Author: margento

MANAGEMENT

Correct pricing can mean the difference between business success and
failure.

Setting the price point for your product or service is not simply the
process of determining the cost of production then adding a mark-up. It is
more a matter of understanding the price the consumer will accept as the
value of your product or service and keeping the costs of production to a
level that will give you a profit at that price.

Consumers Buy for Value

Cost incorporates all the expenses incurred to bring a product or service
to a customer or client. Costs include: parts, labour, production
machinery, manufacturing space, administration, and transportation to the
consumer. These are the true costs of production and a starting point for
determining the price to the customer.

It is ultimately the consumer who decides the value of your product or
service to them and thus what they are willing to pay. This will be the
price that moves your product off the shelf.

Perception Is Everything

If a product is not moving and the price is reasonable given the cost of
production and the price of competitive products, it may be that the seller
has not provided enough information to the prospective purchaser to
establish value. For example, consider the common incandescent 60-watt
light bulb that traditionally sold for about 50 cents each. Newer LED light
bulbs, providing the same lumens cost $5 to $6, and yet they sell. Why?
Because consumers have been given information that persuades them that the
newer product has value. Governments and manufacturers have persuaded
environmentally aware consumers that long-life bulbs (LED bulbs are rated
to last more than 50,000 hours, which is about 35 years if left on for only
four hours per day, depending on the type of bulb) producing the same
number of lumens at lower operating cost is a value worth paying for.
Consumers are told the environmentally friendly LED bulbs will not only
help to save the planet, but also save money through reduced electricity
costs.

Pricing Strategy

Price is normally determined by cost plus mark-up or by estimating the
perceived value of the product/service. Neither method will move your
product/service if your competition is selling the same thing for less.
Check prices by visiting your competitor’s physical store or going online.

Shoppers are price sensitive. If your price is higher because of your
costs, you must convince the consumer your products are better, your
warranty is better, your service is better, or that you supply some other
advantage. Setting a low price is not the best course of action for any
business either. You may enjoy seeing your sales figures improve for a
while, but you risk destroying your brand if consumers unconsciously
reassign your product to a lower-priced brand category. If you constantly
discount, you will eventually be seen as a discounter. Customers will just
wait until you drop the price again. If the selling price does not cover
all your costs, your business will ultimately fail.

Price Changes

Changing prices should be handled with care. Regular customers are familiar
with your prices and if costs suddenly surge there may be a reduction in
sales. If you have to change prices, remove the old price tags and relabel.

Customers look at price but see value.

Provide Comparison

Shoppers may be looking at prices, but they are seeing value. Offer
products/services across a spectrum of values (i.e., extras cost more). The
automotive industry provides a classic model of this merchandising
approach: a base model with the price rising as features are added. This
approach connects the purchaser to your value proposition. Power windows,
heated seats and a high-end sound system are available on some models but
does the consumer perceive them as having value for them?

Boutique Niche

Once in a while, you may have a unique or trendy product/service or perhaps
you supply products/services associated with special holidays such as
Christmas, Chanukah, Valentine’s Day, special events such as weddings, etc.
These times may allow you to price on a value-added basis rather than
cost-plus-markup because the clientele’s perception of what is needed gives
them permission to spend more than they would if they were just making a
simple everyday purchase.

Know Your Customer Base

Pricing products and services should not be a mechanical process.
Owner-managers should examine their entire product line, determine their
customer base and the product/services expected, and identify the special
events that appeal to the environment they service. Knowing your customer
base allows pricing to be in line with your market and customers’
expectations. This will ensure your business will be able to cover all
operating costs and secure a profit sufficient to allow it to remain in
business for many years to come.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

TECHNOLOGY

A review of your HVAC system may show you how to improve your bottom line
by saving on the cost of energy.

Because lighting, heating and cooling represent 19%-25% of the cost of
operating a commercial business, control of energy costs is essential to
improving profit margins. A reduction of even 10% in these costs can
produce a significant improvement. But, because Canada is located in a part
of the world where temperatures can range from 40C below zero to 35C above,
it is inevitably expensive to keep internal temperatures at levels needed
to maintain comfortable working conditions through the changing seasons.

Heating and Air Conditioning

The best means of controlling the temperature in the working environment is
to install commercial programmable thermostats set to the workplace
schedule. Thermostats can maintain comfortable temperatures during working
hours, then be turned down or even off during nights, weekends, or
holidays, when the workplace is not being used. Managing temperatures in
this way can contribute significantly to the bottom line.

Smart thermostats have auto sensors that recognize when people enter or
leave the work area. Once everyone has left for the day, the system
automatically reverts to a lower setting to conserve energy; when the first
worker arrives in the morning, the system will start up and return to the
regular programmed schedule. When employees are absent for longer periods
such as holiday weekends, the automatic system can be shut off completely.
To prevent employees from tinkering with the temperature settings, smart
thermostats incorporate a security code that must be entered before the
temperature or other settings can be changed.

