Tag: bookkeeping services los angeles

Play by the Rules with S-Corporations

 

Rick_E_Norris,_An_Accountancy_Corporation_Play_by_the_Rules_with_S-CorporationsThe use of S-corporations has been rising in recent years. However, the challenge is to operate them correctly so as to not create a fatal mistake invalidating your S-corp election, or other problems. Here are some areas to be careful

  1. Make sure you give yourself an adequate salary. Many S-corp owners take only draws thinking that they can escape all Social Security and Medicare taxes. The IRS is very keen to this one. There has been some attempts to make all S-corp income subject to self-employment tax.  This legislation would eliminate the need for reasonable salaries.
  2. Be careful when you pay back your loans to the S-corporation. If you used those loans as part of your basis to take losses, you may have to recognize income on their repayment.
  3. In order for an S-corporation to have a single class of stock, the economic interests must have the same rights to distributions.  If partners are to receive disproportionate distributions, then maybe an LLC is your best choice for a tax vehicle.
  4. When an S-corp shareholder leaves, be sure allocate the activity properly and provide all applicable elections.

If you have an S-corporation, consult your tax advisor when making decisions that may affect its status.

 

When it comes to your personal finances, are you a Stage 1 or a Stage 4 White Water rafter?

 

Rick_E_Norris,_An_Accountancy_Corporation_When_it_Comes_to_Your_Personal_Finances_Are_You_A_Stage_1_or_A_Stage_4_White_Water_Rafter

This economic meltdown has many people second-guessing the financial decisions made in the last 8 years.Where do you stand, and what can you do about it?

A couple of years ago we shot the Snake River rapids in the Grand Tetons.  Like many rapids, the river offered its “flat” moments (stage 1), and churning moments (stage 4).  One time we prepared ourselves for a level 4, and were hit by something unexpected, hail.    In the middle of summer we turned a corner and were pelted by hail stones in the face during a storm.

I think many of us can relate to this in the current economic times.  But, the extent of damage depended on whether you operate your business (and personal finances) in a stage 1 or stage 4 rapids

I found there are two main types of business and investment personalities:  One type are those who lived during the depression, or learned by it.  They are very conservative in what they do, and try not to be too speculative in whatever they do.  The other type is the sprinter.  Many of these sprinters profited handsomely in the past 8 years riding the leverage train of real estate.In their business and personal finances, they also seem to leverage heavily.

When I work with clients personal finance strategies, I keep these two polar positions in mind.  If a client is younger, then they can obviously take more risks with their personal finances.  However, when a client approaches middle age, I caution them that the downside is more severe if they do not meet their personal finance objectives.  So, both in personal and business opportunities I recommend the following:

  1. Always have a well thought-out strategy. What do you want to accomplish with your personal finances?
  2. Don’t fool yourself with the possible outcomes. Look at worst case scenarios.  Personal finances can be very emotional, and if you don’t drop the emotion in your thinking, it can hurt your final strategy.
  3. Plan for both your intended outcome and your worst case scenarios.  Just the other day, my 14 year old lost his English notebook with homework and school work.  He thought he left it in the classroom, but wasn’t sure.  I told him to not just think about what he would do if he found it, but what he would do if he didn’t.  This took some of the stress off him since he had rationally thought about how he could replace the work while he was calmer.  If he would think about this at the time he found out that the notebook was not in the classroom, then he would have beem more immotional and could have created a flawed strategy.  Luckily, his notebook was there teh next day, and he received credit for all the work.
  4. You may want to reduce your risk, just in case the worst case scenario occurs.  Remember, water can both save you, and kill you depending on how much your drink.  Don’t throw yourself completely  into a personal financial position, whether it be real estate, stocks, or percious metals without thinking about the consequences of over investing in one product.  Your personal finances can live or die depending on the magnitude of your decision.
  5. Execute the plan and view it objectively.   Too many business persons in this position extend their risk because they are looking for the “next big deal.”   I find this rose-colored glasses approach a major cause of business failures.
  6. If you are hurt by the resent economic melt-down, adjust your strategy towards a stage 1, but don’t circle the wagons.   Keep a sharp lookout for business opportunities that may pay handsomely when the economy recovers.   You may want to invest in social networking or search-engine optomization services in order to get your business a higher profile at a smaller price tag.

