The Year End is upon us, and probably not soon enough for many.

How did your business do this year ? Did your business reach the goals you were looking for in 2020? Looking forward, what do you want to do in 2021 better than you didn't do in 2020 ?

A mistake we often see is that small business owners treat their business as if it is just a "job" that has maximum job security, not realizing nothing is guaranteed. In 2020 this has become a stark reality to many.

Many owners often treat their business so badly, its health and sustainability is compromised. Then when there is a business climate change, it suffers badly. Whether you have one employee or over fifty ... having the right mindset and commitment to your business are critical to long term success.

As the Owner, you are the CEO of the business. This position has great responsibility and is not just a "job". The leadership you display is what employees look for during tough times. As CEO, you are not just repairing vehicles, you are in charge of the leadership for the business that repairs vehicles, and it success and health are dependent upon you.

Being a great CEO in 2021 will go along way in allowing you and your business to reach the level of success you plan to obtain.

As we get ready for a very unique Thanksgiving with our family and a few friends, we still should give thanks for all we have, even though 2020 has been a rough one for many.

We also want to wish all of you the best for this Holiday, and for the rest of the year and beyond.

It is certainly timely to reflect on what 2020 has unearthed in both your personal and business perspectives for life, business, and relationships. It is also time to look at how you can make 2021 different and better at he same time. This includes looking at your business as a true "Partner" being a separate entity of it own that you are responsible for its health and well being. Take the time to reflect how you can take better care of this important child by doing things you may have been putting off, or not allocating the time needed to keep it healthy and growing strong.

The weather is changing and we are firmly in the last quarter of the year we may never forget, 2020. I am amazed at how many "unseen" events has took place in a year on 20 - 20 ...
I am glad my eyesight 20-20 is better than what I have seen this year unveil.

Possibly by the time you take a few minutes to read this the biggest election, I believe, in our Country will be over ... hopefully to solidify our Country and get this craziness behind us. If by chance you are reading this before Tuesday, and you haven't voted ... Please exercise your citizen's right of this Country and vote.

In this quick read, there are two critical articles you should take time to read and digest. If anything this year has taught small business owners, it is that financial hardships can come from many unexpected events. It is time as a business owner to strengthen your understanding of the financial metrics involved in your business and prepare better with them and improve your business's overall health.

We also included a quick update for the PPP Loan Forgiveness requirements which its deadlines may be coming quickly for many of you.

Our Product Spotlight in this issue is designed to save you hundreds of dollars and improve security at the same time.

As always, tell us what you would like to see in our future Quick Read Issues in the future, and we are here to help in any way we can.

Sincerely,

Top Five Key Financial Metrics Business Owners Need to Track

Operating a small business is an exhilarating and, at times, overwhelming endeavor. There are so many details to keep track of that it's easy to forget about the nuts and bolts of your organization's finances - especially if you didn't start out as a "numbers person."

Whether you're the one who is assembling your financial reports or you've hired a professional to do it for you, it's important for you to know which of the numbers are most important and what they mean in terms of the decisions you make.

You must also make an assessment of the health of your business overall. Below you'll find our list of the top five most important elements of your financial review, and what you can do with the information.

1. Profit and Loss
   Every quarter, you should review and analyze your business' profit and loss report to understand your operating strengths and weaknesses, as well as your tax implications. It is the single, at-a-glance picture of many areas of your business and should be used to drive your business decisions and that you can show to an outsider for them to gauge your strength. However you also must have a reconciled Balance Sheet to put everything into perspective and show the "whole business picture".
   
   Unfortunately most small business owners look at their Total Sales, Their Gross Profit Percentage, and then their Net Profit. This is far from sufficient to rum your business effectively.
   
   
2. Budget Versus Actual
   Think you're sticking to the plan based on what you see in terms of your bank account? We see too many small business owners trying to manage their business future by checking their online bank balance every day. The truth is that if you compare what you've budgeted as compared to what you've actually spent it will give you a far better sense of whether you're staying on track and what kind of adjustments you need to make.
   
   
3. Cash Flow
   
   Most people consider cash flow the most telling metric of all, and cash certainly is the lifeblood of any company. If you're not keeping your eye on your cash flow you could find yourself caught unaware and flatfooted when it comes to making essential payments, so make measuring your cash flow (as well as your cash burn - the amount you go through monthly) and your runway (how much you can operate based on your cash on hand) part of your regular business health check.
   
   Poor/No Cash Flow is the leading causes of new business failures, but also is key for any established business as well. When you run "Out of Cash", your business health is on the verge of cardiac arrest.
   
   No matter how well you are doing, there is always the chance that you're going to encounter some unforeseen circumstance or drop in business that is going to drive the need to cut costs. The best way to do that is to take a close look at your fixed burn rate and make sure that it isn't too high.
   
   As tempting as it may be to sign on to a long-term contract to save a little money, if you commit yourself to a payment that you can't afford at all in the future you may be sorry. You may be better off taking some of those expenses off of a contracted status so that you can eliminate them if you have to.

