Congratulations to Jennifer Todd, now Certified in QuickBooks Online 2016


Jennifer recently updated her Intuit QuickBooks certifications to include the latest version of Intuit’s Premier cloud-based accounting system QuickBooks Online!  Jennifer has been certified in QuickBooks desktop since version 99 and she also holds certifications in QuickBooks Point of Sale as well as Microsoft Office User Specialist in Excel and PowerPoint!  Contact Jennifer today to get a primer on QuickBooks and find out how the software can best be used to achieve your financial goals!  Interested in learning more about QuickBooks Online? Check out the free test drive here.  Learn more about QBO by visiting their website here! 

Is your Not-For-Profit in a Relationship?

Knowing what forms a not-for-profit organization can be considered related to another entity is important as it affects what information must be disclosed in tax filings and financial statement reports.  A relationship with another nonprofit organization can take any of the following forms:

  • If an NFP organization has a controlling financial interest in another NFP organization, due to direct or indirect ownership of a majority of voting interest or sole corporate membership;
  • If there is control of a related but separate NFP organization, control being facilitated by having a majority voting interest  and an economic interest in the other NFP;
  • If there is an economic interest in the other NFP organization, and control through means other than those stated above;
  • The existence of economic interest but not control or vice versa.

Control is defined as the direct or indirect ability to determine the direction of management and policies through ownership, contract or otherwise.  Economic interest is defined as interest in another entity that exists if any of the following criteria are met:  the other entity holds or utilizes significant resources that must be used for the purposes of the NFP – producing either income or providing services; or the NFP is responsible for the liabilities of the other entity.

Nonprofit board members and Executive Directors or CEOs should keep these rules in mind when working with their outside CPAs on tax return filings and financial statement engagements such as audits, reviews and compilations.  Just knowing that these relationships affect reporting requirements will help the organization be compliant if management has open conversations with their independent CPAs.   Have questions or concerns about these rules?  Give us a call (757) 926-4109 we can work through it with you.

Common Mistakes – Focusing Solely on the Profit and Loss Report

I have seen many sets of financial statements in my day.  Over the years I have worked with companies of many different sizes, in a variety of industries, some with full accounting staff, some just run by “mom and pop”.  Most of the time, the business owner is not looking at the balance sheet or cash flow statement because they only care about and understand the profit and loss report – specifically the bottom line of that profit and loss – the net income figure.  They only want to see how much money their accounting program says they’ve made.

It’s understandable that business owners will get caught up in the operations side of their business and only care about current performance as far as what’s coming in (sales) and what’s going out (expenses) without taking time to really look at the cumulative position of where the company is, as shown in the balances of the assets, liabilities and equity sections of the balance sheet.   It’s a huge mistake for business owners to ignore the other financial statements and not gain an understanding of what valuable information those reports hold.  The information contained in the balance sheet and cash flow statement not only supports the results of the profit and loss statement, it also tells the story of how cash and other assets have been used in the business to run operations, to finance purchases and to pay a return on investment to the owners.

Don't focus on just the profit and loss!

Most of the time a business owner will look at the bottom line of the profit and loss and not understand why it shows an unexpected profit or loss.   They want to know why the bottom line on the P & L doesn’t jive with the cash balance in the bank.  They ask, “if the business is making a profit, then why don’t we have cash in the bank?”  So, what’s the first thing I do?  I look to the balance sheet and cash flow statement to tell me the story, to give me clues that explain that operational bottom line.  What was the change in certain asset or liability accounts over the time period we are examining?  Do the statements show that loans or capital infusions were needed for the company to stay afloat?  Do they show that prior period loans were paid down or that dividends were paid out?  Maybe receivables (the money that is owed to the business) are much higher (or lower) than the last period?  Is the company having trouble collecting customer payments or have they been aggressively paying off their own debts?  Each of these questions can be answered by looking at the balance sheet and statement of cash flows along with the profit and loss report.  The answers provided by the full set of financial statements explain why the company is in its current position, and how to change that position to make the company stronger and to increase profits.

