Cloud Hosting: It’s Time to Break Up with Your In-House Servers.

Gone are the days of dial-up internet and cell phones with buttons for every letter of the alphabet. Neither dial-up nor the Blackberry makes sense in 2023, and frankly, neither does the in-house server. The current era of business demands that your data and software be readily accessible; cloud hosting is the best way to accomplish this. 

Cloud hosting is the process of storing your software and data somewhere other than the box under your desk that’s collecting dust.

It requires no more installs, re-installs, updates, or worries about backups. It allows you to work from anywhere, at any time, collaborate effortlessly with your team and professional service providers, and scale your operations –without the IT headaches. 

The cloud is safe and secure with built-in redundancies, managed IT (think firewalls and virus protection), and is part of a comprehensive disaster management plan, allowing you to eliminate the responsibility of managing it yourself while increasing the accessibility of your software and data.

Anything can happen in business — your server can crash, your office can flood, your back-up could be corrupted. Your financial data is the lifeblood of your business, and safeguarding it with modern technology like cloud hosting is essential.

I’ll never forget my first tax season at a local CPA firm, one customer meeting in particular. We were sitting across the table from a nice young couple expecting their first child. They had started a small construction company that year and did quite well. The purpose of our meeting was to deliver the tax return, tell them the balance due for taxes, and answer any questions they might have about the Federal and state tax returns and future estimated tax payments.

When I shared with them that they owed just shy of $10,000 in income taxes, the young lady burst out in tears! They didn’t have the money. They had profits–but no cash. No one had ever explained the difference to them, and they were not expecting a balance due of that magnitude.

This meeting changed their lives and the course of my career. I never again wanted to sit across the table to deliver unexpected news to a bright-eyed entrepreneur and his expecting wife.

Therein began my career of teaching small business owners the difference between profits and cash, along with many other nuances of business ownership that no one ever tells you (including the fact that approximately 40% of your profits will go to pay income taxes). It’s a harsh reality, and knowledge is power. These outflows of cash can be planned when you have advanced notice. This type of planning is usually called tax planning, business planning, revenue planning, and/or profit planning. But knowing the difference between profit and cash is a good place to start — let’s dive in.

Here is the short and sweet on the difference between profits and cash. Profit is revenue minus expenses. Cash is money in minus money out. There is a fancy, seldom understood financial report called a Statement of Cash Flows that reconciles your profit to your cash, and is part of a comprehensive financial statement package which will also include your Balance Sheet and Profit and Loss Statements.

Most small business owners only look at the profit and loss, pay little (if any) attention to the balance sheet, and have never heard of the Statement of Cash Flows.
However, I would argue that the Statement of Cash Flows is the single most important financial report. It will tell you how much profit you made, where the money went, and what’s left of your profit.

There are certain things that you spend money on that are not tax deductible: some are not deductible at all, and some not immediately. They use cash, deplete your bank account, and do not reduce profits.

 Let’s discuss a few common examples:

Equipment – you buy a new piece of equipment for your business. This might look like a walk-in cooler for a restaurant, a forklift for a warehouse, a work van for a construction company, a new stitcher for a manufacturing facility, or a company truck for the business owner. These items are Assets with a useful life extending beyond a one-year operating cycle and are reported on the balance sheet. They affect cash and do not affect profit until they are depreciated. When you make an investment in a piece of equipment like this, it is not immediately deductible. You’re out the cash and do not have an expense deduction–yet.

Loan Payments – Let’s say you buy that forklift and take a loan for it because the interest rate is better than what you’re making on your savings, or you don’t actually have the cash to pay for it outright. While the interest paid on the loan will be tax deductible, the loan payments themselves are not. The principal portion of the loan payment reduces the loan Liability account on the balance sheet. It affects cash, but never profits.

It is important to reconcile profits to cash, to find out where the money came from and where the money went. You never want to be caught short at the end of the year without enough cash to pay the taxes on the profits generated by your business. And hey, those federal income taxes you pay? Those are not tax deductible either.

While New Business Directions doesn’t prepare tax returns, our clients can benefit from the types of planning we mentioned above. Having a CPA in your corner throughout the year can make or break you at tax time–we can consult with you on the best time to make a capital expenditure decision, keep you informed about the speed at which cash is entering and leaving your business, and more. If you’d like to discuss cash vs. profit within your company, complete our intake form to get started.