The way to look at this also includes knowing your business "Break Even Point". Knowing this will allow you to track where you are compared to where you must be at a given point.

4. Employee Productivity

Though it's a given that your employees are your most valuable asset, that doesn't mean that you should be operating without ensuring that you are getting enough value out of them to justify what you are spending. The best way to do that is to actually monitor each employee's productivity to make sure that everybody is more than pulling their weight.

5. Financial Ratios and Benchmarks

Ratios are among the most useful metrics that a small business owner can use to determine the overall financial health of their organization. Among the most important are their liquidity ratio (how much cash you have on hand to pay the monies you owe); your efficiency ratio (how much it is costing you to bring in a single dollar); and your profitability ratio (profit as it compares to revenue).

Then there are Benchmarks that will compare your operation to other like business operations and well established normal financial indicators. Take a look at a Visual Dashboard Report we have developed and provided for years now.

Each of these elements is extremely beneficial in helping you understand where your money is at any time. If you'd like to discuss how our services can help you run a successful business, please contact us for more information.

The SBA Issues a Simplified PPP Loan-Forgiveness Application

If you are the owner of a small business that obtained a Paycheck Protection Program (PPP) loan, you are most likely aware that the loan can be partially or totally forgiven if you used the loan proceeds for the required purposes. Loan forgiveness is not automatic and must be applied for. The borrower must submit a request to the lender or, if different, the lender that is servicing the loan, which then must make a decision upon the amount of forgiveness within 60 days.

The request must include documents to verify the number of full-time-equivalent (FTE) employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. The borrower must certify that the documents are true and that the borrower used
the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

The whole process of obtaining a PPP loan and applying for forgiveness has been complicated from the start, with guidance from the Small Business Administration (SBA) and the IRS coming in dribs and drabs; for a while, it seemed that the rules were modified every week. The original forgiveness application provided by the SBA was horrendously complicated, and one almost needed an accounting degree to figure it out. It required the applicant to complete numerous complicated side computations and did not provide any corresponding worksheets.

To clarify the process, Congress stepped in and passed the Paycheck Protection Program Flexibility Act. As part of that legislation, the SBA was required to simplify the forgiveness application. In response, the SBA did somewhat simplify SBA Form 3508, this is the original forgiveness application, and came up with an easier version: SBA Form 3508EZ.

The 3508EZ is for use by:

• Self-employed borrowers with no employees
• Generally, borrowers with employees that, during the covered period,
• Did not reduce the annual salary or hourly wages of any employee by more than 25%;
• Did not reduce the number of employees or the average paid hours of employees; and
• Was unable to operate during the covered period at the same level of business activity as it did before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health
  Administration.

During the week of October 5th, the SBA released yet another simplified application- Form 3508S-along with 3508S Instructions for its use. This form can only be used if the total PPP
loan amount that the borrower received from their lender was $50,000 or less.

However, a borrower that, together with its affiliates, received PPP loans totaling $2 million or more cannot use Form 3508S and instead must use either Form 3508 and its 3508 Instructions or Form 3508EZ and its 3508Z Instructions (or their lender's equivalent form).

A borrower that qualifies for and uses SBA Form 3508S (or their lender's equivalent form) is exempt from any reductions in the borrower's loan forgiveness amount based on reductions in FTE employees or in employee salaries or wages from the CARES Act that would otherwise apply.

While SBA Form 3508S does not require borrowers to show the calculations they used to determine their loan forgiveness amount, the SBA may request information and documents to review those calculations as part of its loan-review process. Accordingly, the borrower must retain, for 6 years from the date when the loan is forgiven or repaid, all documentation (1) submitted with the loan application, (2) to prove the borrower's certification of eligibility for the PPP loan and material compliance with the PPP's requirements, and (3) to back up the loan-forgiveness application.

Keep in mind that the application for forgiveness, which can be submitted electronically, must be submitted within 10 months after the end of the loan-covered period to the borrower's lender or the lender servicing the borrower's loan.

If you have questions about how these changes might apply to your situation or need assistance with completing your forgiveness application, please give this office a call.

Contact us for additional information and support.

Deposit Forms Too !!!

This program will print deposit forms as well and the checks. The costs savings are 75% to 90% less than pre-printed checks/deposit forms, and much more secure, because if stolen, the checks are completely blank paper!

The program allows you to setup multiple bank accounts (100) if needed and recognizing multiple company files as well. The program can be set to require a password to print, and it remembers the correct bank account that should be used.

This is by far the most cost effective solution to print checks and deposit forms with QuickBooks. Save even more with purchasing larger check stock quantities.

We also highly recommend the HP Laserjet Enterprise P3015x Printer to hold both your check stock and deposit form stock.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry.

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

Regardless of how the pandemic has affected you, in a few short weeks we will be holding what many believe (including me) is the most important national election in our lifetimes to date. The Country has gone through an awful lot this year, and I know the vast majority just want 2020 to end.

However, how 2020 ends will be greatly affected by what happens on November 3rd ....I am not going to express my political views here, but even though most probably have made up their own minds how they are going to vote, as businesses, you should take a look at each of the Candidates Platform on Taxes.

