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Your Balance Ratio

15 July 2010, 9:12 am

When you hear the word balance, what comes to mind?  If you are a business owner, bookkeeper, accountant, etc. most likely it is balancing the books, your checkbook, your workload, your inventory, or some other work related task.  And the word ratio, brings to mind key indexes, assets vs liabilities, sales vs expenses, returns on investments and all those other ways of measuring how well a business is operating.

But I bet the very last thought that enters your brain, if it even makes it there at all, is the ratio that measures your life balance.  How much of your time is spent in having fun vs work.  And I will admit when you are a business owner fun can be defined as running your business.  After all there is a certain intensity, excitement and pleasure in developing a new idea or product and succeeding at bringing it to market.

24 hour day – 8 hours of sleep x 7

_______________________________

Weekly Fun Time

= Life Balance Ratio

But if you are one of those people who can’t go anywhere without your cell phone, laptop, business cards and being on the look out for new opportunities 24-7 then it is my belief you are not only losing a great deal of enjoyment in your life but you may also be hurting your chances of being successful.  The buzz word in the business world has and continues to be NETWORK.  And while networking is not only important but essential in today’s business world it does not need to occupy every second of your waking time.

And so bring on the BALANCE in your life.  The result will be a more relaxed, less stressed and healthy you.  Which will result in you being better at your job, more creative in your goal attainments, and allow you to be more productive when you are working.

So how do you find the time to put balance back into your life?  Start small, it is small changes that lead to big successes.  Instead of eating at your desk, go for a walk.  It might only be a 5 or ten minute walk but even that small amount of time can refresh you and clear your mind.  Take you lunch with you and sit outside enjoying nature if you can.

And leave the cell phone behind!  Believe me it is not the end of the world if you let a call or two go to voice mail.  And from personal experience I don’t enjoy talking to a person who is inline at the supermarket or walking down the street.  And I will bet your clients will rather wait for a call back then trying to talk over the noise and interruptions.  After all it wasn’t so many years ago that we did not have the “luxury” of cell phones available to us.  And we still managed to have successful business and give good customer service.

Turn away from the computer and turn off the television.  Go read a book or exercise or meditate or do any other relaxing activity that is fun for you.  Your emails and the news will be there when you get back.

If your job mandates you to take work home, budget your time for it.  We tell our kids to assign time for homework and find a place where they won’t be interrupted by family goings on, tv, phone calls, etc. and  and stick to it.  We should take some of our own advice.  If you are spending more than two hours a night Monday through Thursday on work brought home from the office, you need to find a solution to cut back.  I know its hard in this economic crisis to justify to your boss that you need either help or less work but are you wasting time at the office with unnecessary meetings, long lunches, dealing with non- work related emails, searching the web, etc that if eliminated could free up some of the work you are bringing home.  Work when you are at work, save your personal tasks and fun stuff for non-work hours.  And if you still need to bring home work, set a time and place to do it, informing your family that you need to have a quiet, uninterrupted hour or two and when you are done you are all theirs.

Weekends if at all possible should be work free.  It is hard enough to take care of all the responsibilities that a home and family encompasses without adding on work related tasks.  There is cleaning, shopping, getting kids to games and other activities, mowing the lawn, and all the other stuff that comes with being an adult.  If you are working as well when do you have any “fun” time?  Get the errands, cleaning and other chores done on Saturday if possible and turn Sunday into a day of pleasure, whatever that pleasure might be.  Some quiet time for yourself and your family, time to regenerate from the hectic rat race, time to get to know what has been happening in your family’s life, time to talk, time to have fun.  Don’t fill up your Sundays with parties, tourist activities, sports (unless that means a good game on the lawn with the kids).  The key word is RELAX.  The goal is to enjoy and spend time with your family or friends talking and enjoying each other, not to run around doing “things”.  But most important is you choosing to take time away from work and work related issues.

Have FUN!

