I just got off the phone with one of the solopreneurs who grabbed a seat in my upcoming coaching program about doing your own books using QuickBooks Online.  And she had a great comment–so I wanted to pass it on to you.

“I know I’m really good at doing what I do. But I don’t know what I don’t know about the back-end of it, the financial admin and ops side of things.”

Wow! That’s a great insight and the beginning of wisdom and mastery.

So here’s my answer based on what I have seen over the years working one-on-one with clients and in my group programs on bookkeeping and accounting.

1. They commingle funds by running personal transactions through their business bank accounts and visa versa. This not only muddies the waters, it opens them up to unnecessary scrutiny should they get audited. (I’ll show you how to clean that up.)

2. They don’t understand the difference between cash and accrual basis or why it’s even important. (I’ll teach you that.)

3. They haven’t set up a budget, what I call a “financial vision board,” to help them track their progress and dream big. (I’ll show you the ins and outs.)

4. They don’t know what to do on a daily, weekly, monthly, quarterly and annual basis to establish peach of mind thru a consistent workflow. (I’ll teach you how to set up the systems and checklists to do just that.)

5. They don’t know what deductions to take that they are actually allowed and they take deductions that they aren’t allowed. (I’ll explain all this in clear English, not IRS babble.)

6. They don’t look at their numbers at all, they just compile them once a year—usually the weekend before April 15^th—to do their tax returns. (I’ll teach you how to review your financial reports on regular basis so you know what to look for.)

Anyway, I hope this resonates with you. It’s super important. After all, your WORK is important. Your financial operations should be supporting you, not draining you.

I’m offering a special coaching and training program specifically designed for solopreneurs. It’s all about learning how to set up and maintain your own complete bookkeeping system using QuickBooks Online Plus. I will walk you through the before, during and after of running your own set of books.

And not only that, it’s about learning how to understand what the numbers mean and what to look for once you’ve got good financial reports to look at.

All you have to do is send me an email to monique@equitybydesign.com and let me know you’re interested in finding out more. I will write you back and give you the details.

A client sent me this email recently:  Will I need a 1099 FROM (emphasis added) a vendor I paid money to?

No.  Your business doesn’t NEED 1099s from other vendors.  It needs to send 1099s TO vendors (with some exceptions) that your business has paid $600 and over to.

There are exceptions.  What kind of rule would that be without exceptions?

Did you pay under $600?   No 1099.

Did you pay over $600 on a credit card?  No 1099.

Did you pay a vendor with “Inc.” in its name?  No 1099.

Did you pay over $600 not on a credit card to a person, e.g. Monique Lusse?  Yes 1099.

Did you pay over $600 not on a credit card to a company name, e.g.: Equity By Design? No 1099.

1099s are the IRS’s way of keeping us all honest.  A check made out to a person’s name is easy to hide from the IRS and they want to know about those.  So if you made a check out to me, Monique Lusse, I could go to your bank and cash the check, not declare that income on my Schedule C and the IRS would be none the wiser.  So that’s why you should send a 1099 to anyone you wrote a check or ACH transfer to.  Now if you send me a check made out to my business, Equity By Design, I cannot go to your bank and cash it.  That’s against banking rules.  So the IRS is not so concerned that I’ll be able to “shelter” that income from them.  That check has to be deposited to my business account, hence an audit trail, which the IRS loves.

Your business will receive 1099s from other businesses that you have done busines with over $600.  You just need to archive them.  That’s it.  No other action needed.

The deadline for 2015 1099s to vendors was 1/31/16.  The deadline to send the 1099 info to the IRS via snail mail was 2/29/16.  You should still send them now if you need to.  Exception:  the deadline date to send to the IRS is coming up, 3/31/16, if you do so electronically.  Another exception to keep us all on our toes!   So you can still make it if you need to.

Have a question about this?  Throw it up in the comments section and I’ll get you an answer!

photo: Monique Lusse

A frequent question that new business owners ask is some variation of this: Finally getting serious about tracking inflow / outflow. Bookkeeper? Quick books? Quicken? All insight appreciated. Do your books yourself or have a someone else do it?

There’s a very narrow window where it makes sense for a business owner to do their own books; it depends on your business model, your industry, your attention to detail, and your interest. And the fewer moving parts the better.

Here’s the narrow window: soloprenuer, no payroll, no inventory, cash basis, service-based.   If you meet all of these criteria AND you have the discipline and interest in the consistent, detailed work, then I say, give it a go.

