The Thin Line Between Personal Finance And Small Business Bookkeeping

Over a month ago, I was asked to write an article about Wesabe, Geezeo and Mint for an online site. I wrote my piece, but the editor gave notes that required more work including actual journalism (fact checking and writing more than one paragraph). I am much better blogger and than a writer, so it is kinda hard to me to do that efficiently without agonizing every word. [I suck.] Anyway, I found this article about personal finance sites and it covers some of the same material that I would have done. The information is very valuable for both personal finance and for small business bookkeeping. It got me thinking that the two should not be strictly separated. Never commingle personal funds with business funds but realize the your personal expenses affects your businesses expenses and vice versa. I give my bookkeeping clients advice on how to manage and organize personal and business finances for one big reason—All of this information will probably be reported on ONE tax form, a 1040 with a Schedule C.

The new Web 2.0 tools are great for start-ups and are user-friendly for any household. CEOs of Geezeo, Mint, and Wesabe would love it if everyone would use their tools for managing bank accounts as small as $100 and as big as $100K.

Shoeboxed In

The other day I got an email from Julian at Shoeboxed is a Web 2.0 site where you can organize receipts for purchases. You can scan receipts and upload them into a Free account. Since other personal finance sites don’t really have functionality for entering cash receipts, this site is pretty helpful.

The other cool thing is you can give online stores you “shoebox email” instead of your personal email address when sending receipts for purchases. A lot of my clients have envelopes full of cash receipts so this may be a solution.

Retirement Accounts For The Self-Employed

WorkHappy is another cool site that I stumbled upon, and this post about retirement options is good since some of my clients are look for a way to put aside money for retirement which is great for reducing taxable income.

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  • Simplified Employee Pension IRA (SEP-IRA)
    You qualify if you do a Schedule C or F or guaranteed payments from a partnership. You can set one up with the same folks who do ROTH or traditional IRAs, and you can contribute 20% of your net earnings minus self employment tax or $45,000 (for 2007), whichever is less.
  • The Solo 401K
    You qualify only if you have no employees. Finding a broker that offers it might be tricky (try Fidelity or T. Rowe Price), but you can contribute up to $15,500 plus 20% of your business income, with a maximum contribution of $45,000 in 2007.
  • The Simple IRAthis one is for your employees too.
    You can offer it if you have less than 100 employees and you don’t have another retirement plan (403(b) or SEP). You can contribute up to $21K for yourself.
  • The Keogh
    This one is a mess, good grief. But – you can put in up to $180,000 if you structure it right.

And finally – a nice matrix to help you compare, sort it all out and find your best option.

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Calculate This: Financial Calculators That Help You Analyze Business Operations

I actually stumbled upon this link, and there are so many calculators (100) that I suggest reviewing the ones that are most applicable and critical to your business. Cash Flow is a good one!



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Business Operations

Don’t get caught off guard by the unexpected financial pitfalls of owning a business. Keep one step ahead with these useful business calculators.

  1. Break Even Analysis: Figure out how much you’re going to need to sell with your business just to break even. This can be helpful in creating a starting point for your sales goals.
  2. Business Valuation: Whether you are just curious, or want to sell your business, this calculator can help you determine the value. Just enter your cash flow and your expenses to get an estimate.
  3. Working Capital Needs: Find out what your business will need to keep going with this helpful calculator. It will take into account your short-term monetary obligations and figure out how much capital you’ll need so you won’t fall short.

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End Of The Year Bookkeeping Checklist

The end of the year is upon us, and it is time to get organized with your accounting records. If you talk to your CPA, he/she would highly recommend getting on a robust accounting system for your business. Leave the Excel spreadsheets alone!

