Should you be Using Social Media with your Investing?

Public companies are becoming much more integrated with social media, and so should you. Last July, Netflix CEO Reed Hastings announced on his personal Facebook page information relevant to the company that had not previously been reported. The SEC has since reported that companies may release information on social media, so long as investors are made aware the announcement is coming. So what does this mean to investors? Social media is allowing companies to connect with customers in whole new fashion. One of the ways in which they are using social media is through the use of push notifications. When a company you follow on Twitter or Facebook makes an announcement, push notifications can be enabled to allow a pop up on your phone notifying you of what has happened. This allows the user to no longer have to seek out information, but instead have information sent directly to their phone. With the constant clutter and filler bombarding users on the web, the ability to receive information direct from the company without external influence can be invaluable.

However, a reliance on social media still has its downfalls. As has been seen in recent months, social media accounts are still susceptible to hackers, who may post false information. Despite the risk, with over 1 billion users worldwide, the influence of a company’s like Facebook and Twitter are a resource that should not be ignored.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Navigating Auditing Standards, Without the Headache

If you thought the process of navigating auditing standards was a painful process, you are not alone. The PCAOB has started taking steps towards re-organizing auditing standards, aiming to make navigating standards a less painful process and more in line with the workings of an audit. So what does this mean for auditors and their clients? Currently the list of standards and related interpretations is nearly as large as a menu from the Cheesecake Factory, exceeding 2,000 pages when printed. That’s a lot of information to take in and consider. The current proposed changes would re-organize the standards into a four-digit numbering system designed to follow the workings of an audit. Under the proposal, standards would be grouped by the following categories: General auditing standards, audit procedures, auditor reporting’s, matters related to secures laws, and other. The difference lies in removal of interpretations from the system. Interpretations will not be removed all together, but simply contain a link to the relocated interpretation in an effort to “trim the fat” off the current standards.

The proposed changes, if implemented, would result in a much more efficient and painless experience for both auditor and potentially the client as well. I think we can all raise a glass to those improvements.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

How Long Should I Keep my Tax Records?

Tax season is over and the inevitable question is…what do I do with all the paper I have been collecting the past three months?  The best answer is, keep a file with just tax information.  The IRS is only allowed to review your return for three years after it was filed, assuming they are not looking because of fraud or because you grossly understated your income.  In those cases, statute of limitations can last significantly longer. However, for most “Average Joe’s” or Jane’s, the three year benchmark is the sweet spot.  However, it’s probably best practice to keep returns for 4-5 years just as a precautionary measure.  Each year when you put your new return in the file, destroy (shred) the return and related documents from 4-5 years back.  Also, you can consider digitizing your returns and related documents on a thumb drive with other important documents. If you have complex returns and issues related to returns from specific years, consider keeping them at least 6 years.

Remember that your CPA is generally required to keep certain return information for you longer than you are required to keep it personally, under professional standards set by the state.  Mandatory archiving varies state to state, but in California it’s seven years.  Thus, even if you throw your return away from 4 years ago, your CPA likely has a copy (but don’t assume they do).

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Picking a Credit Card Processor

When you are starting a business, most likely you will need to consider taking credit card payments.  While there are a bevy of options at your disposal, some types better than others. The first thing you need to do is assess your business needs:

1.  Will you need a point of sale (POS) system?

2.  Do you expect frequent or infrequent use of credit card processing?

3.  What is the average sale you expect?

4.  What are your annual sales?

Many businesses get trapped into a traditional credit card processor which at times can be a mistake.  Traditional processors tend to be clunky and the fees they charge are hard to understanding even for the most experienced individuals.  If you don’t expect frequent use of the processor, you may want to stay away from the traditional processor; they charge you monthly fees whether or not you use the service and often require a multi-year contract.  Those fees can cost you up to $700 per year even if you don’t use the processor each month.

