Tuesday, 26 March 2019

How Accountants Can Use Factoring to Simplify Tax Season for Clients


Many small and medium-sized enterprises (SMEs) are first drawn to an accountant's services when they realize they have made a mistake on their taxes or are facing an audit. As an accountant, you bear the duty of telling your client the bad news, that they are in tax arrears. It’s only natural to want to help them out of this unfortunate situation.




When you’re helping these clients fix mistakes in their own accounting process and find ways to pay their back taxes, factoring may be a great option to help achieve a positive cash flow and assist with tax arrears. Here’s how:

Pay the CRA with Money Owed

Factoring allows SMEs to immediately convert their accounts receivable into cash and allows them to get the money they are owed immediately after sending out an invoice. This predictable, positive cash flow can give your clients the ability to pay their owed taxes right away, preventing them from incurring more penalties from the CRA.

If your client has had difficulty putting aside and remitting HST in the past, J D Factors can help. We can only hand over the gross amount of your client’s invoices, retaining the HST. Thus, your client never has the HST on hand and does not need to pay to maintain a separate account for it. This saves your clients time, money and hassle.

Of course, if we hold back your client’s HST we will remit it to the government on whichever schedule they prefer, or are mandated to use, whether yearly or quarterly. This saves your client the time and hassle of making these remittances themselves. They won’t have to wait at the bank and won’t have to worry about forgetting to remit.

Payroll and payroll taxes like the Canada Pension Plan (CPP) and Employment Insurance (EI) are other major hurdles for many SMEs. Those who struggle to keep a positive cash flow and who can’t make payroll will fail to retain their top talent. They will also struggle to remit CPP and EI on time. In fact, these non-remittances carry the highest penalties.

Why Should You Recommend Factoring?

Your business clients look to you as a financial guide, and the more potential solutions you have in your pocket, the more value you can offer them. Factoring is one option that your clients may not have heard of, and that can benefit your most vulnerable clients, those in tax arrears.

Factoring offers a win-win, benefiting you as an accountant, too. You won’t have to deal with calls from the CRA if your client fails to remit their HST or payroll taxes because J D Factors will be submitting these funds on time for them.

J D Factors is also dedicated to working with companies that are unable to gain traditional financing from a bank. We can help your client’s business stabilize again. If they recover from their financial troubles, they’ll be around for many years as your loyal client.

Reach out to us today to learn more about J D Factors and how factoring can help your clients.