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Business Tax Planning

Business Growth, Business Tax Planning

Pointers From ONeill & Bergado For Handling Business Debt

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While we all helplessly watch the war in Ukraine, we are also seeing the toll it’s extracting on our economy… and small businesses. Oil prices are skyrocketing and supply chain disruptions are becoming regular fare. The shock of the last two years hasn’t really worn off and new challenges are mounting as war affects the globe.  And the greatest concern among small business owners right now? Inflation and how it is affecting their San Francisco Bay Area business. Most are raising prices, some are reducing staff, some are taking out loans to keep their head above water.  So, even though we’re knee-deep in end-of-quarter matters and all of the various business tax work … I want to assure you that we are here for you as you face the effects of inflation in your business:  (408) 241-4100 With inflation on your brain, that ultimately means facing some realities with your business’s financials, including debt. And that’s what I want to talk about today… how is that business debt different from personal debt?  Let’s jump in. Pointers From ONeill & Bergado For Handling Business Debt “Creditors have better memories than debtors.” – Benjamin Franklin Both individuals and companies routinely run up bills they can’t immediately pay off – or don’t even plan to pay off … welcome to financing.  But personal debt and business debt are two different things. If mishandled, one can keep you from buying that car or appliance, for a while anyway. The other can put you out of business.  Our series on personal versus business financial management continues here with a look at debt, including the similarities and differences between the business and the personal kind – and pointers on how to handle business debt. There’s a lot in a name Getting into what each term means gives a good idea of how you think differently about these two types of debt.  Personal debt: This is when you’re legally responsible as an individual, though generally, it can also be debt you run up with someone else like your spouse – think mortgage, student loan, personal credit card, or car payment. This kind of debt usually improves your non-work with something expensive or worth the cost.  Business debt: This is taken on by a company (let’s say yours). The goal is also usually improvement, maybe property or a piece of big equipment. You, the owner or director, as an authorized person in the company generally can incur this debt in the name of the company. Generally, you can only be personally held liable for the company’s debt if you signed a personal guarantee or incurred the debt knowing that the company was insolvent.  (Owing business taxes doesn’t always work this way. Check with us.)  Alike in some ways There are similarities between the two. Both types of debt can be secured or unsecured, for instance. The first involves collateral and the second relies on your credit history and the likelihood that the lender will get their money back.  That “getting the money back” tends to be the challenge with loans – and again, similar problems can make both personal and business debt a lot worse.  Bad money decisions can happen over a kitchen table or behind an office desk. A down economy can cause both jobs and customers to dry up. Grocery stores and your suppliers both raise prices to keep up with inflation. And everybody needs gasoline, which is climbing steeply up.  By the same token, realistic budgeting is an excellent step when trying to avoid debt in your personal life or in your company. Ditto such other tactics as debt consolidation, refinancing, or negotiation.  But the similarities between these types of debt have limits.  Never mix, never worry Did you know that about half the small businesses in the U.S. are home-based? Small wonder that too many people muddle strategies and solutions for the two kinds of debt.  Using your personal finances to fund your business can be tempting and convenient. But mixing the two can cripple your chances at future commercial loans, not to mention potentially creating tax troubles when you try to claim business expense deductions.  Take the example of using personal credit cards and home equity loans to fund a business. Far better you transfer your personal credit card balance to a clearly designated business credit card (same deal with auto loans and real estate). The protection isn’t 100% – you’ll still probably have to sign a personal guarantee for the debt on the card – but it is a way to keep business and personal debt more distinct.  If you’re a sole proprietor, do yourself a favor and look into becoming a limited liability company (LLC), which can offer you some protection from the fallout of debt. Another tip: Did the purchase or transaction involve an Employer Identification Number, or “EIN”? If not, you may well find yourself with personal debt.  Your business options to handle debt include moves not always as available to those who are in a money hole on the personal front. Contracts can be canceled in business to prevent further debt, for instance, and your small business has way more options than an individual does to increase income and cut overhead.  And now the stop at the end of the debt road that nobody wants to hit: bankruptcy. Bankruptcy, in general, dropped last year, according to filings, but it’s still a danger. All we’ll get into here is that one huge general difference between personal and business bankruptcies is that businesses don’t have to pass a means test to qualify. At least that’s some kind of break.  Next in our series: Business versus personal budgeting. Stay tuned. And know that we can help you examine debt-management strategies for your San Francisco Bay Area business, including keeping records to verify that you are a business. Grab a time here:(408) 241-4100 On your team, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth, Business Tax Planning

