Archive for December, 2007

One of the greatest tools in QuickBooksTM is the ability to print 1099’s from within QuickBooksTM.

To set up your system for this feature, go to the preferences, from the Edit menu, then click on Tax: 1099 on the left side, then on the company preferences tab.

Answer the question, “Do you file 1099-MISC forms?”, yes. Then under the account column across from Box 7: Nonemployee Compensation, click the account(s) to which you have coded your vendors that are eligible for 1099’s. click OK.

Make sure that you have coded all of your vendors as eligible for 1099’s and have entered their address and social security number. You can access all of these fields on the “Additional Info” tab after clicking on Edit Vendor for each applicable vendor in the Vendor Center.

Run a QuickBooksTM 1099 detail report to verify that all of the information is correct. You can create this report by going to the reports menu, then choose vendors and payables, and then click 1099 detail. You can alter the report by changing the “1099 Options” at the top of the report, which will give you more information to review.

Once you have set your preferences and verified all your eligible vendors have complete information, it’s time to print your 1099’s. Be sure to purchase preprinted, red paper stock from an office supply store. Your 1099’s must be printed on this particular paper stock or they will not be accepted. Then go to the Vendor menu, click on Print 1099’s/1096 and click on Print 1099’s. From the print screen you will be given the choice to print 1099’s or 1096.

f you are planning to sell your business, it’s clearly an advantage to have an objective idea of what it is worth. Even though ultimately a business is worth what a buyer is willing to pay, it’s easy for a seller to undervalue and lose out in the deal or to unrealistically overvalue and miss out on attracting buyers.

Many companies are oddly reluctant to invest in getting an accurate valuation. Even among owners who had tried to sell their business at one stage, a survey reported by CFO.com found that only 12% of them had ever had a formal valuation done. This is surprising. Guessing the value to put on your biggest asset is really risking your future.

There are a number of different valuation methods and different methods may be appropriate for different types of business. For example, if you run a services business there’s little point in evaluating it based on the value of its physical assets. Other methods consider intangibles such as ‘goodwill’, which are difficult to put a figure on but can represent a significant element of the value of some businesses. And value may also be in the eye of the beholder - it will actually be worth different amounts to different people depending on their reason for wanting a business.

A variety of factors are taken into account in ensuring that a valuation is accurate and useful. Primarily, the valuation needs to be in line with hard data, particularly your current and past financial position. Some valuation methods focus on financial data such as profit levels, asset value, cash flow and debt carried by the business. Other factors are not so cut-and-dried. The valuation might incorporate financial projections for the next three to five years. It might consider intangible assets, such as intellectual property like patents and trademarks, brand names and goodwill. You also need to consider the context. Your own company may be doing very well but its value will be diminished if it is part of an industry that is in serious difficulty or in decline overall.

There are over a dozen different valuation methods. The crudest methods operate by rule-of-thumb or ‘multiples’. For example, landscape businesses are estimated to be worth 1 to 1.5 times their discretionary earnings plus the value of their capital assets. However, multiples only give a rough, industry wide ballpark figure for business value. They do not necessarily give the real value of a particular business. More accurate methods include the ‘balance sheet’ approach, which basically subtracts business liabilities from assets. The ‘adjusted book value’ method is similar but uses current market value rather than purchase price or depreciated value.

Retail and manufacturing businesses are generally assessed according to the value of their assets, given that they tend to store large amounts of value in their inventory or capital assets while service company valuation is based on the ‘capitalization of income valuation’ method, which places a heavy emphasis on intangible assets. It’s also possible to calculate the value of a private company by comparing it with an equivalent public company and making appropriate adjustments. Business value can also be estimated by anticipating cash flow over a three to five year period and adjusting that into current dollar terms.

A current valuation can be important at times other than sale. There are numerous business and legal situations that require a detailed valuation, among them: when considering a merger or acquisition; when seeking investment capital; when buying out a partner or implementing an employee stock ownership plan. A properly determined valuation inevitably enters into less pleasant activities such as shareholder disputes and divorce settlements. Tax minimization planning can involve business value, for example in developing estate and gift transfers.

A valuation can also indicate how your business compares to its direct competitors. It can identify the strengths and weaknesses of your business. When a valuation identifies weaknesses, it can help you focus on building long term value into your business. This will improve your outlook in terms of succession and estate planning.

With this many potential situations requiring a business valuation it’s important to have an up-to-date professional estimate of the real value of your business. To get a valid and commercially useful valuation you will need to work closely with a professional who has experience in the area. Your accountant already has a good understanding of your business and will be able to advise you on which valuation method will be best suited to your business circumstances.

Information for this article is sourced from RAN ONE.