I just want to encourage you to get out and vote ...and make sure your vote gets counted.

Also, included in this edition are a few important reads that we are sure you will find of benefit. Please let us know what you think at the bottom of this newsletter, and especially provide any other topics you would like to have included in the next one.

We are always here to help small businesses succeed and be profitable.

Sincerely,

Can it Happen to Your Business?

One of the most devastating events that can hit a micro or small business is when a trusted employee is found to have taken assets or money from the company. This act of embezzlement has caused great pain for many small businesses not just from the financial loss. Many times an employer will say "he/she was the last person I would ever have expected to steal from me" as he/she was totally and completely trusted. The loss of trust in these situations can sting even more than the monetary loss for much longer. It is critical business owners must constantly be diligent against theft, and the most common type of theft is by trusted employees. There are some of the telltale signs that an employee is embezzling and below are some tips for protecting your business from this devastating loss.

There is also a potential for recovery of the embezzled funds, but often employers decide not to prosecute. This only allows the past employee to do it again to another business in the future. So what is embezzlement? Embezzlement is theft or misappropriations by employees, or trusted others, in a business. Most embezzlement involves a theft or diversion of company funds/assets to the employee. According to a 2012 report from the Association of Certified Fraud Examiners (ACFE), "the typical US business loses 3% of its annual revenues to employee fraud" and small businesses have the most cases and the highest losses. From the 2017 Hiscox Embezzlement Study, "Funds Theft" is the most common embezzlement scheme, used in more than one-third of all cases, followed by "Check Fraud" at 22%. "Funds Theft" is most commonly perpetrated by women at 56% while 70% of check fraud cases occurred at companies with fewer than 100 employees. Although there is no "typical" embezzler, the Hiscox report points to several common characteristics of white collar criminals, including:

• the median age of a perpetrator is 48 years old;
• slightly more women than men commit this type of crime - 51% vs. 49%; and
• bookkeeping and accounting are the most common job functions of embezzlers at 37%.

Many business owners blame themselves for allowing theft to happen, and this is probably one of the main reasons so many embezzlers go unreported to the law enforcement agencies. The warning signs are often subtle, but there are usually many patterns or behaviors that are common. Business owners should pay attention to the warning signs and common schemes of an embezzler in order to identify areas where they can tighten security and implement controls to manage their exposure. The Hiscox Study has also identified five common characteristics to watch for:

• Intelligent and curious: Embezzlers are often eager to know how everything in the office works. Once they learn the
  processes, they manipulate them for their own gain.
• Extravagant: Watch for employees who are living a lifestyle that is out of proportion to their salary.
• Egotistical risk-taker: An embezzler is often a rule breaker in and out of work life - from speeding tickets to overusing
  'sick time.'
• Diligent and ambitious: An embezzler may come in early and leave late, and never take vacations. This can appear to be
  dedication to the company, but in fact it is an effort to keep from being caught.
• Disgruntled: An employee who feels they are being treated unfairly may be tempted to steal to "even the score." They may
  be unable to relax, or may experience severe changes in behavior.

Additional Signs in smaller businesses are:

• The financials are always in a state of chaos.
• The reports never seem to be accurate
• The financial reports constantly change
• Doing basic analysis they are simply incorrect
• The person doing the books is overly protective of their work
• They do not allow any assistance or delegation of responsibilities.

Employees Are Ingenious Regarding Their Various Methods of Embezzlement, but there are ways to minimize the risks to your business. Embezzlers typically need three things to get away with a crime - means, motive and opportunity. In smaller businesses having one person in charge of all aspects of your company's bookkeeping/accounting without oversights, controls, or just spot check audits is the first ingredient in an embezzler's formula.

Protect From Embezzlement

In many businesses we work with, there are management systems which handle the daily operations and then interface into an accounting system. Both of these systems should always be in balance, and each has several controls built into them to ensure certain processes are not compromised, if they are setup properly.

If you use QuickBooks, we have setup process controls and performed audits for clients to eliminate the means and uninhibited opportunities an employee would have to devastate your business in the future. Contact us if we can assist you in any way. This simply is not a risk you should have to face alone.

This older form will be used to report non-employee compensation in place of the 1099-MISC, which has been used since 1983 to report payments to contract workers and freelancers. Form 1099-MISC has also been used to report rents, royalties, crop insurance proceeds and several other types of income unrelated to independent contractors.

The revival of the 1099-NEC was mandated by Congress with the passage of the PATH Act back in 2015. However, there have been some complications with implementing the form, so its use has been delayed. It will now make its return debut in 2021 for payments made in 2020.

The reason for the change is to control fraudulent credit claims-primarily for the earned income tax credit (EITC), which is based on earned income from working. Scammers were filing tax returns before the normal February 28 due date for 1099-MISC, which does not give the IRS the time to cross-check the earned income claimed in the returns. As a stopgap measure, 1099-MISC filings that included non-employee compensation were required to be filed by January 31, the same due date as W-2s, another source of earned income. By using the 1099-NEC for non-employee compensation, the IRS will be able to eliminate the problems created by having two filing dates for the 1099-MISC.

