5 Easy Fixes for Common Payroll Errors

For most businesses, payroll is a huge expense. While businesses in the service industry generally have higher payroll costs, it's fair to assume that 20% to 30% of your gross revenue will be spent on payroll. It's important to be precise and accurate whenever you're dealing with such a huge chunk of money. Consequences for late payments, missed deductions, and more can add up and eat into your business' bottom line. Here are some common payroll errors and easy fixes to help you get the most out of your payroll.

1.      Remit Your Payroll on Time

Missing deadlines for payroll remittances to the CRA is a costly mistake that's commonly made. The CRA can fine you 10% of the total of the late remittance for a first offense and 20% for a second offense in the same calendar year. The later you are, the more interest you are charged.

Although it's costly, it's easy for a business to lose track or forget to file payroll remittances on time. Outsourcing payroll is one simple way to avoid these late penalties.

2.      Know if a Person is an Employee or a Contractor

You can get into trouble if you pay employees as if they are contractors, especially if you're audited by the CRA and they determine that the arrangement is more like an employer/employee relationship. If you classify the relationship incorrectly, you could end up being liable for the CPP and EI owing on whatever amount was paid to the person. Visit the CRA's Employers' Guide to learn more and ensure you're classifying the people who do work for you correctly.

3.      Deduct CPP, EI and Income Tax from Overtime Pay

If you're paying employees overtime, you still have to deduct CPP, EI and income tax from that overtime pay. The way you should pay overtime depends on the pay period. Whether the amount owed is paid in the same pay period it was earned or paid in a later pay period will depend on how you pay it and what deductions you make. Talk to your accountant of visit the CRA's Employers' Guide to ensure you're paying overtime correctly.

4.      Pay CPP on Commission

In some situations, you may pay an employee commission after they sell something, which can happen irregularly. In this case, to determine the maximum CPP contribution amount, you have to prorate the annual basic exemption amount for CPP for the number of days in the year between the commission payments. Otherwise, you may pay CPP incorrectly and be stuck making up the difference later on.

5.      Ensure You've Got the Cash for Payroll

Let's face it. Payroll can put a huge strain on your cash flow. Talk to J D Factors about invoice factoring, which is a great solution to ensure you always have the cash available to pay your people on time.

Correcting these costly payroll errors will help you avoid having to pay more than you need to. With your payroll under control your cash flow will be too, which is a critical part of a strong, healthy and growing business. Give the team at J D Factors a call for more cash flow tips! 

5 Tips to Reduce Your Operating Costs

What you pay for the day-to-day operations of your business is called your operating costs. Understanding these costs and working to reduce them where possible is important to have a more successful and financially stable business. 

Problems such as poor cash flow and small margins can be reduced if you focus on spending less money on running the business. However, you have to reduce operating costs carefully to be sure that you don’t sacrifice the quality that you deliver to your clients and customers. Otherwise, you’ll undermine your company’s reputation and growth. It's a tough balancing act, but here are five tips to help you reduce your operating costs without negatively impacting your business.

1. Start with Software

Many owners of small and medium sized enterprises do things by hand when there are software options that can do it for them. When you use software, you save yourself and other staff time, promoting efficiency and reducing your operating costs. There are many different software options to consider, including those for marketing, accounting, customer relationship management and more. Consider whether you’re spending a lot of time on something a computer could handle for you.

2. Outsourcing

Staffing is a huge cost, so you should also consider outsourcing where you can, not just to save on staffing costs but also to get better results than you might be able to achieve yourself. A specialist in a field may be able to get you better marketing results, better legal advice, and more. Their guidance can help you make better use of your resources, saving you in the long run.

3. Change Suppliers and Vendors

You likely have a strong relationship with your suppliers’ vendors, but it is simply good business practice to also look elsewhere to see if you can lower your costs. If you have ongoing orders at a supplier, then you may be able to negotiate a discount for your business. Or your supplier may be willing to match lower prices that you’ve found elsewhere.

Consider setting up a quoting process and getting at least two other quotes. This will help keep your vendors competitive even if you keep choosing them over other options. Be sure that you’re providing enough information that all of your quotes are accurate, or newcomers may underestimate the job and quote too low (which could cost you money in the long run).

