Category: Cost-Savings Tips

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Seven Year-End Adjustments to Make to Your Books

Year-end is coming up for many businesses, and it’d be nice to know what your final revenue and profit numbers will be for the year.  Before we can calculate these key numbers, there are year-end adjustments that may need to be made to your books that will change the numbers. Here are seven common ones.

Bonuses

It’s great to give bonuses to employees at year-end, but it’s not so great to forget about the tax part of it. Bonus checks should always be run through payroll, but often are not, which requires an adjustment after the fact.

Retirement Plan Contributions

If cash is available at year-end, it’s a great idea to maximize the allowable deductions for the retirement plan you qualify for.  One example is a SEP IRA.  You can deduct up to 25% of your or your employee’s salary (up to $50,000 deduction maximum per employee for 2012, but please check with us or your tax professional for numerous exceptions and rules.

Withholding

If you are both the owner and an employee of your company and have not made enough tax payments throughout the year to account for all that money you’ve earned in 2012, you can adjust your last few paychecks to withhold the amount you need.  Sometimes, this also reduces or eliminates the penalty for underpayment of estimated taxes.   To find out more, please check with your tax professional.

Depreciation

If you have assets that will last longer than one year, such as factory equipment or a fleet of automobiles, an adjustment may need to be made to reduce the value of those assets.   This adjustment will reduce your profit and will also reduce your tax bill.

Amortization

If you have a loan of any type, the payment consists of both principal and interest.  Each time you make a payment, the principal and interest amounts can vary.  At the beginning of the loan, you pay more interest and less principal.  At the end of a loan, it’s reversed.  Each payment is different, and if they haven’t been recorded correctly each month, it’s time to make the adjustment so that the loan balance is correct.

New Acquisitions or Obligations

If you’ve made a significant acquisition, such as real estate, buildings, large equipment, or another company, and somehow the transaction did not get properly recorded on your books, then now is the time.   Similarly, if you’ve taken on new debt, the new liability needs to be put on the books.

Noncash Transactions

It’s easy to overlook transactions that do not require a cash outlay, but these need to be recorded as well.   For example, if you performed consulting services in exchange for a spa gift certificate, this transaction should be reflected in the proper revenue and expense accounts.

Year-End Profit

Once your books are adjusted for all of these changes, you’ll have all the information you need to find out how your business performed for 2012.  You can then use your 2012 revenue and profit numbers to set new goals for 2013.

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Compliance Checklist: Seven Items You May Have Forgotten

Running a business is filled with regulations everywhere you turn.  These can drain precious time away from the core of your business, but if you ignore them, there could be huge financial consequences you may be risking without even realizing it.  The best way to handle them is to understand your exposure, consult with any experts you need to bring in, create a checklist, and make sure you’re in compliance.

Here’s a head start in creating that checklist.  This is by no means a comprehensive list.  These items apply to most businesses and are often overlooked.   Go through the list to make sure there aren’t any surprises for your business.  If there are, feel free to contact us, and we’ll help you find out where to get answers.

1. EIC notice to employees.

It’s now required annually to notify certain employees about the Earned Income Credit so that more people who need it can take advantage of it.   If you have employees, the next deadline for this compliance item is the first week of February 2013 and can be met if you get the right W-2 forms.  Details are in IRS Publication 15.

2. Corporate meeting minutes.

Just about the first thing the IRS will ask for in an audit is your corporate meeting minutes.  If you are incorporated as a C Corp or S Corp, you need properly formatted and executed documentation of the annual shareholders’ meeting, even if it is just you.  The risk in not having it includes a potential increase in tax liability from undocumented deductions.

3. PCI compliance. 

PCI stands for Payment Card Industry, and if you take credit cards, you may have compliance requirements under this industry standard.  The standard is designed to provide the cardholder with a minimum acceptable level of security, and your requirement is to maintain certain processes and procedures to safeguard the stored credit card data.

4. Document retention.

While it’s a great thing to go paperless, you may get caught by surprise if you are not downloading and preserving the items you used to have on paper.  The IRS and other agencies still need proof of these items in order to approve the deduction.  This includes invoices that are coming via email in PDFs, bank statements you’ve gone green on, and direct deposit payroll stubs, to name a few.

