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Small Business and Insurance: Know the Score

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Dorsey CPA - Small Business InsuranceThere is no lack of options when it comes to insurance for your small business. Not every business needs every kind, but you should know what’s available. Click through to get started thinking about business insurance.

Have you thought about the insurance your small business might need? Whether it’s a one-person outfit you run out of your home or a family corporation with dozens of employees, you need to protect yourself and your company. Review the following list to see what might apply to you.

  1. General liability insurance — Even for home-based companies, liability insurance tops the list. The policy both defends against and covers damages for alleged bodily injury or property damage to a third party by you, your employees, or your products or services.
  2. Property insurance — This is for your building or business personal property of office equipment, computers, inventory or tools. Consider a policy to protect against fire, vandalism, theft and smoke damage. Think about interruption/loss of earnings insurance as part of the policy to protect earnings if your business is unable to operate.
  3. Business owner’s policy — This packages all required coverage a business owner would need, including business interruption, property, vehicle, liability and crime insurance. You have a say in what you want to cover in a BOP, which often costs less money as a package than if coverage were bought individually.
  4. Commercial auto insurance — Protect your firm’s vehicles that carry employees, products or equipment. You can insure work cars, SUVs, vans and trucks from damage and collisions. If employees drive their own cars on company business, you should have non-owned auto liability policies to protect your company in case your employee doesn’t have enough coverage. Non-owned auto insurance can be part of your BOP package.
  5. Workers’ compensation — This provides insurance to employees who are injured on the job, and it includes wage replacement and medical benefits. Employees therefore forfeit the right to sue the employer. This then protects you and your firm from legal complications. State laws vary, but they typically require workers’ comp if you have W-2 employees. Penalties for noncompliance can be very stiff.
  6. Professional liability insurance — Also known as errors and omissions insurance, this coverage in the form of defense and damages is provided for failure to render or improperly rendered professional services. This insurance is applicable for such professionals as lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salon owners and technology providers.
  7. Directors and officers insurance — This coverage protects against actions by directors and officers that affect the profitability or operations of your company.
  8. Data breach — If you store sensitive or nonpublic information about employees or clients on your computers and servers or as paper files, you’re responsible for protecting that information. For electronic or paper breaches, the policy protects against loss.
  9. Life insurance — This provides money to beneficiaries in the event of an individual’s death. You pay a premium in exchange for benefits. This insurance gives peace of mind, allowing you to know that your family/friends will not be burdened financially when you die. Although technically this is not business insurance, if you are essential to a business you own, you’ll want this to protect your family.

You, as a business owner, have been exposed to risks from the day you opened the company. One lawsuit or catastrophic event could be enough to wipe out your business. Fortunately, you have access to a wide range of insurance to protect your company against danger.

We invite you to request a consultation online now or call us at 404-459-4174 to learn more about how we can help you save money on your taxes.

How QuickBooks Online Can Improve Your Company’s Financial Health

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Dorsey CPA - QuickBooksQuickBooks Online is more than just an online bookkeeper. It can help improve your cash flow, your customer relationships, your inventory readiness, and your future.

If you’re already using QuickBooks Online, you know how much impact its bookkeeping abilities have had on your company’s accounting operations. You’re saving time, which in-turn saves money, and you’re reducing errors. When a customer or vendor calls with a question, or you yourself need to track down a critical detail to solve a problem, you’re able to find solutions quickly.

You may already have learned, though, that QuickBooks Online’s benefits include much more than simply getting the numbers right. When you take advantage of all it can offer, you’re likely to notice more far-reaching effects.

The Specifics

Let’s look at how QuickBooks Online accomplishes all of this. You can do much of it on your own, but we’re trained to help small businesses get the most out of QuickBooks Online. We can help you maximize the effectiveness of your accounting time so your company can:

Better balance between income and expenses.

QuickBooks Online provides quick, real-time overviews of your sales status.

You can’t begin to improve your company’s cash flow until you understand where the financial bottlenecks are. QuickBooks Online provides that information for both income and expenses in a variety of ways. In the image above, you can see that there are seven past-due invoices. Click on the orange bar to see a list of them, and you can automatically send reminders. QuickBooks Online also automates the process of sending statements.

You can also run accounts receivable and accounts payable reports that will show where you stand with customers and vendors, like Open Invoices, Uninvoiced Time, Unpaid Bills, and Accounts Payable Aging Detail. If you determine that one of your consistent problems with cash flow is late customer payments, you can set up a merchant account through QuickBooks Online to support credit card payments and bank transfers.

More repeat business because of improved customer interaction.

