The Three Most Common Business Budgeting Errors

budgetingWhen it comes to creating a budget for your business, it’s essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small business owners and some tips for avoiding them.

1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.

2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.

3. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

If you would like to set up a budget for 2016 to help meet your business and financial goals, we can assist you by providing guidance. As a CPA, Accredited Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, Linda specializes in working with small business owners and provides tax, accounting, financial analysis, management, planning, and small business consulting services. She can help you to start, manage, and grow a successful small business. Call her today at (727) 391-7373 or else visit her on the web at http://www.LStortzCPA.com.

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Do You Know The Difference Between Employees and Independent Contractors ?

employeevsindependentAs a small business owner, if you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between employees and independent contractors.

Why It Matters
The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers’ compensation, or by Federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay Federal payroll taxes on amounts paid to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

The Difference Between Employees and Independent Contractors
Independent Contractors are individuals who contract with a business to perform a specific project or set of projects. You, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Sam Smith, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. He is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will receive $6,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. Sam Smith is an independent contractor.

Employees provide work in an ongoing, structured basis. In general, anyone who performs services for you is your employee if you can control what will be done and how it will be done. A worker is still considered an employee even when you give them freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Sally Jones is a salesperson employed on a full-time basis by Rob Robinson, an auto dealer. She works 6 days a week and is on duty in Rob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Rob. Rob also pays the cost of health insurance and group term life insurance for Sally. Sally Jones is an employee of Rob Robinson.

Independent Contractor Qualification Checklist
The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is though their means of categorizing workers as independent contractors are similar.

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS, which considers the following:

1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.

2. What training the employer gives the worker. Independent contractors generally do not receive training from an employer.

3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.

4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.

5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.

6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.

7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.

8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.

9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.

10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.

11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

Minimize the Risk of Misclassification
If you misclassify an employee as an independent contractor, you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or Federal authority. At a minimum, you should:

1. Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.

2. Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

If you have any questions about starting or managing your small business, or have questions about the differences between employees and independent contractors, please call our office today. As a CPA, Accredited Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, Linda specializes in working with small business owners and provides tax, accounting, financial analysis, management, planning, and small business advisory services. She can help you to start, manage, and grow a successful small business. Call her today at (727) 391-7373 or else visit her on the web at http://www.LStortzCPA.com.

Remember To Support Small Business Saturday

smallbusinesssaturdaySmall Business Saturday falls on the first Saturday after Thanksgiving – or as some know it – the recovery day after Black Friday. For 2015, Small Business Saturday is Saturday, November 28th. This day provides more mindful shoppers a way to enjoy Thanksgiving and then support the local business community two days later.

When Did Small Business Saturday Begin?
American Express launched Small Business Saturday in November, 2010 to help bring attention to smaller stores in communities and encourage shoppers to support local business instead of just megastores on Black Friday and Cyber Monday. By the next year, the day had become nationally supported and endorsed by local governments and the White House. In 2014, an estimated $14.3 billion was spent on Small Business Saturday, according to American Express.

Why Focus on Small Business Saturday?
Small Business Saturday is nestled in between the major shopping days of Black Friday and Cyber Monday – so it makes sense people (and their wallets) may want to take a break. It’s hard to believe local businesses can compete with deals from mega-sellers like Wal-Mart, Macy’s and Amazon. So why should a person embrace the shop small mentality?

The shop small local business movement is less about getting the best possible deal and more about supporting the local community. It helps keep local cafes and mom-and-pop delis from turning into Starbucks and Quiznos. It also keeps money in the local community.

In fact, according to the American Independent Business Alliance, 48 percent of the money spent on purchases at a local independent businesses is re-circulated locally, but less than 14 percent of purchases at chain stores stay within the community.

What If You Don’t Want To Face The Shopping Crowds?
Those who don’t live near local businesses, don’t want to leave the comfort of their homes, or don’t want to face the shopping crowds can still shop small online. There are many small business owners who have online stores and are willing to ship their products around the country.

Please remember to support your local businesses on Small Business Saturday.

