accounting http://www.wisebread.com/taxonomy/term/7881/all en-US 7 Money Software Tools Worth the Price http://www.wisebread.com/7-money-software-tools-worth-the-price <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-money-software-tools-worth-the-price" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_investing_software_000054290340.jpg" alt="Young couple using investing software that is worth the cost" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>How was tax season for you? Complicated? Confusing? Exhausting? All of the above? (It's okay &mdash; I'm feeling all of those things, too.) Sure, the tax code needs a major overhaul. Since that could be a long time coming, here are a list of software titles that are worth the investment to help you get and stay on track of your finances, whether it's tax season or not.</p> <h2>1. Personal Capital</h2> <p>There are so many types of savings and investment accounts &mdash; 401(k)s, IRAs, annuities, money market accounts, and the list goes on. Wouldn't it be nice to have all of these accounts in one place so that you could easily track performance, fees, and your allocations? <a href="http://track.flexlinks.com/a.ashx?foid=1029882.216060&amp;fot=9999&amp;foc=1&amp;foc2=582907" target="_blank" rel="nofollow">Personal Capital</a> makes that possible, and it's gained quite a following. Users currently track over $1.2 billion of assets using the software.</p> <h2>2. Neat</h2> <p>There's no piece of financial paperwork more annoying than all of those tiny receipts we need to itemize and categorize. <a target="_blank" href="http://track.flexlinks.com/a.ashx?foid=1029882.1295852&amp;fot=9999&amp;foc=1" rel="nofollow">The Neat Company</a><img src="http://track.flexlinks.com/i.ashx?foid=1029882.1295852&amp;fot=9999&amp;foc=1" border="0" alt="" /> has software, mobile apps, and hardware so that you can set up the system that works best for you.</p> <h2>3. Morningstar</h2> <p>For those who want a more in-depth look at their investments, <a href="http://morningstar.com">Morningstar</a> gives users quite a range of proprietary tools. It will analyze the performance of your investments, and that's only the beginning. It will also provide you with proprietary, industry-standard Morningstar ratings for all of your investments and help you drill down into exactly which specific investments comprise your mutual funds. It doesn't link directly to your investment accounts, so you must manually enter all of the information when you start an account.</p> <h2>4. TurboTax</h2> <p>If you're looking for a piece of software to simplify tax filing time for you, I highly suggest <a href="https://turbotax.intuit.com/">TurboTax</a>. There are a now a number of different versions for those of us with more complicated tax situations (the ownership of rental properties or a business, for example) and it has plenty of bells and whistles to makes sure the filing is accurate, while also maximizing your deduction opportunities.</p> <h2>5. Google Finance</h2> <p>If you're investigating different investment options, <a href="https://www.google.com/finance?authuser=0&amp;ei=MRowVcCLEcv9sQemk4H4BQ">Google Finance</a> is a free and simple tool that gives you a snapshot of a company's performance in easy-to-read charts. You can also use it to track your specific portfolio of investments, investment news stories, and domestic industry trends.</p> <h2>6. You Need a Budget</h2> <p>The name says it all. To achieve your financial goals, you need a budget and you need a budgeting tool that helps you stick to it. <a href="http://youneedabudget.com">You Need a Budget (YNAB)</a>, is a simple and elegant tool that is also sophisticated in the amount of customization it provides. Easily record, tag, and track expenses, especially on-the-go with its mobile apps. You can try it for free for a month to see if you like it, and then to continue after that, there's a one-time fee that will work with all of your devices.</p> <h2>7. Budget Simple</h2> <p><a href="http://budgetsimple.com">Budget Simple</a> is also an excellent budgeting tool that is simple and easy to use. The web app is free to set up and use. It's straightforward and also highly visual so you can quickly see how you're spending your money. If you'd like to get the mobile app and directly link your various bank accounts to the tool, there's a $5/month fee.</p> <p>Achieving your financial goals requires organization, willpower, and performance information. These tools will help you get started.</p> <p><em>Which financial software tools have you used?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/7-money-software-tools-worth-the-price">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-12-month-get-richer-plan">The 12-Month Get-Richer Plan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-the-rich-get-richer">5 Surprising Ways the Rich Get Richer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-best-free-financial-learning-tools">9 Best Free Financial Learning Tools</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance accounting budgeting investing software taxes Thu, 30 Apr 2015 11:00:29 +0000 Christa Avampato 1400908 at http://www.wisebread.com Surprise! 5 Reasons You Might Not Get Your Tax Refund http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/surprise-5-reasons-you-might-not-get-your-tax-refund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2544106090_0e76dfbda1_z.jpg" alt="man looking into mailbox" title="man looking into mailbox" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>The one big upside to filing your tax return that everybody can agree on is getting money back from the government. How good does it feel to see that <em>positive</em> amount on the bottom of your return? For some families their refund goes right into that college savings account, to pay off their credit card, to take that long-awaited vacation, or simply to make ends meet in these tougher economic times. (See also: <a href="http://www.wisebread.com/8-smart-things-to-do-with-your-tax-refund">8 Smart Things to Do Wity Your Tax Refund</a>)</p> <p>But did you know, every year, there are tens of millions of dollars the IRS <em>won't</em> be refunding taxpayers &mdash; even if they might be expecting that nice chunk of change this spring?</p> <p>Before you count on the check from Uncle Sam (and work the expected boost into your household budget), make sure you don't fall into one of these categories...or the IRS might be holding onto your refund or giving it to someone else after all.</p> <h3>1. There are errors on your return</h3> <p>Every spring, people make the same, relatively straightforward mistakes on their tax returns that prevent the IRS from processing their refund on time. Common errors include: putting down the wrong filing status, an incorrect social security number, or missing information that's required for certain credits and <a href="http://www.wisebread.com/3-tax-deductions-you-can-never-take">deductions</a>.</p> <p>Advice for all filers &mdash; double and triple check your return before you mail or submit it, paying particular attention to anywhere you have to fill in names, numbers or addresses. Try to give yourself as much time as possible. Doing your return at 2 a.m. the day it's due doesn't leave you much room to catch any mistakes.</p> <p>If you're preparing your own return, without the help of a tax professional, be careful that you've done your math correctly and you actually <em>are</em> due money back. Too often, I see people who run out and spend a phantom refund, only to have the rug ripped out from under them when they find out their calculations were off, and they really <em>shouldn't</em> be getting anything from the government this year.</p> <p>Better safe than sorry. Don't spend your tax refund until you can either physically hold the check in your hand or see the amount in your bank account.</p> <h3>2. You owe back taxes</h3> <p>Nobody likes to hear this one, but the IRS is like the friend who holds a grudge for a long time and never lets go. If you owe federal or state taxes from previous years, the government can just yank the amount you're expecting back this year and apply it as an &quot;overpayment&quot; towards the taxes you haven't paid yet. And it's bye-bye refunds until the entire debt is gone.</p> <h3>3. You haven't paid child support</h3> <p>While it might take a little while for the right federal and state agencies to catch up with the problem, the government can place a levy on your tax refund to pay any outstanding child support you owe &mdash; even after your kid is 18 (and no additional support is legally due).</p> <h3>4. You defaulted on your student loans</h3> <p>Recent data has shown that people are defaulting on their <a href="http://www.wisebread.com/escape-student-loan-debt-slowly">student loans</a> in record numbers. And with the job market the way it is, it's no surprise more and more students are having trouble keeping up with their payments after school.</p> <p>Be aware &mdash; the IRS can (and does) turn your refund over to the Department of Education to pay down loans you've defaulted on. The agencies do &quot;talk&quot; to one another, and while it may not happen right away, chances are they will catch up with you.</p> <h3>5. They just can't find you</h3> <p>By the same token, hard as it may be to believe in the world of Facebook, Google Maps, and Twitter, the IRS is holding onto $153 million dollars right now in refunds it just can't seem to deliver.</p> <p>Why? Because they have an incorrect mailing address for you, and can't locate your residence to mail you a check. And currently, the IRS won't try to contact taxpayers by email or phone, so you might have no idea that they're holding on to your money in the first place.</p> <p>Best thing to do? Always choose to have your refund deposited directly into your bank account if you can (and triple check those numbers to make sure they're right!), especially if you know you're moving soon. Also, if you suspect you fall into this category, check in with the IRS on their website or call their hotline to make sure there aren't any old refunds lurking around out there that you deserve.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p><em>Jacoba Urist is a tax and estate attorney from New York. She is a regular contributor to The Huffington Post and is writing a book &quot;The Happiest Parent&quot; about preparing the best possible future for every child. Follow her on Twitter at </em><a href="https://twitter.com/#%21/TheHappiestPare"><em>@TheHappiestPare</em></a><em>.</em></p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jacoba-urist">Jacoba Urist</a> of <a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed">Five Easy Steps to Keeping Track of Expenses for the Self-Employed</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-im-spending-my-tax-refund">10 Smart Ways I&#039;m Spending My Tax Refund</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-tax-deductions-you-can-never-take">3 Tax Deductions You Can Never Take</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-if-i-skip-my-taxes-this-year">What If I Skip My Taxes This Year?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/turn-last-years-taxes-into-this-years-financial-spring-cleaning">Turn Last Year&#039;s Taxes Into This Year&#039;s Financial Spring Cleaning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accounting filing taxes tax deduction tax refund tax return Thu, 16 Feb 2012 11:36:30 +0000 Jacoba Urist 898351 at http://www.wisebread.com 3 Tax Deductions You Can Never Take http://www.wisebread.com/3-tax-deductions-you-can-never-take <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-tax-deductions-you-can-never-take" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man-doing-taxes.