Your customers are like gold. To build the best relationships possible with them, you need a clear, updated picture of their transactions, their payment details and history, and your interaction with them. QuickBooks Online provides templates for Customer Information records that provide all of that, along with their contact information and a real-time update of the status of their invoices and payments, estimates, time activities, etc. The latter is provided in the form of an interactive list with links to immediate actions you can take.

A more stable, profitable inventory of products.

If your business sells products, you know that you have to be smart about inventory levels. Stock too much and you have too much money tied up unnecessarily. Too little, and you’ll be turning customers away and possibly losing their future business. QuickBooks Online’s inventory-tracking tools help you achieve and maintain that balance, so you know both when and how much to reorder.

It’s easy to evaluate your inventory status very quickly in QuickBooks Online.

QuickBooks Online also offers multiple inventory reports, like Inventory Valuation Detail, Physical Inventory Worksheet, and Sales by Product/Service Detail.

Readiness for growth.

You may never want to acquire another company, or move into more spacious offices, or employ dozens of individuals. However, it’s not often that a company doesn’t want to be in a position to grow. And you never know when an opportunity will present itself that would require additional capital. Would you be ready?

If you’ve never applied for a business loan or tried to attract investors, you don’t know how much financial information you’ll need to provide, or in what format. There are very specific reports your potential lenders or investors will want to see, standard financial statements. QuickBooks Online includes templates for these, which include a Balance Sheet, Profit and Loss, and Statement of Cash Flows.

Like the reports we mentioned earlier, they’re easy to generate on the site, thanks to intelligent, customizable templates. Analyzing them, though, and making sure they’re ready to be seen by third-parties takes professional expertise. We can provide that for you. We can also help you better understand and use other elements of QuickBooks Online so that you’re taking advantage of all of its benefits. Contact us soon to set up an initial consultation.

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Cash flow problems? Before you can solve them, you need to learn where the bottlenecks are. QuickBooks Online can help. Contact us to find out how.

Is your company ready to grow? You’ll need reports to show lenders and investors. QuickBooks Online can create them, and we can analyze them for you.

How well do you know your customers? Could you assemble a quick, thorough overview of their history with you? QuickBooks Online can, and we can show you how. Are you dealing with product inventory problems due to overstocks or insufficient orders from vendors? QuickBooks Online can help.

We offer a FREE initial consultation for business owners. Please call us at 404-459-4174 and ask for Dorsey CPA to discuss your specific needs.

5 QuickBooks Online Reports You Should Run Regularly

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Dorsey CPA - QuickBooksThere are numerous QuickBooks Online reports that you should be consulting at regular intervals. But you need these five at least every week.

QuickBooks Online’s Dashboard, the first screen you see when you log in, provides an effective overview of your company’s finances. It contains at-a-glance information about your recent expenses, your sales, and the status of your invoices. It displays a simple Profit and Loss graph and a list of your account balances. Scroll down and click the See all activity button in the lower right and your Audit Log opens, a list of everything that’s been done on the site and by whom.

You can actually get a lot of work done from this page. Click the bar on the Invoices graph, for example, and a list view opens, allowing you access to individual transactions. Click Expenses to see the related Transaction Report. Below the list of account balances, you can Go to registers and connect new accounts.

Other Pressing Questions

The Dashboard supplies enough information that you can spot potential problems with expenses and sales, accounts, and overdue invoices. But you’re likely to have other tasks that require attention. How’s your inventory holding up? Are you staying within your budget? How about your accounts payable – will you owe money to anyone soon?

QuickBooks Online offers dozens of report templates that answer these questions and many more. If you’ve never explored the list, we suggest that you do so. It’s impossible to make plans for your company’s future without understanding its financial history and current state.

QuickBooks Online has many reports that can provide real-time, in-depth insight into your company’s financial health.

Comprehensive and Customizable

When you click Reports in your QuickBooks Online toolbar, the view defaults to All. The site divides its report content into 10 different sections, including Business Overview, Sales and Customers, Expenses and Vendors, and Payroll. Each has two buttons to the right of its name.

Click the star, and that report’s title will appear in your Favorites list at the top of the page. This will save time since you’ll be able to quickly find your most often-used reports. Click the three vertical dots and then Customize to view your customization options for that report (you’ll have access to this tool from the reports themselves).

Necessary Knowledge

You can, of course, run any report you’d like as often as you’d like. Most small businesses, though, don’t require this frequent intense scrutiny. But there are five reports that you do want to consult on a regular basis. They are:

1. Accounts Receivable Aging Detail. Displays a list of invoices that haven’t yet been paid, divided into groups like 1-30 days past due, 31-60 days past due, etc.

2. Budget vs. Actuals. Just what it sounds like: a comparison of your monthly budgeted amounts and your actual income and expenses.

