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Gates Bookkeeping & Accounting

Bookkeeping & Accounting Services for Individuals and Small Businesses

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My Blog

An ongoing series of informational entries

7 Things about Failing You May Not Have Known 

June 1, 2020

Nobody sets out with the intention of failing, or particularly likes it when it happens. At best, failure is a frustrating experience, but at worst it can be utterly demoralizing.


It’s important to recognize that many successful business owners continue to fail over and over, and the odds are that somewhere along the way, you will too. Entrepreneurs are natural risk-takers at heart - but where there’s risk, there’s often failure.


While we can’t always control the circumstances that life throws at us, we can learn to control our reactions to them. In other words, we don’t have to like failing, but if we really want to succeed in business we need to recognize how it impacts us so we can learn from our mistakes and move on. Understanding the psychology behind failure can help set the stage to do just that.


Helplessness

When we fail, we tend to feel helpless because our brains want to translate our experience into rules for self-preservation. It doesn’t matter whether a perceived hurt is physical or emotional, our minds respond by encouraging us to avoid whatever it was that first caused us harm. By making you feel helpless, your brain may be protecting you from failing again but it’s also stealing away a large chunk of your chance for success.


Distorted Perceptions

Failure tends to warp the way we perceive ourselves, particularly where our natural abilities are concerned. Studies have shown that, once we’ve experienced failure, we’re far more likely to assess our own skills and intelligence as less than they actually are.


Unattainable Goals

After failing to achieve a specific goal, there’s a natural tendency to see that goal as being further away and harder to attain than we’d originally thought. In reality, the objective itself hasn’t changed, but our perception of it has. It’s important to remember that your goals are just as attainable on the second, third and fourth go-rounds as they were on the first.


Fear of Failure

It only takes one negative experience to develop an unconscious fear of failing. This can make moving forward difficult because our fear of failing again is neither reasonable, nor based on any realistic likelihood. The trick is to try and stay focused on achieving future success, rather than on dodging future failures.


Self-Sabotage

Once we’ve developed a fear of failure, rational or not, our brains kick in again to try and protect us from further pain – this time by encouraging self-defeating behaviors. If you’ve ever “accidentally” slept in on the morning of an important meeting, let your small business bookkeeping get way out of hand, or procrastinated to the point of not making the submission deadline for that crucial loan application, you’ll be familiar with the concept of self-sabotage. By setting ourselves up to fail in advance, it makes failure easier to deal with when it inevitably happens.


Choking

Choking is also known as performance anxiety and is very common when there’s pressure to succeed. But because choking is the result of overthinking and ultimately trying to correct for something we already know how to do, it can be mitigated by forcing ourselves to focus on something other than the task at hand. Dividing your focus will alleviate some of the pressure to perform by forcing your brain to automatically do what it does well, without the need for your conscious assistance.


Willpower

Willpower is the key to overcoming much of what keeps us from success. Believe it or not, you can take better control of your willpower by simply ensuring that you eat properly and get enough rest. Over-exerting ourselves mentally and emotionally, without keeping our brains properly fueled, results in lowered cognitive function in areas like planning, decision-making, concentration and, yes, willpower.


The Bottom Line

Failure is mostly about perception, and our reaction to it is simply our brain’s attempt to protect us by tricking us into believing what isn’t necessarily true. The best way to overcome the inertia and lack of drive that often accompany failing is to understand what’s causing them in the first place - and to fight back with the adaptive behaviors that will eventually lead to success.

Why Pursuing Perfectionism May Be Costing Your Business Money 

May 4, 2020

There’s an epidemic sweeping our nation, and its name is perfectionism. The last few decades, says social psychologist and perfectionism expert Thomas Curran, have seen a disturbing increase in our drive to be perfect in body, mind, and career. But the reality is that perfection is an impossible objective by definition – the compulsive pursuit of which can, among other things, compromise your health, your goals, and your company’s bottom line.


Are You a Professional Perfectionist?

In striving to be the very best version of ourselves, most of us will don the perfectionist’s hat from time to time. But it’s when perfection becomes an obsession that priorities get out of whack and problems arise.


According to Psychology Today, self-oriented perfectionists are people who engage in severe self-evaluation in an attempt to attain perfection and avoid failure. Socially-prescribed perfectionists, meanwhile, believe others are evaluating them critically, creating an external pressure to be perfect.


Whether it’s internally or externally driven, however, if perfectionism has become a point of pride for you, you should be aware that its constant pursuit not only stimulates stress, it’s been shown to hamper creativity, impede productivity, and ultimately work against business profitability.


Here’s how to tell if you’re teetering on the brink of a misguided need for precision:


Perfectionists seek perfect outcomes.

No matter how motivated you are, your productivity is bound to suffer when you focus on results at the expense of the work process. In fact, the more focused you are on generating the perfect outcome, the more likely you are to experience performance anxiety and decrease your output. This can cost your business time and money, and threaten your reputation for reliability.


Perfectionists put in way more hours than they should.

When we’re intent on ensuring that everything we produce is free of imperfections, we spend far more time tweaking, revising, and second-guessing ourselves than is necessary – yet we can still end up feeling vaguely dissatisfied with the results. Trying to fix what isn’t broken by revamping entire projects without compensation, for example, can leave you exhausted and with less time to pursue more worthwhile opportunities.


Perfectionists attempt to avoid mistakes by not taking chances.

Fear of failure is one of the biggest whips spurring the perfectionist on. But rather than encouraging better and more creative results, worry about not meeting new goals keeps perfectionists stuck in the rut of falling back on what they already know. This status quo approach is far from compatible with the risk-taking mindset that’s often required for growing a business.


How to Curb Your Need to Run the Perfect Business

So, what can you do if you suspect that your need for perfection may be taking a toll on your business? To start, Curran advises reminding yourself that failure is not catastrophic. It’s also important to jump into carefully planned endeavors with both feet and not allow the idea of perfectionism to keep you from starting or finishing new projects.


Here are some additional words of professional wisdom to help offset an unhealthy dose of diligence:

  • Take steps to delegate projects where appropriate rather than trying to manage everything yourself. Remember, fewer tasks on your plate means fewer opportunities to erect perfectionism-driven roadblocks.
  • When hurdles do arise, resist the urge to lay down and wave the white flag. Obstacles in the road don’t necessarily mean you made a mistake or took the wrong path. In fact, they can often serve as valuable sources of new information. Try looking at hurdles as a challenge to think more creatively.
  • Rather than letting yourself be driven by fear, focus on what motivates you. Most entrepreneurs are in business for a reason: they’re passionate about what they do. Replacing negative motives with positive purpose will increase your resilience and help you avoid business burnout.
  • One of the wisest things a perfectionist can do is to cut themselves some slack. After all, taking care of you means taking care of your business. Schedule regular breaks throughout the day. Chat with a coworker. Get some fresh air. You should also make an effort to leave work at work as much as possible, since research suggests that insufficient sleep and fatigue can lead to poor judgment, lack of self-control, and impaired creativity – predicaments that many perfectionists struggle with already.

In today’s competitive business environment, it’s only natural to want to achieve excellence in the form of work that’s as near perfect as possible. But with innovation continuing to lead the way to long-term success, your ability to adapt is more important. Putting fear of failure aside in favor of a more flexible approach to problem solving promotes resourcefulness and original thinking – two qualities proven to promote business growth.


So why not set the grueling pursuit of perfectionism aside for a time, and see what happens when you replace it with a new goal of good enough.

Why You Should Be Monitoring Your Online Business Reputation 

April 6, 2020

Your online business reputation can be one of your most important intangible assets. Today, when customers want to order a product or service, they're very likely to check online to determine whether a company is reputable. Poor reviews or a bad business reputation online may be driving away your potential customers, simply because so many customers trust what they read online.


Worst of all, you may never know why you’re not getting the business you deserve if you're not monitoring your business reputation carefully.


What Is an Online Business Reputation?

Your online business reputation refers to the image presented of your company online, not only through your website or social media efforts but also through the fans, critics and reviews you have online. Your online business reputation is made up of a complex number of factors, including online reviews, media mentions, social media feeds and more.


Why Should You Monitor Your Online Business Reputation?

Your online business reputation can have a persistent and significant impact on your business. If you have low ratings or if lots of customers are complaining about you online, it’s likely costing you new customers. In the worst-case scenario, there may be people launching personal attacks on your business reputation or your company may be depicted as a scam. You may not even realize that customers are being driven away. With a low enough business reputation, you may find yourself struggling to keep your doors open.


Worse, facing a bad online business reputation can mean you waste valuable marketing money. If you’re spending significant resources on marketing and advertising but are getting bad reviews online or have a poor online reputation, your marketing money may not be able to counter the negative reviews unless you address your online reputation. You can only do this, of course, if you know what your reputation is.


How Can You Monitor Your Business Reputation?

There are services offering online business reputation management. These services will monitor mentions of your company on social media, websites, discussion forums and other places online. The companies will periodically submit reports so you can understand who’s saying what about your business. Some online business reputation management companies will even advise you on ways to turn around bad reviews.


You can also monitor your business reputation yourself. You can use Google Alerts or simple internet searches to figure out what customers are saying about you online and then build a business strategy to address any concerns they may have.

Why Small Businesses Need Social Media 

March 2, 2020

Why Small Businesses Need Social Media With people ignoring real life to focus on what’s happening online, and tales of social media-driven bullying abounding, it’s easy to write off platforms like Twitter and Facebook as unimportant for your business. Yet, the effectiveness of social media as a way to reach and connect with customers and influencers cannot be denied. It’s true that nasty comments and false rumors can cause problems, but with thoughtful posts and habitual attention, you can become known as a thought leader in your field.


Here’s why using social media to grow your business is more important now than ever before.


Get Direct Access to Customers

Remember how annoying it was 10 years ago when your favorite supplier didn’t have a website? Now, you wouldn’t think twice of checking online to see if a proposed new partner has an online presence. Legitimate businesses have an online presence, and not just through their websites. Social media gives businesses a direct connection with the people who are buying their products and services.


Social media platforms such as Facebook, Twitter, Instagram and LinkedIn let you connect with the customers in your marketplace in an incredibly personal way. High-quality posts that establish a relationship with customers reinforces your brand and raises awareness. Emails get deleted, and direct mail gets tossed out. Social media, when done right, is read every time.


Establish Thought Leadership

Posting value-added content cements your reputation as a thought leader in your field and provides a free service to your customers. For example, imagine you own a vacuum repair shop. On Monday, you could post your top five stain removal tips. On Tuesday, share a coupon for a service you offer. On Wednesday, post a funny meme about cleaning. Thursday, remind your customers that you’re now open on Saturdays. And Friday, share an article about why regular servicing prolongs the life of your vacuum, thus saving money.


No matter what your type of business may be, social media gives your enterprise’s brand a human, helpful touch. And it’s also an opportunity to correspond with your customers in the event that something goes wrong.


Manage PR Problems Faster

Let’s face it: even a successful business sometimes experiences a customer relations problem. And if one of your customers is complaining online, it’s a golden opportunity to enhance your reputation.


Most angry customers want two things: to feel heard and understood, and to get their money back or a free replacement. And although you may not be able to furnish the second, listening and responding appropriately is always free. Other customers will watch you to see how you respond to angry complaints and criticisms. When eyes are on your words, make sure you’re putting your business in the best possible light.


Get Free Advertising

What’s the best thing about social media? It’s free. Completely, 100 percent free. That means you can connect with your customers, grow your brand, cement your reputation and solve PR problems with time instead of money. And although your time is certainly worth a pretty penny, with social media, you won’t have to write a check to accomplish your marketing goals.

Why You Should Be Using Personal Branding to Promote Your Business 

February 3, 2020

As far as your clients are concerned, you are your company. So doesn’t it make sense to capitalize on whatever it is you bring to the table? Making use of personal branding to promote your business is a great way to take a more active role in its direction and growth.


What Branding Can Do for Your Business

Personal branding is about presenting yourself as an authentic individual, both online and off. By demonstrating transparency and accessibility alongside your expertise, you can:

  • enhance your professional reputation,
  • express your personal values to your customers, and
  • inspire trust in your target audience

All of which is enormously important for your business. Because while statistics show that 91% of customers want the brands they follow to be authentic, the fact is that today’s consumers don’t trust most companies.


Those organizations that really “own” their values, experts say, are the ones that will gain more respect - and enjoy larger profits - going forward.


Benefits of Personal Branding

Long gone are the days when most small business interactions took place locally and in person. But despite the explosion of all-things-internet, digital marketing guru Neil Patel says it’s clear that people still want to do business with people. Not only is word-of-mouth responsible for driving $6 trillion worth of annual consumer spending, it accounts for some 13% of consumer sales.


Crafting a personal brand means promoting your personal strengths and showing people how those strengths will benefit them when they interact with your business. The idea isn’t to communicate your ideas to everyone however, but to gear them specifically toward your target market.


Here are a few ways personal branding can help you:

  • Building Trust and Credibility: When your words and actions consistently align with your brand, it tells potential customers you can be trusted. That credibility is enhanced every time your business follows through on the value-driven promises you make as an individual.
  • Staying Focused: Developing a personal brand can serve as an ongoing reminder of what you don’t want for your company. Achieving a clear understanding of your personal goals – and where your innate talents lie – makes it easier to define and stick to your business mission.
  • Keeping Your Business on Track: Exploring and sharing what’s important to you personally can also help you differentiate between business opportunities and business distractions. You’ll develop a stronger sense of what’s “on-brand” when it comes to new business pursuits, which will ultimately conserve energy, time, and money.

Tips for Building a Personal Brand

It’s important to recognize that personal branding is never about selling: it's about making yourself available to customers and peers. Branding simply can’t happen without cultivating relationships with your core audience. And those connections hinge on communication that’s consistent and clear.


In the same way that differentiation is key for successfully selling your product or service, you should find some way to set yourself apart as you build your personal brand. One way to do that is by showcasing your specialty or area of expertise.


Consider the following questions:

  • Do you have a skill set that’s not easy to find in the marketplace?
  • Do you understand and deal especially well with a certain type of audience?
  • Where do your personal strengths, your customers’ needs, and the way you run your business intersect?


Chances are, your answers to questions like these will align with the reasons you started your business. And if so, this is your opportunity to reveal yourself as the driver behind what your company stands for.


Online Branding Tips

To establish your personal brand, you’ll need to get active on a few social media platforms. You could also consider:

  • maintaining a personal blog on your company’s website,
  • giving vlogging a try, or
  • offering to be interviewed as an industry expert for other companies’ articles and podcasts

In all of this, your goal should be to present yourself as a very human individual with a unique set of perspectives.


Offline Branding Tips

Make a point of projecting a public persona that’s in line with your personal brand. Carry and distribute business cards. Watch for opportunities to interact with or be referred to potential clients. You might also benefit from:

  • speaking at local business gatherings,
  • pursuing promotion through regional newspapers, and
  • volunteering at community events

Branding Consistency

Regardless of the platform, consistency is key where your brand is concerned. One way to manage your presence in a uniform way is to always use the same logos, headshots, slogans, fonts, and color schemes across websites and printed materials.


Personal branding is largely responsible for what comes to mind when people hear a certain name or see a certain face. So you should start by thinking carefully about how you want yours to reflect on your business.

Chart of Accounts Reconciliations in QuickBooks

January 6, 2020

Although I'm not a big fan of over used business clichés, I tend to use some from time to time. I sometimes laugh when I hear 'low hanging fruit' or 'think outside the box' or even the hall of famer 'shift the paradigm.' 


 The cliché I use when talking about accounts reconciliations in QuickBooks is 'keep all your ducks in a row.' I first heard the term 10+ years ago from one of my all time favorite Front Desk Managers.. She managed a front desk crew that needed to count cash and reconcile guest accounts multiple times a day. She knew that if it didn't happen consistently, then it would snowball out of control and possible revenue could be lost forever. Even she would laugh when she used the term because she knew it was cheesy, but she was right. Not putting a system in place to regularly reconcile your accounts can lead to a loss in revenue and a drop in profits and inaccurate financial reporting.


There are the obvious accounts to reconcile in QuickBooks, but what about the not so obvious accounts? There are many account types that can be reconciled beyond the obvious bank accounts. These account types are; credit cards, other current assets, fixed assets, other current liability, long term liability, and equity. Let's look beyond the checking and savings account and talk about credit cards, payroll liabilities, loans, lines of credits, commission accounts, and even 401k withholding accounts.


Go Big

Most business owners understand the company credit card needs to be put on the books and reconciled each time a statement it produced. However, most credit cards don't close at month end. In order to close out a month, I like to do a 'soft reconcile' of the account. Meaning, go through the reconciliation process with an end date that ties to the statement, then enter the balance as of month end and tie the book balance to the online balance. Instead of clicking 'Reconcile Now' click 'Leave.' This will show that the actual balance as of month end has been verified.


Other current assets and fixed assets usually have little activity depending on your company's industry. Due to the low activity, the reconciliation process tends to get overlooked. However, if you are an industry leading real estate property firm, then you may need to reconcile these accounts monthly, if not bi-monthly. Booking properties to the OCA account allows you to accurately track costs associated with that asset and you can know if you are meeting your investment goals.


Both Other Current Liabilities and Long Term Liabilities can be a headache if they aren't reconciled. Payroll liabilities should almost always have a zero balance, if not, then expenses might be under reported. If your business pays commission, then you will want to have that number reconciled to the penny so you don't get blindsided by a large payout to a rep or dealer. This is why using your bank statement as your bookkeeping system can lead to a disaster. Seeing an accurate liability on the Balance Sheet can truly help with budgeting and forecasting, especially from a Cash Flow standpoint.


If your company offers a 401k or IRA program, your liability account associated with this better be zero or your could run into some trouble with Uncle Sam down the road. I'm surprised when I work with businesses that don't automate this process. As money with withheld from a paycheck, it needs to be distributed to the corresponding 401k or IRA immediately.


Loans and Lines Of Credit need reconciling each period to capture Interest Expense. Not doing so will under report expenses and inflate profits. Again, this greatly impacts your financial reporting tools.


Avoid The Headache

Get your bookkeeping system set up and make sure the procedures are put in place to keep it maintained on a monthly basis. Not staying on accounts reconciliations in QuickBooks can cause a decent amount of unneeded stress. Feel free to reach out to find out how I can customize your company's process to make your life easier and to see you bottom line improve. Next thing you know, you will proudly be using the proverb that 'all my ducks are in a row.'

Reconciling Liabilities In QuickBooks

January 6, 2020

Often, to the small business owner, the word reconciling is associated with just the checking and savings bank accounts. There is much more that needs to be reconciled in order to be certain your financials are accurate. 


 Reconciling liabilities in QuickBooks sounds a lot more intimidating than it really is. What good is reviewing financial reports if you can't prove they are 100% accurate? Depending on how your business's bookkeeping system was set up, walking through the reconciliation process for banks accounts, payroll liabilities, loans, lines of credits, garnishments, and other withholdings can be easy or a major pain in the butt. 


Payroll Tax Deductions

Understanding payroll liabilities and how your payroll firm reports them can be two different animals. Payroll liabilities are broken down in to two main categories; employer expenses and employee liabilities. Please keep in mind that taxes vary from state to state, so the types of withholdings and expenses may be labeled different. 


From these main two categories they break down even more. In Arizona, the liabilities are broken down into Federal Income Tax, State Income Tax, Social Security Withholding, and Medicare Withholding. These are items that should never hit you expense report and be recorded in the liability accounts that your bookkeeper set up when the books were started. The balances in these liabilities should almost be zero. Basically, the money is collected from each employee when their paycheck is issued and then the money is paid to the proper tax agency via a tax payment check. This is where errors can occur. 


 A small business owner may not know better and just record the employee's net paycheck as an expense and book the payroll tax check as an expense. Truth of the matter is that part of the employee paycheck is an expense and part should be booked to the liability. Same goes for the tax check. After entering both checks, you will see that the payroll liability accounts have transactions in them, but they net out to zero. 


