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What do business owners need to know about Payroll?

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Preparing for Payroll Before you can start running payroll, there are a few steps you need to take to prepare: Legal and compliance requirements To ensure compliance with federal and state laws, businesses need to familiarize themselves with the following regulations: Fair Labor Standards Act (FLSA): sets minimum wage, overtime pay, and record-keeping requirements for businesses. Employee Retirement Income Security Act (ERISA): regulates employee benefit plans. Family and Medical Leave Act (FMLA): mandates that eligible employees receive job-protected, unpaid leave for certain family or medical reasons. State labor laws: vary by state and may include minimum wage, overtime pay, meal and rest break requirements, and other provisions. Setting up a payroll system To manage payroll effectively, you’ll need to set up a system that includes Payroll software: a tool that can calculate employee pay, withhold taxes, and generate reports. Payroll schedule: a set schedule for when employees will be paid. We recommend Gusto to all of our clients. Collecting employee information To ensure accurate payroll processing, you’ll need to collect and maintain the following information for each employee: Social Security number Tax withholding information Pay rate and pay schedule Employee benefits and deductions Calculating Gross Pay Gross pay is the total amount of pay an employee earns before any deductions are taken out. Calculating gross pay depends on the type of employee and their compensation structure: Hourly vs. salaried employees Hourly employees are paid based on the number of hours they work. To calculate their gross pay, multiply the number of hours worked by the hourly rate. Salaried employees are paid a fixed amount, regardless of the number of hours worked. Overtime pay Non-exempt employees are entitled to overtime pay for any hours worked over 40 hours in a workweek. Overtime pay is calculated at a rate of 1.5 times the employee’s regular pay rate. Bonuses and incentives Bonuses and incentives are additional employee payments for meeting specific performance goals or milestones. These payments are typically subject to federal and state taxes. Deductions Deductions are amounts taken from an employee’s paycheck to cover taxes, benefits, and other expenses. Common deductions include: Federal and state taxes Social Security and Medicare taxes Health insurance premiums Retirement contributions Need help?  Ensuring your business’s payroll process is both compliant and efficient can be complex and time-consuming. If you’re feeling overwhelmed or uncertain about any aspect of your payroll setup or operations, we’re here to help. Contact us today to make sure your payroll process is as smooth and trouble-free as possible.

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Accounting & Bookkeeping

Decoding the language of financial ratios

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As a small business owner, you’re likely already wearing many hats. But the hat of a financial analyst might seem a little oversized, particularly if your background isn’t in finance or accounting. However, understanding financial ratios can be a game-changer for your business, helping you assess your business’s financial health and make informed decisions. Financial ratios: what are they? Think of financial ratios as a thermometer for your business’s financial health. These are calculations that compare one item in your financial statements to another. For instance, how much current assets you have compared to liabilities, or the percentage of each dollar of sales that remains after all expenses have been deducted. They reflect the financial relationships vital to your business operations. The power of financial ratios To harness the power of financial ratios, it’s important to understand the financial relationships they represent and the implications for your business. Unless you are well-versed in accounting principles, consider engaging an accountant or bookkeeper to help you interpret these ratios. The ratios that matter Let’s delve into some of the key financial ratios every small business owner should know: Current ratio: This ratio measures your business’s liquidity. A higher current ratio indicates efficient cash management and the ability to meet short-term obligations. If your current ratio is less than 1:1, it might be a signal that additional financing is needed to meet upcoming commitments.  Current Ratio Explained by Investopedia Gross profit margin: This ratio helps understand the relationship between your sales and cost of goods sold. A low gross profit margin could indicate weak product demand or need for better cost control. Gross Profit Margin Explained by Investopedia Net profit margin: It’s the percentage of each dollar of sales remaining after all expenses. It’s a critical indicator of your business’s expense management capabilities. Net Profit Margin Explained by Investopedia Debt to equity ratio: This ratio compares the financing you’ve received from creditors to the amount invested by the owners. It highlights the balance between debt and equity in your business. Debt to Equity Ratio Explained by Investopedia The journey of understanding financial ratios might seem like traversing uncharted territories, but it’s a journey worth embarking on. Decoding the language of financial ratios can provide invaluable insights into your business’s financial health. If you’re feeling overwhelmed by the intricacies of financial ratios, don’t worry. We’re here to help! Feel free to contact us and leverage our expertise.  

