Running your own business can be gratifying, but also stressful. It can consume every ounce of energy and time you have if you let it.  And with a to-do list that’s longer than War and Peace, many entrepreneurs skip the important step of creating a growth strategy.

If you think you don’t have time to create a small business growth strategy, consider this: A few hours of strategic planning now could save you hundreds of hours of wasted time in the months and years to come. 

Strategic planning will get you focused on the right things, and it helps your business to grow and become profitable much more quickly. Then, you can hire people to help you with that to-do list instead of slowly drowning under it by yourself. Here are 5 things to consider when you are planning for small business growth:

Goal for growth. Saying you want to grow is not enough. You need a target growth rate. A 15% growth rate might double a company in 5 years. However, a 20 - 30% growth rate might be a better goal to ensure your small business survives any pitfalls in the way.

Strategy for growth. There are numerous proven strategies for growth. Look at your target market, and decide what avenues would be best to gain their trust and business. Maybe you want to focus on a mobile strategy, email marketing, blogging, video or social media best practices. Building a strategy takes time, but it is well worth the effort.

Timeline for growth. Building a timeline for your growth. The goals you set earlier should have the basic SMART formula (SMART formula stands for Specific, Measurable, Appropriate, Realistic and Timely.) Be sure you hold yourself accountable for achieving those goals in a realistic time frame.

Measure your growth. You can't manage what you don't measure. It's the only way you can know for sure what's working or what's not. Employ Google Analytics and monitor the sources from where your traffic is coming.

Budget. Here you will need to think about how you finance your cash needs: working capital?  Equity? Debt?  If you need to raise finance, be sure to add this to your timeline of ‘things you need to do’.

If you struggle with this bit, Jones & Company, CPAs P.A. can help.

Turning a small business into a bigger one is never an easy task. If you have questions about planning for your small business growth, contact Jones and Company CPAs, P.A. at 727-845-4166.

Corporate minutes are meeting notes from the board of directors for a corporation or business. It is an official account of what was talked about at formal meetings including decisions made and actions taken. The shareholders or owners of a corporation should have at least an annual official meeting. It is mainly for key decisions or company activities not for everyday decisions. For example, issuance of new stock, officer announcements, key employee hires and salary changes. You should include the full legal name of your company, the name of the person conducting the meeting, the location and date of the meeting, list of the attendees and list of those that are absent. You would need to record motions and votes. Record when the meeting started and when it was adjourned. Then at the next meeting, have the prior minutes reviewed and approved by the board. You should keep your minutes in a permanent file.

So why should you have a meeting and keep minutes? Just in case the IRS or State audit you and request the minutes. If you don't have minutes and have other issues and you are a S corporation, the IRS could revoke your S status and treat your business as a sole proprietor or partnership instead. They will determine that you are not truly acting as a corporation and therefore will be subject to the self-employment taxes on all net income. The most serious consequence is the loss of liability protection for the shareholders' personal assets regarding the debts of the corporation, usually referred to as "piercing the corporate veil." When a corporation's shareholders are sued personally for the corporation's debts under this legal theory, the court will examine a number of factors, one of which is whether the corporation kept a proper set of books and records, including minutes of meetings.

The QuickBooks program is a user friendly accounting software for businesses. The set up is very important. The settings can be found in the Edit/Preferences screen. Scroll through the list on the left and choose the options best suited for your business. Be sure that you understand what the chart of accounts is and what accounts you need. The chart of accounts are how each transaction is coded to one of the following: asset, liability, equity, income, cost of goods or expense. For example, if you are purchasing a desk for your office you would record in your bank register the payment and code to the asset account for furniture. This properly records the asset in your software. Below are some tips and tricks to help you with other aspects of QuickBooks desktop.
 

