CRA: Understanding the Differences

After the sometimes long and arduous process of filing your business or personal tax returns, receiving a letter from the Canada Revenue Agency can feel quite nerve-wracking; but if you receive a letter in the mail from the CRA, it doesn’t mean that you’ve necessarily done something wrong on your tax return. Before you start to worry that the Canadian Government is going to come after you for a simple oversight, it’s important to understand what you’re actually looking at. Read this quick guide to learn the differences between an audit, a review, and a notice:


There are several types of communication that fall under the umbrella term “notice”. If you receive a Notice of Assessment in the mail or Online, it is because you have recently filed a tax return with the Canada Revenue Agency. Your Notice of Assessment will notify you of any further actions that are required, such as payment. Keep this assessment for your records, as you will likely have to refer to your assessment while conducting future business with the CRA. Businesses and individuals who file tax returns with the CRA will always receive a notice. Some of the more common Notice of Assessments received are for Personal Tax (T1), Corporate Tax (T2), and HST/GST filings.


If you receive a letter stating that the CRA will be conducting a review of your tax return, don’t panic. According to the CRA website, “…the CRA conducts a number of review activities that promote awareness of and compliance with the laws it administers. These reviews are an important part of the compliance activities we undertake in order to maintain the Canadian public’s confidence in as well as the integrity of the Canadian tax system.” In other words, if the CRA thinks you’ve made a simple error on your tax return, they will ensure that you fix it and understand how to prevent making the same mistake in the future. Reviews are not audits. In the first few years of owning a business, reviews might be more common until you gain more knowledge and experience.


The word audit has been known to strike fear into the hearts of taxpayers—mostly because no one likes to feel like the government is accusing them of a wrongdoing. The truth is that unless there is a serious discrepancy or blunder on your tax return, audits are rare. The CRA selects business accounts to audit based on several factors which could include how the information they have on file relates to your tax returns, potential tax-return errors, or signs of non-compliance. If you’ve been audited, a CRA tax auditor will contact you to begin the investigation that usually happens in your place of business. A more detailed description of the audit selection process can be found on the CRA’s website here.

There’s a reason that everybody hates to be audited. Tax audits can be long, arduous, and costly affairs, which is why it’s so important to keep detailed records of all your financial transactions and to consult the professionals for your year-end preparation.

Contact Clarified Accounting
If you receive an audit or review of your business, we’re here to help. Contact Clarified Accounting for simplified accounting services that are designed to assist start-ups and new companies with a better understanding of the tax-filing process.

Financial Calculators

Planning for financial success is sometimes difficult if you have a new or small business. At the beginning of any new business venture, the constant pursuit for cashflow doesn’t allow you ample time to focus on saving money or planning your financial future. Fortunately, there is something that can help you; financial calculators give you instant financial information based on a few key numbers. Clarified Accounting now features 10 different financial calculators with various scenarios to help save you valuable time and money.

Our financial calculators determine financial information regarding:

Savings: Find out how much your RRSP or TFSA could be worth under varying scenarios.
Loans: Determine a monthly payment that’s comfortable for your budget.
Investment Income: Understand the long term potential value of an investment.
Investment Postponement: What are the financial implications of postponing yours or your client’s investments?
Tax Rates: Determine your provincial tax rates depending on your income through a simple tax calculator.
Inflation: Compare today’s buying power with historical or projected inflation.
RRSP Loans: Find out if borrowing to contribute to your RRSPs is a sensible route.
RRSP Tax Savings: Find out how much tax savings you will realise based on your RRSP contribution amount.
Retirement Budget & Savings: See a more accurate representation of your retirement budget based on inflation of the current dollar value.
Value of Human Life: Where do you stand economically?

Why are financial calculators so helpful?

When it comes to making important budgetary decisions, accuracy is crucial. Saving for the future often requires complex calculations and an understanding of current economic trends. Using a few simple numbers that you likely already know, such as your age and your annual income, you can get instant access to a wealth of knowledge that will help you better determine your financial future. Other benefits of using financial calculators include:

– Planning for the future
– Adjust your expectations or make changes to see results faster
– Fixing problems now
– Get on track of your objective
– Visualizing goals
– “Seeing” what your money can do will motivate you to continue saving.
– Understanding financial health
– If you’re unsure where you stand in terms of your goals, financial calculators can easily tell you how you measure up.
– Save time
– Our financial goals can often change. Don’t spend unnecessary time crunching numbers. Financial calculators provide instant and accurate information.

How do they work?

Select the calculator you want to use. It will help to have your financial information with you, such as bank statements, RRSP contribution documents, and monthly contribution amounts. Input the necessary information in the easy-to-use calculators. Watch how the results automatically generate. Change the information as much as you want to test out different scenarios. To save your results, simply click “print report”.

Clarified Accounting is dedicated to providing day-to-day accounting solutions for new and small businesses. Please don’t hesitate to contact us about how to use our financial calculators or for any other inquiries related to your financial future.