4. Lose the Office Space

Do you really need to have office space, or at least as much as you do right now? By allowing employees to work remotely, you can significantly reduce your operating costs. You don’t need to sacrifice connectivity to do this. There are plenty of online tools to keep you in touch with your employees and monitor their progress on assigned tasks.

5. Energy-Efficiency

Perhaps you have to have an office space to meet customers or host employees? Then you can try to reduce your costs by making the office more energy-efficient and green. Better insulation or HVAC equipment can reduce your monthly utility costs.

While many of these tips may increase your up-front costs temporarily, you should find that they overall lower your operating costs enough to make up for this, and then benefit you, after several months. In the end you’ll have a healthier cash flow and stronger business overall. Invoice factoring can help with that too. Reach out to us at J D Factors to discuss how.

 

Cash Flow Mistakes SMEs Should Avoid & 4 Easy Solutions

You need to buy supplies, pay staff, and make investments. But suddenly you don’t have enough cash on hand for these necessities. Cash flow sputters like this can significantly impact your business, so much so that you miss out on contracts, are late to deliver, drive away your best staff and struggle with other problems. For many small and medium sized enterprises (SMEs), most cash flow issues are the result of a handful of common mistakes that are easy to correct. Here are four things your SME should do to avoid common cash flow problems.

1. Conduct Regular Cash Flow Projections

If you know that a cash flow problem is coming, you can change your decisions to get your business on the right track. The key to seeing problems coming is to conduct cash flow projections. Many different accounting programs include options to project your cash flow. You can also project it yourself with basic expenses and accounts receivables information.

2. Finance Major Purchases

If you need to invest in new equipment, property, or other major purchases, don’t dry up your cash reserves to do it. You need the flexibility of having cash on hand. Look into financing options for all of your major investments. It may cost a bit more, but it also enables your business to be more financially flexible and take advantage of opportunities.

3. Regularly Check Your Profitability

If your business isn’t profitable, then you will inevitably struggle with cash flow. Even if you were very profitable the last time that you looked, it's important to review your finances regularly because things can quickly change. Check how profitable you are and look for ways to boost your profitability. You may need to charge more for certain services or products, focus more on selling what’s most profitable to you, or reduce your expenses. Regularly checking your profitability is a wise idea to streamline your business and prevent major problems before they pop up.

4. Keeping Good Invoicing Practices

When you get paid will dramatically affect your cash flow. In order to get paid as quickly as possible, you have to have strong invoicing practices. That means making payment terms clear to customers from the outset, sending out invoices as soon as you can, demanding payment in 30 days or less, following up on invoices that are late, and using strong collections tactics. If you work with fewer, larger clients and can afford to be selective, it is wise to take on only the clients who pay well. Also, you can consider offering stricter terms (such as higher late fees) for clients who routinely pay late.

What If You Are Still Having Cash Flow Problems?

Some businesses have to wait a long time for payment, manage large projects, and deal with other inherent problems that make managing cash flow more problematic. Factoring can help you manage your cash flow better so you can build a more robust business. You’ll get your money within 24 hours of issuing your invoice and be able to use it immediately. This can also benefit you by reducing the time and resources you spend on invoicing and collecting. Contact J D Factors for more information on how invoicing can help your SME regain control of your cash flow.

Canadian Businesses Struggle to Access Financing Amid Covid-19 Response

The COVID-19 response continues to strain small and medium-sized businesses in Canada. The uncertainty makes buying supplies, paying for new safety features, and even paying staff a struggle for many. While the Ontario government stepped in to offer financial support to businesses, many are still waiting.

Delays in Government Funding

According to the CBC, as of this April, Magdi Bazara, owner of the 3 Cents² Coffee Shop and Eats to Go, was promised funding that never arrived. Both businesses were granted $10,000, but the money didn’t come through. In March, Bazara then learned that his application for the Coffee Shop was deemed ineligible after the fact, without any explanation as to why. Being out $10,000 that you had counted on is a struggle for any business.

The CBC has several examples of businesses that are still waiting for the bureaucratic machine to fulfill its promises. For example, Steve Quay, owner of Quay Communications, has been waiting for a government grant he was approved for since January. As many business owners are no doubt doing, Jones is pouring his personal money into his business to try to keep it afloat in the meantime.

The government admits that while 108,000 businesses received their first payment, 35,000 have not yet received their second. An informal survey conducted by NDP MPP Jessica Bell found that 85% of the business owners she spoke to have not received their funding yet.