• To have a list of the open windows you are using: either click "Open Windows" in the bottom of the left menu navigation pane or click on "View" then "Open Windows List". This makes it much easier to go from one screen to another quickly without opening the same window over and over.
• To close a window you can either click on the "X" in the upper right or you can click the "Esc" key on your keyboard.
• You can print a bill voucher to send with a payment to a vendor by clicking "Print" from the bill window.
• Find related transactions by clicking the "Reports" tab in the transaction window you are researching (invoice or bill, etc), then click "Transaction History". It will list related transactions and you can click one to zoom in on and hit the "Go To" button.
• There is a built-in calculator within every "Amount" field. Simply tap the "+" key on your keyboard to activate. Enter your formula and press "Enter".
• To save time on transactions that re-occur, you can memorize them and have them enter automatically or set up a reminder before being entered. This is helpful for monthly bills that are the same amounts every month or customer invoices that are the same every month. To do this, create the invoice, bill, journal entry you want to memorize. Choose "Edit" then "Memorize".  Name the transaction for easy identification. Choose whether you want QuickBooks to remind you to post, to not remind you or to do the transaction automatically. Choose how often, when the next date is to post, how many remain if the program will automatically post and if you want it posted in advance.
• To view your file location, the version you use, license number, and file size press F2.
• There are keyboard shortcuts to save time. Below are some available for the desktop versions:

            Ctrl + I            Create Invoice
            Ctrl + E           Edit transaction selected in register
            Ctrl +Q           QuickReport on transaction or list item
            Ctrl+ M           Memorize transaction or report
            Ctrl + N          New invoice, bill, check, or list item in context
            Ctrl + T           Open memorized transaction list
            Ctrl + W          Write new check
            Ctrl + F           Find transaction
            Ctrl + J                        Open Customer Center
            Ctrl + H          Opens transaction history within transaction
            Alt + S             Save transaction
            Alt + N            Save transaction and go to next transaction
            Alt + P            Go to previous transaction
            T                      Date shortcut for today
            H                     Date shortcut for last day of the month
           
QuickBooks Online tips and tricks will follow later in the summer. Our office can help with QuickBooks setup and training for you and your employees. Contact our office today to set up a training session in the Trinity, New Port Richey, Odessa or surrounding area. Call 727-845-4166.

Have you been asking yourself "is this the right year to sell my business"? Maybe you are asking a business broker "is this a good time to put my business on the market" or "how is the market these days"? While these are all good questions, it's only a drop in the bucket when it comes to determining the right time to sell your business.

Can you imagine your life without your business? What will you do with your extra time? Have you calculated how much money you will need to retire and continue your current lifestyle after the business sells?  These are just a few of the questions you need to answer before determining the right time to sell your business.

How long does it take to sell a business?

Selling a business typically takes 3-12 months but is a difficult process to time. The length of time to sell your business can depend on the industry in which you operate.  Also, the process itself takes so long that it is often difficult to accurately time.

What's the best time of year to sell a business?

When revenue and profitability are at it's highest and when your business is established is the best time to sell. Selling a business doesn't have anything to do with the time of the year but everything to do with the many other market factors.

When you are thinking about selling, you need to take a moment  and evaluate the situation. Do you have unquestionable reasons to sell? Are the conditions within the company promising in favor of selling at this particular time? Are you emotionally prepared to sell?  If the answers to these questions are yes, then maybe the timing is right. If the answer is no, then focus your attention to building your business and increasing its value, and when the day comes that is right to sell, you will get the most beneficial deal.

Selling a business is time-consuming and for many, an emotional venture. Be sure your business is properly valued and that you are proceeding in the manner that will best benefit your bottom line. Contact Jones and Company CPAs P.A for help during your entire process. We are here to help you every step of the way. Contact us at www.jonescpa.com or call 727-845-4166.

by: Patricia Jones CPA/ABV/CFF CFE

There are several choices in entity types when setting up a new business.  Most businesses set up as either a Limited Liability Company or a Sub Chapter (Sub S) Corporation.  If you set up as an LLC, you can elect to be treated as a Sub S Corporation for tax filing purposes.  

The major advantage as a LLC is that you protect your personal assets from the creditors of your business.  For a LLC, you normally would not be financially responsible for more than your investment in the company.  For both LLCs and Sub S Corporations, you pay personal income tax, but not corporate tax. 

