Better Understand Your Business' Finances By Breaking Down the Balance Sheet & Key Ratios

Better Understand Your Business’ Finances By Breaking Down the Balance Sheet & Key Ratios

Do you know what your company is really worth?

Whether or not you use a professional bookkeeper and/or accountant, knowing how your business is doing at any given time is an essential part of success. While income statements and cash flow statements can give you a view of your business over a period of time, a balance statement (BS) can give you a snapshot view of your business as it exists at this moment. Add to that an understanding of financial ratios, and you’re well on your way to having a firm grasp of the financial underpinnings of your business!

What Is a Balance Sheet?

Simply put, a balance sheet is based on an equation:

Assets = Liabilities + Equity

In this context, your assets are what you own, your liabilities are what your company owes, and your equity is the net worth of your company.

Your assets can be either current, fixed, or long-term. Your current assets are the ones that you will be using in the near future. Your fixed and long-term assets are those held beyond one year and often depreciate in value (unless the asset is land, which tends to mature rather than depreciate). You can also include your long-term investments as part of your long-term assets. Your assets can also include intangible things like your brand, trademarks, and patents.

You can think of your liabilities similar to the opposite of your assets. Similarly, there are both current and long-term liabilities. Current liabilities are generally payables and short-term debt that can be paid within a year. Long-term liabilities can include debt to the bank or to your investors.

Finally, equity can be different depending on the structure of your company. If you operate as a sole proprietor or partnership, you’ll likely have an owner’s equity. If your company is a corporation, then you’ll probably have shareholder’s equity. On your balance sheet, equity is usually made up of your retained earnings over the years; the value of what is left of the assets after all liabilities are cleared. This can also be where your capital stock is listed.

Let’s Look at Ratios

But how does any of this information help you? To take advantage of the data in your balance sheet, you need to look at financial ratios. The three most common kinds are:

  • Current ratio
  • Quick ratio
  • Debt-to-equity ratio

Your current ratio should lay out the liquidity of your company and its ability to pay current liabilities with your current assets. In this case, you want a ratio of 2:1 or higher, as you want to be able to cover the current liabilities you owe completely.

Your quick ratio is a more detailed version of your current ratio, removing your inventory from consideration. Much like current ratio, you want this to be 2:1 or higher. That being said, you don’t want it to be too high, as this would mean you aren’t reinvesting your cash back into your company.

Finally, your debt-to-equity ratio is the level of debt you hold against your equity. You want no more than a 2:1 ratio here, as anything above that means your company is taking on more debt than it can handle versus your level of equity.

Having accurate metrics of how your business is doing is vital to your overall success. You can’t rely on luck alone when it comes to growth. Knowing all about balance statements and the financial ratios that can be derived from that data can be invaluable. If all of this sounds pretty complicated, don’t worry because we can help!

At The Number Works, we’ve helped countless small businesses thrive, taking care of their complicated finances. If you want to ensure that everything at your business is kept in financial balance, contact us today! We can’t wait to help you better understand all of your financial statements!

Taking the Leap Towards Self-Employment

Taking the Leap Towards Self-Employment

Are you ready to strike out on your own?

Being self-employed is the dream of countless Canadians. They fantasize about the freedom that comes with being the master of their own destiny…

But of course there’s another side to being self-employed. The rewards of being self-employed can be huge, but so are the risks and strains. Yes, you’re your own boss, but that means all of the responsibilities and risks are yours as well. If you want to be an entrepreneur, you need to provide your own motivation, pushing yourself every day towards success.

To be clear, we are not trying to talk you out of starting your own business! However, it’s important to have a clear understanding of what’s involved. With that in mind, here are some of the things you need to consider before making the leap to being self-employed.

What Do Your Current Finances Look Like?

Whether you’re considering going freelance or you’ve decided to start your own business, you cannot count on your endeavour becoming profitable right away. In fact, for the first year or so, you might be losing money.

Jumping from a reliable paycheque to invoicing clients and hoping they pay on time can be nerve-wracking—not to mention finding those clients and getting through the start up expenses. You must have detailed knowledge of your finances and your risk resilience before you make the full leap to being self-employed.

Not sure where to start when it comes to your numbers? Luckily, this is an area where The Number Works can help. We can walk you through all of your current financial data, showing you exactly where your profits and expenses are and what you can do to shape things up before you go into business for yourself.

Do Your Research

Before starting your own business, you should probably ask yourself the tough question, “Do I have any idea how to start my own business?”

There can be a real “look-before-you-leap” mentality when it comes to becoming self-employed. It isn’t just about the state of your finances; it’s also about learning the ins and outs of creating your own business and managing it effectively.

The first thing you might want to do is talk to some of your entrepreneurial friends. Getting a first-hand account of what it’s like to be self-employed can be invaluable, enabling you to bypass some of the mistakes they made in the early days of creating their businesses.

You’ll probably also want to read some books about entrepreneurship. While countless books have been written on the subject, you should be selective about which you pick up. There are significant differences between the Canadian and U.S. markets, so be sure your book is focusing on Canadians laws and guidelines. You also need to make sure it was written (or at least updated) within the last four to five years. Technology moves so fast that anything before 2015 will be borderline useless, omitting vast chunks of what it means to be self-employed today.

Ongoing management of finances can be another big hurdle for those who want to jump into the self-employed arena. If you’ve never had to manage anything larger than a personal budget, you might need a hand getting started. That’s another thing we can help you with at The Number Works. Right from the first minute of your business, we can be there to support your financial position and ensure you’re optimized and running things as smoothly as possible.

