Finance

Opening a small business is an incredibly exciting time for first-time business owners to see their vision and passion come to life. Small business owners open their businesses to fulfill their goals and stand behind their products. However, while every small business owner is passionate, most are not financial experts. In 2022, 29 per cent of Canadian businesses failed because they ran out of funds to support their operations. A successful business requires good cash management because positive cash flow, the income that the business obtains, is used for paying employees and suppliers, securing raw materials, making investments and more. As a result, learning about the financial aspects of running a business and organizing financial documents is sometimes put on the back burner. But not giving equal attention to finances can negatively impact how long a business can stay open. In addition, companies need to also keep track of negative cash flow. Negative cash flow consists of expenses that cause cash to flow out of the business. Statistics Canada published a report earlier this year that found 20 per cent of Canadian small businesses are worried about cash flow. Negative cash flow does not mean a business will fail, but businesses should still consider developing a system to track spending and business expenses. Furthermore, organizing financial documents and responsibilities helps business owners understand how well they are doing at different steps of their financial journeys. Small businesses can set themselves up for success by incorporating organizational strategies as early as possible. Here are some ways that small businesses can organize their finances. Open a separate business bank account Managing a small business requires constant withdrawals for business expenses, which leads to more transaction fees and longer bank history statements. When this occurs in the same bank account as a personal checking account, it can be overwhelming for a business owner to keep track of all the different transactions. By opening a separate business account, it is easier to keep track of clients that have been paid, monthly expenses, how often materials are bought for the business and more. Additionally, a separate account can help prove that a business owner is not using their business account to pay for personal expenses. This is helpful if a business ever has to deal with a lawsuit. Lastly, many banks have benefits for business accounts, including cash-back rewards and an extended grace period for bills. Digitize documents to make backup copies and keep them in one place Digitizing documents saves paper and can serve as backups if a workspace is cluttered or ever experiences a fire or flood. Scanning documents is one of the simplest ways to make copies of original documents and can be done through many mobile apps. Digitizing documents also comes in handy during tax season since many software programs allow businesses to do their taxes online. Business owners can start doing this by designating a folder or Dropbox for financial documents and uploading them to the folder as they are received. Plan ahead for potential negative cash flow by creating a cash flow projection statement A cash flow projection statement is a financial document that measures the amount of money that enters a business within a designated time period. It can help business owners understand the negative and positive cash flow they experience every month so they can plan and ensure their businesses can withstand financial problems in the future. To make a cash flow projection statement, a business owner must first determine the opening amount by using their positive cash flow to calculate the cash they have at the end of a month. Secondly, they must identify the projected business expenses, such as rent, utilities and cost of goods, before subtracting them from the opening amount to find the projected cash flow. This total could be negative or positive, but the figure can be referred to whenever a business owner wants to do something new financially, such as switching the materials they buy. Organize and hold onto physical documents Although digitizing documents has many benefits, some government audits may want to see physical copies. Therefore, physical documents should be organized by month, and each year should be separated for tax purposes.     Like digitizing documents, a business owner should organize physical documents in one place. This can include filing cabinets, folders, and work desks. The documents that businesses should keep physical copies of include tax returns, mortgages and lease documents, business licenses, receipts and invoices (up to 120 days) to settle transaction disputes with customers. Although organizing finances can be tricky, following the tips above can help small business owners build confidence in their financial management abilities. Becoming well-versed in financial literacy takes time. Owners should use the passion that inspired them to open their small businesses to fuel their financial literacy journeys. With some hard work and organization, you’ll be a finance whiz in no time!