Small Business Accountants – St. John’s

Cash flow is the lifeblood of your business. Without a steady stream of money flowing through your operation, you’ll find it difficult to pay vendors and employees, invest in growing your company, and use valuable financial tools that could help increase your profits. Use these quick tips to start getting serious about your company’s cash flow.

Even if your Company’s sales are increasing, when money is going out faster than it’s coming in, your business can begin to struggle. Poor cash flow can end up getting your business stuck in the mud.

Here are three easy tips for improving your cash flow immediately:

Require deposits on large orders

Collecting accounts receivable can be a frustrating issue for any business. You work hard to build good business relationships, and you want to give a good faith extension of credit to valued partners, but long response times and late payments can put your business in a tough spot. Some common causes of cash flow issues faced by many businesses are:

– A large portion of receivables from business clients can exceed 90 days before payment is received
– Inefficient internal processes lead to significant delays before a customer receives an invoice. In some cases, the invoice is never received!
– A lack of formal credit policies

Not only are customers slow to pay, but many companies are often not properly organized enough to get payments quickly.

Charging deposits on larger orders is a fair agreement for both sides. A 50% deposit gives you the financial freedom to move forward without having to operate on credit and also lets your customers delay payment until they are 100% satisfied.

Pro Tip: Hiring professional accountants to complement your in-house bookkeeping can optimize your accounts receivable department by improving the billing process and streamlining communication with customers.

Analyse your cash flow with software and other tools

Adequate working capital is a critical component of business growth. If your business is not in a strong working capital position, you are going to find it difficult to maximize profits and growth. A profitable bottom line at year-end can feel misleading for a business that is struggling with cash flow.

Using various software packages or a employing the services of a professional accountant to help analyse payroll, accounts payable and receivable, and other financial aspects of your business can help you determine:
– where money is coming from
– where it’s going out
– the steps it would take to optimize it all

The result could be improved cash flow and profits for your business.

Consider high-interest savings accounts rather than brand-new upgrades

As a small business owner, it can be tempting to want the latest in technology, the absolute best equipment, and all of the bells and whistles that come with running a successful company. However, holding back on some expenditures in order to bolster your cash reserves can provide many benefits.

Instead of upgrading to new equipment, try repairs or buying used for the time being. Rather than getting the latest software, try for a budget version until you’re more stable. It might take some extra legwork on your side, but it will be worth it in the end. The money that you save can be put into an interest-bearing savings account. The cash will then be available on demand to finance a new project or to help your business grow.

Cash flow management is currently an issue for many businesses in Newfoundland & Labrador as our province deals with a sluggish economy. Whether it’s overdue receivables, or a lack of insight into cash flow, many companies struggle to manage their money. Working with a certified accountant can help to simplify these difficult processes and take away the stresses of dealing with them day in and day out. If you’d like to consult a professional accounting firm that can help clarify these issues for your company, contact Clarified Accounting today.

How To – Bookkeeping tips

As a small business owner, you’ve got to wear a closet full of different hats, and we aren’t talking about the latest headwear fashion. You are your company’s marketing team, customer service department, ownership board, and public relations office. It’s the price you pay for calling yourself an entrepreneur. There’s also another role that you get to play: the accountant. Yes, you’ve got to pay your dues, and it isn’t just a once-a-year task.

Keeping your books straight is one of the most difficult tasks for new entrepreneurs. Here are a few basic bookkeeping tips for beginners (and even non-beginners). Want to make your deadlines and avoid penalties? Follow these closely.

Set up a business account and separate your expenses

We live in an age where Canadian startups are raising over $700 million dollars from outside investors, a boom of companies started in the proverbial basement or bedroom with little more than a week’s paycheck to get off the ground. It’s a fascinating time for business , whether you’ve started your company by bootstrapping, angel investors, or opened a traditional store by the side of the road, to open a separate business account.

This will give you a clear idea of what is coming in and out of your company bookkeeping.

Use basic software from the beginning

You might think that you can handle all of your a spreadsheet in Excel rust us when we say that you should take advantage of technology . Automating tasks will save you hours each week and help protect your from human error. Perhaps the biggest benefit to software is that you’ll be able to see everything in front of you: which invoices are due or past due, your profit to date, estimates for projects, invoice templates, and important dates.

The days of a handwritten ledger are gone but don’t underestimate the power of bookkeeping

Pro tip: software available to you ranges from expensive and comprehensive to basic and free. There are plenty of different programs available that run in the cloud. Shop around, take free trials, and see which one fits your needs best. You might not need to pay anything at all.

Set money aside each month for taxes

Businesses are the backbone of any national economy, and the Canadian Government takes pride in helping give businesses the money and incentives they need to grow. There are plenty of grant and financing options, as well as tax breaks and other great options for entrepreneurs chances are if you’re turning a profit, you will owe money to the government at the end of the year.

