Scott Gregory, QuickBooks Expert

Building Better Business Finances - The QuickBooks Profit and Loss Report

Are you running a profit and loss report (aka an income statement) for your business every month?

If not, you should be!

WHAT IS THE PROFIT AND LOSS REPORT?

This report gives you a very handy recap of your income and your expenses. And of course, the difference between the two (and this is where we cross our fingers that there is more income than expenses!).

The profit and loss report quickly summarizes the various transactions that you have entered throughout the day, week, month, etc. (i.e. invoices, checks, etc.)

THE PROFIT AND LOSS REPORT IN QUICKBOOKS

Click Reports (in the menu bar) > Company and Financial > Profit and Loss Standard. From there, you'll see the report for the current month-to-date as shown in the sample below (click the image for a larger view):

This report helps you quickly see how your expenses stack up against your income. From there, you can develop plans to either increase your income and/or reduce your expenses in the weeks or months ahead.

Don't run this report only at tax time. Better - run it at the end of every month so there are no surprises. It will help you know exactly what is going on.

RELATED INFORMATION:

• 15 Trouble Spots that May Be Lurking in Your Business Finances

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Special Webinar: "Understanding the New Hire Act" + "Employee or Contractor: Making the Right Choice"

Register for my webinar to get up to speed on two very critical issues facing small businesses:

• Understanding the New Hire Act and how it impacts your business
• Employee or Contractor: Making the Wrong Choice Can Cost You a Fortune

I am very pleased to have Molly Mulroy for Paycor on the webinar. She'll cover the New Hire Act and what it means to your business.

I'll be covering the "employee or contractor" topic with insight to help you understand what is involved in making the best decision on this important question.

IT'S FREE

The webinar is free!

In addition, it will be recorded for playback in the event you can't make the live webinar.

REGISTER NOW!

Take just a second to register for our webinar on the New Hire Act and Employee or Contractor issues.

Look forward to seeing you there!

Is Your State THIS Business Friendly? You Be the Judge

From the tales of the "sad but true" department...

 I recently became aware of a local small business that got not one, but two surprises in their mailbox from two different state taxing agencies. Actually, they weren't really surprises, but nightmares in an envelope!

The first letter they received was from the state bureau of unemployment advising them that their unemployment tax rate for the new year was increasing from .8% for the year to 11.8%.

You read that right...

Their unemployment tax rate was going from .8% to 11.8%. (that is from point 8 to 11 point 8!)

WTF?

You see, this business, like many others last year, had some turbulence in their cash flow during the year. They happened to make a late payment on their unemployment taxes during the quarter that the state set their rate for the next year. Once that happened, they got caught up in the machine.

Be aware - they did not skip the payment. They paid it in full about 60 days late when cash became available and they also paid the interest that was billed to them for the late payment.

IT GETS BETTER...

Shortly after they had that little explosive dropped into their cash flow planning, they received another letter from the state bureau of workers compensation.

Because one of their payments was 60 days late during the year, this business was told they were being dropped out of their group rating program for workers compensation for one year.

Important note - the state allows you to be 59 days late, but not 60. If you hit the magic 60 days, lights out.

Like the unemployment situation, the late payment was ultimately made in full on the 60th day. The business was not a habitually late payer for either of these tax programs.

End result of this little snafu?

Their workers compensation rate INCREASED 450% for the new year.

THE APPEALS ARE UNDERWAY

Naturally, this business has begun the appeals process with both state agencies. They have already lost the first round of the workers compensation battle.

Why they lost? Because the state is so far in debt, that they passed a law last year that said these penalty rates are in place for a year when late payments are involved. Few, if any, exceptions to be granted. Too bad...so sad.

MORAL OF THE STORY: Don't be late on your payroll taxes. Ever.

Oh, and by the way, are you wondering what state this is? Hope so..

If you do business in the state of Ohio, you could be next...

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Scott Gregory is a specialist with QuickBooks Pro, Premier and Enterprise accounting software.

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Inside QVinci - The Dashboard for QuickBooks: Getting Started

Qvinci is add-on software for QuickBooks that allows you to quickly create your own customized dashboards so you can review and analyze not just your QuickBooks data, but also data from your Excel sheets as well.