 The non liability portion of the tax check should be booked as an expense to the business. The expenses breakdown to 4 categories as well; FUTA (Federal Unemployment Tax Act), SUTA (State Unemployment Tax Act), Social Security Expense, and Medicare Expense.


Payroll Garnishments

From time to time, a business owner may be notified that an employee has to have wages garnished for various reasons. These garnishments can fall into a few different categories:

  • Child support, spousal support, and medical support
  • Creditors
  • Federal and State Tax Levies
  • Federal debts such as Student Loans and AWG (administrative wage garnishments

These garnishments are sometimes easy to handle, but also can unravel quickly if you don't account for them properly in QuickBooks. The last thing a business wants to happen is to have these items fall onto your expense reports. Basically, the money is withheld from the employee's paycheck and booked to a corresponding Liability account. That account will be zeroed out when the monies are paid to the proper agency. 


 Again, these are not expenses to the business and should not be reflected on your Profit & Loss. If that happens, there is a good chance the business in understating their profit and then budgets and forecasts become inaccurate.


Much like most areas of bookkeeping, consistent attention and regular review can save major headaches down the road. No business owner wants to make important financial decisions based on inaccurate books. Look over the Chart of Accounts and make sure that the balances for the liabilities look correct and then get in the habit of reconciling liabilities in QuickBooks on a regular basis. 

How to Handle and Enter Payroll in QuickBooks 

December 19, 2019

Look at the skeleton of the QuickBooks program and it's made of 5 basic functions. All of them are on the home screen that split off into an abundance of specialized categories. It consists of Vendors, Customers, Company, Banking and lastly Employees. The Employee section of QuickBooks is predominately utilized when the payroll function has been activated which I will adamantly advise against. Some functions of the payroll section are available however even if you do not activate it, namely the employee names list. Before we begin talking about how to enter payroll let us briefly discuss the difference between bringing payroll in house (utilizing the QuickBooks payroll function) and using an outsourced vendor such as ADP or Infnisource.


Outsourced Payroll - Most clients that I work with (and will advise if not) utilize an outsourced payroll company. By using an outsourced payroll company the liability of paying the various federal and state agencies the correct amounts in regards to unemployment along with state and federal taxes has now been lifted from you. Not to mention the time and frustration that you've relinquished by utilizing a streamlined system. This alone should be reason enough to sway you from keeping your payroll in house I hope.


Recording Expenses - Now that your payroll has hopefully been outsourced what's the best way for you to properly recorded the associated expenses and liabilities? We'll take a single paycheck made out to Homer at the Springfield Nuclear Power Plant managed by Springfield Payroll. The breakdown for the payroll is as follows...


Employee (EE) - $1000 In Gross Wages earned plus a $100 Advance with $100 in EE Federal Taxes & $50 in EE State Taxes


Employer (ER) - $100 in ER Taxes - $50 Payroll Fee to the Springfield Nuclear Power Plant


This gives Homer a net paycheck of $950, The Springfield Nuclear Power Plant paying $250 in total taxes, and a $50 payroll. Typically these three (Wages, Taxes, and the Fee) are withdrawn from your checking account in three separate transactions.

  • Entering Wages - The first check is made out to Homer Simpson the Employee. His total paycheck is $950. The breakdown for this paycheck would be $1,000 Gross Wages (Expense) $100 Payroll Advance (Other Asset) and -$250 deducted for employee taxes (Payroll Liability). This gives Homer now a net paycheck of $950
  • Entering Taxes - The tax check is then made out to the payroll company Springfield Payroll. The total check will be for $350 broken down with $100 in ER taxes (Expense) and $250 in EE taxes going against the liability account bringing it back to $0. I would even advise as much to reconcile the liability account every payroll to ensure this nets to $0
  • Entering Fees - The fee is the easiest as all you need to do is write a check to the vendor (Springfield Payroll) for the amount charged. In this case, $50 would be a Payroll Fee (Expense)

Garnishments, Advances, & Reimbursements

  • Since Homer has taken an advance on this paycheck you would record the $100 to Employee Advance (Other Current Asset) showing that you are currently due these funds from Homer. On his next paycheck a negative amount of $100 would then be deducted from his paycheck which will bring the Employee Advance account to $0
  • Reimbursements can be realized as an expense to the company adding to the employees' paycheck
  • Garnishment checks paid out on behalf of the employee to the state prior to the paycheck (child support, student loan debt, back paid taxes) can be realized just like an advance to the employee where the next paycheck the total amount would be deducted and thus bringing back to the Employee Advance account to $0

A few other tips...

  • Separate the owner salaries paid out to a different expense account to help with year end reporting, your CPA will thank you
  • If an employee besides yourself is able to view the profile restrict their access from viewing employee checks
  • If you have a lot of manual checks cut per month look into a payroll import provided by your payroll company, the initial costs to have this setup is a huge time saver

Well that's a bit of bookkeeping payroll in a nutshell. The biggest take away from this article is to just keep payroll as simple as possible. It can be an extremely complex chain of events and some people choose to be a masochist when it comes to their payroll. But, by outsourcing your payroll and keeping it to as few accounts as possible everything will be done in no time for your small business.

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QuickBooks Tip: Chart Of Accounts Overview

December 16, 2019

In QuickBooks, the Chart of Accounts is the skeleton to any company file. A well-managed Chart of Accounts provides meaningful reports and year end financial data to provide to your CPA for tax purposes. Understanding how each account works and when to use it helps keep your company file organized and maintains integrity of your financial data. The concepts may seem simple but it's surprising how many folks blindly swing in the dark by putting assets into liabilities, expenses as income, and vice versa. I'm going to just brake each one down and give real world examples on each. You can look further into the true definition (and I highly recommend you do) of each by heading over to Wikipedia.


For the example we're going to use Homer Simpson's small business named Mr. Plow for which he has expenses, borrows money to buy his truck, takes income in for completing plow jobs, and takes money out of the business for his own personal expenses.


1) Business Assets - Money that you currently have both intangible or tangible (Bank, Accounts Receivable, Other Current Asset, Fixed Asset, Other Asset)

  • Bank, use this account for tracking all of your checking and savings accounts. Any activity that shows up in Homer's bank account should be followed to the penny and reconciled to the monthly statements.
  • Accounts Receivable shows all of the money that is owed to Homer for jobs he has completed. When Homer generates an invoice to Moe for plowing his lot for $100 he now has $100 in his accounts receivable and $100 is added to income. When he receives the money from Moe for the job $100 is now taken out of accounts receivable and put into his bank.
  • Fixed Assets for Homer are items that he doesn't plan to sell off in the next year and plans to keep over multiple years such as equipment or fixtures. Both his truck he purchased and plow that came with the truck are fixed assets. Homer purchased his truck and plow on a loan for $10,000 and thus his Fixed Asset is now $10,000 for the truck and plow.
  • Other Current Assets, money that has been given out which is to be returned to Homer within a year. A security deposit on a garage to store Homer's truck, an employee loan given to Barney he'll payback next pay period, or Homer prepaying his insurance expense for a year (a prepaid expense).
  • Other Asset, something that is neither a fixed or other current asset. If Homer was to lend Grandpa $4,800 over 4 years (A long term notes receivable) it would be considered an other asset.

2) Business Liabilities - Money that you currently owe to an outside party (Accounts Payable, Credit Cards, Other Current Liability or Loan, Long Term Liability

  • Accounts Payable, an account that shows all payments due to vendors. When Homer receives a bill for the salt he buys, a bill for work done on his truck, or a rent bill for his workshop they should be inputted into the Enter Bills module which in turn will be tracked in accounts payable until the payment is remitted for the bill.
  • Credit Cards, if Homer has a credit card it should show up under this account. All charges, interest, and transfers of cash to pay down the credit card from the bank account should show up in this register.
  • Long Term Liability, any loan that will take longer then a year to pay down. The truck Homer purchased or if he decided to take a mortgage out on the workshop would be considered a long term liability as they take many years to pay off.
  • Other Current Liability or Loan, any loan or money due that will take shorter than a year to pay down. Sales tax collected on Homer's many plow jobs due to Springfield, recording payroll tax liabilities owed to the IRS, or a loan taken out from Marge to be paid back to her within a year.
3) Business Expenses and Income - Money that is either earned or spent (Income, Cost of Goods Sold, Expense, Other Income, Other Expense)
  • Income, the primary source of cash coming into a company. Any money that Homer receives from plowing driveways would be considered income.
  • COGS, any expense incurred for the production of a product. The best way to understand this is by asking yourself "Would I incur this cost today if I sold a product?". Consult your CPA to further clarify when an item can be considered a COGS for your business.
  • Expense, any expense incurred even if a product wasn't sold.  Rent paid to Homer's workshop, his phone bill, business registration fees to Springfield, advertising used to promote Mr. Plow, or a fixed salary paid to Homer each week.
  • Other Income & Other Expense, any form of income or expense that is not directly associated with the business. Any interest income from his or interest expense from his credit card, selling spare metal found on the side of the road next to the Kwik-E-Mart, or a cash deposit that might be over/short.

4) Equity - Owner's equity (withdrawal or investments into the business by Homer) and retained earnings from previous years. If homer was to purchase all of his family's meals on the company card these would be owner draws. If Homer instead used $5,000 to help fund the company truck it would be an owner's investment.


The Chart of Accounts is daunting at first especially when you inherit a company file with accounts already inputted. As you review the chart of accounts you may find that an inappropriate account has been used, expense accounts that have multiple names which need to be merged, and credit cards that exist but are being solely inputted as an accounts payable! Use your judgment and intuition; it will generally serve as the best guide to determining the appropriate account to be used. As always, consult your CPA or Bookkeeper if you aren't sure as to how to code certain accounts.

QuickBooks - Common Business Expense 

December 12, 2019

Every time I open up a new company file a lot of thoughts are going through my head. Is the balance sheet correct, have credit cards been properly booked, are the payroll liabilities $0 at the end of every pay period, if they have an organized expense list that is meaningful, or are the QuickBoks accounts reconciled. The expense list (which I'll include as Cost of Goods Sold, Expenses, and Other Expenses) give you a true outlook as to where your business is currently spending its money. For this article I'll list out each category, explain what the category is comprised of, then give you common account names I use for a majority of my clients.


To make things easier and relatable we're going to use Homer's business Mr. Plow again to make sense of all of these. If Homer can figure it out then I sure hope you guys can make sense of it. Yes, there will be some grey areas (expenses that don't particularly fit into any one category) but at the end of the day all you can do is ask yourself if the expense was necessary to the well being of the business, if it was, then great, find an account for it and keep on moving.


Cost of Goods Sold - These are costs associated with the creation of your product, without these purchases you would not be able to create the product you offer.

  • Merchant Fees - Homer takes Visa/MC/American Express and codes the fees as charge by his merchant processor to this account.
  • Labor - Homer (not himself) pays his other plow drivers gross wages, the more jobs they create the more money he spends to deliver the product from his employees.
  • Materials - Homer purchases salt to salt the drive ways when he is finished with them, because they are use to provide his product they're a Cost of Goods Sold

Expenses - Fixed Company Costs

  • Advertising & Marketing - Homer buys shirts, advertises in the Shelbyville Times, and spends money on a small business inbound marketing coach.
  • Automobile Expense - I categorized this into 3 sub-accounts. 1- Fuel, Homer buys fuel for his plow trucks. 2- Repairs & Maintenance, Homer replaces the tires and does regular oil changes. 3- Licenses & Fees, Homer pays for registration fees and the occasional parking ticket
  • Bank Charges & Fees - When the Springfield bank charges homer $10 a month to keep his business checking account with them.
  • Business Licenses & Fees - Every year Homer has to pay for his business license to keep it registered in Springfield.
  • Computer & Internet - Homer has website registration fees, buys apps to keep his plow drivers in check, and just subscribed to DropBox!
  • Contracted Services - Every now and again Homer hires Barney the Plow King (a sole
  • proprietor!) to do some extra jobs when he's overwhelmed. Homer keeps a bit on top then pays Barney a check. I typically put all 1099 contractors here as well.
  • Dues & Subscriptions - Homer is a part of the Springfield Plow club and also subscribes to the magazine Plowing & You monthly, he expenses this here.
  • Insurance - All of his insurance expenses are coded here such as general liability and auto insurance.
  • Meals & Entertainment - You better believe that whenever Homer goes to Krusty Burger for a company meeting that this is being expensed here!
  • Office Supplies - Homer buys a lot of pens, paper, and ink to print colorful graphs and send checks to vendors.
  • Payroll - I categorize this into a couple of sub-accounts. 1- Salary, I would post expenses for people who are paid regardless of whether there is work or not. 2- ER Taxes, all employer taxes paid by his company Mr. Plow. 3- Payroll Fee, the fee that he pays his outsourced payroll company to do his payroll.
  • Postage & Delivery - Every now and again Homer sends packages for Mr. Plow related activities.
  • Professional Fees - Homer pays a lot of money to Lionel Hutz his attorney, Moe his bookkeeper, and Lisa his young CPA.
  • Rent - Homer rents a space to hold his plows, keep his salt, and all of his general equipment.
  • Repairs & Maintenance - The space Homer rents has a few leaks and needs to be painted rather regularly, he goes to Homer Depot a fair bit and expenses those purchases to Repairs & Maintenance.
  • Telephone - Every driver needs a phone, he expenses that here.
  • Travel - Every now and again Homer heads to the annual Plow Convention in Knoxville Tennessee, home of the 1982 Worlds Fair. His lodging, flight, and subsequent travel expenses go here.
  • Utilities - His rented space requires that he pay Gas, Utilities, Waste, Water, and Electricity, these are his building utilities.

Other Expenses - Homer knows that some folks like to see EBITDA or Earnings Before Interest, Taxes, Depreciation, and Amortization. Homer separates these into the Other Expense category to show what his Net Income is before these expenses are calculated.

  • Taxes - At the end of the year Homer pays taxes on his earnings, it goes here!
  • Interest Expense - Homer has a loan on his plow, the interest for the truck goes here.
  • Amortization Expense - An expense that Homer waits for his CPA to give instructions on what his amortization expense is.
  • Depreciation - Again, usually a line item that homer waits for his CPA to instruct the amount to put here.

Again, this list is not mean to be all encompassing. Expenses will change depending on the nature of your business and what you intend to scrutinize monthly. For instance if you make Pizza you might want to make a Cost of Goods Sold Category called Food and then make sub expenses for dough, cheese, meat, produce, sauce, and pizza boxes.


The one thing to keep in mind when developing this list (and developing your QuickBooks chart of accounts) is to keep it simple! Don't create a sub-category to an expense unless it's absolutely necessary. If you're finding yourself posting to a random expense category maybe once a year it's probably not a good idea to have it. Make sure these categories are meaningful and help you make good business decisions.

How Successful Businesses Handle Cash Flow & Petty Cash 

December 9, 2019

Cash is king, but without proper bookkeeping procedures in place, mishandling cash can cause business failure.


Weak bookkeeping systems that do not use the correct procedures for handling cash are vulnerable to internal theft and IRS audit failures.


Managing your small business cash flow properly can ensure that your bookkeeper is not stealing from you. Implementing a bookkeeping process for handling cash payments from customers and cash disbursements out of the business (petty cash), is essential to ensuring your small business is successful and profitable.


Cash flow refers to the money coming into a business. There are many ways money can enter a business and many ways for companies to add to their profits and revenues. However, understanding cash flow from operations is an important part of making decisions. If your business is creating a cash flow statement for an annual or quarterly report, cash flow from operations will play a key role.

Here we'll discuss the ways cash can come into and out of a company and how to implement a procedure for them:

  1. What is Cash Flow?
  2. Handling Cash Payments from Customers
  3. The Importance of Petty Cash
  4. Setting Up a Petty Cash Fund
  5. Tracking Petty Cash
  6. Balancing Petty Cash

What is Cash Flow and Why is it Important?

Sometimes called CFO, cash flow from operating activities, net cash from operating activities or operating cash flow, cash flow from operations refers to the money a company makes from its regular business activities.


It does not include investments or long-term capital. Cash flow from operations is calculated before taxes and interest and involves calculating depreciation minus any taxes.


Cash flow operating activities that count towards the CFO include:

  • Regular business activity, such as services or selling of products
  • Inventory increases or decreases
  • Short-term accounts payable
  • Short-term accounts receivable
  • Short-term Debt
  • Changes in working capital

Knowing your cash flow from operations lets you see how your business finances short-term capital. In addition, maintaining a strong cash flow from operations can be reassuring to investors and shareholders, who generally want to see a business making money from its stated mission.


A good cash flow can also be an effective selling point if you're considering setting up your business bookkeeping for an exit strategy.


If you’d like to calculate your operating cash flow, you can do so with this formula:


Operating earnings (revenue minus expenses, excluding tax and interest) + Depreciation - Taxes = Cash flow from operations


How does your small business cash flow look?

Good cash flow from operations shows a company is on track. If you own a restaurant and you are getting a healthy profit from making and serving food, and in fact most of your cash flow comes from these activities, that is one indicator your business is healthy.


On the other hand, if your cashflow doesn't seem to be adding up, or you're not sure if your calculations are correct, then it's time to implement a better cash flow management system.


How to Properly Handle Cash Payments From Customers

Cash payments typically come into the company from a customer paying a bill. These are part of your daily sales summary.


Best practices for handling cash payments in your restaurant or business are as follows:

  • If you are using QuickBooks and you receive a payment against an invoice in the form of cash, then that payment goes into the Undeposited Funds account and shows up in the "Record Deposits" window.
  • If you are recording sales off of a daily sales summary, you should link the cash payments to the "Undeposited Funds" account in the journal entry.

This procedure will accomplish two things for you:

  1. First, it will set up a bookkeeping system that allows cash to be tracked accurately so you can make sure all the cash is ending up in your bank account.
  2. Secondly, it will also allow you to take a group of cash deposits to the bank and make one lump deposit for several invoice payments or several days' worth of cash payments from your sales summary.

Why Petty Cash is Important

Some business strategists have begun to question the need for a physical petty cash fund. After all, secure and streamlined purchasing alternatives like mobile apps, digital wallets, and even prepaid debit cards are making the practice of paying by cash obsolete.


Making it easier to spend, however, isn’t always a good idea when it comes to running a restaurant.


Keeping petty cash on hand offers some valuable benefits:

  • It limits discretionary spending, and can help to prevent a lot of smaller purchases from adding up to one larger annual expense,
  • it makes cash available to employees for certain authorized expenditures without the need to process time-consuming expense reports,
  • it reduces the likelihood that owners or managers will pay for purchases out of their own pockets, then forget to allocate those purchases as company expenses,
  • it cuts down on bookkeeping since multiple petty cash receipts get consolidated and processed as part of a single journal entry, and
  • it’s still more convenient in many situations to pay for a purchase in dollars and cents!

Whether your company takes care of its own business bookkeeping, or outsources those duties to an off-site professional, it’s in your best interest to understand what’s involved in setting up and accounting for a petty cash fund.


Setting Up a Petty Cash Fund

Many restaurants keep a small amount of money on hand to pay for expenses that can't be paid by a check or credit card.


An example of this might be a reimbursement to an employee who picked up business supplies on the way to work and paid with their personal funds.


Another example may be a product that is delivered and can be paid by Cash on Delivery only.


While smaller companies usually require only a single source of petty cash, some larger organizations will have separate cash funds for each of their various departments.


In either case, to SET UP a petty cash fund you’ll need to:

  • Set up a petty cash bank account to track these funds.
  • The petty cash amount should be a set amount and should be able to be balanced out each time the replenishment of cash is needed.

OR, another option is to:

  • Set up an offline tracking system and then cut a check to replenish the petty cash back to its starting balance.
  • Attach copies of receipts to the check stub and you have a very clean and traceable petty cash system. It is not a good practice to replenish petty cash from customer cash payments.

