This remains a very confusing area for many people selling their products and services in an online business. The regulations by Canada Revenue Agency are pretty clear that the tax applies where the individual takes receipt of the product. Therefore, the tax to apply may not be the tax in your home province.
If you are selling a product to a Canadian in another province, then you likely should be selling it at their tax rate. For example, if you are a company in Â Edmonton, Alberta and you are selling to someone in New Brunswick, then you need to sell at 13% HST. This HST would be filed and submitted with your regular GST return.
The tax rates to apply in your sale of your product or service for online businesses can be summarized by this photo. Â You can read an excellent article by clicking on the map or on the link below.
I always tell clients that there are several general levels or styles of bookkeepers, and there are pros and cons to each level.
The most common issue is that a store owner will hire someone to do their books in the interest of cost, and they do not understand that having someone to do your data entry is not good enough to ensure your books are accurate.
What is important to know about any bookkeeper is that there is no regulation on bookkeeping services. Anybody can offer them. They don’t necessarily need schooling or have to prove they are qualified in any way. They might belong to an organization, but that does not mean they are qualified to do your books. Many bookkeepers will specialize. Know who and what you are hiring.
Whatever style of bookkeeper you are using, you must know this:
- As the business owner, you are responsible for all costs.
- You cannot afford to assume anything when it comes to your books.
- This is your company. You are legally responsible.
- Make sure that you are doing what you need to do.
Bookkeeping is a very generalized term, and not regulated. Your bookkeeper should have these qualities:
- has some formal education with a recognized institution
- should have several clients that can provide a reference
- should be able to answer your questions intelligently, and without hesitation
- should be able to list at least 2 accountants that they are dealing with regularly
- should be 100% involved in their business and not treat it as a side job
- should be able to prove that they are engaged and learning from others in the business
- should be able to show you their working environment
There are several different styles of bookkeepers.
The following items are required to do your book keeping. You may not have all these items in your business but items marked by an * are mandatory.
- All bank statements (*)
- All cancelled cheques and/or cheque stubs (*)
- Copy of incorporation documents (if this is your first year of business) (*)
- Deposit books
- All credit card statements
- If you are a home based business, please supply all:
- Utility bills
- Mortgage statement indicating the amount of interest paid
- Property tax bill
- Rent receipts or amount
- Alarm or security system billings
- Home telephone bills
- Home internet bills
- The square footage of your house (include your garage only if you use it for storage/usage of your business items.)
- A listing of invoices that you have not yet been able to collect from your clients that are over 90 days old (and will likely not be able to collect).
- If you carry inventory, a dollar amount of the value of that inventory.
- A listing of all assets (if this is your fist year). Include items that were yours personally prior to using for the business. Include items such as:
- Computer desk
- Filing cabinets
- Sheds and /or storage units
- If you have any loans, please include your financing documents. This includes any leases as well. This can include such items as:
- Vehicle bills of sale
- Vehicle financing
- Line of credit statements/terms
- Loans on equipment
- Operating loads
- If you have any leases, please indicate which items are leased
- Prior year tax return for your business
- All receipts from purchases.
These are the items you need to bring on your first visit to see us.
It is a good idea to get this form also, so that you can easily record your home based expenses.
Bookkeeping seems to be a four-letter word for some businesses. It is just all paperwork! Receipts for this, copies for that. Do this is triplicate. AAHHH!! It can seem like such a mess.
Whether you like it or not, your books are probably one of the single most important thing in your business (customers are first, of course). All that paper that you are generating tells a story about your business; it can tell how profitable it has been, how profitable it can be, and if it is done right, it can keep you out of financial trouble.
When we own our business, we tend to get our head space into doing what we do well. If you own a company that makes widgets, then you tend to spend all your day making widgets, and forgetting about all that paper that making widgets generates. There is certainly nothing wrong with doing that. After all, isn’t make widgets what you are good at?
If you don’t take care of the paper backlash, however, then you may find yourself at the end of a very large and deep lake. Worse than that, in a fairly short period of time, you just might find out that you don’t know how to swim.
This phenomena is called the shoebox mentality. It is where you are concentrating so hard on making widgets that you forget to manage your business.Â You can spend thousands of dollars just getting that paperwork in order.
How do you know how profitable your business is? How do you know how much your costs have increased? Are you truly compliant with Revenue Canada? Is your GST caught up, or do you just *think* it is caught up? How much did you pay in interest and penalties because your paperwork wasn’t submitted on time to CRA? Where will you be financially in 6 months? 2 years? 5 years?
It certainly is not uncommon for a good bookkeeper to see clients living off of credit and making decisions from what they feel the business is doing. But all too soon, it can catch up on them.
If you have ever experienced any of these issues, you may not be doing enough with your bookkeeper.
- penalties & interest on late GST and payroll returns to CCRA
- high credit card balances
- low cash flow
- no budget in effect
- worries about meeting payroll commitments
- stress or an out-of-control feeling about your business
- shoebox of receipts
- a feeling of dread at tax time
Your bookkeeper should be able to tell you where your cash flow is at, when items are due. They should (without a doubt) be able to give you a cash flow estimate 6 months into the future.
You should always have a budget that you are working with. After all, how do you know how much money you can spend if you don’t know how much money you expect to earn?
In all cases, you need to make that paperwork work for you. You need regular reporting from your bookkeeper how your company is doing and how close you are to budget numbers.
After all, didn’t you go into business to make money?
The Institute of Professional Bookkeepers of Canada put out a whitepaper publication of what to look for when you are hiring an outside bookkeeper.
They have some really good points, not the least of which is to know what you are getting.
There are many types of bookkeepers. It is not a regulated industry, therefore many people can call themselves a bookkeeper. Companies will often hire bookkeepers based upon convenience and ease.
The IPBC says in their whitepaper – Hiring the wrong bookkeeper can destroy your business.
That sounds pretty dramatic, but as a professional bookkeeper I have seen this many times over. If you don’t know how to do books, then make sure that you have someone that does! This is your cash flow, your business, and what you report to Canada Revenue Agency. You are responsible and liable for what transpires in your business. Make sure that you are doing it right the first time.
Here is the publication, direct from IPBC.