Filed under Career Advice.
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QuickBooks Company Snapshot

12 July 2010, 12:50 pm

Starting and 2009 versions and enhanced in 2010 the new QuickBooks Snapshot tool gives you a way to review key information in an easy and convenient one page format.  In clear graphical charts you can see who owes you, compare current year with last year data, review trends as well as other important data.

There are two tabs, one labeled Company and one labeled Payments.  The company tab allows you to view Account Balances, Previous Year Income Comparison, Income Breakdown by type, Previous Year Expense Comparion, Income and Expenses Trends, Who Owes you, Top Customers By Sales, Account Balances, Top Vendors By Expense, Vendors to Pay, Expense Breakdown and Reminders.

The Payment tab offers QuickLinks to Receive Payments, Create Sales Receipts, and Credit and Refunds.  Links are also available for commonly used Receivable Reports and the Report Center.  Charts available are an Invoice Payment Status, AR by Aging Period, a List of Recent Transactions, Payment Reminders and a list of customers who owe you money.

On both tabs QuickBooks recommends additional services that might be helpful to you.

You can add or remove any of the sections by clicking on the Add Content button on each tab. And most of the charts let you select specific accounting periods.  And the snapshot pages can be printed out.  Areas available to an user is based on the user access rights.  For instance an user who does not have Account Payable access will be able to see the charts that show Vendor activity.

Filed under Hints & Tips.
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An Elegant Solution

11 July 2010, 10:41 am

“An old puzzle asks how a barometer can be used to measure the height of a building. Answers range from dropping the instrument from the top and measuring the time of its fall to giving it to the building’s superintendent in return for a look at the plans. A modern version of the puzzle asks how a personal computer can balance a checkbook. An elegant solution is to sell the machine and deposit the money.”

Jon Bentley, More Programming Pearls

Filed under Quotes For You.
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New Merchant Services Changes

15 June 2010, 5:00 am
Enable Customer Credit Card Protection for Greater Security     What is happening
To comply with password protection requirements going into effect July 1, 2010, anyone using Merchant Service-enabled QuickBooks files must download the QuickBooks 2010 Release 7 update. Without this update, you will not be able to open any company files that do not have Customer Credit Card Protection enabled.
Overview
Effective July 1, 2010, all merchants accepting credit cards using QuickBooks 2010 must adhere to new, stricter password protection requirements.
Those requirements mean merchants must enable “complex passwords” in order to process credit card payments in QuickBooks. A complex password is simply a password that has at least 7 characters and includes at least 1 number and 1 uppercase letter. Complex passwords must also be changed every 90 days.
An update to QuickBooks 2010 is now available that complies with these new security standards. The update requires administrators and users of Merchant-Service-enabled QuickBooks accounts to have complex passwords – which will make you compliant with the new PA-DSS (Payment Application Data Security Standards) requirements.
Detailed Instructions
  • Download the QuickBooks Release 7 update, enable Customer Credit Card Protection, and understand other actions you may need to take to be compliant.
  • Estimated time: 30 minutes
  • Update to the current release (Release 7)
  • Click on Help on the top menu bar in QuickBooks then select Update QuickBooks…
  • Click on the Options tab, and be sure each item at the bottom has a checkmark next to it.
  • Click then on the Update Now tab.
  • Click on Get Updates. This may take a few minutes.
  • When complete, close out of QuickBooks and then reopen the program to initiate the installation process of the updates in which you have just downloaded. This may take a few more minutes.
  • Enable Credit Card Protection
  • Note: Only administrators can perform these steps.
  • Open QuickBooks
  • Choose Company > Customer Credit Card Protection
  • In the Customer Credit Card Protection dialog choose Enable Protection
  • In the Customer Credit Card Protection Setup dialog specify / confirm a complex password and challenge question and select OK.
  • Understand other actions you may need to take to be compliant
  • You may need to take actions outside of QuickBooks to be compliant.
  • Download the complete Implementation Guide to learn more.
  • It’s that easy and it ensures you’re compliant with the new PA-DSS requirements.

Download the complete implementation guide to learn more!

Filed under Hints & Tips.
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Is It a Fixed Asset?

