Five Best-Practice Accounts Payable Tips for a Smoother Cash Flow

Watching the cash balance is one of the most frequent activities of a small business owner.  Besides making sure you have enough cash for payroll and bills, there is another huge opportunity you can benefit from: lowering the cost of processing your bills.  It can be expensive and time-consuming to process bills and handle the paperwork involved.  We’ll take a look at a couple of the many ways you can streamline your accounts payable processing costs in this article.

Opportunity #1:  Go Digital

The Intuit Payment Network (IPN) is a best-kept secret when it comes to sending and receiving money.  It’s free to set up your account, and it’s also free for your receiver to set up an account.  All you do is add your bank account, and you can easily transfer funds between the two accounts just by knowing the receiver’s email address.

The receiver of money only pays 50 cents per transaction, so when you have a large transfer of funds, it’s totally worth it.  It saves you postage, check stock, envelopes and the related mailing labor.  You could even increase your payment by 50 cents so that your receiver receives exactly what you owe them.

Another way to go digital is via PayPal.  Fees vary, and are usually paid by the receiver.

Opportunity #2:  Get Control

When it comes to finances, it’s never a good idea to mix business and personal, especially when it’s coming out of the same bank account.  Keep separate accounts for business and personal, and your bookkeeping costs will go way down.  Do the same thing for credit cards as well.

If you’re comfortable with credit cards and you can maintain control of your spending, it saves accounts-payable time when you can charge everything you spend on business to your credit card as long as you pay it off every month.  Using your card is faster at checkout than writing a check these days, so you’ll save time on errands as well.

Opportunity #3:  Automate

Put recurring expenses such as utilities, rent, accounting, and other monthly bills on bank draft or autopay if the vendor has that option.  This will save you a huge amount of time, supplies, and postage.  You can also be more accurate with the timing of the payment which will allow you to keep your money for as long as possible until the due date arrives.

Opportunity #4:  Verify

We hope you never pay bills that aren’t yours, but it can happen.  To avoid it as much as possible, implement a three-way matching process on all your payables, especially those related to inventory.  The three-way part refers to the three documents involved in accounts payable:

  • The purchase order
  • The packing slip
  • The invoice

Before any invoice is paid, these three documents should be matched line by line – for quantity, price, and description — to ensure you ordered and received what you paid for.  Only then should your bill be approved.  This will ensure that you don’t pay a fraudulent bill, you don’t pay for out-of-stock that didn’t ship and that you paid the correct price you agreed to in the first place.

Please feel free to reach out and ask us about this if you’d like to know more.

Opportunity #5:  Tell Yourself a Little White Lie

There’s an old saying:  “robbing Peter to pay Paul.”  If you’re always moving money around form one checking account to another to cover bills and payroll, you’re not the only small business owner who juggles funds.  It takes up valuable time to make all these transactions, and then it costs to record them and track them.

Reduce all that by telling yourself a little white lie about your bank balance.  If your bank balance is $10,000, tell yourself it’s only $5,000 (or whatever amount makes sense for you).  That way, you’ll always have a cushion in your account that will help you reduce transfers.  There are several ways to set this “little white lie” up in your books.

More A/P Ideas

These are only five of many ways you can reduce your processing costs and save time on accounts payable processing.  Give these five accounts payable ideas a try, and if you’d like to know more, please reach out and let us know.

Budgeting Breakthrough

When you hear the word “budget,” what do you think about?  Most people would say something similar to “Ugghh!” If you would rather do just about anything besides create a budget, you’re not alone.  The word “budget” brings up connotations of endless numbers, constraints, the opposite of freedom and creativity, and hard work, none of which are very desirable.

Yet, the benefits of a budget are huge.  Budgets can help you with cash flow improvements, keep you on track for higher profits, and alert you to items that need further action.

