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.