15 June 2010, 4:00 am

I often am asked this question by bookkeepers and business owners alike. The Internal Revenue Service defines a fixed asset as property used in a trade or business or in an income producing activity that wears out or becomes obsolete and it must have a determinable useful life substantially beyond the tax year. This might include tangible real estate property and personal property and what is referred to as intangible property.

Examples of tangible real estate property would be of course buildings and the land they sit on as well as any improvements made to the property. And while land is considered a fixed asset, the IRS rules do not allow the value of the land to be depreciated. Therefore, with real estate property the value of the land is kept in a separate balance sheet account from the value of the building. Often in real estate transactions there are closing costs and legal fees. The IRS may consider these expenses to be part of the cost of buying the building and will expect those costs to be added to the value of the building and depreciated over the life of the building. Check with your tax preparer for further clarification.

If you rent space to operate your business in then the rent is an expense that can be written off in the accounting period it is paid or accrued. However, should you make improvements to your rental space then that expense is considered to be Leasehold Improvements and if your lease extends beyond a year then those improvements would be looked at as fixed assets. Be careful with this one as some business leases might go from year to year but if you are staying beyond the term of the one year lease (renewing your lease that is) those improvements could be looked at having a life that meets the definition of a fixed asset.

Some examples of personal tangible fixed assets are equipment, tools, office furniture, computer equipment, vehicles, etc. All purchases of these types of assets must be considered as fixed assets unless there will be no residual value to them after one year. When considering the cost of an asset include all costs involved in putting that asset into use. For example, if you purchase a computer system the fixed asset cost would include the CPU, monitor, and printer as well as any additional equipment purchased with the computer that defines its use.

Intangible property could include copyrights or patents that would expand beyond a tax year.

Remember the key to defining whether an item purchased is a fixed asset or an expense is the answer to this question: “Will this item have a monetary value after being used beyond one year?”. And while a $5.00 screwdriver might have value to you far beyond one year I doubt you would be able to sell it hence it has no discernable monetary value. While making this decision think of the use of the item and the cost of purchasing the item. Usually items costing less than $500.00 have no residual value after a year’s use. And of course should you have any question at all, check with your accountant or tax preparer.

Copyright ©D. L. MacMillan All Rights Reserved

Filed under Bookkeeping Articles, Your Business. Tagged , , , ,
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Embezzlement 101

6 May 2010, 7:00 am

This is not a course in how to get rich by embezzling funds from the company your work for but a group of suggestions on how to protect your company from this heinous crime.

Embezzlement is defined as theft of money or property from a business by someone who has custody of the funds or property. Often embezzlers are the people you would least suspect. After all you wouldn’t put your money into the hands of someone you didn’t trust now would you? So don’t get fooled by an innocent looking face. Of course not everyone you meet who comes across as trustworthy is a crook in disguise. But by putting into place a few simple procedures you can protect your company.

New Features in QuickBooks 2010
First of all whether you are just starting in your business or been in business for awhile, educate yourself in the basics of bookkeeping. You should be familiar with the terms used and their definitions as well as the proper flow of paperwork.

Secondly know how to read your financial statements. Understanding the types of accounts and how they increase or decrease as transactions are posted will help you see when things just don’t look right – a possible sign that someone is dipping into your funds for their own benefit. You should at the very least have a realistic “guesstimate” of how much you are spending for the different expenses your company incurs. If you are seeing higher than expected expenses on your financial statements, than you might have a problem that needs to be investigated. If you do not review your Balance Sheet and Income Statement each and every month you might miss these important clues.

Review your bank statements every month checking for checks or charges that do not make sense to you. If you are making deposits made up of cash and not preparing and making the deposits yourself (which I highly recommend) than also verify the deposits recorded on your bank statement. I know you might leave the actual reconciliations to your bookkeeper but you should give the statements a once over yourself. You will also want to check the dates, amounts and signature on all the checks because the automated systems the banks now use do not always catch unsigned checks, old dates and mismatched amounts.

