6 Common Bookkeeping Errors

July 11th, 2011 by Doug Boswell 7 comments »

 

Since keeping a complete, accurate and up to date set of books on a company’s financial activity is the core of every business, it is important to recognize the most common mistakes made by small businesses. From cash flow problems to tax compliance issues, small errors can have big consequences. Below is a list of six of the most common problems I see which can and should be avoided.

1. Thinking that no Accounting System is Necessary
One big mistake made early on is especially common with start-ups. The neophyte business owner sometimes thinks they can make do without a real system. Instead of using software, like QuickBooks, the business owner just collects receipts in a box and/or keeps a check register by hand. Or maybe the owner creates the illusion of an system by using Excel to make lists of expenses and payments that add up the numbers. Unfortunately, before having your taxes done, the tax preparer needs to cobble together some sort of makeshift system that will allow your tax return to be prepared, but it almost surely won’t capture all your deductions. And the information that this crude system provides will be too late to help you make the “smart” decisions to run your business in the best possible manner.

2. Doing Your Own Books
The DIY approach is one of the biggest pitfalls I see from business owners and managers. QuickBooks and other software programs essentially promise proficiency with just a few simple clicks. However, unless you are familiar with general principles, any software can be confusing and frustrating. You often end up spending a lot of time trying to figure out where you went wrong. Having a professional bookkeeper with the knowledge and skills necessary to complete your books quickly and accurately, and then analyze your financials, is crucial to small business success.

3. Slow Entry of Accounting Data
Most business owners intend to keep their system up to date, but often they don’t. Taking too long to enter the data into your system creates a problem such that any useful insights that come from your financial numbers will come too late to be really useful. Whoever is doing your books should keep up to date on the data entry. Within a few days of transactions occurring, the system should reflect the activity

4. Inconsistent Reconciliation of the Books with the Bank Statements
One of the key elements of good bookkeeping is to consistently reconcile the books with the bank statements (and your business credit card and other statements too). Many businesses either fail to or improperly reconcile on a regular basis. A major benefit of reconciling the bank statement is ensuring that the cash on a company’s books equals the amount of cash shown by the bank.

Errors will be made in using any system. But the nature of a double-entry bookkeeping system means that it’s usually pretty easy to catch errors as long as you reconcile the bank accounts at the end of each month when the statements arrive. Furthermore, if you hold other valuable assets like inventory or investments, you should periodically compare what the system shows to an actual physical inventory count, or to the statements you receive from external sources. Reconciling your books to your various statements is a kind of reality check that cleans up all sorts of easy-to-miss errors. This is important for all decisions made by the company and it is one of the best reasons for outsourcing your bookkeeping.

5. Incorrectly Tracking Expenses
In order to get the most accurate picture of your business, you need to properly track every business expense. A major issue with small businesses is forgetting to record reimbursable expenses. Often small business owners or managers make business purchases with a personal credit card. These purchases can get lost in the shuffle and consequentially not be submitted for reimbursement. Additionally, the owner may mislabel personal expenses as business deductions. Co-mingling personal and business assets and liabilities makes financial records and books pretty much useless for tax preparation and for use in managing the business.

6. Not Being in Close Contact with Your Bookkeeper
Bookkeepers are only as valuable as the information you give them. Unless you keep them current on all of your financial decisions and transactions, the accuracy of your books will suffer. It is the job of a professional bookkeeper to be able adapt to a surprise or an unexpected inflow of information.

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Posted in accounting, best practices, bookkeeping, cash flow, compliance, entrepreneur, financial management, management, profit, small business, tax

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Cool Product: myWorkTime

June 17th, 2011 by Doug Boswell 1 comment »

myWorkTime

for iPad, iPod & iPhone
by
Tús Nua Designs

 

myWorkTime is a Task Management tool to help log and keep track of time spent on tasks. 

Tasks can be grouped by Client and by Project. The app allows for an unlimited number of Clients, Projects, Tasks and Work Logs. You can have multiple running tasks at one time, and there is even a nice feature to allow you to quickly start and stop a defined default task.

For more information visit the website: http://www.tusnuadesigns.net

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Posted in action plans, best practices, business goals, customer service, entrepreneur, invoicing, iPad, iPhone, management, small business, strategic planning, Uncategorized

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Paying Your Use Tax… the Party’s Over

May 11th, 2011 by Doug Boswell No comments »

If you own a California business that has made in excess of $100,000 in gross receipts in the last calendar year, you are required to pay use tax. This makes you what is called a qualified purchaser, and you are required by Section 6225 of the Revenue and Taxation Code to register with the Board of Equalization (BOE) to whom you must pay the use tax.

