In the fast-paced and sometimes chaotic world of small businesses, managing expenses can be a daunting task. Without a clear and concise expense policy in place, businesses are at risk of overspending which makes it difficult to stay on budget. There is also a greater likelihood of employee fraud which, of course, comes at a cost. To avoid these pitfalls and promote a culture of accountability and transparency, creating a well-defined expense policy is essential for small business owners. The Significance of an Expense Policy A well-constructed expense policy serves as a comprehensive guide that outlines the rules and regulations surrounding company expenses. It helps to set clear expectations for employees, ensures compliance with regulatory requirements and helps to promote responsible spending practices. With an expense policy in place, small businesses can streamline their financial processes, minimize errors, and reduce the likelihood of fraud or misuse of funds. Moreover, a well-structured expense policy fosters trust and transparency within the company. It is a fact that employees are more likely to adhere to guidelines when expectations are clearly outlined and this will result in improved financial management and operational efficiencies. From approving expense reports to reimbursing employees in a timely manner, an expense policy can streamline the entire expense management process and enhance overall business operations. If your small business does not have a formal, written expense policy in place, don’t worry. I’ve got the steps to help you get on track. Steps to Create Your Unique Small Business Expense Policy 1. Define Objectives and Guidelines Begin by determining the goals and objectives of your expense policy. What are the permissible expenses? What documentation is required for reimbursement? Setting clear guidelines will help in laying the foundation for an effective expense policy. 2. Involve Key Stakeholders If applicable, collaborate with finance, human resources or any other key stakeholders or owners to gather insights and input for creating the expense policy. Consider the needs and concerns of employees when formulating expense guidelines to ensure buy-in and compliance. 3. Establish Approval Processes Define the approval process for expense claims, including who is responsible for reviewing and approving expenses. Implement clear protocols for pre-approval and post-approval to ensure consistency and accuracy in expense reporting. 4. Communicate Policy to Employees Once the expense policy has been finalized, be sure to communicate it clearly and effectively to all employees. Provide training sessions or written guidelines to ensure that everyone understands the policy and knows how to comply with its provisions. Owners should consider requiring each employee with purchasing authority to sign a copy of the policy to confirm understanding and a willingness to abide by the established policy. 5. Regularly Review and Update As the dynamics of your business change, it is critical to review and update the expense policy periodically to reflect evolving needs and situations. Regular revisions ensure that the policy remains relevant and effective in meeting your current business requirements.

Protecting your financial data is of paramount importance in today's digital landscape. As a QuickBooks Online user, there are essential security measures that you should implement to safeguard your sensitive information. Let's take a look at some best practices for securing your QuickBooks Online data to ensure that your financial records remain safe. Best Practices For Keeping Data Safe Strengthening Your QuickBooks Online Security One of the first steps in securing your QuickBooks Online data is to prioritize comprehensive access controls. This begins with the use of strong passwords, two-factor authentication and careful management of user permissions to limit unauthorized access to sensitive information. Make it a point to regularly review your active user accounts and remove any unnecessary or inactive users to minimize the risk of sensitive information being accessed by those that shouldn't have access to it. Additionally, ensure that your QuickBooks Online account is connected to a secure internet connection. Avoid using public Wi-Fi networks when accessing your QuickBooks Online data as these can leave your information vulnerable to cyber threats. Always consider using a virtual private network (VPN) to encrypt your internet traffic when away from your home or office to enhance the security of your online activities. In many cases, your internet security software will include a secure VPN application that you can use. Implementing Effective Backup Strategies Backup and disaster recovery are crucial components of a comprehensive data security plan. Since QuickBooks Online is a cloud-based application, Intuit routinely backs up your QuickBooks Online data to ensure that your financial records are protected in the event of a system failure, natural disaster or cyber attack. However, it is important to note that, outside of QuickBooks Online Advanced, standard backups performed by Intuit are done so at the server-level at periodic intervals. They are not real-time backups. This means that if you have a need to restore your data, it can only be returned to the point in time that the last server backup was performed. For greater flexibility and safety, it is best to consider a third-party solution that allows restoration to a specific point in time. When selecting a backup solution, look for options that offer secure, encrypted storage and the ability to restore your data quickly in an emergency. Additionally, ensure that your backup process is automated and that you have the ability to regularly test your backups to verify their integrity and reliability. Staying Vigilant Against Cyber Threats Cybersecurity threats, such as phishing scams, malware, and ransomware can also compromise the security of your QuickBooks Online data. Educate your employees on common cyber threats and how to recognize and report suspicious activities. Implement strong antivirus and anti-malware software to protect your internal systems from these malicious threats. Furthermore, stay up-to-date with the latest security updates and patches for any applications you use that integrate with QuickBooks Online as well as any devices that you use to access your financial data. These regular software updates will help address vulnerabilities and strengthen your overall financial workflow security.

