I often open my workshops with the question: “How many of you started your business to keep the accounting records?” Funny thing; no one ever raises her or his hand. Can it be that people start a business to engage their passion and serve customers?
Last week at the Whole World Workshop for health and wellness practitioners, I got the usual response to that question. No hands, but several chuckles. At that point, everyone was relaxed and ready for my presentation about Finance Fundamentals.
My presentation focused on four essentials for a healthy business:
- Separate Business and Personal Finances
The risks of commingling funds are a negative impact on your personal credit and cash flow and an inability to get a clear, isolated view of business finances. It’s never too early to open a separate business bank account, one for each separate and distinct business. Also, apply for a business credit card to help with payments and cash flow.
- Keep Up-to-Date Accounting Records
Keeping up-to-date records means you always know your financial situation. Separate accounting records should be kept for each business to substantiate income and expenses. No particular record keeping method is required – accounting package or spreadsheets – to capture the date, amount, business purpose, and income/expense type.
- Develop Budget and Cash Flow
Use income from existing sales and vendor contracts, leases, and historical data to develop an annual budget. Identify operating expenses by category. Remember seasonal and one-time items. Include plans for investment and growth. Project cash flow needs for 12-to-18 months based on when payments are due to make sure bills are covered.
- Track Financial Performance
Prepare and review a monthly bank reconciliation, income statement (i.e., P & L) and balance sheet. Compare actuals with budgeted income and expenses to identify where your plans need adjusting. Assess cash flow inflows and outflows to make sure you keep enough funds on-hand to meet expense obligations.
Maintaining a healthy business means keeping it “alive” and ready to deliver its products or services. The four essentials described above are as good as “an apple a day” to keep your business in good financial health.
Anything you meant to do before Labor Day, but didn’t? Was one of those things checking your tax withholdings to avoid a nasty surprise when you file your 2016 tax returns? This year, more than before, it’s important to consider a mid-year tax withholding checkup.
Early tax filers who traditionally depend on getting their tax refunds early in the filing season could be disappointed in 2017. Several new factors implemented by the Internal Revenue Service to reduce identity theft and increase refund fraud protections could delay tax refunds, so it’s even more important than ever to perform a mid-year tax withholding checkup.
So what is changing?
- A new law effective in 2017 requires the IRS to hold refunds until at least February 15 for tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). The IRS holds the entire refund to provide time to detect and prevent refund fraud, not just even the portion associated with the EITC and ACTC.
- The IRS and state tax administrators continue to strengthen identity theft and refund fraud protections which means some tax returns could face additional review time next year to protect against fraud.
As in the past, the IRS will begin accepting and processing tax returns once the filing season begins. The IRS says that in spite of the new law and steps to prevent refund fraud, most refunds will still be issued within the normal 21-day timeframe after being accepted for processing.
All these changes mean it’s even more essential to check on your tax withholding and plan ahead for next tax season. It’s your personal choice whether you want to have extra money withheld to get a bigger tax refund. It’s great to know how long you’ll have to wait for that big refund “pay day.”
If you don’t have the right tools, jobs take longer and don’t turn out well. Those jobs often need fixing or re-doing later. It’s the same with people. Trying to get a job done without qualified, experienced people costs your organization more money and aggravation in the long run.
Think that lower compensation saves money? Think your budget isn’t big enough to invest in the people you really need? Think about it this way: What does it cost not to invest in knowledgeable and experienced people?
Organizations are exposed to five risks by not investing in the right people:
- Limited Capacity
People without the necessary skills require more supervision and are less familiar with the latest practices, systems, laws, and other areas. To grow or to stay competitive, organizations need people that keep up with changing conditions and new methods.
Unqualified hires often result in higher turnover. Hiring and training takes time. Vacancies put stress on the rest of your team. Time and stress are not expense items on your financial statement, but those costs are real.
- Higher Error Rate
Unqualified employees make more errors, which is time-consuming and expensive to correct. And that assumes the errors are detected; undetected errors create costs you cannot identify.
Experienced people know what to do and how to it because they’ve seen it before. They assess new situations quickly and accurately. Inexperienced people take more time because they are figuring it out as they go.
- Regulatory or Legal Compliance Issues
Employees who are unaware of compliance issues can harm the organization, increase costs, and tarnish reputations. Issues can range from industry-specific issues to general business concerns, such as taxes and payroll.
Getting the right people on your team isn’t easy, but it’s impossible if you don’t pay enough to attract and retain them. Considering the five risks of not investing in the right people can reduce the expense of making a cheap decision.
After month of looking, you found your dream job! It’s everything you’ve always wanted. Only problem is that it’s located about 500 miles away. Moving is expensive. You heard somewhere that moving expenses are tax deductible. Is that true?
Moving expenses can be tax deductible for “reasonable” transportation, storage, and other relocation costs, other than meals. But the deduction is only allowed under specific circumstances when you experience a job-related home move.
Answering three important questions will help you determine whether your moving expenses are eligible income tax deductions:
Is the Move for Work or Business?
To be considered a deductible expense, your move must correspond with the timing and location of starting a new job or business. Moving expenses that are incurred within one year of starting that new job or business can be considered for the deduction, assuming other tests are satisfied.
Is New Work 50+ Miles from your Old Home?
Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.
Did You Work Enough Post-Move?
Also known as the “time test,” employees must work for 39 or more weeks during the 12-month post-move period to take advantage of the moving expense deduction. Entrepreneurs and owners must engage in their business for 39 or more weeks during the 12-month period.
The distance and time tests rules do not apply if you are a member of the Armed Forces and your move was due to a military order and permanent change of station. To claim moving deductions, file IRS Form 3903. Want more info? Check it out at http://bit.ly/2ca0HlW.