Bookkeepers and Accountants Are Not the Same

Your successful small business needs both a bookkeeper and an accountant. And there’s a reason why they won’t be the same person.

While some skilled bookkeepers and accountants may, in fact, be capable of doing each other’s work, an accountant’s services cost considerably more than a bookkeeper. There are other significant differences to be aware of.

A bookkeeper helps you maintain the ongoing financial recording of transactions to keep your business running smoothly. Specifically, they might:

• Process and record invoices, receipts, payments, and other transactions
• Process transactions for payroll and maintain those systems
• Set up, maintain and review accounting systems and processes

Some bookkeepers (including me) may also look after these additional activities for you:

• Reconcile accounts and prepare reconciliation reports
• Manage accounts receivable and accounts payable
• Prepare working financial statements

An accountant, on the other hand, provides analysis and professional advice, and keeps you compliant with laws and regulations. Specific activities which an accountant might do are:

• Analyze performance and create financial projections
• Provide tax advice and planning
• Help with new business set-up
• Audit records for compliance
• Prepare financial reports
• Give financial management advice

Both roles are extremely important to the success of your small business. They need to communicate well with each other in order for you to maximize on their contributions.

Can You Negotiate Lower Prices From Your Vendors?

Missed opportunities result from complacency. Occasionally questioning the prices you pay for products and services makes sense for businesses of all sizes. The trouble is that small businesses are more likely to lack the skills and experience to do this.

"What you've been paying your vendors does not have to be the final word on what you continue paying. Ultimately, vendors want to stay in business, too, and they're dealing with a tough economy just as you are. Many are often willing to negotiate lower prices rather than lose a regular customer."

- Ian Aronovich, GovernmentAuctions.org

An article by Kevin Brown on Hubspot's blog offers several excellent tips for negotiating better deals with vendors. Here are a few highlights:

• You don't know what you don't know. Do background research.
• Learn what the other person needs most.
• Recognize that for most companies, keeping you as a customer is cheaper than gaining a new customer. This is leverage in your favour.
• Start when there is no deadline to avoid negotiating under one.

Most importantly, recognize the fine line that will keep the negotiations from impacting your long term business relationship.

How long has it been since you reviewed the prices you pay to your key vendors? Perhaps it's time.

Are You Unknowingly Part Of The Underground Economy?

"Can't I just pay my employees with cash?" We still hear some version of this question now and then.

Moonlighting or "working under the table" is the basis for the underground economy in Canada. According to the Canada Revenue Agency (CRA), this can include:

bartering, failing to file tax returns, omitting an entire business activity from your tax return, skimming a portion of business income from what you report on your taxes, and not reporting a portion of employment income, like tips and gratuities.

CRA is actively searching for and fighting these activities. Click here to read more about this important topic.

If you aren't sure if your small business might be unknowingly contributing to the underground economy, stop now and give it some serious consideration.

Do you have questions about how to set up your small business so you can keep yourself safe? Get in touch.

Beyond Data Entry

It’s good you’ve invested in having someone (an employee or a contractor) dedicated to doing your routine entry of invoices and vendor payments. You’re too important to your business to do that stuff yourself.

Now that you aren’t seeing all the details, though, you might be finding it more difficult to make decisions about day-to-day operations and expenses.

Perhaps there’s another role you need to fill: someone to do your payroll, reconciliations and monthly financial statements. If you have a qualified, experienced person looking after these activities, they can help get your head out of the trees and help you see the forest… with valuable insight on how your business is doing. A good person in this role will notice concerning trends and bring them to your attention before they become a problem.

Where can you find such an experienced person? Ask me... or your accountant.

Should I Buy or Should I Lease My Next Vehicle?

As a business owner, I have debated this question many times over the years. I have both leased and purchased, and I like to get a new vehicle every 3 or 4 years... whether I really need it or not.

My advice about making this decision is: speak with your accountant.

There are many ways to handle both the usage and the HST (Nova Scotia) you can claim. Factors, such as whether you are a Sole Proprietor or Corporation, will impact this decision.

• Purchased vehicles become assets and part of your net worth.
• Lease payments become expenses which can be written off using the CRA rules.

Lease payments are generally lower than your payments if you buy, which makes them attractive. Buying might have higher payments but you are making payments on an asset that eventually will be paid off, meaning you will be debt free until you require a new vehicle.

Ideally you don't want to take out a loan to pay off a vehicle that is not expected to last at least as long as the term of the loan. Dealerships may offer longer terms for repayment to make you think the cost is reasonable (smaller payments), however after 5-6 years, the warranty is gone and problems start. A vehicle will depreciate if it's an asset, and generally by 30% in the first year.

Leases have mileage limitations so, based on your future use of the vehicle, this must be considered. There are also penalties if you wish to get out of a lease sooner that its term. Sometimes the lease rates are higher than purchase rates.

Here is a calculator from CRA which will help you compare the costs.