How ONeill & Bergado Handles Investors in Small Business

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I can’t write without mentioning that somewhat awkward, somewhat shocking, somewhat moving star-studded Oscars event. There were some, well, memorable scripted (and *unscripted*) moments. One truly happy surprise was the best picture winner CODA (child of deaf adults) – the first streaming service movie to win Best Picture. Apple’s foray into Hollywood glory is showing how businesses can go beyond money-making endeavors to truly make a difference.  And that’s something I like to talk about all the time – how a business (of any size) can impact the people around them.  One way a lot of businesses are doing that very thing right now? Pulling out of doing business with Russia. Although, with US sanctions in place, it’s less of a choice and more of an imperative now.  If your small business somehow has connections and trade through Russia, you’ll want to seriously consider taking some basic steps to investigate and confirm you’re not falling afoul of the complexities of these sanctions.  That’s something we can talk through. Just get on our schedule:Patti (408) 241-4100  Gale 408-775-7800 Now, some other complexities you’ll want to examine are taking on investors in your San Francisco Bay Area small business, and that’s what I’m discussing today … How ONeill & Bergado Handles Investors in Small Business “The secret of creating riches for oneself is to create them for others.” – John Templeton Everybody loves money. In your small business, you’ll take all you can get, right? Investments in your company may seem like a can’t-be-beat gift. But taking on investors in small business means a lot more than skipping to the bank to cash a check – it means facing some hard realities about your business.  Your plan, their fine print After a few down years, venture capital is booming again, especially for tech and large companies – but don’t mistake “VC” for other kinds of financing that your small business might attract. Get your terms straight from the get-go – and get your financial and legal professionals involved, too.  The other thing to get together as completely and clearly as possible is your business plan – it’s your best tool to sell a would-be investor on the bright future of your operation. Handling an outside investment in your company is going to get off to a much more solid start if you’ve done the work and established some off-the-track records to back up the rosy predictions in your plan.  Let’s assume you’ve done your searching – and vetted your would-be investors … – and you’ve got an investor ready to go. Take a breath first. Investing has a sort of mysticism in business, but in fact, it’s just like any other kind of deal you negotiate.  An equity investor, for instance, usually puts down a fractional sum of money based on the value/profit of your company. If your operation is worth a million bucks, for example, the equity investor plunks down a hundred grand for 10%. Not too complicated.  One major question: Does your investor expect a return based on your profit or your revenue? The latter may mean regular repayment by you whether your business makes money or not. Get this clear with your investor upfront, and if the deal is by revenue, get something in exchange for this tougher deal.  When your stock is up As a symbol of investment, stocks are becoming a familiar tool: More than half of Americans, for instance, say they own some kind of stock. So let’s say your taking on an investor in small business looks like buying stock in your company. Your next question is: common or preferred shares?  Common: This says your investor has a sliver of ownership in your company and says that the investor has a claim on profits (aka dividends) and voting rights. Most stock that’s issued is common stock.  Preferred: Preferred stock requires more care on your part. This holding operates under a different set of rules than common stock, and even though they come with no voting rights you have to be careful how much control of your own company you hand over via preferred stock.  A couple of other terms it’s good to know:  Anti-dilution: We mentioned how stock gives your investors a slice of your pie. Suppose everything works out, your company takes off and down the road, you decide to issue more stock to more investors? That “slice” your original investor got will consequently shrink – unless they insist upfront on anti-dilution protection.  In the most advantageous (for them) version of this, an investor will in the future be able to buy enough stock at its lowest-ever price to maintain their original percentage of control in your company (aka “full ratchet”).  Naturally, you might not want to live under that condition forever – not to mention it might erode your control over your own company. This is one scenario where you have to be a hard-nosed negotiator right from the initial investment: One condition you might insist on is that the investor is welcome to buy additional shares someday, but at a price closer to the fair-market value then.  Covenants: These are basically promises from you to investors on how you’ll run the company. Some can be quite detailed, from your financial planning to your insurance. Investors commonly ask for them, so don’t be alarmed. Also, don’t be quick to sign off on something you can’t, or don’t want to, deliver.  Look ahead to your end game Time to be brutally honest: Only about one in four small businesses last 15 years. It isn’t always bankruptcy. Sometimes owners just want to move on and stick out the For Sale sign.  Investors in small business aren’t just going to evaporate when it comes time to sell your company or, heaven forbid, go out of business. Investors may insist up front that you set up a liquidation preference – who gets what in what order if you can’t keep the lights on.  Two points: Get any investment deal in writing – and never spend against promised investments. Seems obvious, we know,

