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Shareholder Remuneration Planning

Posted by Eric Walker & Steve Frye Posted on 06 Feb 2018

Business owners-managers put money in and take money out on a regular basis during the year, and at the same time often use the business bank account for what may appear to be personal expenditures. This often leads to shareholder advance balances at year end and some major bookkeeping challenges to boot.

These balances are often part of the consideration to determine shareholder bonuses and dividends at year-end, the characterization of which often takes places after year end: A challenge for everyone involved (legal and accounting professionals in particular) to document and execute the appropriate resolutions.

2017 presents some additional challenges in this regard, for Canadian and US taxpayers.

In Canada, 2017 was the last year that dividends could be distributed freely to adult family members as result of the new tax measures on splitting income which came into effect in 2018 and with estate planning ramifications.

In the United States, the recently passed tax reform bill introduces a transitional tax on US shareholders of corporations on the tax-based earnings of the corporation, including those foreign-owned. Canadian personal taxes and non-resident withholding taxes can be used as partial deductions to this transitional tax. US resident shareholders of Canadian closely held corporations who wish to generate Canadian tax to offset this transitional tax will want dividends paid in 2017.

To many of us in the planning world, dating resolutions for this past year may pose more risk than usual. Generally, the Canada Revenue Agency (“CRA”) do not challenge the dating of these documents – in fact as I understand it, the Income Tax Act contains no specific provision with dating or amending documents retroactively.  But the CRA will likely take some additional interest in the dating of resolutions for 2017 given the new tax measures. Possibly the Internal Revenue Agency in the US might as well. Bottom line all of us want to avoid the appearance of “backdating” and/or retroactive tax planning which may prove to be ineffective in the end.

I always encourage my clients and contacts to discuss their remuneration plans and strategies with their legal and tax professionals. For 2017, I would urge them to do so, if it is not too late to do so.

Happy Reading

Acknowledgements to Kevin Nightingale of MNP  and John Sorensen of Gowlings for their thoughtful article in Tax Topics (issued by Wolters Kluwer) on this subject.

How To Escape Your Business While on Vacation

Posted by Eric Walker & Steve Frye Posted on 02 Jan 2018

You’ll return healthier and happier if you learn how to truly unplug

It’s a scene many entrepreneurs know all too well: you go on vacation to take a break from your business, but as soon as you step foot on the beach you begin thinking about work. 

No matter how hard you try, your mind keeps drifting to some matter you forgot to deal with before you left, or the work you must do when you return. 

Sound familiar?

Here are some tips to keep your mind from wandering back to your business while you’re on vacation.

Leave Your Business in Good Hands

A common worry for vacationing entrepreneurs is the business falling apart without them.

While an understandable concern, it’s often not the case. Your business will be just fine providing you’ve taken a few precautions.

Train your employees well. Invest in training once they are hired and again every six months so they can keep up with any changes in the way your business operates.

Appoint an assistant manager and train that person what you do.

Appoint a temporary manager while you are on vacation.

Ask a colleague or trusted family member to handle select business responsibilities while you’re away.

Or, if there’s no one available to run things for you, simply tell your customers your business is closed for a week. Prepare for your vacation by doing any important work before you leave so there’s no void in customer service.

Really Unplug

It’s not truly a vacation unless you’re taking a break from email and your digital devices. 

Ideally you will leave the laptop, tablet and smartphone at home to avoid the temptation to “check in” on your business while on vacation.  

If going device-free is impossible, instead set some boundaries to define your technology use.

Limit email time to 15 minutes each morning.

Send as few emails as possible and only respond to essential messages. 

Check voicemail once a day only. 

Don’t take your electronic devices out of the hotel room to avoid the temptation to power up by the pool.

Give your employees clear instructions about when (and why) they may contact you; otherwise, you may get calls all the time.

Say You’re Away

It’s hard to keep your mind off work if you keep getting calls and emails from your customers or suppliers. 

In addition to communicating your holiday time to your employees (and providing instructions when it’s okay to reach you), consider likewise informing key customers and suppliers or anyone who connects with you regularly. 

Let people know you are away and provide clear information about how and when they can reach you. 

Share your schedule for checking emails and answering calls while on vacation. 

If possible, name an employee or partner as your contact while on vacation.

Set up an email vacation alert containing any instructions for contacting you or your team. Be sure to include your return date.

Chances are people will be much less likely to bother you during your vacation.

Don’t let work eat into your precious vacation time. You deserve a break! There are plenty of benefits to taking some time off but you risk returning from holidays just as tired as when you left unless you can free your mind from thinking about your business while you’re away.

How to create a vision statement for your business

Posted by Eric Walker & Steve Frye Posted on 12 Dec 2017

It’s not just something a big company does

A business vision statement gives your growing company something to aim for. It gives your business purpose. 

