I am a fan of a great software out there called QuickBooks by Intuit. It is the software that 80% of small business in this country use to track their finances.
While QuickBooks makes life easy for the small business owner to prepare sales invoices, receive the payment, and other daily accounting tasks, if you don't know what you are doing, then you may actually have a bigger problem on your hands -your books!
Unless you really understand debits, credits, and how they all relate to each other and how QuickBooks uses them, then you MAY be causing a bigger problem that your tax person will need to work with at the end of the year, which will cause you to spend more money than you need to at tax time.
When people tell me they use QuickBooks for their small business, I am happy for them. That means they at least have a good start. Then I ask them if they really know how to use it. Some smile and nod, others give me the blank "deer in the headlights" stare.
Please, if you are a small business owner, be sure you fully understand how the software works. If you don't want to hire a professional bookkeeper, at least hire someone to get you set up and then show you how to use the tools you have.
Tuesday, May 11, 2010
Tuesday, May 4, 2010
What exactly are liabilities, anyway?
Told you I'd come back to this one! You are a small business owner. You are the best at what you do. You have passion for what you do. Yet, you aren't quite sure what people are talking about when you hear the word, "liability". That's something your CPA will handle at tax time, right? Well yes, but no. You need to understand how to handle them prior to then.
Very simply put, a liability is something you owe. Things like business loans, car loans, bills you owe to vendors, and even the sales tax you collect for the city and state. Liabilities are listed second on your balance sheet. Together with the equity you have in your business they total your assets. There are 2 types of liabilites.
Current liabilities. These are those items that are due paid within a year, such as the sales tax paid to the state or local government that you have collected from your customers, and the payroll taxes you collect for the government from your employees' paychecks, as well as the bills you owe vendors for supplies or services.
Long-term liabilities. These are the items that are due payable in more than a year. An example would be the portion of a loan that is due more than a year from now. For example, if you have a 5 year loan, you might show the next 12 months on the current part of the liabilities section of your balance sheet, while the remaining 4 years will reside on the long-term portion of your balance sheet liability section.
Told you I'd come back to this one! You are a small business owner. You are the best at what you do. You have passion for what you do. Yet, you aren't quite sure what people are talking about when you hear the word, "liability". That's something your CPA will handle at tax time, right? Well yes, but no. You need to understand how to handle them prior to then.
Very simply put, a liability is something you owe. Things like business loans, car loans, bills you owe to vendors, and even the sales tax you collect for the city and state. Liabilities are listed second on your balance sheet. Together with the equity you have in your business they total your assets. There are 2 types of liabilites.
Current liabilities. These are those items that are due paid within a year, such as the sales tax paid to the state or local government that you have collected from your customers, and the payroll taxes you collect for the government from your employees' paychecks, as well as the bills you owe vendors for supplies or services.
Long-term liabilities. These are the items that are due payable in more than a year. An example would be the portion of a loan that is due more than a year from now. For example, if you have a 5 year loan, you might show the next 12 months on the current part of the liabilities section of your balance sheet, while the remaining 4 years will reside on the long-term portion of your balance sheet liability section.
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