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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. View full article

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. View full article

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. View full article

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. View full article

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! View full article

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. View full article

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. View full article

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. View full article

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. View full article

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.

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.