Getting payroll done has gotten so much easier than it used to be for small business owners. But there are still some minefields when it comes to state and federal compliance.
1. Business or Personal?
A great admin might want to help you in any way they can, including personal errands. But time spent having your admin fetch your dry cleaning and drug store prescriptions is not deductible as a business expense, even if it makes you more productive at work.
Be sure you separate your business payroll from personal payroll to avoid tangling with the IRS on this issue.
2. New Hire Report
It’s not every day that a small business needs to hire additional help, and the New Hire Report is easy to overlook. It’s due to your state within a certain number of days of your new employee’s hire date. Some payroll companies will file it for you, and some won’t, so it’s best to check. This will ensure you don’t make the common mistake of forgetting to file this report.
3. Worker’s Compensation
When you have employees, you need worker’s compensation. When you bring on your first employee, you’ll need to overcome this learning curve of figuring out what you need.
Even if you’re a veteran employer, you may have coverage holes in your worker’s compensation coverage. Do you have employees who work at home? Are you sure they are covered? In some states, employees have to be specifically named in the policy before they are covered to work at home.
Be sure you ask the right questions, so there’s not a risky gap in this essential protection for employers.
There are both state and federal notices that must be posted for employees to be able to read. California is especially zealous and liberal about issuing fines (up to $17,000 per location) for employers that do not have their posters, well, posted on workplace walls.
5. Employee versus Contractor
The proper classification of a worker as a W-2 employee or a 1099 contractor has long been an area of scrutiny for the IRS. The IRS has rules as well as court cases that have established the guidelines that exist in this area.
If you classify a worker incorrectly as a contractor when they should be an employee, you can be held liable for paying employment taxes on that contractor.
Bonuses can often be a spur of the moment thing or something that’s done at the very end of the year when we’re occupied with the busy holiday bustle. It can be easy to forget that the bonuses need to be run through payroll like all other wages so that the proper deductions and taxes can be calculated.
Use these six items as a checklist to avoid these common mistakes as well as reduce your business risk in the payroll compliance area. You may also want to check out a few helpful data automation tips you can use to easily avoid making those mistakes, and many others, which we are sharing below.
Five Efficient Steps to Take So You Don’t Make the Six Payroll Mistakes Mentioned Above
Are you manually entering data into your accounting system? If so, there may be a way to enter that data that’s faster, cheaper, and better. Data entry automation has come a long way. Here are five common ways to automate data entry so that it no longer has to be manually entered.
1. Bank Feeds or Online Banking
If you’re still entering your bank transactions, the good news is you have an opportunity to save a significant amount of time and money on your accounting. Almost all banks, and many credit unions, provide interfaces with your accounting system. This means that your checking account, savings account, and credit card transactions can be automatically entered directly into your accounting system.
There are two ways to do this:
2. A Smart Scanner
If a lot of paper flows across your desk, you can scan it in using a smart scanner that can parse the document and enter it straight into your accounting system. You will usually have a chance to edit and accept the data, which is far better than entering it from scratch.
3. Import and Export Functions
If you need to get data from one place to another, such as from a point of sale system to an accounting system, then using the export and import features of the software may be the most efficient method. There are also software apps that help you scrub the data and get it ready for the receiving system.
If you ever convert from an old accounting system to a new accounting system, this method will come in handy to get your historical data moved.
4. Interfaces and Programmers
If you have a high volume of transactions that need to move from one place to another on an ongoing basis, it may make the most sense to employ programmers who can build an interface. Alternately, some systems can talk to each other already; they just need to be plugged into each other correctly.
5. Smartphones, Tablets, and Field Service Hardware and Software
If your sale occurs out in the field, don’t wait to get the data into your system when you get back to the office. You may be able to complete the sale right out in the field, so that when you get back to the office, you can call it a day instead of keying in the day’s work.
Mobile accounting apps are where to look for this form of data entry automation.
In 2020, consider taking on the goal of no more manual data entry to avoid the common payroll mistakes above and make the entire financial side of your business easier. If we can help you with the automation process, let us know.
Have you ever stayed at a hotel and then returned, finding that they have stocked your room with everything you asked for the last time you were there? Your special allergenic pillow was already waiting for you, you were asked if you would like a dinner reservation made just like you always do the first night, and there were even extra hangers because you always need extra hangers. None of this would be possible for the hotel if it didn’t have a CRM, customer relationship management, system in place.
