Small Business Profit Maximizer!

Reviewing the Income Statement to Increase Profits

Learn how a CPA looks at your Income Statement with an eye towards increasing profits.

 

 

Sharing Quickbook files

SATURDAY RERUN

Here is a Yahoo video I posted in the past that shows you the various ways to share your QuickBooks company files with co-workers, your bookkeeper and CPA. 

 

 

8 Financial Tips Worth Implementing

There are plenty of financial tips you can implement into your day-to-day lives and these eight financial tips are worth implementing.

1. Every month pay off your credit cards. Avoid carrying a balance on these expensive products. Treat them like poison.
2. Install Quicken on your computer, or some other income and expense tracking software. Mint.com is another option. All of these programs tell you when your bills are coming up and will help you analyze your spending behavior.
3. Make an aggressive plan to pay down your credit card debt if you went on a spending spree or you were forced to rely on debt to make it through a rough month. Just start to knock your balances off one at a time, beginning with the card that has the highest interest. Paying the minimum is much like running on a hamster wheel, you’ll never get off. When you methodically attack each one, it won’t be long before you find your way to a zero balance.
4. Maximize your contributions to your 457(b), 401(k), or 403(b) retirement accounts. The max for this year is $17,500, but if you are over 50 you can put another $5,500 into the account. These accounts will save you money on taxes for the current year and many employers will match your contributions, so make sure to take advantage of these as much as you can.
5. Pack yourself a lunch. It is far healthier and a lot cheaper than takeout food.
6. To save gas, if possible, walk to the market, which will also provides you with incentive to stick to your list and not make any unnecessary purchases.
7. You should never borrow from your 401(k). The early withdrawal fees cancel out the reason for saving to begin with. A line of credit or bank loan is a better option if you find yourself in a pinch.
8. Your savings should be on autopilot. Do this by automatically channeling a portion of each paycheck to your savings account.

A Small Business Tax Checklist

As a small business owner or an entrepreneur you should be talking to your accountant at least once or twice a year, and ideally more often, to make sure that you are taking full advantage of any tax deductions or opportunities that you may have.

The Small Business Advantage

Often small businesses have significant tax opportunities that are missed simply because the small business owner didn’t realize the deduction or tax credit was even possible.

Some of the most commonly missed money-saving ideas that accountants can help small businesses with include:

• Capital expenses and equipment – there is an annual allowance under the Section 179 deduction that business can take for specific types of equipment and supplies but the total allowable is based on several different factors.
• Fully fund retirement plans – often small business owners forget that by funding their own retirement plan, or getting one started, that you can use to off-set your income for the tax year.
• Hiring – you may be surprised that there are programs that you can take advantage of if you hire a disabled person or a veteran. This is a great opportunity to help out a person that has served the country while also earning a tax credit with each eligible employee.
• Get your equipment repaired – if you have eligible property such as vehicles or an office or building, you may be able to spread out the deduction for the repair over a period of time. In some cases and for some businesses the repair, especially if it improves energy efficiency, may also be a credit.
• Charitable donations – a business can also make charitable donations to recognized charities. These can be made any time of the year but if you have additional income in December it can be a good way to use the deductions in this year rather than waiting until the next year.

Talking to your accountant well before the end of the year is always a good strategy. You can learn about your options and then make the best choices to help to lower your taxable income while maximizing your ability to take advantage of services and purchases that you may need.

Myths Business Owners Believe (Part III)

Myths Business Owners Believe (Part III) 

Myth:  A widely held but false belief or idea.         

 

Myth:  I can't compete with the national chains.  The truth:  The national chains can't compete with you!  You are closer to the customers than the managers of these large chains.  You can spot market trends much sooner, and because you don't have the large infrastructure that they have, you can respond much more quickly.  Plus, you can build a very good business from the small niches the big chains don't want.

Finally, perhaps the most dangerous myth that almost all new business owners (and even many experienced business owners) fall prey to:

Myth:  I know all I need to know about running my business.  The truth:  The biggest problem is not what you don't know.  Rather, the biggest problem is that you don't know what you don't know.  A successful business owner never stops learning.  They concentrate on improving all of their business skills.  They read books, hire coaches, go to conferences and seminars, and learn from what other business owners are doing right and wrong.