Below are some noted differences between the two entities. 

Limited Liability Company(LLC)

• If it is a single member LLC, owner does not have to file a separate business tax return for LLC.  The business activity can be reported on their personal return. 
• For an LLC, single members are required to pay self-employment tax on income which means making quarterly estimated tax payments to IRS. 
• Business operations should always be in a separate bank account.  Owners should keep the LLC separate from their personal assets and not mix funds.  Do not want to lose the protection of an LLC by combining accounts. 

Subchapter S Corporation(Sub S)

• Advantage of Sub S Corp is that the net income is not subject to self-employment tax.
• The Sub S Corp needs to pay reasonable salary to the officers.  The reasonable salary should be tied to the industry standards. IRS is increasingly auditing businesses for this reason. 
• Profits and losses must be distributed to the shareholders in proportion to their interest.  For example, if shareholder has a 25% interest, the shareholder will report 25% of the net income or loss of the business on their personal tax return. If distributions are made, the shareholders must receive 25% of the distribution.  
• Separate tax return must be filed for the Sub S corporation which is additional for accounting and tax preparation. 

If you have questions or need help deciding, feel free to call Jones and Company CPAs P.A. at 727-845-4166 or visit onlinwww.jonescpas.com.

A good bookkeeper is crucial to business for many reasons, but have you ever considered training all of your staff for those responsibilities? Many businesses are employing QuickBooks to help with bookkeeping functions, but many of the staff do not know how to properly use the program. There are many benefits to having a team that is trained and knowledgeable about the accounting functions and the basics of QuickBooks.

1. Vacation or Leave - If the designated bookkeeper takes a vacation, takes maternity or paternity leave or is away for an extended period of time, you can be sure that you have staff that are trained to pick up and keep the company rolling along smoothly.

2. Helps prevent fraud - Sharing in the bookkeeping function helps to decrease fraud in the workplace. A person is far less likely to commit a fraud if he or she has co-workers who are knowledgeable about the process and able to check in at any time.

3. More cohesive team - When the entire team understands the accounting process, items generated outside the accounting department such as purchase orders, quotes or shipping receipts are more likely to be detailed correctly and more accurate. When co-workers understand what each other needs to do his or her job correctly and efficiently, the company runs more productively and more profitably.

4. Increase employee morale - People appreciate the extra attention from their manager, they like the coaching because they want to do a better job, and they like that all employees are being coached and held accountable to the same performance.

Jones and Company CPAs, P.A. are Certified QuickBooks Advisors and can help you train a single person or your entire staff. For information on our training program, contact us at 727-845-4166 or visit online at www.JonesCPAs.com.

Collaborative divorce is a relatively new legal option that meets the needs and desires of many divorcing couples and their counsel and is an increasingly popular approach to handling your divorce or legal separation. When spouses or domestic partners get ready to file for divorce or legal separation, they may negotiate an agreement with professional help.

How does Collaborative Divorce Work?

This process is designed to assist the parties in working out their disputes rather than litigating them. When parties elect to utilize the collaborative divorce process, they can avoid some of the stress and emotional challenges of conventional litigation, with a team designed to minimize conflict and develop respectful and equitable resolutions.

In a collaborative divorce process, you and your spouse or domestic partner negotiate an agreement with professional help. You each hire specially trained collaborative lawyers who advise and assist you in negotiating the settlement agreement.

You meet separately with your own lawyer, and both clients also meet together regularly. Sometimes you and your spouse or domestic partner can bring in other people, like child custody specialists or accountants, to help you settle your case without having to go in front of a judge in a contested case.

Why Couples Choose Collaborative Divorce

Collaborative divorce is becoming more popular for couples who choose to end their marriages without the conflict and emotional anguish that can accompany more traditional divorce proceedings. It can also be a more cost-effective option for couples looking to minimize the financial impact of divorce. In addition, where children are involved, this simpler process can help minimize the emotional impact that more turbulent divorces can have on the children in a family.

What is the Accountant’s Role in Collaborative Divorce?

