Basics of Accounting Are Vital to Survival for Entrepreneurs

New York Times

Business Day
Published: August 3, 2011
Business owners do not necessarily need to know how to prepare a balance sheet, but they do need to know which gauges to watch.

Few people start a business because they are good with numbers. In fact, the terms “accounting” and “financial analysis” tend to put business owners to sleep or send them screaming from the room. But to run a business effectively, most owners need to have some understanding of their finances.

Eric Schultz for The New York Times

Bart Justice, owner of a paper-shredding operation, credits his business’s survival with his decision to hire an accountant.

It is, for example, entirely possible for a company to be profitable but fail anyway because it does not have enough cash coming in to pay its bills.

“It’s like a racecar that goes too fast and runs out of gas,” said Doug Tatum, a serial entrepreneur who is a visiting professor of entrepreneurship at Middle Tennessee State University in Murfreesboro. Business owners do not necessarily need to know how to prepare a balance sheet, but they do have to know which gauges to watch.

One obvious step is to work with a bookkeeper or accountant, someone who can help navigate arcane accounting and tax rules and organize your affairs. But owners should understand that accounting is not just about paying taxes or reporting results.

“Small-business owners tend to hate accounting because it’s boring,” said Brian Hamilton, chief executive of Sageworks, a company in Raleigh, N.C., that tracks financial data for privately held businesses. “The mistake they make is not thinking about how they can use certain numbers as tools to better manage where their business is headed tomorrow.”

What follows is a guide to better understanding the numbers that drive a business. As the examples make clear, even smart people with advanced degrees can become confused by accounting issues.

Read more here.

even smart people with advanced degrees can become confused by accounting issues.” So true!

Carol Topp, CPA

Audit flags and easy recordkeeping

I’ll be giving two sessions at the 2011 Ultimate Women’s Expo

Avoiding IRS Audit Flags (pre-recorded. Buy a ticket for all sessions. See below!)

Making Business Record Keeping a Breeze (live for free!)

May 19 Thursday at 2:00 PM EST

Carol Topp, CPA: Business Record Keeping a Breeze

Listen ONLINE CHAT Here or Call to listen live: 347-215-9316

Ready for a fun Virtual Women’s Convention??? One that promises to inspire you, encourage you, and equip you for your call as a godly woman? This is your event…or EVENTS! (Yep! We host regular events here just for women!)

Right there in the comfort of your home you can join us! We always have an amazing speaker line-up PLUS a Mommy Grab Bag that is completely amazing! Just imagine….

No crowds!
No makeup!
No parking!
No walking for blocks and blocks!
No expensive trips or hotel stays!
No babysitters!

Talk about FUN! This is one that you will not want to miss!

Everything is recorded live online so you can join us for each and every workshop–no conflicts with the schedule! You can listen bit-by-bit to every one of our wonderful speakers! AND! We have a WONDERFUL Membership Site available for all attendees–filled with articles, audios, and free ebooks to help you kick-off your best year ever!

PLUS! That is not all! We have the most AMAZING gifts for you from fellow writers/speakers/sponsors. They are already being added into our Membership Site, ready for you to dig into expo week. It is one of the most amazing offers ever! You will definitely want to join us!

PLUS! When you sign up! You get more!

  • Free ebooks!
  • Free bonus audios to help you get started on the right track!
  • Doorprizes and special gifts–ALL WEEK!!
  • Membership to our Ultimate Women’s Expo Membership Site–With lots of free articles, bonus Mp3 download audios, free printable planning pages, and wonderful savings from our speakers and sponsors!

Get Your Ticket TODAY!!


All the Various Ways You Can Work From Home

Heart of the Matter Online has posted an article I wrote titled

All the Various Ways You Can Work From Home

“Work from Home!” the ads scream and get your attention. The offers sound great and all promise you can make excellent money working from home, but you may be confused by the opportunities that are offered for work at home moms. Are they  real jobs or just business opportunities? Are the workers employees or self-employed salesmen? Is all the work performed at home or are they only based at home and require time outside the home?

The options for working at home can be confusing. As a work at home mom who has been both an employee and a self-employed business owner, I will explain some of the opportunities available to moms that want to be at home but still earn a living.

Home-based or Completely-at-Home?

Be careful to distinguish between “work at home” and “home-based” businesses. The latter means your work is based at home rather than in a store or factory. It may mean that a lot of the work is done outside of your home, such as meeting and serving clients, or delivering products. This may mean juggling childcare and family demands.

On the other hand, many businesses can be run completely from home including daycare, transcription, virtual assistant, web design, writing and editing, and  internet-based businesses. Shaunna Howat is the Academic Coordinator for the Potter’s School, an on-line school offering classes for homeschool students across the globe. She works completely from her home—except the time a power outage meant she had to work from from a nearby coffee shop with Wi-Fi!