Business Growth, Business Tax Planning

Small Business Accounting Software: A San Francisco Bay Area Owner’s Guide

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For as long as trade has existed, so has accounting. Goods are sold, profit is made, expenses are accrued, and everything gets recorded (presumably, ha!).  And it wasn’t THAT long ago that electronic spreadsheets were considered “a big advancement” in accounting technology. Businesses put away those old ledger books and took to smudge-free financial data entry. Today’s small business accounting software is another thing altogether… minimizing mathematical error, quantifying a business’s financial health, making predictions, creating KPIs – and all done in a matter of seconds.  And like any good product out there, there are a multiplicity of options to choose from (even if the process is somewhat painstaking).   But before I get into how to make that choice…  There are a couple of things you should think about putting on your San Francisco Bay Area business’s spring cleaning list: checking for obsolete inventory or uncollectable debts. Some goods just don’t get sold and some debts just can’t be collected.  The plus side of looking into these? Tax deductibility. If you want to talk more about these or any other deductions your business could be taking, let’s chat:Patti (408) 241-4100  Gale 408-775-7800 Now, you might feel like Goldilocks when it comes to choosing the right small business accounting software for your business, but here are some insights to help you decide … Small Business Accounting Software: The San Francisco Bay Area Owner’s Guide  “One man’s crappy software is another man’s full-time job.” – Jessica Gaston Nobody runs a small business long before learning the importance of managing and tracking finances.  Enter small business accounting software, which can also organize receipts, reconcile your books and talk to us and your bank to take a lot of tax and money-related stuff off your plate – not to mention lower the chances of an expensive mistake.  We kick off our series on software breakdowns here with a look at what’s involved in finding the right accounting software.  Oh, the choices you have You basically use accounting software to track transactions to or from your business to an individual or another business, whether to customers or vendors or some other A/P or A/R source.  If it seems like there’s a bewildering variety of accounting software out there to handle this job, that’s not your imagination: There is. Start by narrowing the offerings according to what industry or industries they can serve best. You want one of those industries to be yours.  Most small business accounting software brings you similar advantages. You’ll get a better idea of your outgoing and incoming cash flow from a wide range of reports the software can generate. A lot of the drudgery of accounting will be done automatically, freeing your time for more important jobs. The right software will also synchronize your information for reporting and tax requirements and make it easier to work with us and other financial pros you hire.  Size does matter Is this the first accounting software for your small business? A lot of people start with something like Quickbooks, which has an intro price of less than $20 a month (even less if you’re self-employed) as well as discounts and free trials.  Is your business at the next level, looking to upgrade from a basic accounting package? Maybe you’re looking for functions such as forecasting, more data storage, or accounts for different staffers or offices of your company. At this stage especially, look for software with experience in your industry.  If your business has grown beyond that, you might be nearing an enterprise-class operation that needs accounting software to handle multiple offices and maybe international operations.  And if you’re anywhere beyond this level, you’re probably a company looking for truly customized accounting software.  The price tag This software comes in as many prices as it does flavors. Most come in a subscription-based, internet-delivered cloud model where you choose your tier and pay monthly (as with Quickbooks above).  Prices run from a few bucks a month (even less) to the high double figures and more depending on your needs. Think carefully if you want/need customization, which also drives up the price. Other things that can drive up the price? Support, training, redesign, and upgrades. You can often buy such add-ons as advanced payroll (we’ll address payroll software in a future piece), CRM, HR, and more. One of your first tasks will be getting a price quote from the vendor.  At the very least, your accounting software should be able to handle your budgeting and forecasting, inventory, general payroll, financial reporting, and billing/invoicing.  Here’s a sample of features you’ll probably see as you start clicking vendors’ web pages:  Intuit Quickbooks: Tiers more advanced than what we mentioned are still well less than a hundred bucks a month for this household name in accounting software with features including seats for up to five users, on-demand online training, management of employee expenses and 1099 contractors, and app integration, among others.  Xero: The usual suspects on the accounting features page also include multi-currency capability, quick quote generation (to help you secure jobs before the other guy), sales tax calculation, and Gusto payroll interface (an add-on with a monthly extra price). Pricing from about $10 to a few twenties a month for “Early,” “Growing,” and “Established” businesses.  Freshbooks: This is a software that is designed for the smaller freelancer, or “simple” business but which offers a bit more power than the final option that I will be sharing with you. It is less expensive than the first two, and perhaps less robust … but might be perfect for the smaller, simpler business. Wave Accounting: Organizes income, expenses, payments, and invoices with 256-bit encryption security and other touted measures for handling credit card and bank account information. It is completely web-based and uses double-entry accounting software. Claims that its most basic accounting package is free – so your first question to them might be, “Why is this free?” Ask, ask, and ask again Do NOT be shy when shopping for small business accounting software.  Your good questions include:  What’s included in your quoted price? How much consultation

Business Growth, Business Tax Planning

What is the Best Payroll Software for Your San Francisco Bay Area Small Business?

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Every San Francisco Bay Area business owner in today’s inflationary environment is looking for ways to economize and improve: overhead expenses, workload, staffing needs, office space, supply chains, etc. It all feels stretched. We’re *all* feeling it, even here in San Francisco Bay Area. So it might creep into your lizard brain that the basic function of “paying your employees” might seem like an area that doesn’t need your attention – a great place to slash costs and simplify. Didn’t we figure all of this out in month one? Perhaps not. What is the Best Payroll Software for Your San Francisco Bay Area Small Business?“The biggest thrill wasn’t in winning on Sunday but in meeting the payroll on Monday.” – Art Rooney, founder, Pittsburgh Steelers Making the payroll is one of the biggest responsibilities of running a small business, the lubrication that keeps your company working smoothly. But there aren’t many management chores that can eat up your time and energy faster.  Payroll software can take the headache out of that job, but you have to know what you need and what it can deliver. You may think you have a perfectly good system already in place for your San Francisco Bay Area small business. Or if you’re a startup, you might not even be sure that you can use payroll software. So ask yourself this: – Do more of my workers want to know more details about their paychecks? – Am I ever late issuing paychecks? – Am I late on taxes or struggling to keep up with filling out tax forms? – Am I falling behind on other business requirements because we calculate payroll by hand?  Ask your finance folks, too: They oversee time and attendance, benefits, performance management and a host of other functions that are right up the alley of payroll software.  Payroll is probably one of your highest expenses, if not the highest. It’s time-consuming but unavoidable, touching every part of your business. Payroll software is your investment to make this key part of your business easier. It can also help free you and your HR folks for more planning and forward-thinking activities. It benefits you the owner in ways other than just compliance – errors in payroll can become some of your biggest headaches, causing loss of production and even loss of your workers. Proper integration of your payroll software with your other systems lets you see more accurate budgets and forecasts faster.  Your shopping list It helps to know what you’re buying before you get to the store. Here’s what you should be looking for… Easy to install. You’ve got a business to run. You and your HR people need to be able to get this software up and running with little or no lag with the vendor’s tech support. The software needs built-in and user-friendly tips, tricks, and recommendations for non-technical staff.  Easy to use. Look for intuitive and simple reporting features that help you budget and forecast easily, in addition to dotting all the I’s of having workers. It should take care of remote, gig, contract, and by-project employees paid by whatever time schedule works best for you and through whatever means, such as direct deposit, that works for them. It should also be able to handle overtime and wage-garnishment scenarios automatically.  Security. Your payroll holds a ton of sensitive data – and a ton of hackers out there would like to get their cursors on it. Payroll administrators and employees should have access to the data they need, no more and no less, and validation security is essential.  Taxes. Both the states and the federal government require employers to withhold income and payroll taxes from an employee’s paycheck. Payroll software calculates and deducts these and then sends them to the government. These tax rules also change frequently – your software has to keep up with that.  You should be able to customize, and the system should grow with your company. Most payroll software is available on the cloud and provides self-service portals to you and your employees from a variety of devices. Reviewing vendors Time to get picky. Questions you should ask vendors include: –  Can your system integrate with mine? – Does your system support every region where I have employees? – What’s your experience in my industry? – What’s the hardest thing about using your payroll software?  Though prices vary widely, basic out-of-the-box payroll software generally starts in the low three figures. Cloud solutions range from a couple twenties to the low three figures per month (plus, usually, a per-employee fee). As always, the more you pay, the more you get.  Here some best-known vendors and a smattering of features:  Gusto: Offers a complete range of all the needed tools and often tops the list of payroll software roundups. Offers onboarding features and syncs with the latest meeting apps, too. Pricier plans seem to have the real extras.  Intuit QuickBooks Payroll: It’s not surprising that this integrates well with their suite of accounting and other business software. Taxes and benefits covered of course, among other areas, and they also offer templates for new hires, company policy, HR laws, and conflict resolution.  ADP (Automatic Data Processing Inc.): Any search for payroll software would have to include this household name in the field. Just about all the tools you’d ever imagine for payroll – the trick here would be to not pay for more than you need.   Payroll is one of the biggest software decisions you’ll make for your company. We can advise you on what software fits your business best: Patti (408) 241-4100  Gale 408-775-7800 On your side, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth, Business Tax Planning

