Thursday, April 3, 2014

Reimbursing Employee Mileage Update …

image This article was written by Robin Noah, SCORE Orange County Business Mentor

On December 6, 2013 the Internal Revenue Service issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Alternatively, individual taxpayers may deduct the actual costs of using their vehicles, rather than using the above standard rates.

According to Attorney Chris Olmsted (Olmsted, Barker and Barnier) employers have gone down the road of litigation after failing to reimburse employees for mileage. He notes that California Labor Code section 2802, subdivision (a), requires an employer to indemnify its employees for expenses they necessarily incur in the discharge of their duties. This includes, of course travel expenses. Employers should reimburse employees for mileage driven for business purposes in personal vehicles. (This does not include commute miles.)

Failure to pay for the mileage can easily place the employer in the courts facing litigation on issues concerning wage and hour liabilities.

Prudent employers have employee manuals/handbooks that clearly state the company’s policy on mileage reimbursement; including procedures for employees to claim and receive reimbursement for travel and other expenses. Methods and procedures should also be available to the management staff of the company so that the process can be administered equitably.

Title 8, California Code of Regulations states, in part, that employers must compute and pay mileage reimbursement when wages are paid, or at least once per calendar month, as determined by the employer. All such payments must be made not later than the end of the calendar month following the calendar month in which the expenses were incurred, unless the employee fails to provide the employer with the records of the number of miles driven for the reimbursement period, in which case the reimbursement must be made no later than the month following the month in which the employee provides the employer with the records for the mileage claimed.

Comment from The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Employers that use the IRS standard mileage rate to reimburse employees may deduct the reimbursement as a business expense. If employers use the approved rate (or a lower rate), the IRS considers that requirements to substantiate and adequately account for the expense are satisfied without extensive documentation of actual expenses

Resources: www.IRS.Gov / California Labor Code Section 2802(a) / Title 8, California Code of Regulations, Sections 1300 to 13706

Buying A Home Based Business Part 2: What Is The Right Home Based Business For Me?

image This article was written by Mike Capsuto, SCORE Orange County Business Mentor

The only place success comes before work is in the dictionary. Vidal Sassoon

A previous article defined a home based business. This article seeks to set the course for selecting the right home based business.

Information in this article is provided for general educational use only. No responsibility is assumed for any problems associated with the use of its content. One should seek the advice of their financial and legal counsel in every step of purchasing a home based business.

People quit or change jobs seeking the right fit. They may have taken a job for the wrong reasons - more money, prestige, they were unemployed or other personal reasons. They became frustrated, bored, and lost interest. Similar consequences can happen when purchasing a home based business. Seven often overlooked factors that need to be critically evaluated before starting the voyage to buying a home based business.

Most successful businesses are run by personality and talent. The first factor is to determine the right type of business that best matches these two characteristics. If the nature of the business does not match up there is the risk of losing the business, together with all the money and effort invested, including the frustration and loss of self-confidence.

There are 9 key types of personalities. Each personality type is characterized by specific patterns of thought, speaking style, feelings, emotions, sensations, and belief systems. Understanding each will help you find the right business. Briefly they are:

• Adviser/Counselor: has significant experience and knowledge that others are willing to pay for.

• Builder/Creator: excels at making things, whether it's paintings, wedding cakes, or skyscrapers.

• Caregiver/Maintainer: capable of providing consistent, reliable, nurturing care to others.

• Communicator/Trainer: exceptionally good with words, whether written or verbal and excels at communicating complex ideas to others.

• Entertainer/Host: thrives on being with or in front of other people.

• Investor/Owner: good with numbers, good with money, willing to take calculated risks.

• Organizer/Administrator: keeps things running like clockwork. They excel at managing multiple tasks, details and deadlines.

• Seller/Broker: every industry needs the services of competent salespeople.

• Technologist/Engineer: the person who designs, makes, sells or services all those gadgets the rest of us need but can't figure out.

There are several free or low cost e-type tests on the internet. One is “Rhonda Abrams E-type personality test”. A similar test can be found at Not only will these tests provide an indication of your personality type but also suggest certain businesses that might be the best fit. A five minute test can help set you in the right direction.

The second factor before making a decision is to evaluate your home environment and be able to make adjustments where needed.

• Is your home set up to accommodate visitors? Customers, clients, salespeople, and delivery carriers may occasionally need to meet with you. If your home is not a good place are there other locations such as their place of business, restaurant, or coffee shop to meet with them. For bigger meetings are there conference rooms locally available that you can use at little or no cost?

• Check your local regulations and insurance. Is your home zoned for business? Will your insurance company cover any accidents that might occur on your premises or with your vehicle? Determine if product liability or workman's compensation insurance is required.

• Additional printers, scanners, fax machines, and more file cabinets may have to be added as your business expands. Will your office allow for this expansion?

• Will you be able to answer phone calls, emails, and faxes from customers, clients and suppliers that are located in different time zones? Will travel be a problem?

• How will your family adjust to the office? Will you be able to have a dedicated space, with no intrusions? Will you be able to keep your business phone and equipment off limits to others?