Would your clients be impressed if you remembered all of the details about your last conversation, their last purchase, or their preferences? If so, your business might benefit from a CRM system.
Businesses that have more than 30 or so clients may benefit from a system that allows you and your employees to enter detailed information about each client interaction that they have. It can work for both current and future clients, i.e., prospects. A CRM is basically a great big customer database at its core. It contains master file information on a customer or client, such as name, company, address, contact info, and custom fields. It is also transaction-driven in that you can log activity such as calls, meetings, proposal dates, and more.
A good CRM system is also integrated with your other internal systems, such as your accounting or POS system or both. In some CRM systems, you can see invoice and payment history, so that when a client calls in, you can also peek to see whether they owe you money or what goods they ordered that they may be calling about.
Imagine creating content that is specific to your clients and their needs and then sending that specific content to the people who can use it the most. This is possible when you utilize a CRM for your fitness business!
When you utilize a CRM, you can keep important information about potential clients in one place. All of this information will help you convert more clients, because you know what their specific needs are and you can then find a way to fulfill those needs.
A CRM can help you support your clients in many ways, which will grow your business without too much more effort on your part. The best part about a CRM is it will allow you to get to know your clients even better than before.
There are literally hundreds of CRM systems to choose from. The gold standard for large companies is ActiveCampaign.com; however, some small businesses use it as well. This CRM offers you the capability to accomplish the three things listed above and so much more.
One of the most important aspects of profiting from a CRM is to make sure it gets used, and that takes some habit-changing from you and your staff. Once you have Active Campaign in place, you and your staff can begin to fill out the information you know about each one of your clients. Yes, this will take some time, but think of the potential, and business growth, you are gaining from what will be one of the best business moves you have undertaken since you opened your doors.
When your clients start talking about how great your service is and how much attention you pay to the details they care about, you’ll know your CRM is paying off for you.
If you have any questions about Active Campaign, or using a CRM, let me know. I can answer all of your questions and give you a few pointers to make this a seamless transition for both you and your staff.
As a fitness business owner, you know that your main job is to ensure the health and wellness of your clients. However, do you know how to make sure the needs of your business are met, so you can provide your clients with everything they deserve?
This is one of the biggest challenges business owners like yourself face when running a business. After all, you are the person in charge of making sure your equipment is in excellent condition, you have a full staff that engages with your clients, and your clients are happy.
However, if you have deteriorating equipment, staff that comes and goes with the wind, and unhappy clients, you need to face the facts soon and make a few changes. While you may be ready to rush in and attempt to fix everything at once, please be aware that never works!
You need to choose the item that is of highest priority so you are not fixing the wrong problems at the wrong time. Yes, I know every problem you have needs attention, but by focusing on your business needs’ hierarchy, you will find the success you desire much faster.
We use Fix This Next, which is a system that utilizes the Business Hierarchy of Needs. This hierarchy allows you to see which problems need to be fixed first and which ones can wait.
There are five different levels within the Business Hierarchy of Needs. They include sales, profit, order, impact, and legacy. Each one is part of a successful fitness business, but only if you have them working together seamlessly.
Sales is the base level of the Business Hierarchy of Needs for your business and this is the level you will always want to have met right away. Your business needs cash flow and sales if you want it to thrive in the future. Once you have the sales level in a good place, you can easily move up to the next level of your business needs’ hierarchy.
Profit is what every business owner like yourself wants to see because it means your business is becoming more stable. Of course, so many businesses have issues with their profits because they are focused on sales and not the true profits. Make sure you have built profit into every transaction so that your profit can build as your sales continue to grow.
At this point in the hierarchy, you will want to focus on creating systems and processes that will have your business running smoothly without you. The more you have automated, the less you will need to do when it comes to focusing on the less favorable parts of your business. This will allow you to spend more time with your clients, finding out what their needs are, and creating solutions that will allow your business to grow even more.
At this level of the hierarchy, you will finally realize that you should never have focused on sales in the beginning. While your business needs sales to survive, you should be looking at your business as a solution for the needs of your clients. Once you reach this conclusion, you will begin to focus on the rest of the people in your community and can then determine how you can help them as well. This is where you will truly see an increase with the number of clients you have because you will be focusing on solving problems instead of how many transactions you can make each day.
