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Bay Area Business

Business Growth

Keeping Expenses Separate in Your San Francisco Bay Area Business

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Did you see the Barbie movie or Oppenheimer this weekend? Or jump in with the 200,000 other Barbenheimers and see both? In case you didn’t, your social media feed likely filled you in on what you missed (or didn’t, depending on your view of these things). What a weekend for the movie industry as a whole that hasn’t seen these kind of opening weekend numbers since 2019’s one-of-many in the Avengers series. Seems like a good sign in the midst of inflation, right? Well, whether or not we’re headed for a recession is still in question. I’m sure you have your opinions on the matter. We’ll see how the Fed’s interest rate hikes (including the final one expected this week) have impacted things economically. Keep an eye on the Q2 earnings for big A-list corporations (like Mcdonald’s and Exxon) set to release this week. Their performance will be a helpful indicator of just how effective inflation-slowing efforts have been and if we’ll see the economic ship right itself. While we keep our attention on that, I also want you to remember to not let it consume you. Sure, inflation and recession may force you to make big changes, but change is often a really good thing for a business. Not only does it force creative thinking and more laterally-minded measures, it also pushes you to evaluate your systems and decide where you can streamline them. One area that you might not have considered is your system for keeping business and personal expenses separate.  Because it’s easy as a business owner if you don’t have a (good) system in place, to blur the lines here. Believe me, I’ve seen plenty of people come to me whose books are a mess, which complicates operations unnecessarily. That’s why I’m bringing it up. Now, if you know things are messy and you need help to get them cleaned up, I’m happy to meet with you and do an in-depth dive into it. Just set up a time: (408) 775-7790 But let’s start here with a little about WHY it’s so important for you. Keeping Expenses Separate in Your San Francisco Bay Area Business“In diversity there is beauty and there is strength.” – Maya Angelou When you started your San Francisco Bay Area business, I’m sure you felt that sugar high that comes with it. You have this idea that’s been percolating in your mind for months, maybe even years… and now you finally get to open the doors, make the announcement, close your first sale… It’s such an exciting (and hectic) time that many small-business owners (especially new ones) easily forget one basic fact about having your own company: Keep the money separate.  If we’re honest, treating your business’s money as your personal account (or vice-versa) is so easy to do: depositing a client’s fee paid to your business into your personal bank account, dipping into your business account to pay a personal expense, and not keeping the records because you know where the money went, and everything is doing fine.  The harm comes in the recordkeeping, though… because you might depend on it later to keep your company’s doors open. Here’s how.  A caution against commingling If you’re properly in business, having two pots of money confuses your accounting. And accounting is what you’re going to need first and most obviously to determine your company’s strengths and weaknesses, aka profits and losses down the road.  Separating expenses can also be for your own good if you’ve incorporated them. If — heaven forbid — your company goes bankrupt someday, one avenue that creditors will have to your personal money will be if your business and personal finances were intertwined (piercing what’s called your “corporate veil”).  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. You’ll also need a proper audit trail to prove the deductions and losses you take (and believe me, you’ll need those in the first few years) on your business tax return. While we’re on taxes, if you’ve got even a small online business, this could be the first year you get an IRS Form 1099. For tax year 2023, if you use a third-party payment platform like Venmo or PayPal or sell on sites like Etsy or eBay and make just $600 for professional services, you and the IRS will get a Form 1099-K in January 2024, and you must report the income. If you use a payment platform for personal payments, you won’t get a 1099-K – but there’s no guarantee that mistakes won’t be made in this initial year of the 1099 blizzards. You’re probably beginning to see how keeping good records and separating funds will be especially helpful.  The nitty gritty Bank accounts: From the minute you turn on the lights, get a proper business account that’s completely distinct from your personal accounts. To open a biz account, you’ll need to get a federal tax ID number (EIN) and a state tax ID number, as well as any documents you filed for when you formed your company such as articles of incorporation or a certificate of formation. Business accounts typically give you checking, savings, credit card accounts, and a merchant services account that allow credit and debit card transactions from customers. Other perks should include multiple credit cards for you and your employees (more on that in a sec) and merchant services that keep customers’ personal info secure. You’ll probably get a line-of-credit option for your company larger than what you’d get in a personal account.  A business account in the same bank where you keep personal money may get you a break on some fees, but it depends on the bank. It’s the same for introductory offers and sign-up bonuses (which are taxable). Shop around and study the fine print — and don’t forget non-bank sources, like American Express.  Credit cards: Getting a business credit card separate from your personal plastic is just as important as having a

