Category: Insights

Road Warriors

Post author By margento
Post date February 7, 2017

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

Insights

Motivation

Post author By margento
Post date February 6, 2017

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

Insights

Face to Face

Post author By margento
Post date February 5, 2017

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

Insights

Available for Use

Post author By margento
Post date December 8, 2016

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

Insights

It’s a Bird, It’s a Plane…No…It’s 3D XPoint Technology

Post author By margento
Post date December 7, 2016

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

Insights

Penny-Pinching Pays

Post author By margento
Post date December 6, 2016

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

Insights

Life Is a Gamble

Post author By margento
Post date December 5, 2016

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

Insights

Consider 2017

Post author By margento
Post date October 8, 2016

MONEYSAVER

Look beyond revenue for profit growth.

Businesses are already looking toward 2017 and considering what has to be done to keep profits growing. The Canadian economy is expected to grow at only 1.5% according to a prediction by the Conference Board of Canada, which claims that “…there are plenty of headwinds for Canada’s economic growth prospects:

Investment in the oil and gas sector is still falling.
Non-energy investment is lacklustre, so Canada may soon face lack of capacity in manufacturing.
Canadian consumer spending may not improve because incomes aren’t rising sufficiently.
Consumers are also stretched thin with debt.
Growth prospects for the global economy remain poor.
U.S. growth this year is also tepid.

Preparing for 2017

In a slow-growth environment, the best way to maintain or improve the bottom line is to reduce expenses. Now is the time to look at year-to-date financial figures and establish budget goals for the next fiscal year.

Start with zero-based budgeting.

Consider the Following

Start with zero-based budgeting rather than simply adding a percentage to last year’s expensed figures. Every item of revenue and expense in the general ledger is reviewed and the revenue and expense items are justified with realistic assumptions.

1. Consider the possibility of having employees work from their homes in order to:

reduce the cost of lease space
reduce travel allowances or reimbursement costs
reduce in-house cost for utilities, telephones, taxes, maintenance, and interest

2. Review the communications system. Determine whether a separate facsimile line is necessary. Consider using an Internet system that connects to each employee’s smart phone rather than using the traditional land line.

3. Consider whether the cloud would reduce computer, printing and communication costs and still enable employees to find data from one source.

4. Purge old documents. Much data older than eight years can be shredded to free up space.

5. Review the age and condition of your work vehicles. Should you buy a new vehicle or spend money on repairs and maintenance?

6. Can some vehicles be sold to reduce the cost of insurance, licences, repairs, maintenance and fuel?

7. Review the budget for snow removal and ground maintenance. Perhaps a flat rate per snow removal would be cheaper than a contract. Could ground maintenance be performed less frequently?

8. Review electricity consumption. Can work schedules be altered to take advantage of lower, off-peak rates? Is it time to update the lighting systems, both in the warehouse and in the yard, to higher-efficiency lighting?

9. Consider whether “just in time” delivery is a better way to manage inventory. Delivery “only as needed” reduces the amount of space devoted to storage and frees up working capital by cutting inventory costs.

10. Examine your lines of credit, credit cards, mortgages and loans. Perhaps interest costs can be reduced, advance payments made, and credit cards paid off with lines of credit at lower interest rates.

11. Determine whether it is necessary to maintain all full-time personnel. Could their jobs be done by part-time employees or contract workers?

12. Evaluate employees on performance and return on investment. Give raises simply based on productivity, quality of work, interaction with clients and staff. Have candid interviews with employees to obtain feedback on how they view their performance.

13. Ask all employees how they would improve their expertise to increase productivity or reduce costs.

14. Examine the time taken to collect receivables. If your company is not receiving payment within 30 to 45 days, perhaps it is time to implement a COD policy for late payers. If a large part of a delinquent client’s bill is, for example, machine parts, then perhaps you should have a deposit-for-parts policy in place. Otherwise, your business is acting as a bank for your clients but it is you who is paying your bank or supplier for overdraft or overdue accounts payable.

15. Examine credit card costs. If the cost of collecting credit card payments is excessive, consider switching to a debit card or e-transfer.

16. Going paperless can save funds. Establish a system of filing for incoming email; items received by surface mail should be scanned, filed, and then discarded. Use the Internet to transmit information related to invoices, payroll and payments. Consider e-transfers to clients rather than cheques.

17. Apply the 80/20 rule. Evaluate your customer base and determine the top 20% of your clients. Stratify the remaining 80% and determine which are the most aggravating to deal with. Stop dealing with them and concentrate on the best 20%. Work on improving your relationship with those in the remaining 80% who show promise.