• Can you keep your business and personal life separate? Can you work if the dog needs to be walked, the kids need to be driven to their activities, or tasks around the house required to be done? Will there be resentment if you're home and not spending time with your family?

If serious doubts about your home environment exist, correct them before making any commitment to purchase a home based business.

The third factor requires the careful evaluation of your marketing skills. Buying an established home based business does not imply that the marketing is done and all that one needs to do is to sit back and reap the benefits. Marketing requires more than a website, being on Facebook or other social media. Business conditions are constantly evolving. Your business has to evolve with it - finding new customers, reselling to previous customers and moving your products or services into new markets. Marketing consists of constantly reviewing the overall marketing message, targeting the right audience, having the proper promotional channels and measurement tools to determine the effectiveness of your strategy.

An integral part of marketing is having good written and oral communication skills. This is a fourth factor. All businesses rely on communicating with people through newsletters, reports, telephone calls, emails, resolving customer complaints or promoting products or services in person. Good communication skills are based on understanding people, listening effectively to their needs, and building rapport with current and potential customers or clients. Strong marketing and communication skills are both necessary to maintain business longevity.

Do you have an aversion to risk? This is the fifth factor that requires evaluation. Buying an established home based business has less risk than starting a new one. However, there are still risks involved. You may no longer have a steady pay check. Business may be cyclic. You will be risking your own funds and possibly loans from family and friends in addition to any guarantees or collateral at risk with institutional lenders. Dealing with constant risk can lead to stress affecting ones physical health and family life. Knowing the level of risk that one wants to take can help find the right business.

A sixth important factor is to evaluate is your knowledge of accounting and finance. You must have basic understanding of accounting, interpreting and analyzing of financial statements, developing cash flow projections, budgeting and taxes. These are the tools that help control the business instead of the business controlling you. There are many free or low cost classes available through local SCORE chapters and through government agencies to help increase your knowledge in these important areas.

The seventh key factor is the need to evaluate your technical savvy. Most home based businesses rely heavily on their computer system to communicate with their customers and vendors as well as performing administrative and managerial functions. One needs to have minimum technical knowledge regarding writing and editing text, adding graphics, creating labels as well as the technical knowledge of uploading files into the server, booting your computer and fixing computer system and application errors. If you don’t know how to solve the problem have a technical person familiar with your system and software that you can contact.

Take the time to critically evaluate all these factors. The success and longevity of any business is based on having your heart in your business and your business in your heart.

How To Create Your Elevator Pitch

image This article was written by Barry McKinley, SCORE Orange County Business Mentor

As a business owner or manger it is critical that you are able to tell potential clients about your company without putting them to sleep. The name “Elevator Pitch” came from the idea that in a short elevator ride you could tell and excite a potential investor about your company.

The elevator pitch is a conversation or ice breaker that will hopefully lead into a deeper discussion about the functionality and specialty of what your company can offer. The presentation should typically last 60 seconds or less and leave a stimulating and impactful impression. Done properly the listener will begin to ask questions where you can then support your “elevator pitch” with more in-depth information.

Following are some guidelines to help you write a memorable brief sales presentation that will leave a lasting imprint.

· Define Who You Are

“I am an accountant that specializes in small business.”

· Describe What You Do

“I understand the accounting and tax problems that face small businesses.”

· Identify You Ideal Client

“My ideal clients are busy and driven to grow their business and understand it is best to leave the accounting to experts.”

· Explain What Is Unique and Different About Your Business

“Being a small business myself I understand the unique obstacles that face small

businesses and have developed formulas to overcome those challenges.”

· State What You Want To Happen Next

“I would love to schedule a time to talk more about some of your challenges and help you to come up with solutions which reflect increased deductions and substantial tax savings.”

· Create a Attention Getting Hook

“Have you ever felt held back by lack of time and wished you could clone yourself so you could get everything done?”

· Put It All Together

“I am sure you will agree that I could free up your time to make your business far more productive while at the same time saving you money and insuring your accounting and tax challenges are met.”

Think of your “Elevator Pitch” as the Google Map, each time you click you get a more detailed picture. Too much information at the start will turn off the listener. All they need to know is the product comes in multi-colors -- not the names of the colors--which would be boring and a waste of time.

This presentation should be delivered with excitement and enthusiasm even though it may be the 20th time today. Remember it is the first time the listener has heard it.

To deliver and effective “pitch” that flows well you need to first write it out and then practice until you can say it in your sleep.

Can You Afford To Quit Your Day Job And Start A New Business?

clip_image002This article was written by John Rau, SCORE Orange County Business Mentor

When you’ve got that “entrepreneurial spirit” and want to start your own business, a common question that many “up-start entrepreneurs” need to address is whether or not they should quit their day job and, if so, when. Not easy questions to answer as they depend on many factors, but here is some guidance as to how to proceed.