Alternatively, if your business is mobile, or requires infrequent credit card processing, think about using PayPal or Square for your credit card processing.  The fees as a percentage of the charge tend to be more than a traditional processor, but they also have options that don’t cost you anything monthly.  Both providers have options that allow you to charge cards in a mobile setting (using mobile phones and tablets).  Both have simple calculations for fees taken out of each charge.  Lastly, both provide an option that allows you to disburse money as well. With all these benefits, it’s no wonder why these services are becoming more popular by the day.

Research these services on your own to see what makes sense for your business. There are various calculators online that will help you with your decision.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Three Accounting Related Technologies for the next Ten years

Here are three services that will revolutionize accounting over the next ten years. 1.  Bill.com (www.bill.com) – Bill.com takes over your payable and receivable functions in a cloud setting.  Bill.com is billed as the “No-check” CEO software.  Why…because you can pay vendors by check, ePayment, or PayPal without ever touching a piece of payer.  Bill.com take over all the back of the house work….cutting checks, stuffing envelopes, mailing payments, etc.  It also tracks receivables, sends invoices (both by mail or email) and gives your customers online access to pay bills.  Best of all, it integrates with most major accounting software.

2. Xero (www.xero.com) – Xero is simple and functional accounting software that allows you to add functionality as your business grows.  Best of all, Xero is ever evolving.  Whereas many software companies are slow to update features, Xero releases new functionality each month and allow developers to add on their own programs.

3.  Square (www.square.com) – Square is the easy breezy payment processors for retail and businesses who need on site credit card processing.  For about $250 plus an iPad, you can set up everything need to set up a storefront.  With Square, there are no hidden fees, and not complicated processes.  Swipe a credit card, and receive your money next day.

With our fast paced technological world, its vital businesses are up on current trends.  Check out these services to see if they can help your business, or speak with a trusted accounting advisor.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Think an Outsourced Accounting Department is Too Expensive…THINK AGAIN

Growing companies always have big dreams. Part of those dreams is growth, success, and maybe some wealth as well. There are two kinds of business owners when it comes to their thoughts on their back office accounting: 1) owners who want to hire accountants before there is a significant need, and 2) owners who won’t hire until they are absolutely forced to do so. Rarely does a business hire individuals for their accounting needs at exactly the right time. How to solve this dilemma…outsource the accounting function and back of the house processes. Think about this cost breakdown, a CFO costs between $100,000-250,000 depending on the size of the Company and location (let’s assume its $150,000 for this example). An accountant to do the day to day work will cost $35,000-50,000 (let’s assume $40,000 for this example), your tax preparer another $2,000 and so on. If you follow that model and assumptions, the cost incurred by your company would be $192,000 plus employer taxes, plus benefits, plus 401K, plus the hardware necessary for the individual to do their work, plus increased office space required, plus, plus, plus. With all those pluses, your fees are sure to be close to $250,000 per year for those two employees. That’s a significant cost to incur when you’re still in the growth phase of your business.

On the opposite end of the spectrum, you can use an outsourced accounting department with experienced accountants and CFO types at a fraction of the cost (let’s assume $5,000 per month). If you compare that to the above scenario, it’s a $190,000 savings. Think of having all your back office, accounting and year tax needs taken care of each month for about the same price as that staff accountant. That also means no training, no benefits that need be paid, or extra costs incurred.

In the above example, we used $5,000 as a base amount, but generally such services start at $500 and go up depending on the size and complexity of your operations. In the end, it costs you not to consider having an outsourced accounting department.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Three Functions to Outsource as a Startup

Three Functions to Outsource for your Startup Human Resources – Making sure you are abiding by employment laws in your state is essential.  Hiring, firing, and employment practices can get you sued if not done correctly.  In California, these laws are very strict.  If your startup is hiring interns, do they need to be paid….are they limited in hours if they get school credit?  Do you know some colleges require that you have $1 million in liability insurance before you can hire an intern from their school?  Use a qualified HR firm to handle your employment contracts and relationships.

Accounting – Making sure you are recording transactions accurately for investors is crucial.  Knowing margins and how to react to business developments will help you outperform competitors.   Accountants don’t have to be expensive, and through cloud-based solutions, certain accountants can be very reactive to your needs.  Don’t worry about accounting, focus on building your business.

