Living An Abundant Life

Thanksgiving and the start of the holiday season is a great time of year to reflect on all that we have to be thankful for. Fun celebrations abound at this time of year allowing me to focus on spending time with friends, loved ones, colleagues and clients. It is time when I focus on my abundant life.

Abundance is a mentality in how we live our lives; interact with others and how opportunities present themselves both on a personal and professional level.

This year has been an abundant one for me.

From the joy I get at watching my grown children live their lives, experiencing things together and apart and learning from each other based on different perspectives, to growing from the opportunities that have presented themselves in running my business. Learning and adapting to change every day keeps me growing and is fun most times even with the challenge of figuring out how to stay in touch upon the loss of my cell phone for 3 days after it fell into the cleaning water bucket at puppy training class (was there really life before cell phones?).

With year-end approaching and being in business, it is a time to make sure everything is up to date and look at the results. I have also experienced abundance in working with a great team of people and delivering the results to help businesses grow through having good and meaningful financial information. Our team loves working and showing businesses how to run more efficiently and effectively with good accounting processes and reporting.

This holiday season, what are you most thankful for?

Are You REALLY Reconciling Your Bank Accounts?

Business owners frequently tell us that they are “reconciling” their bank account because they are categorizing and matching transactions downloaded into the connected bank feed.  While bank feeds have significantly reduced the amount of time a business has to spend doing data entry and allows for business to have real time information in their accounting system, it is NOT a replacement for doing formal bank reconciliations.

The bank reconciliation process requires the matching of transactions recorded in the accounting system to a bank statement received from the financial institution at the end of each month. It is the only way to ensure that all transactions recorded in the accounting system actually took place and are properly recorded.  It is a check and balance to safeguarding a business owner’s most important asset, cash.

Problems That Can Occur

Not doing formal monthly bank reconciliation could be costly to a business owner and can result in inaccurate financial statements due to any one of the following:

  • Duplicate entries

  • Missing transactions

  • Transactions entered for the wrong amount

  • Transactions entered that never took place

How This Affects Business Image

This can lead to making bad business decisions based on misinformation verses the actual results of the business.  The business image with customers and vendors could be negatively impacted if accounts receivable and accounts payable aging reports are not accurate due to misapplied receipts or payments. Any one of the above errors could also result in theft of cash.

How This Affects Taxes

No business owner wants to pay more than they really owe in taxes. If there are duplicate income amounts recorded in your accounting system you may be paying too much in income taxes. If expenses either don’t get recorded or get recorded incorrectly, you may be missing or not taking enough of a tax deduction again resulting in paying more taxes.  If audited, IRS agents will ask to see your bank statements and bank reconciliations.

How We Can Help

We guarantee that the time and cost it takes to properly reconcile your bank accounts on a monthly basis will be less than the headaches and errors that could result by not doing it at all. Our expert trainers can show you how to properly and efficiently download and reconcile your banking and credit card activity.

The Concept Of Internal Control

Internal control is a very special phrase in the accounting profession. Tactically, it’s the set of processes that help a company produce accurate data throughout the organization, follow reporting requirements and laws, and maintain consistency and accuracy in its operations. Strategically, it’s an entirely new way of thinking and doing business.

Internal control helps to reduce organizational risk. A blunt way of putting it is internal control is what you put in place to avoid mistakes, intentional or accidental, and to control accuracy and quality. It impacts every aspect of an organization.

As a small business, you’ll want to be familiar with the concept because it can help you reduce risks you might not realize you have. Here are some practical examples of good ideas that support internal control:

  • When data is private and secure, provide access only to employees who need to know the data and restrict access of others. 

  • Have someone check that your bank balance matches the reconciled amount in your books, and that someone should be different from the person who does the reconciliation.  This is an example of what’s called segregation of duties. 

  • Lock up paper checks and use the missing check number report to make sure none of the stock could be used for nefarious purposes.

  • Have employees sign in and out equipment that they take home.  This is part of asset management.

  • Write and enforce a hardware and software use policy that includes items like employees should make sure their anti-virus software is active at all times, they should not bring in disks or CDs, and they should not download games or other unauthorized programs.  This protects from computer viruses and helps to avoid catastrophic network failures.

There are literally hundreds of internal control procedures that should be implemented in small businesses as they grow into larger businesses. 

Internal control is typically a big part of an audit or an attest function in accounting; it determines how many additional procedures an auditor needs to do in order to provide assurances about the reliability of the financial reports.  But it’s also just good plain common business sense to implement as many internal control processes as are cost-effective for your business to protect it at the level of risk you’re comfortable with. 

