If so, here’s a tip: reconcile your primary operating and payroll accounts weekly or even daily if need be.

In QuickBooks this is easy: you do a partial reconciliation, leaving the items “soft reconciled” until your final month-end reconciliation against the bank statement.

If you’re doing this soft recon today, for example, pick today’s date as the statement ending date, enter the cleared online bank balance, and click off whatever’s cleared the bank.

It’s a great way to stay on top of cash, add financial control, and avoid credibility-damaging bounced checks and expensive overdraft fees and penalties.

Make sure your QuickBooks, NetSuite, or other accounting/POS software conforms to the new rates.

Click here for the California State Board of Equalization (BOE) announcement:

California BOE April 1 2011 sales tax rate increases.

Click here for a complete list of California sales and use tax rates, by city or county:

http://www.boe.ca.gov/cgi-bin/rates.cgi.

For example:

• 100% exclusion on gains from the sale of certain small business stock (read: you’ve got an extra incentive to purchase a business by the end of this year).
• “Eligible small corporation” losses that can be treated as ordinary income rather than as a capital loss
• NOL carry-forwards and carry-backwards
• Tax credits for hiring, paying employee health insurance premiums, and others.

Is your CPA proactively looking for tax breaks that might apply to your company? Don’t assume so. Your CPA might be very busy with many clients, so it’s easy to let opportunities fall through the cracks. Bring up these kind of items with him or her. No harm in asking!

For an excellent roadmap on the topic, read Looking for the Light, a recent article in CFO Magazine by Kate O’Sullivan.

Written for CFOs, it’s good cross-training for all leaders in a small business — CEO, CFO/Controller, Sales Manager, Operations Manager.

Our goal as your national association is to raise bookkeepers’ professional status. One way we do this is by keeping members up to date and offering practical, on-the-job help through our monthly newsletter, The General Ledger.

The quiz below is based on just one recent issue of our member newsletter. See if you are current on this professional news and knowledge: Scroll down for answers.

Questions 1-3: As ofJan. 1, 2011, the following new rules are in effect for reimbursements of various health care costs from flexible spending accounts (FSAs) and other health reimbursement arrangements:

1. The cost of over-the-counter medicines or drugs purchased in 2011 cannot be reimbursed unless they were purchased using a _____.

2. Can eyeglasses be reimbursed in 2011 without a prescription? contact lenses?

3. Can co-pays be reimbursed in 2011? deductibles?

4. The place where a taxpayer (resides/earns income) is considered that person’s tax home.

5. Business travel expenses are deductible by an individual or reimbursable to an employee tax free only when incurred while _____ away from the tax home, which means no more than _____ _____.

6. Is it possible for an employer with 20 full-time employees and 9 part-time employees to qualify for the health-care tax credit in 2010?

7. Effective Jan. 1, 2011, advance EITC payments will be claimed by recipients on their _____ instead of receiving them from their _____.

8. A credit card statement is not proof of the business purpose of an expense. This requires receipts or other _____ that serve to demonstrate the exact nature of the purchase and why the expenditure was _____ and _____ for the business.

9. When filling out a 1099 for an independent contractor, for an individual, use the person’s _____ _____. For a D/B/A, partnership or other business entity, use the _____ _____.

10. Predating and postdating paychecks is (permitted/prohibited) under the doctrine of _____ _____.

Answer Key

10 correct        You are up to date—join AIPB now to stay that way.

8-9 correct       You may be missing news affecting your job—join AIPB to keep current.

7 or less right   You are behind—join AIPB today and catch up.

1. prescription

2. yes, yes

3. yes, yes

4. earns income

5. temporarily, 1 year

6. yes

7. 1040, employer

8. evidence, ordinary, necessary

9. legal name, entity’s name

10. prohibited, constructive receipt

To take the test yourself, see Sue’s winter 2011 newsletter: MW News Winter2011E.

