by The HLH Team
It’s been a long three-plus month process since Federal Finance Minister Bill Morneau held his now-famous press conference touting the government’s plans for implementing major changes to how Canadians are taxed. On October 24th, he tabled the
2017 Fall Economic Statement on the heels of multiple announcements the week before which brought some more clarity to which measures the government intends to pursue and which have been currently tabled.
Here are some of the highlights of the most recent announcements:
•Small business tax rate reduction
The government has reversed its previous decision to halt the continued reduction of the small business tax rate applicable to the first $500,000 of active income in a qualifying corporation. Effective January 1, 2018, the federal tax rate on this income will drop from 10.5% to 10% with a further reduction to 9% effective January 1, 2019.
•Limitations on capital gains exemptions and conversion of income to capital gains
The government has lifted the proposed measures that would have limited taxpayers’ access to their lifetime capital gains exemptions on certain transactions or convert income to capital gains. This will help ease the burden on those business owners that wish to pass their business on to family members. “Pipeline planning” will also still be available for those who have passed away while still in ownership of these shares.
•Taxation of corporate investment income
There are no expected changes to the current income tax rates on investment or passive income earned within a corporation up to a limit of $50,000 of investment income earned per year. The mechanics of the additional tax on investment income in excess of $50,000 are yet to be released.
•Income sprinkling
Revised proposals are expected this fall, but the government has made no indication that they will be softening the proposed rules put forth in their July 18, 2017 announcements. This may result in much higher personal income taxes for dividends paid to family members who are also shareholders of private corporations.
What does this mean for you?
Everyone has a different set of circumstances and stands to be impacted by these proposals in varying degrees. It is clear that the response from taxpayers across the country has put pressure on the federal government to revisit these proposals and take the time to properly assess the impacts of any changes on our overall economy. As they sit right now, these proposals are not yet law and are still subject to alteration.
We’re here to help
Our partners and staff are staying on top of these changes and have already talked to many of our clients about these proposed changes. If you have questions about how these changes could affect your business and what actions may be required of you, please let us know. We’re more than happy to walk you through this ever-changing landscape so that we can stay ahead of the curve together.
by The HLH Team
“The most dangerous kind of waste is the waste we do not recognize.”
-Shigeo Shingo
Lean applies to every industry, not just manufacturing. Working in an office doesn’t mean you aren’t probably surrounded by waste.
In the last article (Waste In The Office Part 1) I introduced how 4 of the 8 deadly wastes reared their heads in office spaces. Let’s look at the other 4.
Bottom line: just because you’re in an office, don’t be fooled. You’re surrounded by waste. Let’s talk about how:
Motion:
How many times do you walk to the printer every day? When was the last time the stapler was where you left it? In an office, wasted motion is counted in steps. Whether it’s to the coffee maker or the mail slot, the less people are milling around an office space the better the productivity tends to be.
If you want to get a feel for how much motion you waste, make a Spaghetti Chart. Every journey becomes a line and it repeats all day. At day’s end, how many trips have you made where?
Waiting:
On an assembly line, we measure waiting in the seconds a worker spends idle until the next widget arrives. In an office, it’s subtler but essentially the same thing.
When a file or email goes up the chain for approval, how long before it’s sent back? Does the boss clear the logjam as it builds or wait until people’s jobs are put on hold before signing off to get them moving again.
If you’re the boss, think about how many things you’re needed to sign off on. Can you reduce this number, delegating more decision making to the team you trust? Having to sign-off fewer items will not only cut waiting waste, it will reduce the steps involved in your process considerably.
Overprocessing:
Your clients hired you to do a, b, and c. Whether a contract or a handshake, they expect a certain level of service. It’s your job to deliver the a, b, and c. Your customer isn’t expecting “d”. If you deliver it, it will cost you real money and you’ll get little in return. That’s waste.
The ironic thing is that when we “go the extra mile,” our clients often don’t even notice. You wouldn’t give a grocery cashier more than the bill requires, so don’t do more than your contract requires. It will strengthen your firm in the long run by giving you the flexibility of a better bottom line.
Overproduction:
Overproduction waste happens when you produce too much, too quickly. It’s counterintuitive, but having more work done than is needed is actually more wasteful than doing it on time.
Every office has processes that move at a certain pace. When we do our work faster than those processes, it piles up waiting for the next step. This can lead to broken momentum and cost more time overall.
by The HLH Team
“The most dangerous kind of waste is the waste we do not recognize.”
-Shigeo Shingo
You rarely find the word “Lean” without “manufacturing” beside it. Lean’s origins are in the Toyota production system, but it’s grown far beyond that application. Lean is a methodology focused on increasing profits by reducing waste. While it began with manufacturing, industries from software development to dentistry have adapted it in bids to be more competitive.
Bottom line: just because you’re in an office, don’t be fooled. You’re surrounded by waste. Let’s talk about how:
Transportation:
No fleet of trucks doesn’t mean you’re off the hook for this one. From getting your paper delivered (how much does that cost and could someone pick it up on the way to work?) to the mail cart, transportation waste is everywhere.
How far are people travelling to meetings and getting stuck in traffic on your dime? How many of those meetings could be video conferences, instead? Unless face to face is critical, you can do everything remotely (even sign).
Inventory:
Just because you’re not dealing with warehouses of widgets doesn’t mean you don’t have inventory waste. Inventory is broader than manufactured items to sell. It’s the accumulation of anything that we produce, whether goods or services.