Only you should have the responsibility of signing checks. If you are signing all the checks you will have the opportunity to spot errors and possibly outright thefts.

Company credit cards should be used judiciously and statements should be checked by you when they arrive each month. If you cannot identify a charge then investigate it with the company holding the card. Often the problem is cleared up quickly and you realize after talking with them it is a legitimate charge. But better safe than sorry.

Payroll checks can be especially problematic even when processed by an outside payroll service. After all, who is calling in the payroll? Not you the business owner I bet. Check out your payroll reports before the checks are given out. Know your employees pay rates. Verify that vacation, sick and other paid days off are correctly handled.

Only on your authority should an employee expense reimbursement or loan be issued. Make this a hard and fast rule.

There are many, many hard working and very honest bookkeepers but a few have unfortunately given these good people a black eye. By being vigilant you are not only protecting your company but you are verifying that the bookkeeper you employ is in fact the trustworthy person you already believe them to be – and for all you great bookkeepers this is protection for you as well. You cannot be accused of misuse of funds if you don’t sign checks, use credit cards and authorize payments.

Copyright ©D. L. MacMillan All Rights Reserved

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A Great Interview!

17 March 2010, 4:00 am

Typically there are two nervous people in an interview – the person being interviewed and the person conducting the interview. You the employer, however, can overcome these jitters and the result will be a “great interview” for both of you.

As with any other task, preparation is the key. You go in cold and you will fumble through the process, forget to ask key questions and will not be relaxed enough to hear what is being said between the lines. After all almost all prospective employees have done some home work on what to say in a standard interview. You need to go beyond the expected and dig a little deeper if you want to hire an employee who will really shine.

Before the interview takes place, however you should carefully review all the resumes submitted in response to your job offer. What are you looking for? Besides name, address, job and education experience look for several other items. Neatness, spelling, and a sense that the person is being honest should be part of your first scan. Are there empty periods between jobs or has the person not stayed at several jobs for very long? These are signs that this might be a problem employee. Does their education and/or job experience fit your requirements? Do they have a life outside of work – that’s why we ask for hobbies, interests and membership affiliations. After all a person who is dull, uninterested, only associates with fellow workers often means an employee who will show up at work, do the job and only the job defined and then leave. Unless you are looking for just a body to fill a slot then this is not the type of employee you want.

Now, prior to the interview, check all the references given on the resumes that you find interesting. And now you are down to a much smaller group of people who you would like to meet.

Try to schedule your interviews in the morning, when you will be fresh and not bogged down by everything that might have happened during the day and your interviewee is also likely to be fresh. Mid-week is always better than Mondays or Fridays.

And prepare, prepare, prepare! Make a list of standard questions that you will ask each and every potential employee. And then a sub-list of questions geared specifically to each individual. Remember the goal is not just to determine the work and education qualifications of a person, but to get to know them. What do they like to do, what is it that really bores them? Do they like getting into the nuts and bolts of a situation? Do they feel comfortable at social gatherings or public speaking or are they more likely to be a quiet introverted type? While experience and education are certainly important it is often the personality fitting the position that makes or breaks a good hiring.

And if appropriate, have the prospective employee meet some of your employees and don’t forget to get feedback from both the interviewee and your current people. But remember the final decision is yours to make.

Do not get fooled by someone who has all the answers at their fingertips, they may be very practiced in interviewing but really are less than honest vs. a person who has to think about an answer or two. And lastly if you find a person whom you really feel comfortable with but might have less qualifications or perhaps have a less than perfect job record then don’t be afraid to take a chance. You can always offer them a trial period where you can both try on each other.

Whatever your decision when you finally make an offer, put it in writing. The written job offer should include a job description, starting date and end of trial period if it is part of the offer, salary or wage, descriptions of hours required, a copy of the employee handbook or company rules if available and a list of benefits including paid time off allowances. If a trial period is in play, then the terms of the trial period should be clearly stated in the written offer. Include salary or wages paid and benefits offered within the trial period if they are to be different than those paid when the job becomes permanent. Also include a detailed description of what will determine whether the trial period becomes a permanent job offer. This will eliminate misunderstandings down the road.