Legal – It’s great to do certain things yourself.  But when it comes to formation, partnership agreements, stock option plans, equity vesting, etc…hire a qualified attorney. If you are a startup, you don’t necessarily need a law firm in a high-rise that charges $800 per hour.  Find a lawyer you trust, that you can afford, and that has the appropriate knowledge.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Overtime Rules

In California, the general overtime provisions are that a nonexempt employee 18 years of age or older, or any minor employee 16 or 17 years of age who is not required by law to attend school and is not otherwise prohibited by law from engaging in the subject work, shall not be employed more than eight hours in any workday or more than 40 hours in any workweek unless he or she receives one and one-half times his or her regular rate of pay for all hours worked over eight hours in any workday and over 40 hours in the workweek. Eight hours of labor constitutes a day's work, and employment beyond eight hours in any workday or more than six days in any workweek is permissible provided the employee is compensated for the overtime at not less than: 1. One and one-half times the employee's regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek; and 2. Double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek. There are, however, a number of exemptions from the overtime law. An "exemption" means that the overtime law does not apply to a particular classification of employees. There are also a number of exceptions to the general overtime law stated above. An "exception" means that overtime is paid to a certain classification of employees on a basis that differs from that stated above. Please refer to the State of California website at www.dir.ca.gov/dlse/faq_overtime.htm.

A question that comes up from time to time - Does the sentence above including the following language " she receives one and one-half times his or her regular rate of pay for all hours worked over eight hours in any workday and over 40 hours in the workweek" require the employer to pay for time and one-half for hours over the 40 in a week and 8 in a day? The answer is No. The overtime hours to be paid over the 8 hours are excluded from the total hours for the over 40 hours in the workweek.

For example, assume the employees works three 9 hours days, one 8 hour day and one 7 hour day for a total of 42 hours. Since the 9 hour days contain 3 overtime hours, subtract these 3 hours from the 42 to compute the overtime to be paid. In this case 39 hours are left, thus no hours over 40 are required to be paid.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Five Mistakes Startups Make

Five Mistakes Startups Make Following the American Dream and starting your own company can put you on the fast track to success, but it can also lead to the deep end of failure if not done correctly. Here are five accounting mistakes many startups make that hinder their potential.

1. Mixing business and personal finances – So many startups utilize their personal expenses for business use and vice versa.  Open a bank account for your business, transfer money, and keep the costs separate.  This will help minimize any negative tax consequences.
2. Entity type – A partnership can take many forms, an LP, LLC, LLP, S-Corp, or C-Corp.  There are certain entities that are better for certain businesses.  In addition the number of owners can effect which type of entity you should use.   Not all businesses can distribute earnings in the same way.  Pick an entity that best suits your business by asking a qualified advisor.
3. Not knowing obligations – That’s right, good old Uncle Sam and most states want theirs.  If you don’t have a reseller’s license, you will owe the state sales tax.  If you own an LLC and distribute guaranteed payments rather than W-2 wages, know that you will owe taxes on compensation received. Know your obligations.
4. Have the right tools – Use an accounting system that fits your company needs.  Do you need software to track your client relationships, email blasts, etc…? Make sure you use technology that fits your company and helps it grow.
5. Planning – Many startups think that they will be generating revenue from day one.  They find that it is harder to get off the ground than anticipated and they run out of money before they even start.  Make sure that you have enough money saved to live while you build your business.

And one for the road:

Consider and 83b election when forming your C-Corp.  It needs to be filed within 30 days of incorporation.   The election will minimize immediate tax consequences and lock-in your basis.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Employee versus Contractor

The biggest factor in assessing whether an individual is an employee or contractor comes down to control.  If a company can dictate hours and schedule, the person is more likely to be an employee.  Does a worker wear a shirt with your company’s logo on it while visiting clients?  Then they are likely an employee.  Here are a few other guidelines. Control: Does the hired person work directly under the orders of others in a defined position? They are most likely an employee. However, if the person works separately on specific projects with little to no supervision or time constraints, they are more likely to be a contractor.

