by Joyce
So you started a business and as a solopreneur, you were many hats. One of those being the hat of the bookkeeper/accountant aka the keeper of the checkbook. What’s so bad about that…all you have to do it balance your checkbook, right? WRONG!
I’ve seen it time and time again. Entrepreneurs skipping the necessary step of hiring a bookkeeper or accountant (or accounting firm) to monitor their business finances in an effort to save money. What they don’t realize is what they save in the short term is probably costing them much more than in time, effort, and fixing mistakes in the long term (especially when its the tax preparer/CPA that is fixing those mistakes later).
Here are a few common bookkeeping & accounting errors that small business owners make when they go it alone:
Mistake No 1: Treating sales as revenue before the product or service is delivered. Why it’s a mistake: Not only is it contrary to “revenue recognition rules” (ask an accountant what that means or Google it) but..”Great sales in a month that will be delivered to the customer later…can give a company a false sense of profitability”
Mistake No. 2: Not considering the financial ramifications of a large purchase, such as equipment. Why this is a problem: Dipping into your cash reserves can have long-term consequences if you aren’t adequately covered to pay your day to day or month to month fixed expenses (or if something breaks – and something always breaks, right?) Consider taking out a short-term loan to pay for the large purchase over time or consider leasing the equipment.
Mistake No. 3: Confusing PROFITS for CASH FLOW. Why this is a problem: Business owners need to learn how to read all of their financial statements – instead of depending on one. Your Income Statement may contain several “non cash” items that my lead you to believe that you have more spending power than you really do. So it is important to read it in conjunction with your Balance Sheet and your Cash Flow Statement to get a truer picture of the financial health of your organization and evaluate what your spending power really is.
When you started your business, I’m sure you had no idea that you’d have so much to learn and so much to do. But don’t give up…just like you are good at what you do and have a passion for it, there are tons of professionals out there that are ready and able to exchange expertise with you so that you don’t have to go it alone.
Until next time… Live long and prosper. (ha…sorry, I was in a groove & that just seemed appropriate).
Don’t forget to post a comment and tell me what you think!
Related Links/Source:
Three Common Accounting Mistakes via Entrepreneur.com
by Joyce
What exactly IS cloud computing? As I understand it and in it’s simplest terms, it’s remote software hosting. If you’ve created and stored a document or presentation using Google Docs, then you’ve been exposed to a version of “the cloud”.
Why is this important? As a SME (small/medium enterprise), why should you care? Well, to be honest – it kinda levels the playing field, making it so that the small guys can play with the big boys – at least when it comes to IT. By using remote software hosting/utilizing the cloud, SME’s can do things they couldn’t afford to do before – such as – allowing their employees & contractors to telecommute.
Allowing and encouraging telecommuting is just the beginning of the snowball effect that the cloud can bring. Telecommuting can lead to not only outsourcing your IT functions but now that your staff (employees & contractors) spend less time in the office, they can share space… if they share space, you need less space. Instead of providing 1 desk/1 office space per person, you may be able to cut back to 1 desk/1office space for every TWO or THREE staff members (referred to as “office hoteling”). So in addition to saving on the capital expenditures on IT… converting those to operating costs, you can also save on the overhead costs of office space, computers, telephones, etc. How big the snowball gets is up to you.
Enough about the other benefits…back to the cloud itself. Here are some IT benefits to The Cloud…
- Reduced Costs – instead of buying all the hardware/software yourself, you pay a provider incrementally (monthly, quarterly, yearly) – therefore lowering the “cost of entry”
- State of the Art Hardware/Off-Site Backup
- Increased Mobility – staff is no longer tied to the office or their desks
- Greater Flexibility & Security – SME businesses don’t necessarily have the most secure internal infrastructures when it comes to IT; with the use of the Cloud, these same businesses can reach and exceed compliance & industry security standards
- Automation & Shift IT Focus – Using the Cloud, the SME no longer has to focus on server updates, maintenance, backup issues or software updates.
Are you ready for The Cloud? The choice is yours… but I’m ready to take the leap. And I taking my clients with me … even if I have to drag them there, kicking and screaming!
by Joyce
With all the top ten lists about this and that for Blackberry & Iphone users, I thought I would compile a similar list for G1/Android Users on the go. These are the apps that I use daily and along with GMail & Calendar… pretty much can’t live without because they keep me on track and on task. Hope you find a few that may be helpful and useful to you.
PDANet – I searched high and low for an application that would allow me to get on the Internet using my phone/handset as a modem without messing around with the “root system”. I finally found one that suits the purpose. It’s free for the first 30 days then it’s $29 to purchase. ALTERNATIVE: ProXoid – this one can be a little confusing because you have to “start the tunnel” each time on your laptop before accessing the program on your handset but again…not a bad alternative and it’s f-r-e-e.
