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

Standard

Be Sure Your Business Isn’t Making These Common Mistakes

ab33b82fbcb67e382c8f99fcad2db4c7

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

Continue reading

Is Your Business Prepared for Year-End?

Standard

ded3798fbad935b1002e038fd355d256

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

How to Keep Your Small Business Out of Hot Water

Standard

84d14c0eab5a562173fbcd6bd3238de9

Is Your Small Business in Danger of an Audit?

In recent years, the total number of audits on small businesses has increased at the IRS despite a decrease in the overall number of audits.  Sadly, this change in focus by our IRS is based almost solely on their search for more revenue.  Because of the nature and number of small business deductions, the potential for error is greater.  If you qualify for a deduction don’t be afraid to take, but be prepared to prove you deserve it.  Below, is a list of some of the more common deductions that will set off a red flag at the IRS;

5 of the top reasons for an IRS audit 

Home office deduction 

There are two primary areas where filers make mistakes with this one.  First, is calculating the amount of square footage actually being used for the office accurately.  Second, the office space must be used “…exclusively and regularly for your course of business…”  The problem arises over subjectivity; what do they mean by ‘exclusive’?…or ‘regularly’? Should I include that part of the home or not?  These questions can be difficult, but not impossible to prove and justify.

Continue reading

Do you want to save time and money in your business?

Standard

Rule #6

THE IMPORTANCE OF USING AN ACCOUNTING SYSTEM

One of the most important factors for a small business’ financial health is to use an accounting system. Accounting systems track revenue, expenses and produce financial statements.  They can save a business owner valuable time and money when compared to the alternatives.

Do you use Excel? While Excel might seem like the simple solution, it really isn’t the best use of your time. Why spend your time using a completely manual process when you could be using an automated one?

Are you a shoebox client? Are you not using any type of method during the year to track income and expenses? Do you just toss your receipts in a box and forget about them until tax time? Do you rely on your tax preparer to sort through your paperwork and determine your income and expenses right before the dreaded tax filing deadline? If this describes you, how do you know the performance of your business without proper and routine tracking of sales?

Your time is the most valuable asset your business has.  Use it wisely to grow your business.

The advantages to using an accounting system are numerous. I touch on some of the main advantages below.

  • Tracking Income 

Entering your financial information into an accounting system will automatically track all income. You will know what customers have paid and what invoices are outstanding. Knowing on a regular basis what amounts are owed to you can help you be proactive in collecting past due amounts.

  • Tracking Expenses

You will know what vendors have been paid and what items are open. Having this information can aid you in paying bills on time and avoiding late fees and penalties.

  • Financial Statements 

An automated financial system allows for financial statements and activity reports to be generated quickly, and accurately. Your financials are critical to assessing the health of your business. If you are a shoebox client, reports are not possible during the year.  As well, if you are using Excel you will need to manually prepare reports.

Having all of your information located nicely within an accounting system can help you save time and money, prepare your taxes and increase your bottom line.  A business can’t truly know their financial outcomes without proper tracking. If you are using Excel or are a shoebox client, I urge you to think about moving to an automated system. Your time is the most valuable asset your business has.  Use it wisely to grow your business.

One final point, as important as having and using an accounting system is, it is equally important to ensure it is managed properly.  If you are unsure of how to use an accounting system or how to accurately account for transactions you should seek professional help.  Too many business owners try to do it themselves and find themselves owing penalties and interest on incorrectly filed sales and income taxes.

If you would like to discuss how to get setup on an accounting system please contact us. We handle system set ups, training and routine review for accuracy.

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

Your Next Big Idea Might be Just Around the Corner

Standard

9ecd313dc504d5f26b6e48e5a37c8b34

Why Business Owners Need Downtime

Have you ever been working and had a thought and by the time it took you the 5 seconds to get the paper and pin to write down the thought it was gone?  When this happens it is a CLEAR sign to step away and take at least a few minutes of downtime.  Trust me you will be better off for it.

Our minds read and hear so much information every day. It can be hard to sift through it all, let alone remember it.  Time away from the demands of work can give your mind time to rest and rejuvenate. During non-work activities such as, resting, exercising and hobbies your head can have time to clear. One of the ways I take downtime is by taking a morning walk before I start my work day.  It’s during this time that my mind clears and I think of ideas for my business. It could be a new idea for a blog post, how to solve a clients problem or even a great dinner idea for my family.  When I am ready to start my work day, I can start with a clear mind, which usually leads to a productive day.

Continue reading

The number one way to lose your business and self

Standard

Rule#1

THE IMPORTANCE OF FORMING A LEGAL ENTITY 

Q. My business is a Sole Proprietorship. Is this classification significant? 

For the most basic business, such as a hobby, this designation is fine. Unless you use dangerous equipment, sell a product, have high liability or hire employees. But keep in mind, a Sole Proprietorship is not a true legal entity. It does not provide personal liability protection, which means there is no separation between the business and the owner.  If sued, your personal assets can be taken. As well, if business debts cannot be paid with business assets then your personal assets can be taken.  

There is a large misconception in the business community that this entity form is acceptable due to the ease and low cost to form

Continue reading