For example, you can easily create a dashboard that contains the following key metrics and charts for your business (or your clients if you are a CPA):

• Profit and Loss Overview
• Last 3 year Profit and Loss Comparison
• A/R and A/P Last 12 Months
• Balance Sheet Charts (shown in the screen shot below)
• Key ratios, such as the quick ratio, current ratio, gross profit margin

There is a tremendous amount of functionality and flexibility built into QVinci, and this post will show you a few of the basic things you need to know to get up and running quickly with it.

Once you install the software, open it and follow these instructions:

• Click the New Dashboard button on the File tab
• Click the QuickBooks graphic on the Options tab
• Click the Jump Start button on the File tab
  
  
• Connect to your QuickBooks data file (it must be open in order to make this initial connection)
• Select the "Build Everything" option and wait a couple of moments for your QVinci dashboard to be created.
• Answer the few remaining questions about building charts and using Excel, and you are finished.

Your QuickBooks data file (and/or Excel worksheets) are now attached to your QVinci dashboard, and you are ready to either review the results or customize the dashboard even further by adding or deleting key charts and performance indicators.

As another example, you are able to see information about your Accounts Receivable in a way that QuickBooks can't offer you, as shown in the screen shot below:

Be sure to click the Save button on the File tab to quickly and easily store your dashboard configuration for future analysis. I'll cover more features and functionality of QVinci in future posts.

LIKE WHAT YOU SEE WITH QVINCI?

• Small businesses - save 50% on your first month of QVinci.
• CPAs and Accountants - get your own copy of QVinci for just $5 per month!

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Scott Gregory is a specialist with QuickBooks Pro, Premier and Enterprise accounting software. He is also a QVinci Master Guru.

Connect with Scott today to download his free QuickBooks guides.

ATTN: Accountants - Tools To Help in Your Business

As you look for ways to get more done in less time and provide even more timely insight to your clients in the new year, here are several solutions that may be of interest to you:

• Tic, Tie and Calculate - a plug in for Adobe Acrobat that will help you be far more efficient with your digital workpapers.


• Tungle - software that makes it a snap to schedule meetings with clients and staff members. I've just begun using this in my business with great results.


• QVinci - a great way to set your clients up with a customized dashboard of key financial data, performance metrics, and other key indicators. Works with QuickBooks and Excel data to create the financial dashboard your clients are looking for. Use referral code 74481650 to set up your own copy of QVinci (which you can customize for your business) for just $5 per month.


• Rescue Time - an interesting solution to help recover productive time from your work week. Plans for individuals and businesses available.


• CPA Productivity Survey - a detailed survey tool designed to help you take a closer look at how to make your firm more productive and profitable.

What technology tools are you using in your business to help with productivity and profitability? Post a comment below to share your secrets with us.

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Scott Gregory is a specialist with QuickBooks Enterprise, Premier and Pro accounting software.

Get your clients some huge savings on QuickBooks Enterprise! Limited time offer!

Accounting 101: A Better Understanding of "Accountant-Speak" (an ongoing post)

I've launched a new tweet series on Twitter called #Accounting101. The goal of this series is to help you get a better understanding of common accounting terms and phrases that are important to the financial well-being of your business.

Whether you are using QuickBooks or SlowBooks, you will encounter these terms in the bookkeeping and accounting activities of your business. Knowing what they mean will help simplify (hopefully!) these sometimes confusing topics.

I'll be posting the updates here as well in case you aren't using Twitter. Please be sure to add a comment below about accounting and financial terms that are confusing to you or that you would like to know more about!

Accounting 101: Clarifying "Accountant-Speak"

• Asset = Something you own. Examples: inventory, bank accounts, accounts receivable, machinery and equipment.
  

• Liability = Something you owe. Examples: bank loans, credit cards, sales taxes. Not as much fun as assets.

• Equity = The owners share of the business. Assets (own)–Liabilities(owe) = Equity (left  over). A way of valuing a business.

• Sales/Revenue = The money you earn when you sell a product or service. Ex: Sell a $100 widget. Your gross sales = $100.
• Expense = Costs incurred in your efforts to create revenue. May be cash (example: rent or marketing) or non-cash (example: depreciation).
• Chart of Accounts = Filing cabinet to keep track of your various asset, liability, income and expense accounts. Keep it simple and let it expand as your business matures.
• Current Asset = Something you own that will convert to cash in 12 months or less (hopefully!). Examples: inventory or accounts receivable.
• Current Liability = Money that you owe that will be paid in 12 months or less. Examples: sales tax, payroll tax, credit cards.
• Profit and Loss Report = Income - Expenses = Net Profit (or Loss). Run this report at least on a monthly basis.
• Balance Sheet Report = Assets (own) - Liabilities (own) = Equity (left over). Run this report at least on a quarterly basis.
• Accounts Receivable = Money owed to you by your customers as a result of you selling to them on credit terms (example: net 30 days).

Watch this space for updates!

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Scott Gregory is a specialist with QuickBooks Pro, Premier and Enterprise accounting software.

Have you downloaded his free QuickBooks guides yet?

The One QuickBooks Tip That Will Save Your Business Thousands

As a business owner, you know how you've said that you might have taken different actions at various times if "you knew what you didn't know"? (or said another way  - "I didn't know what I didn't know, so I didn't know what to ask!")

This tip is designed to share a critical idea with you to help you "know what you should know", especially when it comes to managing the accounting and finances of your business.

Here's the tip...

Don't let anyone touch your QuickBooks (or any other accounting software for that matter) unless they have demonstrated they know what they are doing with it. Not now. Not ever.

That includes you.

Some tough advice for sure, but advice that has been proven time and again to pay big dividends for small businesses.

It's a Crock

You see, this concept that "if you can write a check, you can do your own bookkeeping" (a concept made popular in an ad campaign a while back) is quite frankly, a crock of crap.

There is one key word that was left out of that campaign, but a very important one for sure...

"Correctly"

The question should really be - "If you can write a check, can you do your own bookkeeping CORRECTLY?"

The answer in far too many cases is, sadly, no.The required bookkeeping knowledge and experience simply isn't there (no matter how many classes are taken or DVDs reviewed) and "correct" becomes "incorrect" or "disaster" pretty quickly.

How Quickly The Excitement Fades

For the new business that is excited about "doing their own accounting", they run out and purchase the software, load the CD, and then often say "ok, what do I do now?" Especially when they are confronted with terms like "chart of accounts", "sales tax", "items", and "balance sheet".

The eyes soon begin to glaze over and the excitement quickly fades. Errant decisions are then made just to "get through with the stupid setup" so invoices can be created and checks written.

Unfortunately, the setup of the accounting software is one of the most critical junctures in the process. Loading the CD into the computer is easy. Getting it set up right beyond that isn't easy, no matter if the software says it is easy or not.

"We Had a Bookkeeper That Really Didn't Know QuickBooks"

For the existing business doing their own accounting, this is a phrase that I hear with startling regularity. The end result? Their books are either a moderate or full-blown disaster.

Common problem areas and "Tums Moments" that unskilled bookkeepers can cause:

• Bank and credit card accounts not reconciled for months, if ever.
• The chart of accounts showing customers and vendors in it, and is set up wrong.
• The profit and loss report spewing out wrong numbers (True story - one business I worked with was showing 50% less sales in the income section of their profit and loss than they should have been because of a critical setup error).

And this list of common problems is just scratching the surface...

Would you let a mechanic that wasn't qualified perform service work on your car? Probably not.

Why would you let someone that wasn't qualified to work on your accounting software run the risk of turning your critical financial reporting system upside down? Without good financial data, it is extremely hard to make good business decisions.

You're Skeptical About the Magnitude of This Problem

Don't just take my word for it - connect with any of the 50,000+ QuickBooks ProAdvisors that have been working with QuickBooks for a couple of years. They will be able to quickly share with you similar tales of woe that they have seen at their clients. I guarantee it.

Think of it another way - why would there be 50,000 QuickBooks ProAdvisors out there if there weren't a lot of mistakes going on?

So How Do I Save Thousands With This Tip?

Here's a few ways for starters:

• Your business will avoid the interest and penalties that occur from the mishandling of payroll taxes because you outsourced the payroll and didn't let your bookkeeper mess it up. Unfortunately, this issue is like a ticking bomb at many small businesses. Even worse, the extent of the problem isn't known until a year or three down the road because of the reporting delays inherent with many tax agencies. Just because you have a bookkeeper on staff doesn't mean he or she should be doing the payroll!
• Your business will avoid extra fees that are paid each year to your tax accountant to untangle the mess they are given at year-end. These costs can add up rapidly if your books are in poor shape. I don't know about you, but I'd rather have my tax accountant figuring out strategies to lower my taxes than figuring out if the profit and loss statement is accurate.
• Most importantly - your business will be able to make critical decisions based on ACCURATE financial data that reflect your true income, costs and expenses. The benefit of this is priceless.

Your Action Plan

There is no question that having someone unqualified keeping your books and working in your accounting software is truly a case of pay now or pay (a lot!) more later. Unfortunately, sometimes this lesson isn't learned until it is too late and the checkbook has been depleted.

If you have not set up your books or software yet, you're in luck - you can enlist the help of a professional to get you set up the right way and work with you to stay on track.

If you've been keeping your books for a while, it would make sense to stop and get a preventive maintenance checkup on them. Having a professional set of eyes doing a review of your setup should pay for itself in pretty short order. The insight you gain from that review will allow you to fix existing problems within your accounting and also learn ways to better manage your business finances.

Don't be fooled. Keeping your books is harder and more complicated than it looks. Resist the temptation to "hire cheap" when it comes to the handling of your business finances. Don't think of this cost as a budget-buster - rather, think of it as a budget saver! You won't be disappointed.

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Scott Gregory is a specialist with QuickBooks Pro, Premier, and Enterprise. He has been called in to clean up the real-life disasters mentioned in this post many times during the last ten years.

What if the Bank Says No and Your Business Needs Cash?

You mean to say that you didn't get your bailout funds yet? In these days of tight credit and bankers excelling at uttering the word "no", what other options exist for a business to finance their cash flow needs?

Here are a couple of alternatives that your business could consider if you need some working capital but the bank refuses to say yes:

1) Finance Your Receivables:

In simple terms, a company that specializes in this type of financing buys some of your accounts receivable. They pay you a certain amount up front, and then pay you another amount when the receivable is collected. The difference between the original amount of the receivable and what you actually get is what the company keeps as their share or "financing fee".

For example - The Receivables Exchange is a very well known source of accounts receivable funding. In fact, they have a full blown exchange set up to handle the buying and selling of accounts receivable. A search for the term "receivables factoring" turns up a number of other businesses that also provide these services. As with anything involving the finances of your business, be sure to read and understand any and all contract details before signing off on the sale of your accounts receivable.

Other good sources of background and information on financing your accounts receivable:

• BusinessFinance.com
• Wikipedia
• About.com - Small Business Information

2) Consider an Alternative Financing Source

Like the businesses that specialize in accounts receivable financing, others specialize in different ways to help your business get the cash it needs for operations. For example, they might lend you money based on your purchase orders or even structure a sale and leaseback of some of your equipment or other assets that have a value that can be borrowed against.

A colleague of mine with Brooke Funding has the right idea when it comes to promoting alternatives to traditional bank lending - his tag line is "We Know Where to Go When the Bank says No!" Having a resource like this in today's marketplace is very valuable, even if you don't need any funding at the moment.

The terms of these various financing options are as varied as the days on the calendar, so you will want to ensure you understand what the best options are for your particular business and circumstances.

3) Social Lending Marketplaces

If you take the idea of social networking like Twitter or LinkedIn and cross it with banking and business finances, you get the concept of "social lending".

Typically, social lending offers the ability to get a loan for small amounts up to $25,000. One of the leading businesses in the social lending sector is Prosper.  You set the terms of the loan you are looking for and then let members of the Prosper network (the social part of the equation) bid on your loan. 

Social lending is enjoying a great deal of popularity right now as a no frills way to get needed funds. It isn't without its' detractors, but what isn't these days?

For some additional background information on social lending:

• Will a Stranger Lend You $25,000? (Business Week)
• Wikipedia on social lending
• Factoidz article on social lending

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Scott Gregory provides part-time controller services to businesses like yours.

He is also a specialist in QuickBooks Pro, Premier and Enterprise. Connect with Scott at Bottom Line Accounting Solutions.

Streamline Your Accounting: Remote Deposit Capture

C'mon, be honest...

Hauling yourself to the bank to make your deposit every day is a pain in the shorts, isn't it?

As long as your business takes payment by check (and not by coin or currency), you can stop making that daily trip to the bank. How could that could be?

Ask your banker about a product called Remote Deposit. It also goes by Remote Banking, Remote Office, and a host of other names, but the idea is the same. You turn your office into a remote branch of your bank (if only you could print money there too!)

Here is an overview of how Remote Deposit works:

• The bank sells (or rents) you what is called a remote capture terminal. It is a small piece of hardware that sits on your desk. You feed your checks through the terminal, and the image of the check is then stored for processing.
• You use the bank supplied software to then transmit these images securely and directly to the bank to complete your deposit.

What's in it for you?

• No longer waste countless days over the course of a year driving to and from the bank and hanging out in line to make the deposit
• Most banks provide a longer business day when using remote deposit. For example, instead of having deposits after 3pm posting to the next business day, many allow same day deposits up to 5 or 6pm the same day.
• Acceleration of your cash flow so that you can use available funds more aggressively to pay down debt and reduce interest expenses.
• Convert the time you spend on non-value added banking activities into value-added and revenue enhancing activities (i.e. chasing customers down for overdue payments, helping to get quotes and estimates out the door, etc.)

Is there a cost for Remote Deposit?

In most cases, there is a cost to purchase or rent the terminal as well as a monthly cost to maintain the remote deposit service.

Naturally, if you are an extremely small business, this concept may not be cost-effective for you. However, if your business has any steady recurring volume of checks, it may pay for itself relatively quickly. Besides, there is a cost to the way you are currently handling your bank deposits - you just don't see it leaving your checkbooks each month!

With some negotiation, you can usually find a way to lower some of these costs as well.

Additional Resources on Remote Deposit:

• Handy Remote Deposit Calculator - see how much you could save.
• RemoteDepositCapture.com - learn more about this idea
• Background on Remote Deposit from Wikipedia

Are you using Remote Deposit in your business? Let us know how its' working out for you by posting a comment below!

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Scott Gregory is a specialist with QuickBooks Pro, Premier and Enterprise. He also provides part-time controller services to small businesses. With over 25 years of experience, he understands "the accounting side of QuickBooks" and the "QuickBooks side of accounting". Contact Scott at Bottom Line Accounting Solutions.

Don’t Miss This Critical Step in Managing Your Business Finances

Do you have an effective system of monitoring your accounts receivable?

Every dollar you have outstanding on open customer invoices is a dollar you DON’T have in your bank account. If it isn’t in your bank account, you can’t use it for the operations of your business.

Unfortunately, many businesses pay scant attention to the money that is due to them, figuring that their customers will get around to paying eventually. Why hope and pray for this to happen? Develop an effective accounts receivable management system instead.

First of all, ensure that the invoices you send out contain the following critical information: the correct amount due, the correct purchase order number (or other identifying information your customer needs to track it), correct details about what was purchased, your selling terms (i.e. net 30 days), and a remittance address for them to send the check. You don’t want your customer to have any excuses (they have plenty already) about missing information so that your invoice ends up in a pile somewhere in their accounts payable office.

Once the invoice has been created, review the various reports available in your accounting software to monitor the receivables. For example, in QuickBooks, there are several very helpful reports that can be instantly generated to provide a real-time status:  the A/R Aging Summary, the A/R Aging Detail, the Open Invoice Report, and the Collections Report to name a few. Each of these reports provides a unique view on the details of who owes you, how much they owe you, and how long they have owed you. All of this is very critical information that needs to be monitored on a regular basis.

Once you have researched the report tools available to you, create a procedure so that you can then follow-up on overdue invoices sooner rather than later. Choose a combination of steps that may include: faxing or e-mailing copies of invoices that are overdue by a certain amount of days, calling the customer on invoices that are overdue by a longer period of time, and then getting the principals of the customer involved for invoices that are getting really old. Be sure to document each contact made for each customer in your accounting system so you know exactly who said what about when the overdue invoices will be paid. This also provides a history for you to use in determining whether future sales will be done on open account or other alternative methods of payment.

It isn’t easy to ask for money. But remember, it’s YOUR money! If you don’t ask for it, who will?