Start Slowly

Have you ever heard of a “side hustle?” It’s essentially part-time self-employment. A side hustle could be as simple as setting yourself up with an an Etsy store to sell things that you’ve created in your spare time, or taking on a single freelance client to get your feet wet in your desired industry.

Having a side hustle can be a great way to get a small business started. If you’re feeling nervous about jumping into self-employment with both feet, this can be an excellent starting point, building muscles that will come in handy when you decide to quit and go into business for yourself full-time.

Keep in mind that it can require building some serious discipline to force yourself to work even after you get home from your job, but the result can be more than worth it. And you’ll need all that discipline when you’re a full-time entrepreneur who has to continuously self-motivated.

Do Not Forget About Your Taxes

One of the biggest shocks that a self-employed person can go through is their first tax season.

When you’re working for a company, taxes are automatically taken off your paycheques. Now that you’re self-employed, you’re collecting the entire amount you’ve earned… until tax time that is. When tax season rolls around and you need to calculate your taxes, you might be in for a shock! Yes, you knew that your tax bill would be higher than usual because you’re now self-employed but… Surely there must be some kind of mistake, right? Don’t be one of those people who realizes they owe thousands of dollars to the government that they’ve already spent!

While, yes, there is a chance that you made a mistake, it’s much more likely that your numbers are correct and you need to give the government a sum of money that you hadn’t planned for. It’s shocking, but there are several ways you can mitigate this situation.

One thing you should definitely have is an accountant experienced in working with self-employed entrepreneurs in your province. At The Number Works, we know all of the deductions and legal tricks for Ontario that could save you big bucks, especially come tax time. With our help, we might be able to get your taxes down to a slightly less jaw-dropping amount. And we’ll certainly help you prepare so that you aren’t caught off guard when you see the amount you’ll owe.

We also recommend that, rather than just dump every paycheque you have into your Chequing account, you take off about 25% off and put it into a separate savings account that you use for taxes. That way, you’ll have a reserve of money ready for you come tax time, reducing any sense of “sticker shock” when you figure out precisely what you owe.

Take Care of Yourself

For new entrepreneurs and freelancers, self-care can become an afterthought in the pursuit of making your business a success. This is a massive mistake!

If you’ve been putting off going to the gym, heading to yoga, buying healthy groceries, or spending quality time with family or friends, be sure to start scheduling it in your calendar like you would a business meeting or other important event. Same with making sure that you take appropriate breaks for lunch and for stretching if you’re sitting down for long hours. If you don’t take care of yourself physically, you’re going to start getting worn down by the job. Manageable things could start to feel overwhelmingly stressful, all because you aren’t caring for your personal needs.

There is also a mental self-care component of being self-employed. Some people start feeling like every minute they aren’t working is a minute they’re losing money; an unhealthy mindset that can lead to self-esteem issues and self-abusive thoughts of “laziness”.

Even though you’re self-employed and can technically get up at any time of day (including well after 9am), try setting “business hours” where you do your work throughout the day. Working 9 to 5, even if you’re doing so from home, can help you maintain a healthy work-life balance. If you prefer unorthodox hours, that’s ok too but make sure that you schedule your on- vs. off-time. It can keep you from feeling guilty that you aren’t working at 9pm on a Saturday rather than spending time with friends.

It takes a great deal of bravery to be self-employed, either by starting a new business or by going freelance. No matter which path you choose, you can bet that at The Number Works we’ll do whatever we can to help. We work with freelancers and entrepreneurs every single day, helping them balance their finances and making sure they’re fully prepared come tax season. If you want to simplify your financial life while moving towards self-employment, get in touch with us today. We’d love to help your entrepreneurial dreams come to life!

All About Tax-Free Savings Accounts

All About Tax-Free Savings Accounts

Did you know that a Tax-Free Savings Account (TFSA) isn’t really a savings account? Instead, a Tax-Free Savings Account is more like a basket that holds many financial options. In your TFSA, you can choose to include exchange-traded funds (ETFs), guaranteed investment certificates (GICs), stocks, bonds, and of course, actual savings. The best part is that any money you make from the investments in your TFSA is tax-free!

In 2009, the Canadian government introduced TFSAs to encourage people to save money for retirement. Since you pay tax on the money you put into your TFSA, you won’t have to pay anything when you take that money out.

TFSAs are great tools for growing your finances and setting up a cushion for retirement, but they do come with specific rules and limitations. So here’s everything you need to know about TFSAs:

What is the Contribution Limit?

You’re only allowed to open a TFSA or contribute to one when you turn 18 (in some provinces and territories you cannot contribute to a TFSA until you’re 19). Once you turn 18, you’re allowed to contribute $6,000 per year (as of 2019). However, if you don’t contribute the full $6,000 per year, you can carry forward the unused contribution amount and add it to the TFSA contribution limit for the following year. In 2018, the contribution limit was $5,500, so if you didn’t put any money into your TFSA in 2018 or 2019, then in 2020, you can contribute $11,500.

What’s more, if you withdraw money from your TFSA in one calendar year, it’ll create additional contribution room for the following year. For example, if you put in $6,000 in 2019, but then you withdraw $1,000 in 2019, you can contribute $7,000 in 2020.

What If I Exceed the Contribution Limit?

If you overcontribute to your TFSA, then the Canada Revenue Agency (CRA) imposes a tax of 1% per month for each month or partial month that the excess amount stays in your TFSA.

