If not, you probably need to.
This is because of inflation, think of gas prices now versus a couple years ago (or even months ago).
And it's kind of an expensive time to be living right now and you probably need to increase your fees.
I.e. Therefore, for you to provide same level of service (ex. because of increase in agency expenses), you need to charge more or you will be losing money.
Don't just take our word for it:
HST = HARMONIZED SALES TAX, it's the tax you see on most receipts you receive as it is an end consumer tax.
As soon as you bill over $30,000 then you are not a "small supplier" anymore and must register for an HST number and start charging HST on your invoices.
It's 2022 and you billed $29,000 so far for your agency's services, since you are almost at threshold for HST number and notifying client that you will begin to charge HST (13% tax here in ON). You can elect to voluntarily charge HST whenever you want below threshold before it becomes mandatory.
Your digital marketing services you bill one client
= $1,356 TOTAL INVOICE AMOUNT
The $156 you collected, you need to remit to the CRA quarterly/ yearly/ or monthly.
Do no spend this as it's not your money and it is due to the gov't.
This HST has nothing to do with your personal taxes/ sole proprietor taxes.
From that $1,200 you collected (less expenses), you will be taxed a % depending on your tax rate.
Let's say the entire year was this one $1,200 invoice and you had no expenses. Your tax rate assume 12.75%
You would owe the government / CRA
($1,200*Taxrate) + $156 in HST
= 153 + 156
would be your total tax liability all else equal.
An HST return is basically HST collected - HST spent (on your expenses)
Since you already gave HST to another business (as an expense) you don't need to pay it to the government.
This HST you charge, you must remit to the CRA at the end of the year so do not spend this money. However, the HST you spend on purchases, you can reduce the HST owing by the HST you have spent out.
You must put this HST number on your invoice as well so the receiving company can use this for THEIR HST tax credit.
Put in your business number (hst number) followed by RT0001
Put in your access code number
Reporting period, most other fields probably do not apply.
Next page allows you to enter the HST collected
Net this amount from the HST on the receipts you have spent
Gives you the total you need to file and pay.
If you have any questions re: your HST situation, please let us know we'd love to help.
So you have some clients and you think you are on top of the world, which is great, but sometimes it doesn't work out and clients leave... and they will, you cannot satisfy everyone and people rely on revenues being 100% into the future. If you are not acquiring new clients, you are falling behind and client churn will eat your agency alive. Expect some clients will constantly be shopping around and you cannot hand hold all your clients and scale. This means that fancy new office you signed a lease on might be too expensive.
Can you accurately price a potential new client on a call? Do you know how much you are spending per month on salaries, office expenses, apps? Cash is royalty and you need to understand where every dollar is going so you can invest when needed and stop spending in certain areas.
Agency owners also like to forget about the CRA and what is due to them! When your invoicing your clients, there's that 13% HST that is NOT YOURS to spend and you are just holding it for the government. Always know your tax liabilities so you actually know how much money you can reinvest or take out without putting financial strain on the agency. Nothing is worse than being extremely tight for money.
Are you running an agency or are you a consultant? There is a huge difference in what you would charge and how you spend your time. Running an agency means you are selling marketing packages, being a consultant means you are billing for your hours. As a consultant you are limited to how much time you have, whereas an agency can have virtually limitless clients. If you are trying to start an agency and spending too much time on client work, you can't focus on new client acquisition, research & dev, keeping your staff happy, and other CEO related tasks.
An agency plan will keep you motivated and give you direction, this is key for benchmarking progress and determining where you need to focus your time. Without an agency plan, where are you going?
The creative process is changing, automation is rampant in virtually all departments of the modern agency. Not automating and ignoring changes in how businesses are functioning will cut your growth and you will not be around for long.
A bookkeeper is one who takes care of the bookkeeping function of an organization. An online one, is just that, a bookkeeper that works with clients online. An online bookkeeper is deemed a "more modern" bookkeeper because online bookkeeping is a relatively new type of bookkeeping. Bookkeeping used to be done using actual books, only physical invoices, receipts, purchase orders and other physical, financial related documents, and it was very tedious and took a lot more time to process these documents compared to how fast they can be processed today.
A modern bookkeeper is one who uses the "most advanced" accounting technology for your specific industry thats available.
Bookkeeping and accounting are intertwined in the sense that a bookkeeper may perform full cycle accounting where an accountant does not usually do any day-to-day processing of an organization's transactions but tasked with making sure the financials are produced (Profit & Loss Statement, Balance Sheet Statement, Cash Flow Statement) and the organizations obligatory tax filings are being filed (For a corporation you need to file a T2).
Bookkeeping can be done both manually or you can subscribe to an app that takes care of your bookkeeping.
What's the difference between having a traditional bookkeeper using using a bookkeeping firm and having a bookkeeping app with added support?
Charges per hour
A number of bookkeepers
Technologically versed in limited number of apps
A person who utilizes online bookkeeping apps to prepare the bookkeeping entries and transactions for a number of clients. They may or may not complete tax returns for the company.
Your agency needs a business plan!
Doesn't need to be hundreds of pages with exhibits and graphics, but you need to have something.
What's in an agency plan?
How will a new client on-boarding process look & feel like?
How is your team organized & task workflow?
Who needs to
These are the essentials, how it's structured and presented is totally up to you.
With on premise data storage and software being a thing of the past, companies are turning to all cloud based apps and team structure. What does this mean? This means a big squeeze for creative agencies to pump out more sales-converting-creative-assets, faster, and for less.
The process flow on which you onboard and start producing needs to be fast and efficient.
The analytics need to be on point. This usually means a specialization in an industry as to gain expertise.
This information is useful for those yearning to get into the creative industry and want to start picking up some much needed accounting skills and know how!
Now where to begin?
Point of accounting is to know how much $$$ you are making (profits) and how much money you owe the CRA (Canada Revenue Agency). Or how much money you are losing...
You generate profit by selling your agency services (Agency Sales) for more than it costs you to build out said services (Cost of Agency Sales or COS).
SALES - COS = GROSS PROFIT
Probably some expenses not directly related to a specific client, but needed to run your agency.
This would be your agency's operating expenses (OPX).
GROSS PROFIT - OPERATING EXPENSES (OPX) = EARNINGS BEFORE TAX
After you subtract taxes (corporate taxes) from that you get your agency's Net Income.
EBT - TAXES = NI
And then bam, you know how to calculate your agency's net income after corp taxes.
All of this info would be found on the accounting statement known as the "Income Statement" aka "Profit and Loss Statement" aka how much money is my agency making over X period of time.
Ok great, so let's say this past year you invoiced $120,000 for social media management and you spent $45,000 on graphics and you started Jan 01, 2021 and your fiscal year end is Dec 31, 2021. And this is your first year of business.
T (if you are incorporated, you'd fill out a T2 form and submit to CRA, this is due 6 months after your year end, they want the money within 3 months though)
NI This is how much money you get to take home... not quite
Depending on you would pay yourself, there are even more taxes.
If this stresses you out, stop stressing, Klnda can help you automate all your accounting needs and is supported by the friendly team flip 😀