definitions

How To Be Awesome At Investing: Lessons From A Decade In Finance

How To Be Awesome At Investing: Lessons From A Decade In Finance

People always assume I am so deeply passionate and stoked about finance. Like I jump out of bed and get excited about interest rates. That's not exactly true. I am super stoked and passionate about helping people, feeling like my work matters and having autonomy over it. So when people ask me why I started The Hell Yeah Group, the answer is often that, " I looked inside of my tool box of skills and realized I had some sharp tools that all pertained to bookkeeping, running a small business and personal financial planning.” As much as I wanted to create a cool company that had nothing to do with finance, I had constraints: I needed to earn money and there was no denying the skills I had, no matter how uncool I thought it was. Not exactly visions of grandeur, more like shining a turd.

But I’ve really grown to love how my work makes me feel, regardless of it’s non-passion status. I want to share the industry-specific things I’ve learned and observed over the years that I think everyone should know.

The Top Five Tax Return Mistakes and How to Avoid Them

The Top Five Tax Return Mistakes and How to Avoid Them

Written by Luke Frye

Okay, this is going to sound extremely biased... but, as an accountant, I strongly recommend hiring a professional to file your business’s tax returns.

Sure, you’ll have to part with some of your hard earned cash in the short term. But I guarantee it will save you time and headaches. And if it helps you avoid making costly errors on your tax return (y’know, the ones that result in IRS fines), it’ll also save you money in the long run.

That said, I’m aware that it’s not always possible to hire a pro. So, if you’re doing your own tax return this year, here are some common mistakes to avoid.

Top Nine Tax Code Myths and How to Stop Falling for Them

Top Nine Tax Code Myths and How to Stop Falling for Them

Tax filing and small biz accounting are complicated at the best of times. So, as a CPA for photographers and creative biz owners, I spend a lot of time busting tax myths for new clients.

Here are some of the most common tax myths that trip entrepreneurs up. Avoid them all and file a better tax return this year.

Five Things You Thought Your Accountant Was Doing

Five Things You Thought Your Accountant Was Doing

Accountants are smart, hard working, and they basically do everything for you, right?

Well, yes and no.

Typically your tax accountant (maybe you call them an EA or a CPA) is focused solely on filing your federal and state income taxes. This means there’s still a lot of “financial admin” you’ll have to take care of on your own to keep your business running.

Here are five financial tasks you’ll need to get done to keep your business running smoothly.

You’ll need to take care of these yourself or commission your accountant to do in addition to tax filing.

How to Make Money: Focus On Who You Serve

How to Make Money: Focus On Who You Serve

People talk about opportunities like they’re a nebulous, disembodied thing. Like they’re floating around and will land on your shoulder and boom, your life is changed forever. Let’s say they are. Imagine opportunities are all floating around in form of balloons. Every balloon is connected to a string. And at the end of the string, even though you might not be able to see it, there is a person holding the string.

You see, opportunities are not standalone. They’re always connected to a person.

This article is all about understanding who you serve. Who is your ideal customer, target market and what’s your niche?

Do You Need a Will?

"I have an app on my phone and it reminds me 5 times a day that I’m going to die,” is exactly what one of my friends told me recently. I stopped and thought about what she said, coming to the conclusion that I didn’t find it morbid. In fact, I think it’s a little weird that we don’t talk about dying more often; that we go around living our lives, putting things off as if we have all the time in the world.

How an Income Account Can Help You Make More Money

For the past year, I’ve been using an income account as a part of my weekly accounting process.

Accounting process sounds fancy, but it’s just a workflow process that I use every week. The reason I started using an income account was because I wanted to have a better understanding of how much I truly needed to earn. I also wanted to see if I could run my business with less money each month by only giving my business a certain amount of money to work with.

Paco’s Law: Expenses expand to reach the limits of what's available to spend

I’m sure you’ve heard of Murphy’s law; an old adage that states "anything that can go wrong, will go wrong.” And then there is Parkinson's law that basically boils down to: work expands to fill the time available for its completion.

Now, I’d like to introduce you to Paco’s law.

How to Be "Financially Responsible"

How to Be Financially Responsible | The Basics of Financial Responsibility

One of the most frequent financial struggles that people talk to me or email me about is having trouble being "fiscally responsible".

When it comes to doing the things one ought to do with their money, according to what I've learned from the industry and society at large, we fall short in a few common ways. Most people have trouble saving when you know you should save, curbing spending on bull shit that you don't need and understanding how the financial markets and economics. I get it. I make weird choices too. A lot of us do it because we're emotional creatures that act on our feelings

 

How to Catch Up On Your Bookkeeping

Photo by Wes Hicks

Photo by Wes Hicks

 

Staying up to date with your company’s bookkeeping is an uphill battle. When I first started my business, I didn’t update my books for a handful of months - nine, to be embarrassingly honest. As more time passed, more work added up and my fear of tackling it all grew to a critical mass. When I finally sat down to do all the work, I cursed myself and promised myself I’d never let me books get that out of control again.

