effective delegation

Mastering Delegation: Overcoming Hurdles for Team Success

Pick up any book on workplace leadership, and you’re likely to find a chapter extolling the power of delegation. If done effectively, delegating can lead your team to new heights and drive organizational success. Too often, though, we fall short.

To succeed, one must overcome the initial hurdles tied to delegation while ensuring meaningful follow-up.

To illustrate, consider the story of Jane. A seasoned manager with years of experience, Jane has honed her proficiency in her current role. Recently entrusted with overseeing junior staff, Jane’s superior hopes that she’ll pass on her experience by entrusting her juniors with specific tasks. Jane is initially hesitant to follow through with this request. She has grown comfortable with her responsibilities and fears giving them up. Jane worries that relinquishing tasks to the junior staff may render her role expendable, and she is concerned for her job security.

Jane’s apprehension is a sentiment shared by many. As humans, we trust first in what we know, and we avoid stepping into the unknown. That’s why we tend to focus first on the tasks that come easily to us and can shy away from exploring new opportunities. Yet, beneath the surface, delegation presents a dual advantage: it gives those under you the chance to develop new skills while allowing you to enhance your own growth.

Jane’s primary fear is becoming replaceable. However, that doesn’t have to be a bad thing. She can use her newfound capacity as a springboard to learn a new skill or to tackle assignments outside her current scope. By not delegating, Jane is inadvertently limiting her own growth. When properly utilized, delegation is a win/win for all parties involved. Jane and the junior staff open themselves up to promotions within the company. The company also benefits by promoting from within, retaining staff who are familiar with the company’s values and culture while avoiding the hassles that come with external recruiting.

Now that Jane understands the value of delegation, she’s finally ready to pass on certain tasks to junior team members. Delegating isn’t just about passing off tasks, though. Jane must be involved throughout the process to ensure her subordinates complete the tasks effectively.

That begins with clearly communicating what is expected and providing all the resources necessary to succeed. As described in the example, Jane is an expert at what she does. She already intuitively knows precisely what needs to be done. However, she must be careful not to assume that her team members will possess this knowledge. She needs to walk through the project with them at each level.

Regular check-ins can offer support and provide a safe place for questions to arise. It’s important, however, to strike a balance between support and micro-management. Trusting them to navigate challenges independently is essential to the learning experience, even if that means allowing them to falter at times.

When mistakes that require correction are made, Jane may think it best to fix them herself. It would seem quicker than having her teammate rectify the error. While that may be true, it will prove more beneficial to have invested the time in guiding her teammate through the issues in the long run. If your team members understand what went wrong and how to fix it, they will be better able to avoid those mistakes in the future.

Once her team has completed the task, feedback is essential. Jane must ensure her feedback is constructive, highlighting achievements while pointing out areas for future growth. At the same time, Jane should also ask for feedback for herself. This will help in her own development as she seeks to improve her delegation skills.

Delegation is a tool that needs to be managed appropriately. As Jane’s story illustrates, the challenges to delegating continue once the initial hurdle of handing off work is completed. It’s important to set clear expectations while providing guidance and support when mistakes are made. Following these steps will enhance your leadership and pave the way for organizational success through effective delegation.

This post was contributed by Avisar Associate Manager Caleb Barkowsky.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Setting SMART financial goals for your business

New Year, New Financial Goals: A Blueprint for Small Business Success in 2024

As we enter 2024, it’s an excellent time to ensure you’ve set some financial goals for your business. Effective financial planning is a good practice and the backbone of sustainable business growth. If you have yet to set some solid financial goals for your business in 2024, this guide will offer some practical, actionable advice on setting and monitoring those financial goals, ensuring your business not only survives but thrives in the year ahead.

Understanding the Financial Landscape of 2024

The Canadian economy looks to be on track to avoid a recession in 2024. Still, GDP growth is forecast to slow to 0.9% (from 1.1% in 2023). Our dollar is expected to remain in the 72-75 cent range. Most economists expect our inflation rate to get closer to the target 2% range but not achieve it until the end of 2024.

According to the BDC, three elements could worsen things and push us into a recession.

Geopolitical conflicts could affect the energy market. Persistent inflation could affect consumer spending. And even if interest rates hold, the current rates could cause consumer demand to collapse.

The BC economy is expected to experience slightly slower growth, with GDP growth of only 0.5% in 2024. British Columbia Real Estate Association is forecasting 24% growth in the real estate market in 2024, compared to an expected 7.1% drop this year, Which would be good news for businesses supporting the housing and construction industry.

For small businesses, this all means staying informed and adaptable is more crucial than ever. Adapting to these trends can affect everything from supply chain decisions to customer spending habits, making an agile approach to financial planning essential.

Setting Smart Financial Goals

Central to effective financial planning is the establishment of SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals.

For instance, setting a goal like “Increase net revenue by 12% by the end of Q3 2024” is a prime example of a SMART goal. It’s specific, quantifiable, achievable, relevant to overall business growth, and has a defined timeline.

In setting these goals, it’s also essential to consider the broader economic forecasts and how they might impact your specific industry or market—tailoring your financial goals to your business’s capabilities and the predicted market conditions can significantly enhance your chances of success.

Budgeting for Success

A robust budget is your financial compass, guiding every business decision you make. It involves deeply understanding your income versus expenses and balancing them to meet your goals. An effective budgeting strategy starts with thoroughly categorizing costs into fixed (rent, salaries) and variable (marketing, utilities) expenses. This distinction is crucial in creating a budget that guides spending and aligns with your financial targets.

In addition to basic categorization, integrating predictive budgeting can be highly beneficial. This involves using past financial data to forecast future spending and income, allowing for more informed budgeting decisions. Predictive budgeting can help anticipate and plan for market fluctuations, ensuring your business remains agile and responsive to change.

Read more about creating a better small business budget.

Managing Cash Flow

Cash flow management is the lifeblood of any business, particularly small enterprises. It’s about ensuring that your business has the necessary funds when needed. Effective strategies include prompt invoice management, maintaining a cash reserve for unexpected expenses, and managing credit efficiently. A well-managed cash flow ensures that your business can meet its financial obligations and invest in growth opportunities as they arise.

