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I recently did some random surveys, where I ask people questions about budgeting.  Budgeting is a necessary evil but no one wants to do it and I couldn’t figure out why?  Because it’s a very simple process.  I even share some simple steps in my post titled How To Create a Budget in 3 Easy Steps.  So I said to myself, “when in doubt – ask.”  So I asked people everywhere I come in contact with, friends and family, clients and social media connections, these three questions:

• What frustrates you about budgeting?
• What challenges do you face with budgeting?
• What would make budgeting easier?

I received a lot of different responses.  One response was even “trying to get my husband on board.”  I had to laughed at that one.  Wouldn’t you know sometimes I have that same problem.  So I asked around and the most common responses I got were: Not having enough money; Having to create the budget; and Sticking to the budget.

Well let me tell you that last one resonates with me in a big way.  When I graduated college and started getting a real paycheck I moved out of my parents house within six months.  And I haven’t been back yet! One of things I realized very quickly was I needed to make sure all my bills for paid before I could spend money on what I wanted to.  I already knew I had a shopping problem.  Big secret right? So I created a budget for each paycheck.  I would budget six to eight months at a time so I would know when I would have the money to go holiday shopping or shopping for myself, on trips and even which months I could make lump sum payments to get out of debt.  This little schedule was great .  In fact, I still use it to this day.

As time went on, I could never figure out why I didn’t have enough money.  Then I would get a new job with a higher salary but the same thing would happen.  It was years before I realized that I was good at creating a budget but I sucked at following the budget.

So to help you avoid or to stop having the same problems I had, here are solutions to the top three responses.

1. Not having enough money. This is a terrible excuse.  You don’t have enough money because you don’t have a budget to begin with.  You need to create a budget so that you can know where you need to spend money, including saving or paying yourself first.  Whether you are getting paid $5,000 a week or $5,000 a month, you need to ensure that all your costs are covered.  And if all your costs are not covered, that’s when you will know it’s time to ask for that raise or move on to other things.  But my guess, you will be just fine when you see all of the unnecessary things you spend your hard earned dollars on.  It’s just going to take  a little self control.
2. Having to create the budget.  Not sure why people have such a hard time with this one.  If you do, then you are definitely over thinking things.  Here is the link again for How To Create a Budget in 3 Easy Steps.  Doesn’t matter if you’re doing a budget for a business or for your household, the same rules apply.  The only difference is for a household, you may not need to budget a full year.  Six months will do just fine.
3. Sticking to the budget.  Now this I get.  It’s the shiny toy syndrome.  Every time you see something shiny and new you just have to have it, right? WRONG? You don’t need to be a walking model with all the hottest clothing trends.  And you don’t need to buy a new cell phone every time they come out with a new version.  You need to develop a system for tracking your costs.  A system you can stick to.  And try and make it fun.  Enlist a friend, turn it into a game or reward yourself.  When you have a prize waiting for you, you are more inclined to follow through.

Now it’s your turn. What frustrates you about budgeting? What challenges do you face with budgeting? What would make budgeting easier?

Hi BBWO! I hope you are all having a wonder and prosperous New year! Most importantly a Financially Fit New Year! As I am restructuring and growing "Your Business Your Taxes" below are a few blog post, videos and teleseminars to help you prepare for this tax season and 2011.

• 6 Things Your Business Must Do By January 31st
• 3 Tips for a Financial New Beginning
• Choosing a Accounting Software for Self-Employed (video-cast)
• Small Business Checklist
• Money Mastery Magazine "The Financial Doctor Is In" - Ask the Bookkeeper"

Stay Tuned!

-Katrina

If you are a self-employed individual or running a small business, check out 7 quick things you need to do BEFORE or by January 31, 2011 to stay in good graces with the IRS!

1.  ISSUE 1099s  - If you hired an independent contractor in 2010 or worked with a non incorporated business, you must issue 1099 by January 31, 2011. You still have until February 28 to actually report to the IRS giving time for any corrections, however you should ensure your contractors and vendors have received their 1099 by the 31st.

2. ISSUE W-2s - Did you hire any employees in 2010? Even part-time? Seasonal? Aside from ensuring you did apply for employer tax numbers, you should also ensure you submit your employees (even terminated ones) W-2s by the 31st.  If you use a payroll service, check with them to ensure your payroll records are accurate and complete before issuing W-2s.

Check here for the remaining tips!

It's the start of the new year which for many of us means new beginnings, resolutions and planning for tax season. Some of us are looking for a "do over" and want to start this year off on a better foot regarding our finances. I know BEEN THERE!

Well for many micro businesses whose personal life and business life blur starting over can be frustrating and intimidating. I have 3 quick tips to help you restart your Micro Business for 2011 with a simple mindset change:

1. Hire an Accountant! - I know of course an accountant will say that but it's TRUE! Knowing the importance of having a professional at your findertips is very important. Remember, accountants work year-round not just between January - April. In fact most accountants and CPAs are busier in the off-tax season months helping clients SAVE MONEY, Tax plan, strategic planning and more! Ours is always on speed dial ;-)

Check here for the other 2 tips!

