Year end financial tips during this holiday season
Year end has quickly caught up with us all. With the holiday season in the midst of all our daily activities, we get caught up in the cycle of spend, spend, spend. We buy gifts, plan vacations, purchase enormous amounts of food and spirits, as our way of creating a season of tidings and great joy! After all the dust has settled, and we make our way back to the everyday hustle and bustle of life, it is then we take notice of all the resources we used to make such a joyous occasion happen. There are ways to still enjoy ourselves while keeping a close watch on how much money we spend. Planning ahead for major events always puts us in a better situation than if we haven’t planned at all. Take note of what your financial limitations are and put yourself on a budget. Giving yourself these parameters to operate within will guide you through this period of spontaneity, when you feel like having just a little bit more won’t hurt. And remember, tax season is right around the corner. This is not the time or place to have the attitude that your refund will cover all your holiday expenditures. That’s like robbing Peter to pay Paul. Your tax profile should be well organized so that you can have the best tax filing experience ever. Below are some suggestions to help keep you on track.
1. Set up a holiday budget for gifts, parties, vacations, etc. Be sure to add a cushion of maybe 5-10% extra to allow for surprises (ex: I forget to get cousin Susie a gift)
2. DON’T USE CREDIT CARDS. It makes no sense to create more debt during this period. It’s very easy to go overboard with your spending. I personally am a big proponent of using my debit card from my checking account. This way I can’t spend more than I actually have. If you use credit cards, be prepared to pay them off immediately in January.
3. Find unique ways to give gifts, such as hand crafts, baking a favorite dish, or even performing an act of kindness.
4. Keep a receipt for all purchases during this period. During the holidays many events occur, such as parties, galas, and fund raisers, that are actually tax deductible events. You will need this information come tax time.
5. REMEMBER: the holidays are a time for sharing and enjoying the company of family friends. Reach out to someone who you haven’t heard from in awhile and let them know you care. It’s not always about the “things we get”, but more so about the “things we give”, such as Love.
Have a joyous and safe holiday, and remember spend wisely!
Jacqueline Ford
Financial Strategist
Downsizing your life. The wave of the future
Americans have had it with their demanding jobs and stressful lives. “One-third of Americans say they always feel rushed, just over one-third say that their lives are out of control, two-thirds say they want more balance, and about 60 percent would like to simplify their lives”, according to Julie B. Shor, author of “The Overspent American”.
People are getting tired of the daily hustle and bustle, waking up in the darkness, before the sun rises, and getting home in the darkness, after the sun sets. Our lives are on fast forward; work, school, family, community. When do we get to the point of a simpler lifestyle where there is peace and balance? It’s up to us to take charge and make changes towards a more peaceful existence, but not without some drastic changes. For most we are forced into lifestyle shifts due external circumstances, such as lay-offs, salary cuts, re-location, or illnesses. This can be a time of reflection; to ask yourself the tough questions about what do you really want out of life.
Many times we associate our earning potential with our identity. We feel more accomplished with the higher paying demanding positions. Our rationale is we must be valuable because these companies require our skills and talents to succeed, and without us they would fail. Believe me when I say, if you leave today, your seat will be filled in less than 2 weeks. To downsize our lives appropriately we must change our relationship with money, time and work. We have to stop believing that the world will stop spinning on its axis if we don’t show up or stay late. We must stop excessive shopping; stop spending long hours working. A complete mental shift must occur in order to have a simpler life without all the frills and thrills of immediate gratification. Once we make up our minds, the possibilities are endless. Challenge yourself and see what you can let go of to make your life easier.
Partnering for your personal financial success!
Jacqueline Ford
Financial Strategist
THE INS AND OUTS OF OUTSOURCING BOOKKEEPING
Outsourcing can be one of the most strategic management decisions that a small business could make. Daily struggles with trying to maintain operations can be overwhelming for most, and tragic for some. Trying to keep it all together will definitely take its toll on a small operation. A person can only handle but so much before reaching their breaking point. Besides, why would you want to put your business under such unnecessary stress, when you can outsource to alleviate the burdens of having to do it all?
In-House Bookkeeping
Although many small businesses believe it’s necessary to handle their own bookkeeping in order to cut cost, the downside is that managing your books in-house will minimize your ability to focus on the promotion and development of your business. Actually, in the long run, you will end up spending more. The time spent figuring out your debits and credits can be used more wisely and efficiently by allowing a skilled professional to handle the task. They are better equipped to work faster, which saves you money and time, and allows you to spend more time focusing on revenue building activity.
Out-of-House (Outsourcing) Bookkeeping
I can’t stress enough how cost effective this method is, but I will. Not only will you reduce operating costs such as payroll, employee benefits, and employment taxes, the cost savings can be shifted to areas that will promote business development, which in turn will increase revenues. Also, consider not having to spend time recruiting, training and maintaining staff. No more trouble with managing your staff’s behavior and personal issues. Besides, a professional working off site will be less subject to distractions from your office environment.
Outsourcing Abroad
With the rise in conducting business on a global scale, many companies are outsourcing internationally. Countries such as India, Canada, and Mexico, are becoming big contributors to the labor pools of American companies. As international governments relax their regulations and implement educational programs geared towards computer science and technology, the markets have become more competitive. Of course, the decision is very personal in nature and can be controversial. To remain loyal to your local economy versus profit by any means by outsourcing your labor pool to cheaper economies has been a heated debate for quite some time . If you decide to outsource to another country, keep in mind several factors which could affect your relationship, such as, language barriers, potential military conflicts, government regulations, time difference, and cultural differences.
Partnering for your success!
Jacqueline Ford
Financial Strategist
BOOKKEEPER CHOICES-WHO DO I CHOOSE?
