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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My business model is a subscription based plan at $5 a month.

Resolved Question:

My business model is a subscription based plan at $5 a month. So at 10,000 customers that is $50,000 a month gross. But I will have an option that they can pay for a whole year and save $10. So it will be $50 a year. If I have 10,000 people choose that plan what or how should I allocated that money? $500,000 upfront is much diff then receieving $50,000 a month over 12 months. Should I put it in something that will benefit me for tax purposes and that I can still make operating expense payments out of? Any suggestions on how to approach that?

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Submitted: 3 years ago.
Category: Finance
Expert:  Megan C replied 3 years ago.

MyVirtualCPA :

Hello, and thanks for using JustAnswer.com

MyVirtualCPA :

When you receive the annual payment upfront, it becomes deferred revenue, and each month you would amortize the portion that is earned during that month

Customer:

Hi\

MyVirtualCPA :

Hello.

Customer:

What does that mean exactly

Customer:

amortize

Customer:

But should I put it into something that can me making interrest while I use it to pay salaries, expenses, etc

MyVirtualCPA :

Amortize means you would recognize income each month - so if you had $500,000 in January for your entire year of revenue, you would debit cash for $500,000 and credit deferred revenue for $500,000

MyVirtualCPA :

then at the end of January you would debit deferred revenue for $41,667 and credit revenue for $41,667

MyVirtualCPA :

You can put it somewhere earning interest, but right now the rates aren't that great

MyVirtualCPA :

You can use the funds for whatever you like, but keep in mind that you would have to give refunds where allowed and where requested

Customer:

There has got to be something I can do with it other then just throw it into an account

MyVirtualCPA :

Well, your investment options are money market accounts earning interest, real estate, and the stock market - I would not recommend the last two for operating funds

Customer:

so you cant recommend anything to do with it to make money on it in the mean time

Customer:

any decent money market funds you can recommend?

Customer:

And can you have a business money market account?

MyVirtualCPA :

Right now, none are getting very high interest

Customer:

yeah but any interest is better than none

MyVirtualCPA :

Yes, you can have a business money market - it's essentially the same thing as a business savings

MyVirtualCPA :

Yes, but you're talking less than 1%

Customer:

wow thats it

Customer:

What about something that can pay me mothly

MyVirtualCPA :

Yes, right now. Until the quantitative easing ends and the fed lifts the interest rate, banks aren't paying out on their savings and money market accounts

Customer:

or do I just pay myself

MyVirtualCPA :

You just pay yourself

Customer:

what if you are not good with money

Customer:

should you leave that part to someone else?

Customer:

like a service

MyVirtualCPA :

If you're not good with money, I would hire an accountant in your local area

Customer:

they can manage the money?

MyVirtualCPA :

to at least direct you with what to do given your goals, etc

MyVirtualCPA :

Yes, if you agree to it

MyVirtualCPA :

You could also get a banker to assist you, but I prefer accountants because they are licensed

Customer:

so an account or CPA? Anyone better then the other?

MyVirtualCPA :

CPA would be better, because they have a lot to lose if they mismanage your funds

Customer:

ok thanks for the advice

MyVirtualCPA :

You're welcome

Customer:

private or chain CPA?

Customer:

Like H&R Block or something

MyVirtualCPA :

I would go to a local firm

Customer:

The last local firm I went to closed

MyVirtualCPA :

Not a chain

Customer:

a year later I had to go to someone else

MyVirtualCPA :

Look for someone that has been around a while.

Customer:

Okay thanks so much

MyVirtualCPA :

You're welcome. If you would, please rate my response as "Excellent" so that I may receive credit for assisting you today

Customer:

k thanks

Megan C and other Finance Specialists are ready to help you
Expert:  Megan C replied 3 years ago.
Thanks, Timothy for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, or social security needs. IT was a pleasure working with you today.