One easy way to stay sane as a business owner! Rec the checkbook!

Check out our new blog here!

We’re on Thumbtack!

Check out our newest listing here on Thumbtack at Ledger & Pen's Thumbtack Page. Thumbtack is a great tool that links professionals and clients. Here’s what they’re about: http://www.thumbtack.com/about. Want to know that your business finances are OK, but don't have the time, know-how, or energy to figure them out? Check us out at www.ledgerandpen.com or call us at (319) 450-0249 to set up a free consultation for us to help you with your business’s accounting needs!

Duplicate yourself

You know you should. You know you need to. But oftentimes, you don’t know how to go about running your business more effectively. Duplicating yourself, by hiring correctly, using technology efficiently, and outsourcing tasks, can save you time, money, and most importantly, your sanity as a business owner. 

Outsourcing

Outsourcing tasks is probably the single greatest way you as a small business owner can flourish. Let’s face it, you have far more important (and profitable) tasks to do other than, answering the phone, scheduling, doing accounting. Small business accounting is the repetitive task that I want to hit on most of all: it’s tedious and time-consuming if you’re doing the accounting, and a ticking time-bomb if you’re not. 
We at Ledger & Pen know that you didn't start your business so you could do books, you started your business because you wanted to make a living, change the world, and create value. Please contact us for a free consultation on how we can help you with your accounting. 

Hiring

If you’re a small business owner and don’t have employees currently, hopefully you’re looking forward to the day when your business takes off that you can hire others who share your vision to continue your work. Finding someone who shares your zeal for your industry and yet wants to work alongside you in your pursuits is difficult, but realistic. There are many hard-working people out there who crave the challenge of working in an entrepreneurial venture without being the person in charge. Here’s a great article from Entrepreneur.com regarding hiring your first employee: http://www.entrepreneur.com/article/83774. 

Technology

Technology is great, but it does have the tendency to take over your life. The Internet was once touted as a great time-saving mechanism—and indeed still is—but it has taken on a sinister quality in that we have a tendency to spend even more time playing around on the Internet rather than using it to help us get work done. Ironic, right? There are some great resources online for keeping track of your business data, such as QuickBooks Online, Wave Accounting, and Mint.com.

Take off the cape

In regards to a “superhero syndrome,” Chris Ducker, in his book, Virtual Freedom writes, “After all, your business is your baby, and who better to take care of it than the person who gave birth to it—you! However, this will all eventually catch up with you, and the strength that you possess as an entrepreneur will start to backfire. Your superpowers will ultimately begin to control you, eating away at your energy levels and stumping any potential for freedom in your life. They will leave you stressed and overworked, and ultimately you will be no good to anyone or anything—including your business.” If I haven’t mentioned before, Virtual Freedom is an incredible resource on how to hire and work with virtual assistants (VAs) to leverage your time and resources as a business owner. You can find his book on Amazon at: http://www.amazon.com/Virtual-Freedom-Become-Productive-Business/dp/1939529743

Idea machinery, the lifeblood of the entrepreneur

Idea machinery, the lifeblood of the entrepreneur

A business acquaintance pointed me to this blog by James Altucher, and it's pretty awesome! But don't take my word for it, the link is below!

http://www.jamesaltucher.com/2014/05/the-ultimate-guide-for-becoming-an-idea-machine/

You're self-employed, you just don't know it yet

This is a great post by Casey Lewis that came out this morning on how working 40-hours a week is dead. Thanks Casey!

http://casey-lewis.com/2014/05/28/working-40-hours-a-week-is-dead/#.U4cSO_ldWmE

Maybe I should rethink this...

Ever thought this way?

I'm still in the early stages of entrepreneurship, but this blog by Amanda Abella really makes me hungry for this being an entrepreneur. 

Ultimately, entrepreneurship is a lifestyle.

http://www.amandaabella.com/2014/04/28/why-you-dont-want-to-be-an-entrepreneur/

You're not as dumb as you think you are

Seriously, who actually stops learning? Even those who just stumbled out of college with a foam hat still askew about their ears knows that education goes on. Learning continues with your first round of interviews for your career. The first things you learn are what NOT to say in interviews. I would argue that most education happens on an experiential level. I defer to psychologists more on this vein, but it seems that humans are pretty good about running up against something, bouncing a few times, and trying something different the next time.

That's exactly what it takes to be an entrepreneur. You try something, you "fail", then you try something else. You figure out what works.

