What truly matters

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Our “why” statement is: “we want to see our customers financially strong, so that they can focus on what truly matters in life”.

For our team, it’s important to recognize that finances are not the most important thing in life. In fact, one of our core beliefs is that “financial decisions are more than an exercise in math, they’re an exercise in values” — once you know what’s important to you, the answers become so much clearer.

Two videos I’ve run across in the past few months have helped me understand what I value even more, and though I’ve shared them previously through our Facebook page, I also wanted to post them here:

From time to time, we’ll be sharing things like this we’ve found to our Facebook page or Twitter feed, and here too — they help us all as reminders, to be about what truly matters. And if you run across something that inspires you to remember what truly matters, please send us link, we’d love to see it – thanks, and hope you’re having a great day!

Happy Money

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A year or so ago I came across the work of Dan Airely, a fascinating man who is a behavioral economist and professor at Duke University. Behavioral economics is essentially about how humans are not the pure rational creatures that economists sometimes like to think — and that we can even be predictably irrational (affiliate link).

At any rate, just this week I was listening to a podcast episode where he interviewed Mike Norton, co-author of a new book entitled, Happy Money: The Science of Smarter Spending (affiliate link). The crux of the book is that many of us don’t know how to spend our money in a way that makes us happy. We’re typically set on buying things (gadgets, cars, houses, etc.), but the novelty of things quickly wears off. We actually get a lot more happiness-for-the-buck by buying experiences, like vacations, a good meal out, a music concert, etc. And we get even more happiness when we buy things for our friends — it helps create social connections, shared experiences, and more.

So next time you go to spend that $5 in your pocket, or even set savings goals, let happiness factor into your decision making, and consider these pointers as a guide. Because happiness truly matters.

Independent contractor forms

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20130513Independent contractors are important members of your team who may have their own business, or simply operate outside the normal structure for employees. That corresponds to less required forms as well, but there are still a couple that you should have on hand:

  • Form W-9: Request for Taxpayer Identification Number and Certification. This form provides you with the basic identification information for a contractor so that you can issue them a 1099-MISC at the end of the year if they meet the requirements. It also lets you know if they have any IRS tax debts which require you to send a portion of their pay to the IRS first.

Be sure to keep copies of these forms in your company files (either paper or digital), and then you’re ready to get your contractors up and running for easy payments in our online payroll system. Simply give us a ring if you have any questions, or for help in getting started!

 

New employee payroll forms

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20130430Bringing a new member onto your team is exciting for everyone. In between the process of acquainting them with fellow team members, issuing login credentials, and inspiring them with the team values, there’s a few bits of payroll paperwork that must be handled as well. Here’s a quick recap of the main forms that should be filled out and kept in the official personnel file so everything’s on the up and up:

  • Form I-9: Employment Eligibility Verification. As an employer, you’re required to confirm that your team member is legally permitted to work in the United States.

 

  • Form W-4: Employee Withholding Allowance Certificate. This form is what authorizes you to withhold amounts from the employee’s paycheck for federal income tax.

 

  • State withholding: Same idea as the W-4, but for state income taxes. Here are links for Maryland’s Form MW507, DC’s Form D-4, and Virginia’s Form VA-4.

 

 

  • Electronic Paystub Authorization: And Maryland requires an added authorization for those employees receiving electronic paystubs, so they know they can get paper copies if needed at any time.

Once the forms are done, you’re ready to go, and we can get you setup on our simple-to-use online payroll system. Just contact us if you have any questions, and go team!

 

Book Review: Simple Numbers by Greg Crabtree

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20130417I recently finished reading a book called Simple Numbers (affiliate link) by fellow CPA, Greg Crabtree. I’m sort of split on my opinion of the book: part of me really enjoyed seeing another CPA’s take on things, and gained some truly useful nuggets of wisdom. And the other part of me found myself disagreeing with certain ideas he presented, and getting lost in the weeds of lingo and comments that weren’t fully explained (even for a CPA). If my Kindle statistics are any indicator: I had 273 highlighted passages, and 52 margin notes (some of them quite long, where I held debates or developed ideas further). Here are a few of my “goods” and “bads”.

