Why I Moved My WordPress Website to Rainmaker

This week I’m rolling out a new design for TheSolopreneurLife.com. It’s actually more than a new design. It’s a complete website overhaul: the exterior, the interior, a total engine replacement, new tires, new brakes, and new shocks. The only things left unchanged are the paint colors.

This is a bittersweet moment. I’m fond of the original website, which debuted in March 2010. It served me well. I’ll miss it, and I know you probably will, too. (But we can gaze upon the old site whenever we want via the magic of The Wayback Machine).

So why did I overhaul my WordPress website and move it to Copyblogger Media’s new platform, Rainmaker? Read on.
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At the End of Each Month, Are You Guilty of the Mistake That Rookie Marketers Make?

Today while I was eating my lunch — a piece of egg-plant quiche and then a blueberry Chobani with Toll House chocolate chips added (shame on me!) — I was skipping around in John Carlton’s book “The Entrepreneur’s Guide To Getting Your Shit Together.”

Carlton is one of the most successful copywriters of the past 25 years, and he’s an irreverent storyteller. I regularly read bits of his “The Entrepreneur’s Guide” for inspiration and ideas.

Today I found this gem:
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The Home-Office Deduction: IRS Offers New, Simplified Option

I’ve never taken the home-office deduction, because it’s so difficult to calculate. I might have to reconsider.

The Internal Revenue Service has announced a simplified, alternative method for determing the amount of expenses you can deduct for a qualified business use of a home.

“The standard method has some calculation, allocation, and substantiation requirements that can be complex and burdensome for small business owners,” the IRS says. “The simplified method is intended to reduce that burden.”

You may elect to use the simplified method for taxable years beginning on or after January 1, 2013. (The standard method still can be used.)

If you choose use the simplified method, you cannot deduct actual expenses related to the qualified business use of the home, according to the IRS. The amount allowed as a deduction when using the simplified method is in lieu of a deduction for your actual expenses.

The maximum deduction is $1,500. To calculate the deduction, multiply the allowable square footage (up to 300 square feet) by $5.

Qualified Business Use

A qualified business use of a portion of the home generally means:

1) Exclusive and regular use as the main place in which you conduct your business, or meet with customers, clients or patients;

2) Regular use as a storage area for products you sell in your business, or samples, if your home is the only place you conduct your business; and/or

3) Regular use in providing daycare services for children, the elderly, or disabled persons.

For detailed information, check out the IRS’s FAQ for the simplified method.

This article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant or attorney! Do not act upon this information without seeking the service of a professional accountant.

You’re Not a Bank: Don’t Let Your Accounts Receivable Slide

Several years ago I was providing marketing-communications services on contract to a very large B2B publishing company. I had worked for the company for roughly 8 years, and they had paid my invoices like clockwork, at 20 days. Life was great!

But then the company hit hard times. Advertising revenue plummeted for their print publications, and online revenue didn’t replace it. A company sales rep told me at the time, “For a print-ad order that brought in $5,000, I now have to work 40 times harder for an online ad that’s worth $500.”

That’s when I knew old media was dead.

Anyway, over a 6-month period the payment of my invoices got later and later. First it was 30 days, then 45 days, then 60 days, and finally 90 days.

This was bad news for my cash flow (and horrible for my psyche), because the client represented roughly 50 percent of my revenue.

As the company’s payment performance declined, I made sure to let my editorial contact at the company know what was happening; I sent her updates at least once a week.

She was very good about trying to get answers from accounts payable, and eventually they gave her an explanation: employees were the first priority for being paid, and contractors were going to be paid 60 days after the invoice due date.

This meant that since my terms were “Net 30,” they were going to pay me 90 days after I produced the invoice.

I’m not a bank that’s handing out no-interest loans, so I did two things:

1. I changed my terms from “Net 30″ to “Due Upon Receipt,” in order to be paid at 60 days instead of 90 days.

2. I asked the editorial director to appeal to a vice president. She did, arguing that I was an important part of their publishing team, and my tiny company and my invoices shouldn’t be treated the same as those from Waste Management or the U.S. Postal Service.

