Small Business Finance

Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund

ranjan.254 / June 20, 2025

Pretty sure we’ve said this before. We’ll likely say it again, too. If there’s one thing the past year has taught business owners, it’s that the “unexpected” can occur at any time. Managing your San Jose area business during good times is hard enough; rough times make it all the more difficult. To get you through the next rough time — and there will be another one — you need to have contingency plans in place. And one of the best ways to protect yourself from economic calamity is to have cash reserves (aka a business emergency fund). But before we get to that, just a quick reminder that second-quarter estimated tax payments are due June 15. If you operate your business as a sole proprietorship, then you may have an estimated tax payment obligation. Give us a call to discuss this if you haven’t already. Now, let’s talk about that business emergency fund. Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund“Luck is what you have left over after you give 100 percent.” – Langston Coleman Prior to the economic fallout from 2020’s happenings, the typical American small business only had 28 days worth of cash reserves on hand. Meaning, the average small business in this country couldn’t survive for a full month if revenue was suddenly turned off. As a result, Congress had to prop up small businesses through programs such as the EIDL and PPP loans that you’re sick of hearing about by now. As the economy rebounds strongly, it’s a good time to set aside a business emergency fund for your San Jose area business to tide you over during the next period of economic upheaval. This isn’t doom and gloom thinking, it’s simply the reality of the business cycle: There will be another recession at some unknown point in the future. You Need To Know How Much Is EnoughIn many ways, your business emergency fund follow the same rules that your personal emergency fund should. We typically advise both individuals and businesses to maintain an emergency fund equal to at least three months of expenses. These monies should be held in something like a business savings account, business money market account, or other readily accessible, low-risk account. What expenses go into that three-month calculation? Take a look at the income statement that we provide to you, and add up all the recurring expenses for a typical month. Don’t include rare expenses, such as big-ticket repairs, and don’t include sales taxes. But definitely include payroll, payroll taxes, supplies, materials, rent, utilities, fuel, your favorite accountant, and the like. Then, multiply that number by three. This is going to be your initial target. After saving three months of cash reserves, we’ll then going to encourage you to build up to six months of reserves. But we’ll start with the easier goal first. How to Actually Save Up the CashBuilding a business emergency fund starts the exact same way as any other savings process: With action and discipline. Successful companies create documented processes to be used for repeating activities, including how revenue is allocated each month. The biggest tip we can give you is this: Treat your savings goal like any other fixed expense. For example, if the lease on your office is $5,000 per month, then every month you know you need to cough up that $5,000. The same goes with, say, monthly insurance premiums. It’s a fixed expense that you know you need to budget for every month. Treat the amount that you’re going to stick into the reserve fund every month as a similar fixed expense. In fact, we’d suggest taking this a step further and set aside your reserves first. Meaning, at the start of each month, sock away whatever fixed amount. It may take you a while to get there, but by paying your emergency fund first each month, it will prioritize this “expense” item for you and help you build resiliency for your business in the long run. Is it going to take you a while to get there? Yes, it might. As an example, if you have $20,000 per month in base costs to run your San Francisco Bay Area business, your business emergency fund target is $60,000. If you can set aside $5,000 per month, it’s going to take you 12 months to build up your cash reserve. That might sound painful right now, but your business will thank you later. Once you develop this savings habit in your company, an interesting thing will eventually happen: You’ll get by just fine without spending that money every month. When to Call Upon Your ReservesWhile many San Jose companies and small business owners might have already thought the process out this far, the next step in the process is actually the most difficult. You should create a set of rules for when and how you’ll use the cash reserves. This business emergency fund shouldn’t be used for non-emergencies, obviously. By having written criteria for when you’ll use it, you’ll avoid the temptation of dipping into it when you shouldn’t. For example, you might create a written rule that these reserves can only be touched after you’ve done one round of layoffs during a recession. That’s a harsh stance to take, but a necessary one in planning to survive an economic downturn. By taking the time to create and document the process and having the discipline to treat business emergency fund contributions as a fixed expense that’s non-negotiable, a significant amount of liquidity can be put away for emergencies. In some cases, those funds should remain strictly liquid, but in other cases, having them invested in easily liquidated, low-risk investments can help ensure your money continues to work even when it’s in “reserve.” Need some help determining how big your business emergency fund should be? Are you looking for other smart ideas to make your San Jose area business more resilient in the event of future economic uncertainty? Let’s connect, and put together a workable plan for the future of your business: Patti (408) 241-4100 Gale 408-775-7800 To getting things done, Patti ONeill and Gale

