10 Business Tax Deductions You Should Be Leveraging

Tax Day is still a few months away, but you shouldn’t wait until it’s time to file your taxes before thinking about the deductions that can be used for your business. Are you leveraging the business expenses correctly to take advantage of the available write-offs? One of the benefits of having a small business is that you can deduct certain expenses that are necessary for your business efforts. It can be hard to keep up with all these transactions, which is why you might consider leveraging the services of an outsourced accountant for assistance.

How Tax Deductions Work

A tax deduction, also commonly known as a business write-off, is particularly useful for small business owners and anyone self-employed. Whether you have a small side-gig at home or you are working full-time on a start-up, you can manage your tax burden by deducting expenses that are spent on business costs. Even if you are a W-2 worker and earn income from an employer, you can still write off any expenses related to business efforts outside of your employment.

This process lowers the income on paper, showing a reduced taxable income when it is time to file your taxes. As a simple example, if you collect $100,000 in a given year through the business, but you spent $20,000 on business expenses, then your taxable income for the year would be $80,000.

The IRS has a detailed tax code, which includes allowances for small business owners and self-employed workers to write-off business costs. If you are spending money that is required for your business, then it can likely be listed as a write-off. The best way to ensure that you are following the rules is by hiring an experienced tax accountant for tax preparation and filing. For example, an outsourced accountant will help you in determining the expenses that qualify as tax deductions. The goal is to maximize the write-offs as much as possible, while staying within the guidelines set by the IRS.

IRS Guidelines for Business Write-Offs

The IRS allows deductions for anything that can be categorized as a “reasonable business expense.” A few specific guidelines are in place to help you determine if your expense can qualify as a deduction:

  • The cost is related to your business directly
  • The expense is necessary and ordinary
  • The amount spent is reasonable

Examples of Tax Deductions for Your Business

Here are some of the most common tax deductions that are used by small business owners:

  1. Health Insurance Premium: Most people who are self-employed need to pay for private health insurance. Since you don’t have an employer to provide health care support, you can write off a portion of your insurance premiums.
  2. Vehicle Mileage: Track your miles throughout the year because a per-mile deduction can be used on your taxes. These driving miles need to be related to your business. For example, if you drive to the bank or you are driving to meet a client, then those miles can be included on your log for the year. Your commute to and from work does not count as deductible mileage.
  3. Home Office: Do you work from home? A portion of your rent/mortgage, utilities, and more can be written off as tax deductions. It is important that you have a dedicated space for business activities. Additionally, it needs to be the primary place where your business is operated. Then, this square footage can be calculated based on the overall size of your home and the associated monthly expenses.
  4. Professional Fees: Hiring an accountant or lawyer for assistance with your business can be a tax write-off. Any legal or professional fees that are paid for business purposes fall into this category. For example, if you hire an accountant to assist with tax preparation, then the cost of the accounting services can be included in your list of expenses for the year.
  5. Retirement Savings: Self-employment tax deductions can be used if you contribute money into a retirement savings account. The numbers vary from year to year, so the best solution is to work with your accountant and a financial advisor to determine the amount that can be deducted. Your financial team can also provide guidance regarding the most effective way to invest this money. Options include 401(k)s and IRAs.
  6. Startup Costs: Getting a business off the ground can be expensive. Not only are you putting money into product development, hiring employees, and office supplies, but the marketing and initial costs can add up over time. Keep track of all of these expenses so you can use them as tax write-offs.
  7. Bad Debt: Do you have uncollected money from customers? When accounts receivable turns into bad business debt, then it can be used as a tax deduction. In this situation, you need to have documentation proving that you took reasonable steps to collect on the invoice.
  8. Travel and Food: When you are taking a business-related trip, keep track of the expenses incurred for airline tickets, car rental, taxis, hotel fees, and more. You can’t write off personal vacations that aren’t related to business. But there are times when you can travel for business to leverage the write-offs, while still having a bit of time for entertainment or personal activities.
  9. Charitable Donations: Donating to a charity of your choice is a great way to feel good about giving back to the community. Additionally, these donations can be used as tax deductions as well. The rules change depending on the type of donation, the recipient, and the amount that is donated, so talk to your accountant for more information.
  10. Continuing Education: Most business owners need to continue learning to stay relevant in the industry. If you pay for work-related education, then those costs can be used as tax deductions. Examples include tuition, lab fees, books, supplies, transportation to the classes, and any other expenses related to your participation in the classes. For these expenses to qualify, the classes need to “maintain or improve skills needed in your present work.”

