All posts by Carl Heintz

25

May'18

How do I find the Right CPA?

Finding the right CPA or the right accountant is really important. Important because the results depend upon who you get, and it’s an area where you, the client may not be aware of whether you got the best advice or not. There are a lot of stuffy accountants (CPAs) out there who have very high opinions of themselves. They talk about “the firm” and act like they are something special. They tend to be rigid, unimaginative, high priced and advocate for themselves. There are also a lot of very friendly nice guys who are not very competent. They talk a good spiel, but they have neither the resources nor the experience to handle your problem. So how do you find the right CPA? What are you looking for? Lets see: 1. A hard-bitten no nonsense negotiator who can deal with the IRS at their level, knows all the audit tricks, has been there many times, a street fighter. 2. A clever innovative thinker who knows all the ins and outs of the law, understands the difference between light gray and dark gray, wants to take you to the limit of tax savings, but without crossing the line. 3. A plugger, …

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19

May'18

How do I start a business with no experience?

How do you start a business with no experience? Maybe you haven’t worked in a job, other than maybe a temporary job in school. Becoming an entrepreneur, doing a start-up, and being successful is not as easy as it might be portrayed in Entrepreneur or Fast Company, or Inc magazines. They highlight the .1%, not the 95% who didn’t make it. My suggestion is that you shouldn’t start a business just yet, because you really need to have a lot more experience working for someone before you start your own business. Starting a business is hard. You have to know a lot about business, taxes, employees, marketing, organization, etc. Yes, you can learn a lot about these things at school, taking the appropriate courses, but as the saying goes, “in theory there is no difference between theory and practice, in practice, there’s a big difference.” Truer words have never been spoken. Now a lot of people are going to jump all over me saying “you don’t need any experience, just do it! There are many examples of people who did exactly that and succeeded.” Right. And for every one of them, there are 100 you don’t hear about who tried …

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19

May'18

How is the Best Way to Deal with a Trial Balance in Accounting?

I love this question! Lots of great stuff, if you look at it carefully…. “to deal with” meaning, “how do I handle it!” You want to handle it with care. It’s the summary balances of all the accounts and it can tell you a lot. You are probably going to have to make some adjusting entries, and the trial balance will lead you to many of them. “best way” meaning, “what should I do?” Here we want to be methodical. First off, check to see if the thing balances, i.e. debits equal credits. Don’t be fooled by programs like QuickBooks, which force the difference into an imaginary account like “opening balance equity.” (BTW, that should always be zero). Even the best accounting programs can fall out of balance. Got to check that first. If it is out of balance, wow, there is so much potential work to do… can’t live with an out of balance trial balance! Second, methodically go down the balance sheet. Start with cash. The amount in the trial balance is probably wrong. Did you do a bank reconciliation? Do you have the adjustments for things like outstanding checks, bank fees, interest, etc? If all you did …

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24

Apr'18

What Should You Know to Analyze a Financial Statement?

What do you need to know to analyze a financial statement? The answer is a little complicated. Here are the things you should know: A basic understanding of accounting. You need to be able to appreciate what the various components of a financial are, and where they come from. You need to understand the pitfalls of financial reporting, and the limitations of GAAP. A good understanding of the tools of financial analysis, how they are used and what they reveal. Things like ratios, trend lines, scatter charts, and the like are important tools, if you know how to use them. A good understanding of the industry. You need to know what is expected and what is unusual. Without some comparative information and background, your financial analysis of the company is in a vacuum, and probably meaningless. A good understanding of the business. If you don’t know anything about the business except what you see in the financial statements, you don’t know very much. When I read an annual report, I spend far more time reading the explanatory material than actually looking at the financials. I do a web search on the company, try to understand what their products are, their …

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21

Apr'18

What’s the Difference Between a LLC and a S Corp?

There are many differences between a LLC and a S Corp, even though at first glance they appear to be essentially the same. First, let’s tackle the issue of forming a LLC versus a corporation, in general. The LLC is generally a lot easier to form. Usually it only requires registration from the state. To make things formal, you should have what’s known as an operating agreement amongst the owners. That’s it. With a corporation, you also have to register with the state, but you have a lot of busy work to do. You have to adopt a charter, adopt bylaws, appoint a board of directors, pass resolutions, etc. Both a LLC and a Corporation will most probably have to do annual filings with the secretary of the state in which they are formed. Some states, like Missouri do not require that for a LLC. Now, what is the difference between a LLC and a S Corp? Easy. The S corp has one set of rules for its taxation. Very rigid rules. Very mechanical in application. Some of the other respondents have pointed out that S corps must pay their owner/officers reasonable compensation. The balance of the income can be …

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04

Apr'18

Should I leave my low paying, meaningless job to start a business?

