7 Simple Numbers

Have you ever had someone approach you speaking a different language than you? You know the frustration of trying to understand what they’re saying as they gesture and point.

That’s how most accountants talk to their small business owners. Or they bring out a fancy looking dashboard with lots of gadgets and numbers that look like the cockpit of a 747.

Less 10 % of small business owners want or need something that fancy. Most of the data is overkill and it makes it harder to see the real picture of your business.

Wouldn’t it be great if you could just boil it down to 7 simple numbers that make sense to you?

I do to……

That’s why we’re going to talk about the 7 Simple numbers that you can track (easily) that will keep your business from growing out of control.

7 Simple Numbers that Help Your Business Grow

Tracking your numbers will help you reach your goals quicker. That’s why in the 7 Simple Numbers series we’re going to discuss each one in detail and how it can help you see your business in a new light.

Break-Even Point
Money In (Revenue)
Money Out (Expenses)
Direct Labor Cost
Management and Admin Labor Cost
Core Capital Fund
Profit and Profit Margin

I know you’re asking yourself

“Why is Profit Last?”

If you don’t know the first 6, you won’t know your numbers and it will be harder to get your business to a profitable and sustainable company..

In the 7 Simple Numbers Series, we’re going to talk about each of these numbers.

We’re going to discuss what each of them means to you

And….

How to track them easily without a headache

To your business Success

Andrea

7 Things About an Accountable Plan You’ll Kick Yourself for Not Knowing.

Are you making the most of your expense reimbursements with an Accountable plan? If not it’s time to get cracking so don’t let expense report blunders trigger unnecessary taxes, that punish you and your employees.

I’m talking about a little known IRS document called an Accountable plan that helps you reimburse your employees (and yourself) the right way so you can maximize your deductions and minimize your taxes.

What the Heck is an Accountable Plan Anyway?

No, I’m not talking about a plan where you call me up so that I can keep you accountable because you want to lose 10 lbs before summer. If that is something you want or need there are plenty of coaches that will be more than happy to help.

What do I mean the right way…..the right way creates tax deductions for the business and non-taxable reimbursements for your employees when they make purchases on behalf of the business.

And it even works if you’re a sole proprietor, partnership, LLC, or a corporation. Yay!

Sorry, I always get excited when I can save my clients’ money.

Here’s the long version.

An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. This means that reimbursements are not subject to withholding taxes or W-2 reporting. However, these expenses must be business-related to fall under an accountable plan.

Free Fillable Accountable Expense Policy: Get our ” Sample Expense Policy and Calculator” that lets you craft an expense policy that saves you and your employees’ money.

Grab the Accountable Plan Template Here

Now let’s talk about it in English….

An accountable plan allows you to reimburse employees for work-related costs (including yourself).
They are not subject to taxation by your employees (but are 100% deductible for you).
They must be business-related and reported using an expense report
If you give your employee an amount (to buy a laptop etc.) and they don’t use all of the money the excess must be returned to the business.
If the reimbursement is considered non-accountable, then it is considered a taxable event and it would be added to the employee’s taxable wages (including you).

Got it?

If not just keep reading and hopefully, it will become a bit clearer.

1. Who Should Use an Accountable Plan?

Anyone who owns a business. Period. A couple of exceptions though because every rule should have an exception.

If you’re a single member LLC with no employees all your business expenses are deductible, and you don’t need to bother creating an Accountable Plan. But as soon as you hire your first employee it’s time to start creating one. You can download our sample worksheet and sample Accountable Plan here.

2. Not All Tax Deductions Are Created Equal

Let’s Talk Meals and Entertainment

When the Tax Cuts and Jobs Act (TCJA) was put into effect it really tried to limit the deductibility of some meals and most entertainment expenses. But there are exceptions to every rule.

Because you’re reimbursing an employee for their work-related expenses you can now deduct 100% of the meal and entertainment as long as it’s properly identified. (Make sure you have an expense policy in place for the proper documentation).

Remote workers and Office Allowance

Since COVID-19 everyone seems to be working from home which means they are incurring expenses. As an employer, you can give your employees reimbursement for their home offices.

This can include:

Home office
Utilities
Equipment
Computer
Cell phone or land line
Vehicle
Mileage

Which means you can do this in 1 of 2 ways.

You can give them an allowance per month to cover these expenses. (Let’s say 250.00) for the use of their home.

You can have them submit their bills and you cover a portion of them based on usage.

