Ensure you’re tax and legally compliant – Part II

Published: February 26, 2020 by

How a part-time CFO will resolve your tax challenges

The CFO Centre will provide you with a highly experienced senior CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO.

This means you will have:

One of Canada’s leading CFOs, working with you on a part-time basis
A local support team of the highest calibre CFOs
A national and international collaborative team of the top CFOs sharing best practice (the power of hundreds)
Access to our national and international network of clients and partners.

With all that support and expertise at your fingertips, you will achieve better results, faster. It means you’ll have more confidence and clarity when it comes to decision-making. After all, you’ll have access to expert help and advice whenever you need it.

In particular, since every CFO Centre CFO is a qualified accountant and has experience of the kind of challenges which many business owners may feel are beyond solving, he or she will help you with your tax and legal position.

It is always a great relief to our clients to know that this high-risk area is being looked after for them.

It was a problem with GST that led one family-owned business to contact The CFO Centre.

One of The CFO Centre’s part-time CFOs recalls his first meeting with the business owners well.

“They were in a dark place when I went for my first meeting,” he says. “They had a tax problem and they were paying that off. “ “The company had been operating at a loss, running out of cash and they were constantly cutting costs.“

“I asked them what they thought they needed to do and I replayed it to them at the end of the day and all I did was say ‘You do that, you do this’ etc. “ “They knew what they needed to do, but they just didn’t have the confidence to do it. “

“It took us about nine months to sort it out. We put a strategy together and sold off two showrooms.” “Now, in our second year, we have three showrooms instead of five and yet our revenue is greater than what it was when we had five.”

“The family is in a place where they love going to work. They like what they’re doing and they want me to keep going in because I give them the confidence to make decisions about the business.”

A software development client was another business that benefitted from specialist tax advice from one of our part-time CFOs.

“Our part time CFO sorted out the R and D tax credits, which has also been a big help particularly because it came along at a time where life could have got quite tough if we’d had to pay out a huge tax bill,” recalls the owner. “We hadn’t even considered the R and D tax credits so this was a big win.

“It really helps to know that the finances are being professionally looked after. Our CFO is able to come in and steady my nerves if we are going through a difficult patch.

“I can relax knowing that I’ve got somebody watching over the financial side of things. Because I recognize that I’m not a numbers person and that it could all go completely awry if it were left to me to look at the numbers and understand what was happening.

“Having our part-time CFO has given my confidence in the business an enormous boost. I have no worries at the moment because our CFO lets me know when I need to focus on something. His input has meant that I am free to think about all the other things that I’m trying to do without worrying too much about the financial health of the business. When I do need to look at something urgently he can bring the issue into sharp focus then.”

In certain cases where the structure and complexity of the business dictates, it may be necessary to seek out a tax specialist (or even tax experts) to work alongside your part-time CFO. It’s your CFO’s role to determine the requirements for your business and ensure that the plan is implemented in the most effective and efficient way possible.

A CFO Centre part-time CFO will work with you to:

Determine your requirements and devise a tax planning strategy and remove the fear of the unknown so that you and your senior team can offload the burden.

Work with our wider network of tax specialists to solve complex issues as and when required.
Undertake negotiations with CRA on your behalf.
Implement processes that ensure that tax deadlines are met.
Translate specialist terminology into language you will understand and explain the plan in plain English.
Prepare cash flow forecasts for CRA that support applications to defer payments.
Devise an optimal tax efficient exit strategy for the business.
Ensure the tax advice fits with the overall business strategy
Discuss the most efficient ways for you and your employees to be remunerated.
Ensure that your company is kept fully up to date with new tax legislation.
Establish systems that record data the most effectively for tax purposes.
Deal with day to day legal issues – such as terms and conditions – and make sure your company is compliant.
Work with our wider network of solicitors to solve important/complex legal issues.
Help interpret legal letters and contracts.

Ensure you’re tax and legally compliant – Part I

Published: February 14, 2020 by

Managing your tax and legal responsibilities effectively is a critical skill and one that few SME owners possess. This report explains why getting specialist tax and legal advice is crucial for all SMEs and how doing so can be hugely beneficial for businesses and their owners. In these articles, we will see:

The benefits of being tax and legally compliant
How a part-time CFO will resolve your tax and legal compliance challenges

Complying with tax legislation is “an uphill struggle” for many businesses and results in the wastage of precious management time, according to the CBI.¹

It’s estimated that mid-sized businesses spend 110 hours or nine days a year preparing, filing and paying corporation tax, labour taxes and goods and services tax, says PriceWaterhouseCooper.²

Most companies need to comply with at least eight categories of tax. That doesn’t include the industry-specific taxes (such as those in the construction, waste management, and oil & gas industries) that they must also pay.

