The collectibles industry used to be defined by classic keepsakes such as stamps, coins, and trading cards. Today, a new kind of collectible called non-fungible tokens (NFTs) has exploded in popularity. From music to digital game pieces, NFTs are digital assets that sometimes sell for millions of dollars. Twitter co-founder Jack Dorsey sold his first-ever Tweet as an NFT for $2.9 million!
But is there any substance behind the hype? And what does it mean for you?
Understanding NFTs
NFTs offer a blockchain-created certificate of authenticity for any digital asset. This asset can be a piece of music, a token for a popular game, or a piece of digital art. To understand an NFT, consider its components:
Non-Fungible…Where cryptocurrency like a Bitcoin is designed to be readily tradable (fungible), non-fungible is just the opposite. There is one and only one of it.
Token…In this case the non-fungible identification is attached to a specific digital asset or token.
Therefore, each NFT is unique and can readily solve the problem of users creating multiple copies of a digital asset. In effect, Jack Dorsey’s original tweet cannot be copied or duplicated because of NFT technology!
Why NFTs are popular
Traditional artists rely on auction houses and galleries to sell their work. These galleries and auction houses authenticate the work as original. Now artists can sell digital works at the same prices as rare works of art by using NFTs to do the authentication work for them. It is so popular now that even companies are getting in on the action. For example, a Charmin digital brand was auctioned off to raise funds for charity.
Why some NFTs are so expensive
Just like physical collectibles, there’s a market for NFTs. Current NFT buyers tend to be tech workers and entrepreneurs who understand the intricacies of purchasing digital goods. Artists are also dipping their toe into the NFT waters. For instance, superstar artists like King of Leon and Steve Aoki have sold NFTs for millions of dollars. Just imagine if your favorite musician decided to record an exclusive piece of music and then only sell 100 copies of the song. How much would you pay?
What you need to know
Here’s what you need to know about getting involved with NFTs:
Large cash outlay not necessary to invest. There are multiple NFT marketplaces where you can get involved as a buyer without getting into 5- and 6-figure bidding battles. Some of the more popular marketplaces are Opensea, Rarible, SuperRare and Nifty Gateway.
Beware of fees to create NFTs. If you want to create your own NFT, you’ll likely spend hundreds of dollars in various fees to make your own tokens. If you end up selling your tokens, you may be able to cover the cost of these initial fees. If you struggle to sell your tokens, however, you’ll end up eating the cost of creating the tokens.
Do your research. Since NFTs are so new, there isn’t a lot of history to judge its performance. As with any investment, you could either make a fortune, lose everything you invested, or end up somewhere in between. And these digital assets are treated just like other property, so you would pay capital gains taxes if you sold an NFT at a profit.
NFTs require power. NFTs use blockchain technology. Blockchain technology requires power. Lots of it. There is growing concern on the energy usage for this new digital marketplace and whether it is sustainable.
Because NFTs are becoming so popular, so fast, many experts are leery of what the world of NFTs will look like in the future. Regulation is currently lacking, and legal precedence is unclear. While blockchain technology can verify your purchase, does owning the NFT of something really mean you own the asset? Will NFTs stand up in court? These are some of the questions being asked without concrete answers.
The accounts payable process is typically very labor-intensive for many small business owners. While moving to a paperless environment may help alleviate some of your accounts payable headaches, there will be new problems you’ll have to successfully navigate.
Here are some of the most encountered accounts payable problems and several solutions to consider.
Common problems with accounts payable
Double payment. A vendor sends you an invoice for $100. Your company promptly pays this vendor $100, but a short time later another payment for $100 goes out to the vendor. Sometimes this can be the fault of the vendor sending an invoice in different ways (i.e. via fax and e-mail). Or the vendor moves to digital invoicing and emails more than one person in your company, effectively duplicating the invoice electronically. Or even worse, you print out a digital invoice twice.
Vanishing invoices. Your company could get an invoice from a vendor and have that invoice get misplaced, or the invoice accidentally gets destroyed before ever making it into your A/P system. With digital invoices, how do you know which one is the original and which one is a duplicate?
Sending payment prior to delivery. There are sometimes benefits to paying an invoice as soon as possible. However, if your company pays an invoice before a shipment arrives, that could lead to an awkward conversation with your vendor if any of the shipment arrives with damaged or missing items.
Matching errors. A manual investigation is often required if a discrepancy is discovered between purchase orders, invoices and other documents. This often happens when multiple invoices are paid with one check, and the breakout of the invoices does not fit on the check stub or other payment documentation. It gets more complicated if your supplier applies payments haphazardly creating a past due account, all while you continue to pay the bills.
What you can do
Update your internal controls. Have your A/P team help update internal processes and document how invoices should be handled. Pay special attention to separation of duties and full use of purchase orders to ensure invoices are accurate.
Have one inbox for A/P. All e-mails with invoices should go to one inbox. This will help reduce the chances that an invoice will be received or paid twice. Limit access to this billing address.
Limit access to cash accounts. It’s more important than ever for someone without authorization to your company’s cash accounts to review bank reconciliations. Not only will this help to potentially uncover erroneous payments, but it could also help to uncover potential fraud that is occurring in your company.