Moreover, employing tools like cash flow forecasts is highly beneficial. These tools help you anticipate periods of tight liquidity, allowing you to make proactive decisions to maintain a healthy cash flow. Regularly updating these forecasts based on real-time financial data keeps your business one step ahead.

Leveraging Technology for Financial Management

In the age of digital transformation, technology plays a pivotal role in efficient financial management. From cloud-based accounting solutions to mobile invoicing apps, these tools bring a level of automation and accuracy previously unattainable. They streamline tasks like expense tracking and financial reporting. They can even offer predictive insights into future economic trends based on your historical data.

But technology’s role extends beyond simplification and automation. It can provide critical insights into your business’s financial health, offering analytics to inform decision-making.

For example, many modern financial management tools come equipped with dashboards that provide a real-time overview of your financial status, helping you make informed decisions quickly.

Regular Review and Adjustment of Goals

Setting financial goals is not a one-time event but an ongoing process requiring regular review and adjustment. Ideally conducted quarterly, this practice allows you to measure your progress against set objectives and respond appropriately to any changes in your business environment.

Regular reviews also provide an opportunity to reassess your business strategies in light of new market information, economic trends, or changes in your business model. This flexibility is critical to maintaining relevance and competitiveness in the ever-changing business landscape.

Seeking Professional Guidance

While managing finances internally is essential, external expertise can be invaluable. At Avisar Chartered Professional Accountants, we offer tailored advice for your unique business needs, including specialized areas like tax planning, strategic financial consulting, estate planning, and more. Our team is well-versed in the nuances of the Canadian economic landscape, particularly in British Columbia, offering insights tailored to your local context.

Conclusion

Setting and monitoring financial goals is a dynamic process. The beginning of 2024 is the perfect opportunity to plan and adapt your financial strategies. Remember, the objective is not just survival but thriving success.

Avisar Chartered Professional Accountants is committed to guiding you on this journey. Our experience and personalized approach ensure that your financial planning aligns with your business goals. With a strong focus on local businesses in British Columbia, we understand the challenges and opportunities unique to our region.

Ready to set your business on the path to financial success in 2024? Contact Avisar today, and let’s turn your financial goals into achievements.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Financial trends 2024 for small businesses

Big Financial Trends 2024: What Canadian Small and Medium-Size Businesses Need to Know

Supplier costs continue to rise. Inflation continues to impact buyer behaviour. Global unrest is making people uneasy. All of these financial trends are affecting small and medium-sized businesses as we head into 2024. 12% worry they will be unable to continue past 2024. Here’s the good news: 88% of Canadian SMBs surveyed say they are confident about growing their company over the next three years — an improvement from 2022’s 83%.

Regardless of what you see coming in the years ahead, understanding your financial situation is crucial to effectively building a successful and sustainable business. Cash flow will be more important in the coming year, and managing the economic, consumer, technology, and labour challenges should be top of mind.

Financial Trends and Challenges Facing Small and Medium-Sized Canadian Businesses

Here are some of the key financial trends and challenges that SMBs must confront in 2024.

Economic Concerns

Are we heading into a recession? That’s the big question that we’re all grappling with. The Conference Board of Canada now believes we’ll avoid a recession with a recovery in 2024. Others disagree. Either way, SMBs need to keep tight control over finances and prepare for whatever comes next.

The Bank of Canada is expected to hold tight on interest rates for the first half of 2024, with rate reductions not coming until mid-year. High interest rates slow down many areas of the economy, including consumer spending. SMBs seeking financing will find it more expensive, and loan grants may be more restrictive.

With labour challenges causing wages to rise and costs of goods increasing, SMBs will have to make difficult decisions about raising prices and managing cash flow.

Consumer Behaviour

A long-running financial trends that will continue in 2024 is more consumers are shopping online. With internet usage across Canada at nearly 93%, the retail eCommerce market is forecast to hit $71.7 billion in Canada in 2024. Yet, many small businesses nationwide are lagging in building out eCommerce solutions. Businesses must assess their eCommerce strategy to stay competitive, especially with younger consumers.

If there is a recession, expect consumer behaviour to shift. As businesses downsize, many Canadians will suddenly be out of work or have their work hours reduced. Demand for goods and services will decrease, especially for items that aren’t considered essential.

Consumers are also focusing on sustainability and eco-friendly practices in decision-making. More people expect transparency into how businesses operate as part of purchase decisions. Starting in 2024, banks and insurance companies face mandatory disclosures for climate-related risk and exposure. While most SMBs do not have such reporting requirements, expect more interest in how you are operating.

Technology

Technology is playing an increasingly important role in business. Artificial intelligence and automation are both disrupting entire sectors and providing significant efficiencies.

At the same time, SMBs need to worry more about cybersecurity than ever before. Cybercriminals are increasingly targeting small and medium-sized businesses. Cybercrime in Canada is up more than 600% since the start of the pandemic, and nearly half of all attacks target SMBs.

Labour Laws

new regulation goes into effect on February 1, 2024, as part of the Labour Code, increasing the obligations employers have when terminating employees in federally regulated businesses. More notice will need to be given to those with three years or more of employment. Up to eight weeks’ notice is required for employees working at a company for eight years or longer. There are also new requirements about the statement of benefits, wages, and severance pay that must be provided.

Businesses that use employment contracts will want to review them to ensure they comply with the new measures. Businesses must update employee handbooks and policy manuals to meet the new guidelines.

What SMBs Can Do to Prepare for 2024

Seek Financial Advice

Consulting with accounting and finance experts like Avisar Chartered Professional Accountants should be a priority heading into 2024 and pondering how to prepare for emerging financial trends. A CPA firm can provide expert guidance on budgeting, cash flow management, financing options, and more to help SMBs adapt to evolving economic conditions.

Adapting to Changing Consumer Preferences

SMBs need to evaluate their products and services, looking at ROI in light of evolving consumer behaviour. Enhancing eCommerce and digital offerings, managing supply chains, and tight cost control are all part of the SMB landscape moving forward.

Leverage Technology

SMBs should stay current on technology and look for ways to streamline operations. The right technology can boost competitiveness by automating functions. Seeking input from your accounting firm can help you find new ways to optimize finances and reduce your accounting workload.