The 1% tax applies until:

  • You withdraw the entire excess amount; or
  • For those who are eligible, the entire excess amount is absorbed by additions to their unused TFSA contribution room in the following years.

For more information, you can visit the CRA website.

What Are the Benefits of a TFSA?

The main benefit of a TFSA is right in its name: you don’t have to pay any taxes on the money you make on it. For instance, if you invest $5,000 in your TFSA, and it grows to be $15,000 by the time you retire, the extra $10,000 of income is 100% tax-free.

Another advantage to using a TFSA is that unlike your Registered Retirement Savings Plan (RRSP), you can quickly and easily withdraw money at any time. There is no penalty when you take money out of your TFSA. Plus, withdrawing cash allows you to contribute more the following year, as mentioned above.

Lastly, since the TFSA was designed to help build income for retirees, once you retire, you can withdraw your money from your TFSA, and it won’t affect your retirement benefits such as Old Age Security, which decreases when you have a higher income.

How Can I Open a TFSA?

If you’d like to open a TFSA, you must be a resident of Canada with a valid social insurance number (SIN) and be at least 18 years of age. There are four types of TFSAs available:

  • A deposit
  • An annuity contract
  • An arrangement in trust
  • A self-directed TFSA

You can have more than one TFSA at a time, but the total amount you contribute to all your TFSAs can’t exceed your available TFSA contribution room for that year.

To open a TFSA, get in touch with your bank, credit union, or insurance company (issuer) and present the issuer with your SIN and your date of birth. This way the issuer can register your qualifying arrangement as a TFSA.

Can TFSAs Benefit Business Owners?

As a business owner, you might opt to leave extra funds in your corporation for investing. However, according to a report by CIBC, if you decide to take those additional funds out of your corporation and invest them in a TFSA, you’ll generally end up with more after-tax cash, especially if you have a long time horizon for the investment.

How Can the Number Works Help?

It’s a good idea to discuss the above with a professional accountant. So if you’re looking for an affordable virtual accounting firm, look no further than The Number Works! We partner with small businesses and creative entrepreneurs who are looking to grow their businesses and profits.

We offer a wide range of services such as cloud-based bookkeeping, full cycle accounting, financial statement analysis, strategic planning, and tax planning. So if you have a question about TFSAs and how they can work for your business, don’t hesitate to get in touch with us today. We love helping you tell your financial story.

The Benefits of Creating a Personal Budget

The Benefits of Creating a Personal Budget

Do you wish you had more money? Who doesn’t!

Although you might dream of winning the lottery or investing in the next Apple computers, chances are that you won’t be the next Bill Gates (Sorry!)

But that’s no reason to despair. Creating a personal budget is one of the best ways to maximize the money you do have and create a plan that prioritizes your spending for the future.

Many people think that budgeting means giving up stuff you enjoy doing, but it’s actually the opposite! When you create a personal budget, you’re clearly allocating your money for the things you want to do – based on your financial limitations.

By creating a personal budget, you can save yourself tons of headaches that come with overspending and ending up in debt. This, in turn, frees up more of your money to spend on things you enjoy rather than being surprised by unknown expenses in the future.

Although budgeting does require a little bit of extra work, it’s really worth the time and effort! Here are some of the most significant benefits of creating a personal budget:

Budgeting Gives You Control

When you sit down and create a personal budget, you’re taking control of your money and not letting your money control you. However, it’s important to note that any sound financial plan should be flexible so you’re able to adapt in case of emergencies, such as a medical expense or an urgent vehicle repair. In fact, that’s precisely what budgeting is for! By creating a personal budget, you’ll save yourself the stress of suddenly needing to adjust to a lack of funds because you failed to plan how to spend appropriately.

A personal budget will also give you control over deciding if you’d like to sacrifice short term spending, such as visiting Starbucks every day, in exchange for a long term goal, like going on a cruise or buying a new TV.

Budgeting Keeps You Organized

When budgeting, we recommend using a template or an online app to keep your finances organized. By writing out all your monthly expenses including cable, internet, mortgage/rent, insurance, groceries, gym memberships, etc., you’ll make it easy to see exactly how much you need to spend on individual services. Not only does this help you stay organized in terms of monthly expenses, but if one of your bills goes up, it makes it much easier to spot it. For example, if you’ve budgeted $40 a month for insurance and your next bill is $53, you’ll be able to quickly notice the change because you have everything clearly written out.

Creating a personal budget that’s plainly written down will also help you be proactive. For instance, because you saw that $13 increase in your insurance bill, you would be able to call your insurance company ASAP to try and haggle a better rate.

Budgeting Builds Better Habits

Once you’ve created your personal budget, you’ll need to stick to it! By working hard to make sure you’re spending your money according to your budget, you’ll build new and better spending habits. Over time, you will find that these habits become easier and easier to maintain.

Part of working within your budget means shifting your expenses from unnecessary categories to the most essential household categories. This will free up your money for the most necessary expenses, as well as for debt reduction. By creating a personal budget and building better habits, you’ll begin to see real financial progress.

Budgeting Manages Debt

Here’s a surprising statement: Not all debt is bad!

Taking out a mortgage or having a student loan can be constructive forms of debt that could improve your financial standing in the future. However, it’s imperative to fully understand your debt in order to keep in control of it. This means knowing your interest rates, terms, and the length of your loan.

Budgeting not only provides a clear picture of what you need to pay down your debt, but it also helps you understand how much debt you can afford. By creating a personal budget, you’ll be able to determine how much of a debt load you can take on without getting stressed. It can even help you figure out if taking on debt is worth it at all.