Taking charge of who will post your bookkeeping entries
Whose gonna post this stuff? The first of many questions to be asked when trying to determine whose responsibility it will be to head up the accounting function. Many will take the road of the “least expensive” and try to do it themselves. But soon will find out that they’ve bit off more than they can chew. Next thing you know, it’s pushed to the side, and the old attitude of “I’ll handle this later” takes control. Soon afterwards, the paper pile has grown to an insurmountable heap! How do we avoid this scenario from playing over, and over again? Planning is the key to success! Decide whose responsibility it will be to handle this very important function, and delegate, delegate, delegate. But still, “What are my options?” you may ask. And, based on the options available to you, who will best fit this profile?
Local Yokels
These are the professionals in close proximity to your physical location. If you plan on having someone visit your office to service your needs, this can be the best solution. This choice will also help to save on travel charges. A good local professional will be in tune with the markets & economic development in the area. They generally are very familiar with local businesses and their products or services.
A friend of a friend of a friend
You remember being at last year’s barbecue, talking with Uncle Sonny about your problem, and he referred his wife’s cousin’s boyfriend’s daughter, because she just graduated from college with a degree in accounting. Do you choose her? Well, you’d better think twice. Referrals can be a great source of information, but remember to do your homework first. Interview this person and get feedback from other clients or associates in the industry. If you’re still skeptical, then ask for a free trial period of services.
Jack of all trades, master of none!
None other than Me, Myself, and I. We are all familiar with the business owner who tries to do it all themselves. What usually happens is that they end up spinning their wheels trying to figure out something, which doesn’t make absolute sense to them. This is very time consuming and costly. The resources spent in this vicious cycle could be better used in other areas of the business. But what of the business owner who has skills in this area? There is a belief that even the Accountant should have an Accountant to manage his/her records. Stop being “The Jack of All Trades, and Master of None”. Use your talents where they are best suited. For everything else, outsource or delegate to other professionals in the business. Allow those who have the time and expertise to do the job right. In the long run it will be well worth it.
Partnering for Your Success!
Jacqueline Ford
Financial Strategist
Financial Reporting – Give it to me in plain English please!
Financial reporting is the key important concept in summarizing your financial data. It reveals what you’ve done, right or wrong, and shows where your company is headed. Financial reports allow you to analyze your business to determine its proper course of action. From its information you’ll be able to create projections and what-if scenarios, calculate ratios, budget and forecast data. When compiled properly, the data within is a powerful tool for managing your company. Let’s look at some specifics of financial reporting.
THE BASIC STATEMENTS
Listed are the most commonly used statements and their key elements.
- Balance Sheet- this statement is generally referred to as the “Statement of Financial Position”. It reflects the position of a company on a specified date and is comprised of Assets, Liabilities, Owner’s Equity (Capital). Assets reflect ownership of tangible and intangible items. Liabilities reflect amounts that are owed to creditors. Owner’s Equity or Capital Accounts reflect the owner’s investment in the company. It includes owner’s contributions, withdrawals, and accumulated net profits in the business.
- Income Statement- Also referred to as the “Profit and Loss Statement” reflects all the income and expenses incurred for a specified period of time. It calculates the net ending result for the period, whether it’s a profit (positive ending balance) or loss (negative ending balance).
- Cash flow – this statement reflects the flow of cash for a period of time. It reveals where the cash comes from, who it will be paid to, and when it will be paid out. This is one of the key statements used in the budgeting process.
- Statement of Owner’s Equity – this statement summarizes the activity that occurred in the Owner’s Capital section of the balance sheet, which was mentioned earlier. Changes to this account involve owner’s investments, withdrawals, and net change to operations or net profit or loss.
WHO USES THESE STATEMENTS
- Banks and financial institutions – when your company needs capital (money) for expansion or for daily operations, requests for loans or lines of credit are made through banks and other financial institutions. These potential lenders are interested in your company’s ability to make timely payments of principal and interest on loans due. Their decision to lend or not to lend is dependent upon the analysis of the information in your financial statements. Essentially it must be determined that the expected debt does not exceed your expected receivables.
- Creditors/Suppliers – purchasing supplies and materials is not always done on a cash basis. Dependent upon your credit standing and payment history, your suppliers may allow you to purchase on account, or on credit. Suppliers may ask for your company statements to help them in their decision making process.
- Investors – when the time comes that you are looking to expand your operations, but don’t have the necessary funding to do so, another alternative is to turn to investors. Investors will want to know if your company’s financial position is viable. In other words, what’s the potential for profit? A sound well defined business plan with financial projections will reveal the expected potential success.
DON’T TRY THIS AT HOME UNLESS YOU’RE A BOOKKEEPER
With all the pertinent and sensitive information contained in these statements, it’s extremely important that they are accurate. But how do we know this? The typical small business person(s) become very confused with the input and output of data that’s needed to be reflected in these statements. Some may go as far as to educate themselves on basic accounting principles, while others will rely solely on their software program to organize it for them. As I always say, “NO, UNLESS YOU KNOW”. Posting entries without a good understanding of accounting will subject your company to many bookkeeping errors. Not knowing the ins and outs of entries can be more trouble than it’s worth. You will end up spending unnecessary time to correct them, which in the long run, will cost you valuable man hours. Do yourself the favor, if you have any doubts about posting bookkeeping entries, ask the experts, or outsource this function completely so you won’t have to worry about it.
Knowledge is power. Having a basic understanding of bookkeeping entries will give you the confidence needed to be able to ask the right questions when dealing with your statements.
Here’s to your knowing!
Jacqueline Ford
Financial Strategist