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Can you afford your business expenses?

9/17/2018

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When running your business is important knowing the expenses you can claim not just to reduce any amount of tax to pay but also to be able to manage your business properly, making decisions on which expenses to reduce to save money. The main goal of having your own business is paying yourself and be able to pay the business expenses with the business revenues.

All the expenses that you incurred to run your business you are eligible to claim them: office expenses, supplies, salaries, bank charges, insurance, utilities, vehicle expenses, etc. Always providing copies of the receipts and proving that the expense is actually related to your business. If you are in the food business buying supplies like sugar and oil are totally fine, not the same with a software business that the amount of sugar is just related to supplies to giving coffee or tea to your clients when visiting your office. All expenses need to be justified and supported by the nature of the business and the proper supporting documents.

At CRA website you can find a long list of expenses you are able to claim: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html, just be careful with which ones are actually necessary. Remember that the goal is not pay for all the expenses in the list but expend the necessary amount of money to run your business and still be able to pay yourself. I once met with a client that bought anything she can find for her business, her justification “it is eligible, it’s a business expense”. When I asker if she can actually afford all that expenses she was surprised that she could only pay “in cash” for just part of the expenses and the other part she didn’t actually need it. Her business now is running better, she is able to pay herself, have a profit to invest and find the cutest toy for her daycare business.

If you have a web design business you need top of the notch software, but if your business is a daycare you can do it, for starters, with a free version of FreshBooks. Sometimes is not the expense per ser, the main point is if we need it or if we can afford it. We totally understand we need to invest to sale, but are you aware of smarter ways of running your business?
  • You can use free software - even accounting software - that help you be organized and run your business. Once you grow enough and are able to pay you can upgrade.
  • Even if they are not free you can use technology on your favor: online payment services, teleconference services. Buy the software you really need.
  • Don’t buy what you don’t need, even if is on sale.
  • Plan, use budgets to track your expenses. If is not in your budget don’t buy it.
  • Go paperless, print only what is necessary
  • Reduce your credit card debt, reduce your interest payments.
  • Instead of renting an office, be creative. Use co-working spaces (if appropriate for your business model) or work from home.
When buying supplies or incurring in expenses for your business you must also consider the source of money. How are you paying for that? Are you incurring in more debt? Are you able to recover that amount with your sales? This is a topic for next blog.

In summary, we can always plan for ways to afford the business expenses and run a profitable business which can support our life style. 

Photo by Ryan Born on Unsplash

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    Author

    Dayani Castro, was born in Cuba, and is a proud Canadian citizen who pay her fare share on taxes and likes to contribute to the economy.

    In her own words: "I am from Cuba, moved to Canada 10 years ago with my daughter and we love it here. Won't go into politics but I took the decision to up-root my family to find better opportunities for my daughter to become a powerful and an independent woman. I open my bookkeeping and tax business 5 years ago, and love helping immigrants - specially women - navigate the process of creating and growing their business. As a single mom, immigrant an entrepreneur I recognize the importance of a supporting and loyal community when you need to start from Zero and build your dreams in your new country."

    Dayani's vision is to help as many immigrants as possible to create thriving business, giving them the opportunity to be independent, give back to the society and create new jobs.

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