The difficult economic climate of recent years has led more businesses to utilize barter transactions, in which they trade their products and services for other products and services. Many businesses wrongly assume they don’t need to account for these transactions. Accounting for bartering transactions is required by the IRS and is essential to accurately determining the financial health of your business.
When you barter for other goods and services, you are still investing time and resources to sell the item you are trading. You are simply receiving a commodity other than cash in exchange for your product or service. Not accounting for barter transactions is equivalent to not accounting for revenue and expenses. It’s impossible to determine how well your business is doing if you can’t generate accurate financial statements.
Recording these transactions is quite simple if you break them down into individual pieces. When you barter, two transactions occur: 1) you sell something and 2) you buy something. The most confusing factor can be determining the value of the transaction. IRS guidelines dictate that you must value the transaction at the fair market value of the item you are receiving. In most cases, the fair market value is already known-it’s the normal sale price of the item. The sale of your goods or services is valued at the purchase price of the goods you are receiving.
Time tracking is a subject that causes many a manager’s eyes to roll.Â The concern is understandable.Â Most of us have experienced theÂ negative consequences that occur when bad time tracking practices are employed.Â Time tracking can be a major headache, if you get too granular and it can make employees feel like “the man” is watching their every move.Â There are ways to implement time tracking that minimize the commonly quoted reasons for hating the policy, but first you need understand why time tracking is important (even if you bill on a fixed fee basis).
When you track time, you are gathering data that will allow you to do project costing.Â This is especially important when you’re working on a fixed fee.Â I once had a client who bid a project low because it was a good publicity piece.Â Since they knew it was going to be a loser, they didn’t bother keeping up with the project cost reports.Â When the project was finished, they finally took the time to review the time data they had gathered.Â Guess what?Â The project was over budget by 400%!Â The designers went crazy trying to make it the best piece ever. Why?Â Because no one gave them a limit.Â When you actively monitor your project time and budgets, you can give your employees a sense of the project scope and keep scope creep under control.
Project costing information also helps you price future projects.Â Take the above situation, for example.Â With the time and cost information on that project, the client is armed with useful information for a similar quote request.Â Sometimes a project is over budget because of poor project management and sometimes it’s just a bad quote.Â Managers will have to do their own due diligence to determine why the project went south. The time tracking information will help them figure out the problem on current projects and will be a great resource for future project pricing.
It’s time to start preparing 2009 1099 forms. Every year the question arises: Who gets a 1099?
For the complete answer, see: http://www.irs.gov/pub/irs-pdf/i1099msc.pdf
In general, service providers you have paid $600 or more in 2009 need to be issued a 1099.Â Service providers include: independent contractors, accountants, public relations firms, janitorial services, etc.Â Payments to service providers are reported in box 7, non-employee compensation. Sales commissions paid to non-employees are also reported in box 7.Â This does depend on the type of entity you paid:
- Sole proprietors, partnerships, and LLC’s taxed as sole proprietors or partnerships DO get a 1099.
- C Corporations, S Corporations, and LLC’s taxed as C or S Corporations DO NOT need to be issued a 1099.
No one likes tracking their time, but it is important, even if you bill on a fixed fee basis. Here’s why…
- It allows project costing of your fixed fee projects which can help you stay on budget and profitable.
- It gives you the information you need to price future projects.
- You’ll know how much time and money you’ve spent on R&D projects, so you can take advantage of any available tax credits.
- Your bookkeeper/accountant will be able to generate more accurate financials because you’ll have the information to value work in progress.
- The accurate financials will allow you to view your financial trends. Watching your trends allows you to make decisions early, so you don’t end up in a cash crunch panic.
- Time tracking for business owners and salaried employees can lead to a better work/life balance. You’ll see any areas where you aren’t being productive and you can adjust your work habits to get more out of your work day in less time.
- You can value the time you’re spending on tasks outside of your expertise and make an informed decision about outsourcing those tasks.
- You can right size your staff. By gaining visibility in how time is spent, you will see when your staff is in danger of burning out. On the flip side, too large of a staff means lower profits and bonuses, so you’ll be able to see the need to downsize as well.
There are a couple of ways to handle customer deposits in QuickBooks.
Method 1: Receive Payment Without Applying to an Invoice
If the customer hands you a check you, can simply receive the payment without applying it to an invoice. This will create a credit on their account. While this method will allow you to apply the credit to the project invoice, it usually isnâ€™t the best way to handle the situation.
Want to know my biggest beef with QuickBooks?Â Well, really with the Intuit, “the makers of QuickBooks”.Â It’s the marketing.Â They constantly tell business owners that no accounting knowledge is necessary.
Don’t get me wrong, I think a lot of the data entry could and should be done by administrative clerks or do it yourself business owners.Â I just think it’s a huge mistake to run a business based on incorrect financial information.Â If you don’t know accounting, there’s a pretty good chance you’re not getting accurate, helpful information from your books (garbage in, garbage out).
In this economy, business owners need to stay on top of their financials.Â That means actually using the data you entered into QuickBooks.Â However, if the QuickBooks data is wrong, you’re using bad information to make decisions.
Finally!Â Mac users can use QuickBooks online.Â Previously, QuickBooks Online only worked with internet explorer.Â This week, Intuit finally released the online version that works on Firefox and soon will work with Safari.Â Hip Hip Hooray!Â There’s now a multi-user QuickBooks version for mac users.