Ironically, entrepreneurship is a lot like life.

What does an Entrepreneur's education look like?

When I was in community college, I worked full-time. Why? Because I wanted to learn how a business ran. I was also starting up a small business at the same time. Yikes! And a girlfriend on top of all that! But, the lessons I learned about balance, keeping all the plates spinning, how business works (especially the retail world), helped me immensely in my endeavors. 

I also learned that taking Accounting 1 and 2 concurrently is not for the faint of heart, but I digress.

Steve Jobs did much the same thing. He dipped into a few college classes after dropping out, most notably a calligraphy class that inspired his idea to make the Macintosh's text graphics look appealing. 

Free college? Why yes, I will take a slice.

Saylor.org and (my alma mater), Thomas Edison State College (TESC) have teamed up to open free course content to prepare students for TESC's Associate in Science in Business Administration. TESC's credits can be actually earned in a variety of ways, from the CLEP, DANTES, and their own TECEP tests. Also, they have Prior Learning Assessment (PLA) for those who have life experience (perhaps what you've done for a career for the past decade) that they can translate into college credit. Most of Saylor's program falls into test prep for TECEP tests and PLA.

http://www.saylor.org/majors/tesc-open/

Pretty awesome, right? If nothing else, perhaps just spending some time listening to online content (even educational content) can be extremely helpful in running your business. 

Some of the other business educational resources that I've found (though I haven't tried them all), are:

• MIT's OpenCourseWare
• http://ocw.mit.edu/courses/entrepreneurship/
• http://ocw.mit.edu/courses/sloan-school-of-management/
• Saylor.org
• http://www.saylor.org/majors/business-administration/
• udemy.com
• https://www.udemy.com/courses/Business

How much should I charge my customers?

Ever wonder how if you were charging enough for your product or service? Today's blog post by Jon Acuff was really eye-opening to me. Definitely need to do some more analyzing on this one.

http://acuff.me/2014/05/5-ways-charge-clients-money/

How to Prepare for your Tax Bills

Here's an article I wrote for KASA practice solutions, a support system for private practitioners, but the concepts are for any small business owner, enjoy!

http://www.kasa-solutions.com/blog/prepare-tax-bills/?fb_action_ids=10100616627441153&fb_action_types=og.likes&fb_ref=below-post

It’s the most wonderful time (of an accountant’s) year!

                January 31^st, is quickly approaching! The significance of that date is that that is the deadline from the IRS for filing end of year tax forms such as W-2’s and 1099’s.

W-2 to-do

Check with your payroll provider to make sure you have everything ready to send out W-2’s to your employees. The deadline to file and mail them is January 31^st. Also, your employees could be itching to get their taxes done so they can get their refunds. Happy employees generally make happy customers, just sayin’.

1099’s, almost the bane of the small business existence

                This honestly could be a lot worse. For every vendor that you purchase goods and services from in a year and pay more than $600 for those goods and services, if they are a sole-proprietor, partnership, LLC filing as a partnership, or something else exotic non-corporate entity, then you must file form 1096 with the IRS and mail a form 1099 to the vendor. A couple of years ago, the IRS was on the cusp of forcing companies to file 1099’s with EVERY vendor that was paid more than $600. Yikes! The politicians quickly realized that this was a bone-headed move, and reversed course. But don’t think that that sentiment will go away permanently. But for now, you only have to worry about non-corporate entities. Hopefully, you have a form W-9 from all vendors, so you’ll have their tax ID number (Social Security Number or Employer Identification Number), so you’ll be able to quickly process and get those bad boys into the mail. Most accounting software can print 1099 forms directly, and you can get forms from an office supply store.

Help needed?

If you need help and are in the Dallas-Fort Worth area, drop us a line at Ledger & Pen, at acrawford@ledgerandpen.com

Clean up your file drawers

Happy new year! My New Year's Day tradition, (besides eating leftovers and catching up on sleep), is to clean out our desk file drawer. I do this, because sometime around late November, it becomes too stuffed to add more to it. So there I was, on the floor, having the kids help me separate papers into piles: one each for the years that I wanted to keep, and one big pile for the stuff that needed to be shredded. 

Most utility bills, bank statements, medical bills, and things of that nature I hold on to three year's worth. That way, in case something did come up, or I needed them for some unknown reason, I've got them on hand. A lot of things are electronic, and I'm working on migrating as many things to an electronic format that I can so I don't have the clutter to clean. I keep all of my IRS documents, I figure by the time I kick the bucket, there probably won't be but 50-60 of them. That sounds like maybe two boxes, I can live with that. 