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I spent a fair share of my mid-twenties lugging around a two-volume set of the Internal Revenue Code to class every day (picture a small woman with two encyclopedia-sized bricks on the subway), so I know first hand just how overwhelming our tax laws can seem. Every tax season, people ask me about the same mythical deductions &mdash; stuff they feel they <em>ought</em> to be able to deduct on their tax returns, even though the government doesn't exactly see eye-to-eye with them. While it may be freezing in some parts of the country, tax season <em>is</em> right around the corner, and it pays to take a look at these three common points of confusion before filing this spring.</p> <p>(See also: <a href="http://www.wisebread.com/16-great-tax-deductions-you-may-have-overlooked" title="16 Great Tax Deductions You May Have Overlooked">16 Great Tax Deductions You May Have Overlooked</a>)</p> <h3>1. Can I deduct my personal credit card interest?</h3> <p>Nope, unfortunately not. When you make personal charges on your plastic &mdash; like going out to eat, trips to the grocery store or Disneyland, really any of the expenses you associate with your daily life &mdash; the interest is never deductible.</p> <p>Here's the source of the misunderstanding. You <em>used to</em> be able to deduct credit card interest. But you can thank President Reagan and Congress (Democrats and Republicans alike) for eliminating the interest deduction for consumer loans, which includes your Mastercard or VISA. They believed that consumer interest deductions generally encouraged folks to overspend and over-borrow, so they changed the law.</p> <p>People may also be confused because you often <em>can</em> deduct the interest that you pay on the <em>business expenses</em> you put on your credit card.</p> <p>A note of caution: If you are self-employed or run your own shop, I always recommend having a separate credit card for business purposes (or else it's nearly impossible to calculate which portion of the interest is deductible).</p> <h3>2. Can I deduct my new interview suit or work clothes?</h3> <p>Here's another one I get all the time, especially in the current job market when so many people are out there pounding the pavement, and the cost of getting your foot in the door adds up pretty quickly.</p> <p>The tax laws are a little tricky here. You <em>can't</em> deduct your new <a href="http://www.wisebread.com/5-ways-to-snag-budget-friendly-business-clothes" title="5 Ways to Snag Budget-Friendly Business Clothes">interview outfit</a> (on the theory that you could also wear it for personal use, like to a cocktail party, wedding, date or any other event where you want to look pulled together). And you can't deduct the cost of your ordinary, run-of-the-mill work clothes, either. Think: no deduction for things I could otherwise wear out in public anyway &mdash; normal pants, dresses, skirts, shirt &mdash; even if you work at a clothing store that asks you to dress nicely while you're on the clock.</p> <p>But there are some good news. While your fancy interview suit is off limits, you may be able to deduct some of the expenses you rack up <a href="http://www.wisebread.com/25-awesome-websites-to-help-you-get-a-job" title="25 Awesome Websites to Help You Get a Job">looking for a job</a>, like the amount you pay to an employment service, and the cost of preparing and sending out all those resumes under certain circumstances. And there is a clothing deduction exception if you wear a specialized uniform to work and it's not suitable for everyday life. (How many UPS guys are going to whip out their uniforms to wear around town on their day off?)</p> <h3>3. Can I deduct my commuting costs?</h3> <p>Again, this one is a no-go for the IRS. You <em>can't</em> deduct the cost of commuting from your house to your job, on the theory that you choose where you want to live in relation to your workplace and the time in your car or on the train is personal.</p> <p>But of course, because it's the tax code, there <em>is</em> an exception. People who are self-employed with a home office may be able to write off some of the costs of traveling between their residence and another location where they have work-related business. You may also be able to deduct the costs of going from your job (wherever you work) to other work-related meetings and outings. My advice? Sit down with an accountant or tax professional if you plan on deducting these kinds of costs on your return this April, so you can make sure you're calculating everything properly.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p><em>Jacoba Urist is a tax and estate attorney from New York. She is a regular contributor to The Huffington Post and is writing a book &quot;The Happiest Parent&quot; about preparing the best possible future for every child. Follow her on Twitter at <a href="https://twitter.com/#!/TheHappiestPare">@TheHappiestPare</a>.</em></p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jacoba-urist">Jacoba Urist</a> of <a href="http://www.wisebread.com/3-tax-deductions-you-can-never-take">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wisdom-from-my-favorite-frugal-tv-character-julius-rock">Wisdom from My Favorite Frugal TV Character - Julius Rock</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-mistakes-millennials-make">8 Tax Mistakes Millennials Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Taxes accounting tax deductions tax returns Thu, 09 Feb 2012 11:36:37 +0000 Jacoba Urist 892649 at http://www.wisebread.com How to Find the Right Accountant for You http://www.wisebread.com/how-to-find-the-right-accountant-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-find-the-right-accountant-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/croppediStock_000016565687Small.jpg" alt="accountant and couple" title="accountant and couple" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Finding the right accountant can make a world of difference when it comes to managing your money, but it can be easier said than done. There are a few ways that you can make the process go much easier, though.</p> <h3>Why Do You Need an Accountant?</h3> <p>The first question you need to think about when looking for an accountant is why do you need help with your finances &mdash; and what sort of help do you need? Not every individual really needs an accountant. There are a number of services out there that can help you with your taxes, if that's your only concern. An accountant usually works with individuals or organizations with slightly more complicated finances, ranging from managing a business' finances to helping an individual keep investments straight. (See also: <a href="http://www.wisebread.com/6-mistakes-to-avoid-with-a-financial-adviser" title="6 Mistakes to Avoid With a Financial Adviser">6 Mistakes to Avoid With a Financial Adviser</a>)</p> <p>You could just start calling accountants based on who is closest to you, but most accountants have specialties. You're not going to get exactly the help you need from just any accountant.</p> <p>When we talk about accountants, we can actually be referring to one of several different kinds of financial expert. There are quite a few different designations for accountants, from the common &quot;certified public accountant&quot; to a certified management accountant or an accredited <a href="http://www.wisebread.com/small-business/how-to-choose-an-accountant-for-your-small-business" title="How to Choose an Accountant for Your Small Business">business accountant</a>. It's most likely that you're looking for a CPA if you're generally looking for an accountant in the U.S. (other designations are used in other countries). A CPA will help set up the books for a new business, prepare tax returns, and handle a wide variety of other accounting tasks &mdash; unless you have a sizable business and need specialized help with your accounting, a CPA is usually the place to start.</p> <p>It's still important to narrow the field down even further, though. Many CPAs work with specific types of clients. For instance, the CPA who helps me with my business focuses on small businesses that don't need much in the way of payroll but do need advice on business operations from time to time. He works with a lot of freelancers and small business owners, though he does take on other clients. Ask right off the bat about whether an accountant you're considering working with handles your type of situation &mdash; most are very clear about what types of clients they want to work with. You should also ask about specifics like price and who will actually do any work, like <a href="http://www.wisebread.com/how-to-file-your-first-tax-return" title="How to File Your First Tax Return">preparing a tax return</a>.</p> <p>Make a note of what sort of help you need. The price you'll pay for an accountant's help can definitely depend on exactly what you need done. Most CPAs work on an hourly basis, often starting at a price of $150 and going up from there. But for common situations, like needing a tax return prepared, you can expect prices to start closer to $90 &mdash; provided you are employed and don't have particularly complicated finances.</p> <h3>It's All About the Referral</h3> <p>Because an accountant may wind up knowing every last thing about your financial situation, it's important to find someone you're personally comfortable working with. Starting with a referral is often the best way to do so. Ask around to find out whom your peers use and whether they recommend their current accountants. If you're having a hard time getting a recommendation, many review-based sites, such as <a href="http://yelp.com">Yelp</a>, do list accountants and other financial professionals. However, you'll want to dig a little deeper than just a review online &mdash; while it's fine for choosing a restaurant for dinner, you'll want more information when you're putting all your financial information in someone's hands.</p> <p>If you operate a business, it may be worth going to your professional associations (such as the local Chamber of Commerce, if you are a member) and getting referrals there. You can get good leads on reliable accountants quickly.</p> <p>Of course, you'll do the necessary due diligence to make sure that you're working with a reliable accountant. But because of that &quot;certified&quot; part of the job title, it's relatively easy to make sure that anyone you choose to work with has the necessary credentials to handle any accounting quandary you may face. Individual state boards are responsible for issuing certifications, and most will now allow you to verify an accountant's credentials online. A quick online search can also confirm that you've chosen the right person to work with. Many CPAs (including the one I work with) now have websites, Twitter accounts, and even blogs to help you make the right decisions.</p> <h3>An Ongoing Relationship</h3> <p>Even if you only visit your accountant for a yearly tax planning session, it's important to have an ongoing relationship. The best accountants will go out of their way to update you on new legislation, as well as anything else that might impact your finances. You may not anticipate needing help, but already having a great working relationship with your accountant can put you ahead of the game in the event of an <a href="http://www.wisebread.com/how-to-survive-a-tax-audit" title="How to Survive a Tax Audit">audit</a> or other financial situation.</p> <p>Depending on how you expect your finances to change in the future, you may want to ask about some of the options that an accountant might offer before making your final decision. If you know you need to start planning for retirement or a child's education, you should ask about what sort of financial consulting or planning services a particular CPA offers.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/how-to-find-the-right-accountant-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-do-money-like-a-grown-up">How to Do Money Like a Grown-Up</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-budget">FINANCIAL IQ TEST: How Healthy Is Your Budget?