Most work locations have one central heating/cooling system that is fairly
easy to manage. If, however, your building(s) have different areas that
require self-contained heating/cooling systems, or if your business
operates at more than one location, wireless smart systems enable remote
control of individual thermostats through an app you can load onto your
computer or smart phone.

Some systems record the history of heating/cooling adjustments. This data
can be used to identify times and places of peak energy use, which, in
turn, may identify the need to upgrade windows, doors or insulation.

If you install a smart system, have an HVAC technician make sure the new
thermostats will communicate with the existing HVAC system.

Upgrade to multi-glazed windows with low-emissivity coatings.

Windows

Workplace windows should have at least two layers of glass with an inert
gas (e.g., argon) sandwiched between the layers. Normal double-glazed
windows have an R-value (i.e., the ability of material to resist the
transfer of heat) of 2.0; triple-glazed windows provide an R-value of 6.0.
These windows should have insulated edge spacers to reduce condensation,
insulated frames, and low emissivity coatings that reduce heat loss from
within and allow solar energy to enter. Multi-glazed windows not only
prevent heat from escaping, they also prevent the entry of unwanted heat
from the summer sun. Because of their thickness, multi-glazed windows
reduce the effect of road noise and are harder to break than single-pane
windows.

Maximize the return on your window investment by understanding the
benchmark ratings established by the Canadian Standards Association (CSA).
For instance, air tightness is measured from A1 to A3, water tightness
rated from B1-B7, and wind load resistance from C1 to C5. The higher the
number within each measurement category, the better the window.

Light-Blocking Curtains

To supplement new high-R and CSA-rated windows, you may be well advised to
invest in curtains and blinds especially if your building has extreme
window exposure to sun and cold winds. Curtains minimize the intrusion of
heat from the sun and take pressure off the cooling system. During cold
winter days, the curtains can be opened to allow the sun’s energy to
augment the heating system or closed to retain the heat on cloudy days.

Reduce Your Carbon Footprint

Controlling the heating and cooling of your premises with smart thermostats
and retrofitting of windows and window coverings are excellent ways of
reducing the high cost of energy use while reducing your carbon footprint.

Most provinces have programs that help small businesses conserve energy and
therefore reduce operating costs. Check with your provincial energy agency
to save energy through appliance and equipment upgrades, building
enhancements and by educating your employees about the need for proper
maintenance and more efficient use of existing equipment or lighting.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

 

TAXATION

Be aware of the changes that affect your 2016 income tax filing and beyond.

As you gather your 2016 tax data together for your CPA, take a few moments to read about the following changes and assess the impact they may have on you and your family’s filing for 2016 and after.

Principal Residence

There has been a significant change in the CRA’s policies regarding principal residency that must be followed by all taxpayers. Prior to 2016, there was a requirement to fill out form T2091 to designate your home as a principal residence. The form required you to designate the years in which the home was your principal residence. Although this form was required to be filed in the year of disposition, most individuals never filed the form because the resulting capital gain was often fully eliminated by claiming the principal residence exemption. Administratively, the CRA had waived this requirement to file if the exemption eliminated the gain.

Significant Rule Changes

For the taxation years that end on or after October 3, 2016 (e.g., the 2016 calendar year), if you sell your principal residence, you are required to report the sale and the resulting capital gain or loss on Schedule 3 of your T1. You are also required to file the form T2091 if you are claiming the principal residence exemption. These requirements are imposed regardless of whether or not the gain is fully exempt as a result of the designation.

A failure to file and disclose the information will have serious implications. Firstly, there is no limitation period (i.e., after which your returns are considered “statute-barred”) on the CRA’s ability to reassess in the future. Therefore, the deadline which would otherwise restrict the CRA’s ability to re-open the tax return would not start unless the information had been fully disclosed in the year of disposition.

Secondly, the principal residence exemption itself will only be allowed if the sale and the designation of principal residence are reported on your income tax return. Should you realize subsequent to the year of sale and filing of your income tax return that you did not file the sale of your principal residence, the CRA is not obligated to accept a late filing that designates the sale as a principal residence sale. Even if the CRA accepts the late filing, the taxpayer will be liable for penalties that are the lesser of $8,000 or $100 for each complete month from the original filing due date to the date the required information was received by the CRA in an acceptable format.

Since these rules will be effective for the 2016 calendar year, you should remember to report the sale of your principal residence if you had a disposition during the year.

Basic Personal Amount

The Federal Basic Personal Amount will increase to $11,474 for 2016, up from $11,327 in 2015. For 2017, the amount will be $11,635.

Marginal rates remain the same in 2017.

Marginal Rates

There have been no changes in the overall federal marginal tax rates; however, the thresholds for taxable income have been changed as indicated in the comparison table below. Keep in mind that these rates do not include the provincial rate nor do they include the various credits and deductions that may reduce the overall income tax for which you may be liable.

