Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts in category Human Resources

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.


Small Business Health Care Tax Credits

Small Business Health Care Tax Credit

Did you know that your small business could be eligible to receive tax credits for offering health insurance benefits to your employees? The Small Business Health Care Affordability Tax Credits are made possible by the Affordable Care Act passed in 2010. Hopefully your tax preparer checked to see if your small business qualified for the tax credit in 2010. If you missed out in 2010, there are more opportunities to earn the tax credit through 2013. It was estimated that about 4 million small businesses would qualify for the health care tax credit in 2010.

History
The Small Business Health Care Tax Credits were created to help small businesses and small tax-exempt organizations offer health insurance benefits to their employees. The credit is designed to encourage small businesses to offer health benefits for the first time or to help them maintain the current benefit plans they already have in place. The credit specifically targets small employers that employ low-income and moderate-income workers.

Amount of the Tax Credit

  • 2010 – 2013:
    • Small Businesses: Eligible employers can receive a tax credit of up to 35% of the business’ annual health insurance premium costs.
    • Tax-Exempt Organizations: Eligible tax-exempt organizations can receive a tax credit of up to 25% of the organization’s annual health insurance premium costs.
  • 2014 – Beyond:
    • Small Businesses: Eligible employers who purchase insurance through the new Health Insurance Exchanges can receive a tax credit for 2 years of up to 50% of the business’ annual health insurance premium costs.
    • Tax-Exempt Organizations: Eligible tax-exempt organizations that purchase insurance through the new Health Insurance Exchanges can can receive a tax credit for 2 years of up to 35% of the organization’s annual health insurance premium costs.
  • Phase Out: The tax credits phase out when your small business employs between 10-25 full time employees and when you pay your employees average annual wages between $25,000-$50,000.

Employer Eligibility Rules

  • Employ fewer than 25 full time employees
  • Pay average annual wages below $50,000
  • Employer must cover at least 50% of the cost of the health insurance premiums
  • Both for profit businesses (taxable) and non-taxable organizations can be eligible
  • Household Employers may also qualify for the tax credit in 2010-2013.

Receive the Tax Credit
To calculate your small business or tax-exempt organization’s health insurance tax credit, fill out Form 8941, Credit for Small Employer Health Insurance Premiums. Then you will include the tax credit on your annual business tax return.

Resources
The White House Health Reform Information Center
IRS – Health Insurance Tax Credit FAQ’s
IRS Form 8941

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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.


Health Care Reform and Your Small Business

Health Care Reform and Small Business
Small businesses are trying to figure out what the health care reform (the Patient Protection and Affordable Care Act) means for their business. Watching the news and reading articles online, I get confused to! Is it better to start implementing some of these health care reform changes to our small business benefits plan or should we wait until the dust settles and things become more clear? A handful of States are taking the health care reform to court. Some district courts have ruled the individual mandate is not legal while other district courts have ruled the reform laws are constitutional. What does this mean for small businesses? What should entrepreneurs and small businesses owners do?

I recommend implementing the newest changes that are already in affect. These are minor changes in coverage and will ensure your small business benefit plan is up-to-date and in compliance with current laws. Make sure your small business benefit plan has been updated to:

  • Extend coverage for employee’s children, up to the age of 26.
  • Eliminate certain lifetime dollar limits on essential benefits.
  • Eliminate certain annual limits.
  • Eliminate coverage for nonprescription over-the-counter drugs through flexible spending accounts (FSA’s).
  • Check with your accountant and/or CPA to see if your small business qualifies for the Small Business Health Care Tax Credits.

A majority of the other health reform laws go into affect in 2014. Therefore, your small business has plenty of time to implement the future benefit changes. Not to mention, a lot can change between now and 2014.

Resources:
whitehouse.gov

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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.


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.


Snow Day! Are Employers Required to Pay Employees for Snow Days?

I originally wrote this blog post for CafeTax. Since it’s a common question with the winter weather we’ve been experiencing, I wanted to share it with all of you as well.

Snow Day! Employers Obligation to Pay Employees for Snow DayIn the past few weeks, the US has felt the affects of winter. Blizzards, ice storms, and dangerously cold temps have forced schools and businesses to close. Many employers are asking – Am I required to pay my employees for “snow days”?

Federal and state laws determine how employees are paid when businesses close due to inclement weather. The Fair Labor Standards Act (FLSA) from the Department of Labor sets the federal employment pay laws. Every state is different, so make sure to check with your state(s) to see if they have any additional inclement weather laws.

Exempt Employees (Salary)
According to the FLSA, exempt employees are in a bona fide executive, administrative, or professional capacity and paid on a salary basis, not less than $455 per week. Some computer employees also fall under this exemption. To qualify for exemption, employees must meet specific criteria regarding their job duties and are typically paid on a salary basis. Keep in mind, job titles do not determine exempt status.

When it comes to snow day pay, it depends whether or not the employer closes the office. If the business remains open and the employee voluntarily chooses not to come to work because of the dangerous conditions, then the employer may deduct a full day of pay from the exempt employee. Employers are only allowed to deduct a full day’s worth of pay. Therefore, if the employee takes 1 1/2 days off due to the weather, the employer must pay a full day of wages for the 1/2 day worked and may deduct 1 day’s worth of pay for the full day of work the employee voluntarily missed.

When the employer closes the office due to the inclement weather, then under federal law, the employer is required to pay the exempt employee their regular salary for the day. The federal law clearly states no deductions can be made if exempt employees are “ready, willing and able to work,” but there just happens to be no work available.

Non-exempt Employees (Hourly)
Non-exempt employees are generally paid on an hourly basis and are subject to the minimum wage and overtime time pay requirements set forth in the FLSA. Employers are only required to pay non-exempt employees for the actual hours in which they perform work. Therefore, regardless of whether the office is open or closed during the inclement weather, employers are not required to pay non-exempt employees for the hours the non-exempt employee did not work.

Paid Time Off
The FLSA and Department of Labor do not require paid time off. Therefore, the employer can choose to have their exempt and non-exempt employees use their accrued paid time off for “snow days.” Keep in mind, if an exempt employee does not have enough paid time off to cover the snow day, the employer is still responsible for paying the full days worth of salary to the exempt employee.

Inclement Weather Policy
I recommend businesses create a written inclement weather policy. The policy should clearly state how employees will be compensated for “snow days” and if the employee is expected to use accrued paid time off in the event of a “snow day.” The inclement weather policy should be written, reviewed by the employer’s legal counsel, and be well communicated with the employees.

Keep in mind that laws, company policy, and what employees think is fair do not always match. To help keep happy employees, remind your employees of the company’s inclement weather policy and talk about it when bad weather is forecasted. Open and honest communication with your employees helps make snow days as easy as possible.

Resources:
Opinion Letter FLSA2005-41
Opinion Letter FLSA2005-46
Department of Labor’s Model Basis Salary Policy

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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.


Colorado Minimum Wage Increase Effective Jan 1, 2011

Effective January 1, 2011 Colorado’s Minimum Wage is increasing to $7.36/hour.

The Federal Minimum Wage will remain at $7.25/hour. Since Colorado’s minimum wage rate will be higher, effective January 1, 2011, Colorado employers will be required to pay employees at the Colorado minimum wage rate (employers are required to pay the higher rate if the state & federal minimum wage rates are different).


Click Here
to get a copy of the updated Colorado employment poster Colorado employers are required to post.

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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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