What myths do you believe?

How are they holding you back?

 

Reduce QuickBooks Errors and Bookkeeper Fraud

Set Up Users with Limited Permissions and Access 

Every day my staff and I fix client QuickBooks files that are filled with errors.  Many of these are caused by the owner allowing their untrained employees access to all areas of QuickBooks.  This can be alleviated to a great extent by setting up their employees as QuickBooks users with limited permissions and access. 

Limiting access also can help reduce bookkeeper fraud.  In order to better understand the risk of fraud, I highly recommend that every business owner Google “Bookkeeper Fraud”.  When I did, the resulting search brought up 685,000 results.  Read some of the articles.  We will cover how to protect yourself from bookkeeper fraud in our October issue. 

Click the link below to view the video where I show you how to set this up and discuss the importance of doing so in more detail.

http://youtube/E-hd5zuJ3SU

When Can the IRS Call Your Business a Hobby?

Under the hobby loss rules you can’t deduct expenses in excess of income, so no loss is allowed.  A
recent tax court case (Akey, TC Memo 2014-211) involved a collector of sports memorabilia who also was a full-time quality assurance engineer.  On his tax returns he claimed substantial losses, including two years in which he showed zero income, zero costs of goods sold, and approximately $20,000 in other expenses.

The taxpayer failed to insure the collectables, maintain a bank account, had no inventory system, and did not keep accounting records.  At the trial the taxpayer testified that he had an honest objective of turning a profit and that he had learned to grade the condition of sports cards as a means of enhancing his expertise.

The tax court uses the following nine factors to determine if the activity is a business or a hobby:

1. The manner in which the taxpayer carries on the activity.
2. The expertise of the taxpayer or his or her advisors.
3. The time and effort expended by the taxpayer in carrying on the activity.
4. The expectation that assets used in the activity may appreciate in value.
5. The success of the taxpayer in carrying on other similar or dissimilar activities.
6. The taxpayer’s history of income or losses with respect to the activity.
7. The amount of occasional profits, if any, earned by the taxpayer.
8. The financial status of the taxpayer.
9. Any elements of personal pleasure or recreation.

Based on its analysis of these factors, the tax court ruled with the IRS and disallowed the losses as non-deductible hobby losses.

When in doubt, check with your tax advisor.

Recommended Software or App

 

QuickBooks GoPayment

 

We have been using this app for a couple of years now.  It is an easy-to-use app that can quickly create orders and then receive payments.  You can receive payments by swiping a credit card on a reader or by scanning them with your iPhone camera.  Then you can email your customers the receipt.

If you use QuickBooks, this is a must-have app.

Setting Up a New Company in QuickBooks

 

http://youtu.be/lhUluQUfHfk

When an owner first installs QuickBooks, they are often overwhelmed by all of the information required to set up a new company.  This is especially true for established companies switching to QuickBooks for the first time.

 

The video covers how to set up your company and enter the basic information.  We also talk about how to choose a conversion date and how to enter your existing checking account balances, customer account balances, and liability balances.

Sharing QuickBooks Files

http://youtu.be/A8_0Gr1xAVQ

When we talk about sharing QuickBooks files we could be speaking of either 1) two or more people working on the same QuickBooks file at the same time, or 2) sharing a file with your accountant.  Let’s explore both situations.

Two or more people working on the same QuickBooks company file at the same time.

QuickBooks allows this when your file is either located on a local network or when it is hosted on an Application Service Provider (ASP).  At our office, our QuickBooks file is located on our server and can be accessed by everyone.

We also have clients who store their files on Right Networks (an ASP).  This allows us to work on their books from our office and the client to enter information into QuickBooks from their office.  In fact, because the file is located online, you can enter information into QuickBooks from any computer in the world that has internet access.

There are a few things to understand when sharing a file.

First, you must open your file in Multi-User mode.  This allows more than one person to enter the same QuickBooks file at the same time.  There are many tasks where QuickBooks requires you to be in “Single-User Mode”.

