REVolutions has some big news! Please welcome Cat Sauser to the management team as we announce a new location in a cool city!!!
REVOLUTIONS PDX HAS BEEN BORN!!! 👣
REV PDX will serve the greater Portland area with the same attention to detail and love that REV ATX has been serving up for years. Cat Sauser is a great bookkeeper with a passion for small business, and she's bringing her skills back to Portland! Katie Heim and the ATX crew will be on hand to support the new office in every way possible.
The entire REVolutions family welcomes Cat and Portland into our tribe with open arms. Message Cat today for all your bookkeeping needs, Portland!
Question #5: How much is this going to cost?
For every new client call I get one of the first things I get asked is “How much is this going to cost”? My answer is simple; the price is tailored to you exactly like our services. Each accounting project is different, and in order to give you a price, even a ballpark figure, we have to assess exactly where you are and what you need to maximize your accounting project.
Several factors drive the cost of accounting:
-The volume of bank, credit card, lines of credit and other accounts that are being tracked-for every account that is being used a reconciliation must occur to keep the books in accordance with GAAP. (The Generally Accepted Accounting Principles) http://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(United_States)
-The volume of transactions in each of the aforementioned accounts that are being tracked-every item that hits the bank or credit card account must be entered (either manually or via download) and then accounted for in reconciliation. If you have very high volume accounts this will definitely take a bit of time
-The frequency with which your business requires reporting-Some small business have higher reporting needs than others in order to get an accurate picture of the accounting puzzle. If you need to see reports weekly or monthly; that will cost more than seeing reports on a quarterly basis. We recommend at least a quarterly reporting schedule for all our clients, to prevent confusion and memory loss on transactions. It’s important to evaluate both the solvency of the business and the accuracy of the bookkeeping in real time.
-The clarity of the books-Sometimes the books are very inaccurate, or may need clean up to get the project moved forward. Other times the books are very behind. These factors will drive the cost of this first phase of your accounting project up.
The good news is, we understand that budget is an issue for any business, especially the ones we cater to. We love entrepreneurs and the small business spirit that drives America. We work with each client to stay within their budget and deliver quality projects, on schedule.
We also maintain good relationships with your CPAs, and we can provide referrals to CPAs when requested. This keeps the cost of accounting lower by making the CPAs job as easy as possible, and cutting out on fixes that can become costly.
Question #4: Why do you need my statements?
When I meet with new clients I tell them I will need all the bank statements, credit card statements, lines of credit statements and the like in order to get started on their accounting project. I’m frequently asked why I don’t just take their receipts and go from there.
Bank statements provide a clear indication of what has happened with your business. Bank activity can also be printed from most bank websites, but this isn’t enough for a diligent bookkeeper. True bank statements provide a beginning balance and an ending balance so that your bookkeeper can reconcile your account each month.
Banks now offer downloads directly into your QuickBooks software, and it is possible that these downloads can save you time and money. Retail businesses, bars and restaurants, and businesses that don’t use job costing can all benefit from bank downloads. Businesses that have real estate or utilize job costing do better to have manual data entry done on a QuickBooks file to ensure that each transaction is correctly coded; bank downloads aren’t right for these types of businesses.
No matter whether you utilize bank downloads or not, it is still important that you provide any and all bank statements for accounts used in the regular conduct of business to your bookkeeper. This will ensure that they have all that they need to provide you accurate, balanced books for year-end tax preparation.
Providing statements will also allow your bookkeeper to accurately quote you a price for your accounting project, saving you both the hassle of surprise bills and overages.
Question #3: Should I have employees or contractors?
Your business is growing, and you need help. You can’t be everywhere at once, so it’s important that you hire someone you can trust to take on some of the burdens of running your small business. Once you’ve found that person you hit the pentacle question: Should I pay them as a contractor or as an employee?
Like so many other things, the answer is “it depends.” There is a test that the IRS applies to the employee vs. contractor equation:
Do you determine the hours they work? Contractors make appointments but determine their own schedules, while employees are scheduled at the business owner’s discretion.
Do you provide the instruments they work with? Contractors bring their own tools, computers, vehicles and provide their own insurance. Employees use your equipment.
Do you provide any benefits, insurance, pension or paid time off? Contractors get none of these perks, while employees may.