Tracking Your Petty Cash

Tracking your petty cash is particularly important for keeping your bookkeeping under control. Remember, where there’s money, there’s also potential for theft and abuse. As much as we’d like to believe it doesn’t happen, stealing cash is one of the most common forms of employee theft.


Once you have your Petty Cash account set up, you can TRACK your petty cash by:

  • add a Petty Cash account to the asset section of your Chart of Accounts,
  • determine how much money your petty cash float should contain (usually one to several hundred dollars, depending on the size and needs of your business),
  • clarify which types of expenditures qualify for petty cash status, and make sure receipts are collected for every purchase,
  • allocate a secure location for your petty cash holdings (a locked cash box inside a locked drawer or cabinet is best), and
  • assign a custodian to disburse, record, reconcile, and safeguard your petty cash

There are some business purchases – think coffee runs, staff birthday cards, and one-off postage costs for example – where it’s impractical to pay by credit card or check.


As a matter of fact, it was smaller business expenditures like these that first gave rise to the term petty cash!


And they’re still the reason why most companies find it useful to keep funds on hand for minor, last-minute, or cash-only expenses.


But just because the dollar amounts flowing through your petty cash fund are typically minimal, doesn’t make it any less important to manage them properly.


Tracking petty cash transactions is part of an efficient bookkeeping system. Especially when it comes to maintaining accurate journal entries, keeping personal purchases separate from business, and capturing every possible tax-deductible expense.


Balancing Petty Cash

Managing your petty cash fund successfully from an accounting perspective starts as soon as you issue that first check made payable to cash. If you’ve decided to carry a float of $200 for example, your journal entry will involve a debit of $200 to your Petty Cash account, and a credit of $200 to your regular Cash (Bank) account.


From there, every time your custodian doles out money from the petty cash fund, it should always be in exchange for a purchase receipt. That means that at any point in time, the money and receipts in your petty cash box will equal the starting amount of your float.


Once the cash balance in your fund gets too low to be useful, the receipts should be summarized, tallied, and exchanged for a new company check equal to their total.


Cashing this check - and adding the funds to your petty cash holdings - will bring your float back to its original level.


There are two important bookkeeping steps required to complete the replenishment process for petty cash:

  • A journal entry to record the petty cash purchases (this consists of a debit to each of the individual Expense accounts involved - Postage, Office Supplies, etc. - and a credit to your Petty Cash account for the receipt total)
  • A journal entry to account for the new check you’ve cut (as already discussed, this consists of a debit to your Petty Cash account, and a credit to your regular Cash (Bank) account)

They may be small, but petty cash receipts are important source documents for backing up your bookkeeping transactions. Be sure you keep and file them accordingly.


Summary of How to Properly Handle Cash

  • All cash payments should be physically deposited into the bank account to match your sales records.
  • Petty cash reimbursements are best accounted for by a separate account or by actually cutting checks for the reimbursement.
  • Do not take a portion of your customer cash payments to replenish petty cash. This is a poor business practice and you want to keep cash deposits and petty cash separate.

By following these procedures, you will have a system in place for handling cash that is traceable. At any point in time, you will be able to prove to the IRS that you are handling cash correctly and you will be able to prove to yourself that there is no internal theft going on.


Cash flow management can prevent the loss of money and also provide valuable insight into the overall health of your business. Don't neglect to implement a simple system for tracking petty cash and cash payments going into and out of your business.

Your All-Inclusive End of Year Bookkeeping Checklist

December 5, 2019

As we get closer and closer to year-end most businesses will begin thinking about taxes. One of the most hated words in the business world... taxes. By the time year-end passes and you actually start to think about your bookkeeping and taxes you are too late.


You need to attend to your bookkeeping before year-end and do some tax planning. Updating your bookkeeping and reviewing it prior to year-end is very important as you can actually do something about your tax situation before the turn of the calendar. Here is a must do now checklist for your year-end bookkeeping.


If you’ve been so preoccupied with running your business that year-end bookkeeping tasks have caught you off guard, don’t panic. Take a deep, calming breath and get ready to tackle those accounts with a plan for streamlining the process. Even if you're facing down the new year, use this checklist to help get you ready and implement a plan for next year.


#1 Reconcile Your Books

The best thing you can possibly do for your bookkeeping and taxes is to reconcile QuickBooks. A reconciled QuickBooks file that can be confirmed with a bank statement does a lot of positive things for your business.


A truly reconciled file tells your bookkeeper and tax preparer that everything is in the file; now we just need to make sure everything is in the right spot.


If you’re still using a common bank account for both your business and personal finances, you should probably make a mental note to halt that practice at some point during the new accounting year.


In the meantime, you’ll need to analyze all the unreconciled expenses that have flowed through your shared account to determine which were business-related, and which ones were personal.


Having your CPA handle tasks that should be done by your bookkeeper will be very costly. Also, if you hand your CPA a QuickBooks file that is not reconciled you are almost asking for a tax extension to be filed.


Reconciliation Checklist

Follow these steps to ensure that your final books are as accurate as possible. Start by making sure you reconcile ALL accounts, not just bank accounts. Reconcile all of these accounts:

  • Credit Cards
  • Loans
  • Lines of credit
  • Payroll liabilities
  • Bank accounts
  • Asset accounts

Once you’re satisfied that everything is in order, you should run a trial balance to ensure debits equal credits across your accounts. This is also a great way to check for abnormal account balances and potential posting errors.


Follow this up by making adjusting journal entries for any depreciation expenses or fixed asset purchases, and you should be ready to generate and review your company’s year-end financial statements.


#2 Clean Up Your Accounts Receivable and Accounts Payable

Maintaining clean accounts payable and receivable is something we always recommend. However, before year-end is a great time for a once over tune up of your accounts receivable and accounts payable.


Running your aging reports on both accounts receivable and payable may reveal some problems or maybe just some errors.


Common accounts receivable errors I see are not offsetting credits against old invoices. You want to try and collect your outstanding receivables balances before year-end and possibly write of the bad debt that you will never collect.


Looking over aged payables may reveal some old inaccurate balances.


Do some research on any suspicious balances and request statements from those vendors. Going into year-end with a firm handle on payables and receivables will definitely benefit you.


When it comes to cleaning up your end-of-year accounts, the best place to start is with source documents like receipts and invoices. Whether you work with physical files, or you’ve switched to a paperless system, you’ll still need to make sure all your records are accounted for.


Accounts Receivable Checklist

  • Go through your customer accounts to check that you’ve issued, logged, and stored invoice copies for all completed services, projects, and orders.
  • Separate out invoices that have yet to be collected on. This will help determine whether any of your outstanding receivables can be written off as bad debt.


Accounts Payable Checklist

  • Go through your supplier accounts and follow the same procedure as accounts receivable for your payable invoices.
  • Unearth any unpaid bills to ensure they get processed in the correct accounting period before you close out your year.

#3 Do an Asset Review

One thing that you should do is to take a peek through the details of your asset accounts. You want to be looking for any glaring errors that you mistakenly booked to an asset account.


If you are staring at a $30.69 charge in a fixed asset 'Equipment' account you most likely need to reclassify that small charge.


Asset Review Checklist

  • Look for any blatant asset errors and reclassify them to the correct account.

#4 Take Care of Your 1099's

Nothing is more frustrating and stressful than having a 1099 independent contractor mess in January. You already have enough on your plate in January and the last thing you need is another deadline. You want to be focusing on sales and growth to start the new year not 1099 compliance and taxes.


We tell our clients to stay on top of 1099's throughout the year rather than waiting until the deadline is looming.


Most businesses are aware that they should request a W-9 form from their vendors, but very few actually follow through and complete the task.


It is a lot easier to get a W-9 filled out from a vendor before you pay them, rather than 6 months down the road after the contract work has been completed.


I always tell clients to let their contractors know they can get paid as soon as they submit a filled out W-9 form; works every time.


Come January rather than scrambling to gather the information you will be hitting print and mailing 1099 forms out without any issues or stress.


1099 Year-End Checklist

  • Before year-end do a review of your contractors and make sure to input the 1099 information in QuickBooks.

#5 CPA Review Before Year-End Taxes

You have followed through the checklist thus far and all before year-end...good for you. However, don't stop reading because this is by far the most important step. You need to do a year-end tax review with your CPA to get an estimate on your tax liability.


Why would you go through all of this trouble of getting ready for your taxes without actually reviewing your estimated tax liability?


Many small business owners skip this step and I scold them over it. I think many owners dislike taxes so much that they are actually afraid to see what their potential tax liability is. You need to review your taxes with your CPA prior to year-end for two very important reasons.

  1. There are a lot more tax advantageous moves you can make prior to year-end as opposed to waiting until the calendar turns to a new tax year.
  2. If you are going to owe taxes wouldn't you rather have 4 months' notice rather than just a few weeks?

Most people hate getting hit with any unexpected bills and taxes should be treated no differently. If you do owe at least you will be prepared and you will not be surprised by your tax liability.


CPA Review Checklist

  • Perform all the above steps and submit your books to your CPA
  • Have your CPA generate a estimated tax liability

#6 Have a Tax Plan in Place

When you leave your bookkeeping duties for too long of a time it can also take a hefty investment of both time and money to help set them right.


Closing out your books at year-end is largely about ensuring every financial transaction related to your business operation has been accurately recorded.


Not only does this allow you to generate the necessary reports for understanding where your company stands financially, it gets you ready to file your annual tax return. Working with a proven accounting professional can help you accomplish both of those goals.


Among other things, timely accounting habits keep your business on track financially and legally by helping you avoid:

  • cash flow management issues,
  • costly interest charges, late fees, and overdraft penalties,
  • overlooked tax remittances and unnecessary audits,
  • missed tax deduction opportunities, and
  • the miscalculation of profits and costs that can lead to unhealthy business decisions

The easiest way to wrap up one fiscal year and get ready for the next is with a systematic approach to getting your books organized. Follow these simple steps and bring your CPA the cleanest set of books you ever had. One last thing, don't forget that tax review before year end...it's just that important.

The Best Tips For a Small Business Owner Managing Their Own Bookkeeping

December 2, 2019

Have you ever wondered how a small business bookkeeper handles the bookkeeping for their own business? Think about it, if you are using an outsourced bookkeeping service they have to handle their own business bookkeeping.


Ask them what they do for their own bookkeeping that you currently are not doing. Here are the key things I do with our own small business bookkeeping.


Owner in control

I'm in control of our business bookkeeping. While I may not handle every aspect of it like creating invoices and posting payments I have the correct checks and balances in place to ensure the accounting is correct.


Nobody can move money, process payroll, or pay bills except for me. Those are just good accounting practices.


Many owners that outsource their bookkeeping or have an internal bookkeeper put too much trust in them. The more sensitive permissions you give your bookkeeper the more likely it is that they will steal from you. Bookkeeper theft is a major problem right now.


Here are a few things your bookkeeper should never be able to do:

  • Sign checks, pay bills or transfer money
  • Have unlimited access to your bank account
  • Have access to your bank account numbers
  • Have access to your social security number

These may seem like common sense things but quite often I have business owners try and give me this information. Once we explain why we can't take this information they get it.


Updated often

I update our bookkeeping at least once per week but often daily. When you update your books daily you catch things faster and your books are always up to date. I showed one of our clients how to reconcile the books daily and he was blown away.


He said he didn't understand why his previous bookkeeper didn't show him this. When I told him to have his bookkeeper handle the daily reconciling he objected. He said he wanted to do it himself as it only took a few minutes, he had complete control over his books, he knew what was going on at all times, and caught mistakes early.


When you reconcile daily you have a really good handle on cash flow. By printing checks and entering transactions before they post to your bank account you really get an understanding not only of your current cash balance but also your future cash balance. Daily reconciling makes you the king of managing your cash flow.


I have a tradition to email my CPA three QuickBooks files on January 1st each year; our business and my wife's two businesses. It probably takes me 15-20 minutes to finish the books for the year and email them off. The reason is because my books are always up to date and yours should be too.


Always accurate

Another thing about my books is they are always accurate. That doesn't necessarily mean I know how to handle every single transaction that happens on our books. Every once in a while a transaction comes up that is complex enough that I need to advise with my CPA.


When you don't know what to do with a particular transaction don't just bury it in a random account. You should code all questionable transactions to the QuickBooks ask my accountant code. That way you can keep all of your questions organized in one spot.


Make sure to add as many details as possible to the memo so when you do get the chance to review them with your CPA you have sufficient information.


Set goals

It is really frustrating to me knowing how many small business owners don't set goals for their business each year. It is really important to create a budget and forecast each year. Here are some guidelines for building a small business budget.


After you build your budget you should enter the budget into QuickBooks. This makes budget vs actual comparisons really easy.


Having this information at your fingertips will allow you to quickly see if you are on track for the goals you have set. If not make the necessary adjustments to get back on track.


Key metrics and reporting

There are certain key metrics and reports that every business owner keeps an eye on; either consciously or subconsciously. I definitely have my 3 or 4 key metrics that I watch every month. If they get out of line I figure out the cause and try and make the necessary adjustments to bring them back in line with my goals.


Another important part of any small business owner's job is to analyze financial reports. I have a series of reports that I have memorized in QuickBooks to allow me easy access to vital reporting information.


Way too many small business owners operate without any financial analysis. Doing so is like running your business blind. You can't analyze your key metrics and financial reports unless your bookkeeping is updated, accurate, and you have set goals.


Money owing from customers in the form of accounts receivable is one of the biggest contributors to your company’s cash flow.


While business success hinges on having positive cash flow activity - where there’s more money coming in than there is going out - the money that flows into your business can’t really be counted as income until it becomes cash-in-hand.

Every accounts receivable entry in your company records is essentially a short-term loan that’s been issued to a customer.


Keeping your overdue accounts under control means getting paid for these loans in a timely fashion, but many business owners don’t fully appreciate the crucial role that the collection of these outstanding debts plays in their success.


The fact is that more than 80% of small businesses fail because of a lack of effective cash flow management.


Why is cash flow so important? Aside from the obvious need to pay employees and purchase supplies, establishing a positive cash flow is the only way your business can earn a profit.


No company can continue to operate if it consistently pays out more than it takes in, and it’s the ability to generate and use cash that allows your business to:

  • Stay on top of its debts
  • Enjoy regular growth
  • Maintain flexibility in the face of financial emergencies and expansion opportunities
  • Get approved for new credit
  • Attract additional customers with better credit terms

Every business has its share of accounts receivable, and the bigger a company gets the more outstanding accounts it will tend to have.


It might not be the most enjoyable part of running your small business, but learning how to manage these accounts effectively can mean the difference between heading a company that profits from long-term success, and one that simply closes its doors and disappears.


The Importance of Checking a Client’s History

Many collection headaches can be avoided entirely if your business takes the time to investigate each potential new customer before extending the privilege of a credit account. Three of the most important aspects of evaluating and approving a client for credit include:

  • running a credit check, and obtaining a credit report
  • requesting and checking bank and commercial references
  • obtaining a signed agreement with respect to the credit and payment terms being offered

Credit checks may not be free, but at about $30 per report, they’re a bargain when compared with the costs of not being able to collect on a delinquent account.


Meanwhile, reaching out to a potential client’s past and current trade partners is a great way to uncover revealing information about their payment history. Does the customer make a habit of paying their invoices on time, or are they a reluctant payer that consistently requires follow-up?


Don’t fall into the trap of thinking that any new client is worth the risk of overlooking the occasional red flag. The cost of dealing with a customer who doesn’t pay can often be higher than the cost of forgoing that client’s business in the first place.


Collection Success for When You're a Small Business Owner

Lack of integrity aside, there are any number of reasons why a customer might fail to pay their invoices on time:

  • smaller companies may be short-staffed and disorganized in their approach to paperwork
  • bigger companies may have trouble streamlining their large volume of administrative duties
  • companies of all sizes may experience negative cash flow due to a lack of proper budgeting or an inefficiency in collecting their own accounts receivable

Effectively dealing with your company’s accounts receivable demands an objective mindset and an understanding of when, and how, to gradually elevate your collection efforts.


Staying current with your invoicing, monitoring the status of your outstanding accounts at least weekly, and knowing when to enlist outside help are just some of the habits that will help to keep your company’s cash flow moving smoothly.


Here are five valuable tips for ramping up the success of your accounts receivable collections:

  1. Design and enforce a plan for following up on overdue accounts at regular, pre-established intervals – for example, when invoices are 7 days past due, 15 days past due, 30 days past due, and 45 days past due.
  2. Issue an initial reminder letter or email, followed by a phone call – for best results, your follow-up schedule should take advantage of a variety of communication channels, beginning with email, then moving on to telephone and certified letter mail.
  3. Offset a failure to collect with alternative payment options – when a valuable client has fallen on temporary hard times, consider offering to take installment payments for an outstanding balance, or to accept a reduced amount as payment in full.
  4. Mail out a certified payment demand letter – an official letter from your company’s lawyer threatening legal action will often be enough to encourage a consistently negligent client to prioritize the payment of your invoices. But don’t be afraid to hire a collection agency if all else fails – recovering partial payment for a bill is better than receiving no payment at all.
  5. Be persistent, but know when to quit – successful accounts receivable management requires dedication and a willingness to be persistent. Just the same, there may eventually come a point when investing additional time and resources into collecting from a delinquent client is no longer worth the cost.

4 Key Areas of Operations You Should Never Ignore 

November 27, 2019

There are a handful of important functions that drive the average small business, including strategy, marketing, finance, and operations. Your success depends on creating and growing a company with a thorough understanding of all of these elements. But today we’ll focus on the 4 key areas of operations you’ll want to pay close attention to.


What Are Business Operations?

Your business operations include any practice that helps you produce and deliver your product or service. But most initiatives will involve your systems, processes, technologies, or personnel. These four main areas keep your business running smoothly and allow you to generate income.


Successfully managing your business operations is all about turning materials and/or labor into the goods and services your customers buy - as efficiently and profitably as possible.


But remember that, while individual business owners often excel at donning the many hats needed to carry out most operational tasks, you should be wary of getting so bogged down working in and for your business, that you neglect to work on it as well.


Delegation, as always, is crucial where practical.


1. Your Systems

Operational efficiency should be one of your biggest goals as an entrepreneur. To accomplish it, many companies take advantage of the lean systems management concepts that originated with the manufacturing industry.


As the name implies, a lean system is a collection of processes or chain of events that helps maximize productivity (goods created or services provided) in the shortest time - and with the least waste - possible.


From assembly lines to service provision, there are many ways to improve your output by tweaking the steps involved. But managing your business systems effectively also means fine-tuning the balance between meeting customer demand and remaining flexible enough to adapt to the evolving needs of your market.


2. Your Processes

As the ordered steps that make up your systems, business processes essentially help you accomplish a production goal. Most service-oriented organizations, for example, operate with the help of a clear-cut sequence of activities that lead them from sourcing a client to closing a sale.


Key ways you can optimize your operational processes include:

  • looking for ways to multi-task or cut back on work duplication, especially with the help of technology or specialized equipment,
  • trimming out extraneous steps, and
  • documenting your processes for the purpose of both improving them and training new staff

Remember, the more defined and relevant the individual steps, the more efficient and productive your business processes will be.


3. Your Technology and Equipment

Much of a company’s operations today rely heavily on leveraging technology or equipment - whether it’s for manufacturing goods, transporting or otherwise delivering a finished product or service, or communicating and marketing to customers.


Efficiency considerations in this area are most often related to:

  • examining and comparing the costs of purchasing vs leasing certain types of production or office equipment,
  • outsourcing appropriate tasks (think website management, digital marketing, logistics) to outside professionals, and
  • reexamining your business location and the need for facility expansion

You should recognize that a good deal of your time may be spent balancing various resources like equipment and personnel with your operational budget.