Always get professional help.

How to Hire Bookkeeping Services in Los Angeles

Rick_E_Norris,_An_Accountancy_Corporation_How_to_Bookkeeping_Services_in_Los_AngelesBookkeeping: The mere mention of the word can give business owners a headache. But it doesn’t have to be painful. In fact, if you follow these ten tips for  hiring business bookkeeping services , you can reduce errors, increase productivity, and improve profitability.

1. Don’t Do It All Yourself!: Most small business owners hate the idea of handing over the bookkeeping reigns to someone else. They feel like they’re losing control. Does this sound like you? The truth is that having small business bookkeeping services in fast-moving Los Angeles actually frees you up to focus on your core business and serve your customers better.
2. Communicate: Communication is key when you hire a small business bookkeeping services in Los Angeles. Make sure you keep the firm up-to-date on all financial transactions—especially such things as new property purchases and employee bonuses that are often overlooked.
3. Save Receipts: This may sound like a no-brainer, but it’s easy to forget to keep receipts or even misplace them in the day-to-day hubbub of a busy office. It’s important to have the backup documentation for your deductions so tax time can be easier and more beneficial.
4. Track Expenses: As a small business owner, you may pay for expenses out-of-pocket. While this is not ideal, the real problem is forgetting to track these expenses and submitting them to the company to be reimbursed. A small business bookkeeping services in Los Angeles specializes in keeping you on track so you can reduce your tax liability.
5. Reconcile Properly: It’s a fundamental aspect of bookkeeping. The books and bank statements must be reconciled each and every month. This can be a time consuming process for a business owner, so again this is another task that can be managed by a small business bookkeeping services in Los Angeles.
6. Backup!: A paper trail is imperative. Documentation or verification should always be available. You don’t have to have all of it on-hand. Just sign-up with an automatic data back-up service to ensure everything on your system is backed-up on a daily basis.
7. Properly Classify Employees: Do you know who is an employee, who is a contractor, a consultant, a freelancer? It can get confusing. Make sure you hire a small business bookkeeping services in Los Angeles to help you classify each and every employee so you can get the biggest benefit at tax time, not to mention avoiding penalties for misclassification.
8. Know Your Petty Cash: How much money is in petty cash at any given time? Setup a system and make sure a petty cash slip is filled out whenever money is removed for any purpose. Something as simple as petty cash can really mess up a company’s bookkeeping.
9. Categorize Expenses: Are you using the right categories for expenses? Again, this can get confusing. Your small business bookkeeping services in Los Angeles can help you follow generally accepted accounting practices.
10. Deduct Appropriate Sales Tax: Many retail businesses make mistakes when deducting sales tax. This can actually be a huge problem if you have many total sales because it results in a higher total sales amount without lowering the taxes due. Of course, this can be easily corrected and regularly monitored by a small business bookkeeping services in Los Angeles so you can avoid any tax burden as a result of sales tax.

These may seem like second nature to some business owners, but keeping focused can keep your books clean.

Do You Know Your Company’s Risks? Are You Managing Them?

Rick_E_Norris,_An_Accountancy_Corporation_Do_You_Know_Your_Company's_Risks_Are_You_Managing_Them

Leaders of small to medium-sized businesses usually have two things on their mind: What are my sales? And, do I have enough cash to make payroll? Don’t settle on a reactionary position in dealing with the risks that can have long-lasting effects.

Many businesses suffer, and fail because their leaders do not see the inherent risks that can negate the years of hard work it took to build the business.Here are some tips to managing the risks:

  1. Look at your company from the 20,000 foot level: The first step to managing risks is to identify, on a broad level, your company environment. What is the established company culture that increases your risks? Why is the culture like this? What is the company philosophy? If you need a blueprint, use the COSO ERM (Enterprise Risk Management) framework as a guide.
  2. Take your business apart: Look at your company by business unit or profit center. Use techniques like questionnaires, interviews, or my favorite, scenarios.
  3. Access the Risks: Access the risks visually. I have found that flowcharts show the snags in operations that lead to inefficiency, misappropriation, and possible fraud.
  4. Develop a plan and assign responsibilities: An ERM plan should tie into the company’s strategic plan. All cylinders should be firing sending the machine in the same direction.
  5. Be proactive in your thinking: Don’t react to crises, but implement controls that can prevent, or at least detect a breach of company policies and procedures.
  6. Communicate the plan: All department heads and executives should own the responsibility of implementing the plan and controls.
  7. Use metrics to monitor: We create executive dashboards that monitor certain benchmarks, critical success factors, and accounting ratios that indicate the plan is in operation. This is essential, because an unmonitored plan is a dead plan.
  8. Be flexible and alter the plan: Nothing is in stone. Businesses are not stagnant, so change the aspects of the plan that are not working.

