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Customers Paying Late? How to Create Statements

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There are many ways to encourage delinquent customers to pay. QuickBooks Online’s statements may be effective for you.

After the year-plus you’ve just experienced, the last thing your small business needs is customers who are behind on their payments to you. You may have been giving them a break because you know that they’re struggling, too, but things have been looking up for many companies in the past few months. It’s time for you to be more proactive about calling in your debts.

There are numerous ways you can accomplish this. One of the best is to send statements in QuickBooks Online, which are detailed reminder forms that contain multiple transactions. These can be especially helpful if you’ve sent multiple invoices with no response. There are three different types you can send, depending on your needs. Here’s how you create them.

Before You Start

QuickBooks Online offers a couple of options for formatting your statements. To see these, click the gear icon in the upper right corner and select Your Company | Account and Settings. Click the Sales tab and scroll down to the Statements section. Click the pencil icon over to the far right to make any changes needed. You can:

  • List each transaction as a single line or include all of the detail lines.
  • Display an aging table at the bottom of each statement.

Click the buttons to specify your preference and then click Save and Done.

Three Statement Types

You can choose from among three different types of statements in QuickBooks Online: Balance Forward includes invoices with outstanding balances for a specified range of dates. Open Item statements contain information about all unpaid (open) invoices from the last 365 days. And Transaction Statements show every transaction in a date range that you specify. We’ll describe how to create them so you can decide which makes the most sense for a particular situation.

One Way to Create Statements

Like it does for many other actions, QuickBooks Online offers two ways to create statements. The first is easier. Click the New button in the upper left and select Statement (under Other). Click the down arrow in the field under Statement Type to see the three options there.

If you select Balance Forward, you’ll need to define three criteria (there will be similar options for the other two types):<.p>

  • Statement Date
  • Customer Balance Status (Open, Overdue, or All)
  • Start Date and End Date

When you’re satisfied with your statement parameters, click Apply. QuickBooks Online will display a list of the transactions that meet your criteria, along with the number of them that will be generated. Each row in the list will display the recipient’s name, email address, and balance. In the upper right corner, you’ll see the number of statements again and the total balance these customers represent.

If you want to exclude any of these customers, click in the box in front of each to unselect them and delete the checkmark. When you’re satisfied with your list, click Save, Save and send, or Save and close. If you click Save and send, a window will open containing a preview of your statements. Thumbnails of each will appear in the left pane. Click on any to see their previews. When you’re ready, you can download, print, or send them.

If you click Save or Save and close, you’ll still be able to see the statements you’ve just generated. Click the Sales tab in the toolbar, then All Sales. Click the down arrow next to Filter and open the drop-down list under Type. Select Statements, and your list will appear. You can print or send one by selecting the correct option in the Action column. If you want to dispatch multiple statements, click in the box in front of each, and then click the down arrow next to Batch actions.

Another Method

There’s an alternate way to create statements. Click the Sales tab in the toolbar, then Customers. Select any or all of the customers in the list, then click the down arrow next to Batch actions and select Create statements. QuickBooks Online will open the Create Statements window again so you can select the type and process your statements like you did using the previous method.

We don’t expect that you’ll have much trouble working with statements, though you may want to consult with us on when they’re appropriate. We can also suggest other ways to bring your accounts receivable up to date. As always, we’re available to help you maximize and streamline your use of QuickBooks Online. Keeping your financial books current and organized is one way to ensure that you don’t fall too far behind with customer payments.

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Are too many of your customers behind in their payments to you? Consider sending statements in QBO. We can show you how.

QuickBooks Online supports statements, reminder forms you can send to customers whose payments are past due.

Don’t know how many customers are past due on their payments to you? Run QuickBooks Online’s A/R Aging reports.

There are two ways to create three different types of statements in QuickBooks Online. We can help you sort it out.

Call us at 770-229-7145 to learn more about our QuickBooks setup and support services.