And your last task is to send out letters thanking those who you did not hire. After all, you might want to consider then in the future.

Copyright ©D. L. MacMillan All Rights Reserved

Filed under Employees & Payroll. Tagged , , , ,
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Making Work Credit Pay = Tax Savings Up to $800!

17 February 2010, 1:34 pm

Two special tax credits offer taxpayers an opportunity to lower their tax bill or increase their refunds this filing season. Both credits are claimed on new Schedule M, Making Work Pay and Government Retiree Credits.

The making work pay credit helps millions of workers and self-employed individuals, while the government retiree credit especially targets former government workers who aren’t receiving Social Security benefits. Income limits apply to the making work pay credit but not to the government retiree credit. Both credits are refundable — meaning that those eligible can get them even if they owe no tax. Here are further details on each of these credits.

Making Work Pay Credit

Most eligible taxpayers qualify for the maximum making work pay credit of $800 for a married couple filing a joint return or $400 for other taxpayers. The credit equals 6.2 percent of earned income up to the maximum amount. Thus, any eligible couple whose earned income is $12,903 or more qualifies for the $800 maximum credit. Other taxpayers qualify for the $400 maximum if their earned income is $6,451 or more.

For most workers, the credit is based on the taxable wages reported to them on Forms W-2. Self-employed individuals figure the credit using the net profit or loss they receive from a business or farm. Additional calculations are necessary for some taxpayers, including those who have net business losses, wages from work performed while a prison inmate or foreign earned income. More information, including a worksheet, can be found in the instructions for Schedule M.

Some taxpayers are not eligible for the making work pay credit, including:

Joint filers whose modified adjusted gross income (MAGI) is $190,000 or more.
Other taxpayers whose MAGI is $95,000 or more.
Anyone who can be claimed as a dependent on someone else’s return.
A taxpayer who doesn’t have a valid social security number.
Joint filers, if neither spouse has a valid Social Security number.
Nonresident aliens.
Other taxpayers qualify for the credit but must reduce the amount of the credit they claim, including:

Joint filers whose MAGI is more than $150,000 but less than $190,000.
Other taxpayers whose MAGI is more than $75,000 but less than $95,000.
Taxpayers who received an economic recovery payment. This special $250 payment was made during 2009 to recipients of Social Security benefits, supplemental security income (SSI), railroad retirement benefits or veterans disability compensation or pension benefits.
Taxpayers who claim the government retiree credit.
See Schedule M and its instructions for details.

Though all eligible taxpayers must file Schedule M to claim the making work pay credit, most workers got the benefit of this credit through larger paychecks, reflecting reduced federal income tax withholding during 2009.

Government Retiree Credit

This credit is designed to provide a benefit equivalent to the economic recovery payment to those government retirees who did not qualify for these payments. Retired federal, state or local government employees who receive pensions in 2009, based on work not covered by Social Security, are eligible to claim this credit. The credit is $250. For joint filers the credit is $500 if both spouses are retired government employees who receive pensions based on work not covered by Social Security. The credit cannot be claimed by an individual if he or she received an economic recovery payment during 2009. See Schedule M and its instructions for details.

For more information consult your tax preparer or go to IRS.gov

Filed under IRS.
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Planning For Action

15 February 2010, 8:30 am

©D. L. MacMillan, QuickBooks Training. Web Learning

You are likely familiar with the term business plan, but just what is a business plan and how do you put one together? It is not as complicated as you might think. And if you prepare one segment at a time, than it won’t be an overwhelming task.

A business plan includes the following topics:

A basic business concept
A description of your product or service
What advantages your product or service brings to the market
The competition
A marketing plan
Your business background and experience within the field
Partners and/or key employees and what they can add to company
Financial budgets, forecasts and funding needs

The basic business concept is a clear description of your proposed company. For example if I were to open an art gallery I might phase my business concept as follows:

I propose to provide an art gallery in which local artists will rent wall space. I will provide sales staff, opening nights with refreshments and a unique, well lit environment to showcase their artwork. The artists will be responsible for providing a mailing list, invitations and mailing costs, opening night advertisements and carrying insurance on their artwork. All work must be original, owned and copyrighted by the artist and framed. All art and framing must be approved before hung. I will collect a 50% commission on each sale.