From “Budget” to “Profit Plan”

To be successful with budgeting, we need to get rid of all of the connotations that go with the word.  Perhaps it might work if we rename “budgeting” to “profit planning.” And then, rather than focus on how little we should spend, let’s start with how much revenue we’re going to make.

Revenue Clarity

It’s simple to create a revenue plan if you go backwards.  What revenue goal would you like to hit this year?  Just like we would never get in a car without a final destination, a revenue plan gives us a number to aim for in our businesses.

Once you know your number, then we can use averages to come up how many sales or clients we need to generate in order to meet our revenue goal.  Here’s a quick example:  Let’s say you want to reach $5 million in revenue this year.  If you average order is $10,000, then you need 500 sales.  If you have multiple products and services, then you’ll need to sum the product of the average sale times the needed number of sales for each line.

From there, you can make marketing and production plans based on the number of sales or clients you need.

Protecting Your Profit

Think of the expense side of your “profit plan” as protecting your profit margins so that you can ensure financial gain from all the hard work you do.  Setting budget limits on spending will allow you to control overhead and other items so you can keep more of what you make.

Exceptional Reporting

A great “profit plan” report will provide several things.  You can compare budget to actual, or better yet, just be alerted to the accounts showing exceptions.  You can also get an income statement that compares the current period with the prior year period so you can see how far you’ve come.  One last option is a benchmark report which provides industry averages so you can measure how you fare compared to other companies in your industry.

A “profit plan” is a great tool for your business.  If we can help you with the process or provide you with custom reporting, please give us a call.

Need an A/R Makeover? A Quick, 5-Item Best Practice Checklist

Technology has allowed businesses to make substantial improvements in their customer invoicing processes.  The good news is that when you implement these technologies, you will almost always get paid much faster.

If it’s been a few years since the last time you’ve changed your accounts receivable processes, it’s time for a new look.  Here are five tips you can use to rate your own invoicing process, step by step.

1.     Invoice Creation

The best way to create all of your invoices is by the push of a button from one of about five types of systems that already have all of your data:

  •  Time and billing, if you bill hourly
  • Estimating and project management, if you use proposals
  • Customer relations management (CRM) systems that have invoicing as a feature
  • Point of sales systems that track open accounts
  • Accounting system that includes an A/R component

There are a couple of key best-practice concepts to follow at this step:

  • Eliminate any duplicate data entry you can.  You should only have to enter your invoicing data in one place, and it should flow to every other system that needs it.
  • Automate as much of the process as possible.  Never start in Word or Excel, because this always means duplicate data entry somewhere.
  • Have an easy approval process so someone else can do the data entry if needed.
  • Keep your invoice data real-time so you can benefit from the next step, which is….

2.     Invoice Delivery

How you create your invoice will vary by the type of business you have, but the main thing to make sure of is that the invoice is approved quickly and sent out to the client as soon as the work has been done.

The only way to do this is electronically.  If you’re still printing, stuffing, stamping, and mailing you invoices, you’re losing anywhere from two days to nearly a week before your customer even sees the bill.  Change that by using email or delivering the invoice electronically.

3.     Invoice Terms

When do you want to get paid?  Most people feel it’s realistic to aim for 30 days.  But if you set your payment terms to Net 30, you’re more likely to get paid in 45 days, not 30, according to recent research by Xero, where over 12 million small business invoices were reviewed.

Set your terms to 13 days or less, Xero suggests, because most small business debtors pay two weeks late.  Here is the infographic in case you want to check it out:  http://www.xero.com/guides/invoicing/

4.     Payment Method

How does your business rate when it comes to payment options?  If all you take is checks, you can add another week’s delay to your payment.  Instead, we recommend creating lots of choices for customers, such as taking:

  •  Credit and debit cards through MasterCard, Visa, American Express, and Discover
    • You can set up links online (best) or receive a fax or scanned form where you can enter the card into your back office.
  • PayPal
  • ACH for recurring payments that the client agrees to draft from their bank account
  • Checks

Your industry may even have more options.  For example, in accounting, Intuit has their Intuit Payment Network (IPN) where small businesses can receive money electronically and send and receive requests for money.  IPN is far cheaper than PayPal fees, too.