There is no magic formula to whether or not a person is an employee or not. A good rule of thumb is to offer the person you are thinking of hiring a contract position for a specific period of time. If it works out you can always move them from a contractor position to an employee position at a later date. Make sure you always get the required documentation to allow your bookkeeper to prepare year-end forms like a 1099 or W-2. As always, if you need further assistance in making these decisions you can always call your bookkeeper or tax professional for guidance.
Question #2: Should I keep paper receipts?
This question comes up frequently, and it’s another one that isn’t easy to answer. The general rule of thumb is items under $50 do not require additional back up for audit purposes, but there are some exceptions to this rule.
If you have a dedicated bank account for your business (an account used solely for the purposes of business) then you should be using a debit card, or writing checks that will serve as sufficient back up for an auditor. Similarly, if you are using a credit card that is mostly for the business then transactions of all sizes will appear on the statements for that card and can be tracked by your bookkeeper and used for audit purposes.
Occasionally a business owner will pull out cash from their bank account or use personal funds to pay for items related to the business. In this case all receipts must be kept because these transactions will not hit the bank account or a credit card account that your bookkeeper tracks. In order to take a credit on these items they must be meticulously arranged so that no expenses slip through the cracks. It is always best to use the bank debit card or credit card where you can. Not only can you more easily track your expenses and income, you can also take advantage of perks and rewards (like airline miles) offered by many banks.
It is important to understand that bookkeepers and CPAs usually operate from a bank statement perspective; your accounting project will cost you more if you are providing a heap of receipts for them to go through. Receipts are generally printed on thermal paper, meaning that over time in hot cars or in bags where they rub against one another, these receipts will go blank. If you are tracking your receipts it is important to attach them to a piece of paper and copy them so you can preserve their legibility for the seven years required by the IRS. A rule of thumb is to organize your receipts by month and then by payment method (i.e. debit card, credit card, etc) to ensure that you can find a receipt should you need it down the road.
Tell your bookkeeper or CPA how you’ve been spending your money so that they can help with the receipts that you are saving. You don’t want to miss a single expense that could lower your tax burden at the end of the year.
I’m frequently asked by start-up companies whether or not they should incorporate. My answer is always “that depends”. The best place to start when thinking about whether or not to incorporate is with the different types of incorporation structures.
As a sole proprietor you can file a DBA (doing business as) and open up a business bank account in track your income and expenses. A DBA does not give you the tax breaks or the protection of incorporation; you still file under your own social or tax id that is connected to your social, and you are still subject to the self-employment tax. A DBA costs around $30 and can be easily secured from the Secretary of State website by your bookkeeper or by the business owner.
An LLC (limited liability company) gives you the protections of incorporation without the rules that govern S-Corp or C-Corp structures. As a limited liability company the owner isn’t liable for the debts of the business, as long as that debt is in the business name. Similarly, an LLC offers legal protections for litigation brought against the company and may shield an owner from loss of personal property.
In an LLC the owner may take money out of the company as needed with no restrictions. The LLC structure also allows owners to pass through any profit (or loss) to their personal tax forms, thereby avoiding a “double tax” on profits made by the company. An LLC costs just over $300 and can be secured form the Secretary of State website. You can also hire a professional (like me, or a lawyer) to incorporate an LLC for you for a nominal fee.
S-Corp and C-Corp structures are more complex. The “S” Corp can be elected by filing a 2553 form on or before 3/15 of the year. This structure will basically mean that you MUST pay yourself a “reasonable salary” and pay payroll taxes on that salary. This is an important step to take when your business begins to have net profits that exceed one hundred thousand dollars per partner or so. While filing the payroll taxes may seem like a burden, the point of this structure is to shelter your profits from the dreaded self-employment taxes, which can exceed 30% or more. You may still take draws under this structure, but your salary must make sense in balance with those draws.
C-Corp structures are even more complex. In a C-Corp owners must be paid through payroll and the company must contribute to Medicaid, Social Security and state and federal unemployment tax, however, draws are forbidden. If a shareholder must pull money out outside of the payroll structure it has to be done as a loan. The profits are taxed at the corporate level and all profits then are taxed again at the personal level to the shareholder. C-Corps may be useful to large companies looking to mitigate their profits with payroll expenses and pay into certain types of retirements for their shareholders.
The S-Corp and all INC structures also change your due date for taxes, both when they are on time and when they are extended. The new date for on-time filing changes from 4/15 to 3/15, and the final extension date changes from 10/15 to 9/15. This only applies to the business tax filing, which will be separate from your personal filing date. The personal filing date will remain 4/15 and 10/15, respectively.