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-lessons-from-millionaires">5 Money Lessons From Millionaires</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-6-personal-finance-rules-everyone-must-follow">The 6 Personal Finance Rules Everyone Must Follow</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-worst-pieces-of-financial-advice-your-friends-give-you">The 5 Worst Pieces of Financial Advice Your Friends Give You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance accountant accounting financial advice financial advisers Tue, 07 Feb 2012 11:00:34 +0000 Thursday Bram 874763 at http://www.wisebread.com 18 Year End Financial Must Dos http://www.wisebread.com/small-business/18-year-end-financial-must-dos <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/18-year-end-financial-must-dos" target="_blank">http://www.openforum.com/articles/18-year-end-financial-must-dos</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/18-year-end-financial-must-dos" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000017433151Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>There are financial moves you need to make <i>before </i>year-end if you want them to impact your 2011 financial statements and taxes. Some can even affect your ability to raise money, secure vendor credit, or sell your business in 2012, 2013 and beyond. With 2012 fast approaching, the time to act is now.</p> <p><strong>Must Dos that Make a Bad Year Look Better</strong></p> <p>1. Make a last ditch effort to <b>collect from delinquent accounts</b>, even if you have to negotiate on the amount. If you can&rsquo;t, you&rsquo;ll probably want to write them off as bad debt. Not doing so will hurt your <a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/read-your-financial-statements-like-a-banker-1">accounts receivable turnover ratio</a>&mdash;a red flag for lenders and investors.</p> <p>2.<b> Encourage other customers to pay before year-end, too</b>. But before you offer an early payment discount, be sure it won&rsquo;t take too big a bite out of your overall gross profit margin&mdash;<a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/read-your-financial-statements-like-a-banker-1">another financing red flag</a> if it declines from prior years or is below industry standards.</p> <p>3. <b>Ask for progress payments on projects already underway</b> and see if you can secure deposits for any that will begin this year.</p> <p>4. <b>Delay paying bills that can wait until 2012</b>.</p> <p>5. <b>Offer year-end specials on slow moving inventory</b>. This will improve your <a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/12-ways-your-financial-statements-tell-lenders-the-wrong-story-1">inventory turnover ratio</a>&mdash;something that will please your banker.</p> <p>6. <b>Sell any underperforming property and equipment</b> that is fully depreciated.</p> <p><strong>Must Dos that Make a Good Year Even Better</strong></p> <p>7. <b>Wait to deposit any new checks until after the first of the year</b>.</p> <p>8. <b>Purchase property or equipment that qualifies for Section 179</b> or 100 percent bonus depreciation, as these benefits are likely to be scaled down in 2012. Note that qualifying equipment has to be in service before year-end.</p> <p>9. <b>Make charitable contributions</b>.</p> <p>10. <b>Pay employee bonuses</b>.<span id="1323219853922E" style="display: none;">&nbsp;</span></p> <p><strong>Must Dos To Do in Years Good or Bad</strong></p> <p>11.<b> Download copies of all your year-end bank and credit card account statements</b>. Don&rsquo;t forget those PayPal, investment, and Google Checkout accounts. You&rsquo;ll need proof of 12/31 balances and they&rsquo;re sometimes hard to come by after the fact.</p> <p>12. Try to<b> pay down any bank lines of credit, preferably to zero</b>. Lenders like to see that you&rsquo;re using them as intended&mdash;for temporary or seasonal needs. Maintaining a balance year-round suggests that they&rsquo;re being used for long term financing.</p> <p>13. <b>Take a close look at your inventory</b>. You can reduce your taxable income and improve your inventory turnover ratio by writing off any obsolete items.</p> <p>14. <b>Carefully consider whether the IRS or other government agency might look at anyone you treat as a contractor and decide they&rsquo;re actually employees</b>. Desperate for revenue, <a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/irs-wants-its-7-billion-from-independent-contractor-misclassifications-1">governments are hot on the trail of such misclassifications</a>. If you think you may have misclassified workers in prior years, you might be pleased to know the <a target="_blank" href="http://www.irs.gov/businesses/small/article/0,,id=246013,00.html">IRS recently announced a program</a> that can reduce the penalties for admitted transgressions, but you need to have at least filed 1099&rsquo;s for those contractors in each of the last three years. A word of caution if you plan to fess up&mdash;the IRS isn&rsquo;t the only agency that can make your life miserable if you&rsquo;ve misclassified workers. Be sure to get advice from a competent attorney or accountant before you proceed.</p> <p>15. <b>If you incurred costs to start a business in 2011, but haven&rsquo;t yet made a sale, hurry up and sell something</b>! Anything! You can&rsquo;t deduct any of those expenses in 2011 unless you do.</p> <p>16. <b>If you&rsquo;re planning to squirrel money away in a 401k, keep in mind that while it can be funded in 2012, the account has to be in place by December 31, 2011</b>.</p> <p>17. If your personal income will be relatively low this year<b>, consider converting your traditional IRA to a Roth IRA</b>. <a target="_blank" href="https://www.fidelity.com/retirement/learn-about-iras/convert-to-roth?imm_pid=1&amp;immid=00445&amp;imm_eid=e25390951&amp;buf=999999)">Fidelity has a handy calculator</a> to help you figure out if this is a good move.</p> <p>18.<b> Take a look at your investments and decide if it&rsquo;s time to cash out</b>. The special treatment of Capital Gains at a maximum tax rate of 15 percent is set to disappear at the end of 2012. After that, they&rsquo;ll likely be taxed at ordinary income rates. If your capital losses exceed your gains, you can carry them forward to offset future capital gains.</p> <p>Finally, most experts agree that tax rates will increase after 2012 and tax breaks will be harder to find. Be sure to consult a qualified professional about whether these and other strategies are right for you. A good place to start is with those who contributed their tips for this article: Brian Price&mdash;founding partner of Dallas-based <a target="_blank" href="http://www.pricekubecka.com/">PriceKubecka</a>, Rick Dlugasch&mdash;CPA with Boston-based <a target="_blank" href="http://www.wrand.com/">Waldron Rand</a>, Robert Mahoney&mdash;president of Belmont MA-based <a target="_blank" href="http://www.belmontsavings.com/">Belmont Savings Bank</a>, and New Jersey-based <a target="_blank" href="http://www.gailrosencpa.com/">Gail Rosen, CPA</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kate-lister">Kate Lister</a> of <a href="http://www.wisebread.com/small-business/18-year-end-financial-must-dos">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-tax-deductions-you-can-never-take">3 Tax Deductions You Can Never Take</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed">Five Easy Steps to Keeping Track of Expenses for the Self-Employed</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center Taxes accounting bookkeeping finance small business Sun, 11 Dec 2011 22:23:20 +0000 Kate Lister 816778 at http://www.wisebread.com 3 Things Your Accountant May Not Be Telling You http://www.wisebread.com/small-business/3-things-your-accountant-may-not-be-telling-you <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/3-things-your-accountant-may-not-be-telling-you-barbara-weltman" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/3-things-your-accountant-...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/3-things-your-accountant-may-not-be-telling-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000006005093Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Working with an accountant usually is a smart strategy for handling your taxes and tax planning. More than 80 percent of small business owners do just that. However, be aware that your accountant may not tell you <i>everything</i> you&rsquo;d want to know.</p> <p><b>1. Your disclosures to your accountant may not be privileged. </b></p> <p>You know that anything you say to your attorney is privileged; it&rsquo;s a right created by common law. However, there is no such common law privilege for accountants and their clients. There is a <i>limited</i> privilege which was created by statute in 1998 for a federally-authorized tax practitioner &mdash; CPAs, enrolled agents, and enrolled actuaries &mdash; and his or her client. What you say to your accountant may or may not be privileged.</p> <p><b><i>Scope of federal privilege: </i></b>The limited privilege applies to disclosures to accountants to the same extent that they would for disclosures to an attorney. Thus, your accountant can give you advice about a tax question you raise. However, the privilege may be asserted only in civil matters before the IRS or before any noncriminal tax proceeding brought in Federal court by or against the United States. The privilege does <i>not</i> apply to:</p> <ul> <li>State taxes, such as state income taxes;</li> <li>Criminal proceedings, such as a criminal tax prosecution;</li> <li>Preparation of a tax return;</li> <li>Any civil proceeding involving a tax shelter.</li> </ul> <p><b><i>State-level privilege: </i></b>In some states, including Florida, Pennsylvania, Colorado, and Missouri, there is accountant-client privilege. If you have any concerns about what you tell your accountant, first ask about whether state-level privilege applies to you.</p> <p><b><i>Best strategy: </i></b>When in doubt about discussing highly sensitive tax matters that could potentially lead to a criminal case, talk to an attorney; all communications are privileged.</p> <p><b>2. Specific entries or omissions on your return that may cause audits.</b></p> <p>Your accountant isn&rsquo;t being evasive; he or she just doesn&rsquo;t know for sure in most cases because the IRS isn&rsquo;t talking.</p> <p>There are some tax issues that everyone knows are subject to special IRS scrutiny, such as worker classification. The IRS is <i>always</i> looking<i> </i>at businesses to see whether workers have been treated as employees, rather than as independent contractors, where it is appropriate to do so.</p> <p>However, other tax issues, such as claiming a home office deduction, are not guaranteed audit red flags. The IRS doesn&rsquo;t publish a list for most of its audit targets, although from time to time it does say at which issues it will look closely. For example, it has put the research credit in its crosshairs for large and mid-sized businesses by designating it as a &ldquo;<a target="_blank" href="http://www.irs.gov/businesses/article/0,,id=169273,00.html">Tier 1 issue</a>,&rdquo; and will look at every return on which the credit is claimed. Whether the same scrutiny is applied for research credits claimed by small businesses isn&rsquo;t clear.</p> <p><b><i>Best strategy: </i></b>To minimize any audit exposure, make sure that there is a basis for taking a deduction or other tax position, as well as having all necessary documentation to support the position.</p> <p><b>3. Who is actually preparing your return. </b></p> <p>You&rsquo;ve met with your accountant, but is he or she the person who is preparing your return? If you use an accounting firm, your return may be delegated to young associates or even temporary employees. This isn&rsquo;t necessarily a bad thing, but you&rsquo;d certainly like to know about it.