Top 5 Financial Tips For Canadian Entrepreneurs

Owning a business can be incredibly rewarding. It can leave you feeling empowered and in control of your financial success. However, there are a lot of responsibilities that come with being a successful Canadian entrepreneur.

According to a 2018 poll, 42 percent of small business owners in Canada feel “uncertain about their post-business life.” Much of that uncertainty stems from financial worries like figuring out successions, whether their business is ready to sell or not and mapping out a retirement plan.

Whether you are new to the entrepreneurial game or you've been at it for a while, understanding the common pitfalls will put your business on the path to success.

Top 5 Financial Tips for Entrepreneurs

Below are the top five financial tips for Canadian entrepreneurs. These tips will help you enjoy better financial health, both for your business and personally.

Establish Clear Financial Goals

If you’ve ever created a budget for your personal finances, you know that goal-setting is crucial to financial success. Yet, Canadian entrepreneurs don’t always think about setting financial goals for their business the same way, which is dangerous.

Creating financial goals is critical to ensuring that your business succeeds long-term. Not only do financial goals create a roadmap for your spending and saving, but they also establish a foundation for larger goals. For example, if you want to have branches someday or bring a few additional employees on the team, you’ll need to start laying the foundation for those goals now.

It is important to note that the smaller business goals you create today are stepping stones towards your long-term business plans.

Financial goals can be overwhelming to set, but the most challenging part is often getting started. One way to make this easy is to keep things basic. Sit down with a pen and paper and jot down what you want to accomplish financially with your business. At this stage, don't worry about keeping your thoughts organized. Instead, write down your goals as they come to you.

The simple act of writing will help you internalize your goals. You can even put your goals somewhere visible to hold yourself accountable easily. Once you have your thoughts written out, you can use the principles of SMART business goals to organize them. This means identifying the goals that are:

• Specific
• Measurable
• Attainable
• Relevant
• Time-Based

This is a great way to identify anything that doesn’t fit in. This way, you can set aside goals that don't fit your business and revisit them in the future.

Put Yourself On The Payroll

Many small business owners forget that they are employees just as they are founders. Therefore, paying yourself a salary is important. After all, you should always invest in yourself first. Besides, it also helps you check if you can afford to keep your business profitable for years to come.

To get things going, make a list of your bills so that you can get a baseline of how much income you need to keep up to date on your expenses. Then, use that to determine a paycheck for yourself. Of course, in the months your business does exceptionally well, you will need to resist transferring more money to yourself.

Putting yourself on the payroll is the best way to ensure you don’t get stuck trying to pay rent, utilities, software subscriptions, or any other expenses essential to running your business and your personal life. On this note, you’ll need to ensure that your business finances and your personal finances are appropriately separated. You also need to create separate bank accounts for your business and personal finances. The most important thing is to make sure that you have a clear view of your business income and spending.

Keep Track Of Your Income And Spending

This one feels like a no-brainer, but it’s a step that many entrepreneurs forget to take. Spending more than you are earning is a bottomless pit. So understanding your revenue and expenses is crucial to the long-term success of your business.

Take the time to map out a plan for saving and spending. This includes getting an income statement and a cash flow projection. You can do this on your own or with the help of accounting software, but as your business grows, it may be better to consult an accountant or a financial adviser. Once you have a plan in place, it will be much easier to create a budget for your business and identify areas where you may be spending too much. For example, you may find that you need to minimize your write-offs to maximize the amount of profit that your business is bringing in.

Minimize Your Taxes

Everyone dreads the tax season. How much will I settle my tax this year? Have I set aside enough to make my payment? If I’ve expensed on the wrong things, can I claim them? These are some questions that will run through your mind.

Your annual taxes are one of the most significant expenses you incur as you run your business. If you are self-employed and operate your business solely, you’ll have to pay both income tax and employment tax. If you have employees on your payroll, make sure you have accounted for the tax paid on their paychecks. This means you need to get acquainted with the Income Tax Act and fully understand your tax obligations.

Depending on the size of your business, minimizing your taxes may mean:

• Ensuring that you are using the proper business structure.
• Working hand in hand with a financial adviser or a lawyer to develop the proper business structure and learn more about protecting your income.
• Utilizing pension plans, charitable donations, and trusts to your advantage.

For smaller businesses, accounting software can be of huge help in minimizing your taxes. If you already have an accountant, they will be better equipped to help you evaluate the profitability of your business and keep everything in order. And if you don’t have an accountant, software like QuickBooks and FreshBooks can make it easy for you to fill the role of bookkeeper. But, of course, this will require considerable time and energy.

QuickBooks and FreshBooks both offer intuitive platforms to keep track of a wide range of accounting essentials, such as:

• Tracking revenue and expenses
• Storing receipts
• Sending and saving invoices
• Keeping track of clients and employees
• Tracking and submitting tax expenses

Most importantly, accounting software gives you a highly accessible picture of your finances. You can generate reports, create and view graphs, and even access your finances via mobile apps. This way, you won't have to worry about losing important receipts.

Plan For The Future

As a business owner, you need to be well-prepared for the future. Can your business survive a slow period? Have you set aside enough money to keep your business afloat if your influx of customers changes?

These questions are essential for every entrepreneur, especially if you are just starting. Unfortunately, approximately 7,000 small businesses go bankrupt each year in Canada. To avoid being a part of that statistics, you’ll need to put a solid plan in place for your future.

One of the best ways to do this is to ensure that you are saving correctly. You should have enough set aside so that you can cover your overhead costs or supplement payroll expenses for at least a few months. There are varying guidelines on how much you can set aside funds to run your business for about three months to one year. You simply have to choose the one that works for you.

Planning for the future also means ensuring you have a sound financial future outside your business. As a Canadian entrepreneur, you have a range of options to choose from when it comes to saving for retirement, including:

• Registered Retirement Savings Plan (RRSP)
• Registered Retirement Income Fund (RIF)
• Tax-Free Savings Account (TFSA)
• High-interest yielding savings account with your local bank
• Old Age Security (OAS)
• Canada Pension Plan (CPP)

Consulting with a financial adviser is highly beneficial. They will help you identify which type of retirement account best suits your needs. A financial adviser will also keep you updated on the various requirements from one year to the next.

You have a lot of freedom as an entrepreneur, like how long you want to work for. Don’t forget that retirement can happen precisely when you want it, as long as you make the right financial moves early.

Canadian entrepreneurs have a lot to juggle when managing their financial health, but this can be made simpler. If you’re struggling to get your finances in order due to overdue bills, high overhead costs, or you just need some cash to complement your payroll; you should consider taking out a payday loan with My Canada Payday. Call (604-630-4783) or email (getpaid@mycanadapayday.com) our industry-leading customer support team!

You should also check out some more “top 5” tips:

5 smart ways to shop and still save big after the holidays

5 clever ways you can save big on Valentine's Day

Top 5 websites follow 2020 free financial tips

5 ways you're spending too much on food

5 pain-free ways you can save money in 2016

5 creative ways to save during holiday travel

5 tips to help you manage sudden unemployment

5 tips to eat well without going over budget