Seattle Small Business Blog

If you find yourself dealing with financial stress, it can be an exceptionally difficult time. However, you mustn’t let the stress take over your life. Even if the bills are piling up and the savings is dwindling away, there are steps you can take to reduce your stress and your debts.

The most important thing to keep in mind when you’re faced with financial troubles is to make a plan and stick to it. If you need help with this plan, it would be in your best interest to seek out help from someone removed from the situation.

Here are a few tips that can help you on your way:

1. Don’t spend money to relieve your stress. It’s often tempting to reduce stress by going out for meals, entertainment, and other activities. This is clearly counterproductive. Instead, use some free stress relievers such as a warm bath, a good book, or a social event with friends at home.
2. Accept your situation. Being unwilling to accept that you’re dealing with a hard situation can increase your stress. In many financial scenarios, you’re unable to control the situation. However, once you surrender control and accept it, you’ll feel better knowing that you can only do what you can to improve your financial outlook. It may take time, and that’s okay!
3. Don’t be risky. If you have investments that may be on the risky side, it may be time to re-evaluate and move them to more reliable returns. This security alone may ease your financial stress.
4. Discuss your problems with family. If you have a spouse, make sure you keep the lines of communication open. Many marriages suffer during times of financial stress, but with honest communication and careful planning, you can keep your marriage and family happy.
5. Stay Organized. Make lists and keep a calendar. It’s important to schedule time for relaxation, too. You’ll need some time where you can enjoy yourself without worrying about anything – especially your financial troubles.

Have a Plan

Simply having a plan to improve your financial problems can reduce your stress level. Plans and goals will help you keep things in perspective and show you that you’re making progress towards a better life.

You don’t need to do this alone. There are many professionals available to help you create a successful financial plan, even in your current situation.

Here are some items you may want to review before forming your plan:

• If you find that you’re spending more than you’re making, look for ways to cut expenses to a manageable amount. Remember, this doesn’t have to be permanent.
• See if you can pick up a part-time job or implement other ways to add to your income.
• Look into refinancing options for your current loans.
• Start using your debit card instead of a credit card.

Maintaining Your Health

People often forget how important it is to maintain your health. When your body is dealing with any kind of stress, it can take a toll if you don’t take steps to relieve it.

Next time you feel exceptionally stressed out, become aware of the state of your body. You’ll likely notice that all of your muscles are tense. Take a few moments to relax your muscles and take a few deep breaths.

While you may not have control of your financial situation, you do have control over how you feel about it. Focus on taking action to do what you can to improve your situation and know that better days are ahead.

As you build your business, it can be tempting to let tidiness and organization go out the window.  The truth is being messy & disorganized can cost you money!

Good organization is the keystone to making and saving money and if you want to do either, you’ll find that you can easily make some progress by organizing your business and your life.

Schedule Your Bills

The first expenses you have to worry about each month are your bills like the office rent or mortgage and utilities.

• Use a calendar, planner, computer program, or online banking account to schedule when your bills need to be paid. Delays can cost you substantial late fees and finance charges.

• If you set up electronic banking, make sure you understand exactly how the system works. Some programs will not allow you to make a payment on weekends or holidays while others may need a few days to process the payment.

• Pay your taxes on time or early.  Penalties as well as late charges are added if you don’t file the proper extensions. Hire a bookkeeper or an accountant to help with your preparation, especially if you work independently. Remember, you may be required to pay quarterly estimated taxes as well as year-end taxes and can be fined if you don’t file those as well.

• If you work independently, you may also want to consider paying your income taxes quarterly too so you don’t have to worry about them at the end of the year.

Organize Your Paperwork

All of your paperwork should be organized so you know exactly where your receipts, financial statements, and bills are filed.  There’s nothing worse than going in search of a needle in a haystack when a question arises.

• Minimize paper in your work area. Everyday take a look at your desk and think about what pieces of paper you can immediately get rid of.  A wastebasket by your desk is essential, as is a shredder to prevent identity theft.

• Utilize file folders or a portable file container instead of having piles of papers on your desk or countertops. This will prevent you from losing important pieces of paperwork under a landslide of unimportant junk.