4. Your Employees

The process of hiring and managing staff - along with the question of whether to even go there in the first place – is often littered with indecision and waste. To begin with, too many business owners balk at the extra expense without taking the time to compare costs with any projected increase in output.


It’s important to think about:

  • What skills and turnaround times your business processes demand
  • How many qualified team members you ideally need to keep your systems humming efficiently

If you do have or decide to take on employees, it’s vital that you invest in them as you would any other business asset. Put some effort into attracting and hiring the right candidate for the role, then take steps to provide them with the training and leadership they need to stay focused and motivated.


Examining, planning, and implementing best practices for business operations requires your ongoing attention. But reassessing these areas from time to time – and studying the results of any changes or improvements made - is just as important for long-term success.


In the interests of quality control, consider looking to examples set by other high-functioning businesses inside your industry for help with mitigating product or service imperfections, advancing your work flows and communication channels, and preventing little operational inefficiencies from ballooning into major – and often costly – mistakes.

5 Crucial Steps for Small Business Growth in 2020

November 25, 2019

As the saying goes, "failing to plan is planning to fail". This is never more true than in the world of small businesses. Looking back on the year, there may be many obvious mistakes that have prevented your company from seeing its full potential. In the coming year, there are several crucial steps that will ensure manageable and profitable growth for your small business.


1. End of Year Tax Planning from the Get-Go

For many small business owners, the only purpose of end-of-year bookkeeping is to get your taxes in line. But you're missing out on a lot of value, which we will get into in just a moment.


Many small businesses find that their bookkeeping is always behind. For one reason or another bookkeeping always gets pushed to the back burner. Before you know it you are so far behind on your bookkeeping that you don't even know where to begin. When your bookkeeping is behind you are literally running your business blind. You have no idea where your business is at financially and worse you don't know where you are going. It is really hard to find value in something that is not updated.


If you're scrambling to get your bookkeeping in order at the end of the year, then there's a problem. You should be planning for end-of-year bookkeeping all year long.


Following a process for handling accounts receivable, accounts payable, asset reviews, and book reconciliation will allow you to calculate financial reports each quarter that will allow you to set realistic growth plans.


A good bookkeeper will design a customized bookkeeping system to meet both your needs and budget.


2. Start Outsourcing Your Bookkeeping

Bookkeeping is not sexy.


We don't particularly find the data entry portion of bookkeeping attractive, but we love the value that good bookkeeping can put out.


As a small business owner you have bookkeeping needs. You either handle the bookkeeping yourself, hire an internal person, get a friend to help or outsource your bookkeeping. If you are a very small business there is a high probability that you don't need a full-time bookkeeper. You most likely just need someone to update your books a few times a month.


Here's the key...


The best solution to avoid making mistakes in your bookkeeping is pretty simple - don't do it.


Find a professional to help you accomplish your bookkeeping. You can, and should, still stay involved in the bookkeeping process.


You don't have to do your bookkeeping but you do have to understand it. Find a way to get value out of your bookkeeping.


If your small business uses QuickBooks (which we highly recommend) then you may want to look for a Certified QuickBooks ProAdvisor.


Remember lots of people do bookkeeping, you probably know several people that you are associated with. However, not everyone does bookkeeping well.


3. Financial Forecasting

One of the most important benefits you can get from an outsourced bookkeeping service is financial forecasting.


Find a way to get your bookkeeping updated on a regular basis. If you have a bookkeeper or outsourced bookkeeping service hold them accountable to meeting your deadlines.


Set clear guidelines and deadlines for each bookkeeping task. Make sure that you are not only receiving information on time, but that the information is accurate.

Use this information to set predictions for financial growth. Use those financial predictions to make smart business decisions.


Don't run your business blind!


Work with your bookkeeper to make better financial decisions for things like:

  • Cash Flow
  • Revenue vs. Expenses
  • Profit and Loss
  • Disaster Planning
  • Hiring & Downsizing
  • Opening New Locations

Financial forecasting is the greatest tool you probably didn't even know you had. You don't have to take big risks with your business if you have a clear financial plan and a forecast to predict whether big financial moves are warranted. The key to financial planning is having a reliable bookkeeper that can manage your books and work with you to understand your goals.


4. Learn from the Year Before

If your bookkeeping system does nothing to help you with your business then it is really hard to see any value in keeping the books current.


Your bookkeeping system needs to provide you with unique information that is useful to you in moving the business forward towards its goals.


Your bookkeeping should be a tool that you can use to aid you in making key business decisions.


Once you do find a bookkeeper that you want to work with you need to clearly communicate your expectations. If you expect your books closed by the 10th of each month then let your bookkeeper know. If you need certain reports on a weekly basis then your bookkeeper needs to know that.


After you have clearly communicated your expectations on what you expect delivered, how you want it and when you want it then you need to hold your bookkeeper accountable to meet or exceed your expectations. If your bookkeeper is under delivering then you need to find a bookkeeper that can meet your needs. Don't let your books fall behind every year.


Valuable Tips:

  • Turn your bookkeeping system into a valuable tool. First, clean up your bookkeeping system and bring it current.
  • Next you need to figure out a way to find value in your business bookkeeping.
  • Communicate with your bookkeeper to let them know what is important to you. Customize your bookkeeping system to satisfy those needs.
  • Then hold your bookkeeper accountable to keeping your system current and use it to help you grow the business.

It isn't wrong of you to want a better bookkeeping system. In fact you should always be pushing your bookkeeping system to perform better than it currently does. Always ask your bookkeeper to raise the bar and build a better system.


5. Have an Exit Strategy

You should always have an exit strategy - even if you never plan to sell. An exit strategy sets your business up for success.


Sometimes an exit strategy involves a merger or restructuring. The intention of an exit is to have an overall valuation of your company.


It motivates you to keep your business organized and with an overall growth goal in place. This also shows you where your business could stand to improve. If something doesn't look good from a selling stand point, then it certainly isn't ideal from a growth perspective.


Develop an exit strategy whether you plan to sell or not. If sometime down the line, your business is at a place where selling looks like a good option, you will have all your ducks in a row and ready to go. It works with a small business growth planning concept and will keep you on a clear path for the year ahead.


Is your small business bookkeeping being handled the way you want?

Guidelines for Building a Small Business Budget

November 21, 2019

You know that you should be building a small business budget each year, but do you? Most people push bookkeeping to the back burner and the budget typically follows suit. Some businesses build a budget but then don't use it to guide their business. Your budget should be thought of as a roadmap to success for your small business. Many businesses don't build a budget because they are not even sure where to start. Here is a brief overview of how to build a budget for your small business.


Use Historical Data as a Guide

The first step in building a budget is analyzing your financial reports. If your bookkeeping is not updated then you have a problem. In order to build a budget you will need a proper bookkeeping system that is updated and accurate.


When looking at your financial data can you spot any trends? What do your sales growth rates look like and are they trending in a predictable manner? What about the expense side of your business? Do you see any trends or things that stick out? What you want to do is just look for trends and ask yourself some of these questions. Don't start building your budget yet, just start by analyzing the data.


Expense Analysis

The expense side of the budget is the only true thing you have complete control over. While you can influence sales you can't automatically increase them. You can make a decision to cut certain expenses and then make sure it gets done. Are there any new expenses that you are expecting or are there some going away? If so, make a note of those changes and what you are expecting to happen. You really want to look for red flags of expenses that you want to change or monitor. If something seems high then make a note of it.


Where do You Want to Be?

One critical question you need to ask yourself when building a budget is where do you want to be next year? How about 3 and 5 years out? I think one mistake that people make when building a budget is relying too much on forecasting. If you know you have a significant opportunity in your market that will result in a large sales increase, work that expectation into your budget. Your budget needs to be about desires as well as logic based on historical data.


Blend Logic and Desires

If you have followed the above process you are now ready to start working on building your actual budget. You now need to take your predictions based upon historical data analysis and blend it with the numbers you desire. If you know you are taking on a new expense or cutting one completely make sure to note that. I always aim for my budget to be logical but also aggressive. You don't want to make your budget simple to hit, but you also don't want to make it unattainable. Blend logic and your desires to come up with your budget.


Use Budget as a Tool

After you have gone through all of this trouble to develop a budget make sure to actually use the budget. In order to use your budget as a business tool you need to enter the budget in QuickBooks. So many business owners spend a lot of time and resources to develop a budget and then never even look at it again. The budget gets filed away and is never reviewed. It is important to enter your budget into QuickBooks so you can do budget vs actual comparisons throughout the year. I always recommend that you enter your budget into QuickBooks on a per month basis. I would recommend looking at budget vs actual numbers at least once per month if not more.


A Budget is a Guide

Another mistake I see business owners make is acting like the budget is the end all be all for the business. A budget is nothing more than a guide and it needs to be flexible. If there is a major change in your business that affects your budget then you need to note that change or adjust the budget. You may also face adverse changes in the law that will have a major effect on your budget. A budget is a guide and should keep you on track toward your goals. Things may come up that are out of your control and there is not much you can do about that. What you can do is monitor your actual results vs your expected results to look for glaring discrepancies. You can then make the necessary adjustments to get back on track.


Build your Budget Prior to Year-end

The last thing I wanted to mention is that you should build your budget prior to year-end. I would say you should start thinking about your budget in Q4 and aim to have it completed a few weeks before your new year starts. You should then enter it into your accounting system and hit the ground running towards your goals rather than trying to define what your goals are.

3 Unexpected Ways Outsourcing Your Bookkeeping Will Grow Your Business 

November 18, 2019

As a small business owner, you hear this question all the time: "How's business?"


A very typical response is: "Great, but I'm just so busy."


Most business owners are just busy being busy, but I wonder:


How many of them know how their business is actually doing?


Being busy and being profitable don't necessarily go hand-in-hand. Do you know if your business is growing? Do you have a financial plan in place to accommodate for that growth? Do you spend too much time on payroll and balancing your finances each month? Does year end tax planning give you heartburn? I will explain how an outsourced bookkeeping service can actually help you understand how your business is doing, reduce stress, and plan for growth.


#1 You'll Hit All the Financial Checklists

Let's start where we feel it most - stress. After all, why are you looking to outsource your bookkeeping? Probably because you've made mistakes on payroll; didn't plan accordingly for tax season; realized that you didn't make the profits you were hoping for this year; or any number of other financial woes.


Maybe you're not sure where you're planning on taking your business. Maybe you have an idea in mind but not sure how to implement it.


Here's how outsourcing your bookkeeping will knock down your stress levels a couple notches.

  • You will always be organized for taxes and always file on time
  • You will have up to date financial information for your business, which can aid you in making key business decisions
  • You will have great internal controls in place so that you don't have to worry about theft
  • You will have an additional set of eyes on your business financials to make sure they are accurate
  • You will not have to worry about receivables and payables, which many owners consider simple administrative tasks
  • You will never be playing catch up on your bookkeeping
  • You will never be late on bills, taxes etc
  • You won't have to deal with a stressful task you dislike

Your role as CEO doesn't have to include every aspect of business management. Successful CEOs know when and how to delegate tasks. Outsourcing your bookkeeping will take part of the workload off your shoulders and allow you to focus on running your business.


Remember: Time saved is money saved.


#2 You'll Have More Time to Plan for Growth

A good outsourced bookkeeping company is more than just a bookkeeper. They offer insight for successful financial planning.


When working with a financial advisor or outsourced bookkeeper, you can focus more on the big picture of what you want to accomplish with your business and less on the details of how to get it there.


Creating a vision statement for your business is an important step. How will you know how you are doing if you don't know what you are trying to accomplish?


This financial vision includes a long-term budget, short-term forecast, and exit strategy.


Create a Long-Term Budget

You should develop at least a few different budgets: a budget for the next 12 months and another for the next 3-5 years. The budget should remain unchanged throughout the year and should be re-evaluated at the end of each year.


Create a Short-Term Forecast

A short-term forecast is probably one of the most crucial tools we use to run our business. A forecast differs from a budget in that it changes throughout the year, where I like to keep a budget unchanged.


I prefer to create financial forecasts in shorter increments; typically 2-3 months out.


When I create a forecast for our business, I try to think about three things: What just happened? What do I think will happen? Why do I believe this?


That is a pretty over-simplified version of what I do when I create a forecast, but I like to keep it simple. If you have a solid bookkeeping system in place, then you should know your actual results.


You should have a decent handle on your sales pipeline and expenses. Then you just have to think about anything out of the ordinary and create a forecast.


The forecast tends to be more accurate than the budget because it is more short-term and easier to predict.


Have an Exit Strategy

How can an exit plan help you know how your business is doing? While an exit plan is a much larger piece of the strategic puzzle, it is an important one.


An exit plan allows you to stay focused on the much bigger picture. While a vision and a mission are critical to how business operates day in and day out, an exit plan can help bring clarity to the overall goal.


It is important to review your exit plan from time to time. I don't like to put a specific number on it, but I would say that 2-3 times per year is sufficient.


Reviewing your exit plan will help you stay on track with the big picture.


Even if you don’t plan on selling your business, there is a significant drop-off in stress levels when you know that it’s an option.


Having an outside company analyze your assets and value is essential to understanding the overall worth of your company.


Do you know if you're ready for an outsourced bookkeeper? Ask yourself this:

  • Do the daily actions of your business support your vision and mission?
  • Are you still on track to implement your exit plan when the time is right?


#3 You'll Be Able to Set Realistic Business Goals

Compare Financial Expectations and Actual Results

This last step is the most crucial piece to understanding how your business is doing. I also call this step measure and pivot as needed.


As your day-to-day business unfolds, you should be doing a comparison of your actual performance against your expected results. While the budget versus actual is a great way to measure your performance, the forecast versus actual is what I concern myself with the most.


Since the forecast is a more short-term expectation, it is typically more accurate. Therefore, when I measure against the forecast, I'm looking for smaller variances, if any (and hey, if sales are higher than I thought then great).


The forecast versus actual allows you to spot potential shortcomings earlier and make the necessary adjustments to stay on track.


Ready to Grow Your Business?

If you are missing any of the above items like a vision, exit plan, and a forecast you should develop those right away.


Are you keeping up with or exceeding your forecast? If not, can you explain why and are you OK with it? Do you still feel confident in where your business is going?


If you follow these steps you will be able to answer the question of "How's business?" with much more confidence because you will be basing your answer on data, not a feeling.


So, how's business? Want to give a better answer to that question?

'Must Do Now' Year-End Bookkeeping Checklist 

November 14, 2019

As we get closer and closer to year-end most businesses will begin thinking about taxes. One of the most hated words in the business world... taxes. By the time year-end passes and you actually start to think about your bookkeeping and taxes you are too late.


You need to attend to your bookkeeping before year-end and do some tax planning. Updating your bookkeeping and reviewing it prior to year-end is very important as you can actually do something about your tax situation before the turn of the calendar. Here is a must do now checklist for your year-end bookkeeping.


If you’ve been so preoccupied with running your business that year-end bookkeeping tasks have caught you off guard, don’t panic. Take a deep, calming breath and get ready to tackle those accounts with a plan for streamlining the process. Even if you're facing down the new year, use this checklist to help get you ready and implement a plan for next year.

  1. Reconcile Your Books
  2. Clean Up Your AR & AP
  3. Do an Asset Review
  4. Take Care of Your 1099's
  5. CPA Review
  6. Have a Tax Plan

#1 Reconcile Your Books

The best thing you can possibly do for your bookkeeping and taxes is to reconcile QuickBooks. A reconciled QuickBooks file that can be confirmed with a bank statement does a lot of positive things for your business.


A truly reconciled file tells your bookkeeper and tax preparer that everything is in the file; now we just need to make sure everything is in the right spot.


If you’re still using a common bank account for both your business and personal finances, you should probably make a mental note to halt that practice at some point during the new accounting year.


In the meantime, you’ll need to analyze all the unreconciled expenses that have flowed through your shared account to determine which were business-related, and which ones were personal.


Having your CPA handle tasks that should be done by your bookkeeper will be very costly. Also, if you hand your CPA a QuickBooks file that is not reconciled you are almost asking for a tax extension to be filed.


Reconciliation Checklist

Follow these steps to ensure that your final books are as accurate as possible. Start by making sure you reconcile ALL accounts, not just bank accounts. Reconcile all of these accounts:

  • Credit Cards
  • Loans
  • Lines of credit
  • Payroll liabilities
  • Bank accounts
  • Asset accounts

Once you’re satisfied that everything is in order, you should run a trial balance to ensure debits equal credits across your accounts. This is also a great way to check for abnormal account balances and potential posting errors.


Follow this up by making adjusting journal entries for any depreciation expenses or fixed asset purchases, and you should be ready to generate and review your company’s year-end financial statements.


#2 Clean Up Your Accounts Receivable and Accounts Payable

Maintaining clean accounts payable and receivable is something we always recommend. However, before year-end is a great time for a once over tune up of your accounts receivable and accounts payable.


Running your aging reports on both accounts receivable and payable may reveal some problems or maybe just some errors.


Common accounts receivable errors I see are not offsetting credits against old invoices. You want to try and collect your outstanding receivables balances before year-end and possibly write of the bad debt that you will never collect.


Looking over aged payables may reveal some old inaccurate balances.


Do some research on any suspicious balances and request statements from those vendors. Going into year-end with a firm handle on payables and receivables will definitely benefit you.


When it comes to cleaning up your end-of-year accounts, the best place to start is with source documents like receipts and invoices. Whether you work with physical files, or you’ve switched to a paperless system, you’ll still need to make sure all your records are accounted for.


Accounts Receivable Checklist

  • Go through your customer accounts to check that you’ve issued, logged, and stored invoice copies for all completed services, projects, and orders.
  • Separate out invoices that have yet to be collected on. This will help determine whether any of your outstanding receivables can be written off as bad debt.

Accounts Payable Checklist

  • Go through your supplier accounts and follow the same procedure as accounts receivable for your payable invoices.
  • Unearth any unpaid bills to ensure they get processed in the correct accounting period before you close out your year.

#3 Do an Asset Review

One thing that you should do is to take a peek through the details of your asset accounts. You want to be looking for any glaring errors that you mistakenly booked to an asset account.


If you are staring at a $30.69 charge in a fixed asset 'Equipment' account you most likely need to reclassify that small charge.


Asset Review Checklist

  • Look for any blatant asset errors and reclassify them to the correct account.

#4 Take Care of Your 1099's

Nothing is more frustrating and stressful than having a 1099 independent contractor mess in January. You already have enough on your plate in January and the last thing you need is another deadline. You want to be focusing on sales and growth to start the new year not 1099 compliance and taxes.


We tell our clients to stay on top of 1099's throughout the year rather than waiting until the deadline is looming.


Most businesses are aware that they should request a W-9 form from their vendors, but very few actually follow through and complete the task.


It is a lot easier to get a W-9 filled out from a vendor before you pay them, rather than 6 months down the road after the contract work has been completed.


I always tell clients to let their contractors know they can get paid as soon as they submit a filled out W-9 form; works every time.


Come January rather than scrambling to gather the information you will be hitting print and mailing 1099 forms out without any issues or stress.


1099 Year-End Checklist

  • Before year-end do a review of your contractors and make sure to input the 1099 information in QuickBooks.

#5 CPA Review Before Year-End Taxes

You have followed through the checklist thus far and all before year-end...good for you. However, don't stop reading because this is by far the most important step. You need to do a year-end tax review with your CPA to get an estimate on your tax liability.


Why would you go through all of this trouble of getting ready for your taxes without actually reviewing your estimated tax liability?


Many small business owners skip this step and I scold them over it. I think many owners dislike taxes so much that they are actually afraid to see what their potential tax liability is. You need to review your taxes with your CPA prior to year-end for two very important reasons.

  1. There are a lot more tax advantageous moves you can make prior to year-end as opposed to waiting until the calendar turns to a new tax year.
  2. If you are going to owe taxes wouldn't you rather have 4 months' notice rather than just a few weeks?

