The New Year is the perfect time to reflect on your business and make plans for 2020.
Whether you’re interested in improving the financial health of your company or simply getting organized for the upcoming tax season, we’ve listed some ideas on New Year’s resolutions you can make if you’re self-employed or own a small business.
1. Organize your receipts
Keeping your paperwork in order is key to the success of your business.
You’re required by law to keep your receipts, and having an organizational system means you won’t miss out on any tax deductions.
If you’re self-employed or a small business owner, you can deduct everything from home office to vehicle expenses.
You don’t need anything fancy either. A simple accordion folder will help you categorize your receipts. You can also digitize them.
LEARN MORE: 7 simple ways to organize your receipts.
That way you’re not struggling to find anything when it’s time to file your taxes.
Whichever method you choose, get ahead of tax season by making it a priority to organize everything throughout the year.
2. Monitor your cash flow
Take the time to monitor your cash flow on a regular basis.
If you have cash flow problems, you won’t be able to meet obligations like payroll, accounts payable and loan payments.
Even if you feel like you’re on top of things, if a slow month hits, or you face an unexpected tax bill, you might struggle to come up with the cash.
Consistently reviewing your cash flow will also help you catch overdue payments from clients, see if your own bills are overdue and determine if a slow month is cause for concern or just a cyclical part of your business.
LEARN MORE: 5 cash flow mistakes business owners make.
3. Invest company profit
You’ve paid off your debts and decided it’s time to reinvest profit into business improvements.
Look at ways you can reinvest in your company.
Do you need to purchase new equipment? Can you hire an employee to handle the administrative work? Is it time to find a tax specialist that works with small businesses?
You can also invest into assets outside the company to generate passive income.
Here are some basic tips for investing:
1. Start investing as soon as possible.
You don’t need a large amount of capital to start investing.
For example, if you decide to invest in mutual funds, even if you start with a very small amount of money, you’re going to see benefits from compound returns (re-investment of earnings over time).
2. Diversify – You could invest in other businesses, real estate, the stock market or private mortgages.
By investing in a variety of industries and sectors, you’re reducing your overall risk.
If some of your investments are performing poorly, you could still see a return from investments in other industries and sectors.
3. Take advantage of Registered Savings Accounts
Investment income is tax-free in a registered retirement savings plan (RRSP) until you withdraw the money.
Contributions to the RRSP are tax deductible so you receive immediate tax relief and tax-sheltered growth.
The tax-free savings account (TFSA) lets you contribute $6,000 a year and you don’t pay tax on investment income or withdrawals.
Since you likely don’t have an employer-funded savings plan if you’re self-employed or a small business owner, make regular contributions to your RRSP and watch the money grow over time.
4. Use digital tools to promote your business
You likely have a website, but are you utilizing social media to promote your business?
It’s a free and simple way to posts news, updates and connect with your customers.
Take the time to regularly update your social media accounts and respond to questions and comments.
More and more people will visit your social media accounts instead of visiting your website or picking up the phone – especially if they run into a problem.
Make sure your website is optimized for mobile, as web browsing continues to increase on mobile devices.
In Statistics Canada’s 2017 survey of household spending, 97 per cent of survey participants under 30 used mobile services.
In 2018, 57% of Canadian boomers (55+) surfed the web with a mobile device, compared to 44% in 2017 (Canadian Internet Registration Authority report from 2019).
To reach customers browsing on the web, try search advertising.
It can be an effective way of reaching your target demographic when they’re looking for a solution to their problem online.
5. Review and update your business plan
You may have created a business plan when you first started your business or applied for a bank loan, but when was the last time you looked at it?
It’s normal to be consumed by the day-to-day of running a business, but it’s important to regularly review and update your business plan.
Here are some questions to get you started:
- Where do you want your business to be in 3 years, or 5 years?
- What resources do you need to get there?
- What is negatively impacting your business?
Depending on what you find, you might hire another employee to grow your business or cut down on costs by negotiating with a vendor.
6. Take a vacation
If you’re self-employed or a small business owner, you probably dreamed of the day you could manage your own schedule and have more flexibility.
The problem is many business owners work all hours of the day, and will go for years without taking a vacation.
Maybe 2020 is the year you hire an employee and take some well-deserved time off.
Matthew Clayton, a small business owner who runs Duke Sewer Service in Regina, hired his first employee after working 3 years without a day off.
He took the opportunity to travel to Edmonton to watch the Roughriders fight for the 98th Grey Cup.
7. Be ready for the tax season
The tax filing deadline is April 30th for personal income tax returns, and self-employed individuals have until June 15th to file their tax return.
However, if you owe tax, the CRA starts charging compound daily interest on May 1st.
Pay attention to these deadlines so you don’t have to pay interest or penalties.
If you can manage it, submit your tax return before the deadline. That way if CRA owes you money, you’ll get your return sooner.
If you owe money, you’ll have time to set aside money to pay the CRA.
8. Develop outside interests
You might think hobbies are a luxury, or a waste of time.
Why pursue another interest when you’re focused on your business?
But pursuing outside interests isn’t just an enjoyable way to spend your time.
As reported by the BBC, studies have found that Nobel Prize-winning scientists are about 25 times more likely to sing, dance or act than the average scientist.
Enjoy learning something new, and you might find it’ll inspire you in other areas of your life too.
Book an appointment with FBC
FBC works with Canadian farmers and small business owners to minimize their income taxes and maximize their assets.
We’re offering a no-cost, no obligation consultation to explain how you can make sure you’re taking advantage of all the tax-saving opportunities available to you.