Track key performance indicators. Create a report each month of all unpaid invoices and another report that shows payments made. Explore bank security features to identify duplicate payments and allows you to control checks that are confirmed for payment. Use your accounting software to help identify duplicate dollar amounts and duplicate invoice numbers.
Be cautious with ACH. Giving a vendor automatic access to your firm’s checking account needs to be tightly controlled. Explore ways to ensure you are reviewing these auto payments on a timely basis and that you are receiving supporting invoicing of these payments.
Please call if you have any questions about improving your business’s accounts payable process.
With identity thieves continuing to target the tax community, the IRS is urging you to learn the new signs of identity theft so you can react quickly to limit any damage.
The common signs of ID theft
Here are some of the common signs of identity theft according to the IRS:
In early 2022, you receive a refund before filing your 2021 tax return.
You receive a tax transcript you didn’t request from the IRS.
A notice that someone created an IRS online account without your consent.
You find out that more than one tax return was filed using your Social Security Number.
You receive tax documents from an employer you do not know.
Other signs of identity theft include:
Unexplained withdrawals on bank statements.
Mysterious credit card charges.
Your credit report shows accounts you didn’t open.
You are billed for services you didn’t use or receive calls about phantom debts.
What you can do
If you discover that you’re a victim of identity theft, consider taking the following action:
Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. Generally, you can avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This covers all three of your credit files.
Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call to schedule an appointment to discuss next steps.
Your business has a story to tell. And one of the ways to hear your business’s story is by reading through comparative financial statements.
The importance of comparative financial statements
An up-to-date balance sheet, income statement and statement of cash flows are essential financial reports you should consistently analyze. But these financial statements by themselves don’t tell the whole story about your business. Consider the following:
Company XYZ: The most current balance sheet shows $1 million in liquid assets with zero liabilities.
Company ABC: The most current income statement has a net profit margin of 35%.
Company 123: The statement of cash flows shows that the company has consistently brought in more cash than it has spent over the past three years.
And here’s the rest of the story:
Company XYZ: Liquid assets decreased from $5 million to $1 million over the past 12 months.
Company ABC: Net profit margin is typically around 20% for this company. However, a recent round of layoffs temporarily pushed total salaries and wages lower, while pushing the net profit margin much higher.
Company 123: There has been a steady decline in positive cash flow over the past three years.
These examples show the importance of analyzing your financial statements in comparison with something else. Reading through the first list of bullet points only tells part of the story.
What you can do
Here are several types of comparative financial statements you can create for your business and some tips for getting the most out of these reports.
Current period vs. Prior period. Compare this month to the same month one year prior (October 2021 vs. October 2020) or compare by year (2021 Year-to-Date vs. 2020 Year-to-Date).
Current period vs. Current period forecast. This is known as a variance analysis. You compare what you think was going to occur during a particular period to what actually happened. This report can also be done either by month [October 2021 (actual) vs. October 2021 (forecast)] or by year [2021 Year-to-Date (actual) vs. 2021 Year-to-Date (forecast)]
Use both absolute figure and percentages. Percentages allow you to quickly see the degree of change between the two periods that are being compared. Here’s an example of what this could look like:
Ask for help! Please call if you would like help creating or analyzing comparative financial statements for your business.
Meetings, phone calls, emails, text messages, and water cooler conversations with your employees constantly bombard you as a business owner. Freeing up even just another 15 minutes a day could dramatically improve both your workflow and peace of mind.
Here are some suggestions for getting back 15 minutes every day:
Use your phone. Whenever possible, use your phone instead of an email. Oftentimes talking with someone directly is more efficient than spending the time to compose an email. Plus, email chains can fill your inbox and require precious minutes to read and decipher. Using the phone can also help avoid potential misunderstandings, as a person’s tone of voice conveys information that may be lost or misinterpreted when shared via a written message.
Be brief with emails. Tech entrepreneurs Mark Cuban and Jeff Bezos are known for their brief emails that consist of only a couple words. In situations where you do use email, consider crafting a response that is only several words in length. And remember the golden rule of emails: send fewer emails to receive fewer emails.
Plan your meetings. Face-to-face time with colleagues, vendors, and customers is often productive and essential for growing a business. On the other hand, meetings can be a huge waste of time if not properly planned. Establish clear goals for a meeting in advance so your team can focus on priorities and get back to work.
Minimize distractions. Business owners enjoy developing a rapport with their employees. These personal conversations, however, need to have boundaries so that both you and your employee can stay on task. Tell your team if there’s a day you don’t have time for small talk. Consider putting an old-fashioned Do Not Disturb sign on your door when you need to get things done.
Delegate when possible. If you’re a small business owner who built a company from scratch, you may be reluctant to relinquish control over day-to-day operations. But failure to delegate can sap time from more important tasks like planning, building relationships with key vendors, and growing your customer base. So develop a plan to train your employees to assume more responsibility over time.
Fifteen minutes may not seem like much, but a busy business owner can work wonders with just a little more time every day.
