IRS Expects the Rebate Amount on 2008 Returns |
|
The Stimulus Rebate payment that was issued by the Treasury Department earlier this year was actually an advance payment of a new credit called the Recovery Rebate Credit on your 2008 tax return. This credit can be as much as $600 for single taxpayers and $1,200 for joint return filers plus $300 for each qualifying child. Congress required the IRS to use a taxpayer’s 2007 tax return information to estimate the credit and issue the advance payment to stimulate the economy. This means that the rebate amount would have to be accounted for on the taxpayer’s 2008 tax return with the following results:
• If the rebate amount was less than the credit computed on the taxpayer’s 2008 return, the additional amount will be credited to the 2008 return.
• If the rebate amount was more than the credit computed on the taxpayer’s 2008 return, the difference will not have to be repaid.
• If the taxpayer did not receive a rebate, he or she will receive the full amount of the credit on the 2008 return to the extent that he or she qualifies for the credit.
Some taxpayers qualify for this credit even though they are not required to file a tax return. However, to receive the rebate credit, a return must be filed. To qualify, a taxpayer must have at least $3,000 of qualifying income, which generally includes earned income (wages, salaries, self-employment income, etc.), Social Security Benefits and certain disability benefits, or have a net tax liability greater than zero and gross income greater than the sum of the standard deduction and exemption amounts on the tax return.
The amount of a taxpayer’s adjusted gross income (AGI) affects the amount of the credit. When AGI is over $75,000 ($150,000 for married couples who file jointly), the credit is phased out by 5% of the income above the AGI thresholds. Taxpayers who did not receive the full rebate payment in 2007 because of the AGI limitation may be eligible to receive the difference as a credit on their 2008 returns, depending on the amount of their 2008 AGI.
If you did not receive a rebate payment during 2007, it may have been because the rebates were subject to offsets for any federal debts owed, including back taxes, unpaid child support, or federal student loans. Even if you did not receive a cash payment because of one of these offsets, you must still treat the rebate as if you had received the cash when accounting for it on your 2008 return. Please call the office if you have questions regarding the rebate payment.
Paying Off Debt the Smart Way |
|
Being in debt isn't necessarily a terrible thing. Most people are, between mortgages, car loans, credit cards and student loans. Being debt-free should always be a goal, but you should focus on the management of it, not the presence of it. It will likely be there for most of your life, and if you handle it wisely, it won't feel so much like an albatross around your neck.
There are alternatives to shelling out your hard-earned money for exorbitant interest rates, and to always feeling like you're running behind and on the verge of bankruptcy. You can pay off debt the smart way, while at the same time saving money to pay off even more, faster.
Know Where You Are
Assess the depth of your debt. Write it down, using pencil and paper or computer software like an Excel spreadsheet or Quicken. Include every financial situation where a company has given you something in advance of payment, including your mortgage, car payment(s), credit cards, any outstanding tax liens, student loans, and payments on electronics or other household items through a store.
Record the day the debt began and will end (where possible), the interest rate you're paying, and what your payments typically are. Add it all up, painful as that might be. Try not to be discouraged; you're going to break this down into manageable chunks, and find extra money to help pay it down.
Identify High-Cost Debt
Some debts are more expensive than others. Unless you're getting payday loans (which you shouldn't be), the worst offenders are probably your credit cards. Here's how to deal with them.
• Don't use them. Don't cut them up, but put them in a drawer and only access them in an absolutely dire emergency.
• Identify the card with the highest interest and pile on as much extra money as you can every month. Pay minimums on the others. When that one is paid off, work on the card with the next highest rate.
• Don't close them, and don't open any new ones. If you do, this probably won't help your credit rating.
• Pay on time, absolutely every time. One late payment these days can lower your FICO score.
• Go over your credit card statements with a fine-tooth comb. Are you still being charged for that travel club that you've never used? Look for line items that you don't need.
• Call your credit card companies and ask them nicely if they would lower your interest rates. It works sometimes.
Save, Save, Save
Do whatever you're able to do to retire debt. If you take a second job, earmark that money strictly for higher payments on your financial obligations. Substitute free family activities for high-cost ones; your local library may have cheap or free tickets to events. Sell high-value items that you can live without.