Gaps in Government Grants

Government funding isn’t just slow--it also has strict eligibility criteria that leaves many struggling businesses in the lurch. For example, Ontario’s Main Street Relief Grant for Personal Protective Equipment (PPE) is only for very small businesses with 2 to 19 employees. Sole proprietors with no employees and small businesses with 20 or more employees don’t qualify for this support.

Other grants have minimum revenue loss as their metric for eligibility. For example, the now-closed Small Business Support Grant required businesses to demonstrate a 20% revenue drop in April 2021 specifically. However, this was in response to a lock-down measure starting in December. The government did not really offer support to businesses that struggled over Christmas, unless the effect was so severe it lasted into April.

An Alternative: Invoice Factoring

If you find yourself ineligible or still waiting for government financing for your business, we have the financial solutions you need. Invoice factoring is a strong alternative to government loans. When you send out an invoice to J D Factors, we make sure that you have access to the cash from that invoice in 24 hours. That response time means that you can be more flexible, make better decisions, and be certain that as long as you can invoice, the cash will keep coming in.

Our services are particularly valuable as these economically uncertain conditions continue. J D Factors offers non-recourse factoring, which means we handle collection efforts from your clients and don’t ask you to return your money to cover bad debt due to a client's bankruptcy. Reach out today to discuss how invoice factoring can help you manage risk and keep your business open.

What You Need to Know about the Emerging B2B Ecommerce Market

Some B2B companies already had ecommerce sites set up to serve their customers. However, with Covid-19 preventing most traditional in-person sales, even more B2B companies are adopting an ecommerce model that allows customers to order much in the same way as B2C consumers purchase items on sites like Amazon. According to Forbes, B2B ecommerce has become one of the fastest growing segments for both new and established companies. Forrester Research projects that B2B ecommerce will make up 17% of all B2B sales in the United States by 2023.

If you’re considering creating an ecommerce site for your company, there are a few things to consider. Making the move from a personal, face-to-face sales process to an online one can boost convenience, and works especially well for companies that need to connect with younger buyers, but it has its pitfalls too. Here is what you need to know about B2B ecommerce.

General benefits of moving to ecommerce

Larger customer base: Moving online allows you to access a much wider base of customers. So long as you can ship your product or offer your service in their area, you can reach them online. Ecommerce is a key tool to expand your business.

• Convenience for customers: Customers find ecommerce to be highly convenient. They can access the store at any time, see their past purchases to buy again more confidently, look through product specifications at their leisure, and use new payment options.
• Avoid credit card fees: The world of ecommerce provides access to other payment options that may charge you less in terms of fees than traditional credit card providers. Some of your customers may prefer to avoid using credit cards as well.
• Customer loyalty programs: It can be easier to implement a customer loyalty program through an ecommerce site. These programs provide their own benefits to you, like providing a wealth of customer data and intelligence.
• Competition: As ecommerce has not been adopted widely across all industries, it may be a great opportunity for you to get a leg up on the competition.

Potential issues when adopting ecommerce

Starting up an ecommerce site for your business can be rewarding but is expensive and also brings risk, like any business change. You can protect your business from these issues ahead of time if you consider them first.

One issue is meeting customer expectations. Delivery expectations for clients are higher when they are buying online. They compare the experience to consumer-facing ecommerce and expect quick shipping, fast updates on shipping progress and more.

Web development has its pitfalls as well. You’ll need a highly intuitive and functional website right from the start, or you could deter customers who have bad experiences using your website's new functionality. You’ll also need a platform that is secure to protect your customer’s information.

Creating a website that can meet these needs can be expensive. Invoice factoring can help you build up the cash reserves to afford a quality website right from the start, by giving you access to your revenue the moment you send out an invoice. Many businesses work with companies like J D Factors to fund their growth and development, too. With invoice factoring, the factoring company pays you what you invoice your customer, minus a fee, and collects from the customer on your behalf. In the meantime, you can use that cash to fund initiatives like developing an ecommerce website.

J D Factors offers factoring services that can help you grow your business with ecommerce solutions, or in other ways. Contact us today to learn more.

