The WorkingPoint office will be closed on Friday, January 1, 2010.

If you need to reach customer support, please email support@workingpoint.com and we will get back to you as soon as possible but most likely Monday.

In my last post, I explained the accounting cycle so you could get a picture of how your business activity is recorded throughout a reporting period and I briefly touched on what happens at the end of the reporting period. Each business determines their reporting period length, i.e., month, quarter or year. No matter what time frame you consider a reporting period throughout the year, every business reports at least once for year-end. The end-of-year process includes recording adjustments and closing entries and generating financial reports.

In today’s post, I will walk you through adjusting entries in WorkingPoint.

Adjusting entries record changes in account balances that occur outside of normal business operations, e.g. bills and invoices, etc. Account balances change for a variety of reasons but in general there are two types of adjusting entries: accruals and deferrals.

Accruals
Accruals are recorded to change the balance of an account when the expense or income has not yet been realized (before the transaction has been recorded). For example, let’s say you pay your employees every other week. The pay period may straddle two reporting periods, or months. If you waited to record the full payroll expense in the second month, then your payroll expenses for that month would be over-reported and your payroll for the previous month would be under-reported. By recording the percentage of the expense in both months according to the percentage of time worked in each month, you are recording an accrual adjusting entry.

Other common accruals include:  Past-due expenses, Income tax expense, Interest income, and Unrecorded revenue.

Deferrals
Deferrals are recorded to change the balance of an account after the transaction has already been recorded. Prepaid expenses are a good example of this. Let’s say you prepay your auto insurance for the year. Your initial transaction would be to record the prepayment (Debit: prepaid insurance and Credit: Cash). Each month your insurance company is providing you coverage so you are using up a month’s worth of their service. A deferral adjusting entry moves the portion of the prepayment you used each month and moves it from an asset account (prepaid insurance) to an expense account (insurance fees).

Other common deferrals include: Prepaid rent, Office supplies, Depreciation, and Unearned revenue.

To record an adjusting entry in WorkingPoint:

1. Go to the General Journal (Reports > General Journal)
2. Click Record Adjusting Transaction (in the right sidebar), a form will display
3. (Optional) Enter a reference number for the entry.
4. In the Account field, choose the account for the first distribution amount.
5. In the Debit field, if you are debiting the account selected, enter the amount in the Debit column.
6. In the Credit field, if you are crediting the account selected, enter the amount in the Credit column. WorkingPoint displays running totals at the bottom of each column as you enter credit and debit amounts
7. (Optional) In the Contact field, enter the customer name, vendor, or other name associated with the amount.
8. (Optional) In the Notes field for an entry, add a note for the particular entry to explain the adjustment. (You can add a memo for the entire transaction in the Transaction Memo field.)
9. Continue selecting accounts to debit and credit until the transaction difference total reaches a zero balance (the total in the Debit column equals the total in the Credit column). Click Add Line if you need to use more accounts.
10. (Optional) In the Transaction memo field, add a memo for the entire transaction.
11. Click Save Transaction.

If the Save Transaction button is not active, make sure that:

• All entered debits and credits have an account selected
• At least one debit and one credit have been entered
• Debits and credits are balanced

Once your adjusting entries are recorded, you are ready for closing entries – which I will cover next time!

The WorkingPoint Community is made up of small business owners, like yourself, and we want you to get to know each other. We’d like to introduce you to Brittany Rae Williams at Infamous Band Booking and Management Co.:

Infamous Band Booking and Management Co. is a new company that offers services to unsigned bands.

Don’t have a profile for your small business? Learn more or Sign up for an account and create your free company profile today!

The WorkingPoint Community is made up of small business owners, like yourself, and we want you to get to know each other. We’d like to introduce you to Pohakukauea Kekaualua at Kauai Bodyboarding Association:

Kauai Bodyboarding Association hosts Amateur to Professional bodyboarding competition tour.

Don’t have a profile for your small business? Learn more or Sign up for an account and create your free company profile today!

Wishing you a very happy holiday!
The WorkingPoint Team

Our office is closed today (but you can still access your accounts!).  If you need to reach customer support, please email support@workingpoint.com and we will get back to you as soon as possible but most likely Monday.

As if year-end wrap up lists weren’t enough fun by themselves, I thought I’d share another particularly good ‘list of lists’ specifically designed for small business owners.

SmallBizBee compiles a list of their most popular published list, to create the Top 10 Small Business List Posts of 2009 master list.

Ranging from topics such as free online classes and business training, to customer acquisition, marketing tips, and more, SmallBizBee’s got helpful lists, tips and suggestions for entrepreneurs of all stripes, with all types of business needs.  And their year-end list of lists does a great job of bringing together a list of their most popular ones of 2009.