Time Management Software Choices for San Francisco Bay Area Businesses

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Tax “season” is over – at least for most of us. For all of the tax-exempt organizations out there operating on a calendar year basis, just a little nudge regarding the May 16th filing deadline. We’re here to help. Now, however, despite the relief that comes with the passing of the personal income tax filing deadline, it’s important to remember that tax avoidance isn’t a one-time occasion. The truth is that the decisions you make year-round affect how things go down (or up?) on your personal return AND your business return. On that note, you know I would love an opportunity to come alongside your San Francisco Bay Area business and help to maximize the ability to capture tax savings already existent within your books – and perhaps create new pathways for new savings, as well.  You’re only a phone call away from setting up our first meeting. Whaddya say we approach tax season a little differently this year? My aim is to free you up from tax stress so that you can excel in other areas. Grab a time on the calendar if you’re ready to start planning some tax savings moves that can pay off NOW:Patti (408) 241-4100  Gale 408-775-7800 Besides making the most of your tax situation, something else you’ll do good to make the most of is time. Not only on a personal level, but if you’re wise, you’ll also recognize that it’s the most valuable resource in your COMPANY – and it can be so easily wasted.  It’s true: figuring out a system to improve efficiency in the workplace can be like grating nails on a chalkboard (unless you love that type of thing). And the world is filling with people who want to tell you what to do in this area. But, that’s not me today, so much. I’m just going to point you to some tools. Sound good? If so, let’s dive into what’s out there and find something that works for your business… Time Management Software Choices for San Francisco Bay Area Businesses “Lost time is never found again.” – Benjamin Franklin The toughest thing to find in small business – after profits, of course – is enough time to accomplish all you want. Any tool that can help you and your staff work more efficiently has got to be worth more than a quick look.  That’d be time management software, next in our series on software for your small business.  What it can do Basically, this software makes it easier for you to track how long your people work on various tasks. It comes in handy if you’ve got a lot of different kinds of employees (such as freelancers and contract workers) working on a lot of different jobs – and you can imagine the savings when you no longer have to track all those details manually. Another big benefit comes from the software being able to analyze this information to tell you which employee is handling which job fastest and most efficiently, making some of your productivity decisions easier.  Theoretically, this should make your staff happier, too, as you can get them onto jobs they like and recognize your good workers quicker – and spot those who need a nudge. Long-term, employees can see their own remaining time off through the year and you can, too, when you have to juggle workloads. And let’s be honest: It’s no fun finding out you have a worker – or workers – cheating on their hours, but it’s better that you find out and stop the bleeding of your resources. An integrated attendance system of time management software can be one of your best defenses against this fraud.  Time management software can crank out reports to tell you the progress of a project sliced and diced into whatever chunk of time you like, which helps you spot redundancies and keep the workflow moving in the right direction. What it should offer Ease of use. Your software should be simple, intuitive, and clear, with dashboards of key performance indicators, automatic time tracking, and reminders, and customizable and clear reports. One handy feature in the best business software is templates; one of the first you’ll want from your time management software is timesheet templates.  Invoicing. You want to be able to set the auto-billing in days/hours and have the bill on a single dashboard as your different staffers work for different clients.  Scalability. The software has to be able to grow with your company and with your increasing number of employees. Part of this too is flexibility: You should look for a list of extensions and add-ons you can cherry-pick. (One option growing in popularity allows you to turn off social media and news  … talk about time management …)  Alerts. You can’t live without this kind of messaging in small businesses anymore, and it’s especially important when you’re working with employees, deadlines, and tasks of varying priority.  Integration and device compatibility. Most time management software will integrate with payroll and other modules. Equally important these days is compatibility with different operating systems and portable devices. You can’t have a remote worker left out of the loop because the software doesn’t travel well. Check for offline functionality too, in case somebody heads somewhere that has spotty internet. Your questions Time management software is going to be pivotal to your small business. Ask some hard ones. Generally, this software (like most for business today) is usually hosted in the cloud. It comes in at well under 10 bucks per month per user, though as with all business software, the more you pay the more you get. Some vendors charge a base fee or have a minimum number of users.  Here are a few vendors’ offerings to give you an idea of what’s out there:  ProProfs Project: Just under a grand a year for 20 users, with “Covid support” pricing for large companies. Kanban boards to organize and Gantt charts to visualize timelines. Free trial offered. Daily backups.  Rescue Time: Web-based. Free trial offered. Features a daily “Focus Work” goal.