Pandemic Is a Wake-Up Call for Underinsured Small Businesses

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Creative team working at the officeMany small businesses have been devastated by the coronavirus pandemic. Unlike their larger brethren, small companies typically lack the cash cushion or access to funds that bigger businesses enjoy. Even with new programs to help small businesses out, such as the Paycheck Protection Program, many are seeing their resources run dry. A large number of them will not survive.

Those that do make it may want to look into their insurance coverage. Business insurance can cover a wide variety of issues, including property damage, liability, lawsuits, loss of key employees – and especially important today – loss of business income.

If it has been some time since you last reviewed your business’s insurance coverage, now may be a good time to conduct an in-depth review of your policies. A review can help detect shortcomings in coverage and help you protect your livelihood from financial harm.

What’s the “Right” Amount of Coverage?

It’s likely that you have commercial property and general liability coverage as well as additional policies. However, it may be that things have changed in your business since you last reviewed your policies — new locations, updated equipment, or other changes. The right amount of coverage should reflect the current status of your business. You may also consider reviewing your deductibles. Raising deductible amounts to reduce policy premiums is considered a fiscally sound strategy — but only up to a point. The bottom line is that if you cannot afford to pay the deductible, it is too high.

Look for Gaps in Your Coverage

Review your policies thoroughly before you renew them. In particular, look for new exclusions, since these can potentially expose your business to risks you assumed were covered. The review period is also a good time to dig deep into the financial soundness of your insurance carriers. Various insurance ratings agencies, such as A.M. Best, Moody’s Investors Service, Standard and Poor’s, and Fitch Ratings, measure the financial health of insurance companies and their ability to pay policy holders’ claims. Each ratings agency employs its own ratings system, though these are generally similar to letter grades used in education.

Take the time to investigate new areas of potential vulnerability that could harm your business. For example, what if there are repeated waves of coronavirus infections, resulting in more lockdowns and closures? Or what if another pandemic hits? Business income insurance may help cover your costs until your business is up and running again, helping you to continue to pay expenses, such as payroll and monthly bills, until the crisis has passed. But you’ll want to make sure crises such as a pandemic are covered, and the specific terms of coverage.

Insure Your Most Valuable Resources

Who is essential to your business’s success? Most likely, it’s you, your partner, or your most productive salesperson. Think what might happen if you or that person were to die unexpectedly. Your revenues could fall, your operations could be disrupted, and the future of your company could be placed in danger. A key person life insurance policy can provide the funds to carry on with operations as usual.

With a key person life insurance policy, the business buys the policy, pays the premiums, and is the beneficiary. If you or the other insured person were to die, the proceeds from the policy would be available to help your business make up for lost sales and interrupted cash flow. The proceeds also could help hire and train a replacement or permit the business to move on with any business or expansion plans. This calculator can give you an idea of the factors that determine how much personal life insurance coverage is typically called for.

Find Help

It can be time consuming and somewhat difficult to conduct a thorough insurance review. But as recent history shows, bad things can come out of nowhere and devastate your business. That’s why it may make sense for you to work closely with your financial professional to see if your business’s insurance coverage continues to meet your needs.

If it has been some time since you last reviewed your business’s insurance coverage, now may be a good time to conduct an in-depth review of your policies. A review can help detect shortcomings in coverage and help you protect your livelihood from financial harm.

7 Small Business Tax Credits You Should Know About for 2021

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Notebook with tax credit sign on a table. Business concept.Small businesses benefit from various tax credits that reduce the amount of tax they pay to the government. Here, we discuss tax credits, why they exist and provide a list of the top tax credits that small business owners should know.

Small Business Tax Credits

A small business tax credit is an amount of money subtracted from the taxes the business owes. Tax credits differ from tax deductions. For example, deductions cut a business’ total tax by a percentage of the deduction, depending on the tax bracket. Alternatively, tax credits reduce the tax due, not the amount of taxable income. In other words, a small business tax credit is a dollar for dollar deal – every dollar of credit cuts the business’ tax by a whole dollar. This credit is a significant benefit for small business owners because it helps recover some operating costs and retains the precious capital needed for growth.

