Working with your Corporation Part 10: Due Dates & Client Communication

Here are the due dates of filings and returns that you must take a note of.

Personal

Personal Income Tax Return (T1) – Due April 30^th

Personal Income Tax Return for the Self-employed – Due June 15^th

Income Tax Owing – Due April 30^th

Tax Plan Finalized and executed – Before December 31st

Corporate / Business

Corporate Tax Return (T2) – Due 3 months after Corporation’s Year End, if owing tax, in no tax is owed then 6 months after the Corporations’ Year End.

Corporate Taxes Paid – Due 3 months after Corporation’s Year End Date

Annual Financial Statements – Done with Year End

Annual  Return – File annually with the Provincial Government to keep Corporation active

T Slip Filings (ie. T4’s & T5’s) – Due end of February following the calendar year

GST Filings – See GST forms sent by CRA for due dates

Payroll Remittances – 15^th of following month

One other area I’d like to mention that is important to your day to day operations is tracking your client/customer sales, communication, complaints etc.  Your clients and/or customers are your source of revenue.  Relationships make or break a business.  If you are not adequately tracking your communication with your clients, such as quotes, job details, services issues, accounts receivable and more, you are losing revenue!  Determine which technology would best suit your current operation and use it regularly.  Software for smaller businesses such as Microsoft Office, Quickbooks Client Manager, Act and other free CRMs can be a simple solution for the first years of your business.  Whatever system you use to track your clients and/or customers, just ensure that you use it regularly so as to build relationships and not to lose revenue!

There is a lot more to consider in running your business as every business is different.  Again, we refer to the fact that you should have a business plan that looks at all the areas of your business.  Do not hesitate to email us with questions or book an appointment with us at Kustom Design to look at your needs and answer your questions!

Working with your Corporation Part 9: Record Keeping

We would like to make this very important comment: “Good Record Keeping is a must!” Good record keeping is a must for 2 main reasons:

a.      You should always know where your business stands financially

b.      You will need all documentation and paper trails if/when you get audited

Create yourself a simple filing system that matches our bookkeeping intake checklist (Found on our website under our downloads section). Use inboxes, folders or a filing system that works for you and your routine.  It should be as simple as putting all paperwork and receipts into the right inbox or folder daily.  If you are on a monthly package with Kustom Design, we have envelopes with the checklist on them that are available to give us your paperwork (records) every month. 

Important Note on Record Keeping: Good Record Keeping also allows for good bookkeeping which in turn brings accuracy and savings!  Also if and when you are audited, your records need to be in great order, because if CRA finds a mess and has to reassess then they may keep coming back year after year!

We also mentioned in an earlier blog that it is important to file and pay taxes on time when they are due.  Here are some guidelines in this area:

Our goal is to always have you pay lower taxes.  In planning with Kustom Design we can typically help our clients pay little to no tax. However, you must plan ahead!  When taxes are due, they must be paid on time, otherwise interest does accrue.  Also, if you don’t file your returns on time, penalty and interest can occur.  Because the government is in deficit, many of the penalty rates have been raised considerably, so always file on time. Payroll, Corporate tax and other penalties and interest can put businesses into such a financial strain that some never get out from beneath the debt load.  Here are the main returns that must be filed on time:

1.      Personal Tax Return

2.      Corporate Tax Returns

3.      Payroll Remittance Filing

4.      T Slip and Summary filing

5.      GST Remittance Filing

IMPORTANT NOTE REGARDING PAYING TAX: If you do not put away funds for Corporate Taxes and GST, chances are you will not be able to pay the taxes when they are due.  We recommend putting 15-20% of all revenues aside in a tax savings account.

In the next section, we have the due dates of each of these filings and returns for you.  Always file on time to at least avoid penalties, and avoid interest where possible!

Working with your Corporation Part 8: Vehicle Expenses

When running your business you may require a vehicle to travel back and forth from offices or workplaces, pick up supplies, meet with clients and much more.  Vehicle expenses are a very typical deduction for most businesses.  Vehicle expenses may be reported in 2 ways: by mileage or by actual cost of vehicle expenses.  If you own the vehicle personally you should keep a mileage log to determine the amount of kilometers you traveled for business and then the company could reimburse you the prescribed rate per kilometer.  Because these prescribed mileage rates change it is good to inquire as to the current rates for reimbursement of mileage.  If the company owns the vehicle and you are using it for personal use then a mileage log must be kept for this method as well to determine which portion of the vehicle expenses are for business versus what is for personal.  The same rules apply whether you own or lease the vehicle.

Notes on vehicle ownership: It is important to differentiate who owns the vehicle, you or the company.  To determine this we must look at who the bill of sale is to (who purchased the vehicle).  Insurance should also be in the name of the owner of the vehicle.  Remember that you can sell a vehicle to the company, however this should be done at Fair Market Value and using an actual bill of sale.