If you already have debt, a personal budget will help you find which areas you can reduce your expenses so that you can afford to start making extra payments towards that debt.

Budgeting Gives You a Better Life

These just scratch the surface of the many advantages to creating a personal budget. From being in control of your finances to staying on top of your bills to managing and paying off debt, budgeting always “pays” off. When you create and stick to a personal budget, you’ll find you have much less stress in your life, be able to save some extra cash, and move towards your financial goals faster.

Creating a personal budget does require you to sit down and take a little time, especially in the early months, but once you’ve become accustomed to living within your budget, you’ll see results that you never even imagined.

Of course, creating your monthly budget is just the beginning. Remember to schedule monthly budget reviews and stick to them if you want to see your financial health increase in line with your goals.

The Number Works Can Help Your Business Budget

We’re big fans of creating a personal budget for your everyday finances, but we also understand the importance of budgeting when it comes to your business too! If you’re a small business owner or a creative entrepreneur, we can help you grow your profits and budget all your expenses.

So, don’t hesitate to reach out to The Number Works for services including cloud-based bookkeeping, full cycle accounting, financial statement analysis, and strategic tax planning. Let’s work together to take the pain away from managing your business’ finances.

How to Leverage Technology to Improve Your Company’s Bottom Line

How to Leverage Technology to Improve Your Company’s Bottom Line

Times are changing and fast! If you want your business to succeed, it’s imperative to adapt and keep up with trends in technology. By leveraging technology in your business, you can create a positive, productive, and, most importantly, profitable environment.

Investing in technology for your business can actually make you money, more than covering the cost of upgrades. For instance, are you a sales-based business? Then you’ll want to invest in sales management software. If you’re a manufacturing company, then you’ll want to look for programs that will help you manage your inventory and distribution.

To properly leverage technology in a way that will improve your company’s bottom line, ask yourself (or your team):

  • Will this technology help generate more revenue?
  • Will this technology help my business become more efficient or productive?
  • Will this technology minimize risk?

With that in mind, here are three ways to leverage technology that can benefit any company.

Leverage Cybersecurity Technology

Did you know that 4.5 billion records were stolen worldwide in the first half of 2018 alone? What’s more, Statistics Canada found that approximately 20% of cyberattacks that happened in 2017 were aimed at small businesses with 10 to 49 employees.

A successful cyberattack is not only bad for your business’ reputation, but it can quickly become a major expense. In fact, the Ponemon Institute found that Canadian companies spent $6.1 million on breach-related expenses, and approximately 50% of Canadian businesses felt employee productivity was impacted due to a cyber-security incident, according to Statistics Canada.

The lesson is that you can’t let a cyber attack affect your company’s growth. You need to invest in proper cybersecurity technology. Almost every company can benefit from investing in advanced detection and protection tools. For example, some technologies use defensive deception techniques to identify attacks early on and move critical data before it is accessed or damaged. This is a great way to minimize risk and improve your bottom line. You might also consider investing in the use of decoys, web application firewalls, IPS, and web-based deception solutions.

Leverage Digital Marketing Technology

Every business needs to generate leads and go after potential customers if they want to keep growing and scaling. One of the best ways to do this is by leveraging digital marketing technology.

For example, Facebook isn’t only great for connecting with friends or watching cute cat videos; it’s also one of the best advertising platforms around. By investing in paid Facebook ads, you can reach scores of new leads. And the best part? Facebook makes it easy to target your exact audience, so the money you spend on advertising has a higher chance of reaching the people who are actually interested in buying your product or service.

Another fantastic way to reach potential customers is through email marketing. In fact, email generates $38 for every $1 spent, which is a whopping 3,800% ROI!

Investing in technology such as MailChimp can be a great way to automate your email marketing, allowing you to focus on the strategy behind your email campaigns. MailChimp also features reports that make it easy to see how successful an email campaign is at engaging your target audience. This truly is one area where leveraging technology can make your bottom line soar.

Leverage Cloud-based Accounting Software

Do you find managing your invoices, bills, and receipts a hassle? As an entrepreneur, you probably love what you do, but what you probably don’t love is spending hours and hours managing your books. You can’t let it fall by the wayside though as failure to properly manage your books can result in financial disaster for your business.

Fortunately, there’s an ever-growing suite of organizational tools and technologies that will help you reduce the headaches of managing your books while also giving you more free time to do what you love – grow your business!

Cloud-based accounting software, also known as software as a service (SaaS), provides you with access to technology on a subscription basis. This allows you to access your business data anytime and anywhere with an internet connection (sometimes on almost any device).

You can grant access to your cloud-based accounting software to anyone on your team. That means your staff can quickly and easily do their work regardless of their physical location. For instance, if your sales rep needs to add an expense receipt or your project manager needs to verify an invoice from a supplier, cloud-based accounting software will streamline the process. It also helps keep all your invoices and receipts organized, so tax time is a breeze.

If you’re looking to boost your bottom line, then you’ll definitely want to leverage the power of cloud-based accounting technology.

The Number Works Can Help

We specialize in launching cloud-based accounting systems! We also provide bookkeeping, cash flow strategy, and business plan management because we want to help you turn your passions into profits.

So, if you’re looking to make better informed business decisions and get a stronger understanding of your business’ finances, don’t hesitate to reach out to us today and find out how we can help you tell your financial story and boost your company’s bottom line.

Financial Tips for Freelancers: How to Keep Up with Quarterly Taxes

Financial Tips for Freelancers: How to Keep Up with Quarterly Taxes

Being a freelancer comes with so many benefits. You’re in charge of your own schedule, you can work from home, choose your clients, and you’re even in charge of paying your own taxes!

