Archive Monthly Archives: February 2020

Three Costly Accounting Mistakes to Avoid

Small business owners have a lot on their plates and accounting mistakes can happen. Time simply does not allow you to become an expert in all the areas required for running a business. Here are a couple of common accounting mistakes that we see all the time. Correcting them will help you be more productive and profitable in your business.

Mismanaging receipts

Maintaining receipts are challenging for everyone, but the IRS requires that you have proof of business expenditures. Periodically, we come across people who feel that keeping the credit card statements are enough; unfortunately, they’re not. You’ll want to create a process to keep your receipts all in one place so they don’t get lost.

Receipts printed on thermal paper (think gas station receipts and many more) will fade within a year or two, and the bad news is the IRS could audit several years back if they come calling. Correct this by scanning them in or taking a clear picture of them using your smartphone.

Some accounting systems and/or document management applications allow you to upload the receipt and attach it to the transaction in your accounting system. This is a great solution, and if you’re interested in this, please ask us about it.

Ignoring the accounting reports

There are gold nuggets in your accounting reports, but some business owners don’t take the time to review them or are uncertain about how to interpret them. This is when accounting mistakes can happen. We can help you understand the reports and find the gold nuggets that can help you take action toward profitability.

Some of the things you can do with your reports include:

  • Identifying your highest selling services or products
  • Projecting cash flow so you’re not caught short at payroll time
  • Getting clear on your top customers or your demographic of top customers
  • Evaluating your marketing or business development spend
  • Pointing out trends compared to prior years, budget, or seasonality effects
  • Checking up on profit margins per product or service to make sure you are priced correctly
  • Managing aging receivables or speeding up collections
  • Measuring employee profitability, if relevant
  • And so much more

Being proactive with your accounting will help you spot opportunities in your business that you can act on, as well as spot and correct accounting mistakes long before they manifest into trouble.

Mixing business and pleasure

In your bank accounts and on your credit cards, mixing business and pleasure is to be avoided when possible. All businesses should have a separate bank account, and all business transactions should go through there. It takes an accountant much longer to correctly book a business deposit that was deposited into a personal account. Avoiding accounting mistakes in the first place saves everyone a lot of time and energy.

Taking out a separate credit card and putting all your business transactions on it will save your bookkeeper a ton of time. The credit card doesn’t even have to be a business credit card.  It can just be a personal credit card that’s solely used for business. If you have employees making credit card charges, sometimes a separate card for them helps you control fraud.

The hardest area in which to separate business from pleasure is cash transactions. Be sure your accountant knows about these. The accountant can either set up a petty cash account or a reimbursement process so that you can get credit for cash expenditures that are for the business.

How did you rate on these three accounting mistakes?  Avoid these three and your accounting department as well as your business will run a lot smoother.

Connect with Shannon:

www.fitforprofit.com

Facebook Group: Profit First for Fitness Business Owners

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep Your Money Method. Sign up now for our next FREE group by clicking HERE**

Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit? Click Here to find out!

Do You Know Who Your Top Customers Are?

Every business has customers, and while all customers are important, most entrepreneurs will agree that some customers are more important than others. This may be due to the amount of revenue the customer brings in, their ability to refer new clients to you, the interesting challenges of the customer, or another factor. It makes sense to identify these clients so you can spend more time with them or at least acknowledge them in some way.

How do you find out which clients have generated the most revenue with you? Most club management software will be able to generate a report with this information for you very quickly.

The reports look like this: each row holds the customer name and the Income column holds total revenue by the customer. If your system allows you to sort the revenue field, do this in descending order. If not, you can export the data to Excel and sort it in Excel.

Once you’ve sorted the data, the answer is right in front of you. Your top customers based on revenue will show in order. These are the customers you may want to consider spending more time with. Schedule periodic lunches with them, give them a call on a regular basis, and send them a gift or thank you note once in a while. The report helps you organize your connection points with your top clients so you don’t miss an opportunity or forget to reach out to an important customer.

Run this report on a regular basis so that you’re focused on nurturing the most important relationships in your business. You can also look at trends to see if you’re losing revenue over time or gaining revenue with new clients. You can reach out to clients that are spending less with you to try to save the relationship before it’s too late. And you can get to know new clients that are growing with you so that you can grab even more business.

Make this report a regular activity in your business to stay close to what your customers are doing with you.

If we can help with any additional questions, please contact us at any time.

10 Hot Business Trends for 2020

As we welcome in a new year (and maybe a new decade depending on how you count them), it’s a perfect time to reflect on the trends that will impact us and our businesses. Here’s a list for your consideration and reflection.

Trend #1: Sustainability

Concern for the environment has made the list of many companies’ core values. The way businesses are run can have a huge impact on the environment. While we hear a lot of stories about large companies impacting sustainability, we can also do our part as small businesses.  In the accounting profession, many firms have gone paperless, transitioning from staplers, paper clips, and filing cabinets to digital storage which greatly reduces their footprint. You can do the same and also consider the cleaning products you use in your facility. There are many great NEWER options out there that do a GREAT job and are environmentally friendly.

Trend #2: The Gig Economy

Young workers often have multiple jobs instead of the 9 to 5 jobs of their parents. This means there is more flexibility than ever before when it comes to hiring and retaining young workers. They can be employees, contractors, outsourced solutions, remote, local, part-time, full time, temporary, or permanent.  Sub-trends in this area include more virtual workers and many more opportunities for veterans.  

Trend #3: AI – Artificial Intelligence

This trend is impacting the fitness profession in a big way with the ability to find trainers around the world not only at a local facility or upcoming technology that lets The Mirror tell a client how to modify to get the best work out possible. Marketing has also been impacted in a big way through online ads, customer service solutions, and marketing technology. In email, Google is finishing our sentences for us, and chat and other technologies are having fairly effective conversations via bots. 

