If you're looking for an efficient way to track your company's expenses, then this is the right article for you! Accounts payable is an accounting term that refers to money owed by a company or individual to suppliers or others who have done business with them. It may also refer to money owed by the company, business owner, or individuals.
Using an accounts payable aging report can help business owners manage their books. It's a valuable tool for tracking the amount of expenses paid versus owed. And, it helps provide insight into when payments are overdue and the steps needed for them to be paid off in full.
A QuickBooks Online aging report is like having a money management dashboard in your hand. In the next section, we will show you how to set up the aging report. The aging report allows you to view your Accounts payable balance as of any specific day or date (or range of dates). Using the Aging Summary Report below, helps identify accounts payable amounts over 30 days old for your review.
These are the steps you'll need to take to run an Accounts payable aging report:
1) Left-hand side > click on Reports > In the search bar in the upper right-hand corner, type in "Accounts payable" and select either Accounts payable aging summary or Accounts payable aging detail > in this example, we will be choosing the Accounts payable aging summary
2) On the next page > filter for date. For instance, you can choose either "Today" or a specific date range. With date range selected > click "Run Report" located on the right-hand side.
3) To view the amounts owed > click directly on the vendor names or the dollar amounts. For this example >click on "226" owed to "Jennifer Hargreaves."
If you want to change the filters, you can click on the report's gear icon "Settings" at the top right-hand corner. Doing this will open a new window with additional information on the amount owed. Once you've selected your filters, select "Next" again.
4) The last steps include:
- Saving or exporting the data that you want to analyze
- Correcting amounts or applying vendor credits, or payments against the amounts
- Following up with the vendor, paying the vendor, or agreeing to a payment plan
The value of running an accounts payable report is that it provides you with a snapshot of your company's financial performance. The aging process, which we will go over below, will allow you to compare the amount owed versus the amount earned. This provides a baseline for outstanding payments and their percentage of revenue and earnings and will enable you to determine if any trends are developing that may be worth further investigation.
From there, it's an easy step to determine if additional steps are needed for payments to be started or if they are overdue.
As an owner, an accounts payable report can help you make better decisions about managing your company. There are circumstances where you might owe money that you usually wouldn't notice because you don't have access to reports tracking this data. It's important to note that this is a risk if you don't have the money to pay off your outstanding balances. This is why it's critical that you understand the value of having an aging report.
For example, an aged accounts payable report might show a series of overdue payments or payments held up. This could be for various reasons, one being the late payment fee. It's helpful to understand what is causing these payments to be late or why they aren't paid off on time to avoid incurring additional fees or penalties on your end. If you're looking for ways to save on your business expenses, this can help you determine where you're losing money and how you can avoid it in the future.
You want to make sure you understand what the aging process entails and how it will help your company understand your revenue and expenses.
You want to make sure you understand what the aging process entails and how it will help your company understand your revenue and expenses.
You must run an accounts payable report regularly to know your outstanding balances. Ideally, you would be running an accounts payable report at least once a month to ensure that you do not have too many outstanding payments or pay too much in interest.
Having this information at your fingertips is critical for your company's finances. Ask yourself these questions about your business:
- Are there any trends of overdue payments or delayed payments?
- Are any payments being held up?
- How much are you paying in interest?
- If there are unpaid balances, have you considered paying them off early to save money on interest costs?
When you are managing a business, it’s important to stay organized. One example of this is the accounts payable aging report in QuickBooks Online, which will let you view your payables status and the amount that the business owes over various time frames. It simplifies everything into a single document—or spreadsheet, as we would usually call it—that shows you how much money your business owes.
Get in touch with us today. We can help you find the answers to these questions and have the correct information to make intelligent business decisions.
If you don't know your accounts receivable process inside and out, it doesn't matter how good a salesperson you are. You can be on top of your game day in and day out, but until you figure out how to manage the process that comes after the sale, and the bookkeeping that goes with it, you're never going to be able to grow.
When it comes to the accounts receivable process, there are a few things that you need to know about to improve your workflow. Those are:
When you're trying to improve your accounts receivable process, the first thing you need to look at is how long it takes for invoices to go unpaid once sent out. If you're in constant contact with customers and customers who have previously purchased from you, you probably know that it takes about 30 days or so for them to pay your bill after the fact.
