How to Survive a Worker’s Comp Audit

Posted on August 16, 2018 by admin

If you have employees, you have the distinct honor once per year of being part of a worker’s compensation audit.  You likely receive a form in the mail, an email request, or a phone call that will ask you about your payroll numbers and employees for the prior year. 

Worker’s compensation is an insurance program that covers employees in the case they get hurt on the job.  Each employee receives a classification code that describes the type of work they do, and a rate is figured based on the classification and its risk factors.  

If you’ve hired anyone throughout the year, you might need to get a new classification by contacting your provider. If you have employees working in different locations (especially different states), that matters too.

The audit form will typically ask for gross payroll numbers by employee or by category or location of employee. That’s easy enough, but seldom does the policy run along your fiscal year, so the payroll figure needs to be prorated to match the policy period. 

Your numbers need to tie back to the numbers reported on your quarterly payroll reports for both state and federal. The provider may also want copies of your 941s and your state payroll reports. 

Once you’ve submitted your numbers, the insurance provider will calculate whether they owe you or you owe them additional fees. 

The worker’s compensation audit happens every year (even if you pay worker’s comp premiums each pay period, some companies still request an annual audit).  It’s not difficult, but it is time-consuming. If this is something you’d like our help with, please feel free to reach out.  

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Setting Up Products and Services

Posted on August 2, 2018 by admin

The products and services your business sells make it unique. The same thing is true of how these items are set up in your accounting software.  Whether you’re using QuickBooks Online or something else, getting your products and services set up right can impact the quality of the information you can get out of your accounting system. 

Here are the types of items you can set up in most systems.

Inventory item

Inventory items are used in retail and wholesale businesses. They are physical items that the system can keep count of for you.  You can purchase or make the items, and the associated cost is usually tracked when a shipping receipt or bill is entered.  They are sold when a sale is made and an invoice or sales receipt is entered. 

Transactions using inventory items impact a lot of accounts on both the balance sheet (cash, accounts payable, accounts receivable, and inventory) as well as the income statement (cost of goods sold, sales, and returns).  The inventory item can be tied to default sales and purchase accounts in most systems. 

Non-inventory item

QuickBooks offers a type of item called a non-inventory item. There’s a big difference in that non-inventory items do not have quantities associated with them. They don’t increase or decrease the inventory account. But they are able to be tied to default sales and purchase accounts like inventory items above. 

Examples of non-inventory items include items purchased for a specific jobs, such as a contractor purchasing appliances for a custom home, items you sell but do not buy, such as an ebook or other digital product, and items you purchase but do not sell, such as shopping bags. 

Service item

A service item is a special type of non-inventory item. There are no quantities, which makes sense because services are not physical items. They also are only connected to a sales account and not a purchase account. 

With service items, you could set up service packages or hourly rates. 

Bundle

A bundled item is a group of items that were designed to be sold together. For example, if you sell a gift basket of coffee products, you would bundle the items used to create the basket.   

Assembly Item

An assembly item is a special type of inventory item where the quantity is tracked, but it differs from an inventory item in that it can’t be sold separately because it is a component and not a whole item.  Assembly items are available in larger accounting and inventory apps, such as QuickBooks Enterprise, and are used in conjunction with a Bill of Materials or other build feature.

An example is a set of shelves. The assembly components are the individual shelves and the frame pieces that you may want to keep counts of. An inventory item that contains the shelves, the frames, and other parts is “built” from the assembly items.  The nuts and bolts could be non-inventory items or assembly items, depending on whether you wan to keep count of them or not. 

Sales Tax

Sales tax is a very special type of item used on an invoice or sales receipt to calculate sales tax due on the order. In many accounting systems, it’s usually kept in a separate list from the other product and service items. Rates can be entered for each sales tax jurisdiction.

Other

Some systems have an “other” category to capture items such as freight, shipping, handling, and other add-ons to the sale. 

Tracking Profitability

Setting up the right type of products and services is critical to matching costs and revenue for accurate insights into gross margin. This section of your accounting system is also the one that’s most different from industry to industry and company to company. Be sure you get professional help from experts who know both the software and your industry for best results. 

