Quantcast
Jump to content



nptrb

Sponsor Member
  • Posts

    26
  • Joined

  • Last visited

  • Days Won

    1

Everything posted by nptrb

  1. Whether you like Tom Brady or not, you have to admit he is the Greatest Of All Time. I’m not a football person, but when I hear or read about his accomplishments, I’m amazed. If your shop isn’t the greatest, do you know why? What is your vision for your auto repair shop? One lesson I’ve learned is that you have to see where you want to be in the future. See where you want your shop to be in 3 years or 5 years. When you see this picture of your shop the way you want it to be, what does that look like? Does it bring a smile to your face or fill you full of satisfaction? Another term you may be familiar with is a Unique Selling Proposition or USP. This is what sets your shop apart from your competition. This is the reason why people do business with you when they have other choices. Perhaps your techs are THE very best in town or your pricing is fair and more affordable than the rest. It could be that your customer service is amazing, and you treat you customers like clients. You place them at such a high value that they feel like family. This is my goal in my bookkeeping business. To be THE very best at what I do. To serve my clients as part of their team and not just another vendor. If you couldn’t answer that question about if you shop isn’t the greatest, I can help with that. I have a report that shows you what your competition is doing, so you may adjust and be better than they are. It would be like having a video tape of your next opponent’s practice. You would be able to defeat them because you knew what they were going to do next. This was what the Tampa defense did to Kansas City in this year’s Superbowl. Made Mahomes one frustrated guy and no TD’s! That hasn’t happened often. Andy Reid wasn’t thrilled either. I had a friend who knows football help me with that football stuff by the way. This is part of who I am. I do the research, so I know my clients and I have the experience to expect what they need. I’d love to talk to you about how I can help you become the GOAT of repair shops in your area. Let’s find out how I may be able to be that teammate. The one that helps you become the winner you see when you look at your shop in the future. The best to you and the success of your shop. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]
  2. Whew! We’re moving on from the PPP loan blog series to dispensing knowledge about the Employee Retention Credit. Hello IRS! With all of the changes and tax time approaching ~2 months away, I hope you’re ready to go. If you haven’t already filed, here is some information that’s about two weeks old, so grab a cup of coffee as we dive into a summary of this credit. This credit is designed to make it easier for businesses that chose to keep employees on their payroll through all the challenges that COVID-19 brought and is still brining. For those of you who kept your employees, thank you and stick with me as I open some data. The name of this is the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and was enacted December 27, 2020. This made changes to the CARES Act and directly related to this was modifying and extending the Employee Retention Credit (ERC), for six months through June 30, 2021. Several of the changes apply only to 2021, while others apply to both 2020 and 2021. Here’s what this new Act reads as an employer, you can a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. The limits of qualified wages are $10,000 per employee per calendar quarter in 2021. This means the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021. Depending on the size of your team, this could be a substantial credit. You as an employer can access the ERC for Q1 and Q2 of ’21 prior to filing your employment tax returns by reducing employment tax deposits. If you are an employer with 500 or less full-time employees in 2019, you may request an advance payment (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, if you are an employer with greater than 500 employees, you are not eligible for the advance. Here are a couple of eligibility rules. As of 1/1/21 employers are eligible if you operate a trade business during 1/1/21 – 6/30/21 (Q1 & Q2 of 2021) and either of these apply. A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (to be eligible based on a decline in gross receipts in 2020 the gross receipts were required to be less than 50%). If you started your business in 2020 then you can use the corresponding quarter in 2020 to measure your decline. For Q1 and Q2 of ’21 you can measure the decline in gross receipts using the quarter that came immediately before the current quarter (Q4 of ‘20 to measure Q1 of ’21). Effective 1/1/21 the definition of qualified wages was changed to read: For an employer that averaged more than 500 full-time employees in 2019, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts. For an employer that averaged 500 or fewer full-time employees in 2019, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services. Lastly, here is a paragraph for employers who received PPP loans from 3/27/20 and forward. You may claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan. You may check out this link for more information COVID-19-Related Employee Retention Credits: How to Claim the Employee Retention Credit FAQs or contact me and we can talk through this. The next blog will be about what to do after you receive your PPP loan. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]
  3. We ended Part 3 of this blog series with “Second Draw PPP Loan Application and Documentation Requirements”. As this second draw is being distributed, the rules are changing. I encourage you to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. You may also contact me if you would prefer to have a conversation with someone outside the government. My contact information is at the bottom of this post. Beginning Part 4, we start with expanding on this rule from the New PPP Regulations: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: This section is self-explanatory, but just a bit of clarification for you. When you apply for a loan in an amount that is less than $150,000, you may disregard the required documentation mentioned in the previous blog. There is a three-letter word that causes a pause here “BUT” “Must be submitted on or before the date the borrower applies for loan forgiveness, as required under the Economic Aid Act.” A second piece is that IF you as a borrower do not apply for loan forgiveness, you must provide this documentation to the SBA when they request it from you. So, be prepared. How to Request an Increase for a PPP First Draw Loan if the Borrower Returned All or Part of a Loan, or Did Not Accept the Full Amount Previously Approved: Here are the categories of borrowers that may reapply or request an increase in the amount of the PPP loan: If a borrower returned all of a PPP loan, the borrower may reapply for a PPP loan in an amount the borrower is eligible for under current PPP rules. If a borrower returned part of a PPP loan, the borrower may reapply for an amount equal to the difference between the amount retained and the amount previously approved. If a borrower did not accept the full amount of a PPP loan for which it was approved, the borrower may request an increase in the amount of the PPP loan up to the amount previously approved. You may use the SBA’s E-Tran Servicing website to request an increase in the PPP loan amount electronically. After the request, you are required to provide the lender with supporting documents for the increase. As of this writing, the SBA’s process for collecting information from borrowers was under development. This may be available when you apply for an increase in the loan amount as described above. Clarification on Borrowers that are Ineligible to Receive a Second Draw PPP Loan: Here is some language from the Economic Aid Act that describes borrowers who are NOT eligible to receive a Second Draw PPP loan. Read carefully please? A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy, or that describes itself as a think tank in any public documents; Certain entities organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People’s Republic of China or the Special Administrative Region of Hong Kong; Any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612); A person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act; A publicly traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f). Pay attention to the punctuation here. At the end of each bullet, there is a semicolon “;”. This means that if the first bullet does not apply to your situation, the next one or the next one, or the next one, OR the NEXT one may. We’re getting close to the end, but this section has some additional clarification of borrowers that will not qualify for the second draw PPP loan. Check out these are examples: You are engaged in any activity that is illegal under Federal, state, or local law; You are a household employer (individuals who employ household employees such as nannies or housekeepers); An owner of 20 percent or more of the equity of the applicant is presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government; Your business or organization was not in operation on February 15, 2020; • You or your business received or will receive a grant under the Shuttered Venue Operator Grant program under section 324 of the Economic Aid Act; The President, the Vice President, the head of an Executive Department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in your business; Your business is an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); Your business has permanently closed.” Again, same observation regarding the semicolons at the end of each bullet. Thanks for sticking with me and welcome to the end of this blog series. Whew, that IS a TON of reading. Again, I am keeping current of the changes as they happen, so if you want to talk, let’s schedule a time to meet soon. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article
