Tag Archives: home-based entrepreneurs

Who’s Managing Who? Lassoing The Runaways

Sooo, how do you keep your finances organized? Shall I expect your reply to include a sour look and an attempt to change the subject real fast? Many would rather be stuck in a huge traffic jam or go sit in the dentist’s chair rather than think about organizing their finances. But the truth is, if your costs, both business and personal, are running amok… then perhaps you might be throwing money to the wild, or down the drain.

Have you ever been surprised by that pesky late fee, then again, and again in rapid succession? Have you ever complained to the credit card companies that you never received the bill, only to find months later it had fallen behind the desk?

The cost of disorganization is not only financial, it can waste time and take a toll on our mood (and the unknowing around us). Consider how much replacing lost tools, recreating lost files, or time putting out fires costs your business. And there’s more… consider the losses involved with forgetting to send invoices to customers, paying for overtime labor and dealing with employee turnover. Disorganization costs money and could lead to measurable losses in profitability. It is time to stop the stampede, break in and bridle!

The good news is that it only takes 5 simple steps to help lasso in your business costs. You probably already have heard of that nasty “B” word, budgeting?

  1. Figure out your monthly net income (if it fluctuates, take the previous 12 months divided by 12 for the estimated monthly)
  2. Figure your monthly fixed expenses (rent, utilities, lease, insurance etc.)
  3. Figure variable expenses – commodities that don’t have a fixed price tag each month (office supplies, groceries, repairs and maintenance, meals and entertainment etc.)
  4. Figure a monthly contingency or reserve expense for the unexpected (trust me the unexpected is inevitable)
  5. Review the budget versus actuals monthly and fine tune your numbers

Your budget is a very useful tool to help plan for near and far range, and be able to go the distance. You might think you lack the time to organize your expenses, however, a few hours of organization with a professional accountant/bookkeeper, could spur you on towards being knee deep in clover sooner than later.

Make today be the day for changing horses. Decide to run free and keep up with the finances monthly yourself, contract a professional to saddle up on a regular basis, and/or occassionally opt for a bookkeeping/accounting audit to know that you are on the right track. The important thing is to corral the dark days.

Run for the roses.  Unwrap your Daily Double by Contacting Us Here and sending a message.

Small Business Accounting Pitfalls

There are so many things to keep in mind when you own a small business. Details ranging from inventory to order fulfillment are just the baseline concerns. If you’re a brick and mortar business, your overhead includes a lease, utilities, and maybe additional employees. If you run an online business, your overhead includes the cost of parking your domain somewhere, maybe an email management system. Regardless of whatever kind of business you own, though, you will have to make sure your books are in order.

Keep it separated.

It’s true that you will spend money out-of-pocket to start your business. You’ll also most likely spend out-of-pocket to bolster up your business in the first few years. Until you start turning a profit, pretty much everything you have will go into the business.

In spite of what seems like an endless flow of your personal cash into supporting your business, though, you should still keep your personal finances and your business finances separate. Creating a separate business checking account is a good way to compartmentalize and organize your business. Not only is good accounting policy, it’s also a way to help you mentally compartmentalize and look at your business in a critical and objective way.

Anyone who starts a business has to have passion and drive. Without it, there’s little point to making all the necessary sacrifices. But the truth is, it’s just not enough to be passionate about your business idea. You have to be able to look at the business and make decisions as objectively as possible.

Keeping it as separate from your personal finances as possible is a solid first step towards helping yourself do this.

Pay attention to the kind of business credit you get.

Depending on the kind of business you started, you might need seed money to build inventory, or to float your overhead for the first few months — or longer. There are all kinds of options and all kinds of institutions that might be able to help you., from banks to credit unions to even crowd sourcing. Be sure you pick the one that’s right for you; and, if you can, at all costs, try to avoid seeding your business using a credit card. If you find yourself unable to pay it back, it could seriously hurt your chances to access other kinds of funding.

Keep it organized.

Disorganized record keeping is the death knell of small business. If you’re forward thinking enough, you already set how to organize and store your important records. But even if you didn’t think about that in the beginning, it’s not too late to start now. Take the time to go back through your records and organize them. Yes, it’s a pain. Yes, it takes time, which is a commodity that’s already in short supply. Yes, it means some headaches, depending on how long you’ve put off going through and organizing your records.

But it will be worth it. And, it’s also a good lesson for you that will have more good returns than bad.

Update your books on a regular basis… more than just monthly.

You are the heart and soul of your business. But your books are the blood and bones. Keeping your books up-to-date isn’t the sexiest way to spend an evening; but it will give you the confidence you need to make objective decisions.

It may seem like updating your books monthly would be enough, and it may well be enough for a well-established business. If you’re just starting out, however, the ebb and flow of your business isn’t all that stable. The more you put your eyes on your books, the better chances you have to succeed later. It’s not enough to keep your receipts. Add them in weekly, or even bi-weekly. Keep an eye on your receivables and sales. If your business has heavy overhead, it’s even more important that you update your books regularly.