“Each tax has its own legislation, associated case law that has built up over years of interpretation, varying thresholds for calculations and qualification of reliefs, and a myriad of payment dates, reporting deadlines and filing requirements,” says the CBI. “It is difficult to comprehend, let alone manage. It takes time and effort to ensure that a business is fully compliant in the taxes it needs to collect on behalf of the government and pay in terms of its liabilities – distracting it from commercial priorities and reducing management capacity for strategic decision-making.”

Mid-size businesses don’t have the resources or expertise that large companies possess to navigate tax rules and legislation, nor do they receive the targeted support that the Government directs at small businesses.

John Cridland, the former CBI Director-General, said: “Medium-sized firms are not able to benefit from the incentives that small firms do and, at the same time, most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.”³

It’s no doubt why tax worries so many owners of mid-sized companies. As is the case with most finance-related matters, the anxiety usually stems from not having a strategy in place to deal with the issues which arise.

Medium-sized firms are not able to benefit from the incentives that small firms do and, at the same time, most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.

As soon as the business owner accepts that they need a tax specialist as part of their team, the faster they can offload the burden knowing that their back is covered.

In other words, because tax is inherently complicated it really doesn’t make sense for CEOs and business owners to spend their own time trying to understand the detail. Accepting that this is the case and delegating out the responsibility to a capable, experienced part-time CFO removes an immense weight from the shoulders.

When we conduct reviews with our clients, we often discover a deep-seated anxiety about the pitfalls of failing to understand tax issues.

The primary concern is usually the idea that the business may be building up significant arrears of tax, which remain unpaid.

There are often worries about whether or not the accounting system used is recording information in the right way and will reveal significant holes in the event of a tax inspection.

Corporation tax, HST, GST, the implications of capital gains tax vs. income tax, failing to claim tax breaks, employment taxes and understanding R&D credits are common areas of discussion with our clients as is the desire to keep up to date with new legislation.

Most business owners simply want to know that their company (and personal) tax affairs and legal issues are being properly looked after; that they are as tax efficient as they can be and that all statutory requirements are being met. Most companies do a poor job of this because tax is inherently complicated and when things get complicated in business the most common reaction is to move onto something else!

Delegating your tax planning and legal responsibilities to a tax specialist is a must.

Knowing that you are not paying tax you don’t need to be paying and having peace of mind that all your tax deadlines will be met without you having to take on the responsibility personally will allow you to focus on growing the business while we take care of the details.

Come back for part II of our tax compliant article to find out how a part-time CFO can help you navigate the tax season!

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¹ « Stuck In The Middle: Addressing The Tax Burden For Medium-Sized Businesses ». CBI/Grant Thornton, www.cbi.org.uk, www.grant-thornton. co.uk. Juin 2014.
² « UK slips two places down league table of effective tax systems » Nicholson, Kevin, PwC (PriceWaterhouseCooper), www.pwc.com. 21 nov. 2014
³ «Medium-sized businesses need more support to stop them from falling over the tax cliff», Prosser, David, The Independent, Jun 23, 2014, www.independent.co.uk

Improve your banking relationship

Published: November 15, 2018 by

Developing a strong relationship with your bank provides tremendous benefits including offering necessary funding, preferential rates, and better terms. Your bank can provide expert financial advice and help you to find solutions to financial challenges. It can also help you to grow your business and reach your financial objectives.

Since your bank works with a wide variety of businesses, it can also be an excellent source of prospective vendors, partners, and customers for your business.

As banks deal with SMEs in every industry, they are also an excellent source of information and advice about marketing, expansion, fraud prevention, and e-commerce. Some banks take the initiative and offer their customers business ideas and opportunities. So if you don’t have a strong relationship with your bank, you’re missing out in many ways that could help your business to prosper.

Very few business owners appreciate the value of having a strong relationship with their bank.

Why you should develop a strong relationship with your bank

Having a borrowing history and a solid relationship with your bank will make it easier for you to get credit.

It’s important to educate the bank on your business, your strategy, and your financials so that they are fully aware of your business and the vision you have for it, says banking expert, Peter Black of Snowball Consulting.¹

“You need to have a good relationship with your bank,” says Black. “If you treat the bank as a commodity and don’t tell them anything, then when you need them most, they may not be there.”

“Tell the bank the good and the bad news in equal measure, as and when it occurs,” recommends Black. “If you have a new contract or a good story, tell the bank about it. Many don’t do this.”

There’s more to it than regular phone calls, however. You also need to demonstrate that you have a coherent strategy and follow it, says Black. That will help to establish your credibility too.

“Continually changing the strategy or appearing to move from one to another does not give the bank confidence,” says Black. “The worst situation to be in is one where the bank does not even understand your strategy.”