Ok, so that last one isn’t the most fun. But it’s important!

When you’re a freelancer, taxes are a bit more complicated as most freelancers pay their taxes throughout the year instead of just in April.

So, should you pay your taxes quarterly, or once a year?

The answer is… both!

If you’re a freelancer who owes $3,000 or more to the CRA in the current and previous two tax years, you must pay quarterly-estimated tax payments. In general, payments are due on March 15, June 15, September 15, and December 15. Phew, that’s exhausting!

At The Number Works, we understand how hectic it can be to file your taxes once a year, let alone making payments four times, so here are our best tips for freelancers to help you pay your quarterly taxes without any headaches:

1. Put Money Aside for Taxes

The best way to stay stress-free come tax time is to budget for it.

Unlike salaried employees, income tax and payroll deductions, such as the Canada Pension Plan and Employment Insurance, are not withheld at the source. This means that, as a freelancer, you’re responsible for paying all of your income taxes while simultaneously contributing to the employee portion and the employer portion of CPP and EI.

It’s a lot to keep track of. That’s why it’s essential for you to set aside money each time you get paid to cover your quarterly income taxes. For example, if your marginal tax rate is 30%, you should set aside 30% of your earnings from each invoice.

We recommend taking 30% of each payment you receive and putting it in a separate bank account. This way, you’ll have enough money saved to cover those quarterly instalments every time tax time rolls around.

2. Keep Your Payment Options Simple

Did you know the CRA gives you three options to calculate the amount of your quarterly tax instalment? The first two options base your instalments on your 2018 taxes or an estimate of your 2019 taxes. But, be careful! If you underestimate your 2019 taxes, the CRA will charge you interest based on a higher instalment than was needed.

That’s why the third option is our favourite. With this option, the CRA calculates the amount of your instalment and sends you that calculation as a reminder. The total for the year will equal your previous year’s instalment base. By paying the amounts shown on the CRA notice, you won’t be charged any instalment interest, so long as you pay on time.

The CRA should send you two reminders. One in February for the March and June instalments, and one in August for the September and December instalments. Keep in mind that even if you don’t receive a reminder, you still have to pay. In this case, call the CRA and confirm the amount you owe.

The CRA also has a calculation chart for the current year that will help you determine your taxes, credits, Canada Pension Plan contributions, and Employment Insurance premiums, so you can figure out how much you owe.

3. Opt for Automatic Deductions

Did you know that if you fail to pay your quarterly taxes in full, the CRA charges interest on the deficient amounts as if you owed the money? Yikes! And if this interest charge adds up to more than $1,000, the CRA will add an extra fee on top of that. Bottom line: Always pay your quarterly taxes on time!

And the best way to make sure you don’t forget to pay your quarterly taxes is to set up automatic payments from your bank account directly to the CRA.

If you’ve followed our first tip and put 30% of your earnings into a separate account, you can grant the CRA permission to debit this account automatically. It’s the best way to have a stress-free tax time.

4. Hire a Professional Accountant

Sure, freelancing comes with its fair share of perks, but it also takes a lot of work. You have to find your clients, market your services, and plan everything in between. So, it’s probably safe to say that accounting isn’t at the top of your to-do list.

In fact, 23% of small businesses fail because they don’t have the right team behind their business and 29% fail because they ran out of cash.

It’s clear to see why having a professional accountant on your team is the key to success. Not only can a professional accountant help you by properly managing your cash flow, but they can also stay on top of your quarterly taxes for you.

Plus, investing in a professional accountant can save you money in the long run by maximizing all your tax deductions and avoiding late fees. A professional accountant will ensure that your quarterly payments are noted on your annual tax return so you get credit for them and don’t accidentally pay them twice. It’s well worth the cost.

If you’re looking to hire a professional accountant or need help reviewing your quarterly taxes, contact The Number Works today! We love helping freelancers build a thriving business and giving peace of mind to all our clients. Knowing a professional accountant is in charge of your books is priceless, if not tax deductible!

How to Create an Unstoppable Virtual Support Team for your Business

How to Create an Unstoppable Virtual Support Team for your Business

Are you a budding entrepreneur? If so, chances are you’re a natural-born risk-taker! But trying to do everything yourself as a business owner is a risk you really can’t afford to take.

Every business owner needs an unstoppable support team, and in today’s digital world, there’s no reason your rockin’ team can’t be a virtual one!

Not only can an unstoppable virtual support team make the difference between the success and failure of your fledgling business, but it will also help keep you sane. Seriously! So many small business owners exhaust themselves working countless hours to take care of their business. While I have great respect for all those hard-workers out there, a bit of assistance from a stellar support team can not only help reduce that frenetic pace, but also boost efficiency and allow your business to grow.

Go For the Best

Typically, an unstoppable support team is made up of two kinds of people: mentors and specialists. Some you hire, some you pay for, and some you find by networking and outreach. Of course, you want your team to be as cost-effectively as possible, but don’t be scared to pay for experience and expertise. Having savvy people by your side is an investment that pays off by saving you years of hard work and mistakes.

As soon as you begin to draft your business plan, you should be on the lookout for members to add to your virtual support team. It’s a great idea to make a list of everyone you know who might be able to help you and your business thrive. Think about family members, old friends from college, even friends of friends who might help you gain the perspective your business needs. Remember, if you believe the person is mature, experienced, and has some relevant know-how, then they could be valuable to you.

