Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts in category Budgets and Forecasting

Yes, CPA’s Can Do More than File Taxes

CPAs Can Do More Than Taxes Tax season is in full swing and small business owners have taxes on the brain. Don’t get me wrong, tax professionals are an important advisor to your business. Good tax CPA’s can help you save tax money, plan for future tax costs, and create a plan to reduce future taxes. However, did you know that CPA’s can do more than just taxes?

Let’s stop and think about your business. If you run a small business, bookkeeping is a huge part of your daily, weekly, and monthly routine. Bookkeeping is the backbone to your small business. It provides you with a trail map detailing where your business has been, where your business is today, and where your business is headed in the future. Good bookkeeping can mean the difference between a successful business and a failing business. In addition to your tax CPA, why not choose a CPA that specializes in helping small businesses with their day-to-day accounting and bookkeeping needs?

In addition to taxes and audits, here are a few other ways CPA’s can help your small business.

  • Management Consulting
    • Analyze business operations and suggest changes.
    • Help businesses make better use of their resources, thus increasing efficiency and improving profitability.
    • Pricing strategies for new products and services.
    • Develop marketing strategies and track marketing plans for profitability.
    • Create a business plan for entrepreneurs or for existing businesses wanting to roll out a new department, product, or service.
    • Setting up a business – consult on business structure and registering the business with the correct government agencies.
  • Financial Consulting
    • Create forecasts and budgets.
    • Produce financial statements – Balance Sheet, Income Statement (Profit & Loss), and Statement of Cash Flows.
    • Perform ratio analysis – watch for business financial trends, problems, and growth.
    • Teach business owners how to read and understand financial statements, budgets, forecasts, and ratio analyses.
  • Financial Analysis
    • How much revenue does my company need to generate to be able to hire an employee?
    • Would my business save money if we purchased parts from a vendor instead of manufacturing them in house?
    • Create and calculate compensation plans – commission plans for sales staff, salary and bonuses for management, salary plans for staff, etc.
    • Why does one department continually loose money every month? What can the business do differently or change to start generating a profit?
    • Tracking cash flows – how much does my business need to make payroll? How much cash does my business need to pay next month’s bills? How much cash will be left over to pay the owner?
  • Bookkeeping
    • Accounts Receivable – record payments, assist with collections, generate invoices and statements.
    • Accounts Payable – record and pay bills and track expenses.
    • Bank Reconciliations.
    • Credit card statement reconciliations.
    • Reconcile PayPal accounts.
    • General ledger clean up and review.
    • QuickBooks Consulting – QuickBooks set up, QuickBooks training, QuickBooks clean up.
    • Cloud based and/or SAAS (software as a service) bookkeeping solutions.
    • Create, set up, and organize an accounting system.
  • Payroll
    • Online payroll processing for your small business.
    • File your quarterly and annual payroll returns – 940, 941, W-2’s, W-3, and 1099’s
    • New hire reporting.
    • Post payroll figures into the accounting software.
  • Human Resources
    • Generate an employee handbook.
    • Draft and create job descriptions.
    • Calculate compensation plans.
    • Consult on employee benefit plans – retirement savings plans, health insurance, and paid time off.
    • COBRA administration.
    • Workman’s Compensation.
    • Employee management consulting.
    • Unemployment Insurance.

This by no means is a comprehensive list of things your CPA can help you and your business with. As your business grows, changes, and enters new areas contact your CPA. You might be surprised at the additional services and resources they can provide for your small business!

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


Year-End Bookkeeping Checklist

Box of ReceiptsWow, can you believe the end of the year is quickly approaching? To help get your books in order and ready to send to your tax preparer here is a year-end bookkeeping checklist to help keep you organized. Keep in mind that every business is different. This list is meant to provide you with a general idea of items to take care of before December 31, 2010. When in doubt or if you have questions, seek guidance from a professional who knows your specific business situation.

End of Year Bookkeeping Checklist:

  1. Get Organized: Find all of the receipts for any deduction you are claiming on your tax return. For me, this involves looking in my purse, on my desk, in my car, on the kitchen counter, etc. Keep in mind that no receipt equals no deduction. The best way to stay organized during the year is to enter your transactions into an accounting software, like QuickBooks.

    After collecting all receipts, look over your personal bank statements for any business charges you paid for out of your personal account. Do the same with your business bank statement, but this time look for any personal expenses paid out of your business account. Make a list of these transactions to give to your tax preparer.

