Author: Anna Faulk

I am the owner of Incline Business Essentials, a full service bookkeeping and virtual administrative business.

What are Accounts Payable and Why Are They Important?

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Many small business owners struggle with the concept of accounts payable (AP). It’s easy to see why. On the surface, it looks complicated and time-consuming. But, believe it or not, understanding AP can actually be quite simple—and having an effective system in place is an important part of running a successful business. Let’s dive in!

What are Accounts Payable?

Accounts payable (AP) refers to money that your business owes to suppliers, vendors, or other companies. This can include everything from office supplies and employee salaries to taxes and utility bills. Any money that your business owes is considered an account payable and should be tracked carefully as part of your overall bookkeeping system.

Why Track Accounts Payable?

Tracking accounts payable is essential for any successful small business because it helps you monitor your cash flow. After all, if you don’t know how much money you owe at any given time, it’s impossible to budget correctly and plan for the future. Additionally, tracking AP allows you to identify areas where you may need to cut costs or renegotiate contracts with suppliers in order to save money over time. Finally, keeping track of AP also ensures that you never miss an important payment deadline—which could lead to costly penalties for late payments!

How To Track Accounts Payable?

The best way to track accounts payable is through a comprehensive bookkeeping system such as QuickBooks. These systems allow you to easily keep track of all incoming and outgoing payments in one place, ensuring that everything is organized and up-to-date at all times. Additionally, many of these systems offer features like automatic payment reminders and invoicing capabilities—making it easier than ever before for businesses to stay on top of their finances without having to manually enter data into a spreadsheet every day.

Understanding accounts payable is critical for any small business owner looking to stay on top of their finances. Tracking AP helps ensure that your cash flow remains stable over time while also allowing you to identify areas where costs can be reduced or improved upon for greater efficiency. The best way to do this is by setting up a comprehensive bookkeeping system such as QuickBooks or Xero which will make tracking accounts payables a breeze! Don’t wait any longer – start tracking today!

What are Retained Earnings and Why Should You Care?

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As a small business owner, you know that the numbers on your balance sheet matter. But what do those numbers mean? In this blog post, we’ll dive into one of the most important figures on the balance sheet—retained earnings—so that you can understand why it matters and how it can affect your bottom line.

What are Retained Earnings?

Retained earnings, also known as “accumulated profit,” or “profits retained,” is the amount of money left over after a company has paid its expenses and liabilities. This money is then reinvested in the business to cover future expenses or to expand operations. The amount of retained earnings is reported on the balance sheet each quarter or at the end of each financial year. It’s important to keep track of retained earnings because they represent a company’s history of profits and losses, as well as its ability to pay off debt in the future.

In order to calculate retained earnings you’ll need to know two other pieces of information – total equity and net income. Total equity is simply the sum of all assets minus all liabilities, while net income is calculated by subtracting all expenses from revenue for a given period (usually quarterly). To calculate retained earnings, simply subtract total equity from net income – it’s that easy!

Why Should You Care About Retained Earnings?

Retained earnings are an important figure for any business owner because they provide an indication of how profitable your company has been in recent years. If you have high retained earnings, it means that your business has been able to maintain a healthy level of profitability over time; if not, it could indicate that there are issues with cash flow or that you may need to make changes in order to improve profitability going forward. Additionally, having high levels of retained earnings can be attractive to potential investors or lenders who might be interested in providing additional capital for growth or expansion opportunities.

Retained earnings are an important indicator of a company’s financial health and overall profitability. While calculating them may seem daunting at first glance, understanding how they work will help you get a better grasp on where your business stands now and where it could go in the future. Knowing this key piece of information will also make it easier for potential investors or lenders to assess whether they should provide additional capital for growth opportunities down the road. Put simply – if you want your business to succeed long-term, understanding what retained earnings are and tracking them carefully is essential!

Tips for Increasing Cash Flow in Small Businesses

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The world of small business is filled with ups and downs, and one of the most common challenges small business owners face is managing cash flow. Having enough cash on hand to manage day-to-day operations, pay employees, and invest in growth opportunities can be a struggle, especially for new businesses. In this blog post, we’ll explore some tips for increasing cash flow in small businesses.