When building a team, classifying your workforce correctly is vital to your business’s success and legal compliance. Employees and independent contractors are not interchangeable terms, and it’s important that you can distinguish between the two in your organization.

While it may seem like a simple solution to classify members of your workforce as independent contractors, there are actually very specific criteria that determine whether a worker can be classified as an independent contractor. Workforce classification is not a grey area – the IRS has an independent contractor test, as do many states, and they do not always follow the same criteria. In this article, we’ll discuss the differences between an employee and an independent contractor so you can ensure you’re operating your business correctly.

 

When is a worker considered an Employee?

Employees work under your direct control – they follow your schedule, use your company tools, and often receive benefits such as training, healthcare and/or retirement. You withhold taxes from their paychecks and contribute your share of payroll and unemployment taxes, you pay workers’ compensation insurance on the wages, and you file quarterly and annual returns with the IRS, Social Security Administration, and state agencies.

 

When is a worker considered an Independent Contractor?

Independent contractors maintain autonomy – they work for themselves and have their own company, they set their own schedule, they provide their own tools, they have their own general and/or professional liability insurance, and they handle their own income and/or self-employment taxes and pay their own expenses. They are typically hired for a specific project and under contract and take the risk of whether or not they make a profit.

 

What can happen if a worker is misclassified as an Independent Contractor?

If the IRS determines that you have been misclassifying an employee as an independent contractor, the penalty can equal 20% of the wages paid; 100% of the employee FICA taxes that should have been withheld; 100% of the employer FICA taxes that should have been paid; 20-75% of the underpayment of taxes; 25% of the late payment of taxes; and a per-worker fine.

In addition, there are Department of Labor and state penalties for misclassifying employees as contractors, which can equal any overtime that should have been paid. Plus, courts can award an additional 100% of unpaid overtime payments.

Penalties can also include severe criminal sanctions, including felony charges.

There’s a lot at stake when it comes to classifying your workforce correctly, and cutting corners here can be a costly decision for your business. Proper classification safeguards your company from legal issues and ensures compliance with labor laws, workers’ compensation laws, and Federal and state laws. If you have questions about the classification of your workforce or need support with payroll in your business, reach out to our team at newbusinessdirections.com/contact.

Running a business can feel like a whirlwind of responsibilities! Time is a precious resource for entrepreneurs, and taking shortcuts can be tempting. However, there’s one shortcut we really recommend against: sharing sensitive documents like bank statements, financial reports, tax forms, and more over email.

When safeguarding your valuable information (and that of your customers!), prioritizing security is essential. With cyber threats constantly evolving, email is an increasingly vulnerable method for transmitting confidential data. How should you be sharing your sensitive documents instead? By embracing secure document-sharing portals.

Document-sharing portals like SmartVault employ state-of-the-art encryption techniques to prevent bad actors from accessing your information. They can streamline your workflows, save time, and reduce errors. Most have user-friendly, intuitive interfaces, too, making it easy for you and your team to implement the new tech successfully.

Portals don’t just benefit you and your business, however! They can benefit your customer relationships, too. Adopting a portal can demonstrate a commitment to protecting your customers’ data, safeguard your reputation, and help you comply with data protection regulations.

While attaching a file to an email may feel more convenient in the moment, the tradeoff could be catastrophic. Instead, by taking an extra step to secure your documents, you’re investing in the long-term success of your business. We, as accountants, cannot overstate the importance of robust data security, and we encourage you to embrace the convenience and peace of mind that secure document-sharing portals provide!

Living the dream with the dream team! New Business Directions, LLC had an amazing opportunity to escape the cold New Hampshire winter for a few days in Puerto Rico. This was a great chance for the team to relax, refresh, and come together to create a better work experience.

The team was able to take full advantage of the beautiful Puerto Rican sunshine and catch a break from the everyday hustle and bustle of the office to get intentional with its efforts for the year ahead. While they were there, they were able to plan for the future, strengthen their team dynamic, and come up with creative solutions to improve processes and take advantage of individual strengths. This was an experience that the team will never forget, and they are already looking forward to doing it all again next year!

The IRS announced earlier this month that it has increased the optional #StandardMileageRate used to calculate the deductible costs of operating a vehicle for business. The new rate, effective January 1, 2023, will be 65.5 cents per mile driven, which is an increase of 3 cents from the unusual mid-year increase we saw in 2022.

