Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts in category Entrepreneurs

How Much Does Your Employee Actually Cost?

Cubical Espionage

Are you are considering adding another member to your team? If so, do you think your employee will only cost you the $15/hour you plan to pay? Think again. Most business owners are surprised to learn that on average an employee will actually cost 25%-40% above their wages/salary amount. As you think about hiring your next employee, here are some additional employment costs to keep in mind.


Payroll Taxes


In addition to paying your employee their wages/salary, business owners are also responsible for paying employment taxes. On average, these employment taxes cost employers about 15% of an employee’s wages. Business owners are responsible for paying Social Security, Medicare, Federal & State Unemployment Insurance Tax, Workman’s Compensation Insurance, local payroll taxes, etc. These employment taxes happen to cost the employer about an additional 15% of the employees wages. Therefore, an employee making $15/hour will cost the employer about $17-$18/hour.
**Payroll tax figures subject to change**


Paid Time Off


To be a competitive employer, business owners also have to look at offering their employees paid time off benefits. These benefits can include vacation, sick leave, personal time off, paid holidays, and paid breaks (as required by local & federal employment laws). The cost of these benefits typically depends on the employees’ wages/salary, the size of the business, the company’s geographical location, and the industry standard.


Health Insurance


Most employees expect to receive health insurance benefits from their employers. It’s a wonderful benefit to offer employees, but can add a hefty price tag to the employer. Business owners need to consider the monthly premiums paid for their employees’ health insurance benefits. Some employers pay 100% of the monthly premium, while other employers pass along a portion of the cost to the employees. With the new Obamacare laws starting to take effect, these numbers could be even higher for businesses in the future.


Retirement Savings Benefit


Another consideration is whether or not you offer employees retirement savings plans or pensions, such as Simple IRA or 401(k). These retirement benefits are funded by both the employee and the employer. Typically, the employer offers to match the employee’s contribution, up to a certain percentage. On average, the employer contribution costs businesses 3-6% of the employee’s salary/wages. This does not keep in mind the cost of managing the retirement plan.


Overhead Costs


If that’s not enough, there are also additional overhead costs employers must consider when hiring an employee…

  • Work Space – computer, desk, chair, phone line, phone equipment, office space, etc.
  • Office Supplies – pens, paper, printer toner, whiteout, post it notes, etc.
  • New Hire Training – teach them how to do the job and work expectations.
  • Human Resources Department – hire additional employees to handle the hiring & firing, creating employment forms, drafting employment handbooks, and to keep up with the changing employment laws.
  • Payroll Processing – hire payroll processor to generate checks, calculate tax deductions, submit payroll tax deposits to government agencies, filing payroll tax forms, W-2’s, direct deposit fees, etc.
  • Insurance – Workman’s Comp Insurance, licensing & bonding, and other general business insurance.
  • Miscellaneous – uniforms, tools, protective gear, cell phone, computer servers, health club memberships, etc.

With all this in mind, an employee hired at an annual salary of $35,000, will cost the employer at least $45,500, if not more in the additional costs discussed above. Or based on the example above, an employee paid an hourly wage of $15/hour, will cost the employer at least $20/hour, if not more. When you decide to hire an employee, it’s important to keep in mind and budget for these additional hidden costs.

Helpful Resource:
IRS – Publication 15, Employer’s Tax Guide

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

Michelle Edwards, CPA 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 Virtual CFO 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, home brewing, quilting, and hanging out with her family.


Top 7 Tips to be a Successful Entrepreneur

The Key to Entrepreneurial Success

Let’s face it, being an entrepreneur is tough. It’s a risky endeavor, but comes with the dream of big rewards. Below are seven tips to be a successful entrepreneur. I can’t guarantee your success, but I can help steer you in the right direction. The rest is up to you!


1. Get the Cash Flowing


We all know that cash is king. Without cash flow, your business will not be successful. The first step to generating income is to sell a product or service that people want to purchase. Entrepreneurs are known for being dreamers and trying to sell their new big ideas. However, if there’s no market for your product or service, you will not be able to generate the cash flow your business needs to survive.


2. You Need a Profitable Business Model


Great, you have a product or service that people want to buy. Now it’s time to figure out a business model that works. Can you make a profit? Will the income you generate selling your product or service be more than the costs of running a business? If not, your business won’t survive for long. When running these projections, a good rule of thumb is to always overestimate your costs and underestimate your income.


3. Marketing is More Important than Mastering


You have a product or service that people want to buy and a successful business model. Now get out there and market yourself! I’m guilty of this one, spending too much time planning. Fear settles in and I spend lots of time trying to feel more qualified. Be confident, get out there, and sell your product. Funny thing, you actually learn more while you work on a customer’s engagement and interact with your clients. Not to mention, this helps get the cash flowing sooner than later.


4. Spend Time on Revenue Generating Tasks


If you’re coming from Corporate America, you’re used to being paid for sitting at a desk from 9-5. Let’s face it, your paycheck was deposited into your bank account regardless of how much you created or the results of your work. Entrepreneurs need to change this mindset. Now, your paycheck is directly related to the value you add to your customers lives. Wasting Time = No Paycheck. You need to be focused and spend your time doing revenue generating tasks.


5. Continually Look For Ways to Keep Costs Low


You have your marketing strategy down, are closing more deals, and spending your time wisely doing revenue generating tasks. Congrats, you have cash is coming in the door. Don’t forget to keep track of where your money is going. Keep track of what you spend, where you spend it, and see if there are ways you can cut these costs. The more entrepreneurs make, the less frugal they tend to become. Keep in mind, the more money that goes out the door means less money in your pocket. So keep a close eye on those pennies!