Monitor Your Cash Flow Regularly

One of the most important steps toward increasing cash flow is being aware of your cash flow in the first place. As a small business owner, you must keep track of your income, expenses, accounts receivables, and accounts payable. By monitoring your cash flow regularly, you can identify patterns, such as seasonal fluctuations or delinquent accounts, and take steps to address them proactively.

Accelerate Your Invoicing and Payments

One of the easiest ways to improve cash flow is to streamline your invoicing and payment processes. Send invoices promptly after work is completed or products are delivered, and make it easy for customers to pay. Consider offering discounts for early payment or implementing automatic billing. Additionally, you can reduce expenses by negotiating better payment terms with suppliers.

Manage Inventory Efficiently

Inventory management is a crucial factor for cash flow. Keeping too much inventory on hand can tie up cash that could be better used elsewhere, while not having enough inventory can result in missed sales opportunities. Review your inventory regularly to identify slow-moving or obsolete items and consider liquidating them. Another option is to establish a just-in-time inventory system, which enables you to order supplies only when needed.

Increase Your Prices

If your cash flow is still struggling, consider raising prices. This is a strategic move that requires careful analysis of your competition and target market. Remember, increasing prices too much can drive customers away, so you need to balance the risks and rewards. Additionally, consider offering premium services or products at higher prices to increase your revenue.

Expand Your Offerings

Finally, you can increase cash flow by expanding your offerings. This can be accomplished by diversifying your product or service line, reducing your reliance on a single revenue stream. Consider what additional products or services you could offer, and see if there is demand for them in your market.

Managing cash flow is a critical aspect of running a successful small business. With the tips above, you can take proactive steps to boost your cash flow and improve your financial stability. Remember, increasing cash flow requires ongoing monitoring and adjustment, but by focusing on these five strategies, you can achieve greater financial flexibility and boost your bottom line.

Preparing Bookkeeping for the End of Year: A Guide

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As we approach the end of the year, it’s time to start thinking about wrapping up your bookkeeping. Yes, I know what you’re thinking – “Finally, a chance to put my accounting skills to use!” But before you break out your calculator and spreadsheet wizardry, let’s talk about what this will entail.

Well, dear reader, I have some delightful news for you. As you stand on the precipice of spreadsheets and numbers, there’s a trustworthy ally ready to swoop in and carry some of that bookkeeping weight – Incline! That’s right, you’re not alone in this numerical forest. Incline will come with its accounting superpowers, ready to tackle the tangled jungle of receipts, invoices, and tax forms. So hold off on that emergency coffee order and remember, Incline is here to handle the heavy lifting. Breathe easy, keep your calculator at bay, and let’s move on to the next step, shall we?

Gathering The Essential Documents

You’ve got Incline by your side, and now it’s time to bring in the artillery – your essential documents. Think of this as a treasure hunt, only instead of a buried chest of gold, you’ll be unearthing paperwork. First things first, did you make any big purchases or sales this year? Are there any new flashy cars, fancy equipment, or items that had you parting with more than $2500? If so, you’ll need to rustle up the purchase documents.  Your CPA will need copies. 

Bringing in the Big Guns: Final Loan Statements

Now that we’ve dug up the treasure chest of purchase documents, it’s time to gear up for the next level of our financial scavenger hunt – Final loan statements. These are like your report cards but for your debt. They show how well you’ve been managing your loans. Only this time, instead of grades, you’re looking at the interest and balance of the loan, specifically as of 12/31/23. Your CPA will need these to understand how much interest you can write off. So, dig through your files, drawers, email inboxes, or wherever you stash these. And remember, each one you find brings you one step closer to completing your year-end bookkeeping. Put on your adventurer hat, and let’s get to it!

Time to Send Us Your Tax Documents: The Grand Finale

Now that you’ve excavated your final loan statements, and your CPA has stopped crying tears of joy, it’s time for the grand finale. You’ve reached the pièce de résistance of our financial adventure – sending us your tax documents.

Your tax documents are like the secret sauce in your financial burger, the cherry on top of your accounting sundae. They include W-2s, 1099s, 1098s, K1s, and all other tax forms that the IRS loves to pore over. So, it’s time to channel your inner detective and gather these crucial documents.