The collaborative team financial specialist works with the couple provide on-going, practical financial guidance, planning, support, and budgeting advice throughout the divorce process. They make sure that both parties have a thorough understanding of their current financial situation, and assist by gathering and organizing documentation and information relating to the parties' incomes, expenses, assets, and debt. The financial specialist will also educate the clients regarding the short and long-term economic consequences of settlement plans being considered so as to enable them to make fully informed decisions and choose what is most appropriate for their situation.

If you would like more information or a on collaborative divorce, contact Jones and Company CPAs P.A. at 727-845-4166 or visit online at www.JonesCPAs.com.

One of the most common and complicated issues in divorce is determining a spouse’s true income.

Income determinations and classification issues require expertise and you need an experienced divorce financial professional on your team to work through all the financial angles of your settlement.

A forensic accountant is trained to examine personal and business financial records with an eye not only for what they show, but for what is being withheld. In other words, forensic accountants can “sense problems”.

Many times, a spouse will stall before handing over financial documents for the other divorce team to review, driving up legal bills before they even get a look. This serves to make things disordered, confusing, time-consuming and even more costly.

When you finally do get to examine the financial disclosures, you may have the feeling they’ve been manipulated in a way that hides the true financial situation. Even if you can’t tell precisely what is missing, you might suspect your spouse is understating income, or hiding assets to keep them from being divided in your settlement.

Underhanded maneuvers like these can be difficult to prove in court –especially if your spouse owns a business with a significant part of its income in cash or assets have been hidden for many years.

A forensic accountant is trained to examine personal and business financial records with an eye not only for what they show, but for what is being withheld.

A forensic accountant can uncover unethical practices, such as:

        creating fake debt

        padding payroll

        underreporting income

        overpaying creditors

        transferring assets to dummy corporations

        purchasing expensive items with secret cash

While hiring a forensic accountant may seem excessive and you may feel reluctant to add yet another professional to your divorce team, keep in mind that the efforts of a forensic accountant can pay off immeasurably by assuring the assets, debts and income are fairly reported. Contact Jones and Company CPAs P.A. for more information on our forensic accounting services.

One important consideration when starting your business is determining the best legal organizational structure. Why? Because it will affect operating efficiency, transferability, control, the way you report income, the taxes you pay and your personal liability.

Four basic structure types are:

• Sole proprietorship
• Partnership 
• Corporation — S corporation, C corporation 
• Limited liability company (LLC)

SOLE PROPRIETORSHIP

• The simplest legal structure for any business and is not legally separated from the owner.

• The legal business name is typically the same as your legal name, but establishing a business name separate from your own is possible by creating a doing business as (DBA) name or fictitious name.

• Owner can take cash withdrawals from the business at will.

• Owner required to make quarterly extimated tax payments.

• Some states and municipalities may require obtaining a license or permit.

PARTNERSHIP

• The difference between a sole proprietorship and partnership is that a sole proprietorship has only one owner and a partnership has two or more owners.

• Owners can take withdrawals and, if specified in the partnership, guaranteed payments.

• Owners pay taxes quarterly.

• Can be started through an oral agreement, though a written agreement is advisable.

C CORPORATION

• A separate legal entity from its owners.

• Corporate documents are filed with the state and annual fee is paid.

• Separate corporate bank accounts and records are created,and assets and money generated by the corporation are owned by the corporation.

• Most businesses must register with the IRS and state and local revenue agencies. Although any business that has employees will need to get a tax ID number, it is required for a corporation.

• Unlike sole proprietors and partnerships, corporations pay income tax on their profits. In some cases, corporations are taxed twice —  first, when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.

S CORPORATION

• To be considered an S corp, you must first charter a business as a corporation in the state where it is headquartered.

• An S corp is different from a C corp in that its profits and losses can pass through to the owner’s personal tax return. Consequently, the business is not taxed itself. Only the shareholders are taxed. Losses are limited to the shareholder’s tax basis.

• Shareholders can be paid wages, receive distributions of profits or a combination of wages and distributions. 

