Over the last few years, accounting (in it’s truest form of keeping track of your dollars) has come a long way. In the recent past, while software was available to make things simple in the aggregate, there was still a great deal of detailed manual entry required.
The perhaps all to familiar plight of the business owner entailed copying every line of your bank statement into Quickbooks, printing and mailing your invoices in Word, and wondering where in 150 lines of numbers that you reversed a digit, throwing off your balance entirely.
Fortunately, the days of those frustrations are numbered (heh.)…for those willing to adapt, anyway.
As for me, I’ve been using FreshBooks.com, a cloud based invoicing service, to keep track of all hours worked and do all of the billing. I track my projects, which then go straight to automatically generated (yet fully customizable) invoices, which are then emailed directly to clients. When I get paid online, FreshBooks knows instantly, and records the invoice as paid.
From there, all of my invoice and payment data is sent straight to Xero.com, where it’s automatically updated, and where all of my accounting is done. Xero also links directly to my bank account and downloads all debits and credits directly from the bank, every day with no input from me. Then, it “learns” where they go. When it sees a payment to my landlord, it “knows” that it’s rent, and all I have to do is confirm. No data entry, just review.
There’s a misattributed quote to Bill Gates that goes like this:
I will always choose a lazy person to do a difficult job, because he will find an easy way to do it.
And while you’re probably not a lazy person in regards to your business, keeping up on the accounting is not high on the list of most people’s uses of their precious motivation. (And you do have a limited amount, it’s scientifically proven!)
So, if you find your accounting to be tedious, there is hope for you yet!
All that said, in my entire accounting lifetime, I’ve never been quite as excited about something as I am about the implementation of these technological advances.
Sure, people like to have their taxes done and done on time. But seeing the look on people’s faces when they see how ridiculously simple accounting can truly be, is really really fun!
If you are curious about more, I am happy to chat anytime. All of the contacts listed here go straight to my inbox or mobile phone.
Craig Mason, CPA]]>
This time of year, things tend to get busy. So I haven’t made the time to write anything on the ever-thrilling subject of taxes.
However, I would like to share a video that, while not directly related to accounting or taxes, is extremely relevant to business and life in general.
Watch this video on YouTube.
People sometimes ask my why I do strange things like post videos about vulnerability on the news section of accounting firm’s website. I hope this video helps explain.
Please leave your thoughts. If you hated it, I promise to only post my musings on the alternative minimum tax and depreciation recapture from now on.
Clients often ask me the best entity choice when forming a new business venture. The answer is quite simple: “It depends.”
Like many decisions when it comes to taxation, your best course of action (what achieves your long run goals), can’t be summed up in a blanket statement. Even beyond the scope of this article, there are other factors that may affect your situation, so always be sure to run your plans by your accountant and lawyer.
Without further ado, here are a few issues to consider with each form of business:
Sole Proprietorship—As a sole business person, without any formal action, your business will default to this form. Thus, this form of business involves the least hassle. However, a sole proprietorship leaves the business owner’s personal assets at risk. Should your business incur a liability beyond its own assets, you would be held personally liable.
Yes, that’s a big risk. For this reason, a sole proprietorship is often not the most advisable choice for a new business.
Limited Liability Company (LLC)—A limited liability company can be formed by simply filing paperwork with the state in which your company will be based. There is a fee ($500 in Illinois), but the additional upkeep required is minimal.
Unlike a sole proprietorship (or a general partnership), an LLC limits your personal liability in the unlikely event that your business incurs significant liabilities.
Additionally, an LLC allows your business much flexibility and is sometimes called the “chameleon” of business entities. Partnership agreements can be largely structured as you see fit, and should you change your mind, the entity can easily be switched to an S-corporation.
S-Corporation—Like an LLC, S-corporations also protect your personal liability. Even better, they can have significant tax advantages to a profitable business.
Of course, there is a catch (or two…) S-corps are subject to certain rigidities regarding their structure. Only individuals may be shareholders and there can only be one class of stock, meaning that if you own 10% of the company, you get 10% of the profits, no exceptions.
Furthermore, and potentially likely to affect even more business owners, corporations are subject to much more record keeping than are other forms of business. (AKA a hassle.) While it may be a pain, that’s the nature of taxation and law. Jump through the right hoops, and you will be rewarded.
That said, the above is a very general overview of entity selection. There are other less common but equally important factors that go into the decision as well. So, if you have any questions, feel free to leave a comment below or give us a shout!]]>
On a regular basis, I have the privilege of working with a variety of business owners in the Elgin area. Since the state of the economy is a subject that is both relevant to nearly every citizen and a subject I personally find quite interesting, I take the opportunity whenever possible to ask business owners, those that know first hand about the true state of any recovery, to give me their take on the matter.
