FINANCE 101. February 21, 2018

Transcription

1 FINANCE 101 February 21, 2018

2 ABOUT THE PRESENTERS Mark Weiman, CPA, CA, CBV Partner As a leader of Valuation and Transaction Services teams, with more than 20 years of accounting, business valuation and advisory experience, Mark has assisted clients in over 30 merger, acquisition and divestitures transactions across a range of industries. Mark has completed specialty work for financial institutions and small to medium-sized businesses, shareholder disputes, tax purposes, and loss of income calculations; as well as mergers and acquisitions. He joined Collins Barrow in 1990 as a summer student and was admitted to partnership in He earned his CA designation in 1994 and his CBV in He graduated from Laurentian University with his Bachelor of Commerce in 1992.

3 ABOUT THE PRESENTERS Joanne LeBreton, CPA, CGA Partner Joanne LeBreton is a graduate of both Cambrian College and Laurentian University and holds a Master s Degree in Business Administration, as well as a Chartered Professional Accountant s Designation. She has been with the firm since 1993 and became a partner in Joanne has worked with a variety of clients including, individuals, family-owned businesses, corporations, professionals, not-for-profit organizations, and institutions. Providing services in the areas of business consulting, bookkeeping, accounting, personal and corporate tax, Joanne has helped clients progress and further their success.

4 ABOUT COLLINS BARROW SNT 1 Largest 4 Local ST independent accounting firm in Northern Ontario offices Serving clients in Northeastern Ontario since Partners 90 Professionals 3,000+ Clients In the last seven years alone, we have expanded our capacity by 140%

5 ENTREPRENEUR & ENTREPRENEURSHIP

6 ENTREPRENEUR & ENTREPRENEURSHIP Definition en tre pre neur A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so. Definition en tre pre neur ship The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses.

7 START-UP PLANNING The start-up stage is where the entrepreneurial idea is developed into a business. Once you have thoroughly canvassed and tested your business idea and are satisfied that it is ready to go, it s time to make it official and launch your startup. Many believe this is the riskiest stage of the entire lifecycle. In fact, it is believed that mistakes made at this stage impact the company years down the line, and are the primary reason why 25% of startups do not reach their fifth birthday.

8 MISCONCEPTIONS DISPELLED

9 MISCONCEPTIONS DISPELLED What are the common mistaken beliefs of new business owners? A business plan is something you produce for the bank or when you re seeking a grant Market research is a waste of time. A cash flow forecast is something I need do only if my business is in trouble.

10 MISCONCEPTIONS DISPELLED I ll see how far my money goes first and if it s not enough, I ll borrow the rest If I work hard, I ll succeed If I charge below market rate, people will buy from me

11 MISCONCEPTIONS DISPELLED I am not concerned about my competitors I don t need to worry about doing my books I ll never give up It is too soon to build a team of advisors

12 THE BUSINESS PLAN

13 THE BUSINESS PLAN Don t underestimate the need for a solid business plan! Some key questions to ask yourself: Did I analyse the market? Is there a need for my product or service? Do I have the skill, time and money to bring it to market? Am I passionate about this idea?

14 FINANCIAL PROJECTIONS A crucial part of the business planning process is to develop solid financial and cash flow projections. Why? To ensure the business idea is financially viable To determine start-up capital needs To identify operating cash flow gaps and needs

15 FINANCIAL PROJECTIONS Projected Income Statement A summary of net profits for a period of time Revenues Expenses = Profit or Loss Projected Balance Sheet A financial snapshot at a specific date Assets Liability = Equity or Deficit Projected Statement of Cash Flows A summary of cash flows for a period of time Financial Assumptions A listing of significant assumptions used throughout the projected financial statements Combined, these statements give potential investors/creditors the information they need to make their decisions.

16 FINANCIAL PROJECTIONS Examples of things to consider: High costs associated with the setup and promotion of the business Market demand and capacity Assess market potential Break down sales by volume Assess current capacity to generate expected volume Cost of sales - is it reasonable? Does it compare to industry? HR plans - difficulties in attracting staff with appropriate skills Monthly cash flow projections are needed to identify gaps Slow growth in sales putting pressure on cash flow Underestimated money needs, and the time to market

17 TYPE OF START-UP Determining your type of start-up will affect your business planning process Are you purchasing an existing business? Financial due diligence process Business valuation Other considerations Are you starting up a brand new business? Determine pricing strategy Analyze costs of operating Analyze start-up requirements

18 START-UP CAPITAL / FINANCING How will you fund your start-up? Personal savings Potential investors Bank financing Government programs Grants/Subsidies Conditional contributions Loans

19 GOVERNMENT PROGRAMS Examples NOHFC FedNor IRAP (Industrial Research Assistance Program) HRDC R&D Claims & Apprenticeship Tax Credits Ontario Trillium Foundation OMAFRA

20 FISCAL OBLIGATIONS

21 CHECKLIST FOR NEW SMALL BUSINESSES Government of Canada website Some key items from the list: Business structure Registering your business CRA program accounts My Business Account E-services for businesses Keeping records Business income and expenses Filing income tax returns

22 BUSINESS STRUCTURE The type of business structure you choose will affect how you report your business income, the type of returns you have to complete, and many other aspects of your business. 3 types of business structures Sole proprietorship Partnership Corporation

23 REGISTRATION AND PROGRAM ACCOUNTS Not all businesses need to register a Business Number with the Canada Revenue Agency. If you are incorporated - the CRA will automatically issue you a Business Number. If you are a sole proprietor or partnership - you will have to apply for a Business Number, if you need one. Most common reasons for needing a Business Number: Corporation s income tax account GST/HST Payroll A business is only issued 1 BN; the program accounts are defined as follows: Corporate tax BN ending in RC0001 GST/HST BN ending in RT0001 Payroll BN ending in RP0001

24 GST/HST You are a small supplier if you provide taxable supplies of less than $30,000 in the year. You must register for GST/HST in the month after you exceed $30,000 in sales. You must obtain a GST/HST number from the Canada Revenue Agency (CRA).

