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How to Create a Useful Budget for the New Year
Entrepreneurs rarely find anything enjoyable about devising a budget for the year ahead. Consequently, the budgeting exercise is commonly neglected. Yet budgets offer advantages by facilitating planning, guiding cash management, and providing comparison to actual results.

Of course, professionals reap these benefits only if the budget is useful. Giving attention to a forecast that results in gross inaccuracies and misjudgments is even worse than no budget at all. The key to making the budget process easy and accurate is to focus on six basic factors.

Expense Limits, Revenue Timing, and Capital Goods

Always begin your budget with projections of expenses. Fixed expenses are the simplest to address. These are recurring items such as telephone and internet service, office rent, professional liability insurance, and licensing or certification fees.

Next, examine variable costs, which fluctuate with revenue. After paying fixed expenses, you have limited cash available for variable costs, such as inventory, materials, and staff needed to complete sales. Your revenue is then based on your markup of these variable costs.

An additional factor to consider is how long it takes to get paid for sales. This could happen immediately, as in the case of a retailer, or a few months after project completion, if you provide billed services. Be sure to place your revenue collections in the appropriate periods of your forecast. You might need to pay another month of expenses before receiving the income from sales a month prior. And the initial months in next year's budget may have incoming funds from jobs in your pipeline that you complete this year.

Don't forget to include expenditures for capital goods such as machinery, equipment, and computers. For example, rising sales may at some point necessitate adding both a new worker and a new piece of equipment.

Substantiating, Duplicating, and Assessing

Verify your budget accuracy by comparing the numbers to the facts. These are crucial elements such as the number of potential customers in your market and how likely you are to connect with them based on your marketing costs. Identify how many potential customers turn into buyers. Determine the average purchase size. Overall, your aim is to ensure that your sales goal is realistic.

Turning optimism into pragmatism is achieved by forecasting multiple growth scenarios. The numerous factors at play are easily manipulated in a spreadsheet application on your computer. One scenario might modify the overall growth rate for next year. Another could change the pace at which your business grows. That is, you might end the future year at your optimistic sales level but get there more slowly.

Constant reassessment of your budget is vital. Maintain your forecast in a spreadsheet that allows you to recalculate upcoming projections as you enter each month's actual results. Follow up each entry with a re-evaluation of the approaching period. Modify the forecast with a revised projected growth rate to match your recent activity. Change variable expenses and capital goods costs accordingly.

Lastly, review whether sales are rising faster or slower than expected. Based on this trend, consider whether you should expand or slash the fixed costs over which you have control. These adjustments will help keep your budget balanced and keep your business on track for success.

Keeping Your Business Wi-Fi Network Secure
Wireless networks are notoriously insecure, and many small businesses inadvertently leave their Wi-Fi systems vulnerable to cyberattack. Often, these entrepreneurs don't realize just how easily hackers can access data that is transmitted wirelessly.

Fortunately, business owners can take some simple precautions to strengthen the security of their wireless networks. These extra efforts are well worth the added security they provide.

Defaults: Always change the default credentials on devices such as Wi-Fi routers, switches, ports, and access points. These default credentials enable users to log in initially and configure their network, but it's important to customize these once you set up your network.

Ports: A hacker or internal intruder can easily access sensitive business data by plugging in to an Ethernet port. To prevent this, make sure that all network peripherals are safely stored in a locked cabinet or closet.

Firewalls: Ensure that firewalls are running on all your computers and other network devices.

Guests: If you have enabled a guest Wi-Fi, make sure it is isolated from the rest of your network. If your servers are linked to your Wi-Fi, an intruder logged on to your Wi-Fi can easily hack your data.

Monitoring: Regularly monitor network peripherals such as routers and other network components for suspicious activity.

Updates: Keep all hardware and network firmware updated.

Tiers: High-level encryption standards and an extended authorization protocol can add further layers of security.

Securing your Wi-Fi network is essential business hygiene. Whether you're a solopreneur or a small-business owner, these simple steps can keep your confidential information from being exploited.

Five Quick Steps to Save a Laptop from a Spill
One second, you're working. The next, you're fighting panic over the deluge that just hit your keyboard. A single tumbled cup can bring disaster to your day. How can you recover? If liquid gets into your laptop, take the following steps.

Immediately turn the device off by holding the power button down for five seconds. Then disconnect the power cord and remove the battery to prevent it from shorting out.

Now that you're safe from shock, unplug the mouse, cables, flash drives, et cetera. Open and remove anything that can be easily disengaged, such as the RAM and the hard drive or SSD.

Next, blot the spilled liquid with a soft, lint-free cloth. Apply light pressure. Do not rub, scrub, or wipe, as that will just distribute the liquid.

Then open the laptop as wide as possible, turn it upside down, and gently tilt it from side to side and from front to back, allowing the liquid to escape from all sides. Do not shake the laptop.

Once the excess liquid is gone, use a can of compressed air or a hair dryer at the coolest setting to remove any remaining moisture. Be sure to keep the blow dryer or compressed air moving.

Leave the device upside down for a few hours, and use this time to blot up any liquid that may have seeped into the keyboard or other accessories. If the liquid was something sticky, such as soda, send the laptop to a professional for a thorough cleaning. If the spill was water, once the laptop has dried thoroughly, you should be able to reattach the peripherals and start it up.

Buying Out Your Corporation Co-owner
You may think of your joint shareholder as a business partner, but an incorporated business is a tax entity that is different from a partnership. This arrangement comes with specific tax consequences if you decide to buy out your corporation co-owner.

First, it's important to understand that buying the company's shares of stock from someone does not impact the corporation. Rather, this is an arrangement between you and the other shareholder. You are buying his shares. The number of shares issued by the company doesn't change.

If the departing shareholder merely takes some money from the corporation, that is not a payment from you for your stock purchase. It's simply a taxable dividend to the other shareholder. Or, if the business has a tax classification as an S corporation, the departing shareholder is taking a distribution, which is likely not taxable.

The fulfillment of your stock purchase agreement occurs with payment of your personal money to the departing shareholder. If your source for this cash is the company, then you have the tax consequence of receiving a dividend (or distributions, in the case of an S corporation). Again, this process has no tax impact on the company.

The tax consequences of the buyout fall entirely on the individual shareholders. As the buyer, you have a cost for the stock shares you're acquiring. The selling shareholder has a gain or loss that's the difference between what you pay him and his cost basis in the shares he's selling.

If you're unsure about this money flow, consult with your business accountant, who can guide you through the process.
Michele Ball
Perfect Additions
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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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