For example, you can have them submit their electricity bill and then cover a portion as it relates to their home office. Or a portion of their internet bill etc.

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Andrea's Tip

If your employee is getting reimbursed for these expenses it is nontaxable to them so they will not be able to take these deductions on their personal tax return. I think it’s wise to let them know that.

3. You Must Keep Good Records

Look one of the downfalls of many good businesses is that they keep lousy records. Once you have an accountable plan in place it becomes important that you keep your expense reports and associated documentation, and that you properly account for it in whatever your accounting system your using.

A few rules to note when putting it in place

The Expenses must have a business connection
The expenses must be substantiated within a reasonable time period. ( we try to use 60 days) but it can be 365 days as long as it’s in the accountable plan).
Employees must return any money not spent on the employer (also within a reasonable time).

4. You Can Even Give Your Employees an Allowance to Use Their Own Equipment

If your employees use their cell phone, lap tops or desktops for business use then it might be nice to offer them a yearly allowance to upgrade their equipment. Just make sure you go by the three rules above to make sure it is documented. And if any of the equipment is less then the allowance the employee will have to return the excess.

5. Not All Employees Are Equal Under an Accountable Plan

With retirement and other accounts you have to treat all your employees equal so if you give a match of pay to one employee you have to give it to all of them (there are exceptions to this for business owners). However, under an accountable plan you can treat differently.

Let’s use an example:

As the owner you create an accountable plan and reimburse yourself as an executive for the office allowance. That does not mean you have to give your sales staff an allowance for their home office. Just make sure you cover everything in your Accountable Plan. If you need some help you can download the Accountable Plan Reimbursement and Spreadsheet Here.

6. Beware of Business Credit Cards without an Accountable Plan

I love those mileage perks of having a business credit card but beware if you have a corporate credit card without an Accountable Plan. Let’s say you have corporate credit card with three employees. Without an Accountable Plan, the money that you pay to the credit card becomes taxable income to your employees. What would happen? You would have to include that amount as a taxable wage on their W2. Make sure your employees are aware of your expense policy and reinforce it. They’ll thank you at tax time.

7. If You Create it Wrong You Could Create a Taxable Wage to Your Employees

If you don’t have an accountable plan or you don’t create it correctly you could end up reimbursing yourself and your employees and causing a tax event. For example, you have an employee and you reimbursed him $200.00 for mileage. Without an Accountable Plan that $200.00 is considered a taxable wage which means you need to collect payroll taxes and you would be on the hook for paying the business side of the payroll tax.

Instead, download our sample Accountable Plan and make sure your employees have an expense policy that reimburses them for work-related expenses that doesn’t cause tax headaches.

Free Fillable Accountable Expense Policy: Get our ” Sample Expense Policy and Calculator” that lets you craft an expense policy that saves you and your employees’ money.

Grab the Accountable Plan Template Here

Putting it All Together

Accountable Plans come with a lot of perks if you set them up right. Make sure you document your deductions, so they don’t come and bite you in the ass come tax time. You don’t have to treat your employees equal so just because you take an allowance for a home office doesn’t mean you have to give it to your employees as well. Beware of business credit cards so you don’t punish yourself or your employees with taxes. If your not sure which expenses are deductible make sure you read the Big Fat List of Small Business Deductions and include them in your expense plan.

And remember, if you need some help creating an Accountable Plan for your business, we’re here to help you out. You can either download the Sample Accountable Plan or give us make an appointment with us.

Cheers!

Andrea

How to Ruthlessly Cut Expenses in Your Business

As businesses start opening up there may be room to review your operating expenses. So you can can continue to operate with a reduced workforce, and reduced sales. Now is the time to cut your business expenses so you can re-open leaner and meaner. If you’re not sure how to reduce your operating costs, then this article is for you.

How to Optimize Operational Costs

First and foremost, you will need to understand where your money is going. To maximize the income you have coming in you’ll need to follow a few simple steps before you take some action. If you haven’t read our article on Organizing Your Business Fast make sure you have a system in place as it will help you keep your cut your business expenses.

Analyze Spending habits

Pull your reports and statements for the last 6 months. Look for services that you haven’t used or may not need right now.

Make a list of your vendors and suppliers

Create a list and what you pay your vendors and suppliers on average over the last six months. If you need to renegotiate and the contract is coming due it maybe time, see if you can get a better deal.

Automate Manual Processes

If you still do a lot of printing or you have processes that are very manual in nature you may want to rethink through them and see if there are ways to automate your workflows.

