What does a financially fit business owner look like? They confidently take advantage of every write-off and have a tight paper trail. They've automated their instalment payments and save enough from each cheque to pay their taxes, accountant, and lawyer. They also automate their rainy day savings and investing. Their will and insurance policies – up to date. They pay no interest on their credit cards, and they sleep well at night.
Here are six things you can do to get financially fit and rest easy this year.
1. Schedule those instalments
January is a great time to schedule all your instalments using your online banking. The government will charge you interest on missed instalment payments.
If you pay yourself in dividends, look at your personal tax return for your instalment schedule. If you do wages, make your monthly payroll remittances. If you owed more than $3,000 for GST or corporate taxes last year, you will have quarterly (or monthly) instalments – check your notice of assessment.
2. Confidently take every write-off and be audit-ready
Have a tight paper trail of all business expenses – pay for them all with your business card. Keep your receipts (paper or digital). Pay all personal expenses on your personal cards.
Get informed about what expenses can be written off by the business in our blog on write-offs.
Track your business kilometres using MileIQ so you aren't leaving $0.58/km on the table or disputable. Try to make all your travel business-related if you can.
3. Automate your monthly investing
I love Wealthsimple's tagline: "Get rich slow." Just start investing. Take a bit off each paycheque and buy some stocks, ETFs or funds.
Wealthsimple will take the money each payday and put it into the investments you choose. Fill out their investor profile questionnaire, and they will recommend a mix of investments for you. The days are long, but the years are short. Start saving for retirement yesterday.
Both TFSA and RRSP accounts can be set up at Wealthsimple. You have until March 1 to contribute to your RRSP.
4. Automate your rainy day savings
Tangerine offers free savings accounts, and you can set up monthly automatic transfers. Tip: Set up as many accounts as you want and transfer a small amount to each every payday.
You can set it and forget it - it's a great way to stockpile cash for the important things in life: new guitar, vacation, vehicle or home reno. Or just for a rainy day.
5. Save enough for taxes
Small business owners need to save a portion regularly for their taxes. The percentage you need to save will depend on your situation and tax brackets. Make sure you have some money set aside to avoid penalties on late tax payments. Ask your accountant to run the analysis and give you a percentage of income to set aside for taxes. Or ask us – we'd be happy to.
6. Automate monthly credit card payments and never pay interest
Ask your banker to schedule your credit card balance to be automatically paid immediately before interest begins to accumulate. Avoid the 20% and give yourself peace of mind.
You may not be able to tackle all six of these items every year. And that’s OK, we’re not exactly in the best of times right now. But some of these are free and will actually improve your cash flow immediately. Others on this list may be aspirational, and would fit nicely in your 3-to-5 year plan.
True North Accounting helps small business owners in Canada with bookkeeping, accounting and tax services. We offer a clear process and an all-in price, upfront. We provide CRA support and vow not to miss a deadline. Our goal is to give entrepreneurs confidence and clarity over their finances.