Business Tax Planning, Tax Reporting

Customer Relationship Management Software for San Francisco Bay Area Businesses

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Apparently, it is National Small Business Week. And while I tend to think these kinds of “national weeks” or days, or what have you, are often pretty silly … well, as someone who has been in the trenches with the SMB community over the last few years, I could not be prouder of my San Francisco Bay Area SMB clients. I know how much it takes to get a company off the ground. I know the hours and dedication involved in keeping it running and thriving. I know the sleepless nights and the emotional weight of carrying an entire venture on your shoulders. You don’t get to “turn things off” at night. You are my hero. And serving people like you is my passion. And I’d love to be more than merely a resource for you in tax projections or KPI management. There are so many ways we want to come alongside you and your business. Grab a time here if you want to hear more:Patti (408) 775-7790  Gale 408-775-7800 So, in that vein, I’ve recently touched on various software programs from accounting to payroll… so it only seems natural to jump into customer relationship management, the high and mighty “CRM.” Customer relationships are the key to a thriving business – customers are at the heart of whatever it is you provide. And the relationship needs to be MANAGED, and at scale … otherwise, you’re merely a glorified freelancer. And just like accounting transactions and payroll taxes can be automated, so can various aspects of customer interaction.  Let’s talk about customer relationship management software… Customer Relationship Management Software for San Francisco Bay Area Businesses “Employers only handle the money. It is the customer who pays the wages.” – Henry Ford  We all know there’s nothing simple about running a small business these days – and it certainly isn’t easy tracking the activity of your customers from when they first walked through your door all the way to their last transaction.  A clear and complete picture of their journey with your company could have quite an impact on your bottom line.  Enter customer relationship management (CRM) software, next in our series looking at tools for your business.   Everything in one place CRM comprises many customer management systems – sales, marketing, and customer service, to start. It connects your departments to keep a trail of every interaction your staff has with each customer from initial purchase to support calls and emails (including in detail what was discussed) to additional purchases. You can track and analyze this data, then intensify a customer’s experience with your company – presumably leading to repeat or increased sales and better profits. (Data’s key: A recent survey showed that a lot of companies lose a lot of money over bad data in their CRM system.)  Every company can benefit from quality CRM. And even if you have a CRM system now, it should be a constant job to refine it and determine if you should upgrade. You might be thinking this function just sounds like a big spreadsheet – and it is, except to the nth power. CRM doesn’t just retain user and contact information but can use it dynamically: setting calendar events and appointment reminders, prioritizing your pipeline, spotting new sales opportunities, and moving customers through the different departments of your business. Some examples Sales and marketing. The right CRM system can make it easier to connect with buyers exactly when they’re ready to buy and via their preferred method. It can also help predict future sales and budgets and give your salespersons more real-time information on clients on a wider variety of devices, like smartphones. Similar information can help you get word out to prospects more effectively, too.  Customer support. Uniting customer service and sales will help you predict your customers’ preferences and more easily track and act on their purchase history. This also makes it a lot easier to handle (and diffuse) complaints.   What customer relationship management software should offer Look for customizable and continuously updated dashboards, centralized customer data whether on-premises or in the cloud, scalability (as with all business software …), and easy integration with all your other software and modules, such as those for email marketing or customer support. You should, for instance, be able to create customized messages for customers and set up prompts so your employees (no matter where they are) know exactly how often a customer has been contacted and what information they have received.  Your customers should have their own portal in your system; this takes a lot of hand-holding labor off your plate. Look for portal features that let clients create and receive answers to requests (such as for support), update their own information, and receive automated contact.   Cost and value This isn’t going to be the cheapest thing you’ve ever bought for your business, so get the most for your buck.  First, check with your salespeople, marketers, and customer-support staff about what they need in a system. Dig into whether your people will need extensive training or new mobile devices to use the system (those costs add up fast). Look for free trials from providers – most vendors offer one, though some vendors are more generous than others.  Some important questions to ask potential vendors:  Here are a few offerings (as usual with biz software, the more you pay, the more you generally get):  Apptivo CRM: Offers visual pipeline, integration for smartphones, and capturing leads from your website, among other features. Prices start at a few bucks a month and increase by the number of apps, fields, and dashboards.  Sales Cloud Lightning Professional: Features an Account Insights background intelligence on prospects and industries. There’s a personal assistant to ping you about overdue tasks, trouble spots, and leads. Cost is low two to low three figures per month per user, billed annually. A two-week free trial is available.  Zoho CRM: New “Canvas” design editor to create dashboards that give minimalist role-critical information to industry-specific sales data with broader industry context. “Ultimate” package cost is about 50 bucks a month per user but has a