As a practical example, if your business owes $20,000 in taxes, but you can claim a $5,000 tax credit, that amount is subtracted from your total tax bill making the new tax bill $15,000.

The Purpose of Small Business Tax Credits

The U.S. government grants tax credits to promote behaviors it finds favorable. For example, tax credits are offered to businesses as incentives for activities that benefit employees, promote specific industries, or aid or benefit society. One example is the government offering tax credits to businesses that purchase electric vehicles. The government encourages this to fight climate change and global warming. Because tax credits can have such a dramatic impact on a small business’s bottom line, it is crucial to stay apprised of tax credits for which your business is eligible.

7 Small Business Tax Credits for 2021

In the wake of the COVID-19 pandemic, related tax credits for small businesses top the list.

1. Employee Retention Credit

Under the American Rescue Plan, the Employee Retention Credit (ERC) is extended for small businesses through December 2021 and is available for all four quarters of the year. This tax credit allows small businesses to offset payroll tax liabilities by up to $7,000 per employee per quarter. That means a credit of up to $28,000 per employee is available for small businesses whose revenue declined due to the COVID-19 pandemic. A 20 percent decline in gross receipts during a single quarter makes a business eligible for this tax credit.

2. Paid Leave Credit

Another tax credit that falls under the American Rescue Plan is the Paid Leave Credit. This credit is extended through September 30, 2021, and offers credits for small and midsize businesses that offer paid leave to employees for COVID-related illness, quarantine, or family caregiving. The allowable credit is equal to wages up to $5,000 of paid leave for sick or quarantining employees.

Note: Small businesses are no longer required by law to offer paid leave related to COVID; however, if they do, the credit still applies.

Other tax credits of which small businesses should be aware are:

3. Health Care Tax Credit

With the Health Care Tax Credit, the smaller the business, the bigger the credit. The credit is highest for businesses with fewer than ten employees. Generally, the way to qualify for the credit is by enrolling in a Small Business Health Options Program (SHOP).

A business must meet the following requirements to qualify:

  • (a) have fewer than 25 full-time employees,
  • (b) have an average employee salary of approximately $50,000 per year or less,
  • (c) pay at least 50 percent of full-time employees’ healthcare premiums, and
  • (d) offer SHOP coverage to all full-time employees.

This credit can be claimed for two consecutive years, applicable from 2017 forward.

4. Work Opportunity Credit

This credit is available to employers who hire from specific groups that face barriers to employment. For example:

  • Qualified IV-A Recipient – receiving TANF assistance
  • Qualified Veteran – the IRS provides details of what “qualified” entails on their site under Tax Credits
  • Ex-Felon
  • Designated Community Resident (DCR) – between 18 and 40 years old and living in an empowerment zone, an enterprise community, or a renewal community
  • Vocational Rehabilitation Referral – a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services
  • Summer Youth Employee
  • Supplemental Nutrition Assistance Program (SNAP) Recipient
  • Supplemental Security Income (SSI) Recipient
  • Long-Term Family Assistance Recipient
  • Qualified Long-Term Unemployment Recipient

Under the Consolidated Appropriation Act, 2021, this credit was extended until December 31, 2025.

5. Disabled Access Credit

Eligible small businesses that earn $1 million or less and have a maximum of 30 full-time employees in a year can claim this credit each year in which expenditures are incurred to make their business accessible to persons with disabilities under the Americans with Disabilities Act (ADA).

Expenditures include, but are not limited to, installing wheelchair ramps, upgrading restrooms, and providing Braille text materials.

6. Employer-Provided Childcare Facilities and Services

While few businesses these days seem to provide in-house child care for their employees’ children, a tax credit can make this an attractive option. This credit is a general business tax credit for 25 percent of qualified employer-provided child care expenditures plus 10 percent of qualified child care resources and referral expenditures. The credit is capped at $150,000 per tax year.