As a result, the 1099-MISC has also been revised, and Box 7-where non-employee compensation used to be entered-is now a checkbox for "Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale." Other boxes after Box 7 have also been reorganized.

The 1099-NEC is quite simple to use since it only deals with non-employee compensation, which is entered in Box 1, and there are entries for federal and state income tax withholding.

If you operate a business and engage the services of an individual (independent contractor) other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, you are required to issue the individual a Form 1099-NEC soon after the end of the year to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit.

The due date for filing a 1099-NEC with the IRS and mailing the recipient a copy of the 1099-NEC that reports 2020 payments is February 1, 2021. (Normally the due date is January 31, but because that date falls on a weekend next year, the due date becomes the next business day, February 1, 2021.)

It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later in the year and have the total for the year exceed the $599 limit. As a result, you may have overlooked getting the information from the individual needed to file a 1099 for the year. Therefore, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts. If you have been negligent in the past about having W-9s completed, it would be a good idea to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you going forward.

IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the vendors' data you'll need to accurately file the 1099s. It also provides you with verification that you complied with the law in case a vendor gave you incorrect information. We highly recommend that you have potential vendors complete a Form W-9 prior to engaging in business with them. The W-9 is for your use only and is not submitted to the IRS.

The penalties for failure to file the required informational returns are $280 per informational return. The penalty is reduced to $50 if a correct but late information return is filed no later than 30 days after the required filing date or it is reduced to $110 for returns filed after the 30th day but no later than August 1, 2021. If you are required to file 250 or more information returns, you must file them electronically.

In order to avoid a penalty, copies of the 1099-NECs you've issued for 2020 need to be sent to the IRS by February 1, 2021. They must be submitted on magnetic media or on optically scannable forms (OCR forms).

We can assist you in preparing your 1099s for submission to the IRS. If you use QuickBooks, the program can produce them, but you must order the correct forms to print them. They cannot be produced from QuickBooks otherwise. We can provide recipient copies and file copies for your records.

Contact us for additional information and support.

A Better 3rd Party Full Payroll Solution

We have reviewed and worked with dozens of third party payroll services only to find that they have flaws that do not fit well with our clients, or they do not properly integrate into QuickBooks.

This forces manual distribution through a Payroll Clearing Account and journal entries to properly allocate the payroll to proper accounts. This once setup doesn't take a lot of time, but wouldn't it be nice to have a system that can be setup to import into QuickBooks, make processing payroll easy, and take the responsibilities of paying the taxes plus filing the forms from your busy days ?

ADPrun is the best and most reliable solution we have found for all businesses under 50 employees. We highly recommend them for our clients, regardless of operation size.

Why Choose ADPrun?

• Simple to Use
• Imports into QuickBooks better than any other on the market
• No more Required QuickBooks Upgrades*
• Very Cost Effective and Simple Pricing
• Direct Deposit or have checks delivered
• Employee Portals, so their documents are always available
• No Hidden Fees
• Weekly Workers Comp options (No year end payments due to low balled estimates)
• Simple IRAs, 401Ks, SEPs
• Child Support & garnishments handled for you
• Additional HR Tools can be added,
• Recruiting Tools, even a PEO provider

Your Best Payroll Option

Check Out Your Options ...
We highly suggest you check out your options ... they are providing discounts that make this payroll service a great value, and very competitively priced. Click the button below and it will open a contact form to get a direct quote from a very knowledgeable District Representative we have found to be very helpful to our clients.

There is no obligation or "hard sell", just an opportunity to see how this may make your business life much easier and even less costly.

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

As we enter into the final calendar quarter on 2020, many are looking forward to this year ending. At least we didn't get hit with the "Killer Hornets" (knocking on wood) and hopefully we can still count our blessings in many ways. This month we are introducing a slightly different newsletter/blog to you that is designed to not only provide QuickBooks Tips & Tricks, but small business important information. We are planning to keep this newsletter in a smaller format, with fewer major topics. In this way we hope it will only take you a few minutes to review the information. Plus, please let us know what you think at the bottom of each newsletter, and especially any other topics you would like to have included in the next one. We are always here to help small businesses succeed and be profitable.

There are no additional extensions available (except in designated disaster areas), so if you do not or will not have all of the information needed to complete your return by October 15, please call this office so that we can explore your options for meeting your extended filing deadline.

If you are waiting for a K-1 from a partnership, S-corporation or fiduciary return, the extended deadline for those returns is September 15 (September 30 for fiduciary returns); so you should probably make inquiries if you have not received that information yet.

Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month (or part of a month) for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns is also October 15 for most states.

In addition, interest continues to accrue on any balance due, currently at the rate of 3% per year. This rate is subject to quarterly adjustment.

If this office is waiting for some missing information to complete your return, we will need that information at least a week before the October 15 due date. Please call this office immediately if you anticipate complications related to providing the needed information so that we can determine a course of action to avoid the potential penalties.

