Starting a business or being in the early stages is excited but unraveling at the same time. The ideas flow and the creativity is high but often times, the business administration is overlooked or left as an after thought.
Planning is key when starting a business and understanding the systems needed to create success is very important. Most often, when a person starts a business, they are misinformed or do not understand how the financials work. They consider their income as a “paycheque” and forget that they have other financial obligations such as taxes and expenses.
Systemizing every aspect of your business is the key fundamental structure to ensuring you are working on your business not just in it.
Administration is IMPORTANT….
Administrative duties in a business are described as the tasks and activities that are part of the daily operations of a business. This can include managing an office such as answer phones and keeping communication current. It also refers to the financial management of a business, such as paying bills and invoicing clients, along with a good understanding of how your business is running financially.
How can I get organized with my finances? Where do I start?
Luckily, there are a ton of resources on how to better understand your finances.
One of the first things we suggest our clients do is purchase a bookkeeping program and start tracking all their financial transactions. We encourage them to start by entering their client invoices and then adding their expenses and cost of goods. If you are not sure what to consider an expense, check out this website for a list of operating expenses https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html
Once our clients have entered this information, we encourage them to review their “income statements” as a guideline for their taxable earnings. This information will provide them with an idea of how much money they may own the Government at their year end, ensuring they have the money put aside. If you are a sole proprietor, the Federal Tax rates for 2019 are as follows:
- 15% on the first $47,630 of taxable income, plus
- 20.5% on the next $47,629 of taxable income (on the portion of taxable income over 47,630 up to $95,259), plus
- 26% on the next $52,408 of taxable income (on the portion of taxable income over $95,259 up to $147,667), plus
- 29% on the next $62,704 of taxable income (on the portion of taxable income over 147,667 up to $210,371), plus
- 33%of taxable income over $210,371
For information on how to calculate your tax bracket visit https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
The last suggestion we make to our clients is to set up a “tax” bank account. This is an account specific to income tax. We suggest that they deduct (based upon their income statements each month) the amount of taxes that the Government will expect them to pay from their income. The percentage is based upon the calculations above. The Government regulations for payment dates varies based upon income so it is always a good idea to do some research into when you may be expected to make these payments.
Remember, you are not alone in the business world. There are plenty of people to help you navigate the responsibilities of being a business owner. Bookkeepers, Accountants and Administrative Specialists are available to help you better understand the structure and systems designed for your success.
Are you finding yourself financially stressed? Do you currently have a financial plan or policy in place? Do you need help navigating and implementing these systems? We are here to help you do that!
Contact us today for a FREE 30 minute financial review and to get started on your path to financial success.