This is not an exhaustive list, but an outline of what you need to
prepare for the end of the year

Enter final transactions for the year   

  • Review tax form (1040-Schedule C) from prior year and compare to this year’s expenses
  • Enter ALL cash receipts for business expenses (taxis, business meals,subway, train)
  • Reconcile all your accounts and enter any missing transactions
  • Work on reducing receivables (Follow up with clients/customers to get paid)
  • Write-off bad debt if necessary, but work on getting paid first
  • Make SEP IRA  or 401K contributions and donations to charity to reduce taxable income
  • Make all asset depreciation entries (only applicable for equipment that you had put on a depreciation schedule)

Organize: Make Life Easier on Your CPA and Understand What Happened During The Year

  • Organize receipts and statements for expenses that will be itemized on your Schedule C/1040
  • Review your budget and compare actual to budget which will help develop 2008 budget
  • Inquire from your CPA as to what reports and documentation is needed for tax preparation
  • Ask if year-end reports should be on a cash basis or
    accrual basis
  • Print out a copy of general ledger
  • Back up the Quickbooks file in case of any data loss
  • Send a copy of your Income Statement and Balance Sheet to your accountant at the end year to get an idea what your taxes will be in March 15 (quarterly tax payment) and/or April (personal income tax deadline

Employee/Independent Contractors

  • Order 1099-MISC forms (Independent Contractors)  and W-2 forms (Payroll Employees) early. The forms are much cheaper if buy at Staples then via Quickbooks.
  • Get Independent Contractors and Employees current mailing address, SSN and the total payments made to them for the year.

Putting On My Publicist Hat

In addition to bookkeeping, I am a freelance publicist and my clients have included artists, authors, bloggers and start-ups. Lately I have gotten several queries about publicity and everyone wants to know how much is it going to cost them. My answer is that it depends on your goals. Some clients want publicity for an event, but some want ongoing services which may include a developing a publicity strategy, creating press releases, developing media list, and organizing press clips. Before even thinking about procuring services, keep this tips from Zable Fisher Public Relations in mind.

  1. Set aside fund for a publicity budget. Generally, you may want to set 2-10% of your projected gross sales for the next 12 months, but a start-up firm may want to spend way more to get into the market.
  2. Have a clearly defined target market, that includes everything from geography, to gender, income or revenue and more. Your P.R. activities should focus on reaching your target market. [Your target market should be already defined in your business plan]
  3. Know where your referrals come from.Your P.R. activities should also focus on reaching your referral sources. Always ask a new client how did they find you, and thank the referrer if you know them. Gratitude pays!

Selecting A CPA Means Doing Your Homework

My favorite clients are actually the ones who ask a lot of questions, but also respect my knowledge and experience. Many have asked me to refer a CPA to them, but it is hard to do that since each clients has different needs. Some people really want a tax preparer. Some want a financial advisor and some want a budget manager or all of the above. I advise to figure what they need and seek out a CPA who offers a free initial consultation.

The excerpt from the blog below shows how you can do some research before interviewing CPA. NOTE: Do you homework before hiring any service provider.



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So here is how I suggest you select a CPA. Find a few areas of the tax related to your business and read everything you can on it. Look up the topic on the IRS website, read anything you can find about it in the library, browse the local books store tax section and read the pages dedicated to your selected topic. It doesn’t matter if you come to a full understanding of your particular topic, but you need to be familiar with many of the issues and exceptions.

When you sit down with a prospective CPA, give them enough background about your situation and setup and then ask them questions about the topics you’ve researched. Don’t tell them you’ve done extensive research on the topics. You should be able to tell enough from their answers if they will be a good match for you.

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Keith Ferrazzi’s Tip 95: Don’t Undervalue Yourself

Keith Ferrazzi is the author of one my favorite business/personal development books, Never Eat Alone. On his blog, he has success tips and this latest tip is great one about valuing yourself, your brand.

Generosity and working for free when you’re first changing careers is one thing; undervaluing yourself is another. If you’re an entrepreneur and you keep offering services without charge in a well-meaning but misguided attempt to raise business, you are telling people that your time is worth zero. If you give away your expertise for too long, people will value you at the price they are paying. The same goes for employees who want and deserve raises. Bust your butt and show your boss that the market value of your work is higher than your current salary. Now you should continue to be generous by offering extraordinary value for the dollar. But you can be deeply generous and able to pay the rent.