Episode 003 | The Self Made Life Podcast | Bookkeeping with Jessie Manuel
Running a business is hard! There are so many things to consider when opening and operating your business including the financial side. On today's episode, we're chatting with Jessie Manuel from The Boost Up Bookkeeping. Jessie helps explain and answer some of your questions when it comes to bookkeeping, important and best practice financial advise for running your business, and touches on key details that we need to consider to be compliant with the CRA. This episode is specifically geared to business owners in Ontario, Canada. This is not by any means legal advice. Please contact your certified professional bookkeepers, CPA, accountants and lawyers in your specific area.
Should I be charging tax?
Definitely a question I’m asked most and unfortunately, the answer isn’t a simple yes or no. It really
depends on the business structure - whether it’s service-based, product-based, or a combination of both.
First, let's go over the regulations for sales tax. The CRA requires you to register for GST/HST when your sales (NOT PROFITS) reach $30,000 in a rolling four-quarter period. That part is important to note. Often times, you’ll see that called ‘a year’ with no mention of when that ‘year’ begins. It’s not a calendar year, or the anniversary date of your business - it’s literally 12 months (or 4 quarters) from any given time. So it is crucial your books are up-to-date in order to monitor this if you are not registered.
As for whether you should or you shouldn’t…
Let’s walk through a simple illustration.
Let’s first assume your business is in Ontario and you have just billed a client for $100 worth of products
You would invoice them $100 + HST totalling $113.
Additionally, you purchased office supplies for $100 + HST.
The HST you received from your client and the HST you paid out for supplies (called input tax credits or ITCs) cancels each other out!
Let’s now assume you purchased a new laptop for $800 + HST. This would total $904 with $104 of that attributed just to HST.
I think we can all agree it would be nice to get that back, right?
When the return is filed in this case, the $104 spent is netted against the $13 received, putting you in a
refund of $91!
Of course, the flip-side can and usually occurs, in that you receive more HST from your clients than you’ve
paid out to your suppliers.
This is where you need to consider the nature of your business.
If you’re a service-based business, chances are you’re likely not purchasing much in order to sustain your offerings. You won’t get out of paying HST but it’s likely minimal anyway.
However, if you’re a product-based business, purchasing goods in your province, you are likely forking out a
lot of money just towards taxes. If you do the math, and you determine you’re paying more than what you’re receiving, then you should DEFINITELY register!
And remember, HST is paid out not only on the inventory you purchase for resale, but also the packaging for
it, office supplies and expenses like paper or a new printer, your phone bill, commercial rent, etc. There’s a good chance that registering for HST may be a benefit! Especially when you’re a new business -
typically that’s when expenses are at its highest and sales are at its lowest.
Also, in my opinion, having an HST number on your invoices appears more professional. If you offer services to other business, they’ll be able to claim back the HST they pay you on their return! You can register for an HST number online on the canada.ca website (a quick Google search will lead you to the direct link).
A word of caution - sales tax is fairly straightforward *IF* you offer your services in only one province. However, if you offer your services online, tax is charged based on where the services are performed or goods are received. It can get a little sticky and if that’s the situation you find yourself in, it’s best to speak with a trained bookkeeper or your accountant to get the best advice.
DO I need a separate bank account for my business?
What do I need to open a separate bank account?
A thousand percent YES!
No matter if you’re running a simple side-business, the answer is yes, yes, yes!
Keeping personal income and expenses separate from business income and expenses is not only best
practice from a bookkeeping standpoint, but also for precautionary measures for the future. Imagine if the
CRA were to audit your finances 4, 5, 6 even 7 years from now. Would you remember if the $20 you spent
at the dollar store was a business expense? How could you prove it?
Without a separate account, things get messy and messy things are CRAs favourite things. ;-)
SO! Get. A. Business. Account. PRONTO.
The process is simple, whether you’re a sole proprietor, a partner, or a corporation.
Head on over to your local favourite banking institution with your ID and your business registration (aka Master Business License).
If you’re in a partnership, bring your registered declaration of partnership and the partnership agreement....and your partner.
If you’re a corporation, bring two sources of ID for the individuals with signing authority, your Articles of
Incorporation, and Business Number.
The process is similar to opening a personal account and within the hour, you’ll have yourself a brand new
business bank account!
Top three things to start doing/set up right from the start of your business
Register your business and open that business bank account!
