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Quick quiz
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Each month I'll give you a new question.
Just reply to this email for the answer.
Where was Michael Jordan born? |
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Considerations for Accurate Payroll Preparation |
The greatest bookkeeping challenge for most small business owners is preparation of payroll. This is often the case even when the only worker is the owner and the business is incorporated. The corporate enterprise must treat the owner as both employee and shareholder.
Computation of payroll taxes as well as other paycheck additions or subtractions is tedious and complex. Many entrepreneurs outsource the function to payroll services. A substantial number of business owners deploy internal computer payroll applications. These platforms commonly interface with the company’s general bookkeeping system. Unfortunately, this frequently leads to a false sense of security that accurate accounting for payroll is automatic.
Careful input of employee data and details for each pay date is a manual process requiring great care. Scrutiny of the resulting payroll reports is a crucial step to assure the correct amounts and types of payroll taxes are determined and remitted. Most importantly, diligent examination of the business’s financial statements is essential for assuring that the payroll data has imported accurately to the bookkeeping accounts.
Periodic comparison of payroll information to the business financial statements is the best procedure for averting payroll accounting problems. This examination necessitates having both the company balance sheet and income statement as well as the payroll data. The income statement should have an expense account showing the amount of gross wages paid before employee taxes and other deductions. The expense account for payroll taxes should indicate the employer’s taxes only. The balance sheet will have liability accounts for deductions from employee paychecks and the employer share of taxes. |
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How to Win Big in Today's Economy
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The altered economic landscape presents innovative and nimble businesses
with opportunities to thrive.
Find out how by requesting my free
report "How to Win Big in Today's
Economy."
Just reply to this email and I'll send it right out to you.
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Longevity Secrets from Hundred-Year-Old Businesses |
Coming up in March is the anniversary of the invention of Coca-Cola in 1886. Over 100 years later, the thriving multinational has not only generated billions of dollars of revenue but also shaped pop culture in the process thanks to its constant innovation. It and other companies like it have a lot to teach us about longevity in business.
Let’s begin with the oldest American company on our list. Founded in 1837, P&G offers a diverse range of consumer goods. They’ve weathered many a storm thanks to investing in the research and development of market-disrupting innovations designed to make consumers’ lives easier.
On June 16, 2021, IBM will turn the grand old age of 104, and that’s likely due to its flair for reinvention. When it faced an $8 billion loss due to slow adaptation in the fast-growing personal computer market, management shifted its focus to helping businesses maximize their technology use. It generated an annual turnover of $77 billion in 2019.
In contrast, the 111-year-old American manufacturing company Crayola is an example of a company that’s stayed in the same business but figured out how to keep evolving. Over the years, it’s branched out into other kids’ products but has always focused on improving its core product. Crayola crayons now boast a range of colors and are even washable.
Across the Atlantic, the British know a thing or two about keeping businesses thriving over the centuries. Established in 1797, cheesemonger Paxton & Whitfield was once a favorite haunt of Winston Churchill. Now it’s staying close to customers and suppliers and responding to both their needs, and it was even one of the first cheese companies to have a website. |
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Worth Reading |
45 Cool Email Sign-Offs that Generate Replies
By Sophie Krokida
Moosend Email Marketing and Automation |
A strong sign-off will support
an email’s main message and
help to end on a positive note.
It expresses your personality to
a new customer and gives clues
to your intention and intended tone
when managing a team. Here
are creative ideas for effective
sign-offs, both in business
and personal relationships. |
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6 Tips for Dealing with an Angry Customer
By Brandon Gaille
Brandon Gaille, Small Business & Marketing Advice |
| Providing excellent customer service to an angry customer comes with its own "unique" challenges. The way these disgruntled customers are managed makes the difference between a customer who leaves damaging online reviews vs. one who feels satisfied, perhaps even delighted, at the resolution. Here are six tactics to turn an angry customer into one who feels seen, heard and valued by your business. |
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5 Top TED Talks on How to Change
an Industry (and the World) |
March will celebrate the anniversary of the first motion picture (1885), Alexander Graham Bell’s patent for the first telephone (1876), Coca-Cola’s accidental formulation (1886) and the day light was first created from electricity (1877). All of these changed the world of their time.
How do we change the world? How do we change an industry? How can we do things differently, challenge "the way it has always been" and foster innovation? Here are some insights from TED Talks that are all about ideas that can change the world.
