September 2016
header
The Leading Edge - Taking Care of Business
space
What Happens if CRA Audits Your Business?

 

What Happens if CRA Audits Your Business?

Every business owner dreads a Canada Revenue Agency audit. It's not necessarily a fear of being caught doing anything wrong, it's about the hassle and not knowing what to expect. Here's a quick guide to help you prepare for what can be a trying time if CRA takes a close look at your finances and other records.

One thing to realize is that they are looking not only at whether you are obeying all the tax laws, but also applying any tax laws correctly.

So, if you've been selected for a business audit - why did they choose you?

According to the CRA website, "CRA's risk-assessment system selects files to audit based on a number of conditions such as the potential for errors in tax returns or indications of non-compliance with tax obligations. The CRA also looks at the information it has on file and may compare that information to similar files or consider information from other audits or investigations."

So, what happens if you are selected? First a CRA auditor will either write to you or call you and let you know where it will take place. Most times the auditor will come to your office, but occasionally the audit may take place at a CRA office.

Here's what the auditor will examine:

  • Previously filed tax returns
  • Credit bureau searches
  • Property database information
  • Your business ledgers, journals, invoices, receipts, contracts, and bank statements
  • Your personal records including bank statements, mortgage documents, and credit card statements
  • Personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust [settlor, beneficiary, and trustee])
  • Adjustments made by your bookkeeper or accountant to arrive at income for tax purposes.

During the process the auditor will bring up any issues that concern them and discuss them with you. You are, of course, able to bring up any questions or concerns you might have. The length of time an audit takes depends on how well your records are kept, so ensure you keep all records safely, securely and filed professionally.

The auditor may find your previous assessment was correct, in this case nothing else will be done and you'll receive a letter telling you the audit is complete.

If it is found that you owe money, or CRA owes you money, you will receive a proposed reassessment and have 30-days to agree or disagree, or ask for further explanation.

Should you disagree with the proposal, you are encouraged to contact the auditor to try and resolve any factual disagreements. The auditor will carefully consider your explanations and respond to your questions about the proposal. If issues remain unresolved, you can contact the auditor's team leader to discuss them further. You do also have a right of appeal.

Bottom line is you will get a letter with the result. If you owe money you will have to pay it. If you've over paid you will get a refund.

One thing to be aware of if you owe money; it is wise to ask the auditor for an estimate of the amount prior to the CRA issuing a notice of assessment, or reassessment. The reason for this is the sooner you pay what you owe the less interest you will be charged.

There's a lot you can do to ease the pain of an audit and we urge you to seek advice. In the meantime, here are three tips to help you deal with an audit.

  1. Consider having the audit take place at your accountant's office. There will of course be a cost to this but on the upside you won't be pulled away from running your business for the duration of the audit. Your accountant's knowledge might also end up saving you paying as much.
  2. Ask up front how many years CRA want to go back (usually 2-3 years); this can save you time and money by only getting your accountant to compile only the necessary records.
  3. Be pleasant and courteous to the auditor, they are only doing their job so leave them to get on with it with minimal disruptions.

One publication which is a must read is the Taxpayer Bill of Rights published by CRA - you can check it out at http://www.cra-arc.gc.ca/E/pub/tg/rc17/README.html

space
What Happens if CRA Audits Your Business?

 

Organizational Culture - A Powerful Force to be Reckoned With

Every company has an organizational culture, whether or not it's defined in any specific way. It can be felt in the vibe you get when dealing with the company; the energy and enthusiasm emanating from employees; and the structural integrity of your experience. Some cultures are healthy and others are toxic.

Don't think that just because you're a one-person business you don't have an organizational culture - it may be just you, but how you run your business and deal with customers and suppliers very much defines what people will see as your business culture.

If you haven't stepped back from the day-to-day operations of your business recently, now might be a good time to assess your organizational culture. Does it inspire you everyday, or is it dragging you down?

Do you know what your staff think about working for your company? At Thrifty Foods, a grocery store chain in BC, they poll their employees on a regular basis asking questions such as "How do you feel?" and "Do you feel respected?" The company has been carrying out these surveys since the early 1990s and takes the results very seriously. Their HR Director says, "How employees feel about their work is like an oil pressure gauge." The survey (completed anonymously) allows for both rational and emotional issues to be brought to light.

If developing a survey to assess your organizational culture seems overkill for your company, simply watch carefully, listen hard, and ask questions of your staff, customers, and suppliers. This will allow you to get a handle on the negatives and positives of your corporate culture.

In this day and age of rampant social media no company can hide from the harsh tongues of its customers; take this review of a restaurant taken from TripAdvisor, "The worst restaurant I have ever visited!" Of 71 reviews, 44 are in the terrible category. One doesn't need to visit this establishment to know that the organizational culture is detrimental to its wellbeing. What are people saying about your business?

Even when the business environment is tough, certain companies are bathed in a golden light, they are quite simply revered. These are the companies that can pick and choose the best of the best employees. Management and staff get on well and it shows; positive attitudes prevail; and there is a sense that employees are part of a family. These companies are seen as trendy, vibrant, progressive, efficient, honest, accessible, and they have fans rather than customers - loyal fans. Their brands are powerful and magnetic and people desire what they sell. They have a heart and a soul, where others just have bricks and mortar. These companies inspire both customers and employees with their organizational culture; think Apple, Google, Starbucks and others that have an almost fanatical following. These companies have a strong, recognizable culture - one that people want to associate themselves with. It is this culture that makes their success sustainable.