Business Growth

Business Cash Advance: A Loan Alternative for San Francisco Bay Area Businesses

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This year has been a less-than-fun rollercoaster in the world of finance. Well, good news on that front — no more recession bogeyman lurking under the bed, at least that’s what the Fed declared as they raised rates again last week. Doesn’t mean more interest rate hikes aren’t ahead or that inflation’s fully cooled, but things appear to be balancing out. Even with this silver lining, there are still some darker clouds hanging around when it comes to borrowing for your biz. It doesn’t mean you don’t have options, just that things are a bit tougher right now in terms of borrowing to get some extra cash. That’s one reason I’ve been talking more and more about loan alternatives with my San Francisco Bay Area clients. Because, even if it’s difficult, it doesn’t mean you should give up on finding new ways to expand your business and make improvements. You just might need to be a little more creative. I’ve got some ideas on that, but they’ll also depend on your particular situation. If you want some guidance on these matters, I’m here for you, :(408) 775-7790 Today I’d like to give you some details on a loan alternative that might help you circumvent the difficulties with borrowing right now, something called a business cash advance… Business Cash Advance: A Loan Alternative for San Francisco Bay Area Businesses“Put not your trust in money, but put your money in trust.” ― Oliver Wendell Holmes When your San Mateo company needs a little extra change, the first option you consider is probably loans: an infusion of cash that you pay back (if your credit’s good enough to get one in the first place).  But a loan isn’t the only option for a cash infusion, though. There’s another option that comes with its own advantages… as well as disadvantages: a business cash advance (or a merchant cash advance, MCA for short). Let’s take a look and see if this is a finance option for your biz and if it is, what you’ll need to prepare for if you decide to take one.  Banking on your future With a business cash advance (or MCA in this case), a financing company advances you a lump-sum amount of cash against your future revenue at, ostensibly, 0% interest. You agree on a fixed payback amount (aka the Purchased Amount) and have to immediately begin making frequent repayments — daily or weekly — until the advance is paid off. There’s no loan involved. The MCA company is taking a portion of your future credit and debit sales and charging you what’s called “a factor rate.” Let’s say you take a grand in advance and it comes with a 1.5 factor rate. The total amount you’ll have to repay is 1,000 dollars times 1.5, or 1,500 dollars. Obviously, these deals aren’t for every business; for some, they could be downright dangerous. But let’s look at the pros and cons, anyway.  Yay for no regulations Credit is no factor. MCA companies are relatively unregulated, and one of the few advantages of that is they can make advances in unconventional ways — including ignoring credit ratings (though many MCA companies don’t). This can open a flow of capital if you’ve had trouble getting mainstream loans. You get cash fast. Unfettered by most regs, MCA companies can get you money in days. That’s a real boon if you have a deadline and the investment you want the money for will improve your bottom line to cover the business cash advance and its factor rate. (Be certain it will…) Watch out They get their cash fast, too. Just last year, the Federal Trade Commission said this in a news release aboutdefendants (who used “deceptive and illegal means to seize assets,” by the way) in one business financing case: “Typically, a merchant cash advance company will make daily withdrawals from the business’s bank account until the obligation has been met.” That means you won’t just get cash quickly, but you’ll likely have to shell it back out quickly, as well. There is, in fact, “interest.” Let’s say you have to pay off a 10,000-dollar advance at a factor rate of 1.3, or 13 grand. Let’s say the MCA company gives you three months to pay it back. That’s a 229% interest rate. Even if you stretch the payments to a year (12 months), that’s still 57% interest. Fees for missing a payment can also be steep, and there’s no benefit at all to you if you pay the debt off early. The future is unsure. Your advance is against your future sales. If those sales don’t happen, you still have to repay the amount. Defaulting is considered a breach of contract with the MCA company, opening the door to liens and collections on not just your business assets but potentially your personal ones as well.   For real Let’s look at some actual MCA companies. With Credibly and Rapid Finance, you can get advances of upto the mid-six figures, but you have to meet minimums in time of operation, revenue, and credit score (conditions similar to many MCAs recently). With CAN Capital, you can get an advance of just four figures, though there is an administrative fee and the factor rate can hit 1.48. Libertas Funding offers advances of up to a mil, but only says its factor rates “vary.”  If you get into an MCA and find it chewing up too much of your revenue — or, worse, you’re taking out more MCAs to pay off previous ones — there are mitigation methods.  Please be careful before you ink one of these deals, and don’t go at it without having someone in your corner to crank the numbers and make sure whatever agreement you land will actually benefit you in the long run. Remember, we’re always here to offer support. Reach out any time:  (408) 775-7790 Cheering on you and your business, Patti ONeill and Gale Bergado