Both tactics worked. Instead of being paid 90 days after issuing my invoices, accounts payable said they were going to pay me at 30 days. And that’s exactly what happened.

Lessons Learned

This is what I learned from the experience:

1. Generate invoices as soon as you complete your work. “As soon as” means within an hour of finishing the work.

2. Make “Due Upon Receipt” your standard operating procedure. Don’t give anyone terms, unless there’s a very compelling to reason to do so.

3. Be vigilant and hard-nosed about your receivables and make noise when you’re not being paid on time.

Good News for Solopreneurs: 1099-Reporting Requirement Will Be Repealed

A new, onerous 1099-reporting requirement for small businesses and solopreneurs is about to be repealed. The reporting mandate was tucked in last year’s health-care reform legislation.

On Tuesday the U.S. Senate passed The Small Business Paperwork Mandate Elimination Act, H.R. 4, by a vote of 87-12.

The bill now has been passed by the House and Senate and will go to President Barack Obama. The White House has said he will sign the legislation.

The bill repeals Section 9006 of last year’s Patient Protection and Affordable Care Act in which business owners, starting next year, were going to be required to use 1099 IRS tax forms to report all transactions greater than $600 each year.

It also repeals a requirement passed in the small-business lending bill in which people getting rental income must distribute and file 1099s on payments made in excess of $600 annually, according to the Small Business & Entrepreneurship Council.

What Do the 1099 Changes Mean For Solopreneurs?

This is a guest column written by Deb Howard Greenleaf, a solopreneur who provides virtual accounting and bookkeeping services to small businesses and other solo professionals nationwide.

Deb Howard Greenleaf

Visit www.greenleafaccounting.com/blog for more bookkeeping and tax tips from Deb, or follow her on Twitter: @dhgreenleaf.

Beginning in 2012, solopreneurs will be facing dramatic changes in 1099 reporting, but we’re not quite sure exactly what those changes will be!

Thanks to an easily missed provision of the new health care bill passed in January (H.R. 3590, section 9006), all businesses will be required to send 1099-MISC forms for all payments to vendors. This is a significant change from previous requirements:

• Corporations, including Sub-S corporations, were previously exempt from 1099 reporting for “nonemployee compensation,” the category typically reported with 1099-MISC forms. Now all business types—sole proprietorships, partnerships, LLCs and all types of corporations—will be eligible to receive 1099 forms.

• Vendors selling products will now be receiving 1099 forms, whereas previous reporting was limited to service providers.

Did You Buy a Computer? Send a 1099

First and foremost, you might be receiving 1099 forms for the first time if you operate your business as a Sub-S or “C” corporation. If you primarily sell products, you’ll also see a dramatic increase in the number of 1099s you receive. Technically, if you’re already reporting all of your income, then this will have no real impact on your business.

As a business that purchases products and services, however, you will be sending out a whole lot more 1099s. Did you buy a computer from Dell? Send them a 1099! Did you buy over $600 of postage stamps? Send the United States Postal Service a 1099! Crazy, huh?

The reality of these over-the-top requirements has led to numerous attempts to repeal or amend the new provision.

At this time, none of these attempts have succeeded, including a popular effort by Senator Mike Johanns of Nebraska to repeal the new requirements outright. Odds are good that there will be some changes before the new regulations are implemented, as there are currently four proposals to amend or repeal the requirements. Two House proposals and one Senate proposal call for elimination of the new requirements, but differ in how they would pay for lost revenue that was expected from the original requirements. Another proposal in the Senate, called the Information Reporting Modernization Act, would simply increase the reporting threshold from $600 to $5,000.

What Can Solopreneurs Do To Prepare For 1099 Changes?

What can you do to prepare for the new requirements, whatever they may be?

Make sure that you’re using an accounting system that allows you to track your payments by vendor. Under both current and proposed regulations, you don’t need to send a 1099 to a vendor unless you’ve spent $600 or more with them in the calendar year. Most accounting systems will help you keep track of those totals.

