I was inspired to create the tips below after teaching a couple of workshops for the Southeast Wisconsin Chapter of SCORE. The factoids below are based FAQs I encountered throughout out my professional career as an accountant, entrepreneur, and mentor. I comprised the list as if I was answering questions in less than 60 seconds.
Accounting is a social math that explains what transactions a business has done in a certain period of time. It only requires help from My Dear Aunt Sally (Multiplication, Division, Addition, and Subtraction).
Break-even analysis of your business is necessary in order to be successful.
Cash Flow is completely different from profit and should be monitored daily.
Depreciation is an expense that saves cash by allocating the costs of assets purchased each year.
Expenses should be recorded in the same period as the revenue it earned.
Federal tax payments should be made quarterly.
Get every business deal in writing. Contracts help you and the client in the long run.
Hire wisely. The average cost of hiring the wrong person is $25k to $50k.
Interest paid on credit cards used for the business is deductible.
Just dedicating two hours a week to updating your books could save you 2 days during tax season.
Keep receipts for The IRS, which requires that purchases over $50 have a receipt.
Learn, leverage, launch is the business start-up model everyone should use. Learn about your business, leverage your network connections, and then launch the business.
Mileage is deductible to and from clients, job sites, networking event, etc. Not to the grocery store.
Never use your personal checking account for business transactions!
Operating Margin is determines how much money your business makes on each sales dollar.
Planning is essential to make profit. Identifying key performance indicators needed to monitor profitability is a great first step.
QuickBooks is not for everyone. Research all software options before purchasing.
Retained Earnings reflects that amount the business earned and can be reinvested in the business.
Statements of financial position are required for funding! Credit scores just don’t tell the whole story.
Team of professionals your business will need: accountant, business banker, insurance agent, lawyer, and mentor.
Understand the Industry you are in. If you know of the industry works, you will know how you will make money and how much you will spend.
Verify contract terms with the bills you receive. All too often business owners pay based on good faith.
Wives are not the best accountants. A lot of husbands tell me that their wives help spend money, not save it.
Xerox or digitally scan everything! I am frequently meeting clients who have mounds of paper and I have to wait for them to sort through it all.
Year-end should not be the only time you speak to your accountant.
Zero overdrafts on the business checking account. Overdraft fees are an expensive form of financing.
Jéneen R. Perkins is a freelance accountant and consultant serving entrepreneurs, families and small businesses. She prides herself in being fluent in English instead of “Accountant-ese”.
"Putting My Money Where My Mouth Is" is a journal about real life experiences and answers to tough tax questions posed to Jéneen R. Perkins, Owner of Eclat Enterprises, LLC