1. 85 Absolutely Free Online Business Classes
2. 105 Absolutely Free Online Business Videos and Lectures
3. 10 Ways to Market Your Business When You’re Broke
4. 10 Ways to Advertise Your Business On the Cheap
5. 13 Ways to Win Customers for Free
6. 10 Tools Every Small Business Marketer Should Have on Hand
7. 9 Powerful SEO Tips for your Small Business Website
8. Over 90 Field Tested Guerrilla Marketing Tactics
9. 5 Things They Don’t Teach You in Business School About Being an Entrepreneur
10. 20 Surefire Ways to Use Twitter for Business

With an unpredictable economy, record unemployment, a virtual freeze on small business lending, and reduced growth in businesses across the country, 2009 has been a year when ‘bootstrapping’ your small business has come back in style.  As a result, understanding what tools are available to help entrepreneurs get the most bang for their buck has been an on-going theme.

To wrap up 2009, and hopefully to help ring a more prosperous 2010, I will focus my last week of 2009 blog posts on free and/or low-cost tools to help entrepreneurs start, grow and manage their business.  And as we wind down 2009, I’d love to hear from WorkingPoint customers and visitors, on what tools you’ve found and use for your business that simply make your life easier.

Besides WorkingPoint, of course.

In the meantime, best wishes for a Merry Christmas.

Alora Chistiakoff is an entrepreneur, content strategist and project manager who has been developing online business and technology for startups for more than a decade.  She co-owns The Indigo Heron Group, Inc., a content strategy firm in Austin, Texas.

For any entrepreneur, the value of a mentor can almost never be overstated.  Whether it’s building your business plan, defining your market, figuring out a product strategy, or trying to sell your spouse on the idea that giving up a steady paycheck from someone else is a sane thing to do, a mentor is one of the single most valuable things any entrepreneur can find.  Sometimes they come out of the woodwork when you least expect it; other times, you have to go on an aggressive hunt for the right one.

One of the best places for many new entrepreneurs to start is SCORE. (Disclaimer: WorkingPoint is a SCORE sponsor.) SCORE is an organization comprised of small business owners — some actively running businesses, others retired — who work together to build a community to support other small business owners.  While some parts of the country have locally grown networks to support entrepreneurs, SCORE has more than 350 chapters across the US, dedicated to providing counseling and advising services to small business owners.

This week, on SCORE’s Ask an Expert blog, advisor Steve Bloom posted an article on a recent experience he had working with an entrepreneur whose idea was not something he felt had sufficient market to be a viable business.  In the post, Steve recounts the conflict he felt between wanting to encourage the entrepreneurial spirit and the strong sense that this particular idea had extremely long odds of success.

Ultimately, the real point he endevours to drive home, is that whether or not the idea is successful, the entrepreneur can still learn a tremendous amount from trying to get his venture up and running.  The value of the lessons one can learn through failure is something that every entrepreneur must always remember.  In the blogosphere “failing fast” is a common topic, but in reality, most of us are so terrified to fail that we will often turn ourselves inside out in an effort to avoid that experience.

This is one of the places that a mentor can help: a mentor who has been through the process before can not only offer their insight and perspective to help navigate pitfalls, but they can also help remind you that, even in the event of failure, you still get value out of an experience.

One of the most important exercises one of my earliest mentors walked me through was a process of defining my ‘worst case scenario.’  And, amazingly enough, I quickly realized that once I defined my biggest nightmare, it wasn’t anywhere near as scary as it was when it was a nebulous, ill-defined gray cloud hanging over my head; even better, it became much easier to insulate myself from the worst of the possible ramifications once I was clear about the details.

The flip side of Steve’s lesson is equally important: a mentor does not know everything.  And while it’s always nice to have a mentor who understands both you and your idea, the fact is that everyone has different strengths.  Just because a mentor may not consider your venture to be the world’s greatest idea, doesn’t mean it isn’t worth doing.

Part of the test for a mentor is to give you the best advice and encouragement they can; part of the test for an entrepreneur is to listen, process the information, and then make a final determination based on what you know to be true.  You won’t always agree, but that doesn’t make the advice bad, or the mentor wrong.  And hearing those concerns raised is always important, because it helps a new entrepreneur re-examine assumptions and ideas, to make sure there are no holes that have been over-looked.

So, if you have or are looking to start a business, and you do not already have a mentor, I’d strongly recommend looking for one.  There are plenty of different approaches to try (serial entrepreneur Penelope Trunk isn’t above being slightly annoying to snag the one she wants), but whatever you do, start looking for one — check out a local SCORE chapter, Chamber of Commerce, startup incubator or entrepreneurial Meetup.