• Tweeting about us (using #ysbcontest and @yoursimpletweet)
• Sharing the contest with your peers
  
• Joining our Facebook page
• Suggesting our facebook page to your friends
• Joining our community or mailing list
• Or any other creative way you can think to help us spread the word

• What business entity did you choose for your business?
• Why did you choose it?
• Do you know if you are receiving the best Tax benefit from it?
  

One of my favorite websites for business and entrepreneurship is Inc.com (if you haven't been to this site and you're in business check it out!) Today I got the perfect I mean PERFECT alert regarding business and taxes and I want to share with you the highlights!

The article discusses planning for the next tax season now by being PROACTIVE. In essence, what this means is not waiting UNTIL January 2011 or April 14th for that matter to giving attention to your businesses finances. It means taking small steps through out the year to manage and organize your books, ask questions to your Tax Preparer or Tax Advisors, knowing and understanding the new tax law changes and how they affect your business today and so on. Several tax professionals offer their advice and tips on this and have formulated it into an acroymn: P.L.A.N.

P. Preparing your Records

L. Listing Issues and Questions

A. Analyizing for Accuracy

N. Noting Changes in Tax Laws

Do you P.L.A.N for your taxes? As a Bookkeeper and Small Business consultant, I realize that most if not ALL of these steps can be time consuming or frustrating when you don't know where to begin. Especially noting changes in Tax Laws. Unless you're like me and receive IRS updates and alerts daily most businesses find navigating through the text to find relevant information they can apply today elusive, confusing and just a waste of precious money producing time. I get it!

Some small businesses do hire Bookkeepers to take on this task which is highly recommended, but small businesses are made up of roughly 78% Micro businesses who most simply cannot afford to do this! While I LOVE this article, it does very little in directing business owners on where to begin to Plan for tax time. I consult with or talk to many business owners weekly who have this very issue, "where do I begin, and where do I find the time, how can I afford a bookkeeper?" When you don't feel you can afford a bookkeeper, what do you do?

No this isn't a sales pitch, but there are ways you can get the help of a qualified bookkeeper to get your records and books in order before tax time. Some will help you and provide you with tools if you choose to do it yourself completely free or for a nominal monthly fee. Depending on your budget you may be able to afford an outsourced bookkeeper to help you manage your books. Affordable BOOKKEEPING for your business DOES EXIST if you know where to look! I urge all businesses micro or small to take the time to consult a Bookkeeper at the minimum or CPA to request a review of your books and recommendations for how to P.L.A.N. for tax time. In my blog about Proactive Accounting, I talk about how planning in advance can actually SAVE you money at tax time, and save your business!

Take the time to call your local bookkeeper or CPA, invest a couple hundred dollars and request a review, be Proactive about your business! If you are having difficulty in finding a bookkeeper, give me a call, inbox me. Even better become a fan of YourSimple Bookkeeper, Inc. on Facebook and I'll put you on my priority list for the launch of my YourSimple Bookkeeper -in-a-Box Download on Effective Recordkeeping which is available for Free download Tuesday July 6th (and forever and ever and ever after that)! Information is free in my mind.

Remember: Making Money is EASY, Keeping it is where the Challenge comes.

To check out the full Inc.com article click here.

To become a fan of YourSimple Bookkeeper to be one of the first to receive a FREE download click here.

Picture it – Your Business, LLC, April 14^th 20-“you pick the year”. Business is doing relatively great, you’re riding high on the small business/self-employed cloud, there is some cash in the bank, your clients are moderately happy, and you’ve managed to replace your 9 to 5 income. Not so bad for not hiring an accountant or bookkeeper to help you manage things. Well it’s April 14^th and you realize that you must file your taxes, ok still not a big deal, I’ll just go to my CPA give him/her my shoebox of receipts and records, and if need be I’ll just file an extension. NOT A BIG DEAL! Your CPA charges you $XXX hundred dollars to file an extension, never utters a word about why you haven’t come to him earlier takes your money and files an extension on your behalf. 1-3 months later your CPA calls you with disturbing news:

“You owe $X,XXX in taxes this year!” Oh and since you are a sole proprietorship you also owe $X,XXX in self-employment taxes” And because you haven’t reported a profit in over 5 years you’ll probably get a notice that the IRS is going to audit your financial records. Ya might wanna also get those contractors to complete a W-9 cause they might want to review that too. SURE we’ll help ya…that’ll be $X,XXX invoice in the mail! See you next year! à Channel “Deer in Headlights”

Ok I may be over dramatizing this, most CPAs and Tax Preparers do not take this drastic heartless detached approach; in fact many of them work tirelessly to encourage small businesses to plan ahead, follow IRS guidelines and actually offer monthly bookkeeping services to businesses to avoid these pitfalls. But the fact remains that a vast majority of small business owners look at bookkeeping and accounting as an afterthought and even put off planning until after they started making money, started incurring expenses and can actually afford to pay for advice and planning. Frankly, you’re not in business to do your books, so why on earth should you care right now? Well as an Accountant, I’m offended (not really), as a self-employed turned small business owner turned entrepreneur, I understand! BUT the truth is hiring a bookkeeper, or CPA or Tax Advisor in the infant stages of your business can save you thousands if not completely save your business if nothing else your sanity!

