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Every entrepreneur’s primary goal is to make a healthy business profit. But as most entrepreneurs know, there are a plethora of roadblocks that can keep them from financial success. 

From money management to high-interest loans, it’s quite easy to stray from the path of profitability if you’re not on high alert. In this blog post, we’re sharing six common financial pitfalls so you can avoid them to increase your income repeatedly.

 

Inadequate cash flow management (H2) 

One of the most common financial pitfalls we see is inadequate cash flow management. This happens when revenue is coming in steadily but is not being distributed efficiently.

This may happen due to irresponsible spending or financial unawareness. 

When this happens, businesses may find themselves struggling to cover their operational costs, even though their profit looks good on paper, because money has been spent elsewhere.

Accounting software programs like Quickbooks keep you informed of your monthly cash flow so you can manage it efficiently.

 

Excessive Debt (H2)

While leveraging debt can be a powerful tool for business growth, it can be risky if it’s not managed properly. High levels of debt often increase the financial burden on a business through interest and repayment obligations. 

This can exacerbate cash flow problems, so carefully weigh the benefits before taking out a loan or swiping your company credit card.

 

Poor Inventory Management (H2)

It can be difficult to find a healthy balance for inventory management. Holding too much inventory ties up capital that could be used elsewhere, while too little inventory can lead to lost sales.

For more profitable inventory management, try: 

• Implementing streamlined inventory tracking systems
• Conducting regular audits to identify stock levels
• Build relationships with suppliers who can deliver inventory in a timely manner

 

Inventory management software such as Tekmetric provides you with a healthy inventory flow to free up capital, drive more sales, and boost profit.

 

Ignoring Technological Advances (H2)

We live in a digital age that relies on technology. While it may be your first instinct to run your business like you always have, it’s critical to follow technological advances in the industry. Updating your software, tools, and systems to meet new industry standards gives your business the competitive edge to welcome new customers through the door.

 

Failure to Adapt to Market Changes (H2)

The market is ever-evolving, and as a savvy entrepreneur it’s important to meld with the ebbs and flows. Staying up-to-date with consumer demands and leaning into industry trends will lead you to experience steady and increased revenue. 

 

Lack of Emergency Fund (H2)

Adversity is unavoidable as a business owner, and having an emergency fund for those just-in-case situations is critical if you want to avoid accruing debt. 

If you don’t currently have an emergency fund and are unsure of where to start, we can help you accelerate the process with a financial roadmap.

When you have a healthy emergency fund to cover unexpected expenses, you have the peace of mind that your business will persevere through hardships. 

When it comes to financial regulations, understanding and complying with Beneficial Ownership Information (BOI) is key for businesses. Beneficial Ownership Information refers to the details of individuals who ultimately own or control a legal entity. These regulations were established in 2021 by the Corporate Transparency Act to combat money laundering, terrorism financing, and other illicit finance activities. In this post, we’ll break down what BOI is, who it’s for, how to fill it out, and its significance for businesses.

 

What is a Beneficial Ownership Form?

A Beneficial Ownership form is a regulatory requirement enforced by agencies like the Financial Crimes Enforcement Network (FinCEN) in the United States. It requires that certain businesses collect and report information about their beneficial owners (AKA, the individuals who ultimately own or control the company). This information allows law enforcement agencies and financial institutions to identify and prevent illicit financial activities.

 

Who Needs to Provide Beneficial Ownership Information?

BOI requirements typically apply to legal entities such as corporations and LLCs. If your business was created in the United States by filing a document with the Secretary of State or a similar office, you’ll be required to report about your beneficial owners. BOI requirements also apply to foreign companies that were registered to do business in any U.S. state or Indian tribe by the necessary filing.

 

Companies required to report are called “reporting companies,” and therefore, may have to obtain information from their beneficial owners and report on that information to FinCEN.

 

There are 23 types of business entities that are exempt from BOI reporting, including publicly traded companies, nonprofit organizations, and certain large operating companies.

 

How to File a Beneficial Ownership Report

To fill out a BOI form, it involves providing detailed information about the beneficial owners of the company. Follow this step-by-step guide to file a beneficial ownership report if your company is required by law. 

STEP #1: IDENTIFY BENEFICIAL OWNERS

First, determine who qualifies as a beneficial owner of your company according to regulatory guidelines. This typically includes individuals who own or control at least 25% of the entity’s ownership interests or have significant control over its operations. You can find this information and more in the BOI Small Entity Compliance Guide. 

STEP #2: GATHER REQUIRED INFORMATION

Next, collect the information required for each beneficial owner of the company. This includes their full legal name, date of birth, residential address, Social Security number (or other government-issued identification number), and the percentage of ownership or control of the company. 

STEP #3: COMPLETE BOI FORMS

To complete the necessary BOI forms, go to https://boiefiling.fincen.gov/ and use either the BOI E-Filing System or the PDF BOI report. There is also a system-to-system API option. Fill out the forms accurately and completely, ensuring that all required fields are filled out with the correct information.

STEP #4: VERIFY INFORMATION

After filling out the necessary BOI forms, review them for accuracy and completeness. Double-check and verify that all of the information provided for each beneficial owner is up-to-date and accurate.

STEP #5: SUBMIT BOI FORMS

Once finished and verified, submit the completed BOI forms to the appropriate entities or institutions as required by law, such as financial institutions, government agencies, or regulatory authorities.

Why Is Beneficial Ownership Information Important for Businesses? 

It’s key for businesses to comply with BOI requirements in order to avoid penalties, fines, and legal consequences. By providing accurate and transparent information about their beneficial owners, businesses showcase their commitment to running businesses based on integrity, transparency, fairness, and regulatory and legal compliance. Plus, BOI helps enhance the effectiveness of anti-money laundering and counter-terrorism financing efforts, which provides added protection to the overall financial system. 

While Beneficial Ownership Information may sound a bit overwhelming and confusing at first, by taking the necessary steps to understand what it is, its purpose, who qualifies, and how to fill out a BOI form, you can rest easy knowing you are meeting the necessary requirements to contribute to a safer, more secure financial environment. 

With spring upon us and the weather warming, it’s the perfect time of year to do some good spring cleaning. However, it’s not just our homes that can benefit – our finances can benefit from intentional tidying up and decluttering as well. This can lead to increased efficiency, better cash flow, and improved overall financial health for our businesses if done right and done consistently. In this blog post, we’re sharing 5 essential steps to spring clean your finances each and every year.

5 Steps to Spring Clean Your Finances

When spring cleaning your business finances, it’s important to do this in a step-by-step approach so you know exactly where you’re at, what you can improve on, and what action steps you need to take. Follow these 5 steps to declutter and improve your business finances this spring.

STEP #1: ANALYZE EXPENSES

Start by going through your expenses with a fine-tooth comb to identify any unnecessary or redundant costs that could be cut down. This could be subscriptions to services, softwares, or programs you no longer use, excessive spending on office supplies, or high fees from vendors or suppliers. By identifying areas where you can reduce expenses, you can free up more funds to invest in more profitable areas of your business.

STEP #2: NEGOTIATE BETTER TERMS

After identifying areas for potential cost savings, don’t be afraid to reach out to vendors or suppliers for better terms. Negotiating lower prices, longer payment terms, or bulk discounts is a great way to cut back on expenses and ensure you’re getting the best possible deal. Building strong relationships with your vendors and suppliers can also lead to perks such as exclusive deals or priority service, so be sure to keep those relationships and communication strong.

STEP #3: UPDATE BUDGETS AND FORECASTS

After analyzing your expenses, you’ll have a clearer picture of your current financial status and areas in which you can cut back and improve. Now, it’s time to update your budgets and forecasts for the rest of the year. Review your revenue projections and compare them to your expenses to ensure they’re in alignment for a profitable year. Adjust your budget as needed to account for any changes in your business, the market, etc. It’s a good idea to revisit your budget and forecast regularly to stay on track and make informed decisions throughout the year. This can help prevent you from reaching the end of the year and falling short of your goals.