Reimbursement: An important difference between a contractor and an employee is the method of payment for services provided. If the paycheck is constant and includes benefits such as a pension plan and vacation days, the person involved is an employee.

Importance: The proximity of the hired person to your vital operation is a good indicator of hired status. Is the person working on a direct part of your business model required to complete the process? Are tools provided for the job? If so, the hired person is most likely an employee.

The difference between an employee and a contractor has important tax repercussions, and should not be ignored. For more information, read information provided by the IRS here.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Ready Your Business for Investment

You had an idea, you started a business and put that idea into action, you looked for funding, and you found a potential investor that likes that idea.  The investor is ready to put money in and things are looking up.  Your business is about to get the money it needs to ramp up activity.  So what is the problem? Most startups strive so much for funding, they don’t necessarily think about the point at which someone says, “I love the idea and want to invest.”  It’s those magical words you've been waiting for, but now what?  Often those same words are just the beginning of the sentence which goes, “I love the idea and want to invest….so I will need to conduct my due diligence on your finances and records among other things.” Those other things include reviewing your burn rate, the runway you will need to get your product to market, etc.  All these items revolve around finance, accounting, and budgeting.  Remember, for a investor its all about the potential to make their investment back...times ten.

This is the point at which you start scrambling for the shoebox you stuffed with receipts, sift through drawers, print credit card statements, and find anything that resembles an invoice.  Then you figure out what is personal and what is business related.  Then you call a friend with “finance” experience and ask for help.  This is a dire situation to be in.  If you find yourself at this point, chances are that funding may be long-gone.  What does it say about your professionalism and your business savvy if you have to keep an investor waiting a week, a month, or even two days to get them information that you should have readily available.  We aren't talking about projections, we are talking about history.

The importance of keeping adequate books and records cannot be understated.  Having a professional and not a friend who "went to business school" is imperative in your growth and funding strategy.  When an investor asks for financial records, you should have it next day in their hands.  These financial records will also be the basis for your budget going forward.  Historical operating costs are a good starting point when estimating future burn rate, which will ultimately determine the runway your company has.  Remember, why would an investor put money in, knowing the company will run out of money before the intended goal is met.  Lining up your burn rate and development time line or your time to market, is critical for the success of your company.

If you are a founder of a startup, doing all the accounting and financial modeling can be slow and painstaking.  More importantly, it takes you away from what you are best at...developing your startup.  Contracting with a qualified accounting expert will expedite the accounting and finance process while freeing your time.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Audit, Client, Consultant Relationship

At some point, most successful businesses or businesses with significant potential must go through an audit to verify historical activity and results for investors, shareholders, or potential buyers.   However, because so many businesses are stretched thin in terms of staffing and specialized expertise, audits sometime become significantly burdonsom on a Company. These scenarios often result in delayed completion of the audit, unnecessary difficulty in completing the audit, and impaired independence for the auditor.  Companies lacking bandwidth will have to find time to devote to an audit; and those lacking expertise will have difficulty in completing the work in acceptable ways.  Regardless, often times what happens is the auditor assists the client (adjusts balances, writes financial statemens, etc...) to the point where their independence is impaired.  If an auditors independence is impaired, they are precluded from issuing an opinion.  The burden of knowing if an auditors independence is impaired can't be on the auditor alone.  If a company's auditor is determined to be not independent at a later time, their audit report can be disqualified and the Company may be subject to re-audit at the companies expense.

To remedy these situations, wise executive teams hire expert consultants to assist in the audit preparation and oversight.  By hiring a qualified consultant, companies can negate bandwidth and expertise issues, that will in turn resolve most independence issues.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Prepare your Financial Information to go Public

If you are thinking about taking your company public in the coming years, you should start preparing far in advance. Why?

As part of going public you will be subject to putting at least two years worth of books and records together in accordance with US Generally Accepted Accounting Principles (”GAAP”).  That information must be audited before being submitted to the SEC and available for public observation.