Business life is full of twists that can distract from your objectives, so your chances of success are better with a clear vision. A vision will guide you forward. 

The importance of a vision statement cannot be overlooked – not only does it provide long term direction and guidance, but it also gives you the inspiration and the necessary energy to keep going when you are feeling down.

A business vision will steer your efforts beyond a business plan.

A business vision will inspire your employees.

A business vision explains to investors, lenders and suppliers what you want to achieve.

What is a vision statement?

A vision statement declares what an organization wants to achieve over time. It answers the question, “Where is my business going?” in one sentence or one short paragraph. 

Think of a vision statement as a future description of your business. It doesn’t address the immediate goals or activities of a business (usually covered in a mission statement) but instead elevates the discussion to what is possible for your business to achieve and contribute to society over time. 

A vision statement defines the core ideals that give your business its shape and direction. It’s an essential part of success and some of the world’s largest organizations find value in a vision statement. 

Here are three examples of vision statements from organizations that you may recognize:

“Helping people around the world eat and live better” (Kraft)

“To create a better everyday life for the many people.” (Ikea)

“A world where everyone has a decent place to live.” (Habitat for Humanity)

 Crafting your vision statement

Start by addressing the following questions: 

What does my business do? For example, say your business creates software to help people manage their finances.

How will others benefit from it? You believe that better financial management enriches lives.

What will be the legacy of my business? Take a future look at your business to address long-term impact. Using the above example, you might talk about making the world a smarter place through intelligent financial management.

Now put it all together in a trial statement:

 “Improving and enriching lives everywhere using intelligent personal financial management tools.”

 

Once you’re (almost) satisfied with your statement, let it marinate for a while before you return to make any edits. Read your vision statement aloud. Next, share it with business colleagues and other business owners to obtain their reaction and feedback. It always helps to search online for sample vision statements from companies both large and small.

Once you’re happy with your vision statement, share it with the world. Put it on your website. Make it part of your training program for new employees. Add it to your business plan for stakeholders to see.

A business vision statement won’t last forever – once you achieve your original vision, you can (and should!) update your vision statement to reflect new ambitions.

4 ways to improve your business cash flow

Posted by Eric Walker & Steve Frye Posted on 31 Oct 2017

Use these suggestions to keep more money coming into your business than going out

Cash flow is a serious issue for entrepreneurs and can be a source of significant personal stress.

There is plenty of advice on how to improve your business cash flow but not all of it will be applicable to your situation. In many cases your business may only require a cash-flow tune-up in one of the following areas.


1. Speed up receivables

How quickly your customers pay and how you manage outstanding invoices is one of the biggest factors determining the strength of your cash flow. Have you let this area of cash flow management slip? Try any of these tactics to get your money quickly:

  • Ask for payment upfront.
  • Accept credit cards. There are plenty of options online, and most accounting software features a payments option.
  • Invoice right away, with short payment terms. Ask for payment in 10 days instead of 30.
  • Stay on top of receivables. Make it a habit to check the age of your receivables daily so you can take action.

2. Stretch payables

Did you know your cash flow is affected by how you pay your bills, when you pay them and how much you owe your suppliers? Keep more money in your business for longer periods of time by:

  • Negotiating a longer payment period with your suppliers.
  • Asking for a discount from your suppliers if you pay quickly (if you have excess cash).
  • Paying a portion of an invoice and the balance in 30 or 60 days.
  • Using a credit card to pay bills. When used wisely, credits cards can provide an effective short-term interest-free loan that can ease a temporary cash flow crunch.

3. Improve inventory management

If you think your problems are inventory-related it may be time to evaluate your current inventory management system.

  • How often is your inventory turning over? You may need to adjust prices and/or reduce future orders.
  • Are you running out of best-selling items? It deprives your business of cash from sales.
  • Get rid of stale inventory. Hold a sale to move old inventory so you can invest in stock that turns over more frequently.

Accounting software can make inventory management easier, so you might want to consider investing in an affordable program.


4. Make a cash flow strategy

Don’t have a plan to manage your cash flow? You may not have any cash flow issues at the moment, but without a cash flow strategy to help keep you on track you could run into problems in the future. 

Search online for a free cash flow forecast template and take the time to fill it in. Update it weekly or monthly. A cash flow template will let you see how much money is coming in from all sources and how much money is flowing out to pay various expenses. It will let you see how much cash surplus or shortage your business may encounter in any given week or month. By completing a cash flow forecast you’ll be in a position today to spot future cash flow problems so you can take corrective action.

Insufficient cash flow can kill any small business. Make it your personal responsibility to actively monitor cash flow so you can avoid a money crisis and plan ahead with confidence.

The content provided within this site is for general information purposes only, and should not be used or construed as a substitute for consultation with qualified professional advisors.