Accounting

Helpful People to Have On Your Non-Profit Team

Posted on Monday at 5:00

Chances are you do not specialize in every area of business necessary to get your non-profit organization off the ground. There are some people with whom it will be necessary to ask for or hire for their ability to help you.

Mentor

As much as you read about starting a non-profit, it will always be helpful to have access to someone who has gone through the process before. Hopefully you already have someone in mind to talk to, but if not you can look up another non-profit manager in either your local area or in your field of non-profit on Council of Nonprofits, or do an internet search to find more non-profits in your area.

Attorney

Although you probably prefer to resolve business issues on your own, some issues are more efficiently dealt with by an attorney. Some attorneys specialize in working with non-profits. Ask your mentor or anyone else you know in the non-profit world for suggestions. A recent shift in the legal world is the increasing presence of lawyers who are willing to work with you collaboratively or as a coach, rather than the traditional “all-or-nothing” approach. Make sure to ask a prospective attorney if they would be willing to help you collaboratively if that is something you are interested in doing. It might help you save money on legal expenses.

Accountant/Tax Professional

If you qualified as a 501(c)(3), tax deductions are both a huge benefit financially and a significant amount of paperwork and time. Especially if you are a new non-profit, it is important to ensure tax filing accuracy to avoid delays or the revocation of your 501(c)(3) status. Having this paperwork completed or reviewed by someone who specializes in it may be a necessary expense.

Tags: Startup Team

5 Rules for Your Cash Flow Plan

Posted on Thursday at 6:30

Critical to your success, cash flow.

Create an effective plan for positive cash flow with five basic rules. Every business owner should have an understanding of his or her cash flow situation – sales minus expenses. Positive cash flow is critical to continuing business operations.

Forecast realistic monthly sales. It is very important that you don’t optimistically estimate sales figures. Base these numbers around historical data or worse-case scenario figures. The estimates set should be easily attainable. This is necessary to ensure the business creates enough revenue to continue to operate.
Plan for timing of receivables. Sales made with payment terms can take weeks or months to become available cash for operations, while cash and credit card sales are immediately accessible. Depending on your business, payment terms should be set and plans should be made so that operations will not be negatively impacted by this fluctuation in timing.
Consolidate base operating expenses. Your business will have a set of predictable monthly operating expenses, often including rent, payroll, and utilities. These should be consolidated into one operating expense to be the baseline for the amount of cash that must come in to keep the business running.
Keep cash available for growth. Businesses often fail because they can’t afford the capital necessary to support growth when the opportunity arises. Project the expenses that will be required when an increase in sales occurs. This could include equipment or additional employees. Cash from the new sales will unlikely be available before costs are incurred for expenses, so be sure to have this on hand.
Recognize and plan for the known unknowns. Scenarios may develop for your company when cash is needed in order to capitalize on an unusual opportunity. Create a comprehensive list of possible unknowns and their associated expenses. Every cash flow forecast should include a contingency plan with funds to cover an unexpected situation.

Tags: Cash Flow, finance, Operating Expenses

How one small business dealt with owing the IRS $15k

Posted on Tuesday at 10:22

When Debra Locker Griffin realized she owed the IRS $15,000, it became one of the biggest nightmares for a small business owner – not having the money. But luckily, Griffin found a way to pay the IRS and shared her story so other small businesses could avoid this situation.

The problem started with a hired accountant that Griffin rarely checked up on, and that rarely checked up with her. There had been no communication until the news came from the IRS and this can easily be avoided by regularly checking up with your accountant. The solution started with Griffin first receiving a line of credit for her bank to the sum of $8,000 and withdrawing $3,000 from her personal savings. Lastly, Griffin contacted the IRS to request an installment plan.

Due to her proactive efforts, the IRS accepted her proposal and begun an installment plan to be paid off over a year and a half. Small business owners should be aware that the IRS allows for installments – note that there are late payment charges and interest on unpaid taxes.

To read Griffin’s full story, read the article at The Washington Post.

Your Startups Pre-Launch Checklist: IRS Information (Part 2 of 14)

Posted on Thursday at 5:42

How to Get a Federal Tax ID

Photo By Calita Kabir*

Before your new venture gets started, its important that you let the Internal Revenue Service know of your startup. Giving the IRS your business information is a key step in the pre-launch phase because it allows the IRS to collect taxes on your business and allows you to perform other pre-launch actions. In this post, we will go over the most common way to let the IRS know of your startups existence, which is applying for a Federal Tax Identification Number.

What is a Federal Tax Identification Number?

A Federal Tax ID is also known as an Employer Identification Number, or EIN. Your startups EIN is a permanent number used to identify your new venture and is necessary for other important operational procedures such as opening a bank account, applying for a business license, and filing your taxes. If you are wondering if your new venture needs an EIN, take a look at the six questions below and apply them to your small business. If you answer yes to any of them, youre going to need a Federal Tax ID.

Do you have any employees?
Do you operate your business as a corporation or partnership?
Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
Do you withhold taxes on income, other than wages, paid to a non-resident alien?
Do you have a Keogh plan?
Are you involved with any of the following types of organizations?
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrator

How Do I Get My EIN?

Applying for an Employer Identification Number is free through the IRS and can be done:

Online
By Phone
By Fax
By Mail

Getting an EIN online has become the preferred method for entrepreneurs over the years. After you filled out and completed the application, a Federal Tax ID will automatically be issued. However, it will still take the IRS two weeks to put your companys EIN into permanent record, so keep this in mind before you start applying for bank accounts and other business needs. For more information on this process, visit the Internal Revenue Service.

Come back Tuesday where we will go over the importance of a Business License.

*http://flic.kr/p/8NpGme

Tags: Pre Launch, Pre-Launch Actions

What is in a Business Plan: Financial Projections (Part 11 of 11)

Posted on Monday at 6:49

Photo by Rob Lee*

Time For Completion: Approximately 35 hours

Financial statements are a very important part of your business plan. They give you an idea of how your business would be performing according to the market assumptions and the business model you choose. Ask somebody already in the business, or call service providers and ask them how much it will cost. This is great to start building your financial model.

Whats in it?

The Financial Projections section should include an Excel spreadsheet that can help you in preparing your projections. It usually includes key metrics such as the startup expenses, marketing goals, unit sales and costs, personnel, P & L, cash flows and finally it includes the balance sheets. The first years projections are prepared month by month, then annually for the following two to four years.

Why its Important

Your financial projections give you an idea of how your business should be doing at any moment in time. It also shows your potential investors how you will be profitable over time. You have to be as realistic as possible in estimating your initial costs as they will determine how you will start your business as well as your expected profits. A business can easily fail if they honestly believe that they will sell more product and services than their market research suggests is possible. Therefore, financial statements in a business plan should always be conservative so they are believable. Ask somebody already in the business, or call service providers and ask them how much it will cost. This is great to start building your team and determines how much cash you need to reach profitability.

Thank you for reading the 11 part blog series on What Goes Into a Business Plan! If you would like to see an example of a great business plan, we have a free sample on our website.

*http://flic.kr/p/cNdyo

Tags: Business Plan, How to