Warning: Some reports let you choose between cash and accrual basis. Do you know the difference and which you should choose? Ask us.

You can customize QuickBooks Online reports in several ways.

3. Unpaid Bills. Helps you avoid missing accounts payable due dates by displaying what’s due and when.

4. Sales by Product/Service Detail. Tells you what’s selling and what’s not by displaying date, transaction type, quantity, rate, amount, and total. 5. Product/Service List. An accounting of the products and/or services you sell, with columns for price, cost, and quantity on hand.

Customization, Complex Reports

Note that there’s a category of reports in QuickBooks Online named For My Accountant. That’s where we come in. The site includes templates for reports that you can run yourself, but that you’d have difficulty customizing and analyzing. These standard financial reports—which, by the way, you’ll need if you create a business plan or try to get funding for your business—include Balance Sheet, Statement of Cash Flows, and Trial Balance.

You don’t need to have these reports generated frequently, but you should be learning from the insight they provide monthly or quarterly. We can handle this part of your accounting tasks for you, as well as any other aspect of financial management where you need assistance. Contact us, and we’ll see where we might help provide the feedback and bookkeeping expertise that can help you make better decisions for the future of your business.

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QuickBooks Online reports pick up where the Dashboard leaves off, providing dozens of templates ready for your company data. Do you know how to best use them?

You can create some QuickBooks Online reports using either cash or accrual basis. Do you know the difference? Ask us if you don’t.

Overwhelmed by the number of reports QuickBooks Online offers? Click the star next to the ones you run most often, and they’ll appear in Favorites.

QuickBooks Online contains several reports in a section titled For My Accountant. These are complex financial reports that we can run and analyze for you.

We offer a FREE initial consultation for business owners. Please call us at 404-459-4174 and ask for Dorsey CPA to discuss your specific needs.

Growing Pains: Structural Considerations for Growing Your Business

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watering can pouring molten goldAsk any small-business owner what he sees as the major challenges to growing his business, and chances are he’ll say: winning more sales. Ask any medium- or large-business owner what her major challenges have been, however, and she’ll probably say: structural growing pains — putting into place the necessary processes and structure to accommodate a higher volume of business. In fact, one of the most common reasons businesses plateau at a certain level is their inability — or unwillingness — to develop the structure needed for growth.

But aligning structural changes with sales growth is not simple. It is often more of an art than a science. The systems, processes, staff, and organization changes needed to grow are ongoing and dictated by myriad factors such as the nature of the business, its capital requirements and, ultimately, customer demands. Nonetheless, certain structural growth concerns — excluding financing and office/production space issues — are shared among all growing companies and fall into three overall areas: organizational structure, policies and procedures, and systems/technology.

Staffing/Organizational Structure

Among the most common growing pains small companies experience are those related to organizational structure. Organizational structure and reporting hierarchy for a 25-person company is quite different than it is for a five-person organization. Typically, an entrepreneur can manage fine until there are about a dozen people in the organization. At this point, the initial structure — where everyone usually reports to the owner — breaks down. In effect, nothing can be done without involving the owner, creating a communications log jam and a barrier to growth. A telltale sign of such a situation is the line of staff outside the boss’s office — waiting patiently for a decision before work can recommence. The best way to overcome or prevent this from happening is simple: Trust your key employees and learn to delegate. A good place to start is to look at where you are spending your time. You can still have final say on any important decisions, but you need not be involved with the time-consuming, day-to-day issues that can prevent you from focusing on larger, more strategic matters. It’s also important to formalize delegated authority with an organizational chart and job descriptions. These will help you better define functional expertise for a given job and for various departments across the organization, and provide the foundation for the growth of future personnel and key management staff.

Lack of functional expertise is another common growing pain of small companies. Too often, businesses fail to recognize that specific expertise is needed as they grow. Typically, small businesses are organized around the manager’s area of expertise, such as marketing, accounting, or production. This specialized expertise often prevents the business owner from recognizing problems that may arise in other parts of the business. It’s a good idea to periodically get an outsider’s opinion of where expertise may be lacking. These need not be paid consultants, but are often trusted business acquaintances. Tapping into this same group, you can also form an advisory board to give you periodic feedback on strategic direction.

Policies and Procedures

For most smaller businesses, written policies and procedures are often nonexistent and sometimes cursed. Typically, they are associated with the bureaucracy and inefficiency of big companies and the enemy of customer responsiveness and quick time to market. Not surprisingly, most smaller businesses have few documented operational policies or procedural guidelines. But it is precisely this lack of documentation — and the thought that goes into it — that can put a stranglehold on rapid growth. If your business is growing fast enough to require frequent additions to staff, formalized policies are a must for training purposes. Even if you are expanding at a moderate pace, documented policies will likely be necessary once you reach 20 or more employees.