Business Tax Planning

Why San Francisco Bay Area Married Owners Might Choose the QJV Route

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Remember three years ago when you depended on Zoom for work meetings and virtual schooling for your kids? While you’re probably really grateful the second one isn’t a reality anymore, the first one still had its appeal (unless something like this happened).  Working from home had its perks.  In a stroke of irony, the company that enabled us all to work from home during the era of social distancing recently started requiring their employees to spend some time in the office. Time to swap sweats for slacks.  Unless you and your spouse run your San Francisco Bay Area business together. In that case, your WFH options might be more flexible. But there are other considerations for married joint ventures beyond working location that I want to bring up today. As far as business ownership and marriage go, you can obviously have one without the other, but when you and your spouse team up to build a business together as co-owners, it’s a good idea to look at the implications of that — both in a relational sense and but also (for today’s purposes) in an entity structure sense as well.  See what I mean below… Why San Francisco Bay Area Married Owners Might Choose the QJV Route “To get the full value of a joy you must have someone to divide it with.” – Mark Twain More than one married couple has taken their domestic success professional, working together to build a company. It’s an old story, and it can be a happy one – but it can also run afoul of tax law without proper planning.  The IRS maintains that business partners should be filing a partnership tax return, period, the IRS Form 1065. A partnership that fails to file a 1065 (and a lot of married “co-workers” neglect to) risks penalties.  Let’s look at those hefty fines – and a smart way for married owners to avoid them.  The 1065 IRS Form 1065 is an annual tax return used to report the income, gains, losses, deductions, credits, and other information from a partnership. A partnership doesn’t pay tax on its income but passes through profits or losses to its partners, who include partnership items on their own tax returns. You file a 1065 on the 15th of every March, unless a holiday or weekend changes that deadline.  Uncle Sam takes this form seriously: The penalty for failing to file a 1065 by the due date (barring “reasonable cause,” which is up to the IRS), is 220 bucks for each month up to 12 months multiplied by how many people were partners in the partnership during any part of the tax year for which the return is due. Plus up to a quarter of any taxes you failed to pay. That’s potentially pushing five figures that a partnership could owe simply because married owners thought “for richer or poorer” meant when they were in business, too.  And a 1065 is only part of the onerous tax paperwork a partnership has to file annually. Is there no way around this?  Three little letters The IRS generally considers a business jointly owned and operated by married owners as a partnership for tax purposes, meaning the couple must meet the filing and record-keeping requirements we just mentioned. Plus, married co-owners failing to file properly as a partnership might have been filing a Schedule C, “Profit or Loss From Business,” in just one of their names – meaning only one spouse gets credit for Social Security and Medicare coverage.  Unless … they elect to have the business treated as a qualified joint venture.  In the eyes of the IRS, a QJV is a joint venture that conducts a trade or business where the only members of the venture are a married couple who file a joint return, who both elect not to be treated as a partnership, and who both spouses materially participate in the trade or business or maintain a farm as a rental business without materially participating (for self-employment tax purposes) in the operation or management of the farm.  A QJV includes only businesses that are owned and operated by spouses as co-owners and not in the name of a state law entity, such as a limited partnership or limited liability company. (LLCs can be qualified joint ventures only in community property states; extra tax forms may be involved in these cases, so check with us.)  Spouses make the election on a jointly filed tax return, the IRS Form 1040 or 1040-SR by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the venture.  Each spouse also files their own Schedule C or Schedule F (for farming).  Pros and cons for married owners Pros: Easy tax filing is the obvious first one. Partnerships come with a lot of paperwork, such as the 1065 and a Schedule K-1 for each partner and their income, deductions, and so on. QJVs come with no additional forms. Spouses in a qualified joint venture also don’t generally need an Employer Identification Number (EIN). (Check with us if you had EINs already for a partnership.)  In fact, the IRS started QJVs more than 15 years ago as a sensible answer to the tax agency’s suspicions that more married business co-owners were letting just one spouse take all the business income and file the Schedule C and Schedule SE (for taxes on self-employed income) just to make paperwork easier.  The second major plus: the recognition of self-employment taxes paid. Pre-QJV, only that spouse who reported self-employment income (again, to save on paperwork) got credit for taxes paid and built their Social Security benefits for retirement.  Cons: We mentioned that LLCs can’t be QJVs; in the latter, both spouses are sole proprietors in a jointly owned business. That means no shielding business entity between the owners and personal liability for the business. Co-owners in a QJV might also pay more in taxes because they don’t have a corporation’s tax-advantaged structure.  For some (though certainly not all) spouses in business partnerships, the QJV can really be a lifesaver. Now,