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How to Cut Costs with Fixed Assets Management

Posted on July 19, 2018 by admin

Fixed assets are special kind of assets in your business. They include land, buildings, equipment, furniture, and vehicles that your company owns. While we frequently look at expenses to cut costs, fixed asset management is another place we can look to find ways to better utilize our resources and, in some cases, improve our profits.

Fixed asset management is a discipline that requires keeping good records of the assets a company owns. In the case of furniture and equipment, many businesses place an asset tag on the item and assign it a number that goes in a spreadsheet where data is kept about the item.  There are also software apps more sophisticated than spreadsheets that track all of the fixed assets for a company, including original cost, depreciation method and history, and tax treatment. 

You never know how many of an item you might have until you record and count them.  How many computers (and computer parts) do you have lying around your office?  Extra desks and chairs? Maybe you even have extra office space or extra land. 

Part of being a great entrepreneur is fully utilizing all the resources you have at your disposal.  Where can you put to better use the extra assets you have? Could you sell the surplus items?  Or donate them for a write-off? Do you have extra room to rent out to a tenant, earning rent? 

Sometimes we’re so focused on operating the core of our business that we don’t see what else is a money maker right in front of us. In addition to focusing on income and expenses from operations, consider the resources you have in your fixed assets.

At the very least, consider developing a spreadsheet that tracks the major items your business owns. Or reach out to us, and we’ll help you develop a fixed assets schedule and tracking process for your business. 

And if you do sell some of your fixed assets, be sure to reach out to us so we can help you book the transactions properly. 

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5 Tips on Bringing Home the Bacon

Posted on July 5, 2018 by admin

Whether you call it bacon, Benjamins, or big bucks, cash – and having enough of it – is key to running your business.  Here are five tips related to managing and getting the most out of your business cash. 

1-     All banks are not the same.

Choose your bank wisely, and don’t be afraid to switch if you need to.  Banks know they have a “high switching cost,” which means it’s one big time-consuming hassle for customers to change banks.

A couple of things that are important when choosing banks (some of which we never knew to ask five years ago) include:

  • Is your accountant able to connect your accounting system with free bank feeds, saving you hours and hours of accounting work?
  • How automated is your bank? The more automated, the fewer errors, and the more likely the bank is to have competitive services, features and prices.
  • What is their policy on holding large deposits?
  • Do they offer ACH services?
  • Does your payroll withdrawal need to be approved each pay period?

Accountants have experience with banks, so if you are in the market for a new one, feel free to reach out and ask us our opinion on the easiest bank to work with. 

2-      Keep the number of cash accounts to a functional minimum.

Certainly, you’ll need at least a business checking account, often a business savings account, a business PayPal account, and perhaps a petty cash fund.  You may also want a separate account for payroll; a lot of companies do. But if you need more accounts, there should be a functional business reason to support them. That’s already a lot of accounts to reconcile and keep track of each month. 

The same is true of credit card accounts.  It’s the keep-it-simple approach. 

3-     Reconcile all of your cash accounts every month. 

Keeping all of your cash accounts reconciled each month is a good idea. If a bank error, accounting mistake, or even fraud occurs, you can catch it and get it resolved more quickly than if you delay.

You’ll also have more accurate information about your balances and can move and manage your money better. 

As you learn your balances each month, you can also move money around.  Unless you spend a lot out of PayPal, plan to move that money to pay off debt or into your checking account on a regular basis.

4-     Maintain a cushion in your checking account. 

If your checking account hovers close to zero more often than not, you may be wasting precious time watching your bank balance instead of spending time to manage your business.  If you make a small error, you may get hit with costly overdraft fees, making your cash situation even worse. 

Instead, consider depositing a fixed amount, like a cushion, that you never spend. You won’t get overdraft fees, and you won’t have to watch your balance so closely.  You may give up some interest income, but the time freed up and the reduced worry will be worth a few extra pennies.

5-     Watch your liquidity. 

Cash is to business as water is to people; we can’t live without it.  Make sure you have enough to cover future obligations, and when possible, build up several months of reserve for emergencies. Anything that you can liquidate quickly, such as accounts receivable, can count toward this fund too. 