Bag Unnecessary Items to Reduce Debt Load
Do you really need the 800-channel cable option, or that dish on your roof? You'll be surprised at what you don't miss. How about magazine subscriptions? They're not terribly expensive, but every penny accounts. It's nice to have a library of books, but consider visiting the public library or half-price bookstores until your debt is under control.
Don't Ever, Ever Miss a Payment
You're not only retiring debt, but you're also building a stellar credit rating. If you ever decide to move or buy another car, you'll want to get the lowest rate possible. A blemish-free payment record will help with that.
Besides, credit card companies can be quick to raise interest rates because of one late payment. A completely missed one is even more serious.
Do Not Increase Debt Load
If you don't have the cash for it, you probably don't need it. You'll feel better about what you do have if you know it's owned free and clear.
Shop Wisely and Put the Savings on Your Debt
If your family is large enough to warrant it, invest $30 or $40 and join a store like Sam's or Costco. And use it. Shop there first, then at the grocery store. Change brands if you have to and swallow your pride. Use coupons religiously. Calculate the money you're saving and slap in on your debt.
Learn to live this way, and you'll be able to watch your debt decrease every month.
Required Minimum Distributions Suspended for 2009 |
|
A new law passed late in 2008 allows taxpayers age 70-½ and over and those who have inherited IRAs (beneficiaries) to forego their required minimum distribution (RMD) from 401(k) plans, IRAs, and similar retirement arrangements for 2009. Thus, these individuals can take a distribution less than required, even none, and avoid the 50% RMD penalty. Keep in mind that this is for tax year 2009 only. So if you turned 70-½ in 2008 and delayed the first distribution from your IRA to 2009, as permitted in the first RMD year, you will still be required to make that delayed distribution in 2009 and no later than April 1, 2009. On the other hand, if you turn 70-½ in 2009, your first distribution would normally be required by April 1, 2010, but due to the new law’s suspension provision, a distribution for 2009 is not required. However, you will be required to take your 2010 RMD by December 31, 2010.
Background: The reason for the RMD is to ensure that taxpayers take at least some taxable distributions from their retirement accounts over their lifetimes. These distributions are based on the taxpayer’s age, and the percentage of the retirement account that must be distributed each succeeding year increases based upon annuity tables. Each year’s distribution is based on the value of the retirement account on December 31 of the prior year.
Problem: Most individuals have some, if not all, of their retirement funds invested in stocks or mutual funds. The decline in the stock market coupled with the requirement that the current year’s distribution be based on the prior year’s year-end value creates an unfavorable situation for withdrawals. Because of the way in which RMDs are calculated (i.e., based on the previous year's closing value), the law would have forced those individuals taking distributions in 2009 to receive a disproportionately large portion of their remaining account balance. And, to generate the cash required for the distributions, they would have been forced to sell stock or mutual fund shares at exceptionally depressed values. Therefore, this new law gives the taxpayer the opportunity to forego a distribution without penalty for 2009.
What You Should Do: Whether you should take a distribution, a reduced distribution, or no distribution at all for 2009 should be based on your unique financial and tax circumstances. Although this list by no means includes everything, here are some things to consider:
• If your taxable income for 2009 is low, you may wish to take a distribution anyway to take advantage of a zero or low tax rate.
• If you need to take a distribution to cover living expenses, you may still be able to minimize the distribution.
• If you are receiving Social Security and need to supplement your Social Security income with a distribution, keep in mind that the tax on the Social Security income is based on your total income, and by minimizing your distribution you might also reduce the tax on the Social Security income.
• If you can support your yearly living expenses with other funds, you can forego a distribution altogether for 2009.
• If your income is abnormally high for 2009 and you expect it to be lower in 2010, you might want to delay any distributions until 2010.
The foregoing is a summarization of the special rule for 2009. If you have questions or wish to optimize your 2009 distribution to suit your circumstances, please call.
IRS Announces 2009 Standard Mileage Rates |
|
The IRS has issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on January 1, 2009, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 55 cents per mile for business miles driven;
• 24 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service of charitable organizations.
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008, which were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.