Other Changes

The 15% children’s fitness and arts tax credit, as well as the education and textbook tax credit, will be eliminated effective January 1, 2017. For 2016, the maximum Children’s Fitness and Arts tax credit will be 50% of the previous allowable amounts. Unused textbook and education tax credits from previous years may be carried forward and applied to reduce future taxable income.

• Teachers and early childhood educators will be able to purchase up to $1,000 of eligible school supplies for use in the classroom. From January 1, 2016, a 15% tax credit will be available on those purchases. For instance, if $500 is spent, a tax credit of $75 would become available to reduce taxable income. Teachers and early childhood educators should familiarize themselves with the allowable expenses and prepare a summary supported by the original receipts to assist in meeting Canada Revenue Agency’s guidelines.
• Prior to January 1, 2016, if a couple was supporting a child under the age of 18, the couple was able to split income to reduce the overall family tax liability. Effective January 1, 2016, income splitting is no longer available.
• Northern residents will have their residency deduction increased for the 2016 taxation year. The northern residency deduction will increase from $8.25 to $11 per day (or from $16.50 to $22 per day for living in a self-maintained dwelling) if you lived in Zone A for at least six consecutive months. If you lived in Zone B, the intermediate area, the deduction will increase from $4.125 to $5.50. ($8.25 to $11 per day for living in a self-maintained dwelling). The zone for deductions is determined on a province-by-province basis. Thus, to ensure the appropriate tax deductions are available to you, consult the CRA website, click on your province’s name, and search for your place of residence. Make sure your CPA is aware you resided in a zone that provided deductions for line 255 of the tax return.

Check with Your CPA for the Required Documents

There have been changes in personal tax issues in the 2016 year, but none are as important as the principal residence rules. If you have sold your principal residence in 2016, contact your CPA to find out what documentation is required to ensure you are meeting the CRA reporting requirements.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

TECHNOLOGY

Consider taking a few extra accessories when working offsite.

Working while on the road, whether at nearby job sites or when travelling to distant locations, usually means taking a smartphone, laptop or tablet.

The ability to work almost anywhere in the world is marvellous; however, when we are working at a hotel, jobsite, vendor or client location, or even at the cottage, we often wish we had the same conveniences we have at home.

Before taking your next trip, you may wish to consider adding a few of these travel essentials to ensure that, if your makeshift workstation is more like your home office, you will be less fraught with concern about your ability to complete the project.

Productivity

• For many, typing on the touch screens or keyboards provided on smartphones or laptops is inefficient and tiresome. Why not invest in a rechargeable portable keyboard that can be folded and placed into your briefcase? (Cost: approximately $20)
• If you find your laptop’s built-in touchpad or pointing stick frustrating to use, try a miniature (travel-sized) wireless or USB mouse to make dragging and dropping a lot easier. (Cost: approximately $10)
• Check your devices and determine what kind of battery they use. If any of your devices use separate disposable batteries, always ensure you have some spare AA or AAA batteries in the event your wireless keyboard or mouse dies at an inopportune moment. (Cost: approximately $2-5)
• If you frequently need to enter numbers on the go, punching one number at a time into the top row on a laptop can be frustrating. An external USB numeric keypad will make this task go faster, be more efficient and less frustrating than one-finger typing. (Cost: approximately $10)

Always carry extra USB sticks to create backups or share data.

Communication and Storage

• When you are on the road, Internet connectivity may not always be available, and even when it is available, there can be restrictions such as speed or port limitations. Before heading out on your trip, make sure you have copies of all the necessary files with you. Do not rely on the Internet to back up to the cloud or to transfer data to your office computer. Always carry one or two extra USB sticks to create backups or share data. Always check the USB stick for viruses after it has been plugged into any other computer. (Cost: approximately $10)
• If you are using Skype or another video or audio conferencing app, have a high-quality set of headphones with a microphone to provide some confidentiality when addressing private issues. If possible, find a model that is compatible with all your devices, including your computer, mobile phone and tablet. (Cost: approximately $30)