Second, you should set up users with different permissions.  I have seen many business owners make the mistake of letting their employees sign in with the “Admin” password.  This is a HUGE mistake.  It’s like handing them the keys to your house or the PIN to your debit card.  You may trust them, but it’s still not a great idea.

If you are going to have employees enter information into your QuickBooks file, you should set up individual users with specific permissions allowing them to perform only the tasks that you want them doing.

Third, you need to understand “record locking”.  Record locking means that only one person can work with a specific record at a time.  For example, you can have two different employees invoicing customers at the same time.  But record locking means that only one employee can work on that customer at a time.

Sharing your QuickBooks file with your accountant.

You can send your accountant a backup of your file.  But they will not be able to send you their changes.

Creating an Accountant’s Copy is a much more efficient method.  When your accountant makes changes, they can then send them back to you to incorporate those changes into your records.  This way your files will match the file used by your accountant to prepare your tax returns or financial statements.

You will need to set a dividing date.  Until the accountant releases the Accountant's Copy, you will only be able to enter transactions after the dividing date and your accountant will only be able to make entries before the dividing date.

Watch the attached videos for more details on sharing files.

http://youtu.be/A8_0Gr1xAVQ

Using QuickBooks to Track Mileage

The IRS has hired many new auditors and the audit rates for small businesses are increasing dramatically.  Our local IRS office used to have only two auditors for the whole El Paso area.  They now have over 20 auditors.

If you’re audited, auto usage will be scrutinized.  IRS regulations require you to keep a log of your auto usage.  If you don’t, most agents are simply going to throw out your deduction.  Many times we win back most of the mileage on appeal, but the cost in accounting and legal fees adds up quickly.

The best thing to do is to track your mileage in advance.  One question I get is if it’s worth the time.  If you drive 500 miles per week for business, that will total 26,000 miles for the year.  At the current mileage rate of 56 cents per mile, your deduction will be worth $14,560.  If I assume a 25 percent tax bracket and a sole proprietor who pays 15.3 percent self-employment tax, this results in a tax savings of $5,868 that you would be losing each year without mileage logs.

Watch the video below to see how to set this up in QuickBooks.  You will be able to run reports that show you the mileage by vehicle (summary and detail) and mileage by job or customer.  You will not only satisfy your IRS requirements; you will have a tool to manage your vehicle use and capture your vehicle cost by job.

 

http://youtu.be/oWfemCFx-CA

Protecting Your Customer Credit Card Numbers in QuickBooks

Do you use QuickBooks to process sales?  Do you keep your customers’ credit card numbers on file?  Need a way to keep your employees from viewing this information while working in QuickBooks?

Watch this video to see how simple this is to accomplish in QuickBooks.

http://youtu.be/iXNC5h1H484

How to See What Your Bookkeeper Has Been Deleting From QuickBooks

 

If there are a lot of deleted transactions it could mean that your bookkeeper is making a ton of mistakes or it could be that they are trying to hide something.  Neither one of these explanations is good news for the owner. 

So how can you check and see what has been deleted or changed. 

QuickBooks provides a report to help you with this.  It’s called the “Voided/Deleted transaction” report.  When you run the report, it will show you transactions that have been voided or deleted.  It will also tell you which user is changing what and when they did the change. 

In the video I show you where to find the report and how to use the report. 

 

 

 

QuickBooks Blogs

Here are two of my favorite QuickBooks blogs:

 

QuickBooks and Your Business (www.blog.quickbooksusers.com)

This blog has been providing QuickBooks help and guidance since 2010.  The articles are easy to read with great information.  Recent blog posts:

• What Mobile Devices Do QuickBooks Users Use Most?
• How to See What Your Users Have Been Deleting
• How to Make QuickBooks 2013 Look More Like Old QuickBooks Versions
• How to Protect the Viewing of Customer Credit Card Numbers
• How to Create a Purchase Order in QuickBooks [video]
• Help!  I Lost My QuickBooks Password!