With the recent rapid decline in fuel prices, don’t be surprised if the rate is not dropped again during 2009.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
How the Financial Rescue Plan May Affect You |
|
The financial rescue plans and bail-out measure being taken by the government will have far-reaching effects on everyone. The underlying financial situation that prompted these rescues will have even more of an impact.
It’s hard to predict how all this will play out, both in the short and long-term. Much will depend on the actions of the new Presidential Administration and Congress. You may feel effects in several areas.
Your Job
The financial sector has already taken an employment hit. Jobs in other fields, like automobile manufacturing and sales, real estate and construction, are also cutting jobs.
If unemployment figures reach the 8-10% levels some are predicting, the impact will expand to include just about every sector of business. Your job may be at risk, now or in the near future.
Keep an eye on your field and workplace. Keep your resume up-to-date and your network of colleagues active. Try to make yourself indispensable to your current employer. Above all, make sure you have an adequate emergency fund…just in case.
Your Home
Take a look at your mortgage. Is it the best one you could have? Foreclosure rates have skyrocketed, and risky adjustable mortgages play a large role in the debacle. If you owe more than your home is worth or have an adjustable rate mortgage due to reset, you’re at risk. Try to convert to a fixed-rate mortgage, if your credit rating will allow.
Somewhere down the road, there may be a partial bailout for distressed homeowners, but its format is unknown. If you’re on the verge of foreclosure, try to renegotiate with the mortgage holder. Once you’re out of a foreclosed home, any bailout will probably not apply.
Your Savings If you have large cash savings in a bank or savings & loans, there’s good news. Individual accounts in a single bank are now protected up to $250,000. Joint accounts are insured up to $500,000. The protection expires in December, 2009, so keep an eye out for any changes.
There’s a chance that your bank, like some others, may fail, and be absorbed by another bank. Even in that case, your insured assets are protected. Enjoy being in the position where your savings aren’t subject to the whims of the market.
Your Investments
Stock prices plummeted in October, 2008, reaching lows not seen for years. Markets may be volatile for some time. Many simply bailed out of the market. They may have made a serious mistake, locking in their losses without any hope of a recovery. Again, the new administration and Congress will make decisions that will affect your investments. Pay close attention.
History teaches that the markets will recover, over time. How much time? That’s an unknown. With some exceptions, you’ll probably recover your losses over time, unless you own stock in firms that go bankrupt. If you have large equity investments, consult with a trusted advisor, get a second opinion, and use your own best judgment.
Your Taxes
The Rescue Plan and other bailout strategies have one thing in common; they are taking money the government doesn’t have and pumping it into the economy. Eventually, that money has to come from somewhere. Odds are that it’s going to come from the taxpayers. Your grandchildren may still be saddled with the cost of these measures.
In the short-term, though, there is good news for some taxpayers. The Rescue Plan offers some benefits for some middle-income taxpayers. The threshold at which the Alternative Minimum tax goes up to $69,950 for couples filing jointly. The deductions for state and local taxes and for qualified college tuition continue through 2009.
Your Retirement
The Rescue Plan is going to take time to work, and the current economic situation has hit retirement investments hard.
If you’re a decade or more from retirement, time will probably heal your losses due to this crisis. Continue to contribute to well-balanced 401(k) and IRA accounts. If history is any guide, you’ll probably do just fine.
If you are planning to retire soon, you may have lost considerable value in your equity-based 401(k) and IRA accounts. It’s time to reassess your situation. The current economic situation may require postponing retirement or changing expectations.
If you’re already retired, you may be among the hardest hit, especially if you’re invested in equity holdings. The recovery may not happen soon enough. Check your investments now, consult with a trusted advisor, and possibly consider returning to the workplace temporarily.
Business Changes for 2009 |
|
Over the past several months, Congress has been enacting legislation to stabilize the economy. At the urging of the incoming administration, Congress is working on yet another stimulus plan. As they make temporary changes to the tax code and extend expiring provisions, and with the phase-in phase-out provisions of earlier legislation, it becomes more difficult to keep track of what does and does not apply for the 2009 year. The following are highlights of the provisions affecting small to medium-sized businesses for 2009:
• The
FUTA (Federal Unemployment Tax Act) tax rate had been scheduled to drop to 6% after 2008, but under the new law, it will remain at 6.2% through 2009 and will drop to 6% for 2010 and later.
