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Why Budgeting and Forecasting Are Vital for Your Business

February 2, 2017 / by Jim Rice posted in Rochester, Orlando

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Jim-Rice-for-web.jpgRecently, a client in the financial services industry decided to open up several new locations over a 12-month span. I asked if they had a budget in place and a definitive timeline for opening up each location. Nothing concrete, they told me.

This isn't unusual. Many companies make up their budgets and forecasts as they go along. But this is like setting out on a long drive with no map, no GPS, no credit cards and no idea how much gas you have in the tank. Where you'll wind up is anyone's guess.

Plan Ahead by Looking Back
The next company that correctly forecasts its annual budget right down to the penny will be the first. Still, just because you don't know your exact operating expenses is no excuse not to come up with a reasonable estimate.

The best way to determine how much money you'll need in the next year is to carefully track how much you spent in past years. It's important not only to calculate the total amount you spent, but also to analyze seasonal highs and lows. Doing so will allow you to anticipate lean months and set aside additional funds as needed. Also, the more closely you scrutinize your spending, the more likely you are to find ways to cut costs and eliminate unnecessary expenses.

Typically, companies forecast budgets over a 12-month period. Depending on the nature of your business, however, you might want to forecast for six months, or even 30 days at a time. This will provide your employees with a detailed roadmap of exactly where you're headed and the resources you have to get there.

Does Budget Forecasting Work in the Real World?
So how did my client's planned expansion turn out? Very well, I'm happy to say. Together we looked at their sales trends over the two previous years. Then we analyzed the current market and economic conditions and came up with a reasonable sales forecast.

Next, we drilled down and looked at the costs of goods sold (COGS). We also calculated their business expenses over the past few years, noting increases in rent, insurances, advertising, employee expenses, accounting costs and legal fees. That provided the basis for a cash flow analysis, giving us an idea of the money coming in and money going out, including projected income and expenses. And that, in turn, gave us a reliable indicator of when extra cash was going to be available and when revenue would be light.

Based on this solid data, the client was able to proceed with their plan to open up additional locations.

Now, as the client moves forward, we carefully compare their actual cash flow against their forecast. By monitoring their finances on a regular basis, we've been able to identify potential problems at an early stage and formulate a strategy to correct them before they become major issues.

In other words, the client has been able to get where they want to go by carefully studying where they've been.

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Supporting Your On-staff Bookkeeper with Outsourced Services

January 25, 2017 / by Jeff Orchard posted in Tampa Bay

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Jeff-Orchard-for-web-2.jpgPrevious articles on our blog have explored why small-business owners should consider outsourcing portions of their bookkeeping, operational and controllership services. Reasons include introducing controls against internal fraud or theft and the ability to ramp up during temporary periods of high demand.

That's not to say business owners need to choose either an outsourced bookkeeping service or an on-staff bookkeeper. In many cases, the best solution is a combination of both. Here's why.

A Single Bookkeeper Can't Always Keep Up
Recently, I met with a prospective client who told me, "My bookkeeper went to lunch three weeks ago and we haven't heard from her. She won't answer her cell phone or emails."

That situation, unfortunately, is not terribly unusual. Many business owners simply don't realize how stressed their bookkeeper is until it's too late. Just because you're willing to work long hours and wear many hats doesn't mean your bookkeeper is. And even if they're willing, they might not be able.

If you hire a relatively inexperienced, inexpensive bookkeeper to do your payroll and basic AP/AR functions — but then also ask them to conduct bank reconciliations or internal audits, prepare detailed financial reports, track inventory, conduct quarterly forecasts, analyze your annual budget or take on other higher-level responsibilities — can you blame them for succumbing to burnout?

An outsourced bookkeeping service can offer higher-level support as needed, according to your budgetary needs. In some cases, such a service can also provide training and establish systems that will bring your on-staff bookkeeper up to speed at a pace they can handle. So not only will your bookkeeper not feel threatened by an outside service — they might actually stick around longer. (And if they do feel threatened, that's a red flag.)

Don't Get Caught Shorthanded
Of course, even good on-staff bookkeepers get sick, miss time for parental or medical leave or simply decide to move on. That leads to another benefit of supplementing your full-time staff with an outsourced bookkeeping service: If you need to fill a short-term vacancy, or if you want to take your time in selecting a permanent replacement when a staff member leaves, you'll already have a working relationship with an outside service that's familiar with you, your business and your staff.

The bottom line: Having the support of outside bookkeeping professionals whenever it's necessary brings peace of mind — for both you and your on-staff bookkeeper.

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Which Payroll Solution is Right for Your Small Business?