Fax copies fade after a few years and can catch you by surprise when you go to look up an old record and can no longer read it.  It’s best to scan fax receipts in so they will stay readable for the length of the retention period.

You’ll also want to keep up-to-date on how many years it’s necessary to maintain these items in the case of an audit.

5. New hire reporting.

In small business, most of us are hiring so infrequently that it’s easy to forget this one.  Most state unemployment agencies require that you report new hires within about three weeks of their start date.  The purpose of this is to track fathers who have missed child support payments.

6. Changes in state tax compliance.

As geographic borders disappear and our business expands, we need to regularly re-evaluate state requirements on income, franchise, and sales tax obligations.  It can be too easy to “do things the way we’ve always done them” and forget that as our business expands into new territories, new obligations can arise.

If we’ve hired a virtual employee in another state, we may have new obligations.  If we’ve earned money during a speaking engagement in another state, we may have income to report in that state.    And, of course, if we open new offices in another state, we have new compliance items to deal with.

7. Payroll posters.

Surprisingly, the highest payback item in this list for those of you that have employees may be posting your payroll posters.  Compliance usually costs less than $100, and the fines avoided can be as much as $17,000, a pretty big dent, no matter how big your small business is.

Small Business Compliance

Did you get caught by any surprises?  If so, let us know how we can help to bring your business into compliance and help you avoid unnecessary costly risks.

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Five Favorite Freebies You Can Steal

If you’re looking for ways to boost your productivity, technology is a great place to start.  The good news is there are many free options available.  Here are five favorites you might not know about.

1. Bridge lines.

If you need teleconference lines, you’re in luck:  there are many high-quality options that are completely free.  You can have several people, even hundreds, dial into a line and conduct a meeting or training session via the phone.  You can record the session and download the recording as an MP3 file that can be played on an iPod.

Some of the more creative ways to use these free teleconferencing services include:

  •  Staff meetings when someone is absent so they can listen later.
  • Free teleconference, providing tips to all your clients.
  • Free teleconference, allowing prospects to call in and sample what you offer or find out what you’re like to work with.
  • When you need to record anything. (You often need 2 people on the line to be able to record, but not always.)
  • To record a quick training session or how-to that can be distributed later.
  • To have a client record a testimonial you could put on your web site.
  • To record a meditation or therapeutic session you can listen to over and over again.
  • If you’re a coach or trainer, you can record the client training session and give the download as a service perk.

Our favorite:  http://www.freeconferencecallhd.com.

2. FileZilla.

The FileZilla client version allows you to transfer large files between computers that are connected to the Internet using FTP (File Transfer Protocol).  It’s handy for many reasons:

  •  When you need to load large files such as videos or audios to your website
  • When you need to upload something to an artist, a transcriptionist, a warehouse, or other supplier
  • When you have documents such as white papers that you want people to have access to but don’t want to have to keep contacting your webmaster

Download the FileZilla client and find out more here:  http://filezilla-project.org/

3. Gmail.

It’s just a great idea to have a backup email address in addition to the primary email address you use.  Gmail is perfect for this.

Go one productivity-boosting step further, and make your gmail account the one you use for all that email you don’t need to read as frequently.  This could include notifications from social media like Facebook, Twitter, and LinkedIn, blog notifications, list posts, Google alerts, and any other nonproductive email, you don’t need to respond to.

Open your Gmail account less often than your primary email (even once a week if you dare) and gain that productivity boost.  You’ll have freed your inbox from a bunch of clutter and can focus on your clients’ and employees’ emails instead.

Visit this site to find out more:  https://mail.google.com

4. WordPress.

WordPress is free blog software that you can install on your web site or blog site.  Once installed, it’s super-easy to use for both blogging and a website.  You can add photos, graphics, white papers, videos, and audios to the library to put on your blog or your site.

It’s also great for search engine optimization; the search engines love it and will rank you higher when you blog and post fresh content.

Visit http://wordpress.org/ to find out more.

5. Ning.

Ning is a community platform where people can come together and post a profile, participate in discussions, join a group, and interact.  Not all business models will benefit from Ning, but many of you are involved in a club, church group, nonprofit organization, or community where Ning could be very helpful.