•
Section 179 Expense Deduction – This deduction dropped substantially for 2009. The maximum Sec. 179 deduction for 2009 is $133,000 ($66,500 if married filing separately). This is down from the $250,000 allowance in 2008. For 2009, if more than $530,000 is invested in Sec. 179 property, the maximum deduction is reduced. It is quite likely that the incoming Congress will revise this deduction again in its stimulus plan.
•
50% Bonus Depreciation – The special 50% first-year bonus depreciation for equipment purchased during the year was NOT extended past 2008. This is another area where the new Congress might make a change for 2009.
•
Food & Book Inventory Contributions - A two-year extension through 2009 of enhanced charitable contribution deduction rules for gifts of certain types of food inventory, and corporate gifts of book inventory or computer equipment to schools was enacted.
•
Environmental Remediation Expenses - The tax break that allows expensing of qualified environmental remediation expenses, namely cleanup of hazardous substances (including petroleum products) at qualified contaminated sites, was extended two years, through 2009.
•
Energy-Efficient Commercial Building - The deduction for energy-efficient commercial building property has been extended so that it applies through 2013.
•
Electric Drive Motor Vehicles - For purchases after 2008 and before 2015, taxpayers will be able to claim a tax credit for electric drive motor vehicles.
•
Bicycle Commuting Fringe Benefit - After 2008, companies will be able to give employees who commute by bicycle a $20 per month tax-free reimbursement for reasonable bicycle-related expenses.
•
Disaster Area Clean Up - Through 2010, qualified disaster expenses, such as clean up (removal of debris, demolition of structures) and repairs, may be expensed.
•
Disaster Loss Carryback - A 5-year net operating loss (NOL) carryback applies for losses resulting from a casualty within a disaster area instead of the usual 2- or 3-year carryback periods available for other types of business losses. This provision is valid through 2010.
•
Section 179 Expense Increased in Disaster Areas – Through 2010, the otherwise maximum amount of machinery and equipment that may be expensed under Section 179 is increased by up to $100,000 for qualifying assets, and the investment-based phase-out of the expensing deduction is increased by $600,000.
•
Through 2010 - A
50% first-year bonus depreciation allowance applies to most types of machinery and equipment bought to rehabilitate or replace damaged property. A number of conditions must be met, and certain types of property are excluded (including property eligible for the more widely applicable 50% first-year bonus depreciation allowance enacted as part of the Economic Stimulus Act of 2008).
•
Farming – There is a 5-year quick depreciation write-off for most farm machinery and equipment placed in service after 2008 and before 2010.
•
Real Estate, Retailers and Restaurants - The 15-year depreciation write-off for qualifying leasehold improvements and qualifying restaurant property has been extended through 2009. What's more, for property placed in service after 2008 and before 2010, (a) buildings as well as building improvements may qualify for the quick write-off for restaurant property; and (b) the 15–year depreciation write-off also applies to qualifying retail improvement property.
•
Construction Companies - The $2,000 tax credit for building energy-efficient homes ($1,000 for manufactured homes) has been extended to apply to homes acquired through 2009. Note that construction companies also may benefit indirectly from the extended and enhanced tax breaks for real estate, restaurants and retailers.
•
Reuse & Recycling Equipment - For property placed in service after
August 31, 2008, the new law permits 50% first-year bonus depreciation for qualified reuse and recycling property. In general, this is machinery and equipment (not including buildings or real estate), along with associated property, including software necessary to operate the equipment, which is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials. This break is not limited to businesses in the recycling industry.
•
Film and TV - The option to expense up to $15 million of qualifying film and TV productions ($20 million if produced in certain low-income areas) is extended so that it applies for productions beginning before 2010; also, the qualified domestic production activities deduction has been liberalized in several ways for this industry, effective for tax years beginning after 2007.
•
Motorsports Racing - The short 7-year write-off for land improvements and support facilities at motorsports entertainment complexes has been extended to apply for property placed in service before 2010.