STEP #4: PREPARE FOR EMERGENCIES

No one likes to think about worst-case scenarios, but it’s so important to be prepared for emergencies as a business owner. Review your insurance coverage to ensure it covers your needs. Consider adding or updating policies as you see fit. Establish an emergency fund for your business to cover unexpected expenses or disruptions to your business operations. The last thing you want is to be unable to pay your bills or your employees should something go awry. Having a financial safety net in place gives you peace of mind knowing that you can weather any financial storms that come your way.

STEP #5: IMPROVE INVOICING AND COLLECTIONS PROCESSES

Lastly, having efficient invoicing and collections processes is essential for maintaining a healthy cash flow and keeping things running smoothly. Review your current invoicing and collections processes to identify any inefficiencies or areas holding you back. Consider implementing software solutions like Wave that streamline invoicing, automate reminders for overdue payments, and provide insights into customer payment behavior. Improving your invoicing and collections processes can reduce the time it takes to get paid and minimize the risk of late or unpaid invoices.

This is the perfect time of year to spring clean your finances and ensure your business is set up for success and efficiency in the months ahead. Take a good look at where you’re at income and expense-wise, update your budgets and forecasts accordingly, prioritize planning for emergencies, and look for ways to make invoicing and collections more streamlined. By following these steps, you’ll be in good financial health and ready to grow for the rest of the year.

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The Inflation Reduction Act of 2022 was signed into law with the goal of addressing economic challenges and encouraging businesses and homeowners to adopt more “green” energy practices. With this bill comes an important provision: the Home Energy Efficient Tax Credit. This credit incentivizes homeowners to make energy-efficient improvements to their homes. In this blog post, we’ll explore how the Home Energy Efficient Tax Credit works, who can qualify, what potential amounts and expenses there are, and how you can apply to claim this tax credit.
 

What is the Home Energy Efficient Tax Credit Under the Inflation Reduction Act of 2022?

The Home Energy Efficient Tax Credit is a financial incentive provided to homeowners under the Inflation Reduction Act of 2022. This credit gives homeowners the opportunity to receive tax credits when they invest in energy-efficient home improvements, such as solar or wind energy, energy efficient heating and cooling, etc. These improvements aim to make homes more sustainable and “green,” reducing energy consumption and the costs associated with it.
 

Who Can Qualify for the Home Energy Efficient Tax Credit?

In order to qualify for the Home Energy Efficient Tax Credit, there are certain criteria that homeowners must meet. For the most part, if individuals make eligible energy-efficient improvements to their primary residence, they will qualify.

Renters and those that make improvements to a second home used as a residence may also qualify. If you make improvements to a home that is never used as a residence, you will not qualify.

It’s important to note that you can ONLY claim the credits for the year in which the improvements were installed.
 

What Are the Qualifying Credit Amounts and Expenses?

The qualifying credit amounts and eligible energy-efficient expenses are directly related to the type of improvement made.

For home clean electric products, such as solar electricity, fuel cells, wind turbines, and battery storage, the tax credit is 30% of the cost.

For heating, cooling, and water heating, such as heat pumps, heat pump water heaters, solar water heating, efficient air conditioners and heating equipment, etc, the tax credit is anywhere from 30% of the cost up to a maximum of $600 or $2,000 (depending on the improvement).

Other energy efficient improvements may also qualify for at least 30% of the cost such as insulation materials, exterior doors, windows, and skylights, home electric vehicle chargers, etc.

As a homeowner, be sure to carefully review the legislation and rules surrounding these improvements and tax credits in order to maximize your financial benefits with the Home Energy Efficient Tax Credit.

You can learn more on the specifics, qualifying improvements, percentages, and limits on the energy.gov website.
 

How Do You Claim the Home Energy Efficient Tax Credit?

In order to claim the Home Energy Efficient Tax Credit, there is a process you must follow.
 

DOCUMENT YOUR IMPROVEMENTS

You must keep a detailed record as proof of the energy-efficient improvements made to your home and residence. Keep all relevant documents, such as quotes, receipts, and invoices.

ENSURE ELIGIBILITY

Make sure to double check that the energy efficient improvements made quality for the tax credit. Again, check the specific requirements and tax credit amounts and expenses to ensure you are eligible.

COMPLETE THE NECESSARY FORMS ALONG WITH DOCUMENTATION

In order to apply for and claim this tax credit, you must file Form 5695, Residential Energy Efficient Tax Credits Part II with your tax return. You must claim the credit in the tax year that the improvement was installed (not purchased). Be sure to consult your tax professional to ensure the forms have not changed.
 

Attach the necessary documents (quotes, receipts, and invoices) to your form when submitted. This is a key step for ensuring the expenses associated with the improvements are considered and matched up with the potential available credit.
 

In conclusion, the Home Energy Efficient Tax Credit under the Inflation Reduction Act of 2022 is a great opportunity for homeowners to make energy efficient improvements while being rewarded with financial and tax-saving incentives.

Tax season is just around the corner, and for many, this time of year can be both daunting and overwhelming. However, with the proper planning and organization, you can take on tax season with confidence! This blog post will serve as your comprehensive guide to tax season preparation, outlining the key steps you need to take to ensure a smooth and stress-free tax season!
 

How To Prepare For Tax Season

Preparing for tax season seems like a year-long process at times. From tracking mileage to organizing receipts, there’s always something tax-related to do. However, when the calendar turns over to a new year, it’s time to really start thinking about tax season preparation and the steps you need to take to get ready for filing day. Read on for your complete guide to tax preparation and everything you need to know!
 

STAY INFORMED ABOUT TAX LAW CHANGES

Tax laws are ever-changing and it is your responsibility to stay informed on these changes, as they can make a significant difference. Familiarize yourself with any updates or changes to tax laws that may affect your filing status or eligibility for credits. You can also reach out to your tax preparer or accountant for more information on these changes and the potential impacts on your taxes.
 

GATHER AND ORGANIZE KEY DOCUMENTS

This is one of the most daunting parts of the tax season preparation process – gathering all of the key documents needed. This includes tax forms such as W-2’s, 1099s, and other forms. You’ll also want to gather and organize receipts, mileage records, social security documents, bank statements, income statements, expense records, payroll records, tax deduction records, profit and loss statements, balance sheets, financial statements, and any other relevant or requested paperwork.
 

Take some time to review all of your financial documents and categorize them by income and expenses to make it easier to identify potential deductions or tax credits. You can use an accounting software like Quickbooks Online to make this process simple.
 

Having all of the documents you need to properly file your taxes in one organized place will save you a lot of time and prevent last-minute searches.
 

EXPLORE DEDUCTIONS AND CREDITS

With all of your documents and records organized and in one place, you can explore and identify potential deductions and credits that are available to you.

Some common deductions and credits include:

• Mortgage interest.
• Student loan interest.
• Medical expenses.
• Startup costs.
• Business expenses.
• Depreciation.
• Child Tax Credit.
• Education Credits.

These deductions and credits can save you significant amounts of money, so do your due diligence and explore all of your options.
 

CONSIDER PROFESSIONAL HELP

While some individuals prefer to handle and file their taxes themselves, it is beneficial to seek out professional help. Tax professionals can provide advice and expertise, help ensure that you have everything you need, it’s all accurate, you are maximizing your savings, and overall, help you navigate tax season with a little more ease and peace of mind. 
 

PLAN FOR RETIREMENT CONTRIBUTIONS

If you’re looking for more ways to positively reduce your tax liability (while planning for the future!), you can contribute to retirement accounts, such as 401(k)s or IRAs. Evaluate your contributions and look for ways to maximize them in order to take advantage of potential tax benefits, thus, reducing your tax bill.
 