Ning is almost free, at $19.95 per year or $2.95 per month, but it’s such an amazing platform, I include it here.  Whenever you’d like to have a private (or public) community of people who are joined by a common interest, Ning can provide that extra online community connection that can help you group interact and bond even more.

Find out more about Ning at http://www.ning.com.

What are your favorite freebies?

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Ten Things You Might Not Think to Delegate But Should

Just about everyone suffers from a lack of time to do all the things they want, or even need, to do in their business.  One of the solutions to freeing up your time is to delegate.  The question is, what are the most effective tasks to delegate?  Here are ten ideas for you to consider (or reconsider) to free up your valuable time for more important things.

1. Social media.

We didn’t even have social media ten years ago, but now that we do, it can be a major investment in time.  Some companies ignore it completely, not wanting to open that can of worms, but done well, social media can have a great payback.

Rather than ignore it or take up your important time, turn it over to an intern or recent college grad who probably knows more about it anyway!

2. Grocery shopping.

You might think this is only for rich people, but it’s simply not true and very cost-effective.

Grocery shopping is a personal task, but time doesn’t distinguish between work and personal; it keeps marching on.  Set up a grocery list and find someone who wants to work part-time (your housekeeper might know someone).  You’ll be able to free up several hours per week, plus you’ll likely be helping someone who needs the money.

The money you pay to your shopper is not a business expense.  Instead, they may be a Schedule H employee, so you’ll need to keep your books separate or alert your accountant.  Also check on any liability issues with your insurance company if they will be driving on your behalf.

Once you get past a few small setup hassles, you’ll love this.

3. Your email.

How much of your email could be handled by one of your employees?  Set up separate emails by function and not by people so that your employees can take over more of this ever-growing task.  Anything that you respond to the same way over and over again can be drafted in a procedure.   Employees or a virtual administrative assistant can be trained on what to send to whom.

4. Training employees.

Once you get one employee trained, that employee may be able to train additional hires, freeing you up from having to do so.  Well-written procedures will go a long way to reduce training time, and even writing procedures can be delegated to the right person.

5. Vendor research and purchase.

Need to find a hotel to host an event?  Or a webinar company?  Or a project management system?  All of these items require research to find good vendors, and as business owners, we may tend to do this ourselves when we can write up a few guidelines and give the task to a capable employee who would enjoy researching the topic and writing up some options for you to review.

6. Hiring.

Hiring can be one of the most time-consuming tasks of all.  I’m definitely not suggesting delegating the final decision on hiring, just the search process.  I’ve heard of business owners who delayed hiring because they froze at the sight of a 6-inch tall stack of resumes they had to go through.

It might pay to hire an agency to do the screening for you so that you are presented with only the finalists.

7. Bookkeeping.

Bookkeeping is also one of those time-consuming tasks, with two added challenges:  everywhere you turn, there are deadlines and regulations, plus it requires special skills that need updating frequently.  All of this screams to be delegated when possible.

8. Sales.

When you first start your business, you are generally the only one selling.  To get it off the ground, you eventually need a team of people to help you sell your goods and services.  As your sales team gets better and better, you can delegate larger and larger sales opportunities to them.  Who knows, if you’re not natural at sales, you may have employees who are better at this than you.

9. Writing.

Writing can be extremely time-consuming for some people.  Great writing requires a long learning curve, so if writing is not a core skill for you, you may want to look around for someone you can delegate or outsource this task to.  This includes things like writing procedures, web sites, job descriptions, marketing copy, proposals, and even something as small as thank you notes.

10. Calendar scheduling.

All that back and forth phone tag, email tag, postponements, cancellations, and other scheduling challenges can be delegated to free you up for making even more appointments.

Your time is incredibly valuable, and the only way to make it more valuable is to accomplish increasingly valuable tasks that only you can do while delegating the tasks that other people can do.  As a general rule, anything that is not in your core skill set or core business is fair game for delegation.  If someone else can do it faster, then it’s fair game for delegation.

Think about what you’re spending a lot of time on (and possibly spinning your wheels at the same time).  This is a task that can possibly be delegated, so oyu can free up your time for more important things.