5 Ways to Get Organized for Tax Season

     This is a great, simple list to help you get started on organizing for tax season!  You may think you have lots of time between then and now, but once January hits, that's when your time starts flying.  This offers great advice on how to work with your accountant (hint #3) as well as plan ahead for your business by looking back.



5 Ways to Get Organized for Tax Season
Start getting organized now in order to minimize the headache of filing.

Tax season officially runs from January 1 through April 15. But calendar deadlines are deceptive. Face it: Tax preparation is a 12-month activity requiring discipline, organization and data, according to accountants and professional organizers.

Fortunately, it’s never too late or too early to set up a system for tracking tax records, receipts and other paper work. Here are five tips for organizing your taxes.

1. Mental exercise: Tax preparation begins with mental preparation. “The first place to organize is our minds,” said Rivka Gerecht Caroline, a professional organizer with So Be Organized. Make a tax date by marking your calendar with specific times for starting the process. Build momentum by establishing a schedule for organizing records.

If you feel overwhelmed, break the process down into small steps, said Standolyn Robertson, past president of the National Association of Professional Organizers and owner of Things In Place. And remember to book time for a mental vacation, with reserved space for a hobby, sports event or a spa date as a reward for completing the process. This tax incentive will help you override procrastination, Caroline said.

2. Set up a system: Tax records can be collected in a variety of files, ranging from a shoe box to one of several electronic filing systems, Robertson said. Whether you select low-tech or high-tech tax preparation tools, it’s important to maintain a system for storing receipts and other paperwork.

“At the first of every year, set up a large envelope or folder titled with the ‘current year’ and start accumulating tax-related income and expense information during the year as you go along,” said Carol Sokolow, a certified public accountant based in Miami. Key documents include receipts and credit card slips for business expenses, major purchases, charitable donations and other notable transactions.

“Then at tax time throw all year-end statements in the same envelope or folder. You will be ready to prepare the return or meet with your tax preparer. Organizing will not be such a daunting task at tax time,” Sokolow said.

3. Do your homework: Get the most out of tax consultation sessions by doing your own grunt work. “You should use your accountant to prepare your taxes, not organize your paper work,” Robertson said. To make the process painless, she recommends sorting through receipts and other paper work while watching television or listening to music.

[Visit the U.S. News My Money blog for the best money advice from around the web.]

4. Review the past: Use past tax returns as guides for the current tax season. “Last year’s taxes can be a checklist of what to look for this year,” Robertson said. If you hire a tax professional or a bookkeeper, request a checklist or a packet of tax preparation tips. There are also several places online where you can download tax preparation checklists.

5. Check your credit score: Prepare for a tax refund or a tax bill by requesting a copy of your credit report. A review of your credit history will help you set priorities for paying down debt and improving your credit score, said John Branham, a spokesman for TransUnion Interactive, a credit report service. “Understanding their credit situation now can help consumers create a plan to best use their refund or prepare to pay their tax bill,” Branham said.

Sharon Harvey-Rosenberg is a member of Wise Bread’s top personal finance blog network. She is the author of "Frugal Duchess: How to Live Well and Save Money” and a contributing author to ”10,001 Ways to Live Large on a Small Budget.”

To view the original article visit USNews.com.

NOTICE: Not Official Government Form, Possible Email Phishing

Recently I have been made aware of an email going around asking for personal information that is NOT an official government document.  It is a 2016 Annual Records Solicitation Form, you may receive it if you are on certain mailing lists such as the Virginia Council for Corporations email list.  I quickly got an email warning me of the validity of this email.  If you aren't sure whether or not the email forms you received are official or not, be sure to check with your accountant!  Here is an example below of a form you may receive:

Accounting Software for Your Growing Business

     It’s a great feeling to see your business grow!  It’s a not-so-great feeling trying to DIY the accounting for all that growth.  So, you got by with Excel at first, great work!  It’s good practice, and now you know what more you need from the accounting software you’re about to purchase!  You want to consider ease of use, “advanced” functionality, and the capability of the software to grow along with your business.  Buying cheaper software isn’t worth your time if you and your staff will have to re-learn a new program every six months to a year.  You also don’t want to waste money on a product with bells and whistles that you’ll never need.  Ultimately, a good resource to use when looking for accounting software is….your accountant!  They can help you decipher the options and are familiar with how fast you're growing and what your needs might be in the future.

     This article by Jacob Grana on Tech Radar really makes some points to start thinking about when you’re ready to buy new software for bookkeeping.  It gives you an outline of what tools accounting software can provide you with to make tasks more efficient.  It’s a great read for anyone who is newly looking or dissatisfied with their current software!


Small Business Accounting Software: everything you need to know

It's finally here. The problem you've dreamed of having. The problem your jealous business school friends, your nay-saying family, and your competitors wish you didn't have. The problem your mentor calls "good."

Your small business has become too successful to continue accounting with Excel.

Congratulations on your problem. You need accounting software.

Choosing the right software isn't easy, especially for a small business. Accounting software is like marriage: it (usually) lasts forever. So it has to be a match for your business not only today, but in sickness and in health, and most importantly, as your business grows older.

Here are 4 tips to help you find "the one" accounting software your small business needs.

Accounting software
1. Look in the proverbial mirror and make a list

Arguably the most important, if mundane, tip is list your small business's accounting needs. Most owners have a general idea of what they want, but if you want to minimize cost then a specific list is key. Otherwise you end up paying for features you don't need.

Not sure where to start? First, pick the low-hanging fruit.

Take all the functions you are already doing with Excel/graph paper/post-it notes and put them at the top of your list. Things like invoices, inventory, and income and expense tracking. Then ask yourself who accesses, or will need to access, this information. (Sales staff, the bookkeeper, the accountant?) Check off the number of seats your new accounting software will need to support.

Now your list has its basic framework. And if you're a very small business who just needs the "basic framework" then stop here. Software like Wave or Zoho Books is probably the best fit for you.

But if not, it's time to determine what "advanced" features you'll need out of your accounting software. Use these three questions as a guideline:

What functions will help save time on employee management? What functions will help save time on customer relations? What applications and processes will the accounting software need to integrate with?

