Getting Paid on Time

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In a Wall Street Journal survey conducted this year, 64 percent of small businesses reported having unpaid invoices over 60 days old and 20 percent say the problem of delinquent receivables is getting worse.

What’s a small business owner to do? One of the secrets to getting paid on time is to make it as easy as possible for your clients to pay you. Here are a few ways you can streamline your invoicing process and get paid sooner:

Provide all the information your clients could possibly need to pay you.

Every invoice template includes a place for the date, billing address, invoice number, etc. Be aware of what additional information your client may need. They very well could require a tax ID, purchase or work order number, contract number, or an account number. Coming back to you for this information can delay their payment.

Find out from new clients precisely which pieces of information they need from you in order to pay you, and attach all of it with the invoice. This may mean you attach a contract, statement of work, and other documents outlining the work you’ve done and the agreement you’ve made for payment. It can also be helpful to have signed these documents, so if there’s any question, the accounts payable department knows who to contact.

Send your invoice right away.

Don’t wait until the end of the month to send out invoices. If possible, invoice each client once the work or project is complete.

Use the Web.

I’m only somewhat referring to sending a PDF of your invoice via email. If you’re not already emailing invoices (or at least providing the option to customers) you may want to consider it. Also be aware that you can automate (to some extent) your billing system with online software.

You may also want to provide online payment options to your clients. Check out Amazon Payments, PayPal and Intuit online payment options. These systems are easy to use and make it convenient for your clients to pay on time.

Use a payroll service.

If your invoicing needs are a bit complex (and therefore can’t be handled by a piece of software), a payroll service can take a lot of the load and ensure your invoices are sent out promptly (and with all the information your clients require). It can also keep track of late payments and any resulting fees.

We’d love to answer your questions. For more information on accounting, taxes, payroll, bookkeeping, and human resource management for small businesses, leave us a comment or find us at http://www.qualitypayroll.net/html/services.html.

Setting Your Salary as a Small Business Owner in Utah

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On the surface, setting your own salary sounds too good to be true—and in many ways—it is. Paying yourself is made complicated by many factors: partners, additional employees, and whether your business is actually in the “making money” stage.
 

In the startup phase, you basically get what’s left after all your expenses (i.e., cost of operation and bills) have been covered. Once your company shows consistent profit, you are definitely entitled to take a share of those profits and set up a  consistent salary for yourself based on industry and regional standards.

Review SBA.gov’s Income Statistics page to get a feel for what other professionals in your industry are getting paid. One caveat on these figures: you may not be able to pay yourself as much as the averages listed here yet. As a small business owner, your goal is long-term growth and the amount you get paid should foster growth for your company.

The type of business you are running (be it S-corp, LLC, sole proprietorship, or whatever) can also impact the amount of salary you can collect. Be fair with yourself, but keep in mind that paying yourself too large a percentage of your profits (especially if your business is a corporation) can get you in trouble with the IRS—or at least audited.

It is never a bad idea to ask for help when you need it. Many small businesses don’t have an accountant on staff, but need a little more support than accounting software provides. Accounting and payroll services are essential for considering all variables and factors involved when determining your salary and managing your profits.

We’d love to answer your questions. For more information on accounting, taxes, payroll, bookkeeping, and human resource management for small businesses, leave us a comment or find us at http://www.qualitypayroll.net/html/services.html.

Setting Up Your Payroll

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Setting up the payroll for your small business for the first time? Here are some ideas to help you get started.

At the basic level, it’s actually quite simple—payroll is just a system for keeping track of your employees’ time and paying them for it. As your company—and the number of your employees—grow, you’ll have more and more payroll calculations to do for sick days, holidays, vacation, different pay scales and rates, and don’t forget to take into account any overtime that has been worked.

It’s up to you, the small business owner in Utah, to ensure your employees get paid on time and have the correct amount of taxes withheld from their paycheck.  Even if you plan to use payroll software or a payroll service it’s good to have completed the following:

  1. Obtain an Employer Identification Number (EIN) from the IRS. This is actually a step you need to have completed before you hire any employees—so hop to it if you’re behind! You can apply online with the link above or call the IRS.
  2. Have each new employee fill out a W-4 form (issued by the IRS). This will let you know how much federal taxes to withhold from your employees’ paychecks. Other forms you may need to use arethe I-9, W-2, and the W-5 forms, depending on what type of employees you have (e.g., independent contractors versus salaried employees).
  3. Have a standard timecard system for documenting all employees’ hours. Keep track of every hour your employees’ work—even if they’re independent contractors. There are several free timecard templates in Microsoft Word or Excel.
  4. With your timecard system, have a set pay schedule. It can be every two weeks, twice a month, once a month, etc. This will of course need to be determined by you and depends on your cash flow.

Keeping on top of payroll requires time and organization, but should not take the bulk of the time you spend running your business. There are many other aspects of your business to worry about.  In many cases, it’s a good idea for small businesses to use payroll software or outsource their payroll and HR processes to a payroll service.

We’d love to help you with your payroll questions. For more information on withholding taxes from your employees’ paychecks—or any question on taxes, payroll, bookkeeping, and human resource management for small businesses, leave us a comment or find us at http://www.qualitypayroll.net/html/services.html.

How to Withhold Taxes for Your Small Business: Estimated Tax

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At the best of times owning your own business is challenging. When it comes time to figure out how much to withhold from your income for what are usually automatic deductions (e.g., federal income tax, social security, medicare), running a business can be downright aggravating.

Don’t despair—there are plenty of resources out there for you, the small business owner here in Utah.  As you probably already know, the type of business you own determines which income tax return form you have to use and which taxes you have to pay. You can visit the IRS’s Business Structures page to get more information on each type of business and what forms to file.

Really briefly, I want to touch on one important point: paying estimated tax. Oftentimes, you can just pay your taxes at the end of the year, but if you meet certain criteria you will need to pay taxes once a quarter to prevent paying a penalty.  You must pay estimated taxes each quarter if you

  1. Expect to owe at least $1,000 in tax for 2012
  2. Expect your withholding and refundable credits to be less than the smaller of
    1. 90% of the tax to be shown on your 2012 tax
    2. 100% of the tax shown on your 2011 tax return

It’s not quite as simple as that, the percentages are different for farmers,  fishermen, and higher income taxpayers, but this gives you a basic idea.

It is important to pay estimated taxes to avoid penalties. Note that even if you are due a refund at the end of the year, you may still have to pay a penalty if you did not pay enough estimated tax by each quarterly due date (that is, of course, if you fall in the category of people who must pay estimated taxes).

To really be sure about whether you need to pay estimated taxes, check out Publication 505 put out by the IRS.  You can find it here:  http://www.irs.gov/publications/p505/ch02.html#d0e6371

How to figure your estimated tax

Use your tax information from last year to determine your estimated taxes. You’ll also want to have the following numbers ready:

  • Your expected adjusted gross income
  • Your taxable income
  • Your taxes
  • Your deductions
  • Your credits

Click here to use form 1040-ES to determine your estimated tax. If it turns out you overestimated your income for a quarter or vice versa (and therefore are paying too much or too little on your estimated taxes), simply complete another 1040-ES worksheet to get your new estimated tax for the next quarter. Again, you want to estimate your income as closely as you can to avoid penalties.

You’ll be happy to know that there are also many methods for paying your estimated taxes including using the Electronic Federal Tax Payment System (EFTPS).

For more information on withholding taxes from your own income or any tax, payroll, bookkeeping, or human resource management for your small business leave us a comment or find us at http://www.qualitypayroll.net/html/services.html.

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