Month: March 2013

How Much is a Fair Profit? Part III of V – Risk

A third factor in determining a fair profit percentage is risk.  Risk is divided into two types.  The first is insurable and the second is uninsurable risks.  Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter.  …

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Why You Should Incorporate Your Business

As a small business grows, there comes a time when the owner(s) should consider incorporating the business.  A corporation is a separate entity recognized by the state of domicile for the business.  It is as if a new life is created.  The state acknowledges the existence of this entity and therefore grants limited legal rights similar...

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Implement Cost Accounting in Construction – Processing Documents

In construction there is little respect for processing paperwork.  Contractors want to build projects, not deal with how paper is managed.  But to gain a true understanding of what it costs to build a project and implement cost accounting, the contractor has to process documents in a meaningful way.  To successfully implement cost accounting in...

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An Introduction to the Employee Manual (Handbook)

The employee manual is a guidebook and a tool to explain the policies and procedures for the small business operation.  It addresses the basic expectations for performance and conduct of the employee.  The manual is only a guide and the employee needs to understand its importance in the overall corporate policies and procedures hierarchy.  Furthermore,...

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An Explanation of Current Assets

The asset side of the balance sheet is divided into 3 major sections.  They include current assets, fixed assets, and other assets.  Current assets carry the most value to the small business entrepreneur because of the cash conversion aspect.  Cash is the blood that keeps a business alive.  So what are current assets?  How do …

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An Explanation of Goodwill – Part I – Generating Goodwill

Goodwill is essentially customer retention.  It’s the ability of a small business to retain and keep customers coming back.  I remember from my boyhood a hardware store my mother would go to and get parts for the house.  The owner was well into his 70’s and I was a boy of 7.  This was the …

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What is an Audit?

An audit is defined as a methodical examination.  Audits are grouped into two principal sets – financial and organizational compliance (usually related to licensure).  For the small business entrepreneur, it is almost unheard of for them to have an organizational compliance audit.  Small business audits are almost entirely financial in nature.  Within the financial audit...

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Form 1041 – Income Tax Return for Estates

When an individual passes away, his/her will or trust identifies a representative to administer his/her estate.  This representative is referred to as the executor (male) or executrix (female) and is generally approved or assigned by the local circuit court.  The Internal Revenue Service tasks this representative to file a final personal return and information returns...

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