As tax season is winding down, with less than a week left to file your 2011 returns or an extension in the United States, I thought about purging some of my old files. I tend to keep a lot that may not be necessary. Generally, you need to keep supporting records of income or deductions until the period of limitation set by the Internal Revenue Service runs out. This period is that in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Here are some guidelines, according to IRS Publication 583 (Starting a Business and Keeping Records).

1. For most tax returns filed on time with tax paid, keep supporting records for three years after the filing deadline, the extension deadline or the actual filing date, whichever is later.

2. If you had income that you should have reported (but did not) that was 25% in excess of your gross income, keep records for six years after your final payment was made.

3. If you have employees, keep all employment tax records for four years after the employment tax became due or was paid, whichever is later.

4. Keep records to support any deduction for bad debt loss for seven years.

5. In cases of someone required to file a return (and does not) or in the case of fraudulent returns, the IRS requires records be kept indefinitely.

6. Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property.

Those are IRS requirements. You may have other reasons for keeping records longer, e.g., insurance or business valuation. If you do, it would be a good idea to make copies of your records and returns and keep them on a CD (or DVD) and store them offsite.

Do you have any tips for keeping records? Please share your thoughts below.

In the Winter 2012 issue of The Professional Quilter, Sue Tucker, Chief Financial Officer of Studio 180 Design and our financial columnist, wrote about seven resolutions you won’t want to break. One of them was “Look at Your Financial Numbers on a Monthly Basis.” Now that we are at the end of month two, how are you doing on this resolution? I know that lots of creative types just aren’t that interested in numbers. And, that’s great if you’ve got someone to input your data, but you still need to look at the numbers on a regular basis. Here’s an excerpt of the Winter issue with Sue’s article on this resolution:

How do you know if you’re making money and reaching your goals? How do you know if you need to change an approach that’s not working or cut back on expenses to make up for a shortfall in revenue? If you aren’t looking at your financial numbers on a monthly basis, you don’t. Some people look at their bank balance when the statement comes, and if there’s money there they think they’re OK. But let’s say they’ve started a slow slide. How many months will it take for that slow slide to wipe out everything in their account, at which point they’ll realize they aren’t OK? If they’d been looking at monthly numbers they would have seen the problem right at the start and been able to take action before their bank account ran out of money.

If you don’t know how you’re doing month-to-month, you can’t be making the right decisions as quickly as you should be to keep your business strong and growing. At the least you should be looking at your revenue and expenses for the month and year-to-date. That will tell you if you are making money. But in addition, many of you should be looking at month-to-month changes, annual growth, receivables and your balance sheet. Your accountant can help you identify what you should be looking at based on your business situation and help you plan the best way to get the numbers you need.

Please share how you’re doing with tracking your financials below.

With just two and one-half weeks left in the year, you can still make decisions that may lower your tax bill. Here are six for you to consider with input from your accountant:

1. Review your business books. You should be doing this on a regular basis, though I realize that most artists steer away from numbers! You need a clear picture of your earnings and expenses before you make any decisions that will affect your taxes or the life of your business. Talk to your accountant or bookkeeper about your current numbers and ask if you should be tracking something you aren’t.

2. Defer your income. Unless you expect to make considerably more income in 2012, you might want to defer income until after the first of the year. If this is the case, send out your invoices late this month so you won’t receive payment until January.

3. Increase your expenses. Stock up on business equipment and supplies before year end. Pay some of your bills early.

4. Contribute to your retirement plan. Review requirements for payments to your plan. If you don’t already have an individual 401(k), you may want to set up one before the end of the year.

5. Give. Charitable donations are tax deductible if you have a receipt. I recently made a couple of microloans through FINCA (www.finca.org) to women in Afghanistan in handcrafts businesses. You can also find microloan opportunities at kiva.org. Your very small loan will make a difference.

6. Invest in yourself. Since self-development is tax deductible, now is a good time to plan ahead to attend our first Creative Arts Business Summit. You’ll learn strategies you can use every day to grow your creative arts business and the investment is tax deductible.

These strategies apply differently to each business owner based on her particular situation. Since I’m not a financial professional, take time to discuss your strategy with your personal tax advisor. I had a discussion with mine last week and made a few adjustments that will make a difference.

Please share your thoughts on year end tax strategies below.

In the Fall issue of The Professional Quilter, Mindy Wylie took a look at the pricing decisions new longarm quilters need to make when starting their businesses. They are also the questions experienced longarmers need to readdress from time to time. If you aren’t a longarmer, these are the same questions you should consider for commission work. And, if you have work completed by someone else, you would want to know the questions to ask. Here’s an excerpt from the issue.