The best part about working with a virtual team member is that it doesn’t matter if they move away. Using tools like Slack, Trello, Skype, and good old-fashioned email, you can connect with your entire team, no matter where in the world they’re located.

Decide On Your Team Members

So, what’s the relevant know-how and experience you should be looking for in your virtual team members?

The makeup of a virtual support team might differ a bit based on the industry, but almost every company can benefit from these experts: a designer, a copywriter, an ad specialist, a virtual assistant, and, without a doubt, an accountant.

A talented graphic designer will ensure that all of your branding is flawless, giving your business a truly professional look. Don’t underestimate the power of graphics in today’s online world. Graphics are what catches the eye to entice people to buy from your business. Adding a graphic designer to your team will help communicate your message and enhance the overall feel of your brand story.

Eye-catching graphics are essential, but so is the text that goes with them. An excellent copywriter will get people to click that ‘buy now’ button in record time, making them a major asset when it comes to writing sales copy pieces like your marketing emails and sales pages.

Facebook and Instagram are some of the best advertising platforms out there, and their ROI can go through the roof… if you know what you’re doing! An ad specialist is someone who can create marketing materials that position your calls-to-action in a way that gets you what you’re looking for: more clicks, more sign-ups, and more clients.

A virtual assistant is an asset to any great support team. Virtual assistants are there to lighten your load and take care of more mundane, daily tasks, so you’re free to grow and scale your business. Virtual assistants can help you in so many ways, from taking care of your website to keeping your systems up and running. They may even be able to help the rest of your team with light design, copy, and marketing work.

Don’t Underestimate the Power of a Good Accountant

No matter what size or type of business you run, you’ll need a professional accountant on your team. Why? Because it’s vital that you accurately track and report all the cash flowing in and out of your accounts that have to do with sales, expenses, and salaries.

Properly managing your books is provincial and federal law, but most importantly, it’s the only way to gain an accurate assessment of how your business is operating.

A professional accountant will be able to provide you with the information you need to make informed financial decisions to help your business succeed. In fact, one of the most common reasons companies fail is because they don’t have a professional accountant on their team.

Plus, the expense of hiring an accountant often pays for itself! A professional accountant will know the ins and outs of tax law, ensuring you’re maximizing your deductions, claiming all your credits, and ending the tax year with the biggest return possible.

Leverage Professional Networking

So, now that you know precisely who you should have on your virtual team, don’t limit yourself to local industry meetups or inviting people out to coffee. The whole world is your networking oyster, thanks to the power of the internet.

To attract the right people, make sure you have a stellar LinkedIn profile and active social media accounts, including Twitter, Instagram, and Facebook. Joining Facebook groups is a fantastic way to network and find the perfect virtual team members, while your LinkedIn and other social media profiles are the best way to make a good first impression on your potential hires.

Contact The Number Works

If you’re in the middle of assembling an unstoppable virtual support team and need a professional accountant in your corner, you’ll want to work with The Number Works. We’re a virtual bookkeeping, accounting, and financial coaching firm that helps creative entrepreneurs tell their financial story.

We offer a wide range of services, including cloud-based bookkeeping, full cycle accounting, financial statement analysis, strategic planning, and taxes. In other words, we’re your one-stop shop for all your business’ accounting needs in Hamilton and the surrounding Southern Ontario area.

Don’t hesitate to reach out and discover if we’re the right fit to join forces and help your business succeed.

Is Incorporation a Good Idea for Your Small Business?

Is Incorporation a Good Idea for Your Small Business?

Are you a small business owner wondering if you should incorporate? Are you worried about costs and what will change about your business?

For most businesses, it’s actually not a question of “if,” but “when” to incorporate.

Incorporating a small business offers many potential advantages, as well as a few disadvantages. Whether the pros outweigh the cons depends a lot on your business’ individual situation.

With that in mind, let’s take a closer look at the advantages and disadvantages of incorporating a small business so you can determine what is right for you.

The Advantages of Incorporation

Limited Liability

Most people decide to incorporate their small business because it offers the advantage of limited liability. If you run a sole proprietorship, then you as the business owner must assume all the liability of the company. This means that as a sole proprietor, your personal assets, like your house and your car, can be seized to pay off any business debts.

However, if you incorporate your business, then you become a shareholder in the corporation. As an individual shareholder, your liability is limited to the amount you have invested in the company.

Furthermore, as a shareholder in a corporation, you can’t be held responsible for the debts of the corporation unless you’ve signed a personal guarantee.

Corporations Have Unlimited Lifespans

Did you know that even if the shareholders die or quit the business, or if the ownership of the business changes, the corporation will continue to exist? This is not the case when it comes to running a sole proprietorship. Thus, many people see this “immortality” as another advantage of incorporating.

It’s also easier to sell a corporation than it is to sell a sole proprietorship.

It Helps with Taxes

Once your small business becomes a corporation, you can figure out when and how you receive income from the company, which is a real perk come tax time.

If you’re incorporated, rather than taking a salary from the business as soon as it begins to generate income, you’re allowed to take your income at a time when you’ll pay less in taxes. You can also earn income from a corporation in the form of dividends rather than a salary, which can also lower your tax bill.

Lastly, if your business is incorporated, it may qualify for the federal small business deduction (SBD). The SBD is calculated at the rate of 10.5% on the first $500,000 of taxable income, which could lower your net corporate business tax to a much lower tax rate than what is applied to your personal income.

It’s Easier to Raise Money

There are more ways for corporations to raise money, which could help your small business grow and scale faster. Like a sole proprietorship, corporations can borrow and incur debt, but they can also raise money through equity financing. This means selling shares in the corporation to angel investors or venture capitalists.

