Why keep personal and business expenses separate?

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Follow these steps and eliminate reporting headaches!

There are so many reasons to not mingle business and personal bank accounts and transactions.  Whether you are a sole proprietor or have formed an entity, such as LLC or corporation, one of the first steps in forming the business is to set up a business checking account.  This business checking account should only be used for the business. It should not be used for personal expenses or personal deposits.  This applies to credit cards too.

This is something I run into all too often.  It’s one of the first questions I ask a new client and one of the first requests I have before taking over their books. I beg of you, please don’t mix business and personal expenses.

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Are you Making any of These Mistakes With Your Money?

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Tips for Saving Your Business Money

If you are like most small business owners you are looking to save money. But also like most owners, it is all too easy to get buried in running your business and miss out on chances to save money. Organization and setting guidelines are the keys to finding these various savings opportunities.

1. Missing tax deadlines, failing to fill out proper paperwork, or a hundred other legal complications can cost you hundreds or thousands of dollars.  The two main causes for these issues are not knowing or forgetting.  The solutions are simple though; maintain up-to-date calendars and procedure guidelines OR hire an expert that does.

2. Review expenses quarterly. Make sure all your routine expenses are legitimate and are working for you the way you expect them to. Do not get caught paying for services or products that you are not using.  Making sure your accounting is current, will insure your access to reports that will quickly and easily show you this information.

3. Use a budget, do not get caught making impulse decisions. Create your budget and stick to it with little to no deviation.  Do you have a hard time saying, “no”? I have a guideline for myself, I won’t buy from anyone on their first communication with me.  This gives me time to look into the product and determine if it will benefit my company and if the budget can accommodate it.

4. Do not let family involvement cloud your judgment.  Having the support of family in your business can be very reassuring. But when too many people are making financial decisions you can very quickly find yourself over budget.  You might also find you are going in various directions due to varying financial styles. Strict guidelines and a little bit of tact on your part can spare hurt feelings and save your business money.

Stress comes with the territory when it comes to owning your own business, and most of this stress revolves around money.  With some planning and proper systems in place you can go a long way to alleviating some needless worries. If you need help in this area, please contact me for a complimentary needs assessment.

Copyright 2014-2015 – Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC

Do you Have the Plans and Dreams of an Entrepreneur?

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“A goal without a plan is just a wish.”

–Antoine de Saint-Exupery

Sadly, this is exactly where so many first-time entrepreneurs find themselves.  They know they want to own their own business, they have a passion they want to share or they simply see it as the way to get rich.  Whatever the case, they have their eyes firmly fixed on the idea that they want to own their own business and be their own boss.

“By failing to prepare, you are preparing to fail.”

–Benjamin Franklin

So many times, this is exactly where the dream dies, because people have no idea how to move forward.  In some cases though, the dream does move on but without a plan or preparation.  Often, people think that simply latching on to the “latest and greatest” thing will insure success while they figure out the nuts and bolts of owning a business.  Maybe, you’ll open that restaurant?  Everyone loves your cooking, and you’ve seen every episode of “Restaurant Impossible” on the Food Network… Or, How about a lawn service?  How hard could that be? I’ve been mowing yards since I was 12.

It sounds easy, when you’re having the discussion in your head.  Then reality sets in.  What type of company do I want to form?  What are the start-up costs? Do people even want what I’m selling?  Do I need permits? These questions, and a thousand more need to be answered BEFORE you open your doors, failure in any one of these areas could doom you before you really get started.

“When you anticipate adversity, you can then plan for adversity.  You may never gain control of it, but you can keep it from controlling you.”

–T Jay Taylor

The “simple” answer to this problem lies with a well written and well thought out business plan.  First, a business plan can help you to understand your market, or even if there is one…you can get a feel for your competition and what your industry standards are.  Second, it will give you an idea of the costs and potential rewards associated with your field.  Finally, it can help you secure financing, give you the basic information to formulate a marketing plan, and help you to establish reasonable short-term goals to achieve your long-term aims.

“The best laid schemes o’ mice and men often go awry.”