Many Canadians are tired of the recent rise in tipping. A study by the Angus Reid Institute found that 83 per cent of Canadians believe too many places are asking for tips these days. The same survey found this attitude in at least three-quarters of participants across all Canadian regions and demographics. While most Canadians understand that workers rely on tips for income, they believe this shouldn’t be the case. The Angus Reid Institute survey also found that 86 per cent of Canadians believed tipping allows employers to underpay their employees, and 59 per cent think employers should pay more so tipping can be eliminated. This is a complex problem. Among inflation and rising costs, many Canadians feel unable to keep up with a greater demand for tipping. At the same time, some workers rely on tips themselves to earn enough money to survive. Although there isn’t recent available data to know how much of certain workers’ income is based on gratuities, the 15 per cent tip standard can add a noteworthy amount to a worker’s hourly base pay. Read ahead to learn what created this problem and what can be done now that it’s here. Where did tipping come from? Tipping is not a new phenomenon in North America. Although the origin of tipping culture isn’t clear, it has been controversial since its widespread adoption in 19th century America. The controversy began almost immediately. Wealthier people with deep pockets had no objection to tipping, but working-class individuals saw the practice as anti-American. Tipping was especially unpopular among more forward-thinking Americans, as the practice had roots in slavery. While the origins of tipping in Canada are more uncertain, it has been going on for many decades. What has remained the same, though, is the controversy. What’s behind tip-flation? Angela Garcia, a boutique hotel manager in Toronto, described tip-flation, or tip-creep, as the growing expectation to tip higher and tip in environments not traditionally associated with the practice. Although there have always been reluctant tippers, Garcia said she has seen a larger pushback from customers starting after 2021. Garcia explained that she thought this was for two reasons. Firstly, Canadians’ expenses are rising. In 2022, Canada experienced its biggest jump in inflation since GST was introduced. Secondly, she felt that point-of-sales systems in many places are programmed with a tipping option now. This includes places where tipping is less traditionally expected, such as fast food takeout restaurants and some self-serve retail spaces. During the peak of the COVID-19 pandemic, Garcia explained that tipping goodwill increased significantly. She said that there was an understanding that restaurant and service workers had a greater risk of getting sick, so customers were more sympathetic. Although she stressed that tip-flation started before the pandemic, she said it accelerated the cultural expectation of tipping. She recalled that people were even tipping grocery store cashiers because they understood the risk they were taking and felt they weren’t being paid enough for it.  After COVID fears died down and many people returned to normal behaviours, Garcia said the new tipping culture remained, including the expectation of higher tips and tips in nontraditional environments. Should restaurants pay their workers more? Paying a higher wage to employees and eliminating tipping is an experiment that some places have undergone. Garcia explained that her hotel tried this in the past, but it didn’t go as expected. In the bar and restaurant portion of the hotel, she found some customers were particularly hesitant about not tipping. Garcia tried including an automatic gratuity in the base prices at the restaurant and bar. The menu was labelled to explain this, and the employees were instructed to explain that tips were optional because the prices already included them. The tactic was polarizing. Some people enjoyed not having to figure out how much to tip. Others were frustrated with the automatic gratuity. Garcia said some customers even tipped on top of the gratuity because they felt awkward about not tipping. Garcia’s example, however, still supports the culture of tipping. Although the workers enjoyed a more predictable income, the “solution” still relied on customers to pay for a noteworthy portion of their wages. Fundamentally, they still were not being paid enough by their employer and at the end of the day, they were still relying on tips. Garcia said many customers felt awkward not tipping because they had received good service. The negative reactions from customers fatigued employees, and eventually, the restaurant and bar resumed traditional tipping. The other hotel employees kept the new model without any pushback from customers. Garcia added that this experiment was pre-pandemic, and the hotel planned to try that tipping model again. She said she expects customers to be more receptive to it now with the ongoing concerns surrounding tip-flation. Are tips going anywhere? Tipping is a part of Canadian culture, and although tip-flation and tip fatigue are present, Garcia said she believed that tipping isn’t going anywhere anytime soon. She explained that workers need to be paid more for tipping to become an obsolete practice. Although more and more places are cluing into this, Garcia said she believes there still needs to be a lot done to shift cultural expectations around tipping. Garcia wanted her workers to be paid a more predictable wage, and she did what she could do in her position by introducing an automatic gratuity. Unfortunately, this is not a solution to the broader problem because employers still expect customers to partially pay their employees for them via tips. Some large companies are increasing prices not to keep up with inflation but to earn higher profits. Although some smaller establishments may need to raise their prices modestly to pay their workers more, others raise prices despite a lower labour cost and better profit margin. While tipping may not go anywhere in the short term, the best way to encourage this cultural shift is to deliberately buy from places that pay their workers a better wage to forego tips. The