Don’t confuse sales with profits.

You’ve made a few sales, satisfied a few clients, and gotten a few more. Good for you! But if you’re just starting out, be sure to remember that sales aren’t profits. You don’t get to call it profit until after you take out business expenses – if for no other reason than to take pressure off your personal pocketbook – and quarterly or annual taxes.

It’s good to be passionate and important to be excited about your business. But don’t start trying to roll around in profits before they actually start rolling in.

Don’t be afraid to consult a professional.

It’s okay to admit you’re over your head in certain aspects of your business. That doesn’t mean you have to throw in the towel. A smart business owner knows it’s important to sometimes find someone who knows a little more about some aspect of the business. Because in the end, owning a successful business is as much about learning and evolving as it is relying on common sense.

To LLC or not to LLC: that is the question

Being an artist or working in a creative industry as a freelancer isn’t always easy. Unless you’re fortunate enough to find steady clients and gigs, you feel like your professional life is forever going in a circle of feast and famine.  And, if you have worked as an artist of a creative freelancer, you know that being talented at what you do isn’t enough. That myth of the carefree artist with his head in the clouds and no notion of how the business world works is simply that – a myth. Being a great artist goes hand-in-hand with being a savvy businessperson, because as much as you love your art, you need to eat and keep the lights on, too.

One thing every entrepreneur thinks about eventually is whether to operate as a Sole Proprietorship or to form a Limited Liability Corporation (LLC).

In most cases, you’re probably going to start with and stay with a Sole Proprietorship. This is the easiest business to start because there isn’t much set up required. Although you may be required to get a business license, there isn’t any paperwork you need file unless you choose to “Do Business As” (DBA) a name besides your own. You may also want to consider going ahead and applying for an EIN (Employer Identification Number. While it’s not necessary for a Sole Proprietorship, it will help protect your social security number. It also legitimizes that what you are doing is more than a hobby. You report your earnings annually and you are responsible for paying self-employment taxes as well as covering contributions to Social Security and Medicare.

If you’re fine with all of that, and you’re careful with your accounting practices, then you will probably want to form a Sole Proprietorship.

Keep in mind though, that if your business should ever be sued, then you are personally liable for everything. And if you should lose, your house, your property, and other assets will be at risk.

Forming an LLC takes some legwork, preparation, and money. After you chose a name and make sure it’s not already being used, it’s time to file articles of corporation. Depending on the state you live in, expect to pay between $100 and $800. In Kentucky if you forgo the ease of having someone else do the heavy lifting for you, it will only cost you a $49 fee paid to the State Treasurer to file your articles of corporation.

Some states also require an operating agreement that outlines how your business is run; Kentucky, however, does not. You’ll then need to get an EIN (Employer Identification Number), which is free and can be obtained online at the IRS website. Keep in mind though, that you can only register for one EIN at a time. At this point, you can separate your personal and business assets. This is the main advantage for forming an LLC as an artist or freelancer.

Finally, you’ll need to register for state tax and unemployment insurance. Even if you happen to be your only “employee” you will still need to do these things in order to be in compliance of state law.

Depending on the nature of your work, forming an LLC might be overkill. Many artists and members in what is termed the “creative class” keep it simple. And, unless the kind of work you do expands to the point that you need to bring in extra help, you will want to seriously consider keeping your work life as least complicated as possible.

If you’re reading this and your business or business concept doesn’t fall under the umbrella of the “gig economy” or you don’t identify as part of “the creative class,” keep in mind that every entrepreneur has to make the decision at some point whether to operate as a Sole Proprietorship or as an LLC.

Marbles and monkeys: tracking your hours and expenses

Even though Richard Florida’s 2004 brain child, “the creative class”,  has come under fire in the last few years, many cities trying to redefine themselves in the wake of an increasingly dominant technological economy have still spent considerable time and capital trying to accommodate young urban creatives – freelance writers, graphic designers, computer programmers, artists, and media workers, as well as people working in healthcare, business and finance, the legal sector, and education.  As a matter of fact, a 2010 report predicted 40% of American workers will be earning their living as part of the “gig economy” by 2020.

 The next few blog posts will be focusing on accounting issues and challenges that face entrepreneurs whose work falls under the category of “the creative class” in a “gig economy.”

So either you’ve been sucked in by allure of being your own boss or you’re unable to find a single, stable job in your chosen career field. Now here you are. You are part of the gig economy. You have several clients with rotating deadlines, or you have a slew of single-project clients.  You get to work from home. You get to work in your pajamas. Sometimes you can grab your laptop and go to your favorite coffee shop and work. You might even be able to work from the beach! You have more control over your schedule than your parents did. And it’s awesome being your own boss.

But unlike the days of The Organization Man, you also have to shoulder the responsibility for tracking your hours and being more aware of your expenses. Even though sources like Forbes Magazine and Investopedia praise the gig economy and the idea of a mobile creative class, you know there’s a large part of your job that isn’t creative even if it is mobile.