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Business Updates

Business Update – May 15 2024

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Welcome to our Weekly Digest – stay in the know with some recent news updates relevant to business and the economy. The U.S. economy’s soft landing is still on track Despite the recent string of disappointing macroeconomic data, these developments actually indicate the strengths of the U.S. economy rather than weaknesses. The economic pessimism in recent years has been largely based on a misunderstanding of the U.S. consumer, according to a recent article in the Harvard Business Review. These 2 charts show just how little faith Americans have in the economy Indicators be damned: US consumers are still gloomy about the state of the economy. In the latest University of Michigan survey, the consumer sentiment index dropped a whopping 13% from April, after staying roughly the same since January. The Social Security fix no one is talking about What if the traditional wisdom on how to fix Social Security no longer holds? The trustees who oversee the program issued their annual financial forecast on Monday, predicting that the combined retirement and disability trust fund reserves will be depleted in 2035 – one year later than forecast last year. How the U.S. economy adapted to 5% interest rates One year ago this month, the Federal Reserve pushed its target interest rate above 5% — a step that seemed sure to cause ripples across the corporate landscape and the global economy. To a surprising degree, though, the world has taken the onset of 5% rates in stride. Full employment, low inflation and a virtuous cycle in the American economy Until recently, the idea that the economy could simultaneously have low unemployment and low inflation seemed to be a fantasy. Conventional wisdom, after all, holds that when unemployment is low, businesses need to pay higher wages to attract workers, which pushes up the cost of goods and services and, ultimately, inflation. But that logic has been turned on its head. How to place or lift a security freeze on your credit report A credit freeze restricts access to your credit report. If you suspect your personal information or identity was stolen, placing a credit freeze can help protect you from fraud. Labor union push pits the United Farm Workers against a major California agricultural business In a meeting room at a hotel in California’s crop-rich Central Valley, a fight is taking place that could help shape the future of farm labor in fields that grow a chunk of the country’s food. The battle between a unit of the Wonderful Co. — one of the state’s most well-known farm companies that grows pistachios, pomegranates and citrus — and United Farm Workers — the country’s biggest farm worker union — comes after California passed a law in 2022 aimed at making it easier for agricultural laborers to organize. IRS adjusts HSA amounts for 2025 The Internal Revenue Service issued the annual inflation adjustments for health savings accounts in 2025 as prices continue to rise, albeit at a slower pace. IRS Tax Withholding Estimator helps ensure withholdings are correct for 2024 The IRS encourages taxpayers to use the IRS Tax Withholding Estimator to ensure they’re withholding the correct amount of tax from their pay in 2024. This digital tool provides workers, self-employed individuals and retirees with wage income a user-friendly resource to effectively adjust the amount of income tax withheld from their wages. Get in touch Contact us if you have any questions or want to discuss the next steps for your business.

Management

Unlocking Success: The Power of Smart Budgeting and Cash Flow Planning for Your Business

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In the ever-shifting landscape of business, grabbing hold of some predictability can be a game-changer. Though the horizon of the future might be shrouded in the unknown, wielding tools like meticulous budgeting and precise cash flow forecasting can slash through the fog of uncertainty. These tools empower you to foresee hurdles, draw wisdom from what’s behind you, and steer your business with confidence. Budget vs. Cash Flow: the crucial distinction There’s a widespread myth that budgeting and managing cash flow are the same thing. But here’s the real deal: A budget is like your business’s financial daydream—it lays out potential earnings and expenses, allowing you to play out different financial what-ifs. Cash flow, meanwhile, is the nitty-gritty reality check—it tracks the actual dollars that dance in and out of your business every month. Sure, they both tango with similar numbers, but they groove to different beats. For example, your budget might earmark $1,000 a month for digital expenses, but your cash flow chart will jot down what you actually end up spending. They serve unique purposes, but for simplicity’s sake, we recommend Float Cashflow, making it a breeze to compare projections with reality. Budgeting and Cash Flow Forecasting: Unlocking Financial Advantages for Your Business Embracing budgeting and cash flow forecasting can transform your business in countless ways. These tools are your crystal ball for forecasting cash highs and lows, scheduling tax payments, timing the acquisition of new gear, deciding on bulk purchases, and pinpointing the perfect moment to consider a loan or credit line. What’s more, they act like a financial watchdog, sniffing out irregular expense trends so you can leap into action fast. They’re also your sales radar, alerting you to parts of your business that might not be hitting the mark. With these tools in your arsenal, you’re not just running your business—you’re strategically guiding it toward greater profitability. Practical tips for effective budgeting Crafting an annual budget isn’t a quick task—it’s a marathon that demands several months of dedicated effort. Each month, you should fine-tune this budget to reflect the real rhythm of your cash flow. Nailing the sales forecast can be tricky; it’s often the most elusive piece of the puzzle. If you’re new to the entrepreneurial world, break it down by looking at projections for individual products or regions. And don’t overlook the seasonal ebbs and flows that are specific to your business and sector—they can make all the difference in your predictions. Sensitivity analysis: a proactive approach A ‘what if’ analysis, or sensitivity analysis, lets you play out alternative realities in your business to see how changes might impact your bottom line. It’s like a test run for your financial resilience. Imagine one of your customers, who makes up thirty percent of your sales, suddenly disappears. What’s the fallout for your business? Running this kind of scenario can help you plan for the unexpected and keep your business on steady footing. The power of regular updates Consistently measuring your actual spending against your budget sharpens your foresight when it comes to future expenses. It’s wise to recalibrate your budget and cash flow projections monthly, or even more often if your business landscape is particularly dynamic. Think of budgeting and cash flow forecasting as compasses for decision-making in your business. Their true worth, however, unfolds when they are frequently revisited and revised to keep them fresh and aligned with the pulse of your business’s finances. Don’t wait, contact us now for help with budgeting and cash flow for your business.

