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.. is an ex-sysadmin

I am now an ex-sysadmin.

That hit me pretty hard.  I was surprised.

Yesterday I had a final meeting onsite with Client#1’s sysadmin; we talked over all the areas of responsibility, recapped all the services, talked about all the physical and virtual servers, discussed everything from low infrastructure (power, network wiring) to high hopes (finally outsourcing the mail server), and at the end, I said,

“OK – well, I’ll keep the root credentials for now, but I won’t be using them.  At the end of the month I’ll want you to kill all my accounts, but leave the VPN account if I’m still part of the offsite backup plan then.  Let me know when you’ve got that replaced and I’ll blow away my copy of all that data.”

.. and I suddenly felt a physical weight lifting off my shoulders and landing on his shoulders.  I stood a little straighter and said, “OK, it’s all you.”

Then I went home and cried like a baby.

Less Painful Office Ribbons

Microsoft helpfully “upgraded” office in 2007 and destroyed all the personal intellectual capital that people had created by learning the menu system.  I took slight notice of this at the time because, hey, infant twins.

Recently I’ve been dragged kicking and screaming off of Office 2003 and started using Office 2007, so I’ve had to deal with this piece of junk myself.

Eventually I noticed that Excel 97/2000/2003 menu shortcut keys still work through a “magic compatibility mode”.  But for the things that I used to use toolbars, I was screwed.

Right-clicking on a selection brings up a toolbar that contains almost all, but not quite all, of the least useful formatting commands.

Today I was trying to resize some rows and columns and it was so incredibly painful that I actually found a meta-solution: an add-in that lets you search for commands by name.   Found it via Debra Dalgeish’s blog Contextures, which looks to have lots of useful Excel stuff.

I hope someone doesn’t add a command-line interface to Excel next.  I’d have to find something new to whine about.

Remembrance of Futurists Past

I just got around to reading
As We May Think
, Vannevar Bush’s famous 1945 article where he lays out a vision for the Internet, high level programming languages, Wikipedia, CCD-based cameras, and more.

What a contrast to the popular futurist vision of flying cars and humanoid robots…

So: how can you tell which of today’s Futurists are describing future realities, as Bush did, and which are Kurzweil types? And in which camp does Ramez Naam belong?

French Press Tip

I’ve been making French press coffee for at least 20 years.  About every third time, while pressing the coffee, a little bit spills onto the counter.

The other day I tried it differently: I put the French press into the sink and pressed it there.

20 years of pointless, needless counter-wiping could have been averted by using the sink for its intended purpose.

Don’t let this happen to you…

Reimbursement Form

Here’s some more tiny-business advice: you should have a reimbursement form.Denied

It’s not that I’m nostalgic for the “Good Old Days” when I was at UC Berkeley: I’m not suggesting you make yourself sign a loyalty oath.  It turns out that keeping track of expenses is hard; reimbursable expenses especially so; and a form is essentially a love letter from past-self to future-self that makes it slightly easier.

Minimally the form should answer the journalistic questions: Who spent the money?  What was it spent on?  Why is it a reimbursable (business-related) expense?  Where was it spent?  When was it spent?  How was payment made?  Attaching a receipt will help answer the basics: that’ll give you the vendor name, address, payment means, and SKUs for the items you purchased.  What a receipt can’t answer, and what a form makes you confront, is the “WHY”.

Do Your Own Books – Wrap Up

Well maybe just a wrap-up for NOW.  Maybe I’ll bang on this drum more, later.

I don’t know enough about John’s business to argue with him further.  400 journal entries a year sounds like <10 a week to me, which is less than an hour a week.  But if an hour a week is more time than you want to spend on the business at all, because it’s supposed to be passive income… well.  Hard to say.

The underlying principles are:

  • A transaction should be recorded as soon as possible, and ideally by one of the people involved in the transaction
  • The principals/owner/CEO should be aware of the current financial position of the company

When the owner is the only employee, then there’s an obvious candidate for entering the transactions: you!  When the bookkeeping is simple, then there’s no need for intermediate layers of accounting.  The financial position of the company is Cash On Hand + Accounts Receivable – Accounts Payable.

For a lot of people — for me, even, at several points in managing my business — it seemed “easier” to just take a quick look at the bank balance and make a decision from there.  But there’s a big difference between $12,000 in the bank and owing $20,000 in taxes vs. $12,000 in the bank and expecting $2,000 in the coming month.

