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Marti DenUyl

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Posts by Marti DenUyl:

Five Ways to Welcome in a New Year: 2023

A new year is a perfect time for a fresh start for you and your business. Here are five ways to welcome 2023 and make it your best year ever. 

  1. Decide on a theme for 2023

Setting a theme for the year can help you remember what you want to focus on. Some examples of themes might be:

  • Growth and improvements to your business. You can be specific, such as making your theme the year of mastering technology, the year of profitability where you focus on cutting costs or increasing sales, or the year of diversity where you focus on creating a diverse team.
  • Downsizing, cleansing or simplifying. Perhaps your business has grown so quickly that you need to sit back, de-clutter, re-design, or simply clean your office.
  • Is it time to launch a new service?
  • Giving back. If everything is humming along, it could be time to start giving back to your profession or community.

From here, you can create a plan of tasks and timelines that are aligned with the theme you’ve chosen.

  1. Go on a retreat

If you need to regroup and rejuvenate from a stressful holiday season, then a retreat can do the trick. A retreat is a time to set goals for your business and make a plan. You could discover that you are on track or that you need a course correction in your business.

A retreat can be made alone or with certain team members. Typically, the events of a retreat include a combination of planning and brainstorming sessions, education, team-building, and social activities.

If a retreat sounds like too much work, then a quick vacation might be in order, just so you can enter the new year with a relaxed mind.

  1. Learn from 2022

If 2022 was a bumpy time for your business, it might be a good idea to perform a detailed review. This will help you learn what went wrong and explore why. You can then brainstorm ideas on how to avoid the pitfalls of 2022 as you move into 2023. You can make it as informal as you want, or structured as an after-action review.

  1. Select a word for 2023

If setting a theme is too complicated, how about selecting one simple word for 2023? Here are some ideas:

  • Abundance (think big, go after large contracts and big projects)
  • Creativity
  • Powerful relationships (OK, that’s two words!)
  • Gratitude
  • Service
  • Humility
  • Forgiveness (especially good if you are in customer service or have difficult clients)
  • Fun
  • Helpful
  • Prosperity

I’m sure you can think of one that will be perfect for you. Once you do, write the word on several sticky notes and paste it everywhere you work and maybe even at home. Your postings will serve as a reminder of what your intention is throughout 2023.

  1. Make a profit plan (AKA budget)

Making a profit plan for the new year will help you hone in on the profit amounts that you want to achieve. Understanding how much volume you need to reach and what you can spend will avoid surprises at year-end. At mid-year, it’s a good idea to see if you are on track for the rest of the year. 

Whether you do one or all of the ideas above, we hope you have an awesome 2023 and that it’s your best year ever. 

Are Your Employees “Quiet Quitting?”

“Quiet quitting” is a very new term in 2022 that refers to one or more employees who remain working, but only do the minimum job during regular work hours. They are done going the extra mile, they are done working overtime, they are likely done caring all that much, and they may also be quite burned out. 

The last three years have been anything but easy. Shortly after the closings occurred due to the pandemic, many people lost their jobs. While recovery was taking place, millions more people decided that they would either retire or take a rest for a few years. This made up what was called the Great Resignation. It took a few years for employment to come back to pre-pandemic levels.

A huge movement to work remotely simultaneously occurred, and many people have been reluctant to return to the office. Many more people suffered financial hardship, in spite of government help, and are still recovering.

All of these conditions and more have stressed employees and led to mental health challenges for millions. Thus, “quiet quitting” should not be too much of a surprise. 

 

What Can an Employer Do?

There is quite a bit an employer can do about quiet quitting. For the entire staff, here are some tips to try:

  • Ensure that employees’ health plans include a robust mental health component.
  • Partner with a child-care and/or senior-care agency to reduce the stress of finding support for families who need it. This will help women re-enter the workforce, as they have been the most impacted.
  • Implement employee wellness programs designed specifically to reduce stress as well as to take care of physical and mental well-being.
  • Add some perks, such as employing a yoga instructor or a teacher certified in mindfulness-based stress reduction methods for an hour a week.
  • Encourage employees to take vacation time to reduce burnout.
  • Add training programs so that employees can have a chance to develop new skills.
  • Add an education reimbursement program where employees can go back to school and earn a degree or certificate related to their job.
  • Bring back the company Christmas party, picnic, or movie night so employees can socialize with each other again.