  4. We ended Part 3 of this blog series with “Second Draw PPP Loan Application and Documentation Requirements”. As this second draw is being distributed, the rules are changing. I encourage you to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. You may also contact me if you would prefer to have a conversation with someone outside the government. My contact information is at the bottom of this post. Beginning Part 4, we start with expanding on this rule from the New PPP Regulations: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: This section is self-explanatory, but just a bit of clarification for you. When you apply for a loan in an amount that is less than $150,000, you may disregard the required documentation mentioned in the previous blog. There is a three-letter word that causes a pause here “BUT” “Must be submitted on or before the date the borrower applies for loan forgiveness, as required under the Economic Aid Act.” A second piece is that IF you as a borrower do not apply for loan forgiveness, you must provide this documentation to the SBA when they request it from you. So, be prepared. How to Request an Increase for a PPP First Draw Loan if the Borrower Returned All or Part of a Loan, or Did Not Accept the Full Amount Previously Approved: Here are the categories of borrowers that may reapply or request an increase in the amount of the PPP loan: If a borrower returned all of a PPP loan, the borrower may reapply for a PPP loan in an amount the borrower is eligible for under current PPP rules. If a borrower returned part of a PPP loan, the borrower may reapply for an amount equal to the difference between the amount retained and the amount previously approved. If a borrower did not accept the full amount of a PPP loan for which it was approved, the borrower may request an increase in the amount of the PPP loan up to the amount previously approved. You may use the SBA’s E-Tran Servicing website to request an increase in the PPP loan amount electronically. After the request, you are required to provide the lender with supporting documents for the increase. As of this writing, the SBA’s process for collecting information from borrowers was under development. This may be available when you apply for an increase in the loan amount as described above. Clarification on Borrowers that are Ineligible to Receive a Second Draw PPP Loan: Here is some language from the Economic Aid Act that describes borrowers who are NOT eligible to receive a Second Draw PPP loan. Read carefully please? A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy, or that describes itself as a think tank in any public documents; Certain entities organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People’s Republic of China or the Special Administrative Region of Hong Kong; Any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612); A person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act; A publicly traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f). Pay attention to the punctuation here. At the end of each bullet, there is a semicolon “;”. This means that if the first bullet does not apply to your situation, the next one or the next one, or the next one, OR the NEXT one may. We’re getting close to the end, but this section has some additional clarification of borrowers that will not qualify for the second draw PPP loan. Check out these are examples: You are engaged in any activity that is illegal under Federal, state, or local law; You are a household employer (individuals who employ household employees such as nannies or housekeepers); An owner of 20 percent or more of the equity of the applicant is presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government; Your business or organization was not in operation on February 15, 2020; • You or your business received or will receive a grant under the Shuttered Venue Operator Grant program under section 324 of the Economic Aid Act; The President, the Vice President, the head of an Executive Department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in your business; Your business is an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); Your business has permanently closed.” Again, same observation regarding the semicolons at the end of each bullet. Thanks for sticking with me and welcome to the end of this blog series. Whew, that IS a TON of reading. Again, I am keeping current of the changes as they happen, so if you want to talk, let’s schedule a time to meet soon. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]
  5. We ended Part 2 of this blog series with “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 3, we start with expanding on this rule from the New PPP Regulations: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” The Interim Final Rules (IFR) state that if your business is in bankruptcy, you will not be approved for a PPP loan. Congress gave the SBA to defer that decision to bankruptcy judges but did not choose to exercise that option. Again, don’t shoot the messenger please? I was shocked by this decision myself. I encourage you to look at the language from the IFR but will not insert them here. Here’s a quote from the IFR to give you a taste. “If the applicant or the owner of the applicant is the debtor in a bankruptcy proceeding, either at the time it submits the application or at any time before the loan is disbursed, the applicant is ineligible to receive a PPP loan.” There is more that discusses the timing of when you file for bankruptcy and that’s where the hairs start getting split. If you find yourself in this possible gray area, check out the IFR. There is a new way to account for a 25% reduction in revenue that will qualify you for a second PPP loan. Here’s the language: “A borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline.” Here’s the idea. If your shop had a reduction of annual receipts (when comparing 2019 to 2020) while in operation in 100% of 2019 and 2020, then you meet the criteria. Another wrinkle is that you must have already qualified before taking the revenue reduction into account. The IFR does make this simpler than it was before. If you want to find out the reasons the SBA created a variable method of figuring their reduction in revenue, check out the IFR or we can have a conversation. I’m here for you. Lastly, you can still qualify for the second draw when you have a reduction of 25% in revenue by proving that you had the reduction in one quarter of 2020 when compared to the same quarter in 2019. For example, if you had the revenue reduction in the 1st quarter of 2020 when compared to the 1st quarter in 2019, you qualify. Here’s the second and last topic for this blog. My eyes are starting to cross so hang in there. Second Draw PPP Loan Application and Documentation Requirements: If you are wanting to make application, you should do that as soon as the application is available. It may be available now, so check it out. The IFR did specify the documentation requirements, so here we go. The documentation standard is essentially the same as the first draw PPP loan. If you meet these requirements, no additional proof of payroll costs is required. These requirements come straight from the IFR: If the applicant: (i)used calendar year 2019 figures to determine its First Draw PPP Loan amount, (ii) used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of calendar year 2020), and (iii) the lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan. When you meet the standards from above “Additional documentation is not required because the lender already has the relevant documentation supporting the borrower’s payroll costs.” Even if you do meet the standards from above, the IFR allows lenders that latitude to request additional documents if the lender “concludes that it would be useful in conducting the lender’s good-faith review of the borrower’s loan amount calculation.” Here some plain language. The bank can ask for more documents to review your calculation of the loan amount. When you are asking for a second round PPP loan that is greater than $150,000 you have to submit documents that are “adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019.” An example of the documents is: Relevant tax forms, including annual tax forms, or Quarterly financial statements or bank statements if relevant tax forms are not available. Hello Ms. Bookkeeper, do you have a handle on this stuff? I’m confident I do, so if you want to talk, let’s schedule a time to meet soon. In part 4 of the series, we’ll start with: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: See you back here for Part 4. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article
