The Boss of You

We’re not really the sort of business gals to have motivational phrases, credos or mantras plastered on our office walls, but if we did one of them would surely say: “Don’t touch that! It’s tax money!” That may in fact be exactly why we don’t have these things on our walls come to think of it… but I digress. Since we first started our business in the corner of Lauren’s bedroom and received our very first cheque we have always kept our tax money separate. Here in Canada that translates into a few different types of tax: sale tax (for us only the national GST is appicable), and of course personal income tax. Since we incorporated our company last year the latter is now handled through our payroll primarily and is less of a monthly concern, but the sales tax bit is still a going concern.

Back when we managed our books with a few highly prized Excel spreadsheets, I always had a column set up to track every cent of GST that went into our bank account, and when evaluating how much money the company had I never went by our bank balance but rather the final total the spreadsheet gave me once you accounted for the GST that was also sitting in our account. Initially we had thought to actually keep a separate physical account to manage the two sums but that was a bit of a banking nightmare so I went for the papertrail route instead. This system made it really easy and slightly less painless to make our quarterly tax installments. While it still hurt (somedays more than others) to write a cheque to ye olde government for cash that we could often really have used personally, there were never any surprises about what our actual company funds were or what the tax bill was going to be. Now that we’re using a fancy bookkeeping system (Quickbooks), I can generate reports on things like tax owing etc at whim and can very easily keep on top of our payments. We really are sticklers for this whole tax thing, having watching friends and colleagues get burried under tax bills that they avoided or hadn’t accounted for, and so we’ve always stayed to the side of caution when it comes to managing which of our earnings belong to us and which are going into the communal pot as it were.

It would seem however, that somewhere last year I made a mistake. Which is really very unlike me or us, particularly when it comes to this stuff. I didn’t exactly fail to pay a tax bill, I simply paid the wrong one in the transition from Partnership to Incorporated company thus overpaying one account and not paying the other. Fortunately we have fabulous bookkeepers who caught the error and have spent enough hours on the phone with Revenue Canada to make them heroes in my eyes. In all this we got to experience, if only in a very small way, what it would be like to not keep on top of your tax payments as while all was being sorted out we had to pay up the one errant account so we didn’t incur penalty payments, which resulted in a bit of a hit to our cashflow as that payment had in fact already been made, just to the wrong account. (Confused? Don’t worry the moral of the story isn’t in the details.) For us that simply meant a double payment of one quarter worth of tax while we waited for Revenue Canada to release our overpayment, so it wasn’t financially shattering but it still was no fun let me tell you. But what was fun, was getting the refund cheque on that overpayment from way back when. It came in last week and now we’ve got this lovely cheque of what feels like free money (though of course it is rightfully ours and they’ve been holding it for over a year but I digress from the point) to put back into the company. Lauren and I have always functioned best in situations like this: work first, reward later and while I think that we can certainly sometimes take it a bit too far (all to often we forget about the reward part and just keep working), when it comes to things like taxes I believe it is a golden rule of business. Though, admittedly it doesn’t make for a very sexy motivational poster.