5.     Receipt

When you get paid electronically, it’s in your bank (or your merchant account) within minutes.  If you bank online, you can see things immediately now (it’s really amazing!).  When you receive a check, you have the overhead of preparing the deposit and making the trip to the bank.  If you have hundreds of paper checks, you also have additional bank fees incurred from processing the checks.

If your accounting system interfaces with your bank, then you save a lot of time and money not having to post those transactions.

Invoice-Free Zone

Why not get out of the invoicing business altogether by offering a pay-in-advance option?  Your Accounts Receivable balance goes to nothing, to name one of many benefits.  Not every industry can adopt this practice, but if you think creatively, you might find some ways you can implement this in your business.

How did your A/R process rate on the 5-point checklist?  Got some ideas for improvement?  As always, please reach out if you have A/R questions or if we can help you implement your best practice invoicing system.

Five Cash Leaks to Avoid

Cash flow improvement is a hot issue for small businesses; in many businesses, it seems like there is never enough cash when you need it.  The last thing a business owner wants is to reduce their cash balance unnecessarily.  To help you preserve or increase your cash, here are five cash management leaks to avoid.

1. Bloated Bank Fees

Some banks are more business-friendly than others.  We recommend you assess the fees you are currently being charged to see if you can discontinue any unnecessary services.

  •  Could you maintain a cash balance to avoid monthly fees?
  • Are you being charged online banking fees and bill pay fees, and are these still necessary?
  • Are you being charged for a high volume of transactions or cash drawer services, and are these competitive with other banks?

Banks, including national brands, that have not kept up with technology and have not automated a significant amount of their transactions are inefficient and must charge higher fees to cover their processing costs.  If your accounts are located at one of these costlier banks, you do have a choice.

2.   Overtaxed

Are you sure that you are paying the lowest amount of taxes you legally owe?  There are several places to look to make sure you have not overpaid taxes anywhere in your business or personally:

  •  Payroll taxes
  • Sales and use tax
  • Franchise taxes
  • State and local income taxes
  • Property taxes
  • Federal income taxes
  • Taxes that are specific to your industry

In preparing income taxes, a few of the easiest items to overlook include carryovers from prior years and new deductions you become eligible for.  If you received a large refund this year, congratulations, but that means you gave Uncle Sam an interest-free loan on your money.  You can do better next year by estimating your tax payments and paying only what’s due.

3. The Check Is in the Mail

Customers who take too long to pay you are big cash drains in your business.  Consider changing your terms, asking for deposits, or becoming more aggressive with collections to bring your DSO (days sales outstanding) down.  When you do, you’ll get an instant, permanent cash flow improvement.

4.  Sweat the Small Stuff

You may have an eagle eye on your largest bank account, but what about your other cash stashes?  PayPal, petty cash, and business savings accounts are among the places that may not get daily scrutiny.  Make sure those accounts are properly reconciled and have the proper controls in place so funds don’t go missing.

5.  It’s in Your Interest

A nice problem to have is when your bank balances get too large and you don’t need the money immediately.  Make sure that money is still working hard for you by putting the excess in an interest-bearing account.  It’s not much these days, but every little bit helps.

Make a Dash to the Cash

If we can help you plug any of these cash leaks in your business, please don’t hesitate to reach out and let us know.

 

The Fine Art of Prioritization

Running a business usually means putting in over 40 hours a week.  In fact, if you’re the typical entrepreneur, you have more ideas you want to implement than you have time for!  That’s when proactive, strategically executed prioritization can make all the difference.

So Hard to Choose    

If you have lots of ideas in your head or on your “to do” list that are not getting done, you’re certainly not alone.  Here’s a process for helping you decide what to do first, next, and not at all.