Employee Benefits

Compensation Is Just the Start, San Francisco Bay Area Business Owners

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We’re just over a month away from the MLB playoffs, and this year (like every year) has had its share of sketchy calls that fans and players have been unhappy about.  While not everyone’s favorite summer pastime (the sports season that never ends still has more than two months of games to go), this summer there are seemingly more strike calls than ever happening beyond the diamond. UPS, Hollywood actors, and screenwriters, food service workers in Vegas, United Auto workers, LA city employees … even doctors in the UK are getting in on the action. And they’re striking over more than just compensation. The recent SCOTUS ruling makes way for businesses to sue unions for financial damages caused by strikes, but despite that extreme (and expensive) legal protection, many employers are understandably nervous. Now, most San Francisco Bay Area SMBs like you don’t have to worry about a mass walk-out like these major industries are experiencing, but you do have to deal with the issue of disgruntled employees who want better compensation, benefits, working conditions, or company policies than they’re currently getting. You know what I’m talking about. So it’s worth spending time thinking through how you as an employer can manage to keep your workers happy when they ask for more while shielding your bottom line at the same time. This is about staying in business, too. Let’s go there today. Compensation Is Just the Start, San Francisco Bay Area Business Owners“When you take care of your employees, they take care of your business. It’s as simple as that.” ― Richard J. Daly Happy employees are the backbone of any successful organization, as you have probably learned from experience in dealing with staff on both sides of the spectrum. And research says so too: according to a study by Gallup, companies with engaged employees outperform those without by a whopping 202%. But we know keeping satisfied workers is not just about compensation; there are other non-tangibles you can offer to maintain a happy workplace, and much of that can be demonstrated during the negotiation process. How UPS Averted A StrikeYou’ve heard by now that UPS reached a deal with employees in late July to avert a threatened strike. This year’s negotiations between the company and the teamsters’ union representing employees went better than it did in 1997, when 185,000 UPS workers went on strike for 15 days, creating havoc in the shipping industry. But this time around, both sides voiced their satisfaction with the deal’s terms, which included compensation increases, new hires, comfort and safety improvements in trucks, and other changes to overtime and seasonal work policies. Negotiations lasted just over five weeks. This very recent example of a reached deal demonstrates that negotiating with employees can be a delicate dance, but success is always possible, even in complicated situations (like 340,000 workers in the balance).  So let’s talk about a few of the right moves you can make, regardless of the compensation terms, that can help usher in a win-win situation. ListenDo this first, and not just for formality’s sake. Listen actively to your employees’ concerns and requests while remembering that you were in their shoes at one time. Keep the lines of communication open and make sure your workers feel heard. This fosters trust, which is the key to not just a successful negotiation process, but also to retention and a positive workplace culture. Do Your Research Come into the conversation having researched industry standards for compensation and benefits. Use statistics to back your proposals, making it clear that you’re offering a fair deal based on what’s happening in the market today. A data-driven approach can help lend credibility to your negotiations. Be FlexibleNegotiations involve give-and-take so be open to compromise. Consider offering different options for compensation and multiple solutions to alleviate their other concerns. This can create an atmosphere where employees feel more involved in the final solution because they can choose what suits them best. These are days when San Mateo employers have to offer more than higher compensation terms to attract and keep employees, and these principles are applicable to a business of any size in any industry.  My main goal in sharing these values I’ve learned over the years is to remind you that this process doesn’t have to be a battle. It can be a collaborative and peaceful effort where both parties leave satisfied.  A win-win is good for everyone. We’re on your side, Patti ONeill and Gale Bergado

Employee Benefits

Work From Home Policy for San Francisco Bay Area Businesses

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There’s no better way to celebrate work than by taking a day off. The irony of the Labor Day holiday gets me every year, but I do hope that it provided a little extra rest on the front end of a busy fall season. I mentioned in one of my recent notes another piece of irony: how Zoom recently started requiring their employees to come back to the office. Where are you on that journey? If you pivoted to remote or hybrid work models for your employees post-2020, what is your work from home policy looking like these days? If there’s one thing that San Francisco Bay Area business owners in WFH-friendly industries would be wise to pay attention to, it’s that workers still really value having the freedom to work remotely. A full 98% of workers report a desire to work remotely at least some of the time. And the trend still has traction — as of 2023, a little over 40% of the workforce either works from home or operates in a hybrid work environment. But when safety concerns are no longer the banner over this arrangement, business owners find themselves weighing the costs. So today I want to delve into some of the dynamics of creating a work from home policy that incorporates the increasingly popular hybrid work model, but with boundaries that benefit both business owners and employees. Work From Home Policy for San Francisco Bay Area Businesses“Where we’re going, we don’t need offices” ― Doc Brown, ‘Back to the Future’ Now that we’ve mostly accepted the WFH shift in work culture, we’re fully into the weeds of how to make it work long-term, which presents both opportunities and challenges. Based on my conversations with business owners in our area (and beyond), there are themes to the concerns that are voiced.  One of the foremost concerns for business owners is ensuring that employees remain productive and accountable while working from home, despite the statistics showing that remote employees tend to be more productive than their office counterparts. (A study by Stanford University found that remote workers were 13% more productive than office-based workers.) Another question being asked is how to ensure the security of data on external systems. And then there’s the need to maintain a spirit of teamwork and camaraderie in a setup where face-to-face interactions are minimal. So let’s talk about how to address these very legitimate concerns when developing your work from home policy. 1) Maintaining Cybersecurity: Protecting Your Business and Employees It goes without saying that cybersecurity is paramount. Your work from home policy should outline clear guidelines for safeguarding sensitive information. Require the use of secure virtual private networks (VPNs), encrypted communication tools, and strong password protocols. Educate your employees about phishing scams and the importance of keeping their devices updated with the latest security patches. 2) Fostering Relationships: Creating A Healthy Workplace Culture There are still ways to build into a spirit of teamwork, but it will look different than before. Organize digital team-building activities, such as weekly video check-ins, virtual coffee breaks, or even online team games. But most importantly, set up a dedicated virtual space where employees can engage in casual conversations and share personal updates. This is a way you can mimic the daily interactions that would normally happen in the office break room or hallways. 3) Maintaining Productivity: Balancing Trust and Accountability Monitoring work productivity doesn’t have to equate to constant surveillance. It’s not like you were constantly looking over their shoulder at the office so take a similar approach here. Implement tools that allow employees to track their own tasks and progress, which can help foster a sense of autonomy and ownership. Regular check-ins and goal-setting sessions can help maintain accountability while empowering staff to take ownership over their time. An effective work from home policy requires a thoughtful approach that is outside the box of “what we’ve always done.” Such are the times we live in as San Mateo business owners, where adaptation is the lynch pin of survival. But I want you to do more than survive, and that’s why I do what I do. Let’s build your business. I’m here to help you expand your financial future:Patti (408) 775-7790  Gale 408-775-7800 In your corner, Patti ONeill and Gale Bergado

