Don't Make these Mistakes when Hiring for Your Small Business

The success of your small business often hinges on how productive your employees are and how well they work with each other and your customers. But finding staff can be time-consuming and costly. To make sure your get the right workers, you want to avoid the following mistakes.

• Looking for perfection. With so many people looking for work, you're sure the perfect candidate is out there. So you interview person after person and turn each one down because they don't have the exact qualifications that you need at the salary you;re offering. Unfortunately, the perfect applicant does not exist at the price you can afford. Stick to two or three must-haves for your employee and two or three deal-breakers. Once someone meets those criteria, hire him or her.
  
• Using gut feelings. Using your feelings is great when planning a date or doing something nice for someone. But you can't afford to hire people just because you like them or because they look good in what they're wearing. You must base your hiring decisions on hard data. Don't just take their word that the information in their resumes is correct. Look for facts by calling the contacts they list or by searching for their achievements on the Internet.
• Rushing. When someone announces that he or she is quitting, you immediately go into panic mode because you can't afford even one day without someone at the position. You then rush to fill the job with the first warm body you see. Slow down or you're more likely to make a mistake. Offload the most important tasks to other employees and put less important ones on hold. Then take your time to recruit, interview and recruit the right candidate.

If you avoid these missteps, you're more likely to hire someone who can contribute positively right away. For more information on improving your small business, please contact us.

Employee Management: Increasing Work Force Optimization Through Pay-per-Performance Metrics

When it comes to employee management, there are many things to consider. But the most important is motivating and keeping good employees to keep doing their jobs efficiently. 

If you want to maximize workforce optimization and improve your employee management, consider using a "pay per performance" pay plan. Research indicates that paying people according to their abilities and strengths, and rewarding them for excellent work increases their future performance, and creates a system that pays fairly and reliably. 

While some might argue that it favors those who are more skilled, isn't this how the real world operates? Think about the last time you went through a fast food establishment and had orders left out, orders messed up, and money short-changed, then ask yourself why. Is it just carelessness or is it that the workers don't care because they are all being paid the same thing? At the heart of a PPP model, is the basic truth that people should be rewarded for their hard work above those who only do the basic requirements.

To implement a "pay per performance" based system within your business, here are a few things to keep in mind:  

• Establish a metrics system which is succinct and fair to all parties.
• Have regular training sessions to increase motivation.
• Establish coaching and mentoring programs.
• Have contests for extra perks and incentives.
• Give bonus pay for outstanding performance over time.
• Move outstanding workers into "management" or coaching roles.

These are just a few ways you can increase motivation among your current staff, while training new employees and independent contractors to perform at the most optimal level to keep customers happy. Using "pay per performance" metrics to maximize performance involves establishing a set system of rules and expectations and then assignment a specific money amount to the performance levels. It can include giving bonus pay for extra sales, prizes and giveaways for dedicated agents, special mentoring arrangements, and others.

There are many other ways this can be carried out. The main thing is to have a base pay, then allow workers to "reach for the stars" by gradually improving their performance over time. By allowing workers a chance to "shine," and increase their income, you will see an improvement in sales and work performance because they are more motivated to achieve at higher levels. There will always be those who are happy where they are, and that's okay. But the higher achievers can rise above the others, and the results will be increased sales and benchmarks for your company, so that everyone's a winner.

We are experts at moving companies forward by recommending better options to their current marketing strategies and employee management and sharing information through out business publications and webcasts. If we can help you move forward with your vision, contact us.

Job Costing Explained

Job costing is the process of assigning costs to the development of custom products or services. This method of determining costs is utilized when the products or services which are being produced are unique, and it is therefore easier to trace direct labor and direct materials costs to these individual jobs. Job costing is the opposite of process costing, which is implemented when products or services are mass produced and are uniform, and instead of assigning costs to individual jobs they are spread out over the entire project. The information obtained from job costing can be used for various purposes, such as reporting inventory and cost of goods sold values, developing cost estimates, measuring actual costs for the purpose of comparing them to estimated costs, and developing cost estimates.

