My friends at WeddingPro asked me to share the most common questions that I receive from wedding business owners and the advice that helps them set up their business finances. The thoughts that I shared are not specific to the wedding industry or even to business owners. I'm convinced that individuals will greatly improve their financial position by implementing some basic financial management practices. Consider these three suggestions:
At the end of the year, I was asked to share my reflections on lessons learned in 2020 with wedding industry professionals. As we move into the second full week of this new year, I also wanted to share my thoughts with you.
Reposted from WeddingPRO
I brought in the new year eating delicious food, enjoying adult beverages, and engaged in thoughtful conversation with a dear friend. As the clock struck midnight we celebrated with a toast and declared this the best year ever! Last week we laughed about the fact that we had no idea what was coming in 2020. However, we’ve learned so many valuable lessons through all the unexpected twists and turns this year has taken. One of the biggest lessons that I’ve learned is to protect my peace. This year taught me to acknowledge and accept the chaos around me and keep the serenity within me.
One of the main reasons I decided to start my event management company was because I like being in control. This year, all of my events were cancelled, my assistant quit, and every trip that I had planned was cancelled. I questioned my safety as my hometown made national news for the demonstrations that were taking place in response to the murder of George Floyd and countless other Black Americans at the hands of the very people we pay to protect us. I grieved with loved ones who watched those close to them die of cancer, COVID-19, and gun violence. None of that was in my control.
I navigated the financial disruption, the fear and shame of asking for help, and the creation of new channels in business. I worked through the mental fatigue and physical exhaustion of having countless conversations about racial injustice, implicit bias, and generational trauma.
I managed my way through innumerable pivot points in 2020.
And here I am, still standing, at the end of the year still safe and sane.
Actually, I’m in a better place mentally and financially than where I started this year.
I begin most days with affirmations that declare “I am, “I can”, and “I will.” I speak the things I know to be true, even when I don’t feel that they are true. Recently, I have begun to repeat “I can do hard things.” As I reflect on all that has happened this year, this is certainly true.
I’m encouraged by the prospect of what’s to come in 2021. And I’m grateful to be able to wrap up the best year ever and carry this lesson with me.
I've been on the production team of CreativeMornings/RVA for a while, but last month I sat on the other side of the table as the speaker. As a seventh generation Richmonder, I shared parts about my family's history and my life to talk about stress, mainly how I find more joy by protecting my peace and stressing less.
Thank you to CreativeMornings/RVA, friends and family for making this possible.
Notice: Virginia Sales Tax Increase
Effective October 1, 2020 the Commonwealth of Virginia is levying a new sales and use tax of .7% for the counties of Charles City, Chesterfield, Goochland, Hanover (including Ashland), Henrico, New Kent, and Powhatan, along with the City of Richmond. The total sales and use tax in these areas will soon be 6%. This includes the 4.3% statewide tax, the 1% local tax, and the new .7% regional tax. If you are currently collecting and remitting sales and use tax to the Virginia Department of Taxation on product sales, you will now be required to collect 6% on taxable sales generated in the above mentioned 8 localities. There is no increase in tax for food purchased for home consumption and essential personal hygiene products.
Additional information can be found in Tax Bulletin 20-8 on the Commonwealth of Virginia’s Retail Sales and Use Tax page.
The COVID-19 outbreak and resulting season of uncertainty has exposed so much about how we live our lives and run our businesses. So many small business owners are suffering because they didn’t have sufficient savings to make it through this unimaginable interruption in sales. And they didn’t have the financial reports and documentation necessary to submit applications for financial relief.
Now is the time to implement systems to organize financial information and implement systems that make reporting easy. The IRS and state government, lenders, and investors are generally interested in total figures (total revenue, total expenses, net income) and the ratios they can calculate using those figures. As a business owner, it is important to keep detailed records of the money that is flowing in and out of your business. The more details you have, the better you’re able to make decisions and pivot when necessary. In addition to tracking totals and specific expense categories, I like to consider expenses in three larger categories: fixed, firm, and flexible.
