How To for 1) Business Payroll Deductions 2) GST 3) SquareUp

Can someone please take me through the steps for setting up and editing transactions for business?

1) Here in Canada, we have to pay premiums on top of the wages (CPP and EI) to the government. That's an expense. No problem there. But the employees also pay insurance premiums and guess who gets to do that work for the government? Employers. It's our job to collect those premiums by taking it off their paycheques. Then we save that money until the end of the year and then pay all of what we've collected for the government (and yes, we don't get paid to be collecting the money for the government).

So how do I set this up? Do I set these employee deductions as a savings goal? If so, how do I do that? If I did that, then wouldn't YNAB consider that as an expense? So how about I just create an account of the "liability" instead of "checking" (aka "chequing" here in Canada). I would call that as a liability because someone else's money (the government's) is in my bank account and it's possible it could accidentally be spent on something for me instead of the government.

But wait! I don't think I want to do that I'm thinking that a transfer from my Chequing Account in YNAB to another account in YNAB would result in a different balance than what the bank's Chequing account shows. Is that right? If so, then I will never be able to reconcile my YNAB Chequing with my Bank's Chequing. Is that right? Maybe I'm so confused I should just go over to Quicken and let it do everything "behind the scenes" but I don't like it because I just don't know what it's doing to account for everything.

2) Next, there's GST, but wait! There's even more to this tax collecting business the government doesn't pay for us to do for them. The Goods and Services Tax is a "value added tax" which means we only pay tax on the actual value we add to the goods and services we buy in order for us to sell our products or services. So first, we add 5% on every invoice, say, $50 on a $1,000 invoice. So you'd think we would just pass that on to the government, right? No! Of course not. The government knows how to make things complicated. Actually, it's pretty good idea to only pay tax on what value we ourselves and up selling, and here it goes.

Let's say we have to buy $250 worth of good and services in order to get our business working and the $1,000 invoiced and $250 is the only business we do. That means we PAID 5% of $250 in GST to earn $1,000. Now here's the "value added" part. The government's wonderful idea is that we should only pay the amount of tax on the part of the product or service for which we ADDED value. So the 5% of $250 we paid ($12.50)  gets taken off the $50 of GST we collected, so we only pay the governement the difference, which is $37.50. Ok.... so now what? In my bank account I show a deposit of whole amount of the invoice, GST included. Ok, so I'll make a split transaction. Of the  $1,050 the bank shows got deposited, I'll make the first of the split to show it as Inflow, and the $50 will be what? Transferred to another account? I mean, it's not an expense. I'll just put it into another account, say a GST account, where I'll put money in when I collected it, and pay out of it when the taxman wants it, even though it's only $37.50.

Yes, I know, like a reimbursable expense it should be ok because... well, I don't want to get into that because it's not an expense... I WILL have only the $37.50 which is considered as an expense, but if I pay the GST quarterly, then 2 months will be showing a bigger expense than normal, like the $50 and then the 3rd month will be less than it really is. I've chosen the option to pay monthly, not quarterly, because I don't want to be waiting around for 3 months before I square up with the government and know how much GST I ACTUALLY will have to pay. So I would say all GST collected and paid out should be in a separate account, like maybe another bank account? No way! That's more banking fees. How can I do transfer money to another account in YNAB without making it impossible to reconcile my YNAB Chequing account with my actual bank account?  Does YNAB have a capability to have sub-accounts? I just want somebody to take me through the steps to set this up and then walk me through a series of transactions so I get the procedure figured out.

3 ) SquareUp.com is the credit card processor that I use. Here's how it goes. I invoice the customer $1,050. Square takes a percentage for their services and charges me 2.65% (or $68.25) so my actual deposit in the bank is $981.75. How do I account for that? I was thinking I would make a split, showing $1,000 as Inflow for the first part of the split, so I can see on my reports what my ACTUAL revenue was, regardless of how much gets deducted by SquareUp and how much gets set aside to square up some part of the $50 with the government (through my my GST sub-account) and then $68.25 as an expense, but when I try this, YNAB seems to not let me do this. Am I doing this wrong or does YNAB just not allow this to happen?

I also use Plooto.co to e-transfer payroll to my employees but they only charge $1 per payment. Yay! However, they too have an option of me sending money to them to hold on my behalf, so that's like another bank account, so I've created an account in YNAB called Plooto. No problem there. (Yay) Their other option is for Plooto to pay my employees by taking money directly out of my account. I prefer the first option. I believe that to pull this off, all the procedures needed to have a split of $1 expense shown in a split transaction would be figured out by learning how to do the other 3 things explained above.

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  • Your questions are perfect examples of why I think YNAB is a horrible idea for business accounting.  That may not be the official line, but I am a big believer in using the right tools for the right job.  YNAB is budgeting software, and it does that very, very well.  For your business bookkeeping you need accounting software, such as Quickbooks.  Not only will accounting software do the above items, it will do it clearly and easily.

    Incidently, my company just set up a branch office in Canada. As the Controller I am getting a quick education in GST and Provincial differences.  Silly me, I thought dealing with 50 states was complicated.  Nope, you guys win!

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    • 2dogs2cats Thanks for your candidness. As I was thinking of my question throughout the day today, I was beginning to come to the same conclusion, so I open up a trial of Quickbooks and saw that it asked me what province I was doing business in. Why? So that it automatically extracts the GST and PST out of each purchase... or just the GST if it's just a service and not a "goods." Today, I was thinking... I couldn't imagine getting myself to make a split transaction for each every purchase!

      As for the look and feel, Quickbooks is ugly as h**l. It looks some kind of an accountant designed it, the kind of person who has a high tolerance of looking at screens on a computer instead of living a real life with colour that has function and shapes that are consistent. The online version is slow too, even when using it's own app I downloaded for the Mac. I'll give MoneyWorks a look. It's design is for us Mac people who have a low tolerance for having to look at boring-ness all day long.

      As for complicated sales taxes, nope, we are not the winner at all. I have a friend whose job it was to provide answers to ALL customers of AccPac (Simply) in the US. That means he had to know what the taxes were for each and every borough. Yes! That's right. Each borough in New York City area has it's own... something like that. It boggled me so much I stopped listening  :D 

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  • Hi Cyan Guitar ,

    I'm going to move this thread over to the Small Business category of the forum so it can hopefully get some more action from other business owners :) 

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