Cash Management

Cash Management

Cash Management

As a business owner, you truly have an understanding of the saying ‘cash is king.’ Cash is the lifeline of any business. It is a vital component, ultimately impacting a business’s financial stability and success. Without it, your business cannot survive. Although, running a small business comes with a myriad of challenges. One of the most critical aspects that can significantly impact its success is its cash management.

What is Cash Management

Cash management in layman’s terms is how a business manages its cash flow. It is the process of monitoring, optimizing, and controlling the cash within your business. Its goal is to ensure a business has the right amount of cash on hand to cover its operational expenses and to optimize growth opportunities. Effective cash management is like the beating heart of a business. It makes sure the business is not only running smoothly but thriving as well. Without a proper system in place, a business may find itself in a dire situation.

Why Cash Management is Important

Proper cash management is the foundation for a small business’s financial health and growth. There are many reasons it holds immense importance for businesses. First, it helps to create financial stability. It safeguards your business against unexpected expenses and events, like economic downturns. With a financial safety net, your business is better prepared to weather challenges. Also, it helps to seize growth opportunities. Having cash on hand helps businesses make strategic decisions. Lastly, it aids in the process of decision making. Informed decisions rely on accurate financial data. It provides the data you need to make strategic choices for your business.

How a Virtual CFO Can Help

Virtual CFO’s expertise allows them to wear many different ‘hats.’ They play an essential role in helping businesses manage their cash. A virtual CFO provides valuable insight for cash management in many ways. For example, virtual CFOs analyze your business’s historical cash flow data and uses it to create accurate cash flow forecasts. This helps a business prepare for the many financial challenges. A virtual CFO can provide regular financial reports and analysis. This allows a business to monitor its cash position which helps to make better decisions and adjust strategies if needed.

Cash management can be one of the most challenging aspects of a business but it is fundamental to the overall success of your business. While it may not be everyone’s forte, it is ours. Let the CJA team help you with your cash management needs!


Contributed by Elizabeth Partlow

Financial Ratios

Financial Ratios

Financial Ratios

As a business owner financial data is something you have become all too familiar with. Every month you take the necessary steps to ensure your financial data is current and accurate. First, you enter the data entry into your business’ accounting system. Then you have your accountant review the books. Your accountant performs the closing process and prepares a set of financial reports, or financial statements. You take the time to complete these steps because having accurate books is not only important but necessary. However, are you utilizing your financial data to better your business? This is where financial ratios come into play. But what are financial ratios, and why are they important?

What are Financial Ratios? 

Financial ratios measure quantitative data from a business’ financial statements. The calculations for financial ratios come specifically from the balance sheet, income statement, and statement of cash flows. Comparing the ratios to industry averages and standards, and internal trends is beneficial.  In doing this, it shows insight into a business’ performance, profitability, and financial health. In lament terms, financial ratios turn your business’ data into information that helps you manage your business better.

Financial Ratio Categories

There are five major categories of financial ratios. They are:

  • Liquidity Ratios
  • Activity Ratios
  • Leverage Ratios
  • Profitability Ratios
  • Market Value Ratios

Liquidity ratios measure the ability of a business to pay off its short-term debt. The ratios help to determine if a business can use its current assets to cover its current liabilities. Common liquidity ratios are the current ratio, quick ratio, and cash ratio.

Activity ratios measure how efficiently a business is using and managing its resources to generate revenue. Often, these ratios are known as efficiency ratios. They are useful for comparing a business’ performance trending over time. Common activity ratios are accounts receivable turnover ratio, total asset turnover ratio, and days payable outstanding.

The next category of financial ratios is leverage ratios, also known as solvency ratios. These ratios measure how much debt a business uses to fund its operations. Common leverage ratios include the debt ratio, debt-equity ratio, and interest coverage ratio.

Profitability ratios measure a business’ ability to create earnings relative to its sales, operations, balance sheet assets, or shareholder’s equity. With these ratios, the higher the ratio result, the better. Examples of profitability ratios are gross profit margin, operating margin ratio, return on investments ratio, and return on asset ratio.

The last category is market value ratios. These ratios measure and analyze the current share price of a publicly held business’ stock. Examples of these ratios include earnings per share ratio, price earnings ratio, and book value per share ratio.

Why are Financial Ratios Important?

Financial ratios are useful tools for both internal and external users of a business. These ratios provide important information about a business’ performance. They help evaluate a business’ financial health. Also, ratios provide understanding of how a business is performing in comparison to its competitors. For example, management can use them to determine strengths and weaknesses of the business. Allowing for improvements to areas of weakness. As well as capitalizing on areas the business thrives in.

Financial ratios provide businesses with tools to assist in decision making. This ultimately helps a business achieve its goals. Our team is here to help if you need assistance with financial ratios!


Contributed by Elizabeth Partlow


Are CPA’s Solely Tax Gurus?

Are CPA’s Solely Tax Gurus?

Are CPA’s Solely Tax Gurus?

Certified Public Accountants (CPA) are highly trained people, specializing in accounting. They took the time to earn a professional designation by meeting several requirements. The conditions they met include passing the CPA exam, their level of education and experience. These professional accountants are considered trusted business advisors and are well respected. Contrary to many thoughts, CPAs focus on more than just tax planning and preparation. But what exactly do CPAs do other than taxes?

