Don’t Try This At Home!

Today I read in the New York Post’s real estate section about Atelier, a building in Midtown that will let buyers put their down payment for their condo on a American Express credit card.

But they let him put his $90,000-plus down payment on his American Express card, which gave him all the bonus points he needed to fund his shopping spree. “That was quite shocking,” says Feliton. “When I was getting ready to write out the check, I was just joking around and said, ‘Can I put this on my card?’ They said yes. It worked out to a $1,000 gift certificate at Saks.”

How stupid is that?! Putting down payments for a condo or house is not smart. It is risky for both the seller of the building and the home buyer. The home buyer can mess up their credit if they cannot pay off the balance right way.

For the seller, there is the cash flow delay inherent with credit cards. A certified check is really “money in the bank”. Funds are immediate with a certified check. The seller could also be hit with credit card chargeback. Any credit card charge can be disputed. Plus, what if there is identity fraud by the potential “buyer”? The seller would have little or no recourse.

Bottom line, incentives are great but both parties (seller and buyer) have to look at the financial risk of using a credit card for a critical thing like buying your home.

Make A List and Check It Twice, Thrice

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You’re Only Lost if You Stop – MDPNY20070516, originally uploaded by mdpNY.

If you are getting organized for tax filing, don’t get stressed out! Keep it simple. Your money is coming out of four main places: business bank accounts, business credit cards, cash, or personal accounts.Make a list of what you need, then contact your bank to get if statements are missing. Here’s a basic checklist of what you need.

Bank Accounts: Collect bank statements from your business checking account from last year. You will need January 2008 if your December bank statement doesn’t include through December 31, 2007.

Credit Card: Gather all credit card statements business account from last year. You will need January 2008 if your December statement doesn’t include through December 31, 2007.

Cash Receipts: Unless you plan on returning something,only hold on to ones that are deductible expenses like taxi receipts. I personally try to pay for anything business-related via debit or credit card so those pesky little receipts don’t pile up.

Personal: If you made purchases or paid business expenses via a personal checking or personal credit card, then go through your statements and check off every business expense so that they can be included as deductible expenses.

Just Start New York

I am now the organizer of Just Start Meetup Group in New York City.

What’s Just Start?

A meetup of people who want to start a business, have been a business for a year and need a little help, or for people who specialize in providing services to small businesses.   Created by Intuit, this is a way for business owners to connect offline and share stories.

Our first meeting will be in March and will be about a fun subject, TAXES.  I have to figure a date and venue this week.

Web 2 Point Dough: Green, Sprout, Sort

Wind Powered: After writing about Con Edison Green Solutions that Little Cupcake Bake Shop uses, I wanted to provide a link in case other small businesses want to learn about it.

Filtered: Check out the Sproutwire (Beta) which is a new site that cherry picks rather than just aggregates small business news for you.

Sorted: Freelance Switch gives 5 great tips on how to prepare for your accountant. Sorting receipts is important, since I have had to sort personal from business receipts for clients before, and sometimes I don’t want to know how much money you spend at J.Crew. 🙂

Crocs!


Crocs in Parma, originally uploaded by Zé Eduardo….

When I read this morning that shares of Crocs have fallen about 10%, I secretly cheered in my seat on the subway. I am not a fan of the rubber shoes on anyone other than a chef or a five year old. [Some six years old make great fashion choices.]

Immediately I thought the Crocs fad was fading, but to the contrary, sales last quarter were great. In fact, sales at the end of 2007 were up nearly 84% due to international sales. [The Italians love Crocs.]

So what gives?! The people at Crocs say that there margins were affected by unexpected demand which caused high shipping costs.

How does this affect you, Mr. or Miss Small Business Owner? Well, it is a reminder to manage your shipping and delivery costs and price your products and/shipping fees accordingly. With postage costs going up and gasoline prices rising, it can be quite costly because it may cost more to ship which can cut into your profit margin.

If you have a product that sells very well overseas, then you may want to consider working with a company that help you. It can be a consignment deal or a warehouser that can get product directly to your customers cheaply.

Also, Crocs may have simply missed the mark because they totally underestimated demand. This is when too much of a good thing can be bad. How can you anticipate demand? Look at the trends. If sales have been steadily going up and at a fast pace, then profit projections need to be re-evaluated.