There are few things than cutting big check That’s why we recommend you set a little aside each month. m not actually save you any money but it saves you from the sting of paying a lump sum or, worse, not having enough money to pay your tax bill

You’ve got a lot to worry about as a business owner, but you should never forget that paying your fair share in taxes is part of your responsibilities too. Use these 3 bookkeeping tips for beginners to make sure you keep your books straight and have the money to pay when the time comes.

Want to make bookkeeping easier and save some time and money while you’re at it? Get a professional accounting firm that knows how to help small businesses and startups maximize their bottom line.

When to Incorporate Your Business

One of the questions you will ask yourself as a small business owner is: should I incorporate?

In a nutshell, corporations make sense for business owners who either:

  • have operations that can expose the business to significant potential liabilities (ex: dissatisfied customers, dangerous work)
  • who require flexible financing
  • want to provide goods and/or services to large companies
  • have substantial personal assets they want to ensure are protected
  • require a flexible ownership structure (including multiple owners)
  • plan to sell the business in the future and want to take advantage of the lifetime capital gains exemption

While there are a number of benefits to incorporating, there are also several added expenses that should be taken into account. If you rely on all the business earnings for your own personal income, then the extra costs may not necessarily be worth your while. On the other hand, if your business is profitable after paying yourself, then it is worth taking into consideration.

Before making the decision to incorporate, we recommend first bearing in mind the costs and work involved:

Setup Costs

There are fees that come with setting up your newly-incorporated business, such as legal costs to obtain the necessary documents, and possible tax assistance required to transfer the business assets to a newly created corporation. These professional fees are where it stings the most: using a lawyer for the incorporation can cost upwards of $1,000, and depending on how complicated your tax requirements are, these fees could easily be higher again. 

More Tax Compliance

An incorporated business must also file separate tax returns in addition to your T1 personal income tax returns. Corporations in Canada must file a T2 corporate income tax return.  These returns are typically more expensive to prepare and file than a T1 return. 

The Benefits of Incorporation

Once you understand the costs involved in incorporating, consider whether the following benefits outweigh those costs:

Lower Taxes

Corporations can often benefit from lower tax rates than an unincorporated business.  Contact us to see if there are any such tax planning opportunities available for your business. 

Protected Personal Assets

Should a lawsuit be filed against your business, a structure than involves a corporation could ensure that your personal assets such as your home or car, are not exposed to any potential legal liability as a result of actions that occurred within the business.  

If you would like to have a detailed discussion about if incorporating is right for your business, please contact us. Our team at Clarified Accounting offers expert advice for your everyday accounting and business needs.

Why You Should Outsource Your Bookkeeping

As a small business owner, your primary focus is growing your business while keeping your expenses at a minimum. That being said, you may not have the resources or space to have an in-house accounting department. If this is the case, outsourcing your bookkeeping to a specialized firm is the ideal way to keep your books up to date while maintaining your budget.

Saving You Time and Money

If you’re a small business with a tight budget, you might be tempted to do your company’s books yourself, or have someone with some basic accounting knowledge on your team take care of it. Consider the length of time it would take to balance the company’s books, process invoices, or write cheques. Cumulatively, this could take up to 10, 15, or 20 hours – time you could be spending on marketing your business and ensuring you are delivering quality service.
At this point you may be thinking that you will need to hire an in-house accountant on a full-time basis—but that’s not necessary. There’s a viable solution to this: An outsourced accounting service can take care of these tasks for you and ensure they are done properly, but would only work when they are needed, keeping your costs down.
So, before you make the decision to save on costs, ask yourself:

  • How much is my time worth?
  • How much time will it take me to do my own accounting?
  • Will this help maximize my profits?

As an entrepreneur, the ability to delegate is crucial in your path to success; otherwise, you risk being overstressed and overburdened, with little energy left to accomplish the rest of your responsibilities. By trusting professionals to handle other aspects of your business, you are free to devote yourself to the bigger picture.

Helping Your Business Grow

Qualified and experienced accountants can be exceptionally helpful to you as you grow your business in its early stages. Besides managing your payroll and income taxes, they can also help with loan applications, forming a business plan, and providing tips on how to improve cash flow.
That’s where the team at Clarified Accounting comes in. In addition to offering expert bookkeeping, we can help you grow your business, saving you time and money with reliable outsourced accounting services.
Our team of experts can help with the following, and more:

  • List the benefits of incorporation versus sole-proprietorship
  • Provide tips on how to handle and improve cash flow
  • Keep a checklist for income taxes
  • Help to properly record/track mileage
  • Notify you and implement any product updates
  • Help you to avoid penalties and interest
  • Prepare and mail T4 slips before the deadline
  • Advise you on RRSPs versus TFSAs
  • Advise you on credits versus deductions
  • Help you understand business remittance requirements (HST, payroll, workers compensation, etc.)
  • Advise you on audits, reviews, and notices
  • Help you to select the appropriate financing options (operating versus capital)
  • Present you with government funding options
  • Inform you on taxable benefits

To get a free quote on day-to-day accounting services and more, contact us today at Clarified Accounting. Let’s discuss how we can help your business thrive while respecting your budgetary needs.