Wherever you look, just remember: someone who has done it before, always has insights of value for someone just starting out.  They may not all fit, but there is always the chance for some great gems that can help you side-step a landmine.

Alora Chistiakoff is an entrepreneur, content strategist and project manager who has been developing online business and technology for startups for more than a decade.  She co-owns The Indigo Heron Group, Inc., a content strategy firm in Austin, Texas.

With the new year just days away, you may be gathering your depreciation schedules and other adjusting entries to close your books, preparing to print your financial reports for the year, and getting ready for a new year of recordkeeping. WorkingPoint makes it easy to transition from one year to the next by providing you easy ways to record your adjustments as well as handling some of them for you!

If you just started your business or you’re new to accounting for your  business records, I would be honored to walk you through closing your books at year-end, starting with a look at what is involved in keeping records for your business from a process standpoint.

What is the Accounting Cycle?

The accounting cycle is a series of steps that are taken to process your paperwork and generate meaningful financial reports. The accounting cycle is the same for every business. But you can determine the frequency of the cycle based on your business structure (sole proprietor, S-Corp, Corporation, etc.) and reporting period requirements. A reporting period is the date range that you want to report on. Standard reporting periods include month, quarter, and year. A lot of business owners want to see how their business is doing month-to-month, so their reporting period is month. For them, the accounting cycle starts at the beginning of the month and closes at the end of the month. Businesses that choose this frequency tend to have many transactions per day or month, want to keep a close eye on revenue and expenses, and don’t want to fall behind on data entry. If you are just starting out and don’t have a lot of transactions, you could start at a quarter reporting period and then, as your business grows, you could change it to month.

What steps are involved in the accounting cycle?

The accounting cycle includes a set of activities performed during the reporting period and another set of activities performed at the close of the reporting period.

During the reporting period:

For every event that occurs that has a financial impact, a transaction needs to be recorded in WorkingPoint. The following steps should be taken each time a financial event occurs:

• Identify the event—This is often triggered by the receipt of a source document, such as vendor bill or receipt, or it could be the result of a phone call or other interaction that resulted in an event, like a sale you made over the phone.
• Analyze the transaction—Look at the document and gather the details including date, amounts, and accounts affected so you can determine what type of transaction it is (deposit, invoice, payment, etc.).
• Record the transaction—Using the event-specific forms in WorkingPoint or the adjusting entry form, record the transaction. WorkingPoint will update your accounts and the journal accordingly.

Repeat these steps as transactions occur. Keeping your records up-to-date will allow you to use helpful dashboards in WorkingPoint so you can see where your business is at a glance anytime and you won’t have to play catch up at the end of the month or year.

End of the reporting period

At end of the reporting period, perform the necessary closing activities, including:

• Making adjusting and closing entries—WorkingPoint performs some closing activities for you, like tracking your net income and transferring your retained earnings at year end. But there are other activities you might need to perform at the end of your reporting period, including posting depreciation and accruals (like prepaid expenses).
• Generating financial reports—WorkingPoint takes the hassle out of reporting by providing real-time, professional financial reports. You don’t have to transfer your business data to another system to generate reports. If you are incorporated, your financial statements are published for your shareholders, so it is important to practice regular closing activities and generate and distribute your reports. If you are a sole proprietor, you might only print these at year end for taxes.

So now that you are familiar with the process of recording your business activity, next time I’ll walk you through “End of the reporting period” activities that you will want to do as part of your year-end closing for 2009.

I love startups. I love the chaos. I love the insane hours. I love the energy. I love the types of people who are attracted to work on high-risk ideas with long odds. I love the culture that evolves around them. I love it all. I have spent my career hopping from one startup to the next, because there is nothing I love more.

But every startup hits a tipping point, and it’s rarely articulated as clearly and beautifully as Steve Blank does in an article posted to VentureBeat today. The transition from a ‘scrappy startup’ to a mid-sized company trying to be more mature is always infinitely more painful a process than anyone seems to think is reasonable.

This surprises me every time I see it. In his story, Steve recounts watching a new CFO to a mid-sized firm implement a ‘no more free soda’ policy and inadvertently spark an exodus of the founding team of engineers. What’s more interesting, though, is that some of the comments posted on the story miss the point: the engineers didn’t leave the company because the company started charging them $.50 for a Coke. The engineers left because being charged $.50 for a Coke was a sign that the company was no longer the same organization that they’d previously been willing to sacrifice for.