“Rear-view accounting” is what we are used to, I call it reactive accounting, it’s what most small businesses do, and what I described above. It’s doing only what’s necessary regarding the financial management of your business and seeking counsel from professionals when desperation strikes. For most micro businesses it’s being your own bookkeeper to keep cost down or “DIY” Bookkeeping. I’m a fan of the latter if money is an issue, but it’s the former that has me nervous. Thus, I’m talking a “radical” new approach to the way small businesses view their finances, I call it “Proactive Accounting”. I was excited when I “created” with this term a few weeks ago, until I Googled it and saw that in fact this is a concept that has been around. The model of YourSimple Bookkeeper is based entirely on the concept of Proactive Accounting whether I invented this or not and hopes to give a fresh take on it and use it to totally change how we look at small business finances and accountants overall (to all CPAs and Tax preparers, I kindly welcome all donations).

Proactive Accounting is real simple concept; it’s considering how the financial management of your business affects your business from the inception and throughout the course of managing your business. Proactive accounting involves having your bookkeeper if not your CPA in the front seat with you as your trusted advisor from “Day 0” of creating your business. Traditionally Bookkeepers, accountants and CPAs were looked to only at tax time for payroll or once you were in trouble, but most of my business now-a-days comes from people looking to start businesses and want my advice on the proper steps to do so. Mostly from a “how to I pick the right entity” or “how do I lower my tax bill” perspective, but I use this time to push my agenda of actually getting their books set-up right the first time as well as getting in the habit of reaching out to me on a monthly basis for review. I admit it is a challenge to change the mind set of folks but I’m committed to trying. Instead of doing your books alone, proactive accounting involves tax planning, record-keeping set-up and tracking from the very beginning and including this very expense in your start-up and operating cost if needed. This new approach may make some CPAs uncomfortable at tax time with the onslaught of well prepared clients who no longer need extensions, but with the IRS set to increase its audit of small business particularly those who improperly classify employees as independent contractors as well as the new legislature to enforce 1099 reporting, mileage tracking and self-employment taxes, NOT having your books set up from day one nor having someone on your team can honestly cost you your business.

5 ways Proactive Acct is good for business:

1. Can help with potential borrowing – Lenders almost always want to see a well written business plan. Some probably want to also see that you’ve actually started making money in your business already. Having a way to track your expenses and revenues in the beginning and seeking the advisement of a bookkeeper or tax advisor along the way can ensure your books are sound and accurate, something that is crucial to a potential investor.

2. Can help avoid costly pitfalls – Consider most of us do not realize that the IRS makes modifications or changes to the tax code more often than we know or that there are always new tax law changes in the pipeline waiting to be passed a lot of them recently directly impact micro and small businesses. Having a bookkeeper on your “team” on a consistent basis can help you identify potential troubles before tax time. And alert you when it’s time to take a trip to your Tax advisor, make adjustments to how you conduct business as well as make recommendations to help you save money.

3. Avoid Cash Flow issues – As anyone who has been in business for at least a year knows is that CASH IS KING. Which in simple terms means knowing where your cash is at all times is paramount to the success of your business. One small business pitfall in cash management is not knowing how their money is being spent or having adequate records of client payments. Having a simple monthly review of your bank and customer records by a qualified bookkeeper can alert you to some potential cash flow meltdowns on the way.

4. You’re always Audit Proof – Poor recordkeeping is one of the top reasons small businesses fail or get trapped in IRS audits and with 78% of all businesses being small business, it’s true that we are the cornerstones of this country economy. Take it from an accountant, great bookkeeping spills over and improves other parts of your business as well. Example, a client called me one day panicked b/c she was being audited from the ESC for her payroll records (this was a routine audit the ESC performs on businesses under 2 years old). They wanted to see her payroll documents as well as tax returns. They were looking not only if the data was there but how was it kept. Luckily, her financial records and payroll documents were in order and the audit went through without a hitch. Had she had some issues, she would have been faced with steep fines and penalties which for her small business would have cost her everything.

5. One less thing to worry about! – Like I said above, unless you’re me, you’re not in business to do books so WHY would you want to worry about this? You’re good at what you do and making money doing it and should be able to focus on that. Hiring a qualified bookkeeper on a monthly retainer may seem like an expense you can’t afford, but add up the hours you spend working on your books and look at that as an actual LOSS of potential revenue as you could have spend that same time improving your marketing to drive more business. How nice would it be to know that you can bring home the bacon and someone else is gonna make sure it doesn’t go bad.

What do you do next? Fortunately there are bookkeepers and accountants out there who offer Proactive Bookkeeping services such as YourSimple Bookkeeper, Inc. whose fees can run as low as $600 annually ($50 a month) for simple reconciliation and review of your books each month. Some can even provide you training on how to manage your own books if you’d prefer that. To get started, I would find a local bookkeeper and ask them if they offer a low cost monthly review service you can utilize, if they don’t give YourSimple Bookkeeper a call for a free 30-min consultation!