As a small business owner, you're likely no stranger to the world of personal credit, but did you know that your business has its own credit profile, separate from your personal one? Business credit is a critical component of your company's financial health and understanding it is essential for making informed decisions about your business's future. Let's delve into what it is, how you maintain a strong credit profile and what small businesses can do to improve their credit status. Navigating the Realm of Business Credit Business Credit and the Foundation for Growth In simple terms, business credit refers to the creditworthiness of your business, based on its financial history, payment habits and credit utilization. A strong business credit profile can open doors to new opportunities, such as access to loans, credit cards, and other forms of financing. It can also help you negotiate better interest rates, terms, and contracts with suppliers as well as increase your credibility with potential partners and investors. On the other hand, a weak business credit profile can limit your business's growth potential, increase the cost of borrowing and make it more difficult to establish relationships with vendors. Business credit is often measured in the form of a report with a score similar to what is done when assessing personal credit except that the scoring range is typically different than those associated with FICO scores. The Experian Intelliscore Plus , Equifax Payment Index and Dun & Bradstreet PAYDEX models provide a range of scoring between 0 and 100 while the FICO LiquidCredit Service model uses a scale that ranges between 0 and 300. Unlike consumer credit scores that can be accessed for free, business credit scores often require a paid subscription plan with one of the aforementioned credit reporting agencies. Maintaining a Strong Business Credit Profile So, how do you build and maintain a strong business credit profile? The process begins with establishing a business credit history. This can be done by: Registering your business with the relevant credit bureaus, such as Dun & Bradstreet, Experian and Equifax Obtaining a business credit card or loan and making timely payments Keeping your business's financial records up-to-date and accurate Monitoring your business credit report regularly to detect any errors or discrepancies In addition to these steps, it's essential to maintain good credit habits, such as keeping credit utilization ratios low, avoiding late payments and diversifying your credit mix. By doing so, you'll be able to demonstrate your business's creditworthiness and build a strong business credit profile over time. Improving Business Credit If your business credit profile is less than stellar, don't worry – there are certainly steps you can take to improve it. Here are some valuable tips to get you started: Pay your bills on time, every time. Late payments can significantly lower your business credit score. Keep your credit utilization ratios below 30%. This will show lenders that you can manage your debt responsibly. Don't apply for too much credit at once. This can raise red flags with credit bureaus and lower your score. Consider working with a business credit consultant or financial advisor to help you navigate the process. By following these tips and maintaining good credit habits, you will be positioned to improve your business credit score and overcome prior credit hurdles.