SMBs also need to evaluate their current cybersecurity to lower risk.

Remain Compliant

Regulatory compliance is essential. Rules and reporting requirements are changing, and SMBs need to avoid costly problems by adhering to evolving laws. A CPA firm can help ensure businesses adhere to the latest accounting, tax, and other financial standards.

Get Professional Financial Management

With these complex challenges facing SMBs in 2024, you need a trusted advisor to help guide you, keep you compliant, and better manage your finances.

Avisar Chartered Professional Accountants is a trusted BC-based Canadian accounting firm focused on serving small businesses, entrepreneurs, and not-for-profit organizations. Our team of highly experienced accountants understands the unique needs of small and medium-sized businesses and is dedicated to helping you manage your finances and grow your business.

Contact Avisar Charted Professional Accountants today to book a consultation.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Avisar Chartered Professional Accountants Nominated For “Business of The Year” By Greater Langley Chamber Of Commerce

Avisar Chartered Professional Accountants is thrilled to announce its nomination for the prestigious “Business of the Year” award by the Greater Langley Chamber of Commerce.

“This is a proud moment for our dedicated team, who consistently strive to provide top-notch services to businesses and individuals throughout Langley,” said Bernie Zacharias, Partner at Avisar Chartered Professional Accountants. “Being recognized by the Greater Langley Chamber of Commerce underscores our commitment to business excellence and community growth.”

Celebrating its 27th anniversary, the Langley Business Excellence Awards stands as a testament to the region’s economic prosperity and innovative spirit. Avisar’s nomination showcases its excellence in the field of accounting, along with its noteworthy contributions to Langley’s vibrant business ecosystem.

Local residents and businesses are invited to join a night of distinction on Thursday, October 26 from 5:45 pm – 9:00 pm at the Cascades Casino Coast Hotel. The event will shine a spotlight on Langley’s top-tier businesses, offering attendees a prime networking environment accompanied by a sumptuous plated dinner.

Having established deep roots as an accounting firm in Langley, British Columbia, Avisar has cemented its reputation as an industry leader, putting clients’ needs first and playing an active role in advancing the Langley business community.

About Avisar Chartered Professional Accountants:

Located in the heart of Langley, BC, Avisar Chartered Professional Accountants is committed to delivering exceptional accounting services to small- and mid-sized businesses with integrity, excellence, and accuracy. By fostering relationships with local businesses and the community, Avisar aims to contribute positively to Langley’s dynamic growth and prosperity. Avisar was established in Langley, British Columbia in 2004, and today we serve 300+ client groups across the Lower Mainland, Langley, Surrey, & several other areas in Canada.

small business budget

Building a Strong Financial Foundation: 9 Tips for a Better Small Business Budget

Creating an effective small business budget can make the difference between thriving and just surviving in the exciting and sometimes unpredictable world of running a small business. Despite its crucial importance, many small business owners feel daunted by creating and managing a budget, viewing it as a complex and time-consuming process.

Introduction: Tips for Small Business Budgeting

Budgeting is not just about tracking income and expenses or preventing your business from overspending. It serves as a compass that guides your business toward its goals, a yardstick that measures your business’s performance, and a contingency plan that prepares your business for uncertainties. It allows you to anticipate challenges, seize opportunities, and steer your business on the path to growth and stability.

In this blog post, we aim to demystify the budgeting process and provide practical, actionable tips that small business owners can apply to their businesses. Whether you’re a startup just about to venture into your industry or a seasoned business looking to improve your financial management, these tips can help you navigate the financial aspects of your business with greater confidence and foresight.

Stay with us as we delve into the essentials of business budgeting, explore strategies for creating a realistic and effective small business budget, discuss the importance of regular budget monitoring and adjustments, and offer advice on planning for uncertainties. Along the way, we’ll also highlight the value of budgeting in making strategic decisions. Ready to master the art of budgeting? Let’s get started!

What is a Small Business Budget, and Why is it Crucial?

Business budgeting might seem like a fancy term, but at its core, it’s about planning your finances so that your income is greater than your expenses. This allows your business not only to cover operational costs but also to invest in its growth. But let’s go a bit deeper into this concept.

A small business budget is a financial plan that estimates income and expenses over a specific period. It serves as a roadmap, outlining how resources will be allocated to achieve business objectives. Budgets can be designed for a quarter, a year, or any period that suits your business needs.

The importance of business budgeting cannot be understated. It helps you understand your business’s financial health, make informed decisions, and plan for the future. Budgeting offers visibility into your cash flow, making it easier to identify potential cash shortfalls in advance and take preventive measures. It also enables you to allocate resources wisely, assess the feasibility of your financial goals, and measure your progress against those goals.

small business profitability

Different Types of Budgets: Operational, Cash Flow, and Capital Budgets

There are different types of budgets, each serving a unique purpose.

Operational Budgets focus on the day-to-day running of the business. They include income and expenses related to operations, such as sales, cost of goods sold (COGS), salaries, rent, and utilities.

Cash Flow Budgets estimate the inflow and outflow of cash in your business. They are crucial for ensuring that your business has enough liquidity to meet its short-term obligations. They can be beneficial in companies with significant seasonal variations.

Capital Budgets are for large, long-term investments such as purchasing equipment, upgrading software, or expanding to a new location. They help businesses plan and allocate funds for significant expenditures that can drive growth.

The Role of Budgeting in Strategic Planning

A well-structured small business budget is integral to strategic planning. It helps you prioritize your business initiatives, guiding where to cut costs and where to invest more. It serves as a performance metric, enabling you to compare projected performance against actual results, informing future strategies. By aiding in the identification of financial strengths, weaknesses, opportunities, and threats, budgeting helps you chart the course of your business’s future.

Understanding business budgeting is the first step toward mastering it. As we dive deeper into the specifics in the following sections, you’ll see how these concepts are applied to create a realistic budget that can navigate your small business toward financial success.

Know Your Costs

Knowing your costs is like having a clear map for your financial journey. By understanding and categorizing your costs, you can make more informed decisions and create a budget that reflects the realities of your business operations.

Identifying and Categorizing Your Business Costs

There are three main types of costs that your small business will incur: fixed, variable, and semi-variable costs.