Any auditor will tell you it’s much easier to audit a company when you only have to audit the previous year.  Any time the audit period extends two to three years back there are various issues that are generally encountered, including: 1) missing records, 2) turnover in employees, 3) regulatory filings that will require amendment (think taxes), and the list goes on.

If you contemplating going public in the future, start a conversation with all the stakeholders that will be needed: your management team, board of directors, legal, financial consultant, and auditors.  Having these groups on the same page will ensure that everyone is working as a team to an end goal.  Being proactive in your approach will have better results than if you are reactive.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Accounting for Software Development

There are two types of software that are developed for a business: 1) internal-use software, and 2) software developed to be sold, leased or marketed (“software to be sold”).   The accounting and capitalization requirements for these two different types of software is very different.  Here is a high-level comparison of how each type of software is capitalized. For internal use software, there are three stages defined by accounting guidance: 1) preliminary project phase (i.e. planning, evaluating alternatives, conceptual formation); 2) application development (i.e. design, coding, integration with hardware), and; 3) Post implementation phase (i.e. testing, maintenance).   The capitalization of costs should start after the preliminary project phase, and is contingent on management committing to funding the continued development of the software, and the completion of the project being probable.  Costs should cease to be capitalized after the project is substantially finished (generally, close to the start of the post implementation phase).  All costs outside of this capitalization window should be expensed as incurred.  The costs qualifying for capitalization are also restricted, but that is a whole blog unto itself.

For software to be sold to third parties, the accounting guidelines are completely different.  Accounting guidance requires that costs associated with the development of software to be sold are charged to expense as incurred, until the point in which technological feasibility has been established.  Technological feasibility is established once an entity has completed planning, designing, coding, and testing the software to ensure that the software will work for its intended function.   As a general guideline, sometimes technological feasibility is considered established once software enters beta testing.   Capitalization must cease when the software is ready for general release to customers.  Accordingly, the window for capitalization is extremely small, and often, startup companies expense all costs during development.

Based on the above highlights, internal-use software generally carries a higher asset value on the balance sheet of companies than software to be sold (assuming the costs incurred to develop both are the same).

If your startup is developing software, it would be wise to contact an accounting consultant with software accounting experience to review which category your software falls into and what costs qualify for capitalization, if any.   In addition have your CTO track and document the progress of the project.  The accountant will need to line up expenses with the progress of the project to correctly account for the software.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Minimize Business Taxes Before Year End

Minimize Taxes before year end If you find that your Company has been profitable during the year and it is looking at a hefty tax bill after the year end, there are a few things you can do to minimize your businesses taxes.  Note however, that you should consult your CPA to determine if these action items are right for you.

1. Make payments - Pay all your payables and payroll before year end.  Remember, cash expenditures during the year qualify for deduction.  If you normally would run payroll on January 2, consider running that payroll on December 31 instead.
2. Prepay - Prepay certain expenses normally due on the first of each month.  Traditionally, recurring bills such as rent and insurance are due on the first of the month for the following month.  Take advantage of prepaying these items to push the deduction to the current year rather than the next year.
3. Buy equipment – Certain types of businesses can accelerate depreciation for tax purposes during the year of purchase.  For instance, if you have a construction related business and buy a qualifying truck, you can accelerate the depreciation on that truck and take the total value as a deduction to businesses income.

Remember that your businesses may have NOL (Net Operating Loss) carry-forwards and getting extra deductions in a given year may not be needed.  In addition, law changes can effect when and how you should spend money.  Contact your CPA to determine what is best for your company.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Stock Options for Startups

Stock options have made a lot of people rich, and given a lot of people headaches.  In the startup community, stock options are necessary to attract talent, provide value, and retain critical human capital.  But there are more pitfalls in accounting for options than Minnesota has lakes. Accounting guidance states that stock options, whether issued in public or private companies, are valued at the grant date.  Calculating the fair value of an option for a public company is rather easy if you know what you’re doing, but private companies aren't so lucky.  In order to determine the fair value, one of the inputs you will need to know is the value of underlying stock on the grant date.  However, if there is no buying/selling in a freely trading market, how is one to know what the fair value is?  Here are a few suggestions to calculate the value of your startups common stock if you don't have a formal valuation done by an expert:

