How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Finance Question Here...
Megan C is online now
A new question is answered every 9 seconds

My business model is a subscription based plan at $5 a month.

This answer was rated:

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?

Please enter chat

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
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.