SBA: Manage your business

A CBA is a technique for making non-critical choices in a relatively quick and easy way. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy with hiring another employee or an independent contractor. For example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant, Haute Dog. You estimate outdoor seating would add $5,000 in extra profit from sales each year. But, the outdoor seating permit costs $1,000 each year, and you’d also have to spend $2,000 to buy outdoor tables and chairs. Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses). Pick a method of accounting + Businesses often use either the accrual or cash methods of recording purchases. The accrual method puts transactions on the books immediately upon completing the sale. The cash method only records this once payment has been received. For example, if you make a sale in January and receive the $200 payment in February, an accrual method would allow you to record that on January’s books, while the cash method would require that payment to land on February’s books. Method Pros Cons Accrual Creates immediate snapshot. Can reduce tax burden. More complex to manage. Potentially deceiving figures. Cash Shows cash flow clearly. Easier to understand. Limits predictive value. Less long-term clarity. GAAP There are many strategies for preparing financial statements for a small business. Generally accepted accounting principles, known as GAAP or “Gap,” provides a common a way to standardize financial reporting using the accrual method. Private companies aren’t required to follow GAAP. The Financial Accounting Standards Board (FASB) maintains GAAP in the United States. Get accounting help + You might want to get help with your accounting. Consider hiring a certified public accountant (CPA), bookkeeper, or using an online service. A CPA will typically cost more than online services, but can normally offer more tailored service for your specific business needs. A bookkeeper can provide basic day-to-day functions at a lower cost, but won’t possess the formal accounting education of a CPA. Ensure that someone can manage the following: Accounts receivable Accounts payable Available cash Bank reconciliation Payroll Hire and manage employees Establish a basic payroll structure to help you hire employees. Then, manage employees properly with a general understanding of state and federal labor laws. Hire and pay employees + Before finding the right person for the job, you’ll need to create a plan for paying employees. Follow these steps to set up payroll: Get an Employer Identification Number (EIN) Find out whether you need state or local tax IDs Decide if you want an independent contractor or an employee Ensure new employees return a completed W-4 form Schedule pay periods to coordinate tax withholding for IRS Create a compensation plan for holiday, vacation and leave Choose an in-house or external service for administering payroll Decide who will manage your payroll system Know which records must stay on file and for how long Report payroll taxes as needed on quarterly and annual basis