Try these five cash flow tips to keep bringing home the bacon in your business.

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Three Tips to Maximize Your Social Security

Posted on June 21, 2018 by admin

Social security is one of those topics that seems to be minimized by statements like, “You can’t count on it,” and “By the time you reach retirement age, it won’t matter.” Those statements are not only incorrect; they contribute toward a lack of education on what’s possible.

Social security is still a large part of how most seniors will be able to fund their final 20 to 30 years of life. The options we take toward claiming the benefits that are rightly ours are often permanent and can affect our lives and our finances significantly, often by tens of thousands of dollars.

No matter your age today, here are three things you’ll want to dive deeper into when the time is right for you.

Claim date

For retirement purposes, most people will claim their social security payouts any time from age 62 to age 70. It’s your choice to decide when you make the claim and start your benefits. But, and it’s a very big but, the amount you get each month will vary depending on your claim date. Generally, the later you wait, the higher your payout will be.

The federal retirement age for social security purposes depends on when you were born and creeps up a little each year. If you were born in 1954, your retirement age is 66 years old. If you file your social security claim on your retirement age, you’ll get 100 percent of your benefit. If you claim at 70, you’ll get 132 percent of your benefit, which can make a huge difference in payout over your lifetime: tens of thousands of dollars of difference. If you claim early at age 62, you’ll get far less.

Taxability

Your social security income may be taxable if you earn income in the same years you are collecting social security and if you surpass an earnings threshold. This takes many seniors by surprise. There are ways to plan for this, and they are so specific to each family circumstance and often so complicated that software has been developed to calculate all of the situations.

Eligibility

The amount of your social security payment is affected by dozens of factors, including family members’ ages, how much they paid into social security, pensions, previous marriages, and disabilities, to name a few. If any of your family members are disabled, there are payments for that in some cases.

If you are divorced and were married for more than 10 years, you are eligible for spousal benefits. And if you are married, you are also eligible for spousal benefits. If your spouse has passed away, you are eligible for survival benefits, which could increase an existing payment if your spouse earned more than you did.

Social security is clearly a topic where you don’t know what you don’t know. It’s so complex at this point that most people should work with an advisor that has software that can show multiple claiming options that optimize their lifetime payout or meet their financial retirement goals. If we can help, please reach out.

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Do You Spend Too Much Time on Email?

Posted on June 7, 2018 by admin

If you feel like you spend too much time on email, you’re not alone. Almost everyone feels the same way. That’s why it’s so important to learn how to be as productive as possible when it comes to handling email. Here are five tips to help you do just that.

1- Automate your emails.

If you’re sending a lot of the same emails to clients, you may be able to add them to email list management software like Constant Contact or MailChimp. Then you can automate a series of emails using the autoresponder function.

Another way to automate your emails is to set up inbox rules so that certain emails are automatically filed into the folders you’ve set up. For example, if you get a monthly email for a recurring bill payment, you could send it straight to your bills folder if you don’t want to read it. This will save time in the morning when you sort through the pile of email that’s sent overnight.

2- Set a timer.

Make a habit of checking your email only once or twice in the day. Plan those times on your calendar and set a timer to stop if you need to. This employs time batching, one of the most productive ideas in time management. It’s unproductive to stop and read each email exactly as it comes into your box, so setting times restructures the way you work with email for the better.

3- Create draft email answers of your ten most frequently asked questions.

Do you get a lot of the same questions over and over again in your email? Don’t start from scratch each time you craft an answer. Start with a draft of a previous answer, make it generic, and save it in your drafts folder. When you get that question again, copy and paste the draft and customize it as necessary.

Repeat this for your top ten (or twenty) most-asked questions or emails that you send. You’ll shave minutes off each email reply from now on.

4- Learn the email software you’re using.

Sure, everyone pretty much knows how to send, reply to, and forward emails. Most even know how to add attachments. But what else do you know and use on a regular basis?

If you are tech-savvy, then simply spend some time reviewing your email settings and functions. There may be some you discover that will make your day.