Align Costs to Strategy

All businesses spend money make sure that your spending the money on things that help service your customers and grow or stabilize your business. Make a list of your expenses and then ask yourself “Is this cost help service my current clients or get new clients or is it a non-essential cost that I can find another way?

Run Projections on current spending to optimize cashflow

Now that you have your current information and you know what costs will help you and what costs are non-essential here are some common expenses that you can save on

Cut Your Business Expenses and Operating Costs

Reduce Monthly Re-occurring Subscriptions

Now that you have reviewed all your expenses, I’m sure there are a few subscriptions and services that you can cut from your business without missing a beat. If you do find that you need the services, you may be able to purchase them for a year at a time for a substantial discount.

Renegotiate with Vendors and Suppliers

Pay early or on time reduce bank charges and late fees and if you can use cash many vendors will give you 1 to 2 percent discount.

Need a new supplier get at least 3 bids and then ask if any will negotiate additional fees.

Pay early and on time to receive discounts. You’d be surprised at how much you can save by not letting bankers keep fees by charging you for returned checks.

Manage Your Inventory to Cut Business Expenses

There are many ways to reduce the cost of inventory. But one of the most important is to understand the numbers in your inventory so make sure that you have a great way to track your inventory levels. But here are some great tips that will help you.

Avoid Minimum Order Quantities for new products that you may sell because they don’t have a history.
Know your reorder point so you can order products at the right time.
Have sales to get rid of obsolete stock or stock that doesn’t sell

If you need some more information on inventory to cut your business and operating costs check out this article on the Cost of Inventory.

Cut Your Business Expenses for Your Home or Office Space

Cut or Reduce Janitorial Costs

Have a janitor or maintenance service? Renegotiate your contract or hire kids to do it for you. When I was young my dad would pay us to clean his office. This is especially great for younger kids. No reason they can’t dump trash, dust and vacuum it’s not like they’re in school all day.

Print Less or Go Paperless

Print or go paperless. There are many ways to automate processes so you don’t have to use paper. But if you are going to use paper buy recycled toner to reduce those printing costs.

In the market for office equipment? Buy used and reduced the cost. Remember it’s still tax deductible even if you spend half as much.

Cut Business Expenses by Lowering Utilities

I yell at my son all the time to turn off lights especially the pantry light. (Seriously have no idea why that kid couldn’t turn off that particular light to save his life.) So, I went to Home Depot and bought a motion detector light. Easy peasy to install and now no more arguing with the kid. Large corporations have been using automatic lights and timers to reduce their electric bill may be it’s time for you to do the same.

Lower Your Phone Bill

If you haven’t ditched your landline now’s the time. Voice over the Internet phones is cheap, easy to install and cost a fraction of a landline.

Cell phones can run up costs like nothing else. Negotiate with the phone company to see where you can cut the extra costs. Review your bill sometimes they sneak in expenses you’re not aware of.

Share Your Costs with Other Business Owners

If you Rent office space, you may not need as much space as you think. If you have free space another good idea is to rent out the unused portion. Sharing costs will reduce utilities, office expenses etc. You can sign up for a co-working space, but they may be somewhat cost prohibitive as they include a lot of extra fees. It may be easier to find another small solo-preneur or freelancer who would be happy to share costs of an office without all the overhead.

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Andrea's Tip

Accountants and lawyers have been sharing offices for years long before co-working was a “thing”. You never know so just start calling around how many business owners reduce these costs by sharing.

If you know some business owners who need to buy office supplies, cleaning supplies, or really any other supplies share the expense and split the bill.

If you belong to an association, they may have discounts that you can use to buy equipment or services and a reduced or discounted price. Also, you can call the association and see if they will discount there membership.

Reduce Your Vehicle Expenses

Cut Maintenance Costs

If you have a fleet of vehicles look to renegotiate your maintenance contract or find a new vendor who can care for your vehicles and a reduced price.

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Andrea's Tip

I Love using local mechanics as they are usually cheaper and much more willing to negotiate on prices for preventive maintenance.

Buy More Fuel-Efficient Car

Have a delivery service? Gas prices are low right now but make sure your delivering by location or even invest in transportation software to make delivery by location easy and economical.

Cut Expenses by Using a Gas Reward Card

Use gas reward cards to reduce fuel costs and earn cash and reward points to be used for other purchases.

Reduce Your Insurance Costs

Is your insurance for your home or car up for renewal it may be time to look for better prices. Make sure you get at least three bids to get the best available coverage for a reduced amount.

Cut Down on Marketing Expenses

Marketing can be the biggest money suck, but I don’t feel really qualified to give advice on how to keep these costs down. So, I’ve included some really great articles on reduce your marketing budget while still remaining in business.

10 Ways to Cust marketing Costs Before the End of the Year

Reduce Digital Marketing Costs and Maximize Your Results

Use a Budget Template to Track Your Marketing Dollars

Reduce Employee Expenses

I’m not telling you to lay off people, but I can tell you that sometimes you’ll need to reduce some of the perks you offer.

Cut Down on Meetings

Having unnecessary meetings every week contributes nothing. Maybe you can have a board where employees can hang post-it notes on whenever they get a new idea that might contribute to the business. If its worthy you might have a meeting to discuss it. But having unnecessary meetings every week or so is just time consuming and may bore and reduce the productivity of your employees.

Hire Some Temporary Help

Have some overflow work but not enough for a full-time employee? If you’re willing to do some training, hardworking high school and college students are available (especially in the summer!) for low-cost labor. Some organizations will even pay their wages for you.

Maybe you need someone with additional skills then hire an Independent contractor. These workers are more flexible and don’t come with the added costs of benefits. And as your business bounces back you can always add them to your payroll.

Modernize Your Office to Cut Business Expenses

Use Technology to Reduce Business Costs

If you’re using in house servers, it may be time to reduce costs by going to cloud-based or open-source software. There are literally internet-based solutions for everything. From invoicing, to contract signing to phone services. Modernizing your office to save your business and your expenses.

Automate Time-Consuming Tasks

If your staff does a lot of routine work, it may be time to automate the tasks and let them work on more revenue-generating initiatives that align more with your strategies. Everything from redirecting calls to posting updates to social media can reduce the unnecessary workload.

There are a lot of things that your staff may be doing that might be routine work or require no experience at all such as posting updates to social media, redirecting calls, etc. These operations are reducing your work force’s productivity and putting the unnecessary workload on them. These operations can be simply automated through a one-time payment.

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Andrea's Tip

Let your employees know that you’re looking for ways to help them do their jobs more efficiently and let them come up with ways to help. You can even offer a cash bonus for ideas that are implemented

Bonus: How to Increase Your Revenue During These Tough Times

Create Partnerships with other business owners

Make strategic partnerships with Co-petitors and build relationships with other business owners to leverage their network

Learn to Barter

Need some help with a function you don’t know how to do? Learn to Barter and trade your services for other professional services that you need.

Negotiate Your Way to Lower Business Expenses

Some of my more successful clients negotiate everything from office rent to equipment leasing to keep their expenses low. Try these tips to keep your expenses down.

Get Bids on Everything

Compare vendors from insurance to furniture and shop around. Use matching as you’d be surprised how many vendors will match competitor pricing.

Putting it All Together

Ruthlessly cutting business expenses can be a challenge but follow the strategic steps and you’ll make your business leaner and meaner and far more prepared for the next steps. If your looking for some help with negotiation with vendors to get the best prices for their services give me a call. I’d love to help you make your business lean.

If you need some help making some business cuts to your expenses, we want to help. Make an appointment today!

Cheers!

Andrea

The 4 Rules of Money Every Small Business Should Know

It’s been a crazy month, to begin with, and as I write this, we’ll be onboarding three clients this week. I’m excited for them and for me 😉. I have noticed that one of the common issues my clients have is that they don’t follow any rules when it comes to understanding the rules of money for small businesses.

Whenever I take over the accounting tasks for small businesses, I start by asking questions. Hopefully, if your reading this it will help you out.

**Money Rule 1: Know Where All Your Money Is**

I would say that 90% of the business owners I talk to don’t know where all their money is. Let me give you an example. Smart business owners will set up a business checking account in QuickBooks or Xero. But they leave off things like credit cards, business loans, Leasing information, etc.

Andrea’s tip: If you have a business loan the interest that you pay is tax-deductible. Make sure it’s accurately reflected in your accounting system.

List of items that should be in your accounting system:

Business Checking and Savings Account
Business Credit Cards
Any business loans
Any vehicle loans tied to your business (for business use only)
Payroll

Andrea's Tip

If you use your personal car for business use the mileage deduction and don’t add that loan to your accounting system.

Andrea's Tip

If you’re a small solopreneur you might only have a personal credit card. Try and use just 1 card for business expenses and tie it in with your accounting system. That way you know where your money is going.

Another no-no is to have business expenses tied to your personal credit card. That makes it really hard on you to track the expenses and you may lose out on deductions.

Money Rule 2: Set Aside Money for Taxes (and Other Long-Term Obligations)

If you don’t have a business savings account, you should open one soon. This way you can set aside money for things like taxes, balloon payments, and other long-term obligations that you may have. My rule of thumb on how much money you should set aside is fairly straight forward. If you a service-based organization, I suggest a portion of any sales be moved into savings account as soon as you receive payment. That way when you pay your estimated tax quarterly your covered and you don’t have to sweat it.

I have tax brackets laid out for you in the Tax Brackets for 2020. That way you can use the highest tax bracket that you fall into to set aside the money for tax payment.

Want the Profit Roadmap for Free?

Download the excel version of the profit roadmap and keep your finances in line with your goals. Review your numbers monthly, quarterly and at the end of the year so you can get clear on your business.

Bonus Content: Price your services correctly so you always know if you make a profit.

Download the Profit Roadmap

**Money Rule 3: Embrace Your Real Expenses**

My son just turned 16 and will be getting his driver’s license soon (which scares the crap out of me). He recently told me that HE wouldn’t get into an accident (You know, because he such an awesome driver). However, as I told him the statistics prove him wrong almost everyone gets into an accident as a young driver and he’s no different. Well your expenses are just like that…

Embrace it!

Inevitably you will forget about a bill, have an unexpected expense or your cash flow will be low. As I like to say it’s time to whack the mole.

Take some money from a different category pay it off,
Annotate it so it doesn’t happen again or your prepared for it.
And move on.

If you don’t know where your money is going that will be the quickest way to go out of business. If you need a little help organizing check out our 4 Steps to Organizing Your Small Business Finances.

Keep an eye on your expenses and you’ll have enough to cover those unexpected expenses.

Money Rule 4: Prepare for the Down-Cycle

Every business has downtime. As the cycle of life, it’s inevitable. As a business owner, you’ll need to prepare for seasons or years where you’re not in growth mode. Using a phrase from personal finance it’s time to pay yourself first and set aside money to handle those times when things are stressed.

For example, I have a lawn care provider. He generally works from March through October. He’ll make little to no money from November, December, January, and February. I make sure that he sets enough aside so that he can continue getting a paycheck during those months. We worked together to figure out how much he needs to set aside and we make that one of his goals for the year.

If your business has a slow time during the year make sure you know when it is so you can plan for it.

Putting it All Together

If you follow the rules of money for your small business, you’ll be at ease during times when cashflow is tight. By understanding where all your money is coming in and going out will help you build a long sustainable business that can manage the small business roller coaster.

As always if you need help and want to understand your business finances better you can always give us a call and talk to one of our amazing financial geeks. Schedule a time right here.

You’ve Got This!

Andrea

Want the Profit Roadmap for Free?

Bonus Content: Price your services correctly so you always know if you make a profit.

Download the Profit Roadmap

How to Crack the 1099-NEC Code

Don’t make costly mistakes by filing your 1099-nec late or incorrect. Find out how, when and where to send the forms.

What the Heck is Cost of Goods Sold?

It’s tough enough tracking your expenses so you can price your products. Let us help you figure out your cost of goods sold so you can keep your business on track.

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4 Steps to Organizing Your Small Business Finances Fast

Well it’s almost tax season and you know what that means. Frantic rushes to find receipts and make sure your small business financials are organized so you can file your taxes.

Wouldn’t it be great if you didn’t have to do that anymore? And let me tell you your accountant will thank you if you don’t come in with a shoebox full of receipts.

There are truly only 4 steps to organizing your small business finances to get the year started out right. That way you can have a clean desk, a clear mind and keep your business on the right track.

Want the Profit Roadmap for Free?

Bonus Content: Price your services correctly so you always know if you make a profit.

Download the Profit Roadmap

Why You Should Keep Your Small Business Finances Organized

Let’s face it you would rather risk a trip to the dentist than to get your small business finances organized. Maybe you even think that the dentist is fun. If you do decide to take on the challenge of organizing your small business let these be the reasons that you choose.

You’ll make tax season a LOT less stressful
You’ll become more financially aware and it will improve your money management, which in turn will help you make better decisions.
It will help you keep an eye on your cash flow, budget, and your expenses so you know where to spend your money and where to cut back.

Let’s get you organized and on your way and then we’ll work on keeping it organized throughout the year.

Step 1: Organize Your Paper and then Digitize it

The first step is always the hardest, but you got this and really, it’s not so hard.

Stuff You May Need

Cloud Storage (i.e. Dropbox or Google Drive)
Filing Cabinet or a 12 Pocket Folder (1for each year)
Label maker or Sharpie Pen
Manilla folders and hanging folders
3 Empty shoeboxes

Andrea's Tip

If your organizing for more than one year and you are using a 12 Pocket folder make sure you have 1 pocket folder for each year.

Paperwork You Need to Keep on File

ATM Receipts
Deposit records
Deposited Checks
Bank, loan and credit card statements
Tax Returns and other tax documents

Create Your System

Organize your digital cloud storage just like your filing cabinet. (Assuming you’re not going totally paperless).

Create a Folder for each year
Create a folder for each month
Create an Annual folder

See that wasn’t so hard. Repeat for each year. On your computer, this will look like

I love color-coding by quarter but that’s not something you have to do.

Now it’s time to put that paper in the right box. I know you were asking your self why boxes. This is why. I like to sort through the piles first and get them int the right order. It makes filing so much easier.

Time to start sorting: 1 box is for receipts and bills received. One box is for bank statements and loan documents. 1 box if or Tax returns and other IRS documents.

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Andrea's Tip

If you’re looking to go paperless it’s time to get out your phone and start taking pictures of everything. Or if you have scanner start scanning them in. Then download to your computer. Then you can start filing them in by month. This may take a while especially if you have a lot of documents and receipts. Quicker to just file the paper but it’s up to you.

Organize Receipts and Bills

Take the receipt box and start sorting. Since receipts can sometimes be small use an envelope and stuff that. Write the month on the outside.

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Andrea's Tip

You need to keep your receipts for at least 3 years. And though auditors will use your bank statement sometimes they want to see the receipt to.

Automate it!

I love good tools! Below is a list of both paid and free tools you can use to keep your receipts and bills automated.

Paid Receipt Trackers

Free Receipt Trackers

Evernote
Google Keep
Google Drive

Andrea's Tip

If you have receipts going to your email inbox you’ve just made life a little bit easier for yourself. Set up a filing system or label system in your inbox that is the same as above. I like to make copies and keep them in my google drive folders but sometimes that can be a hassle. I label it and then once a week I make copies and upload them.

Organize Bank, Credit Card and Loan Statements

If your bank is like my bank I can go and download my statements from the bank itself. No more paper copies for me. When I reconcile my accounts (yes, I actually do this). I upload the statements to my google drive. Most banks keep anywhere between 1 and 3 years online. Older then that they don’t keep them. I like to make it a habit to download them just in case I need to them.

Check on your loan statements and make sure they line up.

Tax Returns and Other Tax Documents

You must keep your tax records for a minimum of 6 years. Nowadays with efiling tax returns, you should have an electronic version. If using something like turbo tax or H&R block software, make sure you keep a copy.

Tax Documents that you’ll need to keep

1099s you receive or send
Your Annual Tax Return
W2s
I9s
Partnership and Business Organizational documents
Payroll
Estimated tax receipts

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Andrea's Tip

Identity theft is very real don’t keep sensitive and private information on a free cloud drive. They are easy to hack and then your information is exposed. You can check out our article on Tax Identify Theft here.

Step 2: Organize Where Your Money Comes From

The most fun part of this step is to figure out where your money is coming from. Ask yourself a few questions

Are you currently an employee? That means salary. You should list it but separate from your business.
Do you sell services? Packages bundled together.
Do you sell products? How many and how many variations.

If you’re an eCommerce store that means listing all the products you sell and all the variations of products you sell. For example, let’s say you sell Widgets in different.

Example of a Service Product List

Product	In stock Inventory	Units	Selling Price	Cost of Product	Profit Per product
Widget 1, Pink	10	Ea	5.00	2.5	2.50
Widget 1, Yellow	5	Ea	5.00	1.5	3.50
Widget 2, Something different	50	Ea	10.00	3.00	7.50

Example of a Service Product List

Service	Selling Price	Cost of time/or Labor	Cost (set your minimum hourly wage)	Profit Per Service
Life Coaching Monthly product	500.00	4 Hours per month to client	$100.00	$100.00

This may be a bit different depending on the service or products that you sell. If you really want to know how to price your products check out our article on Pricing: Art or Science here.

You can also download the Profit Roadmap which has a spreadsheet that will help you price your products and know that your making a profit here.

Automate it!

Paid

Quickbooks and Xero both have product forms that you can create which will help you track your products and services. They are not the most robust when it comes to inventory products but it is a simple way to get started.

Free

Create a spreadsheet or Google Sheets. Just make sure you keep it updated.

Step 3: Map Your Business Expenses to Keep Your Finances Organized

There are two to three different types of expenses

Loans and Credit Cards that you need to pay
Bills from Vendors like contractors you hire to do work
Day to Day expenses like software subscriptions you have to various services

Let’s start by breaking them down into three groups

Now create a quick spreadsheet that looks like this:

Loans and Credit Cards	Payment	Total Amount Owned
Credit Card 1	$300.00	$5,000.00
Loan 1	$250.00	$10,000.00

Fixed Expenses
Rent	$1,000.00
Software Subscriptions	$35.00

Variable Monthly Cost
Contract Labor	$1,500.00
Material	$125.00

Oh, Look You just made a budget too!

Bonus! you just made your chart of accounts also known as categories.

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Andrea's Tip

If you have had variable costs just try to average the monthly costs for example if you buy material three times a year and spend 500.00 each time average the cost to get your monthly amount.

Formula

3*500/12 = 125/monthly cost

Step 4: Track Your Business Finances Daily, Weekly and Monthly to Keep on Track

Use your system that you’ve set up. Try to keep up with it with daily, weekly, monthly and quarterly tasks so you can stay on top of your finances.

Automate what you can so you stay ahead of the game and make better decisions about your business like what products to keep. What is selling like hot cakes.

Get help when you need it. Finances can be hard you may need to get some help or an outside perspective. Feel free to join our Facebook Group Mind Your Own Business – Powered by Accountable CFO to get answers from a group of like-minded business owners just like you.

Want the Profit Roadmap for Free?

Bonus Content: Price your services correctly so you always know if you make a profit.

Download the Profit Roadmap

Putting it All Together

Getting your filing, paperwork, and finances in order will help you, in the long run, to make better decisions about your money, your time and your business. You don’t have to be a financial wizard to be in control. Use the steps above along with the profit roadmap and good budget and you’ll find that you’ll be clearer on what you need to do next.

If fear is holding you back or your confused about what to do. Then maybe it’s time to talk to an expert. We’d be thrilled to have you Make an appointment today!

Just remember

You Got This!

Andrea

Last Minute Family Tax Strategies to Use Before 2020

Not to be cold-hearted at the beginning of winter but did you know there are savings to be had if you think about a little tax before the end of the year?

Just think if you give some money to family or friends for Christmas you can use some of the strategies below so you can pay fewer taxes and so too does your family.

If you have kids under the age of 18. It might be time to consider putting them on your payroll.

So we’ve put together some last-minute year-end strategies for marriage, kids and family which you can put in place before 2019 is over.

Free Ebook: Grab the Big Fat List of Small Business Deductions: Save money throughout the year with the Big Fat List of small business tax deductions. Use it as a reference all year round to save big at tax time.

Grab the Big Fat List Here

Hire Your Kids

Sole Proprietor, LLC taxed as a sole proprietor, or if your spouse is also your business partner you should consider putting your kids on your payroll.

There are two reasons you might want to include your kids on your payroll

W-2 wages paid by a parent to a kid (under the age of 18) are both

Deductible by the employer/parent
Exempt from federal payroll taxes for both the parent and the child

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Andrea's Tip

Now if you have an S Corp or C corp it does not eliminate the benefits it simply reduces them so read on.

2. Your child can contribute up to $6,000 to either of the following:

A Tax-deductible IRA, which allows the child to deduct that amount from federal tax. Use this strategy if the child earned more than the $12,200 in W-2 wages and you want the child to have more tax-free money.

- Remove contributions at any time (if it is not the interest earned)
- Remove up to $10,000 per year for college expenses
- Remove earnings (interest and capital gains) tax-free after age 59 ½. Roth Ira, which is not tax-deductible, but the child can

This one is great when their earnings are under the $12,200 in total W-2 wages and other earned income because they don’t need the tax deduction.

Let’s look at an example of how the Roth IRA works. (I like to use my son for this).