January 20, 2017 / by Jeff Orchard posted in Tampa Bay

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Jeff-Orchard-for-web-2.jpgIf you run a small business, one of the most important decisions you face is selecting the right payroll service. After all, as difficult as choosing a payroll solution is, transitioning to a different solution is even more difficult.

That's why it's important to get it right the first time. And while price is certainly a factor, the cheapest solution isn't always the best.

Capabilities aren't the issue either. Pretty much any service you choose can process payroll and calculate tax liabilities. The differentiators are customization, automation and reporting. Based on those criteria and my experience, I've narrowed the search down to what I consider the three best choices.

Intuit Full Service Payroll ($100 per month + $2 per employee)
Business owners know Intuit best for QuickBooks, but the company also offers this strong payroll solution. My recommendation comes with a caveat, however: Use the "Full Service" version only. The others require filing and paying taxes manually. Paying a little extra to take that responsibility off your plate is well worth it.

  • Customization: I haven't found many businesses that need custom features that Intuit doesn't provide, from compensation methods to payroll frequency to deductions.
  • Automation: For obvious reasons, Intuit Full Service Payroll integrates directly with QuickBooks. The general ledger mapping is very simple, and the accounting and payroll functions are so intertwined that they act as a single solution.
  • Reporting: The reporting module is simple yet robust.
  • Drawbacks: Intuit Full Service Payroll doesn't withdraw tax payments until they are due, which can be three months after payroll is processed. Although some business owners love hanging onto their cash as long as possible, it can cause havoc when several thousand dollars of taxes suddenly come due from prior payrolls. Most businesses I work with prefer to have all payroll liability handled as soon as they pay their employees.

Gusto Payroll ($39 per month + $6 per employee)
Gusto is much newer than the other two on my list, but has made significant progress and continues to improve. It's been a very good solution for many of my clients. The basic fee is low, though the per-employee cost is higher — something to consider if you're planning for substantial growth. I typically recommend it for companies that intend to have no more than 10 employees.

  • Customization: I'll be honest — it's weak. I often have to come up with workarounds.
  • Automation: Gusto automatically syncs with QuickBooks Online and a few other popular online accounting platforms. It also allows you to establish automated payroll that will run each period based on your company's payroll setup.
  • Reporting: Solid, but not as robust as Intuit. You can always find what you need, but it might take some digging.
  • Drawbacks: I wouldn't use Gusto for a more complex business that requires extra bandwidth from the payroll provider. I recommend it all the time for small businesses, but that's all I recommend it for at this stage of its development.

ADP Run (price varies)
ADP Run is by far the best solution for small businesses. They were the original innovators in this space and continue to be the industry leader.

  • Customization: Best in class.
  • Automation: Best in class.
  • Reporting: Best in class.
  • Drawbacks: As with most things in life, the best solution is also the most expensive. So, yes, ADP is pricey. But if you can afford it, it's well worth it. In fact, I got so tired of my clients settling for lesser products because of price that I partnered with ADP to discount the price to a level competitive with the other solutions. Because I think having the best available payroll solution for your small business is that important.

The Expertise You Need
Evaluating and comparing all the payroll solutions out there would be quite a task. How do you know which one is right for your business? Working with a bookkeeping services provider can help.

Feel free to contact me if you have any questions on this topic!

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Supporting Strategies Expands to Brooklyn - Staten Island

January 17, 2017 / by Leslie Jorgensen posted in Brooklyn - Staten Island

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Lvovskiy Becomes Managing Director of New Franchise

Leslie-Jorgensen-135 x 135.jpgSupporting Strategies is pleased to announce the opening of our latest office, in Brooklyn - Staten Island.

Jane Lvovskiy, Franchisee and Managing Director, has served as Tax Associate at KMPG; Assistant Vice President, Tax, at Credit Suisse; and Assistant Vice President, Fund Accountant, at The Blackstone Group. In 2016 she founded LJ CPA Accounting Services, PLLC, where her responsibilities included reviewing month-end trial balances and financial statements, helping to prepare annual budgets and helping to prepare management reports and analysis to monitor overall financial performance of clients.

"I am excited to join Supporting Strategies," Lvovskiy says. "Over the last few years, the Brooklyn and Staten Island areas have experienced significant growth in business activity. Cost savings and time efficiency have been the driving force behind the success of many businesses. I look forward to helping businesses prosper by implementing my knowledge and experience together with Supporting Strategies' cutting-edge technology. "

Supporting Strategies has developed a proven, scalable business model with highly automated systems and processes to deliver cost-effective bookkeeping services. Franchisees like Lvovskiy are leveraging our proprietary technology platform and team of virtual, seasoned professionals to serve a growing roster of clients.