Retirement can seem impossible for many people. Earlier this year, BMO’s annual retirement study found that Canadians believe they need $1.7 million to retire, a 20 per cent increase from 2020. Yet, only 44 per cent of Canadians are confident they will have enough to retire, marking a 10 per cent decrease from 2020. These issues are amplified for younger generations. According to Statistics Canada, the median income in the 25-34 age range was $45,800 for 2021. With an average living wage of $19.72 per hour in Ontario, this only leaves a few thousand dollars per year to put into savings after basic living expenses. Another concern is the rising cost of living. A 2022 survey published by the Angus Reid Institute found that more than half of Canadians can’t keep up with the increasing cost of living, with seven in 10 reporting feeling stressed about finances. As living expenses continue to rise and wages remain inadequate, retirement can feel out of reach for many people. Read ahead to learn about solutions to the growing retirement problem, including support resources and financial management strategies. Government safety nets Sarah Bennett, a financial planner from Kingston, Ont., wants to assure Canadians that despite seeming hopeless, there are government safety nets in place as a worst-case scenario. She said young people, in particular, seem to think they will work until they die, but this won’t be the case as long as social assistance programs keep up with inflation. The Canada Pension Plan (CPP) is one such government safety net. The CPP pension is a monthly, taxable benefit that replaces 25 per cent of a worker’s average salary earned throughout their working life, up to $1,254 per month. The CPP pension is set to steadily rise to 33 per cent of a pensioner’s average salary, a transition which started in 2019. Beyond the CPP, there is the Guaranteed Income Supplement (GIS). GIS is a pension based on residency, not working life. A long-time Canadian resident may receive up to $667 per month. Pensioners with a low income may also receive the GIS, a guaranteed payment of up to $996 per month if they are single or $600 if they have a spouse. Between these three pensions, a pensioner could earn close to $26,000 per year in either tax-free or low-taxed income. Though this is well below the living wage for Ontario, Bennett said it allows many pensioners to afford basic living expenses. Additionally, Bennett explained that government pensions will increase over time with inflation. Eliminate debt before retirement According to Bennett, it’s wise to eliminate debt before retirement. She explained that the debt is going nowhere and will only become more expensive as time goes on due to interest rates. She added that since interest rates are often variable, predicting how much money a would-be retiree needs to pay off debt after they stop working is difficult. With fixed expenses and variable interest rates, Bennett said the best strategy is to pay off debts in full before retirement, even if that means putting less money into savings. You may need to work longer, but not forever Given the uncertainty of the future, Canadians may need to work past the traditional retirement age. Bennett said that although this is a frustrating prospect for many people, the possibility of working past retirement age is better than in previous generations. New work arrangements, such as remote or hybrid jobs and temporary work assignments, can allow workers to take on a lighter workload while still enjoying a semi-retirement. Though retirement may feel uncertain for many Canadians, Bennett said it is still a realistic possibility for most Canadians, both now and in the future. The important thing to remember is to plan accordingly, minimize your debt and use available support resources. That way, you can enjoy your golden years –– just like you deserve.

There are many things to consider when starting a business. However, expenditures need to be monitored for everything to run smoothly.  There are many ways to minimize spending, and some methods are so simple they might even get overlooked.  Here are some easy ways to help your business’ bottom line through cost reduction.  Buying second-hand equipment Buying everything brand new is often unsustainable, especially for businesses just starting out. It can be tempting to give your business a polished look with newer items. But many smaller businesses cannot afford this luxury. There are several places to buy second-hand items. Sites like Craigslist, eBay and Kijiji are perfect for this. They help connect businesses to the equipment they need for a fraction of the retail price.   Social media marketing Marketing doesn’t always need to be a pricey task. Many businesses already have accounts on social media, so it’s important to use these platforms to their fullest potential. It is becoming more difficult to market effectively on social media without spending money. Though, creating ads on platforms such as Instagram and Twitter is a relatively inexpensive option. Instagram has different bidding models such as cost-per-click or cost-per-impression, prices will vary based on the chosen model. On average, the price of a cost-per-click ad ranges from $0.70 to $1.00. The analytics tabs on many social media platforms make it easy to track spending and adjust campaign strategies. This allows businesses to tailor their ads to help attract their customers.     Email marketing Another popular and cost-effective marketing strategy is email marketing. There are around four billion email users in the world, and this number continues to grow. Thus, it makes sense to reach out to customers this way. When marketing via email, remember that quality beats quantity every time. People receive several emails a day. So, it’s important to ensure that yours stands out from the rest (and not in a bad way.) Don’t send emails too frequently to avoid being marked as a spammer.   Using website builders A business’ website is often one of the first places a customer will go when exploring the business’ offerings. A website must be eye-catching and easy to navigate to avoid leaving a bad impression. Hiring a professional to make a website can get quite pricey, but fortunately there are several free online site builders. Services like Wix, Weebly and WordPress are beginner-friendly and still produce great results.  Hiring freelancers and contractors Contract workers often earn higher wages than regular employees. The Dice 2019 Tech Salary Report reveals that on average, full-time tech employees earn around $93,013. On the other hand, contractors in the same field earn an average of $98,079 for those working for an agency. And $94,011 for those working directly for their employers. However, contractors are less expensive to hire when cutting out extra costs (such as taxes, benefits, training and other expenditures.) These tend to be spent on full-time employees. Hiring freelancers or contractors also allows for flexibility that isn’t always possible with salaried employees. Hours, job requirements and more can be individualized for each contractor based on the changing needs of a business.   Hiring consultants Consultants can suggest, implement and guide many new cost-cutting strategies for a business. They can also help to spark ideas among other employees. It may seem counterproductive to pay someone to reduce costs. But an outsider may be able to see things about a business that people within it might overlook. Consultants can help to save in the long run. And the strategies they implement will stay with a business long after the consultant leaves.   Cost-cutting doesn’t have to be an intimidating task. There are many ways to save that go beyond this list. Different businesses will use different strategies based on their specific needs. In the end, it’s important to cut back as much as possible to allow a business to keep growing. 

