Business 101: Effective Home Office

Many people have the dream of leaving behind the conventional 9-to-5 and abandoning the frustrating commute in favor of being able to work from home. This home-based work could still be for the same company, but instead of having to sit at a desk downtown somewhere, the same employee can perform the same tasks from the comfort of his or her home. It sounds great, right?

When you work at home, however, you will be faced with all sorts of distractions and it cane sometimes be difficult to get into a groove or mentality that is conducive to high productivity. In order to have an effective home office, you may want to consider some of the following elements.

• Completely separate work space: If your home office is just going to be the dining room table, the line between what is work and what is home can be very hard to define. Come tax time, it can also be more difficult to justify some of your home office expenses, like a portion of your utilities and mortgage interest. For this reason, it may be better to have a separate room as a home office.
• No shared supplies: Following in the same line of thought, it may be useful to keep office supplies separate from home supplies. This is not only for income tax purposes, but it’s also to prevent family from raiding your work-related supplies unexpectedly.
• Proper desk and chair: It may be convenient to just sit on the couch or use the coffee table, but even if you are working from home, you are still working! For the sake of your back and comfort, do invest in a proper desk and office chair if possible.

These are just some of the considerations you will have to make if you want to have an effective home office. Feel free to use the comment form below to add to this list.

Business 101: Pay Your GST Online

Most people know that they can file and pay their income tax online. It’s a very straightforward process and it sure beats having to go through the physical documents and filling out the individual lines one at a time by hand. Did you know that you don’t need to fill out the physical forms and make an actual visit to the bank when it comes to filing your GST forms too?

Part of the price of doing business in Canada is that you need to register for a business number and a GST number, assuming that you don’t fall under the small business exemption. It doesn’t matter if you do the regular method or the quick method of accounting, because both methods can be used through the online interface for remitting your GST payment.

If you are eligible to use the online GST/HST Netfile service, you will be provided with an access code when you receive the GST documents in the mail. This is similar to the access code that you get with your personal income tax.

Save some trees and skip the line at the bank. File online.

Business 101: Home Office Expenses

In case you haven’t noticed, the deadline to file your income tax forms is tomorrow. When going through all the numbers associated with your home-based business, don’t sell yourself short when it comes to home office expenses. This applies not only to people who actually work from home — like freelance writers and web designers — but also people who use their homes as a “home base” for their business. The latter group could include plumbers, electricians, and general contractors, for example.

It is best for you to consult a tax professional on the manner, but here are a few areas that you can consider when tallying up your home office expenses.

1. Equipment and tools. Did you buy a new computer for your home office? How about that executive chair, printer, and digital camera? If you use these items for the purpose of running your business, they serve as a perfectly legitimate expense. You may or may not be able to “write off” the entirety of the price paid, so consult with your accountant to be sure.

2. Communication charges. No matter what kind of business that you run from your home, there is a significant chance that you use your phone and Internet service in some way for work-related matters. Assume a fair and suitable percentage of these costs for business expenses.

3. Rent, utilities, and other fees. You will obviously not be able to expense the entirety of your monthly mortgage payment, but a portion of your mortgage interest can be written off as a home office expense. The easiest way to do this is by square footage. If 10% of your home is used as an office, then you can write off 10% of the interest portion on your mortgage payment.

Part of the appeal of starting a home-based business is that you are able to write off expenses that you would be paying anyways. Keep an eye out for things around the home that you use for work and you may be able to reduce the amount of income tax you pay by a considerable amount.

Business 101: Contingency Fund

It’s a bit of a paradox to say that you should expect the unexpected, because if you’re expecting it, it is no longer unexpected. That said, although you may not be able to expect the unexpected, you should do your best to be prepared for it. This is a very important thing to keep in mind when starting and running your business, whether it be an online endeavor or the opening of a brick-and-mortar store.

This is why it is of paramount importance that you keep a keen eye on your cash flow and always have a contingency fund in place in case of emergencies and unexpected expenses. The size of your contingency fund will depend on a number of factors, like the amount of money coming in and out on a regular basis, as well as the possibility of having to repair and/or replace expensive elements of your business. If you run a printing shop, for example, it can be very expensive to replace one of those large printers. If you’re a freelance writer, on the other hand, the largest replacement cost would just be a simple computer.

In dealing with the cost of day-to-day operations, it’s easy to stretch your cash flow thin. You’re going to have bills to pay on a continual basis, but you should have a fund set aside to take care of unexpected expenses. Don’t leave yourself in the unfavorable position of having to ask for a (potentially high-interest) short-term loan from the bank just to cover an unexpected expense.

Business 101: Business Plan for a Loan

You might have a great idea for a new business, but you just don’t have the capital to get it started. Whether it be a new restaurant or an online service, you probably need some money before you get that business up and running. When it comes to a situation like this, you might have to look to the bank for a business loan.

As you can imagine, the bank isn’t going to throw money around to anyone who asks for it. It is up to you to convince them that you are worthy of a loan, and nearly all business loans require a well-detailed business plan. There are a few tutorials on the web that walk you through the process of creating a business plan, but here are a few key pointers that you’ll want to keep in mind.

First of all, you’ll want to start with a statement of purpose. This explains to the bank what your business will do and how it will do it. The statement of purpose should be very brief, but descriptive enough for the banker to know what’s going on. Typically, a statement of purpose is 25 words or less. After this, you’ll want to explain how the business will work and why it will be successful. What makes you special? What is it about your business that will ensure its profitability. This is also the section where you will name the owners and/or shareholders.

After this introduction, you can get into the meat and potatoes of your business plan, outlining the products and services, describing the target customer base, identifying the market and the competition, and listing the managers and their credentials. You will also want to provide projected financial statements so that the bank has a good idea of how much revenue you’re expecting and how high the costs will be, as well as the projected cash-flow.

Any supporting documents can come in very handy as well. This could be from potential clients and suppliers, for example.

Business 101: Mission Statement

When setting up your business, especially if you might consider going public at some point down the line, it might be a good idea to set up a mission statement. Many of the world’s largest companies have mission statements, because it is one way that the company can unify the visions of all their employees, ensuring that they all have the same goals in mind.

A mission statement is a brief statement that describes the purpose of a company or organization. The purpose of the mission statement is to ensure that all members of the organization are aware of the company’s purpose and this purpose can be publicly stated so that outsiders know what the company is all about as well. One of the better mission statements that I have found is that of Google. It reads:

“Organize the world’s information and make it universally accessible and useful.”

I think that sums up what Google wants to do very succinctly and accurately. Although some mission statements may sound a little hopeful and idealistic, it is best to have a mission statement that is both inspiring and realistic. It can be a lofty goal, but it has to be one that is achievable.