The description of your product or service is a specific description of the products you will carry or the services you will provide. Going on with the art gallery business I might say that “The gallery will be showcasing the original art of local artists and offering a unique selection of subjects”.

The answer to what advantages your product or services brings to the market will depend upon the competition within your market area. It may include statements such as “There are no other galleries in this area that offer original art” or perhaps “By showcasing art from local artists only, our customers will feel pride in supporting their local culture”. Or perhaps your easy to reach location, or the uniqueness of your building brings value to your product or service.

Just who is your competition? Look around; visit their places of business if at all possible. Ask those who might use their services or visit their store why they like doing business with them and what they might like to see improved. And don’t stop with the businesses in your immediate area; expand beyond to locate your competition. In this day of Internet access, it would also be smart to do a search for competing businesses. In this segment of your business plan, list your main competitors and describe how your product or service will stand out from the crowd.

Your marketing plan should consist of a clear description of how you plan to get customers to your door. Will you place ads in the newspaper, on the radio or television or do direct marketing? Consider signage, logo design, web site development, mailing lists, business cards and brochures. Will you join organizations that might lead you to contacts? Do you have previous contacts that are willing to sing your praises? Will you have a grand opening? What ever methods you choose to use this is the place in your business plan to put it all in writing. It is not only what you will do, but when and in what order you will do it, and what you expect to reap from your efforts.

What do you bring to the table in this venture? Have you many years of experience in this field? Have you studied and worked in this area of business before? It’s time to toot your horn. Describe everything that makes you unique to succeed. Sell yourself!!!!

If you have a partner or key employees joining you in this business, then describe what they can add to the overall success of your business. List their relevant experience, education and knowledge.

And now the financial part. All of your forecast reports should be broken down by month. The first part is a sales forecast for at least three years. How do you know what you may sell over the next three years? Well you don’t, you do a best guess estimate. Don’t be pie in the sky, but also don’t be too conservative. Your estimate should show gradual increases over time and may adjust upward or downward if your business is seasonal. And remember, this is a good faith estimate and is expected to need adjustment as time goes by.

Next set up a spreadsheet listing all the expenses you might incur over the first, second and third year. This will include the cost of the product being produced, any tools or equipment you might need, labor and related tax, insurance expenses and all other expenses you will incur to bring your product to a ready to sell state. Your Cost of Goods Sold should coincide with the estimated number of units listed in your sales forecast. Also include general expenses such as rent, utilities, business insurance, advertising and marketing costs, loan interest, vehicle expenses, taxes and any other expense you might occur. And don’t forget to include paying yourself in this budget.

During your first year of business you will most likely be operating with a negative cash flow. Most businesses do not show a profit until after year three and some not until their fifth year in business. This will be apparent when you put your forecast profit and loss statement together. A Profit and Loss Statement is a document that lists income less expenses for a specific period of time. The net result is either your Profit (income exceeds expenses) or Loss (expenses exceed income). You need to come up with a plan to cover the time periods when there is not enough cash coming in to cover your expenses. This plan might include using your personal savings, borrowing from family members or friends, taking in partners, selling off personal assets, working a second job, or maybe scaling back a bit. Making this plan will involve taking a close look at all your available ways to raise money for your start-up. It also may involve borrowing money from a bank. Try to refrain from mortgaging your home if at all possible. You don’t want to be in the position of losing your business dream and the roof over your head at the same time. Look into SBA loans, local business loans and grants. SCORE, a division of the SBA (Small Business Association) can be a great deal of help not only in finding financing but in all other areas of starting up your business including preparing your business plan. SCORE consists of volunteer business people who offer free business help.