6. Measure Your Results


Unless you measure and track the results, there is no way to tell if what you are doing is actually working. As business grows, you might add a new department, change your product line, try a new advertising campaign, etc. Did this new department increase your profit margin? Did the new product line help convert more leads to buyers? Did the new advertising campaign bring in new customers? Without tracking and measuring the results of these changes, you have no idea if these programs or strategies actually worked. Meaning you could be wasting money and not even know it. Or on the flip side, you could have stepped into a gold mine and not even know it!


7. Learn From Other Successful Entrepreneurs


Surround yourself with people who are where you want to be. No need to spend your time reinventing the wheel. You can learn from their mistakes and from their successes. Take that knowledge and move forward with your own business! Consider hiring a business coach or find a mentor. Find someone who has done what you want to do. They can give you tips and hold you accountable for your own goals.

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

Michelle Edwards, CPA 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 Virtual CFO 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, home brewing, quilting, and hanging out with her family.


Top 8 Things You Need to Do When Starting A Business

Starting A Business

Entrepreneurship is reaching record highs these days. A combination of people wanting to create their own destiny, people desiring a flexible schedule, and the unemployed that need to start working again fuels this entrepreneurship growth. If you are thinking about becoming an entrepreneur, here are the top 10 things you need to do when starting a business.

  1. Create a Business Plan
    Business plans are a great way to organize your ideas and put your dreams on paper. Business plans force you to evaluate every angle of your business, helping you decide whether or not your business ideas might work. Business plans help you research your competition, price your product, create a marketing strategy, generate a budget, and think about an exit strategy. They are also required if your business is going to need outside funding. Don’t get me wrong, a business plan will not guarantee success, but it will lead you in the right direction and will alert you to potential troubles once your business is up and running.

    Tip: a good business plan grows and changes with your business. Once your business is up and running, make a habit of reviewing your business plan on a monthly, quarterly, or annual basis. See if you are on track to reach your initial goals and update areas where you business took a different direction.

  2. Decide on a Business Structure
    You will need to decide the type of business entity you would like to create. Your business structure choices are: Sole Proprietorship, Limited Liability Company (LLC), Partnership, Corporation, or an S Corporation. Choosing a business structure is not a task to be taken lightly. It is important that you understand the pros and cons to each structure. Some structures offer better tax benefits, while others are much more simpler to operate. Some structures are better for individuals while other structures offer better benefits for business partners. The IRS has lots of information on their website about the various business structures. Individual states also have their own requirements and conditions for business structures. I advise you to contact your CPA to assist in helping you decide on a business structure that best fits your specific and unique needs.
  3. Employer Identification Number (EIN)
    Contact the IRS to obtain your EIN (Employer Identification Number). You will need to fill out Form SS-4, Application for Employer Identification Number, which can easily be done at IRS.gov. Even if you plan to operate as a sole proprietor, I recommend obtaining an EIN so you don’t have to use your Social Security Number on your business transactions.

    If you plan to hire employees, you will need to register with your state(s) to obtain an Employer Unemployment Insurance Tax ID and a state wage withholding ID. Check with your state’s Department of Labor and Department of Revenue for information about your state’s employer identification number requirements.

  4. Register Your Business with the State
    Corporations, s corps, limited liability companies (LLC), partnerships, sole proprietors, and non-profits need to be registered with the state(s) you plan to operate in. You can register your Trade Name and Doing Business As (DBA) with your State’s Secretary of State’s office as well.
  5. Sales and Use Tax License
    Businesses that sell products, goods, food, etc. need to apply for a sales tax license from the state(s) in which you plan to operate. Some states even tax services. You can check with the state’s Department of Revenue for specific information pertaining your individual business. Contrary to popular belief, internet businesses are required to collect and submit sales tax as well. With the state governments strapped for cash, many states are starting to enforce collection of sales tax on internet transactions. Sales tax can be a tricky subject and gets complicated quickly when nexus comes into place. I recommend you contact your CPA to help figuring out what state(s) your business is required to collect and submit sales tax.

    Use Tax – Depending on the state(s) and county(s) in which you live and/or operate a business, consumer use tax can be required to be paid by businesses and residents on purchases that were not taxed when purchased. Some examples include Internet, mail, and/or phone orders. Check with your CPA or your state to determine whether you owe use tax.

  6. Local Business License and Permits
    Many cities, towns, and counties require businesses to register and obtain general business licenses. In addition, building permits, liquor licenses, contractor licenses, professional licenses, home occupational licenses, special event permits, etc. may be required by your state, city, town, and/or county as well. Don’t forget to look into these additional licenses and permits to ensure your business is operating legally.
  7. Insurance
    Business insurance is a necessity to help protect you and your assets. In general, you will want to carry a general business liability insurance policy. If you have employees or hire subcontractors, you will also be required to carry a Workman’s Compensation Insurance policy. An insurance broker is a great resource and can help you get your business insurance set up.
  8. Set Up a Bookkeeping System
    As your business starts making and spending money, you will want to have a system in place to track your income, expenses, bills to be paid, receivables, loan payments, cash, etc. With today’s technology, there are several great and inexpensive bookkeeping software options available. Check out QuickBooks, Sage Peachtree, Outright, FreshBooks, and Wave Accounting.

Keep in mind this list of the top 8 things you need to do when starting a business is a general list. Every business is unique and has individual needs. Please consult with professional advisors regarding your individual business. Most importantly, have fun and enjoy your entrepreneurial adventure!

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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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