April 2018
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The Leading Edge - Taking Care of Business
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Business Expenses - A Tax Perspective Overview

 

Business Expenses - A Tax Perspective Overview

One of the things all business owners should do is claim every available dollar they can, legally, when doing their taxes. Here's a quick guide to some of the things you should know before submitting your tax return this year.

First, what is a business expense? Sounds simple, doesn't it? But, all too often business owners submit expenses that are not allowable and don't submit some they could legitimately claim. As a general rule, any expense you incur for the sole purpose of earning business income is allowable.

However, you can't just say you incurred an expense, you have to provide proof by submitting a receipt, invoice, agreement of purchase or something else that proves you incurred the cost. Usually a line on your credit card statement or bank statement is not sufficient. All documents should show the vendor's name, contact information, date and their tax numbers.

If you receive cancelled cheques from your bank either hard copy or electronically, keep them - these are proof you paid for what you say you purchased.

Allowable Expenses

The following list is shown courtesy of Canada Revenue Agency (CRA). If you visit the CRA website you can access a breakdown of each of these items.

  • Prepaid expenses
  • Accounting and legal fees
  • Advertising expenses
  • Business tax, fees, licenses and dues
  • Insurance expenses
  • Interest and bank charges
  • Maintenance and repairs
  • Meals and entertainment
  • Office expenses
  • Salaries, including employer's contributions
  • Business start-up costs
  • Motor vehicle expenses

Two expenses that often trip people up are meals and entertainment and motor vehicle expenses, so we'll briefly mention them here.

Meals and Entertainment

The maximum percentage you can claim for food, beverages, and entertainment expenses is 50 percent of either the amount you incur or an amount that is reasonable in the circumstances, whichever is less. There are some exceptions in specific circumstances, so visit CRA for more information about events such as conferences.

Motor Vehicle Expenses

If you use a motor vehicle for both business and personal use, you can deduct only the portion of the expenses that relates to earning business income. However, you can deduct the full amount of parking fees related to your business activities and supplementary business insurance for your motor vehicles.

Running a business from your home

People often get confused as to what they claim when working from home. The key is that you have to meet one of the following two conditions if you plan to deduct home expenses; first it has to be your main place of business, or two you use the space in your home only to earn income for your business and to meet clients.

If you meet one of those two criteria you can deduct a percentage of your maintenance costs, such as heating, home insurance, electricity, and cleaning materials. The percentage has to be reasonable; usually this is based on the percentage of space in the house you are using.

Inventory

If you hold inventory (either finished products, raw materials, packaging materials, supplies, work-in-progress etc.) you will need to carry out an annual inventory to calculate the cost of goods sold and net income. There are a bunch of rules appertaining to this so either ask your accountant for more information or visit the CRA website.

One major question people ask, is how to value the inventory. This is done by determining its fair market value (either the price you'd pay to replace it, or the amount you would get if you sold it). Or, the value of individual items, that is their fair market value or their cost, whichever is lower.

One word of caution, once you decide on a method you will have to use that same method in future years.


The above is meant as a rough guide only. For definite information please visit the Canada Revenue Agency (CRA) website (www.cra-arc.gc.ca) and/or retain the services of a qualified accountant.

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Business Expenses - A Tax Perspective Overview

 

The Power of a Positive Attitude

For good or bad, attitude is contagious. A positive attitude, especially in a sales situation, is often rewarded with affirmative action. Upbeat salespeople close more sales - period. Do the salespeople representing you to your clients have the right attitude?

Buyers who feel good, and like the salesperson, buy more! This may seem an obvious statement, but you come across salespeople all the time who exude negativity. It's not that they're miserable, although some are; but they lack confidence in themselves and perhaps their product, and it shows. If it was a physical thing, and sometimes it is, it would manifest itself in a weak handshake and sweaty armpits.

Do you believe in lucky streaks? Do you see sales coming in batches from yourself or members of your sales team? Do they have a run of good days, followed by a run of bad ones? There is little doubt sales success is linked to whether we feel positive or negative during the complete sales process, and even beyond it into our day-to-day life. Now, this may be as much the result of body language as it is positive energy being transferred through thought; no matter, something occurs. It can be measured in the amount of revenue your sales team brings into your company.

