Author Segal LLP

Customers Aren’t Always Right

As a successful business owner, you know customer satisfaction is the key to continued sales and profits. But you also know it’s harder to please some customers than others, and some can be downright problematic.

Of course most customers take little time and effort. They understand that their relationship with your company is commercial. That is, your business offers a product or service and they agree to a set rate and terms.

Tips on Defusing and Solving Customer Problems

lores_hr_cost_cutting_man_yell_phone_anger_unhappy_customer_service_amHere are some general guidelines on handling customers in tense situations:

  • Arrange to have no interruptions during your time with the customer.
  • Assume the customer is truthful.
  • Treat complaints as problem-solving sessions.
  • Let the customer talk in order to defuse some of the emotion.
  • Listen closely without interruption and gather enough information to be able to make a considered response.
  • Ask for clarification if the facts aren’t clear.
  • Ask how the customer would like the situation handled.
  • Provide options on how to resolve the problem.
  • Take the problem to the person who can fix it, or who needs to know.
  • Keep a log or journal of customer complaints to help spot trends.

The remaining customers can run the gamut from moderately annoying to extremely difficult, and although they are smaller in number, the time and energy they require can make them seem to outweigh all the others.

The first step to take when confronted with a difficult customer is to determine if the complaint is legitimate. Most of the time, it is. Many problems stem from a particular situation, for example, a rude salesperson, unsatisfactory customer service, a product defect that causes havoc in the buyer’s own business or a late delivery that caused the customer to miss a deadline.

In those instances, you apologize, do what you can to appease the customer, and take steps to correct the error and ensure it doesn’t happen again. At the same time, consider that the customer has done you a favor by highlighting a weakness in your operations or by calling attention to a problem employee.

If all goes well, you both end up satisfied and the customer stays with you.

But sometimes customers are simply annoying. When that’s the situation, you can choose between two paths:

  1. Determine that the customers are valuable enough to your company that it is worth the effort to try to satisfy them – even when the complaints aren’t legitimate – and to improve the relationships. This would be the case when the customers are those your company depends upon for long-term success.
  2. Sever the relationship altogether because the customers are so difficult that you question their value to your company. These are the buyers who remain difficult regardless of how much you try to appease them. In the end they actually can become obstacles to the smooth operation of your business.

Letting a customer go is a difficult decision and before you do that, you want to consider several factors:

Mitigating Circumstances: There could be an unapparent reason for a customer’s attitude. For example, the individual may be having financial difficulties, grieving, going through a divorce or working under a sudden change of management. If you can determine a reason behind the difficult attitude, you may be able to come up with a strategy that can salvage the relationship. If there appears to be no mitigating circumstance, consider the relationship in light of the following three factors.

Financial Effect:  If the customer is one of your major sources of revenue, determine how hard it would be to replace that income. Also consider whether the customer is a potential source of other valuable customers, as well as how much influence the individual has in the community and over other current buyers. Statistics suggest that one disgruntled customer tells seven people about his or her experience. The more influential your customer is the more people may hear about it and be swayed to switch to the competition. If, however, you think your business can handle the loss of this customer, end the relationship quickly and firmly. You and your employees will gain that much more time to tend to your other, less troublesome customers.

Operations Effect: If you personally have to deal with one of these difficult customers on a regular basis, consider how that might be affecting your ability to tend to the rest of your business and your employees. Constant and unsuccessful attempts to appease troublesome customers can distract you from your other responsibilities as a business owner.

Staff Effect: Your most intransigent customers can create employee burnout, low morale, and turnover. Having to deal regularly with an extremely difficult person can quickly send even the best sales personnel looking for other jobs. If a customer is abusing your employees, deal quickly with that problem or you may find performance spiraling downward and your payroll dwindling.

The best way to handle difficult customers is to put yourself in their shoes. Listen without arguing and get as much information as you can to understand them as individuals. Try to find ways to adjust to their needs when it is reasonable. But don’t hesitate to turn one loose if that solution is best for you, your staff and your business.

Save on Taxes with an Estate Freeze

lores_building_corporate_offices_entry_amEstate freezes are a handy estate planning tool that helps avoid taxes, primarily capital gains taxes that apply on the transfer of assets to beneficiaries at the death of the parent.

An estate freeze restructures the beneficial ownership of certain types of assets. As a result of the freeze, the value of the existing equity is fixed, while future growth is transferred through shares or a trust into the hands of the named beneficiaries. This usually limits the value of the parents’ estate to the value on the date of the estate freeze.

