Category Archives: Accounting

Are you a victim of fraud?

I have had the misfortune on several occasions to speak with business owners who were victims of fraud. Fraud can destroy your business by the way of ruined relationships and cash flow problems that force you into bankruptcy.

Regardless of the size of your business, you don’t have to spend a lot of time and money to reduce your exposure to fraud. Simply put, set boundaries and hold the people who work for you (or otherwise represent you) accountable. Some see these accountability measures as an accusation. (You don’t trust me! or But we’re all friends!) I call them protection. In the words of Ronald Reagan, “trust but verify.” Accounting is about financial responsibility and transparency.

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Stress and the value of time

As I write this, the holiday season is in full swing. Anyone with a product or service to sell is marketing like crazy. Just take a look at your postal mailbox and your email for proof. It takes extra effort just to sort through all that for what you need. Along with the day-to-day activity of running your business there are the year-end things to think about; estimated tax payments, retirement account contributions, health insurance, getting your books up to date, etc. Add to that holiday preparations; travel, decorating, shopping, baking, etc. Overwhelmed? The more overwhelmed we are, the less productive we are because we lose focus. The less productive we are, the more stressed we become.

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What is Europay, MasterCard and Visa (EMV)?

EMV stands for Europay, MasterCard and Visa. What is it and how will it affect you and your business?

U.S. banks will be switching to this new type of credit card by October of 2015. All cards will be equipped with a super-small computer chip that is extremely hard to counterfeit. Europe already has this technology in use in an effort to combat fraud. According to current statistics, the U.S. is currently the capital of credit-card fraud. Here is a link explaining the vulnerability of the U.S. to credit fraud that may help you understand the advantage of the new computer chip technology vs. the old magnetic strip technology:  – http://www.businessweek.com/articles/2013-12-23/why-the-u-dot-s-dot-leaves-its-credit-card-system-vulnerable-to-fraud

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Improving your Collections Chances!

I recently had an unfortunate experience with collecting payment from a client.  I would like to share some information with you so that you will, hopefully, not have to go through this as well…

I had an unresolved invoice from a client and after many attempts on my part to collect the debt, I had to turn to a collection agency.  This is not an avenue that any business owner relishes, however, I was able to receive some sound advice through the generosity of the collections agency. It was suggested to me that I add a “Personal Guaranty” to my standard business agreement. They even provided me with the proper verbiage!  I would love to share this with you so that you may also take advantage of the great advice that I received.

PERSONAL GUARANTY

In consideration of [COMPANY NAME] its subsidiaries or affiliates, extending credit, I/we jointly and severally do personally guarantee unconditionally, at all times, to [COMPANY NAME], its subsidiaries or affiliates, the payment of indebtedness or balance of indebtedness of the within named firm. I understand that this could include remedies up to and including reporting on my personal credit and responsibility for any and all collection or attorney fees associated with the recovery of any past due balances.

 

By adding the “Personal Guaranty” to your service contract, you may increase your chances of being able to collect if you should find yourself in the unfortunate situation of having an “noncollectable” account!!

The Accounting Puzzle

For the first time in years, I bought a jigsaw puzzle to put together. While some see it as a tedious, frustrating task, I found the process of assembling the puzzle very satisfying and somewhat relaxing. Sort of like accounting. What some see as pointless and frustrating I find satisfaction in assembling the puzzle of your financial records. At least most of the time.

photo-1While a jigsaw puzzle may contain 500 pieces to assemble, your business systems (email, marketing, accounting, etc) does not necessarily need to contain that many pieces. Adding complexity to the way you do business makes it that much harder for customers to do business with you and prevents you from really knowing the financial health of your business. This complexity will also cost you in extra time and effort to maintain complex systems.

Do you really need 50 product/service names for the 15 products or services you sell?  No, because too many choices likely means the customer chooses nothing.

Do you really need an income account for every product or service you sell? No, because consistency in recording transactions becomes almost impossible and your financial reports impossible to gain usable financial insight about your business.

On the flip side, do you really need an expense account for every conceivable type of expense your business has? Again, no. Too much detail makes it almost impossible to be consistent in recording your financial transactions.

Unlike a jigsaw puzzle that contains upwards of 500 pieces, you can choose to keep your business model (and the accompanying business systems) as simple as possible. Keep it simple is the best advice I can give to any business. Life has its own way of adding pieces to the puzzle of our businesses without us adding to it.

How to Protect Your Debit Card

The debit card hacking debacle at Target was unraveling as I was traveling across country to visit family for the holidays. Being so far from home, canceling my debit card was not really an option. During a phone call with my bank I learned a lot about how to protect my debit card.

Most banks allow you to change the pin for your debit card by calling the number on the back of the card and using their automated system. It’s a good idea to do this periodically and takes only a few minutes.

Your bank will automatically set a daily spending limit on debit purchases. Not only was I not aware this limit existed, I was shocked to see how high my bank set this limit on my behalf. Call your bank to set this limit to match your spending habits. That way if your card is hacked, you can limit the damage.

Just as there is a daily debit purchase limit, there is an ATM withdrawal limit that is separate from the limits set by the ATM machines. Again, I was surprised to see how high the bank set that limit. When you call your bank to change the daily debit purchase limit, change this one as well.

And don’t forget about your online banking password. When is the last time you changed it? I know, it’s another password to remember but it’s for your own protection. And while you are at it, if you have the option of choosing different security questions, do that as well.

Finally, log in several times a week to review your transactions and immediately contact your bank regarding any questionable transactions, no matter the dollar amount.

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When to Set Up Accounting Software For Your Business

ID-10058688I am often asked when a business owner should set up accounting software for their new business. The short answer: the moment you decide to start a business.