Depending on the client, you will charge for your time differently: by the hour, by the project, or even by the word if you are a copy editor/copy writer. There are a lot of marbles to keep track of when you work for yourself. Different hours worked on different projects on any given day. Different hourly rates for different clients. Record keeping is essential. If you’re good with spreadsheets, that’s helpful. If not, consider finding some accounting software, cloud accounting, or — if you have a large enough client base – find an accountant to take the guess work out.

Not only do you want to keep a precise record of your work hours so you can bill your clients correctly, you also want to keep track of any taxes you will be required to pay. Why? Because now you’re now your own boss, without anyone in human resources or payroll to arrange for deductions. You are responsible for making sure Uncle Sam gets his cut. With all the joys and challenges of being your own boss in the “gig economy,” you don’t want that big angry monkey on your back weighing down your success.

Help your accountant, help yourself: a few tips for home-based entrepreneurs

 

A 2013 article from Small Business Trends stated that 69% of entrepreneurs in the United States start their businesses at home. This makes perfect sense. Many new businesses are in part or entirely operated online. As people buy more and more goods and services online, there’s less need to take the expensive risk of investing in a brick and mortar business. Moreover, if you know what you’re doing, you can help yourself – and your accountant – come tax season.

Although it takes additional time and a few extra steps, you can really help yourself by understanding the upside of claiming a deduction.

First if all, you know need to know what you can and can’t deduct. It’s a good idea to check with the IRS regularly to see if these things change, but here are a few things you can deduct.

The cost of a home office

In order for this deduction to pass any potential audit, you need to make sure the space you call your home office is a separate space or separated and dedicated space in your home. It doesn’t have to be its own room, but it can’t be a multipurpose space, either. For example, many people use an empty additional bedroom as a home office. Others have a separate studio or redesigned barn they use for a home office. If you are using a corner of your basement, that’s fine, too. Your home office doesn’t have to have four walls and a door.

But you can’t set up computer desk in the corner of a guest bedroom or nursery and call it your home office. The key here is that it must be a regular and exclusive space you use to run your business.

You must also be able to show that your office is the principle place of your business. Even if you meet clients other places, you need to be able to show that you do the majority of your work in your home office.

Keep in mind that the IRS only allows up to 300 square feet. But they do allow for $5 for every square foot up to 300.

Technology and technology purposes

It’ll be a hard sell to convince anyone that if you have one computer that you are only using it for business purposes. If you do that, though, you can deduct the cost of depreciation.

If you decide to purchase a dedicated business computer, you can write the cost of it off. After that, you can write off the cost of depreciation. You can even deduct based on the percentage of use. TurboTax is very helpful with this.

You can also write off the cost of a dedicated phone, whether it’s a cell or landline.

It’s worth the hassle

When you’re starting a new business, whether you operate it out of your home or not, every penny counts. Staying on top of and taking advantage of tax laws can help turn a slow first year into a much better second year.

The most important thing to keep in mind is that keeping track of all your expenses, and keeping all of your business receipts will make it easier in your end of year accounting and tax preparation. You will save yourself and your accounant time, money, and headache down the road.

Find hidden profits

  1. Review Balance Sheet and Income Statements (P &) at least quarterly if not more.
  2. Reconcile Bank accounts monthly.
  3. Bank at more than one financial institution to develop a relationship that may help you when you need a loan.
  4. Hire a Bookkeeper to help you part time so you can focus on growing your business.

MJB’s Bookkeeping Solutions assists businesses and individuals with their accounting needs. Services include but are not limited to installation, setting up chart of accounts, training, and troubleshooting problems. We understand the challenges of owning a business, and are ready to connect you to the answer for all your business questions.

Contact us at 805-764-1MJB or 502-309-9MJB,  follow us on Twitter and Like Us on Facebook.

Pay your CPA less by using QuickBooks daily

New to Business?  There is no need to be afraid of finances, QuickBooks is user friendly.  MJB’s Bookkeeping Solutions can teach you how install QuickBooks for your business and how to use it.  Every Company file has a chart of accounts that may include the following:  your bank accounts; credit card accounts; asset accounts like land and building; equity accounts for investors; various income accounts such as sales, interest, reimbursements;  and expense accounts for whatever you need to track for your business.

The Item List is your collection of services, product offered, any tracked inventory items, discounts, payments, subtotals, or misc. charges you use to create invoices, receipts, purchase orders etc.

You can set up your regular Customer and Vendor information, create invoices, enter bills, and manage daily transactions easy as a download from your bank.  If you have any questions about QuickBooks, simply Contact Me or make an appointment day!

Why Bookkeepers are no longer just keeping Books

Times continue to be challenging, and Individuals and Businesses alike should be paying attention to where they allocate their resources.

Are you paying more for Bookkeeping than you need to in belt tightening times?
Take a minute to contact MJB’s Bookkeeping Solutions and make an appointment today, for a clearer economic path.