  2. Reconcile Your Bank Account(s): Bank Reconciliations are a great tool to verify all transactions have been posted into your accounting software. This ensures your general ledger bank balance (the bank balance in QuickBooks) matches your bank statement. If not, fix any mistakes you discover in the process.
  3. Invoice: Have you invoiced all of your customers for work you’ve done and products you’ve delivered/shipped for the year? If not, get caught up on those invoices.
  4. Collections: Follow up with any customers who owe you money. Send them a past due statement and/or give them a call to remind them they owe you money. Now’s a great time to collect your receivables.

    Look through your accounts receivables. Are there any receivables that you are unable to collect that need to be written off your books or sent to a collection agency?

  5. Inventory: Verify your inventory balance is correctly reported on your balance sheet. The best way to do this is to have an accurate count as of December 31st. You’ll also want to verify that your inventory is valued correctly – determine if any inventory items cost more than they’re worth and need to be written down. Remember, your tax preparer is going to need the following in order to prepare your tax return: 1. Inventory balance at the beginning of the year (January 1st); 2. The cost of inventory purchased throughout the year; 3. The amount of inventory that was sold during the year; 4. The ending inventory balance as of December 31st.
  6. Fixed Assets: These are the larger purchases you made throughout the year (i.e. equipment, automobiles, furniture, computers, etc.). Do you still have all of the fixed assets that are reported on your balance sheet? If not, record the sale or disposal of these fixed assets. Don’t forget to verify the depreciation on your fixed assets as well (if you don’t know how to do this, contact your CPA. They will be able to generate a depreciation schedule for you). Make any necessary adjustments.
  7. Expenses and Accounts Payable: Verify all of your accounts payables have been recorded in your accounting software, such as QuickBooks. Now’s a great time to make your 401(k), SEP IRA, and Simple IRA contributions, if you have not done so already.

    If you are a sole proprietor or a small business, did you know your cell phone charges and internet usage for your business is deductible on your tax return? Collect your cell phone bills & internet bills for the year and determine what percentage of your cell phone calls were for business purposes and what percentage of your internet was used for business. Make a list to give to your tax preparer.

  8. Notes Payable: Verify your notes payable (i.e. loans) amounts on your balance sheet match the statements from your banks. Are you missing any notes payables? Do you have any notes payables that you paid off during the year or debts that were forgiven? Make any necessary adjustments. Not sure how to make the adjustments? No worries, make a list to give to your tax provider or contact a CPA to help you make the necessary adjustments.
  9. Mileage: Great news, you can deduct $0.50 per mile for business miles driven in 2010. That means any trips to clients or for meetings are deductible. I keep a mini notebook in car to track all of my business mileage throughout the year (date, purpose of the trip, starting odometer reading and ending odometer reading) to ensure I have the necessary documentation to claim the mileage deduction. There are also a few apps out there that can track your mileage for you. Please note that your daily commute does not qualify for the deduction.

    The IRS also gives businesses the option to calculate the actual costs of using your vehicle (i.e. gas, maintenance, repairs, etc) rather than using the standard mileage rate. If you decide to go this route, you will need to determine the percentage of time you use your car for business and use this percentage to calculate your deduction.

  10. Collect W-9’s: If you have not collected W-9’s from your vendors and/or contractors you paid $600 or more to throughout the calendar year, now’s a good time to collect those. Don’t forget your 1099’s are due on January 31st. Speaking of 1099’s now’s a good time to order your 1099’s. They can be purchased at most office supply stores (Staples & Office Max) or you can order them for free from the IRS (irs.gov).
  11. Payroll Taxes: Verify your payroll tax liabilities match your quarterly payroll returns.
  12. Double Check your Profit & Loss: After making all of the adjustments listed above, double check your P&L Statement (aka Income Statement). Do your income and expense numbers make sense? Compare your profit and loss statement against prior years and against your budget. Think long and hard to make sure there is no additional income you are missing (i.e. advertising income from your blog, any contract work you did, etc.) and no additional expense items you are missing (i.e. those missing receipts you’ll find at the bottom of your purse or in your junk drawer). Make any necessary adjustments. Remember, no receipt equals no deduction.
  13. Create a Budget for Next Year: See our previous blog entries about creating budgets:
  14. Back Up: Back up your Quickbooks file to protect you from loss of data.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


Projecting Cash Flow Using QuickBooks

Cash Flow QuickBooks
The past two weeks we have discussed how to create a cash flow budget and how to effectively use your cash flow projections. If you are list most small businesses, chances are you are using QuickBooks. Today I’m going to teach you the tools QuickBooks has in place to help you manage your small business cash flow.