</p> <p>Today, as a cost saver to firms, tax returns are increasingly being outsourced to preparers in other parts of the country or even overseas. In 2008, new <a target="_blank" href="http://www.irs.gov/irb/2008-05_IRB/ar07.html">IRS regulations</a> directed tax preparers to obtain consent from clients before disclosing information to third-party tax preparers located outside the U.S. However, this rule does not apply when outsourcing to preparers in the U.S.; firms can disclose a client&rsquo;s tax information to another preparer in the U.S. without obtaining client consent.</p> <p><b><i>Best strategy: </i></b>Just ask your accountant who is preparing your return. Likely your accountant will review any return prepared by someone else. Once your accountant adds his or her signature to your return, you can look to this preparer for responsibility for any preparation problems on the return.<b><i><br /> </i></b></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/barbara-weltman">Barbara Weltman</a> of <a href="http://www.wisebread.com/small-business/3-things-your-accountant-may-not-be-telling-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-business-travel-credit-cards">Best Business Travel Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-to-get-a-small-business-loan">10+ Smart Ways to Get a Small Business Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center accountant client privilege accounting small business tax preparer Sat, 26 Mar 2011 18:57:19 +0000 Barbara Weltman 505886 at http://www.wisebread.com 5 Free Tools That Automate Your Business http://www.wisebread.com/small-business/5-free-tools-that-automate-your-business <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/technology/article/5-free-tools-that-automate-your-business-john-joyce" target="_blank">http://www.openforum.com/idea-hub/topics/technology/article/5-free-tools-that-au...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/5-free-tools-that-automate-your-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000004813279Small.jpg" alt="Businessman on computer" title="Businessman on computer" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>The challenging economic climate has taught business owners that it&rsquo;s absolutely imperative they embrace solutions that will help them work smarter and focus on generating revenue. Of course, limited budgets make business automation solutions that much more difficult to evaluate and implement. If your number one goal for 2011 is to bolster lead generation, customer acquisition, or customer retention, you must ask yourself this question: How am I going to create operational efficiencies that will free up my time, give me leverage, and allow me to grow my business? Use these free tools:</p> <h2>ZohoCRM</h2> <p>If you&rsquo;re focused on increasing revenue, it makes sense to consider implementing a <a href="http://en.wikipedia.org/wiki/Customer_relationship_management">CRM</a> (customer relationship management) solution. Qualified visitors to your website are like gold, and you want to create multiple touch points to extend the conversation/interaction and convert them into customers. <a href="http://www.zoho.com/crm">ZohoCRM</a> is one of the most robust free offerings available to small business owners and allows you to formalize your sales process and manage the pipeline.</p> <p>Included in the free version of ZohoCRM are the following:</p> <ul> <li>Accounts for up to three users</li> <li>Sales force automation: leads, contacts, accounts, and opportunities</li> <li>Marketing: campaigns, email templates, and email opt-out</li> <li>Customer support: cases and solutions</li> <li>Common features: tasks, log calls, calendaring, reports, dashboards, and product customization</li> </ul> <p>ZohoCRM offers various a la carte options, like Outlook integration that is reasonably priced at $3/user/month. If you find you need more advanced features like security administration, workflow management, group chat, or case escalation rules, you have the option of upgrading to the <a href="http://www.zoho.com/crm/zohocrm-pricing.html">Professional</a> or <a href="http://www.zoho.com/crm/zohocrm-pricing.html">Enterprise</a> plan.</p> <p>ZohoCRM offers a 15-day free trial of its pay plans, which range from $12/month to $25/month.</p> <h2>Zopim</h2> <p>Another way to make sure you&rsquo;re nurturing incoming leads is to give visitors the option to interact with a representative via Instant Messaging with a service like <a href="http://www.zopim.com">Zopim</a>. Many times, visitors don&rsquo;t want to pick up the phone to ask a question nor do they wish to wait for a response to an email or form submission. This solution is also another way for you to interact with existing customers and maintain a history that can be shared with the rest of your team.</p> <p>The highlights of this solution include:</p> <ul> <li>Integration with your existing IM client (AIM, Google Talk, MSN, or Yahoo)</li> <li>Integration with your CRM system, such as ZohoCRM, to maintain history of customer conversations (in beta and available to all users)</li> <li>Multiple-language support</li> <li>Automatic integration with Google Analytics</li> <li>Offline form</li> </ul> <p>If you find you need more agents or want advanced features, you can upgrade to one of the <a href="http://www.zopim.com/pricing">pay plans</a> that range from $9&ndash;$99/month. Zopim offers a 14-day free trial of these plans that doesn&rsquo;t require a credit card.</p> <h2>HootSuite</h2> <p>You hear a lot of talk about social media being &ldquo;free,&rdquo; but it still requires a great deal of time and effort to make sure you&rsquo;re presenting a consistent message across all relevant channels. One of the best solutions for consolidating and streamlining your &ldquo;social marketing&rdquo; is <a href="http://www.hootsuite.com">HootSuite</a>. It allows you to maintain a central view of your social presence, schedule messages in advance, and track the results of your efforts. The most powerful feature is called Hootlet, which is a plug-in for Firefox and/or Chrome that is essentially a bookmarklet that allows you to share links right from the page you&rsquo;re viewing.</p> <p>The HootSuite free plan lets you:</p> <ul> <li>Monitor up to five social profiles (Twitter, Facebook, etc.)</li> <li>Monitor up to two RSS feeds</li> <li>Use iPhone, Droid, and Blackberry apps</li> <li>Schedule tweets</li> <li>View threaded conversations</li> <li>Integrate with Ping.fm</li> </ul> <p>An upgrade to the $5.99/month <a href="http://hootsuite.com/pro">Pro plan</a> adds the following:</p> <ul> <li>Integration with Google Analytics and Facebook Insights</li> <li>Influence scores</li> <li>URL parameters for identifying and tracking campaigns</li> <li>No ads</li> </ul> <p>You can also add and manage additional team members for $15/user/month.&nbsp;HootSuite offers a free 30-day trial for the Pro plan.</p> <h2>FreshBooks</h2> <p>Most successful companies eventually make the transition from Microsoft Excel for managing invoices to a more robust solution. If you do some research, you&rsquo;ll find a very large number of small businesses using <a href="http://www.freshbooks.com">FreshBooks</a> to simplify this time-intensive process. FreshBooks has done a great job of listening to their customers when it comes 3<sup>rd</sup> party integrations, so you can share data across various tools. You can view an <a href="http://community.freshbooks.com/addons/">exhaustive list</a> on their site, but some of the more notable partners are Basecamp, Outright, Shoeboxed, Highrise, Wufoo, MailChimp, and Zendesk.</p> <p>The free version allows you to:</p> <ul> <li>Manage up to three clients</li> <li>Enter unlimited invoices and contractors</li> <li>Accept online payments</li> <li>Create timesheets, document sharing, support ticketing</li> <li>Add custom logos your invoices</li> <li>Perform data imports/exports</li> <li>Automatically schedule invoice creation</li> </ul> <p>FreshBooks offers a 30-day money-back guarantee on all pay plans, which range from $19.95&ndash;$39.95/month.</p> <h2>Spiceworks</h2> <p>If your business can&rsquo;t operate with free or low-cost SaaS applications alone, you&rsquo;ll have to allocate resources to evaluate and deploy some kind of network management solution for your internally hosted hardware and software. <a href="http://www.spiceworks.com">Spiceworks</a> is a unique solution in that you get access to all features and functionality of their Spiceworks IT Management solution absolutely free. The tradeoff is simply that you will be presented with advertising from companies like Microsoft, HP, and Google while using their product.</p> <p>Rather than purchase several different network management tools from multiple vendors, you can deploy Spiceworks and:</p> <ul> <li>Inventory everything on your network</li> <li>Run an IT helpdesk</li> <li>Monitor your network for trouble</li> <li>View an automatically generated visual map of your network elements and how they interrelate</li> <li>Generate and publish custom reports</li> <li>Troubleshoot network issues</li> <li>Manage your IT purchasing</li> <li>Manage your users</li> <li>Track network configuration changes</li> <li>Connect with more than 1.3 million Spiceworks users and share expertise and best practices</li> </ul> <p>This includes a &ldquo;buyers club&rdquo; offering discounts on various 3<sup>rd</sup> party products and services. Spiceworks does offer an ad-free deployment for $30/month.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/john-joyce">John Joyce</a> of <a href="http://www.wisebread.com/small-business/5-free-tools-that-automate-your-business">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-ways-to-use-social-media-in-business">13 Ways to Use Social Media in Business</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-apps-for-business-owners-on-the-go">5 Apps for Business Owners on the Go</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/join-us-at-the-new-york-times-small-business-summit">Join Us at the New York Times Small Business Summit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center Technology accounting apps free web applications small business social media Fri, 18 Feb 2011 22:15:12 +0000 John Joyce 489467 at http://www.wisebread.com The Language of Accounting http://www.wisebread.com/small-business/the-language-of-accounting <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/the-language-of-accounting-joanne-berg" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/the-language-of-accountin...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/the-language-of-accounting" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000005238174Small-2.jpg" alt="Discussing financial information" title="Discussing financial information" class="imagecache imagecache-250w" width="250" height="150" /></a> </div> </div> </div> <p>Did you ever look at a set of financial statements and wonder what it all meant? Would you like to know how to get more value out of the information?</p> <p>You&rsquo;re not alone. Many business owners find that learning to read, truly understand, and benefit from their financial statements is a challenge.</p> <p>I like to think about it this way: Your financial statements <em>tell the story of your business</em> &mdash; using numbers instead of words.</p> <p>Accounting is the universal language of business. In the simplest sense, it is the process of recording what happens in a business on a daily basis. Sure, we&rsquo;re recording the dollars involved in each transaction, but we are also recording the economic meaning of the transaction and categorizing it in a way that will give us useful information later for decision-making and planning.