Oh my, some serious issues in this question! Jumping off the current boat to swim with the sharks and try to stay afloat and build a new boat from scratch is incredibly difficult, far more difficult than it looks. Look very, very carefully before you jump. The water is cold, full of sharks and unpredictable big crashing waves. Once you abandon the ship you are on, be prepared for some rough times. You may drown. You cannot start a business until you have sufficient savings, have done intensive research, have networked and made good connections, and have a backup plan. Low pay job: Ok, so make something of it. Do the best job you can, be a superstar. Be a sponge: learn everything you can and more. Prove to your employer that you are worthy of a raise. Then look around for another, better paying job. Work your way up. “Meaningless job” – there is no such thing. The meaning you have in a job is what you put into it. If you are a janitor cleaning toilets, put everything you have into cleaning them the best way anyone could. If you sweep the floors, do it with style and …

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02

Apr'18

How do I sell my consulting services?

This is an easy one! First, you have to know as much as you can about your prospective clients. What are their needs? What are the problems that gnaw at them and cause them to lose sleep? What things are just annoying and irritating that they have to deal with? Know your prospect. Understand what motivates them and where their “pain” is. Now, how will you, yes you, solve their problems in a seamless, easy, cost-effective way? What will you provide that will give them (almost) instant relief? What is your USP ( unique selling proposition)? Don’t give them some “generalities” or fuzzy answers. You have to be razor sharp on this. You have to be able to prove that you can solve their pain. Otherwise, why would they risk dealing with you? What guarantees or warrantees can you provide ( and remember, these have to be realistic… if you promise too much, they won’t believe you.) That brings us to the next issue: credibility. Why are you, as an individual, uniquely qualified to provide this “relief?” What are your credentials? What experience do you have? What references can you give? What case studies can you provide that prove your …

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30

Mar'18

Do I need a License to Start a Consulting Practice?

The answer is that as long as you are not giving advice which is regulated, you are good to go. What’s regulated? Law, medical, actuary, insurance, investments, real-estate (in some locales), engineering (in certain fields), architecture, and certain trades. If they license the practitioners, they probably regulate the advice. For example, just try to practice accounting in Texas. They will be all over you if you are not a CPA … Also, you have to be very careful that you aren’t issuing an opinion on certain things. Accounting is a clear example. If you start doing financial statements and attaching some sort of opinion that they are correct, the CPA board will be on your case. Be very cautious about anything involving other people’s money. Giving advice about loans or real estate transactions can get you in big trouble if you are alleged to be an unlicensed real estate broker or loan broker. Even if there is no regulation, you should be careful where some sort of dealer license is involved. For example, I had a client who helped people find the right car for a price. The state alleged he was an auto broker. Big cat fight ensued. He …

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29

Mar'18

What does a Treasurer Do?

What is the function of the treasurer of a company? The answer is simple: the treasury function is all about looking at possibilities, risks, and returns. A treasurer of a company analyzes the economy, the business cycle, the product life cycle and the business plan of the company. What funds are going to be needed? Is there a recession coming or underway? How can funds be deployed for the best risk-adjusted returns? What is the cost of capital? The answers to these questions are all moving targets, and a lot of it is educated guesswork. The treasurer has to work with the management team in formulating and executing the business plan. The work is at the same time very granular and yet also broad brush to the point of conceptual. If they have promising projects, with large risk-adjusted returns on investment, that is where they should put their funds. If they can buy businesses with a good return on investment, they should do it. If they can place the money in investments which pay a greater return than their cost of capital, they should do it. If the Treasurer’s team sees a big recession coming, they may decide to build …

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28

Mar'18

How do you form a Private Company?

A private company is any company that is not publicly held, meaning that it could be a corporation, a partnership, a LLC or a sole proprietorship. Forming a sole proprietorship is easy. Repeat after me: “ I now have a company and it is named ____ (insert name)” You now are a sole proprietor. You may have to register your “fictitious” business name, you may have to obtain a business license from your City/County/State, and you may have to apply for various registrations, such as sales tax, property tax, payroll tax, etc. But you are in business. Forming a partnership is almost as easy. You and others agree to be in partnership. You are there. Of course, only a fool would do that without some sort of written partnership agreement, since people tend to have short memories about what they agreed to, and partnerships tend to end up on the rocks as the result of unfulfilled expectations and misinterpretations. Partnerships are dangerous because they expose you to the liability created by your partners, amongst other things, and if you are determined to have one, consult with an attorney, please. We don’t recommend them. After you have formed a partnership, you’ll …

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