The buzz around investing in collectibles has been on the rise.  Trusted sources have been quick to celebrate the earning-potential of this alternative investment. Guinness World Records recently validated a record-breaking $5.275 million US Pokémon card sale by YouTube personality Logan Paul.   In another recent account, a private investor paid$2 million US for a copy of Super Mario Bros. It was for the Nintendo Entertainment System. An article published on Entrepreneur Media explains that collectibles are  sure to increase in value.  Additionally, the market is easy to navigate. These are bold claims, and the opposite may be true.  Do collectibles always increase in value? Pokémon card scandals have been a new phenomenon. In a recent case, thieves stole$200,000 US worth of cards. In another, an investor used$57,000 US in government loans to purchase a single card. These scandals are a sign of the important demand for Pokémon cards. Sneakers are another example of a soaring market. In fact, the shoe resale market was recently valued at$10 billion US.  Understandably, some people get excited about  unique investing opportunities. It can be tied to a type of investing-specific fear of missing out (FOMO). Some investors are upset  about having missed out on early opportunities to invest in cryptocurrency such as Facebook and Amazon. Collectibles can represent the same type of FOMO. This FOMO has led to many collectible markets collapsing or never taking off. An example is the infamous Beanie Baby fever of the 1990s. Known as the “strangest speculative mania of all time,” most investors were left with nothing but an excessive amount of stuffed animals.  In a more niche market collapse, 2007 saw the sudden crash of the pu-erh tea market among tea collectors. In this market, driven by speculation, a normal pu-erh tea cake jumped from $760 to $4,190 in a  year. Today, one can purchase the same tea cake blend for roughly $30.  Collectible investing does not always go up in value. What makes collectible investing risky is that the market is speculative. It is based on the moods of investors, rather than the actual value of an item.  Is the market easy to navigate? The idea that the collectible market is simple to navigate may be partly true.  For example, the Black Lotus Magic: The Gathering card has slowly increased in value over time. There are many similar stories across the market. This is because collecting is based on the perceived value of objects. If collectors see the value as high, then it is.  In reality, most people can’t actually invest like this. These treasured collectible pieces are often too expensive for most people. So, even though the card increased in value, an investor needs $12,000 US to purchase it. There may be an urge to compromise. An investor may not be able to  purchase a $420,000 US Charizard Pokémon card. But they can purchase a different Charizard for cheaper. Maybe the returns won’t be as dramatic, but there will still be a return. This way of thinking is understandable but may be misguided.  When looking at the current Charizard market, the cards range in price from $0.25 US to $28,000 US. There are more than 30 collectible Charizards, all with different editions. The market is complex and requires niche expertise. Additionally, the collectibles market has a problem with counterfeiting. From video games and sports memorabilia to wine, fake items are a common issue for collectors.  What’s the best way to invest in collectibles? If collectibles are a risky investment and difficult  to understand, what’s the best way to enter the market?  Becoming genuinely interested in having a collection is a good solution. By thinking of collectible items solely as a way to make money, an investor risks losing a lot of money. They also risk getting scammed. If an investor immerses themselfin a community and enjoys it, the risks and rewards will be easier to accept.  This advice is often  given to wine collectors. When a wine collector buys a bottle of wine they do not enjoy, revenue loss is that much more painful. If an investor purchases bottles they enjoy drinking, at worst, they have a bottle of wine they like to drink.  The same advice can be applied to all collectibles. Otherwise, an investor risks losing both time and money.