Options for Financing Your Small Business Growth

Have you ever been in a situation where your company is in a growth cycle? Notice how the cash flow becomes such a challenge? If you don't have the cash to purchase the goods up front, or cash to make payroll prior to getting the job completed and paid for, what do you do? If you don't do the project, how do you grow. It can be pretty stressful and tough to get through.

There are options out there. I know because I have been in this situation.

What was that? You say the banks turned you down because they wanted security... in cash? If we had the cash, we wouldn't need the bank!

There is nothing wrong with getting the help you need to get some working capital - as long as the funds are used for the purpose you are borrowing them for.

Resources are available through your local branches of CBDC and BDC. Their interest rates might be a tad higher than a bank, however they are the easiest people to deal with on repayment plans, longer amortization periods and, if you need to take a break for a month, they are just a phone call away.

Depending on the relationship, you might also get financing for a single project. Then, when you have been paid for that project, you can pay off the loan; or you can keep making payments and use the extra cash to finance another project.

There are also resources through the federal and provincial governments to assist with employee skills training, and programs to hire Nova Scotians who require work experience (e.g. START, WIPSI, WEI and Skills Online NS. Student employment programs, such as SCEI, are also available.

Here are links to some Province of Nova Scotia financing options:

• http://workplaceinitiatives.novascotia.ca/workplace-eduction/
• http://www.coursepark.com/ns
• http://novascotia.ca/programs/workplace-innovation-productivity-skills-incentive/
• https://novascotia.ca/programs/co-op-education-incentive/

Keep in mind, an updated set of financials is essential when applying for funding. If you need some assistance with updating your records, please get in touch!

Does Your Bookkeeper Provide these Essential Services to You?

Whether you choose to work with us or to go elsewhere, these are qualities to look for when seeking a bookkeeper. (Of course, we’d rather you work with us!)

Communication
A good bookkeeper keeps you informed about progress (or delays) and is easy to reach when you have questions. She needs to keep you organized by taking the initiative for following up and keeping you on track to meet deadlines. A little nagging can be very effective.

Organization
Aside from a tendency toward perfectionism and an excellent filing system, your bookkeeper also needs to know the best technology to use to streamline your accounting processes. She is exacting in reporting the appropriate details and reconciling accounts.

Liaison and Relationship Building
A good bookkeeper will act as a go-between for you and your accountant, able to bridge the terminology and jargon communication gap. She will also be able to source appropriate accounting services if you’re in need. As well, she’ll be accomplished at working as part of a team with your own staff.

Problem Solving and Tenacity
You don’t want someone who’s going to flee as soon as they see your shoebox filing system. Ideally you want a bookkeeper who enjoys a challenge and will stick with it when things get rough. Bookkeeping work is tedious and can be frustrating – you want someone to stay the course (and to make the course better).

Flexibility
Accounting is complex and you want a bookkeeper who can evaluate options and select the best for you. Flexibility may be important for other reasons, too, such as if you need someone to work at your location, or to work odd hours, or to work long hours to meet deadlines.

Trustworthiness
You want to feel your bookkeeper has your best interests at heart, that when she is working for you, she is treating your money like it is her own. Trustworthiness can be easier defined by what it is not: unresponsive to inquiries, secretive about pricing, missing deadlines, and murky practices.

If you're looking for a bookkeeper with these qualities, please get in touch.

Don't Mix Business with Personal

Here are 3 reasons why keeping your personal and business finances separate will also help keep you and your business healthy.

Finding, tracking, posting, filing, and reconciling your bank, credit card, and PayPal accounts - paper and electronic - becomes much more onerous and time consuming. You'll often have to chase down personal statements and dig through old purses for receipts to explain debits and credits. If you wait too long, the disappearing ink will confound your efforts even more. All of these things are guaranteed to make you feel overwhelmed.

Accurate information about your expenses on a regular basis will help you make better business decisions, otherwise you're flying by the seat of your pants. When your business and personal finances are muddled, you won't have a clear picture until tax time. Once a year is not the only time you need to make decisions. Inaccurate information can cause insecurity and indecision, detrimental to small business success.

If you keep your finances separate, you'll also find tax season much less stressful. Since less stress is good for your health, keeping personal and business systems separate also contributes to a healthy lifestyle. The impact of "tax stress" can be more than you might think.

If you are already suffering from these accounting ailments, get in touch. Untangling messes is one of my specialties.

Meals vs. Food as Business Expenses

When you're just getting started in business, you may not know how the CRA feels about meal expenses. Here's an excerpt from the CRA's website under business expenses:

The maximum amount you can claim for food, beverages, and entertainment expenses is 50% of the lesser of the following amounts:

• the amount you incurred for the expenses; or
• an amount that is reasonable in the circumstances.

Of course, you need to capture this non-standard transaction appropriately in your bookkeeping records.

Recently a client asked me, "What about when I'm paying for food to be brought in when I'm putting on a training workshop?" In that case the food becomes part of the total workshop expenses because you are (or should be) recouping the cost as part of the workshop registration fee. In effect, you are reselling the food - much different than noshing steak and beer on the waterfront.