Fixed Costs are expenses that do not change regardless of your business activity level. They remain the same whether your business is bustling or experiencing a slower season. Examples of fixed costs include rent, salaries, insurance, and any other expenses that are consistent from month to month.

Variable Costs, on the other hand, fluctuate depending on your business operations. These costs increase as your business activity goes up and decrease when it goes down. They often include expenses like raw materials, shipping, sales commissions, and other costs associated directly with the production or delivery of your products or services.

Semi-variable Costs are a blend of fixed and variable costs. These costs remain fixed to a certain output level, after which they increase. For example, you might have a data plan for your business with a fixed cost for a specific limit. Still, any usage beyond that limit incurs additional charges.

By accurately identifying and categorizing your costs, you can create a more precise small business budget and make better decisions about pricing, cost-cutting, and growth strategies.

The Significance of Understanding Your Costs in Budgeting

Knowing your costs is more than just a pre-budgeting exercise—it’s an ongoing part of managing your business finances. When you understand your costs:

  • You can set prices that accurately reflect your cost structure, ensuring your business remains profitable.
  • You gain insights into the profitability of individual products or services, allowing you to adjust your offerings or marketing strategies as needed.
  • You can identify potential areas for cost savings and efficiency improvements, which could mean the difference between struggling and thriving in competitive markets.
  • You can better manage cash flow by anticipating changes in variable and semi-variable costs.

In the following sections, we’ll delve into revenue forecasting and creating your budget. Armed with a clear understanding of your costs, you’ll be well-prepared to tackle these steps confidently.

Revenue Forecasting

Accurate revenue forecasting is a crucial aspect of budgeting. It offers insights into your business’s potential income, allowing you to plan expenditures and evaluate the financial feasibility of your business goals. Let’s dive deeper into the what, why, and how of revenue forecasting.

Basics of Revenue Forecasting and Its Importance

Revenue forecasting involves estimating the amount of money your business will receive in a specific period. It’s not just a wild guess but a calculated prediction based on past data, market research, and industry trends.

Accurate revenue forecasting can help you make strategic decisions about your business operations. It can inform your budgeting, enabling you to plan your expenses accordingly and avoid potential cash flow problems. Additionally, it can help you identify which products or services are most profitable, assess the impact of price changes or marketing campaigns, and plan for growth.

Tools and Methods for Accurate Revenue Predictions

Here are some strategies and tools that can help you create accurate revenue forecasts:

Historical Data: Your past sales data is a gold mine of information. You can analyze this data to identify trends and patterns, which can inform your future revenue predictions. Keep in mind, however, that past performance does not guarantee future results. It’s crucial to consider other factors, such as changes in the market or your business operations.

Market Research: Understanding your industry trends, competition, and target market can significantly improve the accuracy of your revenue forecasts. You might use online research, surveys, or industry reports to gather this information.

Sales Pipeline: If you have a predictable sales process, your sales pipeline can be a valuable forecasting tool. By examining your pipeline stages and conversion rates, you can estimate the likelihood of potential sales becoming actual revenue.

Seasonal Adjustments: Consider these in your revenue forecasting if your business has seasonal fluctuations. You might have periods of the year with higher or lower sales, which should be reflected in your forecasts.

Creating accurate revenue forecasts requires time, effort, and a bit of skill, but the benefits are well worth it. In the next section, we’ll discuss how to integrate this information into creating a comprehensive and realistic budget for your small business.

Creating Your Small Business Budget

A detailed understanding of your costs and an accurate revenue forecast give you a solid foundation to build your budget. This process may initially seem overwhelming, but it can become a manageable and even empowering task with a step-by-step approach.

Step-by-Step Guide on How to Create a Comprehensive and Realistic Budget

  1. Define Your Business Goals: What do you want to achieve in the specific budgeting period? Your goals might involve expansion, increasing profitability, reducing debt, or investing in new products or services. These goals will influence your budget allocations.
  • Estimate Your Revenue: Use the revenue forecasting methods discussed in the previous section to estimate your income for the budgeting period.
  • Detail Your Expenses: Based on your understanding of your business costs, detail all your expected expenses. They should include fixed, variable, and semi-variable costs. Remember to include non-regular expenses such as annual insurance premiums or tax payments.
  • Create the Budget: Subtract your total expenses from your total revenue to determine your net income. This figure will show whether your business will likely make a profit or loss in the budgeting period.
  • Review and Adjust: If your initial budget shows a loss or less profit than desired, review your revenue and expenses. Are there ways to increase revenue or decrease costs without negatively impacting your business operations or growth? Make adjustments as necessary until your budget aligns with your business goals.

Role of Budgeting Software and Other Digital Tools

In today’s digital age, small business owners have access to a variety of budgeting software and digital tools that can simplify and streamline the budgeting process. These tools can automate data entry, provide visual representations of your budget, and even offer predictive analytics for more accurate forecasting. Some popular options include QuickBooks, Xero, and FreshBooks, but the right tool for your business will depend on your specific needs and preferences.

Allocating Resources Effectively: Balancing Between Growth and Sustainability

Creating a budget isn’t just about ensuring your business stays afloat—it’s about planning for growth while maintaining sustainability. Allocate resources to areas that contribute to your business growth, such as marketing, product development, or customer service. At the same time, ensure your essential operational costs are covered and you have a buffer for unexpected expenses.

Remember, a budget is a living document. It will need adjustments as your business circumstances change. The key is to start with a clear, realistic plan and stay flexible as you navigate your business journey. Next, we will discuss the importance of regularly monitoring and adjusting your budget.

Monitoring and Adjusting Your Budget

Creating a budget is a significant first step, but the process doesn’t end there. You should monitor your budget regularly and adjust as necessary to reflect the changing realities of your business.

Why Regular Monitoring is Essential

Business is dynamic, and the assumptions you use to create your budget may not always hold. Market conditions can change, new opportunities may arise, or unexpected challenges may crop up. Regular monitoring allows you to catch these changes early, assess their impact on your budget, and adjust your plans accordingly.

