Article Contributed by David Spring
Even in the current global financial climate, new businesses are setting up shop in Canada every day. But these remain challenging times, and if your business is going to not only survive but succeed, you need to get a few things right from the start, particularly as far as finances are concerned. Here are five tips that may give you a head start.
#1 – Decide what kind of company is right for you
The most fundamental choice to make at the start, and one which may affect your business affairs greatly later on, is what type of structure your company will take. For many small start-ups with limited assets sole proprietorship or a partnership is the way to go, but these do have the disadvantages of leaving you personally liable for what the business owes if things don’t go so well. This risk can be avoided by making your business a corporation, but this is more expensive from the outset and means you must follow a variety of tightly controlled legal procedures and regulations.
#2 – Identify what financial advice is available
If your business is going to stay financially viable then you’re going to need some degree of financial advice to carry you forward. This might simply be online resources such the CRA’s (formerly Canada Revenue) website – and Revenu Quebec’s website for Quebec residents -, or you may see fit to hire an accountant to provide more in-depth financial advice. A third option that may particularly suit those with limited financial resources is to use dedicated accounting software designed by professionals to make sense of your finances.
You should also shop around for the best bank accounts and business credit cards to ensure they’re working in your favour.
#3 – Identify the most suitable accountancy package
Right at the start, you should also identify what type of accountancy package will work best for your company. Hiring an accountant is one option, but this is often not feasible for new start-ups. You can of course do it yourself, but this can be time consuming and may result in errors. Again, a viable compromise is to use accountancy software to handle your own accounts. This can save a considerable amount of time and help you to keep your records up to date.
#4 – Keep accurate records to simplify tax returns
Likewise, specially designed tax software can help you to keep track of your taxes, and can give you a real time view of what is owed to the CRA.
#5 – Draw up a cashflow forecast for your first year and have a contingency plan
It’s important to plan ahead, and drawing up a 12-month budgetary forecast of your monthly business revenue and outgoings can help you to do just that and foresee any potential cashflow problems in advance. You should also have contingency plans in place for if things don’t go as planned. This might consist of money in reserve to cover ‘slow’ months, or you might plan to target a different market if sales don’t take off as expected.
About the Author
David Spring blogs about personal finance and taxes, covering everything from accounting software to strategy for small businesses. He has written articles in both English and French.