The topic of artificial intelligence (AI) has been in the news quite a bit recently, and one of the reasons is the launch of an AI chatbot called ChatGPT. The GPT in ChatGPT stands for generative pre-trained transformer, which is a program that can realistically write like a human and interact in a conversational way. Basically, you can type in a complicated question, and ChatGPT will give you an amazingly lifelike, most-of-the-time accurate answer. 

ChatGPT was launched in November 2022 and developed by OpenAI, an AI research lab tasked with developing a friendly AI. OpenAI has both a non-profit and for-profit component in its organizational structure. 

As of this writing, ChatGPT is offered at no cost, but you must open an account and verify both your email address and phone number to access it. Once you do, the prompt is simple; just ask it a question. You can get access here: https://chat.openai.com/chat

Here is a sample answer to the question, “What are debits and credits?”

ChatGPT: “Debits and credits are terms used in accounting to describe the money movement into or out of an account. In accounting, every transaction involves at least two accounts, and each account is either debited or credited.”

“A debit is an entry that increases assets or expenses or decreases liabilities or equity in an account. For example, if you buy office supplies for your business, you would debit the office supplies expense account and credit the cash account.”

“A credit is an entry that increases liabilities or equity or decreases assets or expenses in an account. For example, if you sell goods on credit to a customer, you would debit the accounts receivable account and credit the sales revenue account.” 

“Debits and credits are used to keep track of the financial transactions of a business or organization. They are important tools for recording and analyzing financial information, and are essential for preparing financial statements and tax returns.”

Yes, ChatGPT is a touch verbose at times.  

Here is a tax example:

Question: Qualified Business Income – earnings limitations if NOT a specified service business

ChatGPT: “Under the current tax law in the United States, if you are a qualified business owner who operates a non-specified service business, you may be eligible for a tax deduction of up to 20% on your qualified business income (QBI).”

“However, there are certain limitations on the deduction, including a cap on the amount you can deduct based on your total taxable income. For the tax year 2022, the threshold for the taxable income limit is $329,800 for married filing jointly and $164,925 for other taxpayers.”

“Additionally, there may be further limitations on the deduction if your business has a significant amount of W-2 wages and/or depreciable property.”

“It’s important to consult with a qualified tax professional or accountant to determine how the QBI deduction rules apply to your specific business and tax situation.”

It can also answer these questions/requests, along with literally millions of others:

• The best recipe for lemon bars
• Write an engagement letter for tax preparation
• Comment on the elevation of the El Camino de Santiago de Compostela from Sarria to the end.
• Write an ad for marketing services.

There is a disclaimer in place, as ChatGPT will occasionally generate wrong answers. It did generate a misleading answer when it was asked a very complex tax question about the Employee Retention Credit and greater than 50 percent owner wage eligibility.  

How can you use ChatGPT in business?  It might save you time with writing initial drafts of letters, ads, speeches, webpages, or other correspondence. It can also save time on research and data analysis, but be sure to verify its answers. It can help with coding if you’re into computer programming. You can also use it for fun or for a second opinion. 

Try ChatGPT to start seeing how it can benefit you and your business. 

The topic of artificial intelligence (AI) has been in the news quite a bit recently, and one of the reasons is the launch of an AI chatbot called ChatGPT. The GPT in ChatGPT stands for generative pre-trained transformer, which is a program that can realistically write like a human and interact in a conversational way. Basically, you can type in a complicated question, and ChatGPT will give you an amazingly lifelike, most-of-the-time accurate answer. 

ChatGPT was launched in November 2022 and developed by OpenAI, an AI research lab tasked with developing a friendly AI. OpenAI has both a non-profit and for-profit component in its organizational structure. 

As of this writing, ChatGPT is offered at no cost, but you must open an account and verify both your email address and phone number to access it. Once you do, the prompt is simple; just ask it a question. You can get access here: https://chat.openai.com/chat

Here is a sample of the answer to the question, “What are debits and credits?”

ChatGPT: “Debits and credits are terms used in accounting to describe the movement of money into or out of an account. In accounting, every transaction involves at least two accounts, and each account is either debited or credited.”

“A debit is an entry that increases assets or expenses or decreases liabilities or equity in an account. For example, if you buy office supplies for your business, you would debit the office supplies expense account and credit the cash account.”