Actually, the state government has automatically registered every business in California that grosses $100,000 or more and given them an account number and password. The use tax, which has been around since 1935, is the tax that applies when you purchase some tangible merchandise like supplies or equipment for your business from another state where California sales tax is not charged. Most such merchandise purchased, ranging from books to millions of dollars worth of equipment, are not reported and thus not taxed. Sales tax is the tax that is paid on purchases made within California. Both of these taxes are calculated based at the same rates. For California, Publication 71 lists the various rates applied to each county and city.

But the process of collecting the use tax has not been without problems. For one thing, when this went into effect in 2010, all qualified purchasers were required to file their BOC-401-DS Use Tax returns  for the previous three years even if they had no purchases to report. There were complaints that the approximately 180,000 qualified purchasers were not given enough time to compile their records from three years back since the letters from the BOE informing them of their automatic registration only started going out as of March 1st of that year. What’s more, it was, and still is, virtually impossible for most business owners to track whether every website from which they purchased merchandise as far back as 2007 paid California taxes. But since you’ve been tracking those items ever since, you now know exactly what your use tax obligation is for each item, right?

But there are still plenty of headaches left. The use tax must be filed each year by April 15 and no extensions are allowed, even if the qualified purchaser files an income tax extension. Additionally, the use tax filing can only be done online. What can further inconvenience and complicate the matter is that some of the information required in filing the use tax is the same as that for filing income tax.

Failure to comply with paying the use tax results in a 10% penalty plus interest consistent with the law. The BOE has the authority to waive the penalty, and has typically done so for the retroactive years, but does not have the authority to change the deadline. That can only be accomplished by a change in legislation. Even your tax preparer is not spared. They are fined $50 for each client they fail to ask about purchases made outside California, unless they check every invoice, because credit card statements do not give this information.

It gets better. Let’s assume that instead of purchasing a book you bought a computer monitor and were not charged sales tax. You register for use tax, duly pay the use tax, but the Board of Equalization asks you, “Have you registered to pay the eWaste fees?”

A couple of years ago California added a fee; some would call it a tax, on sales of LCD and cathode ray tube devices (generally, computer monitors, flat screens and laptops). This program, administered by the BOE, is separate from sales and use tax.

So what would your response be to the BOE? Perhaps you’d say, “OK, how can I pay the fee on my use tax return?” Well, you can’t. The program is separate and has separate registration and reporting. So if you are impacted by this, you must register separately, and make your payment separately from the use tax payments.

Adding to the joy is the thought that once you register for the eWaste program, you must file a form every year even if you never again have to pay an eWaste fee. It’s yet another registration number to keep track of, and more paperwork to handle.

So the next time you see a great deal on the Internet for something you need for your business, think again about loading up your shopping cart, and consider the true cost, especially if it’s a computer. Oh, and by the way, the use tax applies to your non-business purchases as well. Sweet.

 

Disclaimer: All of the items above are for information only, and are not meant as tax advice. Please consult your own tax advisor to see how each item impacts your own situation.

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Posted in , bookkeeping, compliance, entrepreneur, small business, tax

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10 Important Customer Service Tips

April 28th, 2011 by Doug Boswell No comments »

As a small business owner, it is important to make an effort to not only please your customers, but to treat them very well. Customer service is an important part of a business. By making your customers feel valued, they will continue to use your services. And in that respect, customer service is a vital component to your marketing effort. It may well be the most significant factor in increasing sales to your existing customers, as well as being able to reach the potential customers that they know. Consider these tips to improve the customer’s experience with your small business:

1. Establish a Rapport
Every customer wants to know that you value them, so you need to consider the relationship that you have with them. By maintaining a good relationship, your client will feel like you truly care about them, and will want to continue doing business with you. This is very important small business advice.

2. Make Personal Phone Calls
Whenever possible, make personal phone calls to your customers. If your customer hears your voice, they will feel like your company really cares. In a world where email and other quick forms of communication are popular, you can make your small business stand out by making personal phone calls in addition to your usual communication methods.

3. Distribute a Newsletter
By creating a newsletter, you can keep your customers informed about your company and its happenings. People love when businesses stay in touch and update them on news and industry events and such. There are several good, easy to use and inexpensive products available that you can use to generate an effective e-newsletter. I use Constant Contact for my monthly newsletter, The Small Biz Bulletin.

4. Acknowledge Holidays and Birthdays
If you really want to set yourself apart from the crowd, make sure to acknowledge birthdays, holidays and other special events. Customers want to know that they have not been forgotten. This is a great way to make the day of your customers. This will help keep your customers coming back and will continue to bring you a profit. 

5. Break Your Own Rules Occasionally
There is not always just one way to do something. By breaking your rules occasionally, you may learn that you have kept a customer that may have otherwise left. It is important to make decisions based on each issue that is presented to you. This will enable you to keep your customers happy. 

6. Let Your Employees Make Customer Service Decisions
Teach your employees how to show respect to your clients. Trust in your employees and their customer service decisions. By doing this, your employees will continue to recognize the value of keeping customers happy. 