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Accounting & Bookkeeping

Essential bookkeeping practices for start-ups

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Starting a new business is exciting, but it also comes with its fair share of responsibilities. One of the most critical responsibilities is maintaining accurate records of your business transactions. From saving receipts to processing employee payroll, every money-related detail should be documented. It’s not just about keeping things tidy; it’s about understanding the financial health of your business and meeting all your tax obligations. Don’t underestimate the basics Some small businesses continue to rely on traditional systems, like pen, paper, and a trusty shoebox. Although it may seem outdated, this method can work well for businesses with very few transactions. These businesses might not have the latest payment technology, and could be invoicing customers or receiving immediate cash or cheque payments. In such cases, they would need to maintain a record of all receipts, past, present and future jobs, as well as a log of their customers and transactions. Of course, if you’re serious about your business, you might want to consider using a more accurate system. The power of spreadsheets In the digital age, spreadsheets offer a simple and effective way for start-ups to keep track of their financial activities. When you’re just starting or operating a part-time business with a limited budget, a spreadsheet can be a cost-effective alternative. As your business grows and becomes more complex, you can transition to specific accounting software. With a spreadsheet, you can set up a basic accounting system to track invoicing, perform calculations, and even set up a budget. Embrace accounting software For those more serious about their business, subscribing to accounting software might be the best option. Modern accounting software often links directly to your bank account, making it an efficient way to document all necessary transactions. It also reduces the risk of errors and offers features like generating professional invoices, tracking debts, and ensuring everything is entered accurately for your accountant at tax season. If you opt for a cloud-based solution, you’ll enjoy real-time access to your accounts, increased data security, and the flexibility to access your financial data anytime, anywhere. Stay on top of your cash flow Regardless of the accounting system you choose, a good system will enable better decision-making based on real-time financial insights. Identifying cash flow trends can help drive your business growth by revealing your most profitable products and services, your biggest customers, your highest costs, and more. The ability to monitor these trends places you in a better position to improve your profits and spot potential areas of growth. Wrapping up As a start-up, your primary task is to evaluate your business needs and choose an accounting system that allows you to track your cash position accurately, keep precise records for tax purposes, and identify cash trends. Consulting with your accountant can be an invaluable first step. They can offer advice on the best system to use and ensure it’s compatible with their processes. Remember, your financial records are the lifeblood of your business, and keeping them in perfect order is integral to your success. Want to discuss what system will best suit your needs? Contact us now for advice.  