If you’d like to discuss the idea of internal control further, please feel free to reach out any time. 

5 Ways To Make Your Business More Efficient

A great entrepreneur will always be on the lookout for ways to improve their business. Efficiency is a goal everyone wants to achieve when it comes to business because it can translate into less work and more profits. Here are five ways you and/or your staff can become more efficient in your business.

1-     Get software-savvy.

Do you use the same software apps day in and day out? If you do, ask yourself how well you really know them? Are you able to just get by or are you a whiz with deep knowledge? If you’re just getting by and spending a lot of time wandering around or undoing things, you may want to take a course in that software. 

The deeper our knowledge is in the apps we use every day, the more proficient we can be.  This is true of all of your staff as well.

2-     Reward new suggestions.

Your staff will be the first to know where there are bottlenecks and hiccups in your processes. Encourage them to speak up when they find something that could be improved. Listen to their ideas and reward the good ones. Implementing ideas from your business’s “front line” will increase its overall efficiency. 

3-     Watch your time.

How do you spend the bulk of your day? Working on new strategic projects, fighting fires, or a little of both? An honest evaluation of how you spend your time can yield many ideas about what’s going right and what needs work in your business. 

Allocate at least an hour a day to work “on” your business instead of in it.  That time is the only way your can move your business to the next level. If you’re the CEO, the focus should be more external than internal, more proactive than reactive, and more strategic rather than operational.  

4-     Avoid “bright shiny object syndrome.”

Are you easily distracted by an email (that you didn’t realize waylaid you into an hour of unproductivity), a web link, or a conversation?  It’s crazy-easy to get sidetracked right in the middle of a task these days. It’s also easy to purchase something that looks great without doing your homework.

One way to avoid unnecessary purchases is to get three bids from potential vendors on all major purchases for your business.  Make it a procedure so that you’re not lured into fancy marketing and items you might not ever use once you see the fine print. 

5-     One person’s trash is another’s treasure.

When you start to look around your office, you might be surprised at all the things you haven’t used in a while. Laptops that have been replaced, office supplies that were accidentally double-ordered, those folders you were going to use two years ago for a marketing campaign, even extra desks and chairs that are now empty: all of these items could be recycled to not only free up space but also get you some cash. 

Which idea do you like best?  Try it next week to improve your business efficiency. 

Should You Have A Financial Dashboard?

A quick glance is all you need to check your fuel gauge, speed limit, engine temperature, and RPM when you’re driving down the road. Your car’s dashboard is designed to focus you on what’s important and what you need to know to have a safe trip.

Your car’s dashboard items, if they applied to business, would be called key performance indicators or KPIs. Unlike a car’s, the KPIs of your business vary depending on your business goals and what’s important to you. Common ones might include your cash balance, how fast you get paid, how much revenue is coming in, and whether you’re making plan. There are literally hundreds of them to choose from, and many of them are not derivable from your financial statements, such as number of orders, client satisfaction levels, and employee turnover. 

Would it be useful to have a dashboard of KPIs for your business so you can know what’s working and get alerted to what needs focus? Here are the steps to creating a dashboard for your business:

  1. Decide on the KPIs you want to track.  Selecting 6-10 to create and track is a good place to start. 

  2. Select a tool that will provide you with the KPIs in the format you desire. There are many great add-ons to your accounting software that will instantly crunch the financial KPIs for you and present them in insightful formats, including charts, graphs, dashboards, and reports.

  3. Create any new processes to calculate the new KPIs and get them entered into the dashboard app.

  4. Hold a review meeting to go over the KPIs and determine any action based on the review. 

There are many great KPIs available right in your accounting system, which might be plenty to get started with. And there are some real gems outside your accounting system that will take a bit of work to calculate. In any case, we can help you through this process.  Feel free to reach out to us any time to discuss the possibilities of having a dashboard in your business.   

How To Survive A Worker's Comp Audit

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.  

Setting Up Products And Services

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. 

How To Cut Costs With Fixed Assets Management

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. 

Growing Your Accounting Garden

With over 22 years of experience in landscape architecture, Barbara Wilson, principal of Barbara Wilson Landscape Architect LLC of New Canaan, CT (http://wilsonlandscapearchitect.com) knows what it takes to design and manage homeowner or commercial landscape projects, from simple residential gardens to navigating complex wetlands approval processes, she is known within the industry for her high-level design expertise and customer service.