If you don’t feel very comfortable with all things technical, then sign up for a formal course, preferably in person, where you have a real human teacher that can answer all your questions. It will be a day well spent.

5- Set up folders.

Folders, labels, or categories in your email software are all good ways to segment email so that it can be processed in a particular order. Your folders might be by priority, client, service type, or something else. In any case, it’s easier on your brain to answer all questions from one client or topic at a time than it is to ping-pong back and forth.

Use folders when you are complete with an email but want to save it for future reference. That way, your inbox will stay cleaner and emptier.

6- Use the search function.

Using the search function liberally in your email software when you need to find an old email will help you save tons of time.

7- Get a new email address if your current email address is too spammy.

You may be losing the spam battle with email addresses that have been used for more than a few years or that have been hacked. If so, the best solution might just be to switch to a new email.

Choose a good email address in the first place by staying away from email addresses that hackers can guess, like webmaster@yourdomain.com, sales@yourdomain.com, or info@yourdomain.com. Instead use service@yourdomain.com or a version of your first and last names.

Try these email productivity tips to help you spend less time on email while still getting the job done.

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Cool Apps: Accounting System Add-ons

Posted on May 24, 2018 by admin

Accounting software continues to evolve decade after decade. It started out as one big massive complicated set of programs that only large companies could afford. Today, cloud accounting is the modern solution, and today’s accounting systems are designed to meet the core requirements of most businesses rather than doing everything.

Enter apps. Apps are the add-ons to accounting systems that can enhance functionality, and there are now literally thousands of them. In this article, we’ll look at some of the major categories of apps in the accounting marketplace.

Payroll

Probably the most common add-on to accounting systems is payroll. There are many payroll providers in the U.S. and Canada, including Intuit, ADP, Insperity, Paychex, Ceridian, and Nethris. In the small business space, Intuit, ADP, Paychex, SurePayroll, and Gusto are names you’ll see.

The payroll space includes other related offerings, including support for human resources functions, where you have Gusto and Zenefits, related payroll functions such as workers compensation, where you have AP Intego, and time tracking, where you have TSheets and many more options.

Selling, Collections, and Invoicing

Retail and other businesses will likely have a separate point of sale system consisting of a cash register to ring up sales and a payment collection process to take credit cards, cash, and other forms of payment.

Ecommerce businesses will have an online shopping cart connected to a gateway and a payment processor, and in turn, your bank.

Field service businesses may have a mobile point of sale system connected to a field service system like Jobber or ServiceTrade that lets them create quotes, present invoices, and collect payments.

Service businesses may use an invoicing system that may or may not be connected to time tracking if hourly billing is used. A calendar system might be connected in the case of coaches, hair stylists, massage therapists, and the like.

There are micro apps such as one that will connect your accounting system to Stripe, and major systems that do several of the above functions.

Cash Flow

There is a multitude of cash flow and accounts receivable collection apps that hep you get paid faster or start collection processes when you don’t. This category also contains lending apps in case you need a business loan.

Accounts Payable and Expense Management

On the expense side, there are apps to help you with entering, matching purchase orders, invoices, and shipping documents, approving, and paying bills. For businesses with a large volume of expense reports submitted by employees that need approval and payment, apps like Expensify, Concur, and Tallie are available.

Inventory

For businesses with inventory, there are several inventory apps that will manage the inventory and ordering process. Other apps will help with bar code functions, labels, and shipping.

Data Entry and Document Management

Apps like AutoEntry, ReceiptBank, and HubDoc will transform a cell phone photo of a receipt into a transaction in your accounting system with very little human intervention. Document management apps will help you stay compliant with the document requirements of the IRS, CRA, and other tax authorities.

Other apps like ScanWriter and Transaction Pro Importer can bring transactions into your accounting system from paper documents and other files.

Connectors

Apps like Zapier are available simply to connect one accounting app to another. For example, A2X brings Amazon data into QuickBooks.

Reporting

Dozens of apps are available to help you enhance your reporting, create a dashboard of metrics, plan a budget, or present a graphical view of your financial and non-financial key performance indicators. These include Fathom, Corelytics, LivePlan, Spotlight Reporting, and Qvinci, to name a few.