Let's go question by question.

Employee Management

Payroll, sick, personal and vacation day tracking are the most common employee management tasks a small business handles. Small businesses with significant head-counts should research dedicated human resources management tools and/or payroll processing services for these tasks, but for very small businesses, an add-on to their accounting software, like Deputy or Intuit QuickBooks Payroll, might be all that's needed.

Base your decision on the value such time-saving will generate for your business. Could the time spent on employee management be instead used to generate more revenue? If so, tasks like payroll should go on your list.

Customer Relations

Customers will take note of your sales and delivery strategy, but they will remember forever how you present your bill. How you manage your accounting procedures says a lot about how you manage your customers.

Your new accounting software must maintain the goodwill you've worked so hard to build with your customers – and help you get paid faster too.

Do you want to generate invoices for customers right at the point-of-sale, wherever that may be? Then the phone-and-tablet functionality of FreshBooks might go on your list. Do customers want to pay without having to fill out repeat paperwork? Credit card processing with a program like Sage Payment Solutions should be explored. Are paper invoices getting lost in the mail? Consider an add-on like automatic recurring payments with InvoiceSherpa.

Evaluate each stage of your accounts receivable process, from purchase order to bank deposit, to see where software can clean up any inefficiencies. Cash flow is a top priority for a small business. You want accounting software to speed up payment, not slow it down.

Integration

Consider the applications you're already using to run your business. How would new accounting software integrate with those applications?

Maybe you're a retailer that needs its point-of-sale system to instantly give sales and inventory updates to accounting (Try Xero. It integrates with a ton of third party apps.) Maybe you're a direct sales organization that needs customer invoices to post directly into your CRM. (Yendo could be the all-in-one program you're looking for.) Or maybe you're any business that just wants its old Excel files to load without wingdings infiltrating the spreadsheets. (The industry giant, Intuit QuickBooks, loves Excel – it should be everyone's first demo.)

Whatever you are, save yourself the pulled-hairs and check compatibility before you make a decision.

2. Consult with professionals

Sure, you ignored the warnings from your parents when you married your long-time sweetheart, but with a software marriage, you can't afford to ignore those with experience.

If you have a bookkeeper, ask them for a recommendation. At the very least make sure your accounting staff is proficient with your software choice. After all, it's your money going to waste when your bookkeeper spends their workday googling "QuickBooks tutorial help!!!" instead of sending invoices.

Get your IT staff involved too. If you're going to keep accounting data storage and security in-house, your servers will have to be up to the task.

Accounting software
The most obvious, and critical, consultation is with your accountant or CPA firm. They are not only experienced with many of the platforms you're looking into, they are also deeply familiar with your business.

Ultimately you'll want a program your accountant is comfortable using. Why make the professional who's trying to keep you out of IRS hell miserable? Make sure they endorse your choice. If this isn't an aphorism, it should be: if you're accountant isn't happy, you're not happy.

A side-note: you may want to give your accountant year-round access to your software so they can head off any tax-angina. If so, online or cloud-ready capabilities are something you'll want to put on your software wish list.

3. Demo, demo, and demo again

You have your list and your professional recommendations. Now you need to get your feet wet – but in the shallow end of the pool. It's time to demo products.

Most products on the market offer free trials, and a couple of hours spent clicking around is incredibly useful. Use this time to check how intuitive the interface is, how well it jives with your work habits and task flow. Remember, you're getting married. You don't just want fancy features, you want to be able to talk to it on an average Thursday afternoon too.

Don't dismiss a curated demo. Yes, you'll probably have to listen to a sales rep point out features as breathlessly as a kindergartner with a new macaroni necklace. Put up with it so you can ask questions about everything on your list.

Support is often overlooked when choosing software, but as a small business you're more likely than most to need it. Ask if the vendor offers product training. Ask about the hours and breadth of their tech support. And don't forget to ask how much all that support costs.

If your small business has limited, or even non-existent IT, ask the vendor how your data is backed up and how they keep it safe. And how easy it is to recover all your files if your systems are damaged by an act of God (or man – or office cat.)

Most importantly, inquire about the product's scalability. Do you really want to go through this matching process again when you grow from small to medium to (fingers crossed) enterprise? Good software should grow with you.

4. Don't overbuy

This one's quick and dirty: remember all that time you spent on your list? Honor that effort and stick to your guns. Suspect anything that sparkles. The program that does what's on your list is the best program. As a small business, cost is key - you only want to pay for what you're going to use today. If the program is scalable (and it should be) then its bells and whistles will be there for you when you're ready.

Age-less pro-tip: Garbage In, Garbage Out

You did it. You made your list, you asked your accountant, you hounded a few sales reps and you didn't overbuy. Congratulations again. This time on your software marriage.

Want to stay out of divorce court? Develop good data-entry habits. Your new accounting software, for all its power, won't fix sloppy data-entry. Neither time nor money will be saved when you need a secret decoder ring to figure out your chart of accounts.

Hey, you can always stick with Excel.

For the full article by Jacob Grana on techradar.pro, click here.

Office Position Available

Job title:  Receptionist and Office Assistant

Reports to:   General Manager


Job purpose

We are looking for a receptionist and office assistant to interface with our clients and support

our accounting staff.  In addition, this position is responsible for client invoicing and payments.

The ideal candidate will be experienced in customer service and interaction.  This position is the

face and voice of the company, so this person MUST have the attributes and experience that

are required to manage client interactions and interface with staff to meet company goals.

Duties and responsibilities


Administration

 Greet and provide support to visitors

 Manage incoming calls, faxes, mail, and e-mails and distribute to staff

 Manage outgoing faxes and mail

 Manage office supply list and associated ordering

 File creation and filing

 Maintain general office organization

 Assist general manager with administrative tasks

 Create and manage production software, specifically with project creation


Accounts Receivable

 Create monthly, quarterly, and general invoices in QuickBooks and CRM

 Process recurring payments

 Process payments

 Client interaction, directed by general manager, for collection of payment


Production Assistance

 Scanning and copying for accountants

 Data entry during overflow periods


Qualifications

The ideal candidate will have many of these qualities.