–Robert Burns

There is never a guarantee to success, and the creation of a business plan is no exception.  But what it does do is guarantee that you have an accurate picture of the road before you.  It allows you to take your wish and turn it into a goal with a plan for success.  Preparing for and anticipating the various pitfalls that may lie before you is crucial in being able to adjust when surprises do occur.  Your business plan provides you a focal point to build around by keeping you focused on your long-term aims as short-term goals change and adjust.

The question for you now is: Where does this road start?  Do you know the right questions to ask for your business plan or where to find the answers?  Sit down with an accountant or business consultant that can guide and mentor you through the process.  The time, money and preparation spent now, can go a long way to achieving your goals and avoiding adversity. If you have questions or need help creating or fine tuning a business plan please don’t hesitate to contact us.

Copyright 2014 Christi Rains, President, Alpha Omega Consulting & Bookkeeping, LLC  www.aobookkeeping.com

How to put Your Dreams Into the Proper Perspective

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Most of you know the story of the jar, rocks, pebbles…etc.  It’s about the priorities we set in life and how we fit these things into our lives.  The parable applies to our dreams and goals in business as well.

There is a path to follow for true success in business and it starts by setting out the big vision for our companies.  The Jar that holds these dreams and plans represents the answers to some big questions; “What do I want to accomplish?”…”Why am I doing it?”  The big rocks represent the type of company you want to be; the industry, the size and scope…your mission statement.  These first choices can set you on a path to success or failure.  Make the vision too narrow and you can’t respond to changing situations, too broad and you are stretched too thin.  Pick the wrong industry, and it won’t provide you the means to achieve your dreams.

If those decisions worry you…good, they should scare you.  The best way to overcome this fear though, is information.  The best source for this information, and how it fits with your dreams and hopes, is a Business Plan.  As you and your professional research and prepare the plan, you may realize that the business you hoped to open wasn’t a good choice or you may find a better option that fits your needs.  No matter what the case, a well thought out and researched Business Plan can help you pick the right rocks to fill your jar with.

With the rocks firmly in the jar, it’s time to pick out those pebbles.  These are the monthly, quarterly and yearly goals that we set in order to mark our path toward bigger things.  Just like the rocks, pebbles can cause problems too…it can become hard to gain traction.  What if you don’t meet some of your goals; what if you don’t get that second store front opened on time?  Or reach $50,000 in sales when you expected?  Don’t Panic!   Combined with accurate accounting and up to date financials, you should always be able to plot a course to firmer ground.

Finally comes the sand and water; the day to day grind we go through to make it all happen.  This part is on you…no one can make you be the first one in or the last to leave, except you.  But if you have the right Jar, then you can always look to it for motivation on the hard mornings.  The right rocks will give you the necessary foundation to hold firm to when those pebbles beneath your feet begin to shift.

If you would like to speak to a business adviser or need help creating a business plan, please don’t hesitate to contact us. 972.743.0602 or wecanhelp@aoaccounting.com

Copyright 2014 – Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC

 

Do you Know Your Entity Type?

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What your entity says about your business

What type of entity is your business? I am always surprised to talk to business owners and learn that they are unsure of what type of entity they formed for their business. And the ones that do know usually don’t understand how their entity type affects the classification of their daily, monthly, and yearly transactions. For instance, are you aware that a C-Corp treats owner pay as an expense but an LLC treats owner’s pay as a reduction in equity? An expense affects the Profit and Loss and equity transactions do not.

If you are a single member LLC, do you know if your business is classified as a disregarded entity or an S-Corp.  Do you even know what a “disregarded entity is”? or Why this designation is important?

If you are doing business as a sole proprietor are you aware that this entity type is not a true legal entity and it does not provide any personal liability protection?  All too often liability concerns don’t cross the minds of new business owners…”What could possibly go wrong, it’s just me working out of my home?”  You would be shocked at the amount of things that could happen.

Your choice of business entity, cannot be a haphazard decision made because you have to get your doors open.  The entity type you choose for your business has to be one of the first decisions you make.  It determines how you pay taxes, the classification of certain transactions and can protect your personal property from a law suit.