Here's a good Entrepreneur.com article on business documentation and how long to keep them. http://www.entrepreneur.com/blog/225511 

Hope everyone's new year goes well!

Capital Structuring for Small Businesses (Part 3 of 3)

Finance Option #3 Bootstrap Financing.

I saved this one for last since the other two forms of financing are pretty common and, for most of us, the only option for getting a business off the ground. So what is bootstrapping? The term bootstrapping comes from "pulling yourself up by your bootstraps." Notwithstanding the awkward posture required for this action, this form is not quite as prevalent in the small business world after the first several accounting periods. I will say, it is possible, and if you feel convicted to have a debt-free business, then I say, go for it! Just think, no monthly payments on debt, no investors to worry about keeping happy, the only bills you pay are the ones you have to or the lights will go off. It's a pretty great feeling I'm sure. I'm still in the early stages of my business, and so far we're cash only, no debt. I'm keeping my options open, but not owing anyone anything on the business is awesome.

That being said, you generally need some pretty deep pockets unless you don't have personal debt, a family to support, and have pretty low living expenses. I've heard is said in several places, "Live like a student for the first X number of years of your business." Ironically, the length of student-living varies with the kind of business you have. What I mean by “live like a student” is that you live on just what you absolutely need, and plow every spare dollar back into the business. For some, it could be one year of rice and beans, for others, it could be longer. If I had a crystal ball that told me how long it would be until your business was self-supporting, I wouldn't be blogging or bookkeeping, I would have a roadshow that gives business predictions at a million bucks a head.

In the end, is it a risk to start your own business? Yes, but the real risk could be not starting. 

Capital Structuring for Small Businesses (Part 2 of 3)

In my last post, I said there were several ways of financing your small business. I described how debt works in very basic terms. If you want more specifics on what sort of debt load your business can handle, you should talk your bank, credit union, or accountant to get some ideas on what exactly you're looking at.

Finance Option #2 Stock

The second flavor of financing your small business would be getting outside investors to give money to your business. To give you an idea what this looks like, just go watch the show "Shark Tank." The show's about small business owners and inventors who have an existing business or have some new invention that they need capital to be able to expand operations or start production. Some of the questions that the investor board asks may be some of the questions that you'll face when pitching your business. I will be honest, I haven't gone this route, because I want to have control over my business and how it operates. I don't want someone else telling my how my business is going to be run, or potentially edging me out of it. That being said, the three most important things in accounting and business are document, document, document! If you get an outside investor, make sure you clearly line out who does what and who has what rights over operations, business decisions, etc. Is the investor a "silent partner" meaning they don't have anything to do with the day-to-day operations and only worry about getting a cut of the business profits? What sort of reporting does the investor require? You definitely need to communicate those needs with your accountant, and if you don't have an accountant, get one! I say this, because when tax time comes, both you and your investor will be very interested in the forms that are filed with federal and state tax authorities.

From a very fundamental standpoint, outside investment may be necessary in the short-term. You also need to take the long-term effects into account as well. Generally, in accepting someone's financial backing, you'll be giving up a percentage of the business's profits. Make sure you take that cost into account as well.

For some of the same reasons I described in my last post, I have avoided having a family member as an investor just because I don’t want the potential fallout from something going wrong. I’d rather not thanks.

All these are important considerations to take into account when forming your small business, and determining the risk/return relationship in financing your business. In the next blog post, we'll discuss bootstrapping your business finances.

Financing your business

Money does grow on trees, you just have to pick it—Capital Structuring for Small Businesses

Capital Structuring for Small Businesses. (Part 1 of 3)

Capital Structuring. Sounds scary and complex, doesn't it? After all, you might be thinking, don't we just need money in the bank and everything will be OK? Not if you want to maximize your business's potential. I'm not a fan of personal debt; I do generally lean into the Dave Ramsey camp, but debt properly used in and for a business (note I didn't say for you personally) can unlock great potential for you as a beginning small business owner. In starting my own business, I have a credit line with the bank that allows me some liquidity (ability to pay bills later while making sales now) that I will probably have to dip into in order to finance larger projects or expansion.

