Bookkeeping Tips for the Everyday Entrepreneur

How Much Should You Get Paid From Your Business?

You've been putting in hours (and hours) of hard work to make your business successful and funneling every dollar you make back into the company. You're starting to see a return on that time investment, and you're ready to ask that big question.   How much do I pay myself?     Unfortunately, there's no simple answer. You may have been used to getting paid by the hour or receiving overtime if you worked more than a standard 40 hours. Of course, when it's your own business that's demanding those nights and weekends, no one's checking the time clock and adding extra to your paycheck.    The clearest answer for how much you should get paid? It depends.    Your business's financial success is the big deciding factor. No matter how many hours you put in, you should only get paid from the profits that your business makes. This means that once you've used all your revenue to pay your bills, you can pay yourself. You definitely don't want to get into the situation of paying yourself with money that you need to cover bills of business expenses. Meet your expenses first. Then check out your profits.    Of course, that's not the end of the analysis. Many business owners use their profits (or a portion of them) to update and expand their business. You may decide to use some of your profits to buy better equipment or update your website. You could go to extremes with this and never pay yourself, but that might lead to burnout or - if you're not the only one relying on your income - family strife.    However much you're able to pay yourself, use a budget and a cash flow forecast to help you plan and anticipate accordingly. Some weeks or months you'll make more than others, so you'll have more available to pay yourself. Set some of that aside to help during those leaner periods.   Deciding how much to re-invest and how much to take as a salary depends on your budget and goals for your business. Contact us to help you meet your financial goals.
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From the CEO: What You Need to Know About State and Federal Taxes Before You Hire Your First Employee

I remember the excitement of hiring my first employee.   Bringing on staff can feel like a big step toward that scalable business you’ve always wanted. Now you can delegate tasks and increase your output. But employees also come with obligations. It’s one thing to go into business for yourself. It’s something else entirely to take on the responsibility of another person’s income. Once you’ve decided that an employee is the right next step for your business, you’ll need to be financially prepared for the financial implications. Both you and your new employee have tax obligations. Here are the basics. What you owe: At the federal level, you must pay social security and medicare on behalf of your employee. You are also responsible for paying what’s called a FICA match. FICA stands for Federal Insurance Contributions Act, and you have to pay an amount equal to your employee’s social security and medicare tax.   Under federal law, you must pay for unemployment insurance for all employees. Most states also have an unemployment insurance program. This payment goes into an unemployment fund that your state maintains to provide temporary benefits to people who lose their jobs. Some municipalities also require payroll taxes that are tied to employment, such as a commuter tax. What your employee owes: Your employee is required to pay income, social security, and medicare taxes out of their wages. But if you’ve ever been an employee, you know employees don’t make these payments on their own at tax time. You, as their employer, serve as a withholding agent. You are required to withhold the taxes they owe the government from their paychecks and then submit those taxes on a monthly or quarterly basis to the state and/or federal government. In addition to actually submitting the funds, you have reporting requirements. When you make submissions during the year at monthly, quarterly, or biweekly intervals, you are making estimated payments that have to be reconciled with what you actually owe at the end of the year, similar to the way an individual must file a personal income tax return. What you must do to comply: If all this has you feeling a little overwhelmed, you’re not alone. Many entrepreneurs and small business owners outsource their payroll processing requirements as a way to ensure compliance. There are three basic ways to meet your payroll tax burden: Do it yourself. This could mean manually filling out the paperwork or using an accounting software. Either way, you’ll need to know the applicable laws and make sure you’re keeping up with submitting requirements. Use an outsourced payroll service. Companies like Paychex, ADP, Gusto, Paydata, and Quickbooks Online have options for managing payroll payments. Use a bookkeeping service to manage a payroll service. A bookkeeping service can make sure that payroll taxes are calculated and submitted appropriately and ensure that the information is accurately incorporated into your accounting records. Growing your team provides innumerable benefits - from increased output to the intangibles of having someone else to share the ups and downs with. Bringing on one employee may seem like a relatively small addition to your administrative load, but it’s important to get proper systems in place so that you don’t make mistakes that get you in trouble with state or federal tax authorities. However you decide to handle payroll, we’re here to help. [And a quick word of caution if you decide all this is too troublesome and you’ll just hire an independent contractor. Many entrepreneurs start off using independent contractors before they hire their first employees. I’m all for outsourcing tasks - after all, it’s how my business thrives. But if you’re working with freelancers, check on the state and federal regulations to make sure you’re not avoiding the payment of necessary taxes. Both your state tax department and the Federal Government have rules defining who is an employee and who is an independent contractor. Making the correct determination matters. If the IRS considers your independent contractor an employee, you can be on the hook for substantial penalties and back taxes.]
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3 Ways Outsourcing Can Help Your Small Business Succeed

