Buying a Car or Truck for Your Business?

When you purchase a new vehicle, you get the fun of riding around in a new car with the new car smell! Our job has just begun – to get your new asset recorded properly on your books. We thought it’d be fun to give you a behind-the-scenes sneak peek at our part. 

Sales Contract

The first thing we’ll ask you for is the sales contract. It will give us the payment price of your car, and we’ll use that number to record your new asset on your balance sheet. If you paid cash with no trade-in, the journal entry we’ll make is:

Then we’ll decide on a depreciation method and book depreciation monthly or at year-end. 

Trade-in

If you traded in a vehicle that is on your books, we’ll need to make an adjustment to your books. Effectively, your old car will be eliminated from your balance sheet. If this asset had a book value and it was not fully depreciated, the net value would be compared to the trade-in value and a gain or loss on the asset sale would be recorded on your income statement. 

Let’s say the balance sheet value of the three-year-old car you traded in was $10,000 and you got $8,000 on the trade-in. Here’s what we would record:

We’d also start the depreciation for the new car.

New Car Loan

Most often, a new car purchase will be financed, so we have a new liability to record too. We’ll need to get a copy of the loan documents from you and an amortization schedule of the payments. Let’s say you made a ten percent down payment with no trade-in. Here’s how that would look:

Then, each time you make a monthly payment, the amount will need to be split between principal and interest and those amounts will need to change each month.

We left out a few trade secrets just to keep it intriguing. There are a lot of other numbers on a car purchase: taxes, licenses, warranties, add-ons, fees, and more. Some of these can be directly expensed, while others need to be included in the value of the asset. So if you’re happy that we’ll take care of this for you, we’re happy to do so. 

Let us know if you purchase an asset this summer so we can get it booked right for you.  

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Money and Marriage

One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you stand. 

Show me the money: Combine or keep separate or both  

One of the best ways to avoid conflict is to put your money into three separate piles: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is all your own. The household spending will then come out of the joint account, and you both will make contributions to it on a regular basis.   

As a couple, you’ll need to discuss who will pay for what as well as what your regular contribution will be to the joint account. This is no small discussion. The more thorough you are, the less conflict you’ll have over money.  

One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, you both should have access to this account in case of emergency.   

Savings and future purchase goals 

Do you have goals about upcoming large purchases? These might include:  

  • A home purchase or improvement
  • Children’s education
  • Health care needs
  • Saving for retirement
  • A car purchase
  • A second home purchase
  • A vacation
  • Another item such as a boat, furniture, technology gadgets, a plane, or something else
  • A nest egg or cushion

If so, calculate how much you need and make a plan to set aside the money you need in the time frame you agree on.   

Spending 

Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems come in.    When there are conflicts in the area of spending, the best course is to focus on priorities. If you can agree on your priorities and goals, it can often shift spending habits.   

Budget  

You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future.   

  • Rent or mortgage payment
  • Utilities, including electric, gas, water, garbage, phone, internet, cable
  • Food and supplies, including grocery, kitchen items, liquor, and eating out
  • Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.
  • House maintenance including repairs, cleaning, lawn care, appliances, and decorating
  • Automobile, including gas, insurance, licenses, and maintenance
  • Clothing and accessories, including dry cleaning
  • Health care, including pharmacy, doctor’s visit, and HSA contributions
  • Personal care, such as haircuts, nail care, etc.
  • Tuition and/or education expenses
  • Contribution to retirement and savings accounts
  • Charitable contributions
  • Taxes, including federal, state, local, school, and property
  • Paying down credit card or student loan debt

Retirement 

What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals can change over time as retirement approaches.   You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets.   

Monitoring your progress  

Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.    

When you reach your goals, reward yourself. Managing money is hard work, and you deserve to pat yourself on the back when a goal is achieved. If there is anything we can do to help you make your financial dreams come true, please reach out any time.  