Most people hate getting hit with any unexpected bills and taxes should be treated no differently. If you do owe at least you will be prepared and you will not be surprised by your tax liability.


CPA Review Checklist

  • Perform all the above steps and submit your books to your CPA
  • Have your CPA generate a estimated tax liability

#6 Have a Tax Plan in Place

When you leave your bookkeeping duties for too long of a time it can also take a hefty investment of both time and money to help set them right.


Closing out your books at year-end is largely about ensuring every financial transaction related to your business operation has been accurately recorded.


Not only does this allow you to generate the necessary reports for understanding where your company stands financially, it gets you ready to file your annual tax return. Working with a proven accounting professional can help you accomplish both of those goals.


Among other things, timely accounting habits keep your business on track financially and legally by helping you avoid:

  • cash flow management issues,
  • costly interest charges, late fees, and overdraft penalties,
  • overlooked tax remittances and unnecessary audits,
  • missed tax deduction opportunities, and
  • the miscalculation of profits and costs that can lead to unhealthy business decisions

The easiest way to wrap up one fiscal year and get ready for the next is with a systematic approach to getting your books organized. Follow these simple steps and bring your CPA the cleanest set of books you ever had. One last thing, don't forget that tax review before year end...it's just that important.

Year-End Bookkeeping Checklist for the Small Business Owners 

November 11, 2019

It's that time of year again. Can you sense it? Year-end is just around the corner. The rivers are getting cold, the smell of fall is in the air and everyone is getting excited for winter (at least I am).


For many business owners Thanksgiving through Christmas is a time to take a laid back approach to their business. Taking that approach leaves you behind in your business and that is no way to start a new business year. Here is a year-end checklist for the small business owner.


There is a lot to do before year-end for the small business owner. Too many small business owners tend to kick back and relax as the year wraps up.


Follow this checklist to ensure you're on task for your year end planning.

  1. Review Bookkeeping
  2. Schedule a Tax Consult
  3. Develop a Budget & Forecast
  4. Shop Major Policies
  5. Long-Term Financial Planning
  6. Create an Exit Plan

1. Review Bookkeeping

  • Review your bookkeeping prior to year-end and clear up any outstanding issues.
  • Make sure that your QuickBooks file is completely up to date and reconciled.
  • Ensure that you are in compliance with subcontractors and 1099's. Make sure you have all the proper documentation.
  • Review your asset accounts to ensure nothing is booked to an asset account incorrectly.

2. Schedule a CPA Tax Consult

  • Schedule a tax consultation with their CPA prior to year-end.
  • Bring a QuickBooks file that is updated through November so you can resolve any questions you have and get a handle on your taxes.

First, if there are any tax advantageous moves that you can make you will have time to do so. Additionally if you are going to end up owing a large amount in taxes you will have sufficient notice to make a plan to pay that balance.


Nothing is worse than finding out you owe a lot of money in taxes with just a few weeks' notice.


I always recommend that you have a tax consultation in early December each year with your CPA.


3. Develop a Budget & Forecast

  • Develop a budget for your small business each year. I recommend building your budget towards the end of Q4 each year but definitely before the year closes out.
  • Enter your budget into QuickBooks and use it as a way to guide your business. Don't make the mistake of developing a budget and then tucking it in a file cabinet and never reviewing it again. You should be doing budget vs actual comparisons throughout the year to make sure you are staying on track.

4. Review Your Organization

  • After you have attended to your financial year-end tasks you should take a good look at your organization as a whole.
  • Take a step back from the details and look at your organizational chart from a far.
  • What are your strengths and weaknesses?
  • What will be your needs in the coming year from an organizational perspective?
  • What gaps or opportunities do you see in your organization chart?

Taking a step back and looking at your organizational chart is a great way to define needs, as well as refine your long-term vision.


5. Shop Major Policies

Prior to year-end is a great time to shop your major policies. I like to review my insurance policies with our agent to look for any gaps in coverage or possible ways to reduce our rates.

  • Look at comparisons with other merchant processing companies.
  • Shop and see if you can reduce your costs.
  • Review your health plan and shop with other carriers.

6. Long-term Budget & Forecast

  • Review and modify your long-term budget and forecast before year-end.
  • Develop a five-year budget & forecast. It's a mistake to never modify it. If you don't revisit your long-term budget and forecast each year then that five year forecast becomes a four, three or two year forecast.
  • Always look at the long-term financial plan for your business.

7. Modify Your Exit Plan

  • Simple, have an exit plan.

If you said "what exit plan?" then we already have a problem. Having an exit plan in place for your business is incredibly important. Without a plan for exiting your business how do you think it will ever happen? Additionally how will you know when the time is right?


Many small businesses don't develop an exit plan because they don't see the point of it. Having an exit plan in place is important and you should review and modify it annually as needed.


Are You Ready for Year End Bookkeeping?

As the year winds down it may seem like a time to celebrate and relax. While it is important to relax there are a lot of tasks you need to do as a business owner prior to year-end if you want to succeed in your small business. That way you hit each new business year running on track towards your goals.


In general, you should avoid year end bookkeeping and instead prepare for the year ahead. Don't wait until the end of the year to get your finances in order! Work with your internal bookkeeper or outsource your bookkeeping to ensure all your financial needs are taken care of before tax day!

Turn Your Bookkeeping Into A Kick-Ass Business Tool

November 7, 2019

Most business owners do not use bookkeeping as a business tool to make decisions. Most bookkeeping systems are not set up properly to be used as a tool and therefore most business owners don't see value in their bookkeeping system. At Gates Bookkeeping and Accounting, I like to work with small businesses that want to use their bookkeeping to help run their business. Some business owners know that the financial reports of their business are the roadmap to success and others need to be shown why that is. Taking your bookkeeping beyond data entry and filing taxes into a well-oiled machine that is full of information is why I am in business. Here is how to turn your bookkeeping system into a ass kicking business tool.


Fix Current System

Your bookkeeping will never be a tool until you fix your current bookkeeping system. There is a chance that your bookkeeping is current and accurate, but to be honest it is pretty rare. Most likely there are at least a few mistakes or areas that can be improved. The best thing you can do for your bookkeeping is to reconcile your QuickBooks accounts. This at least gives you a starting point that everything is entered, and then you just need to ensure that everything is in the correct bucket. Another thing you want to make sure of is that your bookkeeping file matches your most recent tax return. After the system is fixed and current we can begin on the next step of finding meaning in your bookkeeping.


Define Meaning

The next step in transforming your bookkeeping system into a tool is defining meaning. You can find meaning in your bookkeeping in all kinds of areas but you need to adjust a few things first.


Chart of accounts - The chart of accounts needs to be meaningful to you as a business owner. I see two major mistakes when it comes to the chart of accounts. First, many people tend to over complicate the chart of accounts, which leads to meaningless reporting. Keep your chart of accounts as simple as possible while still being meaningful to you. Second, I see many people worry more about tailoring the chart of accounts to their tax return rather than their business needs. Your CPA will have no problem filing your taxes as long as you keep your chart of accounts simple.


Business mindset - Next I tell people to stop worrying about bookkeeping and numbers and to talk about their business. What aspects of your business are most important to you? What are you currently not getting from your bookkeeping system that would help you? You need to think about what is important to you as a business owner and tailor your bookkeeping to those needs.


Reports - After you have a meaningful chart of accounts and a goal for what you want your bookkeeping to do, you need to find some reporting that helps fulfill those needs. I will talk about financial reporting in more depth later in this article.


Keep It Current

Now that you have taken the time to fix your bookkeeping system and build a kick ass one let's keep it that way. You need to keep your books current. Establish clear goals, expectations and deadlines with your bookkeeper. Bookkeeping is so easy to push to the back burner, especially if you are handling it yourself. However, once your bookkeeping system is churning out useful information I guarantee you will notice when it is not updated. As always make sure the books are reconciled on a consistent basis because that is the most important bookkeeping step you can take. Once you have your bookkeeping system firing on all cylinders it's time to really use it as a tool.


Financial Reporting

Financial reporting on your small business bookkeeping is what will turn your system into a tool. Most small businesses don't pay enough attention to their financial reports because their bookkeeping in not current and inaccurate. Once you have a bookkeeping system that is working correctly you can really take advantage of financial reporting. Express to your bookkeeper what information is really important to you. You should customize QuickBooks reports until you have a set of reports that are really meaningful to you. Make sure to memorize your reports so that you have easy access to them.


Another thing you should do is to create a budget in QuickBooks. This is really important for any business. Make sure that you create your budget prior to year-end so that you will have it as a tool for the upcoming year. In my mind November and early December is the ideal time to create a budget. By this time you should have a good understanding of how your year is going to end up and what your projections are for next year. Lastly, be sure to enter your budget into QuickBooks so that you can easily do budget vs actual comparisons throughout the year.


The last thing I want to mention is how to use QuickBooks as a cash flow tool. If you are entering transactions in QuickBooks prior to them clearing your bank you have an opportunity to really hone in on actual cash balances. If you print checks from QuickBooks and enter daily sales and deposits before they hit your bank you will know not only what your current cash balance is but where it is going. Cash flow is really important to all small businesses and having this good of a handle on it is powerful.


Bookkeeping System Adjustments

The last thing I want to talk about is the necessity of adjusting your bookkeeping system. Like most everything in your business your bookkeeping needs will change as your business grows. Be sure to audit your current bookkeeping system at least once a year to ensure that it is meeting your current needs. If you need other information from your bookkeeping system communicate that to your bookkeeper and hold them accountable for providing the information. You should constantly be pushing your bookkeeping system to provide you the most meaningful information possible.


Is your bookkeeping system a valuable business tool? Want to find out how to turn it into one?

I Need A Better Bookkeeper 

November 4, 2019

I hear it all the time from new prospects of our bookkeeping service: "I need a better bookkeeper."


This is the response I often hear after I ask them what they are currently doing for bookkeeping. Prospects then tell me that they had a bookkeeper but they made too many mistakes, aren't responsive enough, or some other reason. The bottom line is what they have isn't working and they just need a better bookkeeping solution.


I totally understand where they are at. If I told you I have had success with every client I have ever worked with I'd be lying (and so would any business owner). The reality is its not always the client's fault or the bookkeeping service's fault.


Some clients don't work well for certain service providers. That is, your bookkeeper's failure could be because you should never have been a client in the first place.


Mark Roberge who is a senior lecturer at Harvard Business School has some great insight on client churn. Mark said, "Customer retention problems are rooted in sales execution; the types of customers you bring on and the expectations you set for them."


Maybe your bookkeeper didn't understand your needs and set expectations they could not deliver on. Maybe you weren't a good fit for the service provider but they tried to sell to you anyway.


So do you need a better bookkeeper or just one that is a good fit for your needs?


If you feel like you need a better bookkeeper for your small business here are some things I want you to consider.


Understand why it hasn't worked

Let's not tiptoe around this one; is it you or your bookkeeper?


Meaning, are you holding up your end of the bargain in the bookkeeping relationship?


Are you delivering information to your bookkeeper in a timely manner or constantly pushing things to the back burner?


Do you respond to questions or only reach out when you need something?


Just realize that the relationship with your bookkeeping service provider is a two-way street. Sometimes the way that you want to operate doesn't work with every service out there.


Understand the value of bookkeeping

Do you look at bookkeeping as a valuable tool that can help you make better business decisions or a hindrance that is only a means to a tax return?


You would be hard-pressed to find a successful business owner that says the numbers don't matter.


Identify what you want

Do you want the lowest cost or a bookkeeping system that works? I mean, be honest both with yourself and your bookkeeper here; what exactly are you looking for?


There are plenty of bookkeeping service providers out there that focus or specialize in certain areas. Some bookkeeping service providers aim to offer the lowest price possible. Others specialize only in a specific industry.


Communicate clearly with your bookkeeper

One of the biggest challenges I have seen cause bookkeeping issues is communication.


What are your preferred means of communication? Email, text, phone, video conference or something else?


What specific deliverables do you have? By what date? How often?


When your bookkeeper requests information from you what is a reasonable amount of time to expect a response from you?


Make sure that you set clear expectations with your bookkeeper.


Hold yourself and your bookkeeper accountable

After you have established clear expectations with your bookkeeping service provider hold them and yourself accountable to them.


As I stated earlier, the relationship with your bookkeeper is a two-way street.


So what do you think? Do you need a better bookkeeper or just a better system with clear expectations?

Use the new IRS FITW Estimator now.

October 31, 2019

The Withholding Tax Estimator was just released to help taxpayers implement 2019 adjustments that will apply over as many months as possible—maybe the last chance to avoid huge, last-minute FITW bites. 


The Estimator will also help employees complete the far more complicated 2020 W-4. 


The new Estimator makes it easier for people to have the right FIT withheld. It even allows for users to target a specific desired refund amount, learn which tax credits and deductions they may qualify for, and automatically calculate the taxable amount of any Social Security benefits. 


The Estimator’s new progress tracker shows users where they stand, and there is new support for self-employment taxes related to income other than wages. 


How it works. For most people, the Estimator requires only 10-15 minutes. Users should have at hand their and their spouse’s last pay stub and last year’s tax return. 


They enter their basics and their family’s, including wages and other income, and withholding-to-date for the user’s and spouse’s wages. After clicking where instructed and entering the required numbers, a screen tells them if they will receive a refund or will owe FIT for 2019, makes withholding recommendations for each job and each spouse, and tells users what actions to take. 


Who should use the Estimator. Although it may help any employee, it is especially helpful to:

  • those who had a larger April 15 tax bill;
  • anyone who had a major life change (marriage, divorce, a new job, home purchase, birth or adoption);
  • former itemizers who now may take the standard deduction;
  • households with two working spouses; and employees with other sources of income or complex tax situations.

Update on the new 2020 W-4

October 28, 2019

Update on the new 2020 W-4. The near-final 2020 Form W-4—the IRS says there will be no further substantive changes—reveals that employees will have to input many more details than previously.

Changes include:

  • worksheets with titles—e.g., “Worksheet 1” and “Worksheet 2” are replaced by “Multiple Jobs Worksheet” and “Deductions Worksheet”;
  • a new marital status box for head of household;
  • a checkbox for optional higher withholding (there will be a separate tax table for this);
  • a full-year value of child, dependent and other tax credits;
  • a full-year amount of other (non-wage) income; and
  • a full-year amount of itemized deductions (over the standard deduction amount).

The IRS has also made available the second draft of IRS Pub. 15-T, Federal Income Tax Withholding Methods.


The 2020 W-4 v. prior W-4s. Current employees are not required to submit a new W-4 for 2020, or maybe for years. Thus, your firm may need to support its current withholding-allowance system for many years. The 2020 W-4 will be mandatory only for new hires and those who will adjust withholding or change other data on the W-4 after 2019.

Accounts Payable Practices That Actually Save Money 

October 24, 2019

Money moves in and out of every small business, so managing cash flow is essential. You may not be able to avoid the expense side of the cash flow equation, but following a solid accounts payable process will keep business costs under control and may even save you some money. Let’s look at a few proven ways to plug potential holes in your accounts payable practices.


Resist the Urge to Delay Bill Payments

A recent study by Sage found that 1 in 10 invoices across the globe are paid late, costing small and mid-sized businesses as much as $3 trillion annually! While it can sometimes be tempting to delay paying bills – especially when business is slow - this practice could cost your company more in the long run.

Many vendors maintain a strict policy of charging late fees and interest penalties. So rather than resolving cash flow issues, late payments often compound them. Mismanaging your payables can also damage your credit rating and threaten crucial supplier relations. Delinquent accounts may force sellers to:

  • demand payment upfront,
  • deny future order requests, and
  • forward unpaid accounts to a collection agency

Using a software system like QuickBooks allows your business to generate regular accounts payable aging summary reports. These summaries show you which bills are outstanding (and by how many days), and which invoices have yet to come due. Use these reports to keep your payment schedule organized and avoid the costs of late payments and lost credit privileges.


Don’t Use Early Payments as an Organizational Tool

Some business owners pay their invoices on receipt as a means to avoid losing or forgetting to pay them. It’s true that that early payment practices prevent late fees, but they can also lead to less than ideal circumstances should your business be hit with an unplanned expense.


The problem with many cash crunch emergencies is that they’re unexpected, so your cash flow strategy should include a contingency fund. But if you consistently dip into that fund to pay invoices early, emergency reserves may not be there when you need them.


To dodge the costs of having to borrow against a charge card or line of credit, set up your accounts payable system to pay bills when they’re due.


Not All Early Payments Are Created Equal …

Don’t confuse paying bills early for organizational reasons with the opportunity to reap a sales discount! One common early payment discount offered by some suppliers is 2/10, Net 30, which means that:

  • if you pay the relevant invoice within 10 days of issue, you can deduct 2% from the total amount owing, but
  • if you choose not to take advantage of the early payment incentive, the full invoice amount “Net of any discount” is due within 30 days

Let’s say you've received an invoice for $5,000. The payment terms are 2/10, Net 30 and the invoice is dated September 1. Your business can either pay the full $5,000 by October 1, or $4,900 by September 10 ($5,000 x 2% = $100 / $5,000 - $100 = $4,900).


Your cash flow situation will play a key role in any discount decisions you make. Can your business afford to make this payment 20 days in advance? Or are your cash reserves such at the moment that saving $100 won’t justify leaving your operation vulnerable to an unplanned expense?


Make Sure You Only Pay Once

Shelling out for business expenses can be painful enough the first time without mistakenly paying the same invoice twice. To help prevent this, get in the habit of making payment from original invoices only, rather than from a supplier’s statement of account.


Statements can be a useful tool for identifying which bills you’ve received and which payments you’ve made, but paying outstanding amounts directly from them:

  • prevents you from verifying order quantities and prices,
  • won’t provide a valid source document for any taxes charged, and
  • increases the chances of duplicating payment when the original invoice eventually arrives
Instead, request copies of missing invoices, enter them in your accounting system, and pay them accordingly.


Automated programs are typically designed to alert users when a duplicate invoice number is entered. So to further avoid multiple payments, make sure you enter an invoice number with every bill that you process. While most companies assign unique numbers to their invoices, you should have a logical and consistent policy for creating a number when one doesn’t exist.


One example would be to always use the first three letters of the vendor’s name, in conjunction with the date of the invoice. So a request for payment from ABC Company dated September 10, 2018 might get entered into your accounting system as ABC091018.

Business Valuation Basics Every Owner Should Know 

October 21, 2019

As a business owner, your company is probably one of - if not the - most valuable assets you own. But figuring out its true worth can be tricky. Whatever your reason for wanting to assess your company’s financial value, a formal business valuation is the best way to go. Let’s take a look at some valuation basics.


When You Might Need a Business Valuation

There are many reasons why you might need to set a fair price for your company, including the ones listed here:

  • Selling a business for divorce or estate tax purposes, or as part of your pre-planned exit strategy
  • Gifting shares of your company to your children
  • Establishing and managing an ESOP (Employee Stock Ownership Plan)
  • Merging your company with another organization
  • Pursuing a new business partner, shareholder, or financial investor

No matter the reason behind it, when the time is right for a business valuation, you should take steps to work with an experienced analyst.


Professional valuators are trained to assess the diverse factors that determine the worth of your company. Common designations in this field include Accredited Senior Appraiser, Certified Business Appraiser, and Certified Valuation Analyst.


How Does a Business Valuation Work?

In practice, business valuation is part research, part math, and part highly educated guess. There are several accepted business valuation methodologies to choose from. But a certain amount of professional judgement is also required to assign a fair dollar value to things like:

  • your company’s predicted financial performance,
  • any specialized knowledge or proprietary technology your business holds, and
  • its success potential in relation to economic conditions

The three main ways to conduct a business valuation are known as asset-based, income or earnings-based, and market value approaches.


Although earnings assessments are the most popular, part of an analyst’s job is determining which of these methods – alone or in combination – will yield the most representative value for your specific business.


