Now that taxes are out of the picture, it’s time to readjust your focus and work on building your business and making it more efficient for the upcoming year.
Like most post-submission periods, it’s easy to want to drop your shoulders and relax. However, this is the perfect time to actually carry-on the momentum and start analyzing your business finances. Not only is it a good way to reflect on the aftermath of tax season as a whole, it’s also advantageous for planning the direction you want your business to head towards—and the financial and client-centric steps you need to take—to achieve your business goals this year.
We've rounded up 5 key questions for you to ask yourself to kick off your analysis!
Question #1: Did tax season go as smoothly as it could have?
If the answer is yes: congrats! As important as it is to celebrate this accomplishment, it’s equally important to ask yourself—was anything different than the year prior?
If the answer is no, is there a reason why?
One way to ensure a smooth-sailing tax season next year is by keeping all your documents in check. The CRA says it’s a good idea to keep your income tax records and any documents for six years starting from the last tax year. Your receipts, cancelled cheques, or bank statements are all supporting documents that the CRA may potentially ask for. If you don’t have them on hand, supporting a deduction or confirming the credit you claimed may be more difficult.
Never miss out on a deduction or lose your supporting documents to claim your credits again! With Kashoo, you can take a photo, save, and upload all your paperwork in one place. With everything important digitized, you’ll never have to worry about losing them come tax time!
Question #2: Were my clients satisfied with my product and/or service?
If yes, are you able to pinpoint the reason why?
If the answer is no, what are you going to do this year to keep them as your clients?
Make 2018 the year to go above and beyond for your clients, especially if you want to keep them around for the long-term. With the rank of freelancers growing, with 20 to 30 percent of Canadian workers made up by independent contractors, on-demand workers, remote workers, and other arrangements—it’s no secret that the supply is high for small business owners. Get to know your clients, establish good business practices, be proactive, and deliver additional value-added in every project you take on. You’ll see the results (short term and long term) in no time!
Question #3: What is my current financial and tax situation looking like?
It’s hard to believe but in just a few short months, your mid-year review to ensure your business is financially on track will be back again. It’s important to start fine-tuning and assessing your business’ financials and tax situation throughout the year, rather than waiting around to see where you stand at year end.
Be proactive with your bookkeeping post tax season. Not only can it help you properly view your current business financials, but it can also help you see your operational plans for the rest of the year to start planning ahead. Post tax season period is also a good time address any new personal or business developments (such as finishing your education and starting a full time job) that might affect your tax liability in the following year. Identifying these earlier on can help you keep your tax obligations as low as possible, such as transferring unused credits or keeping them for next year.
Question #4: How are my retirement plans looking?
As a self-employed small business owner, opening a retirement plan with your financial institute is definitely something to consider to increase your tax savings. A Registered Retirement Savings Plan (RRSP) is an excellent way to lower your taxable income to defer income taxes, which can help provide future income that is beyond Social Security benefits. If you are a small business owner however, there is one catch—RRSP contributions are subject to a limit equal to 18% of your employment income up to a maximum of $26,010 as of 2017.
To do:Open up a RRSP to get a head start! To get the most accurate number of RRSP contribution room you have for the current year, check your most recent Notice of Assessment from the CRA.
Question #5: Are there changes I need to start thinking about and/or implementing in the short term vs. long term to continue growing my business?
Do I need need to incorporate?
Does my business need a technology upgrade?
Do we need to be more proactive and/or responsive to clients? And if so, how?
Just like how regular bookkeeping should be made into a habit, so does thinking about your business both in the short term and long term. Schedule weekly or perhaps even monthly pulse checks to ensure your business is growing, rather than hitting a plateau.
As you can see, there are a lot of things to consider before you flip the page on tax season. For small business owners, the extension season is equally as important as the weeks leading up to tax season, and tax season itself. If you want to ensure you file your taxes accurately next year, try Kashoo for free today to see how we can help you prepare now!