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Your New Hire Checklist

Hiring a new employee is a big accomplishment in any small business, and there are a lot of steps involved, too. Here’s a handy checklist to help you stay organized when you bring that new hire on board.    First things first, the legal and accounting items:  

  • Signed employment agreement, typically an offer letter. There may also be a supplemental agreement outlining employee policies.
  • Payroll documents include:
  • IRS form W-4
  • Form I-9
  • Copy of employee’s government-issued ID
  • AZ form A-4
  • New hire report to Arizona.
  • Notify your workers comp insurance carrier.

Next, it’s time for employee benefits enrollment:  

  • Health insurance
  • 401K
  • Any other benefits you provide
  • Provide the employee with the holiday schedule
  • Explain their PTO and vacation if not already explained in the offer letter

Set your new employee up for success with the right equipment:  

  • Desk, chair, lamp, other furniture
  • Uniform
  • Tools
  • Coffee mug, refrigerator shelf
  • Phone
  • Truck, keys
  • Computer, monitor, mouse, keyboard, power strip, floor mat
  • Office keys, card entry, gate remote, parking assignment
  • Filing cabinet, keys
  • Tablet
  • Forms
  • Office supplies
  • Cooler, other supplies

Your new employee may need access to your computer software systems:  

  • Employee email address
  • Any new user IDs and password for all the systems they will need to access
  • Document access

How will your new employee learn the ropes?  

  • Set up training
  • Assign a buddy

Hopefully, this list will give you a start toward making your employee onboarding process a little smoother.

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5 Ways to Speed Up Your Cash Flow

One of the biggest challenges for small businesses is managing cash flow. There never seems to be enough cash to meet all of the obligations, so it makes sense to speed up cash flow when you can. Here are five tips you can use to get your cash faster or slow down the outflow.

1. Stay on top of cash account balances.
If you’re collecting money in more than one account, be sure to move your money on a regular basis when your balances get high. One example is your PayPal account. If money is coming in faster than you’re spending it, transfer the money to your main operating account so the money is not just sitting there.  
2. Invoice faster or more frequently.
The best way to smooth cash flow is to make sure outflows are in sync with inflows. If you make payroll weekly but only invoice monthly, your cash flow is likely to dip more often than it rises. When possible, invoice more frequently or stagger your invoice due dates to smooth your cash balances.  
Take a look at how long it takes you to invoice for your work after it’s been completed. If it’s longer than a few weeks, consider changing your invoicing process by shortening the time it takes to send out invoices. That way, you’ll get paid sooner.  
3. Collect faster.  
Got clients who drag their heels when it comes to paying you? Try to get a credit card on file or an ACH authorization so you’re in control of their payment.
Put a process in place the day the invoice becomes late. Perhaps the client has a question or misplaced the bill. Be aggressive about following up when the bill is 45, 60, and 90 days past due. Turn it over to collections quickly; the older the bill is, the less likely it is to get paid.  
4. Pay off debt.
As your cash flow gets healthier, make a plan to pay off any business loans or credit cards that you have. The sooner you can do this, the less interest expense you’ll incur and the more profit you’ll have.  
Interest expense can really add up. If you have loans at higher interest rates, you might try to get them refinanced at a lower rate, so you won’t have to pay as much interest expense.   
5. Reduce spending.
You don’t always have to give up things to reduce spending. Look at your expenses from last year and ask yourself:
– What did you spend that was a really great investment for your business?
– What did you spend that was a colossal mistake?
– What do you take for granted that you can cut?
– Where could you re-negotiate contracts to save a little?
– Where could you tighten up if you need to?

Managing cash flow is always a challenge, and these tips will help give you a little cushion to make it easier.  