Source:
Lowry, Erin (2015). How You Can Support Small Business Saturday. Retrieved from http://money.usnews.com/money/blogs/my-money/2015/11/25/how-you-can-support-small-business-saturday

If you have any questions about starting your own business or supporting local businesses, please call our office today. As a CPA, Accredited Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, Linda specializes in working with small business owners and provides tax, accounting, financial analysis, management, planning, and small business advisory services. She can help you to start, manage, and grow a successful small business. Call her today at (727) 391-7373 or else visit her on the web at http://www.LStortzCPA.com.

10 NO-COST WAYS TO IMPROVED BUSINESS AND PROFITS

profitIt’s a constant struggle in any small business to improve operations, keep customers satisfied, grow revenues, and increase profits. But, many times these very things that are so important to a small business cost money–just what a small business doesn’t have! Here are 10 no-cost ways to accomplish these very important results.

1. One Chance–Customers can be finicky. Businesses have to make a good (or great) first impression because they never get a second chance to make that first good impression. Of course, we’ve all heard that before, but it is especially important when dealing with customers. Impress them the first time, so they return. No cost, but a little effort.

2. Market Segmentation–Different markets take different market approaches. Segment your business’s marketing efforts for maximum penetration and effectiveness. Dividing and conquering takes the same amount of dollars but produces much greater results.

3. Act–Don’t Delay–When a prospect is ready to act, strike while the iron’s hot. Be prepared to “close the sale” by returning a call, having paperwork completed, be able to deliver, or whatever it takes. Wait until tomorrow, and the prospect might be your competitor’s newest customer.

4. Selling What?–Buyers don’t care about how a product is made or the intricate details of how a service is performed. Buyers care about satisfying needs, solving problems, and feeling good about a purchase. Make sure your pitch hits the right mark with customers, and sales become much easier.

5. Customer Connection–Customers love attention from owners and managers. A few seconds, a few minutes, a short note, or a quick phone call can turn a customer into a company advocate. A little time and energy today versus long-term loyalty tomorrow is a great trade-off.

6. Creative Ideas–Form a “no name group” with business associates to discuss whatever topic might come up. No set time or place, no agenda, nothing formal…just spur of the moment invitations to participate in an informal small business “think tank.” Possibilities for positive ideas are endless–maybe just for the cost of a cup of coffee.

7. Goodwill Ambassadors–Other than you, the owner, who knows your business better than anyone? Maybe, it’s your customers. Ask what they think, receive honest feedback, and build loyalty as a result. Expand your marketing with loyal customers as goodwill ambassadors with this no cost investment.

8. Changing Attitude–Ever notice the difference in some businesses how you’re treated one way as a prospect and another way as a customer? Which do you prefer? Which do you think your customers prefer? When you treat customers as prospects, they see the difference–the same as you. Don’t lose customers over an attitude. Take the reverse approach and increase customers because of an attitude change.

9. Customer Satisfaction–Do you treat customers the same whether they spend $20 or $2,000? You should. You never know when the $20 customer is going to turn into a $2,000 customer, or how many $2,000 customers the $20 customer knows. Keeping all customers satisfied is the name of a no-cost game.

10. Rearrangement–Customers love change and seeing something new. Change what you’re doing in your business to make it better and different. It’s like building something new every year with the discarded parts from everything old. Let your competition remain the same while your business streaks into the future, all by just appearing to be modern and up-to-date.

If you have questions about how you can improve your business and be more profitable, please call our office today.

Source: Weinberger, Richard (2015). Retrieved from http://www.allbusiness.com/10-no-cost-ways-to-improved-business-profits-101504-1.html

As a CPA, Accredited Small Business Consultant and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners and provide tax, accounting, financial analysis and management, and small business consulting services. We can help you to start, manage, and grow your small business. Call us today at (727) 391-7373 or visit us at http://www.LStortzCPA.com.

THINKING OF BUYING A SMALL BUSINESS OR FRANCHISE?

businessorfranchiseAre you thinking of starting your own business and are still undecided about whether you should buy an existing business, start up a business from the beginning, or else buy a franchise? If so, here are some things to think about to help you decide if buying an existing independent small business or else a franchise is right for you.