•
Oil and Gas —There are three significant changes:
(1) The otherwise available domestic production activities deduction for companies that have oil-related income will be reduced after 2009 (a complex reduction formula will apply);
(2) The rule providing that percentage depletion from marginal oil and gas wells isn't limited to 100% of income from these properties is extended though 2009; and
(3) The rules relating to foreign tax credits for the oil and gas industry have been revised for tax years beginning after 2008.
Please keep in mind that the foregoing are only highlights of changes affecting businesses in 2009. If you would like more details, please call at your convenience.
Personal Use of Employer-Provided Vehicles |
|
One of the most common fringe benefits provided to employees is the use of a company-owned or leased vehicle. The personal use of an employer-provided vehicle by law is designated as a fringe benefit and, generally, fringe benefits are taxable unless specifically excluded by law. As such, taxable fringe benefits are subject to employment taxes and are includible in the employee’s Form W-2, Wage and Tax Statement. There are special rules to withhold, deposit and report the employment taxes on these benefits.
If an employer provides a vehicle for an employee’s use, the amount excludable as a working condition fringe is the amount that would be allowable as a deductible business expense if the employee paid for its use. Employees must substantiate their business use through adequate documentation to qualify as an excludable working condition fringe.
The general way to determine the value of a fringe benefit is to determine the fair market value of that benefit. The fair market value is the price an employee would incur to buy or lease the benefit in an arm’s length transaction. An employer can use the following special valuation rules to determine the value of an employer-provided vehicle.
1. Vehicle Cents-Per-Miles Rule - The employer multiplies the miles the employee drove for personal use by the standard rate.
2. Commuting Valuation Rule - The employer multiplies the number of times the employee used the vehicle for commuting times $1.50 if the employer meets all the requirements for using this method.
3. Automobile Lease Value Rule - The employer uses the annual lease value to determine the value of the employee’s personal use of the vehicle.
There are specific requirements that must be met to use these special valuation rules. For example, the employer must provide the employee with a vehicle for commuting for bona fide non-compensatory business reasons to use the commuting valuation rule.
If you feel that your employer may not be computing your taxable fringe benefits correctly or that it may be overstated on your W-2, please call for more information.
Non-Itemizers Get a Real Property Tax Deduction |
|
New for 2008 and 2009, taxpayers who do not itemize can add to their standard deduction the cost of their real property taxes, not to exceed $500 ($1,000 for joint filing taxpayers).
Those who stand to benefit from this provision are taxpayers who pay property taxes but whose itemized deductions are less than the standard deduction. This most frequently will include retired taxpayers who have paid off their home loans and do not have any mortgage interest to deduct. Note that to the extent any real estate taxes are related to business property, such as a home office, and deducted elsewhere on the tax return, they cannot be included in the added standard deduction.
Take, for example, a retired married couple, both over age 65, who paid $2,500 in property taxes and have no other significant itemized deductions. Prior to this law change, their 2008 standard deduction would have been $13,000 (the $10,900 basic amount for joint filers plus $2,100 as an additional amount for married couples both over 65). With the added real property tax deduction, the couple’s standard deduction is increased by the lesser of their property taxes or $1,000. Therefore, for 2008, their standard deduction will be $14,000. Assuming that they are in the 15% tax bracket, this will save them $150 of federal income tax.
In actual application, some taxpayers who are marginally itemizing their deductions may find it beneficial to take the standard deduction. Please call this office if you have any questions.
Smart Ways to Raise Cash in an Emergency |
|
Even the most cautious people can encounter a financial emergency and will need cash fast to deal with it. Unexpected auto and home repairs, health emergencies, and work layoffs are common situations that can occur.
Raising money the smart way can minimize the impact. However, making the wrong choice can have a long-term impact. Here are some ways that you can come up with money, ranked from best to worst-case scenario.
•
Raid Your Emergency Savings - If you have a liquid fund for emergencies, you’re all set. This is that rainy day.
Benefits - Just take out what is needed, then replace the funds when it is possible.
Costs - The only cost is the loss of whatever interest would have accumulated before the money is replaced.
•
Sell Personal Property – Look for items that are expendable and sell them to cover your needs. Online sites like Craig’s List [
www.craigslist.com] and auction sites like eBay [
www.ebay.com] can help sell items fast. Research values and don’t overprice the items.
Benefits - Selling used items doesn’t increase your debt or tax load.
