Monique Lusse | equitybydesign

How Good Financial Oversight Makes You Money In Your Business

December 11, 2013 by Monique Lusse 6 Comments

I was reviewing a client’s year end financial reports yesterday and found $18k to add to his bottom line. IOW, the CFO financial operations and analysis work I did for him ADDED $18,000 in profit to his business.

And talk about return on investment (ROI): he DOUBLED his investment with me and this was just after our very first call!

Indeed, I have long held that cleaning up and keeping on top of your tracking and reporting increases a business’s profits. And now I have proof!

This is so great because this puts the lie to the traditional notion that accounting and finance are expenses to be kept to a bare minimum because they don’t bring in money like sales and marketing. In other words, accounting is a “cost center” while sales is a “revenue center.”

While sales and marketing bring in money to a business (and don’t get me wrong, they should), a hefty top line isn’t the be-all and end-all. It’s really all about how much you keep at the end of the day.

And just as important is good recording and accounting for those expenses. Money spent on good systems and financial oversight is an investment and adds to the bottom line.

So, as you look over your profit and loss statement (P&L) at year end, be on the lookout for any balance sheet transactions that got mistakenly applied to the P&L. Some common ones are:

repayments of loans,
owner draws,
income taxes (except if your company is a C corporation or taxed like one).

A good way to spot these is to look at year over year (YOY) reports. That is, this year and last year side by side. And I’m assuming here that last year’s numbers are clean. Any discrepancies will jump right out at you. For example, last year you had $500 in payroll taxes and this year you show $11,000. That’s a big jump if you didn’t hire anyone so those taxes shouldn’t be going up that high. A closer look reveals that income taxes that should have been recorded as “Owner Draw” (because you’re not a C corp) were recorded as an expense.

This outcome is why I love what I do. Crunching numbers is not boring or dry or dull. It’s exciting because of what good number crunching does: it clears up confusion, promotes peace of mind and makes money!

Need some help figuring out if your books are clean? Are you ready for the tax man? Would you like to see how much money you might have on the table? Let’s talk and see how getting your financial systems in shape will have a positive impact on your bottom line.

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Financial Viability: What The Heck Is It? And Does Your Business Have It?

October 8, 2013 by Monique Lusse 6 Comments

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When I was in college (the first time!) I had this line in the play A Thurber Carnival: “How can I be overdrawn when I have all these checks left?”

The corollary in business is: How can my checking account be overdrawn when I’m making a profit?

The answer is: profitability and positive cash flow are NOT the same thing.

It’s possible to have positive cash flow, but not be profitable.

And it’s possible to be profitable, but have negative cash flow.

Profitability means to charge more for your product or service than it costs you to provide.

Positive cash flow means that you have cash in your checking account to pay all of your expenses.

And both are essential to your business being financially viable.

Financial viability is a key concept in business and it’s an essential metric to asses the health and resilience of your company. If you don’t look at any other numbers, these two are the ones you need to be looking at on a regular and frequent basis.

No matter how big or how small your business is, no matter what legal form it takes, the same principle applies: A business has to be able to achieve its operating objectives in order to fulfill its mission over the long term.

I got my MBA at one of the first Green MBA schools in the country and we all had ideas of birthing companies driven by social and environmental justice. Our goal was to help heal the planet through business.

The notion of financial viability was hammered home again and again: it doesn’t matter how environmentally sustainable your mission, if you’re not making money, you’re not in business. Even non-profits have to be viable.

My job is to get you to there.

I help business owners like you to know what relevant financial information you should be tracking, then how to interpret and use that data so that you can run a profitable business and have positive cash flow.

Working together, you get clear about every facet of your business finances so that nothing surprises you.

Financial viability = peace of mind.

What’s your current challenge around your business finances? Post your comment or question below..

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Here’s How Not To Be “Penny Wise and Pound Foolish”

September 5, 2013 by Monique Lusse 4 Comments

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Here’s one of the most common money mistakes I see you, the newbie business owner, make: you commingle your business AND personal funds in one checking account (usually your personal account).

Why this is a bad idea.

1. It’s time consuming to separate out the business from the personal because it opens up an unnecessary avenue for data-entry error. Instead of designing the separation up front and automatically funneling business expenses only to the business account and personal expenses only to the personal account, you have to think about what’s business and what’s personal every month and manually separate the two. The data-entry error comes in when you misapply one to the other.