The most basic way to keep track of your cash flow in QuickBooks is by using the cash flow reports. QuickBooks offers two cash flow reports – the Statement of Cash Flows and the Cash Flow Forecast.

  • The Statement of Cash Flows shows where your money was spent. You can select various time frames to see how you spent your money. Since this report gives you a retrospect view, it’s not ideal for cash flow forecasting. However, it’s a valuable tool to allow you to see where your money went and how it was used.
  • The Cash Flow Forecast Report helps you forecast how much cash you will have by forecasting your receivables (cash inflows), your payables (cash outflows), and your bank accounts. The great thing about this report is that you are able to customize it to fit your needs. For example, you can specify the date range for your report, change the forecasting periods, and make adjustments for late paying customers. Keep in mind the information provided by this report is limited to the information you have previously posted to your QuickBooks file.

To access these reports, click on the Reports menu, then select Company & Financial from the drop down list, and then select Statement of Cash Flows or Cash Flow Forecast from the list.

Another great tool offered by QuickBooks to help small business owners with their cash flow projections is the Cash Flow Projector. Instead of being a report, it’s a tool to help you forecast your cash flows 6 weeks in advance. Keep in mind, the Cash Flow Projector tool creates cash flow forecasts based on the information you have previously posted to your QuickBooks file. The Cash Flow Projector will take you though a step-by-step process to create your forecast. To access, click on the Company menu, select Planning & Budgeting, and then click on Cash Flow Projector.

There are four steps to setting up your personalized Cash Flow Projector.

  • Determine Your Beginning Cash Balances
  • Project Your Cash Inflows (cash receipts)
  • Enter Cash Outflows (business expenses)
  • Review and Adjust Accounts Payable

Want a sneak peak? At any time you can click the “Preview” button to see what your cash flow projection looks like.

A combination of the cash flow reports and the cash flow projector tool offered by QuickBooks will help you manage your small businesses cash flows. These reports and tools will help you see when your business will have positive cash flows and when your expenses will exceed the cash you bring in. Keep in mind QuickBooks only uses the information you have already entered into your QuickBooks file. Even though these automated reports and tools are nice, make sure you are mindful of your business’ cash inflows, cash outflows, and other things that can impact your cash that are not entered into your QuickBooks file. A proactive approach while using these tools will help ensure the reports and information are as accurate and as useful as possible.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


Effectively Using Your Small Business Cash Flow Budget

Strategy, innovation and planning for small businessesLast week we discussed how to create a cash flow budget for your small business. This week I want to take it a step further and teach you how to use your cash flow budget.

The main goal of running a business is to bring in more cash than your company pays out. Thus allowing you to reinvest in your business, to fund future growth, to put into savings, to reward your employees, and to take larger payouts for yourself. Whatever your plans are with your cash, you can not get there if you have negative cash flow.

The best piece of advice I can offer is to review your cash flow budget on a regular basis. More often than not entrepreneurs will create a well thought out budget, but then do not follow through with their ideas and plans. I recommend reviewing your budget once a month, at a minimum. If you can, a weekly review is your best bet to keep you on track and help you avoid cash flow pitfalls.

At the end of the month, you should print out your aging accounts receivable and aging accounts payable reports from QuickBooks, or your other accounting software. Compare your actual accounts payable and accounts receivable numbers against your cash flow budget. Did your customers pay sooner than expected? Do you have more bills than you originally planned for? Use this actual data to update your cash flow budget. Updating your cash flow budget as you go along creates a better tool and allows you to have a better handle on your actual cash flow needs as you move forward.

If you are strapped for time (let’s face it, which entrepreneur would like more time in their day), here’s a a quick way to check to see if you are on track. Take your actual receipts (money received from your clients) and subtract your payments (bills you’ve paid this month). How does this number line up against your cash flow budget? Take it a step further and include the difference between your accounts receivables and your accounts payables. If your quick review numbers are off from your cash flow budget, ask yourself if this is an amount you are comfortable with? If not, it’s time to review you actual data against your cash flow budget and figure out what went wrong so you can make changes before it’s too late.

Your cash flow budget will help you discover “cash flow gaps,” which are times when your cash outflows exceed your cash inflows. Finding these gaps before they become a reality allows you to plan ahead for them. Maybe you need to take a smaller owner payout next month, talk to your bank about getting a line of credit in place, ask your vendors if they can be flexible with your payment terms (more often then not they are willing to work with you before it becomes an issue), can you get by with ordering less inventory to have on hand, or wait to hire that new employee you’ve been hoping for (or maybe you can bring them on part time to start instead of full time). It’s easier to make these adjustments before your cash flow gaps become a nightmare.