Considering these larger categories allows you to make changes in your spending as cash flow changes. Ordinarily, flexible expenses may be eliminated completely, firm expenses minimized, and payments for fixed expenses must be made to avoid penalties. However, at this time, I suggest speaking to vendors and creditors to learn what types of concessions they’re offering. If you don’t currently have a system that tracks expenses in these larger subcategories – consider implementing such a system to remain aware and nimble in the future.
I advise clients to prepare and review an Income Statement and Balance Sheet at least monthly. Generally, small business owners get more benefit from preparing cash flow projections than analyzing a Statement of Cash Flow.
I suggest business owners keep a list of these key figures at their fingertips:
These numbers change, so I recommend you update the list when preparing the budget and half way through the year. If your cash flow is seasonal, it is helpful to update quarterly or every other month.
The PPP loan forgiveness application was released on May 20. Businesses who received PPP funding will have to report:
Use the same definition of payroll costs to determine PPP loan eligibility to track those costs. Utilities include electricity, gas, water, transportation, telephone, or internet costs. Be sure that your financial tracking method allows you to separate spending of PPP funds. Let me know if you need help.
There is so much information circulating for coronavirus related financial assistance for different types of business, but we felt that there wasn't a comprehensive list of resources that benefits all individuals, including non business owners.
Please use this listing to find out if you’re eligible for financial assistance during the pandemic. All the links take you directly to application pages. We hope you find this list helpful!
** Updated 5/22/2020: PPP Forgiveness Application
** Updated 5/12/2020: see RVA Small Business Grant
** Updated 4/22/2020: The number of US Small Business Association (SBA) approved lenders tripled in two weeks. Collectively, those lenders processed more loans in 14 days than had been processed in the last 14 years! It’s no surprise that on April 16, the program ran out of money. We expect that the second round of funding will be announced soon. Here’s what you we suggest you do to prepare for round two (see PPP, EIDL and Additional Resources).
Recovery Rebates - coming soon to everyone
W-2 Employees who are no longer working
W-2 Employees who are working less
Gig workers, Independent contractors, Self-employed individuals
Previously Uncovered Workers in Virginia
Business Owners and Independent Contractors/Freelancers/Gig Workers
US Small Business Association (SBA) Loans
Updated 4/22/20: The number of US Small Business Association (SBA) approved lenders tripled in two weeks. Collectively, those lenders processed more loans in 14 days than had been processed in the last 14 years! It’s no surprise that on April 16, the program ran out of money. We expect that the second round of funding will be announced soon. Here’s what you we suggest you do to prepare for round two.
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Deferral of Payroll Taxes
The US Chamber of Commerce has an easy to follow handout to explain all these details.
If you’re really interested, read the Interim Final Rule issued on March 13, 2020.
The Save Small Business grant offers $5,000 to businesses that employ between 3 – 20 employees in an economically vulnerable area. Pop in your zip code to see if you can apply.
The RVA Small Business Relief Fund will award 100 unrestricted grants of $2,500.
For-profit businesses may apply between 5/13 – 5/19 if they meet these criteria:
See www.chamberrva.com/relief/ for more info.
Small business owners without W-2 Employees
See details for self-employed individuals
Individuals with federal student loans
Principal and interest payments are suspended on federal student loans until September 30, 2020. No interest will accrue during the suspension period. Contact your loan servicer to learn more or the federal student aid website.
Virginians with utility bills
The State Corporation Commission directed electric, natural gas, and water utilities that it regulates to suspend service disconnections for any customer for 60 days.
Visit the Virginia, Richmond, or Henrico COVID-19 websites for local updates.