The minute you start getting into payroll, even if it’s just for yourself, you need outside expert help. The ways that payroll reporting and tax compliance can be screwed up are legion and just too costly to even consider doing yourself. I don’t care what marketing QuickBooks does saying that their payroll service is easy, it’s just not.

If you have any kind of inventory, either because you manufacture a product or are a reseller, this kicks you into having to do your accounting on the accrual basis to comply with the IRS. Accrual is complicated and if not done right (and it’s usually not done right by beginners) gets you into more costly trouble to have an expert sort out.

If you are in the trades, say a building contractor or plumber, then you need to track time and costs against specific jobs…and again, that adds a layer of complexity that if done incorrectly, will cost you big to untangle.

QuickBooks, not Quicken for sure.

If you fall into the narrow criteria I’ve mentioned, you might be interested in the online class I’m teaching called “Financial Fundamentals for Soloprenuers: DIY QuickBooks Online Plus.” Want more info? Ping me on monique@equitybydesign.com  and we’ll see if it’s a good fit for you. Next class starts in February.

A friend, collegue and client (I just love when they’re all rolled into one!) recently asked me:
How do I know when I need to issue a 1099 for a vendor? So far I have a VA who is working project based (and has other employers) and invoices me for services provided. What about an accountant or bookkeeper?

Here’s my response to her: You’ve asked a really important question about the 1099s.

To answer that you need first to get a Form W-9 from them. Up front. Before you pay them a dime. And if you didn’t get one up front, get one NOW.

The W-9 is an IRS form that tells you whether they are 1099 material or not. Download the form here, send it to every vendor you work with, and make completing it a requirement before they get paid from you. This needs to be part of your onboarding process with any new vendor from this point on. Before they get paid, they have to send you a completed W-9. Otherwise, it can be like pulling an elephant through a knothole to get a W-9 after the fact in January 2016, as 1099s are due to vendors by 1/31/16 and the IRS by 2/28/16.

The second thing is to read Nolo Press’s information on which of your vendors meet the criteria to get a 1099, ’cause not all of them do. Nolo does such an excellent job of laying it out, please go straight to the horse’s mouth for the deets. It’ll also tell you how to file the 1099s with the IRS. Nolo rocks!

I’ll tell you another reason to get W-9s from each of your vendors: you’ll get a better idea of who might really be considered an employee rather than an independent contractor. But that’s a whole other post!

Please leave a comment or ask a question. I love to hear from you!

If you don’t have a bookkeeping system for your business (and tracking your income & expenses on an Excel spreadsheet does NOT count as a system–all right, it’s a system, but not a GOOD system) get yourself QuickBooks Online Plus. It’s on sale right now.

Why the Cadillac version, the Plus version, and not the others? Because that’s is the only online version that’ll do your 1099s. Don’t know what that is or why you need it?

Write a comment and let’s talk.

Oh, and it’s the only online version that does budgets, what I call “financial vision boards.”

Congratulations! You’ve reached the point in your business where keeping your own books is no longer an option. You’re just too busy making money to also be keeping track of it yourself.

You have a few options to choose from to address this:

1. Contract with a free-lance bookkeeper or bookkeeping service.
2. Bring the position in house
3. Have your CPA’s bookkeeping staff do your books.

In this post I will share with you the pros and cons of working with your CPA’s bookkeeper.

Pros:

1. The communication is seamless between the bookkeeper and the CPA.
   1. They have a working relationship already established. They’ve ironed out the kinks, so they can hit the ground running and won’t waste time calibrating with each other.
   2. The time between communications is greatly reduced because they are working together, usually in the same office.
2. The CPA manages and oversees the bookkeeper.
   1. This is huge. The CPA has vetted and hired the bookkeeper. The CPA, in essence, is vouching for the competency of the bookkeeper.
   2. If the bookkeeper leaves for whatever reason (emergency, relocation, retirement) it’s the CPA who replaces them.
3.  Your books are managed and maintained at the CPA’s office.
   1. This saves you the initial expense of purchasing software and the ongoing expense of upgrading software every year or two.
   2. They always back up their work. Can’t say enough about how important this is.

Cons:

1. It’s a higher cost to you as CPA’s usually mark up whatever they pay their bookkeeper.
2. You don’t manage or oversee the bookkeeper; you have less managerial control and input over when and how bookkeeper does her job because you are not her boss.
3. Books are set up and maintained with tax compliance in mind, not managerial analysis. The bookkeeper is working for a tax accountant so her perspective is all about getting the numbers together for the year-end tax return.
4. Books are not in your possession, so you don’t have access to them whenever you want.
5. If books are on your computer, you need a cloud based solution for bookkeeper to access. The fact that this is an added expense is not the real “con” here. It’s that cloud-based solutions add additional layers of complexity to accessing the data and depend on an internet connection.
6. Bookkeeper is not on your team, not invested in your business.
7. Bookkeeper works as an archivist, not in real time cutting checks, making deposits, issuing invoices or running payroll.

How do you decide whether farming out your books to your CPA is a good option for your business at this time?

Here’s some basic criteria:

1. You have a low transaction volume, no more than fifty checks, credit card charges and deposits per month.
2. Your business is service based, where you get paid commission or you are selling your time. You don’t have a complicated reporting structure such as job costing.
3. You send your bookkeeper your receipts and bank statements once a month in a batch.
4. You write the checks and make the deposits yourself.
5. Your books are kept on a cash, not accrual, basis.
6. If you have an employee you outsource your payroll to a payroll service.
7. You have no inventory and are not selling or manufacturing product.
8. Your business doesn’t own any depreciable or amortizable assets, such as buildings, equipment, or land.
9. Your cash flow is always positive, so you don’t need to monitor your numbers more than once a month.

These questions are a starting point.  There are probably circumstances unique to your situation that also need to be taken into consideration.

Would you like some support to get clear about whether or not this option would work for you? Drop me a line in the comment box below and we can talk about it.

I love my clients. They are amazing, heart-centered entrepreneurs who want to use business as a tool to do good in the world.

My client Jack Kinley of Lab Monkey Communications and I were recently wrapping up our year of working together. As his CFO for the past 12 months, we successfully built financial systems and structures for his business that significantly increased his bottom line through accounting and strategic planning.

 Jack sent me a little gift. It’s a colorful coin purse emblazoned with the words “Chief Financial Officer” across the front. Inside the card he wrote: “Hope it overflows with money, laughter, and happiness.”

It doesn’t get much better than that.

The coin purse is just the right size for my business cards, so I put some in it and put it in the pocket of my walking pants. (I’ve learned to never go anywhere without my business cards, ‘cause your never know who you’re going to meet or where.)

One day as I was walking a thought occurred to me—from wherever it is that thoughts are born—that it might be a good idea to also stash a credit card and some cash in my little coin purse. However, I didn’t follow up on the idea because I just plain didn’t remember it once I got home.

And then a remarkable thing happened. As I walked along the trail in the middle of marshland, there, right in front of me on the path was a $5 bill.

I picked it up, looked around to see who might have dropped it, but there was no one in sight. I gave thanks for the unexpected income and continued to walk. About 20 feet on, there was another $5 bill. Wow!

That coin purse is a container. Building containers is a powerful way to manifest your dreams and intentions. A container provides a place for your intentions to manifest. It attracts your dreams and gives them a form to take up residence in.

I believe plans are also containers. Creating a plan for your business allows you to get really clear on your vision and intentions so you can provide a structure for them to fill in and inhabit.

The planning process can take one of two forms: Design Gates or Sprint-and-Scrum.

Design Gates, also called stage gates, are the traditional approach. They call for spending hours and hours planning the whole project from A to Z. Then implementing a written plan by moving from one stage to the next in order.

The Design Gates process is mechanical, and doesn’t allow much room for feedback or revisions. An example of a Design Gates plan would be a 26-page business plan that outlines your 5-year plan, complete with projections and budgets.

The Sprint-and-Scrum approach is much more nimble. It involves coming up with an idea, brainstorming action plans (the scrum part), then putting the ideas into action and watching what happens (the sprint part).

Then, you add another scrum to tweak the plan, and then off to another sprint. This is an iterative process that allows for rapid design evolution and revision. A business plan that employs this format would look at the next 90 days, rather than the next 60 months. This method is particularly useful in industries that experience rapid change.

Both of these approaches have their place in business plans: When you look for bank loan or a line of credit, for example, the traditional business plan based on Design Gates fits the bill. Not because it’s the better plan, but because it’s what traditional bankers are used to. It’s important to always consider your audience and what they are comfortable with, especially if you want something from them.

The bootstrapping start-up would likely find more benefit from the Sprint-and-Scrum approach when they create plans because they are scrambling to learn quickly what works and what doesn’t.

What planning approach do you use in your business right now? I would love to hear from you. Post a question or thought in the comments below.

Wirawat Lian-udom via Compfight

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..