My website designer, Kelly McCausey, is a work at home mom. Her business is internet-based and completely-at-home. Kelly has moved her business twice in the past 3 years as she moved her home.

Employee, Independent Contractor or Business Owner?

Both home-based and completely-at-home opportunities can be as self-employed business owners, such as Kelly, my web designer, or as an employee such as Shaunna. Before you begin working for any business ask the owners if you will be an employee. If they say you will be an independent contractor, then you are considered self-employed for tax purposes and will be responsible for making your own income tax and Social Security tax payments. It’s recommended that you consult a tax expert to discuss your tax obligations as an independent contractor.


Telecommuting means you are an employee of a business, but work via the telephone (or internet)   from your own home. Some telecommuting jobs come about from a current employer who allows workers to work from home. I worked full time for six years before I had my first daughter. Then I arranged to work from home part time as a telecommuter. I did the same job as before and for the same employer—I was just at working from my home instead of at the office.

Finding a new job as a telecommuter can be difficult because you must already have the skills a potential employer is looking for such as writing, bookkeeping, computer software design, medical transcription, editing, etc. Be careful to avoid scams. Tishia Lee, a work-at-home mom posts telecommuting jobs weekly on the blog and warns readers:

While these (telecommuting jobs) have been researched and seemed to be legitimate work at home jobs you still need to be careful and watch out for scams! Just remember that you should NEVER have to pay someone to work for them! If someone asks for money that’s a red flag! [1]

You can use Tishia’s site to find telecommuting jobs or try employment web sites like Craig’s List and Search for jobs that match your skill set. Avoid jobs that prominently mention “work at home.” Working at home is a benefit, not a job title.

Homeschooling mother Katy D. of Loveland, Ohio found a job working as an on-line tutor  helping students with essay writing and English homework. She works from 8 p.m. to midnight several evenings a week. “I wanted a job that allowed me to be in my home, but also not have clients or students come into my home; my 2 year-old is too disruptive.” She finds that the evening hours are very productive. Her biggest pitfall is that she makes only half of what she could make by doing private in-home tutoring, “Right now at this point in my life, on-line tutoring is a good fit,” she explains.

Sales for Another Company

Many advertised home-based businesses involve as selling products produced by another company such as Mary Kay, Pampered Chef and Usborne books. These are considered “home-based” because you will work some time at home making phone calls and placing orders, but many hours are spent outside of the home also.

Many homeschooling mothers enjoy this type of work because their selling “parties” offer an opportunity to get out a bit and are frequently held in the evenings when a spouse is home with the children. Cindy, a jewelry sales representative from Forest Park, Ohio, finds that the best part of her work is dealing with people. “Getting people to commit to booking a party and return my phone calls can be difficult,” she admits. “But I have met the nicest people, too.”

Business Owner

Many home businesses are operated by people who do not work as an employee or independent contractor, but rather own their own business. People are finding hundreds of ways to make money from their homes. The internet opens the door to several ideas including:

  • Web design
  • Advertising via websites and blogs
  • On-line auctions
  • Information products and electronic books
  • Virtual assistant helping businesses with newsletters, marketing, and administrative tasks

Cindy Rushton converted her home-based book selling business to a completely-at-home business selling electronic books. She used to travel the country selling her books and CDs at homeschool conventions, but now sells only ebooks and audio  files of her books. It’s the same business, but has a different way of delivering the products that allows her to be home all the time.

Don’t neglect old stand-byes that are low(er) tech, but still viable businesses such as:

  • Childcare
  • Accounting and bookkeeping
  • Music teacher
  • Fitness trainer
  • Caterer
  • Tutoring
  • Consultant
  • Artist
  • Dog trainer, groomer or daycare

I love running my accounting business from my home. Usually my tax clients come to me and I rarely leave home unless I want to. Many of my clients are nonprofit homeschool groups that are not even in the same state, but because of the internet I can work for them remotely.

As you can see there are many options when it comes to working from home. As you consider the alternatives be sure to discern whether you will be home-based or completely-at-home. Also inquire as to whether you will be an employee or a self-employed independent contractor.  Finally, you could consider starting a business that is run from your home.

Carol Topp, CPA is an author and accountant bringing cents and sensibility to families, small/micro business owners, and nonprofit organizations. Through her writing, speaking and consulting, Carol converts tax rules and business language into clear, easy-to-understand English. She is the is the author several books including the Micro Business for Teens series, Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out and is currently working on Business Tips and Taxes for Writers for release in June 2011. Carol worked for the US Navy as a cost analyst before obtaining her CPA license in 2000. She lives in Cincinnati, Ohio with her husband and two daughters, both homeschool graduates. You can find her site at Carol Topp, CPA

Have a book in your head? Get it out!