Consult with a Financial Advisor

Whether you have a substantial investment portfolio or just want to get started, consult with an expert who can help you reach your financial goals. By organizing your finances, you’ll not only save money, but make it too!

• If your current investments aren’t performing well, an advisor can help you move the money around to better performing funds that earn a higher yield or give you greater dividends.

• If you don’t have any investments, an expert can listen to your financial goals and recommend an investment plan for achieving those goals. Even starting off modestly will often bring you some annual dividends. Every little bit helps!

Consolidate Your Debts

Get in control of your money by consolidating large debts with one loan. Research which banks or credit cards will give you the lowest interest rates and consolidate your payments into one. This will save you money by paying fewer interest fees, but you must also limit your spending until the debts are paid off.

• Ask a mortgage broker about refinancing your home or taking out a home equity loan to consolidate debts.

Be in control of your money and your life by evaluating your accounts regularly and staying organized. A little bit of work each day and regularly monitoring your progress will help you reach your financial goals.

Your attitude about life is one of the most important factors for success. A bad attitude gets you nowhere, while a good one can provide you with enough motivation to succeed beyond your dreams.

You may think that you already have a success-mindset, and perhaps you do. However, you can always benefit from strengthening that attitude and therefore increasing your chances for the success you deserve.

Follow these strategies for improving your attitude for success:

1. Find your inspiration. Discover what inspires you the most and use it to jumpstart your motivation whenever you go. Feeling inspired enables you to maintain the drive necessary to find success. Do anything you can within your power to find inspiration.Make a list of your ultimate dreams, and then ask yourself if you’re on the right path. If you are, you’ll know that everything you’re doing will be rewarded.

• If you don’t feel like you’re on the right path, perhaps it’s time for a change. Maybe there’s a deeper reason why you’ve felt a lack of motivation. Reflect on what this reason might be, and then decide on how you can renew your drive. When you’re on the right journey, you’ll feel inspired!

2. Surround yourself with positive people. When you’re around positive and inspiring people, you’re more likely to adopt those traits into your own personality and go for your goals with enthusiasm. Negative people, on the other hand, tend to make you negative also.

• If you must be around people that continually bring you down, do your best to avoid taking what they say to heart. You know that they don’t speak the truth. Keep the peace as best as you can to get through these situations and then move on.

3. Take a leap. The best way to improve your attitude might be to just jump right into life. Don’t be afraid to take initiative and plunge forward towards your goals. People who take action find success. If you take action and start to see the results of your efforts, your attitude will only improve.

• The increased drive and motivation you get from your actions can be the difference between success and failure.

4. Strengthen your focus. Your focus can also play a role in your attitude. When you maintain driven toward success, it’s easier to have an optimistic attitude. If you have a lack of focus and don’t know where you’re going, it leads to being unmotivated and uncaring.

5. Allow for mistakes. You’re only human and you will make mistakes from time to time. Be careful to avoid judging yourself harshly when this happens, as it negatively affects your self-confidence. If you work on more of a “go with the flow” attitude, you’ll find that you’re able to pick yourself back up and continue moving forward when you do make a mistake.

The main things to keep in mind are that the combo of inspiration, positive thoughts, and proper motivation can lead you to a healthy and positive attitude. Follow these strategies daily and you’ll notice a boost in your spirits!

Finding ways to cut back on your spending can help you during a difficult economic period. Saving money is always good, but it’s a skill that becomes especially important during a recession.

“How is it even possible to save money during a downturn?” you might ask. It’s all about planning, cutting out the really frivolous costs, and changing the way you think about spending money. You can use these tips both at home with your family or in your business.

Here are some handy tips you can use to help you save money:

1. Pay important bills first. Decide what is most important to you and your family, or your business and your partners and agree to pay those bills first.
2. Save money on meals. Groceries and business meals are a huge, yet necessary, expense.