Step 1:  Write down all your ideas, tasks, “to do’s,” projects, and even items you need to do on a daily basis.  Use a spreadsheet and list each item in a row by itself.  Later you’ll want to be able to sort the list, so we recommend using Excel or another spreadsheet software.

Once you have everything down on paper, you will be amazed at how much this unclutters your thinking.  You will also have all your great ideas captured so you don’t forget them.  You might also get very overwhelmed, but don’t stop now.  Relief is on the way.

Step 2: Add some information about each item, creating four additional columns:

  1.  Is this item about working IN your business (client work, overhead, etc.) or ON your business (new products or new services, developing procedures, hiring more staff, marketing, creating new partnerships)?
  2. Is this item revenue-generating?  Or will you lose revenue if you don’t get it done?
  3. Can you delegate this task or does it have to be done by you?
  4. If you were to hire someone to do this task, how much would it be worth per hour?

Step 3:  Analyze your choices.  Once you have these additional items filled in, you can go wild with opportunities.  Here are some very cool eye-opening activities to try:

  • Separate tasks that are working ON vs. IN your business.  There is never enough time to work on your business, so force it by blocking out a few hours or a half-day a week and do it, no matter what.  It might be the best way to make progress in your business.
  •  Sort the list by how much revenue the task could generate or how much potential it has, and decide how to prioritize from there.  If you need help calculating the ROI, return on investment of an idea, we can help you calculate that.
  • Take a look at what you marked “not able to delegate,” and ask “why not?”  Does a procedure need to be written?  Do you need more staff?  Does your staff need training?  Or do you need to learn to let go?  Whatever it is, and especially if there are a lot of these items, get these roadblocks tackled so you don’t become the bottleneck in your own business.
  • Sort the list by “column D” above, the market value you recorded for the task.  Then ask yourself what your hourly rate is.  How many tasks are you doing that are below your hourly rate?  Hiring someone to do your lowest level tasks could very well be another item you need to add to your new “to do” list!

This last one is really important, because it can so strongly affect the profitability of your business.  The last thing you want to do is go backwards and give yourself a demotion with a pay decrease, but that’s exactly what you’re doing each time you do a task yourself that’s at a low market rate.

Step 4:  Prioritize with confidence.   With all of this information in an organized spreadsheet, you will gain the clarity you need to make some powerful decisions about how to spend your time.

Time

There’s nothing more precious and scarce than our time.  Every day, we have a choice about how to spend it, but too often we get caught up in the urgent, but not important, daily fires.  This exercise helps us take a step back and look at what’s important instead of what’s urgent.

What Is Cloud Accounting?

One of the most exciting changes in the accounting industry is cloud accounting.  The concept is easy to grasp:  cloud accounting simply puts your accounting system in a private space online so that it is fully accessible to you via a browser or a secure remote connection.

Two Ways to Be in the Clouds

There are primarily two ways to have your accounting system in the cloud.  First, it can be “hosted.”  This means that the current software you are using on your desktop, such as QuickBooks or Sage, does not change.  Neither does your company file.

The only thing you do differently once it’s set up is click a different icon to start the software.  Once you log in, most everything else is the same.  There are a couple of differences in printer access, Microsoft Excel® access, and some of the other interfaces, but it’s essentially the same experience.

So if it’s the same, why would you want to move to the cloud?  Because it completely eliminates the passing back and forth of the file among you, your CPA, your bookkeeper, and anyone else that needs to update or access your accounting file.  No more restores.  No more DropBox or YouSendIt downloads.

Hosting saves a ton of time because the people you grant access to can login to your file from anywhere.

The second way to have your accounting system in the clouds is to switch to an online accounting system.  In industry jargon, this is called SaaS, which stands for Software as a Service.  Examples of online accounting systems include QuickBooks Online, Xero, Wave, and Kashoo.  These systems have fewer features and will only be right for a client with a need for a simpler accounting system.

When you switch from desktop accounting software to SaaS, it will likely require conversion, setup, and training.  It’s a major change.