If you are a business owner, are you looking at these reports, or at least having your CPA go over them with you on a regular basis (at a minimum annually, but I recommend quarterly)?    As a strategic business advisor, I can enthusiastically tell you, this is the kind of stuff that we actually like to doso please, ask us, we can help you to understand your financial reports!  

While the financial statements show a history of where the company has been, analyzing several time periods allows a business advisor to see trends, compute ratios, and project where your business is headed.  For example, I use these important financial statements in benchmarking analyses.  All of this valuable information should be used to proactively manage your business, and increase profitability through well-informed strategic decisions and proper planning.  Working with a willing advisor who can explain all of the concepts in an easy to understand manner is only half the battle because the business owner must be willing to do their part, by offering their insight and being committed to taking an interest in understanding more than just the bottom line.   Commit today to reviewing more than just your bottom line, if you need some assistance with this task please message me on Twitter, I’ll be glad to help!

Photo courtesy of Flickr -

Common Mistakes – Thinking That There is a Choice Between Independent Contractor or Employee Status

More often than not I come across both new and seasoned business owners who think that they have a choice in whether they will treat a worker as a subcontractor or as an employee.   By treating a worker as an independent contractor, the business does not have to withhold and remit payroll taxes on the amounts paid to the worker.  The business also avoids paying the FICA tax match (currently 7.65%), federal unemployment tax, as well as any state and local employer taxes on the worker’s pay.   The business also may be able to avoid having to include the workers in their worker’s compensation and health and welfare insurance coverage if they are not considered employees.   Companies also skirt overtime and employer wage rules by classifying workers as independent contractors.   Therefore, it is quite tempting for business owners to want to treat workers as independent contractors instead of as employees since it is certainly cheaper in the short run.

At the federal level, the IRS and the Department of Labor are interested in enforcing laws designed to protect workers and the government’s interest (i.e. taxes due to them) and the authorities, not the business owner, have the ultimate say in how workers should be classified.   The IRS has dedicated a whole area of their website to the topic – you can view it by clicking the link at the bottom of this page.  The site even has nice audio lessons and the training materials that IRS agents use to determine whether a worker is in fact an employee or independent contractor.    The DOL also has a nice section about the topic on their site too (link below).

The following conditions are common in an employee/employer relationship:

  • Payer retains significant control over the result of the work to be performed.
  • Payer retains significant control over when and how the work will be done.
  • Payer reimburses worker’s expenses.
  • Payer provides most tools, equipment and supplies to carry out the work.
  • Payer provides benefits such as insurance, paid time off or retirement pay.

The following conditions, while not all inclusive, are common in an independent contractor/contractor relationship:

  • Worker has made a significant financial investment in the equipment used to carry out the work.
  • Payer does not reimburse expenses of the worker.
  • The worker provides services to more than one payer, or is actively looking for more business by way of advertising etc.
  • Worker is paid a flat fee for the work performed (i.e. paid by the job).
  • Worker has his own trade name, business license and professional, liability and worker’s compensation insurances.

While none of the conditions above guarantee the classification of a worker as one type or the other – it is more likely that those having more of the characteristics of an employee will be treated as such by any taxing or regulatory authority if it is ever challenged.

As a business advisor, I almost always recommend my clients to err on the side of caution when classifying workers to avoid problems down the road.  In cases where there is a dispute, or a worker is hurt on the job, or fired, unemployment and other insurance claims made by misclassified workers can cause problems with state and federal agencies.  The IRS can examine company records at any time to determine worker status and can then charge the company with back payroll taxes plus penalties and interest if any workers are reclassified as employees.  Even if there is a written contract between the worker and the company stating that the worker is an independent contractor, the IRS can reclassify the worker if they deem there is evidence present for them to justify it.   While all situations are different and there truly is no one-size-fits-all yardstick by which to gauge every worker relationship, using common sense while planning for the long-term is the best way to avoid trouble later on.   Don’t risk problems down the road just to “save” a few bucks today, it’s just not the smart way to run a business.




Click here for IRS guidance on classifying workers:


Click here for DOL coverage on the crackdown regarding misclassified workers:

Image courtesy of Flickr

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