Helpful info & Updates from EVT
Blog Posts
Key Financial Ratios every Business should Understand
1. COGS to sale ratio What it shows:
How much of every dollar earned is spent directly on producing your product or delivering your service.
Formula:
COGS ÷Sales
Why it matters:
A rising COGS ratio can signal pricing issues, supplier cost increases, or inefficiencies in production or service delivery.
2. Operating Expense to Sales Ratio
What it shows:
How much of your revenue goes toward running the business (admin, marketing, rent, etc.)
Formula:
Operating Expenses ÷ Sales
Why it matters:
This ratio helps you understand whether overhead is scaling appropriately as the business grows.
3. Gross Profit Margin
What it shows:
How much profit you keep after covering direct costs.
Formula:
(Sales – COGS) ÷ Sales
Why it matters:
This is a core indicator of pricing strength, cost control, and overall business model health.
4. Net Profit Margin
What it shows:
The percentage of revenue that becomes true profit after all expenses.
Formula:
Net Income ÷ Sales
Why it matters:
This is your bottom-line profitability – the clearest measure of financial success.
Cash Flow & Efficiency Ratios
These ratios measure how quickly money moves in and out of the business. They rely on average balances from your Balance Sheet.
5. Accounts payable turnover (AP Turn)
What it shows:
How quickly you pay your vendors.
Formula:
COGS ÷ Average Accounts Payable
Why it matters:
A low AP turnover may indicate cash flow strain or slow payment habits; a high turnover means you’re paying vendors quickly.
6. Accounts receivable turnover (AR Turn)
What it shows:
How quickly customers pay you.
Formula:
Sales ÷ Average Accounts Receivable
Why it matters:
A low AR turnover can signal collection issues or overly generous payment terms.
7. Inventory Turnover
What it shows:
How many times you sell through your inventory in a period.
Formula:
COGS ÷ Average Inventory
Why it matters:
Low turnover may indicate overstocking or slow-moving products; high turnover suggests efficient inventory management.
8. Inventory Days on Hand (DOH)
What it shows:
How long inventory sits before being sold.
Formula:
365 ÷ Inventory Turnover
Why it matters:
This ratio helps you understand cash tied up in inventory and how quickly it converts into sales.
CFO Advisory Support for Your Business
If this email sparked questions about your numbers, your pricing, or how these equations apply to your business, EVT offers fractional CFO consulting designed for small business owners who want clarity, confidence, and a plan.
Whether you need help modeling scenarios, understanding your true profitability, or building a financial strategy you can actually use, you can schedule a CFO Consult anytime.
Friendly Reminder: Upcoming Quarterly Estimated Tax Deadline
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W-9 Best Practices every Business should follow
Hi everyone,
As we move deeper into the year, this is a great time to revisit one of the simplest ways to stay compliant and avoid January headaches: consistent W‑9 collection. Missing or outdated W‑9s are one of the most common issues we see during 1099 season, and a few small habits can make a big difference.
Why W‑9s Matter
A completed Form W‑9 gives you the legal name, business classification, address, and tax ID you’re required to have on file before paying a contractor or vendor who may need a 1099. When this information is missing or incorrect, it can lead to filing delays, rejected forms, or the need for corrected 1099s later.
Best Practices to Follow All Year :
• Collect a W‑9 before issuing the first payment. Make this part of your onboarding process for any contractor or vendor.
• Do not pay vendors who refuse to provide a W‑9. The IRS requires backup withholding if a vendor won’t furnish their tax ID.
• Request updated W‑9s when information changes. New addresses, name changes, or entity changes all require a new form.
• Store W‑9s securely. These forms contain sensitive information and should be kept in a secure digital or physical file.
• Review your vendor list quarterly. This helps you catch missing forms long before year‑end.
Common Issues We See :
• Vendors paid throughout the year with no W‑9 on file
• Incorrect legal names or outdated EINs
• Contractors switching from sole proprietor to LLC without notifying the business
• Clients waiting until January to request forms, when vendors are harder to reach.
A Quick Reminder About 1099s
If you paid a non‑employee individual or unincorporated business $600 or more for services during the year, you may need to issue a 1099‑NEC.
If you don’t have a W‑9, you are still required to file using whatever information you have—and issue a corrected form later if the vendor finally provides their details.
Rumor Mill: The IRS did propose increasing the threshold to $5,000, and at one point discussed $2,000, but those increases have NOT been finalized or implemented. As of now, the long‑standing $600 threshold still applies for 2026 filings unless the IRS issues a final rule changing it.
Want help tightening up your process?
If you’d like support setting up a clean W‑9 workflow, organizing your vendor files, or preparing for 1099 season long before January, I’d be happy to help. Strong bookkeeping systems make compliance easier and keep your year‑end stress low.
Local sales tax rate changes
Hi everyone,
As part of our ongoing commitment to keeping you informed and compliant, EVT Consulting is sharing an important update from the Washington Department of Revenue (DOR). Several local sales tax rate changes will take effect on July 1, 2026, and businesses operating in the affected areas will need to update their point‑of‑sale and accounting systems accordingly.
Below is the list of jurisdictions where local tax rates will change:
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City of Auburn – Local Law Enforcement Programs
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City of Burien – Local Law Enforcement Programs
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Chelan County – Emergency Communication Tax
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City of Covington – Local Law Enforcement Programs
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Douglas County – Emergency Communication Tax
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City of Federal Way – Local Law Enforcement Programs
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Island County – Local Law Enforcement Programs
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Jamestown Tribe (Clallam County) – New Retail Sales Tax Location Codes
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Jamestown Tribe (Jefferson County) – New Retail Sales Tax Location Codes
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City of Lakewood – Local Law Enforcement Programs
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Town of Mansfield – Local Law Enforcement Programs
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City of Maple Valley – Local Law Enforcement Programs
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City of Medina – Local Law Enforcement Programs
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City of Mount Vernon – Local Law Enforcement Programs
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City of Olympia – Local Law Enforcement Programs
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Pierce County – Local Law Enforcement Programs
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City of Pullman – Local Law Enforcement Programs
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Thurston County – Local Law Enforcement Programs
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City of Tieton – Transportation Benefit District
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City of Washougal – Local Law Enforcement Programs
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Whatcom County – Local Law Enforcement Programs
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Whitman County – Local Law Enforcement Programs
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City of Woodinville – Local Law Enforcement Programs
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City of Yakima – Transportation Benefit District
You can view the full list of updated location codes and tax rates directly on the Washington DOR website: https://dor.wa.gov
Paper notices are being reduced. Due to budget constraints, the DOR will no longer mail paper notifications to businesses that file electronically. If you’d like an additional reminder 30 days before rate changes take effect, you can sign up for their Sales Tax Rate Change email notices on the DOR website.
For accountants and CPAs: If you support businesses with retail sales in any of the affected areas, please notify your clients so they can make the necessary updates.
If you have questions, you can contact the Washington Department of Revenue at 360-705-6705.