For full information, including deductible amounts for miles driven in service of charitable organizations, medical, or moving purposes for members of the armed forces, read the full article from Journal of Accountancy linked here: https://www.journalofaccountancy.com/news/2023/jan/business-standard-mileage-rate-increases-2023.html

As the year comes to a close and the holiday season approaches, we are reminded of the many things we have to be thankful for. At New Business Directions, our customers are at the top of that list!
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We understand the importance of having accurate and reliable financial reporting so that you can stay focused on your mission and make informed business decisions. As always, we are grateful for the trust you place in our services.
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This season of gratitude is also an opportunity to reflect on our successes and look forward to a brighter future. During this time, we encourage our customers to also take a step back, look at their own accomplishments, and recognize the hard work it took to achieve them. Whether the year brought a financial milestone, a significant process improvement, or the launch of a new service, we’re thankful for the chance to share in your triumphs.
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While we will always feel deeply saddened by the loss of our team member, Wayne, we are grateful for the time we had with him and the lasting impact he had on the lives of everyone he touched.
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We hope that you, your team, and your family find joy and peace this holiday season. We wish you a very merry holiday and a successful 2023!
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Best wishes,
Rhonda Rosand & the team at New Business Directions

 

 

The Critical Link Between Time Tracking and Labor Costs

Keeping track of how you and your workers spend time is one of the most important things you can do in your business. Labor costs can be a large portion of expenses, and understanding how time is spent can help you manage your business better in a multitude of ways. We touched on labor costs in our recent article, “Breaking Down Direct and Indirect Costs,” and wanted to share more on the topic. Keep reading to learn more. 

Benefits of Time Tracking

There are plenty of reasons to track time, some of which we’ve listed below:

  • When pricing by the hour, time tracking is mandatory; without it, you won’t be able to invoice your clients accurately.
  • Documenting time spent on specific projects helps managers understand how long a task should take, when employees could benefit from training, and where processes and procedures may need improving.
  • Project management systems allow users to import detailed time reports, which allows businesses to create more accurate fixed-fee pricing estimates on future jobs and customer proposals.
  • For construction companies, time tracking feeds into job costing.
  • For manufacturing businesses, time tracking feeds into labor reports.
  • For hourly workers, time tracking is used in payroll systems so they can be paid accurately.
  • Time tracking can increase accountability among team members as they become more aware of how they spend their working time.
  • When time is budgeted in advance, actual hours worked can be compared to see how the budget is used and whether it was too much or too little.
  • Time tracking allows managers and business owners to determine when they need to hire additional staff because the backlog has become too large.

What Is Time Tracking?

Time tracking is the recording of how you spend your time. You can use paper, a spreadsheet, or time tracking software like QuickBooks Time (formerly TSheets) to log the task you are working on and the length of time you worked on it. For example, here’s a simplistic example of a spreadsheet time log, aka timesheet, for one day:

Employees may be required to complete timesheets on a daily or weekly basis, which are then turned into their managers and payroll administrators.

Managers can take time tracking to the next level by adding hourly payroll costs as well as the employee’s hourly billing rate to gain insight into further time-tracking financial metrics.

Time Tracking Software

There are many different types of time-tracking software:

  • A time clock allows employees to “punch in” when they arrive for work and “punch out” when they leave. This type of machine is mostly used for payroll in a manufacturing setting.
  • Time tracking applications like QuickBooks Time allow workers with computers and smartphones to enter their time via the application. Features like biometric time clocks (i.e., requiring a thumbprint to verify the correct individual is clocking in) and geofencing (allowing employees to only clock in from certain locations) can reduce employee time theft.
  • Some companies will have their time tracking function embedded into their project management, job costing, or billing system. Employees would then enter their time via those applications.

Getting Employees on Board with Time Tracking

Reporting your hours in a time-tracking system is one of the least favorite tasks of employees and requires managers to spend more time shaping their mindsets and attitudes than any software training. It’s important that employees feel that your policies don’t resemble “Big Brother” when using their time data.

For best results, let employees know how the timesheet data will be used. Allay their fears that they will not get fired or in trouble if they feel something “took too long,” which can often translate into an employee “fudging” their hours on a task where they might have made a mistake. Make sure they know they won’t be penalized in any way for what they report. In other words, remove the risk of penalty for recording their time data accurately.