Moreover, monitoring your budget is about more than just tracking your financial performance. It’s also about understanding why your actual results differ from your budgeted figures. By doing so, you can gain insights into your business operations, the effectiveness of your strategies, and the accuracy of your assumptions.

How to Monitor Your Budget

Here are some practical steps for monitoring your budget:

  1. Regular Reviews: Set a schedule for reviewing your budget. This could be monthly, quarterly, or whatever frequency works best for your business. Consistency is key.
  • Track Actual Results: Keep track of your actual income and expenses. Compare these figures with your budgeted amounts to identify any variances.
  • Analyze Variances: If your actual results differ significantly from your budget, try to understand why. Were your assumptions inaccurate, or did something change in your business or the market?
  • Adjust Your Budget: If necessary, adjust your budget to reflect your new understanding of your business. This might involve changing your revenue forecasts, cutting or increasing expenses, or re-evaluating your business goals.

Tools for Small Business Budget Monitoring

You can simplify your budget monitoring with the help of digital tools. Many budgeting software options include features for tracking actual results, analyzing variances, and even sending alerts when your figures deviate significantly from your budget. These tools can save you time, improve accuracy, and provide valuable insights into your financial performance.

Monitoring and adjusting your budget is an ongoing process that encourages continuous learning and improvement. It keeps your budget relevant and effective, ensuring it continues to be a helpful tool for guiding your business decisions. In the next section, we’ll discuss how your budget can help you plan for uncertainties and secure the future of your business.

Planning for Uncertainties

Running a small business involves a degree of uncertainty. Changes in the market, unexpected expenses, and other unforeseen events can impact your financial position. However, you can use your small business budget to anticipate and prepare for these uncertainties, helping secure your business’s financial future.

The Role of Contingency Planning in Budgeting

Contingency planning involves preparing for unexpected events that could negatively impact your business. When creating your budget, it’s wise to set aside funds for such situations. This contingency fund serves as a financial safety net, ensuring you can meet unexpected costs without jeopardizing your business operations or dipping into your essential operational funds.

The size of your contingency fund will depend on your business’s risk level and financial position, but a common recommendation is to cover at least three to six months’ worth of operating expenses.

Scenario Planning and Sensitivity Analysis

Another method to plan for uncertainties is through scenario planning and sensitivity analysis. These involve creating different versions of your small business budget based on various scenarios, helping you understand the potential impact of changes in key variables on your business’s financial performance.

For instance, you might create:

Best-case Scenarios: What would your financial position look like if your sales were 20% higher than forecast? How could you use the extra revenue to further your business goals?

Worst-case Scenarios: What if your sales were 20% lower than forecast? How would you adjust your spending to keep your business afloat?

Most likely Scenarios: What if your sales were precisely as forecasted? Would your budget allow you to cover all your expenses and achieve your business goals?

By considering these scenarios, you can create plans to respond effectively to different situations, reducing the impact of uncertainty on your business.

Importance of Insurance

Insurance is another tool to manage financial risk and plan for uncertainties. Depending on your business operations, you might consider various types of insurance, such as property insurance, liability insurance, or business interruption insurance. While insurance involves an upfront cost, it can save your business from significant financial losses in the event of an unfortunate incident.

Planning for uncertainties might involve some guesswork, but it’s essential to managing your business’s financial risks. By integrating contingency planning, scenario planning, and insurance into your budget, you can create a financial plan that supports your current business operations and secures your business’s future.

Using a Budget to Make Strategic Decisions

Your small business budget isn’t just a financial document—it’s also a strategic tool that can guide your business decisions. By analyzing your budget, you can identify opportunities for growth, areas for cost savings, and strategies for improving your profitability and sustainability.

Driving Business Growth

Your budget can offer insights into potential areas for business growth. For example, suppose your revenue forecast shows strong sales for a particular product or service. In that case, you might decide to allocate more resources to its production, marketing, or development. Conversely, suppose a product or service isn’t performing as well as expected. In that case, your budget can help you decide whether to improve or phase it out.

Additionally, your budget can inform your decisions about business expansion. If your net income is consistently high and you have a strong cash flow, you might decide it’s time to open a new location, hire more staff, or invest in new equipment. On the other hand, if your net income is low or your cash flow is inconsistent, you might decide to focus on improving your existing operations before considering expansion.

Identifying Cost Savings

Analyzing your budget can also help you identify potential cost savings. By looking at your expenses in detail, you might find areas where you can reduce costs without impacting your product quality or customer satisfaction.

For example, suppose your rent is a significant portion of your fixed costs. In that case, you might consider relocating to a less expensive location, negotiating a better lease deal, or even transitioning to a home-based or online business model. If your variable costs are high, you might look for ways to improve your operational efficiency, negotiate better deals with suppliers, or reduce waste.

Improving Profitability and Sustainability

Ultimately, your budget can guide your decisions to improve profitability and sustainability. It can help you set accurate prices for your products or services, ensuring you cover your costs and earn a profit. It can inform your cash flow management, helping you ensure you have enough money to meet your financial obligations. And it can help you plan for uncertainties, securing your business’s financial future.

In the final analysis, your small business budget is more than just numbers on a page. It reflects your business strategy, a tool for decision-making, and a roadmap for your business’s financial success. It’s an asset that, when used effectively, can help you navigate the complexities of running a small business and achieve your business goals.

The Role of a Professional Accountant

Sometimes, you need a helping hand, and that’s where an accountant comes in. They can provide expert advice, help you develop a robust small business budget, and guide you through the complexities of financial management. Hiring a professional may be an added expense, but it can be an investment that pays off in the long run.

Avisar Chartered Professional Accountants is a leading accounting firm for small and mid-sized businesses in the Lower Mainland. Vancouver, Langley, Abbotsford, and Surrey.

Get a free review of your finances by booking a consultation.

Conclusion

Budgeting is a critical aspect of managing a small business. It provides an insightful financial roadmap that can guide your decision-making and strategic planning. By understanding the essentials of business budgeting, you can identify your costs, forecast your revenues, and create a detailed budget. This is not a static document but requires regular monitoring and adjustments to remain effective and relevant to your business’s changing needs.