REVIEW BEFORE SUBMISSION

Just like when you were in school getting ready to turn in a big test, it’s key to thoroughly review your tax return before submitting it. Check to make sure that all information is entered correctly, you’ve chosen the correct filing status, and all deductions and credits are accounted for.
 

REFLECT AND PLAN FOR NEXT YEAR

While you may be begging for a break from taxes once you’ve filed, this is a great time to reflect and plan for next year. Consider ways to make your life easier when it comes to next year’s tax season preparation as well as ways that you can maximize your tax savings. You may look at adjusting your withholdings, organizing your financial documents throughout the year using Quickbooks Online, tracking mileage using a software like TripLog, or managing your receipts online using Hubdoc or Dext. It’s never too early to stay proactive with your tax planning.
 

By following these steps and guidelines for tax season preparation, you can stay on top of things, take advantage of resources and opportunities to save, and get through tax season with less stress and more confidence. 

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Understanding and navigating the tax implications and responsibilities of business income is crucial for every business owner, especially those operating as an S-Corp. A very common question that often arises is whether or not S-Corp distributions and draws are taxable. In this blog post, we’ll answer this question and explore the key considerations of S-Corp taxation.

 

What Are the Benefits of an S-Corp?

First, it’s important to understand the benefits of operating a business as an S-Corp. S-Corps provide a unique level of flexibility with money, as there is a single-level of taxation on income generated by the corporation. This differs from C-Corps, in which profits are taxed at both the corporate and individual levels. 

 

In an S-Corp, income “passes through” to the shareholders, meaning it is subject to tax on the shareholder’s individual income tax return, not the business’s. 

 

Are S-Corp Distributions and Draws Taxable?

Now, let’s answer the burning question of, are you going to be taxed on distributions and draws from an S-Corp? The short answer is… no! 

Generally, you are not taxed on distributions and draws, which is one of the most significant benefits that an S-Corp offers. 

However, the key to all of this is to pay yourself a fair and reasonable wage as an S-Corp shareholder. The IRS requires you to compensate yourself adequately, and once you have paid yourself a fair and reasonable wage, you are free to distribute or take the remaining profits out in draws. 

 

Avoiding Payroll Tax Pitfalls

Keep in mind that as your profits increase, it’s not recommended to increase your payroll. Why? This leads to higher payroll taxes! However, S-Corp distributions are not subject to these payroll taxes, making this a better option for business owners looking to maximize their income without taking on additional tax burdens. 

 

Distinguishing Distributions from Profit

Distributions are essentially the sharing of profits among shareholders. The benefit is, you don’t pay taxes on the distribution itself, just on the profit that it represents. This is key to remember when understanding the tax implications of S-Corp income. 

 

Before taking out distributions as an S-Corp, you must have actual profits to distribute. Therefore, business owners must track and manage their profits effectively in order to benefit from distributions come tax time. 

 

Avoiding Tax Issues

When taking out S-Corp draws, ensure that you are taking out actual profits, not loan money, such as that from the SBA. This can have significant tax implications that can lead to complications and hassles down the road. 

Overall, S-Corp distributions and draws are not taxable. This makes S-Corps a great choice for small business owners looking to maximize their profits and save on taxes. Just make sure you stay up-to-date on the IRS guidelines, pay yourself a fair wage first, and ensure your distributions and draws are based on profits. This can help you make informed and smart financial decisions that benefits both you and your business long-term. 

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With a new year upon us, this is a time for businesses to reflect on their financial strategies and make resolutions for the year ahead that contribute to the long-term success of their organization. By adopting sound financial practices, businesses can better navigate challenges, improve their efficiency and workflows, and pave a path towards sustained growth. In this blog post, we’ll explore 10 financial resolutions that are essential for every business to make in order to have a profitable, prosperous year ahead.

 

10 Essential Financial Resolutions For Businesses 

#1: REGULAR FINANCIAL REVIEW

Commit to regular (monthly or quarterly) reviews of financial statements. This includes income statements, balance sheets, and cash flow statements. Doing so will help you better understand the financial health of your business while providing you valuable insights into revenue trends, expenses, and overall financial stability. 

 

#2: INVEST IN TECHNOLOGY UPGRADES

Invest in modern technology such as automotive diagnostic software, customer relationship management (CRM) systems, or accounting software to streamline your operations, save time, and increase efficiency.

 

Consider tools like Tekmetric, Nifti CRM, and Quickbooks Online to enhance various aspects of your business. 

 

#3: SET ASIDE EMERGENCY FUNDS

Financial stability largely depends on your ability to prepare for unforeseen circumstances and challenges. Therefore, make it one of your financial resolutions this year to build an emergency fund to cover unexpected expenses or economic downturns. This financial safety net can help your business stay afloat during tough times. 

 

#4: BENCHMARKING AND GOAL SETTING

Regularly benchmark your business against industry standards and set realistic financial goals. Use these benchmarks and goals as a roadmap to guide you in making sound business decisions and tracking progress.

 

#5: FOCUS ON CUSTOMER LOYALTY AND RETENTION

Acquiring new customers is essential for business growth, but retaining existing customers is equally, if not more important to the longevity of your business. Plus, retaining existing customers is often more cost-effective. Develop strategies to enhance customer loyalty, such as implementing a rewards program, providing exceptional customer service, or offering regular maintenance packages.

 

#6: OPTIMIZE INVENTORY MANAGEMENT

Optimizing inventory is another key financial resolution for businesses. Aim to efficiently manage inventory to ensure that parts and supplies are available when needed, without tying up too much capital in stock. Consider implementing an inventory management system to track stock levels and optimize ordering.

 

#7: TAX PLANNING AND COMPLIANCE

Staying up-to-date on tax laws and regulations is key for your business’s financial health, especially come tax time. Work with a tax professional to develop efficient tax planning strategies and ensure compliance, thus, avoiding penalties and maximizing deductions.

 

#8: DEBT MANAGEMENT

Strategize to manage and reduce debt in the new year by prioritizing high-interest debts and looking for opportunities to refinance or consolidate loans for better terms. This can help cut down on loan payments and improve your cash flow and profitability. 

 

#9: REDUCE UNNECESSARY EXPENSES

Reducing unnecessary expenses is a smart financial resolution in both your personal life and your business. Identify and eliminate unnecessary expenditures by regularly auditing expenses and finding areas where costs can be reduced without impacting the quality of your work or customer service.

 

#10: EXPAND MARKETING EFFORTS

Invest in marketing efforts to attract new customers and retain existing ones. This can include digital marketing, social media presence, local advertising, or community engagement initiatives. Tailor the marketing strategy to target the local market effectively.

 

By making these 10 financial resolutions, your business will be well on its way to a prosperous, profitable, and streamlined future. 

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With the new year quickly approaching, it can be tempting to start planning for your future goals and projects. However, it’s important to do a thorough year-end financial review before shifting your focus to the new year. This not only helps you understand the growth you’ve made and areas of learning that you can improve on, but it allows you to celebrate your accomplishments from the past year. In this blog post, we’re breaking down how to do a year-end financial review so you can plan strategically, identify opportunities for growth, and improve your financial management and health moving forward.

How to Do a Year-End Financial Review 

Follow these simple steps and answer these guiding questions to conduct a thorough year in review for your business finances.

SET THE STAGE: WHAT WERE THE FINANCIAL GOALS?

To begin this process, revisit the financial goals of the business that were set at the beginning of the year. It’s important to look at factors such as revenue targets, profit margins, and expense management. These goals serve as the benchmarks that you measure your financial performance against, so reflect on how specific, measurable, and attainable these goals were.