 Reliable, prompt, and professional

 Comfort and skill working with clients that may be challenging at times

 Extremely organized

 Comfortable working with little oversight

 Willing to learn and perhaps improve on office practices


The ideal candidate will have these credentials.

 High school diploma or GED

 Proficiency in Microsoft Office (Outlook, Excel, & Word)

 Minimum of 3 years in customer service or equivalent

The ideal candidate will learn and grow in these areas

 Proficiency in Excel

 Proficiency in QuickBooks

 Proficiency in our contact and production management software


Working conditions

Our office is both professional and relaxed.  We are not a strictly hierarchical office, rather we

approach client service as a team, in which we all have different roles and responsibilities.

The office is located near the intersection of Parham and Patterson.  Beginning hours are

Monday through Thursday 9AM-1PM.  There is potential for increased hours and

responsibilities associated with this position.

Planning for the next stage of your growing business

     There are so many small businesses in RVA that are thriving and successful.  I thought this video was great to help those businesses in their next stage of growth and planning for the future.  That  it's highlighting the growth of a food truck business was icing on the cake considering our blossoming foodie scene here in Richmond.  It's all about cash flow and investing back into your own business. Oh, and don't forget to pay yourself!

Good Accounting Helps Make Sense of Growth

Starting a business is one thing.  Typically, you're going to be spending more than you're making— at first.  Then you see it grow.  People like what you’ve done, hooray!  You see sales are up and you start thinking growth.  But how? Which way?  How much?  It can all seem so unclear when you’re thinking about expanding while trying to keep up progress at the same time.  There’s one thing that can help make everything clear and it’s not magic— it’s good accounting.

I’ve written about ways to track growth and how good accounting can lead to smarter investments of your company’s money.  This article by Kangelon Dexter overviews those basic points by asking a few questions:

Can You Answer These Questions About Your Business?

When you’re growing your business, it’s a lot like being a race horse with blinders on. You’re focusing on the goal ahead, and not paying a lot of attention to what’s going on around you. It’s great to be hyper-focused in the short term, but eventually you’re going to need to take off your blinders and look around. Are you headed where you need to be? Do you know?

While you can’t predict the future, there are a lot of questions you can answer about your business with the right reporting. With built in reports, and business insights, Sage One can help you answer important questions and tell you exactly where you stand. Can you answer these important questions about your business?

How much are you *really* making?

Reviewing cash flow statements and assuring that you’re making money is important. But cash flow is only a piece of the picture. Profit and Loss statements are based on accruals, and will give you an overall picture of how your business is thriving – or not. Without it, you’re operating in the dark. Reviewing your profit and loss statement on a monthly basis will help you make important decisions about your business finances.

How much money will I be making – most likely?

This might be the closest thing you have to a crystal ball for your business – a cash flow forecast. This report estimates how much you will most likely bring in and how much you will most likely spend in the next set period of time. Using projected income and expenses, a cash flow report will help you predict any upcoming surpluses or shortages and plan accordingly.

Which clients are overdue on their invoices?

As a small business owner, you’re busy. You don’t have time to constantly follow up with clients who have overdue invoices. You need a clear way to see who owes you – and who is the most past due. An accounts receivable aging report breaks down unpaid invoices into 30 day chunks (typically) so you can see who is a month late and who has owed you for an entire season. It’s a simple way to get an at a glance view of who you need to follow up with.

For the full article featured on Sage, by Kangelon Dexter, click here.

E-Commerece & Inventory; calculate its true cost

This is a great article on e-commerce and how inventory can affect your expenses in unexpected ways.  This is for any small business owner, and especially speaks to the growing number of business owners who sell through sites like Etsy or Big Cartel.  Opportunity Cost is often overlooked, but this article by Michael Manzione outlines how to calculate the true cost of your inventory.


What's the True Cost of Inventory?

Inventory is often the largest asset of ecommerce merchants. Inventory defines merchants’ businesses and their position in the marketplace. It defines customers’ expectations of the business.

For most ecommerce merchants, the cost of inventory is the largest expense item and what leads to the most financial woes. There’s typically a direct correlation with inventory turns and company success. This seems obvious: You sell more, you turn more. However, even successful companies carry too much inventory and don’t fully recognize the financial impact.

In “SKU Management Ensures Inventory Profits,” my July article, I addressed SKU selection, answering the question: “Do I have the right item at the right margin?”

In this article, I expand the focus on profitability to managing the cost of inventory.

The true cost of inventory extends far beyond the inventory itself and the cost of goods sold. The cost of managing and maintaining inventory is a significant expense in its own right. But the true cost of inventory doesn’t even stop there. Inventory carrying costs add about 20 to 25 percent to the actual cost.

Understanding Inventory Carry Costs

To get a better understanding, one must measure the cost of carrying inventory. Let’s review some of the costs.

• Financing inventory. In its simplest form, you can calculate the cost of borrowing money to purchase inventory by looking at the interest rate payments. However, for some companies inventory financing may include part of a line of credit that is also used for working capital.

In many cases when you try to evaluate the real cost, this one line item may become daunting. But don’t be discouraged; come up with a best guess. It’s more critical to understand what is being financed externally versus internally to know what should be measured.

• Opportunity costs. This cost is almost always overlooked. For opportunity costs, we’re answering the question, “How else could I invest my money?” If it were invested in something else, what is the realistic return I can expect? If you’re unsure, default to the interest rate from a tax free municipal bond as a consistent and conservative way to apply this cost.

• Insurance and taxes. Many merchants overlook this cost, too. It should typically be a variable cost: It goes up and down with the amount of inventory you carry. Depending on the volume of your business and the swing in inventory, this number could be adjusted as frequently as every quarter.

If the inventory value is fairly consistent or if the value is small, don’t bother calculating this more than yearly. However, if you do have large swings from one season to another, any savings will go straight to the bottom line. Many companies today self-insure and keep a reserve to cover the associated risk. That reserve constitutes an additional opportunity cost that should be considered.