LIMITED LIABILITY COMPANY (LLC)

• A hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational  flexibility of a partnership.

• Unlike shareholders in a corporation, in most states LLCs are not taxed as a separate business entity. Instead, all profits and losses are passed through the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.

If you have questions about forming a new business or changing your businesses structure, Jones and Company CPAs can help. Contact us at 727-845-4166 or find us online at www.JonesCPAs.com.

For most business owners, the word ‘growth’ is one of the best in their vocabulary. In their minds, growth denotes a successful business. Unfortunately, many entrepreneurs have learned the hard way that growth is a two edge sword. While a growth phase typically means you are doing something right,  reaching capacity can cause the chain to weaken and could kill your business.

A small growing firm reaches its capacity limit at some point in their growth process. They either run out of human power, business resources, or capacity to manage operational issues. Once they reach capacity, every entrepreneur has a tough decision – do they believe that this is a true growth phase… or is this merely a spike in work?

If the business owner hires the wrong people, they hurt the business by having staff who are not generating a needed ROI. If the entrepreneur incorrectly rides the storm, thinking its simply a spike in work, the firm suffers by having stressed employees, lower quality, and even a damaged reputation. Growth can be a very difficult process to manage – especially as a small business.

Here are some thing to consider when you’re headed into a growth phase. 

* Add systems and procedures

As your business grows, you won’t be able to spend as much time personally checking over details as you did initially. Having systems and procedures in place helps you be sure that management and staff are consistently making checks in the same manner you would have. The more your day-to-day business operations rely on systems and procedures, the more growth you will be able to effectively achieve.

* Watch non-financial limits

Because the lack of money is such an overwhelming barrier to growth, it is easy to overlook other issues that may limit your ability to grow. You might feel that some people on your staff, your computer system, your facilities, or some other component of your business is being overtaxed by continuous growth. If so, don’t hesitate to slow down the pace of growth for a while until you feel that that component of your operations is running smoothly again. It takes a wise, disciplined manager to hold back on rapid growth to ensure that the company can continue to deliver quality products in a professional manner.

* Invest in yourself 

 In the early stages of your business, you'll likely see a very lean profit margin so any money you do make should go directly toward helping you grow. Early growth is is directly affected by a company's ability to invest in itself. In the early years, it's critical to make sure that you're redirecting any revenues back into the company. Invest early and heavily in order to grow quickly.

• Invest in talent

Your employees have direct contact with your customers, so you need to hire people who are motivated and inspired by your company’s value proposition. Be cheap with office furniture, marketing budgets and holiday parties. Hire few employees, but pay them what they are worth. Having a trusted, solid team that will be there for you when hours get long and stress gets high will be well worth the investment during a growth phase. Be aware of certain rules for the numbers of employees as well. For example, non-construction businesses with 4 or more employees need to have workers compensation insurance, while construction related businesses need workers comp for any number of employees. 

There are many, many strategies to managing growth. The most valuable advice is for you to actually sit down and analyze your business. Determine your growth, how it is affecting you, and what steps you need to take to cope. If you have questions about managing growth, contact Jones & Company CPSa P.A. for guidance.

From day one, small businesses should create a good system of bookkeeping and accounting. It is critical to the financial well-being of any good business. Here are a few tips for small businesses.

1. Keep bookkeeping current and accurate. Good record keeping is vital. Many start-ups, as well as existing business owners tend to neglect this aspect of their business until the end of financial year is upon them.  Allocate time each week and devote to your books. Regular reviews will let you know how your business is going and allow you to control your cash flow.

2. Keep accounts receivable payments and borrowed funds separated.

Small business owners often need financial backing or loans for startup capital, marketing campaigns, and other initial expenses. To make sure the loans don’t appear in the receivables, use software that separates income from borrowed funds. Don’t lose sight of what is yours and what needs paying back.

3. Be sure you have a good collections policy.

While a large number in the receivables column is a good thing, the money doesn’t really count until it is in your bank account. Be sure your clients make their regular payments. Insist you receive payment for past orders before letting them have more materials or services, or set up pre-payment and/or credit card payment options. The receivables department is crucial in keeping your company afloat.