  6. We ended Part 2 of this blog series with “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 3, we start with expanding on this rule from the New PPP Regulations: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” The Interim Final Rules (IFR) state that if your business is in bankruptcy, you will not be approved for a PPP loan. Congress gave the SBA to defer that decision to bankruptcy judges but did not choose to exercise that option. Again, don’t shoot the messenger please? I was shocked by this decision myself. I encourage you to look at the language from the IFR but will not insert them here. Here’s a quote from the IFR to give you a taste. “If the applicant or the owner of the applicant is the debtor in a bankruptcy proceeding, either at the time it submits the application or at any time before the loan is disbursed, the applicant is ineligible to receive a PPP loan.” There is more that discusses the timing of when you file for bankruptcy and that’s where the hairs start getting split. If you find yourself in this possible gray area, check out the IFR. There is a new way to account for a 25% reduction in revenue that will qualify you for a second PPP loan. Here’s the language: “A borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline.” Here’s the idea. If your shop had a reduction of annual receipts (when comparing 2019 to 2020) while in operation in 100% of 2019 and 2020, then you meet the criteria. Another wrinkle is that you must have already qualified before taking the revenue reduction into account. The IFR does make this simpler than it was before. If you want to find out the reasons the SBA created a variable method of figuring their reduction in revenue, check out the IFR or we can have a conversation. I’m here for you. Lastly, you can still qualify for the second draw when you have a reduction of 25% in revenue by proving that you had the reduction in one quarter of 2020 when compared to the same quarter in 2019. For example, if you had the revenue reduction in the 1st quarter of 2020 when compared to the 1st quarter in 2019, you qualify. Here’s the second and last topic for this blog. My eyes are starting to cross so hang in there. Second Draw PPP Loan Application and Documentation Requirements: If you are wanting to make application, you should do that as soon as the application is available. It may be available now, so check it out. The IFR did specify the documentation requirements, so here we go. The documentation standard is essentially the same as the first draw PPP loan. If you meet these requirements, no additional proof of payroll costs is required. These requirements come straight from the IFR: If the applicant: (i)used calendar year 2019 figures to determine its First Draw PPP Loan amount, (ii) used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of calendar year 2020), and (iii) the lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan. When you meet the standards from above “Additional documentation is not required because the lender already has the relevant documentation supporting the borrower’s payroll costs.” Even if you do meet the standards from above, the IFR allows lenders that latitude to request additional documents if the lender “concludes that it would be useful in conducting the lender’s good-faith review of the borrower’s loan amount calculation.” Here some plain language. The bank can ask for more documents to review your calculation of the loan amount. When you are asking for a second round PPP loan that is greater than $150,000 you have to submit documents that are “adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019.” An example of the documents is: Relevant tax forms, including annual tax forms, or Quarterly financial statements or bank statements if relevant tax forms are not available. Hello Ms. Bookkeeper, do you have a handle on this stuff? I’m confident I do, so if you want to talk, let’s schedule a time to meet soon. In part 4 of the series, we’ll start with: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: See you back here for Part 4. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]
  7. Hi, Natalie here. We ended Part 1 of this blog with the SBA’s definition of gross receipts which is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 2, we start with expanding on this rule from the New PPP Regulations: “Any Forgiveness Amount” of a First Draw PPP Loan is Excluded from a Borrower’s Gross Receipts.” Simply stated, you can breathe a sigh of relief. Forgiveness amounts from your first draw PPP loan are not included a gross income when adding up what your gross receipts were. Think of this as a tax deduction taken right off the top of your gross receipts. Yes, I went there, taxes. As I write this, I’m preparing my client’s books for the tax pros who will be busy from February through April 15th. But, I digress, back to the SBA interim rules If you want to dive into the SBA rule on forgiveness amounts, check out section 7A(i) of the Small Business Act. The takeaway from this section is that PPP forgiveness amounts are expressly excluded (they don’t count) from being taxed as income. This also makes sure you are not disqualified from receiving the second draw PPP loan because of forgiveness during the first draw PPP loan. Restated, you have a better opportunity to qualify for the second round of PPP loans. The next line in the interim rules reads: “Borrowers May Use any 365 Day Period Beginning on January 1, 2019 to Calculate Their Average Monthly Payroll Costs:” The following is general in nature and not related to your specific situation, so stick with me, please? The maximum amount any individual borrower my receive from the second draw PPP loan is the smaller amount of two and one half (2.5) months of the borrower’s average monthly payroll costs during that 365-calendar day period not to exceed $2 million. You have two options for calculating the time period. “The 1-year period before the date on which the loan is made.” “Calendar year 2019.” You have some flexibility here as you can choose any 365-day period starting on 1/1/19. It may be an exact calendar year or may be any period of 365 days between 1/1/19 and today. An example based on the federal government fiscal year is starting on 10/1/19 and ending 9/30/20. Here’s quote from the Interim Financial Rules if you’d like to read the ‘official’ language: “Subsection (f) of the IFR uses “calendar year 2020” to refer to “the twelve-month period prior to when the loan is made.” Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis. Allowing borrowers to calculate payroll costs based on calendar year 2020 is also not expected to result in a significant difference in payroll costs compared to the twelve months preceding the date the loan is made because all Second Draw PPP Loans will be made in the first quarter of 2021.” To wrap up this blog, we’re going to dive into another section of the Interim Financial Rules: “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” If you are a seasonal employer or new entity that is not a NAICS Code 72 business this is for you, but wait. A NAICS Code 72 business is defined as “businesses in the accommodation and food services sector”. Here’s where it gets a bit deep and potentially confusing. A NAICS Code 72 business may also be considered as seasonal employer or a new entity. I know, what appears to be typical government legalese and double speak. Hang in there as I do my best to translate this for you. The Interim Final Rules clarify this by stating that when your NAICS Code 72 business fits into one of these separate categories… Here’s where the seasonal employer/new entity and NAICS Code 72 business are joined. These businesses MAY calculate their payroll costs used to determine their loan amount… …based upon the formula that applies to the entity, OR the standard formula used to calculate payroll costs for every other type of borrower… while still being allowed to use the 3.5 times multiplier that is applied to NAICS Code 72 entities under the new Act. Wading through government regulations can be challenging and this blog series will continue with Part 3. We’ll start with: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” I may be able to shed some additional light on these new rules, so contact me if you want to talk this over or do my best to answer specific questions about these new rules. See you back here for Part 3. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article