How are you going to price your work? You have three ways to price your work: by the size of the quilt, by the amount of time it takes to quilt it, by the number of bobbins used.

Do you charge differently based on different patterns and techniques? Yes! Take this opportunity to explain the differences to your customer. It is common to have a few different pricing categories, such as edge-to-edge, semi-custom, custom and heirloom. You need to explain what each category is, how each category differs from the others based on time required and skill needed.

Do you give an estimate? Yes. The estimate I give is very accurate, but occasionally something comes up to change it. You’ll need to immediately notify the customer and discuss this with her.

Are there any additional fees? Most longarm quilters have an additional fee for thread used on the quilt. You may also choose to sell batting to your customers. Some longarm quilters add an additional fee for turning the quilt, squaring the backing, piecing backings, repairing seams on the quilt top, pressing the quilt or the backing (or both) and trimming the quilt after the quilting is done. Some of us even offer additional services such as binding or labels.

Once you’ve evaluated the answers to those questions, you can use them to set a pricing schedule and create an order or take-in form.

If you would like to read more of Mindy’s article on pricing your longarm work, it’s included in the Fall 2011 issue of The Professional Quilter and available to IAPQ members. The International Association of Professional Quilters offers resources and networking opportunities for you to create a success from your quilting business. Learn about all the benefits of IAPQ membership here.

Please post your thoughts on this article below.

Many of us travel as professionals, whether that is to teach or vend at shows or to enjoy quilts made by others. Don’t we sometimes vacation around the shows we know about! And, of course, tipping is required on these trips.

Here are some guidelines gleaned from David Nagle’s article in the current issue of The Professional Quilter where he went on an imaginary quilt show trip.

• Cabs or paid shuttles: 10-20% depending on whether you have bags.
• Baggage handlers (Skycaps, hotel bellhops): $2 for the first bag; $1 for additional bags.
• Maid service: $1-$10 a day depending on type of hotel.
• Restaurant: 15%-20% of the bill depending on service
• Complimentary hotel shuttle: $1-$2 per person

During your stay, you will encounter many instances where someone does something extra to help you out and that requires a tip. In your travels, be sure to keep track of all the tips you give, as they are tax deductible – and carry lots of dollar bills.

Please share your thoughts on tipping on our blog. You can read more of David’s article on tipping in the Spring 2011 issue of The Professional Quilter. It’s one of your benefits as a member of the International Association of Professional Quilters.

IAPQ member and CPA Veronica Wasec recently wrote about 10 common mistakes that small business owners make with their accounting and QuickBooks®. As a Certified QuickBooks® ProAdvisor, she’s worked with lots of small business owners, including quilters, for more than 20 years. Here are five of the mistakes she often sees business owners make:

1. QuickBooks® is not set up properly for the business. This causes small business owners to spend a lot of time getting information out of QuickBooks® or tracking information manually outside of QuickBooks®. After you understand how information is accumulated in QuickBooks® primarily by the use of projects, items and the chart of accounts, you can set up QuickBooks® specifically for your company and your needs. Once it is set up properly, you can use reports that show you how much money you made by customer, by project or job, and by inventory or service items.

2. QuickBooks® is only used as a bookkeeping tool rather than as a way to manage business finances. Many small business owners use QuickBooks® only as a bookkeeping tool – to capture their daily transactions. Unfortunately, they don’t review financial reports such as the Profit & Loss, the Balance sheet, and key reports such as the accounts payable aging, accounts receivable aging and several types of profitability reports. To manage your business effectively you need to have timely and relevant financial information available to you and you need to review it on a timely basis.

3. Bookkeeping is not kept up-to-date. Keeping your bookkeeping up-to-date can be a thorn in your side, but it is a necessary function of running your business. Here are a few tips, whether or not you hire an outside bookkeeper:

· Set aside time on a weekly basis to update your books.

· Use a checklist to ensure that you record all your transactions.

· Be sure to have receipts for all of your transactions.

· Set up a filing system that is appropriate for the size of your business and file away all your receipts and documents.

4. Accounts are not reconciled. Many small business owners have messy balance sheets because they don’t reconcile their accounts. This includes reconciling bank accounts, credit card accounts, sales tax accounts and other accounts on a monthly basis to ensure that your financial data is accurate. If your financial data is not accurate then how can you rely on it to make decisions for your business?

5. QuickBooks® is out-of-date. Many small business owners use an outdated version of QuickBooks®. Why is this important? QuickBooks® does not support any versions older than three years. Also, newer versions of QuickBooks® allow for automatic downloading of bank and credit card transactions from the bank and credit card companies. Newer versions also have higher capabilities, for example QuickBooks® 2011 version allows for batch invoicing – a great time saver for companies that bill multiple customers for recurring fixed amounts (such as monthly support charges). Upgrading to a new version of QuickBooks® is very simple and generally only takes minutes.

