5 potholes to avoid on the road to business success
Sometimes running a business is like trying to drive cross-country in 5 days. As a small business owner, you have to keep the pedal to the medal as you rush to accomplish your business goals. You run from one crisis to another while striving to get more customers, remain profitable, and keep money in the bank. You've got plenty of kilometers yet to travel, plus bills to pay and products to deliver. But in your rush to get ahead, you don't have time to look for potholes. If you're not careful, you could find yourself with a flat tire, or worse, upside down in a ditch.
For today's small businesses, potholes come in many different depths and dimensions—but they always mean additional costs. They might take the form of penalties or other businesses losses, resulting from audits, government law changes, or employee fraud. Just like potholes in the road, these unexpected costs appear at inopportune moments and impede your progress. They can seriously deflate your profitability and make you lose your focus. Too many potholes could permanently sidetrack you and prevent you from completing your business journey.
Don't despair. In this document, we'll show you how the right accounting system can free you to focus on the important tasks at hand while avoiding the potholes that line the road to business success.
Pothole #1: Denied a loan
Most banks require properly prepared financial statements in order to lend you money.
You might be doing a great job of managing your cheque book. But how do you know if you're making a profit or charging enough for the products you sell? It's not enough to account for receipts and expenditures: you need to track inventory, account for customer receivables and plan for vendor invoices that haven't been paid. You need to apply proper accounting standards (often called Generally Accepted Accounting Principles) and present your information in a format a bank can understand.
Don't risk being denied a business loan.
Present your numbers professionally with an accounting system that follows generally accepted accounting principles and creates properly formatted financial statements that present at a minimum prior year comparisons, variances with percentages, and departmental details. Your system should give you an option to create charts and graphs that help you identify trouble spots before they turn into bigger problems. Your banker will look to your financial statements for assurance that you are paying attention to your own business results and monitoring not only your net income, but also your assets and cash flow.
Figure 1: Daily Business Manager lets you monitor your progress.
Other ideas: Subscribe to Sage 50 Business Intelligence to create customizable business reports that pull from your data real-time. Store templates and drill down into the details, all within Microsoft® Excel®.
Road Sign: Do not enter this road.
Pothole #2: Charged payroll tax penalties
Failure to properly compute or timely deposit payroll taxes can lead to costly penalties.
You have expanded your business and added employees. While before you were able to calculate the taxes and make your tax deposits, the job seems to get tougher every day. You barely get the payroll cheques cut when it's time to worry about tax deposits. You have to make federal and provincial deposits and follow the rules for employee withholding. At the end of each quarter there are more forms to file and calculations to perform. You can't tell your T4 from your T3 and who knows how much has been withheld for the CPP or QPP.
Don't let payroll tax penalties eat away at your profits.
Take control of your payroll process with an automated payroll solution from Sage 50 Accounting. Be sure you are paying your employees what they are due and withholding the correct amount of tax. Once everyone is paid, you can turn your attention to tax payments. Sage 50 Accounting will not only compute the amount of tax due to individual government agencies, it will also create the remittance for the appropriate payroll authorities so you can quickly create cheques. Add Sage Business Care Payroll services to ensure you receive automatic tax table updates and stay on top of regulatory changes.
Figure 2: Automated payroll processing from Sage 50 Accounting
Other ideas: Subscribe to Sage Business Care Payroll for automatic payroll tax table and form updates.
Road sign: Watch for pedestrians and be prepared to share the road with them.
Pothole #3: Refused credit
Vendors will review your payment history before extending credit.
As your business grows, so do the bills. Before long, you have a stack of invoices arriving every day. You enter every bill when you sit down to write cheques, but you don't keep track of what you owe at any point in time. Paper gets moved around the office, employees take invoices to approve, and balances start to grow. Before you know it, collection calls become a regular occurrence. You miss out on early payment discounts, vendors begin requiring COD payments on new purchases, and you spend more time trying to locate missing invoices than you do running your business.
Take charge of your accounts payable.