For a lot of self-employed people, if they’re not doing their own books, nobody is doing the books.  So do your own books.

Reviewers Wanted for Tech Interview Questions

I’m working on a couple of tech interview questions and I’m looking to test them on people — ideally, people who do tech hiring and project management work.  So if you want to read my tech interview questions and give me feedback on whether they’ll help me find the people I’m looking for, please comment or contact me privately.  I’ll email you.


Do Your Own Books : Far Too Much About Payroll

John also mentioned payroll.  I will admit that this is an area where I am especially gear-headed, so skip this unless you enjoy the dorky energy of ‘Newton’s method applied to payroll deductions’.

First thing: if you have many employees (>5), or pay payroll in multiple provinces/states, or actually pay hourly workers with variable numbers of hours, or overtime, or union dues, or anything like that, then for the love of Cthulhu, buy the payroll tax updates and just use your accounting software.  There’s no point messing around with Excel when someone has already figured out how to do everything.

Quick start for Americans: CPP = Canada Pension Plan (think Social Security).  Medicare – not a payroll tax in Canada.  EI = Employment Insurance, think Unemployment insurance.  There is no weird state/federal system for EI here like there is for UI in the States; it’s just a federal responsibility.  Also, owners and their family members are not eligible to receive EI payments, so they’re not required to pay EI premiums.

If you have few employees on a regular (eg monthly or biweekly) salary schedule, and the salary doesn’t change, then it’s easy to do the payroll deductions manually.  Here’s what I used to do:

  1. Go to the online payroll deductions calculator
  2. Enter the gross salary and deductions status (CPP not exempt, EI exempt for owners; nothing exempt for everyone else)
  3. Click through two pages to the results
  4. Print out and file this calculation so you can refer to it at year-end (I generally scrawl the employee name at the top)
  5. Create a Purchase (not payroll!) transaction.  The accounts you want to hit (in stock Simply Accounting) are:
    • Gross pay – 5410 Wages & Salaries
    • Employer CPP – 5430 CPP Expense
    • minus 2 times CPP amount – 2185 CPP Payable
    • minus Tax amount – 2190 Federal Income Tax Payable

    The balance of the transaction will be the net pay. Make it payable to the employee name and then store the transaction (Purchase | Store) as ‘[Employee Name] Payroll 2013’, recurring monthly (or biweekly, whatever).

  6. To use the transaction, recall it (Purchase | Recall) at the beginning of the month and post it, due at the end of the month. Post all your payroll transactions, then note the total amount of CPP and Income tax payable (balance of 2185 and 2190). Enter a transaction for the 15th of the next month paying that amount to CRA.  I have a stored transaction for this as well, since it doesn’t change.
  7. Payroll is done.  Oh yeah, make sure you write the checks and put in the online transfer to the CRA tax account.  But the difficult part is done.

That’s what I used to do.  If you thought that was bad, then quit reading now, because the dorkiness has not yet begun!

The thing is, I don’t like budgeting with odd amounts. So I wanted my take-home pay to be a round number.  But because of the dumb way payroll tax deductions are calculated, it’s not obvious how to make that work out.  So there’s a spreadsheet (sadly, not a multi-colored one)…

Here’s a link to the online version (Google Docs) and here’s an Excel version, which is what I actually use.  Explanation follows, you can follow along if you’re so inclined.  This work replaces steps 2 and 3 above with an iterative process until we get the take-home pay we want.  There’s also a calculation of marginal tax rate.

Start with a target take-home salary that we want (in the worked example, this is $3,000).  In the example I use this as my initial guess, which is dumb-but-good-enough.  In real life I use the gross salary that I calculated from the previous year.  Enter the initial guess into column B (cell B6).  Click through the two pages of PDOC and get the total deductions (sum of CPP, EI, and FITW); that’s all you need for now.  Enter this into cell D6.  Cells E-I are now calculated for you and a new guess is calculated and entered into B7.  On the PDOC, click “Modify the Current Calculation”, and enter the new guess as the salary; click through to get the updated deductions, and then repeat the process until the net salary in column F converges to the desired net salary.

This is just Newton’s method, and as you can see from the worked example, it has excellent convergence – we’d expect at least quadratic, but the actual convergence is better because the underlying formulas are mostly linear.  Fprime is calculated as the local first derivative of the deduction function based on the previous guess, and the new guess is just linearly extrapolated.  It’s simple and it’s good enough.

