Business Best Practices

As a small business owner, you probably think about tracking expenses and keeping up with tax deductions, but these aren’t the only critical accounting tips you should know. Whether you’ve been in business for a while or you’re a new start-up entrepreneur, read on for our 8 best accounting tips.

1. Outsource your bookkeeping.

For every business, bookkeeping is critical. This essential task is keeping organized records of your business’s income and expenses. If you’re like most small business owners, bookkeeping isn’t in your primary skillset. And even if it is, you probably don’t have time to crunch numbers and keep records. By outsourcing this critical task, you will free up your time; put this vital function in a professional’s capable hands and check one business owner-related stressor off the list.

2. Keep accurate records.

In addition to having someone overseeing your bookkeeping, it is up to you as the business owner to make sure you keep accurate records for your business. For example, you’ll need to account for:

• Gross receipts are sales, deposits, credits, recipes, invoices, etc.
• Expenses include all receipts, canceled checks, or anything else that shows the cost of doing business.
• Fixed assets should be recorded so that annual depreciation can be calculated.

Pro tip: For tracking receipts, you may want to use a receipt scanning app on your smartphone. It makes it easy to scan and store receipts electronically instead of maintaining a large paper file.

3. Keep an accurate inventory.

Keeping accurate inventory records provides you with current data that reveals whether you can take on client requests or additional projects with inventory on hand and when you need to order stock. It also helps you identify trends over time and make basic predictions about your business operations. All of these factors allow you to plan and strategize about your business. This ability is critical to developing and maintaining a small business over time.

4. Separate personal and business accounts.

The most important reason to keep your personal and business accounts separate is taxes. As a business owner, you can deduct expenses like travel and office supplies; however, you must provide supporting documentation for these expenditures to claim them. Lumping personal expenses in with business expenses makes a tedious mess of separating expenses and could knock you out of some deductions. It is best to have a separate line of business credit, separate credit cards, and a separate bookkeeping system to be safe.

5. Have (and maintain) a budget.

You should have developed a budget when you created your business plan to make projections about revenue and expenditures. But beyond that, you must maintain a working budget at all times. This approach helps you stay on track with what you spend versus what you take in, and it provides accountability so that if you do get off track with your spending, it is readily apparent and can be corrected quickly.

6. Work with a tax professional.

When the average business owner attempts to complete their taxes, it costs them about 40 hours in valuable time. And even then, chances are, a professional’s help will be needed to ensure the business is getting all the deductions to which it is entitled. So why not start with a pro? After all, tax preparation fees are a tax-deductible business expense.

7. Plan ahead.

When a small business implements the accounting tips on this list, it allows for planning with accuracy. Accuracy is the key term. Anyone can guess what might happen, but only with accurate records and observations about business patterns can you confidently make targeted predictions. For example, a small business that tracks income and expenses can detect patterns that reveal the best time for large investments and expenses.

8. Monitor business performance with financial statements.

Again, we cannot emphasize the importance of logging income and expenses. It helps in the day-to-day operation of your small business and provides information about overall business performance. For example, income statements help your business determine profit or loss, a balance sheet shows assets and liabilities, and a cash flow statement shows how much money goes in and out of your business in a given time, as well as how much cash remains. These types of financial statements are also imperative when asking banks and investors to secure financing or funding.

With these eight tips, you can keep your small business on track, establish valuable patterns of business behavior, and make sound financial decisions for your business’s future.

If you would like help with some of these accounting tasks, contact us now.

Your accountant or CPA is a business asset that you should put to good use year-round, not just at tax time. There are several topics beyond taxes that business owners should discuss with their trusted financial professionals. In this article, we cover five of them for you. While the new year is traditionally when business owners think of making financial, strategic, and other business-related plans, any time is the right time to speak to your accountant to discuss the following aspects of your business. You can’t begin the conversation too early, but it could be too late in some cases, so don’t put aside these five essential talking points.

1. Financial Planning

Budget is front of mind for business owners, but other financial issues impact your business, too. Consider a full portfolio review with your accountant to plan your financial future. Some critical topics to cover include strategies to improve cash flow, existing business loans, capital investment, charitable contributions, employee-related expenses like bonuses and health care, retirement planning, and asset management.

2. Company Growth

The goal of all businesses is growth. With growth comes change. As your business objectives shift, your valuation and tax liability often shift, too. Any changes you experience in your business should be conveyed to your accountant or CPA so that they can apprise you of liabilities or status changes. For example, suppose you plan to expand, add additional locations, make significant staffing changes, merge companies, acquire new businesses, or plan to sell your business. In that case, you should set up an appointment with your accountant to develop a logical strategy to address the change.