FTC Helps in fighting back identity Fraud

 

Rick_E_Norris,_An_Accountancy_Corporation_FTC_Helps_in_Fighting_Back_Identity_Fraud

You may have noticed, but the Federal Trade Commission is trying to help consumers fight identity fraud.Their literature outlines three phases of protection:Deter, Detect, and Defend.

Deter Fraud from happening to you:

  • Shred financial documents and personal information. (Just think, that old tax return thrown in the trash can linger at the dump for a very long time.)
  • Protect your social security number: Do not carry your card; never write it on a check; don’t give it over the phone to unknown callers.
  • Do not give out personal information on the phone, internet, or mail unless it is a secured site. (The bottom of secured pages used in money transactions have a seal linked to a web site that certifies that the site is secure.)
  • Never click on links sent in unsolicited e-mails, but type in the address.
  • Don’t use obvious passwords like: birthdate, maiden name, last four of social.
  • Keep you personal information in a secure place, especially if you have roommates, domestic help, and parties.

Detect Fraud when it happens:

  • Periodically run a free credit report
  • Review your credit card and bank statements each month.
  • Register for online banking. You can set up alerts that e-mail you when certain events happen in addition to letting you know your balance at all times.

Defend yourself when Fraud happens to you:

  • If your identity is compromised, place a “Fraud Alert” on your credit reports, and review carefully.
  • Close accounts tampered.
  • File a police report. Law enforcement officers may help with creditors who may want proof of the crime.
  • Report theft to FTC. Ftc.gov/idtheft

Common Thefts that lead to Identity Fraud:

  • Dumpster Diving: Rummaging through trash
  • Skimming: Stolen credit/debit card numbers using a special device when processing your card.
  • Phishing: Information sent by the thief masquerading as a bank or financial institution.
  • Change of Address: Diverts your mail with a change of address form.
  • Stealing

Cash is King But a Profitable Return is still Relevant For a Small Business Health

Rick_E_Norris,_An_Accountancy_Corporation_Cash_is_King_But_A_Profitable_Return_is_Still_Relevant_for_a Small_Businesses_Health

Is your small business healthy? How do you know?  Do you just look at one indicator, or several?  Combining the historical Dupont Model and Mobley Matrix tools can open your eyes to the real health of your small business, especially when presented in a graphical format.

In 2004,I was part of a team that conducted a pre-published reviewed of Driving Your Company’s Value, Strategic Benchmarking for Value, by Mard, Dunne, Osborne, and Rigby. One approach used by these authors was combining the DuPont Model and the Mobley Index to gauge the health of a business.

The DuPont Model was created in 1919 by a finance executive at E.I. du Pont de Nemours & Company.It demonstrated that a company’s Return on Equity was actually a summary of the company’s profitability, turnover, and leverage.

The Mobley Matrix was created in the fifties by Lou Mobley, who became the founding director of the IBM Executive School. He discovered the relationship between cash flow and financial statements.

There is a correlation between the two tools displaying many metrics that gauge the health of your small business.  These measures can open your eyes to operating cash problems, excessive debt, and many other hidden ailments.

However,this could be a little overwhelming to the small business owner who is an expert in his/her business and did not have time to go to business school.  So, we place the model, and matrix, in an interactive graphical format.  The measures are presented in a concise format for the owner to utilize.

Small business owners need to have a complete handle on their operations.  Just knowing Sales and whether you have enough cash to make payroll is not enough.  In fact, by time a small business owner discovers what was obvious from out tools, it is usually too late.

Consumer Fraud–Identity Theft Protection Tips

Rick_E_Norris,_An_Accountancy_Corporation_Consumer_Fraud_Identity_Theft_Protection_Tips

Small safeguards can save you consumer fraud giant headaches.  Many safeguards are common sense, but in today’s information age, sometimes the sence isn’t so common.