 

The “goods”:

 

  • Mr. Crabtree speaks from the voice of experience: he counsels small business owners in his business, he teaches at an entrepreneur academy, he has been there and done that many times over. From that comes a very practical, down-to-earth, nuts-and-bolts take on things — less accounting theory, and more business reality.
  • One of the many good nuggets of wisdom I liked was his concept of the “four forces of cash flow”: taxes, debt, core capital, and profits. The four forces must be paid in order (e.g. be sure you’ve paid your taxes, before removing profit from the business). A certain amount of money needs to be left in the business to ride out the normal ebb and flow (the “core capital”). And that profits should really only be taken out if you don’t have a way to earn a better return on them inside the company.
The “bads”:

 

  • One concept he introduced is that of a salary cap: applying a similar approach from the NFL, the idea is that you have only a set amount of compensation that will let you reach your target profit percentage, so you need to cap at that. This can be very critical, as some small business owners will let compensation get on a runaway train. But in my opinion, Mr. Crabtree doesn’t balance it with the reality that the value a company creates comes from its people, and the only real cap is the limits of their creativity. His approach also assumes the non-compensation costs are fixed, while the compensation costs are the first to be cut– not a healthy approach.
  • Another trap accountants are prone to fall into, is that of the “management” mindset rather than the “entrepreneur” mindset. (See a short video I did a couple years ago.) The gist is that the focus becomes cost control and efficiency, rather than innovation and effectiveness. I’ll be releasing materials on this hopefully over the next year, but the danger is that a business can be so focused on eeking profits out of the thing it’s always done, that it loses sight of its customer, and the call to create something new to help that customer. (An example my friend Ron Baker likes to use, is buggy whip manufacturers — it might be the best buggy whip ever made, and at such a low cost, but it just didn’t matter after a while.)
So would I recommend this book? Yes. Just be aware of some of its assumptions, and don’t let it get you thinking like a traditional accountant.

Team project management on the web

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20130223Being able to track and complete projects is the life blood of any organization. There are myriads of ways of doing this, and the key is simply to find the one that works for you. Over the past year I’ve run across a number of solutions that are cropping up on the web to help small business owners, and many of them look really neat. If you’ve been looking for a way to keep on top of projects, you may want to check out:

  • Asana — Free for 30 users, Asana, promises to help your team work together faster, focused, and efficient. Collaboration, mobile integration, and versatility are built in at every level.
  • TeamworkPM — Task management, milestone tracking, messages, and file management are all part of TeamworkPM’s approach to teamwork and project management. A 30-day free trial, a simplified free plan, plus other plans starting at $12/month.
  • SmartSheet — Tracking projects in spreadsheets is commonplace, but SmartSheet takes this approach to a whole other level. Simple, smart, trusted, and flexible, apparently SmartSheet was even used to plan the Super Bowl, and has plans starting at $15.95/mo.

There are others out there too (like WorkEtc and Huddle), but while I’m on the topic of getting more organized, you may be interested to listen to a podcast episode by a friend of mine, Dallon Christensen, on “Eight Tech Tools for Getting Things Done” — he lists tools he’s experimented with over the last couple years, and what he’s found each is good for.

We’d love to hear of other tools you’ve found helpful, or if one of the above makes a big difference in the life blood of your business — just drop us a line!

2012 Taxes: Organizer & Newsletter

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Welcome to the new tax filing season. We’ve put together the below PDF files as a help to you in getting ready to file your 2012 taxes:

If you’re new to our firm, be sure to check out become a customer to learn more about us, or give us a ring!

Frequency and Inaccuracy of IRS Notices on the Rise

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I was recently reading one of journals we follow, and came across this passage I’d like to share:

In 2011, the IRS received more than 1.8 billion information statements for items reportable on Forms 1099, 1098, and W-2 and other similar annual statements. With these statements, the IRS matched income and deductions against 141 million individual tax returns filed. The IRS found almost 20 million discrepancies and issued notices to 4.7 million taxpayers in three rounds…One out of every three CP2000 notices sent does not result in additional taxes owed. Yet, to show that the taxpayer does not owe, the taxpayer must respond effectively by the CP2000′s deadline for the IRS to change its proposal for additional taxes. According to a Forbes article written by Claudia Hill, EA, MBA, CP2000 notices from the IRS are often wrong and long (frequently more than 10 pages, making them hard to understand). The Taxpayer Advocate Office reported approximately 31 million U.S. taxpayers receive some form of correction notice communication annually. In a 1998 General Accounting Office investigate, GAO found that 48% of all IRS correction correspondence and actions regarding account adjustments were incorrect, unresponsive, unclear, or incomplete. Years following their initial audit, the GAO returned to review what kind of oversights and programs had been instituted to correct the inaccuracies they uncovered during their audit. They discovered not much had been done.

I have to say, we’ve also seen the amount of IRS correspondence increasing, and many times it is not correct. That’s why all of our value packages include reviewing with you any notice you receive on returns prepared — we literally should be your first call. And many of our customers select packages that also include automatically replying to the notice for you, or even pro-actively monitoring tax notices for you. To learn more, just give us a call.

Xero vs. Quickbooks

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The world of cloud-based accounting systems is here to stay, and will become only more and more widespread as time goes on. We’ve been looking into one such system that hails from the creative folks of New Zealand, and has taken other parts of the world by storm: Xero. Aside from just being in the cloud, Xero also takes a fresh approach to accounting by using automatic bank feeds as the way to get transactions into your records, saving time and removing some of the mystery of accounting.