I suggest that an easy way to approach answering these types of questions is to conduct your thinking in three distinct phases as follows:

· Phase 1 – The Thinking About It Phase

· Phase 2 – The Planning Phase

· Phase 3 – The Doing It Phase

The Thinking About It Phase begins with the first question you ask yourself which is “Why do you want to do this and why now?” Here are the types of issues, questions and concerns you need to address:

1. You need to think through the reasons for wanting to start your own business such as more money, more flexibility, more freedom, don’t like your current job and/or boss, not going anywhere, looking for a better work environment, hate corporate America or whatever. Some people who think they want to be entrepreneurs are just unhappy with their current roles. Quitting a job with guaranteed income and benefits to pursue a new opportunity full of risks and unknowns (such as starting a new business) may not necessarily be the right answer. You need to take the time to truly consider what you want from a business.

2. Do you have any business training such as in the areas of marketing, business operations, finance and accounting, management, human relations and employment, etc.? Just because you have a college degree in business doesn’t necessarily mean you know how to run a business!

3. Are you thinking about opening a business in an industry that you are familiar with? If not, then you need to assess your ability to start up a business in an area that you know nothing about. It’s best to do some preliminary research and “test the waters” by investigating the market potential for your business concept while you’re still working. You should at least understand who your likely customers would be and what type of competition you would face.

4. You need to assess the risks involved giving consideration to your current financial responsibilities such as mortgage, car payments, credit card obligations and other debts, kids in college, medical bills, etc. Having a working spouse/partner may be necessary to subsidize current financial obligations while moving forward with your new business where you may not see a significant revenue stream for months. (Note: I always advise my clients to have their wives keep their school teacher jobs just in case things don’t work out.)

5. How do you plan to run your business—partners, family members, investors, yourself with or without part-time help, form some type of corporation, etc.?

6. To help ease the transition, you should share your entrepreneurial plans with family members to see if they support the tradeoffs involved in starting a business. If your family members and other members of your “support network” are reluctant to back your idea, then you may want to rethink quitting your current job. You don’t want to be the “Lone Ranger without Tonto”!

Once you have “thought through” the Thinking About It Phase and are now convinced that you want to move forward, then the next step would be to undertake the necessary planning and make sure that you have a workable plan to move forward with your entrepreneurial idea, thus going through the Planning Phase. In this regard, here are some of the types of issues, questions and concerns that you while need to address in this phase of your thinking process:

1. Once you have gotten confirmation from your spouse/partner and family that they support you in this entrepreneurial venture, then pick a date and develop a plan around this date. You will need a plan that details at the very least how you’re going to become self-employed and how much money you will need to get you going. Think of this as your pre-cursor to your business plan which you will need in any case.

2. In terms of business planning, it is in this phase of your thinking that you should attend some of the various workshops and seminars presented by the Small Business Administration, Small Business Development Centers and SCORE. For example, SCORE frequently offers several workshops that you should find to be invaluable such as “How to Start, Run & Manage a Successful Business”, “The ABC’s of Starting Your Own Business” and “Developing a Winning Business Plan” to name a few. SCORE counselors can also assist you with the preparation of your business plan.

3. With regard to the financing, you will have to ask yourself how much you will need in savings to feel comfortable before quitting your day job. It is generally recommended that you should create a savings account of at least six months of income. Because lack of capital is one of the main hurdles to entrepreneurship, rather than figuring out cash flow as you go along, it’s best to come up with realistic projections as part of your business plan before deciding whether you can afford to leave your job. It is important to recognize that your start-up business may not be profitable for some period of time, thus it’s important to be realistic about how you’ll support yourself financially. Consequently, it may be necessary to keep cash flowing in from a day job when your new company may not be making much money. If you take a realistic look beforehand at what you’ll need to do to get your start-up going, you should have a better idea of when (or if) it’ll be safe to quit your day job.

People who decide to walk away from their jobs should take plenty of time to be sure that they’re making the right decision and undertake extensive planning to support this type of decision. If you are at this point, then you’re ready for the Doing It Phase. Here are the types of issues, questions and concerns you need to address:

1. Make sure you have completed your business plan and have obtained concurrence from the experts such as SCORE counselors and other types of business planning advisors. You may even enlist some mentors to help you make this transition to successful entrepreneurship.

2. You may want to consider keeping your day job for a while and starting your business on the side. This would allow for trial and error without too much risk. The advantage to this approach is that it gives you the opportunity to evaluate what’s working and what isn’t so that you can focus on the good and fix the bad. This would give you the opportunity to “fine tune” your business plan before taking that final step.

3. Before quitting your job, it would be a good idea, besides giving adequate notice to your employer, to share your business idea with your boss. You want to avoid “burning bridges” and leave in good standing. Leaving the door open to possibly return can be helpful if you eventually decide that owing a business isn’t right for you. Besides, depending on the nature of your new business venture, your employer may even want to retain your services as a consultant.

As Richard Branson says in his article “On Knowing When to Quit Your Day Job” (see “While you plan and network and find financing, remember that the window of opportunity is closing—at some point, you will simply have to go for it. Then all that’s left to do is give up your day job and become your own boss.” Remember, starting your own business is not right for everyone, but, if you do so, good luck and enjoy the benefits of entrepreneurship.