Small Business Financial

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Small BusinessFinancial Tax Management

• How to Structure the Business and the Accounting
  Operations to Maximize Profits

Presented by Joycelynn Stone, President J.
Stone Associates
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Purpose of this Session

• Identify the best form of business organization
• Address the need for efficient Accounting
  Services
• Design and maintain adequate accounting
  operations
• Explore tax reporting requirements
• Determine when and how to obtain accounting and
  tax services

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Tax and Legal Liability Minimization are the
Primary Drivers for Determining Business
Organization
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Tax and Legal Liability Minimization are the
Primary Drivers for Determining Business
Organization (cont.)
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Efficient Accounting Operations Enable Profit
Maximization, Tax Minimization and Capital
Acquisition

• Accounting Operations are Not a
• Necessary evil
• Burdensome task that detracts from sales and
  strategic efforts
• Back-office function to be addressed at year-end
• Accounting Operations are
• An enabler to tracking all business expenses in
  order to control costs and reduce taxable income,
  thereby increasing profits
• An enabler to making informed and accurate
  business strategy decisions
• Necessary to obtain additional capital for
  expansion
• Necessary to keep your business compliant

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Key Accounting Operations Needed
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Cost Containment and Accurate Record Keeping is
Enabled by Adequate Internal Controls

• Open a separate business bank account
• The number of signatures required depends upon
  the size and structure of the business
• Keep all checks and banking documentation in a
  secured cabinet with minimal access
• Separate income collection and bill paying
  processes (if possible)
• Obtain documentation for all transactions (e.g.
  credit card receipts, invoices)
• Consider implementing a purchase order process if
  you maintain inventory or generate a significant
  number of disbursements
• Establish a process for tracking travel,
  entertainment and auto business expenses (e.g.
  journal)
• Close records monthly and reconcile bank accounts

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An Accounting Program is a Bare Minimum
Requirement for All Businesses

• Why?
• Ease of income and expense tracking
• Ensures that all expenses are captured
• Banks and investors want to see professional
  financial statements
• Package Options
• Quicken (easiest)
• QuickBooks (may need some accounting background)
• Peachtree (need to be an accounting expert)
• Excel? NOT AN OPTION!!!!

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Budgeting/Forecasting should be Performed on an
Annual Basis

• Should be used as a planning guide as well as a
  cost containment tool
• Budgeting vs. Forecasting
• Very little difference. Budgeting refers to
  forecasting one year into the future
• Forecasting usually means predicting financial
  performance 3 to 5 years into the future
• Banks and investors look more for forecasting to
  determine credit worthiness/potential return on
  investment
• Several factors to consider when budgeting
• Past performance
• Possible future contracts
• Future hiring needs
• Projected growth/capital requirements
• Exit strategy

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Failure to Manage Accounts Receivables and
Accounts Payables have lead to Many Business
Failures

• Accounts Receivables
• Depending upon the industry, a company should not
  exceed 30-45 days in receivables
• Perform credit checks on all customers prior to
  establishing credit and make penalty terms for
  failure to pay clear. Consider utilizing Dun
  Bradstreet
• Consider establishing a line of credit with a
  bank to manage cashflow
• Accounts Payables
• Use purchase orders to track spending and
  establish agreed upon costs
• Consider establishing spending limits per
  position/department as your business grows
• ALWAYS KNOW WHERE YOUR MONEY IS GOING!!! (i.e.
  sign all of your checks)
• ALWAYS manage your vendor/credit relationships to
  maintain your business credit worthiness

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The Size and Type of your Organization and the
Type of Business Determines the Tax Forms to be
Filed

• Income Tax Returns
• Sole Proprietorship Form 1040, Schedule C (or
  E, if a rental business)
• C Corporation Form 1120
• S Corporation Form 1120S
• General Partnership Form 1065
• Required state forms very important if you
  operate in several states
• Payroll
• Form 941 must be filed quarterly, however the
  frequency that tax deposits are made depends upon
  the size of the companies payroll
• Company is required to pay FUI, SUI and half of
  FICA tax
• Consider using a payroll service, depending upon
  the size of your company (e.g. ADP, Intuit)

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The Size and Type of your Organization and the
Type of Business Determines the Tax that Need to
be Filed (cont)

• Other possible state and federal forms
• Corporate Annual Report
• Sales Tax (ST-1)
• Independent Contractor Forms (W-9 1099s)
• Airport and City tax (transportation companies)
• Industry specific reporting requirements
• Quarterly estimated tax payments
• Business License renewals
• Notices from tax authorities

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You Know that You Need to Obtain an Accountant /
Bookkeeper When..

• You cannot give an elevator financial synopsis
  of your business
• You have to sacrifice sales calls or development
  work to do the books (or visa versa)
• You cannot focus on expansion because you lack
  the proper financial information (e.g.
  projections, current financial statements)
• You are receiving notices from tax and other
  governmental entities on a regular basis

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In Conclusion

• Know your limitations
• Seek the advice and assistance of a CPA or
  experienced bookkeeper if you know that your time
  will not allow for adequate record keeping
• The cheapest support option (technology or
  personnel) is not always the best option
• Look for a CPA with tax and/or accounting
  experience
• Also look for past banking and investor
  relationship management experience (a plus)
• Acquire the easiest, most efficient and thorough
  accounting software package