Job costing is often mentioned in reference to construction projects, but it can be used in any situation where something exclusive is being created. There are three types of expenses which must be accounted for: direct materials, direct labor and overhead. In job costing direct materials and direct labor expenses are assigned directly to the project. Overhead expenses are allocated, as it the case with process costing.

When direct costs are traced back to individual jobs, there is usually little uncertainty regarding these costs. However, not all direct costs should be traced. When direct costs are relatively small, the expenses associated with tracking these costs are often greater than the costs themselves. In these cases it is generally preferable to classify such small costs as overhead.

If you are interested in implementing a job costing system, contact us today. We will review your business model and help you set up the most appropriate accounting system for your firm.

Employee Christmas bonus and Year End Bonus, what you need to know!

Are you thinking of giving your employees a Christmas bonus, holiday bonus, or year-end bonus? What’s the best way to handle these year-end bonuses? Can they be handled ‘under the table’? Do you have to include them as wages on their W-2?

The answer to this question is quite simple. Any additional compensation to your employees over and above their standard salary or hourly rates is considered to be taxable compensation. The bonus is considered wages and must be reported as payroll on the employee’s W-2 and is subject to all applicable payroll taxes – federal and state withholding, FICA, Medicare and the related employer taxes.

On your books and records, the bonus is reported as wages on the income statement and it is fully deductible as a valid tax deduction if it is handled this way. Payments to your employees made in cash (and not reported) or recorded as other expenses are not tax deductible, and may cause unforeseen issues if the IRS or state audits your books.

Many employers like to give a flat dollar bonus amount. You can do this by choosing the amount of the bonus you want hand to your employee and “gross-up” the amount. By grossing up the flat dollar net amount, you are including the estimated taxes into the amount so that, after taxes, the amount is what you want to provide your employee.

The only way you can exclude the bonus payment from the employees’ W-2, not pay associated employer payroll taxes, and still get a tax deduction on your business tax return, is to make the bonus as a profit sharing bonus through your 401(k) profit sharing plan. Although your employees don’t get the bonus in cash or check, the bonus is completely non-taxable to the employee until they withdraw the funds from their plan, and you avoid paying the payroll taxes associated with paying the bonus in cash or check and including it on their W-2.

Employee Handbook: Your Best Defense

Although it is standard practice for large companies to provide staff with an employee handbook, this is

not always the case in many small and mid-sized companies. Some smaller companies do not have an HR presence and thus may not have the expertise or time to write policies. Other companies simply prefer to take a more flexible approach, and deal with issues as they arise, rather than setting up policies that apply to all employees. Whatever the reason, failing to have an employee handbook can cause problems for employees, managers, and even the company.

Of course the purpose of establishing policies is to provide guidance for how specific situations will be handled within the organization. Without policies, managers have to make a decision every time the issue arises and if the matter comes up only infrequently, they may have a hard time remembering how they have handled it in the past. This can prove frustrating for both managers, who have to make the decisions, and employees, who simply never know what to expect.

But the primary reason why all companies, large and small, need to have an employee handbook is that having – and following – established policies will be your best line of defense in the event of a lawsuit or EEOC investigation brought by an employee or former employee. In discrimination cases, the issue is generally whether or not a certain individual or group was treated differently because of their membership in a protected class (gender, race, religion, etc.). When managers are left to decide policy questions on an individual basis, it is inevitable that some inconsistencies may occur and it will be very difficult to prove that these discrepancies were not due to discriminatory reasons. On the other hand, when you can present an employee handbook that clearly states the company’s policy, as long as you have not deviated from these policies, you will be able to show that you did not discriminate, but rather followed your established procedures.