Costs - You lose the use of the things that are sold. This also entails dealing with advertising and potential buyers.
•
Get in Touch with Relatives - If you’re on good terms with relatives, hit them up for a short-term loan or even a gift. If the loan is interest-free, there’s no tax liability, and gifts up to $12,000 per person are also tax-free.
Benefits – This is a fast way to get money without any impact on your credit history. Monetary gifts, especially from parents, can be part of their estate planning.
Costs - Family loans and gifts can strain relationships. If you ask for a loan, be sure to pay the money back quickly.
•
Pull Money from a Non-Retirement CD - If you have funds in a non-retirement certificate of deposit, those funds can be accessed even before maturity.
Benefits – You’ll have fast access to the needed cash, and income taxes will already have been paid.
Costs – There will be a penalty for early withdrawal, which is usually three months of interest.
•
Liquidate Investments - If you have stocks, bonds, or mutual funds, you can liquidate part of your investment.
Benefits – This is your own money that can be accessed quickly.
Costs - If investments have gone up, you may be liable for capital gains taxes. If they’ve gone down, you lock in your losses.
•
Access Cash Value of Whole Life Insurance - If you have a whole life insurance policy, it accumulates cash value over time. You can borrow against this cash value from the insurance company or terminate the policy and get it all.
Benefits – This is your money. You can usually replace the policy with a lower-cost term policy, and the cash is available quickly. In most cases, there is no tax liability.
Costs - If you borrow against the value, you must repay the loan or you’ll lose the coverage. If you terminate the policy, you lose the coverage.
•
Use Home Equity - If you have a Home Equity Line of Credit (HELOC), any available credit can cover your emergency. With a good credit score and equity in your home, you can also obtain a loan on that equity.
Benefits - With a HELOC, access to funds is quick, while a new loan will take some time to close.
Costs - If you take this route, this adds to your debt load and puts real property at risk. Interest takes another chunk out of your income.
•
Take a Cash Advance on a Credit Card - This is one of the worst ways to get cash. It only makes sense if you are absolutely sure you can pay off the advance almost immediately.
Benefits - Get your cash instantly.
Costs - You’ll pay up to 4% of the amount immediately, plus a usurious interest rate (up to 30%) if it is repaid over time.
•
Use Retirement Funds - Funds in IRA, SEP, 401(k), and 403 (b) accounts are a last-ditch source of emergency cash. You can take distributions from these accounts or borrow against a 401(k) account.
Benefits - If you’re older than 59½, distributions may come without an up-front penalty. It’s your money, so there is no hit on your credit record.
Costs - You’ll pay income taxes on the money, regardless of your age. If you’re younger than 59½, a 10% penalty will also apply for an early distribution. Not only are you hurting your retirement income, but borrowing from a 401(k) is risky. If you can’t repay, be ready to get hit with the tax and penalties.
7 Ways to Use QuickBooks to Manage Collections |
|
In these trying economic times, it’s more important than ever to keep a close rein on your accounts receivable. Seemingly no one is immune to sudden changes in financial circumstances, so be sure to monitor your outstanding invoices closely. There’s an inverse relationship between the age of an invoice and your ability to collect on it, but fortunately QuickBooks can help you manage your credit risk:
#1: Set Reminders
As shown in Figure 1, QuickBooks can display a reminder window when you open your QuickBooks company:
Choose Company, Reminders, and then click the Set Preferences button.
Choose the My Preferences tab, and then click the Show Reminders List When Opening a Company File on the My Preferences tab.
Click the Company Preferences tab, and choose Show List for Overdue Invoices. As shown in Figure 2, you can enter a negative number to be notified of overdue invoices before they reach their due date. Click OK to save your changes.
Figure 1: QuickBooks can show you a list of overdue invoices whenever you open your company.
Figure 2: Enter -3 in the Days after Due Date field to be notified when invoices are within 3 days of their due date or later.
#2: Monitor Customer Balances
In addition to tracking overdue invoices, you should also stay abreast of how much credit you’ve extended to each of your customers. One way to do this is to use the Customer Center whenever you create new invoices:
Choose Customers, and then Customer Center (you can also click the Customer Center toolbar icon or press Ctrl-J).