Ready for Business

• If you travel out of the office with any frequency, keep a dedicated power adaptor in your bag or briefcase. Grabbing your briefcase and heading out to a job site only to find that your battery is low and you have left the power cable at the office is not a good way to start a meeting or presentation. (Cost: approximately $50-100)
• Changes in technology have created situations where devices are not always compatible with each other. It is best to have dongles to make sure you are covered for the most common ports that may not be built into your computer or device, such as VGA, HDMI and Ethernet. (Cost: approximately $20-30)
• Older buildings were never designed to accommodate the proliferation of modern electronic needs and thus may not have electrical outlets close enough to be reached by your plug-in adapter. Consider a two-metre (six-foot) extension cord as part of your emergency kit. (Cost: approximately $5)
• You would never think of plugging your laptop into a wall socket at the office without using a surge protector; yet, every time you plug in at another location, you are undoubtedly not using one. Perhaps it is time to carry a small and affordable wall-mount surge protector that will not only protect your computer or other device, but can also be used as a USB charging station. Quality surge protectors have swivel mounts to allow more adaptability, LEDs that verify the unit is working and provide surge suppression, low clamping voltage, shutdown technology, and EMI/RFI noise reduction. (Cost: approximately $15)
• Many new vehicles have built in USB ports that allow you to plug in adapters to charge or run your devices. For vehicles that do not come with built-in USB charging ports, you can still take advantage of this “free” power source with a converter that steps down the 12 Volt output to the input voltage required by your device. Newer adapters will allow up to 4 USB plug-ins to allow additional units to be used or charged. (Cost: approximately $30)
• If your vehicle does not already have a power outlet, you can plug a power inverter into the cigarette-lighter port to convert the 12 volt DC power into a 120 watt AC outlet like the standard electrical outlets you have at home and at the office. You can operate and charge your computer, or any other electronics using the standard plug without having to buy vehicle adaptors for each device. Read the specs or go online to ensure output amperage is compatible with the more sensitive devices being charged through the USB port. The downside of these units is that your vehicle battery will run down quickly unless the vehicle is running all the time. (Cost: approximately $60)

Start Filling Your Shopping Cart

The list of available technology to make life more bearable when you are working out of the office is almost endless. Putting together a travel kit of practical, inexpensive electronics can turn a potentially non-productive day filled with frustration and anxiety into a productive and successful venture — all for the low, low price of about $420.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MANAGEMENT

Being motivated and inspiring motivation are the keys to success.

Motivation, according to Business dictionary.com is the “Internal and external factors that stimulate desire and energy in people to be continuously interested and committed to a job, role or subject or to make an effort to achieve a goal. Motivation results from the interaction of both conscious and unconscious factors such as the:

• intensity of desire or need
• incentive or reward value of the goal
• expectations of the individual and of his or her peers.”

Keeping yourself motivated and keeping staff motivated is difficult, especially for owner-managers constantly sidetracked by issues that pull them away from their course of action.

Know Yourself — Know Your Reasons to Be Motivated

One of the first steps to maintaining motivation is to determine the reason to pursue a project.

Determine whether your motivation is perhaps sparked by a deeply rooted need to emulate your parents, a desire to reach a million dollars in sales, or to meet the needs of others by providing a high-quality service or product.

Whatever your reasons, the following are some tips to maintain the drive to reach your goals.

• Treat your life as a project and yourself as the project manager. Break the project into long-term, medium-term and short-term projects. Over the long-term, you may want to sell your business for $20 million at age 60, but in the next five years (medium term) you want to reach $10 million in sales. In the short term (this year) you need to improve your operating margin to X%. As usual, Warren Buffett, chairman and CEO of Berkshire Hathaway and one of the world’s most successful investors, got it right: “I don’t look to jump over seven-foot bars — I look for one-foot bars that I can step over.”
• Establish the steps needed to reach the goal. Break each step into identifiable stages. Within each stage outline and document the task needed to complete that specific stage of operation. At the end of each day, review the outline and determine the progress. Such an approach allows you to determine the progress of that stage and to “tweak” the task to move forward quickly. Successful completion of the task will provide you with the motivation to move onto your next goal.
• Prepare yourself mentally for your day. When you awake, review what you plan to achieve that day. Outlining your goal motivates action and gets results.
• Maintain a list of tasks to be done. Thus, when a major task hits a delay and you start to feel overwhelmed, you can look to your list and work on a simpler task that can be more easily completed. Completing each task, even a small one, will provide confidence that other tasks can be successfully completed. Even small successes can sustain motivation and prevent demoralization.
• Pace yourself on all projects. Time frames that are too tight may lead to costly mistakes that will limit your ability to move forward. A measured pace ensures a better rate of success and the successes keep the flame of motivation lit.

You cannot achieve everything by yourself.

• Remember: No matter how much you learn or how much you try, you cannot achieve everything by yourself. Understand both your mental and physical limitations and pick your projects and tasks accordingly. Struggling to reach unattainable goals demoralizes. Knowing your limitations frees you to engage others more knowledgeable and allows you to say “NO” to tasks above your competence level. Staying within your capabilities within your field of expertise allows you to concentrate on what you are good at, which in turn maintains your confidence level and allows you to keep motivated.
• Be positive. Never say “I can’t”. Much of success is attributable to simple endurance. When you have self-doubts, talk to your spouse, a peer or an outside professional. Simply articulating your concerns often provides insight and renews confidence in your own ability.
• Read how others overcame similar obstacles. Meet with others inside or outside your organization who inspire you to move forward. Positive reinforcement or constructive ideas for change are great motivators.
• Motivation comes not only from within but from the enthusiasm and desires of others who share your dreams and goals. When you decide to take on a project, ensure your team is fully vested from the start. The mutually reinforcing drive, ideas, and solutions of a team will keep not only you motivated but will also maintain team motivation until the project is completed.
• “Success” is a word every entrepreneur likes to hear, but “failure” is the word that often creeps into an owner-manager’s thoughts when projects go off the rails. Fear of failure and the accompanying financial loss is a strong motive to keep going. Failure motivates us to re-examine our process and make changes to move forward until we succeed.