3. Inventory

If your business sells or resells tangible goods, inventory is vital. Sales tax laws and regulations can be challenging. Many states have rules about nexus (i.e., how much presence a business has in a city or state) related to where businesses warehouse inventory and fulfill orders. Your accountant can assess your order process to verify your restocking and ordering processes to maximize cash flow, ensure unsold inventory is accounted for, and ensure that sales tax is collected everywhere your company has nexus.

4. Risk Management

Do you have a plan in place to protect your business from disruption? Many do not. If that applies to your business, contact your accountant to discuss continuity planning to protect your business. They can provide professional insight regarding how to mitigate risks should a disruption occur. Some topics to address are whether your insurance policies are up to date, if all compliance, security, and privacy standards are met, whether your business has fraud protection in place, and if the existing internal controls protect your business. Given the time and capital small business owners invest in their passion, they must take time to manage any potential risk that could destroy what they worked so hard to create and build.

5. Tax Compliance

Lastly, as a business owner, you always want to be tax compliant. And this doesn’t apply only to federal taxes. It is just as essential to make sure state-imposed taxes are addressed on time. Regulations and tax laws change frequently, so it is vital to have a firm grasp on these. The best way to ensure you do this is to have your accountant guide you. They can inform you of any changes that affect your business and advise you on addressing them. Discuss collecting and filing W2s and 1099s for any contract employees; ensure exemption and resale certifications are collected and stored correctly; comply with online sales and nexus rules; and have an internal review to find any issues that might trigger a sale tax audit.

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It helps to think of your business accountant as an extension of your team, an impartial adviser who will assess the risks and rewards associated with your business. They will answer your questions and illuminate unclear topics for you. They may bring up important points you’ve yet to consider, so make that call today and get a meeting on the calendar to discuss these critical points with your accountant. And remember, you can do your part by making sure you keep business and personal finances separate and maintaining complete, organized records.

While you may think it’s better to take care of your small business accounting tasks in-house, you may be surprised to know that your business can benefit from having a professional accountant or CPA handle the job for you. Here are the top three reasons to outsource your accounting.

1. Peace of Mind

The number one reason for outsourcing your accounting is the peace of mind you will get regarding managing your accounting records. A qualified accountant or CPA on your team allows you to gain access to their professional knowledge and experience. Further, you can even choose an accountant that specializes in your unique business needs. A professional can help you keep your business records accurate and up-to-date. For example, payroll and tax documents will be maintained appropriately and submitted promptly. Timely and accurate accounting reduces your risk of penalties resulting from inaccurate record-keeping or lack of knowledge regarding aspects of accounting like tax laws and deadlines.

2. Focus on Business Development

When you enlist the services of a qualified accountant or CPA to manage your small business accounting needs, you minimize the time that you or your senior staff must spend performing or micromanaging those tasks. Freeing up your time in those areas enhances your ability to maintain a keen focus on the day-to-day tasks your business faces and any additional business needs that arise. Being able to focus your time on managing and growing your business, you improve operational efficiency. As you develop strategic goals, you can convey those to your outsourced accountant to garner their professional guidance and support when executing and realizing those goals.

3. Save Money

Many small business owners feel that handling accounting tasks in-house is more cost-effective because they can utilize existing staff. However, consider the total cost involved in hiring or training a staff member to manage your business’s accounting needs. There is also the associated time expenditure related to supervising an employee who manages the accounting. For a dedicated in-house staff member to handle the task, you must consider the additional costs of payroll, payroll taxes, and employee benefits. There is also employee turnover to consider, which, if high, could lead to additional training and expenses. By not electing to have a full-time dedicated employee handle accounting in-house, you also save on space and technology required to accommodate that individual.

For these reasons – and more such as getting timely financial advice, understanding cash flow, and maximizing your tax savings opportunities – it’s time to outsource your business’s accounting needs. What you gain far outweighs the cost.

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Contact our firm to find out how we can create a package of accounting services for your small business.

For more information about our outsourced accounting services, visit our outsourced accounting website. »

To learn more about how we can become an extra hand for your small business, call us at 901-685-9411 or request a consultation through our website now.

If you’re one of the many people working from home this year, you may have questions about the home office tax deduction and whether you can qualify for it. Here’s a rundown of the rules.