Business Growth

Thoughts on How San Francisco Bay Area Business Owners Can Achieve Business Solvency

ranjan.254 / June 20, 2025

With our nation celebrating its 245th birthday on Sunday, and all of this talk about “independence” flying around, I have a question for you — one that I think you should think hard about: Are you achieving the independence you wanted in your business? As you know, it’s hard — and it’s LONELY — to be a San Francisco Bay Area business owner in this environment. Achieving business solvency can seem like a formidable task as you see the constant barrage of chaos and fear the media throws at your customers (and maybe even trickling into your own consciousness as well). Which is why it’s so important for you to have a clear handle on the bottom line for your business — and on ALL of the tax implications you’ll be facing under the new tax code, and how to get ahead of them. In short, how to achieve business solvency. For instance, are you taking every deduction possible for this year … and, if so, are you properly accounting for them? For example, one of the big last-minute tax strategies a lot of my clients like is the “heavy vehicle” write-off. When you purchase a heavy vehicle (defined as a vehicle with GVWR of over 6,000 lbs.) that is used 100% for business — well, then you can write off 100% of it. To do this, we use Section 179 in conjunction with bonus depreciation. And, if your vehicle is used 70% for business, then you can write off 70%. But this only works with a “heavy vehicle.” If you don’t have a heavy vehicle but use your vehicle for business purposes, you can still get a deduction, it just won’t be as much. You don’t even need to pay cash for it. You can finance it and still get that write-off. But here’s something that can cause a little problem: What happens when you sell the vehicle? Well, I’ll tell you: Before you sell, you have to calculate how much of a “gain” you’ll have. Estimated sales price: xx,xxx Less: Cost of sales ( x,xxx) Less: Basis ( 000) Gain: xx,xxx Gain is taxable. In the past, it was possible to trade in your vehicle for a new vehicle. It was a “like-kind” exchange for vehicles. Effective 1/1/2018, like-kind exchanges only worked for “real property.” If you “trade in” a vehicle, the value given to the old vehicle is taxable. Another strategy is to distribute out the vehicle at fair market value. It’s distributed to a business owner. Of course, this only works if you have a pass-through entity. If the vehicle got hard use and/or a lot of miles, the vehicle’s fair market value will be lower. Look up the value using the Kelley Blue Book. The FMV could be taxable to the shareholder or could be treated as a payment against a shareholder loan. These are the kinds of analyses that we can make for you — and help you to plan for so that you can get on the path to business solvency. And look … I write about many things in these notes — from adding to your revenue line (sales, marketing, etc.) to all of the many other items that matter to you and other San Francisco Bay Area small business owners. But one of the BEST ways to grow your bottom line is to avoid all of the unnecessary expenses and taxes, which so many San Mateo businesses end up paying, simply because they didn’t plan ahead of time. This is our passion here at ONeill & Bergado. When I meet with a business owner, I often wear many hats — CFO, Marketing Advisor, COO, etc. — truly whatever fits the need of my client most precisely. Because business owners can make rash decisions in times of perceived crisis (like during “tax season”) — they often have unforeseen complications down the road. All of which gets in the way of achieving business solvency. Let’s get ahead of the process for you, (408) 241-4100. Warmly, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth

Patti ONeill and Gale Bergado’s Insights on Financial Planning for Business Owners

ranjan.254 / June 20, 2025

Last week in the start of our series on financial planning for business owners, we got a little carried away by all of the talk of “independence.” So, we took the opportunity to ask you a simple question: Are you achieving the independence you want in your business? But there’s another side to this question that you should consider, and it’s this: Have you considered paying yourself more out of your business? In some cases, it actually might make more sense to pay yourself less — but bring home more at the same time. It all comes down to starting on the right foot when it comes to financial planning for business owners. If you’re not clear on how you could accomplish that, then reading this blog right now could be very important. We spoke last week about cost basis, but these considerations are just one aspect of financial planning for business owners like you who are growing the tax-profitability of your business. When we meet with a San Francisco Bay Area business owner, we often wear many hats — CFO, Marketing Advisor, COO, etc. — truly whatever fits the needs of our client most precisely. Because business owners can make rash decisions in times of perceived crisis (like during “tax season”) — and they often have unforeseen complications down the road… Which is why it iscriticalthat we take a look at how things are set up for you and your San Francisco Bay Area business for the rest of 2021. Here in the middle of summer (and BEFORE the fall rush) is the perfect time to take a clear-eyed look at things and plan for the best outcome for your business come January. With almost-certain-to-be-drastic changes on the horizon, there may be expiring opportunities for San Jose businesses to save on their bottom line as it relates to tax and other aspects of their financial picture. Frankly, we’d like to avoid all of the unnecessary expenses and taxes which so many San Jose businesses end up paying, simply because they didn’t plan ahead of time. Or it could be as simple as saving on expenses — all with the goal of paying yourself MORE, however you get there (which, as we mentioned, could be just what you need this year). Or these upcoming changes could mean that we want you to pay yourself less. But we won’t know until we talk. Warmly, Patti ONeill and Gale Bergado(408) 241-4100 408-775-7800ONeill & Bergado