To learn more about franchise opportunities with Supporting Strategies, please check out an upcoming webinar or attend a future Discovery Day. You may also contact Stephen Schultz, Vice President of Franchise Development, at steve@supportingstrategies.com or 978-479-2871.

If you are with a business in Brooklyn or Staten Island and would like to discuss outsourcing your bookkeeping needs, please contact Jane Lvovskiy at jlvovskiy@supportingstrategies.com or 718-504-5643.
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Plan for Bookkeeping in Your New Business

January 5, 2017 / by Darcie Coy posted in Santa Monica, Los Angeles

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darcie-coy-for-web.jpgEven if your business is profitable, it could still be at risk of failing unexpectedly if you don't track your money properly. And yet every day we see companies launched with little to no budget for professional bookkeeping services.

That's a formula for disaster.

You Don't Get What You Don't Pay For
The reason new businesses skimp on bookkeeping services is simple: They think they're saving money. But just as you can save more than you spend by hiring a professional to prepare your personal income tax returns, you can minimize the "loss" portion of your company's P&L — and maximize the profit — with the help of skilled bookkeepers.

Think about what you have estimated for revenue and make sure your budget for controllership and bookkeeping services is commensurate. If you expect to have a high cash flow, you want to plan for it and not rely on barebones or bootstrap bookkeeping.

Inadequate bookkeeping services can not only eat into your profits, but also lead to significant problems with the IRS. According to Franchise Business Review, "About one in three small businesses will face fines and penalties at some point in their operations due to mistakes, inaccuracies and other errors." And their recommendation for avoiding penalties due to inaccuracy is to hire a professional firm with the skills and experience necessary to handle your business' accounting needs.

Also keep this in mind: If you're crafting a business plan and seeking investors, being thrifty with your controllership and bookkeeping services won't impress them. It will scare them. They'll want to know their investment is well cared for.

Financial Planning Is a Big Part of Business Planning
Besides helping you keep track of your financials, an bookkeeping services company can help you analyze and interpret them, a key component in helping your business grow. You may also need help producing timely, accurate financial reports for investors on a regular recurring basis — usually monthly.

Your bookkeeper should take a holistic approach to your business, understanding not only its current state but also your goals for the future.

You need a bookkeeping services company that can scale with your growth, not stifle it. If you work with a company that has solid processes in place and a large team of qualified professionals, you can minimize the kinds of financial growing pains that can stunt your development.

For more information on this topic, read my blog post from November 2016: Smart Accounting for Start-Up Businesses.

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Legal and Tax Disclaimer
This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal and accounting advisors, and you should consult with a tax, legal or accounting professional before engaging in any transaction.

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Meet the Italian Mathematician Behind Modern-Day Accounting

January 3, 2017 / by Harlan Gleeson posted in Santa Monica, Los Angeles

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Harlan-Gleeson-for-web.jpgItalia. The land that brought us Mediterranean seascapes, the language of love, Michelangelo's "David" and, of course, the origins of keeping good books.

While solid accounting practices date back to ancient Egypt and Mesopotamia, our true Founding Father was, in fact, a Renaissance man: a mathematician named Luca Pacioli. A trusted employee of several successful merchants of Venice, Luca decided he needed a totally new way of accounting that would demonstrate a merchant's performance and the reasons behind his success (or lack thereof).

At the time, the Renaissance elite was developing an appreciation for the practice of algebra and its emphasis on balance. Whatever happens on one side of an equation must be accounted for on the other side.

According to NPR's All Things Considered, Pacioli, who was known to break bread with Leonardo da Vinci, saw in this mathematical thinking a way to appease and impress his high-flying clients. And thus double-entry bookkeeping was born.

While some might call accounting dry, others say the same of a fine chianti (as a compliment). The next time you make an entry in the balance sheet equation, Assets = Liabilities + Owners Equity, remember that the contemporaries of da Vinci recognized the art of accounting as a truly beautiful thing.

(If I've piqued your interest, you can check out our blog for more on balance sheets and P&Ls, trial balance basics and double entry accounting.)

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New Year, New IRS Rules

December 30, 2016 / by Mary Sue Renfro posted in Rochester, Orlando

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Mary-Sue-Renfro-for-web-square.jpgFor accounting services professionals, the New Year always brings new regulations. Here's an overview of some of the key ones up ahead.

Mandatory New I-9 Form
This one's coming fast. Employers must start using the new I-9 form, a.k.a. the Employment Eligibility Verification Form, by January 22. The form is designed to verify compliance with the 1986 Immigration Control and Reform Act, which requires employers to confirm each employee's identity. Among the changes to the form, last updated in 2013, are a supplemental page for the preparer/translator.