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Accounting & Bookkeeping

Three Ways an Accountant Can Save You Money

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Many small business owners think they’re saving money by handling their financials themselves. While it’s a real asset to learn bookkeeping basics, cash flow management and your tax obligations, hiring an accountant to oversee your finances has many benefits. Leaving your books to a pro will free up time so you can focus on serving your clients and implementing plans for growth. Here are a few ways an accounting professional can help you save money that you can reinvest back in your business. Finding money There’s no one more suited to discovering “found” money than an accounting professional. Hire an accountant to sort your books and systemize your bookkeeping; better record keeping is the easiest way to allow you to quickly see – on a monthly, weekly or daily basis – where your money is going so you can cut costs. Keeping your accounts up to date will also help you understand which of your business investments yield the greatest returns so you can be more strategic about spending. An accountant can spot trends that you can take advantage of to earn greater profits – and even find savings with vendors, staff and operating expenses. Hiring someone to manage your accounts will also reduce the costly errors that are commonplace when business owners try to manually track their expenses. Avoid tax penalties Your accountant may be your trusted advisor when it comes to staying up to date with the latest regulations for small business taxes. She can also provide you with expert advice on how to maximize your benefits and minimize your taxes each year. Don’t underestimate the cost savings of hiring someone to complete your tax forms correctly and submit them on time. Penalties for small businesses who neglect to file their taxes on time – or at all – can quickly add up; the longer you wait to file, the more interest you’ll be charged and the likelihood you’ll incur additional penalties. A business that is already struggling may not be able to pay a tax fine and find themselves closing their doors. If your small business is ever audited, having an accountant on board will let you rest easy knowing you won’t be hit with a penalty for errors or omissions. Business advisory services Your accountant possesses business knowledge that can help you make more informed decisions. Rely on your accountant for advice when you draft or revise your business plan; those key insights on assessing profitability will help you move your business in the right direction – and avoid wasting time and money on strategies with a lesser chance of success. Look to your accountant to help you determine your most valuable clients, how much money you need to invest in a growth plan and which marketing strategies yield the best ROI. Having someone you can rely on to help set targets and monitor your progress is an invaluable asset that can help you not only save money, but earn higher profits. The bottom line? Your accountant can do much more for you than simple bookkeeping or ensuring you’re on the right side of the tax authorities. Hire a small business accountant and you’ll be doing a lot to help increase your chances for long term growth and success.

Fractional CFO
Management

What is a fractional CFO?

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A fractional CFO, or Chief Financial Officer, is a finance professional who works on a part-time, retainer, or contract basis. We bring the experience and expertise of a high-level CFO to your business – without the cost of hiring a full-time, in-house employee. Fractional CFOs service several clients at once typically on a part-time, retainer, or contract basis. Their specialty is providing outsourced CFO services to small and medium businesses. Because their financial management skills are so well-developed, it’s common to bring one on board to help navigate a challenge. Read on to learn more about what a fractional CFO does. Navigating Challenges Small businesses and startups typically have a streamlined staff, which keeps costs down and allows the business owner to focus on healthy growth. But sometimes, a financial challenge comes up that is beyond the skill or experience level of those on the team. This is where a fractional CFO can be of great benefit. Some of the issues they assist with include: Cash flow problems Low gross margins High expenses Existing systems that are no longer working Cost cutting analysis Getting through an audit Hopefully, these situations don’t come up often, but when they do it’s beneficial to have an expert on your side to guide you through. Achieving goals Most businesses start with a similar formula–invest your time and money, create a product or service that customers want, and earn money by providing that product or service. Maybe you envision your business expanding somehow, or scaling up. Perhaps an exciting opportunity comes up but you aren’t sure how to take advantage of it. A fractional CFO can help you make your dreams a reality by deciphering the numbers. They will look at where you are now and help you plan where to go next. This includes: Ensuring the books are in order Performing financial forecasts Attending board meetings to get a sense of the company Helping with strategic relationships Overseeing due diligence There are plenty of ways a fractional CFO improves your operations. The specific skills and experience they provide will clarify your situation and help you achieve what you want. Managing growth Taking your business to the next level can seem daunting. You want to grow, but you don’t want to risk your success by taking on too much or making a damaging misstep. Hiring a fractional CFO will help you navigate the steps ahead. If you’re already growing at a rate that makes you feel like you’re losing control, they will help you retake the reins. A fractional CFO will help by: Breaking down large amounts of financial information into helpful data Making a plan to develop existing employees and their skills Identifying the need to hire new employees to manage growth Implementing systems that will work going forward Exploring causes of revenue loss and cost overruns and developing solutions to address them Ultimately, a fractional CFO is helpful to guide you through the growth process so that you can feel confident as your business expands. Final Thoughts Many small- and medium-sized businesses and start-ups could benefit from the services of a CFO, especially during a growth stage, but the cost of hiring one in-house might be out of reach. By hiring a fractional CFO on an as-needed basis, you can enjoy the benefits of their expertise without breaking the bank.  

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