The goal of every business owner is to leave a legacy behind. While a personal legacy would be wonderful, imagine the impact you will have if you simply leave your corporate legacy behind instead. Your business can provide solutions long after you are gone and that is the way you are going to want to be remembered.
Now that you know your business needs’ hierarchy, you can make better decisions to solve your current problems. Simply start at the lowest level, which is sales, and fix those issues before climbing up the ladder to the next level.
It is important to note that you will find yourself at different levels over the years. While you may have reached the order level a few years ago, you may have slid back to the sales or profit level recently. This will happen as your business changes and even grows. All you need to do is get back to the basics and start working from the base of the hierarchy up once again.
As you get used to your business needs’ hierarchy, it will be easier to see where your focus needs to be at different times. This will allow you to act faster when making decisions and knowing that you are making the decisions that are the best for your business.
Don’t worry if you do not have these skills yet though! It takes time to understand how to manage the needs of your business the right way. Our program, Fix This Next, can help with that and we can always set up a time to chat, so you can get moving in the right direction with your business immediately.
Sales tax laws are constantly changing, and sales tax audits have increased since states and local agencies have become creative about finding new ways to generate revenues. If you haven’t made any changes in your sales tax procedures in a while, you are probably at risk.
The taxability of services has grown rapidly as states look to balance their budgets after Federal cuts and other shortfalls. Some states have smaller jurisdictions such as counties and municipalities, making for a total of 10,000 jurisdictions in the U.S., not just 50. Alabama, Colorado and Arizona are just a couple of the states that have statewide rules as well as taxability rules for localities within the states.
A prime example of a difference would be that data processing services including web hosting and graphics are taxable in Texas but not California. Because of these intricacies, it makes sense to consult an expert in this area. Some states have been taxing certain services for many years now.
The new buzzword in sales tax is “nexus,” which simply means presence.
Globalization and technology together have produced dramatic shifts in the way businesses can look today. Not only can we access a pool of local talent to staff and grow our businesses, we can employ almost anyone around the world to work for us. Hiring employees or contractors located in other states can stretch our nexus to include that state.
If your business has a presence in a state, then certain items you sell could be taxable. “Presence” is a little gray, but here are a few examples of some characteristics that the courts have decided prove nexus.
You might receive a form that looks like a survey and asks innocent-looking questions such as how many employees you have and what state they work in. The surveys don’t look like they are from a state government but they might be. It’s their way of getting you to admit nexus. Please do not let a worker fill these out; it could expose you to a huge liability.
If you fail to collect taxes where you should, the risk is easy to calculate. Take the potential taxable sales times the sales tax rate, and add any penalties. The numbers get scary if you’ve been in business for several years.
Let’s say your annual revenues are $5 million. You didn’t realize that your Texas sales were taxable, and this amounts to 10% or $500K. Your tax liability is $41,250 per year. If you have been doing it wrong for five years, well, you can add it up. Add penalties on top, and it’s not a small amount. It can wipe out your entire year’s profit.
Sales tax liability becomes more important if you plan to sell your business. A traditional valuation will always include a sales tax risk analysis. Even if you don’t plan to sell, the odds of you getting audited or a disgruntled employee blowing the whistle can be too much to risk.
Because of the high dollar impact on the profitability of your business, it’s best to get a sales tax professional involved in helping you determine the taxability of your items as well as interpreting nexus. Many states are hiring auditors and aggressively pursuing businesses, so due diligence in this area is prudent.
If we can help in any way, please reach out and let us know.
If you are old enough, you know that this isn’t the first recession we have had in the last twenty years or so. Yes, this one may seem a lot worse, because most of our country is shut down, and the impact may be greater than the others if you are not reacting the right way.
There are five stages during a recession and the very first one is where a business owner like yourself will simply freeze. This is understandable, because you are in shock since this all came on so suddenly. I mean, it’s not like you had months of advance notice, where you could create a plan for this massive struggle in the business world!
The worst thing you can do right now is stay in the grief-stricken phase where you are frozen and have no idea where to turn. Doing that will mean the end of your business, which is the last thing you want after all of your hard work.
