Jared Pilon
The first aspect of the "Planning Process' looks at the fundamentals of your business and helps you ensure that you are building a strong foundation to work from and ultimately generate wealth.
Focus: implement strategies to ensure your business is on a strong footing.
Having the proper systems in place is a vital component of every successful business. These systems should be created through discussions with your accountant and should seek to maximize your business in a number of key areas such as revenue, profit margin and overall growth.
You have numerous options for the fulfillment of tax filing and financial statement preparation services. Not all accounting firms are equal, however. When speaking with your accountant, ensure he/she is providing guidance in the following areas:
- Cash flow
- Budget
- Financing
- Tax compliance
- Use of professionals
Cash flow
Are you monitoring cash flow statements regularly?
You have seen the stats before. The biggest cause of business failure (especially new businesses) is cash flow issues. Do you know what a cash flow statement is? When was the last time you had one prepared for your business? If you do not know the answers to these questions, it possible that your business is headed for cash flow issues.
Depending on the size of your business, we would recommend preparing and reviewing a cash flow statement as often as each month. This will enable you to catch problems before they become too difficult to correct. Specific areas where problems can be avoided: credit and reputational strikes, inventory turnover, collection of receivables and payment of payables.
Do you have a quality bookkeeper?
We get it, you are busy! You do not have time to review a cash flow statement, much less prepare one. A lot of small business owners take on the bookkeeping responsibilities of their business hoping that they will save money, although this rarely ends up being the result. Enter the quality bookkeeper. Having this professional on your team allows you to focus your time in the areas of your business that make you money.
Do your forecasts account for internal & external contingencies?
A cash flow forecast is only useful if it considers the real factors that your business will face in the future. Internal factors could include employee turnover, A/R collection issues, and others. External factors could include rising interest rates, changes in tax policy, and others.
Budget
Have you implemented a flexible & living budget?
Budgets. Most people cringe when they hear this word. Budgets are important for achieving your financial goals. Compiling a budget does not need to be an unpleasant process. Instead, rely upon your bookkeeper to compile baseline income statements numbers and use these documents to guide your future.
Are you reviewing your budget regularly?
Like a cash flow statement, your budget should be reviewed regularly. This will ensure that you are meeting financial targets and avoiding significant issues before they have a chance to significantly impact your business. Consult with your bookkeeper and accountant to discuss the results of the budget and any discrepancies that you feel are out of the ordinary or you are unable to explain.
Financing
Where will your initial capital funds come from?
Small business owners typically have a tough time securing financing due to a lack of credit within the organization. You may need to contribute a significant amount of personal funds to startup your business. Other sources could include friends and family members.
Do you have a clear understanding of the terms of financing?
If your business can secure credit, you may be required to provide a personal guarantee. This holds you personally liable for that business applicable debt. Additionally, if you do decide to borrow funds, ensure that you have an agreement in place to protect all parties. This is especially true if you are receiving funds from friends or family.
Tax compliance
Do you have a system in place to protect you in the case of an audit?
Audits from the Canada Revenue Agency (CRA) are an inevitable aspect of conducting business. It is important to retain proper source documents should CRA request to see them. What is the best system? One that works for you, can be regularly maintained, and keeps you organized. Consult your bookkeeper and/or accountant to get you started on the right path.
Did you know that this system will reduce bookkeeping & accounting fees?
Having a system in place to organize source documents will benefit you in numerous ways. One such way is a reduction in bookkeeping and accounting fees. Additionally, these professionals will be better positioned to provide quality advice to you when they are able to work with accurate & reliable data.
Did you know that this system will protect you from interest & penalties?
CRA interest charges and penalties are non-deductible for tax purposes. Ensuring you meet filing deadlines will eliminate penalties and drastically reduce interest charges. This will free up additional cash flow that your business can use to grow.
Use of professionals
Who are the most important professionals to add to your business team?
- Bookkeeper – maintains ongoing records, assists with payroll & GST filings, and compiles cash flow statements and other vital financial data.
- Accountant – ensure tax compliance needs are met, advises on the overall direction of the business, and can provide succession and estate planning services.
- Lawyer – provides advice on legal matters, drafts contracts & agreements, executes tax planning documents from the accountant.
- Commercial insurance broker – ensures your business is protected from liability concerns, both general and automotive.
- Investment & life insurance advisor – collaborates with you to ensure your wealth and estate planning goals are understood, acted upon, and eventually met.
Conclusion
Want to take the next step in the 'Planning Process'? Click the preceding link to download a free copy of the complete 'Planning Process' eBook.
If your business isn't on a strong foundation, it is time to speak with Legacy Accounting now! Please contact us at for one-to-one advice related to your corporation. It is important to have a professional on your team that is up-to-date and looking out for your best interests. Getting your business on a firm foundation with ensure you can build a financial legacy that will last!
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Posted: 8/25/24