EVALUATE GOAL ACHIEVEMENT: DID WE MEET THOSE GOALS?

After reflecting on the financial goals from the past year, analyze how well you performed financially against those goals. Did your business and team meet or exceed the revenue targets? Were expense controls put in place and made effective? Were there any shortfalls? If so, what reasons can you identify for those shortfalls? Celebrate the successes and growth that contributed to meeting or exceeding any financial goals.

CELEBRATE SUCCESS: WHAT WENT WELL?

It’s important to celebrate the financial successes and wins of the year with your entire company. Point out successful product launches, increased sales, or cost-cutting measures that proved effective for your company. Recognize the key players that made these goals a reality and provide insights into the strengths of your team’s financial strategies and operations.

LEARN FROM CHALLENGES: WHAT COULD HAVE BEEN IMPROVED?

Just as it’s important to celebrate your successes, it’s also important to acknowledge the challenges and areas that could have been improved. This may be budget oversights, unexpected expenses, or inefficient financial processes. By accepting and evaluating these challenges, you can make sound decisions for the future based on experience and use this as information to eliminate potential issues in the future.

REFLECT ON YOUR HONEST FEELINGS

Finally, put the numbers aside and reflect on your honest feelings about the past year. 

• Where did you feel like you made the most growth? 
• What challenged you to grow in positive ways? 
• What caused you stress or overwhelm? 
• What brought you the most joy and pride? 
• How do you feel about your business currently and what are you excited for in the future? 
• What do you want to continue in the new year and what do you need to let go to allow for other focuses?

Answer these questions honestly as you wrap up your year-end financial review. It may also be beneficial to have each team member do this to learn how everyone is feeling in terms of the company and financial goals as a whole.

Overall, conducting a comprehensive year-end financial review is a powerful tool for reflecting on the past, celebrating successes, learning from challenges, and making sound financial decisions for the future based on experience and data. This is about both the numbers and the feelings of you and your team. With this year in review complete, you’ll feel more confident moving into the new year with clarity!

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As the financial year draws to a close, it becomes important to have a well-organized and accurate year-end process. This ensures that you can close out the year and transition into the new fiscal year smoothly by giving attention to the key financial aspects that impact your bottom line and business as a whole. In this blog post, we’re breaking down the 7 essential steps to take to ensure a smooth financial year-end as well as sharing a Free Year-End Checklist that you can use in your own end of year review and planning.  

7 Steps to Ensure a Smooth Financial Year-End

STEP 1: RECONCILE ALL BANK AND CREDIT CARD ACCOUNTS

The first step is to reconcile all bank and credit card accounts, as this is the foundation of a smooth financial year-end. Make sure that your records match the statements provided by the financial institutions that you work with so there are no discrepancies. By reconciling all accounts first, you can uncover potential errors and fix them quickly, maintaining the accuracy of your financial records.

STEP 2: IDENTIFY AND RECTIFY DUPLICATE TRANSACTIONS

If you’ve ever had duplicate transactions, you know just how much havoc they can wreak on your financial statements. This can also paint an unclear picture of your overall financial health. Thoroughly review your records to identify any duplicate transactions and rectify them quickly if you find them. Utilizing accounting software features can help you do this quickly and effectively, ensuring your financial data is accurate and reliable.

STEP 3: GENERATE INCOME STATEMENT FOR THE YEAR

A business’s Income Statement, also known as the Profit and Loss (P&L) Statement, summarizes the revenue, expenses, and profits or losses that a business experiences over a specific period of time. Generating a comprehensive Income Statement for the entire fiscal year provides a clear overview of your financial performance, which is a valuable tool for making decisions for the future.

STEP 4: COMPILE BALANCE SHEET FOR THE YEAR

A Balance Sheet is a snapshot of your company’s financial position at a specific point in time which consists of 3 main sections: assets, liabilities, and equity. It’s important to compile and review a Balance Sheet at the financial year-end to help you get a clear understanding of the overall financial health and position of your business.

STEP 5: EVALUATE ASSETS

Once you’ve compiled your Balance Sheet, assess the value of your assets, including both tangible and intangible assets. Make sure they are accurately valued and organized into the proper categories. When evaluating assets, don’t forget to consider the depreciation of fixed assets and any changes in the market value of investments.

STEP 6: REVIEW LIABILITIES

At the financial year-end, it’s also key to review any liabilities you’re responsible for, including short-term and long-term obligations. This includes loans, outstanding bills, and accrued expenses. Ensure all liabilities are recorded accurately and present a true representation of your outstanding financial obligations.

STEP 7: EXAMINE EQUITY

The final step in ensuring a smooth financial year-end is to examine your equity in-depth. Equity represents the ownership interest in a business. By reviewing and analyzing equity accounts, you can take note of any changes in capital, dividends, or retained earnings. This is key for understanding the financial contributions of the business’s stakeholders. 

In order to have a smooth financial year-end and a solid start to the new fiscal year, it requires a systematic approach, careful consideration, and attention to detail on various elements of your overall financial picture. By following these steps, you’ll be able to get a clear picture of where you’re at, where you’ve been, and plan for where you’re going.

If you’d like more support as you close out the financial year, you can grab our Free Year-End Checklist to get your bookkeeping organized for 2023 and end the year with confidence and clarity.

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Can you believe that another year is drawing close to the end? It really does seem like the older you get, the faster time goes! As we enter into the Thanksgiving season, we wanted to take some time to reflect on our achievements, the achievements of our clients, and express sincere gratitude for all of those who have made this year’s success possible. Read on for some of our thankful reflections as we celebrate financial wins from this year.

Celebrating A Year of Financial Growth

We’ve had the privilege of witnessing several auto shops see significant financial improvements over the course of this year. On average, clients who have been working with us for at least 1 year have seen an average revenue increase of 10.7%. That’s amazing! These financial wins are a testament to their hard work, dedication, and commitment to excellence. Our clients’ successes are our victories, so it is incredible to be able to celebrate these wins together. 

How Our Clients Are Seeing Success

So, what exactly have our successful clients been doing to see these improvements in their business finances? Let’s take a closer look at the strategies and systems that have helped drive their financial growth. 

PARTS MATRICES

Effective parts matrices are key for accurate pricing and inventory management. Our clients are taking advantage of this tool to optimize their pricing strategies, which directly impacts positive revenue growth. 

TRACKING LABOR EFFICIENCIES

An auto shop’s bottom line is greatly impacted by its labor department, which is why tracking labor efficiencies is helping our clients increase profitability and identify areas for improvement. 

IMPLEMENTING NEW PAY STRUCTURES

Our successful clients are also implementing new pay structures that work for the culture of their business, whether that is flat rate, hourly, salary, or a combo. 

INVESTING IN TRAINING PROGRAMS

Investing in training programs for both techs and service advisors is key to the growth and development of their teams. These training programs have helped them elevate their skills and knowledge of their staff while increasing customer satisfaction and repeat customers. 

HIRING BUSINESS COACHES

Many of our clients have also invested in industry-specific business coaches to help guide their companies towards success. Their guidance, insights, and external perspective has been a game-changer for their businesses. 

TRACKING KEY KPIS

Lastly, many of our clients who are celebrating financial wins this year attribute their success to the tracking of key KPIs. Tracking and analyzing these KPIs has helped them make data-driven decisions for their businesses and adjust as necessary in the areas that needed more attention. 

Thankful Reflections From Three Rivers Bookkeeping

To all the auto shops that we have the privilege of working with each and every day, we want to thank you and express our sincerest gratitude to you. Our primary goal is to see each of our clients grow and thrive. This year has been full of many financial wins, and we are honored to celebrate them alongside you. Your success is our success, and we are so thankful for the trust you have shown us. 