Finance Option #1 Debt

This is pretty self-explanatory, but I'll go through the basics. Someone (usually a bank or a credit union) lends you money (a loan) or sets up a line of credit (think credit card). The loan is amortized, (root word meaning "put to death." Pleasant, huh?) or paid back over a certain period of time. You’ll usually have fixed monthly payments that will pay back part interest (the fee the lender charges for their money) and principle (the part of the loan that you're paying back.) In the beginning, the payments are mostly interest, but toward the end, you're paying more on principle than interest and the debt gets smaller faster. Your personal credit score or your business's financial clout determines the interest rate that you'll pay back to the lender.

In contrast, a line of credit just sits there until you borrow money from it, and then the lender calculates the payments you pay based on the amount borrowed. One other financing source you could look at would be borrowing from friends and family. One caution (and the reason I haven’t done this) is that if something goes wrong, all of a sudden Thanksgiving dinner is very awkward or your friend is no longer much of a friend anymore besides all the legal stuff you've had to wade through. I like family at arm’s length. It’s a comfortable distance.

Here are some helpful websites that will help you calculate how much a payment would be for a given time period and interest rate.

If you have more questions on what sort of debt your business can handle, then please talk to your bank, credit union, accountant, or shoot us an email at info@ledgerandpen.com.

There are ways to finance your business other than debt. We'll examine other forms of financing your small business in my next blog posts. 

Why do you need Accounting?

How do you know how your business is doing? I mean do you really know how your business is doing? Is there enough cash in your account? Will it be enough to get you through the next year, month, or week? Are you able to turn credit sales into cash? Is the debt you have for the business working as hard as it needs to in order to grow your business? What do we owe for taxes? These are the questions that can be answered by understanding what accounting is and how it works.

Balancing Act—Examining the Balance Sheet

The Balance Sheet is basically what you own or are owed (assets) minus what you owe (liabilities) with the leftover being your net worth of the business (owner’s equity). The bread and butter of how your company is structured is found on your balance sheet. For analysis, you can compare your balance sheet now to last year’s your balance sheet and see what’s changed. Has cash on hand gone up or down?  Have liabilities gone up? All these questions are the beginning of financial analysis, or the art/science of seeing how a business is performing. If you’re a small business owner, you really, really want to pay attention to your balance sheet. Any wide fluctuations from a previous period should make you question what’s going on. Also, there are two lines in the owner’s equity section, one is Retained Earnings and the other is Current Earnings. The Current Earnings are what you've made or lost this year and should match your year-to-date total on the Income Statement, and the Retained Earnings are your net income or loss from prior years. Pretty cool, right? It all interacts in a big circle.

Easy (In)come, easy go—How much did we make on our Income Statement?

The Income Statement is a much easier statement to grasp than the Balance Sheet. For one, it makes perfect sense. We had $10 million in sales; the inventory we sold cost us $2 million; there were $5 million of expenses, so we had a net income of $3 million. Pretty intuitive, right? It is, and one great way to use your Income Statement is to see how well your business is performing against a budget you (hopefully) wrote before the beginning of the fiscal year. If you don’t have a budget, make one J Life will improve drastically for you, because you will be able to see line by line how much you think you would make and spend based on your income and expense history, versus what’s going on now. If there’s a wide variance (good or bad), it’s time to start digging.

Hmm, my checkbook is thinner—The Statement of Cash Flows

Probably the hardest statement to understand is the Statement of Cash Flows. It doesn't help that there are a couple of different ways of putting the darn thing together, either. So, in short, the Statement of Cash Flows takes your accrual-basis books and makes it like it was on cash-basis. If your books are cash-basis (most small businesses are), then your income statement is like a statement of cash flows. But, for you accrual folks out there (that is, most of the world), there are three basic transaction categories that all transactions fall into, Operations, Financing, and Investing. Operations is what your business normally does. If you sell boxes, then the cash generated from the selling of boxes is an Operating activity. Say you need to sell stock in your business to take it to the next level. The cash generated from selling stock and paying your stockholders dividends is a Financing activity since you’re—you guessed it—financing your business. Also paying interest on debt falls into the Financing activities. The last category on the Statement of Cash Flows is the Investing activity section. This is where you put cash laid out for things like investments in equipment and building for your business. Also you would put cash generated by investments that you've parked your business capital in like stocks or bonds. The awesome thing about that Statement of Cash Flows is that at the very bottom you have cash at the beginning of the period, and cash at the end of the period, with the difference being all the pluses and minuses of each line in the Statement. Pretty cool, right?