What does this mean for you? When was the last time that your customers paid what they owed? If you haven't checked in on it in a while, stop and do so now. Has it been more than 30 days since they paid? Then you need to adjust how long the process takes. If it's taking longer than 30 days, you need to try and require that they pay earlier in the cycle. If it's taking less than that, you should probably consider a way to speed the process up.
There are many different kinds of payment terms that you can offer your clients. Some require no money upfront, while others require full payment before any work goes out. Whatever payment terms you decide to go with, it should be something that makes sense based on your industry and what your clients are willing to agree to.
What does this mean for you? The payment terms that you offer should be something that your clients are willing to agree to. If they aren't, you need to think about changing the terms until you find something that both of you can agree with. This is one of those things where if you settle, all parties come out unhappy.
If you're wondering how much money should be in various stages of the accounts receivable process, here is a rough outline:
Invoices – No money should be sitting at this stage at any time.
Credit Card Payments – This depends on your credit card processor. Most chargebacks are handled by the merchant, with the processor handling disputes.
Payment Schedules – This is the timeframe in which payments should be due. It's essential to know your customers and their payment schedules so that you can create a timetable for when their payments should be received.
Payments – Once they're received, this is how much money you get. Some companies may only allow for partial payments or require an entire payment to come in before they pay anything out.
What does this mean for you? If you've been paying your company's bills, you should know how much money is sitting in each of these stages. Once you do, you can work on optimizing the bookkeeping process based on this information.
Luckily, there are some tried-and-true ways to improve your bookkeeping process that anyone can implement with some deep thought and some elbow grease.
1. Determine the optimal collection process for your business
First, figure out what sort of collection process will work best for your company. Do you need to offer customers a series of payment plans? Will it be better to take a more aggressive stance and set firmer deadlines? There are several factors involved in making this decision, but the most important is your customer base. Are they capable of handling a complex AR system, or is it better to keep things simple? The answer will vary by industry, but most businesses find they can remain competitive with straightforward policies and minimal stress on the AR side.
2. Establish a payment due date
Once you've determined how aggressively to pursue the AR process, the next step is to set a payment due date. This can be helpful if you're offering customers an extension since it will help them understand when they should expect to pay off their balance. You may still wish to provide some payment plan or extension in certain situations, but having an official due date in place can help prevent undue stress for all parties involved.
3. Utilize email reminders when necessary
If your customers fail to make payments by the due date, it's time for a gentle reminder via email. You can't be too pushy or hound your customers via email. However, politely asking for payment by a specific date can be effective at getting some customers to pay up on time. Keep in mind that some customers will need more time, but others are perfectly capable of paying up without much hassle.
4. Offer payment plans when necessary
For some customers, establishing a due date isn't enough to get their payments in on time. If you need to offer payment plans on occasion, don't hesitate to make it clear how these plans work and whether there is any penalty involved if the customer doesn't pay off the balance in the allotted amount of time.
5. Evaluate and adjust your collection process as needed
If you find you need to change your AR collection policy or procedure, be sure to evaluate the situation and make necessary adjustments as necessary. For instance, you may find that a more aggressive approach works better than a more laid-back approach if your customers are slow to pay off their balances. Make the changes accordingly and continue trying new strategies until you find one that works best for your company.
6. Assess your operations with regards to AR processes and controls
As part of an overall systems audit, assessing how effective and efficient the account receivables process is within your company is explicitly also beneficial. What are the strengths and weaknesses of this process? What process improvements can you make to improve collections? By looking at these questions objectively, you can use this information to refine your AR process even further.
7. Automate your AR processes where possible
If you have the resources, it can be helpful to automate your AR collection process as much as possible. This is because automation simplifies the collection process considerably, allowing you to collect payments with ease and ensure that all documentation is readily available for auditing purposes if necessary
Check out some automation tools for this like AR Collect or Chaser
8. Give customers an incentive to pay off their balance.
As a final tip, remember that you can also give customers an incentive to pay off their balance as quickly as possible, so long as it doesn't run afoul of the law. You can offer discounts or other perks for specific customers who are willing to pay off their balance within a specified time frame. This will save you money in the long term, and it's likely to appeal to customers looking for a deal.
Over time, you'll find that your AR management strategy becomes more streamlined and efficient with every improvement you make. This leads to greater profitability over time, resulting in overall business success.