• Handling expenses. These expenses are made up mostly of wages and benefits, but also include lease payments and depreciation on material handling equipment, depreciation on automation, and miscellaneous expenses for supplies such as pallets, packaging, labeling materials, and the like.

• Warehouse overhead. The quickest way to measure this is to split the total expenses for rent, utilities, repairs and maintenance, and property taxes by the percentage of the building associated with processing customer orders.

Here is an example. Assume a merchant uses a third-party fulfillment company. The average rate for pallet space in the U.S. is $15.00 per month. For simplicity, assume 30 items occupy that space. The first month the merchant is paying $.50 per item. At the end of the second month, assume the merchant has 25 items left and therefore pays $.60 per item. So at the end of two months, the first 5 items cost the merchant $.50 each to store and by the end of the second month the remaining items costs $1.10 to store.

Therefore, the merchant’s margin shrinks each month that it carries this item. This is a simple example, but the way you are charged can vary. Many fulfillment companies —such as Fulfillment by Amazon — now charge more the longer the inventory sits.

• Inventory control and cycle counting. These expenses typically are comprised of wages and benefits, but may also include the depreciation or operating expenses of equipment, as well as any miscellaneous expenses directly related to your inventory control team.

• Inventory shrinkage, damage, and obsolescence. Accounting for these costs can become quite complicated. But for the sake of simplicity, capture these costs in the fiscal year they occurred or preferably in the same month.

Calculating Overall Carrying Cost

To determine your overall inventory carrying cost, roll up the components in each category annually and see how close you come to the 20 to 25 percent average. Don’t get bogged down with other aspects that should only be considered if you have a skilled accounting team. For example, in reality many of these carrying costs will vary by item, warehouse, product line, category, product size, and volume. You don’t have to get that detailed.

Here’s a example of how to calculate the overall carrying cost for a hypothetical item with a purchase cost of $10.00.

Purchase Cost of Item: $10.00

Financing: $.30
Opportunity Costs: $.50
Insurance and Taxes: $.10
Handling Expense: $.90
Warehouse Overhead: $.45
Inventory Control: $.12
Inventory Shrinkage, Damage, Obsolescence: $.10

True Cost: $12.47

Once you determine the true cost of inventory, you can better address how to evaluate and manage. You’ll also discover what inventory is essential and what is not. When you reduce inventory, not only are you freeing up capital, but you are also creating opportunities to reduce expenses, improve profitability, and increase cash flow.

It can be the difference between success and failure.

For the full article on Practicalecommerce.com, click here.

"Mental Accounting"

While this article has good advice for individuals, it is also food for thought for the small business owner.  Do you frivolously spend unexpected income, even if it's "for your business?"  Just because you have extra cash, doesn't mean that it has amnesty from your budget.  You'll be kicking yourself if you haven't saved enough for taxes, if your costs go up, or you don't have enough in your emergency fund.  Being aware of how you categorize your income is half the battle.

Behavioral Finance: Mental Accounting

The essence of successful financial planning is using your money to meet your life’s goals. In the process, one dollar is as good as another, but curiously our minds do not perceive it that way. We tend to fall prey to the fallacy that behavioral finance calls mental accounting, commonly known as the “two-pocket” theory of money. We treat money differently depending on its source.

It is as though we put earned income in one mental pocket and money we did not expect in another. Studies show we are much more willing to spend money impulsively out of this second pocket.

Our supposedly rational mind objects to mixing the money from the two different pockets. But our minds are tricking us because dollars are completely interchangeable.

To clarify, we are not talking about budgeting. Earmarking dollars for vacation, big-ticket purchases, house payments, college savings and toward retirement is clearly positive and very much encouraged. This type of positive mental accounting aligns perfectly with meeting your financial goals.

But the type of mental accounting that gets us in trouble is what happens when the way we acquired a dollar causes us to ignore our careful planning and spend it differently.

Imagine a university graduate student who budgets enough for rent and food and hopes to save $500 every month, but her take-home pay is only $1,500. Then she sells her textbooks at the end of the semester and finds herself with an extra $250. Rather than putting the additional $250 toward savings, she indulges in luxury items until she’s sure she has spent all the money.

Put yourself in this student’s situation. In your mind, it is as though you have $1,500 in one pocket where you put serious earned money and stick to your budget. In the other pocket, you put the $250, which you now regard as play money, and rationalize that you should only use it to make frivolous purchases.

Most of us find this tendency so strong and irresistible, we would all do well to find ways to forestall the impulsive spending that slows progress toward achieving our financial goals. Allocating your money to meet your needs and desires is an important step in the financial planning process. But first you must gather all the money available in a single pool and allocate it according to your family’s priorities. The source of the money shouldn’t matter. When it does, we cause ourselves unneeded harm.

Studies show that gamblers rarely leave the casino as winners. The reason is not simply because the house has an edge on every game. Mental accounting is also the problem. Gamblers consider their winnings as house money and reason that they can keep on gambling for free. So most gamblers only stop playing when they are losing.

Research has also revealed that when people receive money unexpectedly, they make impulse purchases, typically quite soon afterward. If the amount is significant, perhaps more than $10,000, they may spend 40% to 50% of their windfall. If the amount is small, such as $1,000, they may actually spend two and a half times more than they received.

This propensity is the hope behind the recent stimulus checks Americans received from the government. The rebate was designed to be a relatively small amount, $1,800 for a family of four. Even when people say they plan to use the rebate to pay down debt, they are already engaging in mental accounting, thinking of the money differently simply because of the source.

In polls, Americans claim they will spend only 18% to 40% of the rebate. But if we tracked their actual spending, mental accounting would have badly misled them.

Perhaps they will pay off some of their debt or put money into their 401(k). But most Americans will jump at the chance that they have some extra money to justify a purchase they would not otherwise have made. And they will probably do it more than once.

In fact, studies suggest that average consumers will spend an astonishing additional $4,500 in relatively small purchases simply because they received a $1,800 check: extra money on eating out, electronic toys, and large appliances. Children may be given their $300 as though it somehow belongs to them, and husbands and wives may rationalize using the money as an excuse to make that purchase their partner considers unnecessary. Past research supports the prediction that consumers will spend 250% of their rebate check without even realizing it.