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A key aspect of managing any business is keeping accurate financial records. One of the most important tools you can use to ensure your financial data is well-structured and organized is a Chart of Accounts. When implemented correctly, a Chart of Accounts can significantly reduce the risk of transaction classification errors, which can be detrimental to your financial reporting. This makes it easier to track income, expenses, and assets. In this blog post, we’re breaking down what a Chart of Accounts is, why it’s important, and providing a few practical tips on how to set up a Chart of Accounts in your business. 

What Is a Chart of Accounts?

Before we get into the nitty gritty of setting up a Chart of Accounts, it’s important that you understand what it is and what purpose it serves in your business’s financials. A Chart of Accounts is a comprehensive index of all the financial accounts used by a business to classify financial transactions. These accounts are categorized into different groups and subgroups, which makes recording, tracking, and reporting on financial activities much easier. 

WHAT IS THE PURPOSE OF A CHART OF ACCOUNTS?

A Chart of Accounts serves many purposes, including organizing finances into different categories to allow interested parties to get a clear view and understanding of a business’s financial health. 

It also allows stakeholders to quickly locate specific accounts in order to see which transactions are occurring in each account from the general ledger. 

A well-organized Chart of Accounts is also helpful for comparing financial data from year-to-year. 

How to Set Up a Chart of Accounts

When setting up a Chart of Accounts, there are a few things to keep in mind that will help you reduce transaction classification errors. A common mistake businesses make when setting up a Chart of Accounts is having too many categories and overcomplicating the entire system. 

CHOOSE SIMPLE CATEGORIES

We recommend that you choose simple categories that are easy to remember, such as labor income, parts income, truck fuel, insurance, etc. The more simplified and easy it is to remember these categories, the less likely it is that you or your team will make transaction misclassification errors. Plus, this also helps streamline your bookkeeping process. 

UTILIZE CHART OF ACCOUNTS TEMPLATES

Most accounting softwares come equipped with sample Chart of Accounts templates that you can use and customize to meet your specific needs depending on your industry. This gives you a solid starting point to build upon. By utilizing these templates, you can ensure the most key categories and data points are included, which will also help reduce the risk of misclassification errors or missing data altogether. 

Just  make sure that you review the template and tailor it to match your business’s specific needs. Remove any accounts that don’t apply to your business and add accounts that are unique to your industry or company. 

AUTO INDUSTRY CHART OF ACCOUNTS 

If you are operating in the auto industry, you’ll need a specialized Chart of Accounts designed to meet the unique accounting needs of your automotive business. 

This automotive-specific Chart of Accounts can help you save time, effort, and frustration, as it is tailored to the unique categories, transactions, and financial data you deal with on a daily basis. 

If you’re looking to improve your financial data and reporting processes, implementing a well-structured Chart of Accounts is one of the first steps we recommend that you take. It will help you streamline your accounting and bookkeeping processes and gain better control over your financial data. 

Follow the steps in this blog post to set your Chart of Accounts up in a way that minimizes transaction misclassification mistakes and streamlines your financial reporting.

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Effectively managing your products and services list is essential for auto shops. Not only does this simplify and streamline your invoicing process, but it also ensures that your financial records are accurate and organized. In this blog post, we’re breaking down a simple and practical approach to setting up a products and services list for auto shops that maximizes your overall efficiency.

The Common Pitfall of Auto Shop Products and Services Lists

In our work with auto shops, we often see a common pitfall in their products and services lists. The mistake they make is creating an overly extensive and long products and services list. This happens when auto shop owners add a new product or service to their list each time they make a sale. This leads to a confusing list that’s a million miles long. However, you can avoid this pitfall by streamlining your products and services and using descriptions effectively. 

How to Streamline Your Products and Services List

Instead of creating a new product or service for each transaction in your auto shop, consider setting up a small handful of products and services and use the description to enter specific part numbers or details on the service provided. 

For example, set up a “Parts Service” item which is linked to the “Parts Income” on the chart of accounts. Then, each time a parts sale is made on an invoice, put the part number in the description with the correct price. 

Here are a few key categories that we recommend you include on your products and services list. 

LABOR

This category covers all labor charges for various types of automotive work, such as diagnostic labor, repair labor, or maintenance labor. 

PARTS

This is the category where it’s important to create a “Parts Service” item linked to the “Parts Income” account on your chart of accounts to avoid a long and confusing parts and services list. Whenever a part is sold, enter the part number and details in the description along with the current price. 

DISCOUNTS/REFUNDS

This category can be used to track any discounts or refunds that are offered to customers. This is important to track separately in order to make adjustments as needed. 

SUBLET

If your auto shop occasionally subcontracts out work to other service providers, this is the category you’ll use to record the costs of these sublet services. 

TIRE

Having a specific tire category for tire sales, installation, and other related services is a great way to keep these invoices separate. 

By having a streamlined products and services list, you can ensure your list is easy to navigate, which saves you time and reduces the risk of errors. You’ll also make financial reporting more accurate by using descriptions and properly documenting each transaction. Plus, it will make invoicing and filing receipts more efficient and give you financial clarity to help you make informed business decisions. 

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Taxes are an unavoidable part of life, and for many individuals and businesses, it can be an overwhelming process and stressful financial burden. We often dread those spring months when tax season is in full swing and we’re rushing to gather the appropriate documents, financial statements, receipts, and more for tax planning and filing. However, by planning for taxes ahead of time throughout the year, you can reduce your tax liability and ensure you are well-prepared for tax season. Plus, you won’t feel so rushed and stressed come tax crunch time. Read on for a few tax planning tips that can help you get ahead on your taxes and make the entire process smoother and less stressful. 

 

Tax Planning Tips

TIP #1: KNOW WHAT YOUR TAXES ARE BEFORE ASKING IF YOU NEED TO REDUCE THEM.

When planning for taxes, it’s important to have a clear understanding of what your taxes are. This will help you effectively reduce your tax liability. In order to do this, you must know your income, expenses, deductions, and credits. Take the time to thoroughly review your financial records and calculate your tax liability accurately. This is a foundational first step to help you start your tax planning efforts with the most accurate information. 

 

TIP #2: PLAN FOR TAXES THROUGHOUT THE YEAR. 

The next tax planning tip is to plan and prepare for taxes throughout the year, not just once a year during the busy tax season. This is a common mistake that many people make. Then, they often find themselves in a rush, making errors, and struggling to get support from accountants who are already booked out with tax work. Tax planning should be an ongoing process that you do throughout the entire year. Review your financial situation and make adjustments regularly. This will help you avoid last-minute stress, feel more prepared, and can even lead to opportunities for tax savings. 

 

TIP #3: IMPLEMENT A 3 PHASE TAX PLANNING APPROACH. 

To help you plan for taxes throughout the year, implement a 3 phase tax planning approach. Here’s a breakdown of what each phase might look like. 

 

PHASE 1: WHILE PREPARING THE TAX RETURN FOR THE PREVIOUS YEAR. 

Begin the first phase of the tax planning process by reviewing the previous year’s tax return. Look at what your financial picture and overall financial health looked like. Ask yourself if there were any significant changes in your income and/or expenses. Check to see if this year’s trends are in line with last year’s. Take note of any projected financial growth or slowdowns, as this will inform your tax planning decisions. 

 

PHASE 2: END OF JUNE

Around the end of June, take another look at your financials thus far for the year. This is a great time to get a solid estimate of where you’re at and what the rest of the year will look like. If you’ve experienced good growth so far, you may want to consider increasing your estimated tax payments to avoid penalties and interest. This also gives you time to prepare for higher taxes in the spring by saving more for taxes. This is also an ideal phase to assess if there have been any major gains or losses in your income or business investments, as these may require you to adjust your tax planning strategy. 