Managing the Crests and Troughs

Motivation to succeed starts out as a tsunami when an idea is first born but tends to diminish to a ripple before it reaches the shore of success. Ensuring that enthusiasm is maintained throughout the life of a project or for your business means that as an entrepreneur, you must manage the crests and troughs of the wave to ensure that motivation keeps your staff moving forward toward a future that fulfills the needs of your employees, the needs of your business, and, of course, your own personal needs.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MANAGEMENT

Social media have their place, but do not forget to talk to each other face to face.

Social media are reducing the number of face-to-face conversations. “In person” encounters allow a person to speak while another responds spontaneously without resorting to the more formal structure of the written word.

Why do we seem to prefer Facebook/Twitter or emails rather than meeting with someone to discuss issues? The most obvious answer is that electronic media is more effective and saves us time. Psychologists tell us we find interacting with others through the computer is easier because a computer does not require us to become emotionally involved.

When to Meet Face to Face

Certainly there are situations when communicating via social media is effective, such as when sending a quick inquiry to a colleague. But when owner-managers need to announce decisions that will have an emotional impact and bring employee reaction, face-to-face meetings are a must for the following reasons:

• Face-to-face communication has incredible advantages since you receive an immediate response. If, on the other hand, you text someone and they do not respond, uncertainty prevails.
• One-on-one proximity allows you to “read” the respondent’s reaction to the message. A shrug of the shoulders, a deep sigh, or an unexpected expletive are great indicators of the recipient’s acceptance or understanding of what has been said.
• People need to be able to express how they feel about a project, a change in venue or a performance review. Face-to-face meetings allow each party to add a level of interpretation to the message by providing and reading body language, eye contact, or voice intonations. The meaning of words alone can often be misinterpreted. Receiving a text saying “The project is due next week.” sends a different message than someone who laughs and says “The project is due next week!” then rolls their eyes.

Talking face to face allows more effective negotiation.

• Talking face to face allows each party to negotiate more effectively by immediately understanding the obstacles and opportunities that may not be easily understood by simply reading a progress report or a job description.
• Communicating face to face provides each party a better opportunity to adjust their approach to ensure the end results are achieved. Interpreted another way, face-to-face interaction builds trust, creates understanding, and assists both parties to understand they share a mission for the project and the organization.
• Face-to-face meetings force interactions, which in turn create new ideas and approaches that are essential to success. Yahoo’s CEO Marissa Mayer indicated in a memo:
  Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.

Meeting through Skype is a means of communicating with remote jobsites. Surveys indicate employees like Skype because it allows them to “get more done” as they can handle one-on-one meetings without the distractions of social graces. However, such methods still disconnect the workers from each other and the company and as such it is important for management to instill the need to maintain one-on-one personal contact.

Communicating face to face embraces the seven most important elements of interpersonal communication by:

• clarifying expectations and purpose
• creating brief, unambiguous communication
• focusing all parties on a purpose
• setting a consistency of tone that allows individuals to understand the underlying pattern and seriousness of the message
• addressing all issues without the need to wait for additional instructions
• ensuring that all points relevant to both sides of the discussion are brought to the table and discussed
• allowing both parties to measure the knowledge and competence of the other party.

Get Back to Personal Contact

Even though Twitter has lifted the 140 character limit on messages, both owner-managers and employees must recognize that regardless of the length of the message, projects must be discussed face to face to generate the best results possible for the company, the employee and its customers.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

TAXATION

Operating an automobile for business and personal use has tax consequences.

Purchasing or leasing an automobile in the company name and allowing employees to drive the automobile has tax consequences that may require owner-managers to add a taxable benefit to the employee’s T4.

CRA Definition of Automobile

For there to be a taxable benefit, the employer must first determine whether the vehicle is an automobile under the Income Tax Act. The Canada Revenue Agency (CRA) defines an automobile as “a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets and has a seating capacity of not more than the driver and 8 passengers.”

This definition of an automobile [paraphrased from 248(1) from the Income Tax Act] does not include “a van, pick-up truck, or similar vehicle” that:

• can seat no more than the driver and two passengers, and in the year it is acquired or leased is used primarily to transport goods or equipment in the course of business, or
• in the year it is acquired or leased, is used 90% or more of the distance driven to transport goods, equipment, or passengers in the course of business; or
• pick-up trucks that you bought or leased in the tax year that:
  a) you used primarily to transport goods, equipment, or passengers in the course of earning or producing income
  b) you used at a remote work location or at a special work site that is at least 30 kilometres away from any community having a population of at least 40,000.