Married Filing Jointly Or Married Filing Separately

Today, I met with a client and her husband to work on setting up Quickbooks. Since they have a business together, but also do freelance work, I needed to figure out whether it was necessary to set up a separate Quickbooks file for each. That got me thinking about how married couples should file their taxes.

Taxes more than love will keep us together, or not. For income taxes, should you file married jointly or married separately? With most things in life, it depends. The objective is that you want to get the biggest tax benefit, so you have to evaluate which method is best. You will have to look how much income each of you made during the year, who incurred the most deductible expenses and maybe what state you live in.

Usually married filing jointly can yield a tax savings, particularly where the spouses have different income levels. If you have children it is almost always better to file jointly since you take full advantage of adoption expense credits and dependent child credits.

Filing separately may be good if you a lot medical expenses and itemized deductions. If you are doing taxes yourself, I suggest running the numbers through TurboTax both ways to see which one is best. Keep in mind the business deductions on your schedule C as well.

Reminder: 54 Days to April 15.

Web 2 Point Dough: Call, Insure, and Pop

Catching Calls: At the Small Biz Technology conference, I met a representative from GotVMail which is a great virtual phone system solution for entrepreneurs and freelancers.

Getting Insurance:  Shifting Careers has a great round-up of health insurance options for freelancers and small business people.

Mainlining:  Check out new blog, MainStreet, which is a mix of pop culture and money.

Struggling At Tax Time? You May Have Broader Organizational issues

Here’s an excellent reason to hire me…

 clipped from www.mercurynews.com

For the time-pressed or disorganized owner, the solution is to get some help.

“Just outsource the bookkeeping function,” said Jeffrey Berdahl, a certified public accountant with Berdahl & Co. in Center Valley, Pa. “There are a lot of competent bookkeepers out there that you can trust.”

Many business owners will shy away from the expense of hiring a bookkeeper or bookkeeping service, although as Berdahl pointed out, it’s much cheaper than hiring an accountant. And, if a company’s books are in chaos or the owner finds there isn’t enough cash to pay the government, the business could be losing more money than it would cost to get some outside help.

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7 Ways To Finance A Startup And How To Record It Your Books

Today I found this article on CNNMoney about ways to finance a startup. Though the ways of financing is familiar, I would guess that many entrepreneurs don’t know how to record this accurately in the books. It could be classified as an aset, investment, owner’s equity or loan.

Here are the seven ways, and I will explain how to classify in your business’ Chart of Accounts.

1. Bootstrapping. That is simply using your own money to finance the business. You can account for this by classifying this as an equity account and calling it Owner’s Investment. However, if you “loan” the business funds periodically by paying for expenses that you want to be reimburse for, then you should also add a liability account called “What The Business Owes Me“.

2. Friends and Family. This could be a loan or investment depending on the agreement you set with your people. It is good policy to have this designated in writing with the terms for repayment or if the person have an equity stake in your business. If this indeed is a loan, the accounting for this to set up a liability account called Friend/Family Loan. If it an investment, then set up an equity account for this and called Friend/Family Investment. Then you also would want to set up a corresponding Friend/Family Draw account to note payment of profits back to them.

3. Banks. Classify as a loan. Depending on the terms it is either a current or long term liability. If it is actually a credit card as oppose to a line of credit, then set it up as such.

4. Grants. If you are diligent and lucky enough to receive a grant, then it is a boon to your business. Classify it as an asset and tell your friends. Grant awards are great publicity!

5. Angels and 6. Venture capital. The accounting is similar for both (an equity account for the investment.) However, the difference is whether Angel Investor or Venture Capitalist is a partner or member of your business and how is profit/capital gains paid to them.

7. Customers and suppliers. This can be a bit tricky. Are you customers/client merely referring new business to you or are they official partners in your business? If it just a referral, then an agreement should be drawn to specify the percentage of the referred sale your customer/supplier brings to the business. Classify the sale as referral/commission income and the payout as a commission expense. If you customer/supplier is more like a business partner, then you have to determine what their role is and what is their member or partner draw. That has to be clearly described in contract terms.