These little nuggets of information are crucial for us to help you file your taxes. Remember, like a good detective, no piece of paper is too insignificant! Send us all documents that carry the information needed to file your taxes. Your diligent documentation now could be the difference between a smooth tax filing experience and a stressful one. So let’s get to it, shall we?

Don’t be shy, send them over posthaste! Your CPA is waiting with bated breath for this accounting banquet. Remember the IRS has a knack for finding missing forms, so let’s beat them at their own game. Incline is here to help you every step of the way. So, polish off that magnifying glass and start rifling through your paperwork. Your end-of-year bookkeeping is a sprint to the finish line and you’re almost there!

The 3 Types of Business Liabilities (And What They Mean for Your Bottom Line)

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 If you’re a small business owner, then you know that one of the most important things to understand is your company’s financial statement. In particular, you need to have a firm grasp on your balance sheet—or, more specifically, your liabilities.

But what exactly are liabilities? And what types of liabilities should you be aware of? Here’s a quick overview:

Current Liabilities:

These are debts that need to be paid within one year. Examples include short-term loans, accounts payable, and accrued expenses.

Long-Term Liabilities:

These are debts that won’t come due for more than a year. Examples include long-term loans and bonds payable.

Equity Liabilities:

These are funds that have been invested in the company by shareholders. Equity is not technically a debt, but it is still considered a liability because it represents money that needs to be repaid (with interest).

As a small business owner, it’s important to have a firm understanding of your company’s financial statement—including your balance sheet. Your balance sheet lists all of your assets (what you own) and liabilities (what you owe). Of those liabilities, there are three main types: current, long-term, and equity. By understanding the difference between each type of liability, you can make better decisions about how to manage your finances and grow your business.

How to Avoid the Wrath of the IRS by Understanding the Difference Between Contract Labor and Employees

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It’s tax season, and you know what that means… lots of businesses are scrambling to get their paperwork together to avoid any unwanted attention from the IRS. We’ve all heard the term “contract labor,” but what does that mean, and how does it differ from an employee? Don’t fret, my small business owners – I’m here to break it down for you in a way that’s actually kind of fun (I know, controversial statement when we’re talking about taxes). Grab a cup of coffee (or a stiff drink), and let’s dive in.

The first thing you need to know is that the employee vs. contractor classification is based on several factors, not just one. Here are a few questions you should ask yourself to determine whether your worker is an employee or a contractor:

Who controls the work?

If you have the right to control the worker’s actions on the job (when, where, and how they perform their duties), they’re likely an employee. If the worker determines those aspects, they’re more likely a contractor.

Who provides the tools?

If you provide the workers with the necessary tools and equipment to perform their job, they’re probably an employee. Contractors usually provide their own tools.

Is there an ongoing relationship?

If the worker is hired for a set period of time or project, they’re more likely a contractor. If there’s an expectation that their employment will continue indefinitely, they’re probably an employee.

Overall, the more control you have over when, where, and how the work is performed, the more likely the worker is an employee. If the worker has more control and autonomy, they’re usually a contractor.

Now, let’s talk about why this distinction is so important. When you hire employees, you must withhold certain taxes from their paychecks (like Social Security and Medicare) and pay the employer portion of those taxes. You’re also responsible for paying unemployment insurance and worker’s compensation insurance. When you hire contractors, you don’t have to withhold taxes or pay insurance – the contractor is responsible for those things.

However, just because you call someone a contractor doesn’t mean they actually are one in the eyes of the IRS. The consequences of incorrectly classifying workers can be severe – you could be on the hook for back taxes, penalties, and interest. So, always make sure you’re following the rules!

Another important factor to consider is how much control you have over the worker’s rate of pay. If you negotiate a rate with an independent contractor and don’t try to dictate what they charge, you’re likely in the clear. However, if you set a specific hourly wage or salary for a worker, they’re probably an employee.

One final thing to note: some workers are considered “statutory employees,” which means they’re treated like employees for tax purposes even if you consider them contractors. Examples of statutory employees include drivers and delivery personnel who work for you using their vehicles, as well as certain kinds of home-based workers. It’s important to know the rules for each type of worker to make sure you’re in compliance with the law.