  8. Hi, Natalie here. We ended Part 1 of this blog with the SBA’s definition of gross receipts which is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 2, we start with expanding on this rule from the New PPP Regulations: “Any Forgiveness Amount” of a First Draw PPP Loan is Excluded from a Borrower’s Gross Receipts.” Simply stated, you can breathe a sigh of relief. Forgiveness amounts from your first draw PPP loan are not included a gross income when adding up what your gross receipts were. Think of this as a tax deduction taken right off the top of your gross receipts. Yes, I went there, taxes. As I write this, I’m preparing my client’s books for the tax pros who will be busy from February through April 15th. But, I digress, back to the SBA interim rules If you want to dive into the SBA rule on forgiveness amounts, check out section 7A(i) of the Small Business Act. The takeaway from this section is that PPP forgiveness amounts are expressly excluded (they don’t count) from being taxed as income. This also makes sure you are not disqualified from receiving the second draw PPP loan because of forgiveness during the first draw PPP loan. Restated, you have a better opportunity to qualify for the second round of PPP loans. The next line in the interim rules reads: “Borrowers May Use any 365 Day Period Beginning on January 1, 2019 to Calculate Their Average Monthly Payroll Costs:” The following is general in nature and not related to your specific situation, so stick with me, please? The maximum amount any individual borrower my receive from the second draw PPP loan is the smaller amount of two and one half (2.5) months of the borrower’s average monthly payroll costs during that 365-calendar day period not to exceed $2 million. You have two options for calculating the time period. “The 1-year period before the date on which the loan is made.” “Calendar year 2019.” You have some flexibility here as you can choose any 365-day period starting on 1/1/19. It may be an exact calendar year or may be any period of 365 days between 1/1/19 and today. An example based on the federal government fiscal year is starting on 10/1/19 and ending 9/30/20. Here’s quote from the Interim Financial Rules if you’d like to read the ‘official’ language: “Subsection (f) of the IFR uses “calendar year 2020” to refer to “the twelve-month period prior to when the loan is made.” Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis. Allowing borrowers to calculate payroll costs based on calendar year 2020 is also not expected to result in a significant difference in payroll costs compared to the twelve months preceding the date the loan is made because all Second Draw PPP Loans will be made in the first quarter of 2021.” To wrap up this blog, we’re going to dive into another section of the Interim Financial Rules: “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” If you are a seasonal employer or new entity that is not a NAICS Code 72 business this is for you, but wait. A NAICS Code 72 business is defined as “businesses in the accommodation and food services sector”. Here’s where it gets a bit deep and potentially confusing. A NAICS Code 72 business may also be considered as seasonal employer or a new entity. I know, what appears to be typical government legalese and double speak. Hang in there as I do my best to translate this for you. The Interim Final Rules clarify this by stating that when your NAICS Code 72 business fits into one of these separate categories… Here’s where the seasonal employer/new entity and NAICS Code 72 business are joined. These businesses MAY calculate their payroll costs used to determine their loan amount… …based upon the formula that applies to the entity, OR the standard formula used to calculate payroll costs for every other type of borrower… while still being allowed to use the 3.5 times multiplier that is applied to NAICS Code 72 entities under the new Act. Wading through government regulations can be challenging and this blog series will continue with Part 3. We’ll start with: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” I may be able to shed some additional light on these new rules, so contact me if you want to talk this over or do my best to answer specific questions about these new rules. See you back here for Part 3. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]
  9. I'm so sorry to hear this but I'm glad you're making a good recovery!
  10. Hi, Natalie here. There is wealth of information to clear up confusion about the new regulations regarding PPP loans. There will probably be changes, so this is summary is based on the best information currently available. Before you take action, I encourage you to check for updated rules and make sure you are fully informed before signing any paperwork. As with any government program, there are a lot of details that need to be understood. So this may be spread out over two-to-three blogs, as my goal is to deliver this information in bite-sized chunks. For additional information, I suggest you contact your local Small Business Association (SBA). Here’s a headline of the first section from an article in Forbes magazine: “Second Draw PPP Loan Eligibility Requires that Borrower will have spent the “Full Amount” of the First Loan Before Receiving the Disbursement of the Second Loan” The title for this Act is a mouthful of legalese, but the short title is the “Economic Aid Act”. This Act states that “a Second Draw PPP Loan may only be made to an eligible borrower that (1) has received a First Draw PPP Loan, and (2) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. Let’s break this down into simpler language. You have to be eligible You have received the first PPP loan You will spend 100% of the first loan before collecting any of the funds from the second PPP loan Here is some clarification from the Interim Final Rules: The borrower must have spent the full amount of its First Draw PPP Loan on eligible expenses under the PPP rules to be eligible for a Second Draw PPP Loan; and “The full amount” of the borrower’s First Draw PPP Loan includes the amount of any increase on such First Draw PPP Loan made pursuant to the Economic Aid Act. This next topic is what the definition of “Gross Receipts” is. “Gross Receipts” Defined for Purposes of Determining Whether There Has Been a 25% Drop in Revenues to Qualify for Second Draw Unfortunately, the Economic Aid Act does not include a general definition of “gross receipts” for purposes of determining a borrower’s revenue reduction. Here is what is included in gross receipts: ““All revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” Here is what is not included in gross receipts: “Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); Proceeds from transactions between a concern and its domestic or foreign affiliates; and Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.” One additional statement regarding what may not be excluded from gross receipts has to do with contractor costs and other items under the category of “all other items”. These items include: reimbursements for purchases a contractor makes at a customer's request investment income employee-based costs such as payroll taxes Lastly for part 1, this definition of gross receipts is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. I may be able to shed some additional light on these new rules, so contact me if you want to talk this over. View full article
  11. Hi, Natalie here. There is wealth of information to clear up confusion about the new regulations regarding PPP loans. There will probably be changes, so this is summary is based on the best information currently available. Before you take action, I encourage you to check for updated rules and make sure you are fully informed before signing any paperwork. As with any government program, there are a lot of details that need to be understood. So this may be spread out over two-to-three blogs, as my goal is to deliver this information in bite-sized chunks. For additional information, I suggest you contact your local Small Business Association (SBA). Here’s a headline of the first section from an article in Forbes magazine: “Second Draw PPP Loan Eligibility Requires that Borrower will have spent the “Full Amount” of the First Loan Before Receiving the Disbursement of the Second Loan” The title for this Act is a mouthful of legalese, but the short title is the “Economic Aid Act”. This Act states that “a Second Draw PPP Loan may only be made to an eligible borrower that (1) has received a First Draw PPP Loan, and (2) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. Let’s break this down into simpler language. You have to be eligible You have received the first PPP loan You will spend 100% of the first loan before collecting any of the funds from the second PPP loan Here is some clarification from the Interim Final Rules: The borrower must have spent the full amount of its First Draw PPP Loan on eligible expenses under the PPP rules to be eligible for a Second Draw PPP Loan; and “The full amount” of the borrower’s First Draw PPP Loan includes the amount of any increase on such First Draw PPP Loan made pursuant to the Economic Aid Act. This next topic is what the definition of “Gross Receipts” is. “Gross Receipts” Defined for Purposes of Determining Whether There Has Been a 25% Drop in Revenues to Qualify for Second Draw Unfortunately, the Economic Aid Act does not include a general definition of “gross receipts” for purposes of determining a borrower’s revenue reduction. Here is what is included in gross receipts: ““All revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” Here is what is not included in gross receipts: “Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); Proceeds from transactions between a concern and its domestic or foreign affiliates; and Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.” One additional statement regarding what may not be excluded from gross receipts has to do with contractor costs and other items under the category of “all other items”. These items include: reimbursements for purchases a contractor makes at a customer's request investment income employee-based costs such as payroll taxes Lastly for part 1, this definition of gross receipts is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. I may be able to shed some additional light on these new rules, so contact me if you want to talk this over.
  12. You're absolutely right about that. I'll keep posting new information from the accounting community as it becomes available. We're all rallying together to make it as easy to understand as possible.