The process of bookkeeping is an essential function for any small business. Keeping track of financial information is not only a requirement of the Internal Revenue Service, but it's also the primary means for equipping small business owners with the tools necessary to make informed business decisions. Despite its significance, however, many small businesses fall victim to a series of common mistakes that often lead to future problems down the road. Understanding these perils—and how to avoid them—can save you time, money and stress. The Pitfalls To Avoid 1. Neglecting to Keep Receipts The Mistake: One all-too-common mistake is failing to keep receipts for business expenses. Some small business owners believe that scribbled notes or a collection of receipts for the majority of purchases is sufficient. However, this mindset can lead to issues if the IRS ever comes knocking on your door to conduct an audit. The Fix: To avoid this mistake, create a systematic way to capture and store receipts. Consider using the QuickBooks Online mobile app's receipt capture function which provides a convenient way to capture and attach digital receipts to your posted transactions. Moreover, establish a routine for identifying and organizing your purchase receipts weekly to ensure that expense substantiation does not get overlooked. 2. Mixing Personal and Business Finances The Mistake: Another common error is co-mingling personal and business finances. This often happens when owners use personal accounts for business transactions or vice versa. This practice complicates the bookkeeping process and is not best practice. The Fix: To steer clear of this problem, make sure you open and use a dedicated business bank account for all business purchases. In conjunction, you should utilize a business bank debit card or dedicated business credit card for any point of service or online purchases. This helps to provide clarity during tax season and is a critical step in protecting personal assets in the event that legal issues arise. 3. Inconsistent Data Entry The Mistake: Inconsistent data entry makes it very challenging to maintain a set of accurate books. If small business owners forget to input transactions on a regular basis, there is a high probability that there will be discrepancies in their financial records. The Fix: Implement a consistent data entry schedule. Set aside specific times each week to enter financial transactions into your preferred accounting system such as QuickBooks Online. This practice fosters accuracy and ensures that your records reflect the true state of your business finances. 4. Ignoring Reconciliations The Mistake: Failing to complete bank reconciliations on a regular basis is a serious error that many small businesses make. It is only through this process that it is possible to quickly and accurately spot discrepancies between bank statements and bookkeeping records. The Fix: Schedule regular monthly reconciliations, ideally as soon as the month ends and your bank has issued a statement for the prior month. By comparing your bank statements with your records, you can catch errors early, reducing the risk of fraud and inaccuracies that could compromise the financial health of your business. 5. Not Using Bookkeeping Software The Mistake: Relying on spreadsheets or even pen and paper for bookkeeping remains a common practice among small businesses as a means to save money on recurring expenses. Unfortunately, this method is cumbersome, inefficient and often leads to errors. The Fix: Invest in reliable bookkeeping applications like QuickBooks Online. Transitioning to cloud-based tools streamlines the process, reduces the likelihood of mistakes and provides valuable financial insights through the use of native reporting features. 6. Failing to Track Expenses The Mistake: Many small businesses overlook the importance of tracking every expense. They abide by the "close is good enough" mantra to exclude minor costs. This approach can lead to inaccuracies in budgeting and reduces the amount of deductible business expenses. The Fix: Utilize tools such as the QuickBooks Online mobile app to categorize and track every single expense. If the expense is relevant to your business, include it. Over time, including all of your expenses will benefit you come tax time. 7. Underestimating the Value of Professional Help The Mistake: Many Small business owners often believe that they can manage their own bookkeeping without any professional guidance. This approach almost always leads to costly errors oftentimes requiring additional billed time from your tax accountant. The Fix: If you are a startup, consider hiring a professional accountant or experienced bookkeeper at the onset to help you structure your records and establish sound accounting workflows. This will save you significant money in the long run. If you are an established business, utilize the expertise of a professional to provide you with invaluable feedback on the health of your business, guidance for navigating complex financial regulations and tips to help mitigate the risk of costly financial recordkeeping errors. 8. Overlooking Tax Obligations The Mistake: Failing to account for tax obligations can lead to significant financial repercussions for a small business. Unfortunately, some businesses neglect to set aside funds for taxes, thinking they can cover it when the time comes. This is a short-sighted approach that can have real consequences especially as it relates to cash flow. The Fix: It is imperative to create a tax strategy that includes setting aside funds on a regular basis. Consider keeping a separate tax savings account and transferring funds there on a regular basis. This will help you avoid last-minute scrambling and potential cash flow issues when tax payments are due. 9. Waiting Until Year-End to Get Your Books in Order The Mistake: Unfortunately, many small businesses wait until the end of the year to prepare their financial records for tax season. This procrastination compounds a business owner's problems as rushed work leads to mistakes which could cause inaccuracies in your tax return. The Fix: Adopt a proactive approach by maintaining your company's books throughout the year. Take time to dive into your books on a regular basis so you can gain a better understanding of your business’s financial health. That way, you can feel better prepared for tax season with insight into your tax obligations at year-end. 10. Ignoring Financial Reports The Mistake: Lastly, many small business owners overlook the value of financial reporting. This mistake severely limits their understanding of the business's performance and hampers potential opportunities for cost savings and growth. The Fix: Regularly review key financial reports, such as profit and loss statements, balance sheets and cash flow statements. In addition, capture and review reports specific to your business to monitor key performance indicators. By understanding the data available in these reports, you can obtain a level of financial clarity that will enable you to make data-driven decisions.