Even the most rational of us who receive money this way spend more as a result. The psychology behind this thinking is so strong, we can safely assume we are all influenced by it.

Thus found money, the green stuff we do not earn or save, is easily spent, wasted, and risked. Most lottery winners are broke or worse within five years of their win. Unfortunately, winning encourages the worst tendencies of those with the temperament to play the lottery in the first place.

Although mental accounting is described as the two-pocket theory of money, I propose adding a third pocket. Earned income is linked to planned purchases in one pocket. Some money is gained unexpectedly and too often provokes impulse spending in the second. But in the third pocket, we could put automatic income, that is, money gained from investment interest, dividends and appreciation. Mental accounting often leaves this third pocket in an investment account to compound and appreciate, helping us reach our long-term goals.

You can’t spend apart from increasing your lifestyle. And when you increase your lifestyle, you increase by large multiples what you will need in retirement to support that lifestyle. Here’s a sobering fact: Every time you increase your spending by $1, you need $23 more in your investments when you retire.

If you get and spend an extra $1,000, you will need $23,000 more in retirement to support your increased lifestyle. You can spend your way into financial troubles, but you can never make your troubles worse by saving.

Another error of mental accounting is to differentiate between income and appreciation. If one stock trades at $100 per share paying a $6 dividend, it’s equivalent to another stock that pays no dividend whose share price rises from $100 to $106 per share. Some people mistakenly think the dividend-paying stock is better during retirement and the appreciating stock is better when you are younger.

Now there is a small distinction: The dividend-paying stock forces you to pay the capital gains rate on the dividend paid, whereas the appreciating stock allows you to defer the capital appreciation until later. But the difference in tax treatments doesn’t matter once you are retired. And it’s much less relevant now that qualified dividends are taxed the same as capital gains. In retirement you can simply sell appreciated stock and pay the capital gains to generate cash for withdrawals.

The real difference between dividend-paying stocks and appreciating stocks is in the type of company. A company with little growth potential, such as a utility, pays its profits out to shareholders in dividends. A different company, perhaps a restaurant with ambitions to open branches across the country, uses its profits to expand. As it does so, it generates more profits from more locations, which drives the share price up. Both types of companies provide portfolio returns that you can spend in retirement.

If you struggle with self-control, only taking the dividends allows you to limit your withdrawals. But it may also cause you to adjust your asset allocation to maximize dividends, putting all of your net worth in one type of investment.

The biggest mistake occurs when people believe they need interest and dividends to generate cash in retirement. As a result they put too great a percentage of their portfolio into fixed-income bonds and do not invest enough in stocks that will keep up with inflation and provide appreciation for the end of their retirement.

The source of your money, whether from interest, yield (dividends) or capital appreciation should not matter.

Part of the emotional push toward using a two-pocket theory of money may stem either from an effort to be disciplined or a failure to do so. In general, people both want to enjoy the money now and also plan for the future. This dilemma between a short-term and long-term focus requires a measure of discipline and willpower that most people don’t have. So they fudge by feeling guilty about using hard-earned money frivolously but fall prey to using easily received money quite carelessly.

There is an upside, however. You can use mental accounting to your advantage by using that third pocket of money and automating as much of your savings as possible. People tend not to count money that is automatically deducted from their paycheck as money they can spend. Increasing the amount you have withdrawn in your 401(k) or 403(b) account is an easy way to use the third pocket to your advantage.

It is also just as painless to have money transferred regularly from your checking account into an investment account. This automatic savings puts money into a mental accounting third pocket from which it is very difficult to spend emotionally. Add to this account any money you receive unexpectedly, and you will be well on the way to securing a successful retirement.

To read the full article by David John Marotta, click here.

Sales Tax Holiday August 7- 9

Recent legislation combined our 3 tax holidays into one big blowout weekend event!  That means qualifying items can be purchased all weekend long just in time for back to school shopping!  Not only can you get all the clothes, shoes and notebooks you need for the school year tax-free, you can also upgrade your home with qualifying Energy Star and WaterSense products.  

School Supplies, Clothing and Footwear:

• School supplies— $20 or less per item
• Clothing and footwear— $100 or less per item

Hurricane and Emergency Preparedness Items:

• Portable generators— $1,000 or less per item
• Gas powered chainsaws— $360 or less per item
• Chainsaw accessories— $60 or less per item
• Other specified hurricane preparedness items with a sales price of $60 or less per item.

Energy Star and WaterSense Items:

• Qualified Energy Star items include dishwashers, clothes washers air conditioners, ceiling fans, light bulbuls, dehumidifiers and refrigerators
• Qualifying WaterSense items include bathroom sink faucets, faucet accessories such as aerators and shower heads, toilets urinals and landscape irrigation controllers.

For more info on what is going to be tax-free this weekend, visit http://www.tax.virginia.gov/

Hardywood Park Brewery's Tax Dispute Finally Being Settled

     After disputing their tax bill since 2012, Hardywood and the City of Richmond are finally coming to a settlement.  Hardywood is an enormously successful brewery that got slapped with an unexpected tax bill that kept them in litigation until now.  Had they been a smaller business, would they have been able to afford to dispute their tax liability for this long?  

     Tax laws are constantly changing.  In order to protect your small business, it’s vital to be prepared for tax season.  With the third quarter tax due dates approaching, take advantage of my free one hour Quickbooks consultation and make an appointment today!

To read more about Hardywood’s tax dispute, read here. 

Free QuickBooks Consultation

Are you a small business trying to tackle daily operations on top of all the bookkeeping?  Make sure you're on the right track when balancing the ledger by scheduling an appointment with me!  I'll give you a free hour-long Quickbooks consultation to ensure your business is running as efficiently and your finances are healthy.  

Fourth Friday

     It’s not just First Fridays that’s a hot hangout anymore.  Fourth Friday is gaining popularity for art openings and the gay community, not necessarily in that order.  This Friday there is an art opening at Art Works gallery in Richmond’s South Side featuring an artist from Hampton, Virginia.