Business Growth, Business Valuation

A Financial Systems Check-Up For Your San Francisco Bay Area Business

ranjan.254 / June 20, 2025

Your San Francisco Bay Area business obviously makes and spends money. The pluses and minuses add up (you hope) to being able to stay in business, and a look at the books tells you if your San Francisco Bay Area business is doing okay or headed for trouble. What are your books telling YOU? In our experience, it’s often the company’s financial system (or lack thereof) that makes the answer easy to discover or downright difficult. Have you looked at your own business’s financial system lately? Would you know how to read between the lines to interpret what you see there? Because a financial system for a San Francisco Bay Area business should provide a clear answer to that question. Such a system helps you function and takes the form of different records that let you — and such others as investors, lenders or auditors — see how your business is doing. Let’s take a closer look at what folks like us will be looking for, shall we? A Financial Systems Check-Up For Your San Francisco Bay Area Business“I value self-discipline, but creating systems that make it next to impossible to misbehave is more reliable than self-control.” – Tim Ferriss First, a definition of terms to get on the same page. What you bring in and what you spend travels under a few different names. Bookkeeping. Aka recordkeeping, bookkeeping is the foundation of any business financial system and lets you keep tabs on what’s flowing in either of the two directions that money takes in your business (in your door and out your door). Depending on the size and complexity of each business, we’ve seen literal books kept, even handwritten, in a ledger or loose sheets of paper. You can also create simple electronic ledgers using Excel or some other spreadsheet program, or using a function in of the simpler business accounting software packages. Invoicing.First step in generating income is invoicing. You must get paid. The invoicing segment of your system should accomplish three things (these aren’t complicated): 1) Ensure that you get paid in a timely way. 2) Be something that you don’t need to spend too long maintaining 3) Communicate clearly to you and your San Francisco Bay Area clients. (Is the amount the customer owes front and center on your bill?) While most businesses include due dates on their invoices, many do not state their consequences for late payment. And how do you know it’s being delivered? Get a dependable delivery system: beyond snail-mail, a lot of businesses use email with a read receipt. Income. Today there are a dizzying number of ways to get paid. Cash or checks remain okay for many businesses — though as always be sure to have safeguards to validate personal checks. You can use electronic transfers and payments direct to your bank, or you can use online payment services such as PayPal or Venmo. Your payment policies can be more complex. These are the details of your payment schedules and discounts. For instance, does your customer get a discount for paying early or incur an extra fee for paying late? Refund policies are also key: spell them out clearly and completely because often there’s eventually conflict in a refund or return. A word of caution here: managing cash flow is another part of a financial system, and one that can cause confusion. Cash flow isn’t just income and outlay, but a matter of your day-to-day liquidity. If your business needs something, do you have the cash to pay for it? Cash flow is distinct from profitability, which tends to be more long-term. Managing cash flow also means having a sense of timing, knowing if you can spend cash against income that isn’t actually in your account yet. Filing.Your financial system can’t exist without good records: the bills, receipts, invoices, and many many many other documents that pour into your business. You need to keep these on hand and in clear order for a set period. You can keep paper copies in a filing cabinet, or go digital and scan and store documents in the cloud or on such external media as thumb drives. Most companies these days pick the digital option for convenience, space savings, and, hackers aside, security. The taxman cometh. One more reason to keep good records is taxes. Good document management saves the stress of scrambling for records when it’s time to prepare your tax return for filing — not to mention backing up your argument in a dispute with a tax authority like the IRS. Often storing documents is the least painful of preparations in this segment of your financial system. The bigger challenge is usually paying the taxes. It’s key that your financial system can help you estimate and bankroll for federal, state, and local taxes. Once or twice a month you will need a good system to check the books and either set the money aside or send the amount due. Mess up in this part of your plan and you can face fines (or worse). Financial systems differ with each company. If your business needs help with this, let’s talk: Patti (408) 241-4100 and Gale 408-775-7800 To making business easier, Patti ONeill and Gale Bergado(408) 241-4100ONeill & Bergado

Business Growth

Keeping Expenses Separate in Your San Francisco Bay Area Business

ranjan.254 / June 19, 2025

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

Patti ONeill and Gale Bergado’s Tips for Building a Business Emergency Fund

Thoughts on How San Francisco Bay Area Business Owners Can Achieve Business Solvency

Patti ONeill and Gale Bergado’s Insights on Financial Planning for Business Owners

A Financial Systems Check-Up For Your San Francisco Bay Area Business

Keeping Expenses Separate in Your San Francisco Bay Area Business

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