  13. This is all very well said. Even with how tough this year has been, if I look at what was accomplished this year it shows many steps in the right direction. Helping shops financially survive and make it to 2021 has been one of the greatest and most humbling experiences of this year.
  14. The new 5,500+ page Covid Relief Bill is massive, and it will take many weeks to digest everything included in the legislation. Here's what we know about business relief and PPP funds: There is now streamlined forgiveness for PPP loans under $150K. This is a significant development for many so check with your lender about how they want that now to be handled. There is also now an additional $284B in PPP funding for impacted businesses to access. More on this in days to come...
  15. Version 1.0.0

    1 download

    With the end of 2020 fast approaching, we’re going to look at annual financial reports. Your shop’s financial report is being prepared and there are some steps for you to take. There are also steps you can take to prepare for a solid start to the new year.
  16. As you plan for your giving budget in this holiday season, remember that THIS YEAR ONLY (per the CARES Act), you can take the standard deduction, as well as up to $300 of cash donations. It has to be cash though, and it's up to $300 per return, so if you file jointly, it's still only $300. (Since most people use the new higher standard deduction, charitable giving is not deductible. But this year, you can claim up to $300 on top of that standard deduction.)
  17. Hi, Natalie here. You have a great selection of tools on hand that will cover every job a customer will bring into your shop. Whether it’s Mac Tools, Snap-on, OTC, or Wright, the right tool for the job is priceless. The tools we’re talking about in this post are for finances, but the same strategy holds true. If you’re planning to do your own bookkeeping, the right tool for your financial job is also priceless. They can take what may appear to be a daunting challenge and save you a ton of time. You’ll be back to running your shop before you know it. Stick around until the end and I’ll outline what’s in my bookkeeping toolbox. Here is an overview with some suggestions on how to choose great financial tools Here are the top 10 categories: 1. Accounting Software QuickBooks has been the go-to software for accounting for decades. There are online tools that may be a better option for you. The most popular choice is Xero and the numbers of small business owners that are using Xero is increasing. Compare several and pick the one that is both robust and flexible. According to the 2015 edition of the Business News Daily’s Buyer’s Guide here are the features you should look for:  Invoicing  Expense Tracking  Client/Vendor Contact Management  Billing and Recurring Payments Automation  Quote and Estimate Creation  Tax Preparation  Multiple-User Access  Payroll Processing  Mobile Access  Integration with Programs Such as Point-Of-Sale Software, Credit Card Processing, and Google Apps 2. Budgeting Tools Creating a budget is the cornerstone of your shop’s financial success. Staying on task within your budget is equally as important. If your accounting software has this feature, you may already have the proper tool to create that budget. If your preference is a tool dedicated to this task, a recommendation is PlanGuru. 3. Payroll Management System Payroll management can occupy so much of your time and mistakes are easy to make. Look for tools that streamline the payroll process and cut costly errors. A tool that integrates with your other tools is another feature to look for. Some tools like SurePayroll can calculate and pay payroll taxes. Simple. A couple of other tool suggestions are ZenPayroll and ADP. These combine payroll and HR functions in one. 4. Agile Billing Speed and flexibility in your billing process means quicker cash flow back to you. With a tools like FreshBooks or Bill.com the billing process will be quicker and give your customers an easy experience. Improving the billing process will serve you and your customers better and shorten delays in receiving payments. 5. Financial Dashboard The dashboard gives you a quick look at your shop’s financial health. See at a glance if your shop is thriving or surviving. Tools such as LivePlan or InDinero give you clear visuals and show you if you’re starting to go off course. Then you can take the actions to keep moving towards your financial destination. 6. Cash Flow Analysis Your accounting software should have cash flow statement capability. As with the budgeting tools there are specialty tools for cash flow tracking. A couple of suggestions are Float or a simple spreadsheet. These give you patterns from the past to offer a forecast of your shop’s financial future. 7. Inventory Management This is all about efficiency and tracking. From the purchase of parts and consumables to generating sales reports and low inventory alerts, this is a very valuable tool. A couple of cloud-based options are SOS Inventory and Scout’s top Shelf. 8. Expense Tracking Those tiny expenses can quickly add up and may be hard to track. Using an expense report tool such as Expensify or Xpenditure makes this much easier. Track those meals, gas, and incidental expenses by scanning receipts and typing in cash expenses. Some tools have the capability to link to mobile devices helping to track these instantly.. 9. Business Credit Card A business credit card, when used properly has several benefits  Improve your shop’s credit history  Earn higher credit limits  Receive rewards and discounts  Manage employee cards (ease of tracking expenses)  Boosts employee morale due to convenience and trust 10. E-commerce Solutions Imagine your customer paying for their oil change before the service is completed. They need a couple of quarts of oil to tie them over. It’s easy to buy them online from their trusted repair shop. Many businesses have seen an increases in cash flow since the beginning of the pandemic by using E-commerce solutions. These are powerful and create revenue streams that you may not have thought of. 11. Three Rivers Bookkeeping With my 5-years of experience, these are the tools I use:  Accounting software – QuickBooks  Payroll Management System – ADP  Agile Billing – bill.com  Financial Dashboard – LivePlan I’m passionate about books and service to my clients. If you’d like to have a conversation about tools and why I selected the one’s above, contact me. I can also outline the services I provide and why adding me to your team may make perfect sense to you. Saving you time and headaches is the value I bring to you, the Auto Repair Shop Owner.
