Hobbies, start-ups, and technologies

Don’t Let the IRS Reclassify Your Business as a Hobby @ Entrepreneur: As a follow-up to my reader Q&A last week regarding the difference between a business and a hobby, here are some tips for keeping your business legit.

How to Turn Your Hobby Into a Business @ Bplans: More on this week’s theme: did you see this great resource from Bplans on turning your passion into business.

10 Mistakes That Start-Up Entrepreneurs Make @ Wall Street Journal: Launching a start-up can be tough, but if you learn to avoid beginner mistakes, you’re already on your way. “Make sure there’s enough margin in your pricing to enable you to bring in other people. Clients generally don’t mind outsourcing as long as they can still get face time with you, the skilled professional who’s managing the project.”

Five Technologies That Will Increase Your Cash Flow This Year @ Forbes: Cash is king. Keep it that way by using the latest tools and tech.

5 Year-End Tax Savers for Businesses @ Cisco & Co: As we’re coming up on the end of the year, consider how your invoicing and expenses could benefit (or hurt) your tax bill.

Spotlight: Reader Q & A

In a previous reader Q&A we’ve covered what to do to find your accountant for your SB and get yourself all set up. This time, we’re covering another Q&A from a slightly different angle.

Hi Sarah, I love your site! I’ve been running my business for a little while, but I guess I’ve been treating it more as a hobby than I have a real business. What do I need to do to transition from hobby to bona fide business?

– Reese

Great question, Reese! The simplest answer is to keep track of your income and your expenses, with as much detail as you can, but before we dig into that I want to go right to the source – the IRS.

Continue reading “Spotlight: Reader Q & A”

My favorite accounting sites for new small business owners

When I was first learning accounting and bookkeeping, I was hungry for anything break down the accounting process clearly and simply, without putting me to sleep. That’s a lot easier said than done.

I know I’m not the only small business owner who didn’t start out with a background in accounting, so today I’d like to share with you some of my favorite sites that will get you feeling like an accounting superstar in no time. If you’re an entrepreneur just starting out on your own, but want to understand some of the fundamentals yourself, read on.

Continue reading “My favorite accounting sites for new small business owners”

Small Business Owner

Reader Q&A: When should I get an accountant?

This week I’m featuring a reader’s questions about when to get an accountant, and what that process might look like.

Today’s question comes from a reader who runs their own virtual assistant company. They’ve recently started their business, and want to make sure they’re making all the right choices:

Hey Sarah,

Thanks for your help. As I mentioned, I’m just starting out and I think I’ll need an accountant but I’m not sure what they do/what they’ll help me with and why I should have one (I mean, I *know* I need one, but I’ve been filing my own taxes for years so I don’t see why I need to bring one in now), what those first steps for getting an accountant would be, and what the ongoing relationship would look like. I’m nervous about paying a lot of money for someone who won’t be able to do more than I’m already doing. Is it worth it?

 

Alright, let’s dig right in.

Continue reading “Reader Q&A: When should I get an accountant?”

Entrepreneurship, useful questions, and setting goals

A busy week on Twitter! Check out the links below for my weekly roundup.

How to Decide if Entrepreneurship is Right for You @ The Wall Street Journal: “Starting a business is a lot like becoming a parent. Not only do you have to prepare for your start-up emotionally and financially, but you have to be committed to its constant needs until it’s mature enough to hum along on its own.”

How to Ask Useful Questions @ Josh Kaufman: Sometimes you might think you’re asking a good question, but have you given enough context for a solid answer? Does your question respect the other’s time and experience? Has your question indirectly transferred responsibility away from you? Josh Kaufman lays out some solid tips for getting useful answers.

Forget Setting Goals. Focus on This Instead. @ Entrepreneur: Setting goals is smart, but it doesn’t have to be the only method you use for accomplishing what you want. As a small business owner, it’s important to understand the difference between goals and systems. As James Clear writes, “Goals are good for planning your progress and systems are good for actually making progress.”

How to Avoid Work: A 1949 Guide to Doing What You Love @ Brain Pickings: Even though it’s from 1949, this little pocketbook, How to Avoid Work, is chock full of practical wisdom for learning to do what you love. “Despite the occasional vintage self-helpism of the tone, the book is remarkable for many reasons — written at the dawn of the American corporate era and the golden age of the housewife, it not only encouraged people of all ages to pursue their passions over conventional, safe occupations, but it also spoke to both men and women with equal regard.”

Introducing QuickBooks Tutorials @ Quickbooks: Whether or not you’re new to QuickBooks, there’s always more to learn. And fortunately, QuickBooks has recently announced QuickBooks Tutorials! Great for small business owners looking to learn the ropes on their own (but of course, it’s always good to have a QuickBooks Certified ProAdvisor on your side, too).

Getting the most out of your accounting program

Whether you’re a new or established small business, cash flow is always a concern. It’s important to keep in mind the big picture for your business as it grows, but depending on the size of your team, you need to spend some time in the weeds, too. Accounting is essential, but can be tedious, so how can you get the most out of your accounting program, and how can your accounting support your big picture?

Continue reading “Getting the most out of your accounting program”

Millionaires, leadership traits, and brain-expanding books

Here’s your weekly link roundup! This week, it’s all about becoming a millionaire, key leadership traits, and brain-expanding books.