• Next, you should send an IRS Form W-9 to each and every one of your service providers, including freelancers, consultants, your landlord, your cleaning person, your landscape service, your accountant, your lawyer and anyone else you may have paid for services. When sending out a 1099, you’ll need to report your vendor’s legal name, address and tax ID number. The W-9 form will help you acquire and document this information for each of your vendors.

• Lastly, mark your calendar. You are required to send out 1099 forms to your vendors no later than January 31 of each year. Copies of the 1099s, along with a Form 1096 summary, are due to the IRS by February 28 of each year.

Preparing now for the inevitable changes to 1099 reporting requirements will give you a head-start for the paperwork you’ll be facing in January 2013. In the process, you’ll have some peace of mind knowing that your systems are up-to-date for current requirements, and you will have one less thing to worry about!

References

H.R. 3590, Patient Protection and Affordable Care Act
IRS Form W-9
Information Reporting Modernization Act

Accounting For Solopreneurs: What To Do, and When

This is a guest column written by Deb Howard Greenleaf, a solopreneur who provides virtual accounting and bookkeeping services to small businesses and other solo professionals nationwide.

Deb Howard Greenleaf

Visit www.greenleafaccounting.com/blog for more bookkeeping and tax tips from Deb, or follow her on Twitter: @dhgreenleaf.

You may be a solopreneur whose business is up and running. You’ve closed on some sales and spent some money. At some point, though, you need to tend to bookkeeping chores.

Or you may be an established solopreneur who has a nagging discomfort about your books. You’re wondering if your bookkeeping practices are adequate.

New and established solopreneurs share the same fundamental concern: What tasks do I need to perform and when? Here are some guidelines:

On a weekly basis, you should:
• Record client payments and enter a deposit
• Record new bills from vendors and pay the vendor bills that are due
• Record any invoices that weren’t recorded during the week
• Send a W-9 request to any new vendors (so you can prepare a 1099-MISC for them at year-end, if necessary)

On a monthly basis, you should:
• Reconcile your bank statement when it arrives
• Reconcile any credit card statements or loan statements that you receive
• File sales tax returns, if necessary
• Run an accounts receivable aging report and send statements, if necessary, to encourage clients to pay
• Run an accounts payable aging report to make sure you’re not late on any bill payments
• Run a monthly profit-and-loss report and compare it against your budget, if you have one

On a quarterly basis, you should:
• Pay your estimated quarterly tax payments, if necessary, to the IRS and your state
• Run a quarterly profit-and-loss report and a balance sheet.

On an annual basis, you should:
• Report your vendor payments, as necessary, on Forms 1099 and 1096 by January 31
• Make an appointment with your friendly, neighborhood tax preparer to file taxes by the March 15 (corporations) or April 15 (partnerships and sole proprietorships) deadlines

How To Use the Reports

Now that you have all these monthly and quarterly profit-and-loss reports, how do you read them? First of all, it’s very helpful if you can compare them against last year’s or last month’s numbers. Then:

• Are sales increasing or decreasing? Can you explain why? Maybe your most recent marketing effort was a big hit? You need to understand why your sales go up and down in order to plan to grow them!

• How much of your sales revenue is left after paying your monthly expenses? This is your “net income” or “net profit” for the month. For your business to remain healthy and thriving, this number needs to be positive most of the time. If you’re operating as a sole proprietor and not taking a salary, this number has to be high enough to cover your monthly draws.

• Divide your net profit by your total sales. This is your net profit margin. Has it gone down? If so, are there any costs you can trim? Ideally, there will be some costs that stay the same even as you grow your sales. For this reason, you should expect a slightly higher net profit margin as your total sales increase.

Tackling these tasks in a routine fashion throughout the year will save you hours of needless headaches at tax time. More importantly, these numbers will help guide your decision-making throughout the year as you grow your solopreneur business.

Share Your Thoughts

If you have an opinion on Deb’s article or on accounting for solopreneurs, please comment below.

Tools That Work For The Solopreneur Life: WorkingPoint Accounting Software

There was a TV ad in the 1970s for Trident gum that claimed, “Four out of five dentists surveyed recommend sugarless gum for their patients who chew gum.” (If you’re close to my age, you remember the ad well.)