 

The QuickBooks Specialists’ QuickBooks Help Blog (ww.theqbspecialists.com/quickbooks-help)

This blog by Ruth Perryman has a simple concept.  QuickBooks users write in with questions, and Ruth answers them.  The questions deal with errors and “How do I…?” questions.  So if you’re looking for a specific answer to your problem, this is a great blog for you.  Recent blog posts:

• How to Set Up Main Categories For QuickBooks
• How to Track Inventory in Multiple Locations in QuickBooks
• News Flash – Duplicate Credit Card Charges in QuickBooks POS With Intuit POS Merchant Account
• How Will Independence Day Affect My QuickBooks Payroll Processing?

Setting Customer Credit Limits in QuickBooks

While I was the CFO at Magnolia Coca-Cola, we changed our policies to give every new restaurant and bar credit terms—no questions asked.  But we controlled our losses by setting a small credit limit that forced them to pay our bill in order to get the second or third order.  Our Pepsi competitor didn’t give credit to new customers, so we picked up all the new business. 

My experience was that new sales far outweighed the bad debts and helped give us a ton of goodwill with businesses.  Because we had trusted them from the very beginning, they remained very loyal customers. 

QuickBooks can help you control your outstanding receivable balances by setting credit limits for each customer.  Once you do, you and your staff will get a warning any time you try to record a new invoice that would bring their outstanding balance above the credit limit.  You can then decide to approve the order and/or call the customer to arrange payment at the time of delivery

Check out this screen capture that shows how easy it is to setup credit limits in QuickBooks http://youtu.be/cEYAaEBGuzQ

How to Enter Customer Prepayments in QuickBooks

A common question I receive from business owners is how to handle customer prepayments.  It is very common for the business owner to accept a deposit.  But how do you set this up in QuickBooks?  You want to be able to track the customer payment, provide the customer with a receipt, give the customer a credit when the work is complete, not pay sales tax until the job is complete, and clean up receivables at the end.

Here is the basic way to handle this in QuickBooks (Watch the attached video to see this in action):

1. In the Chart of Accounts, create the Customer Prepayment account as an “Other Current Liability”.  On the item list, create a non-taxable service item called “CustDep – Customer Deposit” and link it to the Customer Prepayment account you just created.
2. Create a customer account if needed.
3. Record the non-taxable receipt using an invoice or a sales receipt.  Use the item code set up in Step One.  Then receive the payment so there is no balance.
4. When the work is done or the product is delivered, invoice as normal.  Reduce the invoice by the amount of the deposit being used for that invoice by using the “CustDep” code and applying the amount as a negative.  This will eliminate the deposit amount.
5. Accept the payment for the remaining balance as normal.

Our New Issue Is Up!!

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New Issue Coming Soon!

This best of issue recaps many of our most popular articles over the last seven months.

Reduce QuickBooks Errors and Bookkeeper Fraud

Set Up Users With Limited Permissions and Access 

Every day my staff and I fix client QuickBooks files that are filled with errors.  Many of these are caused by the owner allowing their untrained employees access to all areas of QuickBooks.  This can be alleviated to a great extent by setting up their employees as QuickBooks users with limited permissions and access. 

Limiting access also can help reduce bookkeeper fraud.  In order to better understand the risk of fraud, I highly recommend that every business owner Google “Bookkeeper Fraud”.  When I did, the resulting search brought up 685,000 results.  Read some of the articles.  We will cover how to protect yourself from bookkeeper fraud in our October issue. 

Click the link below to view the video where I show you how to set this up and discuss the importance of doing so in more detail.

http://youtube/E-hd5zuJ3SU

 

QuickBooks Tips: Switching Between Cash & Accrual Reports and Using Sample Companies

In my blog dated July 09, 2012 (http://bit.ly/LJAmHo), I answered a client question which asked if they could keep two sets of books—one set for tax returns, and one for management use only.  My answer was of course.

This led to a question about how to do this in QuickBooks.  In the screen capture video below, I show you how to switch from cash to accrual financial statements, and how to set the preferences so one opens as a default.

Sample companies are a great tool to use when you are experimenting, training or looking for the best way to setup QuickBooks correctly.