What Do CPAs Do?

CPAs help business owners make informed decisions, ultimately helping them to achieve their business’ goals. Also, their level of experience and expertise allows them to provide guidance and advice. There are a few common areas of expertise that CPAs focus on. These areas include:

  • Auditing and assurance services
  • Tax preparation and consulting
  • Consulting services
  • Financial planning

The guidance and services a CPA provides can be advisory, specialty consulting, or relating to the daily operations of a business. Some examples of the day-to-day services include bookkeeping and payroll administration.

Advisory services can include assistance in recruiting future accounting staff, creating budgets, and forecasts/projections. Government contract consulting is an example of a specialty service. As a government contractor being DCAA compliant is imperative.

Benefits of Working with a CPA

As a business owner, it is very easy to get caught up in the daily. You become so focused on this, that you often push aside the financial health of your business. Working with a CPA can help you with this. They provide many benefits for a business. These benefits include:

  • Giving you more time to focus on running your business.
  • Being compliant with applicable laws (Tax, FAR, DCAA)
  • Receiving personalized business advice.
  • They can help with business growth and development.

CPAs are highly educated and experienced accounting professionals. Often, they are associated with tax planning and preparation. However, their skill set is far greater than just taxes. They possess the knowledge to provide reactive guidance when errors occur. While simultaneously using foresight to encourage growth and guidance.

Originally written by Maryney Ramirez

Updated and additional content provided by Elizabeth Partlow

Are Employee Gifts Taxable?

Are Employee Gifts Taxable?

Are Employee Gifts Taxable?


As a business owner, giving employees gifts and other fringe benefits is something that you are familiar with. Every year you may like to give holiday bonuses or give a gift to each employee on their birthday. This allows you an opportunity to show your appreciation for your employees and to help build a great company culture. However, your good intentions may backfire if you do not understand the tax implications of gift giving. Depending on the type of gift given, it may be taxable income to your employees. But how do you know if a gift is taxable income or not?

What are De Minimis Fringe Benefits?

Most employee gifts are taxable income, unless they are de minimis fringe benefits. These benefits have a minimal value and occur infrequently. They also are not taxable and a business can deduct these items. A previous IRS ruling specifies that a de minimis benefit should not exceed $100. If the value and frequency cause accounting to be impractical, it is likely the gift it is a de minimis benefit. Examples of de minimis fringe benefits are:

  • Holiday or birthday gifts with a low market value
  • Occasional tickets to sporting events
  • Flowers provided under special circumstances

These types of gifts and/or benefits are so small that there is no need to report them.

Taxable Employee Gifts

Cash and cash equivalents are some of the most convenient gifts to give your employees. Some examples of cash equivalent items are gift cards and gift certificates. You may want to think twice before giving these types of gifts though. These gifts are almost always taxable. For example, giving your employees a gift card to buy a turkey for Thanksgiving becomes taxable income for them. All taxable income is reportable on an employee’s W-2.

Planning ahead and having a good understanding of the tax implications for employee gifts is crucial. Keeping records of taxable employee gifts, you give makes W-2 processing easier. But what if you are unsure about what is or is not a taxable employee gift? The best thing to do is to ask your trusted CPA.

Originally written by Jamie M. Shryock, CPA

Updated and additional content provided by Elizabeth Partlow

Employee Retention Credit

Employee Retention Credit

Employee Retention Credit

Over the last few years, the COVID-19 pandemic did not discriminate against the businesses it has affected. Whether large or small, businesses were forced to reduce their operations. In some cases, they had to shut down completely. Thankfully, in March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. The act implemented many relief packages to help American families and businesses. Some of the more well-known programs include the paycheck protection program (PPP) and economic injury disaster (EDIL) loans. However, there were tax credits created to help as well. One of those tax credits is the Employee Retention Credit (ERC).

What is the Employee Retention Credit?

The Employee Retention Credit (ERC) is a fully refundable payroll tax credit. It was designed to encourage employers to keep employees on their payroll during the pandemic. The credit is for qualifying employee wages. Qualified wages include wages and some health expenses paid to employees during eligible periods. Small businesses, with less than 100 employees, can treat all wages paid to employees as qualified wages. However, larger businesses, with more than 100 full-time employees, can not treat all wages paid as qualified.

An employer can claim 50% of the first $10,000 in wages per employee that were paid in 2020. For 2021, they can claim 70% of the first $10,000 in wages per employee for quarters 1-3. In total, a small business can receive up to $26,000 in credit per eligible employee. The ERC is not an income tax credit and does not relate to a business’s profit or loss.

Who Qualifies for the Employee Retention Credit?

To qualify for the ERC, a business needs to meet certain criteria. A business must have had their operations partially or fully suspended due to the government orders regarding the COVID-19 pandemic. Or a business must have experienced a significant decline in gross receipts during the calendar year compared to the same periods in 2019.

Businesses can also qualify for the ERC even if they have received other CARES Act assistance, such as the PPP Loan. However, the credit cannot go towards wages that were claimed in the PPP Loan application.

A business must complete a multi-step process to receive the employee retention credit. This process includes determining if the business qualifies for the credit, as well as calculating qualified wages. The amended payroll tax returns need to be filed. It can be a lengthy and tedious process, but it does not have to be. Our team members are here to assist you!


Contributed by Elizabeth Partlow