Access the new form here.

New Filing Deadlines for W-2 and 1099 Forms
Under terms of the Protecting Americans from Tax Hikes Act of December 2015, employers must now submit their copies of W-2 forms to the Social Security Administration by January 31. Previously, employers had until either the last day of February (for paper copies) or the last day of March (for digital copies). In addition, employers can now file for only one 30-day extension, and they must file the required form (8809) by January 31.

The new deadline also applies to 1099 forms covering payments to independent contractors and certain other forms of compensation for non-employees. The current deadline for employers to furnish copies of W-2 forms to their employees, January 31, is unchanged.

According to an agency bulletin, the earlier deadlines "will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them."

New Filing Deadlines for 1065 and 1120C Forms
The filing dates for these two forms have essentially flip-flopped, per the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. Form 1065, pertaining to partnership income, has changed from April 15 to March 15. Form 1120C, pertaining to C corporations, has changed from March 15 to April 15. (Form 1120S, for S corporations, remains March 15.)

The idea is that putting the partnership filing deadline (including Schedule K-1 "pass-through" taxes) ahead of the C corporation deadline would make it less likely that corporations would be forced to seek extensions for their tax returns.

The American Institute of CPAs has posted this handy guide summarizing original and extended tax return due dates.

One Significant Postponement
A quick reminder: The new revenue recognition standard set by the Financial Accounting Standard Board, originally slated to go into effect on December 15, 2016, has been postponed for accounting periods beginning after December 15, 2017, for most public companies and a year later for nonpublic companies. Among the reasons for the delay cited by the Journal of Accountancy was "a lack of available IT solutions for the new standard."

We haven't covered every change in IRS regulations, of course. Some, like the Transportation Mainline Pipeline Construction Industry Optional 62(c) Expense Substantiation Rules for Payments to Employees under Accountable Plans, cited in the IRS's Revenue Procedure 2016-55 bulletin, are incredibly arcane.

Be sure to stay tuned for an update on other changes going into effect in 2017. And if you're looking for the latest on the new Fair Labor Standards Act overtime regulations, I've also blogged on that topic.

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Legal and Tax Disclaimer
This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal and accounting advisors, and you should consult with a tax, legal or accounting professional before engaging in any transaction.

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Why Business Owners Need to Understand Cash Flow Statements

December 28, 2016 / by Ann Willett-Thomas posted in Santa Monica, Los Angeles

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Ann-Willett-Thomas-for-web.jpgI once did the books for a restaurant owner who kept confusing the bottom line of his profit & loss (P&L) statement with his actual cash flow. If he hadn't had someone looking over his shoulder, the results could have been disastrous.

There's a cautionary tale here for all small business owners. Please note: I've provided a simplified example here to illustrate my point.

Another Day Older and Deeper in Debt
To get his business started, the restaurant owner had taken out a business loan. He had also run up a lot of credit card debt early on, charging additional equipment and supplies so as not to burn through the loan too fast. There's nothing wrong with that per se; a lot of small businesses start out in debt.

Even though he no longer used the credit card, the restaurant owner still had to pay down the debt. All told, he was on the hook for about $10,000 a month between the loan and the credit card. Even so, he was keeping his head above water. In an average month, his P&L would show a profit of about $15,000.

That's when the confusion started. Time and again the owner would see that profit and want to write himself a check for, say, $10,000. And time and again I would have to explain that he couldn't do that. That's because the P&L only shows profits or losses for a given month and doesn't factor in any cash used to pay for balance sheet items, like long-term debts. Before he could write himself a check, the restaurant owner needed to subtract $10,000 (for his monthly debt obligation) from the $15,000.

So while his profit for the month was $15,000, his overall positive cash flow was only $5,000.

Getting with the Program
Fortunately for small business owners, accounting software has come a long way since then. (And if you aren't using accounting software, you need to join the 21st century!) Every type of accounting software can generate a cash flow statement. This — not your P&L — is what you should use to gauge the true health of your business.

Basically, the cash flow statement analyzes a handful of vital signs worded something like this, depending on the program:

  1. Net cash provided by operating activities
  2. Net cash used in investing activities
  3. Net cash used in financing activities

To determine cash flow, you start with No. 1 and add 2 and 3 (don't let the negative numbers confuse you — just keep adding them!).

Your cash flow should be a positive number. If it's positive, but still lower than you'd like, you need to do a deeper analysis. If it's negative, you need to address your financial situation immediately.

Our restaurant owner had two basic options for increasing cash flow beyond $5,000 a month:

  1. Increase revenue (difficult, considering he had only one modest-sized restaurant to work with).
  2. Cut expenses (the more practical avenue).