The Asset-Based Method

The asset-based approach to business valuation is the most straightforward way to determine how much your company is worth. Because it typically results in the lowest figure of the three processes described here, it can be useful for setting a company’s base value.


Asset-based methods involve subtracting the value of an organization’s liabilities from the fair market value of its assets. This process is most commonly used to assess companies that are being liquidated, or that are continuing unchanged as a going concern. In each case, liabilities and assets may be weighed differently.


If you’re operating as a sole proprietor, you should know that asset-based business valuations can present a challenge. Some of your assets may be owned by you personally - and shared with your business - rather than be the property of your company alone (as in the case of a corporation). This can make assigning business-related value to such property difficult.


The Income or Earnings-Based Method

The income or earnings-based valuation method reflects the notion that your business’s true value lies in its ability to produce revenue. In a sense, this approach is all about measuring your company’s financial potential, and it relies on a complex framework of:

  • current income, expenses, and cash flow,
  • historical earnings performance,
  • unusual or one-time financial event adjustments, and
  • projected future costs and client base growth

In some cases, a percentage of business is lost when a company changes hands – especially if the firm was originally family or single owner-operated. If you’re a sole proprietor, special consideration must be given to predicting your company’s future worth with you out of the picture.


The Market Value Method

The market value method of business valuation is a comparative process, similar to what realtors use to establish property prices. A business appraiser will compare your company to others on the market that have recently sold. They’ll attempt to evaluate similarities and differences (revenue or net income is a good place to start), and will make appropriate value adjustments based on their findings.

The market value approach is really only useful when there are a sufficient number of comparable businesses to appraise. Some entrepreneurial ventures are so uncommon that they’re virtually one-of-a-kind. If your company also happens to be a sole proprietorship, it may be extra challenging to find public information about similar private business sales.

In most instances, the reason behind your business valuation, the evolving demand for your product or service, and general economic conditions will help drive the assessment approach. Business valuations are clearly complicated affairs. So while the upfront cost may seem steep, it’s worth putting your financial future in the reliable hands of an appraisal expert.

4 Simple Steps To Clean Up Your Business Bookkeeping Mess 

October 17, 2019

I am often contacted by businesses that are in need of a massive business bookkeeping clean up. Most prospects will tell me that their bookkeeping product is up to date and very clean. However, that is rarely the case. If you have found yourself in the middle of a bookkeeping nightmare take these four simple steps to clean up your mess.


1. Get serious about it

The first step is to identify that you have a business bookkeeping mess and that you are willing to do whatever it takes to get things cleaned up and caught up. Nothing is more frustrating than working with someone that clearly is not serious about getting the job done.


2. Hire a professional

It is important to work with a bookkeeper or bookkeeping service that actually knows what they are doing. If you are using QuickBooks you might consider hiring a Certified QuickBooks ProAdvisor. Also, check to see if you can find a Certified Bookkeeper to work with. Lastly, it is always a good idea to tap your business network to see who your colleagues use for their bookkeeping needs.


3. Follow Your Bookkeeper's instructions

When you bookkeeper asks for something you should provide it. It is really frustrating to continually ask for the same information. Having your statements available online is probably the best thing you can do. Make sure you have access to ALL your statements including bank accounts, credit cards, lines of credit and payroll reports.


4. Stay on top of it

Once you have found an individual or business bookkeeping service to clean up your mess it is important to stay on top of your bookkeeping. You don't want to spend all your efforts on cleaning up your bookkeeping system if you don't intend to maintain your bookkeeping on an ongoing basis.  

Do You Have a Bad Bookkeeper?

October 14, 2019

There are a lot of great bookkeepers out there, but there are also a lot of really bad bookkeepers. I have a lot of different sources of obtaining new bookkeeping clients. One of them is through bad bookkeepers. More often than not when a new prospect contacts me it is because they are not happy with their current bookkeeper or bookkeeping service. Is your bookkeeper good at what they do? Here is how to find out.


Can your bookkeeper answer your questions and provide you with the information you need to make key business decisions?

When you ask your bookkeeper a question do they stare at you blankly? If they don't know the information off the top of their head can they extract it quickly from QuickBooks or your accounting software? If you are constantly waiting on reports or answers to your financial questions then you may have a bad bookkeeper.


Is your bookkeeping system getting updated in a timely manner?

How often is your bookkeeping being updated? Can you see your cash flow situation? Not only your cash on hand but where your cash flow situation will be a week from now. Your bank account should be being reconciled on a weekly or monthly basis at minimum. It is really the only way to know you are looking at accurate financials.


Are you constantly finding mistakes in your bookkeeping?

If you ask questions of your bookkeeper that lead to changes due to mistakes on their end then you might need to change things up. Another way to find out if your bookkeeping has a lot of mistakes is to ask your CPA. If your CPA is not getting the bookkeeping in an organized manner or has to make a lot of changes then that is probably due to bookkeeping mistakes.


Then again is it your fault?

You are pinning all the blame on your bookkeeper but are you at fault for some of the bookkeeping issues? Does your bookkeeper constantly have to ask you for information? Do they have to ask more than once? Have you set your bookkeeping expectations from the beginning? Are you communicating effectively with your bookkeeper?


It's true there are both good and bad bookkeepers out there. Some may be wonderful bookkeepers but just not a good fit for you or your business. Some people just don't work well together. In general if you are not happy with your bookkeeper or the results they are delivering maybe its time to change things up.

Try One of These Popular Management Tools to Keep Business Projects Under Control 

October 10, 2019

Tussling with time management? Struggling to move that new project forward? You’re not alone. A recent study listed managing project costs, hitting deadlines, and sharing information across teams as the biggest hurdles facing project managers in 2018.


Handling tasks and deadlines successfully is a perpetual challenge for the small business owner. Fortunately, technology has equipped us with a wide range of popular management tools to help keep business projects under control.


Organization: The Key to Better Management

Organization is essential when you manage a business. But key organizational skills go beyond just keeping meetings blocked off on your calendar. They include the ability to assess your company’s future needs, so you can plan accordingly and prioritize the use of resources like working capital and personnel.


As a result, managing an organized business means paying close attention to scheduling, time management, prioritization, and project planning. And while successful project management is all about setting and meeting incremental goals that will move your business forward, you’ll be more likely to reach those objectives when you leverage tools specifically designed to:

  • coordinate tasks,
  • organize schedules,
  • and plan and manage workflows

It doesn’t matter if you work better with lists, or prefer a more visual platform, there’s an internet-based management tool that’s right for your business.

We’ll look at a handful of the most popular applications below. But before we get started, you may want to check out a tracking program called RescueTime to gain a better understanding of your daily work habits - and where you might benefit from improved focus and productivity.


Google Calendar

Google Calendar is a convenient way to ease yourself into the use of web-based support tools. As a time-management and scheduling calendar service, Google Calendar lets you create and edit daily business events. It’s free to use, and it works particularly well in owner-operated service industries for managing meeting times and keeping track of recurring appointments. Google Calendar also allows you to sync between your phone and your laptop, and to sync the calendars of multiple team members.


Trello

Trello is an internet-based project management app that’s especially popular with entrepreneurs who aren’t experienced project managers. It’s a highly visual program that’s easy to use - and many people find it an enjoyable way to organize and prioritize planning. Trello lends itself to team collaboration. Just create a project board, add some virtual activity cards and checklists, and you’ll be well on your way to assigning tasks, managing due dates, and viewing the status of your project at any given time.


Todoist

If you’re more of a list person, Todoist is a great way to get all those pending tasks out of your head and onto a list – anywhere, anytime, whether you’re online or off. The creators of Todoist understand that an uncluttered mind is a creative and productive mind. So their app is intended to let you capture to-do items as they arise, set deadlines and due dates, and review your workday or week in advance - checking off tasks as you go.


Evernote

If you’re on the move often and prefer to work from your phone, Evernote is a mobile app specifically designed to take notes, create to-do lists, and organize reminders. When you use Evernote, you’ll never have to worry about losing that great new idea again. In addition to helping you seize moments of inspiration with voice, notes, and pictures, the app lets you track tasks and deadlines, keep records, and manage your projects both online and off.


Basecamp

Constantly searching for your files and emails? Basecamp software was created for every business owner who knows what it’s like to feel scattered. By giving you and your team a dedicated place for chat threads, word documents, and group email chains, Basecamp promotes efficiency and task accountability, while it helps prevent missing information, communication gaps, and a lot of extraneous work.


Mailchimp

Managing your mailing lists and newsletter subscribers is easier when you use a program like Mailchimp. But better organization is only part of the story. Mailchimp is also a business favorite for creating and running successful marketing campaigns. Built for growing ventures, Mailchimp offers easy-to-use newsletter design templates, email performance reports, and the capacity to connect with more than 300 other apps and services.


No company can succeed long-term when deadlines are missed and time is mismanaged. Why not take advantage of today’s vast collection of management tools to run a more profitable business?

Top Reasons to Stop Using a Personal Bank Account to Run Your Business

October 7, 2019

Regardless of the size of your company, deciding to open a business bank account shouldn’t be a question of if, but a matter of when. In an ideal bookkeeping world, every company would open a business account before conducting their first commercial transaction. But if you’ve yet to separate your company’s payables and receivables from your personal bank account, it’s never too late to make that happen.


A survey conducted by TD Bank revealed that 27% of small business owners use the same checking account for their business dealings as they do for their personal finances. We get it. Consolidating all of your income and expenses in one account is convenient – especially if you’re a new or part-time entrepreneur, or are operating as a sole proprietor. But that convenience comes with a price.


Commingling funds is never a good idea from an accounting perspective because it can be all too easy to dip into one source of income to support the other. Neglecting to keep your personal finances separate from your business funds not only creates potential tax and liability problems for your organization, it can cause you to miss out on some important benefits as well.


Here are some of the top reasons why you should stop using a personal bank account to run your business.


Realistic Cash Flow Information

When your personal and business income and expenses are mixed together in a single bank account, it can be difficult to manage and forecast your cash flow situation. Having a clear understanding of the cash that’s flowing in and out of your business is critical for preventing setbacks like unexpected cash crunches.


That same financial clarity is also important any time your business needs to:

  • apply for a loan,
  • obtain new credit, or
  • drum up investment funds

Making it easy for prospective lenders to evaluate your company’s cash flow position and financial health is more likely to lead to a positive outcome - whether you’re dealing with a banking institution or a new business supplier.


Low-Hassle Bookkeeping

Most bookkeeping operations are an intricate web of deposits, payments, and transfers. And since many business owners put off their bookkeeping duties until the end of the year, confusing personal and business transactions is common when you use a shared bank account.


If you’ve ever had to sift through weeks of receipts - or analyze a year’s worth of bank statements, line by line - you’ll know how time-consuming a task it can be. Maintaining separate accounts is the best way to avoid having to figure out whether that 6-month-old cab receipt was a personal or business expense.


Accurate Tax Returns That Will Benefit Your Business

Beyond the time-saving benefits you’ll gain from keeping personal and business dealings autonomous, there are some distinct financial advantages attached to filing an accurate tax return at the end of the year.


The ability to correctly designate payments or deposits as business-related, for example, makes it easier to identify tax deductions and credits you may be entitled to claim.


On the flip-side, commingling personal and business banking transactions can lead to messy, inaccurate accounting records that result in penalties and fines when your organization is audited. Many such tax-related charges are subject to compound interest, as well – an important consideration when your company is hit with an expense it wasn’t prepared for.


Fewer and More Favorable Tax Audits

Speaking of tax audits, you’ll be far more likely to breeze right through them - or avoid them altogether - if you invest in a dedicated business bookkeeping system. Although the government doesn’t require that you maintain a separate bank account for your small or solopreneur business, there are at least three good reasons why you should:

  1. Because a sole proprietor’s personal and business finances are so closely linked (they’re actually reported together at tax time), these types of operations are more likely to be audited.
  2. The IRS requires that income and expense records be accurate, complete, and permanent. The best way to produce a clear audit trail is with separate business bank and financial account statements.
  3. Special tax rules apply when individuals claim expense deductions related to hobby-driven, rather than business income – just one more reason why using a personal account for commercial activity can prompt the IRS to take a closer look at your books. And if you are audited, the onus will be on you to prove you’re running a bona fide business.

Getting help from an accounting professional to permanently separate your personal finances from your business activities may be one of the best decisions you’ll ever make for your future success. Not only will it simplify your record keeping, you’ll be laying the groundwork for long-term business growth.

How to Manage Your Cost of Goods Sold: Small Business Bookkeeping Tips 

October 3, 2019

An important aspect of small business growth planning is understanding and managing your cost of goods sold. Whether your business sells products or services, it’s important to know “what is the cost of goods sold?” for each item or service you sell. This number provides the basic information you need to promote small business growth.


Understanding Cost of Goods Sold Can help your business make sound financial decisions. If growing your small business is your priority, then make certain you have calculated your expenses and all of your costs.

  1. What is Cost of Goods Sold?
  2. Cost of Goods Sold Calculation
  3. Operating Expenses vs. Cost of Goods Sold
  4. Expenses vs. Costs
  5. Direct Expenses vs. Indirect Expenses
  6. Tracking Your OE & COGS
  7. Hire an Outsourced Bookkeeper

What Is Cost of Goods Sold?

Cost of Goods Sold or COGS puts a number on your actual costs of goods and services. This number is associated with both physical items as well as services offered by your staff.


Even when you’re not selling, what you sell is costing you money. When you learn how to determine cost of goods sold for your small business, you get this exact dollar figure.


COGS appears on your profit and loss statement and helps you calculate net income. It is also the largest expense at many companies, so learning to manage COGS can help you with revenues, business growth planning, and with just about every financial decision at your company.


Knowing your Cost of Goods Sold can help you make key decisions about your business.


For example, if you want to seek financing interest can increase your COGS. Knowing what the current costs are can help you determine whether you can afford another loan.


If you are pricing a product or considering price increases, COGS can help you understand how much you need to charge to make a profit.


Calculating Cost of Good Sold is a strategic part of small business planning along with working directly with a bookkeeper and business growth advisor.


How to Calculate COGS for a Small Business

You don’t need to be a mathematician to calculate COGS. The calculation for COGS is easy:


starting inventory + purchases of inventory - end inventory


For example, say you have 100 writing journals in your shop and you create 100 more. You have an end inventory of 150. This means the total number of journals you have sold is 50.


Once you know that, you can determine how much it costs to create each journal, so you can determine COGS. There are three ways of doing this:

  1. First In, First Out (FIFO): In this evaluation, you assume the latest products in your inventory are the ones selling or being put out for sale first.
  2. Last In, First Out (LIFO): In this evaluation, you assume the older items sold first. This can be especially true with perishable goods.
  3. Average Costs: This determines an average price per unit. To calculate this, you add purchases in dollars and the beginning inventory. You divide the number you get by purchases in units plus beginning inventory. This gives you the average cost per unit. Once you have this number, subtract the number of units you have sold to get COGS.

Operating Expenses vs. Cost of Goods Sold

As one of the more common bookkeeping questions we hear, the difference between Operating Expenses (OE) and Cost of Goods Sold (COGS) is a fairly straightforward one, but it plays a significant role when it comes to allocating and analyzing the resources you spend to make your business profitable.


While both OE and COGS are considered expense accounts from a bookkeeping point of view, they’re separated on the income statement to differentiate between money that’s spent to keep your company running, and money that’s associated with providing your company’s product or service.


In the case of a service industry, the term Cost of Sales (COS) is often used rather than Cost of Goods Sold since there are no physical goods involved, but for the purposes of this discussion, we’ll be using the generic term COGS.


What's The Difference?

Understanding the difference between regular operating expenses and COGS begins with recognizing two important facts:

  1. The terms "expense" and "cost" don’t always mean the same thing.
  2. All expenses are not created equal.

Expenses vs. Costs

An expense is a cost of doing business, but a cost is not necessarily always an expense. The easiest way to illustrate the difference between these expenses and costs is to look at a simple example.


Example of Expenses vs. Costs

Let’s say your company sells souvenir widgets to passing tourists from a truck on the street. You have a pretty good idea of how many widgets you usually sell in a day, but you never want to risk a lost sale, so you always buy a few extras when you purchase your supplies each morning.


If you spend $500 on today’s batch of widgets, but you only end up selling $400 worth of them:

  • the cost of your widgets is $500;
  • $400 of that amount constitutes an expense; and
  • the remaining $100 constitutes an asset.

From an accounting point of view, an expense is something that’s used up, or consumed, during the normal course of your business operations.


The $100 worth of widgets that you didn’t sell today, while still representing a cost to your business, won’t become an actual expense until they’re sold on some other day.


Don’t get too hung up on the name. Any business cost directly related to the sale of your product or service becomes an expense once it’s been allocated to a sales transaction, even though it’s still referred to as a cost of goods sold.


Direct Expenses vs. Indirect Expenses

Every business has operating expenses, but whether or not those expenses can be classified as COGS depends on whether or not they’re directly related to the sale of a product or service. The terms direct and indirect are often used to differentiate between money that’s spent to:

  • fund the purchase or manufacturing costs of goods or services being sold – such as raw materials or inventory, packaging, sales or manufacturing labor, or shipping (direct);
  • keep a business running – such as rent, insurance, utilities, or administrative wages (indirect).

One way to figure out which is which when it comes direct and indirect expenditures is to ask:


Would this still be considered an expense even if a sale had not occurred?


If the answer is no, as it would be for the purchase cost of our vendor’s widgets, then they probably fall into the direct, or COGS category.


If the answer is yes, as it would be for the insurance on our widget-vendor’s truck, then they’re most likely an indirect operating expense.


Tracking Your OE and COGS

So, where does all of this land us when it comes to managing our books?


Outsourcing your small business bookkeeping allows you to let someone else worry about the answer to that question.


But for the sake of staying in the loop where your business accounts are concerned, the basic entries would look like this:

  • When you incur an indirect expense, such as rent or insurance, your bookkeeping entry would debit the appropriate expense account and credit accounts payable.
  • When you incur a direct cost, such as inventory, your entry would debit the appropriate asset account and credit accounts payable.
  • When inventory is subsequently sold, it becomes an expense, so your entry would credit the asset account and debit its correlating COGS account for the same amount.

Determining COGS can help you manage your business and finances more effectively.

There’s A New W-4 Form for 2020. Here’s What You Need to Know. 

September 30, 2019

In August, the Internal Revenue Service issued a major revision to the 2020 W-4 form. By releasing the nearly-finalized version now, the IRS hopes it will give employers and payroll processors extra time to learn about it and update their systems for next year. Here’s what you need to know.


Background on W-4s

The W-4 is an IRS form that employees complete so employers know how much money to withhold from their paychecks for federal taxes. The form calculates “allowances.” The more allowances your employees claim, the less you can withhold from their paycheck.


Why the change?

The change follows the Tax Cuts and Jobs Act, which eliminated many traditional exemptions and deductions. As a result, you may have ended up owing taxes this year because you didn’t have enough money withheld from your paychecks last year. The revised form is supposed to help prevent that kind of miscalculation.


When does the new form take effect?

December 31, 2019.


How does it work?

The new form replaces complex worksheets with more straightforward questions. This should make it simpler for employees to calculate a more accurate withholding.


Are all current employees required to submit a new Form W-4?

No. Employees who submitted Form W-4 in any year before 2020 are not required to submit a new form because of the redesign.


Who should use the new form?

Your new 2020 employees, and any current employee who wants to adjust their current withholdings.


Otherwise, employers should continue to withhold based on the information from an employee’s most recently submitted Form W-4.


Should we encourage employees to review their current withholdings?

Yes. Think of it as a “paycheck checkup.” The IRS launched a new Tax Withholding Estimator. It is supposed to make it easier to calculate an amount to withhold that won’t surprise you at tax time. I recommend that your employees use this tool to help them determine if they should make adjustments to their current withholdings, and complete the new W-4 form.


With this change, you may have questions. “How do employees correctly complete the form?” and “Will the new form impact my current payroll software/systems?” are two questions we expect many of you will ask.