Budget Like a Start-Up

Ensuring a solid continuous bottom line in times of economic uncertainty requires owner-managers to veer away from the traditional budget process. Management must look at all revenue opportunities and expenditures as if their business were still in the start-up phase and justify the figures for the following year on a line-by-line basis. This will give a better understanding of how to build opportunities and reduce costs.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Insights

Technology for Seniors

Post author By margento
Post date October 7, 2016

TECHNOLOGY

Innovative software relieves the burden of looking after elderly parents.

Many owner-managers in their thirties and forties or even older not only have to run their businesses but also have to look after growing children as well as aging parents. These owner-managers are part of the so-called “sandwich generation,” trying to be successful business people but also caught between two levels of family responsibility. First, they have to cope with the physical and mental exhaustion of the job, then take on the responsibilities of caring for parents who might have reached the “critical-needs” point in their lives. Add to that the potential high costs associated especially with seniors’ residences and the time-consuming responsibilities of being power of attorney and it is little wonder the sandwich generation is looking for help. There are, of course, marginally beneficial tax breaks and social programs that assist, but these cannot meet the 24/7 on-call requirements needed by a concerned child of elderly parents.

New Software Available

Innovative software is now providing the means for many seniors to monitor their own activities without making a telephone call to their adult children. Most of these innovations require the seniors to have a properly installed computer or device with access to the Internet. An unlimited Internet service will avoid surprise overage charges.

An abundance of health-tracking software and apps are available to monitor their health, remind them of medications, and even track their nutritional needs. Setting up an easy-to-follow, step-by-step repetitive regime makes them more aware of their health needs and provides an easy tool to permit them to take charge of their own wellness. Caregivers can also use the program to determine whether the parent is following the program or medication set out by health providers.

New software can dispense medication and monitor its use.

Medication Management Software

Medication management systems can remind the user, dispense the medication and alert you, the caregiver, whether medications are being properly administered. The program can be set up to be accessed remotely by the adult caregiver. The base unit is installed in the senior’s home and can dispense medication at the proper dosage. Medication is inserted by the caregiver or a pharmacist into the cartridge. As many as 13 medications can be dispensed either singularly or in multiple doses. Within each cartridge is a memory chip that permits the pharmacist to access and enter each customer’s medical information when the label is generated. At the predetermined time, the medication is dropped into a cup for the individual to take. The system alerts the caregiver so the caregiver can phone the senior to make sure the medication has been taken. As well as dispensing medication, the system records information on compliance (i.e., how much of each medication is left). This information is accessible by the caregiver through a secure Internet connection.

Monitoring Devices

Smartphones combine the ability to chat back and forth and even face to face through Skype or Facetime so that you can more readily determine their physical state. Apps are also available that monitor the senior’s movements and enable you to know where they are at any time. Indeed, you can set geographic boundaries within which you feel the senior should travel, which can be tracked with an on-screen map. Software can be programmed to email you when they exit the area and when they return. Similar systems exist that allow monitoring of text messages and telephone calls to determine whether the senior is being “scammed” by a con-artist. It goes without saying that it would be wise to seek consent before installing such a procedure.

In cases of extreme dementia, monitoring with a smart phone may not work if the individual does not remember to carry the device with them. There are GPS trackers that are embedded in wrist bands, watches or devices that attach to clothing. The latest device embeds a tracker in the shoe that allows you to set the perimeters of travel so that the individual can be tracked once the perimeter is breached.

Medical Alert Systems

Medical alert systems enable elders to live within their own environment knowing that at the push of a button, an operator will respond. These systems are relatively inexpensive, from $28 to $33 per month. Live, two-way communication is provided through “emergency buttons” that can be worn on a belt, as a pendant or on a wrist band. The more sophisticated systems are equipped with waterproof sensors that can detect when an individual may have fallen. If the senior is unable to respond to the call-centre enquiry, the call-centre can immediately cont

Living at Home in Old Age

The insertion of unobtrusive and easy-to-use technology into seniors’ regular patterns of daily life allows the sandwich generation to softly interact with the senior(s) in their life while constantly monitoring the elders’ degree of need. The instant feedback provides the caregiver with the ability to make decisions to assist a senior who may not remember appointments, bills to pay, medication to take, or even the date of your next visit. Because time and financial resources available from caregivers are limited, any technology that extends an elder’s ability to stay within their home and live a happier life not only alleviates their anxiety about leaving the neighbourhood but allows caregivers to monitor and participate in the lives of elderly loved ones without always being on their doorstep.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Insights

Corporate Year End

Post author By margento
Post date October 6, 2016

TAXATION

Before choosing a date for your year end, think about the date that works best for your kind of business.