Now we have you up to speed on your cash flow budget, but what good is a plan if those around you don’t know your goals? Get your management, employees, and bookkeepers on board. If they know you need to generate x number in sales next month to cover payroll or they need to collect a certain amount of receivables to keep your business afloat, you have a better chance of meeting your cash flow needs with their help. Your employees will be happy you included them in your plans and it will offer them a sense of responsibility. ┬áThis gives them an extra purpose and desire to help you reach your business and cash flow goals.

Lastly, I recommend creating 3 scenarios for your cash flow budget – a best case scenario, an average case scenario, and a worst case scenario. As your company moves forward and you compare you actual results against your different scenarios you can see where your company is falling. If your year is not going as hoped, you already have a plan in place to help manage your cash flow under the worst case scenario. On the flip side, if you’re having the best year ever, you probably have dreams, aspirations, and goals you would love to implement. Now might be the perfect time to try out these ideas. After all, you’ve budgeted for them so let’s put this extra cash flow to use.

By proactively managing your cash flow let’s you be in control instead of your cash. A cash flow budget gives you the tools to ensure you have enough cash flow to cover your business needs. It also allows you to see if you are headed for a cash flow gap. By catching those gaps before they become a reality allows you to better plan for them before they become a cash flow disaster. By reviewing your actual cash flow against your cash flow projections, getting your office team on board and involved, and by having three case scenarios will help guide your company to better cash flow success.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


Cash Flow Budgeting For the Small Business

Cash Flow Budget for Small BusinessCan I make payroll this month? Do I have enough cash to fund my business’ growth? How much money do I have left to pay myself? If you find yourself asking these questions, you are not alone. Cash flow is an important step to running your small business. Without cash, your company (big and small companies alike) can not last for very long. Learning to manage, budget, and track your cash flow is an important step for small business owners. It is possible for companies to report a positive income while having negative cash flow. Which is why, contrary to popular belief, cash flow troubles are usually a businesses downfall, not profitability issues.

Creating a cash flow budget, also known as a cash flow projection, is a great way to manage your small businesses cash flow. The purpose of your cash flow budget is to track and project the cash inflows and cash outflows over a specific period of time. Most businesses will track their cash flow on a monthly basis, but it is not uncommon to see daily or weekly projections. The first step is to determine how far in the future you should be forecasting. As you know from creating your Profit and Loss Budget, projecting your future sales and expenses can be tricky because of the many uncertainties and unforeseen events that exist. The general rule of thumb is to budget your business’ cash flow for 6 months in advance. This provides the business owner time to look into the future and plan for future events.

Follow the steps listed below and you will have a cash flow budget for your business in no time.

  1. Prepare a Profit and Loss Budget (also known as a Sales Forecast).
    The easiest way to do this is to use your previous year’s financial statements and budget from there. If this is the first year you are in business it will be a little trickier, but not impossible. Research your industry, your competition, and economic factors and create a profit and loss budget for your business.

  2. Forecast Your Cash Inflows
    Working from your Profit and Loss Budget, determine how much money you plan to collect each month based on your monthly invoices. Pay special attention to your billing terms. If your invoices are due in 30 days, but your customers typically take 45 days to pay, use this time frame for your cash flow budget. This means January invoices will most likely be collected in March, not in February. If you offer discounts for customers paying early and three-quarters of your customers take advantage of these discounts, make sure to use these figures on your cash flow budget. For example, a 5% discount if the invoice is paid in full in 10 days, results in a receipt amount of $95.

  3. Forecast Your Cash Outflows
    Again, working from your Profit and Loss Budget, look at your expenses and enter them on your cash flow budget. Think about other cash disbursements that might affect the months you are budgeting for as well. Figure out what expenses will be paid and when. Some items to consider are rent, payroll, leases, office supplies, insurance, fixed asset purchases, etc. Don’t include your non-cash expenses (depreciation and amortization). Even though they show up as an expense on your income statement, they are not cash outflows.

  4. Cash Inflows – Cash Outflows = Net Cash Flow
    Now you have the tools to start managing and predicting your company’s cash flow. You can predict when your cash flows will be positive and also forecast for gaps in your cash flow (cash outflows exceed your cash inflows). This allows you to plan for the future and make any necessary arrangements or adjustments before you find yourself in cash flow troubles.

Here’s a great Cash Flow Budget Template courtesy of the U.S. Small Business Administration (www.sba.gov).

Next week I will give you tips on how to effectively use your cash flow budget, things to watch for, and how to plan for future events.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


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