     If you still don’t know what you’re getting into this weekend, why not soak in some of Richmond’s great art culture and stop off for a cocktail at Fourth Friday, this month hosted by Graffiato’s.  They are providing an affordable specialty cocktail list and beer offerings just for us starting at 6:30.  Hope to see you there! 

Cash Flow Forecasting 101

     As every small-business owner knows, cash flow is so vitally important to the increased success of their company.  It allows the business to operate from day to day, paying vendors and employees to keep your service running smoothly.  It is also the key to growth.  Making investments at certain milestones in the life of your company cannot be done without cash.  There are loads of excuses for not getting handle on your cash flow, from time complaints to the forecast always being ‘inaccurate.’  But it remains, that the time you spend understanding your cash flow could be the most valuable investment of all.

     There is usually some degree of predictability based on industry norms.  Manage your cash flow based on these norms along the lines of your business model and prior operating history.  Making a forecast will help you be a better manager of the risks in growing your business.  This is can be especially tough for small-business owners, as they tend to not have as much cash “elbow room" on any given day.  You need to be able to predict expenses for the next 12 months, spot red flags in advance and have enough to stay afloat in financial storms.

     There is no one single plan, but rather 3 scenarios to outline when creating your cash flow forecast.  There are the (1)Best-case, (2)worst-case and (3)expected scenarios.  Identify the key factors that effect your business and their dynamics.  Sales cycles, competitors and reliability of products and services are a few of these variables.  You want to be proactive about handling any obstacles along the way, rather than constantly doing damage control.  You should be able to come up with a number for how much money your company will need in the next year to continue along your business plan, including when bills are due and when customers are expected to pay.

     Having a forecast will also help you achieve investment goals.  If you have major upcoming expenditures to grow your business, having a forecast will help you determine the best time to expand.  Your three scenarios should reflect three different bottom-line numbers.  You may not reach the exact goals, but creating these guidelines helps you make better decisions by understanding what you can and cannot afford. 

Accounting Advice from Big Business

     It’s hard doing everything for your small business, especially making time to sit down and do the books. Larger companies have an advantage in this area.  They have the capital to hire financial experts that manage their financial efficiency.  Here are 7 practices to borrow from bigger companies to manage your own business’s finances. 

1. Renegotiate your payment terms.  30 days is no longer the universal standard.  Extend your payment terms to 60 or 90 days.  Try to settle these terms beforehand, avoid breaking payment agreements.  However, if cash flow is a major issue, communicate with your vendor that you’re extending payment terms unilaterally by 15 days and stay within those terms.  Most vendors will be accepting of this.

2. Get paid upfront.  Larger companies aren’t known for extending credit to customers. As a small business owner, you deal with people on a more personal level in the day to day.  Just remember that credit is a privilege and extending it is risky for most everyone these days.  Make sure you accept credit cards, electronic transfers or electronic checks so there are no excuses for not making a payment up front. 

3. Follow up on invoices.  Larger companies most always have a follow-up plan after sending an invoice.  A call or an email to confirm your invoice was received and when payment is to be expected.  If the payment doesn’t arrive when scheduled, make another reminder call.  If you’re not necessarily good with keeping track of accounts, account apps can help with reminders for you.  Most people want to pay their bills on time, sometimes they can just get lost in the shuffle of everyday business.  Follow-up action almost always increases cash flow.

4. Extend your cash flow by paying with a credit card.  Paying an invoice with your company credit card when it is due (about 30 to 90 day) will give you an additional 30 days of cash flow.  This only works if the credit card bill is paid monthly and not used as a long-term loan.

5. Bill on time.  At minimum keep a monthly billing schedule.  This will help keep your cash flowing.  Don’t wait until the end of the month to bill, either.

6.  Move to a different state.  All states are not equal when it comes to corporate taxes.  Lots of larger companies move to states where these are the lowest.  The highest tax burdens are found in Tennessee, Arizona and Louisiana.

7. Careful accounting tricks.  With the advice of an accountant, you can learn some tax strategies that large corporations use.  

     — Treat certain operating costs as investments.

     — Change the depreciation policy.

     — Sell equipment like computers or machines (fixed assets) and recognize the income as normal sales.

     — Recognize the income of a long-term contract in one lump sum rather than when it will actually be realized. 

Small Business Checklist: 15 Accounting Tasks

     As the end of the year arrives, business owners should be thinking about their strategies for the upcoming year.  As your business grows from year to year it is important to track your finances to keep its growth successful and healthy!  Making a routine of tracking your finances can help you make more business savvy decisions when you have to make them, like where to cut costs or when to finally invest in that big money item.  Here's how to start making your accounting tasks part of your business routine.

Daily

1. Check cash position— Cash is the lifeblood of your company, keep it pumping so your business thrives.  Begin the day with an overlook of how much you have.  How much you expect in payments and how much you expect to spend is useful to keep in mind for the future as well.

Weekly

2. Record Transactions— Every one of them.

3. Document and file receipts— Best if scanned to a computer that sorts them automatically. Keep your statements, invoices and vendor files organized.

4. Review unpaid bills— Keep an “unpaid” folder to track of what you still owe.  If there are discounts to take advantage of for early payment and you have the cash on hand, do it.

5. Pay vendors— This is where technology becomes helpful.  Get reminders for upcoming payments due to avoid late fees, make automatic payments and keep copies of invoices.

6. Send invoices— Include payment terms (generally give a 30-day grace period).  If you don’t specify your due date, other businesses won’t prioritize paying you.

7. Review projected cash flow— So critical.  A realistic forecast of how much cash you need in the upcoming months will help you plan and maker better business decision on how to spend.

Monthly

8. Balance your checkbook.—  Reconcile your business' checking account.  It helps you discover inaccuracies and oversights by either you or the bank, so you can correct them quickly.

9. Review past due receivables— Separate “open” invoices with “overdue” ones.  Send outstanding reminders at the beginning of the month and to anyone else who owes money.  Keeping this column will help you determine what to send to collections or what to write off at the end of the year.