  18. Hi, Natalie here. You have a great selection of tools on hand that will cover every job a customer will bring into your shop. Whether it’s Mac Tools, Snap-on, OTC, or Wright, the right tool for the job is priceless. The tools we’re talking about in this post are for finances, but the same strategy holds true. If you’re planning to do your own bookkeeping, the right tool for your financial job is also priceless. They can take what may appear to be a daunting challenge and save you a ton of time. You’ll be back to running your shop before you know it. Stick around until the end and I’ll outline what’s in my bookkeeping toolbox. Here is an overview with some suggestions on how to choose great financial tools Here are the top 10 categories: 1. Accounting Software QuickBooks has been the go-to software for accounting for decades. There are online tools that may be a better option for you. The most popular choice is Xero and the numbers of small business owners that are using Xero is increasing. Compare several and pick the one that is both robust and flexible. According to the 2015 edition of the Business News Daily’s Buyer’s Guide here are the features you should look for:  Invoicing  Expense Tracking  Client/Vendor Contact Management  Billing and Recurring Payments Automation  Quote and Estimate Creation  Tax Preparation  Multiple-User Access  Payroll Processing  Mobile Access  Integration with Programs Such as Point-Of-Sale Software, Credit Card Processing, and Google Apps 2. Budgeting Tools Creating a budget is the cornerstone of your shop’s financial success. Staying on task within your budget is equally as important. If your accounting software has this feature, you may already have the proper tool to create that budget. If your preference is a tool dedicated to this task, a recommendation is PlanGuru. 3. Payroll Management System Payroll management can occupy so much of your time and mistakes are easy to make. Look for tools that streamline the payroll process and cut costly errors. A tool that integrates with your other tools is another feature to look for. Some tools like SurePayroll can calculate and pay payroll taxes. Simple. A couple of other tool suggestions are ZenPayroll and ADP. These combine payroll and HR functions in one. 4. Agile Billing Speed and flexibility in your billing process means quicker cash flow back to you. With a tools like FreshBooks or Bill.com the billing process will be quicker and give your customers an easy experience. Improving the billing process will serve you and your customers better and shorten delays in receiving payments. 5. Financial Dashboard The dashboard gives you a quick look at your shop’s financial health. See at a glance if your shop is thriving or surviving. Tools such as LivePlan or InDinero give you clear visuals and show you if you’re starting to go off course. Then you can take the actions to keep moving towards your financial destination. 6. Cash Flow Analysis Your accounting software should have cash flow statement capability. As with the budgeting tools there are specialty tools for cash flow tracking. A couple of suggestions are Float or a simple spreadsheet. These give you patterns from the past to offer a forecast of your shop’s financial future. 7. Inventory Management This is all about efficiency and tracking. From the purchase of parts and consumables to generating sales reports and low inventory alerts, this is a very valuable tool. A couple of cloud-based options are SOS Inventory and Scout’s top Shelf. 8. Expense Tracking Those tiny expenses can quickly add up and may be hard to track. Using an expense report tool such as Expensify or Xpenditure makes this much easier. Track those meals, gas, and incidental expenses by scanning receipts and typing in cash expenses. Some tools have the capability to link to mobile devices helping to track these instantly.. 9. Business Credit Card A business credit card, when used properly has several benefits  Improve your shop’s credit history  Earn higher credit limits  Receive rewards and discounts  Manage employee cards (ease of tracking expenses)  Boosts employee morale due to convenience and trust 10. E-commerce Solutions Imagine your customer paying for their oil change before the service is completed. They need a couple of quarts of oil to tie them over. It’s easy to buy them online from their trusted repair shop. Many businesses have seen an increases in cash flow since the beginning of the pandemic by using E-commerce solutions. These are powerful and create revenue streams that you may not have thought of. 11. Three Rivers Bookkeeping With my 5-years of experience, these are the tools I use:  Accounting software – QuickBooks  Payroll Management System – ADP  Agile Billing – bill.com  Financial Dashboard – LivePlan I’m passionate about books and service to my clients. If you’d like to have a conversation about tools and why I selected the one’s above, contact me. I can also outline the services I provide and why adding me to your team may make perfect sense to you. Saving you time and headaches is the value I bring to you, the Auto Repair Shop Owner. View full article
  19. With the end of 2020 fast approaching, we’re going to look at annual financial reports. Your shop’s financial report is being prepared and there are some steps for you to take. There are also steps you can take to prepare for a solid start to the new year. The content of this blog comes from two checklists provided by Three Rivers Bookkeeping. If you would like copies of these checklists, ask by phone or email at the bottom of this post. I would love to deliver these useful tools to you. Let’s start with a quick explanation of the annual report. Annual reports contain your repair shop’s operating and financial activities over the past year. These reports serve two functions: 1. To evaluate your shop’s financial performance 2. Guide you to make future strategic financial decisions. Here is an end of year checklist. You, the shop owner use these items and so does your bookkeeper. These items are the foundation of your annual report. End of Year Checklist:  All bank and credit card account reconciled  Are there any duplicate transactions? Income Statement for the year  Compare to the previous year  Are all the transactions properly categorized?  Are there items in miscellaneous/uncategorized accounts?  Are there any “Ask my Accountant” items?  Do payroll expenses match what was paid for the year? (940/941, state unemployment)  Calculate gross profit percentage of net revenue Balance Sheet for the year  Review each Balance Sheet account  Assets  All transactions are like type and belong in that account  All adjusting entries are accounted for and  All account balances make sense  Liabilities  All transactions are like type and belong in that account  All adjusting entries are accounted for and  All account balances make sense  Equity  All transactions are like type and belong in that account  All adjusting entries are accounted for and  All account balances make sense Last, let’s look at a checklist that will prepare you for the new year and thinking ahead. New Year Checklist:  Make updates to payroll withholding rates, if the rates have changed  Does payroll reflect the correct unemployment rate?  Start a new budget  Fill out the business calendar of important tax dates  Set some goals! My goal in showing you this information is that you will see what to expect at the end of the year. Looking at the new year, this should get you thinking and planning for an outstanding 2021! If I may assist you in any way or if you’d like copies of the checklists outlined above, send an email to me at [email protected]
  20. Within this post we’re going to pull back the covers and take a look at what goes into a quarterly report. For this conversation we’ll be talking about privately owned auto repair shops only. By definition a quarterly report is a summary or collection of unaudited financial statements. These include balance sheets, income statements, and cash flow statements. These are prepared by your bookkeeper every quarter (three months). Some quarterly reports may also include year-to- date figures and compare last year’s quarter to this years quarter results. Companies fiscal years may begin on January 1st and end on December 31st. Some will mirror the federal government’s fiscal year which begins on October 1st and ends on September 30th. For calendar year accounting the quarters end on March 31st, June 30th, September 30th and December 31st. Using the government fiscal year model the quarters end on December 31st, March 31st, June 30th, and September 30th. File quarterly reports within a few weeks of a quarter’s end. Quarterly reports include key accounting and financial data for a company. This includes gross revenue, net profit, operational expenses, and cash flow. If there are investors in the shop, there may be a meeting where the owner presents the quarterly report. The quarterly report is a summary or a collection of the shop’s financial statements. These include balance sheets and income statements and the comparison reports mentioned earlier. Other ingredients in quarterly reports may include an executive summary, goals and objectives, highlights, and new and ongoing challenges. When addressing challenges, the quarterly report may include strategies planned and implemented to overcome them. The specific reports and other ingredients depend upon the ownership structure and what financial data is relevant to the shop. Ownership decides what to include and shares with your bookkeeper so these reports are available on time with accurate data. The presentation of the data is also important. The format is also a decision that is made during a conversation between the shop’s owner and their bookkeeper. Besides the written line-by-line data, graphs and spreadsheet provide a visual representation of the date and help to add context. There are also quarterly payments due and reports that are filed with the IRS, state, and local governments. An example of these is on a quarterly checklist available from Three Rivers Bookkeeping and include the following items::  Make estimated tax payments  Make payroll payments which include  State report and payment  941 report  940 deposit Communication is the most important ingredient to achieve accurate and timely quarterly reports. This ensures quarterly payments are made and reports are filed. I am your source for which reports and payments are needed. Requirements vary depending upon your state and local regulations. You as a shop owner need to communicate what your expectations are for the quarterly report. One sign that you have a competent and professional bookkeeper is the questions she asks. I can guide you to having the quarterly report that will serve you best.