Business Growth

Facing the AI in Business Trend in Your San Francisco Bay Area Business

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Since the release of ChatGPT in November of last year, headlines about AI in business have been incessant.  One of the biggest controversies is whether or not AI is a threat to the job market. Lots of differing opinions on this one, and time will soon reveal its lasting effects. I’ve personally observed a whole gamut of responses from San Francisco Bay Area business owners: mild interest, full adoption, growing irritation, all-out worry, and absolute avoidance. And as a trusted advisor to your business, I’d like to posit that with technology, the inevitable is inevitable. Let’s give it some serious consideration today and weigh the pros and cons. Blockbuster showed us that business owners can’t ignore new technology and hope it will go away. ChatGPT is here to stay, even though its place and function are bound to evolve as we go. My question for you today: How should we as business owners who want to stay in business respond to this new technology? As a financial professional running an accounting and tax practice, I am constantly tasked with the evaluation of new softwares on the market that boast of new tech to make my job easier. ChatGPT has affected my industry massively, and my response, then and now, is that I must do what all business owners have had to do for centuries: I adapt.  Here’s what I think that could look like for business owners responding to AI today… Facing the AI in Business Trend in Your San Francisco Bay Area Business“When you’re finished changing, you’re finished.” ― Benjamin Franklin If you’re feeling like ChatGPT hasn’t yet affected your San Mateo company, think again. Some, if not most, of your employees have been using it in their personal lives and possibly experimenting with it in their work. Many employees are admitting to using it to expedite their work, even at companies where it has been banned. Well-known names like Apple, Spotify, Verizon, and Wells Fargo (to name just a few) have already imposed restrictions on its use in the workplace, while others are specifically hiring people with experience in using it. The most impacted industries by ChatGPT so far are computer coding, software development, copywriting, advertising, legal, customer service, Wall Street, and graphic design. If you’re in any of these industries, this isn’t news to you. My intent today is to lay a framework for how to address the use of AI in your business. Because the businesses that embrace new technology tend to outlast those who ignore it altogether. So, let’s talk through some considerations that will help you evaluate the use of ChatGPT in your business with authority and understanding. Understand its capabilities and limitationsChatGPT is still in its infancy, and like any new development, it’s not flawless. The information it provides might be accurate, or it might not be. It’s crucial not to take the responses it generates at face value without human oversight and fine-tuning. Do your research. Consider legal and privacy issuesAs you use the tool, remember to protect customer privacy. Italy actually banned ChatGPT in March because of worries about data privacy. Make sure you don’t expose employee or customer data, and take steps to prevent data leaks. You can set up ChatGPT to stop gathering customer data or to stop collecting data after a certain point. Think about how to leverage it for your businessThis tool can be adapted for use in various arms of your company, not just the tech and marketing departments. Consider how AI in your business might increase efficiency in even the smallest tasks, from helping customers to generating new ideas. Define its role in your companyEstablish necessary boundaries. Define how AI should be utilized and remember that, as a relatively new technology, it’s wise to avoid overusing it across all aspects of your operations. Be clear with your employees about how it should be used, and empower your team to apply it where it fits best. Oversee its useIt’s essential to recognize that in human terms, the tool is still in its early stages and requires continuous monitoring and guidance. ChatGPT is like a toddler that is still learning to walk. Guidance and supervision are key. AI in business is not a distant concept anymore. But with careful consideration, it could become a useful tool that helps you grow and expand. You won’t know until you explore it for yourself. And this note should help you get started. Need help exploring new tech for your bookkeeping and accounting? That’s my area of expertise: (408) 775-7790  Looking out for you, Patti ONeill and Gale Bergado

