Consulting Business in Need of Guidance
Situation:
An individual set up a consulting business but had no idea how to set up her books or track her financial information. She was using a personal credit card to charge both personal and business expenses and was using her personal checking account for writing both personal and business checks and depositing all funds into the single account. Invoicing was sporadic and collections efforts were none existent. Payables were being paid when an invoice was received and cash flows were suffering due to these practices.
Solution:
When Bookkeeping Express first met with the client, even before an engagement agreement had been executed, we advised the consultant to establish a business checking account and credit card. We explained that this would allow her to differentiate revenues and expenses for the business versus personal expenses. This is necessary for tax purposes as certain personal expenses cannot be deducted but the business can deduct them. We also explained that separating the personal income from business income could save her in self employment taxes at the end of the year.
With that advice in hand, she decided to sign up with Bookkeeping Express. She also elected to have Bookkeeping Express invoice her clients and agreed to adhere to our policy on collection efforts. By the simple effort of calling and verifying that an invoice had been received by the client, days outstanding on receivables were brought down to an average of 31 days.
The company now has an understandable set of books that can provide an immediate picture of assets, liabilities and cash projections. When the company decides to grow and needs to obtain financing this information will give them the basics to understand how much they can borrow and how it will be repaid. The company will also have the necessary information to assure they are receiving the maximum possible tax savings because of the correct establishment of revenues and expenses.
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Consulting Business in Need of Guidance
Situation:
An individual set up a consulting business but had no idea how to set up her books or track her financial information. She was using a personal credit card to charge both personal and business expenses and was using her personal checking account for writing both personal and business checks and depositing all funds into the single account. Invoicing was sporadic and collections efforts were none existent. Payables were being paid when an invoice was received and cash flows were suffering due to these practices.
Solution:
When Bookkeeping Express first met with the client, even before an engagement agreement had been executed, we advised the consultant to establish a business checking account and credit card. We explained that this would allow her to differentiate revenues and expenses for the business versus personal expenses. This is necessary for tax purposes as certain personal expenses cannot be deducted but the business can deduct them. We also explained that separating the personal income from business income could save her in self employment taxes at the end of the year.
With that advice in hand, she decided to sign up with Bookkeeping Express. She also elected to have Bookkeeping Express invoice her clients and agreed to adhere to our policy on collection efforts. By the simple effort of calling and verifying that an invoice had been received by the client, days outstanding on receivables were brought down to an average of 31 days.
The company now has an understandable set of books that can provide an immediate picture of assets, liabilities and cash projections. When the company decides to grow and needs to obtain financing this information will give them the basics to understand how much they can borrow and how it will be repaid. The company will also have the necessary information to assure they are receiving the maximum possible tax savings because of the correct establishment of revenues and expenses.
Print this case study