If you have a function in mind that you wonder if your accounting system can meet, give us a call and we’ll be happy to discuss your options. There’s an app for just about anything these days.

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How to Read Your Income Statement

Posted on May 10, 2018 by admin

The income statement of any business is probably the most important report of all. It is a snapshot of the financial performance of your business over a period of time, such as a month or year. You might also hear it called the Profit and Loss Statement, or P&L.

The income statement can give you all kinds of insights as to whether you are bringing in enough sales, if your prices are generating enough profit, and how your expenses are running. Let’s take a look at the report, step by step.

Revenue

The report starts by listing the revenue for the period of time covered. Revenue includes all sources of income, including sales from operations, interest and investment income, revenue from insurance claims, sales from assets or other parts of the business, and any other source of revenue. In most small businesses, sales will be the largest part of the revenue, if not all of it. In some countries, the term used for sales is turnover.

If you sell more than one item or have more than one location, it might be a good idea to be able to view the sales detail from these categories. This may or may not be on your income statement depending on how formal it is, but you should be able to get a drill down report on your sales detail.

Look for exceptions to what you expect to see. There can be some decisions you can make and actions you can take from the insights you discover.

Cost of Goods Sold

This section of the income statement includes costs you incur directly on items you sell. If you maintain an inventory, it’s the cost you paid for the inventory items that you sold during the period. If your business is a manufacturer, cost of goods sold, or COGS, will include costs of materials and labor to produce the items.

If you own a service business, COGS will typically be zero. As a service business, you may incur direct costs when providing services, and these costs can be booked in a variety of expense accounts, including supplies.

Gross Profit

Some income statement formats will include a gross profit number which is sales minus cost of goods sold. This number is important for businesses with inventory.

Expenses

The expenses section of the income statement is the longest part. It includes all of the expenses you incurred in your business, including advertising and marketing, rent, telephone, and utilities, office supplies and meeting expenses, travel, meals, and entertainment, payroll and payroll taxes, and several more.

You might also hear the term overhead. Overhead is a subset of expenses that have to be met whether you sell zero items or millions. They include items like rent and utilities, management payroll, and office supplies.

To review your expenses, check line by line to see if anything looks out of sorts, and take the appropriate action.

Net Profit or Loss

The final number on your income statement represents whether you made or lost money in the period the report covers. The formula is simple: revenue less COGS less expenses equals net profit or loss.

Net profit/loss can go by many names, depending on the size of your business and your accountant’s vernacular. You may also see EBITDA: Earnings before interest, taxes, depreciation, and amortization. Earnings is another word for net profit.

Perspective

It’s a good idea to compare your income statement numbers to other periods in your business. Common comparisons include last period, last several periods, and same period last year.

It’s also a great idea to have a budget that sets goals for your income statement numbers. Then you can compare budget to actual numbers and take action on the variances.

If your business falls into a standard type of business, you may also be able to see how it is doing compared to others in your industry. This is called benchmarking, and the income statement is a very common format that’s used in benchmarking.

Do spend some time each period reviewing your business’s income statement. It can help you make a faster course correction in your business so you can be even more successful than you already are.

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Boost Your Accounting Know-How with These Terms

Posted on April 26, 2018 by admin

The field of accounting has its own vocabulary, which can sound like a foreign language to some people. Your financial savvy will increase by learning a few new accounting terms. You’ll be “speaking accounting-ese” in no time, and you’ll become a smarter entrepreneur too.

Trial balance

A trial balance is an accounting report that simply lists the current balances of your accounts in your chart of accounts as of a certain date. It can also be called working trial balance. Another way to look at the trial balance is it’s a very informal version of a balance sheet.

Entity

Entity is a generic term for a company or organization. There are many types of entities: nonprofit, corporation, partnership, and sole proprietor.

Going concern

Going concern is an accounting principle. An entity is a going concern if it’s expected to continue operations in the near future.

Double entry

A double entry bookkeeping system means that when a transaction occurs, two accounts are impacted. For example, when an invoice is generated, entries are made to both the sales account and the accounts receivable account. It was invented in the 1400s and is widely used in modern accounting today.