Trend #4: Stories

Storytelling is huge everywhere. People want to know:

  • The story behind your business and why you do what you do
  • The stories about your customers and the experience they have with you and your services
  • The stories from your employees and how it is to work at your organization

Digital communication has moved from text to graphics to video as bandwidth improves. Video makes stories even easier to share. Smart companies will leverage both stories and video going forward to get their message out.

Trend #5: Diversity Expanded

The conversation is no longer about race, gender, and even sexual preference. It’s now about authenticity and being the same person at work and at home. No one is “normal.” But it takes courage to reveal our differences, especially if they are outside the “standard.” Your courage is more likely to be honored in 2020 than it has in prior years.  

Trend #6: A WOW Customer Experience

We’ve moved way past the time of “infotainment,” yet the concept is parallel. As businesses, the challenge is how we can deliver an entertaining, positive, and memorable experience while producing the outcomes the client desires.  

Trends #7:  Drones

So far, drones have made appearances in photography, special effects at conferences, as toys, in movies, and of course, in war. I see them in use for safety reasons, going where people shouldn’t or can’t. They will become more pervasive in 2020 and there will be more rules, protocols, and court cases on their use.  

Trend #8: User Interface

The move from desktop to mobile is nearly complete, with only the laggard portion of the population remaining. The move to voice is still a work in progress, and it will steadily continue to gain traction in 2020.

Trend #9: Actionable Analytics

Capturing information digitally gives businesses a huge amount of data to utilize but small businesses have barely scratched the surface of this profitable information. It’s time they started catching up, and that’s something our firm can help you with.

Trend #10: Pace of Transformation

New business models in companies like Tesla, Uber, Google, and Facebook will continue to show up at a rapid rate. The business that’s most nimble will be the one that changes the game or at least stays in it without folding.

Which trends impact your business the most? Which ones speak to you? Feel free to reach out to discuss any of these ideas with us.

5 Things You Must Consider When You Set Your Own Salary

The two major ways entrepreneurs can take money from their business is through draws or by receiving a paycheck.  The type of entity in which their business is set up will determine which method can be used. In either case, entrepreneurs need to be careful not to shortchange themselves.

Reasonable Compensation for a Salary Per the IRS

For small businesses formed as an S Corporation and with plenty of profits, reasonable compensation is a term you may want to be familiar with.

Many small businesses have organized as an S Corporation form of entity. In many cases, the S Corp election allows a business owner to save money on self-employment taxes, especially if they are operating as a sole proprietor. S Corp profits, or distributions, are not subject to payroll taxes.

If you are a business owner taking a salary and contributing substantially to the operations of the business, you may think that you should just take the distributions and forget the salary. After all, think about how much you would save in payroll taxes. But this has already been tried and shot down by the IRS in the courts. And this is where the term reasonable compensation comes in.

The IRS requires that business owners who perform a substantial contribution to the business be paid a salary according to a number of factors. This is called reasonable compensation. You can’t pay yourself below the market and take a large amount in distributions.

The IRS has issued a fact sheet that describes the guidelines that can be used to determine reasonable compensation. They include employee training, experience, duties, time spent, history of distributions, bonuses, and many other factors.

There are also reasonable compensation ramifications for C Corporations as well.

The 5 Things You Must Consider When You Set Your Own Salary

If you’re running a service business, it’s easy to initially think you can do well with a similar hourly rate that you earned as an employee.  However, think of the amount of time and energy you are putting into your business every day of the week.

Here’s a quick list of five elements that should be included in the salary of every entrepreneur:

Competitive Pay

If you were doing the same work for a company that hired you, what would your payment be?  Are you making at least the market equivalent or better?  A lot of times, as entrepreneurs, we tend to focus only on this piece of our salary when we set our pricing, and that’s a big mistake.  It’s only 75 percent of what our total pay needs to be.

Profit

As an entrepreneur, you take extra risks when you own your own company, and you should be compensated accordingly.  Your capital is tied up in your business and should be earning a good return in addition to your reasonable salary.

Benefits

Employees get vacations, health insurance, and bonuses; and you should too.  This should be part of your salary package as an entrepreneur.

Taxes

Although our individual taxes are not deductible as business expenses, we need to compensate for them so that we’ll have enough cash for our living expenses.  It’s a huge chunk too.  We work about three and a half months every year, just to pay for our taxes.

Retirement Plan

When you work for yourself, no one is going to fund your retirement for you.  Although the Social Security program helps a lot of seniors, it’s up to you to set additional money aside for a comfortable future.  The only way you can do this is to make sure you have given yourself a good salary.

Your salary should include all of these components.  If it doesn’t and you feel like you can’t afford to pay yourself that much, then your pricing might not be reflecting all of these items correctly, you might have a volume problem, or your business model may need some adjusting.

It’s normal to take a smaller paycheck the first few years as we’re building our businesses, but if you’re still doing it after several years or constantly having cash flow issues, then something may be wrong.

I would be more than happy to chat with you about your salary, to see what changes need to be made to ensure you are getting the salary you deserve.

Connect with Shannon:

www.fitforprofit.com

Want to learn tips and tricks live with Shannon?  Join the Facebook Group where she goes live every Wednesday at 8 pm EST to talk about these topics.

www.facebook.com/netbooksaccounting

**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck.  Learn how to improve your business finances with our Keep More Money Method. Sign up now for our FREE next group by clicking HERE**

Shannon Simmons, a 10+ year business owner, and 5+ year Profit First Coach is the owner of Netbooks Accounting Services, LLC.  She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.

NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.

Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals.  Think we might be a good fit? Click Here to find out!

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