Qualifying expenditures:

  • Include operating costs of a qualified child care facility
  • Include costs for acquisition, construction, rehabilitation, or expansion of a property used as a care facility (but not land or any part of the principal residence of the taxpayer)
  • May not exceed the fair market value of care provided

The employer-run facility must open enrollment to employees and must not discriminate in favor of highly compensated employees. At least 30 percent of the facility’s enrollment must consist of dependents of taxpayer employees.

7. Research and Development (R&D) Tax Credits

Several R&D tax credits exist for small businesses. These credits typically apply to science, medical and technology-based businesses; however, many businesses engage in qualified R&D activity.

The following activities qualify for an R&D tax credit:

  • New prototype or model development
  • Proprietary product on which you seek a patent
  • Developing a new manufacturing process or business process
  • Improving product efficiency or existing business processes
  • Improving quality control processes
  • Environmental or certification testing

Businesses that qualify for this credit can subtract up to 10 percent of R&D costs from their tax bill.

Ask your tax professional about small business tax credits that apply to your business. There are additional federal small-business tax credits from state and local governments. Tax credits often expire after a few years, so act quickly to take advantage of those that apply to you.

From small businesses to individuals, our Snellville, GA CPA applies the same level of dedication to every client, with sound tax strategies and unsurpassed attention to detail. Call our office now at 770-229-7145 to discover how we can decrease your tax obligations. We welcome new clients and offer a free consultation so contact us today.

Do You Have a Business Continuity Plan? You Should

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Businesswoman and businessman using computer discussing business issuesWhat if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.1 Having a business continuity plan can help improve your odds of recovering.

The Basic Plan

The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected, and identify appropriate recovery actions.

Make sure you have a list of employees ready with phone numbers, email addresses, and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers, and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.

Risk Protection

Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance, and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.

Maintaining Operations

If your building has to be evacuated, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).

Protecting Data

A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off site.

Protecting Your Business

If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your financial professional for a full review.

Source/Disclaimer:

1Source: U.S. Small Business Administration, www.sba.gov/content/disaster-planning.

Call David C. Huff CPA at 770-229-7145 today and set up an appointment for a free initial consultation to discuss your business goals.

Investing for Tax-Favored Income

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Tax-Favored Income - Individual TaxIf you are seeking a steady income stream from your portfolio while trying to minimize the tax impact of that income, you may want to look into municipal bonds. Municipal bonds traditionally have had a relatively low default rate and may offer diversification benefits.1

What They Are

Municipal bonds are debt securities that are issued by states, cities, counties, and other government entities. Issuers use the funds to fund day-to-day obligations and to pay for capital projects.

Municipal bonds come in two basic types: general obligation bonds and revenue bonds. General obligation bonds are backed by the issuer’s taxing power. Revenue bond payments are funded by the revenues from a specific project or source.

Why Buy Municipal Bonds?

The interest investors earn on most municipal bonds is exempt from federal income taxes.2 In addition, many states do not tax their residents on interest earned from municipal bonds issued in the state. The tax-exempt feature of municipals may mean that, after taking into account tax considerations, you can earn a better return on a municipal bond than you would from a higher yielding taxable bond.

The value of this tax benefit depends on your tax situation and is highest for investors in higher tax brackets or those who reside in high-tax jurisdictions.

Additional Benefits

You can potentially enjoy several other advantages apart from tax-exempt income when you invest in municipal bonds:

  • A predictable income stream for the life of the bond;
  • Marketability should you need to sell the bonds before maturity; and
  • Choices as to issuer, quality, and geographic location.