Additional October 15, 2020 Deadlines - In addition to being the final deadline to file 2019 individual returns on extension in a timely manner, October 15 is also the deadline for the following actions:

• FBAR Filings - Taxpayers with foreign financial accounts exceeding an aggregate value of $10,000 at any time during 2019 must file a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically with the Treasury Department. The original due date for the 2019 report was April 15, but individuals have been granted an automatic extension to file until October 15, 2020.
• SEP-IRAs - October 15, 2020 is the deadline for a self-employed individual to set up and contribute to a SEP-IRA for 2019. The deadline for contributions to traditional and Roth IRAs for 2019 was July 15, 2020, instead of the usual April 15 contribution due date because of the COVID-19 emergency, but no further extension is available.
• Special Note: Disaster Victims - If you reside in a presidentially declared disaster area, the IRS and most states provide additional time to file various returns and make payments.

Please call this office for information on extended due dates of other types of filings and payments as well as extended filing dates in disaster areas.

Payroll Protection Loan Information

As we get closer to the end of the year, we also are getting closer to the deadline to request the PPP Loan (if you got one) to be forgiven.

If you were one of the earlier recipients of the loan, you may have already sent in your documentation for the eight weeks following the date you received the money deposited into your account. If not, the forgiveness requirements have changed, and there may be possibility the requirements may change again.

There is talk that according to two bank lobbying organizations and Treasury Secretary Steve Mnuchin, borrowers with loans under $150,000 should not have to go through the forgiveness process. This would mean that more than 86% of all PPP loans would be automatically forgiven, according to data provided by the SBA.

However, being an election year, the replacement of a SCOTUS hearings, and other issues facing Congress, it may not get changed in time for the current year end deadline.

Also, keep in mind that even if the SBA forgives your loan, that is for Federal Tax Purposes, and there may be some additional restrictions with the actual expenses you incurred and documented for business expenses on your tax return, and definitely how States will handle the forgiveness as well.

Information about PPP Programs

To download the PPP Loan Forgiveness Application - Click Here

To download the PPP Loan Forgiveness Application Instructions - Click Here

Contact us for additional information and support.

Financial Insights & Improving Your Business

If you are a Collision Shop, we would like to give you our latest eBook titled, Financial Insights & Improving Your Business... For The Collision Industry Owner.

This valuable resource is specifically designed for the Collision Industry Owner.

The Second Quarter eBook will be released soon. It will build upon the basics covered in this eBook ... so if you haven't already read this one, you should before the next becomes available.

Just click the cover below.

(Click the Image)

Please take the time to review this new resource, as well as the other free eBooks we have created to help you. This latest eBook includes additional tools we are sure your will find valuable.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

Another twist in the normal payroll processing includes The Families First Coronavirus Response Act (FFCRA or Act) which requires certain employers to provide employees with paid sick leave, or expanded family and medical leave for specified reasons related to COVID-19.

This new mandated benefit provides employers with wage and tax credits for providing employees with special family leave as well as personal leave if they test positive for the virus, someone in their immediate family tests positive, or if they have to take care of a family member as a result of the virus.

 What mad this more difficult is that some payroll programs were not updated quick enough to have this established properly at first. This did cause some issues with the filing of the second quarter Federal 941s.

 The following link below will explain in detail the circumstances related to this benefit from the Federal perspective. Keep in mind, your individual State may enact additional guidance and benefit levels, so check with your state website on this as well.

Another unprecedented program rolled out by the Small Business Administration (SBA) is the Economic Injury Disaster Loan (EIDL). This is a low interest loan from the SBA that normally was designed for losses from loss from catastrophic events. This normally was reserved for losses due to natural events such as storms, tornadoes, hurricanes, and floods.

However, this was extended to small businesses that have been economically damaged by the pandemic. This is a loan and is not designed to be forgiven unlike the Payroll Protection Loan. The repayment is also deferred until next year.

This has been a life saver to many businesses across the Country.

Bad Risks Cause Wasted Costs

An Area Collision Shop Owners Almost Never Think About 

Of course, it will never happen to you ... right ? But those that it has, know how much costs in money, time, and frustrations it caused ... and they were not prepared when it happened.

What am I referring to ? I am talking about when your computer system crashes, you accidentally deleted an important file, you get the "Ransomware Virus", or someone sabotages your data. These things happen regularly, and when they do, it can be devastating and sometimes not recoverable.

This small area of your business, can essentially bring it down or minimally causing you losses you simply should never be exposed to. However, most collision shop owners never think about the consequences until it happens.

There are hundreds of solutions for this possible catastrophe, but where to start ?

The Old Way Never Worked
In the past we intended to use Tape Backup Systems, thumb drive transfers, and other hardware options that often were not kept up diligently. At the time of need ... no current backup was available.

This system relied on one to perform as scheduled, and most importantly take the backup media off site after every backup, so just in case of a fire or theft of your system, your data was safe.

Let's face it ... who is diligent enough to do this as scheduled every day ? No one!