</p> <p>After being entered using the categories on the chart of accounts, the accounting data is summarized into a standardized format, which is broken down into three different financial statements:</p> <ul> <li>Balance Sheet</li> <li>Income Statement</li> <li>Statement of Cash Flows</li> </ul> <p>Let&rsquo;s look more closely at these three basic financial statements and analyze the story they&rsquo;re telling us.</p> <h2>The Balance Sheet</h2> <p>The balance sheet is also referred to as the &ldquo;Statement of Financial Position,&rdquo; and that&rsquo;s exactly what it&rsquo;s about. This statement tells the story of what your business <em>owns</em> (assets) and what it <em>owes</em> (liabilities) as of a given moment in time (say, December 31). It is literally a &ldquo;snapshot in time.&rdquo;</p> <p>During the month, as transactions are recorded, the impact of each transaction on the assets and liabilities of the business is also recorded. For example, when you make a cash sale, you not only record income, but you also record an increase in the value of an asset &mdash; your cash balance. When you incur an expense, you record the amount of the expense, but you also record the reduction in the value of your cash. (This is why it&rsquo;s called &ldquo;double entry&rdquo; accounting!)</p> <p>The difference between the assets and the liabilities of the business represents the book value of the owner&rsquo;s equity in the business. In a corporation, this is referred to as shareholder&rsquo;s equity.</p> <p>The balance sheet is used primarily to help us understand the financial strength of a business. Changes in the balance sheet accounts over time help us understand important trends in the business as well.</p> <h2>The Income Statement</h2> <p>The income statement can also be referred to as the &ldquo;Statement of Activities.&rdquo; This statement tells the story of what your business actually accomplished during the time period that it covers (for example, the month of December). It does this by summarizing the economic results of all of the transactions that occurred during that time, and letting you know if you made or lost money on those activities.</p> <p>You can learn a lot about your business from analyzing the income statement. It&rsquo;s not enough to simply know if you made or lost money. You will also want to use this statement to understand exactly where your money is going each month.</p> <p>Also, by comparing different spending categories as a percentage of sales from month-to-month and watching your sales, cost of goods sold, and spending trends, you can get a pretty good idea of any changes that you need to make to become more profitable. Negative trends on the income statement are important to investigate &mdash; don&rsquo;t ignore them!</p> <h2>The Statement of Cash Flows</h2> <p>Last, but certainly not least, is the statement of cash flows. Many businesses don&rsquo;t bother with this statement, but it&rsquo;s an extraordinarily important storyteller. This statement explains the change in your cash balance from the beginning to the end of the time period by breaking down your business activity into three sections:</p> <ol> <li>Cash flow (in or out) from operations</li> <li>Cash flow (in or out) from investing activities (for example, funds used to purchase assets to run the business)</li> <li>Cash flow (in or out) from financing activities (such as loan proceeds or loan repayments)</li> </ol> <p>Since good cash flow is critical to any business, it&rsquo;s extremely important to clearly understand where your cash is coming from and where it&rsquo;s going. This statement is a little trickier to learn to read, but it is worth the effort.</p> <p>Understanding the story of your business as told through your financial statements is a powerful tool for business success. You&rsquo;ll be glad that you took the time to learn the language!</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/joanne-berg">JoAnne Berg</a> of <a href="http://www.wisebread.com/small-business/the-language-of-accounting">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-to-get-a-small-business-loan">10+ Smart Ways to Get a Small Business Loan</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-all-successful-freelancers-do">10 Things All Successful Freelancers Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center accounting cash flow statement financial statements small business Thu, 17 Feb 2011 17:02:40 +0000 JoAnne Berg 489581 at http://www.wisebread.com Make More, Save More With Project-Based Accounting http://www.wisebread.com/small-business/make-more-save-more-with-project-based-accounting <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/make-more-save-more-with-project-based-accounting-julie-rains" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/make-more-save-more-with-...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/make-more-save-more-with-project-based-accounting" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000011554548XSmall.jpg" alt="calculating" title="calculating" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>You may sense that profits are lower than they should be, despite full slates of projects and timely collections. Providers of creative, technology, consulting, and even project-management services have joined construction businesses to benefit from project-based accounting or job-cost accounting. Getting a handle on what constitutes a project and the resources required to develop, sustain, execute, and complete project-oriented assignments can mean the difference between barely getting by and showing strong profits.</p> <p><strong>Predict findings and benefits of project-based accounting</strong></p> <p>Until you see project totals and cost breakdowns, you may not know precisely what you'll do with the financial intelligence that project-based accounting delivers.</p> <p>Instinct may be telling you that projects are underpriced, especially if demand is high but profits are low. The benefit in this scenario is that you'll have a foundation for justifying and negotiating higher prices. You may be able to pinpoint project details that are critical to clients' successes as well as those that are expendable because they increase cost but add little value.</p> <p>Discoveries that you may make based on compilation of total project costs:</p> <ul> <li>project types that are most profitable;</li> <li>client profiles that tend to engage your business in high-profit projects;</li> <li>inconsistent pricing among similar projects; and</li> <li>problems with pricing that occur only when scopes of projects are broadened.</li> </ul> <p>Drilling deeper into costs by category may lead to revelations such as:</p> <ul> <li>inexpensive per-unit costs on project materials through bulk purchases (but accompanied by the need to dispose of excess inventory);</li> <li>higher efficiencies among in-house labor compared to contract labor;</li> <li>use of materials with specifications not appropriate to project requirements; and</li> <li>failure to assign certain costs to projects.</li> </ul> <p>Cataloging benefits can provide inspiration and direction for pursuing, shaping, and implementing project-based accounting and financial reporting.</p> <p><strong>Decide that you're going to adopt project-based accounting</strong></p> <p>This approach will require your full support and commitment from nearly everyone in the business. Your accountant can produce reports but the raw information will come from your team. They'll need to track resources (labor hours, professional services, inventory, etc.) dedicated to each project.</p> <p><strong>Create boundaries for what constitutes a project</strong></p> <p>Much emphasis is rightly placed on defining the scope of projects. Clients and service providers should agree on project deliverables along with features to be included and those available for additional fees. Uncertainties can still exist in regard to scope, such as the cost of preliminary research prior to the project start or routine maintenance and upgrades scheduled just prior to completion. Set guidelines for charging expenses to projects for consistency in comparing and scrutinizing costs.</p> <p><strong>Design processes for capturing project information</strong></p> <p>Ideally, financial data relevant to projects can be recorded at the same time that accounting information is being captured for the general ledger. Billable (or labor) hours and materials used for projects should be included; other line items may include equipment rental, professional services, insurance, and supplies pulled from inventory for specific projects.</p> <p>Employees or their supervisors can provide breakdowns on hours expended by project when completing timesheets. Managers can designate project names and authorize payment approvals when they review vendor invoices. Depending on the size and complexity of your projects, find software solutions that will capture and keep project information integrated with your accounting system.</p> <p><strong>Start tracking all information</strong></p> <p>To get project reports that are meaningful, allocate all resources among active projects. Otherwise, some expenses may be omitted altogether or charged to the wrong project, canceling out reasons for setting up project-based accounting.</p> <p>If time constraints prevent assigning all related expenses to projects, then start by recording one category, such as payroll. Implement processes for assigning billable hours to projects. Reconcile project hours with payroll hours to confirm that information is being captured and recorded properly. Research and resolve discrepancies, and redesign processes or reeducate team members on methods of assigning expenses to projects. You may uncover questions about the difference between overhead and project hours; decide how you'd like to treat these issues so that information among projects stays consistent.</p> <p><strong>Create project-based financial reports</strong></p> <p>Compile numbers and produce project financial reports with total revenues and expenses. Seeing project profits (or losses) is the first step in gaining insight into methods of improving results. Compare pricing and expense ratios among projects to discover ways to enhance efficiencies, find cost-savings techniques, or eliminate certain tasks not relevant to project successes.</p> <p>Looking at project financials can be startling. The projects that you love may not be the ones that are the most profitable. The clients who are the most endearing may be the ones who continually ask for extras and expand project scopes to the point that profits plummet. Get a true understanding of costs so that you can negotiate pricing and earn the profits you deserve.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/small-business/make-more-save-more-with-project-based-accounting">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-business-travel-credit-cards">Best Business Travel Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-to-get-a-small-business-loan">10+ Smart Ways to Get a Small Business Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center accounting financial forecast small business Tue, 26 Oct 2010 21:12:36 +0000 Julie Rains 233585 at http://www.wisebread.com Solve the Mystery of Staffing Your Accounting Department http://www.wisebread.com/small-business/solve-the-mystery-of-staffing-your-accounting-department <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/solve-the-mystery-of-staffing-your-accounting-department-ken-kaufman" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/solve-the-mystery-of-staf...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/solve-the-mystery-of-staffing-your-accounting-department" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000011027870XSmall.