Benefits

There are many benefits to moving to the cloud; here are just a few of the more common ones:

  • Anywhere, anytime access to your accounting system.  Companies with multiple locations will benefit significantly from a hosted solution.
  • No more worrying about who has what version and whether the changes the accountant made were updated or applied.  There is one central file, and multiple people can be accessing it at the same time as long as you have the right number of user licenses.
  • No more software updates that you have to apply yourself or wait for.  This is done by the hosting provider or the SaaS.
  • Tighter security for your data.  The data centers typically have multiple state-of-the-art data security controls and must pass a rigid audit, which is far more protection than any small business can afford to provide for their own data.
  • Automatic offsite backup for disaster recovery purposes.

Concerns

Clients’ two major concerns include security, which is covered above, and costs.  When it comes to costs, the most important thing to look at is return on investment.  Will the time you save be of greater value to you than the costs of hosting or moving to a SaaS?  That answer varies for each client.

Curious About the Cloud?

If we’ve piqued your curiosity about cloud accounting, please feel free to reach out so we can continue the conversation.

Five Ways to Protect your Cash

As entrepreneurs, we work hard for our money, and the last thing we need is to have it disappear due to fraud, hackers, or identity theft.  Some people have called 2013 the year of the hacker, which is worrisome.  But you’re far more likely to experience risks with disgruntled or financially desperate employees and contractors.  Mistakes happen, too, and when they do it can be costly to get them corrected.

Here are five ways to increase your financial controls so that you can lower your business risks when it comes to the handling of cash and cash equivalents.  As you read the list, check to see where you can tighten up controls in your business.

Checking for Checks

Do you have blank checks lying around?  If so, reduce the temptation and get them locked up.  You can also go a step further and have your accountant run a report each month (or week) of missing check numbers.  If any checks are unaccounted for, take action by processing Stop Payment orders at your bank.

Bank on It

If you are still getting your bank reconciliation on paper, where does it get mailed?  The business owner should always see the bank reconciliation before anyone else does.  Also, make sure the person that performs the reconciliation is not the same person that deposits the checks.  Segregation of duties is essential to improve cash controls.

Today, it’s a good idea to do all your banking online, if possible, so that nothing gets mailed.  In that way, you have some reduced risk over identity theft.

Some banks offer multiple-user access to your banking account, so that bookkeepers can get the information they need.  Lock that user ID down as much as possible, so that the user can only get to what they need to.  If they’re honest, they will appreciate the reduced level of responsibility and consider it a smart financial move.

PayPal Protection

If you have a PayPal account, keep the balance low by transferring funds frequently to your bank account.  You can also restrict access to reduce your risk.

Credit Card Control

If you use credit cards in your business, you’ll want to maintain tight control over them.  For each employee or contractor that needs to charge items on a credit card, here are a couple of points to consider:

  • If the credit limit on the current card is sky-high, then ask the bank to lower it or set up a new card with very low credit limits just for employee use.
  • Contact your credit card company and get a card in the employee’s name.
  • Make sure you can access the credit card transactions online.  They are immediate, and if necessary, you can closely monitor what’s going on.
  • Insist on a receipt brought to you for every purchase.
  • Create clear procedures, limits, and approvals before the spending occurs.
  • Don’t let the employee “keep” the credit card during off hours.  Keep it locked up on your premises instead.

Safeguarding Payroll

One of the biggest cash outflows for small businesses is payroll.  Here, segregation of duties comes into play again.  The person preparing the payroll should not be the one who approves it and actually runs it.

You can do this by having different user accounts and controls within your payroll system.

Hopefully, you already have a lot of these ideas in place.  If not, add the ideas you like to your to do list so that your business risks will be reduced.

Five Places to Find More Profits

It’s always a good idea to be on the lookout for ways to increase your profits, and luckily, there are many ways to do that.  One way is to focus on cost-cutting, and here are five places that are good to periodically review for cost-cutting possibilities.