Equity financing is a nice benefit in that equity capital typically doesn’t have to be repaid, and there is no interest on it. (However, you must remember that by issuing shares, you are reducing your percentage of ownership in your business.)

The Disadvantages of Incorporation

Added Paperwork

Once your small business is incorporated, you’ll have to file two tax returns every year, one for your personal income and one for the corporation, which means increased accounting fees.

Plus, corporate losses can’t be deducted from the personal income of the owner, as they can in a sole proprietorship or partnership.

It’s also mandatory for corporations to keep a minute book composed of the corporate bylaws and minutes from corporate meetings, the register of directors, the share register, and the transfer register. These are all corporate documents that must be kept up to date at all times.

It’s Not Always a Tax Advantage

Unfortunately, corporations aren’t eligible for personal tax credits. That means every dollar a corporation earns is taxed, whereas, if you run a sole proprietorship, you may be able to claim tax credits that you can’t claim as a corporation.

Less Flexibility in Handling Business Losses

If your business suffers operating losses as a sole proprietor, you can use the loss to lower your other types of personal income for that year. However, if you run a corporation, these losses can only be carried forward or back to lower the corporation’s income from other years.

Limited Liability Depends on Credit

While the main advantage of incorporating is limited liability, it can be undermined by personal guarantees and/or credit agreements. If a lending institution doesn’t feel that your corporation has sufficient assets to secure debt financing, they usually insist on personal guarantees from the business owner(s).

In this case, even though the corporation technically has limited liability, the owner still winds up being personally liable if the corporation fails to meet their repayment obligations.

It’s Expensive to Register a Corporation

Another disadvantage of incorporating is that it costs more to set up a corporation.

Why?

Because a corporation is a more complicated legal structure than a sole proprietorship or partnership, so it’s more costly to create. This includes the previously stated maintenance and related fees and increased accounting costs.

It’s Harder to Close a Corporation

Closing a corporation in Canada means you need to pass a resolution to dissolve the corporation, settle all payroll accounts, and send a copy of the Certificate of Dissolution to the Canada Revenue Agency. Then you must file your final tax returns for the corporation.

So Should I Incorporate My Small Business?

The answer is, well, maybe!

Now that you’ve read about the advantages and disadvantages of incorporation, it’s time to discuss your personal situation with your accountant and lawyer before making your final decision.

Here at The Number Works, we can help give you a much more exact picture of how incorporation might work to benefit your business and if all the trouble and cost of incorporation is worth it for you.

So don’t hesitate to get in touch with us today and let us get behind your success!

How to Start the New Year Off on the Right Foot with Your Accounting

How to Start the New Year Off on the Right Foot with Your Accounting

With the new year is upon us, it’s the perfect time for us to make resolutions to better our health, finances, or social situations.

But did you know that as a business owner, New Year’s resolutions offer you a fantastic opportunity to make some positive changes that will contribute to your future success? Especially when it comes to your finances and accounting!

So, if you’re looking to start the year right, here are some essential accounting tips that will help you tackle the daily accounting challenges of your business and get you on track for success!

Plan Ahead

As the old saying goes, “If you fail to plan, you’re planning to fail.”

As a business owner, planning your fixed expenses for the whole year, rather than a monthly basis, will help you start 2019 off on the right foot. Don’t forget to take seasonality and other potential downturns into account so you can be sure that your minimum expenses are always covered.

During your business’ peak sales months, plan to set more money aside. This will help you cover your expenses if harder times come later in the year. By getting a firm grasp on your company’s fixed expenses, you will have a clear view of your business’s future and how to plan for taxes appropriately.

You should also take this opportunity to plan for emergencies. Determine how much money you can set aside for any significant, unexpected expenses, such as losing a major client, economic downturns, or other crises. The amount of money that needs to be in your emergency fund depends on the minimum expenses necessary for your company’s survival. A good rule of thumb is to set aside at least six months worth of expenses.

But what if you can’t afford to save that extra money right now? In that case, it’s a good idea to make sure you have a line of credit set up with your bank so that if something unexpected takes place, you can use that money (with an affordable interest rate) to keep your business afloat.

Take Time to Review Your Business

Set aside some time to reflect on 2018 and determine how your revenue and profits compared to the previous year. Determine if your sales numbers are trending upwards or downwards. And ask yourself some critical questions such as, how much money did you have to spend in 2018?

Did you make a list of goals for 2018? If so, did you meet those goals? Taking the time to review 2018 should help you figure out how your company has changed over the past year. If your business hasn’t improved, analyze the figures to find out why and what you can do to see more growth in the new year.

Leverage Technology

It’s 2019, which means the days of tracking your expenses manually are over! If your business isn’t using computer software to help keep track of your finances, then it’s time to make the leap!

The good news is multiple technologies allow you to track all your expenses quickly and efficiently, so you can choose the one that will be a perfect fit for you and your company. By leveraging accounting software and cloud-based technology, you’ll be more informed about your business’ finances, saving you both time and money!

Switching to computer software or cloud-based technology will also help provide a near real-time idea of how your money is being spent, as well as the records to prove it.

Get a Head Start on Taxes

Not unlike how you should set aside money for emergencies, you should also set aside money to cover your taxes. I highly recommend meeting with your accountant at least twice a year – once in May and once in October. This way, you can get a sense of what your business’s taxes will look like in the coming year. Plus, understanding how your financial picture is evolving can help you keep up with how your business is growing and how much you’ll need to cover what you’ll owe.

