can be dated back to the ancient Greeks? They would hold festivals to honor the mother goddess Rhea. While I’m sure many mother’s out there today would happily embrace a comparison to a goddess, this isn’t actually the roots of our modern day celebration.

The most likely starting point for today’s incarnation is Christian festival known as Mothering Sunday that was celebrated in the UK and other parts of Europe. It was a time during Lent when the community would return to their “mother church” for a special service.

By the early 1900’s, the celebration shifted towards our mothers and children would demonstrated their appreciation by presenting moms with flowers and gifts. Some form of honoring motherhood is practiced in almost every culture and for good reason; Moms rock!

Happy mother’s day to all our friends, staff, customers and family. You deserve to have an amazing day.

Fort McMurray Residents get Help From Calgary Registries

Along with the rest of Alberta, we at Calgary Bookkeeping are saddened by the terrible devastation that is occurring in the Fort McMurray area. We commend Service Alberta and the Association of Alberta Registry Agents for moving quickly to come up with a plan for how we can do our part to assist the thousands of Albertans who have been affected by the tragic Horse River Fire. Starting over without identity and ownership documents is challenging. Here is what we can do to help:
  1. Clients who need a duplicate of their vehicle registration, Alberta driver’s licence or ID Card can go to any Registry Agent to get an expedited duplicate at no charge. Service Alberta is advising that these can be produced in about 3 days and they can be delivered to a temporary address. In recognition of the fact that many people who were displaced by the fires did not have adequate time to gather identity documents, Service Alberta is allowing Registry Agents to verify client identity through viewing of photos and signatures and knowledge verification of information on the motor vehicle database.
  2. Clients who require Alberta Health replacement cards can visit any Alberta Health processing office. Registries Plus is a processing office for Alberta Health, which means we are able to look up a Health number, provide a temporary card and order a replacement card on the spot. Alberta Health Care services are always free of charge for all eligible Alberta residents.
  3. Birth certificates can also be ordered free of charge for any Albertan affected by the Horse River Fire. These documents can be delivered to any address that the requester provides.
  4. Land title ownership documents can also be ordered with no government fee when required by Albertans affected by the Horse River fire.
If you have been affected and have relocated to Calgary, please come see our parent company at Registries Plus in NE Calgary. We are here to help.

Salary vs Dividend

One of the most common questions I get asked from entrepreneurs who are thinking about starting a small business is whether or not they should pay themselves a salary or a dividend. This is actually a fairly complicated question because the answer really depends on a number of factors. For example, do you want to operate with a fixed salary budget, do you want to retain earnings for the next operating year and do you have other shareholders that expect remuneration?

The problem is that new entrepreneurs don’t generally have any experience with business finances to understand what these factors are nor what they want to do about them. As a result, it can be a fairly lengthy and sometimes frustrating process to get to the answer of salary vs dividend.

Sometimes small business owners aren’t ready to go through the lengthy process and just want a general sense of things before getting too far into the decision. As a result, I’m often asked for my opinion based on my experience, so I’ll offer that today in this post.

Please keep in mind that I’m focusing on small businesses and startups and that I am not advocating this as a rule nor as advice.  If you want the right answer to the question of salary vs dividend, then you really have to work with your advisor to determine what’s best for you based on your needs and goals.

That said, my opinion is that paying a salary or wage is likely a good place to start for most small businesses for three reasons:

  1. The size of the potential tax savings from dividend payments can be smaller than you think: It’s true that dividends are taxed more favorably. However, you have to keep in mind that you have to pay corporate tax. If your business generated $100,000 in profit, then ~$15,000 will be paid as corporate tax. If the remaining $85,000 is paid as a dividend, then you still have to pay taxes on this amount. In many cases, the after tax income isn’t that far off from what it would be if you paid the full $100,000 as salary.
  2. Salary qualifies you for other benefits: If you pay yourself a salary, then it’s treated as personal income. This means you can contributed to CPP and RRSPs. It also means you’re eligible for other tax deductions like child care expense deductions. Finally, the salary is a tax deduction for your corporation.
  3. Filing tax on personal income is easier: If you pay salary equal to your gross profit, then your corporate T2 is simpler because there is no Net Income. Also, filing your T1 is simpler because you have a T4 and you follow a standard tax situation that’s just easier. Income splitting and dividends are a bit more complicated and often require assistance from an experienced tax filer.

The reason I think many small businesses prefer the salary approach is because it’s what they’re use to. They understand what it means to have personal income. They like contributing to RRSPs. The want to participate in CPP. It’s just more natural for them, so they default to what they know. At least initially. As they become more familiar with being an entrepreneur, they start to think differently and become more open to other approaches.

Whether or not salary or dividend is the way to go ultimately depends on what you want, so there really is no right or wrong answer to the question.

Canada helps small business exports with new $50-million program

podium-freeland-Phil.Froklage@communitech.ca_Chrystia Freeland, our new Minister of International Trade, just unveiled a $50-million program to help small businesses increase sales abroad. The program is called CanExport (read more here). This five-year program is designed to match export and development expenses with grants from $10,000 to $100,000.

“Something I want to say to all the small businesses here is, I am your Chief Marketing Officer,” Freeland said. “My job is to help every company in Canada export its services and its goods.”