In it, she expands on the most difficult question in the test, the one about bonds and interest rates. She discusses some basic strategies for investing (or divesting) in the bond market, including the ability to distinguish between trends (herd mentality) and underlying value.

Thank you, Sue, for letting me share this with our readers.

This helps prevent unauthorized divergence between your balance sheet and the one your CPA is working with.

Result: fewer downstream accounting problems and associated expense.

Record for all items in stock the 1) item/SKU; 2) quantity on hand; 3) cost basis; and 4) extension (quantity x cost basis).

As of the last day of each month, you want accurate numbers for inventory and Cost of Goods Sold, which combined with sales will give you your gross profit margin.

In a product-based business, knowing your gross margins (even down to one-half of one percent) helps you improve profit and cash flow.

If you’re pressed for time, don’t skip your monthly inventory count: just pare it back a little.

It’s also easier to do a little house cleaning each month than to do major house cleaning once a year for tax purposes. For instance, each month write down some of the damaged or deadwood inventory, then donate, liquidate, or discard it.

In terms of accuracy…

• The end of year (12/31 for calendar year companies) inventory should be the most accurate since it’s used for income tax calculations.
• Quarterly counts during the year should be very accurate.
• In-between months need to be at least “reasonably accurate” — i.e. close enough to send the right signals when you’re analyzing financial statements.

There are lots of ways to save time during your in-between month counts. For example, if you have a box of 200 widgets that cost $200 ($1 each) and it looks to be half full, call it 100 widgets @ $1 = $100 of inventory and move on.

Account for all your higher value items, though, because they usually exert greater influence on the total number.

TIP: It’s better to do a “good enough” inventory count and calculation each month than none at all. And if you can’t take the count at the end of the last day of the month due to business hours/operational reasons, take it within a few days, and back into the end of month values by subtracting subsequent goods received and adding back goods sold.

TIP: Do your cycle counts (physical counts that are used to update your POS system) throughout the month. Use a hand-held scanner to cycle through different inventory categories on a rotating basis. Do more cycles on your high value or problem (can’t seem to get it right) inventory categories. The beauty of this approach is that you can in-fill staff downtime with these cycle counts and you don’t have to take a physical count at the end of the month, because you’re continually updating your database. At month-end you use the information straight out of your POS system, give it a once over reality check, and you’re done.

Keeping on top of physical inventory is one of those little things that can pay off big in terms of reducing losses due to shrinkage, pointing out errors in your inventory system, and giving you more accurate data upon which to make decisions that will improve financial performance.

Here’s a link to the January small business tax calendar:

http://www.tax.gov/calendar/january.htm.

And an eHow article on the topic:

http://www.ehow.com/how_13664_know-issue-1099.html.

Tip: don’t send your 1096 to the IRS for a few weeks. Sometimes the recipients of your 1099s catch errors and it’s easier to fix them before you send the summary transmittal to the IRS.

Tip: your state might require additional reporting. California, for example, has the (ugh!) DE-542: http://www.edd.ca.gov/payroll_taxes/independent_contractor_reporting.htm.

Depending on how the debt is structured (corporate or schedule C, personal guarantee or no, collateral, etc.) you might be able to either a) walk away unscathed (unlikely); b) walk away with a big ding on your credit (more likely); or c) restructure it.

Walking away is an active process of communication and negotiation.

Restructuring, a hefty topic all unto itself, is a very active process, almost a part-time job if one owes a lot of money to many creditors.

The key points are to:

1. Go lean in terms of business and personal expenses.
2. Figure out how much your business can afford in monthly debt service.
3. Rank your debt in terms of your creditors’ claim to your assets and their legal/operational ability to squeeze you.
4. Know your walk away point (at which it’s better to file bankruptcy).
5. Start negotiating for lower interest rates and smaller monthly payments.
6. If at all possible, have some cash to offer as an immediate buy down. (“I’ll pay you 60 cents on the dollar today if you write the rest off.”)
7. Be firm, get support, but stay in contact with creditors; avoidance usually only makes matters worse.