In the last few weeks I’ve had an unusually large number of inquiries about hiring us for our accounting, bookkeeping and tax services. And as much as business owners need to ask numerous questions (which I strongly encourage), I also have a responsibility to ask numerous, sometimes probing questions. This ensures that I can help them make informed decisions and give them a sense of direction if something is not correct. Here are 3 recent questions that I asked and the problematic responses. P = Problematic.
1. Q -What is your corporate year end and when did you incorporate?
A– We incorporated July 8th 2014 and our first year end is July 31st 2015
P = Your year end cannot be more than 53 weeks after your incorporation. So either you change your first year end (i.e. June 30th 2015) or you can do a corporate return for July 2014 and July 2015. Unless there are unusual circumstances I usually suggest the June 30th date as it can still be costly to file a corporate return that only covers a 3 week period.
2. Q – When did your HST number become effective?
A – I thought when the person incorporated my company for me the application for an HST number was automatic, but they didn’t do that and I’ve been collecting HST. What do I do now?
P = Call or go online to Canada Revenue Agency (CRA) immediately and register for HST. Explain the situation to them and ask them how far back they will allow your HST number to be effective. It’s not usually more than 2 weeks. Whatever you’ve collected, you owe the CRA, no matter the effective HST date, but you will not be able to reduce that amount by the HST you paid until your HST comes into effect.
3. Q – As a corporation your account records need to be more detailed. How are you keeping track of your income, expenses and taxes now, along with assets, and are reconciliations being done?
A – We have a part-time administrative assistant that says she knows bookkeeping and does everything on a spreadsheet. But she’s never asked us for copies of our bank or charge card statements. Could that be a problem?
P = Yes, it could be a problem. All bank, charge card, loans and lines of credit accounts registered in the corporate name need to be reconciled. And, all assets need to be set-up as such in the Balance Sheet. Copies of the assets should be supplied for back-up when your corporate tax return is prepared. You also need details of the loans to and from the Shareholder(s). One of the problems when starting a business is accessing all the information that is required to ensure that it is successful and adheres to all the laws and rules. It’s also one of those situations that “You Don’t Know What You Don’t Know”, so you don’t even know what questions you should be asking.
I’m not suggesting you ask your Aunt, who runs a daycare business or your next door neighbour that has a part-time renovation business on his days off. They may be successful, or tell you they are, but they don’t know your business model. You need to consult with a professional about your specific needs; one who knows the questions that you perhaps haven’t considered. That professional will give you the knowledge to move forward at a cost less than those of possible accumulated penalties, interest and missed tax savings opportunities.
With open communication and mutual respect you and your accounting professional can move forward together in a long term successful relationship. And that’s what good business is all about.
I look forward to your feedback. Need help? You can connect with us via email or telephone, leave a comment right here on the site, or click the contact tab at the bottom of the screen if you are reading this post on the website.
Until next time,