Liquidity in business has nothing to do with water, milk, or juice! It describes how quickly you can sell an asset and convert it into cash. Cash is the most liquid asset of all.  Real estate, in contrast, is not quite as liquid because it could take months to sell it to a new owner.

Liquidity is important to all businesses.  It affects your credit score and how much you can borrow. It’s a measure of whether you can pay your bills on time.  It’s also one of many measures of the overall financial health of your business.

If your business sells items that take a long time to produce, liquidity can be extremely challenging and should be carefully managed. Examples include farms, wineries, breweries, automobile manufacturers, and biotech researchers.

Liquidity Ratios

A couple of financial metrics can quantify your business’s liquidity. The current ratio is computed as follows:

Current Ratio = Current Assets / Current Liabilities

The largest components of current assets include cash, cash equivalents, accounts receivable, and any other asset that is expected to be converted to cash within one year. The largest components of current liabilities include credit card balances, accounts payable, bills due, interest payable, and the amount of any loan due within one year.  You can find both current assets and current liabilities on your balance sheet.

Companies with a current ratio of less than 2:1 are considered less liquid, while companies with a current ratio of more than 2:1 are more liquid. However, current ratio values and whether they are “good” or “bad” vary by industry, so before you panic, check out your industry benchmarks.

Another measure of liquidity is the quick ratio. It measures how equipped a business is to meet its short-term obligations by taking its most liquid assets, cash equivalents, and using them to pay down current debt. Its formula is:

Quick Ratio = (Cash + Cash Equivalents + A/R) / Current Liabilities

This ratio’s value should typically be 1:1.

Emergency Fund

A good common-sense measure you can use to stay on top of your business’s liquidity is to build a healthy emergency fund.  To calculate how much you need, determine how much you typically spend each month. You can get that number by reviewing a bank statement and summing all of the withdrawals including checks paid and online withdrawals. Do this for each bank account you have and include other accounts such as PayPal if you use them for disbursements.

This should give you your total spend per month. Go back a few months to calculate an average spend per month. The farther you go back, the more accurate your average will be, especially if you have a lot of large annual payments throughout the year.

Now that you have your average spend per month, your emergency fund should be a multiple of that spend. Three months’ worth should be the minimum amount in your emergency fund. If you spend $50,000 per month on average, your emergency fund should be $150,000 at a minimum.

An emergency fund will not only make your business more liquid; it will protect you if disaster strikes. According to FEMA, 90 percent of small businesses that experience a disaster will fail within a year unless they can resume operations within five days. Having an emergency fund will increase the odds of your business continuing in spite of any hardship that may occur.

If you have questions for us about your business’s liquidity or starting an emergency fund, please feel free to reach out any time.