If I can be of service, please don’t hesitate to reach out to me about these or any other questions related to the new W-4.

How to Organize Your Filing System for Improved Efficiency 

September 26, 2019

The goal of organizing your company’s digital filing system is to be able to find what you need, when you need it – even if it’s months or years from today. 


Whether you store files locally (on office desktops, laptops, or mobile devices), in the cloud, or with the help of a dedicated company server, good file management practices will save you time, money, and endless frustration.


Has your business ever experienced one of these situations?

  • A customer or supplier calls to discuss their account, but you can’t seem to lay your hands on the specific invoice or sales document they’re calling about.
  • One of your employees is off sick and unavailable – or worse, has left your employ permanently – and no one can find their project files for this afternoon’s client meeting.
  • It’s year-end again, and you’re spending more time tracking down account documents than you are running your business. Last year, your company paid the price for its disorganized filing system with missed tax deductions and a costly tax audit.

If any of this sounds familiar, you’re not alone. A recent study of 18,000 business leaders revealed more than half were losing the equivalent of six working hours every week as a result of disorganization. The lack of an orderly filing system can negatively impact your business’s reputation, growth potential, and bottom line.


Electronic Filing System Basics

All you really need to create a more efficient filing system is an organized approach to using these basic filing components. Start by picking a storage system (local or cloud-based, for example) – or a combination of systems, if that works best for your business – and drill down from there. The key is to be consistent in your filing and maintenance habits.


Root Folders

Root folders are so-named for a reason. By providing a common base location for all business documents, they serve as ground zero for your filing system. The default root folder for individuals using Windows is the My Documents folder. But in a shared work environment, you’re better off using Shared Documents folders as your root storage location.


Main Folders & Sub-Folders

Depending on your business, the main folders inside your root folders might include Customers, Suppliers, and so on. But within those main folders, you should nest as many levels of sub-folders as you need to stay organized. Just make sure you use plain language to name all your folders, regardless of their location.


Under the main Customers folder, for example, you might have a folder named “Cathy Customer” that in turn contains a sub-folder named “Invoices”, that houses additional sub-folders labeled by individual year. The point is that anyone with access to your filing system should be able to understand what each folder contains, without having to open it.


Files

Part of your organizational goal should be to have every file your business creates stored in an appropriate folder. The other part should be to assign descriptive names to every document. The more specific your file names are, the less time you’ll spend opening and closing them to find what you need.


If, for example, the document you’ve just created is an email outlining the new terms you’ve agreed to with one of your vendors, don’t just name the file “Supplier Sam Email”. It’s unlikely you’ll ever remember what that particular email was about unless you spend time opening and reading it. Instead, qualify the file description with a name like “Supplier Sam Email New Terms Jan 15 2019” – or 01152019, if you prefer.


It’s also important to remember that, if your employees share documents over portable devices or email, the file paths will be missing. Since the recipient can’t see that the file you’ve just shared normally resides in the 2018 Customer Invoices sub-folder, implementing a policy to always name similar documents something like “Cathy Customer Invoice July 31 2018” when they’re created will save everyone time.


Keeping Your Digital Filing System Intact

Once your files have been organized for efficiency, make sure you keep them that way by intermittently weeding out old or inactive documents. Permanently deleting older files isn’t necessarily a good idea - even if you’re certain you no longer need them. Instead, consider moving them to a new folder labeled “Closed” or “Inactive”. If you’re using a local storage system, you can get old files out of your way by moving them to a separate hard drive.


Remember, the best time to file any document is when you create it, so get in the habit of naming and storing documents the right way, the first time. If you’re in a hurry - or are unsure of where a certain file is eventually going to live - you should at least make a point of saving it to your (hopefully uncluttered) desktop, where you’ll be more likely to see and deal with it properly later on.

Restaurant Bookkeeping 101 - 5 Step Simple Guide

September 23, 2019

Long hours, high overhead, wasted ingredients, and difficulty making profits are some of the barriers to success for restaurant owners.


Yet, for those who love the business or who dream of having a place where everyone knows your name, there’s no other opportunity that comes close.


An often neglected aspect of restaurant management is bookkeeping. 

Unfortunately, once you are behind on your restaurant accounting, it is difficult to get caught up.


The profit margins in the restaurant industry are too tight to let your bookkeeping slip. If you aren't watching your financials closely it may be too late to fix problems by the time you catch them.


This guide will help you understand the basics of what a trained accountant will help with as you develop a reporting and growth plan.


Effective restaurant bookkeeping starts with you. Whether you’re running the accounting services yourself or outsourcing your restaurant accounting, staying on top of the day-to-day bookkeeping is essential to stay ahead of your competition and turn a profit.


How do you handle bookkeeping for a restaurant? 5 Easy Steps!

  1. 1. Record Sales
  2. 2. Set Up Accounts Payable
  3. 3. Outsource your payroll to a professional payroll service.
  4. 4. Reconcile all accounts.
  5. 5. Analyze financial reports and restaurant financial ratios.

1. Record Sales Through Your POS Daily

One of the first items you will have to figure out is how to properly record your sales.


Many find using QuickBooks for restaurants is an effective recording system.


Record Your Sales Entries Per Day

Record a separate daily sales entry for each day (not monthly or weekly). With this method, your are mimicking how the cash and credit card deposits hit the restaurant's bank.


Most restaurants accept credit cards and settle the batch on a daily basis. This will result in a credit card deposit or deposits hitting your bank account separately for each batch.


You need to analyze how funds are hitting your bank and set up your restaurant bookkeeping system to mirror that activity.


Generate a Sales Report

In order to record the daily sales you will need to generate some sort of report that summarizes your sales.


Most restaurant POS systems will have a daily sales summary built into them. If you need to customize the report to get more detailed information you will need to work through the customization with your POS system.


Create a Daily Sales Journal

Once you have a sales summary you should set up a daily sales journal entry and create a memorized transaction in QuickBooks.


2. Handling Accounts Payable

The next step of your restaurant bookkeeping process should be to set up accounts payable. Keeping your vendors happy will be important if you want them to continue to do business with you.

  • To start, learn how to enter bills and pay bills in QuickBooks; both are easy tasks to accomplish.
  • Enter your bills 1-2 times per week and pay them once per week.
  • If you are cutting checks for your bills you want to make sure to print checks from QuickBooks. This will automatically feed the payment information into your QuickBooks file, thus reducing unnecessary data entry.
  • Another option is to pay your bills with online bill payment by linking your bank account to QuickBooks and signing up for online bill pay.

Pro Tip: Another part of your accounts payable will be setting up a credit card in QuickBooks. I have seen many users set up credit cards incorrectly in QuickBooks. A credit card should not be set up as an expense type account; it should be set up as a credit card type. Your expenses are recognized as you enter credit card charges. Setting up a credit card with the correct type will also allow you to reconcile the account, which is very important.


3. Payroll

As a business owner, you are at major risk by doing your own payroll. If you incorrectly file your payroll taxes or file them late, the penalties and interest you will be assessed can be quite large. You are held at a high level of liability if you do not outsource your payroll to an accounting firm.


Outsourcing your payroll is surprisingly affordable and a necessary option to ensure consistent and reliable paychecks and accounting.


Pro Tip: Look for a payroll company that is very reputable. Require the payroll data have the capabilities to be imported into QuickBooks and all reports and paychecks to be sent digitally.


4. Reconciliation

Reconciling QuickBooks accounts is the single most important piece of the entire bookkeeping process.


Reconciling your accounts is the only way to know that you have recorded all of your financial transactions. You need to reconcile all of your accounts not just your bank accounts. You should reconcile bank accounts, credit cards, loans, lines of credit and payroll liabilities. Any account that gets a statement with a beginning and ending balance can be reconciled. Account reconciliation ensures that you are looking at accurate financial reports.


5. Financial Reporting

If you are not using financial reporting for your restaurant, then you are running your business blind. With such tight profit margins in the restaurant industry it is important to analyze your financial reports on a regular basis.

Restaurants should be looking at sales vs. cost of goods sold ratios as well as labor ratios.


Another ratio many restaurants should consider is the prime cost, which aims to keep cost of food + beverage + labor at roughly 60% to 65% of your total sales.


Calculating Costs

Cost of Goods Sold

“Cost of goods sold” refers to the products you buy that make up your product. And in the restaurant business, it’s no secret that, in order to make food, you’ll have to buy ingredients.


If you’re opening a franchise restaurant business, such as Pizza Hut or TGI Friday’s, you’ll source your food directly from suppliers as instructed by the home office. But if you’re striking out on your own, you’ll be responsible for buying ingredients, possibly every day.


According to Chron.com, restaurants typically try to keep the cost of food to about 33 percent of their total sales.


Beverages are another expense, but the good news is that liquor is a great way to boost your profit margin. Chances are you’ve noticed this already if you’ve ordered a bottle of wine. The same bottle that costs $15 in your local liquor store could cost $30 or $45 when you’re out.


Cost of Labor

Labor expenses depend on your restaurant. Will your wait staff work for tips, or will you add gratuities to every bill? Will you furnish uniforms, or provide an allowance?


Waiters and waitresses that work for tips typically earn smaller hourly wages than those who don’t, but you’ll also need to pay for kitchen staff, hosts, valets, cleaners and other essential personnel.


Regardless of your choices, you’ll still need to pay unemployment taxes. And if you hire full-time wait staff, you may also need to furnish benefits. Many restaurants rely on part-time or seasonal employees to avoid this expense. Once you can anticipate your busy times, you can schedule your staff members accordingly.


Cost of Occupancy and Equipment

Unless you’re lucky enough to own space and your own equipment outright, you’ll need to pay for your infrastructure. That could be rent, or a mortgage and property taxes.


Utilities, cooking and cooling equipment, insurance and signage are common expenses, but you’ll also need to consider maintenance costs.


Remember, servicing your commercial ovens and refrigerators will probably cost more than what you pay for your Frigidaire at home.


Cost of Marketing and Administration

Lastly, you’ll want to get the word out that you’re open for business. That may include newspaper ads and billboards, in addition to social media.


Social media, at least, is free — and you’ll have direct access to the customer marketplace you want to serve. Offer promotions and coupons to get customers in the door.


You’ll want to pay yourself, of course, plus any contractors you need to help with necessities, such as bookkeeping. You’ll be plenty busy managing day-to-day operations, so consider outsourcing payroll, payables and other functions to a firm that can let you focus on making your business a success.


Looking at profit and loss comparisons to previous periods and years will also give you some insight as to how things are going financially.


Restaurant financial reporting can be the difference between success and failure.


Should I Outsource My Restaurant Bookkeeping?

As they say in the business industry, leverage your strengthens and outsource your weaknesses.


Learning to delegate tasks is a necessary step in becoming an effective manager.

As a business owner, it can be tempting to take on all of the roles; however, outsourcing your restaurant accounting services will take the pressure and liability off of you and allow you to focus on the growth and management of your restaurant. Are you ready? Get started by scheduling a financial consultation of your business.


There are many other aspects that go into your restaurant bookkeeping like restaurant POS selection, inventory controls, controlling theft and handling cash. However, the 5 simple steps above will put down the foundation for a solid bookkeeping system. As you grow you will have to continually modify your bookkeeping system to meet your needs.


Is your restaurant bookkeeping system dialed in?

What is your biggest bookkeeping challenge?

How to Manage Your Petty Cash Fund

September 19, 2019

There are some business purchases – think coffee runs, staff birthday cards, and one-off postage costs for example – where it’s impractical to pay by credit card or check. As a matter of fact, it was smaller business expenditures like these that first gave rise to the term petty cash! And they’re still the reason why most companies find it useful to keep funds on hand for minor, last-minute, or cash-only expenses.


But just because the dollar amounts flowing through your petty cash fund are typically minimal, that doesn’t make it any less important to manage them properly. Tracking petty cash transactions is part of an efficient bookkeeping system. Especially when it comes to maintaining accurate journal entries, keeping personal purchases separate from business, and capturing every possible tax-deductible expense.


Why Petty Cash is Important

Some business strategists have begun to question the need for a physical petty cash fund. After all, secure and streamlined purchasing alternatives like mobile apps, digital wallets, and even prepaid debit cards are making the practice of paying by cash obsolete.


Making it easier to spend, however, isn’t always a good idea when it comes to running a business. And keeping a certain amount of money on hand in the form of petty cash still offers some valuable benefits:

  • It limits discretionary spending, and can help to prevent a lot of smaller purchases from adding up to one larger annual expense,
  • it makes cash available to employees for certain authorized expenditures without the need to process time-consuming expense reports,
  • it reduces the likelihood that owners or managers will pay for purchases out of their own pockets, then forget to allocate those purchases as company expenses,
  • it cuts down on bookkeeping since multiple petty cash receipts get consolidated and processed as part of a single journal entry, and
  • it’s still more convenient in many situations to pay for a purchase in dollars and cents!

Whether your company takes care of its own business bookkeeping, or outsources those duties to an off-site professional, it’s in your best interest to understand what’s involved in setting up and accounting for a petty cash fund.


Setting it Up

While smaller companies usually require only a single source of petty cash, some larger organizations will have separate cash funds for each of their various departments. In either case, to implement a petty cash fund you’ll need to:

  • set up a Petty Cash account in the asset section of your Chart of Accounts,
  • determine how much money your petty cash float should contain (usually one to several hundred dollars, depending on the size and needs of your business),
  • clarify which types of expenditures qualify for petty cash status, and make sure receipts are collected for every purchase,
  • allocate a secure location for your petty cash holdings (a locked cash box inside a locked drawer or cabinet is best), and
  • assign a custodian to disburse, record, reconcile, and safeguard your petty cash

This last is particularly important for keeping your bookkeeping under control - and because where there’s money, there’s also potential for theft and abuse. Much as we’d like to believe it doesn’t happen, stealing cash is one of the most common forms of employee theft.


Keeping it Balanced

Managing your petty cash fund successfully from an accounting perspective starts as soon as you issue that first check made payable to cash. If you’ve decided to carry a float of $200 for example, your journal entry will involve a debit of $200 to your Petty Cash account, and a credit of $200 to your regular Cash (Bank) account.


From there, every time your custodian doles out money from the petty cash fund, it should always be in exchange for a purchase receipt. That means that at any point in time, the money and receipts in your petty cash box will equal the starting amount of your float.


Once the cash balance in your fund gets too low to be useful, the receipts should be summarized, tallied, and exchanged for a new company check equal to their total. Cashing this check - and adding the funds to your petty cash holdings - will bring your float back to its original level. But there are two important bookkeeping steps required to complete the replenishment process:

  1. A journal entry to record the petty cash purchases (this consists of a debit to each of the individual Expense accounts involved - Postage, Office Supplies, etc. - and a credit to your Petty Cash account for the receipt total)
  2. A journal entry to account for the new check you’ve cut (as already discussed, this consists of a debit to your Petty Cash account, and a credit to your regular Cash (Bank) account)

They may be small, but petty cash receipts are important source documents for backing up your bookkeeping transactions. Be sure you keep and file them accordingly.

Talking the Talk: 10 Financial Terms You Need to Know 

September 16, 2019

Entrepreneurs often cringe at the idea of coming to terms with the language of finance. After all, isn’t that what accounting professionals are for? But getting up close and personal with key terminology not only helps keep you agile as a business owner, it can improve your understanding of financial strategy and increase your income potential.


Here are 10 financial terms you need to know to grow a more profitable business.


1. Equity

Equity is the combination of cash and other assets you’ve invested in your company. It also typically includes any earnings your business has retained since first opening its doors. A simple way to calculate your current equity is to subtract all the money your company owes (liabilities) from the value of everything it owns (assets). Positive equity is a good thing where lenders and buyers are concerned, whereas negative equity can be the result of high debt, low profitability, or too many owner withdrawals.


2. Draws and Distributions

Rather than paying themselves a salary, some business owners choose to withdraw cash directly from their companies in the form of draws or distributions. These personal financial payouts effectively reduce the amount of equity (ownership) you hold inside your business, and the result is reflected on your company’s balance sheet.


3. Cash vs Accrual-Based Accounting

In cash-based accounting, revenues and expenses are recorded as they occur – or when customer payments are received, and supplier bills paid. In accrual-based accounting, revenues are reported as they’re earned, and expenses as they’re incurred – regardless of when cash changes hands. Many new or smaller businesses use cash-based accounting because it’s the more straightforward of the two systems.


4. Capital Expenditures vs Operating Expenses

Capital expenditures are purchases or fixed costs that contribute to the value of your business. They often take the form of long-term assets like software, machinery, vehicles, and buildings, and their purchase price is usually spread over a number of years for expense deduction purposes. Operating expenses, meanwhile, are short-term, everyday costs like office supplies and business insurance that are fully deductible in the tax year they’re expensed.


5. Depreciation

Depreciation is the amount by which certain assets are considered to decrease in value each year. For tax purposes, it applies only to items that will be in use for longer than one year – computers and office furniture, for example. It does not apply to land, which is considered to have an infinite useful life. Depreciation amounts can usually be deducted against income on your company’s tax return.


6. Burn Rate

The rate at which your business spends money each month (especially venture capital) is known as its burn rate. As a measure of cash flow, burn rate is calculated by subtracting cash on hand at the end of an accounting period, from cash on hand at the beginning of the same period, and dividing that amount by the number of months the period contains. A negative burn rate indicates a positive cash flow - or an increase in cash reserves.


7. Cost of Goods Sold (COGS) or Cost of Sales (COS)

COGS and COS respectively refer to how much it costs your business to make its product or provide its service. Knowing the amount of these direct expenses lets you determine whether your sales are generating a profit, and how much that profit is. You should note that reducing your COGS or COS is an effective way to increase profits without having to increase prices or sales volume.


8. Gross Profit and Gross Profit Margin

Deducting COGS or COS from company revenue tells you how much gross profit your business is earning. When you express that profit as a percentage of your revenue, it’s known as your gross profit margin. If your consulting business earned $200,000 in revenue last year, and your COS was $50,000, your gross profit was $150,000 and your gross profit margin was 75%. These figures are especially useful for performing year-over-year profit comparisons.


9. Return on Investment (ROI)

Calculating the return on investment from an outlay of time or money can be helpful in determining whether a process or product represents good value. If your business spent $500 on a specific marketing channel last month - and performance metrics indicate that channel was directly responsible for $1,000 in revenue - the resulting ROI of 100% tells you the program is probably a worthwhile investment. ROIs must be monitored closely, however, to ensure returns consistently measure up against costs.


10. Intangible Assets and Goodwill

Every successful business holds some combination of tangible (physical) and intangible (intellectual) assets. Intangible assets like patents, trademarks, copyrights, and goodwill can be difficult to quantify on a balance sheet, but represent real business value none-the-less. If you sell your business as a going concern, the size and quality of your customer base and relations – along with any branding you’ve established – are considered part of its goodwill. Goodwill typically accounts for any difference between a company’s tangible asset value and its selling price.

How the “Rule of 78” Could Help You Reach Your Revenue Goals

September 12, 2019

From yoga studios to hospitality services, many small businesses rely on multiple income streams to support their revenue goals. If your business activity lends itself to recurring sales, the Rule of 78 could be just the tool you need to take your company to the next level.


The Rule of 78 is essentially a mathematical shortcut that lets you estimate annual revenue from subscriptions, membership fees, and other monthly recurring sales. It can be used to:

  • extrapolate year-end income from your current monthly billings, and
  • set monthly sales targets to ensure you meet your annual revenue goals

The Rule of 78 is based on calculating consistent monthly amounts that extend over a full fiscal year, but you don’t need to be a math whiz to take advantage of it.


Whether you’re looking to expand your business revenue through recurring billings – or you just want to shore up your financial stability - seeking monthly sources of guaranteed sales can help. And the Rule of 78 will quickly tell you how much you need to generate in recurring fees to meet your income objectives.


Why “78”?