Restrictions on Deductibility

Vehicles that fall within this definition of an “automobile” are subject to a maximum capital cost allowance addition (available for future capital cost allowance) of $30,000 plus HST. This limitation imposes a significant constraint on many business owners’ primary motivation for purchasing the vehicle in the corporate name. Vehicles such as king cab trucks that do not fall within the definition of “automobile” are not subject to such a restriction since they are considered necessary for the business and are not considered “luxury vehicles”. There are also restrictions imposed on leased automobiles. Generally, monthly lease costs for automobiles are restricted to $800 plus HST.

Taxable Benefits

In addition to the restrictions on the deductibility of annual depreciation (or leasing costs), users of such vehicles are also deemed to have received a taxable benefit from the corporation for the use of the vehicles for non-business purposes.

For example, assume an owner-manager purchases a high-end SUV in the company name but the owner-manager’s spouse uses it primarily (i.e., more than 50% of the use) for non-business purposes. Assume also that the base price of this vehicle is $90,000 and the overall cost of owning the vehicle, once HST is added, is $101,700. The standby charge to the employee is calculated at 2% per month of the total cost of the vehicle. Thus, the standby charge for the employee is calculated at $101,700 at 2% ($2,034) per month or $24,408 per year. The standby charges would be reduced in cases where the vehicle is used primarily for business purposes and annual personal driving does not exceed 20,000 kilometres.

On top of the standby charge, an additional operating benefit of 26 cents per personal kilometre driven is taxable in the hands of the employee. In the case where the vehicle is primarily used for business purposes, the operating benefits could be reduced to 50% of the standby charges if the benefit results in an amount lower than otherwise calculated.

(Standby charges for a lease can be expensive as well. A monthly lease cost of $1,350 over 84 months creates a standby charge for 12 months of $10,800 plus an operating expense benefit as mentioned above.)

Owner-Manager’s Use of Vehicles

Owner-managers may believe they are not subject to the available-for-use rules because they are shareholders of the corporation and not employees. The CRA has made it clear that owner-managers are subject to the same taxable benefit as employees as indicated by the CRA’s reference to archived IT63R5 Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer — After 1992.

Paragraph 18 reads as follows:

Shareholder Benefit
18. The above guidelines may generally be applied to a shareholder of a corporation. Subsection 15(5) provides that, for the purpose of subsection 15(1), the value of the benefit to be included in a shareholder’s income when an automobile is made available to such a person (or to a person related to that person) by a corporation, whether or not resident or carrying on business in Canada, is calculated on the assumption that subsections 6(1), (1.1) and (2) apply with such modifications as are required in the circumstances, and as though the references therein to “employer” were read as references to “corporation.”

Working from Personal Residence

Many owner-managers may work from their principal residence and thus have access to the vehicle 24 hours a day. The question is: “Does the close proximity of the vehicle mean that it is available for personal use and therefore a taxable benefit must be added to the owner-manager’s income at the end of the year?”

CRA: There is no taxable benefit if the automobile is operated for business use only.

Taxable Benefits

“An automobile is available to your employee if he or she has access to or control over the vehicle. It includes any part of the day, weekends and holidays during the calendar year.” (This suggests that, since the vehicle is parked at the place of residence and is available 24 hours a day — 365 days a year, there is a taxable benefit.)

“If your employee does not use the company’s automobile for any personal driving, there is no taxable benefit, even if the automobile is available to your employee for the entire year. This applies as long as the kilometres driven by your employee are in the course of his or her employment duties and the vehicle is returned to your (business) premises at the end of his or her work day.” (This suggests that, if the owner-manager can establish that they do not use the vehicle for personal use at all and park it at the “corporation’s” premises [also the owner-manager’s principal residence] then there may not be a taxable benefit.)

Keep Detailed Records

Convincing taxation authorities that the vehicle is not used for personal use will require due diligence and good record keeping since the CRA will take into consideration many factors when determining whether available-for-use benefits should be added to income.

The first line of defence is a complete log book. Record the odometer reading as at January 1 of and December 31 of each calendar year to establish the total annual distance the vehicle has been driven. Log each business trip taken plus a description of the purpose. Hypothetically, the number of kilometres driven for business trips and the total kilometres driven should be the same.

Although it is highly unlikely an owner-manager would purchase or lease an expensive “toy” and use it primarily for work purposes, the CRA may start to review the purchase of vehicles to ensure they are indeed “work vehicles.” Additional calculations and circumstances will alter the available-for-use add-on, whether for a purchased or leased vehicle. But, as our hypothetical taxable benefit examples demonstrate, the additional taxable benefit will push the employee (i.e., owner-manager) into a higher tax bracket and thus bring closer scrutiny by the CRA.

Consult Your CPA

Calculation of available-for-use benefits is complicated and may be somewhat offset by taxable deductions within the corporation. If your business is considering purchasing or leasing a vehicle that will be operated in the gray area between business and personal use, consult your CPA to ensure you understand the potential personal tax consequences.