25 GST/HST Certain supplies are either zero-rated or exempt Examples of zero-rated supplies: Basic groceries Certain types of agricultural and fishing supplies Medical devices Examples of exempt supplies: Residential rents Child and personal care services

26 GST/HST If you register for GST/HST, you can claim Input Tax Credits (ITCs) for the GST/HST you pay unless you provide exempt supplies

27 GST/HST Businesses with annual taxable supplies of $1.5 million or less are only required to file annually, but can elect to file monthly or quarterly. Be careful not to use GST/HST collections to supplement your cash flow!

28 PAYROLL Employers: A Business Number is required for remitting payroll deductions to the CRA Remitting requirements are based on the size of your payroll Most employers remit monthly (Watch your cash flow!) Smaller employers may remit quarterly (under $1,000 per month) Larger employers need to remit more often: Twice a month - Threshold 1 (over $25,000 per month) Every week - Threshold 2 (over $100,000 per month) You also need to consider the following: WSIB EHT ROE

29 REGULATORY ENVIRONMENT Other regulations to consider: Environmental regulations Accessibility Canada s Anti-Spam Legislation Health and safety regulations Human resources regulations Bill 148

30 MY BUSINESS ACCOUNT AND E-SERVICES My Business Account A secure online portal that provides an opportunity to interact electronically with Canada Revenue Agency (CRA) on various business accounts. E-Services Easy way to NETFILE various returns, such as GST/HST, payroll related forms (T4s, etc.) Online calculators and tools Payroll remittances, installments, etc.

31 BOOKKEEPING

32 BOOKKEEPING & ACCOUNTING WHY? Why record keeping? To file taxes/cra requirements To account for every business transaction To determine how your business is doing

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34 BOOKKEEPING Selecting the right software QuickBooks QuickBooks Online Sage 50 (Simply) Excel Other

35 BOOKKEEPING Set up company bank account and company credit card Keep business and personal transactions separate Easier to track taxable income and deductible expenses CRA auditor could request personal bank statements

36 CALCULATING BUSINESS NET INCOME

37 REVENUE All revenue earned by your business is taxable

38 DEDUCTIBLE EXPENSES As a rule, most expenses incurred are deductible if: they are reasonable they are incurred to earn business income they are allowed by the Income Tax Act

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40 BUSINESS USE OF VEHICLE Need to determine business portion of auto expenses Automobile operating expenses include: fuel & oil, maintenance & repairs insurance, license fees interest on car loans capital cost allowance or lease payments Automobile deduction limits apply purchased or leased Keep a travel log travel to and from work is not deductible!

41 HOME OFFICE Meet one of two tests: principal place of business or used on a regular basis to meet clients Proper records must be kept Percentage of rent, taxes, utilities, etc. (based on square footage of home)

42 CAPITAL EXPENDITURES Expenses that are capital in nature (i.e. computers, vehicles) are treated differently from regular expenses They are assigned a Capital Cost Allowance class and a deduction for a percentage of the cost can be taken annually

43 MEALS AND ENTERTAINMENT Include description and those attending on back of receipt Claim only 50% of the HST ITCs Expense is only 50% deductible for tax purposes

44 TAXATION OF BUSINESS INCOME Regardless of structure, taxes are owing on the net income of your business. Net income is calculated by deducting allowable expenses against the revenue earned by your business

45 REPORTING AND PAYING TAXES Sole Proprietor Partnership Corporation Net business income is reported on what type of tax return? On the individual s T1 personal income tax return On the partner s T1 personal income tax return or T2 corporation income tax return On a T2 corporation income tax return Tax rates Personal marginal tax rates Depends on partner s structure Small business rates in Ontario are currently 15% for 2017 and being reduced over the next few years When are taxes due? April 30 th of each year, unless installments are required Depends on partner s structure Usually 3 months after the company s fiscal year-end, unless installments are required

46 ANALYZING RESULTS

47 HOW IS YOUR BUSINESS DOING? How to interpret the financial statements / results of your business: Analytical Review Bottom line Gross margin Fixed vs. variable cost Compare to business plan How often should you be looking at this?

48 CASH FLOW MANAGEMENT How are you managing cash flow? Consider liquidity ratios and compare to industry standards Are there areas where you can improve? How?

49 HOW CBSNT CAN HELP

50 OUR SERVICES Entrepreneurial Audit & accounting Private enterprise Public markets Enterprise risk Organizational governance Government funding applications Business development Assurance Advisory Management Consulting CBSNT Services Transaction Financial projections Human resources Feasibility/market studies Tax IT Tax minimizing strategies New market implications Corporate structure Security & data protection Backup solutions Network assessment Corporate finance Valuations Capital raising

51 RESOURCES Collins Barrow Services E-Business Toolkit Sudbury Regional Business Centre Canada Business Network

52 CB E-BOOKS If you would like tax assistance or other financial service support, we would be pleased to connect with you and learn more about your business. Our team is particularly well versed in audit, accounting and specialty advisory services that support business growth and success. The following Collins Barrow e-books are available: 10 Questions to Ask Your Next Financial Advisor Incorporation and the First Year After That Tax Side of Starting Your Business What You Need to Know About Grants and How to Get Them Contact us to receive one of our FREE e-books. One of our experts will be in touch to set up a call or meeting sudbury@cbsnt.ca

53 THANK YOU

54 Collins Barrow SNT 1174 St. Jerome Street Sudbury, Ontario P3A 2V9 Tel: Fax: