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Financial Analysis for Your Small Business

March 20, 2022 by admin

Woman Working At Desk In Busy Creative OfficeComparing a business’s key financial ratios with industry standards and with its own past results can highlight trends and identify strengths and weaknesses in the business.

Financial statement information is most useful if owners and managers can use it to improve their company’s profitability, cash flow, and value. Getting the most mileage from financial statement data requires some analysis.

Ratio analysis looks at the relationships between key numbers on a company’s financial statements. After the ratios are calculated, they can be compared to industry standards — and the company’s past results, projections, and goals — to highlight trends and identify strengths and weaknesses.

The hypothetical situations that follow illustrate how ratio analysis can give company decision-makers valuable feedback.

Rising Sales, Rising Profits?

The recent increases in Company A’s sales figures have been impressive. But the owners aren’t certain that the additional revenues are being translated into profits. Net profit margin measures the proportion of each sales dollar that represents a profit after taking into account all expenses. If Company A’s margins aren’t holding up during growth periods, a hard look at overhead expenses may be in order.

Getting Paid

Company B extends credit to the majority of its customers. The firm keeps a close watch on outstanding accounts so that slow payers can be contacted. From a broader perspective, knowing the company’s average collection period would be useful. In general, the faster Company B can collect money from its customers, the better its cash flow will be. But Company B’s management should also be aware that if credit and collection policies are too restrictive, potential customers may decide to take their business elsewhere.

Inventory Management

Company C has several product lines. Inventory turnover measures the speed at which inventories are sold. A slow turnover ratio relative to industry standards may indicate that stock levels are excessive. The excess money tied up in inventories could be used for other purposes. Or it could be that inventories simply aren’t moving, and that could lead to cash problems. In contrast, a high turnover ratio is usually a good sign — unless quantities aren’t sufficient to fulfill customer orders in a timely way.

These are just examples of ratios that may be meaningful. Once key ratios are identified, they can be tracked on a regular basis.

Filed Under: Best Business Practices

How to Maintain Customer Records in QuickBooks Online

February 16, 2022 by admin

quickbooks helpYour customers are your company’s lifeblood. Make sure their records are thorough and up-to-date.

When companies buy other companies, what’s often considered the most critical asset? The customer list. When a business is damaged and data possibly lost, which set of records do they most hope to recover? The customer list.

You probably spend most of your time in QuickBooks Online working with transactions and reports, but your customer records deserve equal time. If they’re incomplete or otherwise not maintained well, you lose time filling in the blanks when you’re trying to complete a task that requires complete customer profiles. Your searches and reports may not tell the whole picture. Your relationships can suffer, and you may miss out on sales opportunities.

QuickBooks Online provides excellent tools for creating and maintaining comprehensive customer and sub-customer records. Here’s a look at how it all works.

Moving Your Customer Data In

There are two ways to create customer records in QuickBooks Online. If you have an existing database in Outlook, Excel, Gmail, or Google Sheets, you can import it. This will save you an enormous amount of time, but it’s a challenging process. You select the file you want to import, and then you have to “map” it by matching the fields in your database to fields in QuickBooks Online. You’ll likely need our help with this.

Quickbooks online tips

To import a customer file into QuickBooks Online, you’ll have to “map” its fields. We can help you with this.

Your other option is to enter records manually. This is time-consuming, but the more information you can include about your customers from the start, the better. You can always edit your records to add, delete, or modify what you originally entered.

To get started, hover over Sales in the toolbar and click on Customers. Then click on New Customer in the upper right corner to open the Customer information window. The only field you’re required to complete is Display name as. You may want to do this if you have a new customer on the phone and you want to concentrate on the conversation. You can take notes about their contact information and fill in the record later, when you’re off the phone.

But wherever possible, as we’ve already said, complete as many fields as you can. You’ll enter name and billing and shipping address and phone number(s) on the opening screen. You can also supply contact details like fax number and website.

Creating Sub-customers

You’ll notice a checkbox that says Is sub-customer. QuickBooks Online lets you “nest” related records under the “parent” record. This can be an actual customer, but many people use it to document jobs they’re doing for the customer. So if you’re a contractor, for example, you might have sub-customers like Sun deck and Spa.

If you want to set up such a record, enter the job name and click in the box next to Is sub-customer. Two fields will open below that allow you to select the parent customer and to indicate the sub-customer’s billing status. The remainder of the fields will automatically fill in with the parent customer’s contact information.

Quickbooks Online tips

You can set up jobs as sub-customers in QuickBooks Online.

Supplying Details

When you’re setting up individual customers, you should add as much detail as you possibly can to each record, beyond basic contact information. QuickBooks Online’s record templates display a number of tabs running horizontally across the window. The most important of these are:

  • Tax info. Are the customers taxable or exempt? If taxable, what is his or her Default tax code? (If you haven’t set up sales taxes yet and need to, please let us help. It’s complicated.)
  • Payment and billing. Do they have preferred payment and/or delivery methods? Will you be assigning default payment terms, like Net 30 or Due on receipt? What is their Opening balance? If they’re brand-new customers who have never ordered from you, this will be $0.00. If they’re existing, active customers, enter any outstanding balance they have with you as of the date that you enter. This must be correct, to avoid any problems with the customers’ ongoing balances. Questions? Ask us.

Other tabs here are self-explanatory. When you’ve entered everything you can, click Save. The new record will now appear in the Customers list and will be available to select from the drop-down list in transactions.

There will be times when you have to refer back to these forms to answer questions. By maintaining detailed, accurate customer records, you’ll be ready to respond. If you have questions about any of the information requested, or about other elements of QuickBooks Online that are puzzling you, please contact us so we can set up a consultation.

Filed Under: QuickBooks

Small Businesses Facing Labor Shortages

January 10, 2022 by admin

Businesspeople in officeSmall business owners cite the unavailability of workers as one of their biggest challenges1. The labor shortage means that employers cannot, in some circumstances, operate at full capacity and must forgo some revenue opportunities. Businesses may have to delay planned expansions or the addition of new products or services because of the scarcity of workers.

Employers understand that having a skilled, trained, and committed workforce is key to growth and profitability. In the competition for a decreasing pool of skilled employees, employers have to assess their current hiring practices, identify any deficiencies, and develop and implement policies that help ensure that they can hire the employees they need when they need them.

Here are some issues employers need to consider when developing a strategy to attract and retain key employees.

Sharpen Your Hiring Process

Use every available tool. If you are not using social media to reach out and contact potential hires, you are not taking advantage of a very helpful medium. Social networks like LinkedIn and Facebook can be productive resources. They can be particularly effective if you ask family members, friends, and current employees to reach out and talk up job opportunities with your company on the sites they frequent.

Posting available positions prominently on your company website can also be effective in reaching out to a pool of potential hires. Traditional avenues, such as headhunters and employment agencies as well as radio and television ads, remain helpful.

Revisit Your Compensation

Some industries, such as information technology, pay more in wages and benefits than other traditionally low-paying industries, such as food services and retail. Still, if the job opening you want to fill is critical to the future growth of your business, you may want to consider paying above market salary if you can afford to do so. You may even have to get into a bidding war with other employers.

The reality is that employees with in-demand skills typically command a premium salary. Before you make a prospective employee an offer, find out how much other employers in your area pay for similar jobs. One place you can find useful employment and wage statistics is the Bureau of Labor Statistics website (bls.gov). The BLS information covers most geographical areas in the United States and is broken into type of occupation as well as various levels within that occupation.

Rethink Benefits

Most employees look for health care coverage, paid vacation days, and an employer-provided retirement plan. If you can’t be competitive with these benefits, you may have to step it up with others. Think of offering employees the chance to work remotely for a few days a week if it is feasible with your business’s operations. Consider summer hours, employer-provided snacks and drinks, and casual dress days.

Coping With a Labor Shortage

Not every incentive has to have a price tag attached. Non-monetary awards — from recognizing an “employee of the month” to a heartfelt face-to-face expression of gratitude for a job well done — can be remarkably constructive and can leave a lasting impact on employees. Inexpensive incentives can include gift certificates, cash spot awards, and even extra paid vacation days.

Offer Training

While costly, offering courses and educational opportunities that can help employees advance in their area of expertise is a potent way to attract ambitious, committed employees. Courses that develop well-rounded team players who can take on other roles within your business are especially cost-effective in the long run.

Consider Incentive Plans

Incentive plans reward employees for their achievements and create a sense of accomplishment. Plans can be used on a one-time basis or as an ongoing program. Some incentive plans include:

  • Annual incentive plan: Rewards for this type of plan are tied to expected results that are identified at the beginning of the performance cycle.
  • Discretionary bonus plan: The owners/managers determine the size of the bonus pool and the amounts that will be given to individuals after a performance period. Typically, payouts from this type of plan are not guaranteed, nor is there a predetermined formula.
  • Profit sharing plan: A profit sharing plan allows employees to share in their employer’s profits. Such plans typically include a predetermined formula for allocating profit shares among participating employees and for distributing funds accumulated under the plan. Some plans are tied in with the employer-provided retirement plan and some plans are discretionary.

Work With Your Financial Professional

Structuring an effective compensation and incentive package can be a complex and time-consuming task. The help of an experienced financial professional can be invaluable during every stage of this undertaking.

1″The America Works Report: Quantifying the Nation’s Workforce Crisis,” U.S. Chamber of Commerce, June 1, 2021.

Filed Under: Best Business Practices

Should You Pay Estimated Taxes?

December 20, 2021 by admin

Image of businessperson pointing at document in touchpad at meetingOnce you’ve filed your income tax return, you may be ready to put some distance between you and the IRS and turn your attention to other things. If you’re employed, you probably can take a breather, since your employer will handle ongoing income tax payments for you through the wage withholding process. But it’s a different story if you receive other forms of taxable income — from self-employment, rental property, or investments, for example. When that’s the case, you’ll typically be required to make estimated tax payments during the year.

Generally, you must pay estimated tax for 2021 if you expect to owe at least $1,000 in tax for 2021, after subtracting withholding and refundable tax credits.

When Are Estimated Taxes Due?

Estimated taxes generally should be paid in four equal quarterly installments. The due dates for the four 2021 estimated tax payments are April 15, June 15, September 15, and January 15, 2021. If you receive income unevenly during the year, your required estimated tax payments may not be the same for each period under the IRS’s “annualized income installment method.”

How Much Is Enough?

The IRS can charge an underpayment penalty if you don’t pay enough estimated tax for the year or if you don’t make your payments on time or in the required amount. The IRS generally requires payments of 2021 estimated tax to total at least (1) 90% of your 2021 tax liability or (2) 100% of your 2020 tax liability, whichever amount is smaller. However, if your 2020 adjusted gross income was more than $150,000 ($75,000 if your filing status was married filing separately), your 2021 payments should be at least (1) 90% of your 2021 tax liability or (2) 110% of your 2020 tax liability, whichever amount is smaller.

If you or your spouse is employed, it may be possible to avoid the need to make estimated tax payments by having more tax withheld from your wages. To adjust your withholding, file a new Form W-4 with your employer. Taxpayers who had no tax liability for the 2020 tax year (the full 12-month period) and were U.S. citizens or residents for the whole year don’t have to make 2021 estimated payments.

Filed Under: Individual Tax

5 Common (and Costly) Payroll Errors and How to Avoid Making Them

November 20, 2021 by admin

Payroll is one of the most important aspects of any business, but it’s one that, when running smoothly, business owners don’t tend to think about; however, when there’s a payroll glitch, it jumps to the forefront of an owner’s mind. Here are several payroll mistakes that can cost you a bundle and how to avoid them in your business.

1. Misclassifying Employees

How you classify employees when you hire them impacts how you and your employees are taxed. If you hire an office staffer to answer phones and file paperwork for an hourly wage, that is a non-exempt employee. Alternatively, if you employ an individual as a salaried Head of Operations, they are exempt. The main difference is that non-exempt employees are eligible to receive overtime pay; exempt employees are not.

There is also a distinction between employee, freelancer, and contractor. An employee receives a regular wage, while freelancers and contractors are typically paid per project. Misclassifying employees may not seem like a big deal at first, but in time, the IRS will find out, and your business will end up paying the taxes due, the associated fines, and of course, the interest on the past-due taxes.

To avoid this issue, understand the classifications and the capacity in which you hire your employees. To classify employees, be sure to use IRS definitions. For example, the IRS defines independent contractors this way: “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

2. Miscalculating Pay

There are many payroll aspects to consider, such as overtime, commissions, deductions, paid time off (PTO), and more. When it comes to calculating pay, payroll admins should keep in mind that different policies apply to each state, and that must also be considered. For example, the federal overtime law dictates that overtime wages (pay for hours worked over 40 hours in a workweek) are paid at 1.5 times the employee’s regular hourly rate. However, some states have different policies regarding overtime. For example, in Alaska, California, Colorado, and Nevada, overtime is also based on hours worked in a day. As a general rule, a business should comply with the more generous law for the employee.

In addition to overtime pay miscalculations, poor time tracking capabilities also contribute to miscalculated pay. To avoid an issue miscalculating pay, be sure to know your state’s guidelines on overtime pay. Further, be sure that your company has a reliable tracking system for keeping up with employee hours so that pay, overtime, and other payroll aspects like PTO are correctly recorded and calculated. This process will significantly reduce the chance of payroll overpayment or underpayment mistakes that could become costly payroll corrections.

3. Missing Deadlines

One of the most damaging payroll mistakes for a business is missing payroll tax deadlines. Missed deadlines can cost thousands of dollars in penalties, and in extreme cases, a company’s business license can be suspended.

To avoid this critical error, use the IRS Calendar Connector to help you remember your tax deadlines. However, if you miss a tax deadline, contact the tax agency immediately because late payment penalties pile up quickly. The quicker you get in touch with the IRS, the lesser penalty you will have to pay.

4. Messy Recordkeeping

What is the word a small business owner least likes to hear? There are likely a few, but “audit” has to be right at the top of the list. The anxiety that term induces should be reason enough to keep accurate, complete payroll records that are well-organized. The price you pay for not doing that could be fines, penalties, and a plethora of costly payroll-related tax issues. For example, if you accidentally file W-2 forms late, you will pay between $50 and $260 in fines depending upon how late the W-2s are filed.

The same goes for late-filed 1099 forms or any other tax-related documentation. The fines vary. For example, if you do not provide a contract employee with a 1099 form, that’s a $250 fine.

To avoid this issue, keep accurate, complete, up-to-date payroll records for all employees. Mind your paperwork like W-2 forms, timesheets, 1099 forms, and pay records. Also, be sure to retain employee records for the four-year minimum that the IRS requires after an employee leaves your company. FYI: The SBA recommends retaining payroll records for six years.

5. Missed Tax Forms

An extension of point four above targets the end-of-year task that some payroll admins dread – preparing and sending all the necessary tax forms to all employees, whether they are full-time (W-2), part-time (W-2), or independent contractors (1099). Remember, form 1099 is required to be sent to an independent contractor who earned $600 or more during a tax year.

To avoid this issue, make sure tax rates are in order, payroll is correctly calculated, and all forms are correctly filled out and sent to employees promptly.


Payroll-related tax issues are avoidable. Take time to speak to your trusted tax preparer or CPA today so that you avoid these mistakes and keep your business running as it should.

Filed Under: Best Business Practices

Who Owes You? 5 QuickBooks Online Reports That Can Tell You Fast

October 20, 2021 by admin

Keep a constant watch on your accounts receivable to improve cash flow.

Quick: How many of your invoices are unpaid? Have any of your customers gone over 30 days past due? Did you bill all of the time and expenses for that project you just completed for a customer?

If you’re doing your accounting manually, there’s simply no way to get that information quickly. Depending on your bookkeeping system, you may not be able to get it at all.

QuickBooks Online has more than one solution for this problem. You see the first one every time you log in. The Dashboard contains a graphic in the upper left corner that tells you how many invoices are overdue and unpaid. Click on the colored bar labeled OVERDUE, and you’ll see a list of invoices with the unpaid ones right at the top.

You can tell at a glance how much of your money is tied up in unpaid invoices.

While this is important information for you to have as you start your workday, it doesn’t tell the whole story. To get that, you’ll need to access some of QuickBooks Online’s reports – five of them in particular. Click Reports in the left vertical pane, and then scroll down to the heading labeled Who owes you.

These reports are listed in two columns. Each has the outline of a star next to it. Click on the star, and the report will be added to the Favorites list at the top of the page. Click on the three vertical dots next to it, and you’ll be able to Customize the report. And as you hover over the title, you’ll see a small, circled question mark. Click on this to get a brief description of the report.

There are several reports in this list that can provide insight into where your outstanding revenue is. We recommend you run five of them at least once a week – more frequently if your business sells large quantities of products and/or services. The suggested are:

Accounts receivable aging detail

This report provides a list of invoices that are overdue, along with aging information. There are several columns in the report, but you’ll want to pay special attention to the last one: OPEN BALANCE.

Tip: If you have many customers or simply a high volume of unpaid invoices, you might consider running the Accounts receivable aging summary instead.

Changing the Content

Before you run the report, you should explore the customization tools provided for it. They won’t be the same for every report, but you can start to get an idea of what can be done. Hover over the report title and click Customize. A panel like the one pictured below will slide out of the right side of the screen.

QuickBooks Online provides deep customization tools for reports.

You can see some of your customization options in the image above. Beyond these, you can also work with filters and headers/footers. When you’re satisfied with your changes, click Run report.

If you want to run a report with its default settings, just click on the report title in the list to display it. You’ll have access to limited customization from there.

Four other reports you should be generating regularly are:

  • Customer Balance Summary: Shows you how much each customer owes your business
  • Open Invoices: Lists invoices for which there has been no payment
  • Unbilled Charges: Just what it sounds like: tells you who hasn’t been invoiced yet for billable charges
  • Unbilled Time: Lists all billable time not yet invoiced

We don’t expect you’ll have any trouble understanding reports like these; they’re fairly self-explanatory. QuickBooks Online offers many other reports, the standard financial reports that need to be generated monthly or quarterly, like Balance Sheet, Profit and Loss, and Statement of Cash Flows. You’ll absolutely need these should you apply for a loan or need to supply in-depth financials for any other reason. We can help you analyze them to get a comprehensive, detailed picture of your company’s fiscal health.

Filed Under: QuickBooks

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