Business Growth, Business Tax Planning

Three Financial Statements San Francisco Bay Area SMBs Need To Get Right

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If you’re a successful San Francisco Bay Area business owner in this high-pressure time, you’ve learned to master the art of the pivot.  Pivot on pricing, pivot on operations, pivot on hiring, pivot on supply, pivot on financials…  Successfully pulling it off is impressive – really. As someone who works closely with a LOT of SMB owners, believe me, I know that it ain’t easy. In fact, maybe you’re one of those businesses struggling to come through it all, even with those sweet, sweet pivots. Well, one piece of good news right now: there are (still!) many grants available to small business owners that could bring a little cash infusion to help get you through.  Another significant help? A little bit of guidance. (Ahem.) We’d behappyto sit down with you, take a look at those financial statements and see how we can get your business on steadier ground. Patti (408) 775-7790   Gale 408-775-7800 We’ll start by taking a look at the big three financial statements: balance sheet, income statement, and cash flow statement. And so that’s what I want to talk about today… Three Financial Statements San Francisco Bay Area SMBs Need To Get Right  “A business that makes nothing but money is a poor business.” – Henry Ford  As a small-business owner, you probably spend a lot of time thinking about the ins and outs of your company’s cash flow, A/R, A/P, and so on. Those and other financial categories of your books can show you a lot about where your company is headed… if you know where and how to look for both warning signs and good omens.  And that’s more important than ever as small businesses struggle to get their revenues back to pre-pandemic levels.  Here’s what you can learn from your books to keep your business on track.   The big three financial statements Three major parts make up the basic financial picture of your small business: your balance sheet, income statement, and cash flow statement.  These three  financial statements seem similar – and they are, at first glance. But digging helps you see the details that combined give you a clear picture of the direction of your small business.  The balance sheet The balance sheet presents the financial position of your company – your assets minus liabilities and owners’ equity at any given date – and how the assets are funded either by income, investment, or loan.  You’re familiar with most of the terms here, such as accounts receivable and payable. Assets are generally listed in order of liquidity (“cash” is often first, for example). Liabilities are generally listed in the order in which you should pay them.  Points to look for:  Balance sheets can also quickly show you red flags. Debt, for one. Watch for high amounts when they’re stacked against your company’s overall net worth or cash flows. This can spell special trouble in inflationary times like these.  Double-check contingent liabilities – how bad are they and when will they come due? Are you a seasonal business? Check the date on assets and receivables and make sure you’re getting a picture of your company’s year-long strengths.  Also, check the sheet for cash,including at-hand, banked, and what comes from short-term investment. Is the level low or high relative to debt? How rapid is the outlay relative to your company’s growth? It should be fairly steady unless you recently went through an unusual expansion. The income statement Your income statement (aka your profit and loss statement) is the barometer of your company. It shows the financial performance over time with a picture of direct and indirect expenses.  It starts with revenue from the core operating activities and includes such other revenue as income from dividends, rentals, and other factors. Deducting expenses, of course, show net pre-tax income.  A couple points:  Some warning signs here are clear, such as if your costs exceed your sales (meaning you may need to lower expenses or increase prices). Also, watch for unexplained drops in sales and marketing expenditures – this can hurt your bottom line down the road – or for jumps in operating costs without a corresponding rise in revenue.  The cash flow statement This statement shows where you get your money from your core activities, investing activities, and financing activities. Operating activities should be your biggest category here. Investing activity shows cash flow related to asset costs and sales. Financing activities present the movement in the capital structure of your business, such as long-term and short-term borrowings’ repayments and procurements, payments of dividends, and interest on obligations.  A glance at your cash flow statement can show you distinct warning signs. Do you rely too much on big but infrequent payments from just a few clients? Do you have many delayed receivables, maybe from slow-paying customers? Are you paying your bills too slowly? The ending cash and cash equivalents should also match with the cash and cash equivalents reflected in the balance sheet of the entity for the said period.  Don’t forget to step back and look at the bigger picture. Do you even have all these financials, and are they complete? Are you the only one who ever looks at them or who seems to care? Those too are warning signs – big ones. These three financial statements just scratch the surface. If you know you need some help to start digging deeper into your business financials, let’s schedule a time to chat. Patti (408) 775-7790  Gale 408-7775-7800 We’re here for you and your San Francisco Bay Area business. On your team, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Tax Planning

ONeill & Bergado’s Guide to the Profit and Loss Statement

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As a small business owner, you’re often preoccupied with all the things that go into running your San Francisco Bay Area business – the daily logistics, managing employee workflow, paying the bills, bringing in more customers… making a profit.  Let’s focus on that last one, shall we? Good. Profits are the lifeblood. And the P&L is probably the most crucial financial statement in growing your San Francisco Bay Area business. But too many people don’t really look at them or even know what to do with them. So today, I’m here to help. If you want to talk about how you can use these P/L report thingies better – or perhaps just how you can chart a financial forward path through times that might currently look a little bleak … this is what we do:Patti (408) 775-7790  Gale 408-775-7800 So let’s get into the details. Firstly, how to BUILD an effective profit and loss statement – because that’s more than half the battle… ONeill & Bergado’s Guide to the Profit and Loss Statement“I made my money the old-fashioned way. I was very nice to a wealthy relative right before he died.” – Malcolm Forbes  Your San Francisco Bay Area small business needs a lot of documents, and one of the most important is your profit and loss statement (P&L).  It’s called other names – income statement, a statement of profit and loss, income and expense statement, earnings statement, statement of financial results – but it always shows whether your company made a profit in a reported time period. Sure sounds like something your small business shouldn’t be without.  What’s on one? Here’s an overview.   Why you need a P&L Your P&L basically shows your revenue minus expenses and helps make clear how your business turns revenue into profits.  Private companies use their P&L for internal management and decisions. Public companies must include a P&L in financial statements for public disclosure. Outside your company, creditors and investors will consult your P&L to estimate risk, and we’ll use your P&L to figure out your taxes and other information for the Internal Revenue Service.  Plainly put, the Small Business Administration says the P&L is the best tool for knowing if your business is profitable.  What to include As we said, the formula for a P&L starts with your sales minus the costs of your goods/services sold to find your gross profit. Take away your overhead and you have your net profit.  The parts are:  Typically, a P&L can run from a few to several pages depending on how complicated your business is. How do you start?  Pick a timeframe. Monthly (usually they’re no more frequent than this), quarterly or yearly are the usual periods. Longer timeframes can show more information you can act on, but you don’t want overload from decades of data, either. List your revenue for the period. In this top line, break down the totals by month (include income sources by month) and, if applicable, account for discounts and returns. Also, note whether sales are recorded when an order is placed (accrual accounting) or later when you receive payment. Calculate your expenses. Separate such direct costs as goods and operating expenses. Costs of goods do not include selling and administrative costs (as you might have with services); those you list later.  Many small businesses compute the cost of goods sold directly by taking the value of inventory at the beginning of the period, adding the value of goods purchased during the accounting period, and then subtracting the value of the inventory on hand at the end of the period. (This gets more complicated if you’re a manufacturer – check with us.)  Determine your gross profit. Subtract your direct costs from your revenue. Here’s also where you enter your selling expenses and general and administrative expenses such as rent, utilities, telephone, travel, and supplies. Repairs and improvement expenses can also be deducted, but only for expenses to maintain property or equipment. (Major overhauls of equipment or maintenance that extend the life of the asset must be capitalized.)  This part is also known as your gross margin, and it’s usually given as a percentage of your revenue.  Other income and other expenses. Other income includes interest, dividends, non-categorized sales, rents, gains from asset sales, and so on. Other expenses can be unexpected losses unrelated to your normal business. Add both to your income and expenses categories. Subtract your total expenses from gross profit. A positive number means you’re making money. A negative number means, with luck, that you can at least pinpoint what’s hurting your company.  Also, you can use one of two accounting methods to create your P&L. The simple single-step method means you just total revenue and subtract expenses. With the multi-step method, you deduct operating expenses from revenue, showing your operating income. You then add that to the net of non-operating revenues, non-operating expenses, and investment gains or losses to get your pre-tax income. Deduct taxes and you have your net income. (We can help with this.)   Models to work from You can assemble a simple P&L using Excel and Google Sheets, which offer templates. Templates are also on financial websites such as U.S. Legal Forms or come with such software as QuickBooks or Microsoft 365.  These, paired with what you’ve learned, should get you started on this indispensable business document. Next, we’ll look at how to analyze a P&L. If you want to get more into the details of your profit and loss statement or any other financial statement, we’re here and ready to serve you:  Patti (408) 775-7790 Gale 408-775-7800 In your corner, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth, Business Tax Planning