The moment you decide to start a business you start incurring expenses; web domains, business licensing, logo design, product development, legal fees, etc. These start-up expenses must be tracked not only to get all those deductions on your tax return, but to know the financial facts about your new business.

Xero cloud accounting software has partner editions available for as little as $9 per month for start-up businesses. As your business grows there are subscription levels to grow with you. This also allows you to stay with the same software as your business grows and avoids the additional expense of converting to new software. Once you know how to use the software, your learning curve is limited to learning features newly added to the software or just now becoming important to your business.

Here’s something else to consider. The sooner you set up accounting software for your business, the sooner you build the habit of tracking income and expenses as well as building a budget and learning to read your financial statements.

budget

Budget is not a bad word

Just say the word “budget” and people change the subject. Their eyes glaze over.

Budgets are useful for personal and business purposes and don’t have to be some giant detailed document that rules your life. It’s a guide; a plan; and it’s certainly not cast in stone. A budget reflects what you think/hope/want to happen. It can help you make decisions – whether to spend or not your money, look for another or additional job, or raise your prices.

Let’s create a quick budget. Grab a piece of paper.

Write down all your fixed expenses for the month. Examples would be rent, insurance, utilities, software subscriptions, loan payments, etc. Include amounts put aside for equipment purchases and taxes.

Now write down your best estimate for your variable monthly costs. These would be merchant and/or bank fees, independent contractor fees, continuing education, office supplies, salaries and travel expenses.

Total up all those numbers you just wrote down. That’s your “break even” point; how much you have to sell just to keep the doors open. Now add in how much the business should be paying you each month (if not already added in above).

If nothing else, just writing down a quick budget like this can quickly streamline and prioritize your to do list.

Take a look at your accounting software to see if it has a budget feature. If it does, enter the numbers from the budget you just created. This will allow you to run budget versus actual income statements which can be very helpful. And don’t be afraid to change your budget. It’s a tool, not a ball and chain.

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People don’t buy what your business does; they buy why you do it.

I recently watched a Ted Talk given by Simon Sinek called ‘How Great Leaders Inspire Action’.

The main point Simon made was that people don’t buy what your business does; they buy why you do it. That got me to thinking about why I do what I do.

I accidentally started my business in early 2010 after losing my full time job two weeks before Christmas. As that was in the midst of the recession and I live in a small town, there were no jobs to apply for. So I started responding to ads on Craig’s List posted by small businesses needing occasional help with their bookkeeping. I also stumbled on an opportunity to serve as a mentor at Northern Arizona Center for Entrepreneurship and Technology (NACET) that brought in clients as well. Work also came along in the way of part-time jobs, mostly temporary. Somehow I made ends meet. And suddenly I had a business. I made mistakes along the way of course, and learned many things along the way. Continuing education is something I engage in every week in the form of podcasts, webinars, and lots of reading. My business slowly evolved from just wanting to earn a living to looking for the best ways to serve my clients.

Child with learning difficultiesMy goal is to take the confusion and frustration out of small business accounting by providing training and ongoing accounting services. Small business accounting isn’t just about QuickBooks any more. Cloud based software offers many tools for running a business. I believe in choosing just the right tools, balancing necessity and cost, to streamline all of the administrative tasks (including accounting) of a business.

As I continue on the journey of being a business owner it is my hope that I find more and better ways to serve the small business community.

Why do YOU do it?

Cash Flow

Cash flow.  It is the backbone of your business. If you don’t learn to manage the money coming into and leaving your business it is nearly impossible to be successful.  Just because you have a positive bank balance this week does not mean that you can afford to spend it on the latest and greatest new gadget.  You must focus on the big picture, which at times, can be difficult to do.

In order to understand cash flow you need to understand what goes on behind the scenes.  Imagine for a moment that we live in a perfect world.  In this world:

  • Using available cash, you purchase quality supplies from your vendors and turn them into your finished product.
  • Your customers purchase that product and pay for it on time.
  • The payment from your customers allows you to pay your vendors, order more supplies and pay yourself.

Unfortunately, this is more what it looks like:

  • Using credit, you purchase supplies from your vendors, not necessarily the best supplies, because hey, the vendor was having a sale & these supplies will do.  You turn them into your finished product.
  • Your customers purchase that product and don’t pay their invoice in a timely manner.
  • 30 days later, you don’t have the cash you need to pay your vendors and suppliers, but you need more product so you put the balance due to the supplier on a credit card and order more product, because you cannot sell more if you don’t have it available.
  • You know your customer is late paying but has always paid before so you put their invoice on the back burner because you don’t want to call and “offend” your customer.
  • Your late/non-paying customer comes to you and says they need more of your product.  They’ve had a bit of a cash flow problem and could you just float them on the invoice for a few more weeks.  Just add the new product to their balance.  Not wanting to lose a “good” customer, you agree.

The vicious cycle starts again.  Does this sound familiar to you?

There are many components to cash flow that I’d like to address.  I’ll be blogging about each one of these components in detail over the coming month.

  • Suppliers and vendors: am I using the best, most cost effective suppliers for my business?  Notice I did not say cheapest.  Do they ship on time?  Do they deliver what I need?
  • Customers: am I keeping dead beat customers because they are “good” customers?  Do my customers pay on time?
  • Employees and Consultants: do they understand the vision and focus of my business? Are they promoting my brand in a manner that I support?
  • Your business: do you pay your bills on time?  Are you delivering your product on time?  Are you delivering a quality product?  Are you ensuring that your employees and consultants understand the vision and focus of your business?  Are you able to take a salary?

In order to write blog posts that resonate with you, my customers, I’d like to know what issues you have with cash flow.  Please leave a comment or send me an email and I will address these concerns (anonymously, of course!)  I look forward to going into more detail about this soon!