Find an accountant you know, like, and trust.
And of course, determine how your books will be handled. If you’ll be handling it, make sure you do your
research on CRA reporting requirements and software offerings! If you’re outsourcing, I highly recommend
interviewing bookkeepers and finding the one you best click with. You’ll be working very closely with them
throughout the year so make sure you enjoy their company!
I’m Trying to set-up a bookkeeping business - How do I go about getting clients?
First of all - CONGRATS!!!! I’m obviously biased, but I think you’ve made a GREAT decision! :-D
So where to find the clients? Well obviously there’s places like Kijiji or Craigslist you could advertise on. Facebook ads may work also help reach your local market. Get registered on Google as well. If you work from home and don’t want your personal address to come up, rent a UPS box and use that!
Personally, all my clients have been through word-of-mouth referrals. My very first client was referred to me by my accounting professor.
So let anyone and everyone know that you are open for business!
I was fortunate enough to be accepted into my local BNI chapter (shout-out to my Paramount peeps!).
Your local Chamber of Commerce is a great alternative also. There are many Mom-to-Mom business groups around, as well as women-run groups to join (another shout-out to my BOSS Ladies tribe!)
Also, become certified in the software you’re running on. For example, once you become QBO Certified, you will show up in a local ProAdvisor search. Become a Certified Professional Bookkeeper (CPB) through the Institute of Professional Bookkeepers (IPBC). Again, you’ll appear in the search results.
Head down to your local shared-workspace venue and plaster your laptop with your logo or affiliations. Fill your pockets with your cards and visit some local business to introduce yourself.
And lastly, advertise your accomplishments in your own house, even if you don’t plan to entertain clients. I recently had the carpets shampooed and the gentleman noticed my IPBC, QBO and other affiliate certificates hanging on my wall. Guess who needed a new bookkeeper? You just never know!
Tips & Tricks for staying current with your bookkeeping
HA! Would you believe me if I told you I am totally guilty of falling behind myself? Look, we’re all entrepreneurs. We’re building something great. We’re focusing on our clients. We’re TIRED!!! We’re not remembering to tend to such booooorring tasks as bookkeeping. Especially since it’s non-revenue generating!
I TOTALLY GET IT! ;) ;) ;)
But! It’s super important you stay on top of it and trust me when I say it can WAAAAAY too quickly get out of
hand. So try to set some time each week to keep ahead with a few simple tips:
Every Friday afternoon, pull the receipts from the car, your wallet or purse, coat pockets, wherever they wind up. Every Monday, log your drives from the previous week. When your bank statement comes in, do the books. If you know your statement comes in sometime around the 10th of each month, block off the 15th for bookkeeping. And don’t forget to reconcile that statement!!!
It all boils down to breaking it off in small bites and planning it out. PUT. IT. ON. YOUR. CALENDAR. Make a coffee, tea, wine, whatever suits your fancy, put some awesome tunes on and have fun with it!
Where Do I start when looking for someone to help with bookkeeping/accounting/tax?
Right out of the gate I’d say ask your friends who are also business owners. They’ve been where you are and have likely found someone they click with so chances are pretty good that you will too.
If that’s not panning out so well, I’d recommend looking on the sites I mentioned previously. Google ‘QBO ProAdvisor search’ and you’ll be directed to Quickbooks’ search feature to find a bookkeeper in the area. Google ‘IPBC CPB Search’ and you’ll be on your way to finding a certified professional bookkeeper. Check out their websites, see if they offer what you’re looking for.
Some bookkeepers post their pricing - see if that falls in your budget. But don’t stop there! Narrow it down to a handful and reach out to them. Book a call and get to know them. Does their personality click with yours?
That’s so key in my opinion! Knowledge and education can only offer so much - it’s the relationships that take it to the next level. Once you’ve selected your bookkeeper, ask them if they have an accountant they’d recommend. We bookkeepers tend to develop some strong relationships with accountants and together as a team, we offer the BEST solutions, advice, and teamwork for our clients.
All in all, I’d recommend you find someone you feel comfortable with not only from a professional point, but as a friend. Handing over your business and/or personal finances is often very personal and I encourage you to find someone you can feel comfortable with to share allllllllllll the details. I once heard the saying: ‘the three people you should always tell the truth to: your doctor, your lawyer, and your accountant’ - so make the best of it! :D