Making the Most of Your San Francisco Bay Area Business’s P/L Statement

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In the arena of not-so-good news, along with so many other things these days, it looks like IRS interest rates have gone up for Quarter 3. Inflationary insults to injury for San Francisco Bay Area business owners. These days are getting tougher. Hang in there. Now … the one bright spot in this is that we truly can help your business adjust for this sort of thing and keep you on track with the IRS (in all its changes). That’s the good thing about having a friendly neighborhood tax pro. If you want to discuss your quarterly payments, look things over, and make sure you’re good to go, let’s get something on the calendar: Patti (408) 775-7790  Gale 408-775-7800  Aside from interest rates, another thing you’re going to want to pay close attention to (so your business isn’t leaking profits or headed towards financial disaster) is your P/L statement.  Likely, you already have access to this kind of report. At least I sure hope so. Especially after last week, when I talked about how to build it correctly. So naturally, this week I want to focus on how to interpret it. Because this one financial statement can give you a whole lot of insight into where your company is at and where it’s headed.  But only if you know what you’re looking for. So, let’s dive in, shall we? Making the Most of Your San Francisco Bay Area Business’s P/L Statement“War is 90% information.” – Napoleon We can’t hammer this in enough: Your profit and loss statement (P/L) is one of the most important documents in your business, and putting it together is only half the battle. To really make the most of what the P/L offers, you have to understand the story it’s telling about your business. You must know how to read it.  There’s a lot of information on there about your revenue and expenses past, present, and future. Sifting through it, knowing what to pay attention to, and what to let alone for the moment are all key to making good decisions for your small business. So, let’s revisit what it is and then we’ll focus on learning how to interpret it. A basic picture Your P/L shows your revenue minus expenses and helps make clear how your business turns revenue into profits. Details of your profit and loss can reveal insights into your business performance including your strengths and weaknesses. You can also use it to easily see how you stack up against your competitors.  In addition to aiding management decisions, P/Ls are also used by public companies as financial statements for disclosure. Others – including the IRS – use your P/L, too, for many reasons. Two of the biggest groups are investors and lenders examining your company for risk.  To the lender, you must show your financial stability and the ability to take on more debt. Investors want to see you’re not too heavily leveraged and that you have enough over for dividends and future growth. What to look at and watch for You can study your P/L a long time and keep learning about your company, but a quick analysis starts with a few basic points.  Year-on-year comparisons. Look for such big changes as a drop or spike in sales. Assuming you’re not a seasonal business, do the big periods have to do with anything special you did at that time?  Trends. What’s the trajectory of your business? Are your strategies paying? Comparing annual performance will also help you see whether revenue is outpacing your expenses.  Projections. For future cash flows, look at your income sources and ask yourself if they’re sustainable. Your direct costs subtracted from your revenue also give you your gross margin – examining where it’s gone over the past year or so can help you determine how your cash flow is likely to do near term.  Expenses. Are yourbiggest ones justified? Are there ways to reduce expenses overall? P/Ls can also show warning signs of trouble. The proper relationship between revenues and expenses, for instance, has to make sense to pass with the IRS.  Other signs you should look for in the P/L include: Declining profit. Your company is growing; it can become harder for you to keep individual quotes, jobs, and revenue streams in your head. Gross profit can fall without you even noticing it – unless it’s spelled out clearly on a P/L. Revenue growth with declining reserves and operating profit margins can also show you that your costs are climbing faster than your sales. Income consistency. Is your income steady or spiky? Here you can spot if a surge in profit came from gradual growth or a specific event or promotion and whether you should try to repeat that event in the future.  Jumps in A/R. This could just indicate the good news that you’re selling more. It can also mean your customers are paying you more slowly. Decline in sales and marketing. Conventional wisdom says you need to spend about 10 percent of your gross revenue on sales and marketing.Did you? Increase in the percentage of wages and other costs. You hire more people as you grow, but revenue should increase alongside such operational expenses as wages. Do expenses make sense for the period you’re looking at? Remember that some costs are fixed long-term. Others like supplies or wages could vary especially these days.  Bear in mind… What the P/L tells you could depend on your accounting method. There are generally two methods: a cash basis or an accrual basis. (We’ll look at both in more detail in a future article).  With a cash basis, revenue and expenses are recognized when the cash moves. An accrual method accounts for revenue when it is earned and expenses when they occur rather than when money changes hands. Obviously, the actuality of the figures in the P/L could be different depending on which accounting method you use.  And of course, check your math. Wrong figures on even the most scrupulously prepared P/L send your decision-making down the wrong path.  Finally, what’s your bottom line really telling you? Net profit is always

Business Growth, Business Tax Planning

Why Should San Francisco Bay Area Businesses Care About FASB and GAAP?