  21. Before this installment, I talked about the balance sheet and before that I educated you about the income statement. Let’s learn about your statement of cash flows and how to read it. My goal today is for you to totally understand the statement of cash flows The statement of cash flows is also called the cash flow statement. It is a general-purpose financial statement and the numbers are related to the information on the balance sheet. When the balance sheet changes, so does the cash account on the cash flow statement for the same time (for this blog we'll be using a month. It also reconciles beginning and ending cash and cash equivalents account balances. Don’t get frustrated by the terms. These will be broken down as we move forward. This statement shows what transaction affected the cash accounts. It also shows how effectively and efficiently your shop uses its cash to finance operations and if needed, expansions in equipment and facilities. In other words, does your shop have good cash flow? A healthy statement of cash flows is very valuable should you look for investors or when is comes time to sell your shop. Generally ‘cash flow’ defines your shop’s ability to collect and maintain positive cash flow and balances to pay upcoming bills. Another way to look at this is that when you have good cash flow, you can pay for your operations and pay your debts without making late payments. The statement of cash flows has three main sections. Cash flows from: Operating Activities Investing Activities Financing Activities Let’s take a look at operating activities Cash flows generated from operating activities include transactions from the operations of the business. This section represents the cash collected from the primary cash generating activities (revenues) of the business like service and sales. These are short-term activities and only affect the current month. An example is, payment of supplies is an operating activity because it relates to the shop’s operations and is used in the current month. Operating cash flows are calculated by adjusting net income by the changes in current asset and liability categories on the balance sheet. Now let’s shift our attention to investing activities. Cash flows from investing activities consist of cash coming in from sales (inflows)and cash going out for purchases of long-term assets (outflows). As defined in an earlier blog a long-term asset is an asset that is not expected to convert to cash within one year of the date shown in the heading of the balance sheet. In other words, the investing section of the statement represents the cash that the shop either collected from selling a long-term asset or spending money on buying a new long-term asset. You can also think of this section as the shop investing in itself. Investing cash flows are calculated by adding up the changes in long-term asset accounts. Drum roll please?! Now for the final topic, financing activities Depending upon the size and structure of your shop financing activities may not apply to your situation. Check out the rest to see if it does. The financing section on the cash flow statement represents the amount of cash collected from issuing stock or taking out loans and the amount of cash disbursed to pay dividends and long-term debt. You can think of financing activities as the ways a shop finances its operations either through long-term debt or investment financing. Financing cash flows are calculated by adding up the changes in all the long-term liability and equity accounts. These numbers come from your balance sheet If you need a bit more help understanding your cash flow statement, sit down with your bookkeeper and she will show you the money until you have total understanding of what your cash flow statement means to your shop.
  22. Check out this post to learn about the three parts of your balance sheet; Assets, Liabilities, and Equity. We’ll break them apart but first here’s a statement about a balance sheet in general. A balance sheet is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by owners, investors and/or shareholders. In other words, the balance sheet shows a shop owner(s) the shop's net worth. Now let’s talk about assets. Within the assets segments, accounts are typically listed from top to bottom in the order they convert into cash. The term for that is liquidity. Assets are separated into current assets (converted into cash in one year or less) and non-current or long-term assets (cannot convert into cash within 12 months). In general, this is the order that current assets are listed on your balance sheet: Cash and cash equivalents The most liquid and can include Hard currency Treasury bills Short term certificates of deposit Marketable securities Equity and debt securities for which there is a liquid market Accounts receivable Money that customers owe the shop Consider subtracting a percentage of customers who can be expected not to pay Inventory Goods available for sale Value these at a lower cost or market price Prepaid expenses The value that has already been paid for: Insurance Advertising/marketing contracts Rent/Mortgage Long-term assets are listed in any order and they include: Long-term investments Securities that will not or cannot be liquidated in the next year Fixed assets Land Machinery Equipment Buildings Other durable, capital-intensive assets From the plus side of the sheet, assets, now let’s move into the minus side or liabilities. Liabilities are the money that a shop owes to outside parties, to include invoices to suppliers and/or vendors to rent/mortgage, utilities and salaries. As with assets, these are separated into current liabilities (due within one year,listed in order of their due date) and long-term liabilities (due after one year). Current liabilities may include the following: Current portion of long-term debt Bank loans Interest payable Wages payable Customer prepayments Earned and unearned premiums Within the insurance category; talk to your bookkeeper or insurance agent Accounts payable Long-term liabilities may include the following: Long-term debt Example: interest and principles on bonds issued Pension fund liability The contributions the shop pays into employees’ retirement accounts like a 401K Deferred tax liability Taxes that the shop owes but will not pay for another year See you tax professional for an explanation The final category, equity, known as owners’ equity or shareholder’s equity, depending upon the size and structure of the shop ownership. This is also called “net assets,” which is calculated by subtracting liabilities (debt owed to non-shareholders) from total assets. A sub category to equity is retained earnings. These are earnings retained by the shop owners and is not paid to investors in the form of dividends. Retained earnings are used to pay down debt or invest in the shop for expansion or to take advantage of growth opportunities such as new or upgraded equipment or expanding the footprint of the shop. Balance sheets have some limitations. This snapshot contains valuable information is it static and represents one moment. When combined with the other financial reports, the income statement and the statement of cash flows shows you the complete picture of your shops financial health. If you have any questions or concerns about your balance sheet, sit down with your bookkeeper and she will be able to pull back the covers until you have total understanding of what the balance sheet means to your shop.
  23. Last time we took a quick look at three financial reports: Balance sheet Income statement Statement of cash flows We talked about how you should read/review each of these monthly like reading the financial GPS to your repair shop’s finances. How financially healthy is your shop? Not-so-subtle hint, if you haven’t talked to your bookkeeper about the three reports, book an appointment with her today. In this day and age, this is a bare minimum service that your bookkeeper should be providing for your business. Your bookkeeper should also be able to easily explain what each point on these reports mean specifically for your business. We’re diving deeper into what an Income Statement is. You may want to take notes as you read along or print this out. Great, useful information coming your way… Income statements show how much profit a business generated during a specific time slice. This includes the amount of expenses incurred while earning revenue. Talk to your bookkeeper about the most effective interval for your specific situation. Income statements are also known as a profit and loss statement (P & L) and can be called a statement of operations, statement of earnings, or statement of income. Remember the income statement shows: Revenues Cost of goods sold Expenses Gains Losses You can also learn a great story from the income statement: Is the business making money? Are the products and services the right ones? Are products and services priced correctly? Do we know what our true direct costs are? Do we have the right mix of clients? It does not show: Cash receipts (money you receive) Cash disbursements (money you pay out) The income statement shows how profitable your repair shop was during the previous month, quarter, and year. This part of your financial road map is important because it is a clear snapshot of how healthy your shop is. Let’s take a look at other users of the income statement. Income statements are not only used by business owners. Others who also place high importance on Income Statements and the information they show are: Accountants Bookkeepers Current Investors Prospective Investors Banks and other Lenders Each one of these people glean crucial information from this profit and loss statement. Looking at the structure of an income statement it finds the net income of a business. This is described as total revenue minus total expenses. Start from the gross income from revenue the business received and work from there to get to the net income. Depending upon how many different sources of revenue or expenses a shop may have this can involve a lot of figures. Common income generating services may include: Diagnostics Alignment checks Suspension A/C and Heating Oil changes Brake jobs Tire repair and replacement Engine work Transmission tuneups and repairs With each of these services come their own specific expenses. You can see how valuable your bookkeeper is as she creates an accurate profit and loss statement. Overhead is also listed in the expense side of the statement and examples of these expenses are: Rent/mortgage Advertising Marketing Office Supplies Utility bills Insurance Depreciation of fixed assets Not all of these may apply to your shop and there may be more overhead expenses which are not listed here. Subtract the operating expenses from the gross income and you have a total known as your operating income. This may also be your net income if there are no other figures to factor into your shops finances. We mentioned investors, banks, and lenders earlier. They, as the shop owner, use Income Statements for comparison from previous months, quarters, and/or fiscal years. With this information, you and they can better analyze if your shop is getting financially stronger. When looking to buy, lease, or repair your equipment, these numbers are valuable to securing financing at the most attractive terms available. We hope you have learned more about how an income statement is structured and the critical information it shows you. Sit down with your bookkeeper and let her teach you what your profit and loss statement says. That’s part of her job she enjoys because she wants you to have the full financial picture of your successful repair shop.