Make sure the forecasts you provide are realistic and credible, recommends Black. “The bank will build up a history of how accurate the forecasts are that a business provides. No forecast can ever be totally accurate, but the banks see no end of forecasts showing a massive increase in profits and cash just to underpin the latest request.”

Let your banker know about regulatory changes that could have an impact on your company’s growth opportunities.

Banks need to know:

Who your customers are
Who your vendors are
What is going on in your industry

For that to happen, you need to establish regular communication with your bank manager.

Share your company’s long-term strategy with the bank. Your bank may be able to provide additional resources to help you achieve your goals.

Schedule regular meetings with your bank throughout the year so that he or she gets an accurate picture of your business. It will also make it more likely the bank will respond faster when needs or opportunities occur.

The stronger your relationship is with your bank, the better they will be able to understand your business when you come to them for advice and solutions to help it grow. Banks know things don’t always go as planned. They want to be comfortable that they understand your ability to deal with these situations and make good decisions to improve, building a track record with them based on trust, sharing information and debate. It’s astonishing how many business owners don’t invest in building a track record and strong relationship with their bank.

At a recent event focusing on how to build a world-class finance function, CFO Centre Group CEO, Sara Daw, found only four out of 50 business owners who attended considered their bank was a strategic partner to their business. This is far too low. At The CFO Centre, we make building a strong value-adding relationship with your bank a priority.

If you don’t have a good relationship with your bank manager, you’re missing out on more than a possible future credit facility. You’re missing a valuable free resource for advice and information.

Your bank can provide a regular evaluation of your business and financial strategy, as well as ideas and solutions to overcome many challenges you might face.

Banks also offer a wide array of services including:

Cash management tools
Credit card processing
Online and mobile banking services

Since banks deal with SMEs in every industry, they are also an excellent source of information and advice about marketing, expansion, fraud prevention, and e-commerce.

They can walk you through your balance sheet and explain how they perceive your finances and business. They can also learn more about where and when you’re likely to need the money to grow the business.

Giving information and asking for advice helps to build trust between you and your bank manager. Gradually, you learn to trust their advice and they begin to trust in your ability to repay your loans.

Banks hate surprises so if your business is encountering problems, it’s important to let your bank manager know as soon as possible. If you know that you’re likely to miss payments or be late in paying vendors, let your bank manager know in advance so they can assess the situation and provide you with options.

This will also demonstrate to your bank manager that you can manage the business and also be trusted to inform the bank before the problem gets worse. Your bank manager might even be able to extend your line of credit or temporarily waive your fees.

You can increase your chances of getting a loan or credit extension by demonstrating your ability to repay, whether it is a short-term overdraft or a longer-term loan. The bank will expect to see the proof so you’ll need to provide the following documents:

Your track record
Your previous results
A business plan (which needs to cover how the company started, your products/services; the management of the business and its plans for the future; market research undertaken to support assumptions and forecasts; and your financial requirements)
Your last audited accounts
Current and up-to-date management accounts
Accounts Receivable and Accounts Payable lists
A budget for the current/next trading year
A cash flow forecast

How a part-time CFO will strengthen your banking relationship

Many business owners are uncomfortable speaking with their bank manager. Owners and CEOs often do not know how to communicate their business strategy and needs to the bank and do not know what information the bank needs to support their funding requests. This is where an experienced CFO can be an essential part of your team; someone who understands how banks make their decisions and can, therefore, position your application for a greater chance of success.

Your part-time CFO will:

Develop a relationship with key personnel at your bank.
Share information about your business with the bank and keep the bank fully updated. The more trust that can be built the more the bank will be willing to help.
Provide the bank with a credible business plan which takes into account previous track record including debt and cash flow history.
Provide you with independent advice on bank products and their suitability.
Negotiate the best deal on bank facilities.
Provide access to senior contacts in the bank where required.
Introduce new banking options if needed and negotiate terms.

Your part-time CFO will work hard to forge a strong relationship with your bank so that when you need access to any of the bank’s services your request is treated as a priority.

What’s more, your part-time CFO has many years of banking experience so can advise you on the best banking deals.

Your part-time CFO knows where to go for supplementary funding to complement your bank finance (if necessary) and how to benchmark funding deals for your peace of mind.

CFOs can skillfully communicate your needs in a way that appeals to bank managers. That helps to add further credibility to your credit application.

Conclusion

Your bank can play a significant role in your company’s future growth, both in terms of providing necessary funding and strategic advice.

That will only happen if you take the necessary time and energy to foster a relationship with your bank manager. The benefits of doing so, however, make it one of the best investments you’ll make.

¹‘How to get the most out of your banking relationship’, Black, Peter, Forum of Private Business, www.fpb.org