There is a lot of really great news with this announcement. It show’s Canada is committed to increasing its economic standing from its 11th-place global ranking. It also shows there’s support for our startup communities. What’s not clear is the extent to which this program will actually create jobs.

Many technology and manufacturing companies have depended on labor from markets other than Canada to produce its goods. Will this program simply fund development in these other markets to the tune of $50M, or will it encourage more home-grown jobs. Time will tell.

To be eligible for this program, companies must have fewer than 250 employees and generate between $200,000 and $50 million in revenue. Unlike many other development programs, like the Scientific Research and Experimental Development (SRED) incentive, this one doesn’t target any specific industry like tech, though tech was referenced a number of times in her speech.

“The companies who we really want to help are exactly the kind of companies who are incubating here at Communitech; who are just getting started,” she said, adding “. . . we have to go global really, really fast in order to succeed.”

Many Albertans have been uncertain about having left-wing parties at both the provincial and federal level. Particularly in light of issues like Energy East. Regardless of where you fall on the political spectrum, one thing we can likely agree on is that an 11th-place ranking is a terrible economic position for our country. Programs like this are an encouraging sign that we’re prepared to take action to build a stronger economic future.

No more license and registration reminders in the mail?

Many Albertans are confused about what the cancellation of mailed-out renewal notifications means for them when it comes time to renew their plates or driver’s licences.

The Government of Alberta recently announced that Albertans will no longer receive Operator and Vehicle Renewal Notices in the mail. Cancellation of mail our reminders is expected to save the Alberta Government $3 million per year. Seniors over the age of 70 get an extra year and will continue to receive reminders until April 2017 and persons with disabilities will receive mail notifications indefinitely.

As far as renewing your operator licence, it is important to remember that your licence always expires on your actual birthday, not on the last day of your birthday month. Simply come to Registries Plus with your expired licence and we will issue you a new one for $84.45. Keep in mind that your old licence will have to be surrendered and destroyed. You will be issued a temporary licence which does not contain your photo. You are allowed to drive with the temporary licence, but you will need to make other arrangements for photo ID, so please plan ahead.

For your vehicle renewal, we can also do this renewal by looking up your motor vehicle file in the motor vehicle database, provided you can show us valid government-issued photo ID (in most cases, your driver’s licence). We can also renew a vehicle registration for a person who isn’t present as long as the person who is coming into the office has either the previous vehicle registration certificate (valid or expired less than 90 days) or a letter of authorization from the owner of the vehicle. If the person coming into Registries Plus doesn’t have a letter of authorization, we will not be able to make any changes to the registration (i.e. address), but we can still renew the registration.

If you have any questions about these changes, pop into Registries Plus #20 150 52 Street NE anytime 7:30 – 6 Monday – Friday or 9:30 – 5:00 on Saturday or call us at 403 272-5513. We look forward to serving you!

Bookkeepers vs Accountants; which do you need?

When most small business owners look for help managing their finances, they assume their only option is to work with an accountant. It’s true that they will likely need one to finalize financial statements, provide tax-saving advice and to complete tax returns. However, many small and even medium sized business owners are pleasantly surprised to learn that bookkeeping services are lower cost alternative to managing the month-to-month finances of their companies.

Using bookkeeping services can save companies thousands of dollars each year, so let’s take a look at the differences between the two functions to help you feel confident that combining bookkeeping services with your accountant is the way to go.

The main difference between the two functions is that they are used at different stages of the financial cycle.

Bookkeeping is the function of recording daily transactions

How well your daily transactions are recorded is one of the keys to building a strong business foundation. This is why bookkeeping is so important. It’s comprised of

  • Recording financial transactions
  • Posting debits and credits
  • Generating invoices
  • Maintaining and balancing general ledgers and accounts
  • Managing payroll
  • Preparing interim financial statements

Maintaining a general ledger is one of the main components of bookkeeping. The general ledger tracks the amounts from sales and expenses. The complexity of this task depends on the size of the business and the number of transactions that are completed daily, weekly, and monthly.

Accounting is the function of optimizing business decisions through data

Accounting is a high-level process that makes sense of information from the financial statements to support sound decision making for the business owner. This is much more subjective than bookkeeping, hence why it requires a highly trained professional. The process of accounting includes:

  • Preparing adjusting entries
  • Finalizing financial statements (i.e. Notice To Reader)
  • Suggesting ways to optimize the business based on the financials
  • Completing and filing income tax returns
  • Aiding the business owner in understanding the impact of financial decisions

The accountant will help business owners better understand profitability and cash flow implications. This is why business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.

Why use both?

Some business owners get peace of mind by having both functions completed by their accountant. The fact is that that peace of mind comes at a fairly high price. Many accountants hire bookkeepers to take care of the monthly transactions and record keeping, yet charge rates that are reflective of an accountant’s time, which can be around $100/hour. The alternative is to hire a bookkeeping service provider who will charge around $50/hour for the same work. If an average small business requires 10 hours of bookkeeping a month, this is a savings of $500. Over the course of a year it’s a savings of $6000, which could go straight to the owner’s salary vs their accountant’s.

Calgary Bookkeeping by Registries Plus is offering a spring special to help small business owners transition to using bookkeeping services. Learn More