Brown Acorn Accounting

08/25/2025

My latest video is up! https://youtu.be/zAxd5-bTdH0

Defines and describes the S-corp election that helps small business owners save money on taxes.

08/21/2025

I've got a video out on when you should convert your business to an S-corp.

I discuss when you should consider converting your business to an S-corporation from a schedule C.

08/13/2025

What is tax planning?

Tax planning is a legal way to pay less taxes by strategically taking advantage of deductions, credits, and other methods to lower your tax bill. The tax code specifically says that you have the right to pay as little as legally possible in taxes -but it’s up to you or your accountant to find the ways to do so.

You have to be proactive to take advantage of tax planning. You can’t wait until after the end of the year. You have to start during the year you want to reduce your tax liability in or even a few years before; both long and short-term tax planning strategies exist.

Some common strategies for tax reduction include timing the purchase or replacement of equipment and vehicles for depreciation savings, loss harvesting, and retirement investing. Self-employed taxpayers often use an accountable plan and the Augusta Rule to reduce their taxes.

More advantages strategies include hiring your children, setting up additional retirement plans, conservation easements, and alternative investments. These latter are only suitable for certain taxpayers, however.

You can take advantage of most tax planning strategies on your own by implementing them in your business. If you want to employ more advanced strategies or want help with determining which ones are suitable for your situation, contact your accountant or tax advisor.

07/17/2025

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07/17/2025

How to Increase Positive Cash Flow in Your Business

Cash is essential for running your business, and poor cash flow can kill it. That’s why it’s so essential to keep your cash flow positive. (Positive cash flow is when more money comes in than goes out) How can you boost cash flow? Here are 6 ways.

1. Delay and/or Reduce Expenses
Always hesitate before taking on new expenses; too much overhead is one of the biggest business killers. Try to negotiate better rates with your supplies and vendors at least once a year. Also take a thorough look at your P&L each year and see if there’s anything you can cut. It’s not unusual for businesses to be able to cut 10% off their expenses without hurting quality.

2. Adjust Pricing or Run a Sale
This isn’t a long term strategy, of course, but it can help. Check your current pricing to be sure it’s in line with competitors and the market. You may be due to raise prices. If you’re in a cash flow crunch, consider running a sale as a temporary fix.

3. Increase A/R Turnover
In other words, get your customers to pay you faster. Offer small discounts or other incentives for quick payment. Send invoices quickly and follow up on overdue invoices.

4. Lease Equipment Rather Than Buy It
Sure, buying equipment is preferable but it is also more expensive. Leasing equipment will keep more cash in your business right now, which is critical if you don’t have s
ufficient reserves.
5. Manage Inventory Efficiently
Watch your inventory closely to make sure you’re not ordering too much (or too little) of any item. Inventory = tied up cash. Close out slow-moving items to get the cash back.
6. Establish a Line of Credit

Too much debt is a bad thing but if you need a temporary cash boost to help you bridge a difficult period, a line of credit can be the difference between making it and folding.
These techniques can help you improve your cash flow but you need to manage your business such that you gradually develop a cash reserve. That will keep your business healthy over the long term.

06/27/2025

Why an LLC Doesn’t Do Anything to Reduce Your Taxes
You have probably heard the advice to form a Limited Liability Company (LLC) if you start a business for most of your life. That’s because it’s a good idea to do so -it will provide you some protection against liability in your state. That will keep your assets safe if you ever get sued.

It’s not going to do anything for your taxes though, unfortunately. This is because LLCs are state level entities; they exist for liability protection only and are not recognized by the IRS. The IRS considers them a disregarded entity and treats them like a sole proprietorship (one owner) or a partnership (if multiple owners).
In either case, all the profits are considered self-employment income and you have to pay both income taxes and self-employment taxes on all of it. If you want to reduce these taxes you can, but you have to elect to be treated as an S-corporation.

This is a tax election; it doesn’t happen automatically. When you elect to be treated as an S-corp, you will still pay income taxes on all of your profits but you will only pay self-employment taxes on the amount you pay yourself through payroll. That might not sound like much, but self-employment taxes are 15.6% of your profits!