An iterative approach like this is necessary because the tax calculations are complicated and non-linear, and quite hard to invert.  Initially (15 years ago) I tried to find a closed-form or even table-based lookup.  But once we started making contributions to retirement accounts (on which payroll tax but not income tax is assessed), I gave up on a closed form and switched to this iterative system.

Having finished the calculation, I generally do some basic checks.  I enter the calculated amounts, line by line, in B14-B20.  (Using cell references is evil because the guess amounts are not actually round cents.)  This then calculates the annual gross and net pay.  I check out the CPP maximum for the current year and make sure I’m not overpaying CPP, since the CRA will not refund the employer portion of overpaid CPP.  The annual CPP paid in the sample calculation is $2078.04, which is less than the 2013 CPP max of $2356.20, so it’s fine.  If the calculated CPP came out to be more, then I’d just reduce the CPP payment to the calculated max monthly amount and increase the federal withholding by the same amount to keep the net pay where I want it.

The next bit is the monthly contribution to the CPP and FIT Payable accounts, AKA the monthly payment to the Receiver General.  This is double the CPP plus the tax, plus both sides of EI.  I don’t know much about EI because in Canada owners are not required to pay EI premiums.  The total salary expense is the cost to the company to have the employee, and as such, it provides a floor for the amount of value the employee should be creating.  I allow about $1,000 a month for overhead, so I set my monthly minimum billing goal to be $1000 + salary expense.

Finally, there’s a marginal tax calculation.  Go back to PDOC one last time and enter the gross salary you calculated plus one dollar and copy the relevant withholding amounts into G28:G35.  Now your marginal CPP, EI, Federal, and Provincial tax rates are shown.  Our imaginary sample employee lives in Alberta (10% flat income tax), is still paying CPP on the marginal dollar earned (gross pay is <$51,100), and is in the 21% federal bracket.  The average (effective) tax rate is 21% overall, which is not bad; the marginal tax is 36%, but what can you do.

What you can do is make some RSP contributions (Retirement Savings Plan, think Roth IRA or 401(k)).  But this post is already long enough, that can wait until next time.

Do Your Own Books : Tiny Business Edition

In response to my earlier post, John writes:

That works for single owner /employee businesses, but I’ve found it gets harder as you scale up. (either more owners or more employees).

Aren’t payroll checks their own nightmare?

It does get harder as you scale up.  This is “Sam’s business advice – tiny business edition”: when your business is not big enough to be called a “small” business.

Take me as a specific example: I have between three and five transactions a month — invoices to clients, one payroll check, one payroll tax payment.  Add in a few trips to Staples and I’m still barely breaking 100 journal entries in a typical year.  This is not rocket science.  I can do my bookkeeping in five minutes a month.  I spend as much time waiting for Simply Accounting to load as I do using it.

But maybe you have 15 employees.  Maybe you have 100 different categories of inventory, with 5-10 different items in each category.  Maybe you’re billing the federal government (in which case, God help you, because I can’t.)

You should still do your own books.  You should hire a bookkeeper or a payroll specialist to enter the journal entries for the complicated bit, but you (as an owner) should still be involved in the bookkeeping.  As a rule of thumb I’d try to limit it to no more than 5% of your working time.  Anything above that, I’d consider hiring a part-time employee.

So then let me ask you: do you spend 2 hours a week on your books?  Is there even two hours a week (ten hours a month) of work to be done there?

And if you think 5% is excessive, then how much time do you think a typical “real” business CEO spends thinking about accounting and business development and cash flow, all of which are founded on up-to-date, accurate books?

Do Your Own Books – You Are Responsible

You’re responsible for paying your taxes.

Seems simple, right?  Nobody else can be responsible, so it has to be you.

Unfortunately this means you better stay on top of how much you’ve made and how much you owe.  The nice folks at the IRS and CRA (Canada Revenue Agency) — and in my experience, they’re all actually very nice — will try to help you, but if you truly have no clue, then they will assess penalties.  And interest.  And interest on the penalties and interest that they’ve already assessed, and then interest on that.

“That’s why I hire a bookkeeper!” you object.  Calm down, please.  We’re having a reasonable discussion here.

Your bookkeeper is a wonderful person who helps you out of a jam every year, by turning your messy folder full of receipts, scraps, and stubs into financial statements.  Your bookkeeper, however, is not responsible for paying your taxes.  Your bookkeeper is not on the hook for the taxes, penalty, and interest you have incurred and failed to pay.  Do you remember who is responsible?

You.  You are responsible.

So do your own books.