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Business Expenses: Get Reimbursement Right
If a business owner is the main or only employee of the company, it's important to implement a judicious policy of expense reimbursement that's similar to that of major organizations. Solo enterprises are, in fact, the most likely operations to incur business expenses paid with personal funds. This often occurs when the owner uses a personal credit card for company purchases.

The business should treat reimbursed expenses as if it had paid for them directly. The reimbursement is recorded in an expense category of the company's accounting system that describes the type of expenditure. Creating nebulous categories with such names as "Reimbursements" or "Credit Card Payments" obscures the actual business purpose. Instead, use an expense account that classifies the cost exactly as you would for nonreimbursed, directly paid expenditures.

A sound reimbursement policy ensures that you don't miss claiming valuable tax deductions, improperly classify business expenses, or suffer cash drains of uncertain origin.

Limit the Episodes

It's best to limit the occurrences of expense reimbursement. The easiest solution is to have a single credit card devoted entirely to business purchases. Bookkeeping accounts for each credit card charge as it occurs. Since all the charges are company costs, the credit card bill is simply paid by the company. The bill payment is allocated to the credit card liability account on the balance sheet to which the charges were applied.

A credit card provider that supports a business account will issue secondary cards if you have employees. This allows tracking of charges by each worker.

In an era where almost anything may be purchased with a credit card, cash advances are generally unnecessary. Company policy should prohibit cash advances - even to the owner. If you must spend cash for a small item, place the receipt in the business records and collect a reimbursement. This is the same procedure you would utilize with an employee. In these cases, bookkeeping should record the expense in the same category it would have if the expense had been directly paid by the business.

Avoid Complications

Personal expenditures inadvertently charged on a company credit card are not business expenses. An owner may easily make the mistake of charging something like a personal dry-cleaning bill on the company credit card. Account for these charges as owner distributions. With all credit card charges recorded on the books - even these owner distributions - the liability balance in the bookkeeping system will match the eventual credit card bill.

Setting a standard of recording every charge exactly as it will appear on the credit card bill ensures easy reconciliation of the books to the credit card statement. Avoid the temptation to make a bookkeeping entry for a group of charges. This technique is suitable only when reimbursing multiple expenses paid with cash or a credit card not dedicated exclusively to business. A single charge may be divided into multiple expense categories. For instance, meals while traveling for business must be distinguished in the company's accounting from lodging and transportation. Additionally, personal entertainment during a business trip is not tax-deductible, despite the allowable deduction of travel costs.

Are Entrepreneurs Born or Are They Made?
What makes entrepreneurs successful? Is it how they're wired? Is it a certain inherited ability, innate instinct, or genetic quirk?

The truth is, there are some inborn traits that characterize successful entrepreneurs. Entrepreneurs as a breed tend to be self-confident, action oriented, adaptable, and able to deal with uncertainty.

Attributes such as optimism, curiosity, risk tolerance, and moxie - not to mention the good luck of being in the right place at the right time to bring their ideas to market - all figure into the equation.

However, many of the qualities associated with entrepreneurial success are acquired through life experiences. These include patience, tenacity, self-discipline, a strong work ethic, and the ability to overcome failure and "keep on keeping on."

Education matters too. You cannot achieve success as an entrepreneur unless you grasp the basic fundamentals of running a business and the dynamics of your particular industry.

And then there's practice. Negotiating, problem solving, spotting trends, understanding markets and customers - these are skills that take time to master, and there is simply no substitute for practice.

Ultimately, the reason why some entrepreneurs are successful and others fail is not just good genes, brilliant insights, good luck, hard work, education, or practice. It is a combination of all of these things. Entrepreneurial success involves using innate skills as well as those learned or acquired along the way to build a successful business.

It has been said that "the harder you work, the luckier you get." And while having entrepreneurial DNA may allow someone to hone the creative instincts and inborn attributes they possess, every successful entrepreneur must prove their DNA with hard work.

Building the Right Cash Reserve for Your Business
Knowledge and preparation are as constant in the life of an entrepreneur as the daily sunrise. Paramount to this ongoing focus is cash liquidity.

Upward trajectory in business requires incoming cash to exceed cash outflow. Keeping the bills paid when cash collections are low is an exercise in perseverance to achieve the ultimate objective of positive cash flow.

When cash flow is negative, you have to dip into a reserve that you've built as a safety net. The appropriate size of this cash reserve is related to the volatility of your sales. For a business with steady collection of revenue, reserving cash that covers a couple of months of overhead is probably sufficient.

If any uncommon cash crunch arises, you can still meet your obligations while making adjustments for a return to cash flow stability. To determine this figure, you merely need to know the amount of your recurring monthly costs.

Conversely, a business engaged in extended projects over many weeks may require enough cash reserve to pay for several months of expenses. The key measure is the average period that elapses between project start and customer payment. If there are delays in starting or getting paid, you can weather these times with an appropriate cash reserve.

Business owners with a lot of cash in their companies are frequently tempted to overspend. On the other hand, holding more cash than is needed as a reserve is inefficient.

Once you identify a sound amount of emergency cash to hold in reserve, any excess may be deployed to grow your business.

What You Need to Know about Capital Gains
No one likes to pay taxes, especially on an appreciated investment.

With careful planning, you could avoid or minimize capital-gains taxes. Here are three tips.

Hold investments for at least 366 days

How long you keep investments in your portfolio before selling them determines the taxes you pay on your gains. Short-term capital gains are taxed as ordinary income. Long-term capital gains are taxed at rates of 0%, 15%, or 20%, depending on your tax bracket.

Invest in a low-turnover fund

Mutual funds realize capital gains just as individual investors do. Any time your fund sells a security at a gain, that gain is taxable. Since the law requires mutual funds to pass most of their net gains on to investors, you realize a capital gain. This is either long-term or short-term, depending on how long the mutual fund held the securities. You can avoid these types of gains by investing in a low-turnover mutual fund.

Use capital losses to offset capital gains

Do you have a losing investment in your portfolio? You might want to sell it and use the loss to offset gains. For example, if you have $4,000 in capital gains, and you take a $4,000 capital loss, the two will negate each other, and your tax liability on the gains will be eliminated.

Plus, if your investment losses for the year exceed your gains, you can use the balance to offset your ordinary income, up to a $3,000 limit.
Michele Ball
Perfect Additions
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Hiring and Firing
They are two of the most difficult things you must do as a business owner. They also have a significant impact on your success. Hiring and firing are key tasks that must be done properly to keep your company moving in the right direction. Use the following as a road map:

When you need a new hire yesterday, it's hard to be patient. Here's why you should slow down your hiring process:
The Best Strategy To Finding the Right Team

Sometimes you simply need to let someone go. Follow these ten tips to do it right:
10 Steps Needed to Properly Fire Someone

What trends are in store for recruiting and hiring in today's marketplace? Find out here:
Nine Recruiting And Job Search Trends

If you tend to hire for "the right fit," reconsider your strategy. Here's why:
How to Hire

There are certain things you should never do when you fire someone. Discover the top ten here:
Top 10 Don'ts When You Fire an Employee
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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