Each project Barbara runs requires that she first do a site analysis, surveying the landscape and seeing what there is to do.  After her initial survey, she documents her findings and then creates a plan to design a landscape of someone’s dreams.

So when Barbara first came to meet with the SIMPLY Financials PLUS team,  to ask us to assist her with designing an accounting system and workflow that would work for her in her business and allow for future growth, it was a natural fit for her.

“I initially came to Sharon and her group with an excel spreadsheet and a stack of papers – invoices that were produced in Word, deposit slips and check stubs and bank statements.  While I knew how to invoice customers and receive payments, pay bills and create a spreadsheet of my business income and expenses, I had no idea how to put it all together. I knew my current system would not work for me in the long run as my business was taking off and growing.  QuickBooks was the accounting system used at the previous landscape architecture offices I had worked at so I had some familiarity with the software and thought it would meet my business’s needs.

Similar to what I do in my business, a “site analysis” was done of my current accounting processes including reviewing how I invoice customers, track professional billable time and client reimbursable expenses.  Using QuickBooks Online (QBO) was a perfect fit for me for anytime, anywhere access to my accounting information since I am always on the go.  An implementation plan was created to set up my QBO file- creating opening balances in my accounts, setting up my Customers, Vendors and the Items lists, a Chart of Accounts and connecting QBO to my bank and credit card accounts so it would automatically download allowing me to record activity in real time.  I love how they helped me create a customized invoice template that projects my professional image. Even better is how easy QBO is to send out invoices and receive payments by ACH or credit card with a click of a button allowing me to effectively manage my cash flow on each project. The invoice template they helped me create truly projects the professional business image I wanted.   What I especially liked was that the one on one customized training sessions was done by a trainer who held advanced certifications in QBO, allowing me to learn how to use the software with ease and in just a few sessions.”

“Like designing elegant plantings that enhance any property, and working collaboratively with my clients to realize every detail of their vision, the team at SIMPLY Financials PLUS created an accounting workflow for me that has allowed me to create the financial reports I need to manage the financial side of my business with ease, allowing more time to do the design work I love.”

To see how SIMPLY Financials PLUS team can help you design the accounting system of your dreams, meeting your needs and designing your business landscape, contact sharon@simplyfinancialsplus.com.

5 Tips On Bringing Home The Bacon

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.

5 Financial Spring Cleaning Tasks You Should Make A Priority

While the idea of spring cleaning might make you think of kitchen cupboards and closets, there’s another kind of spring cleaning you can give your attention to (and we think it might be even more important!)

Your finances!

While the hot and cold spring weather doesn’t seem to be able to make up its mind just yet, here are 5 things you can make up your mind about right now – and you can do them all without having to guess if you need a jacket or not!

Here are five financial spring cleaning tasks you should make time for ASAP:

Purge clutter

  • If you have already filed your income tax returns, you can clean up by shredding statements, bills and other financial records. Go through your piles and drawers of papers, only keeping the documents that are absolutely necessary. As a rule of thumb, hang on to tax records and supporting documents for seven years. If it gives you peace of mind to keep hard copies you can, but the IRS is fine with digital copies. Remember, there is no need to hang on to paper records forever. If you are worried about not having something for reference, just scan it or make a digital copy of the record and then shred it. Note: Lots of groups and businesses host a day to bring your papers to a shred site. Check to find out if there’s one happening near you soon!

Clean up your accounts

  • During tax season, it gets crazy trying to get your records in order for your tax accountant, and that sometimes means that you fall short when trying to keep up with your current accounting. Take the time now to catch up and clean up

Touch base with your tax accountant

  • Yes, you just finished filing your returns, but now is the time to look at the first quarter’s results and see if any changes need to be made to your estimated tax payments going forward. With the tax rules changing, this is especially important this year.

Upgrade your accounting system

  • Don’t be caught unsupported. Each year in May, Intuit sunsets all of its products that are three years older than the current product. This means that all versions of QuickBooks 2015 (Pro, Premier, Enterprise, Accountant and Mac) will no longer be supported as of May 31, 2018. If you have Intuit services that you integrate with your 2015 QuickBooks software, such as Desktop payroll services, credit card processing, bank downloads and others, they will no longer work. But don’t worry, we can help you upgrade and show you new features in QuickBooks 2018.

Review your current financial reporting

  • Your business’s financial statements are your best indication of its current financial health and your most effective tool for making critical business decisions. At a minimum, you need to know if your business is making a profit or losing money. Also, knowing what lines of your business are profitable are key. Review the financial information you are getting from your accounting system and determine if changes in processes and/or reporting are needed.