 

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

TECHNOLOGY

The way you store your data is about to change.

For the last 60 years, increasingly vast amounts of data have been stored primarily on magnetic hard disk drives (HDDs). Hard drives are capable of storing a huge amount of information, but they are mechanical devices and can be more delicate and a lot slower than more recent NAND (stands for negative-and logic gate) flash memory, which has no moving parts. NAND flash memory, sometimes called a solid state drive (SSD), has become ubiquitous as a storage medium since it is a compact, fast and fairly inexpensive alternative to the noisy hard drives currently used in computers, mobile phones, USB flash drives and memory cards, among other things.

While hard drives and NAND flash memory are great for data storage, mobile devices and computers also have a smaller amount of super-fast short-term memory called DRAM (dynamic random access memory). DRAM is quite a bit more expensive and, unlike your hard drive or SSD, the contents in memory are “volatile”, meaning whatever is stored disappears when you turn off your device.

But what if long-term storage could be as snappy as DRAM?

The new technology does not use transistors.

“You Ain’t Seen Nothin’ Yet”

Sometime in 2017/2018, a new memory and storage technology called 3D XPoint (pronounced 3D cross point), developed by Intel and Micron, will hit the market. The new technology is different from both NAND flash memory and DRAM in that it does not use transistors; instead, it uses a three-dimensional checkerboard structure that allows each memory cell to be addressed individually. The ability to read and write data in smaller increments is a huge advantage over flash memory, which is only able to store information in blocks of data.

How Fast Is Fast?

What makes this new technology so incredible and likeable is that it allows the user to take stupendous amounts of stored data and treat it as if it were in active memory rather than in traditional storage such as a hard drive or SSD flash drive. 3D XPoint memory is expected to read data three times faster, write four times faster and use 30% less power than NAND flash memory. That means it is not only faster than your current SSD or flash storage, but will help manufacturers to stretch the battery life a bit further once it is available in laptops and mobile phones.

How Much, You Ask?

We all know that those who purchase the newest technology pay the higher price and pave the way for those who wait for the technology to become mainstream. At the moment, a fixed price point has not been set in stone, but it has been suggested that 3D XPoint memory will cost about four or five times the current price of NAND flash drives.

Do I Really Need 3D XPoint?

For most owner-managers, today’s computers with their hard drive or SSD will be sufficient for everyday use. However, if your business applications require rapid data storage and transmission, whether for extensive analysis, high-performance databases, or simply for fast storage of immense amounts of data, this new technology is a game changer that will undoubtedly be worth the cost.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MONEYSAVER

Playing Scrooge is not just for Christmas any more.

Even though penny-pinching is harder to do today without any pennies, the concept remains valid and is especially applicable to the expenses incurred by small businesses. Here are a few ideas to improve the bottom line.

Outsource

Employees require salaries and benefits as well as insurance, office space and equipment. Contracting out office tasks transfers these costs to a highly competitive third party and frees up your own premises for revenue-producing uses.

Negotiate with Suppliers

Contact your suppliers and see whether you can get a better deal. Far too often suppliers mechanically increase prices without recognizing the value of a long-term, reliable client. Why should rewards and discounts go to new clients while long-standing customers like yourself see costs go up? Call and make your pitch.

Use the Cloud

Using the Internet to send invoices and make and receive payments saves the cost of cheques, envelopes, letterhead and postage as well as the related labour. Further, cloud-based solutions for almost every manufacturing or accounting need are available for a reasonable “lease” rate. Such an approach reduces the cost of buying and installing software and assures you your cloud services will always have the latest updates.

Consider In-House Printers

Many businesses still need to print data to hard copy. Consider purchasing a laser or inkjet colour printer. Once templates for invoices, letterhead, or business cards have been installed, they can be printed as needed, thus eliminating large inventories of pre-printed forms. The templates can be adjusted for format changes or for staff and address changes.

Face-to-face meetings are not always necessary.

Meet with Telecommuting

For most business communication, a face-to-face meeting is not necessary. Virtual meetings will work if the number of participants is small, the meeting is kept short, and the agenda well planned. Establishing timelines, requesting daily updates and having access to work-in-process by the use of shared cloud facilities will ensure projects stay on time and on budget.

Maintenance

How often are the premises cleaned? Perhaps reducing the frequency of cleaning or having staff empty their own waste baskets at the end of the day are options that will reduce costs without impacting the tidiness of the office.

Go Paperless

Going paperless can be difficult for older employees used to paper trails. Paperless offices must establish a filing system suitable to everyone; this includes scanning every piece of paper that comes into the system and allocating it to the appropriate folder. Going paperless also means reviewing existing client files and purging data no longer required for taxation, legal or business purposes. This is the time to adopt standard records management practices for preserving, storing (onsite and offsite) and destroying documents. Scanning documents saves the cost of renting physical storage space, using employee time to file paper, and ultimately shredding and disposing of that paper.