Deciding on the kind of business you want to start is a very big decision. Some require specialized skills that either the owner or employees will need. Others require a substantial initial capital outlay. In any case, it’s always a good idea to consider the health of the industry you’ll be entering in.
While we are not giving any kind of investment advice in this article, we thought it’d be fun to list the business ideas that will be recession-proof in 2020, many of which were also fast-growing in 2019. They are not in any particular order.
1. Bicycle shops
Demand for bikes ramped up this year when people started staying at home due to shelter-in-place orders. They saw the need to exercise close to home, and a bike is the perfect accessory to get people out of the house safely.
2. Building services
This group includes businesses that provide services like office and home cleaning, landscaping, and pest control. New demands in cleaning will continue for some time.
3. Software development
Businesses with skilled developers are in demand as other businesses look to automate more and more of their processes. Workers with skills in artificial intelligence and virtual reality are in very high demand. In 2020, we added a huge demand for video conferencing tools, and other tech tools we need to work from home.
4. Online publishers
While the traditional print media such as book publishers and newspapers are declining in growth, online publishers are thriving. This category includes bloggers as well as the internet stars on YouTube that are making great money through online ads and product endorsements. The fast pace of the news in 2020 has simply accelerated this trend.
5. Building finishers
This category includes construction companies that provide drywall, painting, and flooring to finish out a building or house. Th need will continue in 2020 as offices, shops, and other businesses remodel to meet social distancing and other safety rules.
6. Outpatient care
An alternative to going to the hospital emergency room, these care facilities are growing fast. For patients, they are less hassle than making an appointment with a doctor and far less expensive than ER bills. Once tests and treatments for COVID-19 become universal, these places will become good alternative for people with mild symptoms.
7. Administrative services
There’s a growing need for businesses that need additional administrative support beyond what employees can provide. Virtual assistants are included in this category as well as staffing companies that provide temporary clerical workers onsite.
8. Physicians
If you’ve ever been in a doctor’s office waiting room full of people, you know that this area is in demand. This include offices of physicians of all specialties.
9. Professional drivers
Professional drivers fall into two categories: truck drivers and delivery/taxi services. The demand for truck drivers is always increasing as online orders and ecommerce steadily grows. Many of these drivers are independent and own their own rigs as well as their own businesses.
Uber, Lyft, GrubHub, and DoorDash, to name a few, have increased the demand for professional drivers who can deliver food, medicine, or people to where they need to go.
10. Data processing
The demand for data hosting, server farms, and data processing continues to grow as our appetite for technology increases.
11. Warehousing and storage
Places like self-storage facilities will be in demand for a couple of reasons. Families have more stuff than they have room for. And as families continue to be mobile, they will need temporary storage space. All you have to do is look on your street at all the cars that don’t fit in their garages to see the demand in this type of business.
On the commercial side, increased ecommerce demand and the need for pickup and delivery services has increased the need for warehouses for businesses in the distribution space.
12. Construction
In most places, construction is booming, so there is a demand for general contractors, subcontractors, architects, engineers, and businesses that support construction.
Architects should be busy re-designing spaces, such as offices, restaurants, nursing homes, day care centers, and jails, to name a few, to keep people safer.
13. Medical and diagnostic laboratories
Even before COVID-19 came on the scene, this type of business was growing fast for several reasons beyond standard medical test ordered by doctors. People are getting DNA tests on their own, and nutritionists are doing more testing as people realize diet is a huge factor in health and personal energy.
Now that COVID-19 diagnosis and treatment require a variety of tests, these labs will be busy for a long time in the future.
14. Ecommerce wholesalers
There is a growing number of people who sell items on ecommerce platforms such as eBay and Amazon. While a few source these items through agreements with manufacturers, many visit flea markets, donation centers, and resell shops to make their purchases and repurpose the items.
Smart wholesalers that have their systems set up can help brick-and-mortar shops without an ecommerce presence sell their items while they are shuttered.
15. Professional services
Fields that are fastest-growing include technology and marketing consultants. An interesting new type of security consultant is one that trains groups on how to deal with violence in the workplace and schools.
Attorneys are busy helping individuals update their estate plans and will likely be busy with divorce filings after COVID-19 has let up some. Accountants have new laws to communicate to their clients, and many small businesses want their books caught up now.
16. Educational services
This broad group include elementary and secondary schools and junior colleges. It also includes adult career education, including businesses that teach trades skills, computer skills, and business skills.
Companies that provide an online component to learning will be in demand for quite a while.
17. Real estate agents
Competitive, yes. But the average home sells twice as fast as it did eight years ago, so the number of transactions have doubled, increasing demand.
18. Personal services
While a broad category, the areas seeing growth include personal trainers, personal nutritionists, and wedding planners, to name a few.
If your business falls into one of these categories, congratulations. If you’re considering starting a business and you have the skills needed to start one of the businesses above, what are you waiting for?

If you’re unlucky enough to have a car without GPS navigation maps, the next best thing to use is your smartphone. This article will take a look at apps that help to get you from point A to point B.