 

PHASE 3: OCTOBER OR NOVEMBER

As the year progresses, continue to monitor your financial situation and take a look in October or November to see if any new opportunities for tax planning have emerged. This is the time when you may consider making significant purchases before the end of the year that will benefit your tax situation. 

 

By implementing these 3 simple tax planning tips throughout the year, you can set yourself up for a less stressful (and surprising) tax return. You’ll head into tax season feeling confident in your decisions and prepared for any tax liability you must take care of. It’s important to remember that tax laws and regulations can change, so be sure to stay informed and consult with an accountant or tax professional to stay up-to-date.

1 minute ago, NoticeAutoTN said:

No way.  Usually means he's hiding from something and probably isn't to be trusted anyway...we had a local shop for a while paying his guys 1099...which I think is almost as bad..

 

1099 is a tricky slope to manage in the auto industry. I agree with you that it's not a great way to go. 

Well, you don't get quality techs who want to get paid "off the books".

If the potential new hire wants the shop owner to pay them off the books because they're trying to fly under the radar for maybe unemployment, what kind of stunts would they pull on the shop owner?

In the world of business, cash flow management is a key element of financial success. A business’s ability to effectively manage the cash coming in and out of the business will ultimately determine whether it remains successful and profitable or struggles to keep its doors open. One of the most widely used strategies for cash flow management comes from the book Profit First by Mike Michalowicz. This strategy helps business owners transform the way they manage their finances in order to ensure stability, growth, and confidence knowing they’ll always get paid. Read on to learn more about this strategy and how it can help you master cash management in your business. 

 

What Is the Strategy for Cash Management?

The Profit First strategy that Mike Michalowicz teaches is more than just a financial concept. It’s a true mindset shift around how you manage your money and operate your business. This mindset prioritizes profitability over everything else. In fact, it’s so powerful that the Profit First method has been copyrighted, as it is so well known for helping business owners transform the way they look at and manage their finances and make decisions. 

 

The core principle of the Profit First strategy is to set aside an allotted percentage of revenue as profit to pay yourself first before you pay off any expenses or set money aside for taxes. 

 

Instead of the traditional profit formula of Sales - Expenses = Profit, this strategy flips the equation, making it Sales - Profit = Expenses. It might seem like a small, simple shift, but it can have a huge impact on your business’s overall financial health and the health of your personal finances as a business owner. 

The Power Of Separate Accounts

One of the key ideas behind the Profit First strategy is to have separate bank accounts for different aspects of your business in order to manage cash flow and divide money appropriately. This is the bread and butter of the strategy and is where you’ll see the most positive impact on your cash flow management. 

 

By separating out your accounts, you’ll be able to see exactly what’s going in and out of each account, allowing you to make sound financial decisions and take control of your business finances. 

 

The two most important accounts to have are taxes and payroll. How this works is the business owner transfers a certain percentage of revenue into these separate checking accounts, and payroll and taxes are then paid from their specific accounts. 

 

By having these separate accounts, you can ensure that you are consistently saving money for taxes so you never have to scramble at the last minute to scrape together enough money to cover your tax obligations. Your employees are the heartbeat of your business, so it’s essential to set aside funds in a payroll account to ensure you can always pay them on time. 

 

Benefits of The Profit First Strategy 

There are many benefits of using the Profit First strategy for your cash management. First, by having separate bank accounts for each aspect of your accounting, it creates clarity in your finances, allowing you to see where your money is going, which makes it easier to make informed decisions based on the numbers. 

 

It also can greatly reduce the stress on the business (and owner) by knowing that you always have funds set aside to pay your taxes and your employees. With this strategy, you never have to worry about your obligations come tax time or pay day. 

 

With the focus on profit, your business will increase profitability and be able to grow sustainably. Your spending will be under control and you’ll be able to make sound business decisions that drive you towards growth. 

 

Plus, in all of this, you’ll actually be able to pay yourself! So often, business owners put paying themselves on the backburner, especially in tough times. With the Profit First strategy, paying yourself a wage before expenses or taxes is a priority. 

 

If you’re looking to implement the Profit First strategy in your business to increase cash flow, I highly recommend getting a copy of Mike Michalowicz’s Profit First book. It teaches the tried and true, straightforward process for putting this strategy in action. 

As an auto shop owner, one of the most important aspects of managing your business and ensuring it is profitable is effectively organizing and analyzing financial statements in order to make sound decisions for your shop and employees. As an accountant for auto shop owners, I often see financial statement issues arise that cause frustration, overwhelm, and discrepancies in a shop’s finances. In this blog post, I’m breaking down 6 of the most common issues with auto shop financial statements and offering quick tips on how to fix them.

Financial Statement Issues In Auto Shops

Not Understanding Your Financials

The first issue I see with financial statements is auto shop owners simply not understanding their financial statements. They don’t know what they’re looking at, what the numbers mean, or how to navigate QuickBooks. This can make it really hard to make sound financial decisions if you don’t know how to use them to increase profits and make sound financial decisions. 

Solution: 

The solution to this issue is to set your financial statements up in a way that you can easily access, organize, and understand them. We recommend using QuickBooks for all of your financial statements, as this makes it easy to organize and analyze them. 

 

Shop Management Software Doesn’t Match QuickBooks

The next common financial statement issue is having discrepancies between your Shop Management System (SMS) and your accounting software, such as QuickBooks. This can lead to a lot of confusion and inaccurate financial reporting. Your SMS may offer one figure, but what QuickBooks shows is the most accurate financial recording. 

Solution: 

The solution to this issue is to make being consistent in your financial reporting a priority. Calculate and record your financial data in the same way each month, at the same time of the month. Err on the side of being conservative with your figures to ensure your shop remains profitable and your financial statements reflect the actual performance of your shop as accurately as possible. 

Parts and Labor Income Are Not Split Out

Failing to keep parts and labor income separate in your financial statements is another big issue, which makes it difficult to see where your actual revenue is coming from. With labor, there are so many factors to consider, such as employee wages, paid time off, benefits, etc, so it’s important to keep these aspects separate. 

Solution: 

The solution for this financial statement issue is to organize your income into separate categories for parts and labor. This will give you clarity in your finances and make it easier to analyze how profitable each aspect of your business is. This will help you make more informed decisions for your business. 

Parts and Labor Cost Of Goods Sold Are Not Split Out

Similar to the last problem, if you fail to split out parts and labor costs of goods sold, you can create discrepancies in your gross profit margin. This is a key indicator of the overall financial health of your business, so it’s important that it is as accurate as possible. It’s important to note that technician pay should be classified as a labor cost of goods sold for the most accurate financial reporting.

Solution: 

When setting up your accounting software, make sure to create a clear separation between parts and labor costs of goods sold. This will help you see the profitability of each side of your auto shop, allowing you to lean into the revenue streams that bring in the most money for your shop. Be sure to classify technician pay as a labor cost of goods sold. 

Not Tracking Warranty Work

Warranty work is where a lot of financial statement issues arise. When you are looking at your financial statements, you must account for warranty work, otherwise, your income will look skewed as well as your expenses. 

Solution: 

To ensure warranty work is classified and tracked properly, create a simple system to track this work and any transactions related to warranties. This will keep your financial statements accurate. 

Misclassifying Transactions

The last common financial statement issue in auto shops is misclassifying transactions. When you set up your QuickBooks, do so in a way that allows you to easily classify each transaction properly right away. This is an issue with a simple fix, but it can drastically skew your financial statements. 

Solution: 

After setting your QuickBooks up in a way that works for you to keep everything properly classified, make sure to regularly review your transactions to verify they’re accurately classified. This will help you catch any outliers or misrepresentations before it becomes a huge issue.

 

All in all, by knowing what financial statement issues to look out for in your auto shop business, you can ensure you are set up for success and have your QuickBooks laid out in a way that works for you, that makes it easy for you to manage and understand. 

