Are you an Oilfield or Construction Consultant?

In our business, we have many construction and oilfield consultants that we do bookkeeping for. I can honestly say that they tend to be a different type of client with special needs.The equation for each consultant seems to be a familiar one.

  • They work for large companies.
  • They make a decent wage
  • They have few expenses
  • They are busy, work expectations are high
  • The often travel lots
  • They know very little about how to meet their business requirements

In a lot of cases, we see employees moved to a contract position. Their new contract often requires them to incorporate their company, obtain their own WCB, and be responsible for all their own deductions and reporting to CRA.  So, the  former employee will go to a lawyer or to registries, and incorporate a company, fulfilling that portion of the contract.

BUT THEN WHAT? 

WHAT HAPPENS NOW?  BY INCORPORATING, THAT PERSON NOW HAS A LOT MORE RESPONSIBLITY, AND A LOT MORE TO THINK ABOUT THAN EVER BEFORE.

If this is you, and you haven’t gotten a bookkeeper, then make sure you don’t enter a common path of financial trouble.  You may be starting into a cycle that you aren’t even aware of yet, and won’t be aware of for a full year.  But when it does hit you, it will be swift and the financial implications can be steep. We call it “The 18 Month Corporate Crunch”, and for very good reasons.  Many of your financial obligations will hit you 18-24 months after you incorporate.  And when they begin to come due, the amounts that you will owe to the CRA can be staggering.

So, what are your obligations that you must fullfill from the day you incorporate?

You need to declare your payroll earnings to CRA on a monthly basis.  There are 3 basic (but very different) ways to pay yourself from your company.  If one of the chosen methods includes taking a payroll or salary needs monthly attention from the day you take your money out of the bank account.

Understand how you pay yourself affects your WCB coverage.  How much WCB coverage did you get?  $21,500?  $50,000?  Did you know that unless you pay yourself properly, you don’t actually have the WCB coverage that you thought you did?

GST is due to be paid every 3 months, regardless of if you told CRA you would register “yearly”.

Receipts are important!  We often see clients give us their bank statements at the end of the year, and they didnt’ realize that they also need to provide the receipts.  Often out comes the shoebox of receipts which need to be sorted and entered.  Often a very expensive way to do bookkeeping!

Mixing personal and business is never a good idea. When you open up your new bank account, always remember to never cross the line between using it to pay for you personal expenses. Transfer the money to your personal account.

Income plan at the beginning of the year to save money on taxes at the end of the year.  Very few people outside of our accounting industry understand how complicated it can be to plan how much income you will make.  Income planning is saying “this is how much money I want to make this year” vs the traditional “this is how much money I made”. By planning your income you can save taxes by making the “right” amount of income throughout the year.

The CRA does not accept “lack of time” as an excuse.  If you are being looked at by the CRA, they will not accept “I didnt’ have time” as an excuse, and you will incur all the interest and penalties for not meeting your CRA obligations on time.

Personal Service Business (PSB) companies will pay higher tax rates.  This topic is all the rage right now for consultants.  In a nutshell, this legislation stops people who work in an employee environment (meaning they do not meet all the requirements of being an independant company) from paying the lower corporate tax rates…just because they incorporated.  I do not profess to be a professional on the PSB rules, but I do know that to minimize your risk of paying a much higher tax rate, you need to do all the right things all year long before it comes time to do your tax return.

SO WHAT CAN YOU DO AS A CONSULTANT?

The first thing it to realize that you MUST meet all your corporate requirements and not knowing them does not escape you from any liability that any other corporate has to fulfill.

Find a good bookkeeper that will look after you and take care of your needs.

Become informed on your obligations.

Put 20% of all your money away. Every dime that you are paid should have 20% allocated to a seperate account that you can access down the road to pay your CRA obligations.

Income plan.  Take the right amount of income in the right tax brackets to minimize your taxes.

WHY IS ON-CORE BOOKKEEPING A SPECIALIST FOR YOU?

We gently walk our clients through the processes, and help them to understand what they need.

We don’t assume that you will know what you need to do.

We will tell you (in real time) what you need to pay and when to pay it.

We give you a 12 month future outlook so that you know what CRA obligations you will have coming up.

We pay your CRA obligations for you so that you are never late, and never pay penalties.

We have many clients, just like you, on our client list.  We are familiar with your needs.

We are your office. We become your office.  We work for you.

Sounds like we are tooting our own horn. And, technically, we are.