While most people don’t think of finances as fun, the biggest reason they don’t is because they’re always behind and disorganized! Take advantage of this “spring cleaning” mindset and get financially organized right now. Not only will it make you feel better, but it just might help you find ways to make (and save) more money – and what’s more fun than that!?

Cool Apps: Accounting System Add-Ons

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.

How To Read Your Income Statement

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.

Boost Your Accounting Know-How With These Terms

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.

Five Fun Customer Perks To Set You Apart In The Marketplace

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.

Cool Apps: Food Delivery Options

If you haven’t looked recently, there is a whole new world out there designed for our convenience. One of these conveniences is food delivery. This industry has changed so much that it deserves a fresh look.

No longer do you need to go out for lunch if you are having a busy day or just need to stay in the office for any reason. You can simply order lunch on your cell phone, and it will be delivered approximately 45 minutes later to your door.

There’s an app for that

It used to be that you could only get pizza or Chinese food delivered, but those days are over. Some restaurants will deliver directly, but there is an easier way. Food delivery apps such as GrubHub will let you order from hundreds of different restaurants in your area while they send a driver to collect it and deliver it to your door.

How much will it cost me?

First, ask yourself how much you are worth per hour to your company. Or, if you will get home earlier because you don’t have to go out for lunch, ask yourself what the value of spending more time at home or with your family is worth to you.

Besides the cost of food, you’ll pay a delivery fee of $0 to $5 and a tip for the driver. When you factor in the cost of your time, gasoline, and wear and tear on your vehicle, using a food delivery company is a no-brainer. Not only will you be helping yourself, you’ll be helping a hard-working driver, too.

What are my options?

The specific options in your location will vary, but some of the companies that are offering food delivery services include:

  • GrubHub and Seamless

  • DoorDash

  • Eat24

  • Postmates

  • Caviar

  • UberEats

  • Delivery.com

  • Amazon Prime Now

All you need to do is download the app, set up an account, choose a restaurant, and order your food. You can also order from your PC or Mac using a browser and visiting their website.

Try these food delivery apps, and while you’re at it, treat the entire office to a meal.

How To Evaluate Your Marketing Spend

One of the most important success factors of small businesses is the ability to generate revenue, and to do that, most businesses need to market their services and products to bring in new customers and sales. The challenge for small business is how to make their marketing dollars work the hardest, and this requires careful tracking and measurement. Here’s one way to get started tracking your marketing spending so that you can find out what’s paying back the most.

List your sources of revenue

First, determine where your sales are coming from by making a list of all the ways you are currently attracting customers. Here are a few:

  • Website via search

  • Social media

  • Google ads

  • Referrals from existing customers

  • Ad in local magazine

  • Article on Huffington Post

  • Board membership on local nonprofit

  • Chamber of Commerce membership and participation

Track your expenses by source or method

Once you have your list, it’s time to look to your accounting system. Create accounts or other types of tracking codes in your system to track expenses for each of these marketing methods. If you need our help, please feel free to reach out.

The goal of this step is to be able to get all costs associated with each of these marketing methods so that you have a total cost over time by method. Don’t forget labor: if an employee spends three hours a week updating your social media accounts, this should be included in your costs.

Determine the source of your sales

To the extent you can, match the sales that come in with the marketing source or method. In other words, if a customer knows you from the Chamber and spends $500 with you, match the $500 revenue with the Chamber marketing source. Do this for every sale you can. If you don’t know or can’t attribute the sale to any one method, then code it to an Unknown tracking code or account.

This step can be difficult, depending on your business type, especially if your customers are anonymous, as in retail or restaurant sales. However, every business can do better by asking “how did you find out about us?” to each new client that comes in and recording that answer.

For online sales, you can use tracking apps such as Google Analytics to help you measure digital marketing methods.

Do the best you can on this step, and implement procedures to capture this information as accurately as possible for future sales.

Analyze and adjust

This is the fun part. Once you’ve done all the hard work, you should be able to match sales to costs and determine the volume of sales that are coming in for each marketing method. Let’s say you found out that you are getting no sales from your nonprofit board membership, the Huffington Post article, and social media. You now have some decisions to make.

If you are doing these things solely for the purpose of marketing, you could cut them out and focus on the remaining methods. It could also mean that you need to redo your social media strategy; it’s not working now, but another strategy might. Or just one article in HuffPost is not enough, but three articles could start paying off.