7. Offer Gift Certificates
If your customer is happy with your company and its services, chances are they will be likely to recommend your small business to friends and family. By offering gift certificates, you are making it easy to share your company and a way for other people to learn about your business and its many offerings. 

8. Give Back to Your Community
It is important to show support for your community. Small businesses are often supported by their surrounding communities. By showing that you care, and by giving back to your community, you will show customers that you, like them, care about things other than just your business. 

9. Create a Network
Reach out to other small businesses. Learn and share information from other businesses in your industry. There is always more to learn about your field, and by creating a network with other businesses, you will not only learn more, but your business will continue to grow. 

10. Spy on Yourself
Consider having mystery shoppers visit your store. This will teach you what is working and what is not. What you learn will be important for improving on all the various aspects of your business. 

These small business tips will help you continue to improve customer service. In a world where small business owners are constantly competing with corporations and big businesses, customer service helps you stand out from the crowd. Customers appreciate working with small businesses that care. 

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Posted in action plans, best practices, business goals, customer service, entrepreneur, management, small business

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7 Mistakes That Hold Back Your Business

April 13th, 2011 by Doug Boswell No comments »

Some small business owners often loose opportunities because of bad habits and by not recognizing that certain things must be in place before they start marketing their products and services. These issues speak directly to the trust and credibility of a business.

Here are seven common mistakes that will hold back your business:

1. Poor Social Skills, Social Intelligence and Awareness
This is the mistake that small business owners make the most.  Having proper social skills and being in tune with your surroundings will take you a long way in business. Here are several examples: 

  • Do you have a tendency to talk too much at networking events, or worse, share too much personal information? No one except the banquet manager cares about how hard it was to find a parking space. Keep your networking chat smart.
  • Are you dressed like someone that has an executive presence, or like you should be serving the refreshments at the event? Everyone should have signature colors and at least three killer outfits. Men, the tie color and the shoes are very important.
  • Do you have a strong elevator pitch or do people need to ask you questions to help you define what you do? Great elevator pitches hit on three key things: explain the type of business, explain the target customer and close with a question.
  • Do you appropriately follow-up new leads and contacts?  Be smart with follow-up. You can send an email, personal note and make a phone call within three weeks of meeting a contact, unless instructed otherwise. Calling every week will not bring opportunity to your business.

2. Your Business Needs a Professional Website
It’s surprising how many business owners do not have a website. Many prospective customers or clients, and even your vendors, will perform an Internet search before they call you. If they can’t find you online, then you are missing out on opportunities. Putting together a business website is not difficult, and there are plenty of people and organizations that can help you inexpensively gain an Internet presence.  Have an idea of what you want first. If you plan on incorporating a blog, I suggest you start writing blog posts a few weeks or even months prior to the launch of your website, so that you do not get backed-up trying to develop content while running your busy company.

3. Your Email Address Needs to be Branded With Your Company Name
I have a Gmail account too, but that’s not the one I use for customer contact. Your emails should come from a branded account that promotes your business. You need to be branding your business, not Hotmail or Yahoo. You need to take every opportunity to establish credibility. Your email address should be something like myname@mybusinessname.com. Having a free email address says you couldn’t be bothered to spend the money on your own business to get a domain name, so why should customers spend money on you?

And about those business cards, I can’t believe how many I see that don’t include an email address. It is most likely that a new prospect will first try to contact you through email, so don’t give them the impression that you consider their emails to you to be spam. Be open to all means of contact; phone, email and snail mail.

4. Not Investing in Your Brand
Yes, all of you out there using business cards that you can get for free online are really hurting your business brand.  Invest in a professional logo and a two-color business card. Do not hand out business cards that have it printed on the back that they were free.  That tells a prospective customer that you are not serious about your business.

5. Have a Real Phone Number for Your Business
Your small business should have a dedicated phone line with voicemail.  Do not use your cell phone as your main business line.  You’ll never to do business with a major corporation with that as your brand image.  Also, please do not use those answering machines that come with the phone. No matter what you do, the message will never sound professional.

6. Poor Record Keeping
Some business people are not born administrators; they feel more comfortable getting out there and doing business. Paperwork is too easy to ignore but can never be put off indefinitely. Sales, purchases and other expenditures must be carefully documented so you know whether you are making a profit or not. Invoices must be issued on time and followed up on promptly if there is a delay in payment. Closing sales is good, but poor record keeping can hold you back. Having your paperwork in order will also save you time when it comes to your tax preparer doing your returns.

7. Trying To Do Everything
Finally, a problem most small business owners have is the fact that everything falls on their plate. Inevitably this is how it’s likely to be in the beginning, when a limited budget means that staff are a luxury, but as the business grows be aware that you cannot continue to do all the tasks. There will come a point when you become inefficient and do not have enough time to complete everything in sufficient detail. Taking on an extra pair of hands will increase your costs but you will be surprised at how much time will be saved, allowing you to do what you do best, which is bringing in more business.

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