Cheap is Not the Best Option
If you Google, Backup Options, there are hundreds of options and companies that provide a wide range of products and services.

There are systems that use "appliances" that act like the tape backup units backing up the data almost at real time, and then transferring it to online storage area. These systems are usually very expensive and are designed for much larger data processing companies rather than the typical collision repair shops worldwide.

In recent years companies like Google and even Microsoft have created Online storage space programs such as Google Drive and One Drive.

Unfortunately these systems are "real time transfer programs" that are known to slow your whole system down due to the bandwidth they require along with the processing load.

Then there are the low cost providers of online storage space that take very long to sync every evening. Many of these can act like the "real time" models with the same issues with slowing down your systems. They also can be configured to operate at night as well. However, you are on your own when there is a loss and you need recovery assistance.

What we have found to be the best approach is to provide a solution that not only backups up very efficiently every evening, but also includes the service to restore your data when you need it.

Critical Backup Solutions
Several years ago, we found that our clients were taking risks for loss of their critical data that just should not be happening. We also found that when they did have a loss, they often did not have any idea how to restore their backup data, or where to begin.

Our solution incorporates not only a software solution, but a monitoring process as well as a restoration team even if it just an accidentally deleted file.

We:

• Centralize your critical data to be backed up every evening
• Monitor the backups every day and send you messages of their completion
• If needed we assist in the restoration of a single file (7 versions saved) to a complete system loss restoration.
• Automated and very quick backups in evening.

Don't Make the Mistake that Costs

The risk of important documents, images, accounting data, program settings, and a host of other key files being lost, corrupted, or accidentally deleted is not worth it.

Check out the options by clicking below:

In Review:

• There are hundreds of products out there ... but not services that monitor and assist in recovery
• Real time systems slow your system excessively
• Centralize data to allow backups to be efficient
• The risk of loss is far greater than the cost

S-Corp Officer Medical Insurance

One of the Most Common QuickBooks Payroll Mistakes

Many Collision Repair Companies are structured as a S-Corp (Sub S Corporation) for at least tax purposes. 

Even if your company is a LLC (Limited Liability Company) you still need to determine how you will be filing taxes. This would be either as a Sole Proprietorship, Partnership, or either a Regular Corporation, or Sub-S Corporation. 

There are major advantages to S-Corps, but this is not the focus of this post. This post is designed for those that are S-Corps and the company pays for or at least contributes to the costs for medical/dental/vision insurance and/or life insurance for officers that own at least 2% of the stock.

This scenario requires some special setup of the payroll so that these benefits are properly reported on the Officer's W-2 at the end of the year.

QuickBooks Payroll can handle this automatically in the background if it is set up properly. What is unfortunate is that many CPAs and Accountants are not only able to set this up, but many are not even aware of this requirement.

Setting Up QuickBooks Payroll

If you use QuickBooks Enhanced Payroll setting this up properly is pretty straight forward once you are shown how.

Step 1: Payroll Items Are Key to the Success 

• Setup Payroll Item - S-Corp 2% Medical Contribution
  - Add New > Company Contribution
  - Do not use E-Z Method

Step 2: Vendor and GL Account Setup

• Enter the Vendor you pay the premium to as well as your account number for the vendor
• Select the Current Liability Account and Expense Account from the Drop Down Menu
  - Payroll Liability Account can be the same account as for any other medical insurance contribution made by the company 
    for any employees.
  - Expense Account would be Officers Benefits - Medical Insurance

Step 3: Select the Proper Tax Tracking Type

This is a critical step often not completed correctly...

• The Tax Tracking Default will be "None". This must be changed to "SCorp Pd Med Premium"
  - This will begin to track this cost properly, otherwise it will not.

Step 4: Taxes Affected

• QuickBooks will automatically select what is normally affected.
  - If you are sure that the amount of Federal and State Taxes will be sufficient for the year without extra deductions, you can
    deselect the Federal and state taxes checked.
  - You should either contact us to discuss this deselection.

Step 5: Calculated Based on Quantity

• Select "Neither"
  - This is not applicable for this Payroll Item

Step 6: Default Rate and Limit

This is the second most critical input for allowing this Payroll Item to work properly.

• In this example the monthly premium paid by the company for this officer's insurance is $865.00
  - This company payroll is "weekly"
• Divide the monthly premium by 4 ... equals $216.25
  - If the amount does not divide evenly adjust the amount by +$.01 ...
• Enter in the Total Premium for the month in the next box.
  - This allocates $216.25 each of the first four weeks monthly, and nothing the fifth week becasue it has reached the limit.
  - This is why you round the weekly payment up by .01 so the fourth week will correctly adjust to the limit.
• Make sure to select "Monthly - Restart Monthly"
  - This will then allow a monthly limit to begin again.
• Select "Finish"

Final Step: Set up Officer's Payroll Information in each record

• Go to each Officer (Must Own at least 2% Stock)
  - On Payroll Info Tab - Make sure item is listed in the right section, and the amount and limit are listed properly.

That is it !