Enter vendor invoices in your automated accounting solution the minute they are received. With Sage 50 Accounting software, you can record due dates, payment discounts, and default account numbers for each vendor. When it is time to pay bills, you can review amounts due and pay them all at once or individually. You can make payments electronically or by credit card. With Sage 50 Accounting, you can plan ahead, review your cash flow requirements, and stay on top of outstanding bills. With the insights you gain from Sage 50 Accounting, you can even analyze your vendor purchase history and negotiate discounts from your top suppliers.
Figure 3: Review payables graphically
Other ideas: Create automated purchase quotes and purchase orders to ensure invoices match agreed-upon purchase arrangements.
Road sign: Watch for fallen rock and be prepared to avoid a collision.
Pothole #4: Assessed additional taxes
You aren't collecting the correct amount of GST, Harmonized Sales Tax (HST), or PST on sales made in certain provinces.
You are making sales and charging taxes. But how do you stay on top of regulation and rate changes? Even if you manage to file your tax returns and pay amounts due on time, you run the risk of undercharging customers and having to make up the additional tax due in an audit assessment. When you add in the complexity of managing HST charges less any applicable purchase credits, the whole process gets even harder to manage and more costly.
Don't let HST create disharmony in your organization.
Turn your taxes over to an automated system that can manage sales, apply the correct rates of tax by customer and item, and accumulate any taxes due for reporting and return filing purposes. Look for a system that offers electronic updates and powerful tools. There is no point spending inordinate amounts of time manually processing tax information when an automated solution can manage all aspects of the chore.
Figure 4: Sage 50 Accounting manages the taxes for you.
Other ideas: Increase efficiencies and reduce errors with Sage 50 Accounting by generating an electronic version of your GST/HST return (.tax file) to upload to the Canada Revenue Agency using the Internet File Transfer service.
Road sign: Shows maximum safe speed on ramp.
Pothole #5: Defrauded
You don't have good control of cheques, accounts, or transactions.
As you add employees, you will want to delegate some of your accounting tasks to others. You may want help entering customer and vendor invoices, recording payments, and managing inventory. Make sure that when you turn over tasks, you don't also turn over control of your business. It is important that you balance access to information with proper security and management oversight. You don't want your AP person to have the ability to both add new vendors and pay the bills – instead, you want to separate these duties to reduce your exposure to fraud. Ideally, your system should let you determine user rights down to the report level.
Don't let additional help increase your exposure to fraud.
Look for help from an automated system like Sage 50 Accounting that supports multi-user access through user- and role-based security. You can limit access to specific areas of the software and reports within each area. With the right level of security in an automated system, you can get the help you need without having to hand over the keys to your business.
Figure 5: User and Role based access lets you limit employee access.
Other ideas: As your business grows, you can move up to Sage 50 Accounting Enterprise, which supports up to 20 users. No need to re-learn software or worry about losing historical data.
Road Sign: Steep hill ahead. You may need to use a lower gear.
Don't let your business take a wrong turn.
You can't afford to waste time on detours. Let Sage 50 Accounting software help you keep your business on course. Produce reports your banker will love – including charts, graphs, projections, and forecasts. Stay on top of payroll tax changes while withholding and remitting the correct amount of payroll tax in one seamless process. Improve your vendor relationships through timely payments and detailed monitoring. Avoid sales tax adjustments with automated updates and integrated tracking. And once you have all your compliance issues addressed, protect your business assets with detailed permissions and user passwords.
Sage 50 Accounting can smooth out the bumps on the road to business success. With the right accounting system for your business, you will not only be able to move at a faster pace, you can spend less time worrying about the details and more time enjoying the scenery. You can rely on Sage 50 Accounting's full-time audit trail, sophisticated GAAP-compliant reporting, tax, remittance, and return filing, automated updates, and role-based permissions, to help you quickly reach your destination with fewer hassles.
"Sage 50 Accounting is our solution of choice for managing the business in terms of financial, payroll, sales and inventory needs. The software helps keep our business running, allowing us to monitor our profitability on a regular basis and helps ensure that we are always in compliance."
—Niloufer Bhesania, Chemsynergy, Inc.
"With thousands of inventory items to keep track of, using Sage 50 Accounting is an essential part of our daily business. Having accurate, up-to-date financial records that comply with all government payroll and sales tax obligations while using a secure interface gives me strong peace of mind."
—Nazrul Islam, All Canadian Business Products