I’m sure as tax season closes in many of you might also be filled with this same sense of dread. If that’s the case, worry not. Although we offer catch up bookkeeping over at Hell Yeah, Bookkeeping, there are lots of small business owners who prefer to handle bookkeeping on their own. If you’re in the latter camp, here’s a step-by-step guide to help you get your caught up on your bookkeeping. Let’s dig in.
 

 

Step 1: Sort and Organize Your Documents

The first step is getting organized. You’ll want to start compiling invoices you sent to customers, receipts and/or the bank and credit card statements where you made purchases that are business expenses.

 

Invoices

Find all the invoices you sent to clients and organize them in one place. Make a note of what invoices are still outstanding, if any. The invoices and their status (paid or unpaid) will help you compile your business’ income or revenue and your receivables (what’s owed to you).

But of course there is a caveat. You’ll need to know what accounting method your company uses to operate. The two methods here in the U.S. are cash and accrual. Most businesses operate on a cash basis. If you don’t remember, you can ask your accountant to confirm.

For a cash basis business, you technically only need to send the customer an invoice once they have paid. For accrual accounting, you record the income when the sale occurs.

For example, let’s say you made a sale in the amount of $1,500 in December 2018, but the client didn’t pay you until March 2019. With cash method, revenue isn’t recorded until March 2019, whereas with the accrual method, you’d record the sale in December of 2018.

 

Collect on Debt

Sometimes you’ll have invoices that are outstanding for a long time. At some point, you might need to cut your losses. In order to do this, you must first make a concerted effort to collect on the debt. If that doesn’t work, you can charge off the debt using accrual accounting or non-accrual experience method. I know, the names of these methods really just roll off the tongue, huh? 

For accrual accounting, when a customer flakes on their obligation to pay you, you’re able to write off this off as bad debt expense. Remember, you’ll need to prove to the IRS that you took reasonable steps to try to collect on the debt and recover the loss. The specific charge-off method means you can deduct a specific bad debt that becomes partly uncollectible during the year.

You can use the beautifully named, nonaccrual experience method to deduct what you were unable to collect. The deduction would reduce your gross income for tax purposes.

 

Separate Business and Personal Expenses

Most accountants will tell you that they prefer it if you’d keep receipts for every single business expense. Of course, this doesn’t always happen. But most accountants will advise that you should still deduct legitimate business expenses even if you didn’t keep the receipt.

At any rate, gather all your receipts for your business expenses and organize them in one place. I like to scan everything to Google Drive or Dropbox. I also like to include the date of the expense in the title of the scanned file so it’s easy to reference the receipts by date.

Here’s one hack that has made keeping meal receipts especially easy. I set up an email account, something like pacosreceipts (at) gmail.com. And every time I do business over a meal, a drink, or a coffee, I simply snap the picture of the receipt and email it to that email. In the subject line, I write who I was with and what the meeting was about. With this method, I have an audit trail that was kept in real time. This is important to the IRS if you ever get audited. They would like to see a real-time record as opposed to a spreadsheet that you threw together on one day of the year.

 

Vendor Invoices

If you’ve paid vendors and contractors, you should make sure that you’ve got all these invoices and bills organized in case you need to access them for an audit. If you don’t have all your bills, you can simply reach out to your contractors and vendors and ask them to send you whatever you’re missing.

 

Step 2: Update + Reconcile Bookkeeping

Now that you’ve gathered everything together, it’s time to get into your bookkeeping software updated and reconciled with your bank accounts. Bank account reconciliation is when you make sure your accounting records match your bank and credit card statements exactly. Each transaction in your account should be categorized and entered into your bookkeeping software. It sounds redundant to replicate your banking records within an accounting software program, but the software can allow you to run reports that your bank doesn’t. Reconciliations ensure your records are accurate.

Make sure to spend the time needed to ensure your accounts are accurately reconciled; it may be costly to have a bookkeeper or accountant go back and fix your books if they aren’t.

 

Alternatives 

Hire A Bookkeeper

If you don’t have a bookkeeping system, you have a few options. First option is to hire a bookkeeper to put your books together for you. This method will likely result in the most accurate records, saving you time, but costing you more to pay for someone else's time and expertise.

 

Use Your Statements

One method to add up all your expenses is to use the bank statements and credit card statements where the transactions occurred. For any expenses that were cash, you’d have to add that back in after. This method is super easy if you’ve kept your business and personal expenses separate. It’s not recommended for a long-term solution because you won’t be able to accurately and quickly generate financial reports.

 


Use Your Receipts

If you saved all your receipts, another method is separating your them by expense category and adding up them all up. Again, this is not a long-term solution or long-term bookkeeping alternative. It’s only a very small, limited picture of your company’s finances.

 

If you'd prefer to outsource all of the bookkeeping work and your feeling of existential dread, please get in touch, we'd love to help.