Tax liability is determined by fair market value of property at time of death. By implementing a freeze beforehand, the value of one’s estate that is subject to tax is reduced and the value of assets received by beneficiaries is maximized.

An estate freeze makes sense in cases where the value of estate assets is expected to appreciate. The most common form of estate freeze involves the transfer of estate property to a corporation, or the reorganization of an existing corporation.

It locks in the corporation’s current value, leaving it in the hands of the founders. Their children are brought in as the new owners and will reap the benefits of any future growth of the corporation.

Typically, when the corporation is created the original holders receive shares with a nominal value from $.01 to $1 each. Years down the road, when the founders want to pass on the operation of the business to their children, those shares are usually worth considerably more. Now assume the parents want to stop working and need money to finance their retirement but the beneficiaries may not have the money or want to take on high debt to acquire the stock.

Adding to the conundrum are the tax consequences. Because the shares will be sold to a related party, the Lifetime Capital Gains Exemption on qualified small business corporation shares is affected. The parent can claim the exemption, but the tax cost of the shares to the child is reduced by the amount claimed. As a result, the children may have to pay taxes if they sell the shares.

An estate freeze can solve both the financing and tax issues. The parents swap their voting shares for preferred shares with a redemption amount equal to the value of the company at the time of the swap.

Section 85 of the Income Tax Act allows the swap to be recognized at any value between the fair market value of the new preferred shares and the tax cost of the old voting shares. The exchange value that is chosen is normally one aimed at letting the lifetime exemption shelter the resulting capital gain from taxes.

Typically, the founders also receive new voting shares with no redemption value that are then sold to the children. Because all the value of the corporation lies in the preferred shares, the voting shares have only nominal value and can be sold to the children without significant tax consequences. If the children sell the shares, they can claim their own lifetime exemption.

The founders then redeem the preferred shares as they wish. The redemptions are financed by the profits of the business rather than money the children borrowed.

Redeeming the shares produces a taxable dividend added to the parents’ income. That reduces the capital gain on the redemption and any resulting capital loss can be used to offset other capital gains.

Estate freezes are complex, but can be advantageous. Talk to your accountant about this or other methods that can help minimize taxes in your estate.

Businesses: A Guide to Holiday Gift Giving

112216_thinkstock_486563680_lores_kwParties, gifts and awards can help provide a positive work environment for employees and help boost morale. But keep in mind there may be tax implications for your staff.

Employees generally are taxed on the value of these benefits, although there are exceptions.

Take holiday parties. The Canada Revenue Agency (CRA) has an administrative policy concerning the taxation of benefits from work-related social occasions. If you provide free parties or other social events that are open to all employees and the cost isn’t more than $100 per person, the benefit isn’t considered taxable to your employees.

Additional costs, however, such as transportation home, taxi fare and overnight accommodation, aren’t included in the limit. So if the added perks bring the value to more than $100 each, the entire amount, including the additional costs, will be a taxable benefit.

When the social event is work-related, such as a planning, education or networking session, the CRA considers your business to be the primary beneficiary, so the event isn’t taxable to employees. But if the event is to celebrate the completion of a project or task, or if it is a “thank you for a job well done,” the benefit must be included in employees’ taxable income.

Gifts and Awards

Non-cash gifts and awards given to arm’s-length employees aren’t taxable benefits provided that the aggregate fair market value (FMV) of each is less than $500 annually. (Arm’s-length employees are those who aren’t relatives, shareholders or people related to them.) There isn’t a limit on the number of them you can give, but the total value for each employee that exceeds the $500 limit will be a taxable.

Gifts must be given in recognition of a special occasion, such as a religious holiday, a birthday or a wedding.

As well, an award given for an employment-related accomplishment, such as outstanding service, is non-taxable. But awards for performance-related accomplishments, such as meeting sales targets, is considered a reward and is taxable.

Under the gifts and awards policy, it’s also possible to give a tax-free, long-term service award to an employee if it’s a non-cash award with a value that doesn’t exceed $500. The award also must be for a minimum of five years’ service and it can be given only once every five years.

Any value exceeding $500 is considered a taxable benefit. This value is separate from the value for gifts for special occasions and awards for employment-related accomplishments.