Business Tax Planning

Alternative Approaches To Paid Time Off Policy for San Francisco Bay Area Businesses

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October is right around the corner. So is the October 15th extension deadline. And so is the fourth quarter for your San Francisco Bay Area business. As we approach Q4, be mindful of the usual year-end accounting needs and reporting requirements that will be popping up. We’ll keep you informed of changes coming, but please do reach out proactively to begin preparing if you haven’t already: (408) 775-7790  And with the start of a new year coming in just a few months, it can also be a great time to reevaluate some of your company benefit packages that will be rolling over on January 1. Specifically, your “use it or lose it” paid time off (PTO) policy. Not all companies take this approach, so let’s discuss some alternatives that are out there. Alternative Approaches To Paid Time Off Policy for San Francisco Bay Area Businesses“A vacation is what you take when you can no longer take what you’ve been taking.” ― Earl Wilson If your paid time off policy hasn’t changed in decades, it may be time to take note of the latest statistics regarding PTO and the challenges that both employees and employers are navigating.  The Current PTO Landscape Utilization gap: Only four out of ten workers use all their allotted days of leave each year, leaving 60% struggling to use it all effectively. (Source: Human Resource Management) Job demands: One in three workers find it hard to take their vacation time due to demanding job responsibilities. (Source: Indeed) Special situations: Some employees save their PTO for special occasions, lack the funds for a vacation, or simply feel guilty about taking time off. Interest in other options: Surprisingly, 83% of workers express interest in converting PTO into other financial resources. (Source: MetLife) These are situations when PTO can become more of a burden than a benefit. So let’s talk about other options you have as an employer. Offering Unlimited PTO The concept of unlimited PTO gained popularity around a decade ago, with companies like Netflix offering this perk to their staff. This kind of arrangement can boost productivity and morale, remove the pressure of having to work while sick, and can be used as a great recruiting tool for a population looking for more flexibility and freedom in their work. But time has shown that it might not be the ideal paid time off policy for everyone. Nearly 30% of Americans with unlimited PTO policies end up working during their vacations. Others avoid taking vacations to meet unspoken work expectations, leading to burnout. Note: If you decide to adopt an unlimited paid time off policy, consider setting a minimum annual vacation requirement to encourage employees to take time off for genuine relaxation. Combining Vacation and Sick Time Many employers are moving towards PTO banks that don’t distinguish between sick leave and vacation time. This approach has seen positive results, including a decrease in unscheduled employee absences and reduced HR tracking efforts. But it’s not universally popular among employees, especially those with high healthcare needs, who report finding themselves using a significant portion of their time off for medical reasons. And some say it could backfire and incentivize sick employees to come to work so they can save PTO for vacation. Note: Before implementing a combined PTO policy, be aware of state and local laws that may restrict or regulate its usage, which can vary from state to state. Converting PTO Into Actual Money This paid time off policy allows employees to cash out their unused PTO for other benefits. Instead of losing unused PTO or being constrained by calendar timeframes, employees can choose how they want to use their earned time off. Employees can convert PTO into cash for various financial purposes, such as building an emergency fund, contributing to a Health Savings Account (HSA), or adding to their retirement accounts.  For you as an employer, it could potentially reduce the liability and administrative burden associated with PTO management. Note: Don’t forget to consider the tax implications and reporting requirements when implementing PTO conversion policies. This includes adjusting payroll taxes and complying with IRS regulations for contributions to HSAs and retirement accounts. Ultimately, the best PTO policy for your San Mateo organization will depend on your specific needs and goals. But this is one of those small changes that could make a big impact for your organization, both in hiring and employee management. I can help you assess the impact on your bottom line. Helping you think outside the box, Patti ONeill and Gale Bergado