Google Maps

Google Maps is the all-around favorite, whether you own an iPhone or an Android.  The default navigation system on the iPhone is Apple Maps, so you will need to download Google Maps to get it.

The database is robust, mostly up-to-date, and shows not only places but also traffic congestion.

Waze

Waze is a crowd-sourced app that is good for current traffic conditions.  It has some fun features, such as the speed limit of the road you’re on. You can even set it to warn you when you’re speeding. Waze users let others know where local police are checking for speeders, although this is a bit of a controversial use of the software.  Other user reports include the locations of construction, road hazards, gas stations, and toll roads. A carpooling feature is also available.

At this writing, Google Maps and Waze, both owned by Google, are the only apps available for Auto navigation on the Android.

Komoot

Do you prefer to cycle or hike?  If so, Komoot’s AllTrails app maps all of the hiking and cycling trails around your town.  It lets you know the distance, elevation, and suggested fitness level of each trail so you can plan accordingly.  You can set routes and save them as well as favorite your local trails.

There’s no fee to use the above apps.  The following apps require a fee to use.

Bird and Lime

Don’t have your own rideYou may have seen people riding on motorized scooters or simply seen scooters parked on sidewalks scattered here and there. Welcome to the new field of micromobility. If you need to get somewhere that’s too short a distance for a car but too long to walk, you can unlock one of these rides with an app and hop on. A couple of companies in this space include Bird Rides Inc. (bird.co) and Lime (li.me), and Lyft.

Uber and Lyft

Of course, if you want a car, you can get a quick ride via Uber or Lyft as well as rent a car at all the traditional places.

Try out these apps so you can get where you want to go.

At first glance, this article topic might seem too simple.  After all, to get paid, don’t you just take money out of your business?  Well, yes, but there is much more to it in the long run as well as from an accounting side.  Let’s take a look.

The Traditional Paycheck

If you’ve ever worked for someone else, you probably received a paycheck every few weeks. It took care of three major things:

  1. Your regular pay that you live off of from day to day
  2. Taxes you owe to the federal and state government
  3. Benefits. Depending on the employer, you might have received health care, retirement contributions, and vacation and holiday pay.

The employer took care of the needs you have today as well as some of your future needs.

Your Business Pay

Now that you’re the employer – of yourself, your business has to cover all of the items mentioned above. How it does that depends on the type of entity you chose when your business was formed.

Sole Proprietors

If you are doing business as a sole proprietor, you take draws from your business instead of paychecks. A draw is simply a cash withdrawal that reduces the ownership investment you have made in your company.  The draws do not include any kind of taxes, including self-employment taxes; these need to be deposited separately, usually through quarterly estimated tax deposits to the IRS and to any relevant state agency.

As a sole proprietor, you’ll likely need to find your own health insurance. And the most important thing you’ll need to do is plan for your retirement by investing in IRAs or otherwise saving money that is earmarked for your retirement.

From an accounting standpoint, owner’s draws are shown in the equity portion of the balance sheet as a reduction to the owner’s capital account.

Corporations

If your business is formed as a C Corporation or an S Corporation, you will most likely receive a paycheck just like you did when you were employed by someone else. You will also be responsible for making the payroll tax deposit, funding the retirement plan, and paying for health care insurance.

Owners can also take money out of the business over and above their paychecks.

From an accounting standpoint, corporate payroll, taxes, and benefits are all considered expenses and are shown on the income statement.  Any money taken out additionally is a reduction to the owner’s capital account, and this is shown in the equity section of the balance sheet.

Partnerships

If your business is formed as a partnership, each partner will be paid distributions based on the partnership agreement.  Typically, that means receiving a base salary and a portion of the profits. You can also take money out of the partnership. Taxes are not included; you are responsible for making your quarterly estimated payments. Plus, you will also be responsible for paying self-employment taxes.

For benefits like retirement plans, partners can be eligible, but the tax treatment of these and other benefits is not necessarily the same as it is for a W-2 employee. The rules are complex for deductibility, so it’s best to contact a tax professional to find out more.