Generally speaking, a new start-up company would do better under the LLC incorporation structure in most circumstances. If you feel like you might be ready to incorporate, don’t hesitate to call me or whatever professional tax advisor you use to get all the facts before you move ahead. As with all things related to business, doing your homework on this issue really pays off.
People often ask me what a bookkeeper is and if they need one: “How is a bookkeeper different than a CPA? Why do I need a bookkeeper, isn’t tracking my cash flow in Excel enough?”
A bookkeeper is a professional who can accurately track income and expenses and provide you with a full accounting picture for your business or investment portfolio. In the simplest sense, a good bookkeeper draws a financial map to help lead you to better business planning and decision making. This map tells you where your business has been, where it is going, and can help you predict future trends and pitfalls.
A bookkeeper is also a bridge; bookkeepers can act as an intermediary between a business owner and tax agencies, CPAs, auditors and lending institutions. A good bookkeeper can speak the language of finance but should always be able to break it down into easily understood concepts for their client. Bookkeepers can pull reports, assist with tax filings, enter journal entries and negotiate fines and penalties with tax agencies.
A bookkeeper should work toward easing the burden on the clients he or she services. This means making recommendations, being knowledgeable about new laws, and helping with organization whenever possible. People start businesses to work at doing what they love or what they are good at. Just because you have passion to start a small business does not mean you know anything about how to organize an office or account for money earned and spent. A bookkeeper should be patient, able to put your mind at ease and take as much or as little of the accounting burden off your plate so you can focus on growing and running your business.
When looking for a bookkeeper, it pays to do some homework. A bookkeeper is not a CPA; they aren’t required to sit for an exam or defend a license issued by a state agency. A great bookkeeper should have great references, an impeccable reputation, professional insurance or be bonded. A well-rounded bookkeeper should hold some certificate of proficiency like being a QuickBooks Certified Pro-Advisor. As with all things, you get what you pay for with a bookkeeper; you are looking for an artisan of his or her trade. Business owners should be on the lookout for someone who takes pride in the work that they do and has solid back-up to prove it.
The most important thing your bookkeeper can do is be a part of your accounting and business team. Yes, you can track your bank balance in a spreadsheet, and it may give you a small piece of the full accounting puzzle. To get a full accounting picture you need a professional in your corner that has the best interest of your business at heart; that’s your bookkeeper.
Does your small business accept credit cards? Have you been paying 3% on every total charged as well as a transaction fee? Well now you don’t have to. Intuit PaymentNetwork has a new and cheap alternative for accepting payments and it all takes place on the web.
At only $0.50 per transaction, small businesses can now receive immediate payments online from customers which are deposited directly in the bank. Whether they are paying $50 or $500, the charge is always $0.50. The price is right for small businesses, especially those just starting out. All your customers need is an email address and they can pay through this service. The best part is no contracts, no hidden fees, and no equipment. Unheard of.
An online service like this is exactly what small businesses need to get paid and get the money in the bank as fast as possible. I don’t know about you, but I can’t always find time to run to the bank while trying to deal with every other aspect of my business. Add in the rising gas prices to drive there, and that $0.50 transaction fee seems trivial to get paid instantly and directly. However, if your most common form of payment is check, you will need to weigh the number of checks on which you would be paying that transaction fee with the time and effort you will no longer have to put in to cash them. It could still be a good deal.
As a small business in today’s economy, we have to save money where we can. And luckily Intuit agrees.
Anyone who has heard of the new 1099 law has been dreading end of year reporting for 2011. New requirements would force businesses to send 1099’s to all their vendors, even corporations or those from whom we buy goods, like Best Buy. Yes, anyone you paid more than $600 to, for any reason, would be subject to 1099 reporting.
The Senate fought over several drafts of a measure to repeal the law, finally passing an amendment repealing the changes in the 1099 requirements. The House of Representatives took its sweet time but finally passed the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” two weeks ago, which repeals the additional 1099 requirements. So it looks like we are out of the woods on that one.
Well, not so fast. Just like the original 1099 reporting requirements were a “rider” to the health care legislation, House Reps included riders in the legislation to repeal the new 1099 requirements that are opposed by the president. Confused yet? This means the president may veto the law and send us all back to the old drawing board. Meanwhile small business owners are advised to start collecting 1099 information on anyone you say hello to just to be on the safe side.
You have to love politics.