Communication is key in getting employees to report their time accurately so that managers and owners can receive meaningful information. Have managers tie time tracking to an employee’s personal career goals to increase adoption and reduce resistance.

Personal Time Tracking

Time is our most precious commodity, and tracking your personal time can give you insights into how you are investing in yourself. Some really interesting questions can be considered when you have some time data for yourself.

  • How much “downtime” do you need each day in order to live a productive and healthy life?
  • How much time are you spending on your goals?
  • Are you spending time on what you consider to be important?

Getting Started with Time Tracking

If you’re considering time tracking or would like to take your current time-tracking function to the next level, please contact us [here]. We may be able to help with integration, implementation, the accounting aspect of time-tracking, and financial metrics and reports.

 

Did you forget your password again? Are you using the same password for multiple log-ins? Have you been locked out of your online banking? Again?

If you answered yes to even one of these questions, keep reading–we have some insight that might help!

At New Business Directions, we take data security very seriously–a compromise of our security system is, quite simply, not an option. That’s why we use LastPass, a game-changing application we think would improve the lives of all of our customers. 

LastPass is a password management solution that uses strong encryption algorithms to store and protect your sensitive information while removing the stress of logging in. No more forgotten password runarounds, hacked Facebook accounts, or “this password is too weak” messages.

When you create an account with LastPass and install the  app’s browser extension, your log-in credentials will always be current on every web-based platform you utilize. LastPass will auto-fill your credentials on a website, update your records when it sees your credentials have changed, and save your log-in information when it notices you’re signing in to a location that’s not saved in your Vault.

LastPass also makes sharing sensitive data with other people (like your accountant) easier. From the LastPass Vault, you can opt to share a password to another individual with or without their ability to view the password. By using the sharing feature, whenever your passwords are updated in your Vault, they’re also automatically updated for anyone else you’ve shared access to.

The functionality of LastPass extends even further, with options to add information to your password cards like a one-time password or security questions and answers. Plus, their secure password generator can help you create complex passwords that are more secure than the variations on a common theme you might be using. If you’re interested in learning more about LastPass or signing up for your small business, reach out to us. You can also learn more by visiting this link.

Our “Comprehensive COVID-19 Sick Pay and Paid Leave” YouTube tutorial has helped thousands of people since it was released last year, teaching QuickBooks Desktop users how to set up COVID-19 Sick Pay, FMLA, and Health Premiums under the Families First Coronavirus Response Act (FFCRA).

Recently, the tutorial received some updates. Below, you’ll find helpful screen grabs and instructions with the most up-to-date information about the processes explained in this video. The times mentioned below are all hyperlinked to the video and will route you directly to the timestamp being mentioned for ease of access. For additional helpful information, make sure to view the comments section of the video.

The video can be viewed in its entirety here: https://www.youtube.com/watch?v=D8zIiPk3eNI&t=2s

1. At 6:03, we discuss creating a COVID-19 employee sick pay item. The video shows that the social security company tax is checked, which is no longer correct. To revert back to the correct tax settings, select the “default” button. The screenshot below demonstrates the correct tax settings:

 

2. At 7:17, we discuss creating a family sick pay item. To revert to the correct tax settings, select the “default” button. The correct settings are reflected in the screenshot below:

3. At 8:30, we discuss creating a child care pay item. To revert to the correct tax settings, select the “default” button. The correct settings are reflected in the screenshot below:

4. At 11:48, we discuss setting up a national paid leave credit. A second company contribution for the COVID-19 Medicare credit should have been created; Intuit later released information on this, and while the comments in the video contain this update, we wanted to ensure this information was easily accessible. The seven consecutive screenshots present the correct steps to take.

5. At 15:28, we discuss health premiums. These need to be apportioned to the COVID sick time pay.

6. At 17:51, we discuss payroll liabilities. The video shows that the Medicare employee additional tax is checked, however, it should not be. Instead, the following items sh0uld be checked off:

  • the federal withholding
  • the Medicare company
  • the Medicare employee withholding
  • the social security company (this should be zero for COVID pay)
  • social security employee withholding
We hope this clears up any questions about the COVID-19 sick pay and paid leave process. Make sure to view the comments for additional helpful information, and subscribe to our channel to be notified about future videos!