Cash and Equivalents

The tax-free policy for gifts and awards doesn’t apply to cash or near-cash gifts and awards. These are always a taxable benefit to the employee. Near-cash gifts are those that function as cash (such as a gift certificate or gift card), or can be easily converted to cash (such as gold nuggets, securities or stocks).

For example, if you give an employee a $100 gift card or gift certificate to a department store and the employee uses it, the CRA views the gift as additional remuneration because the card is used as if it were cash.

However tickets to a sporting event or a play on a specific date and time won’t be taxed because there’s no element of choice if the other rules for gifts and awards are met.

What about Prizes?

Prizes may be taxable. For example, if they’re given through a random draw, they’re a taxable benefit if:

  • The draw is open only to employees,
  • The company hosts the draw, and
  • The business pays for the prizes.

Otherwise, the winnings aren’t taxable.

Use the fair market value (FMV) of each gift to calculate the total value of gifts and awards given in the year, not its cost to you. You have to include the value of the GST/HST.

In short, nearly everything you give to an employee is considered taxable by the CRA — unless your company is in Québec.

Gifts to your Customers

If you’re planning to show customers your appreciation for their business, here are six guidelines to consider:

  1. Avoid alcohol, religious items and gifts that are too personal, such as jewelry, perfume or clothing. Good choices might be gourmet baskets with food, fruit or coffee; desk accessories such as pens, desk blotters, letter openers, clocks, business card holders or calculators; travel accessories such as travel alarm clocks or carrying cases; plants and flower arrangements, and tickets to sporting events or the theater. Or consider a gift certificate to a fine restaurant.
  2. Check with personnel. If the gift is going to someone in another company, you might want to check with the personnel or human resources department first. Many organizations prohibit employees from accepting gifts or limit the value allowed.
  3. Keep it appropriate. An overly extravagant gift might suggest you are attempting a bribe or may make the client feel uncomfortable. Gifts that are seen as inappropriate could damage a business relationship.
  4. Avoid corporate logos. It’s generally best to leave logos for complimentary items given throughout the year.
  5. Send a card expressing sincere holiday wishes rather than a gift if you’re involved in a bidding process.
  6. Consider the person. Whenever possible, reflect the recipient’s unique interests and tastes, such as a gift related to the person’s job, hobby or other interest. For example, an avid reader might appreciate a nice set of bookends.

The key to giving effective gifts to customers: Choose items that show you value their business and want a strong relationship.

As you can see, the tax rules for gifts, rewards and tokens of appreciation can be complex. Consult with your tax advisor for the last word on whether they are taxable.

2016 Year-End Tax Planning Letter

We are coming to the end of 2016, and our tax team has been busy compiling a list of tax planning ideas that can increase tax savings for yourself and family members.

The topics we cover include:

  • Changes in tax rates for individuals and corporations
  • Eligible capital property
  • Trust & estates
  • Key dates

To assist you with this, click here to view the Year-End Tax Planner which includes some ideas you may want to consider.  Your Segal advisor can assist you in determining which of these ideas make sense to you.

Please do not hesitate to call your Segal advisor with any questions about this communication

Inside Public Accounting The 2016 Best of the Best Firms Canada

inside-public-accounting 2016_best-of-the-best_web


Listed in alphabetical order

GGFL / Ottawa Deborah Bourchier 11 / 79
PSB Boisjoli LLP / Montreal Marc Elman 18 / 135
Segal LLP / Toronto Dan Natale 12 / 70
Shimmerman Penn LLP / Toronto Maj-Lis Vettoretti 6 / 27
Williams & Partners / Markham, Ontario Nick Angellotti 9 / 45

Copyright © 2016 The Platt Group / INSIDE Public Accounting /


Being named one of Inside Public Accounting’s (IPA) Best of the Best Firms in Canada for 2016 is a tremendous honor for Segal LLP and a clear reflection of our team’s dedication and hard work. This is the first year Canadian firms have been considered for the Best of the Best recognition; IPA honors CPA firms across North America for their overall superior performance. “Best of the Best firms are built on a strong foundation of openness, trust and respect for their employees. They are not content to stand still. They plan ahead for the future of the firm and they anticipate the needs of their clients” says Michael Platt, publisher of IPA. We congratulate our fellow honorees and thank IPA for this important acknowledgment. Over our forty-year history, our clients have come to expect exceptional service from Segal and this acknowledgement is an affirmation that our focus on culture, collaboration and client service is a successful formula, one we are committed to as we look to the future.

Dan Natale CPA,CA
Managing Partner, Segal LLP