Please make sure you protect yourself by understanding your business entity type.

Copyright 2014 – Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC

Is Your Staff Classified Properly?

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The Employee VS. Independent Contractor Debate

The classification of personnel affects how much a business pays in taxes, if withholding from paychecks is necessary and what tax documents to file. Misclassification of an employee can result in penalties and additional taxes. There are many questions to ask in determining the classification of personnel. There are three main categories the IRS uses in determining the classification. They are listed below in bold:

Behavioral Control:

The first question to ask in determining classification: Does the company control what the worker does and the manner in which he or she does their job? For example, do you set the hours the worker works? Do you set the work location? Do you provide all of the resources and materials? Do you provide training? If you can control what is done and how it is done then your workers are probably employees. If you can control only the outcome of the work and not the method of reaching the outcome then your workers are probably independent contractors. However, there are other factors involved in determining classification.

Financial Control:

Can the worker realize a profit or loss? Meaning, does the employer provide the work location and all resources to perform the job. If so, then there is no profit or loss to be realized. If these items are not provided then there is a profit or loss. This will usually mean the worker is classified as an independent contractor. How do you pay the worker? If you pay a flat set fee the worker is probably an independent contractor. If you pay for a period of time, such as hourly or weekly the worker is probably an employee. Does the worker provide services to other businesses? If so, they are probably an independent contractor.

Type of Relationship of the Parties:

What is the underlying nature of the relationship? Sometimes a written contract is necessary to prove this. Does the business provide the worker with benefits, such as insurance or vacation pay? An independent contractor does not receive these type of benefits from an employer. What is the length of time the relationship is expected to last? If it is indefinitely, the worker is most likely an employee. Are the worker’s duties an integral part of the operation? If so, they are probably an employee.

It is important to note, the worker must meet multiple rules before determining their classification.

As a business owner, if you would like to hire an independent contractor it is advisable to find one that is self-employed and pay them through their company. While this alone is not enough to determine classification it can help prove the nature of the relationship.

Copyright 2014 Christi Rains, Alpha Omega Consulting & Bookkeeping, LLC

The Seven, not-so-deadly, Sins of Small Businesses

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Be Sure Your Business Isn’t Making These Common Mistakes

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During my time working with small business owners, and of course being one myself, I have found that there are certain common mistakes that can ultimately doom most businesses.  All too often, small business owners become enamored with the idea of “being their own boss” and doing something they “love”.  These thoughts often cloud the judgment of even experienced business owners in their desire to pursue the American Dream.  In order to avoid these pitfalls you have to establish a strong foundation to your business; put in place systems that will help you keep your feet firmly planted in reality while you pursue your dreams.  Below, I have listed seven common mistakes that prevent entrepreneurs from building that strong foundation for their dreams;

  1. Seek professional advice

“Concentrate on your strengths and seek help for your weaknesses.”, that is the first piece of advice I give to any new entrepreneur.  Seeking out trustworthy professionals to guide you through the start-up process will help you to avoid all manner of financial and legal problems.  Later on, when the company is up and running, these same professionals will continue to be valuable members of your team. In order to grow your business you need to be able to concentrate and put your energy into your core business. Allow the professionals to take care of tasks such as; accounting, marketing and legal affairs while you manage growing your business.

2Create a formal business plan

Creating a formal business plan is important for any business. Think of a business plan like a road map.  It can aid you in determining specific goals and be a guide to help you stay on track.  In the process of creating one you will determine the size, location and buying pattern of your target market and the feasibility of your business idea. It can also be useful when seeking outside funding from banks or other types of investors.

3. Form a legal entity

If you are thinking of starting a business as a sole proprietor or are already doing business as a sole proprietor you need to examine your threats and determine if it’s really right for you. It’s important to note that a sole proprietor is not a legal entity. There is no separation between the business and the owner. Because of this, the business will cease to exist when the owner dies. Also, this form of business does not provide any type of personal liability protection between your business and personal assets. If you want to develop a successful long term company, it is advantageous to form the proper legal entity

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Is Your Business Prepared for Year-End?