Watch the Video to See in Action

In Review:

• The Key Points to This Process Are:
• Set up the Payroll Item Properly
• Add the Item to All Officers that own at least 2% stock and the company is paying at least partially their medical/dental/vision insurance.

I hope this explained a more streamlined process to follow tracking this for S-Corps.

Handling Short Pays & Sales Tax Credits

Another Important Process to Follow That Most Do Incorrectly

In the Collision Industry there seems to always be times where the amount expected to be paid is shorted by scores of reasons. For this reason shops with management systems have often "held" Repair Orders open waiting for the final confirmation of what the actual payment will be. This is simply not the correct practice or procedure to handle these situations.

There are basic rules that are necessary to allow for timely and accurate information during the month close. If these rules are not followed, it delays the ability to achieve the goal of the final financial statements being made available by the 5th of the following month. It is important to understand that the later in the following month the final financial statements are produced, the less valuable they are to the business. Accounting statements are always "history", they need not be ancient history.

Rule 1:

Repair Orders should be closed when the customer leaves the parking lot with their vehicle. - The repair order should be closed with the amount you expect to be paid

Rule 2:

If the amount you are paid differs from what it was closed for, do not change it in either the management system or your accounting system.

Rule 3:

The management system sales report and the accounting system sales report should match at the end of each month.

Both the management system and your accounting system require some setup to be able to follow these procedures. However, this process will require much less time than changing the repair orders to match what has been "Short Paid. In addition, if the repair order is just left open or changed after it has been exported, you will never be able to actually track and determine how often or how much this may be costing your business.

Management System Setup

Additional Payment Types must be added to the management system to indicate the type of Short Pay the transaction represents. The typical additional Payment Types are: Short Pay, Customer Goodwill, Warranty, Coupon, Gift Certificates, Collections, Discount, Contra/Barter, Refunds/Rebates. However, this can vary based on your needs.

Depending on the management system, how the payment type is identified, not as a payment but an adjustment can streamline this process even further. For this document, we are assuming that the new payment type will be a payment and not an adjustment entry. If the management system allows for adjustment entries several of the following steps will be eliminated.

Step 1: Receive the deficit balance in the management system with the appropriate payment type.

• In this document we are using "Short Pay".
• Other types will have different distribution accounts used in the accounting system.
• Send this into the accounting system.

We will be using QuickBooks in this document for this process, but the process is basically the same regardless of the accounting system. They also require some setup for this process.

In this example, we will using a simple single job, Repair Order 59140, with a total of $318.00. When payment was received it was Short Paid by $43.00 and we do not expect additional payment.

The process that follows will properly address the Accounts Receivables Balance, track the Short Pay, and allow for a Sales Tax Adjustment.

Step 2: Deposit the Short Pay in Adjustment Bank Account *

• Note: Item clearly identified "Short Pay"

This Step is not needed if management system can create an adjustment rather than a standard payment type.

This process is used regardless for Short Pay, Customer Goodwill, Coupon, etc.

*The Adjustment Bank Account is part of the necessary QuickBooks setup process.

Step 3: Open Adjustment Bank Account Register

• Add an entry on the same date as the Deposit redistributing the same
  amount to the proper General Ledger (GL) Account.

The account being used is a COGS Account 5575.00 - Adjustments and Shortages
- It is can be setup as a Contra Income Account on the financial statements and it will
be a negative Income Account. I just prefer the number listed as a positive in COGS.

At this time the Account Balance for the Customer is zero, the Adjustment Account is zero, and the amount of the Short Pay is being tracked in the 5575.00 Account.

This account should be reviewed monthly to determine the extent and costs Short Pays are having in your business.

In addition, the sales report from the management system will match accounting; the Accounts Receivables report of both systems will also match.

Sales Tax Adjustments

Over the years, some shops have indicated that this method will require them to pay Sales Tax on sales they do not collect and has been their justification for leaving Repair Orders open and not closed.

How big of a problem is it really?

Depending on the extent of Short Pays that occur in each month typically this is a very small amount. You should determine if these few dollars is worth the time to calculate the credit for Short Pays on your Sales Tax returns.

There are some additional considerations such as whether all income accounts are taxable or not to consider as well. In some States only certain items are taxable such as Parts and Paint/Materials, while other States have additional taxable items, and some tax all income items.

For instance if the total amount of Short Pays for the month total to $500.00 and your State taxes everything, is the time required to do this worth $22.50 - $45.00 (Depending your tax rate) ? If you do not tax all income items this would be even a smaller amount.

For this above reason, we have seen shops use Credit Memos in QuickBooks to handle Short Pays. Keep in mind, using a Credit Memo will affect the Total Sales Amount, and then cause the management system sales report to not match the accounting report. This then requires adjusting the management system Accounts Receivables as well.

The only exception to this is if the Credit Memo is dated in the following month instead of the same month. This is simply not worth the time required, and is not the best method to use.

How to Adjust the Sales Tax

There is a fairly easy and straight forward method of taking the credit for the "Short Pays" when paying the Sales Tax through QuickBooks.

Sales Tax should always be paid through the Sales Tax process built into QuickBooks.