• Buy generic rather than name brands. They usually taste just as good but cost less.
• Order a tall cup of tea instead of a vente latte. In addition to being more wallet friendly, this could be more waist-friendly too!
• Buy non-perishable foods in bulk. Many items can be bought in bulk such as rice, canned foods, and frozen foods.
• Schedule business meetings in between meals and at coffee shops instead of restaurants. Brownbag your lunch and eat with your co-workers or employees instead and build up your relationship with them.
• Never shop on an empty stomach. Eat before grocery shopping; otherwise, you’ll wind up buying more junk and convenience foods because you’re hungry.
• Keep snacks in your office. If you absolutely have to run out in the afternoon if you get hungry between meals, you will have little choice but to spend the money. Keep snacks with you at work just in case.
• Make a list of what you need at the grocery store and stick to it. It really is that simple

1. Rent movies instead of going out. Have a movie night once a week. Sit down with some popcorn and watch a movie. This is a great way to spend quality family time, without much expense.
2. Only buy things that you have the money for right now. As much as you can, pay cash or debit instead of using a credit card.
3. Cook at home. If you go out to eat two or three times a week, cut back to once every two weeks or once a month. Instead, learn to cook at home. If you plan ahead and cook in quantities, you’ll save time and money by popping the extra portions into the freezer.
4. Unplug. If there are things in your house plugged into the wall and you aren’t using them, unplug them. Many items, like computers and phone chargers, draw electricity whether they’re on or not. Plug it in when you need it, then unplug it when you’re done.
5. Check your thermostat. Setting your thermostat just a few degrees higher or lower than normal can help save a chunk of money on your energy bill. If you take the weekend off, turn the thermostat off at the office.

These are just some of the many ways to save money and stretch your dollar a bit.

We all need to relax every now and then. Relaxation, stress relief and improved health go hand in hand, and we all want to be healthy and performing our best. However a massage or spa weekend or non-working vacation is not always something we can squeeze into our budgets, much less our busy schedules.

What if we want to find some simple ways to relax without breaking the bank? There are many of them out there and it’s easier than you think!

Here is a list of ideas for zero cost ways to relax:

1. Light Exercise. A great way to relax is getting some light exercise. This can mean going for a walk around the neighborhood or playing a low impact sport. Exercise has been known to help the body relax and engaging in non-intense exercise will help your mind to unwind as well.
2. Meditation. Taking up meditation is one of the most relaxing activities you can engage in for free. All you need to do is sit in silence and focus on your breath. When negative thoughts arise, acknowledge them, and then let them go. Try doing this for 5-20 minutes each day.
3. Take a Nap. Babies and toddlers aren’t the only ones that can benefit from a nap! You may even feel relaxed and rejuvenated after a simple 15-minute snooze. You don’t need to completely fall asleep to benefit from this activity.
4. Shoot the Breeze. Go to a friend’s house or talk to a friend on the phone. Chances are you have one of those friends that you can chat with as if no time has gone by since you last talked. Old friends usually provide great opportunities to talk about the good old days.
5. Listen to Music. Grab the MP3 player and chill out with some great tunes. Pick out a group of songs that you find especially relaxing or rejuvenating. Classical and other light songs usually work best for naps, while music you just got to dance to is great for replenishing your energy during a long day.
6. Read a Book. Go check out a new book from the local library and start reading. It may even be a fun activity to read one of your favorite books over again.
7. Take a Hot Bath. Take a hot bath or shower. If you’re taking a bath, add in bubble bath soap, play some music you enjoy, and remember to turn off your phone ringer. This is a simple way to have some peaceful time just for you.
8. Look at Old Photos. Bring out some old photos from your childhood or the photos from a fun trip you took. Remembering some of your treasured moments will make you smile and relax for sure.
9. Play Board Games. When was the last time you played your favorite board game? Dust off the old Monopoly or Scrabble, prepare some snacks, and play a few games with your family or partners. Incidentally this is also a great team building activity for you and your employees. It’ll be fun for all!
10. Daydream. Allow your mind to wander and dream. Escape to where you’d like to travel one day. Think about what your life will be like in the next 5, 10, or 15 years and write these thoughts down in a journal for you to read later.

Endless Possibilities

These are just 10 simple ideas when it comes to relaxing the zero cost way. Stay creative and remember that it’s okay (and healthy) to not be in motion every second of every. You can either hang around doing some self-reflection, or you can hang out with friends or family, whatever it is, do something fun!

I just paid a bunch of vendor bills using credit memos that we have on file with that Vendor. There was a little left over on the final invoice, which was paid by check. However, the check stub only lists one invoice and one credit memo, but I know that’s not right.  How do I get a list of all the other invoices that were paid using the credit memos?