Not sure where to start? Get in touch with us today. We can help you find the answers to these questions and more so that you have the right information to make smart business decisions. Want to know more about hiring an Elevate cloud-bookkeeper and how they can help improve your bottom line - check out Anita's piece here.
So, you invested in crypto. By most accounts, you are not alone. And while this is a hot topic, many people still don't fully understand and grasp the consequences of investing in cryptocurrencies. The guides on Reddit and the internet just don't explain everything you need to know. So, we created this easy-to-read guide to help anyone who is either just about to buy their first crypto investment or are looking at diversifying their portfolio.
Cryptocurrency has become one of the hottest investment options in the last year. Many people are attracted to the exciting potential of this pioneering, decentralized technology. However, there is one major thing holding people back: The Unreliable Income Tax Conundrum.
For tax purposes, crypto is not currency. Crypto is property and a business asset (like stocks). The CRA has issued guidance on how taxpayers should report transactions involving virtual currency. When you buy or sell cryptocurrency, it's taxable just like most property transaction.
Cryptocurrency creators (Bitcoin, Dogecoin) set up these currencies as systems separate from any central bank, central authority, or government influence. However, cryptocurrencies are still considered commodities for the purposes of the Income Tax Act. In other words, when you receive Dogecoin and use it to purchase goods or services, the CRA considers this as a barter transaction. The CRA requires you to report any earnings or losses from these transactions on your income tax return.
When you sell a cryptocurrency for more than what you paid, the difference is considered a capital gain. If you sell for less, then this difference is considered a capital loss.
If you are the one who has sold a cryptocurrency for more than what you paid, then you owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are deductible against other capital gains.
When you buy a cryptocurrency, either directly or indirectly from someone else (for example, on an exchange), then the CRA treats this as a barter transaction. Since the value of the cryptocurrency has increased, any capital gains will be realized on the date you sold it.
If you are the one who bought the cryptocurrency and sold it for more than what you paid, then you owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are not deductible on your tax return like income losses.
When you trade one cryptocurrency for another type of cryptocurrency, the CRA considers this a barter transaction. Since the value of the cryptocurrency has increased, any capital gains will be realized on the date you sold it.
If you are the one who traded cryptocurrencies for another type of cryptocurrency and sold that one for more than what you paid, then you most likely owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are not deductible on your tax return like income losses.
Let’s look at some examples pulled from the CRA’s Guide for cryptocurrency users and tax professionals:
Crypto mining is the process of verifying transactions on a blockchain ledger by solving mathematical problems. In this way, a miner creates new cryptocurrency, which is then added to the digital ledger.
To mine cryptocurrencies, you need a powerful processing unit like an ASIC, or Application Specific Integrated Circuits. The processing power that ends up being used for this purpose is called hashing power (commonly expressed in megahashes per second). The faster your computer can compute hashes, the better chance you have of earning more bitcoins or other cryptocurrencies.
When it comes to cryptocurrency mining, it's a good idea to keep your capital loss and income loss separate. Capital losses can be used to offset capital gains, while income losses are deductible against any type of taxable income.
“The income tax treatment for cryptocurrency miners is different depending on whether their mining activities are a personal activity (a hobby) or a business activity. This is decided case by case. A hobby is generally undertaken for pleasure, entertainment or enjoyment, rather than for business reasons. But if a hobby is pursued in a sufficiently commercial and businesslike way, it can be considered a business activity and will be taxed as such.” - from the CRA’s Guide for cryptocurrency users and tax professionals
Individuals who are income tax residents of Canada are taxed on their worldwide income, including any income earned from cryptocurrency mining. Be aware that due to the large fluctuations in daily activity across trading platforms, tax authorities may take the average of the opening and closing values of the day, and also average values across a number of major exchanges.
The Income Tax Act describes income as the total of all amounts, monetary or not, that a person receives for any purpose. What this means is that all amounts are subject to income tax, even if there is no cash involved. This applies to cryptocurrency mining.
Since every business activity has to report income and expenses, the first step in determining your tax liability is to determine whether your cryptocurrency mining activity is a business activity or not. Therefore, you need to determine whether:
Your cryptocurrency mining activities are carried out in a sufficiently commercial and businesslike way; and You have acquired the necessary skills and knowledge that would allow you to carry on these activities as a profession or business.