Municipal Bonds Are Not Risk-Free

Like all investments, municipal bonds have their own set of risks. The financial health of an issuer and its ability to make timely payments of interest and principal is something you should investigate before buying. Various credit rating agencies, such as Moody’s Investors Services, assess the credit rating of the governmental entities that issue municipal bonds. Generally, issuers with lower credit ratings tend to offer higher yields on their municipals to compensate for the added risk to your principal.

Municipals, like other bonds, are subject to interest rate risk. Rising interest rates cause bond prices to fall. In a period of rising interest rates, selling a municipal bond before it matures may mean having to accept a lower price than you paid for it. In addition, municipal bonds can be impacted by other market forces.

Despite credit, interest, and market force risks, municipal bonds may have a role to play in a carefully structured, diversified fixed-income portfolio. Your financial advisor can help determine whether your portfolio would benefit from holding municipals.

1Diversification does not ensure a profit or protect against loss in a declining market.

2The interest on certain “private activity” bonds must be included in income for federal alternative minimum tax purposes.

Small Business Health Care Tax Credit

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David C. Huff, CPA, PC -Eligible small employers who provide health care coverage to tAheir employees can receive a Small Business Health Care Tax Credit from the Federal government. Here’s what you need to know about who qualifies and how to take advantage of the credit.

What is the Small Business Health Care Tax Credit?

Small business owners make numerous decisions about employee benefits. For example, the type of benefits offered can entice the most desirable candidates to apply for their company’s positions. The right type of benefits can also boost employee retention. An excellent employee benefit to consider is health insurance. If that’s a perk being offered, the small business health care tax credit is a feature of the Affordable Care Act (ACA) that may be of interest. The tax credit is limited to employers with less than 25 employees, and it operates as a sliding-scale credit based on the size of the employer. The larger the employer, the smaller the tax credit. The maximum credit is 50 percent of premiums paid (35 percent for tax-exempt employers).

Qualifying small employers can take advantage of the small business health care tax credit for two consecutive tax years providing the business owes no taxes during those years. The credit can also be carried forward or back to other tax years. Any excess amount paid for health insurance premiums over the allowable credit can be claimed as a business expense.

Who qualifies for the Small Business Health Care Tax Credit?

As mentioned above, the small business health care tax credit is for small employers with fewer than 25 full-time equivalent employees (FTE). Note that the FTE concept is based on hours worked rather than the actual number of employees.

Other qualifications include that:

The employer pays less than $50,000 a year per FTE in average wages. Determining FTEs and average annual wages should be done by your qualified tax preparer, CPA, or via guidance from the Internal Revenue Service (IRS).

The employer offers a qualified health plan to employees through a Small Business Health Options Program Marketplace (SHOP).

The employer pays at least 50 percent of the employee’s premium cost. (Not family or dependent premium cost.)

What about Tax-exempt Organizations?

Tax-exempt organizations are also eligible for the small business health care tax credit. In this case, the credit is refundable to the extent that it does not exceed income tax withholdings or Medicare tax liability. Refunds to tax-exempt organizations are reduced by the current fiscal year sequestration rate. For an explanation of sequestration and how it impacts the small business health care tax credit, consult your tax advisor or accountant.

How do small businesses take advantage of the Small Business Health Care Tax Credit?

To claim the small business health care tax credit, the IRS requires Form 8941 (Credit for Small Employer Health Insurance Premiums) to be filled out and submitted. For small businesses, the amount should be included as part of the general business credit on the company’s federal tax return. The amount should be included on Form 990-T (Exempt Organization Business Income Tax Return) for tax-exempt organizations. Note: this form must be filed for a tax-exempt organization to claim the small business health care tax credit, even if the business does not typically file that form.

Small business owners may find that offering perks like health insurance aren’t beyond their economic reach with incentives like this. As always, a trusted tax professional is the place to turn regarding this and other tax credits for small businesses.

Call us at 770-229-7145 today. We offer a free initial consultation for new clients to find out how they can benefit from our accounting, bookkeeping and tax services for small businesses. We work with businesses in Lawrenceville and throughout the Snellville area.