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="171" /></a> </div> </div> </div> <p>You are either spending too much or too little time and money to get what you need (and should expect) from your accounting and finance department. Most startup, entrepreneurial, and growing businesses struggle to solve the mystery of how to properly and effectively structure their accounting and finance department to maximize the value they receive from it.</p> <p>There are basically three Tiers to running an accounting department, whether large or small. Tier 1, which is the lowest in terms of compensation and hierarchy, includes data entry and other routine tasks like receiving, entering, and paying bills and entering timecards for payroll. The middle Tier includes somewhat higher level tasks like reconciling accounts, ensuring receivables are entered accurately and correctly, managing <a href="http://ad.doubleclick.net/clk;218396076;41475586;v?http://www201.americanexpress.com/sbsapp/FMACServlet?request_type=alternateChannels&amp;lpid=298&amp;openeep=17460&amp;ccsgeep=17460">cash</a>, and providing some reporting to management. The highest Tier focuses only on high level accounting entries, financial statement reporting and analysis, accounting/ERP system design and structure, training others in the accounting and other departments, forecasting, and helping make strategic decisions that impact the company's operations, bankability, taxes, competitive advantage and much more.</p> <p>Giving one person the responsibilities of all three Tiers is irresponsible, especially if you expect that person to perform them all efficiently and at the lowest cost possible. Either the person does not have the right background to do it all, or, if they do have the right background, you end up over-paying them to do routine and simple tasks. Knowing that most companies cannot afford to hire someone in all three Tiers right away, what is the best way for a business to get everything it needs for the best price?</p> <p>Start by hiring a very part-time independent bookkeeper or bookkeeping solutions that can recommend an affordable accounting system that they know and can train others to use to fulfill Tier 1 tasks. This person will fulfill items in Tier 2 and a little bit of Tier 3 initially, and they can be as affordable as $100/month. The bookkeeper is essential because they will make sure your business is compliant and even getting a little bit of strategic data. Then have this person train lower cost employees to handle the Tier 1 functions. This will be a very good and healthy start, although some of the Tier 3 functions will not be covered. This will be OK in the interim, but ultimately most businesses cannot neglect Tier 3 for too long without suffering negative consequences.</p> <p>Finding the right part-time bookkeeper is not always easy. They need to know your accounting system and have some experience in your industry. Some CPA firms have bookkeepers on staff that they hire out to their clients, but more affordable options exist in the form of independent bookkeepers if you put in the effort to find them. There are usually ample options in every market, and they are often more affordable and more flexible to best fit your needs.</p> <p>As the company grows the part-time bookkeeper may need to put in more time, but the bulk of the work will be absorbed by lower cost employees in Tier 1. The uncovered parts of Tier 3, like forecasting and strategy, will need to be solved by another part-time addition to the team, and they are usually referred to as a part-time or outsourced Chief Financial Officer, or CFO. The <a href="http://www.cfowise.com/">CFO Services</a> these professionals offer have grown in popularity and demand over the last decade because of the affordable and high-impact solutions they offer. For more information on the right time to engage these services, read my recent article, <a href="http://www.openforum.com/idea-hub/topics/money/article/4-signs-you-need-a-cfo-ken-kaufman">4 Signs You Need a CFO</a>.</p> <p>Ultimately the part-time bookkeeper will become overwhelmed by the time and expertise demands of the company and it will make sense to bring on an Accounting Manager or Controller full-time to handle all of the Tier 2 functions as well as assist in the fulfillment of the Tier 3 functions. The last full-time hire in a company's accounting and finance department should be the CFO. Not only is the CFO the most expensive position in this department, but it also requires the least amount of time dedicated to it. It will also need to become full-time when an organization grows so large (usually over $50 million in sales) and too complex (multiple locations, international expansion, multiple business models, etc.) for a part-time solution to truly cover all the needs of the business.</p> <p>You can solve the mystery of properly staffing your accounting department by understanding these three Tiers of tasks and leveraging part-time and full-time resources to get exactly what you need at the very best price available.</p> <script type="text/javascript"> federated_media_section = "gold"; </script><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ken-kaufman">Ken Kaufman</a> of <a href="http://www.wisebread.com/small-business/solve-the-mystery-of-staffing-your-accounting-department">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-to-get-a-small-business-loan">10+ Smart Ways to Get a Small Business Loan</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-all-successful-freelancers-do">10 Things All Successful Freelancers Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center accounting small business Thu, 27 May 2010 01:17:43 +0000 Ken Kaufman 80269 at http://www.wisebread.com Cash vs. Accrual and Why Accounting Matters for Taxes http://www.wisebread.com/small-business/cash-vs-accrual-and-why-accounting-matters-for-taxes <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/cash-vs-accrual-and-why-accounting-matters-for-taxes-thursday-bram" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/cash-vs-accrual-and-why-a...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/cash-vs-accrual-and-why-accounting-matters-for-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000003584033XSmall.jpg" alt="Accounting" title="Accounting" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>When you're running a small business, it may seem like deciding between cash and accrual accounting is just one more thing on the long list of things you need to get done. But the fact of the matter is the decision on which accounting method you're going to use makes a difference in something as simple as how you do your taxes and can have long-lasting effects beyond the end of the year.</p> <h3>The Difference Between Cash and Accrual Accounting</h3> <p>The cash method of accounting is the most common choice for small business owners. Under the cash method, you don't count income until you have the cash or the check in hand and you don't count expenses until the money leaves your account. In comparison, under the accrual method of accounting, you record transactions when they happen, no matter when the money actually changes hands. The cash method tends to more popular because it's easier for many businesses to keep track of. But if there's a lengthy delay between when you do work and when you receive payment, some issues can occur.</p> <p>There are some situations in which your business absolutely must use the accrual method. If you have sales of more than $5 million per year or your business maintains an inventory of items you sell to the public and your gross receipts total more than $1 million per year, you're required to use the accrual method.</p> <p>Paul Miller, a <a href="http://www.flowcircus.com/">professional juggler</a> who just happens to have a degree in accounting, chose the accrual method in an industry &mdash; entertainment &mdash; that tends more towards the cash method. His choice was based on the fact that it's easier to tell where your business' finances actually are with accrual accounting, rather than just knowing what cash you have on hand. Miller says:</p> <blockquote>I selected the accrual method for more accurate reporting. Many of my receivables are paid <em>net 30, net 60</em> and sales as a whole are very dependent on the month of the year. I will earn $20-30,000 from library and camp work in August and much of it won't be paid until September. Most of this income in September will be from school and after-school programs. By using the accrual method, I can get an accurate picture of how much I earned each month and from what sources.</blockquote> <h3>Using Accounting to Manage Taxes</h3> <p>One of the biggest changes a choice in accounting methods can create is how you handle tax deductions. Under the cash method, if you make a purchase in 2010 but don't send payment until 2011, you won't be able to deduct that expense until 2011. Under the accrual method, however, you would be able to claim the deduction in 2010. That may sound like a subtle difference, but depending on your business' expenses and income, it can be quite complex.</p> <p>For instance, if you often have long periods between the point when you make a sale and when you receive payment, the accrual method can actually cause some problems. For instance, you may send out an invoice at the end of December, but not receive payment by the time you need to send in your tax return. If you're using the accrual method, you're still expected to pay taxes on that expected income, although it isn't in your bank account yet.</p> <p>There are certain situations in which the system of accounting that you choose will play a more minor role. Dick Barnes has operated several small businesses over the years and is now a partner with <a href="http://www.freelandgroup.com/">the Freeland Group</a>, a management consulting firm. Barnes says:</p> <blockquote>If cash accounting shows too much profit one year, it will likely show too little the next and vice-versa. An example of a difference might be if using long-term debt with a single balloon payment and you write-off the entire debt load in a single year (kind of dumb normally, unless you're having an extraordinary year).</blockquote> <h3>Making the Switch Between Accounting Methods</h3> <p>As a small business owner, you're likely already using one accounting method or the other. But just because you've been using a particular method in the past does not mean that you cannot switch to the other. Barnes suggests talking to your accountant, especially if you're moving from the cash method to the accrual method.</p> <p>Depending on the type of business, the switch could be very simple...or it could be pretty complex.&quot; Barnes points to certain issues that may slow down the switch: if you already have a commercial line of credit, where your accounts receivable stand and how long your operating system is.</p> <p>If you're the one keeping the books for your company, you may need to pick up a few new skills if you make the switch to accrual accounting. Miller says:</p> <blockquote>I do think that an attentive small business owner can pick up the steps to run an accounting system based on the accrual method. It is mostly a case of reporting and a couple of extra accounts.</blockquote> <p>Your CPA may even be willing to walk you through the differences, especially if you're using common software, such as Quickbooks.</p> <h3>Beyond Taxes: Make Sure You Have Room to Grow</h3> <p>Your accounting method isn't just a matter of doing your taxes. Barnes has owned a number of small businesses and, as a business owner, preferred the simplicity of cash accounting. But when he changed tracks, he realized how important it was for small businesses to use the accrual method when possible:</p> <blockquote>As a commercial lender, I found that cash accounting makes it difficult to verify or judge what the firm is actually doing at any one point in time. Most banks will not consider putting together a loan package with cash accounting financial records, particularly if the firm grows beyond the $500k annual revenue level. They simply want the owner to go back to the blackboard, hire a CPA for accuracy, and come back with what they often call 'legitimate' financials (accrual).