Contingency planning, scenario analyses, and insurance play a vital role in preparing your business for uncertainties, enabling you to mitigate risks and maintain your business’s financial health in various situations. Your small business budget is also a powerful tool for strategic decisions, helping you identify growth opportunities, discover potential cost savings, and improve profitability and sustainability.

In essence, a well-structured budget is not merely a financial statement—it’s a strategic compass guiding your business toward its goals amidst the dynamic landscape of the market. By integrating effective budgeting practices into your business operations, you can enhance your financial management skills, drive your business growth, and secure its financial future.

Ready to take your budgeting to the next level? Book a free consultation today.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

using key financial ratios

Unlocking Business Insights: Using Key Financial Ratios to Analyze Small Business Performance

In the competitive business world, small business owners need to make informed decisions to ensure the success and growth of their ventures. One crucial tool at their disposal are financial ratios, which provide valuable insights into a company’s performance.

By understanding and leveraging financial ratios, you can assess your business’ financial health, identify areas for improvement, and make strategic decisions to drive their businesses forward. This article will explore the power of key financial ratios and how you can use them effectively.

The Significance of Key Financial Ratios

Financial ratios are quantitative tools that help assess a company’s financial performance, efficiency, profitability, and liquidity. They provide a snapshot of the business’s financial health and offer benchmarks for comparison with industry standards and past performance. You can utilize these key financial ratios to understand your company’s financial position and make data-driven decisions.

  1. Liquidity Ratios: Liquidity ratios help you understand your cash flow by assessing your ability to meet short-term financial obligations. You can calculate ratios such as the current ratio and quick ratio to determine if the company has enough liquid assets to cover immediate expenses. These ratios help identify potential cash flow issues and enable proactive measures to ensure smooth operations.
  2. Profitability Ratios: Profitability ratios measure a company’s ability to generate profits and help in assessing business performance. Ratios such as gross profit margin, net profit margin, and return on assets (ROA) enable you to gauge your profitability and compare it to industry standards. By analyzing these ratios, business owners can identify areas for cost reduction, pricing adjustments, or revenue enhancement to maximize profits. We explore many of these in The Ultimate Small Business Profitability Checklist.
  3. Efficiency Ratios: Efficiency ratios provide insights into how effectively a business utilizes its resources to generate revenue. You can analyze ratios like inventory turnover, accounts receivable turnover, and asset turnover to assess operational efficiency. These ratios help identify bottlenecks in the supply chain, inventory management issues, or inefficiencies in resource allocation, enabling you to streamline operations and improve overall efficiency.
  4. Debt Ratios: Debt ratios evaluate a company’s leverage and ability to meet long-term financial obligations. You can calculate ratios like debt-to-equity and interest coverage ratios to assess their company’s risk exposure and debt management capabilities. These ratios assist in making informed decisions about borrowing, managing debt, and maintaining a healthy balance between equity and debt.

Interpreting and Applying Financial Ratios

While understanding these key financial ratios is essential, interpreting them correctly is equally crucial.

You should compare their ratios to industry benchmarks, historical data, and competitors to gain meaningful insights. Additionally, tracking ratios over time allows you to identify trends and evaluate the impact of strategic decisions.

It is essential to note that financial ratios should be used with other performance indicators and qualitative analysis to make well-rounded assessments. You can learn more about some of these metrics in The Ultimate Small Business Profitability Checklist. You’ll also find key financial ratios formulas in a key financial ratios pdf.

Financial ratios serve as invaluable tools for small business owners to assess their company’s performance, financial health, and areas for improvement. By leveraging liquidity ratios, profitability ratios, efficiency ratios, and debt ratios, you can gain a holistic view of their operations and make informed decisions to drive growth and success.

Understanding and interpreting financial ratios empowers you to optimize resource utilization, manage cash flow, improve profitability, and make strategic decisions for your business.

To learn more about how to calculate these ratios using your financial statements, check out How to Read Financial Statements: A Guide for Business Owners.

If you’d like help better understanding your financial ratios why not book a free consultation with one of the experts at Avisar.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

estate planning

Estate Planning 101

A Comprehensive Guide to Estate Planning in Canada

Estate planning is an essential aspect of personal finance that helps individuals manage and distribute their assets effectively during their lifetime and after their death. Proper estate planning not only ensures that your loved ones are taken care of but also helps minimize taxes and avoid costly probate fees. In this article, we will provide an overview to help you get started.

Estate Planning Basics

Estate planning is the process of organizing and managing your assets to ensure their efficient distribution upon your death. It involves several aspects, such as wills, trusts, powers of attorney, beneficiary designations, and tax planning. The primary objectives of estate planning include:

  • Providing financial security for your family and loved ones
  • Minimizing estate taxes and other costs
  • Ensuring a smooth transfer of assets to beneficiaries
  • Designating guardians for minor children
  • Protecting your assets from creditors

The Estate Planning Process in Canada

The estate planning process in Canada typically involves the following steps:

  1. Identifying your assets: Make a detailed list of your assets, including real estate, investments, business interests, insurance policies, and personal property.
  2. Setting objectives: Determine your estate planning goals, such as providing for dependents, minimizing taxes, or supporting charitable causes.
  3. Choosing an executor: Appoint a trustworthy person to administer your estate according to your wishes.
  4. Preparing a will: A will is a legal document that outlines how you want your assets to be distributed after your death. Consult with a lawyer to ensure it meets all legal requirements.
  5. Establishing trusts (if applicable): Trusts can offer greater control over asset distribution and help reduce taxes. Consult with a lawyer or financial planner to determine if trusts are appropriate for your situation.
  6. Reviewing beneficiary designations: Ensure that your beneficiary designations on insurance policies, retirement accounts, and other assets are up to date and aligned with your estate planning goals.
  7. Preparing powers of attorney: Designate someone to make financial and healthcare decisions on your behalf if you become incapacitated.
  8. Tax planning: Work with a financial planner or tax professional to minimize the tax burden on your estate.
  9. Periodically reviewing and updating your estate plan: It’s essential to review and update your estate plan regularly, especially after significant life events, such as marriage, divorce, or the birth of a child.