The Art of Innovation. Famed marketer and author Guy Kawasaki shares his top 10 evergreen lessons about the art and heart of curve-shifting innovation.
Watch here
How Play Leads to Great Inventions. Many of today’s technologies have surprisingly been born out of good, old-fashioned fun. Pulling from history’s revolutionary ideas, Steven Johnson explains how "necessity isn’t always the mother of invention."
Watch here
The Puzzle of Motivation. Career analyst Dan Pink explains the research behind how our brain’s reward systems change when tackling a creative task. Incentives can actually harm creative performance, whereas autonomy, mastery and purpose are linchpins of highly engaged work that is productive and innovative.
Watch here
The Surprising Habits of Original Thinkers. Organizational psychologist Adam Grant studies "original thinkers" and shares the key ways these dreamers innovate to create tomorrow’s breakthroughs.
Watch here
The New Rules of Innovation. In this talk, Carl Bass discusses the five most powerful trends that are accelerating the rate of innovation at an extraordinary pace.
Watch here
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Links You Can Use - Leadership |
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With 2020’s setbacks and chaos, leadership development had to take a back seat. Quickly catch up on the latest tips, tools, training and techniques. |
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Working from Home in 2021: New Ways to Communicate with Your Employees and Colleagues |
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The latest guidance to help leaders foster an outstanding remote workplace environment. |
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From Remote Work to Organizational Health: 5 Ways to Help Teams during Uncertain Times |
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Consulting firm McKinsey & Co shares their top must-reads. |
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9 Great Tools
that Enable Employee
Engagement |
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Employee engagement is a two-way
street and a gift that keeps on giving.
Discover the latest tools to help
you fulfill your end of the bargain. |
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Leadership during COVID-19: Resources for
Times of Uncertainty |
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Free webinars and
white papers to
foster an attitude
of agility. |
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Some Business Costs Are Not Recorded as Expenses |
Learning one basic rule about business expenditures will vastly improve bookkeeping accuracy and avoid tax-reporting mistakes. This standard is simply the fact that some (but not all) purchases of items used in business are not expenses. These exceptions are assets.
Recording Assets
Business assets appear on the balance sheet, which is a key component of your financial statements. By contrast, the income statement has the incomplete picture of only revenue and expenses. The balance sheet shows you what happened to profit that remained after paying expenses with revenue. Over time, the balance sheet may indicate that profit was used to increase funds in the bank account or repay loans. Another use of profit is acquisition of fixed assets, such as new equipment, machinery or building improvements.
Great care is necessary to identify expenditures that should be classified as fixed assets on the balance sheet. Most importantly, accounting help may be necessary when you borrow money to acquire a fixed asset. The entire asset cost and loan amount are recorded. Loan payments are therefore not expenses or asset additions. They are reductions in the loan balances on the balance sheet.
Fixed Asset Tax Classification
Improperly recording an asset purchase as an expense results in understated profit. This upsets tax planning. For income tax purposes, the costs of fixed assets are deducted as depreciation over time. Complicating this matter is the variety of periods over which different types of assets are depreciated. Your accountant therefore needs not only the cost for a fixed asset but also a description and the date when it was first used in business.
As a general rule, depreciable fixed assets are property with a useful life of more than one year. But small assets are an exception. A screwdriver, for example, may be an office expense on the income statement, although it will last for more than a year. But a programmable robotic assembly machine should be classified as a fixed asset on the balance sheet.
The threshold amount that identifies when a purchase qualifies for expensing tends to vary based on business size. For small businesses, the U.S. Internal Revenue Service generally permits an expense deduction for any single item with a cost of less than $2,500. Anything with a greater cost and a useful life exceeding one year should be classified as a fixed asset. Its cost is then depreciated over the allowable length of time permitted by the tax rules for the type of property.
Additions to Asset Value
An especially complicated purchase to classify is an improvement to an existing asset. Expenditures that improve property are categorized as new assets. Improvements to buildings are the most common area of confusion. But the issue also applies to machinery.
In general, a cost that merely makes something operate better is an expense. Conversely, you’ve acquired an asset when you spend money that adds to the life of a property, expands its size or is crucial to its functionality. For instance, fixing a hole in the ceiling may be a repair expense, but replacing the entire roof is likely considered an asset. The IRS has threshold amounts to distinguish repair expenses from improvement assets. These quantities vary based on multiple factors. So checking with your accountant about the numbers that apply to your business is the ideal route for avoiding errors. |
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This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter. |
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