As shown in Figure 3, the customer center lists the Balance total for each customer. You can use this information to determine whether you want to sell additional products or services. You can quickly create an invoice from the Customer Center: select a customer name, and then press Ctrl-I (as in I for invoice).
As also shown in Figure 3, you can add an Open Balance column to the transaction list. To do so, right-click on the transaction list, and then choose Customize Columns. Choose Open Balance from the Available Columns list, and then click the Add button.
Figure 3: The Customer Center makes it easy to monitor open invoices.
Expert trick: To sort customer open balances in descending order, click twice on the Balance Total column.
#3: Create an Overdue Watermark
An attention getting messages, such as “OVERDUE!” or “PLEASE PAY!” can add impact to follow-up copies of invoices that you send out. It’s easy to add a watermark to your invoices:
Choose Customers, and then Create Invoices to display the Create Invoices window.
Click the Customize button on the toobar, and then click the Manage Templates button.
Select an existing invoice, such as Intuit Product Invoice, and then click the Copy button.
Use the Template name field shown in Figure 4 to assign a name like Overdue Intuit Product Invoice, instead of Copy of: Intuit Product Invoice.
Click OK to close the Manage Templates window, and then click the Layout Designer button in the Basic Customization window.
Click the Add button on the toolbar, and then choose Text Box.
Enter the message you want to add in the Text field, such as OVERDUE!
Click the Font button, and then make these changes:
• Set the Font Name to Arial Black
• Set the Font Style to Bold
• Set the Font Size to 60
• Change the Font Color to Silver
Once you’ve set the font settings, click OK to close the Font dialog box, and then click the Border tab. Unclick Top, Left, Right, and Bottom, and then click OK.
Resize and reposition the text box on your invoice, such as in the center of the body section, as shown in Figure 5.
Right-click on the text box and choose Order, and then Send Backward.
Figure 4: Assign a meaningful name to your new template.
Figure 5: You can add an OVERDUE! Watermark to a customized QuickBooks invoice template.
Going forward, you can choose this template from the list anytime you wish to follow-up on an overdue invoice.
#4: Send e-mail follow-ups
A friendly note can sometimes shake a payment loose on an overdue invoice. For instance, you can choose Reports, Customers & Receivables, and then A/R Aging Detail. Double-click on the invoice in question to display it onscreen, and then click the Send button on the toolbar, which looks like an envelope with a green arrow. As shown in Figure 6, you can change customize the body of the e-mail to your liking. If you typically mail print copies of your original invoices, then consider changing the default text of the e-mail to make your collections easier. To do so, click the Edit Default Text button and then make any changes that you like. Do note that these changes won’t appear in the Send Invoice window until you close it and click the Send button again. Click the Send Now button to e-mail the invoice copy to your customer.
Figure 6: Customize the default e-mail text to simplify invoice follow-ups.
#5: Use Statements
QuickBooks makes it easy to send statements to one or more customers. Choose Customers, and then Create Statements. Set the desired options, including which customer or customers to contact, and then choose Print or Email to generate the statements.
#6: Tweak the Collections Report
When calling on an overdue invoice, it’s helpful to make sure that your customer is aware of all pending invoices. You can easily tweak this report so that it lists all open invoices:
Choose Reports, Customers & Receivables, and then Collections Report.
Click the Modify Report button, and then click on the Filters tab.
As shown in Figure 7, click on the Date filter, and then choose Remove Selected Filter. Do the same for the Aging and Due Date filters, and then click OK.
As shown in Figure 8, the Collections Report now displays all open invoices. You can click the Memorize button to save this report for future use.
Figure 7: Modify the Collections Report filters to add helpful information to this report.
Figure 8: The resulting report shows all open invoices, as well as contact names and telephone numbers.
#7: Accept credit cardsMany business owners avoid accepting credit cards due to the fees involved, which can top 3%. However, 97% of an overdue invoice is far better than 0%, or having to wait even longer to collect. You can learn about QuickBooks Merchant Services by choosing Add Credit Card Processing on the Customers menu in QuickBooks. Or, consider a payment service like PayPal (
www.paypal.com), which offers a free Request Money with QuickBooks wizard. Look under the Merchant Services section of your PayPal business account.