Important Documents for Estate Planning

To create a comprehensive estate plan, consider including the following documents:

  • Will: Outlines your wishes for asset distribution and guardianship of minor children.
  • Trust documents (if applicable): Establish and manage trusts for asset distribution and tax benefits.
  • Power of Attorney (POA) for property: Designates someone to manage your financial affairs if you become incapacitated.
  • Power of Attorney (POA) for personal care: Appoints someone to make healthcare decisions on your behalf if you become incapacitated.
  • Living Will: Specifies your preferences for end-of-life care and medical treatment if you are unable to communicate your wishes.
  • Beneficiary designations: Ensure that the beneficiary designations on your insurance policies, retirement accounts, and other assets are up to date.
  • Letter of instruction: A non-binding document that provides additional guidance to your executor and beneficiaries regarding the location of important documents, account information, and personal wishes.

Trusts vs Wills

Trusts and wills are both tools used in estate planning to distribute your assets. While a will outlines how your assets should be distributed after your death, a trust can be used to manage and distribute assets during your lifetime and after your death.

The main differences between trusts and wills are:

  • Privacy: Trusts are private arrangements, while wills are public documents that go through the probate process.
  • Probate: Trust assets can bypass the probate process, making asset distribution faster and less expensive, while wills must go through probate.
  • Control: Trusts offer more control over asset distribution, allowing you to set specific conditions and terms, whereas wills provide for outright distribution to beneficiaries.
  • Tax benefits: Trusts can provide tax benefits by minimizing estate taxes, while wills do not offer the same tax advantages.

Estate Planning Checklist

To help you get started with your estate planning, follow this simple checklist:

  • Inventory your assets: Make a list of your assets, including real estate, investments, business interests, insurance policies, and personal property.
  • Identify your goals: Determine your estate planning objectives and priorities.
  • Consult with professionals: Seek the advice of a lawyer, financial planner, or tax professional to help create a comprehensive estate plan.
  • Choose an executor: Select a responsible and trustworthy person to administer your estate.
  • Prepare a will: Work with a lawyer to draft a will that outlines your wishes for asset distribution and guardianship of minor children.
  • Establish trusts (if applicable): Create trusts to manage and distribute assets according to your preferences.
  • Review and update beneficiary designations: Ensure that the beneficiaries listed on your insurance policies, retirement accounts, and other assets align with your estate plan.
  • Prepare powers of attorney: Designate someone to make financial and healthcare decisions on your behalf if you become incapacitated.
  • Draft a living will: Specify your preferences for end-of-life care and medical treatment.
  • Organize important documents: Keep all essential estate planning documents in a secure location and inform your executor and family members of their whereabouts.
  • Review and update your estate plan: Regularly review your estate plan to ensure it remains current and reflects any changes in your personal circumstances or financial situation.

Estate planning is a crucial aspect of personal finance that helps individuals manage and distribute their assets effectively. By following the steps outlined in this article and working with experienced professionals, you can create a comprehensive estate plan that ensures your assets are distributed according to your wishes, provides financial security for your loved ones, and minimizes taxes and other costs. 

This post was republished with permission and originally appeared on the Cash Management Group blog. The Cash Management Group has been providing investment management services to publicly-funded entities and public corporations for over 19 years.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

SR&ED tax credit program

What is SR&ED

SR&ED stands for Scientific Research and Experimental Development. And if you want to get tax benefits for doing R&D in Canada, you should know about the SR&ED tax credit program.

Our guest expert, Jude Brown, CEO & Co-Founder of Bloom Technical, explains what the program is, how to qualify, and what you need to do to apply.

The SR&ED tax credit program rewards Canadian businesses for doing innovative and risky work in their fields. The CRA runs the SR&ED tax credit program, and it gives you tax credits, refunds, and deductions for your R&D expenses. But only some businesses can qualify for the program.

How Do I Apply for the SR&ED tax credit program?

You need to meet some criteria to be eligible. Here are the main ones:

  • You must be a CCPC, a Canadian partnership, a sole proprietorship, or a trust. CCPCs get the most benefits from the program.
  • You must do scientific research or experimental development to create new or improved products, processes, materials, or knowledge.
  • You must face technical risk, meaning you don’t know if your work will succeed or fail. You must demonstrate your project iterations.
  • You must keep proper records of your R&D activities, including what you did, how you did it, and what you learned.

To apply, you need to fill out Form T661 and submit it with your tax return. This form asks you to describe your R&D activities in detail and report your expenses and outcomes.

This can be tricky and time-consuming, so getting help from a professional SR&ED consultant is best. They can help you prepare your application and maximize your benefits.

How Big Could My SR&ED Claim Be?

The size of your tax benefits depends on your business type, income, and tax rate. The CRA has different formulas for each factor. The more you spend on eligible R&D expenses, the more you can claim. But there are limits and rules to follow.

Eligible R&D expenses include:

  • Salaries or wages of the employees who worked on the R&D project
  • Contractor fees for the arm’s length parties who performed R&D on your behalf
  • Materials that were consumed or transformed during the R&D project

Some expenses are not eligible for SR&ED, such as capital, overhead, and marketing costs. You also need to prove that your R&D expenses are reasonable and related to your industry. In BC, businesses can expect to get about 64% back from eligible SR&ED expenses.

To get an accurate estimate of how much you can get from SR&ED, contact us today, and we can put you in touch with a SR&ED professional. You can also find extensive information on the program through the CRA.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Other Measures

Small Business Credit Card Fees

Budget 2023 announced that commitments had been obtained from Visa and Mastercard to lower fees for small businesses. More than 90% of credit card-accepting businesses are expected to see their fees reduced by up to 27%.

Automatic Tax Filing for Low-income Canadians

Budget 2023 announced that the number of Canadians eligible for CRA’s automatic File My Return service will be increased to 2 million by 2025, almost tripling the number of currently eligible Canadians. In 2022, 53,000 returns were filed using this service. In addition, a new pilot project will be implemented to assist vulnerable Canadians in applying for benefits even if they do not file tax returns.

Student Benefits

Budget 2023 proposes increasing Canada student grants by 40%, raising the interest-free Canada student loan limit from $210 to $300 per study week, and waiving the requirement for mature students (aged 22 or older) to undergo credit screening in order to qualify.