The CRA has indicated that cryptocurrency mining is a taxable business for Canadian tax purposes due to the fact that miners generate revenue from the sale of cryptocurrencies.
For additional information on how you can calculate your mining expenses and determine what kind of income tax treatment you should receive, please contact us today.
From the CRA's Guide for cryptocurrency users and tax professionals:
"Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.
If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.
Keep all records that show how you calculated the fair market value."
For additional information on how you can calculate your GST/HST, please contact us today.
"If you acquire (by mining or otherwise) or dispose of cryptocurrency, you have to keep records of your cryptocurrency transactions. This also applies to businesses that accept cryptocurrency as payment for goods and services." - from the CRA Guide for cryptocurrency users and tax professionals
From the same CRA guide, please see below:
You should maintain the following records on your cryptocurrency transactions:
If you are a miner, also keep the following records:
To sum up, the CRA expects you to keep track of all your cryptocurrency transactions. Get in touch with us today should any of the above speak to you - or if you just need help with understanding your specific situation. If you would like to learn more about how Elevate by Welch can help with bookkeeping and tax services for cryptocurrency, contact Sean at firstname.lastname@example.org
How does it work? Read on to find out, and feel free to reach out to your Elevate by Welch professional to learn more and ensure you optimize your 2020 tax return.
To claim a home office expenses deduction, you must meet all of the criteria:
If you meet the eligibility criteria, you have two options to calculate the deduction for home office expenses:
Employers may suggest a method for their employees. It is the employees who have the ultimate authority to choose which method to use.
What is it?
If you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19, you can claim $2 for each day that you worked at home up to a maximum of $400 (200 working days) per individual.
If working at home and claiming home office expenses was the norm for you pre-COVID-19, you cannot use the temporary flat rate method to complete your 2020 claim.
What counts as a work day?
Days you worked full-time hours, overtime-hours or part-time hours from home.
Days that cannot be counted: days off, vacation days, sick leave days, other paid or unpaid leave of absence.
Do I need from my employer a certified Form T2200 Declaration of Conditions of Employment or Form T2200S Declaration of Conditions of Employment for Working at Home Due to COVID-19?
Do I need to retain documents in support of my claim?
How to claim?
You would need to complete the “Options 1 – Temporary flat rate method” section on Form T777S Statement of Employment Expenses for Working at Home Due to COVID-19.
Is the deduction calculated by the individual or by the household?
Each employee working from home who meets the eligibility requirements can use the temporary flat rate method to calculate his/her deduction. If there are more than one eligible employee working at home in the same household, each can choose his/her method to calculate the deduction.
What types of expenses are covered by the $2 flat daily rate?
The temporary flat rate method is used to claim home office expenses that you paid like rent, electricity and home internet access fees, as well as office supplies like pens and paper, and cell phone minutes.
Under this method, you cannot claim any other type of work-space-in-the-home-expenses, home office expenses or costs for items purchased of a capital nature.
Can I claim any other employment expenses?
No, you cannot claim any other employment expenses such as allowable motor vehicle expenses, parking, travelling expenses, etc.
Is the up-to-$400 a credit or a deduction?
Home office expenses can be claimed as a deduction on an employee’s personal income tax return. A deduction reduces the amount of income they pay tax on, so it reduces their overall income tax liability.
Will the temporary flat rate method be extended past 2020?
No. The temporary flat rate method only applies to the 2020 tax year.
What is it?
If you meet all of the criteria listed above under the “Eligibility” section, you may use the detailed method or the existing method to deduct home office expenses.
Do I need a certified Form T2200S or Form T2200 from my employer?
Form T2200S is a new simplified form for employers to complete and sign for employees who meet the eligibility requirements and who choose to use the detailed method.
If an employee pays for other employment expenses, such as allowable motor vehicle expenses, parking, travelling expenses, the employer must complete the traditional Form T2200.
For 2020 only, the CRA will accept an employer’s electronic signature on Form T2200S or Form T2200.
Do I need to retain documents in support of my claim?
Yes. Generally, you must keep all required records and supporting documentation for a period of six years from the end of the last tax year they relate to.
How to claim?
You can claim the actual working-at-home eligible expenses you paid that are supported by documents. Eligible expenses will be detailed out in the “Options 2 – Detailed method” section on Form T777S Statement of Employment Expenses for Working at Home Due to COVID-19.
How to determine the employment use of work space?