Phew, that was a lot of information! The bottom line is this: determining whether someone is a contractor or an employee isn’t always clear-cut. It’s important to consider all the factors and make a well-informed decision. If you’re unsure, consult with a tax professional who can help guide you through the process. Remember, getting this right can save you a lot of headaches (and money) in the long run. Happy tax season!

How to Prepare and File Quarterly Payroll Reports

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Every quarter, small business owners must submit payroll reports to their state and the Internal Revenue Service (IRS). These reports are essential for keeping accurate records of employee salaries, wages, and taxes. In this blog post, we will discuss the information required in these quarterly payroll reports and how to prepare them.

What Information is Required?

The information required in a quarterly payroll report varies by state but generally includes:

  • data on employee wages earned each quarter
  • employer contributions made during the same period
  • taxes withheld from employee paychecks

The report will also include detailed records of each employee’s gross wages (wages earned before any deductions) and net wages (wages after deductions have been taken out).

Additionally, employers should provide information on all employees, including their name, address, social security number, and job title/position held at the company or organization.

How to Prepare the Reports

Incline Business Essentials outsources payroll to a specialized payroll provider like Gusto or Quickbooks.  These payroll providers ensure that the reports are remitted to the various jurisdictions in an accurate and timely fashion. Quarterly payroll reporting is included in the service we provide to ensure your company is compliant.

Filing quarterly payroll reports is an important part of running a successful business or organization. The process can be time-consuming, but we ensure this is handled on your behalf.

PCI Compliance 101 – A Beginner’s Guide to Secure Payment Processing

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Cyber-security and payment protection are top of mind for small businesses and consumers.  Small businesses are becoming increasingly vulnerable to data breaches and cyber-attacks. And when it comes to processing payments, PCI Compliance is a way to certify that your business meets current cybersecurity milestones.  As a small business owner, understanding payment processing and data security can be overwhelming. That’s why we’ve put together this beginner’s guide to PCI Compliance, to help small business owners understand the basics and protect their customers’ payment information. We hate that we have to think about this at all!

If you accept payments through Intuit/Quickbooks, make sure you read the last section of this blog!

What is PCI Compliance?

PCI Compliance stands for Payment Card Industry Compliance. It was developed by a council of payment card issuers, including Visa, Mastercard, American Express, and Discover, to establish security standards for businesses that process payment transactions. These standards were established to protect customers from payment card fraud and data breaches. Did we mention that this is boring and we don’t want to have to learn about this?

If you accept payments through Intuit/Quickbooks, make sure you read the last section of this blog!

Who needs to be PCI Compliant?

If your business accepts ACH, credit card, or debit card payments, you should be PCI Compliant. Even if you only accept a few payments a year, you are still at risk of a security breach. If your business is not PCI Compliant, you could be at risk of liability, fines, and a damaged reputation. They hit you where it hurts!

How can you become PCI Compliant?

Becoming PCI Compliant involves a series of steps that ensure your business is complying with the Payment Card Industry Data Security Standards (PCI DSS). These standards require businesses to implement certain security measures to protect their customers’ payment card information. The steps to becoming PCI Compliant typically involve completing a self-assessment questionnaire and undergoing a vulnerability scan to identify any potential security issues. Snooze, snooze.

What are the consequences of non-compliance?

If your business is not PCI Compliant, you could be at risk of fines, legal action, and a damaged reputation. In addition, if your customers’ payment card information is breached, you could be liable for the cost of the damages. Ensuring that your business is PCI Compliant is not only a legal requirement but also a crucial step in protecting your customers’ payment card information and your business’s reputation. Hit where it hurts….again.

PCI Compliance is essential for any business that processes payment transactions. As a small business owner, it is crucial to understand the basics of PCI Compliance and take the necessary steps to protect your customers’ payment card information. By implementing PCI DSS security measures and regularly monitoring your systems, you can reduce the risk of data breaches and cyber-attacks, and ensure that your customers’ trust in your business is maintained. Remember, being PCI Compliant is not only a legal requirement, but it’s also good business practice and a sign of your commitment to keeping your customers’ payment information safe.