Dental Care for Canadians

The Canadian dental care plan would provide coverage for all uninsured Canadians with an annual family income of less than $90,000 (the Canada dental benefit only provided benefits for children under 12) by the end of 2023. The plan will be administered by Health Canada with support from a third-party benefits administrator. Benefits are reduced for families with income between $70,000 and $90,000.

Protecting Federally Regulated Gig Workers

Budget 2023 proposes to amend the Canada Labour Code to strengthen prohibitions against employee misclassification for federally regulated gig workers such that they will receive protections and benefits including EI and CPP.

Ensuring the Integrity of Emergency COVID-19 Benefits

Budget 2023 proposes to provide $53.8 million in 2022-23 to Employment and Social Development Canada to support integrity activities relating to overpayments of COVID-19 emergency income supports.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Personal Measures

Alternative Minimum Tax (AMT) for High-Income Individuals

Individuals will owe AMT if the tax amount calculated under the AMT regime is greater than the tax calculated under the ordinary progressive tax rate regime. Under the current rules, the calculation of AMT allows fewer deductions, exemptions and tax credits than under the ordinary income tax rules and applies a flat 15% tax on income over a standard $40,000 exemption.
Budget 2023 proposes several changes to the AMT calculation. First, the AMT rate is proposed to increase from 15% to 20.5%.  

Second, the exemption would increase from $40,000 to the start of the fourth tax bracket (for 2024 this is approximately $173,000). Third, the AMT base would be broadened by further limiting tax preferences (i.e., exemptions, deductions and credits) as follows:

  • The capital gains inclusion rate would increase from 80% to 100%.
  • 30% of capital gains eligible for the lifetime capital gains exemption would be included.
  • Deductions of capital loss carry forwards and allowable business investment losses would apply at a 50% rate.
  • 100% of employee stock options benefits would be included.
  • 30% of capital gains on donations of publicly listed securities would be included.
  • Only 50% of many deductions would be allowed, including the following: employment expenses (other than those incurred to earn commission income); moving expenses; child care expenses; interest and carrying charges incurred to earn income from property; northern residents deduction; and non-capital and limited partnership losses of other years.
  • Only 50% of non-refundable tax credits historically allowed for AMT purposes would be allowed.

The ability to recover AMT in the seven subsequent years, to the extent that tax computed under the ordinary progressive tax rate regime exceeds AMT, is not proposed to change.

The proposed changes would come into force for the 2024 personal tax year.

Grocery Rebate

Individuals and families with modest incomes receive the Goods and Services Tax Credit (GSTC). The maximum 2022/2023 GSTC is $467 for a single person, and $612 plus $161 per child for a married or common-law couple. Budget 2023 proposes a one-time payment called the Grocery Rebate which will equal half of the annual maximum (twice the quarterly payment received in January, 2023) to be paid as soon as possible after the legislation is passed.

Deduction for Tradespeople’s Tool Expenses

Under the current law, a tradesperson can claim a deduction of up to $500 of eligible new tools acquired in a taxation year as a condition of employment. Budget 2023 proposes to double the maximum employment deduction for tradespeople’s tools from $500 to $1,000, effective for 2023 and subsequent taxation years. As a consequence of this change, extraordinary tool costs that are eligible to be deducted under the apprentice vehicle mechanics’ tools deduction would be those costs that exceed the combined amount of the increased deduction for tradespeople’s tool expenses ($1,000) and the Canada employment credit ($1,368 in 2023) or 5% of the taxpayer’s income earned as an apprentice mechanic, whichever is greater.

Registered Education Savings Plans (RESPs)

Government grants and investment income can be withdrawn from RESPs as an education assistance payment (EAP) when a beneficiary is enrolled in an eligible post-secondary program. These withdrawals are taxable.


Under the current law, beneficiaries that are full-time students cannot withdraw more than $5,000 in EAPs in respect of the first 13 consecutive weeks of enrollment in a 12-month period. For part-time students, the limit is $2,500 per 13-week period. Budget 2023 proposes to increase these limits to $8,000 for full-time students and $4,000 for part-time students.
Budget 2023 also proposes to enable divorced or separated parents to open joint RESPs for one or more of their children or to move an existing joint RESP to another promoter. Under the current law, only spouses or common-law partners can jointly enter into an agreement with an RESP promoter to open an RESP.


These changes would come into force on Budget Day.

Registered Disability Savings Plans (RDSPs)

Where the contractual competence of a person with a disability who is 18 years of age or older is in doubt, the RDSP plan holder must be that person’s guardian or legal representative. A temporary measure allowed the person’s parent, spouse or common-law partner (a “qualifying family member”) to open an RDSP and be the plan holder where the person does not have a legal representative.


Budget 2023 proposes to extend this measure by three years, to December 31, 2026. Budget 2023 also proposes to broaden the definition of qualifying family members to include a brother or sister of the beneficiary who is 18 years of age or older. Qualifying family members who become a plan holder before the end of 2026 could remain the plan holder after 2026.
These proposals would apply as of royal assent of the enacting legislation.

Retirement Compensation Arrangements (RCAs)

An RCA is type of employer-sponsored arrangement that generally allows an employer to provide supplemental pension benefits to employees. A refundable tax is imposed at a rate of 50% on contributions to an RCA trust, as well as on income and gains earned or realized by the trust. The tax is generally refunded as the retirement benefits are paid to the employee. The employer receives a full deduction for contributions made to the RCA.


Employers who do not pre-fund supplemental retirement benefits through contributions to an RCA trust and instead settle retirement benefit obligations as they become due, can obtain a letter of credit (or a surety bond) issued by a financial institution in order to provide security to their employees. To secure or renew the letter of credit, the employer pays an annual fee or premium charged by the issuer. These fees and premiums are subject to the 50% refundable tax.
Budget 2023 proposes that fees or premiums paid for the purposes of securing or renewing a letter of credit (or a surety bond) for an RCA that is supplemental to a registered pension plan will not be subject to the refundable tax. This change would apply to fees or premiums paid on or after Budget Day.


Budget 2023 also proposes to allow employers to request a refund of previously remitted refundable taxes in respect of such fees or premiums paid in prior years. They would be entitled to recover 50% of retirement benefits paid after 2023, to a maximum of the refundable taxes paid in the past.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.