Employees

Unfortunately, home office expenses incurred while working as an employee are not currently deductible. The reason: the Tax Cuts and Jobs Act temporarily suspended the itemized deduction for unreimbursed employee business expenses (and various other miscellaneous expenses). Unless lawmakers make a change, the deduction won’t become available again until 2026.

Self-Employed Individuals

The news is better if you are self-employed. You will be eligible for a home office deduction provided you can satisfy certain requirements. If you do, you can deduct all direct expenses and part of the indirect expenses involved in working from home. The deduction is generally limited to income from the business, and excess expenses may be carried over to the next year.

Direct expenses are costs that apply only to your home office. The cost of painting your home office is an example of a direct expense. Indirect expenses include expenses such as rent, mortgage interest, real estate taxes, maintenance, and homeowners insurance. You can deduct only the business portion of your indirect expenses. These expenses are typically allocated between business and personal use based on square footage.

IRS Requirements

To qualify, a home office — a room or another separately identifiable space — generally has to be used regularly and exclusively for business purposes. The home office also must be (1) your principal place of business; (2) a place where you meet patients, clients, or customers; (3) a separate unattached structure that you use in connection with your business; or (4) a space within your residence that you regularly use to store inventory or product samples in connection with the business, if the residence is the only fixed location of your business (in this situation, the space doesn’t have to be used exclusively for storage).

You don’t necessarily have to spend most of your work hours in your home office for it to meet the principal place of business requirement. A home office can qualify if you use it for administrative or management activities and it is the only fixed location where you conduct those activities. Some examples of administrative or management activities include: billing customers, clients, or patients; keeping books and records; ordering supplies; setting up appointments; forwarding orders or writing reports.

Simplified Option

If you prefer not to keep track of your expenses, there’s a simplified method that allows qualifying taxpayers to deduct $5 for each square foot of office space, up to a maximum of 300 square feet. When the simplified method is used, qualified mortgage interest and property taxes are separately deductible as itemized deductions.

Your tax professional can help you determine whether you qualify for a deduction and what you may need to do to take advantage of it.

Send us an e-mail or call us today at 901-685-9411 or 870-739-8664 to discuss your business needs with an experienced CPA

Payroll is one of the most important aspects of any business, but it’s one that, when running smoothly, business owners don’t tend to think about; however, when there’s a payroll glitch, it jumps to the forefront of an owner’s mind. Here are several payroll mistakes that can cost you a bundle and how to avoid them in your business.

1. Misclassifying employees

How you classify employees when you hire them impacts how you and your employees are taxed. If you hire an office staffer to answer phones and file paperwork for an hourly wage, that is a non-exempt employee. Alternatively, if you employ an individual as a salaried Head of Operations, they are exempt. The main difference is that non-exempt employees are eligible to receive overtime pay; exempt employees are not.

There is also a distinction between employee, freelancer, and contractor. An employee receives a regular wage, while freelancers and contractors are typically paid per project. Misclassifying employees may not seem like a big deal at first, but in time, the IRS will find out, and your business will end up paying the taxes due, the associated fines, and of course, the interest on the past-due taxes.

To avoid this issue, understand the classifications and the capacity in which you hire your employees. To classify employees, be sure to use IRS definitions. For example, the IRS defines independent contractors this way: “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

2. Miscalculating pay

There are many payroll aspects to consider, such as overtime, commissions, deductions, paid time off (PTO), and more. When it comes to calculating pay, payroll admins should keep in mind that different policies apply to each state, and that must also be considered. For example, the federal overtime law dictates that overtime wages (pay for hours worked over 40 hours in a workweek) are paid at 1.5 times the employee’s regular hourly rate. However, some states have different policies regarding overtime. For example, in Alaska, California, Colorado, and Nevada, overtime is also based on hours worked in a day. As a general rule, a business should comply with the more generous law for the employee.

In addition to overtime pay miscalculations, poor time tracking capabilities also contribute to miscalculated pay. To avoid an issue miscalculating pay, be sure to know your state’s guidelines on overtime pay. Further, be sure that your company has a reliable tracking system for keeping up with employee hours so that pay, overtime, and other payroll aspects like PTO are correctly recorded and calculated. This process will significantly reduce the chance of payroll overpayment or underpayment mistakes that could become costly payroll corrections.

3. Missing deadlines

One of the most damaging payroll mistakes for a business is missing payroll tax deadlines. Missed deadlines can cost thousands of dollars in penalties, and in extreme cases, a company’s business license can be suspended.