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10 Ways to Boost Your Business Revenue for 2019

The start of a new year also means that it’s the perfect time to revisit old business strategies from last year so that you can maximize your revenue for 2019. If your financial numbers were fantastic last year, that’s great! Keep the strategies that worked for you and cut the ones that didn’t.
If your financial numbers weren’t amazing last year, or maybe you’re just interested to see how you can increase your revenue, we have you covered. Here are 10 ways you can boost your revenue this year:

1. Revisit your current prices and make adjustments as necessary. Many people will tell you that increasing your prices will increase your profits, but that’s not necessarily true. Increasing your prices by a small amount might increase your profits without turning away existing customers, but make sure you research your competitors’ prices and adjust based on what makes sense in your market.
2. Bundle your services or products together. Make your products or services more attractive by bundling them together and pricing them at a better deal than purchasing the services or products separately. Customers that only want one particular product or service should still be able to purchase the product or service à la carte, but offering different packages of increasing value makes it much easier to upsell to clients and increase your business revenue.
3. Offer free gift with purchase. Tacking on a complimentary or free service to your products or services could be the small push needed to close sales. Even better, you could add a complimentary or free service to your highest-quality bundle. As an example, the cosmetics industry has been doing this for decades.
4. Start a new product or service line. If you’re limited to just a few products or services, it’s time to expand. If you mow lawns, offer a leaf collection or snow removal service. If you sell shoes, add socks. If you manage a restaurant, consider offering alcohol. Expanding the scope of what you’re selling will provide you with additional revenue. 
5. Expand your geographic reach. If you’re still only offering services and products locally, consider expanding your reach, especially because the internet is so readily available nowadays. Think about which services you can offer virtually; some may require you to invest in cloud-based delivery systems. If you only sell products at a physical location, ecommerce is a huge industry and you could definitely increase revenue by having a storefront online.
6. Learn to say “no” to bad clients. This may seem counterintuitive, but learning to turn away bad clients is really important. When clients are ungrateful, unreasonable and just take up too many of your resources, you have to realize that they are unprofitable. By turning them away, you can devote more of your attention to building relationships with your best customers and creating new, profitable opportunities.
7. Make your online presence known. Everyone uses search engines and social media to find the right business to serve their needs, so make sure you can be found online. Create a website for your business and make sure your have business pages on social media platforms like Facebook, LinkedIn and Twitter. You’ll have to develop some marketing strategies and optimize your site to rank high, but, when done right, these channels can drastically impact the amount of revenue you get.
8. Manage your online reputation. When you have many good reviews, your credibility goes up and your business is more appealing to potential clients and customers. If your clients leave you an amazing testimonial, it’s a good idea to ask them to post it online as well—especially on Yelp, your Facebook Business Page, and Google Reviews. On the other hand, negative reviews will look bad to potential clients and can negatively impact your revenue, so make sure you respond appropriately to the review and show potential clients that you care about getting things right.
9. Encourage customers and clients to sign up for a continuity program. Do you have loyal customers? Reward them by offering a membership or continuity program with VIP benefits. Retail, restaurants, and service businesses can set up privileges like faster service, discounted prices, and frequent purchase rewards that many consumers will pay a small monthly fee for.
10. Encourage customer referrals by building and nurturing customer relationships. Connect with clients and build strong relationships through effective communication, providing exceptional service, getting feedback, addressing concerns, and showing appreciation. Doing so can increase repeat customers, customer referrals and your business revenue.

If you’re looking to boost your business revenue this year, definitely give these strategies a try. 

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How to Save More in 2019

Many people in their retirement years have regrets about not saving more during their earning years, but you don’t have to be one of them. All you need to do is be realistic and proactive about saving. It’s all about paying your future self.   

Circumstances can arise that can erode savings you hoped would be there for retirement. Some of those events include not being able to work due to poor health or a bad job market, unanticipated hospital bills, a divorce, overestimating Social Security benefits, bad investments, procrastination, and simply not realizing how much you need to live on.  

The good news is you can prevent future regrets by making a strong savings plan now. As a small business owner, you may not have a retirement plan, so it’s essential that you create one for yourself. You earn an income today. Put some of that income toward paying your future self, and pay that “bill” first each month or each paycheck.  

