Let me first say that I think QuickBooks is a great accounting software for small businesses. It’s versatile and easy to use; you can’t ask for much more than that. The main complaint I have is that it’s TOO easy to use. I can’t tell you how many times I clean up QuickBooks files because people don’t understand the accounting that is happening behind the scenes. I’ll save that rant for another day…
My point today is this: QuickBooks invoices are customizable. Invoices go to your clients, so they should be branded just like any other client communication. I’m sure I’m not the only person in the world who can spot a traditional QuickBooks invoice. Each time I see one, I think, “oh, they’re a small business”. That’s great if you want to be seen as a small business, but a lot of business owners don’t.
Just because you use QuickBooks (and it will grow with you for quite some time), it doesn’t mean that everyone has to know it. A few weeks ago, I signed up for a new hosted sharepoint account. I received a standard QuickBooks invoice from the company. I have to say, it was very disconcerting. I know it sounds bad and I’m a small business too, but I want to believe that the company I’m hosting my secure documents with is a good sized company that’s going to be around. The fact that they sent a QuickBooks invoice shouldn’t make me question that, but it did.
I’d like to take a moment to explain what the IRS business mileage rate means to small business owners. It’s quite simple really…it’s the maximum amount per mile you can deduct from taxes if you’re reimbursing using the mileage method. If you reimburse employees more than this rate, the overage is taxable to them (known as a taxable fringe benefit). On the flip side, you don’t HAVE to reimburse this amount. It’s the MAXIMUM deductible amount, not the required amount (unless you’re in California, everything is different there!).
So, if you’re like many of the small businesses I work with and the thought of reimbursing 50.5 cents/mile for a trip to the post office is something you can’t handle, it’s okay. It’s nice to reimburse at the IRS rate, it’s a good thing to do, but you don’t have to. Sure, your employees will complain because all of their ill-informed friends have told them they are mistreated. You can simply tell them that the IRS sets the maximum tax deductible amount and they can consult with their tax preparer about the possibility of deducting the rest. The IRS certainly doesn’t know how to manage your business!
A question was posted on LinkedIn regarding how to pay the owner of a LLC: http://www.linkedin.com/answers/finance-accounting/accounting/FIN_ACC/149517-15002788. I posted an answer to this question and thought it might interest some readers here. This is a common question among business owners, so I’ll expand on the answer.
When a LLC is created, the tax treatment is determined. Payments to the owners of the business are made per the tax treatment.
Sole Proprietors (or LLC single member): No payroll is paid to the owner. The owner may take draws from the business.
I have been searching for a time tracking tool that will take care of my simple tracking needs inexpensively in an easy to use format. I find that when I track my time, I am more efficient and I bill more hours. I tend to lose track of time easily through out the day, but a timer keeps me focused.
The requirements for my tracker were pretty simple: 1) Track time by client name and project, 2) Must have a timer and 3) Report hours worked by client for a time period. Bonus points for tracking time with an hourly rate and/or QuickBooks importing. After downloading a few programs and settling on one, my computer had to be sent out for repair. That led to the final requirement – must be web based, so I can keep track of time no matter where I am or which computer I am using.
I stumbled across Toggl and have been using it for about a week. The base version covers my essential needs and it’s FREE! If you need more functionality (billable rates, customized reports), you can upgrade to a paid version. The paid version is $19/month/workgroup. So far, the free version is working great for me.
The question I get asked most frequently from new clients is "what are the independent contractor rules?" All small business owners like to use independent contractors to save money and avoid the dreaded payroll.
The IRS and state agencies want to ensure that you are not misclassifying employees as independent contractors to get around employment laws and taxes. You must be sure you’re following the rules or you could face stiff penalties. In the event worker’s are reclassified during an employment audit, you could be forced to pay all of the employment taxes owed from prior periods plus penalties and interest. (and yes, they do regularly audit small businesses. I’ve personally handled 2 audits in a two year period for my small client base.)
So, how do you know that you are classifying independent contractors appropriately? Well, it’s not as easy as you would think. The IRS and individual states employ different rules. The general rule for any employment law is you must follow the most conservative law. If the state’s laws are more stringent, you must follow state law…it’s usually the state that further clarifies a federal law.