4. Detail daily expenses for a solid budget.

Business owners should keep good records of everyday expenses the company incurs. Rather than calculating expenses every two weeks, focus on every day or every week. This will help better understand where finances are each week and how much money you’ll need to budget for in the upcoming weeks.

5. Know your minimum monthly profit.

Sometimes, knowing how much it takes to keep a company up and running can be complicated. Create an accurate system of expenses and regular financial obligations so you know minimum amount of income you need every month. This will not only keep you focused on your financial goals, but your marketing goals as well. 

If you have other questions about accounting for small business, feel free to contact Jones and Company CPAs, P.A. at 727-845-4166 or online at www.jonescpas.com.

If business is booming but you are finding less time to keep up, it might be time to hire some help.

Here are eight must-know things that can help you start the hiring process and ensure you are following key federal and state regulations.

1. Obtain an Employer Identification Number (EIN)

Every business needs one, but before hiring your first employee, you must get an employment identification number (EIN) from the Internal Revenue Service. The EIN is also referred to as an Employer Tax ID. Businesses need an EIN for reporting taxes and other documents to the IRS. In addition, you need an EIN when reporting information about your employees to state agencies. Obtain the number via online with the IRS or using Form SS-4.

2. Set up Records for Withholding Taxes

Businesses must keep records of employment taxes for at least four years. Keeping good records can also help you monitor the progress of your business, prepare financial statements, identify sources of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

Below are three types of withholding taxes you need for your business:

Federal Income Tax Withholding

Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment.

Federal Wage and Tax Statement

Every year, employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2, wage and tax statement. Employers must complete a W-2 form for each employee who they pay a salary, wage or other compensation.

Employers must send Copy A of  W-2 forms to the Social Security Administration by the last day of January to report wages and taxes of your employees for the previous calendar year. In addition, employers must  send copies of W-2 forms to their employees by Jan. 31 of the year following the reporting period.

State Taxes

Depending on the state where your employees are located, you may be required to withhold state income taxes.

3. Employee Eligibility Verification

Federal law requires employers to verify an employee's eligibility to work in the United States. Within three days of hire, employers must complete Form I-9, employment eligibility verification, which requires employers to examine documents to confirm the employee's citizenship or eligibility to work in the U.S. Employers can only request documentation specified on the I-9 form.

Employers do not need to submit the I-9 form with the federal government but are required to keep them on file for three years after the date of hire or one year after the date of the employee's termination, whichever is later.

4. Register with Your State's New Hire Reporting Program

All employers are required to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date.

5. Obtain Workers' Compensation Insurance

Businesses with four or more part-time or full time employees in a non-construction industry in the State of Florida are required to carry workers' compensation insurance coverage through a commercial carrier, on a self-insured basis or through their state’s Workers' Compensation Insurance program. In Florida for  a construction industry employer, the number is reduced to one or more part-time or full time employees. The construction industry owner may request an exemption for himself/herself.

6. Post Required Notices

Employers are required to display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws.

7. File Your Taxes

Employers who pay wages subject to income tax withholding, Social Security and Medicare taxes must file IRS Form 941, Employer's Quarterly Federal Tax Return.

8. Get Organized and Keep Yourself Informed

Simply following these steps won’t make you a good employer. Maintaining a healthy and fair workplace, providing benefits and keeping employees informed about your company's policies are key to your business' success. Be sure to set up good record keeping that are in compliance with standards for employee rights in regards to equal opportunity and fair labor standards. And, following statutes and regulations for minimum wage, overtime, and child labor will help you avoid error and a lawsuit.

If you need some help with your first new hire, feel free to contact Jones and Company CPAs P.A. at 727-845-4166.

While the idea of starting a business may be daunting, over 500,000 new businesses are started annually in the United States, according to the Small Business Association. 

