Penny discontinued: What does it mean for Canadian small business owners?
Ask anyone what a coin means to them and they’ll likely tell you it’s something unique to a country, a symbol of value or even a sign of a little luck. Coinage in Canada has been a hot topic recently in anticipation of the news that as of today, the Canadian one cent penny will no longer be distributed by the Royal Canadian Mint and be phased out of usage.
A few of us in the office recall when the Canadian one dollar bill was replaced by the shiny gold Loonie in the early 90s. I recall the strange feeling of swapping a bill for a large coin, and noticing the extra heft in my wallet. Yet as the coin with our iconic Canadian maple leaf emblematic of our dear country disappears, it also presents some new arithmetic for cash payments. Retailers and business owners will now decide how to adjust the final cash amount, which may include rounding to the nearest five cents.
How life without the Canadian penny impacts your business
According to the Mint, the change primarily affects the retail environment where cash exchanged can be rounded up or down to the nearest five cents. It may, however, impact your transactions if you collect via cash payments. These are the new rounding guidelines from the Mint:
“Only cash transactions will require rounding. This means that cheques, debit, credit and payment cards will still pay to the specified amount. For cash payments, however, “only the final amount (or equivalently, the change owed) should be subject to rounding. Individual items, including duties, fees or taxes should still be tabulated in their exact amount prior to rounding.”
So, when sending invoices in FreshBooks, continue to charge exact (or, to the penny) amounts as usual. If you collect payments by cash, when you enter your payment into FreshBooks, it should correspond with the amount invoiced. Even though the rounded amounts may put a few more or less coins in your pocket throughout the year, applying the rounding rule should result in your final totals balancing out and should not affect reporting requirements.
More info about the Canadian government’s initiative to retire the penny is found here.
Finally, pennies retain their value so they can be used indefinitely for payments and redeemed at financial institutions anytime. Sounds like a great time to trade in that penny jar!
Did you know? (source: the Mint infographic on the history of the Penny)
- 35 billion pennies have been minted since 1908
- 1982-1996: The shape of the penny was changes from perfectly round to 12-sided
- 5 reverse designs have appeared on the penny since 1858
35 billion, eh? What do you think the mint should do with all those old pennies? Post a comment below!