By seeking professional tax planning advice, you’ll not only feel confident that your business is complying with federal and provincial tax regulations, but you’ll also ensure you’re getting all the deductions and credits your company might qualify for.

Hire a Professional Accountant

Every tip and trick I mentioned above will be made that much easier by hiring a professional accountant. Although it may seem like an added expense, hiring a professional accountant will actually save you money in the long run, plus your accounting fees are tax-deductible!

So, if you’re looking to make 2019 your best year yet, outsource your bookkeeping and accounting needs to The Number Works! You’ll receive all of the benefits of competent financial reporting without the headache of needing to onboard, train, and pay a full-time employee.

The Number Works is your one-stop shop for the best accounting in Hamilton and the surrounding Southern Ontario area. In fact, no matter where you are in Ontario, I can help your business seamlessly using virtual technology.

I offer a range of professional services including cloud-based bookkeeping, full cycle accounting, financial statement analysis, strategic planning, and taxes. Combine this with my passion for process, efficiency, simplicity, and helping small businesses succeed, and you’ve got the winning formula to help start the new year off on the right foot with your accounting.

So don’t hesitate to get in touch with The Number Works today and meet all of your business’s New year’s resolutions!

Why Hamilton, Ontario is a Great Place to Start a New Business

Why Hamilton, Ontario is a Great Place to Start a New Business

Did you know that Hamilton is southern Ontario’s most populated and economically active region?

Over 1 million* educated and skilled workers live within a 30-minute drive from the city. Meaning that if you live in the Greater Toronto Area and you’re thinking about starting a new business, you might want to shoot Hamilton to the top of your list!

Here’s why…

You’ll Find the Support You Need

It’s easier to start a small business when you have the necessary support and information nearby. The Hamilton Small Business Enterprise Centre offers every budding entrepreneur the tools and support they need to grow their business. The Centre is a one-stop shop for business information, guidance, and professional advice on how to start and run a thriving business.

The Hamilton Small Business Enterprise Centre offers free consultations on:

  • How to prepare a business plan
  • How to identify the rules and regulations that could affect your business
  • How to determine which government and private sector programs could be useful for your business
  • How to get help during the critical start-up and growth phases of your business

You can also sign up to take part in four different workshops covering the following topics:

  • 10 Steps to Starting a Business
  • Business Planning
  • Marketing Strategies and Social Media
  • Bookkeeping and Taxation Basics

But what if you have more in-depth business questions? Maybe you need to know about zoning, how long it would take, or how much it costs to set up or expand?

The One Stop for Business part of The Centre is available to help answer all these questions, in addition to having all of the applications you need to complete and if you need a licence or not.

What it really comes down to is that Hamilton has a very strong sense of community, a great #shoplocal spirit and pride, and part of that it the support network for startups. With all this support in one easy to access place, it’s really a no-brainer! Hamilton is an ideal place to start a new business.

You’ll Attract Employees

Of course, there’s so much more to Hamilton, Ontario than just the Small Business Enterprise Centre.

For example, Hamilton is home to McMaster University and Mohawk College. These institutions are excellent resources when it comes to research and innovation/apprentice training.

Moreover, the graduates of these fine institutions, along with their relative proximity to other towns and cities in the area, offer a pool of over one million skilled workers available to you. Now that’s a lot of talent to pull from to help your business grow and succeed!

But what about if you were hoping to bring some talent with you when you relocate? Well, the cost of living in Hamilton is far cheaper than in a big city like Toronto. Hamilton also has some of most comprehensive quality medical care in the province, including six hospitals and a cancer care centre.

As a city, Hamilton doesn’t only concern itself with big business and industry; it also has a focus on the neighbourly things that matter, such as parks and playgrounds. This makes it not only the ideal place to start a business, but also a family!

You’ll Find All the Necessary Infrastructure

Did you know Hamilton is a transportation hub of Ontario?

This city boasts the Port of Hamilton, is in close proximity to railway links, and it has the 400-series highways. What’s more, the John C. Munro International Airport acts as a large courier/cargo hub, perfect for any international shipping and receiving your business might need.

Another bonus to starting a new business in Hamilton is that it has a lot of available land for industrial development at a fraction of the prices in and around the GTA.Plus, the Hamilton agricultural sector is exploding, to the tune of $1.26 billion annually. So, if your business is related to this sector, you don’t want to think twice. Hamilton is the perfect spot for your entrepreneurial initiatives!

You’ll Have Access to the Best Accountants

Here’s a professional tip: one of the best ways to grow your Hamilton-based business is to partner with a professional accountant that you can really trust. The Number Works Professional Corporation is located right here in Hamilton. We’re a virtual bookkeeping, accounting, and financial coaching firm that’s here to help any entrepreneurs in Hamilton and the surrounding Southern Ontario area.

We’d love to help you get started with your new Hamilton business, or help get your existing business on the right track. Your business will benefit from many of our financial services, including cloud-based bookkeeping, full-cycle accounting, financial statement analysis, strategic planning, and taxes!

By outsourcing your bookkeeping and accounting to us, you get all the benefits of competent financial reporting without any headaches from onboarding, training, or paying a full-time employee. The Number Works is your one-stop shop for all your accounting needs.

So, if you’re looking for an accountant who has a real passion for helping your business succeed, let’s connect! Together we can make sure your new business in Hamilton, Ontario is a wild success!

 

*https://www.hamilton.ca/moving-hamilton/economic-development/doing-business-in-hamilton