Carefully Consider Your Options
When you acquire an established business, you purchase important intangible assets, such as a customer base and brand recognition. Risk is potentially lower than owning a startup because you will have immediate cash flow. Also, the previous owners have hopefully ironed out the kinks in the beginning stages allowing you to focus on the future. After finding an affordable, promising business, a “due diligence” process is needed to determine if the company is the right fit for you. Some of the financial factors to investigate include:

1. Profit and loss statements from previous years
2. Projected financial statements
3. Last three years of tax returns
4. Cancelled checks
5. Lease conditions

You will want to learn as much as possible about the business beyond what the seller tells you. An attorney or CPA can advise you during this intensive process.

Should You Purchase?
You’ve found your dream business, which passed a thorough investigation. Now what? You must decide whether to purchase the business entity or its assets. These are the major differences:

1. Buying the “business entity” entails buying the corporation or limited liability company (LLC). You are purchasing the assets and contracts but also any existing debts. You will need to ask questions and do your homework to determine the actual debts and liabilities, such as any possible tax liens or unpaid loans.

2. Buying the “assets” means you are buying the tangible items like equipment, furniture, and property. However, you must create a new company with new loans, leases and contracts as if the seller’s business no longer exists.

Should You Buy A Franchise?
Another choice for small business ownership is purchasing a franchise. What exactly is a franchise? An entrepreneur buys the license of a larger trademarked company to sell its products or services. The new business is backed by a well-known brand name, training and support from the larger company and fellow franchisees.

With this established business structure, the success rate of a franchise is usually higher than an independent business. You don’t need to be an expert in all aspects of running a company because the franchise provides specific guidelines to help sell their products. Even though it’s a franchise, it’s still your business.

Still have questions about whether you should buy a small business or a franchise? For more information, please give us a call today.

Source: https://www.sba.gov/blogs/tips-buying-existing-small-business-or-franchise

As a CPA, Accredited Small Business Consultant and Advanced Certified QuickBooks ProAdvisor, we mentor small business owners to empower them with the tax, accounting, and financial knowledge and business skills to run a successful business. Allow us to evaluate your small business needs. Give us a call today at (727) 391-7373 or visit us at http://www.LStortzCPA.com and www.tampabayaccountingservices.com.

4 SIGNS THAT IT’S TIME FOR YOUR SMALL BUSINESS TO UPGRADE YOUR COMPUTERS

computerupgradeUsing outdated computer equipment can mean security risks and loss of business, not to mention a whole lot of frustration. Here are four signs that it’s time for your business to upgrade.

1. Your systems and software can’t work together.

Crystal Kendrick, president of The Voice of Your Customer, a Cincinnati-based marketing firm, spent thousands of dollars last year with an IT firm that worked for days trying to make her office and mobile systems sync. In the end, the firm had to give up, telling Kendrick her systems were too old and no longer supported by manufacturers. Now, when facing an IT issue, her first question is whether her systems are too outdated to coordinate with other software and whether replacement is the most efficient solution.

2. Your computer’s speed impedes productivity.

“The right computer is the one that gets the work done in the most efficient, stress-free way possible,” says Kevin Tumlinson, a Houston-based author and consultant with tech industry experience. “Authority businesses need to be able to pivot in an instant, so every second you waste waiting for Microsoft Word to open or trying to get onto a crucial website with an outdated browser can cost you an opportunity. It’s time to upgrade when the computer is a roadblock to doing the work.”

The problem many small business owners have is the perception that computers are solely equipment and should only be replaced when they stop working, says John Dini, an NFIB member and small business consultant in San Antonio. But computers are actually the principal source of productivity for most employees, so the cost/benefit analysis on replacement should focus on lost work time.