The Rule of 78 is so named because, mathematically speaking, 78 is the number of monthly billing periods each full year contains. Don’t believe us? Let’s take a closer look at the numbers.


Consider that any recurring sales amounts you manage to snag in January – a single, $50 monthly membership fee, for example - contributes 12 full months of billing to your annual sales total, or $600 (12 x $50). Recurring sales of that same single membership earned in February, meanwhile, contribute 11 billing months, or $550 (11 x $50).


But any new recurring revenue your business earns in a given month is always compounded by the recurring revenue it earned in previous months. So in February, you not only have 11 months at $50 contributing to your annual revenue, you still have January’s 12 months at $50. That means that, as of February, your annual revenue is now comprised of 12+11 billing months at $50, or 23 x $50 = $1150.


Continue these calculations through the end of December, and you’ll soon discover that your calendar or fiscal year actually contains 12+11+10+9+8+7+6+5+4+3+2+1 = 78 billing months! Apply the Rule of 78 to our example above and it tells you that selling a single, $50 recurring membership fee each month translates into 78 x $50, or $3900 worth of revenue for that particular product at the end of the year.


And that’s why “78” is the magic number when it comes to harnessing the relationship between recurring sales and annual income goals.


The Rule of 78 and Your Revenue

The Rule of 78 may be an intriguing equation, but the real question is: how can it help your business?


Well for starters, with 12 full months of active billing on the horizon, it’s clear that January recurring sales are far more valuable than sales made during other months of the year (January sales are literally worth twice as much as July sales, for example – just do the math). So if you’ve been planning a big subscription push, you might want to consider firing up that promotion as early in the new year as possible.


But as we mentioned earlier, where the Rule of 78 really shines is as a tool for forecasting revenue and generating sales targets – especially for well-defined income categories.


Forecasting Revenue

To get a rough idea of your annual revenue potential for a certain product or service, simply multiply the amount of new recurring sales you expect to generate from that item each month by 78.


Generating Sales Targets

Conversely, if your goal is to reach a certain level of annual revenue from a certain product or service, simply divide that amount by 78 to discover how much your business will need to generate in new recurring sales each month to reach your objective.


For example, if your revenue goal for a specific subscription service is $60,000 this year, you’ll need to achieve a minimum of $769 in new subscription sales every month from January through December to meet that goal ($60,000 ÷ 78 = $769).


There are many ways to create recurring revenue inside a business, and some companies will experience better growth when they combine recurring and non-recurring sales. But if this is an income area you’ve yet to explore, you may want to seek help from a planning professional before applying the Rule of 78 to your particular business model.

Can My Business Avoid Credit Card Processing Fees? 

September 9, 2019

Accepting credit card payments allows your business to benefit in a number of ways. To begin with, getting paid by credit card means getting paid faster than is possible with just an accounts receivable or check payment system. Charge cards also give your business the ability to set up automatic client payments, and they provide a more convenient customer experience overall.


While fees are a necessary part of processing credit card payments, with a little understanding of why they exist, you can take steps to avoid being over-charged for making the most of this indispensable payment system.


Why Your Business Should Consider Credit Card Payments

Small business owners frequently struggle with the question of whether or not to accept credit card payments. In fact, the newer or smaller the business, the more likely an owner is to view credit card fees as an overwhelming or unnecessary expense.


In truth, however, it’s become difficult - if not flat-out impossible - to stay in business without accepting credit card payments and the fees that go with them. When you deny potential clients the convenience of paying by charge card, you also deny your business the opportunity to:

  • benefit from small or spontaneous customer purchase decisions,
  • take advantage of lucrative recurring income business models, and
  • successfully compete with similar companies that do accept multiple forms of payment

As we move closer to a cashless society, a growing number of business owners are discovering that digital payments of all types not only deliver better bookkeeping efficiency, they offer an enhanced level of payment security.


How Credit Card Processing Works

Once you’ve established that credit card processing fees can be a worthwhile investment, it doesn’t mean your business shouldn’t be vigilant about reducing or avoiding them where possible. To understand what drives credit card fees, we first need to understand how credit card payments are processed.


Whether you accept charge cards in person – with a point-of-sale (POS) terminal, for example – or online, the process is virtually identical:

  • Your customer’s credit card and payment information are collected by swipe or manual entry.
  • The data is forwarded to your payment processor or merchant account provider.
  • Your service provider directs the payment request to your customer’s credit card issuing bank for approval.
  • The card issuer confirms the availability of customer funds by approving or denying the payment transaction.
  • That approval or denial is communicated back to your payment processor, who in turn relays it to you.

The only real difference between processing credit cards through your website as opposed to through a physical card reader is that online payments require the use of a payment gateway.


This gateway performs two important tasks: it encrypts your customer’s payment data in such a way that it can be securely transmitted to your payment processor, and it relays the payment processor’s approval or denial message back to your website.


Once payment has been approved, however, your business still needs to get paid – so the process doesn’t end there:

  • Your customer’s issuing bank must transfer the approved funds to your company’s merchant bank, and issue a payment statement to your client.
  • Your merchant bank, meanwhile, is responsible for administering your merchant account, and for transferring payment funds from it to your regular business account after the settlement period has ended (usually within a few days).

With such a complex procedure involved, it’s hardly surprising that the credit card payment process includes a number of fees. After all, every specialist in this chain of events must be compensated for the role they play in making digital payments happen in seconds, and for the financial risk they assume.


Keeping Credit Card Fees to a Minimum

When it comes to moderating your company’s credit card fees, you should first understand that - because they represent a lower level of fraud and chargeback risk - card-present (in person) transactions have a lower fee attached than card-not-present (online or over the phone) transactions.


The average fee for a card chip reader payment, for example, is 1.5% to 3.0%, whereas the fees associated with remote credit card payments are closer to 3.5%.


Payment processing charges are made up of a combination of fixed interchange (issuing bank) fees, and potentially flexible transaction fees, flat fees, and incidental fees. So, the simplest way to avoid over-paying for the opportunity to accept credit card payments is by:

  • researching and comparing payment processing fees upfront,
  • reviewing the fit of your existing merchant account at least annually, and
  • negotiating better fees based on your transaction frequency, volume, or sales type

Once you’re satisfied that your credit card processing fees are in line with the individual needs of your business, you should take steps to ensure you're recording them correctly in your accounting software of choice.

How to Succeed as an Introverted Entrepreneur 

September 5, 2019

Do you consider yourself an introvert? More importantly, have you fallen into the trap of believing that your introverted tendencies are interfering with your business success? If so, prepare to have your confidence boosted. Because the reality is that succeeding as an entrepreneur is no less doable as an introvert than it is as an extrovert. In fact, most studies show that introverts make better leaders.


Success Isn’t Just for the Socially Skilled

What do Bill Gates, Mark Zuckerberg, Elon Musk, and Warren Buffett have in common? Aside from being mega-prosperous entrepreneurs, they’re all self-professed introverts - and they’re far from alone at the top.


Despite the fact that many of us have come to view successful business leaders as outgoing, high-social-energy types, that impression is mostly a myth. When you actually look at the some of the greatest entrepreneurs of our time, you’ll discover that many introverts are right there among them.


So what’s behind the misconception that you have less chance of succeeding as an introverted entrepreneur than you do if you’re socially adept? The fact that so many extroverts end up in positions of power is largely responsible.


Introverted Entrepreneurs Have Some Unique Advantages

People who thrive in collaborative, social environments are not only drawn to leadership positions, they tend to be selected for those roles more often than their introverted counterparts. But there’s little evidence to suggest that extroverts do a better job of managing others once they’re in the position to do so – and the opposite is true in many cases.


Here are just a few of the unique advantages that introverted leaders bring to the table:

  • Introverts think – a lot. They also excel at noticing details and connections others don’t. So while introspective entrepreneurs may need more time to process their thoughts, this can actually lead to more meticulous, well-rounded decisions.
  • Because they’re not exactly gregarious, introverts spend a lot of time listening to what other people have to say. Many introverted leaders exhibit well-developed listening skills – skills known to promote more effective communication in the workplace.
  • Introverts have a knack for inspiring trust in others – an indispensable leadership trait. Not only are introverted leaders empathetic and more than willing to sit down one-on-one with team members who aren’t comfortable sharing ideas in groups, they’re also known for their perseverance and their ability to follow through.

It would be inaccurate to claim that just because introverts have a great deal to offer, that they don’t also face some distinct business challenges. Many introverted individuals struggle as entrepreneurs. And this is true regardless of the fact that the breakdown of what a successful entrepreneur looks like makes no mention of personality traits.


It does, however, bring up a few key points that are worth taking note of:

  • successful entrepreneurs take risks,
  • they prioritize the building of personal and professional networks, and
  • they attribute a significant portion of their success to working effectively with management teams

Should we be concerned as business owners if our low-key behavior seems incompatible with such outward-facing goals? That all depends on your perspective.


Making the Most of Your Introverted Attributes

We often perceive risk-taking as being synonymous with extroversion. That may be true for introverts who define risk as speaking in front of a crowd, but the true definition of risk-taking in business has more to do with:

  • your ability to accept the potential for financial loss that accompanies the decisions you make, and
  • your capacity for tolerating ongoing uncertainty

If you’re an established business owner, odds are you take these risks every day.

And while there’s no question that a little charisma – an attribute shared by many extroverts – goes a long way when it comes to making connections and motivating employees, all is not lost if you’re more the reflective type.


An outgoing nature may make it easier to attend networking events, meet potential business mentors - even to address your management team – but there are workarounds for situations like these.


Bill Gates, for example, claims to have purposely hired extroverts so he could learn from them. Mark Zuckerberg says he surrounds himself with outgoing team leaders who complement his quieter strengths. And Elon Musk made a dedicated effort to learn how to wield personal power through communication and socialization.


Introversion doesn’t dictate your behavior – and it certainly doesn’t have to be a detriment in terms of achieving greater success with your business. Being an introverted entrepreneur simply means you have an exclusive set of skills and a unique disposition that should be taken into account as you build your business and assemble your team.


You can be an introvert and still be a confident decision-maker and creative problem-solver. At the end of the day, it’s your innate persistence, your perpetual drive to learn, and your ability to buckle down and focus that will get you where you really want to go.

Time-Tested Marketing Strategies For Small Business Success 

September 2, 2019

Every marketer knows that having a dynamic marketing strategy is the key to their success. You know that marketing plays a key role in the success of your business, but you might not know how to develop a dynamic marketing strategy that expands your business and helps you tap new markets.


How Much To Spend?

For starters, you're going to want to spend around ten percent of your overall small business income on marketing. You'll want to scale up from there depending on whether you're attempting to gain inroads with new markets or solidify your current customer base - you should be doing both, but one will naturally take priority at different points in your business's journey.


Focus On Content Optimization

The backbone of any digital marketing campaign will be fresh content marketing delivered in a manner that your customers deem timely and relevant. Translation: when your customers have an issue or are about to make a purchase, you should be there to deliver content that will solve their problem or facilitate the purchase by providing more relevant information.


Search engine marketing, a critical component of small business marketing success, is predicated on rewarding content optimization in the sense that optimized content ranks higher on major search engines like Google. Getting ranked high on these search engines is paramount because the vast majority of your potential customers will not scroll beyond page one of the results.


Focus on delivering quality blog content that's in tune with industry trends and rich with relevant keywords. You will be rewarded for optimizing your content with higher search rankings - technically, search engine results pages (SERPs) - and your website popping up right after the customer's search query on, say, Google.


Social Media Engagement Is Key

If you're like most businesses, your customer base is getting younger and more digital. In fact, this new generation of kids - known as Generation Z - are said to be digital natives, a cohort that hasn't been without a smartphone or social media their entire lives.


It is hard for many of us to imagine, but engaging this part of your customer base where they like to spend time (e.g., social media) is critical to reaching them. What's more, social media engagement is already considered a key marketing strategy by approximately 90 percent of businesses.


Brand engagement tends to be much higher on Facebook and Instagram; Instagram, in particular, is a favorite social media hangout for the younger generation. Facebook shouldn't be forgotten, though, since it has a 75 percent post engagement rate over the first five years.


Website Optimization Ties Everything Together

You may need to edit your website's Metadata to ensure that your website is findable for search engines and overhaul your website to incorporate UX design principles.


A responsive website that loads across devices ties everything together in the sense that your content marketing, search engine optimization, and social media engagement will be greatly enhanced with an optimized, responsive business website.


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24 Hours To Improving Your Leadership Skills​

August 29, 2019

For the small business owner, leadership skills are not just a nice-to-have, they’re an integral part of running a successful company - whether you’re responsible for one employee or one hundred. Managing others and actually leading them however, while often confused for the same thing, are two very different talents. We can’t all be natural born leaders, but we can learn to develop the skill set that defines one.


To become a successful leader, owners, managers, and other business executives must be willing to be more than just a “boss”. Beyond the supervision of others in assigning work and managing schedules, leaders strive to guide and inspire their personnel by modeling and encouraging:

  • Innovative thinking,
  • Creative problem solving, and
  • Mindful performance

Employees who feel engaged and motivated tend to be significantly more productive, and as one of your most important assets, they add increasing value to your business. Honing your leadership skills should be an ongoing process, but by implementing small, targeted changes today you can be well on your way to becoming an effective leader tomorrow.


Let’s look at a handful of fundamental leadership traits that will help to transport you from someone with a great idea who hires staff, to someone who inspires confidence, loyalty, and a sense of personal investment in their team.


Become an Effective Communicator

While running the show often goes hand-in-hand with managing the tasks of others, it shouldn’t end there. Effective communication in the workplace goes beyond the simple transmission of information, to connect and inspire. Taking the time to really listen to your employees, customers, and colleagues will inevitably lead to:

  • great ideas that can help to improve your business
  • the creation of a supportive work culture defined by happy, engaged, and loyal personnel

When you make a point of always communicating your ideas and expectations clearly, and of providing regular insights into company efforts and progress where overall goals are concerned, you’ll be far less likely to find your work environment bogged down by disgruntled workers who feel disconnected from what’s going on.


Dedicate Yourself to Building a Well-Rounded Team

No man or woman is an island, and as a business owner it’s crucial that you take regular inventory of your own strengths and weaknesses so that limitations can be addressed. This task can be a particularly challenging one for the high-octane entrepreneur who believes they can do it all. But the fact is that hiring talented others with skill sets that complement your own will not only allow you to shore up potential weak points in your day-to-day business affairs, it will positively impact your company’s performance at every level.


Learn to Delegate

Much like raising a child, growing a business requires that you learn to let go a little as your company matures. While many entrepreneurs start out wearing multiple hats, the most successful ones eventually realize that it’s only by giving others equal chance to run with the ball that their business will ever reach its full potential for success. Simply put, the best leaders, delegate. Aside from the obvious time-saving benefits, delegation:

  • Fosters an environment of trust, cooperation, and elevated morale,
  • Promotes a higher level of efficiency and productivity,
  • Produces a more skilled and proactive workforce, and
  • Reduces employee turnover

Be Willing to Make Mistakes

Great leaders understand that not only is it impossible to run a business without making mistakes, it’s often those very slip-ups that teach us how to do things better. Learning to deal with and benefit from failure, both in oneself and in one’s employees, is key to becoming an effective leader.


Henry Ford might have said it best when he claimed that “The only real mistake is the one from which we learn nothing.” While making a mistake may not always be the most pleasant learning experience, failing is usually more about our distorted perception of and emotional reaction to what happened, than it is about bumping up against an insurmountable hurdle. There’s always another way around.


Encourage Accountability

Just because mistakes are an inevitable part of every professional endeavor, that doesn’t mean it’s okay to simply gloss over blunders without a second thought. Both you and your team need to be held responsible for results produced, and for owning up to the fact when something goes wrong. Accountability is a two-way street that begins with the setting of clear expectations, and that relies heavily on leaders who:

  • Provide appropriate training and ongoing guidance
  • Maintain an open-door policy that encourages questions and feedback
  • Give employees sufficient control over their responsibilities
  • Model the openness, honesty, and integrity they want to see in their personnel

One of the most realistic predictors of how successful your business will be down the road is the excellence of its leadership. While products and processes can be imitated, it’s the human quality of those in charge that will continue to set you apart from the competition.

4 Proven Ways to Deal with Difficult Clients

August 26, 2019

You know your business offers a quality service. You know you work hard to keep clients happy. But despite your best efforts, you’re bound to cross paths with the occasional customer who feels they’ve been wronged by your company. The best way to deal with difficult clients is to remain professional, take steps to defuse any conflict, and strive for a resolution that satisfies both you and your customer.


Reasoning with an Unreasonable Client

We’ve all been there: desperately trying to reason with someone who’s beyond being rational. Logical arguments won’t help. And because our brains have trouble distinguishing between physical threats and emotional danger, difficult people are not only frustrating, they can occasionally prove frightening to deal with.


So how do you stay composed enough to neutralize the situation at hand while hanging on to your personal dignity, your professional reputation, and your customer’s business? Consider these 4 proven ways to deal with difficult clients the next time you’re forced to sort out a complaint.


1. Encourage Them to Vent While You Listen

If you think back to the last time you took part in an angry discussion, you’ll probably remember how important it was to feel heard. Disgruntled clients feel much the same, which is why it’s critical to let them vent while you listen.

Engaging in careful, active listening is all about concentrating on what your customer is saying, so you can:

  • fully comprehend the points that they’re making,
  • remember what they said once they’ve finished, and
  • validate their feelings by summarizing their concerns

Creating a supportive space for your customer to share their frustration will help set the stage for turning difficult conversations into simple, empathetic solutions.


2. Stay Calm and Objective

Listening to someone beat up on you or your business isn’t easy. But remaining objective while they have their say is the only way to determine which response will get them back to their happy place, faster. When a customer is emotionally charged, defending your actions won’t help – so try this instead:

  • Do your best to stay calm by breathing deeply and slowly.
  • Recognize that angry customers sometimes go off on a tangent. It’s your job to sift through their outburst for the specific grievance that applies to your business.
  • Stay outside the dispute as much as possible by focusing on delivering a solution – even if the problem doesn’t involve you directly.

Successful business owners care about their clients. But the truth is that you’ll be in a better position to help them if you remember that most criticisms aren’t personal. Instead, try looking at customer complaints as an opportunity to learn more about the areas where your business can do better.


3. Find Out What Your Customer Wants

To temper conflict quickly and effectively, you should make every effort to view complaints from your customer’s perspective - and use language that communicates clearly your desire and intention to help. After listening to your client’s concerns, the best course of action includes:

  • apologizing sincerely for not meeting their needs,
  • confirming your understanding of the issue by repeating it back to them, and
  • finding out exactly what they expect you to do to resolve their dilemma

Does your customer want a refund, a replacement, an upgrade - or some other acknowledgement of the inconvenience your company has caused them?


If a client’s expectations are blatantly stubborn, unreasonable, and completely out of sync with the size of their problem, you may need to review their history and carefully weigh the value of continuing to do business with them. Only then will you be able to decide whether it’s worth meeting their demands, or whether you should perhaps try negotiating more moderate terms.


4. Propose a Solution That Works

Once a customer hears that you’re prepared to fix their problem quickly, and in a way that works well for them, they’ll usually be inclined to forgive, forget, and move on. You should outline exactly how you plan to make things right, and when your client can expect to benefit from your solution.


In most cases, demonstrating your leaderships skills by taking responsibility for your customer’s dilemma will serve as a powerful antidote to their anger. Just remember that once you’ve promised a certain course of action, it’s vital that you follow up and deliver in full, and on time.


Dealing with difficult clients frequently comes down to being flexible in your approach to problem solving. And since no two customers are exactly alike, listening carefully to their issues and proposing fitting solutions is essential for restoring their faith in your business. Once you’ve successfully worked through an awkward dispute, don’t forget to document what happened and discuss it with your team before taking some well-deserved time out to de-stress, relax, and recover.

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