Google Voice – I like this one especially if you’re like me and want to have a “super secret” phone number for only friends/family or use it as your “home” number for co-workers and business contacts instead of giving everyone and their brother your cell phone number. One of the slick features about this program (that I love) is that it records and transcribes your messages AND it will text or email it to you. Although it is by invite on, the price is right on this one too…as in, free. ALTERNATIVE: YouMail Visual VoiceMail Plus – if you don’t care about giving out your cell phone number (some people don’t), YouMail offers some of the same features as Google Voice, like voicemail notification via text & email and, for a fee, transcription.
DubMeNow -When you’re traveling and/or out and about, you have enough to care without having to worry about packing your business cards too. DubMeNow (or DUB) is an electronic alternative to carrying around business cards. You can send the person your information from your phone.
GoogleMaps – with the recent upgrade, you really don’t need another app. Google Maps will now give you driving, walking and mass transit directions AND it moves with you (like the various GPS navigators on the market). The only thing it doesn’t do is talk to you but I imagine that will be included in future updates. ALTERNATIVE: Glympse – the addition cool feature with this one is that you can create a profile and share your location with your friends. Both apps are free.
PayPal – if you have a need to take payments on the road, PayPal has a free app that will link your phone to your virtual account. Just that simple. ALTERNATIVES: I’m sure there are also apps for Authorize.Net and others… just do a search in the Market.
MoneyManager – last but not least, while you’re on the road (or at home), you need to keep track of the ins and outs of your money, right? This is a nice app that allows you the categorize your income/expenses, backup and export (to csv file). Packs a lot of punch…
If you have noticed a trend, I like free apps that work *smile*….hey, what can I say… I’m an accountant some have ads on them but what’s a little ad at the top or bottom of your screen going to do? Developers have to make their money too, right?
Inspiration:
Phone Applications for the Business Traveler
Related Posts:
Alternatives to Paper Business Cards
by Joyce
This question seems to come up more often than not – Am I (should I be considered) an independent contractor or an employee? The answer to this question is critical for both the employee (who could lose benefits, such as the right to claim unemployment, and incur higher tax liability) and the employer (who could incur interest and penalties in the case of misclassification).
So how do you define an independent contractor? And what do you do if you believe you have misclassified? Let’s take this one step at a time…and start with the definition of an independent contractor, or at least how the IRS defines it. The IRS uses three broad categories to determine IC status: Behavior Control, Financial Control and Type of Relationship.
“Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.”
What do you do? As with most things, the lines can get murky so if are unsure about your work status or think that you may have been misclassified,you can ask the IRS to make the determination by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Related:
Employee vs. Independent Contractor – Ten Tips for Business Owners
Publication 1779
Publication 15-A
Form SS-8
Publication 1976
Disclaimer: This blog post/article is not meant as tax advice. Please consult a tax professional regarding your specific situation.
by Joyce
Before delving into the topic, I think it would be helpful to actually define what is a “sole proprietorship”. It is a business represented by a single individual without benefit of a separate legal entity (for example, corporation).
This business “entity” type tends to be somewhat popular because of the ease in which it can be “formed”…
- Determine if you will use your name (example John Doe) or a fictitious one (JD Photography).
- If you will be using a fictitious one, you will need to register it with your state (or city, if required) by filing a “DBA/Doing Business As” or Tradename form.
- Apply for a FEIN (Federal Employer Identification Number) – go to www.irs.gov. Not necessarily a requirement per se but your accountant and/or tax preparer will thank you later. (If you are a contractor of some sort, you will use this number when filling out W4 Forms).
- Open a separate bank account. Again not necessary but extremely helpful when managing your company finances…your accountant/tax preparer will thank you.
- Acquire any necessary licenses. If your business is one that requires it, make sure you are compliant from the beginning (for example, hair salon requires cosmetology licensing).
As with any business entity type, you should review the pros & cons to decide if that is what is right for you and your business. I thought about going into the pros & cons for this particular business type but decided against it. Instead I have provided a few related topic links that should cover that base pretty accurately.
Disclaimer: I am not an attorney nor is this to be taken as tax or accounting advice. Please seek the advice of a professional for specific insight on your particular business situation.
topic suggested by Malik Alex: Painter & Aspiring Gallery Owner
Related Topics:
Why You Should Never Operate Any Business As a Sole Proprietor
Sole Proprietorship: The Right Business Structure?
I’ve seen it time and time again. Entrepreneurs skipping the necessary step of hiring a bookkeeper or accountant (or accounting firm) to monitor their business finances in an effort to save money. What they don’t realize is what they save in the short term is probably costing them much more than in time, effort, and fixing mistakes in the long term (especially when its the tax preparer/CPA that is fixing those mistakes later).