That’s a subtle distinction, but a vital one. More than once, I and many of my colleagues, have been willing to take significant pay cuts to work in environments that had a culture (or other intangibles) that made the trade-off worthwhile. Eventually, though, most organizations change enough to where that trade-off ceases to be worth it. The part that is often upsetting, however, is that those changes are frequently sparked by someone coming in the door more intent on shaking things up than on understanding the culture they are walking into.

Steve’s story is one that I can relate to over and over again. It wasn’t until I had a truly remarkable executive come into our organization, and refuse to act precipitously, but instead insist on watching and interviewing the entire staff for his first 60 days, that I had the slightest hope of someone making positive changes without unraveling the cultural elements that held us together, even in the face of the chaos. So now, when I go into startups, many of which are at the transition point between early-stage/founding team, and their second generation, I have a five step approach I follow:

1. Recognize that, for founding teams, everything is personal. The people who build a new organization take on a lot of risk and chaos to do it. They have to believe in it. It’s almost a religious experience, and you can’t come in a year or two later and expect them not to take your changes personally. Because, whether it makes sense to you or not, everything is personal. They’ve sacrificed too much for it not to be.
2. Understand the evolution. You have to be a bit of an archaeologist when you go into a new business. Do not make assumptions about how they got where they are. If you look long and hard enough, talk to enough people, and do your research, you’ll find that even the craziest things you see have a reason for having evolved the way they did. Unless or until you understand that reason, anything you do to try to “fix” the situation runs the risk of alienating people unnecessarily.
3. Respect the sacrifices made by the people who came before you. Unless you know that the people who are there when you walk in the door are dead wood and you want them to quit, make sure you demonstrate some respect to what they were able to accomplish — especially if they did it under tough circumstances. The single biggest source of alienation I have ever seen has been when new people come in, hot-to-trot, making changes and the people who built the company in the first place are treated like morons who simply got lucky.
4. Work on depersonalizing the business. It is reasonable that early stage startups are often personal sacrifices for people — they need to be. But a maturing company has to pass the point where that is no longer true. Not all of the early stage team will be able to handle that transition, but many of them can and will if they do not feel kicked in the teeth by new leadership brought in from the outside. Slowly building in an ethic of, “It’s not personal, but this is where the business needs to go now” is actually often much easier than people assume it to be. Founding teams want the business to be successful. That was the whole point for their sacrifice. If you want or need them to stick around, then help them learn to take a step back and not see the evolution of the business as an emotional affair.
5. Facilitate relationships between the old guard and new guard. Not all of the old guard is (or should) make the transition to the new phase of the business. And not all of the new guard is capable of showing any respect for what the old guard has done. But if you focus on individuals, their talents, and understanding what drives them, it is often possible to help connect people in ways that build strong teams to move the company forward. But you must keep in mind that there is often an automatic lack of trust between both groups, a tendency to point fingers, and a common tradition of resentment that you must work through before you are going to see progress.

Businesses are made up of people. And not every person is right for every business at every stage. Some really do need to move on as an organization grows. But that should be a deliberate, well-considered decision, not a haphazard, expensive mistake spurred by a short-sighted, penny-pinching reason. Unfortunately, that’s the cause I’ve seen most frequently throughout my career. And it’s a bit tragic, because a lot of dynamic organizations have lost a lot of amazing talent that could have helped grow the business and make it successful.

With the end-of-the-year just days away, taxes are on the minds of many small business owners. Our newest tax reports – Estimated Tax Report and Sales Tax Report – will help you prepare important tax forms and help you plan for next years tax payments.

Estimated Tax Report
WorkingPoint’s Estimated Tax Report estimates your federal income and self-employment taxes based on IRS tax schedules for the current year, so you know how much you need to save for end of year taxes or for estimating your taxes for quarterly tax payments.

If you paid additional taxes to the IRS last year over and above your prepayments or withholdings, you’re likely required to pay estimated quarterly income taxes for this year. This means that 4 times a year you pay an estimated amount to the IRS to cover your taxes for the year in advance. You can also choose to pay the estimate for the entire year if you pay it all by April 15. While this can seem like a drag to pay taxes “up front”, it can actually be a help because as sole proprietors, we often forget to plan for our income taxes and then we find out too late that we owe a ton of money in taxes and we don’t have it.

Sales Tax Report
If you charge sales tax for your goods or services, WorkingPoint’s new Sales Tax Report will help you complete the forms required for reporting your sales and tax back to the state. As you invoice your customers, WorkingPoint is tracking where your sales occurred, how much of the total sales were taxable or non-taxable, how much you charged in sales tax and the rates used.

You can use this report to fill out your tax reports and to view complete your sales tax forms as well as view your sales broken down into taxable and non-taxable and your sales total by state, county or city.

These reports are available on our Premium account plan.  For more information on account plans, click here.