Own your name - Make sure the company name you choose is available and an appropriate internet domain name can be obtained.  Check for fictitious name registrations or trademarked names. Failure to properly obtain a trademark could put your business at risk — not to mention that the time and money you have invested in establishing your business name could go to waste if someone else owns the trademark. 

Know the law - Understand the regulations, licenses and taxes you will need to follow, obtain and pay for your new business. Consult with an accountant or a lawyer to help structure your business to be in compliance with the law. Typically, you will need to need to be sure you are charging the correct amount of tax that your business is promoting and have all of the proper licenses needed to run your new business. A good accountant can help you with all of the filings you will need to start your company.

Know your needs - When working on your business plan, do not forget about your needs. Consider all of your living costs from rent, mortgages, health insurance, gas or groceries. - all things that don’t pay for themselves. Make sure you account for unforeseen or unexpected expenses by factoring a little flexibility into your budget for those “just-in-case” moments. To do this, you will most likely need to cut out all the unnecessary extras you can live without. 

Don’t over (or under) spend. Starting a business can be financially taxing on you and your family. You will need to learn good cash flow management practices as well as the best places to spend your money. It’s important not to waste those precious seed dollars but it’s equally important to spend where necessary. In any business, you often have to spend money to make money.  Be sure to provide for the things your company needs, but have a clear definition of ‘need’. For example, it may be worth it to put $1500 in an online vendor listing, but it may not be necessary to give every new customer a $15 coffee mug. Beware of impulse buying and be disciplined with your funds.

While there’s so much to starting a business, be sure to get experienced guidance. It is the best support system of all and can save you a lot of headaches. Ask friends and colleagues who have started a company for a list of what to do or what not to do. and hire competent partners to help with the process, and feel free to contact Jones and Company CPAs at 727-845-4166 if you have questions.

Poor cash flow management is a big stumbling block for entrepreneurs and is the main reason for business failure, according to many business analysts. Therefore, it is vital to businesses to understanding the basic concepts of cash flow will help you plan for the unforeseen eventualities that nearly every business faces.

Cash is ready money in the bank or in the business. It’s commonly referred to as a liquid asset and is not inventory, accounts receivable or property. While these can potentially be converted to cash, they are not readily available sources used to pay suppliers, rent, or employees. 

Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most important management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.

Why is Cash Flow Management so Important?

While there are many reasons why having a good understanding of your businesses cash flow is important, these seem to top the list:

Having cash puts you in a more stable position with better buying power. While you can borrow money at times, cash affords you greater protection against loan defaults or foreclosures.

When you borrow money to buy buildings, equipment and inventory, you essentially use future cash flow to make your purchases. As a result, you need positive future cash flow to pay for your debt commitments.

Along with debt management, strong cash flow provides the comfort and capabilities a business needs to invest in growth. Cash flow also gives your business greater flexibility in responding to emerging dilemmas or making critical decisions.

Confidence in cash flow makes it easier to make critical purchases in the near term rather than waiting. It also allows you to disperse cash in the form of dividends to shareholders or owners. This strengthens the bond between the company and its owners. Strong cash flow also makes your business more appealing to a lender if you desire to take on new debt at some point. You also have the ability to offer favorable credit terms to attract new buyers if you are less desperate for cash.

What Are the Components of Cash Flow?

A Cash Flow Statement shows the sources and uses of cash and is typically divided into three components:

Operating cash flow, often referred to as working capital, is the cash flow generated from internal operations. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.

Investing cash flow is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.

Financing cash flow is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.

How Do I Practice Good Cash Flow Management?

Good cash management can be simple. The basics you need are:

1. Knowing when, where, and how your cash needs will occur

2. Knowing the best sources for meeting additional cash needs

3. Being prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors.

The starting point for good cash flow management is developing a cash flow projection. As a business owner, you must know how to develop both short-term cash flow projections to help manage daily, weekly and monthly cash needs. Annual and long-term cash flow projections will serve to help develop the necessary capital strategy to meet business needs. It is also beneficial to prepare and use historical cash flow statements in order to understand how money has been spent in the past.