  1. Do not readily give out personal information. For example, some restaurants request a credit card number over the phone when making reservations. Do not give it, and go to another restaurant. Your protection is only as good as their security.  Even if the restaurant’s employees are trustworthy, credit card information could be left unattended for the others to view.
  2. Be careful of copied documents or identifications. Years ago, I was asked to prove my residence in a city three different ways for my son’s baseball all-star qualification. One identification they were requesting was a copy of a driver’s license. Parents were unaware that a driver’s license number and birthdate are invaluable data for bank accounts and other privacy circumstances. If you must provide a copy of such, black out the sensitive information. The document you may be handing over may pass through many hands.
  3. Restrict access to your personal information. Passwords on computers are essential. Access to your computer can provide information to undesirable eyes
  4. Do not let anyone cash your checks without a phone call from the bank. Visit your bank and arrange to block the cashing of all checks unless they phone your cell phone. This procedure has prevented the  fraudulent check cashing four times in  five years for me. The last time, a bank called me for check cashing by a client who did not write the check. Individuals produce fraudulent checks and cash them at your bank.
  5. Do not return calls to suspicious area codes. Scammers text messages, or leave phone messages with some urgent message. They entice you to call a number that is to the Caribbean (e.g., “809” area code) and keep you on the line as long as possible. That can bring charges up to $25 per minute. I have also heard of some scams that transfer your call around the world amounting to hundreds of dollars on your bill. Be careful. Here are some other area codes.

Country Code

  • Bahamas 242
  • Barbados 246
  • Antigua 268
  • Cayman Islands 345
  • Monsterrat 664
  • St. Lucia 758
  • Puerto Rico 787
  • St. Kitts/Nevis 869
  • Jamaica 876
  • Bermuda 441
  • N. Commonwealth 670
  • Trinidad &Dominica 767
  • Tobago 868

Strategic Planning–Avoiding Sharks with a Blue Ocean Strategy

Rick_E_Norris,_An_Accountancy_Corporation_Strategic_Planning_Avoiding_Sharks_With_a_Blue_Ocean_Strategy

When I hear, “Think outside the box,” I cringe. I believe that this command frustrates analytical people; they do not know what to do, or how to do it because there are no rules or assumptions.Instead, I like to tell people to use the right side of their brain – the creative side.A strategic planning approach, The Blue Ocean Strategy, facilitates this type of thinking.

Blue Ocean Strategy (BOS) is a corporate strategy and business book written by Professors W. Chan Kim and Ren© Mauborgne, of INSEAD. The strategy attempts to create an uncontested market space, and thereby make competition irrelevant. Dim & Maubourgne initially called this “Value Innovation,” in 5 articles for the Harvard Business Review published before their 2005 book. BOS is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).

There is no easy way to quickly describe BOS, except by example. Cirque du Soleil is a good example of a company that meets the BOS criteria (focus, divergence, and compelling tagline).For example, compare this circus to Ringling Bros. using the following factors: star performers, animal shows, 3-ring arenas, aisle concessions, theme, unique venue, and artistic dances. Cirque du Soleil concluded that the public really did not want star performers, animal shows, 3-ring arenas, and aisle concessions.In addition, star performers and animal shows were very expensive.They decided to do away with the three, but added theme, unique venue and artistic dances. This created a unique market because they were discarding what the public did not value, and added new aspects that the public would value.Instead of being in a “bloody” red ocean competing on price or quality, they could be competitive by offering a new experience for the audience.

If you are in the artistic world, maybe I can stretch this example to Paul Simon.In 1986, he could have composed music using the same style such as folk (Simon & Garfunkel), or a pop (Kodachrome).However, he used his artistic ability to expand his use of world music. In 1986 he released Grammy award-winning Graceland, which featured the groundbreaking use of African rhythms and performers. In 1990, he followed with the album The Rhythm of the Saints, which featured Brazilian musical themes. These albums helped to popularize world music as a genre.It essentially created a blue ocean for him without competition in a new genre.

Now this is not to say that every blue ocean does not turn red, because once the idea is manifested, there is a window of uncontested opportunity.So, what a business must do is continually develop blue oceans and keep ahead of the competition.