To be proactive and build as much savings as possible, take these steps:
1. Increase your financial skills by learning how to fund your retirement, including all that traveling you’d like to do.
2. Take care to manage your investment risk and be realistic about investment returns. In good markets, purchase rather than rent or lease so you are building an asset.
3. Put as much aside as you can, and try living just below your means.
4. If you do have periods where you are out of work, try living frugally until your income is back to normal.
5. Optimize your business profits and apply some of them to your savings plan.
6. Minimize taxes where possible so you can keep more of what you make.
7. Make everything work twice as hard for you:
– Get credit cards with loyalty programs.
– Sign up for frequent customer programs to earn points.
– Make sure your bank is giving you the best deal on interest.
8. Sell unused belongings on eBay and put the money in savings.
9. Cancel used subscriptions and memberships for both your personal and business needs and move the saved money to savings.
10. Periodically reach out to vendors to get a better deal on the expenses you incur. This could be for phone plans, utilities, and any other routine expense. Put the difference saved in savings.
11. Select cars and trucks with good gas mileage and also high resale value. Consider that using Lyft or Uber may be cheaper than maintaining a car, depending on how much you drive. Put the difference in savings.  

There are hundreds more ways to save more, and these will get you started in the right direction for 2019.

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Being Grateful

With holidays approaching, this is the perfect time of year to take a moment and reflect on all of the things we are grateful for. Being grateful may sound a bit trite, but it’s also the number one, hands down, fastest way to bring more positivity and less negativity into your work and life.

Acts of gratitude are selfless and done unconditionally. You can use gratitude as a private exercise of reflection or you can express your gratefulness to show people that they are appreciated.

You don’t have to wait to feel gratitude; you can invoke it proactively.

If you don’t have a gratitude practice, consider starting one. Science has gotten involved in studying gratitude, especially in the field of positive psychology, and the benefits to health and well-being are enormous. It can benefit your business, too, when you show appreciation for business partners, employees, customers, and vendors.

Here are five easy ways to bring more gratitude into your work and life:

  1. Think of five clients you can send thank you notes to. You can write them by hand or send a greeting card with a thank you message.
  2. On your customer service email templates, add a line before the closing that says, “We appreciate your business.” It does make a difference.
  3. Quick, right now, think of five things you are grateful for and list them off the top of your head. After you’re done, you should feel a little bit happier than you did a few minutes ago. Use this tool after you feel a negative emotion to move you back into positivity faster.
  4. Find part of your day that you don’t love, such as your commute to work. Change it to your gratitude commute, finding things along the way to be grateful for. You might be surprised how great you feel when you arrive at work.
  5. Let one of your employees know that you’re grateful for the work they do for you. You can do this verbally, with a note, or with a gift.

When you practice gratitude, you can’t help but feel happy for the things you have in your life. Try these five things on a regular basis to bring more gratitude and positivity into your work and life.

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Business Meals with Tax Reform

In Notice 2018-76, the IRS states that client and prospect business meals continue as tax deductions under the Tax Cuts and Jobs Act.

This is very good news indeed.

Under this new IRS guidance, you may deduct 50 percent of your client and prospect business meals if:

1)     the expense is an ordinary and necessary expense under Internal Revenue Code (IRC) Section 162(a) that is paid or incurred during the taxable year in carrying on any trade or business;

2)     the expense is not lavish or extravagant under the circumstances;

3)     the taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;

4)     the food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and

5)     in the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

To prove your business meals, follow the two easy steps below:

1)     Keep the receipt that shows the name of the restaurant, the number of people at the table, and an itemized list of food and drinks consumed.

2)     On the receipt, record the name or names of the person or persons with whom you had the meal and also record the business reason for the meal.

In the event that the receipt is not available, such as with the purchase of hot dogs and drinks at a baseball game while sitting in the stands, make sure to make a written note of the expenditures immediately after the game.