It is common to go through the second phase of disorientation for a little bit too. I am not telling you that you shouldn’t have a million different scenarios going through your head in the beginning. However, I urge you to not just jump in headfirst and do the first thing that comes to mind or try to work multiple angles without any clue of whether it will work or not.
This reactive phase will usually have you doing the wrong thing, even if you are thinking you are doing it for the right reasons. This is not the time to incur a ton of new expenses, because it will cause you long term agony. The impact of those types of actions can cause your business to fail before you have the chance to rebuild.
Out of the five phases, the third stage is going to be where you want to have your focus sooner than later during this current recession. Not many businesses are there yet, so don’t feel concerned if you are still a little disoriented. However, now is the time to get busy and start evaluating the data you have available.
Now, it normally takes between two and four weeks to get a real trend from all of the data you collect. This is the time when you are going to need to ask some hard questions before creating a plan that has appropriate actions with a positive impact for your business. Most of the time, your action will be only one thing, but it is the most important item when it comes to moving your business forward.
This is also the time when you will see many of your competitors closing up shop. Do not begin to panic again, or start ignoring all of the data you have been collecting. Instead focus on the fourth phase, which is the action that you came up with using all of your data and nothing else.
The last phase that every business goes through during a recession is the burst. If you keep your business moving forward with actionable plans, your business will be around when the burst happens! I know that we do not know when this burst will happen yet, but it will happen. It always does!
That also means that you must be prepared when it does! Many of your competitors will not be around when the burst occurs and that means you will have even more clients headed your way when they are ready to spend their hard-earned cash. Therefore, you must be working on actionable actions before the burst happens.
This is the time to determine how you will meet those higher demands. Now, you shouldn’t go out and hire a bunch of employees or order a ton of supplies just yet. But, you should create a plan that will allow you to obtain those supplies quickly when you start to need them and allow you to hire the employees you need when the time is right.
These are unchartered times, but I cannot stress the importance of evaluating your business’s needs now, so you can be ready when the upward curve towards the burst happens. If you are struggling, and need some help, let’s set up a meeting to chat.
When your business begins struggling, whether it is a simple downturn in income or the downfall of a recession, you are going to feel so many emotions. After all, your business is like your baby. You worked hard to get your business up and running and you have spent hours honing your skills, so your business could grow and thrive.
Once unchartered times, like our current recession, hit, you are going to want to instantly go with your gut when it comes to making all of your decisions. However, I want to urge you to ignore your gut and focus on the data you are collecting. This will allow you to create actionable plans that will help, and not hurt, the future of your business.
The 10-10-10 method is what I love to use when things are on a tailspin, because it allows you to focus on the next ten minutes, ten months, and ten years. This is excellent, because what may seem like a fantastic idea right now, could be the worst decision for your business’s future.
In the beginning, you may only want to focus on the first ten minutes, but you will want to determine what the long-term results will be from those actions.
For example, laying off an employee now may make you feel horrible emotionally, but when you think about ten months from now when you can rehire them, you will feel much better. Creating a new offering for your business might seem like a ton of work right now, but in the long term, all of that work will allow you to reap the rewards later on.
One of the best things that the 10-10-10 method can do is stop you from taking out a loan. While a loan may seem to be your best answer for the next ten minutes, in ten months, and even ten years, from now, you won’t be as thrilled when you are struggling to make the payments when they are due.
Of course, during this recession, you do have options when it comes to loans and they are the Paycheck Protection Program (PPP) and an SBA loan. You can also take advantage of the emergency disaster funds that are being distributed.
It is important to note that you must place any money you receive from the three funding options above into a separate account from the rest of your business’s finances. The reason for this is that the above loans can be forgiven, but only if you use the money for what it was designated for. Therefore, you must keep track of everything, even if it appears to be a small purchase like hand sanitizer.
If you think you will qualify for forgiveness of a loan mentioned above, that might be the only way it would pass the 10-10-10 method for being good ten minutes from now, as well as ten months and ten years from now.
Looking past the immediate future can be very difficult, especially if you haven’t been able to start focusing on what is truly important. However, making rash decisions will not help your business, so start using the 10-10-10 method to see how every decision you are considering will affect your business now and in the future.
If you have no clue where to start, or have so many questions, please give me a call! I want to help you figure out what the best options are for your business.