What warrants a formal policy and what should be documented? This will depend on the nature of your business and average skill level of your employees. In general, however, it’s a good idea to document all HR policies in detail, expense approval authorization levels, inventory control policies, billing and collection procedures, and any operational policies that could materially affect your business if they went amiss. An annual budget and sales projection, updated monthly, are also a necessity if you are ever to obtain outside funding or sell your company. Later on, consider putting together a comprehensive policy manual where employees can get answers to questions when decision makers are unavailable.

As you grow bigger, you will also need to put into place more formalized communications channels for employees and customers. An informed and involved staff is usually a more productive and enthusiastic one; whereas a staff that is left in the dark often feels alienated and unappreciated. Regularly scheduled employee meetings, periodic e-mail updates, and a cascade communications policy are several ways to make sure your internal communications channels facilitate, not constrict, growth.

Is your business suffering from growing pains?

Here are some sure signs that structural changes may be in order.

  • Sales continue to grow but profits do not.
  • Everyone is working increasingly long hours.
  • People spend too much time putting out fires.
  • There are constant lines outside the boss’s door.
  • There are no regularly scheduled meetings or employee communications.
  • The “system” is constantly down.
  • Aging equipment is not replaced.

Systems/Equipment

Perhaps more obvious than organizational or procedural growing pains are those associated with systems and equipment. Smaller businesses are often the last to upgrade to new technology, usually due to cost. Yet the costs of not upgrading are usually much higher. Low productivity, frequent downtime, and incompatibility with newer client systems can cripple a business that’s poised for growth. There’s also the matter of keeping up with your competitors both operationally and across product and service offerings.

The average computer is virtually obsolete in just three years, and most of the widely used software applications come out with new versions every two years, so keeping on top of technological advances must be an ongoing endeavor. Start out by working regular capital upgrade costs into your budget. Consider dedicating a full-time person to information technology (IT), if you don’t already have one, and make sure he or she is current on the latest technological developments in your field. Even though you may not be able to afford all the latest equipment, at least you’ll be on top of technology trends in the industry and know what your competitors are up to — or are capable of.

Dorsey CPA offers a FREE initial consultation to individuals and businesses in Roswell, Sandy Springs, GA and surrounding areas. Call us today at 214-361-1400 to discuss your specific needs.

Business Auto Deductions: Two Ways to Calculate

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accountant working on a calculatorDo you drive your car for business purposes? The costs of operating and maintaining your vehicle are potentially deductible. Here are some guidelines.

Two Methods

The IRS provides two basic methods for computing deductions for the business use of an automobile.

Actual expense method. With the actual expense method, you deduct the actual costs of operation, including licenses, registration fees, garage rent, repairs, gas, oil, tolls, and insurance. Additionally, you may claim depreciation deductions (and/or elect expensing under Section 179). If the car is leased, you deduct your lease payments rather than depreciation. (Certain limits apply.)

Standard mileage rate. Alternatively, you may choose to use an IRS-provided standard mileage rate. With this method, you multiply the number of business miles you drive during the year by the applicable rate (58¢ per mile for 2019). When you use the standard mileage rate, you don’t separately deduct expenses such as gasoline, oil, insurance, repairs and maintenance, depreciation, or lease payments. However, business-related parking fees and tolls are separately deductible.

Which Should You Use?

Generally, you will want to use the method that produces the largest deduction. If your vehicle is costly to own and operate, the actual expense method may be more advantageous. Conversely, if your vehicle is fuel efficient and/or inexpensive, the simpler standard mileage rate method may be a better choice.

With either method, the IRS requires that you keep records that substantiate your business use of the car: the date, place, business purpose, and number of miles you travel. When you use the actual expense method, you’ll also need records substantiating the amount and date of car-related expenditures. You can avoid having to retain receipts by using the standard mileage rate.

If you decide to use the standard mileage rate for a car you own, you may switch to the actual expense method in a later year. However, you won’t be able to claim accelerated depreciation deductions for the car. With a leased car, you have less flexibility. If you choose the standard mileage rate the first year, you must use it for the entire lease period.

Personal and Business Use

If you use your car for both personal and business purposes, you must keep track of your mileage for each purpose. To figure the percentage of qualified business use, you divide the business mileage by the total mileage driven. Then multiply that percentage by your total expenses.

Dorsey CPA offers a variety of tax planning services to both businesses and individuals. Conscientious tax planning throughout the year can save you money and make tax time easier. Call us at 404-459-4174 and request a free initial consultation to learn more.