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

Your supply chain starts when you acquire materials to create your goods for sale. It includes the production of your products and services. And it doesn’t end until the customer receives the product or service you offer, as well as any help required for them to consume your product. 

Whether your business is still being affected by supply chain delays and shortages in 2023 or not, it’s a good idea to take steps to make your supply chain as resilient as possible. In this article, we share a process you can add to your standard operating procedures to evaluate your supply chain and ensure it remains resilient.

Start with an Inventory of Your Suppliers

To evaluate your supply chain, start by making a list of your vendors. An easy way to get this vendor list is from your QuickBooks account. Organize your vendors and their contact information as follows:

  • Primary vendors that are crucial to your business. This includes vendors from which you purchase goods for resale, and can also be vendors such as your online shopping cart because if it goes down, you lose sales. These are your mission-critical vendors. 
  • Secondary vendors that provide support indirectly, such as maintenance to machines you use or vendors that provide human resource benefits. Your business won’t be terribly disrupted if something happens to these vendors.  

Once you’ve organized your vendor information, it’s best to focus on your primary vendors first. If this list is large, you may want to further prioritize your vendors by sorting them by most dependable.  

Contingency Planning

For each vendor on your primary list, do some research to find alternatives. You want to develop a deep bench of suppliers who can support your business. If one supplier has trouble meeting your orders, you will be more prepared and can consider switching. It’s a good idea to develop relationships with these alternate vendors, and perhaps even use them a time or two to test the relationship before your supply chain strains demand it.  

Many factors can go into selecting alternate vendors: price, quality, service, delivery time, shipping costs and methods, country of origin, location of warehouses, troubleshooting effectiveness, and much more. You know your industry and business’s needs best, so you can develop a table of criteria to evaluate potential new vendors. The ultimate goal is to have backup plans all along your supply chain.

Once you’ve gone through your primary list, you can move on to completing this process for your secondary vendors.  

Purchasing Department

Large companies have entire purchasing departments to do this kind of work. Even if your business is small, you may be still able to delegate portions of the list to trusted and well-trained employees. Know that this type of work can take a long time. It will also evolve over time, as new vendors spring up and older vendors retire or go out of business.  

Internal Operations Including Selling and Distribution  

Now that you’ve taken care of your suppliers, the next big step in supply chain efficiency is to standardize your operations. Take a look at your internal operational processes to ensure they are as efficient as possible. Create policies and procedures to ensure quality and customer satisfaction. 

This includes reviewing the production process as well as selling and distribution, all the way to customer service. You may have covered this while you assessed your vendor list, but if not, you can do it now.   

One example is how you get your product or service to your customers. Be sure there is an alternate method in case your primary distribution method breaks down. 

Again, this is a marathon, not a sprint. Take your time to do this project right, and it will benefit you for years to come. 

Risk versus Reward

In some cases, it may not be cost-effective to have a fully developed contingency solution; instead, there may be times when taking a loss is the more cost-effective solution. You’ll want to evaluate the circumstances and determine the right solution for your business.  

Taking the time to improve your supply chain resilience now, rather than in a moment of crisis, will create a more resilient, valuable, and profitable business.

As accountants, we understand the significant impact that employee turnover can have on a business’s bottom line. While high employee turnover is certainly an inconvenience, this pattern also comes with financial consequences. High turnover rates can lead to increased costs, decreased productivity, and even long-term damage to a company’s reputation. Keep reading to learn more about the financial implications of having high employee turnover in your business, and what you can do to help mitigate the issue.

The Costs of High Employee Turnover

To control the costs, we need to identify them first. Here’s a list of the most common costs associated with employee turnover.  

  1. Costs of replacing an employee through the hiring process
    • Job listings on Indeed, retaining a headhunter, etc.
    • Time spent screening resumes, scheduling interviews, and interviewing candidates
    • Paying to run a background check
    • Signing bonus, if applicable
    • Time spent onboarding a new employee, including setting them up in payroll, IT, HR, setting up equipment, purchasing business cards and name tags, and more.
  2.  Training costs
    • Time spent training the new employee
    • Costs of any required training courses on safety, sexual harassment, timesheet, and other required onboarding training, etc.
    • Costs of mistakes made by new employees
    • Productivity losses while new employees learn the ropes
    • Extra supervisory costs monitoring new employee
  3.  Vacancy losses
    • Costs of overtime while remaining employees cover vacant shifts
    • Productivity losses while the job is vacant
    • Disruption of peers, including fears of them being next if it was an involuntary termination

How to Reduce Turnover Costs

It’s clear that replacing an employee comes with financial costs. In fact, a recent study performed by Gallup suggests that replacing an employee costs a business one-half to two times the employee’s annual salary. So, what can you do to reduce this loss in profitability?

  1. First, analyze your company culture. Would you describe it as more positive, or are there toxic elements to it? Has the culture changed in the past year? Two years? Are employees citing burnout as a reason for their departure? Lack of opportunity for advancement? Ineffective management? Find out your weak links, and determine a plan to correct them. And remember: a pizza party won’t fix your company culture.
  2. Review your pay package. Consider paying slightly more than your competitors or providing above-average benefits for your employees. These don’t have to be expensive; we have an entire blog post on benefits that are less expensive yet more valuable to employees that you can find here.
  3. Consider overstaffing to release some of the pressure employees may be feeling. 
  4. Automate and streamline your hiring process. Having a more efficient process can keep hiring costs down when you do need to hire.  
  5. Hire slow, fire fast. If you do have a team member who is dragging the rest of the team down, you may not be the right fit for each other. 
  6. Train your first-line supervisors and managers to be excellent bosses. People skills and supervisory skills do not normally come naturally but can–and absolutely should–be learned. Many voluntary terminations occur because people dislike their boss.
  7. Be consistent with raises and performance reviews. Employees expect annual raises in most industries, even if it’s just a cost-of-living adjustment. Let employees know how they are doing on a regular basis, and formalize the process at least annually.  
  8. Conduct exit interviews. Find out why people are leaving by conducting exit interviews. You may have to dig deep to find out the real reason, as most people don’t want to burn their references. Take action if it’s something in your control.  
  9. Communicate purpose. Help employees understand the importance of the job they do, and help them connect to the deeper meaning of their job and its place in the world.  

Many of these ideas have costs associated with them, but your accountant can help you do a cost-benefit analysis to determine which of these approaches seems best for your business situation. You can spend money to improve employee retention, or you can spend money hiring a replacement.