Beginning Balance

Employee theft and fraud happens in the business world all the time, from theft of office supplies to slipping cash out of the register to massive multi-million dollar embezzlement schemes. Most of it happens, unfortunately, to small businesses, which often lack the sophsitication and manpower to prevent and detect fraud.   Jesse has a few easy to implement strategies for preventing most common fraud that could occur in your business. Controls, authorization, and review custody of assets and accounts, or ARC for short. Setup your employees with good controls for spending company funds, proper chain of authorization so that no one person controls company assets and expenses, and periodically review those expenses.   With a few steps you can not only prevent fraud in your company, you can also be kinder to your employees by not putting them in situations where their actions could be construed as potentially fraudulent.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Can you imagine it? Mark and Jesse discuss Cal Newport's book A World Without Email, which urges workers, especially knowledge workers, to rethink their work in terms of process and systems. Good processes make us more efficient, but more importantly they allow us to engage in deeper work and be more creative as a result.   Good processes and systems don't just happen, however. Typically they are emergent, and it is so easy to fall into a mindset of "it's working, and I always do it this way, so let's keep doing that." If you can develop a mindset that process improvement actually results in better and more impactful work, however, then you can start to see all the processes in your business as opportunities for growth.   A World Without Email by Cal Newport https://www.amazon.com/gp/product/0525536558/ref=as_li_qf_asin_il_tl?ie=UTF8&tag=stuhac-20&creative=9325&linkCode=as2&creativeASIN=0525536558&linkId=b21bad29be593b14442630aa5d3e5612   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse answer a question submitted by a listener wanting to know if he could run his coffee shop books in YNAB? Jesse has recommended in the past that businesses with inventory run YNAB in parallel with their normal bookkeeping software, but he and Mark agree that a coffee shop, although it has inventory, is a great candidate for YNAB.   Question for Mark or Jesse? Email the show at askjesse@ynab.com   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark shares his practice of taking quiet days, quiet weeks, and (eventually) quiet months to find clarity and focus on bigger questions and problems. Jesse explains why YNAB recently decided to implement a four day workweek, and how scarcity of time can actually drive productivity.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark recounts a recent conversation with a client in which she wanted to create a profit sharing arrangement with an employee who had previously only worked for a standard hourly rate. The idea was that the profit sharing would incentivize this employee to do a good job, since the better the product sold the more money she would make, thereby "aligning" her compensation more closely with the company's goals.   While in principle this is a good idea, Mark and Jesse both point out the dangerous precedent this kind of arrangement can create. For better or worse, hourly employees that receive extra compensation in the form of a profit share will come to expect that extra money. When it doesn't come, or the amount is less than normal, employees may be left wondering whether it was their fault, their work was not up to par, or perhaps the company is in trouble. At the very least, once some form of bonus compensation (whether it's an actual bonus or a profit share) is paid out regularly, it becomes difficult for a company to NOT pay it out going forward without upsetting or confusing employees. It's a precedent that is difficult to walk back in the event the company can no longer afford it.   However, the principle of the idea is still sound, and in the right situation it can be a great way to align employees and business partners with the interestd of the business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark explores his anxiety around staying in the same business for several years, and why he has finally come to peace with staying in one lane and executing his book keeping business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Thinking about a business partnership? Well, think long and hard about it, because entering into a business partnership is a lot like entering into a marriage. Good partnerships require effort, resources, and a high level of emotional intelligence. Put simply, they add a lot of complexity to the task of running a business. This doesn't mean they aren't worth it, but Mark and Jesse urge extreme caution before getting married to your partner!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse explain how you can incorporate YNAB and the Four Rules into your business without changing your accounting software and without making your accountant grumpy!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

At some point in their growth, most businesses will need to hire additional help. Often businesses begin by hiring contractors to offload some of the operations from the owner, which are paid as contractors and issued a 1099. As the business continues to grow and the need arises for full-time team members, those contractors sometimes become defacto employees, and therein lies the trap!   It's vitally important to understand the difference between a W-2 employee and a 1099 contractor. The tax consequences are too great to guess and potentially make a mistake! Mark and Jesse break down the differences, and offer some thoughts on the pros and cons of employees and contractors.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com      

Mark points out that liabilities on the balance sheet don't necessarily reflect all the liabilties a business (or an indivudal) has. Following Rule Two (Embrace Your True Expenses), there are known long-term, non-recurring expenses that will come up in a business. Operating with no debt on the balance sheet is a wonderful thing, but without sufficient reserves for those non-recurring expenses... Mark argues you are still carrying debt. It's just unrealized debt.   It's not on the balance sheet yet, but it will be without running a surplus and creating reserves to pay for the expense. This concept  lies at the heart of the YNAB budgeting philosophy, but many businesses fail to embrace their true expenses and end up creating future debt liabitlies for themselves. Mark and Jesse discuss strategies for identifying these true expenses and building appropriate reserves for them.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com