</blockquote> <p>If you think that, down the road, you may need capital to expand your business, it's important to make sure that your accounting method won't get in the way of you getting a loan. Barnes suggests meeting with your bank long before you ever need a loan to check what your options will be with the bank that already has your business; ask your banker if the bank would have a problem with <a href="http:// http://ad.doubleclick.net/clk;218396076;41475586;v?http://www201.americanexpress.com/sbsapp/FMACServlet?request_type=alternateChannels&amp;lpid=298&amp;openeep=17460&amp;ccsgeep=17460">cash accounting</a> if you ever ask for a line of credit.</p> <script type="text/javascript"> federated_media_section = "gold"; </script><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/small-business/cash-vs-accrual-and-why-accounting-matters-for-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center Taxes accounting small business Sun, 07 Mar 2010 17:00:07 +0000 Thursday Bram 5389 at http://www.wisebread.com FINANCIAL IQ TEST: How Healthy Is Your Budget? http://www.wisebread.com/financial-iq-test-how-healthy-is-your-budget <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/financial-iq-test-how-healthy-is-your-budget" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/first step to budgeting - full budget.jpg" alt="budget" title="budget" class="imagecache imagecache-250w" width="250" height="88" /></a> </div> </div> </div> <p>Budgeting is one of the hardest things for any of us to do well &mdash; and stick to. It requires discipline, attention to detail, and persistence. But it doesn&rsquo;t have to be impossible; and effective budgeting can actually be quite empowering.</p> <p>Following is a Financial IQ Test to help you determine how healthy your budget is. <strong>Simply look at each statement, and answer it with a YES, NO, or NOT SURE.</strong> Keep track of your answers, and we'll see how you score at the end. Then, check out the resource articles below to increase your knowledge base.</p> <p>&nbsp;</p> <h3>Budget Maintenance</h3> <p>I plan ahead for large expenses like repairs, appliances, or periodic bills.</p> <p>I amortize annual expenses over 12 months for budgeting purposes (I apply the same principle to other periodic expenses too, for example quarterly expenses are amortized over 3 months).</p> <p>I record all my expenses (or have an accurate record of expenses through bank statements or the like).</p> <p>Before I created my budget, I monitored my expenses over a few months to figure out what I spend.</p> <p>I review my budget regularly for effectiveness and modify as needed.</p> <p>&nbsp;</p> <h3>Savings</h3> <p>My savings plan is an expense that is part of my budget.</p> <p>Extra money like pay raises, bonuses, and tax refunds go directly into savings or to pay off debt.</p> <p>Gifts and charitable donations are part of my budget.</p> <p>&nbsp;</p> <h3>Flexibility</h3> <p>If I anticipate that I&rsquo;ll go over the budget in one category, I find the money from another category that month.</p> <p>I have financial padding built into my budget for flexibility (and sanity).</p> <p>I have allowances in my budget for unexpected expenses.</p> <p><st1:place>Holiday</st1:place> season festivities and birthday gifts don&rsquo;t throw me off budget.</p> <p>&nbsp;</p> <h3>Accountability</h3> <p>I know how much money I live on each month/year.</p> <p>I balance my chequebook so I don&rsquo;t go into overdraft.</p> <p>I can account for all my spending.</p> <p>I live within my means.</p> <p>I don&rsquo;t charge anything to my <a href="http://www.wisebread.com/how-to-avoid-getting-your-credit-card-canceled">credit card</a> unless I can pay it off in full by the due date.</p> <p>I pay all my bills on time.</p> <p>My income is larger than my expenses.</p> <p>&nbsp;</p> <h3>Budget Lifestyle</h3> <p>I don&rsquo;t allow myself to feel pressured by peers to spend money that I don&rsquo;t have.</p> <p>I don&rsquo;t buy caviar (for example) unless it&rsquo;s in the budget &ndash; even if it is on sale for half price.</p> <p>I view my budget as a way to figure out what I CAN afford, instead of what I CAN&rsquo;T.</p> <p>I have a positive goal or <a href="http://www.wisebread.com/vision-boards-dream-big-play-with-pictures-and-watch-your-life-change">vision</a> to keep in mind (like being debt-free, or having a <a href="http://www.wisebread.com/america-is-the-no-vacation-nation">vacation</a>) for times when the budget is tight or I start to feel deprived.</p> <p>I budget for small rewards to keep me on track and motivated.</p> <p>Everybody in the family participates in the budgeting process.</p> <p>&nbsp;</p> <h2>Scoring</h2> <p>Did you keep track of how many times you answered YES, NO, and NOT SURE? Great! Give yourself the following points for each answer:</p> <p>YES = 4 points</p> <p>NO = 0 points</p> <p>NOT SURE = 2 points</p> <p>&nbsp;</p> <h2>Analysis</h2> <h3>Score: 0-35 &ndash; More Budgeting Required</h3> <p>If you have a budget at all, you&rsquo;d probably agree that it&rsquo;s not particularly effective. You might manage your expenses on the fly each month, and although it may work for now, there may come a time when some unexpected expenses will railroad you &ndash; or you may simply not realize that you could do more with the money you have. A little more attention to what you spend could be enlightening.</p> <h3>Score: 36-70 &mdash; Getting There</h3> <p>You probably make an attempt to budget, but it&rsquo;s not quite effective, and you may not even realize why or where you&rsquo;re going wrong. Don&rsquo;t be too hard on yourself; budgeting requires a lot of discipline, tenacity, and attention to detail. This isn&rsquo;t easy for everybody. Check out some of the resources below to improve your technique.</p> <h3>Score: 71-100 &ndash; Budget Master</h3> <p>Although there&rsquo;s always room for improvement, you&rsquo;ve got a system that largely works for you. Take a look at the questions you answered &ldquo;not sure&rdquo; or &ldquo;no&rdquo; to, and see where you can improve. But for the most part give yourself a pat on the back &ndash; you are in the minority of people who have &ndash; and stick to &ndash; an effective budget. Congratulations!</p> <h2>Resources</h2> <p><a href="http://www.wisebread.com/the-first-step-to-budgeting">The First Step to Budgeting</a></p> <p><a href="http://www.wisebread.com/ponder-it-to-budget-or-not-to-budget">Ponder It: To Budget or Not to Budget</a></p> <p><a href="http://www.wisebread.com/budgeting-hack-gift-calendars">Budgeting Hack: Gift Calendars</a></p> <p><a href="http://www.wisebread.com/prepaid-gift-cards-for-modern-envelope-budgeting">Prepaid Gift Cards for Modern Envelope Budgeting</a></p> <p><a href="http://www.wisebread.com/make-grocery-budgeting-a-game-the-price-is-right-style">Make Grocery Budgeting a Game &mdash; The Price is Right Style</a></p> <p><a href="http://www.wisebread.com/why-you-can-t-stick-with-a-budget">Why You Can&rsquo;t Stick With a Budget</a></p> <p><a href="http://www.wisebread.com/3-ways-technology-makes-personal-finances-easier">3 Ways Technology Makes Personal Finances Easier</a></p> <p><a href="http://www.wisebread.com/tricks-for-budgeting-as-parent">Tricks for Budgeting as a Parent</a></p> <p><a href="http://www.wisebread.com/beyond-budgeting-pocketsmith-helps-you-forecast">Beyond Budgeting: Pocketsmith Helps you Forecast</a></p> <p><a href="http://www.wisebread.com/how-to-save-money-at-restaurants-budgeting-tips-for-dining-out">How to Save Money at Restaurants: Budgeting Tips for Dining Out</a></p> <p><a href="http://www.wisebread.com/taco-tuesday-the-inner-mechanics-of-budgeting-on-vacation">Taco Tuesday: The Inner Mechanics of Budgeting on Vacation</a></p> <p><a href="http://www.wisebread.com/budgeting-for-your-next-vacation-yaycations">Budgeting For your Next Vacation: Yaycations</a></p> <p><a href="http://www.wisebread.com/your-budget-envelopes-or-a-plan">Your Budget: Envelopes, or a Plan</a></p> <p><a href="http://www.wisebread.com/a-budget-is-not-a-constraint">A Budget is Not a Constraint</a></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-budget">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/financial-iq-test-how-healthy-are-your-bank-accounts">Financial IQ Test: How Healthy Are Your Bank Accounts?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/simplify-budgeting-with-personal-money">Simplify budgeting with personal money</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/in-times-like-these-separate-the-want-from-the-need">In times like these, separate the want from the need.</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-easy-ways-to-save-50-every-month">9 Easy Ways to Save $50 Every Month</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oprah-asks-a-great-question-what-can-you-live-without">Oprah Asks A Great Question; What Can You Live Without?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting accounting budget expenses financial IQ Test Thu, 11 Feb 2010 14:00:11 +0000 Nora Dunn 5111 at http://www.wisebread.com 6 Common Money Mistakes Small Business Owners Make http://www.wisebread.com/small-business/6-common-money-mistakes-small-business-owners-make <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/6-common-money-mistakes-small-business-owners-make-joanne-berg" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/6-common-money-mistakes-s...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/6-common-money-mistakes-small-business-owners-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000000928541XSmall_0.jpg" alt="Closed sign" title="Closed sign" class="imagecache imagecache-250w" width="250" height="159" /></a> </div> </div> </div> <p>We&rsquo;ve all known businesses that appear to be doing well, but end up going out of business because they&rsquo;ve made major mistakes in pricing, cost control, or financial management. Here are some of the areas where these problems arise, and some suggestions for how to avoid making the same mistakes.</p> <h3>1. Pricing Strategy</h3> <p>Pricing is probably the most important decision you make every day. If your prices are too high, you won&rsquo;t do enough volume. If you set them too low, you may get lots of sales, but you will lose money. So how do you find the right price?</p> <p>If you&rsquo;re in a business where your prices can be directly compared to your competitors&rsquo; (shoes, for example), your flexibility is limited. You can always run specials and have sales, but your competitors may follow. You&rsquo;re better off trying to create a sense of immediacy so that your customers buy as much as possible at full price. This is where good marketing makes all the difference. Try different approaches, track customer behavior, and make adjustments as you learn what works.</p> <p>On the other hand, many non-retail businesses and businesses with patented products have more flexibility in their pricing. It&rsquo;s common here for entrepreneurs to actually under-price their products. Most advisors recommend starting a little high and monitoring the response &mdash; it&rsquo;s easier to lower a price than to increase it.</p> <h3>2. Tracking Gross Profit</h3> <p>Many small businesses do not correctly account for the full cost of their products or services. It&rsquo;s much more complex than many realize. For example, if you are a clothing retailer, the cost of the freight to your store is part of the cost of the clothes. You also need to track and factor in shrinkage, damages, and unsalable returns &mdash; all of those costs that can eat up your profit margin.