If you have questions about cash flow management, contact Jones & Company, CPAs at 727-845-4166. We will be happy to answer any questions.

Source: Summary of Findings – From the 2014 Global Fraud Study (ACFE)

According to the 2014 Report to the Nation on Occupational Fraud and Abuse (copyright 2014 by the Association of Certified Fraud Examiners, Inc.), research shows that the typical organization loses 5% of its annual revenue each year due to employee fraud. Prevention and detection are crucial to reducing this loss.

The median loss caused by the frauds in our study was $145,000. Additionally, 22% of the cases involved losses of at least $1 million.

The median duration — the amount of time from when the fraud commenced until it was detected — for the fraud cases reported to us was 18 months.

Many cases involve more than one category of occupational fraud. Approximately 30% of the schemes in our study included two or more of the three primary forms of occupational fraud.

Tips are consistently and by far the most common detection method. Over 40% of all cases were detected by a tip — more than twice the rate of any other detection method. Employees accounted for nearly half of all tips that led to the discovery of fraud.

Organizations with hotlines were much more likely to catch fraud by a tip, which our data shows is the most effective way to detect fraud. These organizations also experienced frauds that were 41% less costly, and they detected frauds 50% more quickly.

The smallest organizations tend to suffer disproportionately large losses due to occupational fraud. Additionally, the specific fraud risks faced by small businesses differ from those faced by larger organizations, with certain categories of fraud being much more prominent at small entities than at their larger counterparts.

The higher the perpetrator’s level of authority, the greater fraud losses tend to be. Owners/executives only accounted for 19% of all cases, but they caused a median loss of $500,000. Employees, conversely, committed 42% of occupational frauds but only caused a median loss of $75,000. Managers ranked in the middle, committing 36% of frauds with a median loss of $130,000.

Approximately 77% of the frauds in the study were committed by individuals working in one of seven departments: These departments include accounting, operations, sales, executive/upper management, customer service, purchasing and finance.

It takes time and effort to recover the money stolen by perpetrators, and many organizations are never able to fully do so. At the time of our survey, 58% of the victim organizations had not recovered any of their losses due to fraud, and only 14% had made a full recovery.

To find out more about fraud or to schedule a private consultation, contact us at 727-845-4166.

By Traci A. Malik, CPA CFE MAcc

This question has been around for many years. Starting in 1987, the IRS required Social Security numbers of all dependents over the age of 5 claimed on returns. That year 7 million American children disappeared from the nation's tax returns according to Snopes.com. Nowadays with matching technology and Social Security numbers getting issued upon birth, it's nearly impossible to get away with claiming a fictional dependent. Who can you claim then?

Dependent is a qualifying child

Five tests must be met for a child to be your qualifying child. The five tests are:

• Relationship (child, siblings, grandchildren, descendants of them),
• Age (under 19 at end of year or under 24 if full time student, or permanently and totally disabled),
• Residency (lived with you more than half of the year unless student),
• Support (provided more than half of the support for the year), and
• Joint return (child can't file a joint return).

or a qualifying relative.

Four tests must be met for a person to be your qualifying relative. The four tests are:

• Not a qualifying child test  (see above),
• Member of household or relationship test (live with you all year or be related to you in one of the ways listed below),
• Gross income test (person's gross income must be less than $4,000), and
• Support test (must provide more than half person's total support during calendar year).

What is the member of household or relationship test?

To meet this test, a person must either:

Live with you all year as a member of your household, or

Be related to you in one of the ways listed under Relatives who don't have to live with you.

Your child, stepchild, foster child, or a descendant of any of them (for                                              example, your grandchild). (A legally adopted child is considered your child.)

Your brother, sister, half brother, half sister, stepbrother, or stepsister.

Your father, mother, grandparent, or other direct ancestor, but not foster                                         parent.

Your stepfather or stepmother.

A son or daughter of your brother or sister.

A son or daughter of your half brother or half sister.

A brother or sister of your father or mother.

Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-                                     law, or sister-in-law.

If you have other questions or for more information, contact our office or IRS Publication 501.