The International Association of Professional Quilters offers resources and networking opportunities for you to create a success from your quilting business.  Learn about all the benefits of IAPQ membership and join here.

No Excuses!: The Power of Self-Discipline
Brian Tracy
Vanguard Press; $17.99

Brian Tracy says that what separates successful people from less successful people is self-discipline. In this book he looks at self-discipline in three distinct areas: personal success; business, sales and finance; and the “good life.” To be able to grow as a person and achieve happiness, which is really our end goal, requires self-discipline. Not easy to achieve in all areas. Some of the material wasn’t new to me, though it served as a good reinforcement. Because each of the 21 chapters (seven in each of the three areas) includes action exercises, I think it would be useful to do one each day for three weeks to build on the discipline you are practicing. Some readers may have problems with the sales focus in part of the book. I also wish the book included a list of references.

Look for the book at your favorite book retailer or go to Amazon to learn more about the book.

The New Year is two days away. I’m excited about some of the things I have planned. I have some exciting new business programs to announce in the next few months, and I’ve started a coaching program for creative entrepreneurs.

As I look ahead, I can see that I have a lot to accomplish, and I need to stay focused to do that. A lot of you know that one of my favorite planning resources is Your Best Year Yet by Jinny Ditzler, and following her process helps me focus. See the review below.

I wanted to share five tips to keep in mind as you start 2011:

1. Set time for yourself in your calendar. The older I get, the more important I realize that this is. And, I’m sure I’m not the only one who doesn’t take enough time for her or himself. It’s important to find a little time here and there to care for ourselves. We’ll feel happier and stronger inside and this will in turn make us happier and stronger business people. For me, the best way to do this is to make an appointment for self-care in my calendar. One good reference on self-care is The Art of Extreme Self Care by Cheryl Richardson.

2. Set time in your calendar to grow your business. Many of us are solopreuneurs and tend to spend much of our time working in our business when we should be working on our business. Again, the calendar is a great tool. A quarterly business retreat is an option, so is working with a coach. I’ve set time aside to meet on the phone with a Mastermind group.

3. Allow adequate time for marketing. For many, the production is the fun part and the marketing takes a back seat. I’ve had more than one person tell me that she spends two to four times as many hours marketing herself and her product as she does producing the product. Marketing is an ongoing process; you are always marketing. I love this quote from actress Carrie Fisher, “There is no point at which you can say, ‘Well, I’m successful now. I might as well take a nap.'” This keeps me focused on marketing my product.

4. Keep on top of your financials. I know, most people do not enjoy bookkeeping, and if you can hire someone to take it over, that’s great. But watch your numbers. You need to know what’s coming in and what’s going out. What is your ROI (return on investment) for your activities? Your business can’t grow if you aren’t aware of the financials. The Winter issue of The Professional Quilter will include an article on common mistakes small business owners make with their accounting. Watch for it.

5. Remember why you got into business. For many of us, it was our love of quilting or fiber arts and wanting to share our gifts with other quilters. Sure, we work hard at it, and we are rewarded. When times get tough, step back and remember what got you in the business. Maybe use some of that self-care time to make something for yourself. Another quote I like is from Thomas A. Edison. “I never did a day’s work in my life. It was all fun.”

Hope these tips get you off to a positive start. Feel free to share your ideas with others here on the blog.

The International Association of Professional Quilters offers resources and networking opportunities for you to create a success from your quilting business. Learn about all the benefits of IAPQ membership and join here.

As the year is winding down, you can still make decisions that may lower your tax bill. Here are five for you to consider with input from your accountant:

1. Review your business books. You need a clear picture of your earnings and expenses before you make any decisions. Ask your accountant or bookkeeper if you should be tracking something you aren’t.

2. Defer income. Unless you expect to make considerably more income in 2011 when our tax rates will likely be higher, you might want to defer income until after the first of the year. If this is the case, send out your invoices late this month so you won’t receive payment until January.

3. Increase your expenses. Stock up on business equipment and supplies before year end. Pay some of your bills early.

4. Contribute to your retirement plan. Review requirements for payments to your plan. If you don’t already have an individual 401(k), you may want to set up one before the end of the year.

5. Give. Charitable donations are tax deductible if you have a receipt.

These strategies apply differently to each business owner based on her particular situation. Since I’m not a financial professional, take time to discuss your strategy with your personal tax advisor.

The International Association of Professional Quilters offers resources and networking opportunities for you to create a success from your quilting business. Learn about all the benefits of IAPQ membership and join here.