If you charge a business meal to a credit card, the credit card statement provides your proof of payment. When possible, always pay by credit card or write a check so that you have clear proof of payment.

Proof of payment is not proof of what you purchased, so in addition to proof of payment, keep the receipt with the notations as described earlier. With this combination of proof of payment and receipt with notations, you have what we call audit-proof documentation.

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Mortgage Interest with Tax Reform

The recent tax reform contains big changes to how much you can deduct in mortgage interest for tax years 2018 through 2025. During this seven-year period, you may not deduct any interest on prior or current home equity debt, with certain exceptions.

Exception alert. Your home equity loan may include acquisition or home-improvement debt, and that debt continues as deductible under the recent tax reform rules.

Example. Billy took out a $90,000 home equity loan in 2015. He used $50,000 to remodel portions of his home and used the remaining $40,000 for his daughter’s college tuition. Billy’s total home mortgages never exceeded $1.1 million. Under the new law, Billy may deduct 5/9 of his home equity loan interest in 2018.

Acquisition debt. When you buy your main home or a second home and take out mortgages secured by those homes, your mortgages are called acquisition debt. You can add acquisition debt when you improve your main or second home, and that new debt is secured by the home you improved.

Refinancing alert. Your acquisition debt does not increase when you refinance unless you use the new monies to improve the home.

Example. Tom bought a home in 2010 and took out a $500,000 mortgage that he secured with the home. In 2018, Tom has paid down his mortgage to $430,000, and his home has increased in value to $800,000. Tom refinances the home and takes out a new mortgage in the amount of $600,000, secured by the home.

If Tom uses none of the new money to improve his home, his mortgage interest deduction in 2018 is based on the $430,000 of mortgage principal that remained as of the date of his refinancing.

To put this in perspective, your original acquisition debt never increases on that original home. To increase your debt eligible for the home mortgage interest deduction, you need to use the new debt to improve the home.

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Your Perfect Work Day

How well do you love the way you spend your typical workday? What would a typical workday look like if you had absolutely no constraints? Here’s a fun exercise to get you thinking about your future and how you can make small changes in your current day to move it toward your ideal day.

Get comfortable and begin jotting out what your ideal day looks like. Start with what you do before you get to work. How do you start your day? With a workout or breakfast or something else? What does breakfast consist of? Where are you eating? What do your surroundings look like?

How do you get to work? What is your commute like? List the sights, sounds, smells. Once you get to work, what do you do first? Will you spend time on the phone? With whom? At the computer? Do you go somewhere?

Do you get a nice break for lunch? Write it all down in detail, and continue until your post-workday routine. Who are you with? Where are you? What do you do?

Here’s a partial sample:

“Lunch with my two friends at our favorite Mexican restaurant on the beach. We laugh a lot, share stories, and part with hugs and handshakes. After lunch, I work on my favorite work project, which challenges me to think about how to help my employees gain new skills. While I work, I listen to my favorite music CD. In a few hours, I am ready for a stretch break and walk outside to water the plants. After break, I return calls, talking with my clients and catching up on how to best serve them.  …”

OK, now it’s your turn. Here are some questions to consider while you do this exercise:

  • What’s important to you to spend time on?
  • What’s enjoyable that you would really like to have as part of your daily routine?
  • What activities will give you a nice balance of accomplishment, relaxation, and socialization, even during work?
  • What do you need to include in your ideal day to get your needs met?

Change One Thing

Getting to your ideal day can take time. Don’t try to change your whole routine all at once. What one or two things can you pull out of your ideal work day description that you could bring into your current work day to brighten it with happiness? In the description above, this person might block out time to find employee training, go out for lunch instead of eating at her desk, make a new playlist, delegate tasks that are not part of her ideal day, or take more time when returning client calls.

Make gradual changes in your current day to improve it. With each change, you’ll be moving toward the realization of your ideal day.

Remember, if your ideal day doesn’t include bookkeeping but your current day still does, we’re here for you.

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