The federal income tax filing deadline has been extended to July 15, 2020. Many states have extended the filing deadline as well. The extension relieves pressure and allows time to focus on the most important task of the day. I’m encouraging my clients and friends to file their taxes as soon as possible. Here’s why:
Easy to Gather Info
Do you have a (digital or physical) filing system that allows you to organize tax documents as you receive them? If so, congratulations! If not, then you’re like the millions of Americans who scurry about your home or office digging through piles of papers or sit at the computer for hours searching for emails that may contain the information your tax preparer has requested.
Whether it’s shorter commute times, a relaxed work schedule, or a partner who can contribute to chores because they’re now #WFH, miraculously, we’ve all been given the gift of more hours in a day. Use the time to gather the information necessary to file your 2019 taxes. You’re more likely to recall the details of specific transactions and to put your hands on documents you need now than you will be in three months, so go ahead and take care of the gathering and submission process now.
I am unaware of the number of people on the IRS staff and I am unsure of the system capacity for tax returns. However, I am certain that these the quantities are fixed. Last week I held for an hour and 54 minutes before the IRS telephone system told me that they wouldn’t be able to accept any more calls that day and I should call back the following business day. The tax return processing system works the same way. The more returns in the que, the longer it takes to process the return. File now before the system is overwhelmed.
If you’re due a refund, it will be processed more quickly if there are fewer people in line to receive funds. In fact, the IRS urges taxpayers who are due a refund to file as quickly as possible. File now and get your refund quickly.
Avoid Interest and Penalty
I encourage my small business clients to have a separate bank account for taxes. I recommend that they transfer a specific percentage of their monthly income into that account and that they make quarterly estimated payments to the federal and state government to cover their tax liability for the year. It’s great to establish the discipline of paying those taxes regularly, however, many of us don’t have a system in place for paying our tax liability and only begin strategizing when we’re specifically aware of the amount.
The sooner you file your taxes, the sooner you’re aware of your tax liability and the more time you have to pull those funds together to make a payment. Waiting until the extended July 15 deadline to file, may cause you to pay interest and penalties because you haven’t set aside enough money.
If you’re an employee and you do not have the proper amount withheld from your paycheck, the sooner you file your taxes, the sooner you’re aware of the adjustments that you need to make, and the sooner you can impact your 2020 withholdings. If you wait until July, the year is half over and you have to take greater efforts to correct the amount withheld from your paycheck.
Apply for Disaster Relief
The US Small Business Administration provides disaster loan assistance. Some private foundations are making grants available to small business owners most impacted by government mandated closings. Applications for these loans and grants will request your most recent tax filings and additional financial information. Filing now ensures that you have current information to submit with your application.
Across the country, state and local authorities are responding to current events with stay-at-home or shelter-in-place orders. I live in Virginia and today, the Governor announced a stay at home order effective through June 10. Please believe, as soon as the beach is open, I’m there! Honestly, we’re all going to want to resume our regularly scheduled activities as soon as we can. File your taxes now and get back to life just in time for summer.
Following was a guest blog featured on RebelleCon (reprinted with permission)
One of my good friends moved to Memphis in December. She is back in town for a couple of weeks teaching a university seminar. We made plans to get together after one of her classes last week. I was so looking forward to catching up over dinner. A few hours before we were scheduled to meet, she sent me a text, “I have a tax appointment at 9am and I have to find [electronic documents] for it… and I don’t know WTF I am looking for. Can we reschedule? Must be a place with wine… cuz I need a drink now.” I suggested an alternate date to meet and I giggled.
I avoid the stress that drives many people to drink around this time of year as they get ready for “tax season”. I believe and promote the idea that tax preparation is a process, not an event. Therefore, I’m never racing toward a tax appointment or a filing deadline. My dad coaches sports and one of his favorite phrases to share with his teams, encouraging them to practice and work out in the off season is “Stay ready, because it takes too long to get ready.” I’d like to share my system for organizing money documents and staying ready for tax season.