</p> <p>If you&rsquo;re a service provider, the wages that you pay the employees providing the service; including payroll taxes, insurances, and benefits; should be considered &ldquo;cost of services provided.&rdquo;</p> <p>Accurately accounting for cost of goods sold is important so that you can control those costs and also so that you can easily monitor gross profit, which is the difference between sales dollars and the cost of goods or services sold. It&rsquo;s not enough to just monitor sales volume &mdash; what matters is the profitability of those sales.</p> <p>If your gross profit percentage starts to slip, you need to immediately find out why and fix it.&nbsp;It could be caused by a cost issue, a pricing problem, or both. Don&rsquo;t wait until the end of the month to look at your gross profit numbers &mdash; put a system in place where you can monitor them weekly or even daily.</p> <h3>3. Credit and Collections</h3> <p>Many small businesses do a poor job of credit and collections. In many industries, customers expect to buy on credit, and in many service businesses, fees are billed after services are performed. This means that your business is making an investment in your customer or client&rsquo;s company. Treat this with the seriousness it deserves! Use a solid credit-checking process, set realistic credit limits, be very clear about what your credit terms are, and stick to those terms. You can also ask for a deposit up front, or a retainer if you are providing services. You may lose a sale or two, but it&rsquo;s better than never getting paid.</p> <h3>4. Budgetary Controls</h3> <p>Every business has overhead expenses, which can get out of control. These are things like rent, utilities, administrative employees, insurance, and office supplies. You should prepare an annual budget for these. Have your accountant load it into your accounting software, and then run a &ldquo;budget vs. actual&rdquo; report each month. This will show you where spending is creeping up.</p> <h3>5. Necessary Business Infrastructure</h3> <p>Small businesses often skimp on the personnel, resources, and infrastructure needed to run a business effectively. You need top-notch accounting help to track your day-to-day activity as well as a good CPA. You also need a robust accounting system, a great attorney and insurance broker, good computer systems, and a responsive IT firm to keep your systems running, Make sure these are in your budget.</p> <h3>6. Taxes</h3> <p>You need to be informed on tax issues in order to make good business decisions. These taxes include income taxes, sales and use taxes, payroll taxes, and business property taxes. Don&rsquo;t be afraid to ask questions of your tax advisor when you need to. The cost of non-compliance, especially with payroll taxes, can be staggering, and knowing how to manage your business decisions with income taxes in mind can leave more money in your pocket.</p> <p>Even if you&rsquo;re already doing a good job in these six areas, you may be able to enhance your profitability by making small improvements to your current procedures. If you&rsquo;re <em>not</em> doing these things, I encourage you to start implementing them. You&rsquo;ll be amazed at the results.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/joanne-berg">JoAnne Berg</a> of <a href="http://www.wisebread.com/small-business/6-common-money-mistakes-small-business-owners-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-to-get-a-small-business-loan">10+ Smart Ways to Get a Small Business Loan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-got-over-the-hump-and-sold-my-blog-for-3-million">How I Got Over the Hump and Sold My Blog for $3 Million</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center accounting business mistakes pricing small business small business taxes Fri, 08 Jan 2010 20:17:01 +0000 JoAnne Berg 427232 at http://www.wisebread.com Five Easy Steps to Keeping Track of Expenses for the Self-Employed http://www.wisebread.com/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/receipts.JPG" alt="receipts envelope" title="receipts management" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>&nbsp;</p> <p class="MsoPlainText"><span>I have had as many as five separate businesses at once to keep track of, including proper accounting of expenses for tax purposes. And it takes me no more than 5 minutes per week to do. </span></p> <p class="MsoPlainText"><span>A big hassle for most people I know who are self-employed or in contract positions (especially in creative fields) is the boring necessity to track expenses and receipts for tax purposes. </span></p> <p class="MsoPlainText">&nbsp;</p> <p class="MsoPlainText"><span>There are a few methods I've seen employed that leave a little to be desired:</span></p> <p class="MsoPlainText">&nbsp;</p> <p class="MsoPlainText"><span><strong>The Shoebox Approach.</strong> </span></p> <p class="MsoPlainText"><span>This usually entails a nightly or weekly emptying of the wallet or pockets into a shoebox labelled &quot;taxes&quot;. At the end of the year, one of two things happens: The culprit dedicates long days upon days to &quot;file their taxes&quot;. Really this process is less about the <a href="http://www.wisebread.com/taxes/tax-preparation " title="Wise Bread's Guide to Tax Preparation ">tax preparation</a> itself and more about sifting through piles of receipts, tallying up everything with calculators, and hoping that everything adds up. </span></p> <p class="MsoPlainText"><span>The other option for the shoebox guru is to simply take the unkempt pile of receipts into their accountant or bookkeeper and get them to sort through everything. </span></p> <p class="MsoPlainText"><span> <br /> I see two problems with this strategy: </span></p> <p class="MsoPlainText"><span>1: The daunting task of taking time off to sift through receipts and prepare taxes makes it one of the dullest and soul-sucking chores around. So consequently throughout the year there is less motivation to save the right receipts since it will just have to be tallied at the end of the year and less receipts to tally means less of a pain in the you-know-what to contend with. It also means less tax dollars saved. </span></p> <p class="MsoPlainText"><span>2: For those that go with the bookkeeper option, you are spending more money paying somebody else to do something that could easily be maintained yourself. For the frugal business owners in us, it's not always a wise expenditure. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span><strong>The Day-timer Approach.</strong> </span></p> <p class="MsoPlainText"><span>You know those expense logs that often come with the reference pages for most day-timers and schedules? Well, I haven't actually seen anybody use them successfully, but they keep coming out every year so I have to assume that somebody uses those pages and likes them. </span></p> <p class="MsoPlainText"><span>My beef with that approach is that there is no proper filing of the receipts which are needed for the actual <a href="http://www.wisebread.com/taxes/tax-preparation " title="Wise Bread's Guide to Tax Preparation ">tax preparation</a> (which relegates even the Day-timer User to the Shoebox Approach in a manner), and when it comes down to tax time even the expense logs need to be re-categorized and<span> </span>shuffled by hand according to the types of expenses incurred. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Here's what I personally do with my receipts, and it seems to work out quite well for me and is not time consuming at all: </span></p> <p><span><strong>1: </strong>Whenever I incur an expense, I usually <strong>stuff the receipt in my wallet</strong> until I get home, or until there are enough receipts in my wallet that it occurs to me to take them out. (This usually happens about once a week). </span></p> <p class="MsoPlainText"><span><strong>2: </strong>Once I've pulled the pile of receipts from my wallet, it's time to deal with them right then and there. I <strong>enter the following information into a spreadsheet</strong>:</span></p> <p class="MsoPlainText"><em><span>Date</span></em></p> <p class="MsoPlainText"><em><span>Vendor</span></em></p> <p class="MsoPlainText"><span><em>Type of expense for tax purposes</em> (eg: auto, office expenses, advertising, insurance, etc)</span></p> <p class="MsoPlainText"><em><span>Amount of money spent</span></em></p> <p class="MsoPlainText"><span><em>Additional notes </em>(eg: that dinner I'm claiming was when I took John Doe out to discuss ABC business, or that auto expense is specifically for gas or repairs.)</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span><strong>3: </strong>Once entered, I <strong>file the receipts away</strong>. I have a file folder that stores all the receipts for the year, and I clip all the receipts together by expense. For example, within my folder is an &quot;auto&quot; pile held together with a paperclip to which I attach my gas receipts. </span></p> <p class="MsoPlainText"><span>This way if I ever need to reference the original receipts again, I can easily put my hands on that specific receipt since it's already filed according to category and roughly by date as well since I enter and file the receipts regularly.</span></p> <p class="MsoPlainText"><span> <br /> That's it for the daily or weekly maintenance. No more than five minutes each week once you get into a system that works for you, I promise! </span></p> <p class="MsoPlainText"><span>When it comes to tax time, I go through a few additional steps to make things easier on my accountant: </span></p> <p class="MsoPlainText"><span> <br /> <strong>4: </strong>Since all my receipts are logged in spreadsheet format, all I have to do now is <strong>organize the spreadsheet</strong>. Using data sorts and searches, I create a page for each type of expense and print it out. For example my advertising page itemizes all the expenses I incurred for that category, showing dates, amounts, and special notes. </span></p> <p class="MsoPlainText"><span>This process can be tedious especially if you are still learning how to categorize your expenses or manipulate spreadsheet information. But it gets easier and easier each year, and at the height of my business frenzy, it sill only took me a couple of hours to do. </span></p> <p class="MsoPlainText"><span> <br /> <strong>5: </strong>I take all the printed spreadsheets (along with the original receipts just in case we need to reference them) to my accountant. I <strong>sit there with my accountant as we review the spreadsheets</strong>. If he or she feels that a certain expense is best claimed in another area, then we can easily subtract it from the total on that sheet, and add it to another sheet. It's a great learning experience for me, so the following year I can better manage my receipts and have a greater understanding of how to file taxes to get the best bang for my bucks spent. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Not only is this approach easy and helps me to maintain some semblance of control over my finances, but I also save money even with my accountant, since I've already done a lot of the prep work. All he or she has to do is plug in the numbers and tell me how much money I saved!</span></p> <p class="MsoPlainText">&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tax-document-checklist-what-to-gather-before-doing-your-taxes">Tax Document Checklist: What to Gather Before Doing Your Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-old-school-tools-to-help-you-stay-on-budget">6 Old School Tools to Help You Stay on Budget</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-tax-deductions-you-can-never-take">3 Tax Deductions You Can Never Take</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Organization Taxes accounting bookeeping filing taxes managing taxes receipts self-employment tax preparation Fri, 28 Sep 2007 04:22:23 +0000 Nora Dunn 1223 at http://www.wisebread.com