If you accept payments through Intuit/Quickbooks:

Intuit recently released an announcement requiring businesses to use Intuit merchant services to become PCI compliant. To continue receiving electronic payments through Intuit merchant services, you will need to become compliant. You have likely already received an email from Intuit (yes, it’s in your junk) explaining the process.

Compliance requires that you pay an annual fee of $85-$300 to SecurityMetrics.  SecurityMetrics will provide you with your final price.  

As a small business owner, you have choices.  You can become compliant.  You can change to a different payment processing system.  You can decide not to accept electronic payments.  All of these options have implications for your business and for your bookkeeping system.  Please take a moment to talk with your lead bookkeeper about your options.  For more information, contact your lead bookkeeper to schedule a talk.  

If you decide to become compliant, Quickbooks has partnered with SecurityMetrics to provide a more seamless experience.  For more information about how the process works and to become compliant, here is the update from Intuit. 

Or for a more personalized experience, contact SecurityMetrics directly at 801-995-6400

How to Get Paid Faster: A Guide to Accounts Receivable

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As a small business owner, you know that cash flow is key. Without cash, you can’t pay your vendors, staff, or yourself. But sometimes it feels like getting customers to actually pay what they owe is an uphill battle. That’s where accounts receivable come in! Don’t worry if you don’t know what it is – we’re about to break it down for you.

What is Accounts Receivable?

Accounts receivable (AR) is the money that customers owe a business for goods and services provided but not yet paid for. It can also refer to the process of tracking how much each customer owes and how much has been paid off. AR falls under the umbrella of financial management and plays a major role in your company’s overall financial health.

How Can You Generate Faster Cash Flow?

Generating faster cash flow involves making sure that customers are paying their invoices quickly and accurately. Here are some tips on how to do just that:

1. Offer discounts for early payment

This provides an incentive for customers to pay their bills on time or even early!

2. Make sure your invoices are clear and easy to understand.

Include due dates, itemized lists of products/services, payment methods accepted, etc. This will help avoid confusion or miscommunication down the line and ensure that payments get made in a timely manner.

 3. Automate reminders.

Automated text messages or emails can remind customers when payments are due or remind them of any discounts they may receive if they pay early. Automation saves time and ensures more reliable communication with customers so that payments get made promptly!

4. Use online payment portals.

Online payment portals make it easier for customers to pay their bills quickly and securely without having to mail in checks or other forms of payments manually.

5. Offer multiple ways for customers to pay.

Accept credit cards, e-checks, direct debit, check by phone, PayPal, Venmo, etc. Allowing multiple forms of payment makes it easier for customers to pay their bills on time !

6. Streamline Collection Process

Streamlining your collection process includes tracking invoices sent out as well as payments received so that nothing slips through the cracks. This helps ensure that all outstanding accounts are being tracked accurately and consistently.

7. Implement Automated Credit Control Systems

Automated credit control systems allow businesses to automate tasks like sending out reminder emails/texts or automated follow-ups when invoices remain unpaid after a certain period of time has passed. This helps keep track of all accounts receivable efficiently without having someone manually monitor them every day which saves time and resources!

8. Follow Up On Late Payments Immediately.

Following up on late payments immediately shows your clients that you take their commitments seriously by providing prompt responses when necessary. Prompt responses help ensure quicker resolution times which can result in faster cash flow!

Accounts receivables play an important role in managing a business’s overall financial health as well as its ability to generate faster cash flow – but it doesn’t have to be tedious or overwhelming! By following these tips you’ll be able to manage your AR more efficiently while still providing excellent customer service throughout the process! So put them into action today – let’s get those invoices paid faster! Contact us if you’d like help managing your accounts receivables.

An Overview of the Colorado Secure Savings Act: Employer Responsibilities

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If your business is in Colorado AND you have payroll (even if your payroll is only for yourself), PLEASE READ THIS ARTICLE!  

The Colorado Secure Savings Act, signed into law in May 2021, requires Colorado-based employers with at least five employees to offer a retirement savings program to their workers. 