There’s no built-in/easy way to do it. It will require that you create and customize your own report to give you exactly the data you’re looking for and nothing else.  Here’s how:

• Do a “Find”  (Ctrl-F)  and go to the Advanced tab
• then click on “Date” in the Filter list and select “This week,” “This month,” etc., or choose the specific date you recorded the transactions
• then click on “Name” in the Filter list and select the name of the Vendor you’re working with
• then click on “Transaction Type” in the Filter list and select “Multiple”
• then in the “Multiple” screen select Bill, Bill Payment, and Bill Credit
• then go back to the main Find window and select “Paid Status” in the Filter list
• then check the button next to “Paid”

That should show you all the bills that were paid to that Vendor, and their corresponding payment method, whether by Credit Memo or Check.

Click the “Report” button to the right of the screen, and it will give you a printable report. You can also “Memorize” it (button at the top), in case you might need to perform a similar search in the future, for this or any other Vendor. You can further customize the report by clicking on the “Modify Report” button, also at the top of the screen.

-Veronica

Q: I noticed that Owner’s Draw is not showing up in the expense column of the P&L statement, is there a reason why?

Treatment of an owner’s compensation is determined by what type of entity/taxation structure your business is operating under.

When you are operating as a single-member LLC (taxed as a Sole Proprietor), Owner’s Draws are not considered Expense transactions. They are Equity transactions, which show up on the Balance Sheet, not the Profit & Loss.

In a single-member LLC (as well as a partnership LLC), all the profits/losses of the business flow through to your personal tax return and are considered to be the “Owner’s Equity” in the company. If you decide to take money out of the company, it is not considered an Expense — just as if you decide to put money into the company, it is not considered Income.

If your business entity were a Corporation or an LLC taxed as Corporation, then you would be taking a Salary instead of Draws. In that case your Salary, as well as all your company-paid Payroll Taxes, would show up as Expenses on the Profit & Loss.

If you really want to include your compensation on the P&L, we can create an Expense account for “Management Fees,” which will reflect all the Draws you take throughout the year. At the end of the year, we would need to make an adjustment to move that “Expense” back over to the Equity section of the Balance Sheet, since it is not allowed to be included as an Expense on your Federal Income Tax return.

I know this can be a difficult concept to grasp right offhand — but then again, so is most Tax Law. Let me know if you need any further explanation…

-Veronica

Q: I’m still learning QB, so can you walk me through merging the vendors?

Merging vendors is pretty easy:

• Go into Single User mode
• Then go to the Vendor Center and decide which vendor name you want to keep. I usually go with the one that’s either 1) oldest, or 2) has the most transactions posted to it.
• Double-click on that Vendor’s name in the list, copy the name as it appears in the top-most field of the Edit Vendor window, then close that window.
• Now double-click on the name of the Vendor you don’t want to keep, and paste the copied name into the top-most field. Click OK or Save (whatever the button is called) and QB will ask you to confirm that you want to merge the two Vendors.
• Say yes and you’re done.

The other option is to just make one of them inactive (right click the Vendor’s name in the list and choose “Make Inactive”), but that makes the Vendor’s name disappear from the list in the Vendor Center. If we ever want to see our complete history with that Vendor, we have to remember that there’s a second one that’s inactive, and search for it separately. Most of the time, if you’re looking for historical transactions and you find a Vendor that’s active, you’ll stop there and won’t bother continuing to look for duplicate/inactive Vendors that may provide additional history.

If you merge the two, then you will have all the transactions available to view under just one name, which will stay active and easily viewable without having to take any additional steps. 

-Veronica

Question:  I added three payments I received this week through “Receive Payments” and showed that I received all 3 through my PayPal account.  These payments are now associated to the A/R account, but I can’t seem to edit the account they are associated to (it should be Products/Services income, right?)

Perhaps you can explain how to do this?

A/R is the correct account to which payments should be posted. The Income account is affected when you create the initial Invoice and specify which Products/Services you sold to that person.

When the invoice is created, it posts “Income” to the Products/Services accounts, and an offsetting amount is posted to “Accounts Receivable,” since you have not yet received the actual payment. When you receive the payment, the appropriate amount is then moved out of Accounts Receivable and into your PayPal or your bank checking account (whichever account the payment originally posted to). This decreases your A/R account and increases your bank account.

