Category Archives: Saving money

Budget…not a 4-letter word

Budget is not a bad word. On the contrary, it is something every business needs to pay careful attention to. Running a business without a budget is dangerous at best. In order to plan for future growth or expenses a budget is a necessary tool to have in place. Also, keep in mind a budget is not a fixed tool. It is fluid and needs to be referred to often to see if the business is healthy or if it needs some tweaking.

If you find budgeting intimidating, give us a call. We can help you set up and manage your business budget.

What is a budget? A budget is simply a tool that tracks expenditures and helps plan how money will be used. A well planned budget takes the guess work out of both day to day bills and long term goals.

Realize that a budget will not solve financial problems. It is simply a tool to help identify and address problem areas.

If you are in the process of starting a business and don’t have a previous budget to use, research typical costs and sales trends associated with firms in your sector and determine averages.

Keep it simple. There is no need to list every expense in great detail. For example, combine your office supplies into one category.

•          Calculate net cash flow: This is the most critical part of a budget. Calculate the funds the company brings in. Gather every financial statement possible including bank statements, investment accounts, all utility bills, and all sources of income and expenses. The goal here is to create a monthly average, so the more information you can find the better.

•          Record all sources of income: Hopefully, your business is already set up in electronic software such as QuickBooks. If so, this part will be fairly easy. Compile specific reports to get all of the information needed.

•          Review bank and credit card statements: These are all recurring expenses that have fixed amounts. Review the last 3 months in order to obtain a good feel for the pattern of recurring expenses.

•          Create a list of monthly expenses: Write down a list of all the expected expenses you plan on incurring over the course of a month. Then break the expenses into two categories: Fixed and Variable. Fixed expenses are those that stay relatively the same each month and are a required part of a business. Variable expenses are those that change from month to month.

•          Analyze results: If you have cash remaining at the end of the month, your financial business life style may be healthy. If your cash flow shows a higher expense column this means some changes will have to be made.

•          Make adjustments to expenses: Knowing that you have accurately identified and listed all expenses, the goal would be to have the income and expense columns equal. Therefore, all of the income is accounted for and budgeted for a specific expense.

If you are in a situation where expenses are higher than income, look at your variable expenses for areas to cut.

Always review a budget monthly. It is important to review a budget on a regular basis to make sure you are staying on track. After the 2nd or 3rd month, compare the actual expenses versus what was created in the budget. This will show where you did well and where you may need to improve. QuickBooks has a built-in feature to help with this process. If you have questions on setting this up in your QuickBooks, give us a call.

Why is a budget important?

Referring to a budget at regular intervals is a very valuable learning tool. Forecasts can be compared with actual numbers. It is important to revisit the budget on a periodic basis to evaluate these numbers and see whether planned figures diverge from the actual. Try to make this a regular part of running your business.

Be flexible. A budget, although a useful tool for remaining disciplined, is not set in stone. A budget should not be used as an absolute ceiling as to how much can be spent but a tool for making sure business goals are being met and all spending is justified.

In the beginning, planning the small business budget may seem like an overwhelming task. However, over time you will see how this simple planning tool actually takes much of the stressful guesswork out of running a business and helps you in getting control of your business.

–Fran McCully, Your Administrative Solutions 2013

Do You Check Credit References Before Extending Credit?

Don’t just ask for a credit-reference—use it. Simply providing credit references does not make someone creditworthy. Checking credit references isn’t bad manners—it’s crucial for avoiding disaster. Make sure your credit application or other signed document gives you permission to contact references.

Three key questions to ask when contacting a credit reference are:

“How recent was your latest transaction with this firm?” If the most recent transaction was not within the last 4 months, the information may not be of great value because your customer’s financial position may have changed materially.

“Are the references related to the prospect in any way?” This may be difficult to assess, since people may lie. Use your instincts to decide how accurate the answer is and whether to probe further.

“Would you consider this firm a good, slow or bad payer?” Talking to a few references now can save you months of stonewalling down the road.

–Attorney Donald B. Kramer, J.D., President, Kramer & Frank, P.C. via AIPB Bookkeeping Tips

Corporate Profits Soar as Worker Income Limps – NYTimes.com

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

via Corporate Profits Soar as Worker Income Limps – NYTimes.com.

Retirement success is about spending, not saving – MarketWatch

The traditional approach to saving for retirement goes something like this: Save 10% of your income every year, starting as early as you can, and if you can begin in your 20s the compounding growth will let you easily retire 40 years later. If you don’t start saving until your 30s and 40s, you have to save more to “make up” for what you didn’t accumulate when you were younger. In fact, recent research has even developed National Savings Guidelines to build recommendations for the right amount to save based on your current age and how much income you want to replace in retirement.