How to Be a Millionaire @ Forbes: Investopedia weighs in at Forbes on what it takes to be a millionaire. Spoiler: it takes a lot of hard work, skill cultivation, and sometimes—but not always—a bit of luck.

4 Things Successful Entrepreneurs do before Breakfast @ Forbes: Neil Patel at Forbes discusses the four things successful entrepreneurs do before breakfast. But first things first: wake up early, and knock the difficult stuff out early.

5 Visionary CEOs and Their Key Traits That Every Leader Should Master @ Entrepreneur: Good advice from Chuck Cohn, CEO and founder of Varsity Tutors: “You may believe that the leaders you admire are smarter, luckier or more creative than you, but the traits that make them wildly successful can be honed over time.”

The Not-To-Do List: 9 Habits to Stop Now @ FourHourWorkWeek: Small business owners spend a lot of time checking things off the to-do list, but what about the NOT-to-do list? Tim Ferriss lists nine bad habits to cut out, like answering calls from unknown numbers, sending emails first thing in the morning or late at night, and most importantly, hoping that work will fill a void that other things should, like relationships and activities.

The Ten Most Important Books To Expand Your Brain @ Medium: Skip the author’s self-serving preamble at the beginning, scroll down to the actual list of business books for some healthful brain expansion. Especially Malcolm Gladwell’s “The Outliers.”

Friday linkage

In today’s weekly link round, it’s all about cash flow, tax audits, and learning how to think like a chef. Have a great weekend, everyone!

Entrepreneurship: Sometimes Work Is Just Work @ A Practical Wedding: Your passion drove you to start your own small business, but now that you’re here, it can be hard to see the green grass. You haven’t made the wrong choice! Sometimes, work is still just work.

10 Cash-Flow Surprises That Could Kill Your Startup @ Entrepreneur: 90% of small and startup business failures are caused by poor cash flow. Martin Zwilling at Entrepreneur offers ten great tips for small business and startup owners to “maintain a certain reverence for cash”—and make it to the next level.

How to Better Manage Your Cash Flow @ Entrepreneur: A few more words on cash flow today: “Prepare cash flow projections for next year, next quarter and, if you’re on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes.”

These 6 Things Can Lead to IRS Tax Audit @ YFS Magazine: According to TaxReceipts.com, small business owners are 940% more likely to be audited than W2 wage earners! Here are six easy things you can do to keep your records keep and your audit probability low.

For A More Ordered Life, Organize Like A Chef @ NPR: Americans spend almost $10 billion per year on self-help and organization, but Dan Charnas at NPR says maybe all we need to do is look into the kitchen. In the culinary world, it’s called mise-en-place (put in place), a practice, “a way of life … it’s a way of concentrating your mind to only focus on the aspects that you need to be working on at that moment, to kind of rid yourself of distractions.”

What’s the difference between a bookkeeper and an accountant, anyway?

David Letterman once said, “There’s no business like show business, but there are several businesses like accounting.” And one of those several businesses is bookkeeping. So, what’s the big difference between accounting and bookkeeping, anyway?

The good folks at Bench provide a solid starting point by breaking down the tasks of bookkeepers and accountants into the following categories:

  • Bookkeepers “record financial transactions; post debits and credits; produce invoices; maintain and balance subsidiaries, general ledgers, and historical accounts; and complete payroll.”
  • Accountants “prepare adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process); prepare company financial statements; analyze costs of operations; complete income tax returns; aid the business owner in understanding the impact of financial decisions.

To oversimplify the difference—bookkeepers enter data, and accountants (who may also enter data) also provide analysis, tax returns, and other high-level duties. An accountant will often utilize the data provided by the bookkeeper to provide financial reporting and outlooks for a company. As Katie Bunschoten explains on the Intuit Small Business Blog, “Many bookkeepers get their start acting as a data-entry clerk or entry-level bookkeeper for a business and grow, through experience and merit, into being a go-to person for the day-to-day financial recording. […] An accountant may also focus on reporting, business analysis and processes, and possibly advice.”

While these differences may seem minor, they’re important for you to know as a small business owner. Bookkeepers and accountants function similarly, but noting the differences will allow you to ensure that you’re getting the most out of their respective knowledge and expertise. Additionally, recent advancements and efficiencies in accounting and bookkeeping software has allowed for increased crossover between the two areas, which enables accounting professionals to be responsive and adaptable to various demands and expectations.

There are many accounting professionals active in the market that might describe themselves as accountants or bookkeepers, but are otherwise uncertified. While working with a non-certified financial professional might save you a few bucks, accounting is one of the areas you don’t want to skimp—especially because small businesses are far more prone to tax audits than individuals. When you’re working with an accountant, always go with a Certified Public Accountant (CPA), who is state certified after a rigorous round of testing and years of demonstrated experience. And when you’re working with a bookkeeper, look for those with either or all of the following: QuickBooks ProAdvisor certifications, professional certification through the American Institute of Professional Bookkeepers (AIPB), and/or certification and training through an established college or university.

While accounting isn’t always as singular or exciting as show business, no business can thrive without good accounting and balanced books.

(PS: If you like what you see here, be sure to subscribe to my newsletter for more tips and advice to help your small business grow.)

Friday linkage

Friday is here! Friday is here! Which means that it’s time for my first weekly link roundup. Click around and enjoy your weekend!