To avoid this critical error, use the IRS Calendar Connector to help you remember your tax deadlines. However, if you miss a tax deadline, contact the tax agency immediately because late payment penalties pile up quickly. The quicker you get in touch with the IRS, the lesser penalty you will have to pay.

4. Messy recordkeeping

What is the word a small business owner least likes to hear? There are likely a few, but “audit” has to be right at the top of the list. The anxiety that term induces should be reason enough to keep accurate, complete payroll records that are well-organized. The price you pay for not doing that could be fines, penalties, and a plethora of costly payroll-related tax issues. For example, if you accidentally file W-2 forms late, you will pay between $50 and $260 in fines depending upon how late the W-2s are filed.

The same goes for late-filed 1099 forms or any other tax-related documentation. The fines vary. For example, if you do not provide a contract employee with a 1099 form, that’s a $250 fine.

To avoid this issue, keep accurate, complete, up-to-date payroll records for all employees. Mind your paperwork like W-2 forms, timesheets, 1099 forms, and pay records. Also, be sure to retain employee records for the four-year minimum that the IRS requires after an employee leaves your company. FYI: The SBA recommends retaining payroll records for six years.

5. Missed tax forms

An extension of point four above targets the end-of-year task that some payroll admins dread – preparing and sending all the necessary tax forms to all employees, whether they are full-time (W-2), part-time (W-2), or independent contractors (1099). Remember, form 1099 is required to be sent to an independent contractor who earned $600 or more during a tax year.

To avoid this issue, make sure tax rates are in order, payroll is correctly calculated, and all forms are correctly filled out and sent to employees promptly.

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Payroll-related tax issues are avoidable. Take time to speak to your trusted tax preparer or CPA today so that you avoid these mistakes and keep your business running as it should.

To learn more about how we can become an extra hand for your small business, call us at 901-685-9411 or request a consultation through our website now.

Running a small business is demanding, and there’s not always time to manage every task well. If you’re letting some tasks slip through the cracks, or if you want to prevent that from happening, it’s time to consider hiring an accountant. Here’s how your business will benefit if you do:

1. You will save time.

Your number one asset as a small business owner is time. Saving as much time as you can by streamlining tasks, assigning the right employee to the job, and working efficiently are all ways business owners can manage and save time. If you’re currently managing all the accounting and payroll tasks for your company, you might be feeling the pressure of getting everything accomplished. For example, you may need to learn a new accounting software program to keep records, but you likely don’t have time to do that. Leaving bookkeeping, payroll, and other general accounting tasks to a professional saves time and dramatically reduces the likelihood of costly errors.

2. You will save money.

Understandably, you want to cut costs as a business owner. After all, that’s what intelligent owners do – minimize expenses and maximize profits. However, if you think hiring an accountant is just another added expense, think again. It may seem like you’re saving money by doing your accounting at first, but in the long run, an accountant can save your business money in a big way. They can reduce the risk of costly tax errors, provide sound advice on business decisions, and advise you on the most cost-effective choices for running your business. 3. You will gain valuable advice.

An accountant’s advice doesn’t end at how to manage your taxes or payroll. Any business decision you make as an owner involves finances. If you’re hiring new employees, launching a new product, or expanding your operations, you need to know the projected cost, any additional tax ramifications, and your potential return on investment. Your accountant can help with all of that and more, which puts you in the ideal position to make the best decision for your business.

4. You will get business plan support.

This is crucial for new startups or anyone in the early stages of starting a business. Accountants draw on their experience to help business owners understand how much money they should be making in their particular business and project out over those first few crucial years to know what to expect. That information is beneficial when putting together the financial portion of your business plan because it helps you set realistic goals regarding expenses and cash flow.

5. You will reap sound financial advice.

Your accountant is a financial expert. Unless you are as well, they know more than you do about making the most of your dollar. Choose an accountant with experience working with clients in the same business you’re in so that they will know the ins and outs of what you do and what to expect. This is particularly important when it’s time to make significant financial decisions. Your accountant can draw on their experience and help you minimize risk and get a better outcome than if you made uninformed financial decisions.

Remember, rely on the experts to help you with aspects of your business that mean the most, like finances. With a qualified accountant on your team, you’ll garner these benefits and more by freeing your time up for what’s most important – running your business – your stress level with decrease. The chance of errors in vital areas of your business like taxes and payroll will be significantly reduced, and your business will run smoother.

Send us an e-mail or call us today at 901-685-9411 to discuss your business needs with an experienced CPA. Or, request a free consultation online.