I have a file cabinet at home where I store all my financial documents. I have hanging files for documents that fall into one of nine categories. Each of those hanging files have several individual folders for subcategories. I’m old school, so I still like getting paper for money things. Some financial institutions limit the amount of time that you can go back and print statements or charge a fee to reproduce documents past a particular point. I want to be sure that I have all that I need, when I need it, without the fees. I have a “mailbox” inside my home, at the front door beside my keys. I drop mail in the mailbox as I enter my home and open all the mail at one time when I am able to take action – pay bills, review account balances, file the items that I need to keep, or recycle the papers I no longer need.
I use electronic systems as a back-up or to make sure that I get real time alerts and deadline reminders. If you prefer to store things electronically, this system still works, just think of the hanging files in terms of folders on your laptop or tags in your email. One of the hanging files is dedicated to taxes. Within the taxes hanging file, I have one folder for earnings and one for deductions. If using an electronic filing system, be sure to rename the downloaded files so that you can search for “2019 Client ABC Form 1099” instead of the nonsensical file names that are often assigned to digital files.
When I was earning a paycheck, I kept my pay stubs in the earnings folder until I received my w-2 and made sure that everything was reflected properly. Now that I’m self-employed, many of my payments are electronic. I have a folder in my email for each of my clients and I file notification of payment in that client’s folder. If I’m paid by check, I keep the stub until I get the 1099 from that client to be sure that all the payments are included.
Receipts are our friends. ☺ They share details that statements don’t. I pay my personal property taxes in person, with a check, at City Hall so that I can get a receipt. I file that receipt in my deductions folder. All the items that come in the mail that indicate important tax documents are inside also get filed in the deductions folder. Other usual suspects in my deductions folder are thank you letters from charitable organizations, statements reporting mortgage interest and real estate taxes paid, proof of medical expenses and premiums paid. Understand that this is not an exhaustive list of things that can be deducted on your income taxes. Speak to your preparer for a comprehensive list.
These are all the categories in my paper filing system, presented in the order that they appear in my file cabinet from front to back, which represents the frequency that I access the hanging file. I have also shared the length of time that I keep the documents within each category:
I’m not suggesting that you adopt my filing system, although I’m happy to teach you my ways, if you’re interested. Instead, I’m hoping to encourage you to find a system that works for you in hopes that you’ll choose to pick up one new organization habit that helps you stay ready for the tax preparation process, so that you can spend more time sippin’ with friends and less time searching for paperwork in the coming months and years.
Money management is super personal. Entrust your accounting to a professional who is knowledgeable, experienced, and whose personality is a good fit with yours. An accountant is a person whose profession is inspecting and auditing accounts; think data analysis. A certified public accountant (CPA) is licensed by a state examining board as having fulfilled the requirements of state law; these professionals are required to uphold a code of ethics and conduct. They are also required to meet state specific educational requirements. If you choose to work with an accountant that is not a CPA ask questions to learn how they remain current on rules and regulations.
CPAs are generalists. However, many choose to work with a specific type of client, within a specific industry, business size, or stage of growth. C Corporations have a different tax structure than Partnerships. Non-profit organizations have different reporting requirements from sole proprietors. Consult with a lawyer to choose the best legal structure for your business and select an accountant that specializes in that type of structure. Ask questions to find a professional that is familiar with the opportunities and challenges that your business is currently facing. There are not separate rules for recording financial transactions as a start up versus a business that has been around for 30 years; architects follow the same financial reporting rules as photographers. However, the decision making may be different depending on your industry or time in business, and I encourage you to choose a professional that understands your financial position.
Clearly state your expectations and the desired outcome for your partnership with an accounting professional. Are you looking for tax preparation only? Do you want to drop off a box of receipts and move on to their next task allowing the accountant to handle recording and reporting all the transactions? Would you prefer to sit and share the challenges that you have in business and work together to problem solve and make better financial decisions? Have conversations before you engage a professional to be sure that their personality and communication style will work well with yours and that they can meet your expectations.
Be sure to check out the video from my Instagram LIVE post earlier this week!