Back in the old days, outsourcing certain functions or departments of your business was only an option for larger companies. With recent technological advances, even small businesses can benefit from many types of outsourcing. Today, a number of services exist that can handle a variety of business functions remotely. Some of the most common outsourced tasks are information technology services, accounting, customer service, and data processing.   If you've maxed out your own capacity (or the hours of your existing staff), but you're not quite ready to hire more employees, outsourcing is your best solution. Here's why:   1. Outsourcing Services Improve Consistency And Often Provide 24/7 Support   Consistency can be tough for small businesses, but it's often a necessary ingredient, especially for tasks like maintaining financial records or responding to customer concerns. Third-party companies that specialize in one area can provide consistently both to businesses and their customers. They're also often available to help with problems that arise 24 hours a day and seven days a week.   2. Outsourcing Helps Free Up Your Staff So That Your Company Can Focus On Its Core Competencies   As you grow, it's easy to get pulled away from those key elements that set your business apart from your competitors. Outsourcing tasks that are necessary but not related to your core competencies allows your employees to focus on the things they do well, the things you hired them to do.    3. Third-party Companies Bring Specialized Skills To Your Business   Outsourcing is an easy way to recruit the help of experts into your business. Even the most well-rounded entrepreneur or business owner has knowledge gaps. Relying on the skills of someone with more expertise is just smart business.      Many small businesses - especially in the early startup stage - struggle with quality and consistency. Outsourcing can improve your efficiency and customer service while saving you time and resources. Contact us today to find out how we can help you and your small business succeed.
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Quick Tip: Why Doesn’t My Bank Balance Match The Register Balance in QuickBooks Online?

When you open up QuickBooks and sit down to do the finances for your business, one of the most worrying discoveries can be that your bank balance doesn’t match your register balance. A discrepancy could be a red flag that something is wrong in your books, but it's more likely that there's an innocent cause.   If you know what to look for, you can quickly determine why the numbers don't match up and whether you need to act quickly to correct a serious problem or just fix some clerical issues.     Reasons Bank and Register Balances Don’t Match   If your bank and register balances don’t match up, don’t immediately assume that theft has occurred or that there has been a billing mistake. There are actually two more common reasons for this to happen: Timing Differences - When a timing difference occurs, the money that shows up on your QuickBooks account is not yet in the bank. For example, when you print out a check in QuickBooks Online, the software automatically takes that amount from the register balance, but that doesn’t mean it has been cleared in the bank yet. The same can occur with payroll and customer checks as well. These timing differences are very common, but easy to track down and monitor so you can put the numbers in line and your mind at ease. No Bank Reconciliation - In order to keep your QuickBooks Online finances healthy, you need to perform a reconciliation between your bank register and bank statement each month. Doing so is crucial to uncovering common mistakes like duplicate or missing transactions, errors featuring wrong dates or amounts, and changed transactions. If you have not reconciled your accounts lately, these mistakes might be causing a discrepancy. For help understanding and reconciling your QuickBooks account, contact us today.
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Creating a Dynamic Budget for Your Small Business

No matter what size your business is, it can fall into a common trap:   At the beginning of the year, you create a perfectly-balanced, clean budget, but then it gets filed away in a drawer that never gets opened. At the end of the year, you pull it out to discover that your perfect budget is now wildly out-of-date. You chalk it up to a crazy year and start the cycle all over again.    A budget is the control panel for your business. It can help you set financial objectives and show you whether they are in reach. It helps you anticipate any future costs as well as plan for periods of spiking or dipping cash flow so your small business is a successful one.   However, if you leave your budget in a drawer or closed up in a file on your computer, it won't do any of those things. In fact, a budget that doesn't get looked at is like a control panel that's taped over - pointless. If you want more clear and concise control of your business financials, you need to make your budget dynamic.   How do you create a dynamic small business budget?   Consider adopting the following steps: Review Monthly – Instead of tucking your budget away at the beginning of each year, set time aside at the end of every month to look it over. Create a list of questions that you will ask yourself: Are your sales in line with your projections? Is your cash flow growing or shrinking? Do you have enough stock to meet your demands? Apply Changes – Are you above your projections and realize you need to hire on some staff? That is going to require a change in your budget. And you may need to make a change to the business. Sometimes your budget will show areas you can improve, like increasing the speed of invoicing or getting your product out faster. Don’t just focus on changing your budget. Let your budget encourage effective changes to your business as well. Expect the Unexpected – You may see extra money in your budget and become eager to use it, but remember to be prepared for unplanned losses. Look at your budget to see what the impact would be if your biggest client went bankrupt and stopped making purchases. Use your past numbers to make projections for the future, keeping the best and worst case scenarios in mind.  For more information on how to better organize and control the finances for your small business, contact us today.
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