“A credit is an entry that increases liabilities or equity or decreases assets or expenses in an account. For example, if you sell goods on credit to a customer, you would debit the accounts receivable account and credit the sales revenue account.” 

“Debits and credits are used to keep track of the financial transactions of a business or organization. They are important tools for recording and analyzing financial information, and are essential for preparing financial statements and tax returns.”

Yes, ChatGPT is a touch verbose at times.  

Here is a tax example:

Question: Qualified Business Income – earnings limitations if NOT a specified service business

ChatGPT: “Under the current tax law in the United States, if you are a qualified business owner who operates a non-specified service business, you may be eligible for a tax deduction of up to 20% on your qualified business income (QBI).”

“However, there are certain limitations on the deduction, including a cap on the amount you can deduct based on your total taxable income. For tax year 2022, the threshold for the taxable income limit is $329,800 for married filing jointly and $164,925 for other taxpayers.”

“Additionally, there may be further limitations on the deduction if your business has a significant amount of W-2 wages and/or depreciable property.”

“It’s important to consult with a qualified tax professional or accountant to determine how the QBI deduction rules apply to your specific business and tax situation.”

It can also answer these questions/requests, along with literally millions of others:

• The best recipe for lemon bars
• Write an engagement letter for tax preparation
• Comment on the elevation of the El Camino de Santiago de Compostela from Sarria to the end.
• Write an ad for marketing services.

There is a disclaimer in place, as ChatGPT will occasionally generate wrong answers. It did generate a misleading answer when it was asked a very complex tax question about the Employee Retention Credit and greater than 50 percent owner wage eligibility.  

How can you use ChatGPT in business?  It might be able to save you time with writing initial drafts of letters, ads, speeches, webpages, or other correspondence. It can also save time on research and data analysis, but be sure to verify its answers. It can help with coding if you’re into computer programming. You can also use it for fun or for a second opinion. 

Try ChatGPT to start seeing how it can benefit you and your business. 

In the last few years, the shortage of accounting professionals has grown tremendously, and many business owners are struggling to find reputable, quality accounting services. Prices for accounting services may have gone up due to this supply/demand imbalance, and they will keep going up for years to come– due to the shortage in accounting graduates and the overall pipeline. It makes sense to explore how to work better with your accountant as they become more and more scarce and in demand.  

A Successful Partnership

Intuit conducted a survey in October 2022 which found tremendous benefits to the accountant-business owner relationship:

• Nine out of ten small businesses with an accountant or bookkeeper say they contribute to the business’s success. 
• More than eight out of ten business owners say accounting professionals helped them reduce the impact of inflation on their business. 
• More than 80 percent of business owners say their accountant helps them make better use of technology.
• More than 98 percent of business owners say they are more confident in their business because of their accountants.  
• Small business owners overwhelmingly say their accountants save them time and money. 

There’s no doubt that the relationship between a business owner and their accountant is of utmost importance to your business. Here are five ways to work even better with your accountant so that you can both benefit from this important business relationship. 

1. Reduce your accountant’s administrative time.

There is a lot of paperwork when it comes to accounting and tax work, and administrative work goes hand in hand with that paperwork. When you can reduce the administrative work, your accountant can focus more on planning and advisory work, which is more valuable to your business. Here are a couple of tips.

• When sending paper information to your accountant, scan it in and convert it to PDF instead. Then upload it to your secure portal.
• When sending digital information, convert images to PDF files when possible. Images can’t easily be converted to text as PDFs can.
• Instead of sending multiple files, combine PDFs into one image when they are the same document.
• Use a client portal instead of email if a client portal is provided. 

2. Spend time understanding your accounting and tax reports.

A little education can go a long way. Learning a bit about finances and accounting can help you become a much better business owner. Your accountant may have suggestions on the best source for this or they may have videos they have produced themselves.

3. Honesty is paramount.

It’s critical that there is trust and complete honesty on both sides of the relationship. Your accountant may have earned a CPA or Enrolled Agent or other certifications that took years to acquire. Their license is in peril if anything is not above board. You might be surprised to learn that there are potentially many penalties and jail time for the accountant as well as the client if fraud or other criminal acts are discovered.