Evaluating Company Profits

It’s critical to understand where your wages show up on your books so that you can truly understand your business’s profitability.  With corporations, the salaries are included in the expenses, so net income is after, or net of, salaries and payroll taxes.

With sole proprietors and partnerships, the net income figure on the income statement does not include owner salaries because there aren’t any. Instead, only the equity section is impacted. Net income for partnerships and sole proprietors should always be high enough to at least “cover” an amount equivalent to a “so-called salary” for all of the active, participating owners.

If you have questions or need help understanding how business owners get paid, please feel free to reach out any time.

If you agree that “there’s no place like home,” then you may also have a wish to work from home more often. In many cases, you can, and here are some tools you need to get started.

If the products and services your business sells can be sold or delivered digitally, then you’re a candidate for working from home most of the time. If you have a storefront where customers visit to purchase your products and services, you can still perform some of your business duties remotely or rely on staff to greet and serve the customers.

You may also be able to be proactive about moving more and more of your business online. Some examples include:

  1. Hold more business meetings online instead of face to face.
  2. Encourage employees to work from home if their presence does not require face-to-face customer meetings.
  3. Provide online training for clients who cannot travel to an onsite course.
  4. Move your scheduling online by providing an app for clients to book their own appointments.
  5. Move your products online by using a shopping cart.
  6. Provide a delivery option in your business. (This may have you or your staff traveling more and not less unless your items can be delivered via a shipping service.)

Meeting with Customers

The next best thing to greeting customers in person is using video-conferencing.  You can easily start with FaceTime (for iPhone users). Android users have it a little tougher, but many use Facebook’s Messenger, Google’s Duo (both parties need to download the app), or imo (ditto on both parties).

If you have more complex meeting needs, software like Zoom is perfect to get you started. Hardware-wise, you’ll need a webcam, and a microphone is preferred. If you have a cell phone, you can use the mic and speakers in the headset provided.

Simply create your account at Zoom, and set up a meeting.  Invite people by emailing them a link to join you. Join the meeting at the set time, and conduct your business with your customer. You can hide your webcam if you’re shy, and you can share your screen in case you want to go over a report or something else with your client. Zoom has a free account option and can be found at https://zoom.us.

And remember, if you’re a little too shy for videoconferencing, you can always conduct business with clients using the good old-fashioned telephone or email.

Sharing Documents with Customers

If you have documents to share with all of your customers, you can post them online on your website. If you have private documents, you can use portal software to securely create a private section of the portal exclusively for that client. Apps that can do this and that are not accounting-specific include Citrix ShareFile and Box.com.

You can also share documents that don’t have sensitive financial or company information with clients using Google Drive. Simply create them, then share them using the email addresses of the appropriate clients.

Receiving Client Communications

Already customers are reaching out to businesses via all of the social media platforms as well as the messaging platforms, such as Messenger and WhatsApp. Your virtual team can easily track all of these incoming messages by watching for notifications from anywhere in the world.

You might also be using an industry-specific app for customer interactions. For example, if you’re in the wellness space, MindBody apps are ubiquitous. If you’re an attorney, you’re likely using Clio.

Keeping in Touch with Your Team

You can use the same tools mentioned above to connect with your team members, but you will probably want one or two more apps – a private messaging app for when urgent things come up that need an immediate answer, and in some cases, a task management system.

Software like Slack is perfect for you to stay in touch with your team and keep communications private. It provides messaging functionality and more.

For task management, there are literally hundreds of apps to choose from. The simplest is something like Todoist, and typical small business options include software such as Asana and Monday.com.

If you want a Swiss-army-knife suite of tools that perform many of the above functions and are deeply integrated, Microsoft Teams fits the bill by providing a full collaborative platform for businesses of all sizes.

There’s No Place Like Home

We hope these apps provide you with the ability to stay in touch with your customers and your business while working from home, sweet home.