Successful small businesses thrive on informed decisions and the foundation for these decisions lies in a comprehensive understanding of financial data. As a small business owner, tracking the right financial reports can mean the difference between strategic growth and stagnation. Let's explore the five essential financial reports that every small business owner should be familiar with before making important financial decisions. The Cornerstone of Sound Decision Making Mastering the Balance Sheet: Understanding Your Financial Snapshot The balance sheet is a powerful tool that provides a clear picture of your business's financial standing at a specific moment in time. It outlines your assets, liabilities and equity, thereby giving you a snapshot of your company's overall financial health. By regularly reviewing your balance sheet, you can identify areas for improving cash flow, make informed decisions about investments and debts and ensure your business is on a stable financial footing. Diving into the Income Statement: Tracking Your Profitability The income statement, also known as the profit and loss (P&L) statement, is a crucial report that tracks your business's revenue, expenses and net income over a specific period. This report helps you understand the profitability of your operations, identify any areas where costs are high and make strategic decisions to improve your bottom line. By closely monitoring your income statement, you can make data-driven decisions to help you optimize your pricing, gain greater control over your expenses and maximize your profits year after year. Analyzing the Cash Flow Statement: Navigating the Ebb and Flow of Cash The cash flow statement is the unsung hero of financial reporting, as it provides a clear understanding of the movement of cash in and out of your business. This report tracks the sources and uses of cash, including operating activities, investing activities and financing activities. By closely monitoring your cash flow, you can identify potential cash flow issues, plan for upcoming expenses and ensure your business has the necessary funds to operate smoothly. Exploring the Accounts Receivable Report: Knowing What Your Customers Owe You The accounts receivable report is a vital tool for managing your business's cash flow and customer relationships. This report tracks the outstanding invoices owed to your business, allowing you to identify any late payments or potential issues with your payment processes. By regularly reviewing this report, you can take proactive steps to improve your collection efforts, offer incentives for timely payments and ensure your business maintains a healthy and stable cash flow. Monitoring the Accounts Payable Report: Staying on Top of Your Obligations The accounts payable report is the counterpart to the accounts receivable report, as it tracks the outstanding bills and invoices your business owes to its suppliers and vendors. By closely monitoring this report, you can ensure timely payments, negotiate better terms with suppliers and identify any areas where you may be overspending. This report also helps you plan for upcoming expenses and helps to ensure that you stay in the good graces of your most important business partners.

It is safe to say that digitalization has infiltrated nearly every aspect of our lives. The days of swiping cards have given way to tapping them and walking around with your bulky wallet is no longer a necessity thanks to cashless transactions and e-wallets. Virtual cards are a cutting-edge innovation in the online payment space and small business owners should get familiar with the convenience, security, and superior user experience that virtual cards offer. So What Exactly Are Virtual Cards? Virtual cards, also known as digital cards or e-cards, are essentially online representations of physical payment cards (like your standard credit card), designed for use in e-commerce and other digital transactions. They are issued by banks or other financial institutions and are linked to an active bank account that serves as the funding source. Like their tangible counterparts, virtual cards contain critical payment information such as the cardholder's name, card number, expiration date, and CVV code. However, unlike physical cards, virtual cards exist in digital form only and the card number, expiration date and security code are all unique. This means that every virtual card you use is different and can only be accessed via dedicated mobile apps or virtual wallet platforms. Why Virtual Cards Make Sense There are plenty of reasons why the use of virtual cards by small businesses continues to grow exponentially. Less Prone To Fraud One of the primary advantages of virtual cards is their advanced security features. Traditional credit or debit cards are prone to theft, fraud and