Whether you work in a spare room exclusively used as your work space at home, or at the dining table sometimes or at the kitchen table other times, there are several factors to consider when calculating the employment use of the work space at home, for example:
The CRA may accept a method of calculation other than one based on square meters (feet), as long as you are able to demonstrate to the CRA that your calculated percentage of use is reasonable.
What are eligible expenses?
Commonly seen eligible work-space-in-the-home expenses and other home office expenses include:
The CRA has expanded the list of eligible expenses that can be claimed to include home internet access fees.
Note that salaried employees cannot include the expenses paid pertinent to home insurance, property taxes and mortgage payments (principal and interest) in calculating the home office expenses.
Can I claim any other employment expenses?
If you are eligible to deduct home office expenses by meeting the requirements listed in the “Eligibility” section above, you would use T2200S and T777S forms to complete the claim. You cannot claim other employment expenses such as allowable motor vehicle expenses, parking, travelling expenses, etc.
If you are eligible to deduct home office expenses by applying the traditional criteria, which are outlined in the CRA Guide T4044 Employment Expenses, you would use T2200 and T777 forms to complete the claim. You can claim other employment expenses such as allowable motor vehicle expenses, parking, travelling expenses, etc.
The CRA has expanded its previous position (2020- 0845431C6 (F)) on employer reimbursement of personal computer equipment to include home office equipment. In the COVID-19 context, the CRA will not consider an employee to have received a taxable benefit where their employer pays for or reimburses up to $500 of computer or home office equipment that enables the employee to carry out their employment duties by working at home. To be treated as a non-taxable benefit, the employee must submit receipts to the employer. The CRA indicates that home office equipment would include items such as desks or chairs.
Jessica Zhang-Chapman, CPA, CGA, CIA, of Welch LLP illustrates it perfectly with a great example:
“ For example, if an employee purchased a second computer monitor for $300 plus an adjustable desk for $400, and the employee submitted receipts in support of the purchases, an employer can reimburse the employee up to $500 without the employee receiving a taxable benefit under the CRA administrative policy in the COVID-19 context. If the employer reimburses the full $700 for the purchases, the amount over $500 (that is, the $200) must be included in the employee’s income as a taxable benefit”
Parsing through tax guidance can be daunting. If you are unsure of where to start, need help moving it along, or want to entrust us with your personal taxes, please reach out to us at email@example.com
Were you eligible for the 10% Temporary Wage Subsidy and you accounted for it during 2020? If you did and you have a payroll account with the Canada Revenue Agency, you have to complete and submit Form PD27. As an employer, filing your TWS information on time is important. Elevate and Alex Mitrovic, CPA, CA, of Welch LLP will guide you through this important process.
“There is light at the end of the tunnel as to the global pandemic and the havoc it has caused for Canadian business owners”, says Alex, he continues “it’s important to remain compliant with CRA regardless of your situation. My team, along with Elevate, want everyone to be as audit-proof as ready. We have helped countless businesses stay afloat and thrive despite the upheaval – let’s get to the finish line together and ensure all is in order”. Alex has provided the following information to help you get there.
Do any of the following apply to you:
CRA has indicated that the PD27 must be processed by them before the TWS credits claimed by the employer will be posted to the source deduction account. Consequently, the PD27 needs to be filed before the T4s are filed as it informs CRA of the discrepancy between the remitted amounts during the year and the tax deductions reported on the T4s. Failure to do so may trigger a Pensionable and Insurable Earnings Review (PIER) by CRA.
Part D of Form PD27 requires the employer to provide details of the calculated wage subsidy, and also provides a box for written comments to provide further details not included in the calculations. CRA will use this form to verify the TWS claimed as well as reconcile to the CEWS claimed, if applicable. Eligible employers who only claimed the CEWS are still required to file Form PD27, indicating in the comment box the lower percentage claimed.
If you have not yet reduced your remittances with the TWS, you can still calculate and apply for the subsidy using the Form PD27. Employers should indicate in the Additional Comments section of the Form how they would like to apply the subsidy. The three options are:
For each pay period identified on the form, the employer will need to provide the following information:
The self-identification form can be submitted online, by mail or fax. Online submissions are filed through CRA My Business Account. Parsing through payroll guidance can be daunting. If you are unsure of where to start, need help moving it along, or want to entrust us with the work, please reach out to us at firstname.lastname@example.org