Archive for June, 2007

Author’s note: I’m taking a break from blogging (click here for details), but please feel free to contact me at (800) 889-6484 or David@SmallBizLogic.com.

“How long should I keep my tax returns? Cancelled checks? Payroll records?”

1. Don’t keep certain documents at all (restaurant expenses paid by credit card)
2. Keep everything else for seven years (fixed assets)
3. Except keep some documents forever like tax returns and property deeds
4. Ask your CPA for written guidelines
5. Consider a long-term, online electronic storage solution
6. Revisit your policy annually; stay current in today’s fast-changing data environment (web 2.0, wireless, mobile, etc.)
7. Use your judgment to resolve the contradictory advice you’ll receive.

Links…

• Business Owner’s Toolkit: Ask Alice About Record Retention
• San Francisco Chronicle: Hang on to those employee records as long as law requires
• Internal Revenue Service: How long should I keep records?

Should you lease or buy that new computer?

Buy it. In leases, you often pay a much higher interest rate. Use a loan calculator (see Quick Links on the front page of Financial Think) to calculate the interest rate before you sign a lease. Leases have other hidden costs, and their tax advantage is rivaled by the section 179 deduction for purchased equipment.

Exceptions? When you have no other financing options, you need the asset for short-term use, or if your strategy is to use a lot of leverage to grow your business.

For more information, click here.

A quick, accurate monthly close gives you the numbers you need to run your business. Here’s a guide to help you stay on track.

Desired End Result: Financial Statements

You’re “done” when you’re looking at meaningful financial statements. These are reports that give essential decision-making data to you, your banker, your investors, and your tax person.

All of these can be memorized in QuickBooks and generated in seconds:

• Profit and Loss (P&L)
• Balance Sheet
• Statement of Cash Flows
• Accounts Receivable Aging Summary (A/R)
• Accounts Payable Aging Summary (A/P)

How Do You Get There? Three Easy Steps…

1. Complete data entry. Important items here:

• Bank, credit card, loan, and line of credit transactions all entered and accounts reconciled
• Customer invoices/sales all entered and dated in the correct month
• Vendor bills/checks all entered and dated in the correct month
• Payroll entries current including wages, payroll tax, worker’s compensation, PTO, and retirement plan deferrals and liabilities
• Other key accruals entered such as general liability insurance

2. Line by line review of financial statements

• P&L
• Balance Sheet
• Support schedules
• General ledger detail

3. Work the punch list of open items

• Last month’s open items addressed
• Suspense account is actively managed; items aren’t stuck in there and left for dead until tax time
• Update the punch list so it’s current - makes it easy to pick up where you left off
• If an item’s hung up on the punch list, you might have a systemic problem to fix.

Commitment

The key to the monthly close is a commitment to the process.

I guarantee it: you’ll never have “more time” to catch up later.

But if you ever get audited, run into a cash flow crisis, work on government contracts, take on partners or try to sell your business, you will be thankful you had the foresight to close the books promptly month in and month out.

June 26th will be my last blog post. I’m going to redirect this time into R&D – new channels to deliver our brand of financial management consulting to businesses around the U.S.

The Financial Think e-mail and RSS feeds will remain active. We’ll use them periodically to tell you about Small Business Logic Inc. news and promotions. For example, we plan to roll out webinars on a range of financial analysis and QuickBooks topics, and Financial Think subscribers will receive special pricing. Your subscription is self-managed, so if you don’t find those helpful, you can unsubscribe at any time.

But we hope you’ll stick with us. We gear our offerings to an annual calendar of small business CFO tasks. In December/January, for example, we tend to do a lot of “pre-tax scrubs” – getting your QuickBooks ready for tax time. Or we’ll send out a reminder soon that the deadline for setting up a new retirement plan for your company is rapidly approaching – would you like some help deciding which plan is best? That sort of thing.

Thank you for your readership. Some of you have been subscribers since 2001, and I’ve appreciated all the comments you’ve sent my way.

And remember…while I may be leaving the blog…I’m still here working every day, so please feel free to contact me at any time:

david@smallbizlogic.com
(800) 889-6484 / (510) 891-8841

Entrepreneurs tend to underutilize the value of their QuickBooks file. We get sidetracked by bookkeeping details.

For some “instant perspective”, pull a graph of your company’s net worth in QuickBooks – it only takes a few seconds to show assets, liabilities and net worth.

Is your company gaining or losing ground?

How to pull it? REPORTS / COMPANY & FINANCIAL / NET WORTH GRAPH.