Telephone

Re-negotiating with the phone company every one to two years is a really good idea.  Many telecommunications companies will often bargain with you or offer you a new deal just for checking in with them.

Has your business changed?  Do you need all those extra features you are paying for?  Could you do without those extra lines?  Would another phone plan save you money on long distance or international calls?

The risk is low:  one quick call will let you know if you can save money in this area.  It’s worth it to give it a shot, and while you’re at it, you can call your smartphone provider too.

Travel

Travel is always a great area to look into for possible ways to save.  Are all trips necessary and profitable?  Are there any meetings that can be done virtually instead of face-to-face?  Virtual tools such as GoToMeeting can make travel unnecessary.

What trips can be cut this year?  Can the number of people sent per trip be cut?  Can travel arrangements be made early to save money?  Are booking dates flexible so you can compare and find the lowest rates?  Is a taxi or rent car cheaper?

Dues and Subscriptions

Paying our annual dues for the club or association we’ve belonged to forever may be a habit, but is it beneficial for your business?  We might enjoying seeing everyone once or twice a year at the meeting, but we may not necessarily have to have a membership to do that.  Sometimes paying the guest rate is more affordable than the member rate if we are attending infrequently enough.

Review a list of organizations and publications you and your employees are part of, and choose which ones you are truly benefiting from.   If being an officer in one of your organizations is not getting you any new business, then you may eliminate a time drain by bowing out and letting someone else volunteer.

Labor

As your business grows, it can be a challenge to decide who to hire next.  The first place to look before you decide should be your existing employees.  What tasks are they doing that you are paying them too much for?  For example, do you have a manager doing clerical work?  If so, you may be able to piece together an administrative job that frees your current staff from all the clerical work they are doing.

It’s worth a look to see where your current employees are being overpaid and find someone to do those parts of the job.  You’ll save labor costs and come out ahead in the long run.

Fixed Assets and Equipment

Another place to save money that can be significant is purchases of large items such as furniture, automobiles, and production equipment.  It’s a good idea to get three bids from reputable vendors so you have a choice.  Going with the lowest bid is not always a good move; going for the highest quality is.

Look in these five places, and let us know how much you find to increase your profits.  As always, if we can help, let us know.

Seven Year-End Adjustments to Make to Your Books

Year-end is coming up for many businesses, and it’d be nice to know what your final revenue and profit numbers will be for the year.  Before we can calculate these key numbers, there are year-end adjustments that may need to be made to your books that will change the numbers. Here are seven common ones.

Bonuses

It’s great to give bonuses to employees at year-end, but it’s not so great to forget about the tax part of it. Bonus checks should always be run through payroll, but often are not, which requires an adjustment after the fact.

Retirement Plan Contributions

If cash is available at year-end, it’s a great idea to maximize the allowable deductions for the retirement plan you qualify for.  One example is a SEP IRA.  You can deduct up to 25% of your or your employee’s salary (up to $50,000 deduction maximum per employee for 2012, but please check with us or your tax professional for numerous exceptions and rules.

Withholding

If you are both the owner and an employee of your company and have not made enough tax payments throughout the year to account for all that money you’ve earned in 2012, you can adjust your last few paychecks to withhold the amount you need.  Sometimes, this also reduces or eliminates the penalty for underpayment of estimated taxes.   To find out more, please check with your tax professional.

Depreciation

If you have assets that will last longer than one year, such as factory equipment or a fleet of automobiles, an adjustment may need to be made to reduce the value of those assets.   This adjustment will reduce your profit and will also reduce your tax bill.

Amortization

If you have a loan of any type, the payment consists of both principal and interest.  Each time you make a payment, the principal and interest amounts can vary.  At the beginning of the loan, you pay more interest and less principal.  At the end of a loan, it’s reversed.  Each payment is different, and if they haven’t been recorded correctly each month, it’s time to make the adjustment so that the loan balance is correct.