Helping your sales reps become more positive and confident is the single biggest thing you can do to immediately increase sales revenue. Here are three things you and your sales team can do today to pump up your positivity quotient.

  1. This may sound hokey, but be assured it works. Give it a try. First thing in the morning, perhaps while you are showering, ask yourself, "How do I feel today? Is this a nine-out-of-ten-day, when I feel totally confident and up for whatever life throws at me? Or is the weight of the world on my shoulders and my positive attitude is hovering around a three, and I'm feeling about as positive as a sloth on a slow day?" If it's the latter remind yourself, "Today is a fresh start and whether I'm successful or not is completely dependent on how I approach the day."
  2. On days when you score low, remind yourself the power to have a good day or a bad one is completely in your hands. If you can't budge your attitude, adjust your workload accordingly if possible. If your score is very low, it may not be the best day to try to close that important deal, or sell to a difficult prospect. It might be more productive to reconnect with some favourite customers and see if you can get a little upbeat energy from them!
  3. Every day for a month, grade yourself on a one to ten basis, one being "I just want to go back to bed" ten being, "Today I'm unstoppable!" On low days, try talk yourself up a few notches. At the end of each day, note the number of sales you have made and the value on a spreadsheet. At the end of the month, mark down your attitude rating above each day's sales in your spreadsheet. It's important to not combine the figures until the end of the month. Once your month's chart is complete, look at the relationship between sales figures on days where your attitude rating is six or higher, to those five and under. You will be surprised to learn how much your attitude affects your sales figures. If you are a sales manager or business owner, use this exercise with your sales team to help them see the power of a positive attitude on their success.

When we go into each sales situation with a high-level of energy and enthusiasm, and with a positive attitude, we are far more likely not only to make a sale, but begin to create a long-term high-performing customer.

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Business Expenses - A Tax Perspective Overview

 

Coach's Corner - In Teams we Trust

"A team is not a group of people who work together. A team is a group of people who trust each other."

- Simon Sinek, Author of Start with Why.

When we think about teams often we think about each person's strengths and contributions to the team. How do they fit in? What role do they play? What are their attributes? What do they bring to the table?

No matter what qualities each team member brings to the table, great teams are built upon trust. Each person needs to "have the back" of their leader and their colleagues. Everyone needs to feel and be trusted to create that successful team. Whether on the sports field or in the office, teams are successful when they exhibit the trust factor.

As leaders of our business or department, we need to adopt certain behaviours that foster trusting and effective teams. These behaviours need to be incorporated as intentional habits in our role as a leader.

"I bring you the gift of these four words: I believe in you."

- Blaise Pascal, French Physicist and Mathematician

First and foremost, we need to trust our team. If we don't trust our team, they will not trust us as the leader. Earning trust is like earning respect, neither can be forced upon people. How are we demonstrating trust in our staff on a regular basis?

Leading by example is another important facet to building and maintaining trust. Our role as a trusted leader is seen when we act with consistency, treat every team member fairly (no favourites) and keep gossip out of our conversations. When we talk and show frustration with one team member with one or more other team members either in private or in a meeting, we are undermining the team's trust. Effective leaders need to set and follow a rule of not discussing one team member with another behind his/her back. How do we ensure we are intentionally maintaining trust?

"Leaders also establish trust by giving credit where credit is due. They never score off their own people by stealing an idea and claiming it as their own."

- Jack Welch, former Chairman and CEO of General Electric

Acknowledging and crediting people for their contributions enhances trust. Genuinely showing each team player how valuable their input is, motivates them to continue putting forth their best efforts. We must all stop and put the success of the team before our own. How do we acknowledge and give credit to our team members?

Listening is a crucial skill for leaders and their teams. If we, as leaders, simply stay quiet and truly listen after consistently asking questions, we will be surprised by what we can learn. How do we ensure we are really seeking to understand?

Great teams are built upon trust. What are we doing to foster trust?

Paul Abra, Certified Executive Coach, Motivated Coaching and Development

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CFDC of North & Central Hastings and South Algonquin
PO Box 517 (26 Chemaushgon Rd), Bancroft, ON, K0L 1C0
Toll Free: 1-800-465-4119 | Phone: 613-332-5564 | Fax: 613-332-5628
mlrutledge@community-futures.ca
www.community-futures.ca

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