One thing he couldn't afford to do was to run his business as if his long-term debt didn't exist. That's why he needed to focus on his cash flow statement — not his P&L.

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How to Work with Clients in Different Time Zones

December 26, 2016 / by Jennifer Lang posted in Santa Monica, Los Angeles

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jennifer-lang.pngWorking remotely opens a whole network of possibilities. You can collaborate just as effectively with a client who's halfway around the world as one who's right around the corner, provided you account for the difference in your time zones.

All it takes is being flexible with your availability and establishing procedures to avoid communication breakdowns.

What Time Is It? That Depends …
In an increasingly global economy, many U.S. companies have to adjust to doing business 24/7. When it's 9 a.m. in Kokomo, Indiana, it's 7:30 p.m. in Kolkata, India. Three p.m. in Beijing is 2 a.m. in Boston.

Fortunately, most Supporting Strategies clients are stateside, meaning that time differences are fairly minor. Still, you need to be aware of them to avoid miscommunications and missed communications.

You also have to be careful not to inconvenience your client. Say you're in the Central Time Zone and you call an East Coast client at 11 a.m. your time. Well, it's noon at your client's office, so your call could interrupt their lunch hour. Or if you're on the West Coast and you call a client out East at midafternoon your time, they could be preparing to leave for the day.

So that leads to the first rule of communicating with a client in a different time zone: Schedule calls whenever possible. That provides an opportunity to select a mutually convenient time and for each of you to prepare. Once you've determined a time that works for each of you, schedule regular calls at that hour to discuss routine business.

Be Proactive
If you're not instantly familiar with the time difference between you and your client, apps such as the Time Zone Converter can help you figure it out.

Be sure to include both your local time and the client's local time in your email when you set up a call. Otherwise your phone might ring at 8 a.m. when you're expecting a call at 9 a.m. Really, it comes down to being proactive. Don't allow a miscommunication to occur when you can easily avoid it. And by taking control of the process, you can also set your expectations for the client.

Establish Clear Deadlines — But Make Yourself Available, Too
Many of your routine client communications can be conducted by email, which resolves most of the time zone issues. Still, it's important to establish response deadlines. The deadline, whether it's one business day, 48 hours, a week — whatever — can vary depending on the nature of the business or the complexity of the request. The important thing is to set a reasonable timeframe and stick to it.

Despite all of your best efforts, you might still need to make yourself available outside normal business hours to accommodate a client in a different time zone. As long as both parties are considerate of one another’s preferred working schedule you should be able to collaborate harmoniously with minimal disruptions. Being thoughtful and flexible in these ways creates the opportunity to work remotely with interesting clients all over the United States — and beyond!

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Automating Recurring Charges with QuickBooks Online

December 22, 2016 / by Angel Mazariegos posted in Santa Monica, Los Angeles

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Angel-Mazariegos-for-web-square.jpgRecently I’ve been approached by several clients looking for a way to automate collection on their recurring credit card payments using QuickBooks Online (QBO)—one of the best web-based tools for small business bookkeeping services.

For business owners who have multiple recurring payments to collect, automating recurring payments can help you streamline your processes.

For example, think of a produce distributor who makes multiple regular deliveries to local restaurants. Each month the same goods are distributed at the same price. For both the distributor and the restaurants, a lot of time and effort can be saved by automating this invoicing and payment process.

To set up an automatically recurring charge:

  1. Go to the top right corner of your QuickBooks Online window. Click “Company/Gear” and then select Recurring Transactions.
  1. Click “New,” then choose “Sales Receipt” as your transaction type. You’ll be presented with a sales receipt template form.
  1. Choose “Scheduled” as your type of Template and give it a name. Select a customer and enter in an email address so that your client will receive a confirmation email when the payment goes through.
  1. Set up your payment Interval as well as your Start and End date (if needed).
  1. Enter in your client’s credit card payment information. Make sure to check the box that says “Process Credit Card.”
  1. Fill out the rest of the Sales Receipt. This should be straightforward, done the same way as with any other sales receipt, recurring or non-recurring.
  1. Hit “Save.” You’ll receive a recurring credit card authorization form. Have your client sign this form and return it to you before the first payment goes through. Then either save this form or hand it over to your bookkeeping services provider for safekeeping.*

After this you’ll be all set up to collect this regular payment automatically, no manual data-entry required. If the details of the payment should change, just return to this sales receipt to make any necessary changes. 

*NOTE:  There are PCI compliance requirements regarding the proper transmittal and storage of credit card information.  If you are unsure of how to comply, consult your bookkeeping services provider, CPA, or legal counsel.

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