Business Growth

Steps For Prioritizing Profit In Your San Francisco Bay Area Small Business

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Profit is the lifeblood of any organization.  Show me a small business with PROFIT at its center, and I’ll show you something worth modeling yourself after. An organization NOT to model yourself after: the federal government. They prefer to operate in deficit mode, narrowly avoiding yet another shutdown this weekend with a temporary funding bill that expires around Thanksgiving. So stay tuned for more drama on that front. Meanwhile, I’d like to help you avoid drama on your turf, by creating a strategic plan for prioritizing profitability. You might have heard the term “profit first accounting” in various business-type conversations. It’s not a new philosophy. It was first made popular almost a decade ago by Mike Michalowicz and his book, Profit First. I think it’s worth remembering, so today, I thought I’d cover some of those core principles so that it might spark new accounting ideas as you prepare your San Francisco Bay Area business for the close of another year. For a deeper dive, obviously, read the book, and we can talk more about putting it into practice. But here’s a start. Steps For Prioritizing Profit In Your San Francisco Bay Area Small Business“Money is a terrible master but an excellent servant.” ― P.T. Barnum In the world of business, priorities are essential for long-term success.  So, where does profit fall on your list of priorities for your small business? Traditionally, profit might come after handling expenses like COGS and payroll, but a profit-first approach flips that. You pay yourself first. Here are some shifts that would need to come first… 1. Structuring Your Accounts One of the first steps in embracing the profit-first mindset is organizing your bank accounts strategically. This simple adjustment, implemented with your accounting team’s help (ahem), will keep your small business profit goals on track.  Here’s the setup: Profit: Savings AccountOwner’s Pay: Savings AccountTax: Savings AccountOperating: Transaction AccountRevenue: Transaction Account 2. The Weekly Instant Assessment Fill out the Instant Assessment Table (from the author’s website) on a weekly basis to maintain allocation and accuracy. You and your team will need to record and report all revenue appropriately.  Be mindful that tax laws may impact the percentages year by year. This is a key area where I can help you walk out these principles. 3. Implementing Profit Transfers Every two weeks, the transfer of funds becomes your small business profit-first ritual. Accountability is paramount here. Consider partnering with a trusted team member to ensure precise fund allocation according to these objectives: Profit: Build Profit ReservesOwner’s Pay: Take Home Your CompensationTax: Fulfill All Tax ObligationsOperating: Cover Day-to-Day ExpensesRevenue: Exclusively for Income Deposits Making Profit Your Small Business Mantra The profit-first mentality is not a groundbreaking concept anymore, but it’s a pivotal step for small businesses seeking improved cash flow management. And if your current strategies aren’t giving you what you want, why not give it a try for a month or two? After all, adaptability is a hallmark of successful businesses, as I’ve said before. If you have any questions about these profit principles and how they can benefit your San Mateo small business, don’t hesitate to reach out:(408) 775-7790 Your profit is my priority, Patti ONeill and Gale Bergado

Employee Benefits

A PTO Payout Policy Checklist for San Francisco Bay Area Business Owners

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This weekend’s news coverage and social media scroll were dominated by reports of the awful things happening in Israel right now. It’s pretty difficult to swallow the images of violence and abuse being perpetrated by Hamas. And no matter how many times you hear about these kinds of things, it never gets easier.  But even with difficult things like this, be mindful of letting your thoughts and feelings be dominated by the coverage. There will always be something to read and take in, but these things have a way of igniting emotions to a breaking point if they’re not regulated.  And, as a business owner, you need to make sure a good portion of your energy is spent on what pertains to your business.  Before I move on, let me also briefly address what you should do if you have an Employee Retention Credit (ERC) claim submitted to the IRS that’s been put on pause. The primary thing you need to keep in mind is that if you get faced with an audit about the claim, the IRS will want concrete evidence and documentation to support your eligibility. So make sure you have that in order. It’s your best defense against over-zealous investigators.  So, on to what I want to discuss today. I wrote recently about some of the other paid time off policy options out there for businesses to offer besides the “use it or lose it” approach. A fellow San Francisco Bay Area business owner responded to share how she was kicking herself for not having more clearly defined PTO payout rules in place in her own office.  She had apparently found herself in a financial pinch when two of her staff resigned and opted to take their unused vacation days as paid time after their last day in the office. Because she had no PTO payout rules in place to govern when employees could take that benefit (her state doesn’t require payment of accrued vacation time upon separation), she opted to pay those staff members for their unused days to avoid potential legal confrontation over her vague vacation policy wording. That’s a place none of us want to be in, especially because it’s entirely avoidable. So with that in mind, and as we’re rapidly approaching EOY, I’d like to show you some policies to make sure you have included in your official vacation benefit package. A PTO Payout Policy Checklist for San Francisco Bay Area Business Owners“The biggest lesson I’ve learned by living a little is you should always put things in writing.” ― Richard Branson Because PTO payout rules vary from state to state, you’ll want to start by verifying the local laws you’ll need to abide by first. You can find those PTO payout laws by state here. Whether your employees get paid for their unused vacation days when they say their goodbyes depends on two things: your company’s policy and your state’s laws. Some states have specific rules about this, while others leave it up to the employer. In most cases, it’s the company’s call. You decide whether or not to dish out some extra cash for those unclaimed PTO days when an employee leaves. But here’s my main point today – you need a well-defined PTO payout policy in place to guide this process. I should point out that there’s technically no federal law that forces businesses to offer PTO to their workers. It’s not a requirement. But, let’s be real, offering PTO makes for happier employees and will help you attract better talent. Now, if you’re thinking about creating or changing up your own PTO payout policy, here are some definitions and provisions to include: 1. How payout is calculatedYou (the employers) are responsible for stating how PTO hours are tallied and calculated, while also withholding taxes according to IRS regulations. Vacation pay doesn’t always fall under the category of supplemental wages, but when it’s disbursed as a vacation payout, it becomes subject to a flat 22% supplemental income tax. 2. How to handle sick daysIn 14 states and Washington, D.C., employees have the right to get paid when they’re sick. It’s a state thing, not a national one. So, think about whether you want to pay your employees for unused sick days when they leave. 3. Timing of payoutIf you’ve got a policy for paying out unused PTO, there’s usually a deadline. Most times, it’s within 30 days after the employee leaves. 4. The reason for separationIn some states, it doesn’t matter if an employee gets the boot, gets laid off, or decides to call it quits – they still get paid for their unused PTO. But that’s not the case everywhere. Some places let you decide if the reason for their departure affects the payout. If your state doesn’t spell it out, make sure your policy does. Now, this list isn’t comprehensive. There’s more to it, and that’s where an HR pro can lend a hand. They’ll make sure your San Mateo company’s policy abides by local regulations while also contributing toward a happier workplace. To being prepared, Patti ONeill and Gale Bergado