Despite the benefits of having an employee handbook, it can be a daunting undertaking. Even if you do have HR professionals on staff, they may not have the time or expertise to complete such a project, and outsourcing this work is often the most cost-effective option. For information on how we can assist you with this important task, please contact us.

Downloading Your Transactions Into QuickBooks Is Not Reconciling!

Believe it or not, computers can make mistakes sometimes.  We live in an age where data entry for bookkeeping is getting faster and faster via downloading or importing transactions.  When the financial institutions communicate with QuickBooks a lot of information is exchanged and errors do occur.  This is why the reconciliation step is so important.  Every so often we will review a set of books and the credit card accounts are not reconciled.  'Why would they be off, I downloaded all the transactions' is the response we get when we point out the credit card balance is completely wrong.  This is when we always have to tell the client that downloading is not reconciling.  In addition to reconciling each time you download data you should look over renaming rules too.  

Renaming Rules Errors  

When dumping data in QuickBooks via the bank import the user will get hit up with a lot of prompts and questions.  If you aren't careful and you are cutting corners your Renaming Rules can get royally screwed up by clicking Yes or OK without reading what the prompts are telling you.  Once the Renaming Rules get screwed up, you won't know the scope of the damage until you review these rules.  

When in the Bank Feeds or Online Banking screen (this label varies from QuickBooks 2013 to 2014), click on the Renaming Rules link and then start reviewing the rules that QuickBooks has generated based on your previous imports.  Recently, I caught a renaming rule that categorized all items with the term 66 in it to vendor Sinclair and gas expense.  This caused all imported transactions that have 66 in the sequence code being booked as Sinclair and being a Gas Expense.  This greatly skewed the expenses for the year and threw the financial budgets out of whack.   Monitoring Renaming Rules might be tedious, but it is well worth doing a few times a year to make sure the books aren't suffering from a Renaming Rule error.

Banking and Credit Card Institution Upgrades

Banks and credit card providers are constantly updating the software, programming, etc. and this can cause issues with the QuickBooks data import.  During a recent consultation, I noticed that Key Bank rolled out a new website several months ago and the Bank Feeds had to be re-established.   For some reason, re-establishing the Bank Feeds were ignored and the bookkeeper reverted back to manually entering data, ultimately making a big expensive mess.  Not only is this a bad bookkeeping practice, but its easily avoidable if you take 5 minutes to link the two programs back together.  

First, right click on the account within the Chart of Accounts > Edit > Bank Feed Settings, then select 'Deactivate All Online Services' and Save & Close.

Once online services are deactivated for that account, log in to the account via the web and access the download screen.  Before downloading, within QuickBooks verify starting date and balance as a quick but important checks and balances step.  Then download the specified date range.  This will prompt QuickBooks to ask permissions to import a new bank or credit card account.  You will have to select the proper account from a drop down box during this step.  This will then bring the data in to QuickBooks and re-establish the Bank Feed.

Make sure to pay attention to renaming rules questions when importing new account transactions too.  

Reconcile, Reconcile, Reconcile   

You have done a majority of the heavy lifting at this point, now it's time to click through some steps and make sure the import worked properly.  It would be great to open the reconciliation screen and click 'Select All' and drive the reconcile balance to $0.  We call this the Hail Mary in the bookkeeping world and hope it works each and every time but it doesn't.  Slow down and find out why the difference is off in order to make sure the books are 100% accurate.  Duplicated transactions can occur if someone is typing in transactions by hand during the statement period that doesn't match up exactly to the imported date and cause expenses to be over stated and net profit to be understated.  Next thing you know, your books are jacked and you have no idea why.  

These few pointers can truly make a good bookkeeping system a great bookkeeping system.  It allows for more accuracy while not sacrificing time to review and find errors within the books.  Not your cup of tea since you prefer to be focused on growing your revenue or developing different customer experiences?  Or maybe you are a bookkeeper that wasn't properly trained to be one and need some more explaining. Either way, reach out and let's talk more about streamlining.