****Regardless of the number of employees you have, this Act REQUIRES ACTION****

If Incline Business Essentials provides payroll services to your company, we have you on our list to assist.  If your payroll services are provided by a CPA or other outside company, please coordinate with us if you need assistance.  

BUSINESSES WITH FEWER THAN 5 EMPLOYEES 

  1. If your business has fewer than five employees, you will receive a PIN number from the State of Colorado.  You will receive this via a letter/postcard AND/OR via email.  This PIN is necessary to officially notify the state that your business is exempt.  Please be on the lookout for this PIN and forward it to your bookkeeper.  
  2. If Incline handles your payroll, Incline Business Essentials will ensure that you are registered as an exempt business with the State of Colorado.  Incline will bill you accordingly for this additional work.  If you have an outside payroll provider (CPA or other), please please coordinate with us if you need help setting this up.
  3. If you hire additional employees and reach the 5-employee threshold, PLEASE, PLEASE let us know.  We cannot ensure your compliance unless you communicate these changes to us.

BUSINESSES WITH 5 OR MORE EMPLOYEES

Do you already offer an acceptable employee savings plan?  Please read the applicable category below:

If your business has five or more employees and you already HAVE an acceptable savings program set up for your employees: 

  1. You will receive a PIN number from the State of Colorado.  You will receive this via a letter/postcard AND/OR via email.  This PIN is necessary to officially notify the state that your business is exempt.  Please be on the lookout for this PIN and forward it to your bookkeeper. 

If your business has five or more employees and you do NOT already offer an acceptable savings program:  

You are required by law to offer the Colorado Secure Savings program.  What does this mean for you?

  1. We will need to create an online account/portal for the Secure Savings Act.  You will receive a PIN number from the State of Colorado.  You will receive this via a letter/postcard AND/OR via email.  This PIN is necessary to set up the required online portal.  Please be on the lookout for this PIN and forward it to your bookkeeper. Incline will handle the setup and will bill you accordingly.  We MUST HAVE THE PIN from you.  Please send this to us no later than June 10th.
  2. Important:  YOUR EMPLOYEES WILL AUTOMATICALLY BE SET UP FOR THIS PROGRAM.  This is an “opt-out” program.  Your employees will receive an email with opt-out instructions.  This will come directly from the state after we create your online business profile.  It is YOUR EMPLOYEE’S RESPONSIBILITY TO “OPT-OUT” IF THEY CHOOSE NOT TO PARTICIPATE.   Incline cannot Opt-Out for your employee.  You cannot opt-out for your employee.  Your employee must complete this opt-out process.  Otherwise, 5% of their gross earnings will be automatically withheld from their paycheck to be placed into a savings account.
  3. Each pay period, Incline Business Essentials will log into the portal with the state and make the appropriate payments into the employee savings accounts.  
  4. Incline Business Essentials will be billing accordingly for this work.

TO HELP YOUR EMPLOYEES “OPT OUT”

Incline cannot opt your employees out.  The employee must opt out of the program themselves OR they will AUTOMATICALLY have 5% of their gross payroll withheld.  If they do not opt-out and funds are withheld, your employee will have to access their funds directly from the state.  Incline cannot assist you with withdrawing funds from Colorado Secure Savings.

  1. Your employee should receive an email from the state with opt-out instructions.
  2. If no email is received, please direct your employee to: https://coloradosecuresavings.com/ 

To our knowledge, this is the only way to opt out of the program.  If you have employees who may not be able to navigate the opt-out, we recommend that you sit at a computer or device and help them through the process.  While it is the employee’s responsibility, as the employer, it is your legal responsibility to inform your employee and ensure that your employees understand this will be happening.

Important Reminder:

Incline Business Essentials is NOT an HR company.  It is your responsibility to notify your employees in accordance with the Colorado Law.  For full details, visit the Colorado Secure Savings website.  If you are a Gusto or QBO payroll client, we can connect you with Gusto/QBO HR services if you need things like employee handbooks, etc.  

For more information about the Employer Responsibilities, please refer to: https://coloradosecuresavings.com/employers/program-details

Incline is here to help.  If you have any questions, please do not hesitate to reach out.  If we don’t know the answer, we will do our best to help find the answer.  Reminder that we will be billing for our services in setting up these systems.