CrackerJack Insights

Cash is SO Old School

Posted on by Kelly Totten

Most businesses have credit or debit cards to manage their non-check or automatic transactions.  But I still run into some businesses that are relying on old school cash for various transactions.  Don’t get me wrong, there’s nothing wrong with properly documented use of cash, but it’s rarely tracked well.

PLEASE, I beg you, do not randomly go to the ATM machine and take cash out for business use.  If you are traveling, you’ll need some cash.  If at all possible, pay for it personally, collect the receipts and/or keep a journal of how the cash was spent.  Then get reimbursed from the business.  This keeps your books clean, doesn’t raise eyebrows in the event of an audit, and gives you a great incentive to make sure you’re collecting those receipts.

Of course, the best action is to use a credit card as much as possible.  With the credit card, there’s a record of the transaction.  That means your bookkeeper knows to ask you for the receipts.  Debit cards can work for this too, but I really prefer businesses to limit their use of debit cards.  Unless you are keenly aware of the amount of money and the bank and on top of cash flow tracking, using the debit card can be a dangerous and expensive habit (overdrafts, inability to pay important bills, etc).

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Controlling Your Paper: 3 Paperless Office Solutions

Posted on by Kelly Totten

Like many others, I am in pursuit of the paperless office. There are many solutions out there, but finding the right solution is difficult. For my purposes, mac compatibility and an online solution were a must. In addition, I needed a solution that would accept emailed receipts, since75% of my receipts are in email format. I explored three solutions: Dropbox, Shoeboxed, and OfficeDrop. Keep reading to find out the pros and cons to each….

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Year End Tax Strategies

Posted on by Kelly Totten

At this time of year, a lot of my conversations revolve around tax saving strategies. I’ve spoken with several CPAs recently and the advice for cash basis tax payers is consistent. If you are showing a net profit for the year, here are the top 3 strategies for reducing your 2010 tax bill:

  1. Defer income – If you can, push income into 2011. Delay the invoicing, ask your clients to hold payment until January, and/or be less aggressive with your collection efforts.
  2. Accelerate Expenses – Buy needed items before the end of the year and pay down your accounts payable. Cash basis tax payers don’t get deductions until the money is spent, so pay as many of your outstanding bills as possible. Some accountants caution that prepaid expenses (like rent) are not deductible until the period they are used. Check with your tax accountant before pre-paying regular bills.
  3. Buy Needed Equipment – If you are going to need equipment next year, buy it before year end to take advantage of the Section 179 deduction.

Of course, talking with your tax accountant and reviewing your specific tax situation is advised.

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How To Create A Cash Flow Forecast

Posted on by Kelly Totten

A relatively simple Microsoft Excel spreadsheet is usually the best tool for predicting cash flow.  This spreadsheet will track when you expect your revenue to hit the bank account and when your bills and payroll will leave the bank account.  The first column (each column represents a time period, usually a week) in your spreadsheet will begin with your bank account balance, then add incoming cash, subtract outgoing cash, and finally total to what you expect to have left in the bank.  That ending bank balance will be the beginning bank balance in the next column (time period)…wash, rinse, repeat.

Sample Cash Flow Forecast
(Invoices are kept on a separate spreadsheet in this sample.  Forecast would normally extend numerous weeks)

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3 Quick Tips to Reclaim Cash & Profit

Posted on by Kelly Totten

Most business owners have too much on their plate, so much in fact, they end up throwing cash and profit away. It’s not that they are so profitable and have so much cash they don’t know what to do, it’s that they “save time” by skipping the financial review. Here are 3 common places to quickly reclaim lost cash and profit (it’s like looking between the couch cushions for your business!):

1. Forgotten Subscriptions – Free trials and automated renewals are often forgotten. Almost every business I have ever worked with has some automatic charges happening on their credit or debit card for subscriptions they don’t even use.

Solution: Review all bank and credit card statements. Have your bookkeeper research any charges that are questionable. Also ensure that the subscriptions you want to keep are for the right amount. If you’ve changed the number of users, for example, you might not be on the right rate plan.

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How to record a refund for merchandise inventory in MYOB

Posted on by Kelly Totten

Recently, I received this question:

The situation:

I bought inventory and pre-paid the invoice with a credit card. When I received the inventory, they said they had misquoted me and refunded me $50.00 on the order. The refund was made back to the credit card that was used to pay for the order.

The question (in two parts):

  1. This is a refund on the the whole order, not just a handful of the inventory items  (i.e. I am not returning anything, I’m just getting some money back on the job overall). Do I handle that by using Bill–>Misc and entering negative $50  as the bill, which generates a return credit to me? AND
  2. If I do that, I am then being asked to to apply that $50 to one of my accounts, but which one?

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4 Steps To Keep Your Finances on Track in the 4th Quarter

Posted on by Kelly Totten
  1. Forecast Revenue - Based on your year so far, historical numbers, and marketing plan, what revenue goals are achievable for the rest of the year? If you haven’t been doing well this year and you really need to bring your A game to 4th quarter, what are you going to do differently? In your review process, you should have pondered why your year hasn’t gone according to plan.  Use that information to inform your plans for the 4th quarter.  If you have been meeting your targets so far this year, review what is working for you and what you need to do to maintain the momentum.
  2. Adjust Spending – With your year to date information and your revenue plan for the 4th quarter, what changes need to be made to your spending plan?  Will you need increase labor spending to meet your 4th quarter goals?  Do you need to reduce labor costs to get your financial ratios where they need to be? Have you been spending your marketing dollars on things that aren’t working? Do you need to spend more on sales and marketing efforts that are working?
  3. Collect Aggressively – If your business is like most businesses in the b2b service arena, the first quarter is known for clients paying slowly.  To keep your company running smoothly in the first quarter, you must collect aggressively in the 4th quarter. Be vigilant about getting deposits on your fourth quarter work and get December invoices out as early as possible.  Ensure your accounts receivable team is staying on top of collections and do your best to get everything possible collected before everyone heads out for the holidays.
  4. Keep An Eye On Cash Flow – The first quarter collections slow down means you’ll have to be extra careful with your cash flow. Make sure you’re maintaining an adequate cash reserve to handle your critical bills and payroll during the first couple months of the new year.  If your historical trends show first quarter to be normal or strong for cash collections, you may want to pay forward some of your debt in 2010 to get the tax deduction this year (assuming you’re a cash basis payer). Also make sure you adjust your cash flow forecast to coincide with any revenue or spending adjustments.

8 Interview Questions for Prospective Accouting & Bookkeeping Staff

Posted on by Kelly Totten

I’ve been doing some interviewing lately and I thought I’d share some of the questions I ask potential bookkeepers. For more information on how I like to see them answered, subscribe to CrackerJack Business Insights. A full article will be in the October 21st issue.

  1. Do you think accrual or cash basis reporting is better for business management?
  2. What is the accounting equation (or balance sheet equation)?
  3. The bank account is off $0.72.  How long will you spend looking for the problem and what steps will you take to find it?
  4. In cash basis accounting, how would you record a $600 annual insurance premium?
  5. How would you record a $600 annual insurance premium using accrual accounting.
  6. How many gas stations do you think there are in the U.S.?
  7. Rank the following in order of importance for business success: Sales, Teamwork, Quality, Service, Profitability, Integrity
  8. Tell me about a time when you didn’t agree with something your boss asked you to do.

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