At any rate, you have far more information than you did before you started, and now you can make smarter decisions about your marketing. If we can help you code and crunch all of these numbers, please reach out any time.

Making Deadlines Can Save You Big Bucks In Your Business

There are a lot of deadlines that come with running a business. Missing some deadlines can have serious financial implications to the health of your business. Let’s take a look at how much you’ll save by being on time with the following deadlines.

Payroll

One of the toughest deadlines of all, making payroll, is essential to keeping employees happy. Making payroll tax deposits on time is even more crucial. You’ll save the following in penalties by staying on time with payroll deadlines:

  • If you’re 1-5 days late with payroll tax deposits, the penalty is two percent of the payroll.

  • If you’re 6-15 days late, you’ll pay five percent in penalties.

  • If you’re more than 15 days late, the penalty goes up to 10 percent.

And that’s just the federal penalties, not your state penalties.

Income Taxes

Everyone knows about the April 15th deadline to file your taxes. Some people file an extension and have until October 15th. However, we need to remember that the best estimate of your tax liability needs to be paid by April 15th even if an extension is granted. Failure to correctly estimate and pay income taxes leads to a penalty that is calculated by multiplying the number of days the tax is late by the effective interest rate.

Paying Vendors

If we’re slow to make our accounts payable payments, our vendors may tack on a penalty, but the larger consequence is the effect on our credit score.

Business Goals

It’s so easy to let internal deadlines slide, but they may be the most important of them all. To move your business forward, set goals with deadlines so that you can measure your results.

Mastering Deadlines

Here are a couple of tips to master your deadlines so you can avoid the above consequences:

  1. Keep a list of deadlines, or hire someone to help you with them.

  2. Make a mental commitment to yourself that the deadline is important to your business.

  3. Set aside the time you need to prepare for the deadline.  Block time on your calendar and stick to it.

  4. Remind yourself of the consequences of missing the deadline.

  5. Try not to overcommit. Delegate other tasks when possible.

  6. If possible, automate or systematize the processes around the deadline so that it’s met automatically.

  7. Stay up late if you have to in order to meet your deadline.

  8. Celebrate when you meet your deadline!

Is Your Workplace Female-Friendly?

Attracting and retaining talent in your small business can be a giant step toward growing into a mid-sized business. Beyond attracting new employees with salary and benefits, here are several perks, policies, and benefits to consider when recruiting women, and employees in general, to your workforce.

1. Flex work hours.

Everyone likes regaining control over their workday, and offering flex hours can be one of the lowest cost policies to implement. Flex hours support work-life balance and are especially important for employees who have school-age children who can plan work around their children’s day.

2. Wellness initiatives.

Large companies are able to offer a wellness program, but small companies can take small steps to reach the same result. Find a local gym to partner with for a membership discount. Bring in the occasional yoga teacher. Or hire a nutritionist to speak once a quarter to your employees. All of these small initiatives demonstrate to your employees that you honor a culture of wellness.

3. Maternity and adoptive leave.

Do you have a policy about time off for new parents? And more importantly, you’ll need a process to re-integrate the employees into the business when they return.

4. Child care support.

Even if you can’t afford to provide onsite child care, you might be able to partner with a local child care facility to provide reduced or subsidized rates.

5. Gender hiring goals and metrics.

Do you have an equal number of men and women in your workplace? If not, do you have goals in place to adjust the ratios when possible? If you have a disproportionate number of one gender making all of the hiring decisions, you may want to consider the effects of implicit bias on your hiring processes.

6. Mentoring.

One way to speed the growth of employees is to provide mentoring. All employees will benefit from strong role models.

7. Opportunities for promotion.

Both men and women will perform better when there is a clear path to promotion as well as leaders in current positions who demonstrate leadership.

8. Dress for your day.

One of employees’ favorite perks is to be able to dress casually when no customer meetings are scheduled.

9. Paid time off.

Paid time off, which used to be called sick pay, is a favorite. But now, with most employers, you don’t necessarily have to be sick or explain your reason for wanting to take a personal day from work.

10. Gender-neutral company events.

Many companies create events for employees and sometimes customers to enjoy and mingle. This can include the company Christmas party, lunches, and happy hours. It can also include sports events such as golfing and attending baseball games. For every traditionally male event, be sure to plan a traditionally female event to keep the options gender equal. Spa day, anyone?

These benefits are a great start to attracting top talent, boosting employee morale, and maintaining a happier workforce in your business.