General Ledger Accounting – Keeping Track of Your Business Information

If you are in business, you have data-it’s just a simple fact. It’s what you DO with that data that can greatly affect your business success. Do you throw all of your invoices and receipts into a drawer? Or worse yet, do you not even keep that information at all? Doing either of these leaves you in the dark about your business finances, which can quickly end in the demise of your business. This is why general ledger accounting was created. General ledger accounting is a system whereby, in a double entry accounting system, each transaction is posted using debits and credits. The purpose of general ledger accounting is to know where you stand financially, so you won’t have to guess about your financial position, and you can make better decisions.

To record, in the formal sense of accounting, means to make an accounting entry in a journal or in a ledger. What has previously handled in a paper journal is now typically handled by a computerized accounting system. The analysis of business transactions in the form of old-fashioned journal entries is still important; it is merely handled in a different (and more efficient) method as technology has grown over the years: with a computer and software.

Each transaction must somehow be recorded so that people may be able to refer back to the details of that transaction. The ‘journal’ serves as a diary where each transaction is recorded. The next step is to take the same transactions and record them into the ledgers. Journal transactions are recorded chronologically as units. The ledger is organized into as many different accounts as needed to accumulate the pieces posted from the journal, and are classified according to significant financial elements.

Once a general ledger accounting system is set up and in use, it provides extremely useful information to the business owner, allowing him or her to base future decisions on solid financial information.

Small Business Information

So you have had it with the 9 to 5, your sick of your boss always looking over your shoulder, and the idea of you doing all the work so the executives can reap all the benefits makes you sick to your stomach. So you have decided to go out on your own and start a new business. That is a great idea and I am here to help you with some of the tougher questions that may come to mind.

What’s next? Well you need to decide how you will structure your business for tax and liability purposes. If you do nothing, and start the business alone, you are considered a sole proprietor. If you do nothing and start the business with someone else, that business will be considered a partnership. You can also form a corporation or limited liability company (LLC). The last two options are a bit harder to set up, but the liability is passed on to the business and not yourself or your partners. You should seek the advice of an accounting expert before making this decision; once the decision is made it is difficult to change the company type and it’s an accounting nightmare.

Sole proprietorship and partnerships are taxed on your normal 1040. You figure out how much money the business brought in and how much was spent on the business. This is the number you add to your 1040. This option is very easy for taxes very easy to run. The main problem with sole proprietors and partnerships is you can become personally responsible for all debt and damages. For example, if you run into credit problems with your suppliers they can come after you and your partners for payment. Also, any damage that your company may cause and is unable to make restitution for could become your personal financial obligation. This includes liens on personal property.

To distance yourself from personal liability you need to form a corporation (INC, C, or Corp) or a limited liability company (LLC). Both of these allow the business to become a separate entity for tax purposes and liability. The downside to these types of businesses is the extra paperwork needed to stay compliant and start up costs. You can search the internet for companies that will form your corporation or LLC, but you need to make sure they are reputable and not online scams.

If you start a corporation or LLC you will need a tax expert that specializes in small business and good accounting software. The government will send you an Employer Identification Number. This is the company’s unique id number, think of it like your social security number. This number needs to be used on all documents pertaining to the company, as well as all tax forms.

All parts of the business must to be kept separate from your personal life. You need different bank accounts, different phone numbers, and different credit cards. Next to making a profit this will be your biggest and most important challenge. If you mix funds or you are sloppy with book keeping, the corporate veil can be pierced and that means you can become personally liable for the company and its actions.

I recommend a good CPA and a lawyer. These can be found online within your area and are well worth the upfront money. After you are set up it is possible to do all the taxes and accounting yourself with powerful accounting software, but this is time consuming and may not be worth it to some. Remember starting a new business can be fun and rewarding; just stick to the rules and laws.

Building Your Coaching Business – Information Marketing in Networking

Here’s another step in information marketing (see the other articles on Information Marketing), this time applied to networking.

This is a way to take a prospect through a step by step warming up that results in 20% to 70% of them moving forward….this time through networking.

As a coach, you should be an unlimited resource for helping your clients. A part of that can be continually sending them emails, articles, and just plan face-to-face opportunities to expand their business (business coach, executive coach), or answers to their life or career problems (for life coaches and career coaches). This should apply to any kind of coaching. Just provide as many of the answers to the problems that your client is facing.

The more you give, the more value you have established that you provide. If you are really good, you can establish such value in a very short time that they will be begging for more.

Some coaches respond with, “People will drain me, take it all for free.”

Let me state what I said earlier, IF you are good, you can give a little, prove so much value in that short time, that they will clamor to want more. So, you encourage them to want that next meeting…and the next…and the next. Each step is a bigger commitment in time, and eventually cost. This is all about giving value until they want more, then asking them if they’d like more at the next meeting.