unauthorized charges as physical cards can be easily misplaced, lost or stolen. Virtual cards, on the other hand, mitigate these risks by removing the physical card altogether. The absence of a tangible card greatly reduces the chances of unauthorized access to sensitive card information. Seamless Online Shopping Experience By storing all payment information digitally, virtual cards eliminate the need to repeatedly enter card details for every online purchase, thereby streamlining the checkout process. With just a few simple clicks, users can quickly authenticate transactions which makes online shopping faster and more convenient. In addition, you no longer need to rely on a merchant for safely storing your credit card details online for future transactions which, in turn, makes the whole experience significantly less worrisome. Greater Expense Control One item that sets virtual cards apart is the precise spending controls that they offer business owners. Users can create multiple virtual cards, each with a designated spending limit, and use them for specific purposes such as online subscriptions, utility bills or online shopping. This feature makes it easier to stay within budget and cap spending on certain categories of expenses as business owners can establish spending limits on each virtual card so they don't overspend. Just consider how useful this can be when you purchase recurring SAAS (software-as-a-service) subscriptions. Now, you can take back control of auto-renewal payments by limiting the amount that the card can be charged by the vendor. This means that you no longer have to be surprised by annual subscription auto-renewals for software that you never intended to continue using. Increased Purchasing Flexibility Entrusting purchasing responsibilities in a small business is almost always limited to a select few individuals because the risk associated with having multiple credit card holders has always been too high. Now, however, spending authority can be extended to more employees because you can establish strict spending protocols so only the amount needed can actually be charged to the virtual card. If an employee no longer needs purchasing authority or they leave the company, it’s as simple as deleting the virtual card or changing its authorized spending limit to $0. What Makes Virtual Cards So Secure Unlike payments using traditional credit cards, virtual cards eliminate all of the inherent vulnerabilities of physical cards, such as skimming, card cloning, or interception of card details during online transactions. What sets virtual cards apart from their traditional counterparts are the unique set of security features this type of payment offers. Limited Exposure of Sensitive Data When making an online purchase with a virtual card, the user's actual card details are never exchanged with the merchant. Instead, a unique card number and CVV code are generated for the specific transaction. Therefore, even if the virtual card details are compromised, the attacker would not be able to use them to make any additional purchases. Single Use Nature and Expiration Settings Virtual cards typically have an expiration date tied to a single transaction or a specific time period. This attribute further strengthens security because even if the virtual card details are intercepted or stolen, they become useless after the transaction is complete or after the expiration date has passed. Transaction-Specific Security Measures Virtual cards may also come equipped with additional security features, such as dynamic CVV codes that change periodically. This frequently changing CVV adds an extra layer of security making it more difficult for fraudsters to exploit the card details. Suspicious Transaction Alerts Many banks and financial companies that issue virtual cards offer real-time transaction alerts via mobile apps or email. This enables users to quickly detect any unauthorized activity or suspicious transactions and allows for prompt action to be taken such as freezing the virtual card or reporting the incident to the card issuer. Are Virtual Cards Too Good To Be True? The list of benefits is long, but it’s important to mention just one item that might prove to be challenging with a virtual card. Refunds can sometimes be tricky due to the single-use nature of virtual cards used to make online purchases. If a merchant requires refunded items to be credited to the same card that was used for the original purchase, it might result in a merchant store credit being issued instead. The best way to steer clear of this predicament is to refrain from using a virtual card if you think there a chance that you may seek a refund for the purchase at a later date. Despite this less-than-ideal scenario, the benefits of virtual cards from a security standpoint far outweigh any potential inconveniences.