To paraphrase the ad, I think it’s safe to say that four out of five English majors surveyed who have to do their own small-business accounting would prefer WorkingPoint.

WorkingPoint is Web-based accounting software that is going after the small-business market: solopreneurs, freelancers, consultants and service providers.

Here’s a bit of history on WorkingPoint. Its founders worked for Intuit and were behind the creation of Quickbooks and Quicken. They believed Quickbooks had become too complicated and that the small business software segment was ripe for innovation. Tom Proulx, WorkingPoint chairman, and Tate Holt, CEO, wanted to create a small-business product that was well-integrated, simple to use, and of very high quality. WorkingPoint, based in San Francisco, launched in July of 2009 and has been adding features since.

I have used Quickbooks for the entire 17 years that I have been in business. Do I like Quickbooks? LOL! I have used Quickbooks because I have never come across a better, easier alternative.

This is what I will always want from small-business accounting software:

1. Easy to use
2. Helps me get the job done quickly
3. Answers questions that arise
4. Provides me with backups of my data

After spending several hours playing around with WorkingPoint, it meets three of those four criteria. Here’s my take on WorkingPoint (two screen shots are included below).

Pros of WorkingPoint

1. I think it’s a good value. WorkingPoint offers a free version, but if you want more than two people to have account access, you have to use the premium option, which is $10 per month.

2. The “getting started” instructions are easy to follow.

3. The user interface is attractive and far superior to Quickbooks.

4. I can give clients the option of using PayPal to pay their invoices (not available in the free plan, though).

5. There’s an accounting primer included! This is a cool feature that most of the solopreneurs I know will appreciate.

6. It is easy to select different data criteria when viewing reports. For example, if I am looking at a list of my invoices but I want to see only those that are not paid, it’s very easy to make the change.

7. WorkingPoint has a suggestions forum where users can submit ideas for improvements to WorkingPoint, plus review and vote on those ideas. The suggestion that has received the most support is “download bank and credit card transactions.”

Cons of WorkingPoint

1. I am not thrilled with the idea of using cloud computing for my accounting. I use the cloud for other things, but there’s something about using it for accounting that makes me uneasy. If I did use the cloud for accounting, I would want to receive a weekly e-mail backup of my data sent to me (Bluehost does this for my Web site data), but WorkingPoint at this time does not offer e-mail backups.

WorkingPoint says my data is far more secure in WorkingPoint than it would be on my own computer. I’m sure that’s true, but in addition to WorkingPoint possessing my data, I want to possess my data, too.

2. WorkingPoint works with Internet Explorer 7+ and Firefox 2+. That’s a bummer for people who are devoted to other browsers. Having said that, I used Chrome while testing WorkingPoint, and it seemed to function with no problems.

Summary

I am itching to switch to WorkingPoint, but I will not make a final decision on a switch until the end of the year; I do not want my accounting year to be broken in half between two accounting sofware packages.

I REALLY want to move to WorkingPoint, but possessing backups is a deal-maker or a deal-breaker for me. WorkingPoint appears to be responsive to user ideas, so perhaps they will decide to offer e-mail backups of user data.

If possessing backups is not a concern, then WorkingPoint definitely is a tool that will work for The Solopreneur Life, and I encourage you to check it out.

Have You Used WorkingPoint?

What do think of it? Leave your comments below.

How to Find the Right Accountant for Your Solo Business

If you are starting out as a solopreneur, I cannot overemphasize the importance of hiring an accountant who understands your business. Do your homework and get a good one—it’s absolutely worth it.

Here’s an excellent piece on how to choose an accountant who fits your needs. This is a critical point from the article:

“Imagine this scenario. You hire an accountant based on the assumption that he understands the basics of your business. Then, you find out that he’s never had a client like you before. Instead, he’s only prepared tax forms for wealthy individuals that don’t own businesses. Avoid that possible disaster by asking who the accountant works with.”

My take: I wish I had received that advice before I began as a solopreneur. The first accountant I hired wasn’t right for my business, and he made errors that cost me money I could not afford to lose.

What’s your take on finding an accountant? Accountants, please chime in!