2. It makes you look less-than-legitimate in the eyes of the IRS. First off, should you get audited for your personal taxes, the IRS now has access to your business as well. Give the IRS what it asks for and not an iota of information more. Second off, you just don’t seem like a serious business.

3. It also puts you at a disadvantage with vendors, who take you at your own valuation. If you don’t take you and your business seriously, why should they?

4. And your money gets confused. I know I’m getting a little woo-woo here. But really, money is energy and your money needs to know where to go. It needs a container, a separate business account that lets your business income know where it lives.

5. Commingling also gives you a false picture of how much cash you really have in your checking account. Say you have a total of $8,000 in the account. $3,500 is business money and $4,500 is personal money. And say you have a business bill that comes in for $5,500. While you have the actual cash in the account to pay that bill, the business doesn’t have that money. Commingling makes it hard to see the cash flow status of your business.

6. And here’s the last thing: If your business has a name and clients write a check using your business name, most banks will not accept that check for deposit into a personal account. This just keeps you playing small.

Why you may think you’re doing the right thing (but you’re really not):

1. To save the cost of bank fees and checks.

2. To save the time involved in setting up the account.

3. To save the time involved in reconciling another account.

Best Practice: Open a separate checking account for your business.

Have you opened your business account yet? Would love to know if you felt any differently about yourself and your business after. More grown up? More official? More legit? Please leave a comment below!

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Creative Accounting: It’s Not What You Think

June 19, 2013 by Monique Lusse 2 Comments

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An artist friend was complaining recently on Facebook about doing her bookkeeping on QuickBooks. “Boo hiss,” another friend commiserated. “These moments make you wish you were creating, I’m sure.”

What struck me about this was the notion that tracking and organizing one’s books was not creative.

Accounting and finance have a bad rap and I’m here to give you the straight skinny.

You know the stereotype: accountants are a bunch of boring bean counters who lack joie de vivre and élan. We are seen as having no imagination, as robots governed by black and white rules that leave no room for, well, creativity.

In fact, accounting is more of an art than a science. Yes, there are rules (called Generally Accepted Accounting Principles, or GAAP, pronounced “gap”) that we follow. This structure gives us a standardized framework, a common language if you will. And in that structure one finds freedom.

It’s a lot like how houses are built…while the outsides all look different–thus allowing for individual expression and creativity, the internal structure follows similar basic rules of construction—allowing for strong support.

Don’t think that you are not creating when you are tracking your numbers. Au contraire, mon ami! You are visioning your future and laying the groundwork for your success.

When you create a budget, for example, you are not just guessing about what your income and expenses are going to be for the next year. What you are doing is creating a financial vision board, an energetic container. You are declaring your intention to the universe.

Do you have a story to tell about the creativity of bookkeeping? Let us all know in the comments section below.

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The Three Critical Things You Absolutely Must Do Every Month To Ensure Your Financial Health

June 13, 2013 by Monique Lusse Leave a Comment

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If your financial content doesn’t get organized it doesn’t get out and then your work doesn’t impact lives to the fullest extent possible.

And by “organized” I mean timely, complete and accurate: the triumvirate of healthy financial operations.

Don’t get stopped by your own confusion. Let’s unpack those three conditions that need to be extant in order to be on top of your business. While each one is important in its own right, none of them can stand alone. It’s like a three-legged stool: neither leg by itself is worth much. It’s only when all three are together that you have something to sit on!

Timely: The minimum frequency to do your books is once a month. Sure, you could do your books once a year the weekend before the 15^th of April and that will get you your taxes done. But keeping your books up to date in real time gives you timely information. It’s also a heck of a lot easier to code your transactions when only a couple of weeks have past, rather than over a year.

Complete: It doesn’t do any good to have your checking account fully entered for the month, but not your credit card transactions. You need each and every transaction accounted for to get the full picture.

Accurate: It’s possible to have transactions entered into your QuickBooks in a timely and complete way, yet have your “Airfare” expenses codi incorrectly into “Marketing Supplies.” Hey, it happens. This is where the timeliness principle comes in handy: when you’re reviewing your Profit & Loss statement once a month, you’re more likely to notice something wonky because your trip will be fresh in your mind.

Let me know if you have any questions or comments about this. Love to hear from you!

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The One Thing You Absolutely Must Do To Fund Your Dream With Other People’s Money

June 5, 2013 by Monique Lusse 4 Comments

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Business is about sharing your message and your love with the world; and the easiest way to give something to someone is by packaging it in the way that they want to accept it. You have a gift…you have a message… and the way to share it is by putting it in the context that a bank or an investor is most going to respond to.

You have to craft your message in a way that makes sense to them; give them what THEY want and once you’re in, you can give them what YOU want.

Open yourself up to understand about business plans and financial projections so that you can reach more people with your message. Trust that it’s an important message. Value it enough to be willing to do what it takes to build a business. And that means meeting bean-counter types where they are.

I am NOT saying that you have to stop dreaming of changing the world for the better.

I am NOT saying that you need to give up or compromise your strength of vision and purpose. You don’t have to sell your soul to get other people’s money.

Give people what they want the way they want it, especially if you are trying to get something from them. For example, if you want a bank to loan you money then by all means find out what documentation they need and give it to them. If they want five years of financial projections, give them five years, not three. And when they come back with clarifying questions or suggestions, by all means answer their questions and follow their advice.

Keep you eye on the prize…get the money, get the money, get the money.

You are doing yourself and the world a service by adapting this seemingly harsh reality in order to make your message palatable to bankers and investors.

Have faith in yourself. Have faith in your message and adapt to things that work, like Excel spreadsheets and budgets. You’re not going to help save the world if you don’t.

P.S. They say that the good writers copy, but great writers steal. Thanks to Wendy Keller and Christine Kloser for their inspirational words that prompted this blog post.

What is challenging you in your business right now? Would love to know…leave me a comment below.

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Strategic-Thinking Secrets of the Financial Sort

May 27, 2013 by Monique Lusse 6 Comments

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The first thing to think about when thinking about your business books is: what do you want them to do? What is your desired outcome for your books? This type of thinking applies whether you’re starting your books from scratch or whether you’ve been in business for years.

It’s what “thinking strategically” looks like and there are two main tracks.

1. The “rear view mirror” approach (aka financial accounting).

If your goal for your books is to have numbers to turn over to your tax preparer at the end of the year, then Mint.com or Freshbooks.com should work just fine for you. They are “off the shelf,” canned systems for you to track your income and expenses with the IRS tax forms in mind.

This is what I call “looking in the rear-view mirror.” Your books will show you where you have been. This is the bare, doggone minimum you need to stay in business and comply with tax laws. This is basic bookkeeping and it is the foundation, the bedrock of your business operations.

And while I don’t recommend it for so many reasons, it is possible to do your books but once a year to get this done. Somebody’s even written a book about it!

2. The “windshield” approach (aka managerial accounting).

If your goal is to see how you are doing as a business, if you’re making money, which customers and services are making money and which ones aren’t, then QuickBooks for Mac or Windows is the program for you. Designing and customizing the format of the reports is the key to giving you the information you need to make plans. Monthly reports give you the feedback you need to take the pulse of your business and make strategic decisions.

Successful businesses have a plan and they work that plan. Doing your books on a monthly basis is the frequency needed here to get the information you need in a timely manner. The key here is to turn the unrelated bits of data into a clear pattern of information that you then can use to make decisions.

The truth is that your business needs both these points of view to be viable and sustainable. Trouble is that lots of businesses just do the “rear view mirror” one for tax compliance purposes. Running a business requires so much more and only the “windshield” approach combined with the “rear view mirror” is going to get you there.

Where on the road are you in your business? Are you tooling down the highway or stuck in the garage? Let me know. Post a comment. Ask a question. Would love to hear from you.

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Interview With The Expert: Ana Melikian

March 11, 2013 by Monique Lusse 2 Comments

I had a lovely conversation with Ana Melikian of AnaMelikian.com last week. Ana is a Book Yourself Solid® Certified Coach and she specializes in helping other coaches and consultants get more clients with ease and joy.

What I love about Ana is that she not only teaches entrepreneurs the marketing strategies they need to build their online business, but she also shows them how to implement those strategies using the latest technology.

I can’t tell you how valuable this nexus is. It’s not enough to only understand what to do; you also need to know how to do it.

So here’s the interview. I hope you enjoy it. Listen in here!

And after you listen, I would love you to post in the comments section one thing you got out of it that you can implement today!

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You Still Have Time to File Your 1099s for Tax Year 2012

February 8, 2013 by Monique Lusse 9 Comments

The big date to keep in mind for complying with an important IRS requirement is coming up: February 28, 2013. That’s the deadline for filing your 1099 forms with the IRS. Penalties apply if you file after that date. So now you know…that ship has not yet sailed!

Right about now you might be wondering, “What the heck are 1099s and do they apply to me?”

Good questions.

1099s are forms that you, the business owner, fill out and send to the vendor and the IRS reporting each vendor’s tax info and the total amount you paid them in 2012.

It used to be that businesses were required to report to the IRS all payments of $600 and over to vendors who were not incorporated or taxed like corporations (more below on how to determine this little factoid about their tax status.)

That all changed effective with tax year 2011.

Now you, the business owner, are only required to file 1099s on vendors that meet ALL THREE of the following criteria:

Paid $600 or more in the calendar year

AND

Paid by cash or check

AND

Paid a vendor who is not a corporation or taxed like one.

Another way of looking at this is that you don’t have to report any payments you made to vendors via credit card, debit card, gift card, or PayPal, no matter how much you paid them or what tax status they hold. That’s because your credit card company, your bank, and PayPal will file their own 1099s with the government. So helpful, nay?

How do you know what your vendors’ tax status is? How do you know if they aren’t a corporation or taxed like one?

There are a couple of really quick ways to know:

If your vendor has “Inc.” as part of their name, then you know that they are a corporation and you are NOT required to fill out a 1099.
If you made payment to a vendor using their personal name, then they are sole proprietor and DEFINITELY need to get a 1099 from you.

If neither of these two applies then you have to ask them what their status is. You do this by sending them a request to fill out a W-9 form. When they send it back to you, you’ll know. Here’s where you get the most current form online from the IRS: form W-9. Don’t be put off by the date of December 2011 on the form; it is the most current…really.

So to recap: if you paid more than $600 via cash or check to any vendor NOT a corporation or taxed like a corporation, then you need to file a 1099.

Now the deadline of January 31, 2013 to send all your 1099s out to your vendors has come and gone; but not to worry. You still have time to complete your 1099s, send them to your vendors and meet the hard deadline of February 28, 2013 to send the report to the IRS. This is the important deadline that has consequences if you are late.

What if a vendor doesn’t send a completed form back to you?

The best way to insure that this doesn’t happen is to make receipt of a completed form a REQUIREMENT before they get paid. It’s amazing how much of an incentive that is. If they blow you off after you’ve requested the info, then send them a letter via certified mail to record that you did your due diligence and that you sent it.

Why jump through those hoops and go to the expense?

I have one word for you: penalties.

So here’re the steps to follow to get ‘er done!

Download form W-9.
Email the form to all your vendors that you paid $600 or more in calendar year 20112 and ask them to fill it out and return it to you.
Mail the 1099s to the IRS by February 28, 2013. (If you file electronically, you have until April 1, 2013 to file. No foolin’!)

Have some further questions? Please shoot me a query in the comment section and I’ll be happy to answer.

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Should You Use the Desktop or the Online Version of QuickBooks?

December 27, 2012 by Monique Lusse 2 Comments

Whether you use a PC or a Mac, the desktop version of QuickBooks beats out the online version hands down. Where did that term, “hands down” come from, anyway? “The term dates back to the mid-19th century and the genteel world of British horse racing. Back then, a jockey who found himself way ahead as he approached the finish line would relax his grip on the reins and drop his hands.” http://ask.yahoo.com/20051215.html Thought you’d like to know.

But I digress. Why the desktop? Let me count the ways…

1. The desktop version is cheaper.

The cost of the desktop version, QuickBooks for Mac 2013 or QuickBooks Pro 2013, is $249.95 and you can use it for a good two years ( if not more) before having to upgrade to a newer version. Compare that to the monthly subscription for QuickBooks Online Plus of $39.95 or $479.40 a year. At the time of this writing Intuit, the maker of QuickBooks, is running a special: $199.95. And it’s a tad cheaper than that on Amazon. You do the math!

2. The desktop version is faster.

OMG! Close to twice as fast, depending on the day. Instead of spending an hour on the online version, you spend 1/2 hour on the desktop. So what takes you 2 hours a month on a desktop could take up to 4 hours online. Again, do the math!

3. The desktop version is much more robust.

It has so many more features and report options that make it so much easier to use. I could go on and on about this, but I won’t.

“But,” I can hear you saying. “QuickBooks Online lets your virtual bookkeeper access your books. Doesn’t that make it all worthwhile?”

No. I have one word for you. Dropbox. Putting your desktop version company file in file sharing technology like Dropbox gives you the exact same functionality at significant cost savings. It’s really a no brainer.

Please send me your comments or questions. Love talking with you.

Happy Holidays and Best Wishes for a Healthy and Happy 2013!

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