New overtime rules

UPDATE: The implementation of this rule has been delayed indefinitely.

If you use ADP’s payroll service, you’ve been getting a lot of updates about upcoming changes to overtime rules. Now they’re here! These rules are good news for workers, in my opinion. Briefly, where an employee previously needed to make only $455 per week to qualify for exempt status (a worker is “exempt” when they are on salary, e.g. not eligible for overtime; there are several other criteria involved as well), they now need to make $913 a week. If you are paying your exempt employees less than $913 a week, you need to check yourself! Raise their salaries or reclassify them as non-exempt. The argument that this change will have a negative impact on small businesses and/or nonprofits holds no water with Cathy Keeps Books. You knew you were on a progressive site when you got here.

Read more about the new rules here.

Edit: Additional links have come my way from CNN and the Department of Labor itself. And here’s the DOL’s detailed guidance for nonprofits.

Non-GAAP financials: don’t try this at home

Another Sunday at the local café, another used New York Times picked up for free. Writing in Business Day, Gretchen Morgenson reports on the increasing tendency of public companies to use “fantasy math” in their financial reports:

According to a recent study in The Analyst’s Accounting Observer, 90 percent of companies in the Standard & Poor’s 500-stock index reported non-GAAP results last year, up from 72 percent in 2009.

Regulations still require corporations to report their financial results under accounting rules. But companies often steer investors instead to massaged calculations that produce a better outcome.

What are these “massaged calculations”? Morgenson explains: financial reports prepared according to GAAP—generally accepted accounting principles—must show all expenses, which of course reduce the bottom line. But financials prepared outside of GAAP can leave off any number of costs, making the company’s performance look better. In other words, non-GAAP financials can omit anything management finds it too inconvenient to include. “Thirty companies in the study generated losses under accounting rules in 2015,” Morgenson writes, “but magically produced profits when they did the math their own way.” For the 380 companies in the study, non-GAAP income was up 6.6% from 2014—but GAAP income for the same companies was down almost eleven percent.

What does this mean for small nonprofits that will never darken Wall Street’s doors? It’s just one more reminder that GAAP should be your religion. Following GAAP means that your financials will be consistent, reliable, and as accurate as possible. GAAP keeps your organization accountable and transparent. Mind the GAAP!

Freelancer tax tips

Kids, this comes from the New York Times so is presumably pretty legit. In “Tax Tips for Those Who Make Money in the Gig Economy,” from the March 4 Sunday Business section, Tara Siegel Bernard lays it out: self-employment taxes, expenses and deductions, estimated tax payments, health insurance. A great starting point for new freelancers.

From Cathy Keeps Books’s point of view, the most important thing to know about self-employment is you’re going to pay a lot of taxes. Or, at any rate, more than you’ll want to believe when you’re just starting out. You know how when you’re working for the man, a chunk of your paycheck is taken out for taxes? That deduction probably includes:

  • FICA (Federal Insurance Contributions Act). This comprises Social Security, at 6.2% of your wages, and Medicare, at 1.45%.
  • Your federal income tax.
  • Your state income tax.

Meanwhile, your employer pays their share of FICA, which is usually equal to yours (barring tax-relief legislation for workers, or what not). When you’re working for yourself, what happens to that chunk of your paycheck? Well, you don’t get a paycheck, so no chunk gets taken out. That means you have to pay your own FICA, federal and state income tax out of whatever you’ve earned. Moreover, you have to pay employer’s FICA, too, because you’re your own employer. And in a special twist, because you’re not contributing taxes every time you get a check, you have to pay estimated taxes on a quarterly basis.

In short, freelancing is totally awesome, but do your tax research before you start out and avoid getting into trouble later.

Bookkeeping apps for folks

Boston’s Bay State Banner, a venerable Black newspaper, has recently introduced the slick Boston Biz magazine. The March 2016 issue included an article called “Manage Your Money” by Martin Desmarais. It listed the following apps:

  • Expensify: “streamlines the process of tracking and organizing employee expenses.”
  • Indinero: “a platform that takes care of all accounting, payroll and tax needs” for small businesses.
  • Wave: “a popular accounting, payroll and invoicing app with services that cover all of a small business’s finance needs.”
  • FreshBooks: “allows small businesses to create online invoices, capture expenses, record times on a job and track cash flow and expenses.”
  • Zoho Books: “the platform and its mobile app version cover all aspects of a business, from sales and marketing to email collaboration and even hiring.”

As a bookkeeper, I think granularly and in technical details, and I think about GAAP. Therefore, I am not crazy about working on these platforms. I had a bad experience with Wave which did not allow me to reconcile bank accounts the way I wanted to and in general proved to be the wrong path for me and my client. These new finance apps were not created for bookkeepers. If you want me to keep your books, I will encourage you to create a QuickBooks Online account and add me as an “accountant.” If you really want me to work in one of the above apps I will try, but I probably won’t be happy.

Importance of insurance

From  The Fenway News comes this item about the demise of the Boston Courant (print only):

Times are tough for print publications everywhere, and so we are sorry to have to say “goodbye” to another Boston community-based newspaper. Early last month Boston Courant publisher, David Jacobs announced that the Feb. 5 issue would be the paper’s last, due to the costs of settling a lawsuit filed by a former employee. The Courant (originally The Back Bay Courant) celebrated its 20th anniversary last year. While The Fenway News focuses primarily on Fenway events and issues (of which there are many), The Courant’s fine reporters brought us news and photos about our neighbors in Back Bay, on Beacon Hill, and in the South End—and sometimes put the spotlight on events we’d missed in our own Fenway backyard. So now, sadly, there’s one less community newspaper in Boston. Goodbye and good luck, Courant. We’ll miss you!
I don’t think the Courant was a nonprofit, but this news reminded me of the crucial importance to nonprofits of general liability, directors & officers/employment policies, and possibly professional liability insurance. Here are some good readings from Blue Avocado on the topic.