Navigating the early stages of starting a business as a Canadian business owner can be challenging. One of the first steps in your financial plan should be applying for federal and provincial grants. Yearly, small- to medium-sized enterprises (SMEs) play key roles in the growth of Canada’s gross domestic product (GDP) and employment rates. As necessary assets for the country’s economy, the government has continued to invest billions of dollars into grants. These can help you to begin or expand your business. In 2021, the government released the Canadian Key small business statistics.  It reported that small businesses alone contributed to the GDP by 37.5 per cent by the private sector. Medium businesses contributed by 14.4 per cent. In 2020, small businesses employed more than seven million workers in the private sector. As for medium businesses, they employed more than two million.  Online, you can find grants available to fund all types of businesses. The Ontario website has made this easy by creating a list, search engine and guide to support your needs. Depending on the scale of your business, you may be eligible for up to $1,000 in grants for personal protection equipment to as much as $5 million if you are operating an innovation project to develop your rural community in Southern Ontario. It can be overwhelming if you don’t know about the different types of grants or how to assess your needs. It can also be difficult when you aren’t sure which grants to apply for. Below is a simple list to help get you started. To better prepare yourself, keep in mind the tight deadlines, competitiveness, terms and conditions. You should especially pay attention to whether the incentive allows ‘stacking.’ This involves a combination of grants and loans to fund a business. Some funding may or may not be available if this is your strategy. So, it’s important to read carefully and treat grants competitively! Types of federal small business grants Non-repayable   Free grants require no repayment or contribution, unlike a loan. However, these funds often have very specific criteria depending on what the business needs. If your business fails to use the funding as required, your grant may turn into a loan. Partial contribution With matching contribution grants, you must provide half the amount of your desired funding. The other half is fully covered by the government, and if eligible, no repayment is needed. But depending on the type of business, the amount of partial contribution can differ. Conditional repayable As the name suggests, these funds must be repaid fully or by as little as 10 per cent. That is the case only when certain conditions are met. For example, a few conditions may look like:  No repayment until the business has met a profitable margin Partial repayment after a set amount of years of profitability Only 10 per cent of the grant is to be repaid Grants to consider for SMEs in Canada To start, SME grants generally cover hiring, training, capital investment, research development and market development.  Some grants that cover these areas and work on an ongoing basis include: Canada-Ontario Job Grant Program This grant helps business owners with hiring and training new employees. You may be eligible for 50 to 83 per cent of non-repayable funds if you need  assistance. That includes access to business training programs.  This grant helps employees stay up-to-date with the current knowledge and skill sets wanted for a growing and competitive economy.  Note, if an employer has less than 100 employees, they are required to cover one-sixth of all training costs. To apply or learn more, you can visit http://tcu.gov.on.ca/eng/eopg/cojg/. Government of Ontario Apprenticeship Completion Employer Bonus This grant provides $1,000, no repayment required if a for-profit. That is under the condition that the SME hires and trains an apprentice from one of Ontario’s 27 trades. Its purpose is to improve apprenticeship registration and completion, address skill shortages and reduce training costs. The first requirement is  the apprentice’s certification. The second is proof that the business has not received more than $2 million in funding. To apply or learn more, contact your local Employment Ontario apprenticeship office. Canada Digital Adoption Program (CDAP) SMEs who need assistance obtaining new technology for better efficiency can receive up to $15,000 in grants. They can also receive  up to $100,000 in a no-interest loan. The loan covers new or updated IT equipment, installation of new technologies and staff training for technology equipment. It also covers material and support services related to technology. It comes with two elements in the form of sub-grants that you can apply for together or separately.  The first grant of $2,400 helps SME owners who need to grow their business online. They also provide guidance from third-party organizations. Additionally, they developed a network of youth e-commerce advisors to help SME owners get started. According to the Government of Canada page, the second grant is for “boosting your technology” with updated technology and software. Funding can be up to $15,000. To be eligible, businesses require one to 499 employees with annual revenue of $50,000 to $100 million. For more information: https://www.canada.ca/en/innovation-science-economic-development/news/2022/03/backgrounder–the-canada-digital-adoption-program.html. Government of Ontario Summer Company Youth may be eligible to receive $3,000 to start their business in the summer, if the SME owner is aged 15 to 29 and still enrolled in school. Applicants must apply between May and July and not own a business yet. On top of the grant, owners will receive free advice and mentorship from local business owners.  To send an application and learn more, visit: https://www.ontario.ca/page/start-summer-company-students Starting a business is challenging, and for SMEs, the biggest barrier to taking that first step is access to funding. Exploring the grants or loans available is always a great start to get your business running. It may just be the opportunity you need to transform your business and yourself into a successful leader.