Anything that can help to refresh and rejuvenate your employees will help reduce quiet quitting in your company. While many of these can cost quite a bit, a few of them are very affordable.

On the individual level, and especially for individuals you suspect may be quiet quitting, it’s a good idea to conduct a formal process of setting goals. While this is normally done during employee performance review time, it doesn’t have to be. It can be very effective to sit down with an employee and simply ask what they want to get out of this job and what they want their future to look like.

Goal-setting encourages well-being and can give an employee something to strive for. Refreshing goals quarterly can help an employee re-engage with their job. It can also help a supervisor identify an employee who might be happy doing another job, so that a re-assignment can take place that is advantageous for both parties.

Increasing Employee Engagement

Whether your employees are quiet quitting or not, it’s always a good idea to offer programs and benefits that help employees re-engage, rejuvenate, and refresh their work on the job. 

What Is an Audit?

The word “audit” can be thrown around a lot in casual conversation. When an accounting professional uses it, it means something very specific. We’ll discuss this and other uses of the term “audit” in this article.

Financial Audit

A financial audit is an official service designed to inspect the accounting records, technology, and processes of an organization. An audit can only be conducted by a licensed CPA that is independent of the organization.

Independence is a special term as well, meaning the CPA who audits the organization must have no relationship with the organization or its owners and employees. For example, if the organization’s owner is the sister of the auditor, that won’t work!

To conduct an audit, the CPA performs an audit program, which is a set of tasks that review the company transactions, balances, and accounting processes. The audit program is custom-designed to the company based on the risks perceived by the audit team, the type of organization being audited and other factors. Once the audit has been completed, the auditor will issue a formal report stating the findings of the audit. The report typically includes a letter, financial statements, and footnotes.

The auditor’s report can be utilized by the company’s management as well as third parties, such as lenders and stockholders.

While there are mandatory audit requirements for large public companies, government institutions, schools, and some larger nonprofit organizations, small businesses are not typically audited because of the expense. That’s when additional assurance services come in handy.

Other Assurance Services

An audit falls under assurance services in accounting, and it’s the most stringent of all. Other types of assurance services include:

Compilations. In this engagement, the CPA performs basic checks on your financial statements and puts them together with a cover letter. It basically tells a third party that you have a CPA, but it provides the least amount of assurance service. 

Reviews. In a review, there are a few more checks and tests that a CPA will perform before issuing financial statements. This service provides more assurance than a compilation, but less than an audit.

Agreed-upon procedures. An engagement with agreed-upon procedures is a very specific engagement where one aspect of the business is reviewed in accordance with a specific goal. 

For small businesses who are asked for documents from your accountant by a bank or lender, you can often provide one of these lower-level assurance reports and it will not only suffice, but save your money.

Auditing a Class

Auditing a class has nothing to do with accounting! It simply means you’re sitting in on a college course, but not getting any kind of credit or grade.  

The Dreaded IRS Audit

The term audit can also be used informally to define an inspection that is narrower in scope, such as an IRS audit or a state agency audit. There is no assurance provided in this type of audit. The purpose of this audit is to produce whatever records you are asked for in order to verify the numbers you sent to the agency. 

An audit may be somewhat of a stressful and unpleasant, but necessary, experience. Having your accountant support you along the way can be reassuring (pun intended).

The Accounts Payable Process

All businesses, no matter their size, have bills to pay. The larger the business, the more formal the accounts payable process tends to be. That doesn’t mean small business owners can’t benefit from a formal accounts payable process. Too many “fake” bills are being sent, and all businesses should have safeguards in place. Let’s take a look at the workflow of accounts payable to see where we can put some controls in place to protect your hard-earned money. 

Purchase Order

A good first step is to initiate a purchase ordering process. All spending over a certain amount, such as $500, should require pre-approval from a manager or officer of your company. This can take the form of a purchase order.

A purchase order (PO) is simply a pledge on the part of your company to purchase an item or group of items from a particular vendor. It should include the vendor’s information, the item(s) and quantities, the price that the vendor has agreed to, and who initiated and approved the proposed purchase. It will look similar to an invoice, but it’s not an invoice and should be appropriately marked.

