Spring Cleaning, a Little Late

It’s hot as hell outside, and you just want to hibernate in the air conditioning. Trying to figure out what to do while you’re chilling out? How about organizing your tax records?! If you start organizing yourself now, come this tax season, you’ll be cool as a cucumber, and ready to make your favorite CPA’s day, with all of your organized records. IRS has some recordkeeping tips for individuals and small business owners.

What to Keep – Individuals

IRS recommends keeping records that support items on your tax return for at least three years after the return has been filed. Some of these records are bills, credit card and other receipts, invoices, auto mileage logs, canceled or imaged checks, and any other records to support deductions or credits claimed on a tax return. You should also keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Examples of this include a home purchase or improvement, stocks and other investments, IRA transactions, and rental property records.

What to Keep – Small Businesses

Similar to individuals, for small businesses, IRS recommends the three year timeframe for retention of business records. Examples of these include records that document gross receipts, proofs of purchases, expenses, and assets. These can include cash register tapes, bank deposit slips, purchase and sales invoices, credit card charges, Forms 1099-MISC, canceled or imaged checks, account statements, petty cash slips, and real estate closing statements. Electronic records can include databases, saved files, emails, faxes, and others.

IRS generally doesn’t require records to be kept in any special manner, but common sense would indicate that having a designated place to keep your tax records is a good idea. If you have all of your records in one place, it will make your job a lot easier when preparing to meet with your CPA, or if you should be one of the unfortunate souls who receives an IRS notice, or need to substantiate something for an audit.

The morale of the story is, even when it’s brutally hot and humid outside, you can be one of the coolest people around, when you have your tax records in order (at least this CPA will think you’re cool!). How organized are your tax records? Leave a comment, telling us the good, bad, and the ugly! Please forward this article along to anybody who you think needs to get their tax @#$% together.

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Do I need an Outsourced CFO?

Whether you’re starting a business or are already established, you probably have many different concerns, including keeping costs under control, the instability of the economy and business climate, staffing/employee issues, and trying to figure out the best plan for your business’s future growth, profit, and security. Using an outsourced Chief Financial Officer (CFO) makes sense when considering all of these things. Below are some of the benefits of having an outsourced CFO on your team, as well as when to consider using such a service.

What Is an Outsourced CFO?

I’m guessing that we’re all familiar with the term “outsourcing”, regardless of whether that means somebody local or in another country. As it relates to CFO services, some of the more common services that an independent professional can do include preparing and analyzing financial statements (including balance sheet, income statement and cash flow). Additional services may include helping with future growth models and projections, assistance with a business plan, developing an operating budget, and more.

Benefits of an Outsourced CFO

Independent and Objective viewpoint: Unlike internal staff, an external consultant has no preconceptions or agendas in relation to the business agenda.

Creative solutions: Since many consultants have a breadth of experience in a variety of industries, they often bring a new perspective to operations that could be beneficial in the long run.

Networks: In many cases, an external CFO has connections in a variety of fields and industries that may benefit you, particularly for business growth.

When do you need an Outsourced CFO?

As I mentioned above, an outsourced CFO can help when starting a business, or during growth periods:

Start Up: Utilizing the knowledge of an experienced CFO to help you build the proper financial structure initially will pay off in the long run.

Business Growth: As the bookkeeping function starts to morph into something more than payroll, accounts payable, collections, billing, etc. a CFO is necessary to help the company with more advanced activities, such as financial statements and compliance.

Full-timer Is Unnecessary: There comes a time in every business when the financial portion of the company becomes more complex and begins to take up more and more time. However, there is also a gap between this period and the need for a full-time CFO. It’s during that gap when outsourcing CFO services makes the most sense.

Preparing Business Plans: Unless you have experience in this area, it’s best to work with a professional who knows how to prepare the documentation needed by funding sources.

Sounding Board: When a business owner seeks an objective, independent review of his/her business, having a dependable consultant to speak with may be invaluable, especially if it helps you to avoid a costly mistake later.

In the end, to determine if this model is right for your business, weigh the benefits against potential risks. Do your homework. Be diligent about keeping your finger on the pulse of your business and engaging with the chosen CFO through open and frequent communication. And if you’re in the Northern Virginia/DC metro area, contact me about CFO services.

As always, feel free to pass this along to others who may benefit from it, and if you have your own outsourced CFO experience, please share it!