In my entrepreneurship class this year, we’ve had a variety of guest speakers come in to talk to the class about various aspects of running one’s own business. Among them was Michelle Paquin, who works in the school of business. She spoke about a number of things I think are important to remember, and also several things that never occurred to me beforehand. I feel like I should share a few of my thoughts about and notes on what she talked about.
Maybe it’s a boring topic, but financial management is probably one of the most important things there is about running a business, on your own or otherwise. The entire point of being part of operating a business (non-profit organizations aside) is to earn money. If you don’t have good financial management, then you won’t make money, and your business will be a flop—plain and simple.
The quickest, most painless solution? Hire an accountant and bookkeeper to manage your money for you. But even when you do this, you should still be involved somehow in the financial management of your business. You’re still buying your materials and bringing in revenue with your work, so you should at least have a cursory understanding of the monetary workings of your business.
The thing that struck me the most during Michelle’s presentation was the idea of keeping every single receipt for every purchase you make for your business, right from day one. I’m not sure why it didn’t occur to me—probably because I don’t save my receipts from the school cafeteria, and I’ve gotten in the habit of tossing them out once they’re a couple weeks old. (I buy from the cafeteria with my meal plan so often it isn’t funny; the receipts pile up.)
But when you think about it, it makes sense. You need to keep track of everything you’re spending on business expenses if you want to apply for tax deductions and keep more money for yourself and for your business. This is especially important for a sole proprietor, upon whom all financial and tax responsibility falls.
(The complicated side of tax deductions is something I might talk about another time, but only if there’s interest. That might get even drier than this post is already.)
Another thing I really suggest folks keep in mind is that you have to start paying HST to the government when you go over $30,000 of income for any annual period. If you go over $30,000 income before taxes, then you have to pay that HST even if you’re not charging your clients for it—which means the tax comes right out of your income.
Considering the costs of living where I do*, $30,000 is not really that much. Even despite how scary such large monetary figures look to me and how badly I might want to avoid ever touching them, I may have to make that much or more to live comfortably where I am (and I would have to earn even more to live someplace like Toronto). It’s safest just to register an HST number with the government ahead of time so you’re charging HST from the start. Then if you go over $30,000, it’s not a problem—and, as a small bonus, your clients will be used to the HST-prices you charge from the start and you won’t have to explain a price hike to them.
I’ve barely scratched the surface on the topics of what Michelle spoke about, but this seems like an all right stopping point all the same. Y’know, before I talk your ear off.
I think it’s enough to make one thing clear enough at least. She made me think. And she made me really realize how important keeping track of the legal and financial aspects of your business is. It’s something I’ll be giving some long, hard sessions of thought if and whenever I set up my own business in future. It might not be a bad idea to look* at* some* resources* and do the same yourself, readers.