1. What is the per share value of the last sale to a third party.  When a willing third party buyer and willing seller exchange cash or other value for shares, the value of those shares can be considered fair value.
2. Use metrics within your industry.  Did two of your competitors just sell their companies for 2x top line revenue or 5x EBIDA.  If you have comparables that can be applied to your company that is also a good starting point.  Make sure to discount as appropriate for lack of marketability, etc.

The bottom line is when you start issuing options; contact a qualified accountant to assist you in stock option accounting.  Lawyers can draft option plans, and may be able to advise you on some tax issues, but accountants are needed to tell you how those options affect your company.  As a final word of wisdom, contact your accountant before issuing options, rather than after.  Suggestions on the strike price and potential dilution can significantly improve the functionality of those options without negatively impacting the company.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Raising Money for Inflection Points

As a business gets off the ground and ideas are swirling in the air, startup founders start committing significant time to raising money.  The question is how much money should a startup raise?  Most founders will answer “as much as possible,” however, that is often the wrong answer for investors. Some founders think it’s important to get a high valuation in hopes of more money coming in the door upfront.  This can also be another potential pitfall.  Valuations are great, but the market sets the price of your company.  A valuation can be high, but the market may indicate and act otherwise.    A company will never raise more money than the market is willing to invest.

What founders should be focusing on is infection points in their business.  When raising money, there should be a reason as to why you are asking for $5M compared to $1M.  An investor needs to know where that $5M is going to get the company.  If a company can only accomplish half their goal with $5M, than that $5M is already lost money to an investor.  If a company can have a finished product ready for market with that $5M, that is an inflection point in your business that an investor can get behind.

As you map out your business, think long-term and realize that your business likely won’t get big money up front.  It will take a few small tranches of money, until larger sums are realized.  Accordingly, think of fundraising like a road trip.  Plan your path and know where you need to take a pit-stop (i.e. get more money).  Think about each tranche of money and how it will relate to an inflection point in your business (i.e. working prototype, completion of code development, finished product, commencement of revenue, etc…).  Think about how much of a runway you need to reach each inflection point and how much money will be required to get there.  Creating a plan and a road map will help investors understand that you have a structured plan to execute an idea.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Five Accounting Resolutions for 2013

Improving your company should be a constant effort.  Here are fie resolutions to make for 2013 to improve your company's accounting and business.

1. Outsource the work that doesn't benefit your top or bottom line – Business owners should not spend one, two, three or four or more hours a day doing administrative work that doesn't directly impact the company’s growth and future.  Business owners are the face of the company and shouldn't spend all their time behind a computer and a stack of paper.  Outsource the accounting work to a qualified accountant that can take over receivables, payables, and general oversight of the company’s accounting needs.  Use a payroll company that can also help you with HR related issues.  Don’t try to wear all the hats in the organization.
2. Review – Create a monthly or quarterly review process.  Review margins, receivables, payables, and cash forecasts.  Sometimes business owners aren't as profitable as they think they are.  You may get a great margin on a sale, but are you thinking about your overhead costs, how long the product sat on the shelf, etc?  Are your prices to low/high?  Your product/service may need price adjustments.  Reviewing these items regularly will ensure your company doesn't fall behind needlessly.
3. Automate – As your business expands, make sure that efficiencies are found where available.  Credit card processing, storing bank information for clients, or automating payments can assist in becoming more efficient.  Upgrading your accounting software or billing practices can also help.
4. Plan – Speak with your CPA a few times throughout the year not just at year end.   Planning with your CPA can help minimize taxes.  Planning expenditures, creating retirement plans, and taking advantage of certain deductions can all help minimize taxes.
5. Take action – Most resolutions never get off the ground.  Make a concerted effort to do at least one thing that will help your accounting in 2013.  The first step is usually the hardest!

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.