Go to: Vendors Menu > Sales Tax > Manage Sales Tax

Here access the Sales Tax Liability Report, Pay Sales Tax, and Adjust Sales Tax.

In this simple example there was a total of $1100.00 in total sales.
The tax rate is at 4.5%
The total tax the system thinks you have collected is: $66.00.

Step 1: Run a Monthly Report on 5575.00

Adjustments and Shortages Account to determine the amount of sales tax credit.

This will reflect the total dollars for the month that you were Short Paid.

If you also utilize other accounts to track Customer Goodwill, Coupons, Discounts, Warranty, etc., you must total all these accounts. This can easily be done by creating a memorized report that includes all the accounts that you utilize.

In this example the $43.00 represents the total dollar shortage and the State taxes all income accounts. Keep in mind, this report amount includes sales tax.

To determine the amount of sales tax it includes, divide the total amount by 1."your tax rate" (1.045 in this example).

Tax Rate is 4.5%, so divide $43.00 by 1.045 which equals $41.15 ... then the difference is sales tax ... ($43.00 - $41.15) ... $1.85.

Step 2: Select Adjust Sales Tax Due (Manage Sales Tax) and complete the Adjustment

This Example:

• Entry No. Tax Adj
• Vendor Your Sales Tax Vendor
• Account 5575.00 Shortage Account
• Reduction $1.85
• Memo Uncollected Sales Adjustment

This will create a Journal Entry in the 2200.00 Sales Tax Payable Account as well as the 5575.00 Adjustments and Shortages Account indicating the amount of Sales Tax Credit being taken.

Step 3: Pay Sales Tax

The Pay Sales Window will include the original tax amount on the first line and the credit being taken on the second line.

Be sure to check both lines

In this example you should also notice that "EFT" is in the check number field.

This is because most States I am aware of now require Sales Taxes Paid Online. This online form often allows for a credit for paying on time as well.

(See below Online Form Example - item 5. Collection Allowance)

If your State does offer a credit, you will need to enter the information from our now updated Payroll Liabilities Report to determine your credit, then just add another Sales Tax Adjustment.

This type of adjustment is typically distributed to an Other Income Account such as Rebates and Refunds, or Accounting Discounts.

QuickBooks does not automatically add these credits to the non-taxed column in the Sales Tax Liability Report. You must include the $1.85 (This example) in the Non-Taxable Sales Total but use a positive number.

Once you have paid the Sales Tax Online, review your Pay Sales Tax Screen, make sure all credits are checked and save.

State Online Payment Screens

Some clients have asked where the Uncollected Sales Adjustment Credits go on the State's Sales Tax Forms. Most States have similar forms, but they are not exactly the same.

The Amount of the Credit should be added to any other Exempt/Deductions/Non-Taxable Sales.

Other Considerations:

In this example, we took the Short Pay in the same month as the invoice closed. Most likely in the majority of cases, you will be taking the Short Pay in a later month. In these cases, the credit will be taken in the current month and the Payment Dates should be the current month you are taking the credit.

If the management system is capable of sending adjustments into QuickBooks, the process of Depositing the Short Pay into the Adjustment Account and then distributing the amount to the proper account is not necessary, it is done automatically.

State Taxes Do Not Tax All Income Accounts

If your State does not tax all items determining how much of the total Short Pay includes Sales Tax is very subjective. Was it all parts, then it is all taxable. If it was labor, it may not be taxable in your State.

As a general rule Part + Materials usually represent close to 50% of the sales invoice, so if you State only actually does tax Parts and Materials, you may decide to use this as a basis to calculate the Sales Tax credit.

Sales Tax - Accrual or Cash Basis

In QuickBooks, in the Sales Tax setup, the default setting is to pay sales tax on an accrual basis. In other words you take the sales tax liability as soon as you invoice the job. Many States require this.

However, there is a setting to pay sales tax on a "cash basis".

Preferences > Sales Tax > Company Preferences Tab

With this setting, you take the sales tax liability as you receive payments. The system in fact on an individual Repair Order basis determines the ratio of taxable verses non-taxable dollars for the job, and uses this ratio to determine your sales tax liability as you receive payments.

If your State taxes all income accounts the ratio would be 100% taxable. This setup when your State doesn't tax everything can be very confusing to an auditor, but you can create a few memorized reports that clearly shows that the proper taxes have been paid.

Even with this setup, the same Short Pay Process should be used and the credits taken the same. It however is not going to be easy to calculate the exact ratio as QuickBooks does automatically if your State does not tax everything. In these cases, I would suggest resorting back to the split as explained earlier.

In Review:

• The Key Points to This Process Are:
• Close RO's When the Vehicle Leaves and Send to Accounting
• Do Not Readjust RO's or QuickBooks
• Invoices for Deficits
• Track Deficits in Categories in QuickBooks
• Use the QuickBooks Process to Pay Sales Tax
• Take Credits Based on the Reports in QuickBooks

I hope this explained a more streamlined process to follow when it is regards to Short Pays and other deficient payments.