How many unfinished projects have piled up in your inbox and in your brain? They’re slowly draining your energy the longer they’re not finalized. Finishing the projects you start will keep your focus sharp and your desk efficient.
Email is a type of inventory. How many are in your inbox, either opened or no? Many of the most efficient people keep their inboxes trimmed to one page or less.
Defects:
Defects are pinholes in a boat, slowly letting the water in to sink the profitability. It’s also the frustrating waste because it’s jarringly avoidable.
A simple typo or spreadsheet formula error in an important document can cost money, destabilize client relationships, and do long term damage to your reputation. The longer a defect goes unnoticed, the more damage it tends to do.
To fight defects, don’t succumb to the temptation of not editing. A second pair of eyes costs money, but can catch the errors likely to cost you much more.
Talent:
I saved the worst for last. Unused talent is everywhere in offices. Every member of your team has skills and ways to contribute that didn’t come out in their interview. It’s up to management to create a culture where people feel valued enough to step up and use their talents to the fullest.
If staff don’t feel like their ideas matter, they’ll bite their tongues, feel unheard, and not come to you about the inefficiencies that are bugging them. Meanwhile, you’ll bring in expensive consultants to give you the same ideas.
Those ideas will flounder in implementation because your team won’t buy into them, and you’ll end up just as inefficient, thousands of dollars poorer, and downright demoralized.
So listen to your team. Take their ideas seriously. It will save you money.
by The HLH Team
“The road to success is always under construction.”
-Arnold Palmer
In the construction industry, it sometimes feels like the only way to be more profitable is to work more and more hours. But driving up revenue is only one way to make more money.
Reducing waste is the best way to cut costs. Dollars you cut from your net costs are more profitable than revenue because other factors (labour, goods) are already factored in.
Let’s talk about some ways for your business to make more and still have you home in time for dinner:
Strategic Bidding:
Are you bidding on every job that graces your desk? You shouldn’t be.
Every company has a target job and/or client, one that fits your company better than the others. Not only will you do your best work with this client, these jobs will likely be the most profitable as well.
Bidding on everything is tempting, especially with soft sales when you want to keep your guys employed. But not only will it eat your time, it also has the potential to win you jobs that lose you money because they’re a poor fit.
Figure out who your target client/job is. Define the parameters to qualify it.
Don’t bid on jobs outside your target. Monitor how close your bids come to actual costs.
Take the time to learn why a job was unprofitable in the past. Looking at your processes in past jobs will help you reduce waste and become more efficient.
Reduce Waste:
An average of 3 tons of materials is wasted building the average house. That’s about 4 pounds of waste per square foot.
Waste costs twice. You pay to buy the materials, and the insult to injury is when you pay to dispose of it. So be brutal with waste:
- Double and triple check your measurements. Challenge yourself to stay close to the rocks with your materials
- Cut back on your bulk purchases. Buying a season worth of materials isn’t worth the % you save.
- Spend the extra time to store, stack, and secure materials properly at day’s end. This becomes a training issue.
Inventory waste will devour your profit faster than almost anything. Dig deeper into inventory waste here: https://hlhcpa.com/pi-blog/inventory-8-8-deadly-wastes/
Avoid Defects:
Defects are the most frustrating of the 8 wastes. Having to rework a project is a guaranteed profit-killer via overextended schedules, increased chance of injury and long-term damage to reputation.
You can protect your bottom line and reputation with a little pre-planning:
- Do you homework with the contractors you hire to make sure they won’t be a monkey wrench in the job
- Track reworks from past jobs and why they had to happen. Identify the weak spots and focus on them for improvement.
- Look into Lean construction techniques. It’s a whole methodology designed to identify and eliminate waste.
by The HLH Team
“The more inventory a company has, the less likely they will have what they need.”
-Taiichi Ohno
The Temptation of Over-inventory:
As dangerous a waste that over-inventory is, most business owners have fallen victim to it. Saving 15% when buying in bulk is a siren song that puts visions of high markups in our heads. But as we’ve learned, that’s not reality.
Usually, the extra good sit, and sit, and sit. We pay to store them, saturate our market with them, and then put them on sale to clear them out. 15% in savings is gobbled up by 50% markdowns and waste.
In business, buying or producing small amounts, frequently, tends to be the most profitable. We pay more on the front-end, but keep control and save more in the long run.
Over-Inventory at Home:
Shop at Costco? The lure of buying groceries in bulk brings as much waste as producing widgets in bulk. A new study from the University of Arizona confirms that shopping frequently costs consumers less by resulting in far less waste than buying bulk.
Our retail economy is built on people buying more than they need. If you’re in retail, you probably rely on that behaviour for revenue even as you’re cautious with it in your own business.
Saving Money:
Buying 6 litres of milk reassures us that we won’t have to buy anymore for a while. It also means we’ll be pouring 3 litres down the drain in a week.
Over-inventory is as expensive as it is comfortable. Lean methodology teaches us that staying close to the rocks, and only carrying as much inventory as is necessary, is the path to profitability.
At home, staying close to the rocks means buying 2 litres of milk at a time, running out sometimes, and never pouring spoiled milk down the sink.
Staying Close to the Rocks:
The next time you’re in Costco or anywhere else, remember that their business model is based upon consumers falling prey to over inventory. Interrogate yourself about what you really need to buy.
You spend your days at work eliminating waste from your company. Spend your evenings and weekend eliminating it from your personal life, and you’ll save money in both.
Cites:
https://uanews.arizona.edu/story/ua-food-study-shop-more-waste-less
