Every dollar counts when you’re running a small business. That’s no business owner wants to spend more money than necessary on professional fees for accountants or lawyers. There’s no doubt the advice and assistance available from your accountant or lawyer is extremely valuable and worth money:
• Accountants are valuable advisors to any business, because an accountant can help you to reduce taxes, increase revenue, decrease costs and plan ahead.
• Lawyers are valuable advisors to a business because a lawyer can help you to create contracts, review agreements and avoid legal hassles.
However, you owe it to your bottom line to take whatever steps you can to get the professional services your business needs without paying a fortune.
Follow these suggestions help keep costs down.
Do the easy work
If you hand an accountant a shoebox of receipts, or ask a lawyer to create a document from scratch, that professional will need to do more work on your file. And that will cost you more money.
Instead, you can save money by doing some of the work required to prepare a project or file before you hand it over to a professional.
For example, if you want a lawyer to create a sales contract for your company to use with customers, you can start by finding a free version of a contract online, downloading a copy, and making some edits. Along with some instructions, give your edited version of the file to the lawyer and ask him or her to draft the agreement from there. It’s a lot less expensive to have a lawyer work from your draft document than preparing an original document from scratch.
Share your budget
No one likes to receive a big invoice by surprise, but that’s exactly what can happen if you don’t set a budget with your professional advisor.
By disclosing your budget upfront with the professional, a lawyer or accountant can communicate the level of service they are able to provide. It helps to clarify expectations on both sides: you’ll know what you’re getting for your money, and the professional will know what to deliver for the agreed fee. If your budget is too low for the work required, ask if you can do some of the preparatory work on the file—like entering receipts into bookkeeping software instead of handing a shoebox of loose papers to your accountant. Or, you may need to shop around for another provider.
Tip: Be sure to ask about payment policy. Ask how much of the fee must be paid upfront and how much can be paid 30, 60 or even 90 days after the work is complete.
Shop around Take your time when selecting a professional because you will likely be working with that individual or firm for a long time. Identify and approach at least three other professionals in order to find the best choice. The right professional for your business will be the one who:
• Has experience working with similar clients.
• Can do the work within your budget.
• Makes you feel comfortable.
Lastly, before you make the decision to hire a professional, be sure to ask for references. It’s always wise to first check the experiences of other business owners.
The prescribed rate is the minimum interest rate prescribed by the Canada Revenue Agency (“CRA”) that should be charged on various non-arm’s loans such as those made by you to your spouse or child (through a family trust). Such loans are a common device to split income with others in your family. The money is often used to invest in income-producing properties and the income is taxable in the hands of the loan recipient, as long as the loan recipient faithfully pays the interest on the loan at the minimum prescribed rate on an annual basis.
In a blog I wrote about 4 years ago, I suggested that the prescribed rate was about to change, or so we believed at the time and several times since. At the risk of sounding like the proverbial shepherd boy who cried “wolf, wolf”, we believe it will happen soon.
The CRA has just announced the third quarter rates and they will not change from the second quarter. It is currently 1%. The prescribed rate is based on the T Bill rate, which is hovering at around .54% recently. Nevertheless, interest rates in general are expected to be on the rise soon (Bank of Canada rate, mortgage rates etc.) and with that we can expect a rise in 90 day Canadian Treasury Bills yield (“T Bill rate”) over the next couple of quarters. As this rate edges up beyond 1%, it is CRA’s policy to round up to the next full percentage, hence 2%.
If you set up a loan in the next few months the charge rate will be 1%. After the prescribed rate change it will be 2%. A $500,000 loan might cost $5,000 more a year.
If you are contemplating such a plan or have had a plan recently presented to you, the time to act is now, really.