When entrepreneurs incorporate their businesses under their respective provincial articles of incorporation, often, little thought is given to the date for the fiscal year end. Many company founders unconsciously identify the company’s fiscal year end with the calendar year end of December 31, and therefore automatically select this date. After the articles of incorporation have been issued, the business may choose any date as year end provided the number of days of the fiscal year do not exceed 371. Conventional wisdom suggests, however, that the last day of the chosen month is the most practical date since most businesses and financial institutions process client data on a month-end basis. Setting the year end date at the end of your chosen month permits an easier cut-off and reconciliation process.

Factors to Consider

Inventory

If, for example, you are a retail business, physically counting inventory during your busiest sales period (i.e., Christmas) would disrupt business, so January 31 would be a good date for your year end. Inventory, as well as the level of in-store activity, will be at their lowest in January when your staff can count, price and value inventory without taking time away from selling. For a service industry such as landscaping, work-in-progress may have to be calculated. It may be best to have a year end such as November 30, after the bulk of the contracts are finished.

Choose a year-end date that works with your accounting cycle.

Accounting

Choosing an arbitrary year end such as December 31, which may not match your accounting cycle, could create issues for your in-house accounting staff as well as your CPA. Internal staff is often overwhelmed with completing year-end procedures for payroll, government reports, and finalizing year-end inventory, not to mention cut off of receivables and payables or budgeting for the coming year. Such stress can lead to errors, increased overtime and frustration.

Also, if your year end is December 31, your CPA may not be as available as you would like because they are consumed by tax planning and tax preparation for individuals and may be in no state of mind to work with staff that is already frustrated by their own year-end requirements. (This is not the best of formulas for getting quality time with your CPA to analyze your financial results.)

Start-up capital

When a business starts up, cash flow difficulties are common, given the need to borrow working capital for start-up costs and capital assets. If, by good fortune, the business does extremely well in its first year and substantial taxable income materializes, a year end set 365 days from the date of incorporation may be advisable. Since there is no requirement to pay monthly or quarterly instalments in the first year of operations, the business gets the maximum tax deferral by setting the first year end as late as possible. A later year end would lessen the actual cash outflow for corporate income tax and provide additional working capital in the start-up period.

The requirement to pay monthly or quarterly instalments begins in the second year, the payment amounts are determined by the taxable income reported in the first year. In case the first year end was shorter than 365 days, the taxable income is normalized to reflect the income had it been for the full 365 days. This may be helpful for seasonal businesses, to set a year end prior to the peak income period because that would not only defer the tax liability of the first year but also reduce the required instalments in the second year. This allows businesses to have more working capital during the start-up phase.

Tax Deferral

Choosing a year end of July or later allows tax deferral of corporate profits. Suppose, for a moment, that the corporate profit is $150,000. Rather than pay the corporate tax on the $150,000, management may decide to pay out the $150,000 in bonuses to various employees of the company. If the bonus is declared for the July 2016 year end but not paid until January of 2017, the income tax expense for the corporation is nil and the tax on the bonuses is not taxed in the hands of the recipient until it is paid in January of 2017. This approach provides working capital for the corporation that otherwise would have gone to the Canada Revenue Agency (CRA).

Changing Your Year End

Your business may have changed over the years so that now there are compelling reasons to change its current year end, such as staffing or administration issues that make it impossible to complete the year-end process in a timely fashion. If, for instance, your business now has a high sales volume or high inventory at the current year-end date, it might be less disruptive to end the year on another date. If you are a subsidiary or highly dependent on another business such as a supplier, there could be administrative and accounting advantages to aligning year ends.

A request to change the year end must be sent to the CRA. Changes can only be made for sound business reasons (i.e., not for the purpose of an income tax benefit). A request for a change is not required if:

the corporation is wound up and the final return is filed with a shorter fiscal year
the corporation is emigrating to another country, is becoming exempt from tax or will cease to be exempt from tax
persons or a group of persons acquired control of the corporation under subsection 249(4) of the Income Tax Act.

Owner-managers should keep in mind that, if a change in year end is granted, it will be necessary to produce financial statements and tax returns for the shorter period. Further, depending upon your accounting system, there may be additional cost in establishing the new year-end protocols.

Check with Your CPA before Making a Change

Decisions about establishing a year end or changing a year end can be fraught with unforeseen income tax consequences for both the corporation and owner-managers if personal and corporate tax issues are not considered. Entrepreneurs should meet with their CPA to discuss tax consequences; seasoned owner-managers should consider meeting with their CPA if making a change to the business year-end seems to be more and more necessary.

Contact Argento CPA today!

Source: BUSINESS MATTERS