Review the Cost of Your Premises

Signing a long-term lease may lock your business into a lease cost that will not be acceptable in the future. Look ahead and determine how your business will evolve over the next five years. If your strategic plan includes increasing or decreasing your space, consider signing shorter-term leases that allow an exit with, for example, three months’ notice.

If you own your building but no longer need all the space, consider subletting. You might also think of selling or leasing the entire property and moving to a smaller space. Such a move would provide proceeds from the sale of the building or lease income while reducing your own rental costs.

Think about Your Future

Taking an hour or so with your CPA to look at your current business model and associated costs will help you think about changes that will positively impact the bottom line and ensure that your business keeps on going.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MANAGEMENT

An insurance plan today can support your business and family tomorrow.

No one, with the possible exception of a professional gambler, expects to build a reserve of funds by gambling. Nevertheless, purchasing or not purchasing life insurance is a gamble in itself. If you buy life insurance, you only win if you die early because the insurance pays off your debts; if you don’t purchase life insurance, you only win if you live a very long life and pay off your debts without having paid life insurance premiums. What you must decide is whether you want to gamble that you will live to pay off all your obligations, or take a more conservative position and accept that you might die younger and be willing to pay the insurance premiums to ensure that your debts will be paid off at your early death.

Facts to Consider

To understand why you would need to provide these funds, ask yourself: Will my spouse be able to pay for:

• my funeral?
• our home (including any outstanding mortgage) and way of life for the children?
• outstanding credit card debt?
• funds borrowed from the RRSP to put a down payment on the house?
• the monthly mortgage/rental, utility and maintenance?
• mood changes
• day care?
• my personal income tax liability as an owner-manager if I have not repaid draws or have not deducted sufficient taxes at the source?
• short-term loans from the company?
• personal guarantees to financial institutions if there is no other source of income?
• our children’s future education or future medical costs should they currently have special needs or develop them in the unforeseeable future?
• RRSPs, investments or TFSAs for the future needs of our family?
• the capital gains tax (if) the second residence (e.g., a cottage) has to be sold?
• an equalization of my estate? For example, the family cottage has been left to three survivors, but only one has a real interest in preserving it. What will happen to the cottage if that person does not have the financial means to pay out the two other survivors? Does that mean the property would have to be sold to meet the terms of the will? Should life insurance be purchased to provide a cash payout to the other two beneficiaries to prevent the sale of the property and therefore keep it in the family?

Entrepreneurs should not defer purchasing life insurance.

What about Now?

Term life insurance provides coverage at a fixed premium for a limited period of time (i.e., the term). After the term expires, coverage at the previous rate is no longer guaranteed. Term insurance is usually the lowest-cost way to purchase a substantial death benefit.

Putting off purchasing life insurance is not an option entrepreneurs should consider because (in the event of your passing):

• your business associates will need cash flow to fill your vacancy
• Tlife insurance becomes more expensive as you get older: your province of residence, your life style, the amount of the payout and your gender will impact the insurance premium; for a non-smoking 25-year-old man, for example, the yearly premium for $600,000 of renewable five-year term life insurance may cost you $600* per year; however, as you age, the amount goes up: at age 46 (around $900) and age 55 (around $1,500); the problem with term life insurance is that, after the term expires, the policy has no value.
  *Please note that all amounts and calculations are generic estimates. Each individual’s circumstances will impact the premium.
• even if you paid an annual premium of $1,500 (hypothetically) from age 25 to 55, the total cost of your premiums would be only $45,000, but the payout would be $600,000, which is an excellent return on your investment
• conversely, if you invest $1,500 per year at 5% compounded annually for 30 years, you would have only about $100,000 at age 55
• if you incur serious physical problems or develop a medical condition, you may not be able to purchase life insurance.

Key-Person Insurance

Key-person insurance is paid for by the company, with the company as beneficiary. This type of insurance is designed to cover the consequences of losing an indispensable person such as the founder or owner who can no longer contribute to the business through death or disability. Funds will be available to keep the operation going while restructuring is taking place after your death.

Key-person insurance can provide funds to buy your share from your survivors without the business assuming additional debt. A key person payout can be used to back your personal guarantees on business loans as well as pay deferred taxes and other regulatory deductions.

How Much Should You Buy?

How much insurance you need depends upon what you need to insure: self-employed earnings, current assets, debt, savings, cost of living, business and family structure, as well as the future needs of family and the business. To determine this amount, first put together a summary of the collective assets and debts of your business and your family unit along with details of the cost of your current life style and future expectations. Contact an insurance agent, discuss your situation and design a policy that will meet your needs.

Something to Think about

Don’t gamble with your future. Accidents and illness happen. Hope for the best but plan for the worst. Think about your business and family situation and what would happen if you were not there. Do not leave your survivors in jeopardy when you can take care of their futures today.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca