Owning It

Owning a small business is like starting a family but often I feel like a single parent with quintuplets.

When I first began my business in 2012 I filed out all of the correct paperwork. As it would seem, I did so in the most backwards order I could imagine. This was not by my poor planning as much as it was my overall lack of knowledge about the entire process, which between you and I is not incredibly obvious even after having gone through it. I do have to give credit where it is due and I owe a lot to the Small Business Development Center as I may not be where I am today without their guidance.

As a small business owner I have had to wear many hats and to keep my costs low I have had to wear all of those hats on my own.Meghan

The Photographer As a lead photographer I have enjoyed the ability to be as structured or organic as I like and have been able to be creative with on the spot changes due to weather, venue and wardrobe mishaps. I feel that this is my strongest role and one that I am constantly improving and honing. A big thanks to friend and fellow photographer Sam Dingley for my stunning headshots. That comes off like I am bragging about me, but I promise I am bragging about his photography skills.

The Website Designer In all fairness the bare bones of my website was originally created by a friend Kendall Totten Design who is an incredible developer but is now ran almost entirely by me. I try to check in with her once or twice a year to do an overall update to my site when I need assistance with code or say, I accidently delete a section of content. Oops. But other then that, all content, now comes from me in all of my glorious grammatical errors.

The Ad Executive I do my best to funnel all social media traffic back to my website but at this time do not use any paid advertisements to gain clients. My social media presence is crucial to my image so I do my best to keep my brand consistent. My logo was again created by a dear friend Mindy McPeak Illustration and my business cards and header by another Graphic Designer friend Danielle Webb who I think I traded the designs of for wine and cheese. Overall my business is driven by word of mouth. My clients return year after year and tell their friends about their experience with me and in turn become new clients.

The Attorney I cannot afford one at this time and so I am my own legal counsel. I have done my best to be upstanding and have tried to protect myself by using contracts and holding a Limited Liability Corporation (LLC). I even keep my business bank account separate from my personal account. I figure there is no excuse for being careless so I might as well be prepared.

The Salesman I like to pride myself on my ability to sell. I used to sell for J.Crew and could sell corduroys and chino’s like it was my job. And at Cheesetique I used to sell cheese and wine like it was my job, because at one time it was my job. But now, I am in the business of selling myself. Gasp. And this is not easy for me. I believe I am an incredible artist and yet it takes everything in me, to sell me. It is not like I bathe in confidence but I do have to overcome myself sometimes and sell my experience, skill and artistry.

The Accountant I file my own taxes. I create my own budget. I try to keep my advertising costs and business expenses low. I pay sales tax in three states and currently for an LLC in one. I file everything on my own that I need to keep my business running and upstanding with the law.

The Balance I am a full time wife and mother and so it is essential that I maintain a balance with my work. I tend to work nights (editing) and weekends (photographing) when my partner can be with our little one. The lifestyle of a Wedding and Portrait Photographer lends itself well to my available schedule.

Starting Your Own Business? Ask for Help The Small Business Development Center of Alexandria was an excellent resource for me when I began my business and they helped to point me in the right direction and showed me where to file my LLC, Business License, Trade Name and Sales Tax. I also had to set up an Employer Identification Number (EIN) with the IRS and I would not have known this had it not been for their assistance. I also took advantage of their social media counseling which has proven to be priceless.

You can reach me at:

 

(202) 681-9848

[email protected]

http://www.shotinthedarkphoto.com/

 

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Who Me? Avoid These Employment Traps

Recruitment
Recruitment (Photo credits: www.mydoorsign.com)

How are you hiring and paying for services your business needs? Do you have employees? Independent contractors? Contractors or consultants? Interns?

Tax and labor laws contain a lot of traps if you do not pay attention to what you are doing when you bring in the help you need. Workers Compensation insurers and VA’s Unemployment Insurance rules also must be followed. Often small organizations and solopreneurs hire extra help or expertise on an ‘as needed’ basis. But you do need to be clear about the ‘how’ and ‘which’ among your options.

Want to hire a consultant, contractor, or independent service provider?
If you hire via a company which provides such services, it is usually a nice clean transaction – business to business. When you work with and pay an individual directly, you need to be sure to keep it legal. Check out this IRS guidance  on hiring of independent contractors versus employees.

Be sure the help you hire, no matter what you or they call themselves, is working with you to ensure both of you are in the clear legally on your payments to them.

Want to hire an intern?
Lots of small organizations think of interns as free help. Not so! I see organizations all the time that want an unpaid intern to work for them but violate these rules – and get into trouble. Back pay, taxes, and fines are not fun to deal with! If you are legally a non-profit, you may be able to hire an intern without paying the person. All others – very unlikely. See this DOL guidance.

Do you have employees?
The federal and state governments are cracking down on proper payment of employees. Both are looking at whether employees are properly classified in relation to wages or the organization is trying to call them independent contractors when they are employees. They are checking out pay for overtime work and whether the organization is trying to treat employees as exempt from overtime laws when the work done is actually not exempt. Need more info?

Got questions?  Your CPA, HR advisor, or attorney can help.


Patricia A. Frame is an experienced management consultant, HR executive, speaker, and author on human capital issues. She is known for her ability to address organizational goals and issues effectively and to create human resource management practices which support these goals without excessive administrivia. Patricia has advised executives and boards on a wide range of human capital and strategic planning issues. She has expertise in organization development, talent management, process restructuring, compensation, and training. She has worked with technology-based companies, government contractors, non-profits, associations, and retail operations. She advises small to mid-size organizations on ways to succeed and to help their employees thrive. Ms. Frame has given seminars for SBDC in recent years on the basic processes of HR management. Additionally, she generously provides one-to-one HR counseling once a month through Alexandria SBDC.

Risk Avoidance: Risky for Small Business Investors

Risk
Risk (Photo credit: The Fayj)

When I first joined Wachovia in 2008 (you may know us as Wells Fargo), one of the first things I was told was that “Sometimes you buy stocks when they are down so you won’t get tempted to buy them when they go up.” I feel it was great advice. It tells me there are subtle risks in stocks that are just as real as the obvious ones.

Academics define risk in terms of volatility. Most of the Small Business investors I know do not worry that the stocks that they own will go up too quickly; that would be a wonderful feeling! They worry that what they own will go down in price and that they will lose money; pretty normal if you ask me. Losing money is painful. It’s only right that we all want to avoid doing it. That being said, I am not 100% sure that this risk should be avoided at all costs.

Overtime, we have been shown that stocks seem to defy the rules of supply and demand. In most cases, higher prices mean less demand and lower prices mean more demand, which is not always true in the capital markets. Sometimes when an asset appreciates, there is a belief in further appreciate of that asset in those who have not participated in the rise. Those who have not bought in experience remorse. The feeling can exist even more if that rising asset was avoided because of fears of losing money. In addition, an alternative asset was purchased as a result of expected lower risk when unfortunately little or no return was given to its holder causing even more remorse.

It can be painful not to own stocks as they are going up. Investors feel they have “missed the boat,” which can cause one to enter the market at higher prices and set the stage for future losses. I believe that investors should be risk averse, but I also believe that they should be aware of the bucket of risks that exist. I feel that the future is risky by nature. One cannot avoid risk but one can manage it. A diversified portfolio may mean that you are never entirely right, but guess what? The chances of you being entirely wrong are not so great. When was the last time you rode on a Ferris wheel. It would be stupid to invest all of your assets on one bucket. What would be smart is to divide those assets into several buckets in that Ferris wheel. Should one bucket tip, you have others to stabilize that one bucket’s loss. If you ask me, 100% cash portfolio can cause almost as much trouble as one that is 100% common stocks.

In my opinion, there is still room for appreciation. The world is still far from perfect. The perceived risks of stock prices are still widely felt. Is the least understood risk the risk of no equity exposure at all?

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JASON FUCHS is a financial advisor for Wells Fargo Advisors in the Alexandria, Virginia area and can offer you a wide range of financial and investment services.

 

Why are you in Business?

Let me ask you a question:  why are you in business?  I am sure your answer is to earn money, to make a living, or to prepare for the future.  Then let me ask a second question:  what is your most important tool to manage your money?  Do you keep track of your bills and receivables in your head?  Do you go online to your bank to find out how much cash you have?  If this is how you keep up with your financials; does it make you a bit nervous?

Do you use an accounting program, such as QuickBooks or Peachtree, so that you can give your tax preparer your financial reports in January?  Is that all you use it for?  Maybe you use an excel spreadsheet to track your financial transactions.   Why should we, as business owners, take the time to set up and maintain an accounting program – our “books?”  This is a good question and there are many good answers.  A good program is specifically designed to pull data that you or your bookkeeper enters and then uses that data to create reports to provide you with essential information, to keep your “book” balance reconciled and current, to remind you of important financial tasks, and to make your financial life much simpler.

If I want to know how much money is owed to me, I run a receivables report.  How much cash will I need to pay my bills this month?  I run a payables report.  Will I have enough money to pay my bills by the end of the month?  I take my book balance + receivables (to forecast cash) – payables = Uh! Oh!  I much prefer to say “Great!  I can do it.”  But if it is Uh! Oh!  I need to know that sooner rather than later.  An essential part of my financial management is looking ahead to my financial needs.  This gives me the opportunity to prepare and to stay ahead of the business of running my small business.

An accounting program will create invoices for you which will point to your receivables reports.  It will help you manage your bills by pointing to your payables reports.  It will keep track of your loans, credit card expenditures, fixed assets, payroll, and more.  Want to know your profitability of a single item in your inventory?  There is a report for that.  How much sales tax do you owe for last month?  There is also a report for that.  And, how much money did I make on that job?  Yes, there is a report for that too.  The Balance Sheet, the Profit & Loss, and all the different reports I just mentioned pick up data from the transactions that we entered.

Having good financial data and good historical financial data is essential in creating a budget and forecasting cash flow.  This data will also help you analyze your profitability to see if it is what it should be and whether to make any changes.  This is a good time to meet with your accountant to strategize what, if anything, you should be doing differently.  What is the impact on your tax liabilities?  How much in estimated taxes should you be sending to the IRS and the state?  You know about one-stop shopping.  Everything you want to buy is in one place.  Well, your books are like that too….. we could call it one-stop financial: all your financial data in one place.

To make good business decisions, you must have good financial data.  I know, the products or services you sell are extremely important and should be part of your primary focus.  But you can’t have one without the other.  If possible, keep them current, on a daily basis, so that you have real-time financial data.  Remember….. that’s why you are in business.

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Touch It Once Then Act on It

Let’s talk about going green.  Yes, going green.  There are many ways you can keep a green office.  But there is more to having a green office than saving the environment.   The most common commodity we all work with is paper….. to me, a close second  is my time.  If I can save a tree or two and save myself time so that I can take a guilt-free lunch, then I want to do it.   One side benefit is that I make my office more efficient.  I’ll save some of my tricks for another time, but let’s start off with one thing I do to save time!  I have to admit that I’m partial to this one.

Be Smart – touch it once….  Be Smart – be efficient and thrifty….. touch it Once

Be disciplined.  When you open your mail or paper is handed to you, categorize it immediately.  If it is trash, toss it or recycle it; if it needs to go to someone else for action, address it and put in your outbox; if it needs to be filed, put it in your filing box.  If action can wait, create a tickler file.  If it is urgent, put it in your action folder.  Touch it once then Act on it!

How many times have you looked for an important piece of mail that you are sure you received but for the life of you can’t find!  Is it in this pile or in that pile.  Is it – OH NO!, did I throw it out with the trash?  There is a dance we have all done in our office, it’s called the “paper shuffle.”  Sound familiar?  Where is it; what did I do with it?  You’ve got to touch it once then act on it!  I live in a highrise condo.  Every day, I see my neighbors open their mail boxes and before they head for the elevator, they go through their mail and toss in the bin all the junk!  They don’t even bother taking it upstairs where it will eventually be added to their desk clutter.  They touched it once, they acted on it!  Be disciplined!  That is what it takes.  If you truly can’t go through your mail at that moment, keep it in your inbox so that it doesn’t get mixed with other things.

I have some other ideas for going green that benefits both you and the environment.  These include using “quiet time,” efficient filing systems, electronic filing (my new favorite), and the list goes on.  Remember…. Be Smart – touch it Once!

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Document Retention for Small Business

Frequently small businesses ask me as a professional bookkeeper varying questions about document retention.  I am not going to tell you which documents you should retain.   This information needs to come from your CPA, attorney and/or your corporate headquarters.  I want to write about document retention because ultimately, you may be responsible for archived documents.  There are certain documents that you will be required to keep on file and available if needed by auditors.  Not only must you have them, BUT you must be able to retrieve them – which box and which folder.   If you can’t find it, then you don’t have it!

Learn which documents you must retain and for how long.  Find out if electronic copies are acceptable or if you must keep hard copies.   I will write about my best filing system another time, but a few tricks concerning retained documents:

  1. Use colored dots to mark the corner of files you will need to archive at the end of your fiscal year.  Then all you will need to do is pull those files and place them into an archive box for storage.
  2. If you have a single document and not a year’s worth of similar documents, it is okay to create a folder for one document, label it and then color tag it.  This makes it easier to retrieve this document if it is needed.  I always give critical documents their own folders.  [HINT:  I will make an electronic  copy of an archived document if it is something I may need to refer to from time to time.]
  3. Part of my filing system is to keep an electronic catalog of all my files.  Not only does it make it easier to find a document or folder (I’ll write more about this another time), it makes it very easy to create content lists of archived boxes.
  4. Number your boxes and label them with the general contents and dates.
  5. Your boxes need to be stored someplace where they will be safe.   If your basement floods easily or is subject to dampness, don’t put them there.  If your attic has insects, don’t store them there.  If you have a lot of boxes don’t stack them beyond their maximum load; the boxes can become damaged and will collapse.  You might consider checking into commercial storage companies.  They will pick up your boxes and will deliver boxes back to you if you need to retrieve a document (see the value of having a good list?).  These companies can be expensive, but may be worth the cost if you have neither the space nor a good, safe location to store them.
  6. If electronic copies of your documents are allowed, typically certain guidelines must be followed.  Some of the requirements will include minimal redundancy of your electronic files, where the electronic data is stored, legibility, etc.  You must obtain a copy of those guidelines and adhere to them.

Retention is a very important topic and should be part of your company’s Policies and Procedures.  Documents that must be retained should be known to anyone in your company who works with them.  I recommend also that document management be assigned to someone who will take responsibility.  That person might be you, because ultimately the liability is yours.

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Bookkeeper and Your Accountant

Bookkeeping and Your Accountant - MBS Bookkeeping ServicesThere can be confusion among small business owners when it comes to responsibilities between bookkeepers and accountants.  There are some who believe that they will save money by using the services of a professional bookkeeper rather than services of a Certified Public Account (CPA.)  I answer that question with this analogy:  would you ask a nurse to perform open heart surgery, or would you ask a heart surgeon?  Both are critical to the field of medicine just as the bookkeeper and the CPA are both critical to the field of accountancy.  Let me point out a few important differences.

CERTIFIED PUBLIC ACCOUNTANT

A public accountant is qualified to help you strategize and make important decisions so that you can grow your business and avoid some common pitfalls.  A CPA can also help you with strategic tax planning.  Your CPA takes your business financial planning to the next level.  If you don’t currently have a CPA, get one.

BOOKKEEPER

The bookkeeper then implements at the nuts and bolts level the strategy you and your accountant develop.  Your bookkeeper will set up your books and classify transactions that correspond to your business strategy.   At the most basic level, your bookkeeper spends a great deal of time posting transactions to the correct accounts so that your financial reports correctly reflect the financial health of your business.   Other important functions include maintaining reconciled book balances and managing your accounts payable and accounts receivable.   Your bookkeeper must be able to provide you with your current cash position when you are faced with a critical financial decision.   I’ve just scratched the surface.

These are your most basic differences.  But as with all things, bookkeeping professionals have different skill sets and areas of proficiency.  There are many professional bookkeepers who are trained and skilled to help you in many other areas.  These might include budgeting, forecasting, pricing, payroll, training, and so on.  So what should you do?  Your business is your ship and you are its captain.  You should make a list of skills and assistance you are looking for in a bookkeeper and look for someone with those skills.  A good place to start is by asking for referrals from similar businesses or from your accountant.  Schedule a meeting with the Alexandria Small Business Development Center; they have professionals available to advise you.  If you have an in-house bookkeeper, make sure your bookkeeper gets the training she/he needs.  If you are a start-up, meet with your accountant on a periodic basis to be sure you are on track and give your bookkeeper feedback.   Bad bookkeeping means poor output which can mean insufficient data for you to use when making critical financial decisions.  Don’t be penny wise and pound foolish, as the old saying goes.  The little you may save today may cost you plenty in the future.  Be smart and get professional advice.  It doesn’t matter if you keep your own books, if you staff it, or if you outsource… Be Smart!

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Smart Entrepreneurship: Small Business Financial Management

Small Business Financial ManagementGuest Post by Barbara Greenwald of Sheinwald Financial Strategies.

 

I define “Smart Entrepreneurship,” as the willingness to plan ahead, adjust your plan as you go along, know your own limitations and when to consult others, only take risks that you understand and can afford to take, deliver your product or service with the utmost quality and professionalism, and always manage your business functions (especially your financial management) well.

Owning your own business requires research, planning, dedication, persistence, problem solving, and resilience. Whether it is generating revenues, keeping the cash flow going, maintaining employee morale, or managing the growth of the company, the buck stops with you.

My insights are gleaned from 30 years of lending money to small businesses. My efforts as a financial strategist are always to provide guidance that will contribute towards a smoother ride. If owning your own business were an easy path to success, however you define success, then everybody would be doing it.

Do you have 6-12 months cash to support both your personal and business cash requirements? 

You want your business to be a source of pride and fulfillment, not a source of worry and distress. Why not strive to be in a position where you can minimize any worry about money? Properly managing financial risk is one of the most important elements of running your business.

Having sufficient resources will permit you to concentrate on generating sales, hiring and training the right employees, and implementing operations. All too frequently businesses are going along and a cash flow shortage suddenly occurs when a receivable doesn’t come in when expected; or when a business expands rapidly. To better understand when revenue growth will eat cash, ask your accountant, your banker, or a financial strategist like myself. .

Depending upon the size of the business and the pace of its growth, a periodic financial check-up with an expert is advisable. Just like your personal health, if you don’t catch a problem early enough, it can be much harder to resolve in a favorable manner. It’s advantageous to be proactive and keep the financial health of your business fine-tuned.

What do the right financial advisors mean for your future success?

If a company doesn’t have its books set up properly to reflect its financial status at any given point in time, and it has not selected an accountant to pull regular financial statements, the owner won’t know if the company is making money, losing money, or breaking even, and will not have the financial reporting to make sound financial decisions when future opportunities or other challenges present themselves. Lack of knowledge about a company’s financial status is one of the biggest financial risks a business owner undertakes.

Questions to ask yourself:

  1. Do you have an accountant and an accurate accounting system kept current?
  2. Have you found a banker who will follow your business progress and be prepared in advance to set up a financing facility?

What is your plan if you find that you are making progress towards increased growth and profitability, and you find you need more capital?

If you cannot identify sources for cash for the fixed overhead for your personal and business expenses for at least six months, which might include a spouse’s salary, consider a back-up plan. Finances can operate on a shoestring and even transform you into a better money manager, but can also create a more nerve-wracking experience and a greater possibility of failure.

The most important message I can deliver is to understand the financial risks you are undertaking, the business implications, and your own personal risk tolerance. It is important to only take risks you can afford to take to preserve the long term potential of your business venture.  Cash provides the maximum flexibility to get through downturns in your business or the economy. In the end, everything starts and ends with finance.

If you are a Government Contractor, please join me for my upcoming talk:
Tuesday, May 8: “Financing for Government Contracting: The Importance of Timing” presented by Barbara Greenwald, Sheinwald Financial Strategies. Held at the Alexandria Small Business Development Center, 625 N. Washington Street, Suite 400 from 9:00 – 11:00 AM. Register online or call 703-778-1292 for more information.

Photo courtesy of Andres Rueda