Cybersecurity

Prioritizing Cyber Network Security in Your San Francisco Bay Area Business

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A few things are grabbing my attention this week. The first being that the tax extension deadline has passed. That’s a big relief for my office, and perhaps for yours too.  I’m continuing to avidly watch, as I’m sure you are too, the unfolding events in Gaza. Though Biden issued a back-channel warning to Iran about not joining in the conflict, the possibility of a larger scale war looms. Economically, that affects gas prices and other factors of the global economy. Then there’s the national budget deadline and the Congress’s gridlock over finalizing it.  It’s more important than ever to keep your San Francisco Bay Area business doings sharp right now. I’ll be here to keep you informed on how bigger happenings will affect your business… and to help you thrive through it.  All of these headlines probably dominated your attention, and rightfully so, but there’s something else happening in October to give attention to: Cybersecurity Awareness Month. That might make your stomach twist, thinking through all you need to be prepared for within a budget. It can be daunting to know where to allocate funds for a pressing need that is so frequently changing and developing. Because my office handles so much sensitive data, you better believe this is something we monitor and update systematically.  Business spending for cyber network security is up 70 percent over the past four years, though that number has started trending downward and recent security company layoffs confirm this. But recently issued SEC rules regarding the reporting of data breaches by public companies (more on that shortly) reemphasizes the importance of regularly addressing our own cyber network security measures as business owners. So let’s talk about budget building for your cyber network security plan.  Prioritizing Cyber Network Security in Your San Francisco Bay Area Business“The best investment you can make is in yourself.” ― Warren Buffett There are new rules from the SEC regarding the reporting of data security breaches that go into effect December 15, 2023. While those rules primarily target public companies, small and private companies should know what’s being required as they review their own cyber network security measures, especially since the SEC has shown a willingness to extend its regulatory reach to private companies when it comes to cybersecurity. Basically, companies need to assume that they might face real cyber network security threats and breaches. And when they do, they have to tell the SEC about it within four business days if it’s a significant incident. Plus, U.S.-listed companies also have to share information about how they handle cybersecurity in their yearly reports. With all of this in mind, let’s discuss how to build a cyber network security budget for your San Mateo business. Making a budget When building (or assessing) a budget, know that there are three basic areas that drive the needle: software and hardware, ongoing security services, and in-house training for employees. Of course you want top-notch protection for all your important stuff, but the reality is that you probably can’t afford it all. This is why budget planning is so crucial – it decides how much you can spend and where you should spend it. Here’s a simple exercise: First, make a list of all your important assets. Then, think about how vulnerable each of them is to potential threats. In other words, figure out which assets are more likely to be a security risk. Assets that are both high-risk and critical to business operations should get the lion’s share of your cyber network security budget. On the flip side, if something is low-risk and not that critical, you can allocate less money to protect it because the chance of a cyberattack is lower there. And don’t forget a line item for incident response and recovery. Factoring actual costs Cybersecurity costs can vary a lot, and here’s why: Saving money where you can Despite all the costs, there are inexpensive but high value measures you can put in place. Now, I get it, not all of these budgeting decisions will be crystal clear. So, it’s a good idea to team up with your Chief Information Security Officer and accountant (that’s me) to figure out what makes sense within your budget constraints. Reach out to talk through your budget potential in light of your particular needs:(408) 775-7790 Secure your assets and your future. Patti ONeill and Gale Bergado

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