That means you can save a significant amount in taxes by electing S-corp status, but only if your company makes enough in profit to make it worthwhile, because there are costs to being an S-corp. You have to pay for payroll services and file a separate tax return, for example.

Definitely form an LLC for your business if you haven’t already done so, and talk to your tax pro about whether or not becoming an S-corp.

06/20/2025

What Is Business Strategy?

Strategy, in generally, is a plan to get from where you are to where you want to be. When applied to your business, it becomes a plan for how you want your company to operate and succeed. Your business strategy is a roadmap that guides decisions, sets priorities, and helps you reach your long-term goals.

Business strategy isn’t just for big corporations; every business, from the smallest to the largest, needs a strategy it is going to succeed and meet its goals. If you don’t know where you want to go, any road will do, but if you have a destination in mind, you need a good map to find your way.

A good business strategy answers three questions:
Where is the business now?
Where do we want it to go?
How will we get it there?

The first question is the easiest to answer -how is your business doing now? What are the financials? Who are your customers? What market are you serving? And so forth.

The second question is harder. What are your goals for your business? Do you want to operate a corner store successfully for the next 30 years and pass it on to your children? Are you growing a chain of dry cleaning stores you want to sell to private equity? Do you want to keep your business small until you sell it to fund your retirement?

Finally, the final question is the hardest to answer. How are you going to get there from here? This is where you’ll get back into the hard business questions.
A good strategy will include choosing what you focus on: lower prices, premium products, the best customer experience? It also needs to know what makes your business different, identify your target customers, and show that you understand your market.

For example, let’s consider two coffee shops. Shop A decides its strategy is to offer fast, affordable drinks in high-traffic areas. Shop B, instead, chooses to focus on premium, organic coffee in a cozy, sit-down environment. Both are viable business strategies—they just target different customers and business goals. The owners of each shop need to choose their locations to meet those goals.

A clear strategy helps with everything from choosing a location, designing marketing and hiring employees to product development. It also helps you stay focused, especially when faced with new opportunities or challenges. You can also adapt your strategy as your business grows and the market changes.

Your business strategy is your plan to succeed—a way to use your resources wisely, stand out in your market, and build long-term success.

06/16/2025

The Importance of Cash Flow for Businesses

Clichés became cliché for a reason and in the case of a business, they are 100% true. You’ve heard them -Cash is King, cash flow is the lifeblood of your business, and so forth. They are all accurate. But what is cash flow and why is it so important?

Okay, first the textbook definition: Cash flow refers to the movement of money into and out of your business. It is money that comes in from sales and goes out to pay for expenses. If money out is greater than money in, you’re in trouble. And if that situation continues for too long, you’re out of business.

Does cash flow matter even if your business is profitable? Absolutely. You can also get into trouble if you don’t manage your cash properly. Maybe you’re making a profit but you don’t have a cash cushion and some of your customers pay late -but your bills are due and you don’t have the cash to pay them. Oopsie. Late fees, here we come.

There are two types of cash flow -negative and positive. Negative cash flow occurs when you’re spending more than you’re making. This is common in new businesses and those growing rapidly -but it can ruin the business if it’s not carefully managed.

Positive cash flow is the opposite. It means your business is bringing in more money than it’s spending. This is what you want to aim for. Positive cash flow means you’re making a profit and your cash is growing, which will allow you to build a safety net and expand your business.

Cash flow management is most important for those businesses that have unpredictable income, such as startups and seasonal businesses. Managing it well helps you avoid surprises and keep operations running smoothly. Managing it badly destroys your business.

Monitoring your cash flow regularly—monthly or even weekly—can help you catch problems early. It will also help you make decisions. Can you afford to hire a new employee? What about expansion?

Stay on top of your cash flow to keep your business strong and flexible. If you need someone to help you with this, hire a bookkeeper or an accountant.

06/12/2025

Amazing pics of the Strawberry Moon taken in the City That Never Sleeps.

06/10/2025

The Importance of Good Bookkeeping

Let’s be honest: almost no one likes bookkeeping. It’s a pain in the rear end and it takes time away from seemingly more important (and fun) tasks in your business. Yet bookkeeping -GOOD bookkeeping -is one of the most important parts of running a successful small business. Bad or inaccurate bookkeeping causes businesses to flounder and even fail.

