HST is a part of doing business. You need to charge HST to your customers for the goods and services you offer if you are registered and have sales of $30K. As such you need to remit the 13% you collect on your sales to the Receiver General of Canada. As such, this can be a huge cash outflow either monthly, quarterly, or annually based on the levels of sales your business generates. Obviously, you can reduce this amount you remit based on the HST you pay on your purchases of goods and services for carrying out your business activities, but this just helps relieve some of the amount you need to remit. Therefore, managing your cash flow and tracking you HST is important.
We have seen instances with our clients that consider making large business expenses and look at their business bank account and think they are in good shape to make the purchase. They forget that a portion of that cash is not theirs, but needs to be remitted to the government and they feel the pinch when filing their HST return. Therefore, managing HST is important and here are some points to help your business manage HST:
1) Use Good Accounting Software and Maintain Good Records: As businesses grow, it is important to have good accounting software so you can record your sales and HST amount on a monthly basis. Quickbooks is quite popular and easy to use. You can review the HST amount collected and assess your current cash flow situation before making your procurement related decisions. Keeping track of your sales invoices and expenses is important and having your bookkeeper stay on top the records is important.
2) Have a Separate Bank account: A client of ours keeps a separate bank account for the HST collected. It may be a little hassle to transfer the HST amount to a separate account, however, our client likes to know what cash is available for the business and what needs to be remitted to the government. This may not be efficient for our larger clients, but for small businesses it helps manage the cash flow.
3) Cash Flow Management: Your bookkeeper should be familiar with the regular HST filings and should have an idea of what the monthly, quarterly, or annual HST remittance would generally be. Understanding the business cash flow is important and having the right individual review cash and collections is critical to any business. As they say in the finance world, Cash is King.
For more information or questions on managing your cash flow or HST, please contact an MP Group professional.