Unfortunately, with a few exceptions, I would classify the general outlook as fairly negative. On a general level, they just don’t see signs of a recovery. Business is by no means booming like it once was. When I inquire about the reality of the alleged recovery as reported by the government, many literally laugh at the prospect.
In case you didn’t hear, the recession ended in 2009.
Furthermore, many business owners are nervous to expand or hire new employees due to uncertainty regarding future or already passed government regulation like the recently passed health care bill.
Along the same lines, businesses already have an often overwhelming body of regulation to deal with, preventing them from focusing their efforts in productive areas important to growing business. On recent study suggested that one in three businesses now need the governments permission to operate. That’s up from one in twenty in the 1950′s.
In Elgin, every business now needs a license from the city to operate.
From an even higher altitude, the economy seems unsustainable. We have a massive national debt compounded by a gigantic budget deficit, and politicians are doing essentially nothing to fix it. We (read: our leaders) have an addiction to debt that can’t be paid back. This bodes poorly for those hoping to grow their business in a prosperous environment.
Aside from any facts regarding the sustainability or state of the economy, for whatever reason it may be, experienced business owners are concerned and are reluctant to expand.
Until I see this sentiment changing, I won’t have much hope for a significant sustainable economic recovery.]]>
Yesterday, in the wee hours of the morning while most Elginites slept, your state legislators were hard at work—raising your taxes.
The personal income tax rate went from a flat 3% to 5% tax on every taxpayer. This means that a family making $100,000/year will now pay just under $2,000 more per year in taxes to the state.
Additionally, business owners who have with operations structured as corporations will see their Illinois tax rate jump from 4.8% to 7%.
While Elgin residents don’t seem to be happy with the tax increase, some might be glad to know that Elgin’s representatives voted against the bill.
What are your thoughts?]]>
While Congress is still working their “magic” on a tax plan that would continue the Bush era tax cuts enjoyed by Americans since 2001, leaders from both parties expect it to pass soon.
So the real question is, how will this affect Elgin residents? On the whole, things will remain largely the same. You won’t see the income tax increase that awaits us all should Congress fail to act.
Additionally, the tax plan allows for a slight reduction in the taxes taken out of Elginites’ paychecks. However, this cut is largely a wash, as the “Making Work Pay” tax credit that many taxpayers received in the form of a refund last year, is no longer valid.
All in all, given what taxpayers were up against, I’d call this a small victory for taxpayers given what they were up against. That is, as long as Congress manages to get the job done and pass the bill. What do you think?
Stay tuned for further updates.]]>
The Center For Economic Progress is looking for volunteers to help prepare tax returns for low income community members so they don’t have to pay someone to do so.
I did this last year, and it was an awesome experience. The volunteers are extremely nice people and those that they help are overwhelmingly appreciative. Overall, it’s a lot of fun and a great way to help the community!
The Center works right out of Elgin’s Gail Borden Public Library and you don’t need any experience. And don’t be put off by the tax preparation; they also need plenty of volunteers to do other things.
Here are the details:
To volunteer at a tax preparation site:
Volunteer positions available as…
If you plan on getting or have any questions, I’d love to hear it in the comments!
Have you heard of the Elginite? If not, check it out. It’s a blog/news website that’s been around for quite some time and keeps a pulse on the goings on around the city of Elgin.
And now, if you’d like to hear this Elgin accountant kvetch about politics and the economy, you can do so there.
I’ve been a fan of the Elginite for a while, and I’m honored to have the opportunity to be a part of it.
For business owners, the Elginite is a great example of how to promote and manage a blog: Rick, the guy in charge, has been consistently delivering quality content for years and has developed a solid organic following. While he’s not using this blog promote a business, it’s nonetheless a great example.
If you’re curious about social media and small business, I would highly recommend reading Six Pixels Of Separation by Mitch Joel. It’s really an eye opening read about how much social media has changed how people do business.
In an effort to support local small businesses, American Express is sponsoring the first ever Small Business Saturday, on November 27th. Squeezed between “Black Friday” and “Cyber Monday”, Small Business Saturday is a drive to encourage consumers to spend an entire day shopping local in order to support and grow their local economies.
Personally, I often need a reminder to support local businesses, and I think this is a great way to do just that!
So, next Saturday I’m going to eat local, shop local, and even bank local!
If you want to help support local business and grow Elgin’s economy, simply shop local, tell your friends, and if you’re on facebook “like” Small Business Saturday as well!]]>