Tax Advice for Businesses that Have Survived the Pandemic

First, if you’re here, congratulations for surviving a very tough year! About one in six businesses considered closing for good this year. We’re not quite out of the woods yet though and are heading into a tough tax season for businesses that have survived the pandemic. Thankfully, you still have options and strategies that can help. Here’s our pandemic tax tips for 2021.

The Canadian Emergency Wage Subsidy (CEWS)

Many businesses took advantage of the CEWS in order to pay their employees and keep their doors open. If you claimed CEWS, then the money that you claimed is considered business income and must be included with your taxes. You also must withhold CPP, income tax and employment insurance premiums from the CEWS that you give to employees.

The CRA is doing mini audits of the CEWS and requesting that some businesses give them information about how they used the relief benefits within 10 days. It’s wise to work with your accountant to have this information available quickly.

The Temporary Wage Subsidy (TWS)

If you were eligible for this tax break the CRA already calculated it and told you. This is not taxable income, instead it is a straight tax break that you will not need to pay taxes on, although you will need to report it.

For Your Employees: Working from Home Tax Deduction

Keeping your employees employed this year was likely tough. While you probably can’t offer them the kind of benefits or bonuses you’d like to, you can at least make them aware of the tax benefits that the government is offering. If your employees are newly working from home, or did for a period of time in 2020, then they may be able to claim a maximum of $400 for their expenses, without having to track them. In most cases you do not need to provide anything for employees to claim this.

Moving Matters

Do all of your employees still live in Ontario? When people began working from home they also moved away from the office. Some may have moved out of province. There can be tax implications to hiring or having an employee who is out of province. This is an important subject to bring up with your accountant.

If your employees moved out of the country, or you chose to hire people who are not residents of Canada to fill gaps or lower your employment costs, then there are even more tax implications that you should discuss with your accountant.

Factoring and Taxes

Do you find that you don’t have the cash on hand to handle your tax obligations? It has been a challenging year, and many businesses are in the same position. Factoring can help you have a healthier cash flow, maintain your savings for your corporate taxes, and save for and pay your employee’s salary more effectively.

Invoice factoring gives you access to your accounts receivables immediately. At J D Factors, we pay you when you send out an invoice and then we handle the payment from your customer. This means that you’ll have a stronger cash flow all year, which is especially helpful come tax time.

Last Minute Tax Tips

It’s tax season again, which means it’s time to get your affairs in order. This can be a busy and stressful time for everyone, but particularly for small and medium sized businesses. Add the unique stressors of the pandemic, and your taxes may seem even more daunting this year. But have no fear, there are a handful of simple, last minute tax tips that will help alleviate the stress.

1) Start Early

Don’t procrastinate. This can be hard when things are stressful, but you will be better off if you just buckle down and get things done. So, call your accountant to make an appointment to start early to ensure that you are ahead of the game and avoid any surprises.

2)     Pay on Time

Missed payments, late filing and other delays can lead to unnecessary fees or interest payments, ultimately making your tax season more expensive than it needs to be. Worried you won't have the cash on hand to pay your taxes? The team at J D Factors can help. We can work with a pre arranged payment plan with the CRA and can even put aside a portion of funds from funding to go towards your tax bill.

3)     Ask for Help

The Canadian government offers several credits and deductions for small-to-medium sized businesses to assist with pandemic recovery. These programs are designed to help you save money to support the growth of your business and the Canadian economy. Make yourself aware of these assistance programs and their tax implications. Doing so could help save you money and accrue additional support for your business.

4)     Be Thorough

The last thing you want is to be finished with your taxes and then get a letter from the government saying your business must undergo a costly and time-draining audit. While sometimes being audited is random and unavoidable, you can take steps to prevent the likelihood. Your accountant and bookkeeper will help ensure that you:

• Are thorough with your deductions.
•  Understand the limits to deductions such as travel expenses and dining out and don’t overestimate them.
• Keep consistent and detailed records of what you claimed on your taxes (this is important to keep for your own purposes in case an audit is in your future).

 5)     Seek Help from a Professional

At J D Factors, we provide factoring advice to small and medium sized businesses looking to improve cash flow (and following these tax tips will help you do just that). Contact us to get your cash flow under control so you can pay your taxes on time.

Remember, there's still time to seek help from a professional accountant, and we'd be happy to connect you with some of the best – reach out if you need a referral. Working with an expert will ensure that your taxes are done properly, thoroughly and on time.