It’s hard to imagine that the key to the accuracy of your tax return may very well depend upon a collection of crumpled slips of white paper, but the reality is certainly true in the minds of the Internal Revenue Service. From what seems like the dawn of modern American taxation laws, many small business owners have struggled with the responsibility of consistently capturing and storing the evidence of their business expenses. Years ago, we only had to worry about those cash register receipts that were spit out after every in-store transaction. But now, receipts can be distributed in other ways like via email, vendor dashboard downloads or even text message. With all of these avenues varying by vendor, how can a small business owner keep track of it all? The secret lies in having a reliable system in place. THE EXPECTATIONS OF THE INTERNAL REVENUE SERVICE In general, the IRS considers business expenses to be tax deductible. Therefore, approved business expenses offset your taxable income and reduce your overall income tax obligation. This is one of the fundamental benefits of owning a small business. With this advantage, however, comes the Internal Revenue Service’s expectation that small business owners will only claim legitimate business expenses that qualify for deductibility. According to the Internal Revenue Service in Publication 535, a deductible business expense must be both “ordinary and necessary.” Ordinary expenses are those that are common and accepted in your industry and necessary expenses are those that are helpful and appropriate for your particular business. Some common deductible business expenses include rent or lease payments, payroll, consumable supplies, interest, marketing, taxes and insurance. To motivate business owners to follow the rules associated with properly accounting for business expenses, the Internal Revenue Service has equipped itself with a powerful tool to encourage compliance – the audit. This time-consuming, detailed process allows the Internal Revenue Service to review the expenses you have claimed as deductible business expenses to assess their legitimacy and accuracy. If you cannot substantiate expenses to the satisfaction of the Internal Revenue Service, the expenses will no longer be considered deductible. So why might this be important? Well, any expense disqualified by the Internal Revenue Service will have a direct effect on your net profit. When you remove these expenses from your books, your profit will subsequently increase assuming all things remain the same. What compounds the problem is that it will result in a situation where you have underreported your profit on your audited tax return which means you didn’t pay enough income tax. Now, not only will you have to pay the additional tax due but you will also have to deal with the consequences of it being paid late which means you will likely be subject to fines and interest penalties on the amount of net income you didn’t report accurately. It’s a problem you definitely want to avoid. EXPENSE SUBSTANTIATION – THE BASICS Deductible business expense substantiation is critical to a small business owner’s chances of surviving an IRS audit as it provides the background and rationale for the incurred expense. Typically, expense substantiation comes in the form of receipts or invoices. For expenses, the IRS requires that all supporting documentation include the following: The payee (who you purchased the item or service from) The amount that you paid The method of payment that you used The date the expense was incurred A description of the item or service that shows why it would qualify as a business expense Some business expenses require additional details. Examples include: Business Meals (Include the names of the attendees and the business purpose for the meal) Rideshare Expenses ( Include your destination and the business purpose for the trip.) Gifts (Include recipients name and their relationship to the business.) Lodging (Include dates of stay and the business purpose for the hotel stay.) Parking (Include location and the business purpose for incurring the parking expense.) Be sure that when you store copies of these receipts, you record the additional details needed so you don’t have to try to remember the circumstances surrounding the expense if you go through an audit years later. DEMYSTIFYING RECEIPT PRESENTATIONS – THE BUSINESS MEAL Since meal receipts are quite common, let’s take a look at how these are often presented for substantiation purposes. Most meal receipts are consistent with one of these three types: THE “AT LEAST I GOT ONE” RECEIPT

In this second installment, we look at the robust Tagging feature available in QuickBooks Online. Introduced in 2020, tags allow you to categorize transactions in multiple ways to allow you to aggregate data in any manner that you deem helpful to running your business. By creating customized tags for your business and grouping them in related categories, you can run reports that provide you with more focused financial information. Since their purpose is simply informational, they don’t affect your books in any way so you can use them as much or as little as you want. To give you an example of how tagging could be useful, let’s say that you own a small graphics design business where you help other small business owners create dynamic marketing materials that they can use to promote their business. As part of your new customer paperwork, you typically ask how they first heard about your services and give them a list of options like Google search, Facebook Ad, word-of-mouth, website or returning customer for instance. With the tagging feature, you could create a group of tags called ‘Source of Business’ and then create tags for each of the categories listed. Then, when you generate your customer invoice or sales receipt, you can designate an applicable ‘Source of Business’ tag to that transaction. The magic happens when you run a report that shows you all of the transactions associated with each tag. This can provide you valuable information on how your customers are finding you and how much revenue is being generated by each source. This can ultimately help guide your marketing strategy. By using your creativity, you can generate a number of different tag groups and apply various tags from different tag groups to the same transaction. Keep in mind, however, that QuickBooks Online has a limit of 300 unique tags that you can create and use and the number of tag groups is capped at 40 for all QuickBooks Online versions except QuickBooks Online Advanced which allows unlimited tag groups. There are absolutely no restrictions on the number of times that you use each tag in QuickBooks Online.