10. Review current monthly balance sheet vs. previous month— Determine whether or not there is significant up or down activity in managing your assets and liabilities.  Then set out to understand why.  Are you up because of increased sales or down because of unpaid invoices?  Determining the cause will light the way to resolving any problems.

Quarterly

11. Review payroll reports and make payments— You’ve been withholding income tax, social security, Medicare and disability taxes from your employee’s paychecks (usually semi-monthly).  The IRS and most states require quarterly estimated filing and payments.

12. Calculate estimated income tax and make payments— Review your year-to-date P&L statement to determine if your business is required to make estimated quarterly tax payments.  Your tax accountant can help you determine your status.

Annually

13. Review your inventory— Calculate the value of items not sold if your business has an inventory.  Write-down of inventory translates to tax deductions at year’s end.  Don’t pay additional taxes on unsellable inventory by overstating your inventory balance.

14. File taxes— Report the earnings of your full-time employees by filling out W-2 Forms.  Use 1099s for independent contractors you paid more than $600.  Mail out forms to your employees by the January 31 deadline.

15. Review and approve annual financial reports and tax returns— When it comes to filing taxes, accuracy is your responsibility.  Review annual reports carefully, if you've been keeping up all year, this won't prove too difficult.  

While this is by no means a comprehensive list of everything that pertains to your business, it is a guideline to hold your bookkeeping at bay throughout the year rather than the insurmountable chore playing "catch-up" can be.

Quarterly Tax Returns

     

     If you make quarterly tax payments, the due date for the 2nd quarter is fast approaching; June 15. There are a few possibilities that mean you are required to make quarterly tax returns.

1. Self-Employed sole proprietor filing Schedule C.  As part of your personal return, you may be required to make quarterly estimated income tax payments.  Use Form 1040-ES.  Your payments will be in compliance with the federal “pay as you go” system and will save you from any underpayment penalties that you may incur even if you pay the full balance by April 15.  These payments include federal income taxes as well as self-employment taxes.

2. Payroll taxes.  You must issue and withhold taxes from any employee paychecks.  You are given a certain timeframe to pay, usually using Form 941.  They must be paid one month after each quarter.  The next deadline coming up is July 31.

 

3. Some LLCs, S Corporations, partnerships.  If you’re performing services for your company, you are required to pay yourself “reasonable compensation.”  That means giving yourself a paycheck and filing payroll taxes.

     Make sure you’re in compliance before the next quarterly due date!   

Escape These 5 Common Retirement Pitfalls

If you’re already contributing to a 401(k) or other retirement account, superbly done!  Pat yourself on the back, because there’s one thing about saving for retirement— it’s easier the earlier you start. Making contributions regularly will certainly help fluff your retirement pillow, but few actually have a savings goal in mind.  Knowing where you’re headed is half the battle, along with avoiding these other common retirement pitfalls.

1. Not knowing how much you need to save.  Many people have not even considered the actual number they need to reach in order to live comfortably after retirement.  You can use an online calculator, or talk to a financial planner. The number, at first, may be overwhelming, but remember that you have compounding growth on your side.  Having a goal to reach may ignite a newfound passion to make regular contributions.

2.  Not knowing how much you spend.  To better understand a retirement budget, you’ll need have to have a grasp on your current budget.  If you don’t know how much your spending on a daily, weekly, or even monthly basis, you probably won’t know where your money is going in the future.  Start tracking your spending in order to come up with a plausible retirement budget.  Keep a meticulous record for a few months, then sit down and estimate which of those costs could fluctuate up or down in retirement.  Expenses for children will likely drop, along with your dry cleaning bill or commuting costs.  Big bills such as mortgages are likely to be paid off as well.  However, keep in mind the type of lifestyle you’d like to lead once retired.  More travel, more leisure costs, etc.

3.  Not accurately budgeting for health care.  Before the word “Medicare” falls from your lips, stop to think about what won’t necessarily be covered.  Most eye exams and dental care, as well as any long-term care, aren’t covered under Medicare.  There are tools you can use, such as AARP’s health care costs calculator, that will help you estimate out-of-pocket costs you might incur.  

4.  Guaranteeing losses by responding rashly to market fluctuations.   It’s easy to panic when the stock market takes a nose dive and change your mind to a safer bet.  However, if you respond to losses rashly, you won’t be around for the gains, either.  Converting some of your holdings to cash doesn’t provide growth.  The best way to protect yourself is by diversification.  Talk to an investment planner and they can help you further diversify your portfolio beyond just stocks, bonds, cash.

5.  Keeping your head in the sand about fees.  Many financial institutions charge fees for their 401(k)s.  Some charge flat fees, others percentages, but the bottom line is you need to know what you’re paying.  Until the financial planning industry wins it’s battle for transparency when it comes to fees like this, you may have to search the fine print.  Paying even a 2% can wind up being a huge chunk of your savings.  Typically fees up to 0.5% are considered reasonable.

Getting to your retirement goals isn’t rocket science, but it does require some careful planning. Educating yourself and knowing what to plan for will help you achieve the comfortable retirement you’ve worked so hard for. 

5 Ways to Keep Household Financial Documents Organized

Let’s face it, staying organized for most people is a pain in the butt, especially when it comes to bills, documents and records.  It’s hard to tell what you need to save or what’s superfluous in your record keeping.  Here’s how to keep it organized as it flows through your mailbox instead of just letting it stack up.

1.  Use your computer.  When it comes to documents that you can’t download via the internet, use a scanner and store what could be a giant stack of paperwork in one tiny folder on your hard drive.  Things like pay stubs or monthly credit card statements, medical bills, can all be scanned and saved to your computer.                                                                                                                                                                                                           

2.  Toss documents the safe way.  With identity theft being such a huge threat to millions of people a year, it’s time to invest in a shredder.  Costing a lot less than you realize (starting around $50), you could potentially save yourself thousands in losses from the careless tossing of personal documents.

3.  Not a shoebox, but a file.  Having your documents organized for tax time is so important.  Charitable donations and business expenses need to be documented and saved to reference come January.  Again, you can scan and save to your computer in a specialized file for just this purpose.  Lots of times you can use an app to scan receipts as well.