This alone will not confirm success.    To stop at a strategic plan level will only bring frustration, because the process will not be complete. In order to be successful, you must properly impliment, monitor, and alter a strategy.

How do you include social networking in your business strategy?

Rick_E_Norris,_An_Accountancy_Corporation_How_do_you_Include_Social_Networking_in_Your_Business_Strategy

I remember when I was a little boy, how I used to marvel at the futuristic gadgets that Walter Cronkite would display in the Sunday night program, The 21st Century.The program was designed around scientific advances that could re-shape our lives in the next century.The 21st Century seemed so far away to a little boy in the 1960s.But here we are.

In the 1996, my interest was piqued with Bill Gate’s books, The Road Ahead. In this book, Bill Gates predicted that we were nearing a society where financial transactions, product research, file transfers, and such could be transacted though the internet on a device the size of a checkbook.

How ironic, within the next decade, Steven Jobs would spearhead the invention of the Iphone.Users now bring up all sorts of applications including social networks like Facebook, Twitter, etc. These social networks are becoming the foundation of the new business communication.

But, how do these social networks impact business? So many businesses just stick their toe in the SN waters.  Can business really take advantage them?

The answer is a guarded “yes”.

The advantages of such networks are communication and visibility. Implemented correctly, vehicles like FaceBook, LinkedIn, Twitter, blogging, and others can enhance your company’s visibility, and draw the world to your web site.With increased visibility comes opportunity.
There is a downside to these opportunities, however. Employees can post criticism on blogs that may hurt the firm’s reputation.In addition, the opportunities with any of these networks can be a bottomless pit sapping into employees time with no immediate response.

Like any tool, the internet can be the piece of your strategy that increases your market share, if used correctly. If used incorrectly, it could be a wasteful tool.

So, here are a few basic tips when your business ventures into social media:

  1. Concentrate on building relationships, not just numbers.  It’s nice to see the numbers grow, but if many are not viable business contacts, then so what?
  2. Don’t spam people with your services.  Give them something to take home with them every time you connect.
  3. Build partnerships among those who have similar business interests, or work in a similar industry.
  4. Don’t just copy what others are doing in your industry. Set yourself apart by using your core competancies to create your own uncompetative ocean (i.e., Blue Ocean).
  5. Be consistent, be creative, but be real in your daily social networking business strategy.
  6. Write about relevant topics that concern your market place.

These six points will give you a start in developing a real social networking strategy for your business.  A very important point not listed, though is that you start today.

Strategic planning tips when buying a company

Rick_E_Norris,_An_Accountancy_Corporation_Strategic_planning_tips_when_buying_a_company

So you found the perfect company to buy! That’s great, but are you going to sleep at night?  Here are a few strategic planning tips you should consider when buying a company:

  1. Do your due diligence. Investigate the trends of Accounts Receivables, Cash, Accounts Payables, Officer Loans, Sales, and Cost of Goods Sold over five years. The trends will tell you a lot about the past, present, and possibly the future of a company. If these trends look bad, ask the hard questions, and demand support for their responses.
  2. Create a Strategic Plan. Most new owners do not know what this means. The main point is to visualize where your company is in relation to its industry and where you want it to be. The strategic  plan will include your internal strengths and weakness.  Be honest and don’t look at the business through rose-colored glasses.  An honest strategic plan before you buy the business can alert you of business aspects that you overlooked.
  3. Plan for technology. Technology can help you monitor your strategic plan. Along with your budgeting plan, strategic plans have benchmarks that a company wants to meet. Use technology as a “thermometer” of your business health. A few troubling metrics can signal a bigger problem down the road.  Also, how will social networking and search engine optomization help you in achieving your goals?
  4. Cash is king. Always capitalize your company adequately and properly. Sometimes the best capitalized companies are those who squander their resources, while the poorest companies may have the best ideas but no capital to get there.  Again, your strategic plan along with your maketing and budget plans should give you an honest idea of what it will cost to finance your company.  Many feel that once you arrived at that number, multiply it by three because your sales will usually lag behind your estimates for a lot longer than you think.
  5. Consult experts:  There are many forms of strategic planning.  If you have a good grasp of you industry, you can solicit the help of a strategist and business plan professional to help you organize the plan.  Never venture out in a new direction without professional help.  A couple of hours of consulting with a CPA or an attorney can save the business down the line.