My 15-year-old son has no earned income other than what he earns from me. I pay him $12,000 per year (which is a fair market for the crap that he does for me). I deduct the $12,000 from my business expenses. And I don’t have to pay federal payroll taxes so I get to pocket that.

My son collects $12,000 and pays a big fat 0 to the federal government because

He is exempt from federal payroll taxes,

and

The $12,000 standard deduction eliminates the $12,200 from his taxable income.

Now my son can put up to $6,000 in a Roth IRA and begin savings for college, or retirement or some other financial.

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Andrea's Tip

Think your missing out because you’re an S Corp or C Corp? You might be a little because the corporation does the hiring which means you and the kid must pay payroll taxes. Because you don’t get those savings however, your kid still has the Roth IRA and if you file their tax return, they’ll get a refund on the payroll taxes.

Just a Note

The kiddie tax does not apply to the child’s wages and other earned income. The kiddie tax only applies to unearned income, like dividends, interest, and rent.

Get Divorced After December 31st

I’m not telling you to get divorced to save money! But if you happen to be in the unhappy circumstance of getting a divorce you might want to wait until after December 31^st.

The marriage rule works like this: you are considered married for the entire year if you are married on December 31.

Many changes in the tax code may have eliminated some of the differences between married and single taxpayers, in most cases the joint return will work to your advantage.

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Andrea's Tip

Warning on alimony! The Tax Cuts and Jobs Act (TCJA) changed the tax treatment of alimony payments under divorce and separate maintenance agreements executed after December 31, 2018: Under the new rules, which apply to all agreements executed after December 31, 2018, the payor gets no tax deduction and the recipient does not recognize income.

Own a Home with Your Non-Spouse? You Can Deduct More Interest than a Married Couple

Two single people can deduct more mortgage interest than a married couple.

If you own a home with someone other than a spouse, and you bought it on or before December 15, 2017, you individually can deduct mortgage interest on up to $1 million of a qualifying mortgage.

For example, if you and your unmarried partner live together and own the home together, the mortgage ceiling on deductions for the two of you is $2 million. If you get married, the ceiling drops to $1 million.

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Andrea's Tip

If you bought your house after December 15, 2017, then the reduced $750,000 mortgage limit from the TCJA applies. In that case, for two single people, the maximum deduction for mortgage interest is based on a ceiling of $1.5 million.

Get Married On or Before December 31st

Remember, if you are married on December 31, you are married for the entire year.

If you are thinking of getting married in 2020, you might want to rethink that plan for the same reasons that apply in divorce (as described above). The IRS could make big savings available to you if you get married on or before December 31, 2019.

You have to run the numbers in your tax return both ways to know the tax benefits and detriments for your particular case. But a quick trip to the courthouse may save you thousands.

Use Your Gift Tax to Help Loved Ones

If you give money to your parents or other loved ones to help support them and your parents are in the 0 Percent tax bracket for capital gains then do this.

Make a gift of stock versus cash and you can give them up to $15,000 tax-free.

What is the 0 percent tax bracket? A single person with less than $39,376 in taxable income for 2019 or a married couple with less than $78,751 in taxable income pays 0 percent on capital gains.

Let’s give you an example of how this works.

You give Mom and Dad shares of stock with a fair market value of $20,000. Mom and Dad sell the stock and get $20,000 and pays 0 in capital gain taxes. They now have $20,000 in after-tax cash to spend.

Now if you sold the stock, you would have paid taxes on the $20,000

Now, you can only gift up to $15,000 if your single which means $5,000 of your gift will go against your $11.4 million estate tax. However, if you’re married and you make the gift together you each have a $15,000 gift-tax exclusion, for a total of $30,000. Just remember to file a gift-tax return that shows you split the gift.

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Andrea's Tip

This no longer works with college students: In the old days, you used this strategy with your college student. Today, this strategy does not work with the college student, because the kiddie tax now applies to students up to age 24.

Grab the Big Fat List Here

Putting it All Together

If you haven’t put your child on your payroll it may be time to take a look at that strategy to save money for both your children and you.

If you are about to get married, consider the mortgage ceiling available to singles co-owning homes as well as the post-TCJA alimony rules. Married or divorced you’re going to be married or divorced all year long (at least when it comes to your taxes).

Make sure you speak to a professional to run your numbers to see if getting married or divorced this year is best for your year-end taxes.

If you helping parents or other family members out it may be a good idea to see what strategies will work best for both of you.

Taxes can be confusing so if you need some help Let’s talk!

Happy Holidays!

Andrea

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