Outsourced CFO | GST Deadlines
The longer a business owner opens their business says outsourced CFO, the more there is a cash crunch potential in that business. The reason for that, is because the longer a business is in operation, the more opportunities it has for running into cash flow issues if this happens, many business owners try to come up with creative solutions on how to increase cash flow in their business in a way that doesnít affect their bottom line. Many businesses believe that by avoiding paying GST on time can help them use the GST money to fund their corporation to generate more revenue and they will be able to pay GST late, after they have generated more revenue in their business.
This is a very dangerous game to play, because Canada revenue agency looks very strongly at businesses who donít pay their GST on time. The reason for this says outsourced CFO, is because they view GST as a trust fund. Trust fund that doesnít belong to the business owner. Business owner collects money from individuals on the half of the government. If they miss paying their GST, then they have collected that money for the government, and then used it personally to fund their business. They view this as misusing government funds in order to fund a private corporation. Which is a very serious events. Because of this, there are penalties for paying GST late.
In order to avoid paying GST late says outsourced CFO, business owners should understand what the deadline is for GST in their business. GST is due three months after the fiscal year end. This means that the GST is due three months before businesses corporate taxes are due. This can end up running into serious problems because it is often hard or impossible for business owners to file their GST before theyíve completed their year end. One strategy that an accountant may use with a business is if a business owner gets into the habit of paying their GST quarterly, they can ensure that by keeping track of all of the GST that theyíve collected, and then paying that to the government on a regular basis, they can at least continue paying the GST that they know they owe, without having to wait for their taxes to be done, and then incurring penalties on top of that.
Because Canada revenue agency views GST as a trust fund, and take a very hard line with businesses that misuse government funds for operating their business, they also take a much stricter policy on helping business owners pay for the GST payments that are in arrears. While Canada revenue agency allows the payment plan for corporate and personal taxes to be six months, the payment date that they allow for paying GST is only three months. The reason this is much shorter, is in hopes that business owners will not use the GST that theyíve collected for their business, but take the GST from their businesses and pay it directly to the government.
Business owners who collect GST from their clients, but then failed to send it off to the Canada revenue agency because they are trying to use that money to generate more income in their business or playing an extremely dangerous game says outsourced CFO. Canada revenue agency takes an extremely harsh stance on business owners who misuse government funds, which is technically what GST is. There are far better ways for business owners to increase cash flow in their business, without being in danger of incurring penalties and collection calls and demand letters from Canada revenue agency.
One of the reasons why Canada revenue agency looks so harshly and businesses that are late in paying their GST, is because they believe that since the business owner collected the GST on behalf of the government from their clients, the business owner shouldnít be able to touch that money and should have to pass that directly over to the government. They view GST as a trust fund, and is not the businesses money to use. CRA gets quite upset when businesses get behind in GST, because that means that they used government trust funds, in order to operate their private business. Business owners should actually set up their business, so that 5% of everything that is deposited into their bank account by any means, is funnelled into a separate account. What this does says outsourced CFO is ensure that business owners are putting aside the 5% that they collect from their clients so that when it comes time to pay their GST, they can simply take the money in that separate account, and give it to the government. Business owners can run into an extremely dangerous game by not separating out the GST from their profits, because if they run the cash flow problems, theyíll be unable to pay GST.
Because Canada revenue agency takes such a hard line with business owners who have misused government funds, any businesses that is late in paying their GST, will find that CRA is less forgiving with a payment plan. Even though personal and corporate payment plans are six months, GST payment plans are only three months. Canada revenue agency hopes that by making it more difficult to pay back GST that is in arrears, business owners will use that as a deterrent to avoid getting into arrears with GST in the first place.
In order to avoid paying GST late, business owners should understand when it is due in their corporation says outsourced CFO. GST is due three months after a businesses fiscal year end. This actually means that GST is due three months before the corporate taxes are due. One way to avoid running into problems is to file GST quarterly. This way business owners can have that money set aside to pay GST on a regular basis, and be sending it to the government on a regular basis. This can help avoid the cash crunch that comes with having to give 5% of their entire yearly profit to the government especially if they were not setting that money aside ahead of time.