So, how do you do that in networking?

When you are talking to someone at a networking event, start asking them what they are struggling with. Then say something like, “I wrote an article about how a client of mine did ____________, and __________ (state measurable results). Would you like to have a copy?” Send them a copy, and make sure that you sign them up for your weekly emails, Hints and Tips on _________________. The email is a way of continually nurturing that relationship. If you are using an autoresponder, then it can be nearly on autopilot.

In most cases, I offer to send the first article to them by email, IF they’d be willing to discuss how it might work for them, and then we set a time for a call to discuss if that will work for them.

Sometimes I email them a copy, sometimes I mail them a printed copy, sometimes I send them a link to the articles that are published in online articles. In any of those cases, I make sure that they see that I am a published online author, an expert in the field. And, I am there to help them through this issue.

At no time am I trying to sell them anything. I want them to want me after exploring how those articles helped someone else with exactly their problem.

Of course, I will always be asking, “was that helpful?” “How helpful?” “Do you think something like that would solve your problem.”

And if all of those are “Yes, it was great.” Then I will be asking “would it be helpful if we set down together to work through issues like those that helped the client in that article?”

The “Yes,” in that instance is the first step toward closing the sale.

You do have to ask for it, but it isn’t a high pressure sale at all. Most of the time the prospect will be asking you for the next step.

Selling Your Business – Informing the Employees

When is the best time to inform employees that you are selling your business? Business brokers and merger and acquisition professionals are asked this question all the time.  The short answer is, “Wait until the transaction is completed,” and with good reason.

Most owners understand that much of the value of their business is embodied in their employees. Employees make the company possible, and many owners develop a close relationship with some of their employees.  Those relationships sometimes lead business owners to want to disclose the potential sale of their business to one or more of their employees.  “They deserve to know” is a common refrain.

There is an enormous risk in sharing this ‘inside information’ with employees.  Confidentiality needs to be maintained.  Once it is common knowledge that your company is for sale (and it will become common knowledge once employees know), it loses value: vendors are less like to sell to you or increase credit limits; customers are less likely to buy for fear of a lack of continuity of the relationship; and employees are less likely to stay.  Once the cat is out of the bag, if you are able to get it back in at all, the damage is already done, and it can take years to redevelop those relationships that made your company valuable in the first place.

While change is scary to some people, nothing is scarier than the unknown.  For example, with one or more employees knowing what is ‘in process’ or being considered, at a minimum the information will be shared with a spouse or close friends.  Invariably, their reactions are to share stories of mass layoffs, companies being relocated, wage and bonus reductions, etc.  It is human nature to fear the unknown and to expect (and perhaps plan) for the worst.  Planning for the worst often involves looking for alternative employment, sharing the news with other employees and, perhaps, outright resignations.  Also understand that when a concerned employee interviews within your industry, the first question they are asked is, “Why are you planning on leaving your current employer?” The answer will put an afterburner on the wildfire of rumors within your industry.  Remember, most buyers expect to have key employees on board when they acquire a business: If one or more of them have departed or indicated that they intent to depart, the value and marketability of your business has clearly been damaged.

Therefore, the best time to make announcements concerning the sale is on the afternoon of the day on which the transaction closes, after the closing is complete.  An employee meeting should be pre-planned to ensure 100% employees attendance.   Once everyone is gathered, you explain your reasons for considering a ‘transition of ownership’ (don’t use the word ‘sale’ or ‘sold’), and that, after a diligent search, you have found the perfect new owner(s).  You can also talk about how there will be a transition period where you will be involved in the operation of the business working with the new owners. The new owners should then be introduced to discuss their backgrounds, share their reasons for wanting to own the company and demonstrate their enthusiasm to do whatever is necessary to grow the business and create more opportunities for everyone. Last but not least, the new owners should honestly indicate that they plan no dramatic changes, that they value the current workforce, and that they want to meet individually with each employee (unless the number is just too large) to get their ideas and suggestions on the best way to grow the business.

In general, anyone who buys your company will want to keep your employees since they represent a significant portion of the value (and continuity) of your business. Massive job losses only occur in extremely rare cases where a new owner relocates the company a great distance, and then usually only after a period of transition.  Experience has taught that when the transition is handled well, virtually all employees perform better under the new management, for the simple reason they want to impress and be on good terms with the new owner.  New owners typically arrive with additional capital, new ideas, perhaps a synergy with an existing business and, almost invariably, a desire to grow the business.   Growth spells new opportunities for employees who want to develop their careers and, in almost all cases, they look forward to working with a new owner.

By keeping the sale of the business totally confidential until the transaction is closed, you are able to both preserve the value of your business and greatly reduce the fear of the unknown from your employees, thus making the transition of ownership a more seamless operation.