Unfortunately, though, there are several significant problems with this standard approach. The first is that by relying primarily on compounding a modest amount of savings for a very long period, the results become highly dependent on short-term market results in the final years before retirement. For instance, while it’s true that starting to save $300 a month as a 25-year-old for 40 years in a balanced portfolio at 8% will give you $1,000,000 to retire at age 65, the caveat is that at age 55 you’re not even up to $450,000 yet! In other words, “save for the long run and let compounding work for you” could also be characterized as “save for decades, then quickly double your money and retire.“ Of course, when you look at it that way, it seems a whole lot riskier to count on your money doubling in the last 8 to 10 years. As the last decade has shown in particular, sometimes that strategy doesn’t work out very well.

via Retirement success is about spending, not saving – MarketWatch.

Americans Rip Up Retirement Plans – WSJ.com

The labor force has been getting older for decades for reasons that range from longer life spans and better health to companies’ replacement of defined-benefit pensions with higher-risk 401(k) plans.

But the stark increase in workers expecting to stay on the job—now 62%—was a surprise, Mr. Levanon said. After all, the stock market has largely earned back its losses, home prices are rising, and the unemployment rate is creeping down, all of which suggests workers should be feeling more secure.

Many middle-aged Americans, though, drew down their savings during those lean years and now find that leaving the work force on their original timeline is no longer viable, he said.

They are also facing low interest rates, an uncertain future for Social Security, and a lower likelihood of receiving employer health insurance after retirement.

The uptick may be good news for some industries—notably utilities and power companies—that face disruptive skills shortages when older workers retire.

However, senior employees can be expensive for companies, both in salary and health-care costs.

via Americans Rip Up Retirement Plans – WSJ.com.

Cellphones Are Eating the Family Budget – WSJ.com

More than half of all U.S. cellphone owners carry a device like the iPhone, a shift that has unsettled household budgets across the country. Government data show people have spent more on phone bills over the past four years, even as they have dialed back on dining out, clothes and entertainment—cutbacks that have been keenly felt in the restaurant, apparel and film industries.

via Cellphones Are Eating the Family Budget – WSJ.com.

CFPB finds discrepancies in credit scores provided by credit bureaus – The Washington Post

Credit bureaus sometimes provide Americans with credit scores that are different from those that lenders use in deciding whether to offer a loan and at what interest rate, the government’s consumer watchdog found in a study released Tuesday.

Researchers at the Consumer Financial Protection Bureau found that the discrepancy happens for as many as one in four people.

via CFPB finds discrepancies in credit scores provided by credit bureaus – The Washington Post.

Educational Tax Credits and the IRS on YouTube!

Did you know that the IRS has YouTube videos to help taxpayers? Check out this one for educational deductions!

For more information on Educational tax credits and ways to save on your income taxes, see this IRS publication.
http://www.irs.gov/publications/p970/index.html

5 solid branding efforts on the cheap – Auto-promotion (1) – FORTUNE

Looking for ways to promote your business…here are some great ideas to use as a jumping off place. Thinking out of the box doesn’t have to be expensive!

5 solid branding efforts on the cheap – Auto-promotion (1) – FORTUNE.

We Don’t Just Count Beans

I recently read an article about bookkeepers and got to thinking—we do that. The part of the article that spurred this follows:

I believe that if accountants were more proactive, they could actually help more small businesses stay in business and do their part to make a big dent in reviving the economy.

I truly believe we have such valuable skills that there are millions of people who really need us right now, if only we would speak up just a bit more. —Sandi Smith Leyva

At Moore Bookkeeping, we do speak up. We tell you things we notice, even if they aren’t what you hired us to do. For example, one of my clients recently related a problem she was having keeping track of receipts from her other office hundreds of miles away. I knew her employee had an iPhone, so I suggested she have him use DropBox. It’s an online storage facility that anyone can logon to–free. I suggested she have him scan and upload his receipts to DropBox, and they would be immediately available to her, not to mention once uploaded, she could have him trash his paper copy or stick it in a box somewhere.

Sharing this little tidbit—really not what she hired me to do—has made an enormous difference in her business’ productivity. It makes me no extra money– I told her because I knew it would work, and that’s my job–help my clients in whatever way I can. She can’t thank me enough—and she’s already decided to pay for extra storage space to get all of her records off her desk.

The way I look at it–our clients do better, everybody wins!

At Moore Bookkeeping, we don’t just count the beans—we help you find ways to make better soup.