4.  Using a digital strategy to keep your paperwork at a minimum requires back up.  Make sure to save all of your documents to an external hard drive or flash drive depending on the size of your data. 

5.  Use old binders.  You can make them pretty, or just use some of last year’s school supplies.  Use these binders to keep around annual statements in case of an audit.  You don’t need your monthly statements.

You can find a way to make organizing easy for you.  The point is to review what you need to hold on to or let go on a somewhat regular basis, usually monthly or quarterly.  If your annual statement comes in, you can throw away the quarterly report.  Just make sure there is a secure place to keep passwords and account information in case you forget and communicate with your partner in the event they need access to the information. 

Put Your Plan Into Action (or Your Next Vacation!)

This month is all about budgeting.  You’ve done your taxes and got an unexpected bill and now you want to plan accordingly throughout the year.  Perhaps you’ve gotten a big return and want to spend it wisely.  Maybe this is just the year you’ve decided to get your finances on track and reach those long term goals you’ve been thinking about.  Either way, this month I’ll be sharing various tips and strategies to organize, budget and spend wisely.  Maybe you can use some of these methods to help you save for that relaxing summer vacation you were hoping to get around to this summer!

     Last week was all about the 50/20/30 strategy.  It’s just a simple guideline to make sure you have enough money to save and enough money to play, without going overboard on either!  Now that you’ve sat down and considered your budget, what’s coming in and what’s going out.  It’s time to start putting it to work!  Here’s a week by week checklist to help you implement your goals.

     Before the 1st of the Month

Set your budget goals by following the 50/30/20 rule.  Decide how much of your budget will go toward necessary expenses. Allocate the leftover budget to your goals, according to priority.  Remember, It is up to you to decide what goals that extra money will go towards.  How quickly would you like to build your emergency fund?  Was there a large purchase you were hoping to save for, like new living room furniture?  That’s the excitement of building your own budget.  They’re your goals, and you get to meet them in a financially responsible and sustainable way.

     Week 1

Follow your spending carefully the first week by downloading a financial tracking app or using your online banking tools.  The first week of following this budget is where you can find the spending that slips out from under you.  Perhaps your Starbuck’s tab is a little higher than you thought.  These things are fine, you can either decide to cut back to save a little extra money for other goals or work it into your “extras” category.  Don’t wait to fine tune the initial outline of your budget.

     Week 2

You’ve been super conservative the first week, trying not to go overboard on spending, and now you’re getting antsy.  Before you blow the rest of your play budget for the month think of the next big expense you have coming up.  For example: That vacation!  There’s no sense in blowing all your play money on new sunglasses, hat and bathing suit for a beach vacation you can’t afford anymore.  Setting aside a little money at a time will save you from the feast or famine financial conundrum so many people find themselves in.  Instead of shopping or eating out, spend that time researching your travel interests and figure out how to spend your well saved money on location!

     Week 3

Check in on your ratio goals.  Now that you’ve almost made it through the whole month, check back in to make sure you’re meeting your savings goals.  Have you made those transfers into savings automatic yet?  Sometimes you can focus so much on not spending, you forget about putting the extra away.  If it’s sheer willpower to not spend your extra dough, make those savings transfers right away so you don’t even see them!  Out of sight, out of mind, until Maui.

     Week 4

Congratulations!  You made it through the month.  Now check your monthly statement.  Did you fine tune your budget enough?  Make sure to adjust your goals for next month as well as reward yourself for your success!  Try that new restaurant you’ve been hearing about.  See, goal oriented budgeting isn’t so hard after all!

Take a sigh of relief and repeat.  

3 Habits to Improve Productivity

Most business owners when they first start out are excited to be their own boss.  They’ll be their own best boss ever!  When in reality, they wind up being their own slave driver because they’re passionate about what they do, and that’s what it takes to get things done.  Those days, weeks or even months of burning the midnight oil can take it's toll on anyone, and could actually be diminishing your productivity.  Keeping healthy and reasonable habits amid your demanding lifestyle could help make the most of your efforts and keep you sane in the process.

1. The early bird really does get the worm.

     Staying up late to get work done may seem like a good idea, sometimes it seems easier to stay up later than wake up earlier.  However, not all 8 hour time blocks are created equal.  Staying up late creates more obstacles to productivity, even biological reasons, like your body producing melatonin once the sun goes down to make you sleepy.  Waking up early gives you the advantage of mental clarity and energy for your work day.  Staring at a computer screen in the dark, or even worse, taking work to bed with you, interrupts your work AND your sleep so you don’t get good results from either.  Your brain needs it’s rest and recuperation time to be able to handle tomorrow’s tasks.  Unapologetically enforce your own bedtime.

2.  Straighten out your goals before meeting others'.

     How often do you wake up to missed phone calls, urgent emails and even before your coffee is done brewing, you have already jumped into work like yesterday never ended?  Take a moment for yourself to get off the phone call/email treadmill.  Take 10 deep, slow breaths or heck, light a candle and mediate, whatever it takes to get you focused on the goals YOU want to achieve for the day.  It may seem too simple to matter, but taking a moment for yourself is stress relieving which helps you better handle the day ahead.  Focusing your energy on specific goals you set for yourself also helps drive your day more productively rather than just reacting to what’s going on around you.  Take the wheel.

3.  A healthy mind starts with a healthy body.

     Everyone hates this one.  But the simple fact is that exercise consistently keeps you feeling great physically and emotionally while boosting your energy level.  Yes, it’s hard to tear yourself away from work, but at least 30 minutes a day isn’t that big of a sacrifice for the payoff you reliably get.  It keeps you balanced and energized and your brain functioning at top capacity.  An added bonus, it will most likely help you know when bedtime is as well.  

     Incorporating these things into your daily routine might be difficult at first.  The temptation to fall back into your long but only partially productive hours can seem easier, but only because you’ve been practicing bad habits for too long.  Think of your new habits as an investment in your business.  If you’re not doing well, how will your business thrive?