3. You’re more than two versions behind on software.

“The general rule of thumb is to stay within two versions of the latest release,” says Joe Rodichok, IT manager for eZanga.com, an online advertising firm. “For example, the current version of Windows is 8.1. If you’re using Windows Vista, your software is out-of-date. The reason it’s so important to stay up-to-date is because software stops being supported at a certain point. As exploits are found, there are no longer patches available, exposing you to a whole bunch of dangers.”

This is exactly what’s happened with Windows XP. In April 2014, Microsoft stopped supporting Windows XP with security patches, and shortly after, hackers started to target the operating system, says Darren Boozer, CEO and president of NCC Data, an IT consulting company in Addison, Texas.

4. You’re losing your competitive edge.

“To stay ahead of the pack, even at your size, you must remain agile and different from the competition—and that means maintaining knowledge about the latest trends in consumer behavior for your industry,” says Cody McLain, founder of WireFuseMedia, a digital creative agency in Austin, Texas. “What do consumers want now, and are you able to offer it?”

Using old technology to try to create new things will mean hitting a brick wall in progress at some point, McLain says. It can also mean a loss in ability to relate to customers. For example, if you’re still using a cellphone from 2003 but have created a cutting-edge app for customers to download, you can’t use your own technology, let alone improve it.

If you have questions about upgrading your computers, please contact us today.

Source:
Truesdell, K. (2015). 4 Signs That It’s Time To Upgrade Your Computers. Retrieved from http://www.nfib.com/article/4-signs-its-time-to-upgrade-your-computers-bizhelp-69476/

As a CPA, Accredited Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we mentor small business owners to empower them with the knowledge and skills to run a successful business. Allow us to evaluate your small business needs. Give us a call today at (727) 391-7373 or visit us at http://www.LStortzCPA.com and http://www.tampabayaccountingservices.com.

WHY DO SMALL BUSINESSES FAIL?

smallbusinessfailureThere are many reasons for the staggering failure rate of small businesses. Some consistently stand out more than others. Fortunately, for every weakness there is a cure. Improving upon these weaknesses, recommending solutions, and mentoring small business owners is a major role for a small business consultant.

These small business weaknesses include:

1. Basic Knowledge – While many small business owners know the technical aspects of their businesses very well, they lack the basic knowledge in all core functions necessary to operate a business through the various organizational life cycles. It is this wide diversity of knowledge that is necessary for survival, success, and growth.

2. Internal Strengths and Weaknesses – Small business owners must know how their businesses fit into the competitive landscape in which they operate. A business cannot improve if the owner does not understand its internal strengths and weaknesses. Without this knowledge, it is also difficult to ascertain market opportunities or recognize external threats that might hinder a business.

3. Finances – Cash is king in a small business, but many small businesses operate day-to-day simply hoping for better results tomorrow. A business owner must know what products or services bring in the most profit (dollars and percentages), what expenses are out of line, and whether the business will be cash flow positive in the future. A general lack of business finances and poor cash management is a partnership for disaster.

4. Lack of Planning – Planning is important for any business regardless of size. Small businesses must establish growth objectives that include operations, sales, marketing, employees, etc. Planning creates a proactive rather than a reactive environment in a business.

5. Customers – Many small business owners are so swamped with work that they never take the time to “step into the shoes” of their customers to see and experience their business from another vantage point. It is important for a business owner to understand what customers like and dislike about the business, how the competition differs, or what the customers desire most when dealing with the business.

6. Little Things – Little things in a business mean big things to employees, customers, vendors, bankers, and other business relationships. The lack of detail and follow-up, especially when dealing with customers, will always result in a lack of customer service and retention, which is not a recipe for business growth.

If you can identify with any of these items, we can help you. Why not let a small business consultant work with you to achieve success for your small business? Call our office today at (727) 391-7373.

Reference:

Weinberger, R. (2014). Small Business Weaknesses. Retrieved from http://www.aasbc.com/blog/post/small-business-weaknesses

As a CPA, Accredited Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we mentor small business owners to empower them with the knowledge and skills to run a successful business. Allow us to evaluate your small business needs. Give us a call today at (727) 391-7373 or visit us at http://www.LStortzCPA.com and http://www.tampabayaccountingservices.com