The secret of what makes a positive culture is difficult to pin down but for many it's about a 'family' feel, it's about team-building, camaraderie, a coming together for the common cause. It's the reason your business exists. For others it's about being down-to-earth, genuine. Often a company's organizational culture comes from the founder and is embedded at the birth of the company, which is why single-person businesses still need to consider their company's culture.

Is it all about personality then? Not necessarily; an organization's culture is, or should be, aligned with its vision, mission, goals, structures, performance and behaviors. Underlying this is its belief system. A company focused on making money at all costs, will have a very different culture to one that puts clients first. It is this foundational understanding of what the company is, and what it stands for, that motivates employees and drives its leadership. It promotes loyalty and productivity, and binds various departments. It builds consistency and control - it breathes life into a company.

The simple reality of having an organizational culture that owners, managers and staff fully buy into, and that translates into a way of being that is attractive and enticing to customers, is beneficial to the bottom line. It will help attract top performers to the company and reduce employee turnover, ensuring the company's current winners remain loyal to the company.

Cross-department synchronicity and cooperation will be enhanced, and it will encourage consistent decision-making. In marketing terms, it will allow the brand to be communicated accurately and effectively across all media. The focus a strong organizational culture imbues on a company promotes creative thinking and creates opportunities.

Another major benefit of having an identifiable, experiential organizational culture is that each company is unique and therefore difficult for competition to emulate - it differentiates a company in a powerful way.

By now you might be reflecting on your own company's organizational culture. Perhaps it's not as strong as you would like, or it may be a little wooly around the edges. How can you re-set it, or at least give it a healthy tweak? Hotel owner Mandy Farmer, of Accent Inns, offers the best advice, "Look for the shiny spots." What are you doing best? Where are you getting the best feedback from customers and staff? Develop those areas and make them shine. On the flip side, look at what's not working - what elements of your culture are slowing you down?

space
What Happens if CRA Audits Your Business?

 

Coach's Corner - What is your legacy?

"First say to yourself what you would be; and then do what you have to do."
- Epictetus, Greek Philosopher

As a business owner or as a leader in an organization, it is important to take the time to think about the mark you wish to leave. How do you want to be remembered when you leave an organization, retire from your position, or even pass away? What is your legacy?

It's not about living up to others' expectations or wishes, it is about living up to your own expectations and dreams. It's about understanding how and what others think of you and whether this is consistent with the person you want to be, the legacy you want to leave, and how you want to be seen by the world.

Your actions speak louder than your words. As a human being, whether you are a leader, a parent, a teacher, or whatever your position in life, you are a role model to those who know and surround you. The question is; what role model do you want to portray?

Susan Scott in her book Fierce Conversations speaks about taking responsibility for your emotional wake. She describes it as "…what you remember after I'm gone. What you feel. The aftermath, aftertaste, or afterglow." As Scott states using the analogy of a boat's wake, we need to know how our words and actions affect others and therefore be conscious of "…the wake I was [you are] leaving during my [your] conversations with others."

In Dicken's Christmas Carol, Scrooge had the opportunity to see himself through other people's eyes. It was a reality check for him as to how others saw him. The legacy he was leaving behind at the outset of the ghostly visits changed dramatically to what he desired at the end of the tale. He changed dramatically, becoming the person he wanted to be, and leaving the legacy he wanted to leave.

When you figure out what you want your legacy to be, it's a good time to reflect upon how others view you and determine if the two are in sync. Sometimes how you think others view you and how they actually see you are two different things. It is important to be honest with yourself and really find out what others really see in you. Ask your subordinates, colleagues, and family members, what comes to mind when they think of you? What is the lasting impression you are leaving? Stop and listen to what they say. Ask curious questions to find out what has made them come to these conclusions. As hard as it may be, do not interrupt or be defensive, it is an exercise in seeing yourself through another's eyes, to truly view what your legacy might be.

The ability to change is within us all.

Paul Abra, Motivated Coaching

space
infographic
space
Small Business News
Why the loonie is still flying high despite the economic storm clouds
Canada's economic performance hasn't been very good lately-but compared to the rest of the world we look like a safe harbour.
Read more arrow

 

Small businesses don't see CPP hike as 'modest'
A full 70% of small business owners disagree with the notion that the proposed CPP increase is "modest" and would have a limited impact on their businesses.
Read more arrow
Canada's small business sentiment rises in August, likely to gain moderately in coming months
Small business optimism took a bounce back upward in August. CFIB's Business Barometer Index erased a weak July reading, rising more than two points to 59.8-almost the same as its June level and the second-highest monthly mark registered since May of 2015. Sentiment still has plenty of room to improve though, with the index running five points under its 2010-14 average.
Read more arrow
SME Bank Market Share
CFIB has been tracking small- and mid-sized entrerprises (SME) bank market share over the last few decades. While there are differing definitions of market share, CFIB offers a unique perspective on the relative dominance of the financial institutions in the SME segment, namely by the number of businesses.
Read more arrow
INNOVATION CENTRAL: 5 Technologies For 2031 Look back to the year 2001 and it's hard to imagine how different the world was. Global Internet penetration was just 5% then, compared to 50% today, and connection speeds were frustratingly slow. Mobile phones were fairly common, but were capable of little more than voice or text. Google was still just a startup.
space
Quote
space
Footer Image
space

Community Futures Mount Waddington
14 - 311 Hemlock Street (Box 458), Port McNeill, BC, V0N 2R0
1-877-956-2220 | Phone: 250-956-2220 | Fax: 250-956-2221
info@cfmw.ca
www.cfmw.ca

Top