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One way to Increase Your Bottom Line Before Year-End

Have you ever been told that the way to a better and bigger bottom line is to look at your revenue streams? Determine what product or service you offer that is bringing in the most profit and focus on it.  Or brainstorm different revenue streams that could bring in not only more clients, but would appeal to a different market base.

As the last quarter of the year is approaching, I recommend to all my clients to review their financial statements.  But I recommend a different angle than just developing new revenue streams.  At this time of the year, I recommend you concentrate on an area that you have more control over. Your expenses. It is the perfect time of year to review over your last 3 quarters and see what areas of spending are larger than you anticipated.

Like a majority of small businesses one of your biggest areas of spending might be advertising.  This is the perfect time to examine your advertising campaigns and determine what is working and what might not be working for you. You can eliminate the low performing campaigns and still have time before year-end to reap some savings.  Is your phone bill pretty high?  Maybe you need to look into a plan that might be more fitting for your current usage needs. Do you have recurring payments for products or services that you aren’t using anymore? This is the perfect time to cancel unneeded fluff; savings can be found all over.

Just go down your Profit and Loss statement and review each category, looking to see the specific vendors and charges. You may be surprised at what you find. This is also a good time to verify that each transaction is coded to the proper account. If not, move it to the proper account so you can get a true statement of your expenses. This part is extremely useful with tax time right around the corner.

If you are reading this and thinking, “But I don’t have a Profit and Loss statement. How do I get one?”.  You should contact me. I am more than happy to discuss with you how to go about getting and utilizing a system to track your income and expenses.  This will also allow you to have proper reporting and be ready at tax time.

Copyright 2014 Christi Rains, Alpha Omega Consulting & Bookkeeping, LLC  www.aobookkeeping.com

Does Your Business Have a Solid Foundation?

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Is Your Business Insured?

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There are various types of insurance that a business owner should consider to protect their investment. Even if you have formed a legal entity that provides personal asset protection you still need insurance for your business. The limited liability offered with forming an LLC or corporation offers protection of your personal assets if your company is in financial trouble and is in the process of closing its doors.  Commercial insurance offers protection while you are in business, helping you recover from a disaster or tough situation and stay in business.

If someone injures themselves on your premises are you covered? If you are at a client’s place of business and you damage their equipment are you covered? If an employee injures themselves while working how will you pay for their medical bills? If there is a fire at your warehouse or office do you have coverage to rebuild?

Insurance, such as general liability and professional liability, will provide an additional layer of protection for your company. This type of insurance can protect you in various situations with employees, customers, clients, vendors, etc.

Most states require various insurance if you have employees but few require other types of insurance. Be sure you have the proper type of insurance to limit your liability.

Owning a business may be your dream come true, but there are a lot of factors involved to build a strong foundation. Be sure you have a solid foundation before the unthinkable happens to you.

Copyright 2014 Christi Rains, Alpha Omega Consulting & Bookkeeping, LLC  www.aobookkeeping.com

How to Determine if You Have Household Employees

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Do you have household employees?

Do you have an individual that comes to your house routinely to handle such tasks as house cleaning, gardening, cooking, babysitting or any other position that personally supports you? If you pay this individual more than $1900 a year then the IRS recognizes the relationship as an employee/employer. This does not apply if you are hiring these services from a third party company.

Are you treating this relationship properly? How do you know if you are?  The IRS defines a household employee as someone hired to do work in or around a home, at the direction and control of the person who lives in the home.

As an employer, you should be withholding tax from the paychecks. If you are not withholding payroll taxes then you are out of compliance and you will owe back taxes plus penalties. If you have been treating the relationship improperly, it is fairly easy to begin a household employee payroll system. There are many payroll services that can help you by processing the payroll to save you the time and energy with calculating payroll taxes and remittance to the state.

If you have questions about determining the relationship of a worker, please don’t hesitate to contact me.

Copyright 2014 Christi Rains, Alpha Omega Consulting & Bookkeeping, LLC  www.aobookkeeping.com