All in all, your business plan provides a written document to guide you through your start-up and will keep you focused on your goals. Also if you are looking for funding, a well thought out business plan will show you are serious about the success of your business.

Copyright ©D. L. MacMillan All Rights Reserved

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Year End Tasks

14 January 2010, 9:40 am

©D. L. MacMillan, QuickBooks Training. Web Learning

The holidays are over and we have had a few days to ease back into our regular business schedules.  But with the new year comes a long list of tasks that need to be attended to in order that your filing requirements are met and your books are ready for your tax preparer.

The first tasks are definitely tied into a deadline and they are preparing your W2’s and 1099’s.  The copies sent out to employees and subcontractors need to post marked no later than January 31st.  You have a small reprieve this year however as the 31st lands on a Sunday moving the deadline to February 1st.  The filing deadline of these forms to the various government agencies (federal, state, local, etc) is March1st, 2010 (usually February 28th however again this day falls on a Sunday this year).

Before distributing either of these forms be sure to make sure the names and addresses are correct.  And the employee’s Social Security number or the subcontractor’s FID number matches the name on the form.  This is more likely to become an issue with subcontractors, as they may have filled out their W-9 with a dba name (doing business as) but using their Social Security number as their identifying number.  A Social Security number should be matched to the individual’s personal name and only FID’s used for a company name.

Verify that the information shown on the forms is correct.  Do the wages reported and the taxes withheld agree with your payroll records?  Have you included any taxable benefits are listed in the correct boxes?   If you have any questions regarding these amounts please consult either your payroll provider or your accountant.

Now that these forms are done and mailed, lets discuss what should be done about making sure your books are ready for tax preparation.

There are certain key accounts that should be reconciled and analyzed.  These include all bank, credit card, inventory and payroll accounts.

Reconcile your bank and credit card accounts to the year end statements.

If you are tracking inventory take a physical inventory count as close to the 1st of the year as possible.  And compare this to your booked inventory.  If there are discrepancies either in count or value than make sure your count is correct and if you find it is adjust your booked inventory as necessary.

Verify that your payroll liability accounts are in sync with what your payroll records are

reporting.

Review your accounts receivable and accounts payable agings.  Are there invoices that should be written off?

Review your Balance Sheet and Income Statement looking for any numbers that may not look right.  Perhaps you have an unusual high amount posted to office supplies for example (or any other account).  Was the cost of a computer purchase incorrectly posted to this account instead of a fixed asset account?  Verify that the entries posted in these accounts are correct.  The goal is to take a “does this make sense” review of these statements.

Wait until your January bank and credit card statement have been received and any transactions dated in the previous year are posted before you present your records to your tax preparer.

By taking these steps you will save time and money in the preparation of your taxes.

Filed under Your Business.
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Choosing Your Business Structure

4 December 2009, 6:30 am

©D. L. MacMillan, QuickBooks Training. Web Learning

You are starting up a new business. Congratulations. This is a very exciting time but it is also a time to make many decisions. This could possibly be a time when you will make more decisions at one time in the entire duration of your business. And one of those decisions will be the structure of your business.

There are several choices available to you and all have pros and cons to consider. You can choice from Sole Proprietorship, General Partnership, Joint Venture, Limited Partnership, Limited Liability Partnership or LLP, Limited Liability Company or LLC, Corporation, S Corporation, Not-For-Profit Corporation or a Professional Corporation. So what is the right structure for your business?

The first step is understanding what defines each of these business structures. A sole proprietorship is operated by a single person and that person is not considered an employee. It can be set up by an individual with little legal requirements and depending on the business may or may not require business licenses or permits. The owner reports the income or loss on their personal income tax return using a Schedule C.

A General Partnership requires at least two partners and should be defined by a legal partnership contract. Partners, like sole proprietors are not employees. Both personal and the partnership assets may be at risk. No separate income taxes are paid as income flows through the individual partner’s tax returns. Although a separate return (1065) must be filed. As with all business structures, certain permits and/or licenses may be required.