  24. Let's take a look at three financial reports, balance sheet, income statement, statement of cash flows. You should read/review each of these monthly. Looking at the numbers from these three reports is a clear picture of your shop’s financial health. This is a road map to planning your future. Let’s begin with the balance sheet. A balance sheet is a snapshot of your shop's financial condition at a moment in time. In the this article, we’re going to use a month as the bookkeeping period. Assets and liabilities are short- and long-term obligations. These include cash accounts such as checking, money market, or government securities. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business. Now that we know what a balance sheet is, let’s take a look at how you use a balance sheet. A balance sheet helps a shop owner get a handle on the financial strength of the business. Is the business in a position to expand? Can your shop handle the normal financial ebbs and flows of income and expenses? Should the repair shop take immediate steps to increase cash reserves? Now let’s shift our focus onto the second type of report, the income statement. Income statements show how much profit a business generated during a specific time slice (in this discussion, one month). This include the amount of expenses incurred while earning revenue. Income statements are also know as profit and loss statement (P & L). This is a statement of operations, statement of earnings, or statement of income. Keep in mind the income statement shows revenues, expenses, gains, and losses. It does not show cash receipts (money you receive) nor cash disbursements (money you pay out). The income statement shows how profitable your repair shop was during the previous month. This part of your financial road map is important because it is a clear snapshot of how healthy your shop is. Another use of income statements is they are critical to obtaining credit should the need arise. Balance sheets, along with income statements, are the most basic elements in providing financial reporting. Provide these to potential lenders such as banks, investors, and vendors who are considering how much credit to grant the firm. Ready for the third piece of your monthly financial tripod? Let’s move forward to the statement of cash flows. The statement of cash flows also known as the cash flow statement, reports the cash generated and used during the time interval specified; monthly for this conversation. Generally, the period of time is the same as the income statement. The statement of cash flows reports a businesses major cash flows in the following categories: Operating Activities - Converts the items reported on the income statement from the accrual basis of accounting to cash. Investing Activities - Reports the buy and sale of long-term investments and property, plant, and equipment Financing Activities - Reports the borrowings and repayment of short-term and long-term bank loans and other debt. Supplemental Information - Reports the exchange of significant items that did not involve cash and reports the amount of income taxes paid and interest paid. Now that you have an overview of income statements, balance sheets, and statement of cash flows, consider your next action. Having a conversation with your bookkeeper so she can teach you how each of these reports apply to your specific situation. Her explaining how these reports crafted to your business shines a light on how to understand what all the numbers mean. By reading and reviewing these reports on a monthly basis, you will keep your finger on the financial pulse of your business. Know exactly what moves you can make that will protect and move your repair shop forward. Like a road map or GPS that guides you to your destination, these reports are the coordinates you plug into your financial GPS to keep you on course to a solid financial future.
  25. Are you thinking about hiring a bookkeeper to handle the day to day finances of your business but not sure of the price tag? Not to worry, here at Three Rivers Bookkeeping, we want to give you as much information as possible so that you can make an informed decision about hiring a great bookkeeper. What is the initial cost? When outsourcing a new bookkeeper there might be some up front costs that are incurred and they can range anywhere from $200 - $5000. Why can this range be so big? There are several questions and considerations that a bookkeeper will have for you that will go into the initial cost. A good bookkeeper will request read-only access of your financial information. In order for them to give you an accurate initial cost, they need to be able to see the current state of your finances. A few questions that they might have for you include: Are your books up-to-date? Are your taxes up-to-date? Has the bookkeeping been kept up or is there clean up that needs to taken care of? Do you already have accounting software or does this need to be set up? Is there payroll for the business? If there are several months worth of clean up work, some of these initial costs may be paid over several months and that can ease the payment of the initial cost. What are the monthly costs? The costs of outsourcing a good bookkeeper for your business are dependent on many, many different variables. Company size, the number of bank and credit card accounts, the number of transactions per month, the number of employees, how payroll is handled, how many invoices need to be sent out and how many bills the business incurs every month are just a few of the variables that can go into the monthly cost of hiring a bookkeeper. When considering these variables, a good outsourced bookkeeper can charge anywhere from $550 - $2500 per month depending on the level of service that your business needs, their expertise or specific industry that they work with. There's no doubt that you get what you pay for and unfortunately hiring a good bookkeeper is not going to be cheap, however, a good bookkeeper is worth their weight in gold when it comes to saving you money during tax time, keeping your finances organized and up to IRS standards and keeping your accountant happy when tax time comes around. However, one of the all time best benefits for you, is that your bookkeeper will be able to prepare critical financial statements and best of all be able to educate you on what these key business documents mean for your business. Now I know you're probably sitting here with your jaw almost to the floor with those numbers but in all reality, a great bookkeeper is going to save you more money than you actually spend for their monthly services. What should be included in monthly services? The three biggest reasons to have a bookkeeper is to make sure that you are staying in compliance with IRS regulations, are ready for tax time and to help you understand where your business stands financially. A quick, bare minimum list of the services that your bookkeeper should be providing for you: Correct organization and classification of transactions in accounting software Monthly reconciliation of bank and credit card accounts Monthly financial statements Takeaways Hiring a good virtual bookkeeper can not only keep you in compliance but can help your business reach ultimate financial success. Three Rivers Bookkeeping specializes in outsourced bookkeeping for auto shops. If you have any more questions after reading this article, please do not hesitate to reach out. Now get out there and do what you do best... run your business like the champ that you are!



×
×
  • Create New...