Retained earnings

Retained earnings is an account in the equity section of the balance sheet. It’s the amount of earnings that is reinvested in the company after dividends are paid out. It’s computed by taking the retained earnings beginning balance, adding income or subtracting loss for the period, and subtracting any dividends paid.

Realization

A business transaction has many stages. It starts with an idea, may progress to a promise, then it actually happens. Accountants need to figure out when it becomes “real,” when to record it on the books. This is the concept of realization. A transaction is realized and put on the books when there is a contract, a legal obligation, an exchange of products or services, or an exchange of cash. There are many complicated principles and rules to help accountants determine this timing.

Cost principle

The cost principle is a foundational accounting principle. It means that when a transaction is booked, it is booked at cost and not market or current value. So even though an asset may have gained in value after you bought it, your books will still reflect the cost of the item, not the current value.

Client portal

A client portal is a software application where client files can be stored and retrieved securely. Both the accountant and the client have access to the portal.

Engagement letter

An engagement letter is the contract that defines the relationship between the client and the accountant. It is typically signed before the work starts and can be renewed once a year. It can also be changed if the scope of the work changes.

Matching

The matching principle is another basic accounting principle. It says that for any particular transaction, all aspects should be booked in the same accounting period. For example, let’s say you incurred expenses on an order in November. The order wasn’t delivered or invoiced until December. To meet the matching principle, the expenses should be deferred until December when they can be matched with the revenue that relates to the expenses.

Adjusting entry

An adjusting journal entry is made when account balances need to be corrected. An example is depreciation expense, which is typically booked with an adjusting entry. Accountants will make several adjusting entries like this at year-end.

Reversing entry

A reversing entry is a form of adjusting entry that is made in the period following an adjusting entry. It reverses the adjusting entry. One example of this is a cash basis taxpayer that is tracking accounts receivable. The accounts receivable balance is adjusted to zero prior to year-end and reversed on January 1.

How many terms did you already know? Now you can talk with your accountant about these concepts.

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Five Fun Customer Perks to Set You Apart in the Marketplace

Posted on April 12, 2018 by admin

It’s always fun to surprise and delight your customers. This puts a smile on your client’s face, boosts loyalty, and is fun for your employees too. Here are five ways to surprise and delight your customers with inexpensive perks.

1. Handwritten thank you note.

Email and social media have all but killed the handwritten thank you note. So when you send yours to your top customers, it will really stand out.

2. Promotional items.

Promotional items are frequently handed out at trade shows, but they can be used in other settings too. These are items where your logo is typically imprinted and you purchase them in quantity. Items that are useful and popular include coffee mugs, t-shirts, fidget spinners, screen cleaners, webcam covers, keychains, note pads, calendars, and more.

Choose an item that is similar to or a reminder of your business or product. An IT consultant might choose a screen cleaner, while an accountant might choose a piggy bank.

3. Coupon bag.

If your business is located in a strip center, shopping mall, or office building with other businesses around, go door to door and ask for coupons that you can put in a coupon bag to give to clients. Clients will be delighted to get a coupon for the dry cleaners, florist, and hair salon in your center no matter what type of business you’re in.

4. Random prize.

If your business has a stream of clients coming in a physical store or a virtual one, you can award prizes randomly to customers. If customers are grouped together as in a classroom or lecture hall, it’s easy – you can hold a drawing for a prize. Or you can select a random number and the customer assigned that number wins a prize.

Choose a prize from one of your services or products, or give something away that’s universal and “hot,” such as an Amazon Echo Dot.

5. Free samples.

The cosmetics industry has been giving away free samples and gifts with certain purchases for decades. Grocery stores often have free samples of food at a little booth staffed by a host at the end of an aisle. You might be able to apply this idea to your business with a little bit of creativity.

Think of how you can “sample” your service or product and package it up in a free gift or sample. If you offer a service, you may have to get extra creative. A consultant can offer a book that’s related to the service offered, a spa can have healthy treats while clients wait, and a divorce attorney can offer stress balls or fidget spinners.

With customer service declining in many businesses, try these five things to wow your customers and set your business apart.

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