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Yes, inflation isn’t slowing down, even here in San Francisco Bay Area. Though it’s not the main thing I’ll be writing about today, I did want to point out this economic elephant in the room for my San Jose business owner readers and clients, and not just speed on by and into my accounting geekery. One thing is clear … SMB’s are feeling the pinch. But each situation will require a different prescription, and one thing I do NOT want to do during this craziness is to provide blanket advice to cover all of my San Francisco Bay Area area business owner clients and friends. I will, of course, continue to offer you these weekly notes … but I can’t get as specific with your situation as I’d like to in them. So if you want to talk through your particular landscape, ONeill & Bergado is in your corner, right here: Patti (408) 775-7790 Gale 408-775-7800 Now … for San Jose businesses of a certain growth rate (or of a particular model), the move from “cash accounting” to “accrual accounting” is an important step in the journey. I just covered that recently. And we know about the role of the IRS in all of these matters. (Speaking of which: reminder that second quarter estimated taxes are due next week on 6/15/22.) But there’s ANOTHER organization that you should, at the very least, be educated about as you grow. So I’m putting on my teacher hat today… Why Should San Francisco Bay Area Businesses Care About FASB and GAAP?“Standards are always out of date. That’s what makes them standards.” – Alan Bennett If the last 20 years of the economy’s highs and lows, downturns and headlines taught us anything about business, it’s that complete and transparent accounting is in everyone’s best interest.  One independent organization working to keep companies’ books clear and honest is the Financial Accountant Standards Board. You’ve probably heard of FASB – but what do they do and how could they have an impact on you and your small business?  In general, if your San Francisco Bay Area business is small enough, not much for now. But as your business grows, you should know about the Board. Let’s take a look.  What FASB is FASB, based in Norwalk, Connecticut, is an independent, private sector organization that establishes accounting standards for financial reporting in the U.S. It was started some 50 years ago as a successor to the Accounting Principles Board.  Today, FASB is part of a structure that also contains the Financial Accounting Foundation, the Financial Accounting Standards Advisory Council, the Governmental Accounting Standards Advisory Council and the Governmental Accounting Standards Board (that last sets rules for state and local governments). FASB also coordinates with the International Accounting Standards Board, which is responsible for standards of international financial reporting.  FASB works to improve financial reporting within the U.S. and globally while educating stakeholders on understanding accounting standards – specifically, in this country, generally accepted accounting principles (GAAP).  That’s where FASB is likely to make the most impact on your business.  Standard setter FASB’s work is key to the economy. A few of the organization’s functions: Reporting standards. In what is widely considered the major function of the Board, FASB ensures that accountants and other intermediaries who deal with financial information create accurate and factual reports for stakeholders, reports that follow clear guidelines and schedules.  Improved standards. Investors need clear information on a company’s profits and losses, and FASB updates and tweaks accounting principles (sometimes raising as many questions as they initially answer, as we’ll see). Principles. FASB oversees new principles designed to improve accounting and reporting. One example is the recent disclosure principle, which gives a company the right to publicize its details and structure of costs incurred in the year. Education. FASB continually educates and updates its accountants and other professionals. One recent example is an overview of the intersection of environmental, social and governance (ESG) matters with financial accounting standards.   GAAP. FASB has the authority to establish and interpret GAAP in the United States for public and private companies and nonprofits. These principles allow stakeholders and investors to interpret a company’s financial position and condition through the financial statements – and allow comparisons with other companies.  Other users of GAAP include creditors, employees and regulators like state accounting boards, the American Institute of CPAs and the Securities and Exchange Commission.  FASB frequently posts updates to the codification of GAAP on various hot topics. The Board recently issued guidance on how companies need to disclosure and account for pandemic-relief money from the government, for instance. Many are now calling for FASB to finally issue guidance on cryptocurrency. Sometimes FASB guidance just ignites questions at first, as with its “going concern” standard a few years ago.  How FASB impacts San Francisco Bay Area businesses Clearly FASB exercises pull over how companies conduct business. Though it might seem to be just another regulator sticking its nose into how your company operates, FASB can help even a small business move ahead.  The right accounting method, for instance, gives a more accurate and complete picture of your company’s income and cash flow – and that can only help you make better-informed strategic decisions about expansion or streamlining. For large and growing companies, the FASB-developed GAAP is required, and GAAP in turn requires you to use the accrual method of accounting (where income and expenses are recognized as they occur, not as they’re collected or paid out). Remember, GAAP is recognized as the standard by stakeholders, investors and lenders.  Small businesses don’t interact with FASB. But even small companies not yet required to use GAAP can benefit from switching to accrual from cash accounting.  It all depends on your goals for your business and how you foresee your growth.   And again … if your San Francisco Bay Area business isn’t at the stage to care about this, it’s still good to know how it all works. But if it is … well, we should definitely talk: Patti (408) 775-7790 Gale 408-775-7800 Or just

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