If the price is not standard or the items are custom, there may be an estimate from the vendor that documents the price on the purchase order. The estimate document is written by the vendor, while the purchase order is originated by your company.

While the purchase order is important, it does not create any entry on your accounting records, as no transaction has taken place yet.

Invoice

The invoice is the documentation of the purchase with a request for payment and is created by the vendor you are obtaining goods or services from. It should be recorded on your accounting books once it is received from the vendor.

The invoice should be matched with the purchase order, checking to see if each item, quantity and price match the same on the purchase order. Any discrepancies should be explained.

The timing of the invoice can vary. It may be received before or after you actually receive the goods or services that it covers.

The invoice should not be paid yet (unless prepayment is required). We’ll cover that in a minute.

Packing Slip

If the goods you have ordered are physical and are to be shipped to you, then there will usually be a packing slip or shipping document included in the shipment. The shipping document will have quantities, but may not have prices.  The document should be matched with the actual items received and any shortages or overages should be noted.

A process to stock the items into your inventory should then occur. A transaction should be entered into your system to increase inventory for the goods you receive.

The (corrected) packing slip should be matched with the invoice to make sure everything on the invoice was received. If there is a discrepancy, it should be noted.

Items may come in a later shipment if they have been back-ordered. You’ll need to set up a process for that, noting it on the appropriate documents.   

Approvals

As you can see, a couple of processes need to be put into place. There should be a process for each document listed above. There should also be a process for matching the documents, and there should be a process for when there are discrepancies. Last, there should be approval processes all along the way.

Your workflow may vary from the one listed above, depending on the order the documents are received and when payment is required. You may even have a different workflow for different vendors.   

Once the purchase order, shipping document, and invoice have been matched and corrected, it’s time to get them approved for payment by the appropriate level of management that you desire. This is something you’ll want to set up in advance: which of your employees can spend and approve what amounts. 

Payment

Once your invoice is approved, it is time to look at the payment terms, noting when payment is due. It can then be set up to be paid. This can be done inside a system, using a company credit card, sending a bank transfer or wire, or writing, signing, and mailing a manual check. 

Payment affects your books as well, so an entry should be made when payment is issued. 

Workflow

A great accounts payable workflow will protect your company from unauthorized payments, missing items, and even hasty purchasing decisions. There are also many accounts payable systems to support the automation of many of the steps, but don’t forget you still need to set up the processes so they work for your company and the vendors you use.

As always, if you need our recommendations, we’d be happy to help.

Understanding Equity on the Partnership Balance Sheet

The equity section of a business’s balance sheet is the most difficult part to understand. The accounts that make up that section vary depending on the type of entity in which the business is structured. In this article, let’s take a look at what the equity section looks like for companies that are organized as partnerships. 

The Equity Section

As a reminder, the balance sheet has three major sections: assets, liabilities, and equity. The equity section focuses on the investments that the owners have in the business. For partners, it consists of their capital accounts. The section could look like this:

Partners’ Capital

            Partner A Capital        $25,000

            Partner B Capital        $25,000

            Partner C Capital        $50,000

Each partner has their own Capital account within the equity section of the balance sheet. A partnership with 100 partners will have 100 capital accounts in the equity section. Computing the balance for each partner is where the work comes in.   

A partner’s capital account balance is affected by numerous transactions throughout the year as well as current earnings, which are distributed to the partners based on their ownership percentages. Ownership rules and percentages are spelled out in the partnership agreement.   

Items Affecting Partners’ Capital

 

To compute a partner’s capital account balance, here is the basic formula:

Balance at beginning of period

Plus Contributions

+/- Partner’s share of net income/loss

Less Withdrawals

= Balance at end of period

Contributions to capital includes money that the partner has given the partnership out of their personal assets. Withdrawals are the opposite: this is money that the partner has taken out of the partnership and used for their personal use.

Net income is a bit more involved, with two more steps. First, the sum of the entire partnership’s income and expense accounts must be calculated. This number should be the same number as net profit or loss on the partnership’s income statement, from the beginning of the year to your balance sheet date. Second, the net income must be divided up to calculate each partner’s share based on their ownership percentages. These amounts are then rolled into each partner’s capital accounts.

To make sure the partnership equity section is accurate, good recordkeeping is a must for the partnership as well as each of the individual partners. If we can help you understand more about your partnership, please reach out any time.

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