One example of something you can do to ensure your accountant’s trust is in tax preparation: clients should complete the tax organizer in full when the tax preparer sends it, even though it is a pain to do so. If a piece of information is missing, or you decide it’s not important but the government feels it is, that omission can spell the beginning of trouble for both you and your tax preparer. 

4. Be mindful in communications. 

Good communication is an essential part of the accountant-client relationship. A great client will take the time to read any emails or correspondence and answer all the questions in the email (not just the first one!). 

Both you and your accountant may have preferred ways of communicating, among the choices of text, voice, and email. Keep in mind your accountant has a higher duty to protect your private information. Text and unencrypted email can be problematic for them, depending on the type of information to be conveyed. 

To save time and reduce interruptions, keep a notes file on your desktop, and add any non-urgent questions to your list. That way, you can cover a lot of ground when you meet periodically.  It’s a better use of both of your time. Of course, if you have urgent questions, feel free to contact your accountant at any time.  

5. Vet any advice you hear.

Be wary of unsolicited advice as well as tips you might see on social media. They can be uneducated and worst case, downright fraudulent. One of the biggest problems today is ERC mills: companies that have sprung up to help small businesses claim the Employee Retention Credit from 2020 and 2021. Most of these companies are not following IRS guidelines and do not have the proper credentials to evaluate the tax law properly.

Social media sources can be quite unreliable as well. TikTok has some outrageous financial claims regarding the choice of business entity, so please do not act on this advice until you speak with a qualified accounting or tax professional.  

Try these tips to build better rapport with your accountant, and your business will blossom as well. 

Being in business means taking a lot of risks, especially financially, and as an entrepreneur, you deserve to be rewarded for those risks. Your pay is just one of the many benefits of your self-employment. But it’s not like the pay you get as an employee; it needs to be more comprehensive than that.  

Getting Paid

The two major ways entrepreneurs can take money from their business is through draws or by receiving a paycheck.  If your business is incorporated, you’ll take a paycheck; if your business is a sole proprietorship or a partnership, you’ll take a draw.  

Here’s a list of five items to make sure you have covered in your pay:

1. Reasonable Compensation.  

If you were doing the same work for a company that hired you, what would your pay be?  Are you making at least market equivalent or better?  A lot of times, as entrepreneurs, we tend to focus only on this piece of our compensation when we set our pricing, and that’s a big mistake.    

There are also tax implications of paying yourself too little (to avoid payroll taxes if you take a paycheck) or too much. 

2. Retirement plan

When you work for yourself, no one is going to fund your retirement for you.  Although the Social Security program helps, it’s up to you to set additional money aside for a comfortable future when you can’t or don’t want to work anymore.  

3. Benefits

Employees get vacations, health insurance, and bonuses; and you should too.  This should be part of your compensation package as an entrepreneur, and there are many tax advantages as well.

4. Taxes

You need to cover taxes that will be incurred on your pay as well as your business profits. This includes:

• Normal withholding for federal income taxes, state and local income taxes, Medicare, and social security. If you receive a paycheck, these will be taken out of your paycheck, but they may not be enough because they don’t consider taxes on your profits. If you take a draw, you may not have withholding, but you will need to factor in self-employment taxes.
• Taxes on your profits. For sole proprietors, partnerships, LLCs, and S Corps, your taxes will be figured on the profits of your business when you complete your federal income taxes. They will “pass-through” from your business to your personal return. Don’t let this part surprise you!
• State business taxes. If your business does business in multiple states, you must file a tax return for each state. Many of them collect taxes based on flat corporate fees, the revenue you earned in that state, state payrolls, and/or the value of property owned in that state.

Check with your tax advisor so that there are no surprises in your tax bill for your business or your personal returns.   

5. Profit

As an entrepreneur, you take extra risks when you own your own company, and you should be compensated accordingly.  Your capital is tied up in your business and should be earning a good return in addition to your regular salary or draw.  

Complete Compensation

Your compensation should include all of the above components.  If it doesn’t and you feel like you can’t afford to pay yourself that much, then your pricing might not be reflecting all of these items correctly, you might have a volume problem, or your business model may need some adjusting.  

It’s normal to take a smaller paycheck the first few years as the business is growing, but if you’re still doing it after several years or constantly have cash flow issues, then something may be wrong.  

If you’d like our help in this area of your business, please reach out and let us know.  

Make sure your future is bright and financially secure by considering all five items in your entrepreneur compensation.