Bookkeeping helps business owners with four essential tasks:
Monitor profit levels -are you making money or losing it? You don’t know without bookkeeping!
Track cash flow -are you going to be able to pay all your bills on time this month? Are you sure? Without good bookkeeping, you don’t know.
Make smart financial decisions -can you afford to buy new equipment? Expand? If not, when can you?
Prepare for tax season -yeah, no one likes taxes but they are on the list of universal life experiences for a reason. Being better prepared will lower your stress considerably.

If you don’t have good bookkeeping, you can overspend, forget to pay bills, pay bills late, or run out of money. Poor bookkeeping leads to late fees, overdraft fees, audits, and even business failure.

On the other hand, if your bookkeeping is good, you’ll have a good idea of how healthy your business is financially. You’ll know how much you’re making, spending, and where all that money is going. This will let you stay in control by spotting problems early and planning for growth.

Another bonus: it’s necessary to have good bookkeeping if you want to bring in investors or apply for loans. They want to see good financial records. Sloppy bookkeeping is going to be an immediate no.

Don’t want (or don’t have time) to do bookkeeping yourself? Hire someone to help.

Good bookkeeping keeps your business strong. Don’t let it fall behind.

06/06/2025

When Should You Switch from a Schedule C to an S-Corporation?
If you’ve seen the tax videos on social media, you probably think you should do this the moment you create your business. But hold on a moment -unless you’ve already got a ton of money coming in, you’ll want to wait until you do.

First, a review. A Schedule C business is a sole proprietorship. It goes on your personal tax return on a form called the Schedule C. You have to pay both income taxes and self-employment taxes on your net profit. The latter is both halves of payroll taxes -Social Security and Medicare taxes. When you have a job, your employer pays half of them. When you’re self-employed, you pay both halves, or 15.3% of your profits.

When you have an S-Corp, you only pay income taxes on your net profits. You don’t pay payroll taxes. Doesn’t this mean you SHOULD convert right away? Nope. Hold up. There are downsides to an S-Corp.

The first problem is called reasonable compensation. You have to pay yourself a “reasonable wage” via payroll when you’re an S-corp. This means you pay yourself a wage via W2 and therefore pay something into payroll taxes. The savings comes because your reasonable wage will be less than your total profits. (If your total profits are $100k with a Schedule C, you’ll pay $15.6k in payroll taxes; if you convert to an S-corp and pay yourself $50k, you’ll pay half that!)

The second downside is that you have to file a corporate return called an 1120-S every year. Those aren’t cheap. It’ll run you $1k-$3k a year, depending on the complexity of the return. If you’ve just started the business, you probably aren’t making enough money to justify a monthly payroll and a corporate return.

So, when should you consider switching? When you start making around $50k a year in profits, give or take a bit. Before that it’s probably not worth it. Talk with your accountant to find out if you’re ready to make the switch.

06/03/2025

Revenue vs. Net Income: What’s the Difference?

This might seem like an overly simplistic concept for business owners but you’d be surprised how many don’t understand the difference! It’s understandable, given that most people who start a business do so because they’re experts in their own field, not business.

That said, understanding the difference between the two is essential for every business owner. While both terms relate to how much money a business makes, they measure very different things. If you don’t understand and keep track of both, you might go broke and not even realize it’s happening.

Revenue is the total amount of money a business earns from selling its products or services before any expenses are taken out. It’s the total amount you have coming in, the top line or sales figure. For example, if an attorney sells $100,000 worth of law services in a year, that $100,000 is her revenue.

Net income is what’s left after subtracting all the business’s expenses from its revenue. This is the bottom line, or profit amount. These expenses include things like rent, employee wages, materials, utilities, and taxes. If the attorney above spends $80,000 on expenses, her profit, or net income, is $20,000.

In short:
Revenue = Total money coming in
Net Income = What’s left after expenses

Why is this important? Because a business can have high revenue but still lose money if its expenses are too high. On the flip side, a business with modest revenue but low expenses can be very profitable.

Revenue is not the most important number! You can have $1,000,000 in revenue every year, but if your expenses are $1,000,001, you are losing money and are broke. Net profit is the number you need to focus on to determine how well your business is doing and how efficiently it’s being run.