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As a business owner, hiring the right people to work for you and serve your customers is a critical aspect of running a successful company. As you look to grow your team, there are two different categories of workers to be aware of: employees and contractors. Both of these types of workers serve essential roles, but it's vital to understand the differences between employees and contractors, as there are different legal compliances, tax obligations, and nuances to both. In this blog post, we’re diving into the key differences between employees vs contractors so you can make the best, most informed hiring decisions for your business.  

Key Differences Between Employees and Contractors

Definition and Role Clarity

The most fundamental difference between employees and contractors is their relationship with your business. Employees are individuals who work under your direct control and management, performing tasks assigned by you that are integral to your daily operations. On the other hand, contractors are external workers or individuals who are hired to complete specific projects or provide specialized services, working independently and autonomously from the business.

 

Work Schedule and Degree of Control

The degree of control that a business has over its workers is another defining aspect between employees vs contractors. Employee-employer relationships typically involve a higher degree of control and direction from the employer. As an employer, you dictate an employee's work schedule, the tasks they perform, and how they accomplish them. Contractors differ because they generally have more independence and control over how they complete their assignments, when they work, and where they work.  

Ownership of Tools

The ownership of necessary tools needed to complete a job is another distinguishing factor between an employee vs contractor. An employee will be supplied with the necessary items, tools, and softwares necessary to complete their job. A contractor must supply their own tools and softwares, as they are likely used for more than one client. 

Tax Implications

There are vastly different tax implications when hiring employees vs contractors, and understanding these is crucial. When you hire an employee, you are responsible for withholding and remitting income taxes and Social Security from their wages. Hiring contractors is different in the tax sense because they are considered self-employed and are responsible for their own taxes. As the employer, you don’t withhold taxes for contractors, but instead, they summarize their earnings on a Form 1099 at the end of the year. 

Employment Benefits

As a business owner hiring employees, you may be required to provide employee benefits, such as health insurance, retirement plans, paid time off, and other benefits, depending on your company policies and legal requirements. Since contractors are self-employed, they do not receive these benefits from your business.

Long-Term Commitment and Dependence 

Hiring an employee for your business implies there is a more long-term commitment with the expectation of ongoing work. Employees are likely dependent upon the business for their income and benefits. With contractors, these commitments may be more short-term and have a defined scope and timeline. Of course, contractor contracts can be renewed or terminated depending on the business’s needs or the contractor’s desires. Contractors likely have a roster of clients, so they are less reliant on one single client or business for their income. 

Ensuring Legal Compliance

Classifying employees vs contractors correctly is critical for legal compliance. Misclassifying employees as contractors and vice versa can lead to an array of legal issues and expensive penalties. Stay up-to-date on the specific worker criteria set out by the IRS, Department of Labor, or other state authorities in order to ensure you are differentiating the two and classifying your workers properly. 

 

Knowing the differences between employees and contractors is vital for managing your team effectively and ensuring compliance with tax and labor laws. As you expand your business and hire new team members, take the time to assess the nature of the work and the relationship with the individual to make the appropriate classification. Understanding these differences is key for making informed financial decisions. 

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4 hours ago, Obsidian Motors said:

Nice post! Only thing that's missing is follow-up contact info on accountants who are extremely familiar with the auto industry.  

Thank you! Well, you're in luck. I happen to know a few of those people

Running an auto repair shop is a rewarding career and an integral part of a community. However, it also comes with its fair share of financial challenges. As an auto shop owner, you must understand the importance of implementing the necessary systems and processes to keep your business profitable and sustainable long-term. In this blog post, we’re uncovering a few of the most common auto repair shop financial mistakes to avoid so you can stay successful and improve your bottom line. 

 

Top Auto Repair Shop Financial Mistakes To Avoid 

Neglecting Proper Inventory Management

Inventory is one of the most significant expenses that an auto repair shop has. Failing to manage your inventory efficiently can lead to issues such as overstocking, which ties up valuable capital, or understocking, which leads to a loss in revenue and dissatisfied customers. In order to avoid this financial mistake, implement a robust inventory management system that tracks parts usage, orders, and replenishment schedules. This will help you find the right balance and optimize your cash flow. 

Ignoring Preventative Equipment Maintenance

Another common auto repair shop financial mistake to avoid is not putting the proper preventative equipment maintenance procedures in place. An auto repair shop relies heavily on specialized equipment to deliver quality services to its customers. Neglecting to maintain this equipment regularly can lead to expensive breakdowns, emergency repairs, and force you to cancel customer appointments (which also leads to a loss of revenue). To avoid this, create a maintenance schedule for all tools and machines, ensuring they remain in excellent working condition, reducing unexpected expenses, maintaining safety, and improving efficiency.

Overlooking Employee Training and Development

Skilled and well-trained auto repair shop technicians are the key to running a successful shop. They are the ones doing the daily manual labor, therefore, you should invest in continuous training and development for your staff to help them improve their skills, enhance customer service, and reduce the likelihood of errors or costly mistakes. Incentivize your team to seek certifications and stay up-to-date with the latest advancements in automotive technology. An auto shop that values innovation and constant growth will see the benefits both in customer satisfaction and in their bottom line. 

Inadequate Budgeting and Financial Planning

Many auto repair shop owners are great at the actual manual work and labor involved in running a repair business, but when it comes to creating a comprehensive budget and financial plan, they’re not as skilled or confident. Without a clear financial roadmap, it’s challenging to track expenses, identify areas where you can cut costs, or allocate resources effectively. To ensure your business is running like a well-oiled machine financially, develop a detailed budget that takes into account all overhead costs, labor expenses, marketing efforts, and savings for future investments.

Ignoring Marketing and Customer Relationship Management

While marketing is an ever-changing field, it's so important to embrace modern marketing technologies, such as digital advertising, social media, and targeted promotions in order to grow. Word-of-mouth marketing is great, but it should not be your sole reliance. Additionally, you must prioritize customer relationship management by collecting feedback, addressing concerns promptly, and offering loyalty programs to retain existing customers and attract new ones.

Not Complying with Tax Obligations

Finally, the last auto repair shop financial mistake to avoid is not complying with tax obligations. Tax regulations for businesses, including auto repair shops, can be complex and ever-changing. Failing to comply with tax obligations can lead to penalties, hefty fees, and legal issues. To avoid this mistake and ensure you are fulfilling your tax obligations properly, consider hiring an accountant or tax professional who understands the automotive industry to help you navigate tax requirements and maximize deductions. 

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It’s been 3 years since the onset of the global Covid-19 pandemic, and we are still feeling the side effects when it comes to accounting, taxes, and tax refunds. In both 2020 and 2021, the IRS issued notices under the Tax Code, giving them the authority to postpone deadlines and due dates related to filing tax returns due to the federally declared disaster. However, these notices did not pertain to the IRS lookback period for refund claims filed after April 15th. Therefore, many taxpayers who file yearly after April 15th will not be able to claim a refund as it falls outside of the lookback period. 

Now, in 2023, a new notice has been issued by the IRS, extending the lookback period for refund claims. 

Here is a rundown of everything you need to know about this IRS extension. 

What is a Lookback Period

First off, it’s important to understand exactly what the IRS lookback period for refund claims is. 

In general, a taxpayer must claim a refund on their taxes within 3 years from the date the related tax return was filed or 2 years from the date that the tax regarding the claim was paid. This IRS lookback rule allows taxpayers to request a refund in amounts paid within the lookback period. 

The Extended IRS Lookback Period

Since the IRS failed to extend the lookback period in 2020 and 2021, many taxpayers who filed after April 15th have been left unhappy and without an option to request refund claims on those payments. 

In an effort to remedy this problem, the IRS has issued a new notice regarding the lookback period, Notice 2023-21. This notice disregards the time periods from April 15, 2020 to July 15, 2020 (2019 tax returns) as well as from April 15, 2021 to May 17, 2021 (2020 tax returns), when determining the start of the lookback period. 

This notice comes in an effort to realign the lookback periods with the formerly postponed due dates for filing tax returns due to the pandemic.  

What Does the Extended IRS Lookback Period Mean for Taxpayers?

While the IRS’s extended lookback period is a positive move for taxpayers, it does not fully fix the problem created 3 years ago. This should be taken as an opportunity to look deeper into tax law and how we can create a permanent solution and prevent this type of misalignment in the event that future disaster filing postponements are made. 

People are already weary of the IRS, filing taxes, and making refund claims, and this situation definitely does not help their confidence. It is our hope that necessary changes are made to ensure that all taxpayers have the opportunity to claim credits or refunds moving forward without being denied. 

All in all, taxes and dealing with the IRS and lookback periods can be stressful, but the best way to ensure your tax filing and refund claim experience is as positive as possible is to keep your bookkeeping and financials up to date and organized so you always have what you need and can file on time. 

If you need help getting your bookkeeping and finances organized and ready for tax season, I’m happy to help with our bookkeeping and financial services. Feel free to browse our services and book a free consultation call with us today!

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Have you ever walked into a room and stopped because you couldn’t remember what you were trying to do?

Forgetting is easy. Especially when it’s something that we don’t actively engage with on a regular basis.

When it comes to the reasons for what we do and the decisions we make as a business, remembering the “why” behind our actions is important. 

 

How It Started

ThreeRivers Bookkeeping started because I wanted to help small automotive businesses overcome a challenge I observed while working with them. I started my career working with mechanics and automotive specialists in a related industry, but I realized that my passion was for helping those small businesses in a different way.

 

Managing Bookkeeping’s Challenges

Bookkeeping is boring and tedious. Keeping everything properly organized takes so much time, effort, and specialized knowledge that everyday business owners can’t easily handle it. And errors in bookkeeping, which are quite common, can financially ruin businesses. Errors can make it harder to budget correctly. But worse is the damage caused by errors that impact taxes. 

 

My goal in creating Three Rivers Bookkeeping was to help remove bookkeeping as an obstacle for small businesses. Even as I am coming up with new services (coming soon), my goal is to help businesses eliminate obstacles and run their businesses more efficiently and effectively. 

 

Build Wealth Through Business

How much money do you want to make? 

In other words, what do you want to do outside of business?

This is a question we ask our clients when we start working with them. What you want to do with your time, will require a specific amount of money. And in order to make the amount of money you want, your business will need to make a certain amount of money as well. 

While there are many people who work on books and do bookkeeping, the key difference between them and Three Rivers is our desire to help our clients build wealth through their businesses. 

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Taxes are annoying. They cost your business a lot of money to pay. And then you have to spend a lot of time gathering all the proper documentation. And don’t forget to keep it organized. 

That’s where I have a couple of tricks that I recommend for my clients that I would like to share with you.

 

Use a Receipt Manager

A receipt management system will allow you to collect and organize your receipts digitally. You won’t have to worry about losing the receipts or not being able to access them when you need them.

There are two types of receipt management softwares that I recommend depending on your situation and business needs. While both of these apps have a recurring membership structure, with your financial security at stake, it’s better to get something good that you have to pay for.

Dext

Dext’s primary focus is the ability to snap pictures of your financial documents and receipts while allowing you to split and itemize those receipts. It also has more features that are available at higher tiers of memberships.

HubDoc

Hubdoc does most of the same things as Dext but can’t itemize receipts. It is less expensive and has a different approach to organization.

 

Whichever of these two you choose, I recommend starting with a free trial and seeing which one is the right fit for your business.

 

Track Mileage Digitally

 

Tracking and calculating mileage can be tricky. But you don’t have to do it manually. And with a good software you won’t have to stress about it at all. 

 

TripLog

TripLog has a few key features which make tracking mileage easier. The most important feature is their compliance with tax codes. After that, they offer tools that can track your trips automatically, and help you classify your trips easily. 

And they offer good packages for either large businesses or individuals.

In Conclusion

There are plenty of other softwares that can help you avoid wasting time with tracking and organizing your documents for tax season. And using them will not only help you feel less stressed when it comes time to visit your tax preparer. They will make your daily management of your business easier too.

Don’t miss out on using tech to set your business up for success.

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I’m not going to sugarcoat things. Times are hard.

And they aren’t going to get any easier. 

One of the problems that makes hard times worse is fear. 

• Fear of the future 

• Fear of financial issues

• Fear of a collapsed economy

We could spend all day writing out lists of the things we are afraid of, but we don’t have time to be that thorough. There are however a few key fears when it comes to your business finances that I believe need to be faced and addressed.

Losing Savings

When your money reserves start to dip, it’s easy to feel the pressure.

Pressure turns into stress which turns into sleepless nights and uncomfortable discussions about money. 

Inflation is probably the biggest drain you will face in your finances. But that doesn’t mean your situation is hopeless. 

You can slow or stop the losses by eliminating redundant purchases and waste. Unused subscriptions for things such as streaming services are one of the largest sources of wasted money (and they’re easy to find and fix).

Losing Work

As business owners, spending money is less scary when you have enough work coming in to pay the bills.

When work slows down, what you need is a strategy to boost your sales.

Sometimes you need to start or increase your marketing. Other times you may need to seek help from a business coach to help you find where your business is not reaching its potential. Slow downs are unavoidable, but there are ways to handle them.

Losing Investments

The stock market is not fun to watch. 

Your money is riding a roller coaster, but you still feel your heart drop when the market turns down. The good news is that investing is a long-term game. 

If you miss the best days on the market, you will miss out on a lot of money. That’s not to say that every strategy works for every person. And you should seek out a financial advisor to help you make the best decisions. But just because the market is down today, doesn’t mean that the market will be down forever.

Living Boldly

Once you have recognized and faced your fears, you can start to address the solutions. Most companies that fail to grow or even survive, fail because they can’t or won’t face their fears. You can’t solve a problem you aren’t willing to look at. 

Sometimes you need help to get through the challenge of facing your fears, but in the end it will be worth it. If you don’t know how to address your financial fears in your business, I would be happy to speak with you and give you some direction.

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I don’t have a crystal ball. And I can’t predict the future.

But there are some things I do know about what is coming in 2023 based on the current direction of our economy. And none of it looks pretty.

Continued Inflation

Inflation has been at an all time high for the past year and it’s not going to suddenly go down.

Thanks to government spending and the printing of money to pay for that spending, inflation has spiked. And normal inflation which comes from increasing costs of goods and services is still a factor. 

All that to say, inflation is going to continue to impact the economy and business finances well into 2023.

Less Disposable Income

With inflation and increased cost of living comes a decrease in disposable income. A factor we are beginning to see, even now, is the reduction of unnecessary spending in low income households.

While it starts by affecting low income households, it will begin to affect middle class households very soon. Many local businesses depend on people being willing and able to spend money on non-essential items.

More IRS Involvement

Last year saw the largest increase to the IRS in decades. The number of agents that have been added is a sign of increased focus on small businesses and increased audits.

Expect to pay more in taxes or to be stuck dealing with surprise audits as the government attempts to crack down on errors in filing and those who evade payment. 

Preparation is Essential

Local businesses fail first. 

When the economy suffers, the mom and pop style stores will bear the brunt of the problems as they don’t have the resources to spread out the losses. 

Survival requires preparation. You have to start making decisions now if you don’t want to get caught off guard by increased financial hardships.That’s where a review of your current financial situation can be extremely helpful. 

If you want to be prepared, I would be happy to sit down with you and discuss some solutions. Just set up a no-obligation appointment to get started!

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