The only time this workflow would be different is if you did not invoice the customer, but you did receive payment — i.e. the customer paid at the time of purchase, so you never issued an Invoice. In this case, there are two ways you can handle this:
1) Create a Sales Receipt (best/most “correct” way), by going to Customers > Create Sales Receipts
2) Enter the deposit directly into the PayPal or bank checking account, by going to Banking > Make Deposits

A Sales Receipt is just like an Invoice, but instead of issuing an Invoice and collecting payment later, a Sales Receipt combines the two and shows that the payment was received at the time of the sale. It’s filled out the same way as an invoice — you select the products/services the customer purchased, QuickBooks calculates sales tax, etc. You just don’t have to go back in afterward and do the Customer > Receive Payments step, as you would with an Invoice.

If you enter the deposit directly into the bank account, you are not able to select which items the customer purchased. You are only able to designate the name of the customer and which “type” of income you received — Sales of Products or Sales of Services. You also cannot auto-calculate Sales Tax using this method.

The proper way to do it would be to always enter an Invoice if they customer will be paying later; or to always enter a Sales Receipt if you collect payment in advance or if the customer pays in full at the time that the order is placed.

Until you’re routinely invoicing all customers through QuickBooks, there may be some discrepancies, but part of my weekly review process includes checking Accounts Receivable and Accounts Payable to make sure they are reflecting the appropriate amounts. If I do see a customer who has a balance due or a credit balance (meaning that you received payment against the A/R account but there was no invoice to match it to), then I will either fix it myself, or ask you for more details if it’s unclear.

Let me know if you need any more info on this process. It can be a little abstract to try to wrap your head around it, until you see it in action.

Let’s begin by defining what a small business expense is.  You spend money on your small business simply to carry on your business.  In other words, in order to trade whatever it is you trade, it costs you money.  If your business is designed to make a profit, the cost of operating your business is often deductible in the preparation of your tax return.

According to the IRS, a business expense is deductible if it is “ordinary and necessary.”  If your trade normally has a certain expense, for instance, a quilt maker’s fabric, then the cost of fabric is considered an ordinary expense.  If your business needs to spend money on something that is helpful to your trade, for instance, it helps if you advertise your quilts, then those advertising costs would be considered appropriate and helpful to your business, and necessary.

If you produce goods to be sold, you have expenses involved to produce those products.  Again, if you produce quilts, you have fabric, batting, and thread.  However, along with these raw materials, you may have the freight it costs you to receive your materials, costs to store your materials, factory costs, and possibly even labor costs.

There are complicated rules for determining what costs can be deducted as direct expenses.  Depending on your business, you may have indirect costs to consider such as rents, interests on loans, handling costs, and even administrative services.  Your tax accountant will sit down with you and make these determinations by reviewing the current laws and regulations of the IRS.

Some costs to your business are not considered “expenses” – at least when it comes to a simple deduction on your income taxes.  Capital expenditures fall under three classifications:

• Start up costs
• Assets
• Improvements

These three classifications make sense when you take a look at the items you have to create and maintain your business.  Getting back to the quilting business, you have sewing machines and tables, for instance.  You can see that those items are not going to go out the door to make you money. These items will not be deducted as expenses, but rather as a capital expenditure on an amortization schedule.

Business Expenses v. Personal Expenses

Small business owners often operate a portion of their business in their own home, using their own income, their own time, and their own car.  You cannot deduct your personal or family expenses, but you are allowed deductions for those costs that are exclusive to your business, even if those expenses occurred in your home. Two common examples follow:

• Business Use of Your Home – There is a strict division between personal and business expenses, and you must prove your square footage, utility bills, maintenance, and rent or mortgage, used for business purposes.

• Business Use of Your Car – Many small business owners use their own family car for business. If this is the case, the actual mileage must be tracked in order for the business mileage costs to be deductible.

There are many deductible expenses that fit within these direct expenses categories.  You’ll need to sit down with your tax accountant to work through the differences between business expenses to be deducted directly and those expenditures that should be capitalized.  Follow your accountant’s advice, keep good records, and tax time should go smoothly.