Here’s a comparison of Xero to Quickbooks our team member Virginia Jackson, CPA put together after we both underwent Xero training, and are now proud to say we’re “Xero Certified Advisors”. So check it out, and let us know if you’d like to learn more about how Xero might help you!

“Both Xero and QB provide access to accounts receivable, accounts payable, invoicing, general ledger, bank reconciliation and reports functions. However, while QB requires some amount of knowledge about basic accounting terms and concepts in order to be use most efficiently and effectively, Xero requires little to no accounting knowledge. Xero marketing focuses on the idea that it is easy to use, and the integration of simple terms like ‘Spend Money’ or ‘Receive Money’ make Xero intuitive and user friendly. However, it also includes tabs for Accounts Receivable and Accounts Payable, which will make an accountant feel like Xero is also speaking their language.

The pricing for these products is about the same but Xero seems to have the advantage when it comes to accessibility. First, Xero allows for unlimited users at no additional cost.  And because Xero is cloud-based, there is no need to e-mail accountant or portable files back and forth between client and accountant. Both client and accountant can access Xero files from any computer with an internet access at anytime.

One of the best features of Xero is its automated daily bank uploads. Xero is a global product which integrates with almost all banks and will automatically download your transactions on a daily basis. The reconciliation process is easy and setting up bank rules so that your bank transactions are matched to the correct account is a breeze. I did find the process of finding and correcting transactions after they were reconciled a little confusing. I also think that using the term reconcile for the process of matching bank transactions to Xero transactions might be confusing for accountant and bookkeepers who are expecting to have to complete a traditional bank reconciliation. Xero’s automated download and matching process are much more user-friendly than the QB bank download which must be manually initiated. Although this post is focusing on the features of QB desktop version, I will note here that the QB online version will automatically download your bank transactions. However, the review and matching process in Xero is still much more user-friendly than the process required by QB online.

There are several areas where QB still has the advantage over Xero. One area is payroll processing. While QB is a leader in providing small business payroll services, Xero does not provide a full service payroll options. Companies wanting a service that will calculate payroll tax withholdings and deductions will need to use an add-on service for Xero. [Update 3/2013: Xero is planning to release payroll functionality in 2013.] Another area that QB excels in is the area of payment process. QB supports merchant account payments and has several other options for receiving electronic payments from customers. Xero will import information from your bank or PayPal account after the payment is received and deposited, but they do not provide other methods of receiving payments. (For this you could use an add-on like Freshbooks.)

Quickbooks’ reports are also more robust and provide more options than Xero. Because the QB has been around for so long, their reporting features are more mature and will meet the needs of accountants who need to customize reports for their clients.

A few other areas to highlight:

  • Xero–Compatible with Windows, Mac, iPhone, Android, Blackberry; QB–Compatible with Windows and Mac (limited functions)
  • Xero–Limited to two tracking categories; QB–Unlimited classes for tracking
  • Xero–Multi-currency functionality is more user-friendly and automated; QB–
    Multi-currency functionality exists but requires manual process for updating exchange rates
  • Xero–Fixed asset tracking is more user friendly and Xero will calculate depreciation for assets and post to general ledger; QB–Fixed assets can be tracked using Fixed Asset Manager but depreciation entries must be manually entered
  • Xero–Printing of 1099′s is not available (but is being worked on), information must be exported and entered into another system [Update 3/2013: 1099's can now be prepared from Xero]; QB–1099 forms can be printed from within the software
  • Xero–Inventory tracking is not available, must use an add-on; QB–Inventory tracking and job costing options are available within the software

Overall, both are great products. For the client whose business is more mature and requires a full suite of accounting options and flexibility, QB is still the way to go. However, for the smaller start up company who needs basic bookkeeping functions and a solution that is easy to use and doesn’t require a lot of time for upkeep and data entry, Xero is a better alternative.” VFJ

Filing “zero” payroll

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Once you register for payroll accounts with the government, they’ll be looking for you to report your payroll activity, even when there is none. This can be a trap small business owners don’t realize, until that notice shows up in the mail. Fortunately, you can usually get out of it without any penalties, but it’s a lot easier to avoid the mix-up in the first place simply by following these steps below:

  • MD withholding–Call the automated phone line at 410-260-7225 to report zero.
  • MD unemployment–Fill out and submit the quarterly report on their website showing zero activity.

Of course, be sure to have your various ID numbers handy — they’ll be needed during the process. And if it’s the case you won’t have employees anymore, it’s probably a good idea to close the payroll accounts altogether. Don’t hesitate to give us a call if you get stuck: we’re here to help!