Notes on keeping a mileage log:  It is important to keep a separate log for each vehicle which is driven for both business and personal.  The log should record the date of each business trip, destination, reason for the trip and the kilometres driven.  Also, make sure to record the odometer reading at the beginning and end of each year to determine the total kilometres driven in the fiscal year.  If you have a smart phone, such as an Iphone or Blackberry you can get a tracking app that can even work with your phone’s GPS for ease of tracking. 

Once you have maintained a log for a full 12-month period, the CRA has indicated that they would “afford considerable weight” to a log maintained for a “sample period” as evidence of the business use for a full year, if it meets the required criteria. 

If you want to avoid a mileage log you need to have a vehicle that is used for personal and a different vehicle that is used for business.

Working with your Corporation Part 7: Accounts Payable & Receivable

In this 7^th part of our blog series on working with your corporation, we will discuss some important things you would need to know about managing your Accounts Payable and Accounts Receivable.

                                                                         

Accounts Payable

Accounts payable is simple, but you do need a tracking system and a filing system.  If you are only going to have a small amount of payables, you do not require a digital tracking system, just a way to ensure your bills are paid on time.  If you have larger amounts of regular accounts payable, you will need a digital tracking system such as Quick Books or other software.  .

Important Note on Accounts Payable: Always do your best to keep current with all vendors to ensure good relationship and good credit.  Whatever your terms are, pay them by the due date.  Also, remember that when you have extended credit terms, such as net 30, you can utilize this credit and pay just before or on the due date and maximize your cash flow!

Accounts Receivable

If your business gets paid when the job gets done, or you are selling a product without credit terms then you may not ever have any Accounts Receivable.  However, most business do end up with some accounts receivable.  Have a way to track your accounts receivable and always collect as soon as possible. Do not let people that owe you money drift off.  Contact them and/or send them statements regularly if need be and ensure you get paid!

Important Note on Accounts Receivable: Uncollected Receivables have closed businesses due to lack of cash flow.  Make it a priority in your business to collect all revenue as soon as possible!

In our next post, part 8 of our blog series, we will discuss Vehicle Operations in detail.  You will know what constitutes vehicle ownership as well as how to keep a mileage log. 

Working with your Corporation Part 6: Banking

Another important aspect of working with your corporation that you must be familiar with is banking. 

Your banking relationship is important.  You will be depositing funds, writing cheques and paying for expenses regularly.  We’ve already covered paying for expenses and paying yourself, but there are some other things to consider in banking such as being on the right bank service package.  Bank Service Charges add up and it is important to be on the right package for the number of transactions you will be using.  Utilize Direct Deposit when it is free or relatively low cost as this will save you time and money.  Most banks have direct deposit/EFT systems. 

*Important Note on Banking: When making bank deposits, you must keep records of what you are depositing and where it is coming from.  If these are cheques and cash you are depositing, you should keep a bank deposit book that will track what all the deposits are.  If it is electronically deposited funds, get a record of the transactions, such as a merchant account statement.  If and when you are audited and you cannot prove where all funds that came into the company came from, CRA may determine that all funds that went into the company are income, when in fact some may be shareholder loans or from other sources.  Also, if you ever do directly withdraw funds from your Corporation for any reason, ensure to have a record of where it went or CRA may determine that these amounts are personal income to you.  The problem with CRA making either of these determinations is not only the extra tax and audit fees you will pay, but also the penalty and interest because of the timing when CRA would reassess!

Check back for the next segment of our blog series focused on Accounts Payable and Accounts Receivable.

Working with your Corporation Part 5: Paying for Expenses

This is part 5 of our blog series, “Working with your Corporation.”   Let’s now look into how you can pay for expenses.

Paying for Expenses

You will typically pay for expenses in 1 of 4 ways:

a.      Cash

b.      Cheque

c.      Debit Card

d.      Credit Card

Here is a basic rule to follow: IF YOU PAY FOR AN EXPENSE, ALWAYS GET A RECEIPT OR INVOICE.  You probably say, “I have record of the expense on my bank/credit card statement”.  Yes, statements are extremely important for bookkeeping and accurate records. However, statements MAY NOT withstand a CRA audit as they require receipts and invoices with details.

*Important Note for paying expenses: Always pay for Business Expenses from the business, and pay for personal expenses personally.  This is extremely important for bookkeeping, accounting and CRA reporting.  Keeping your business and personal expenses paid separately and properly will not only ensure accurate records, it will also save you money on your bookkeeping and Corporate Year End!  Keep it simple. You should have a business Debit and/or Credit Card and a personal Debit and/or Credit Card in your wallet and when you are paying for things ensure you use the correct card by determining if it is a business or personal expense you are paying for.

If you cannot get a business credit card, just get a sub account on your personal credit card account that you can use to pay for businesses expenses, keeping the record separate from personal.  Your bank can give you a separate credit card with a sub account that can be tracked separately on your statements.  Always let your business pay for its own expenses even when the company does not have the funds to pay.  In this case, personally write a cheque or transfer funds to the company and let the business pay for the expense.  Remember, this is a shareholder loan!  In the case of multiple owners, you may want to use reimbursement sheets so expenses can be approved by all partners.