A Limited Partnership contains one or more general partners and one or more limited partners. A limited partner differs from a general partner in that they are only personally responsible up to the amount of capital they contributed to the business. They are also not directly involved in the management of the business.

A Limited Liability Company combines the advantages of a corporation and a partnership but maybe more complicated to set up. It also allows for a choice of how it will be taxed – as a partnership with income flowing through the individual partner’s returns or a corporation. Also non-U.S. citizens, resident aliens and other business entities can participate as partners. An unlimited number of partners are allowed and its owners are not usually held responsible for the entity’s debts.

A Corporation gives the participating owners some protections from the entity’s debts. Only one person needs to be a shareholder. This structure must be set up under the state law by filing documents. The corporation files and pays its own income taxes. Any income the corporation earns that is distributed to the shareholders is called a dividend and the shareholders must pay a tax in addition to what the corporation pay.

A S-Corp provides many of the same protections for its shareholders as a C-Corporation. However the income the S-Corporation earns flows through the individual shareholders returns with the business filing an informational return but not paying any taxes. This is true even if the business does not distribute any funds to the shareholders. The limit for shareholders is 100 individuals who are either U. S. citizens or Resident Aliens.

A Not-Profit Corporation is just what its name implies. This is a company formed for the express purpose of  not earning a profit. They may pay employees including the organizers of the business and expense those expenses against funds earned or collected. There are forms and permits required and you should confer with your individual state for their requirements.

Professional Corporations or PLLC’s are created under their state’s legal requirements and provide limited protections for its members against personal responsibility for the business’s debts. All the partners must be licensed to practice the profession the business is set up to provide and all partners are liable for their own malpractice insurance and any possible liabilities incurred from malpractice. This business entity can be set up as a regular corporation or a professional corporation.

The choice you make is dependent on whether you are going it alone or choosing to have partners or investors, how much protection you want or need from having your personal assets protected and how the tax requirements effect your personal or your partners own tax situations. This is not a decision to take likely. You can change the format of your business structure in the future, but making a change after you have been in business may require you to meet certain legal and tax requirements.

©D. L. MacMillan, QuickBooks Training. Web Learning Dissemination of this article in its entirety is allowed under this copyright.  Extractions of any content are not permitted for any purpose and the article must be disseminated in its present form without modification or change of authorship, whether in whole or in part.  This dissemination allowance applies to this specific article only and does not transfer to other publications copyright protected or developed by Donna L. MacMillan, D.L. MacMillan and Associates,  Bookkeeping R Us or CFOMAC.

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Using Classes In QuickBooks

3 December 2009, 4:00 am

Would you like to know how much profit is made by a particular department or location within your company? The use of classes will allow you to do just that providing you with reports showing the income earned and the expenses incurred for each segment of your business you wish to break out. For example, if your company is a retail store with more than one store it would be helpful to know just how profitable each store is. Or perhaps you are an electrician and would like to know whether you make more of a profit on commercial jobs versus residential work.

Setting up classes is very easy. First under the Edit pull down menu, choose Preferences. In the new window in the left hand column click on Accounting and then the Company Preferences tab. Check the box titled Use Class Tracking and the Prompt to assign classes box. To set up your classes, access the List Menu and choose the Class List option. On the bottom of the window that opens up click on the Class pull down menu and choose New. Name your class and click okay.

You will see a class field on all forms and should you save an entry without filling in the class you will be prompted to add a class. However, you will have the choice to either use a class designation or not to use one.

You may run a Profit and Loss Report by class by clicking on the Report menu, choosing the Company & Financial section and selecting Profit and Loss By Class. Other reports may be modified to show data by class should you wish. For example if you would like to see all open customer invoices by class, then bring up the Customer Open Invoice Report and click on the Modify Report button at the top of the window. In the Filter tab you may choose to filter by class and then you can either choose to filter by all classes or choose to filter on multiple classes. If you choose to filter on multiple classes an additional window will open and let you choose the classes you wish to see in your report.

As always QuickBooks gives business owners many ways to see and analyze their financial information in order that they might use this information in their quests for profits and success.

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