I took some information that was in my head and wrote an ebook about it. It’s so much easier than you think!

From Idea to Information Product to Profitable and Very Successful Business.

It only takes 4 short weeks to create your own information product…

If you have an idea, then you can go From Idea to Information Product to Profitable and Very Successful Business in only 4 short weeks! Yes, YOU! Even if you do not have a website or even one customer yet!

My fiend and business mentor, Cindy Ruston, is offering her Information Product on-line, live coaching sessions again starting Wednesday, April 6, 2011.

I took this on-line class in December 2009 and learned a TON. It is one of the best classes I have taken to help me learn how to package and sell my information. It is PACKED with helpful information, resources, how-tos, tutorials, etc. This is very hands-on. Cindy is a great teacher and shows you step-by-step how to set up a website and sell your information product.
This class would be good for a teenager or parent or anyone who has some information about something that they can share!

Here’s what you get:

WEEK ONE: From Idea to Information Product to Profitable and Very Successful Business
Who are You?
Which Topic TODAY?
Ideas! What Do I Do with Them?
My Idea-A BUSINESS??? Also, includes Question/Answer Session recorded in our coaching session.

WEEK TWO: Information Products-YEP! YOU Can Do It!
What Can You Do With Your Ideas? Let’s Make it Easy!
Tips and Practical How-To’s for Creating Your Own Products
What Do You Need?
What Do You Do With Your Information Product?
How Do You Get It All Done-With the Hubby, Kids, and a Busy Life? Also, includes Question/Answer Session recorded in our coaching session.

WEEK THREE: Get Ready for Success! Secrets that will EXPLODE Your Business!
Setting Up Your Site to Sell!
Building a Responsive Mailing List
Stepping into Social Networking
Taking it Uplevel! Also, includes Question/Answer Session recorded in our coaching session.

WEEK FOUR: Finished! Now What????
Now WHAT???
Getting Ready to Launch
Lining Up Your Help
Marketing: Getting the Word Out
Marketing Mistakes  Also, includes Question/Answer Session recorded in our coaching session.

Cindy’s class was great. I created an information product (an ebook) in those 4 weeks, learned how to set up a website to sell it, and started a mailing list. It was amazing how much I learned and did in those 4 weeks.

Go here to sign up for the class:

But that’s not all. I was amazed that Cindy set up a membership site that I can revisit at any time and watch videos, listen to the sessions again, chat with other classmates and read helpful articles.

  • Access to our Membership Site-– When you join this group, you not only receive access to the live group coaching sessions in April, but you also get immediate access to the Membership Site with all of the audios, tutorials, and videos from the last group coaching course. You will LOVE this!
  1. Video Tutorials on setting up your website step-by-step!
  2. Video Tutorials on setting up and using WordPress!
  3. Video Tutorials on how to set up your mailing list!
  4. Bonus Audios and Ebooks!

The From Idea to Information Product to Profitable and Very Successful Business class is offered in three different price packages:

  • 4 week class and membership site (recorded; not live, so listen when you want) $99.00
  • 4 week class, membership site and live Group Coaching Sessions $149.00
  • 4 week class, membership site, live Group Coaching Sessions plus 4 private coaching sessions $349

I bought the middle package. I really enjoyed the live sessions because I could ask a lot of questions and the live sessions kept me on track to accomplishing my goals. The Membership site alone is worth $149 (or more). I still keep up with other students and go back to the site to refresh what I’ve learned.

Cindy Rushton

Do you have some knowledge or information in your head! Get it out and create an information product. Consider joining Cindy in her 4 week class. I encourage you to do the live sessions. I think they were worth every penny. I might pop in too, because as an alumni I can join in the sessions!

Read more about the class here and scroll down to the bottom page to order.

Sign up for the class today:

Carol Topp, CPA Author and accountant

IRS audit flags

Ever wonder if your tax return is setting off flags to the IRS?  I found a very interesting article where the IRS shares what issues on a tax return might invite an audit.

IRS Targets 1040 Schedules, Procedures in Preparer Compliance Visits

This specific article focuses on the IRS making visits to professional tax preparers offices, including CPAs.  These are investigations of the tax preparer,  not the taxpayer (or so the IRS says). The IRS is investigating the following:

Returns with Schedule E Supplemental Income and Loss (from rents and royalties), reporting income or loss of more than 50% of adjusted gross income and high levels of rental property depreciation or loss.

Schedule A Itemized Deductions flags included high levels of charitable contributions or employee business expenses, and either reported as round numbers.

Schedule C, Profit or Loss From Business (Sole Proprietorship)

Moral of the story: If you have a tax return with any of these schedules, use a knowledgeable, ethical CPA to prepare your return.

How to Chose a Qualified Tax Preparer (pdf)

Carol Topp, CPA