New Acquisitions or Obligations

If you’ve made a significant acquisition, such as real estate, buildings, large equipment, or another company, and somehow the transaction did not get properly recorded on your books, then now is the time.   Similarly, if you’ve taken on new debt, the new liability needs to be put on the books.

Noncash Transactions

It’s easy to overlook transactions that do not require a cash outlay, but these need to be recorded as well.   For example, if you performed consulting services in exchange for a spa gift certificate, this transaction should be reflected in the proper revenue and expense accounts.

Year-End Profit

Once your books are adjusted for all of these changes, you’ll have all the information you need to find out how your business performed for 2012.  You can then use your 2012 revenue and profit numbers to set new goals for 2013.

Compliance Checklist: Seven Items You May Have Forgotten

Running a business is filled with regulations everywhere you turn.  These can drain precious time away from the core of your business, but if you ignore them, there could be huge financial consequences you may be risking without even realizing it.  The best way to handle them is to understand your exposure, consult with any experts you need to bring in, create a checklist, and make sure you’re in compliance.

Here’s a head start in creating that checklist.  This is by no means a comprehensive list.  These items apply to most businesses and are often overlooked.   Go through the list to make sure there aren’t any surprises for your business.  If there are, feel free to contact us, and we’ll help you find out where to get answers.

1. EIC notice to employees.

It’s now required annually to notify certain employees about the Earned Income Credit so that more people who need it can take advantage of it.   If you have employees, the next deadline for this compliance item is the first week of February 2013 and can be met if you get the right W-2 forms.  Details are in IRS Publication 15.

2. Corporate meeting minutes.

Just about the first thing the IRS will ask for in an audit is your corporate meeting minutes.  If you are incorporated as a C Corp or S Corp, you need properly formatted and executed documentation of the annual shareholders’ meeting, even if it is just you.  The risk in not having it includes a potential increase in tax liability from undocumented deductions.

3. PCI compliance. 

PCI stands for Payment Card Industry, and if you take credit cards, you may have compliance requirements under this industry standard.  The standard is designed to provide the cardholder with a minimum acceptable level of security, and your requirement is to maintain certain processes and procedures to safeguard the stored credit card data.

4. Document retention.

While it’s a great thing to go paperless, you may get caught by surprise if you are not downloading and preserving the items you used to have on paper.  The IRS and other agencies still need proof of these items in order to approve the deduction.  This includes invoices that are coming via email in PDFs, bank statements you’ve gone green on, and direct deposit payroll stubs, to name a few.

Fax copies fade after a few years and can catch you by surprise when you go to look up an old record and can no longer read it.  It’s best to scan fax receipts in so they will stay readable for the length of the retention period.

You’ll also want to keep up-to-date on how many years it’s necessary to maintain these items in the case of an audit.

5. New hire reporting.

In small business, most of us are hiring so infrequently that it’s easy to forget this one.  Most state unemployment agencies require that you report new hires within about three weeks of their start date.  The purpose of this is to track fathers who have missed child support payments.

6. Changes in state tax compliance.

As geographic borders disappear and our business expands, we need to regularly re-evaluate state requirements on income, franchise, and sales tax obligations.  It can be too easy to “do things the way we’ve always done them” and forget that as our business expands into new territories, new obligations can arise.

If we’ve hired a virtual employee in another state, we may have new obligations.  If we’ve earned money during a speaking engagement in another state, we may have income to report in that state.    And, of course, if we open new offices in another state, we have new compliance items to deal with.

7. Payroll posters.

Surprisingly, the highest payback item in this list for those of you that have employees may be posting your payroll posters.  Compliance usually costs less than $100, and the fines avoided can be as much as $17,000, a pretty big dent, no matter how big your small business is.

Small Business Compliance

Did you get caught by any surprises?  If so, let us know how we can help to bring your business into compliance and help you avoid unnecessary costly risks.