HST regular Method or Quick method? That is an accounting questions.
If you are a contractor, IT professional, basically a professional either incorporated or not incorporated you must read this and determine for yourself what the best method for you is. The quick method can potentially saves you a few thousands which could cover your accounting fees. Quick method for HST or regular method of HST?
So pay a lot of attention here. There are 2 methods to file your HST, Quick and Regular method. Certain professionals can not choose Quick method such as accountants however, most business have this choice. In order to determine the best method for you go ahead and prepare an estimate on your HST collections and payments and determine which is best for you.
One important note here, you must communicate to CRA in advance which method you prefer and are using. By default everyone is setup on the Regular method so you don’t to advice Canada Revenue Agency however, if at year end you realized that you should have chosen the Quick method it is too late to let CRA know or that you can’t choose when the reporting period is over. Please ensure you do this in advance.
Example of why
Examples of why you should Quick method. Your company doesn’t have too much expenses, for example you are making $10,000 per month and you work from your home office, your main expenses are cell phone, website, … so you are not paying that much HST to begin with however you are collecting based on that 10K $1,300 in HST. In addition, even if you choose the Quick method you can still claim the HST on capital assets.
This is amazing, so the HST on the laptop is deductible under this method. As I explained earlier this will potentially saves you a few thousands. So please do this analysis and determine which method works for you if you qualify. Professional who can not choose the Quickmethods? Accountants, however they are nice enough to let you know that you can choose that method. Lawyers also can’t choose Quick method. To be 100% certain check with CRA or send me a tweet or text on my cell 613 266 7013.
On the topic of HST, HST is cash basis. Did you know this? Good for you if you did. If you didn’t, it means, let’s say I invoice a client for $10,000 and added the HST for $1,300. I wouldn’t include this HST as part of my HST calculation until I receive the payment. The rational is let’s say I paid this HST to CRA and the client never paid me.
So to avoid this, we pay the HST once the payment is in our hands. I have seen a few clients that paid the HST before getting paid. not only they didn’t have to pay it at that time, they experienced cash flow problems. Cash flow management is extremely important to any business. So take extra care and review the cash inflows and outflows, use budget and forecast numbers and so on. cash flow is the blood line of your business. My mentors use to say, collect right away and extend the payments as much as you can. It is like having short term loans with no interest to pay.
For more information, please contact The Bookkeeping Company Of Ottawa (www.tbco.ca) or call us at 613 266 7013.