Tips to Maximize Your Tax Write-Offs

As you can see, there are many ways you can increase your tax deductions each year. But it takes work and organization to ensure that you are taking the write-offs your business is entitled to. Taking as many deductions as possible can help to lower your taxable income, which in turn reduces the amount that you will be paying in taxes each year.

Are you leveraging the write-offs for your business? Here are a few tips to follow so that you get the best results possible with your tax deductions:

  • Good Bookkeeping System: It is essential that you are keeping track of all of your business costs. In order to utilize the deductions, you need to know where the money is going. Use a bookkeeping and accounting system to record every transaction that moves through your bank accounts and credit cards. You need to have specific details about the amount of money that was spent, how it was spent, as well as documentation to back up the spending. The IRS won’t accept estimates, and you might need to verify the write-offs if you are audited in the future.
  • Check the Requirements: Talk to your accountant about specific requirements that need to be met for the deductions. For example, you should keep copies of the receipts when purchases are made. You can file these paper copies in a folder for each year. Or, consider a digital system with scans or photographs of the receipts for easy reference. Other requirements include logs or tracking information, such as a mileage log that records the odometer, purpose of the driving, and the number of miles traveled. This documentation does not need to be filed with your tax return, but you need to have it available in case there are questions about your filings in the future.
  • Simplify and Outsource: You can spend your time filing receipts and recording the transactions, but these busy-work activities are a waste of time when you can hire an outsourced accounting team to help. As a busy business owner, you shouldn’t be spending your limited hours on tasks that can be handed off to the experts. Instead, focus on your strengths and skills, and let the pros handle the number crunching and reporting for you. Outsourced bookkeeping and accounting allow you to focus on your business without getting behind on the never-ending paperwork and admin tasks.

When it is time to file your tax return, your accountant will help you claim the write-offs in the correct Schedule C section of your 1040. As this information is compiled, make sure you have open communication with your accountant regarding the rules around the deductions you are planning to take. An experienced tax accountant can provide valuable advice to help you avoid problems with the IRS in the future.

Easier Accounting is Here to Help

Are you ready to maximize your tax deductions for your upcoming tax filing? Our team at Easier Accounting is here to assist. Not only can we help with your current tax prep, but we can also create a system to ensure that you aren’t overlooking important deductions in the future. Call to learn more about available accounting services: (888) 620-0770.

Start 2020 Right with These Small Business Accounting Goals

The New Year is just a few days away… are you ready for a fresh start? Not only is January 1st the beginning of a New Year, but 2020 means that we are also ushering in a new decade. This date on the calendar marks a symbolic opportunity to reset, begin new initiatives, and align your habits to create the lifestyle that you desire.

What do you want to create in 2020 and beyond? As a small business owner, you likely have both personal goals and business goals in mind. Keep in mind that building your personal mindset can be an effective way to help your business grow as well.

While there is much to be said about mindset and personal development goals, today we are going to focus on New Year’s resolutions that will help you create a strong financial foundation for your business. Following these strategies will boost your cash flow, improve your tracking systems, and give you more peace of mind regarding the financial health of your company.

Reasons Resolutions Fail

Everyone has the best of intentions at the start of the New Year. But, how long do you stick with the new habits or goals that you’ve chosen? More often than not, we start with great intentions, then slack off by the end of January or beginning of February.

If you want to set yourself up for success, then you need to be deliberate in setting goals that will last. Not only do these goals need to be achievable, but they also need to be meaningful and impactful. When you can see results from your goals, then it increases the likelihood that you will maintain consistency in the future.

Here are three main reasons why New Year’s goals often fail:

  • You choose a goal without a realistic plan to achieve the outcome
  • The resolution is not defined or too vague
  • The goal is based on what society or other people say that you should be achieving

Understanding the reason why many New Year’s resolutions fail will give you insight into the strategies that should be followed to help you choose the right goals for 2020.

Creating SMART Goals for Your Business

In 1981, the journal Management Review coined the term SMART goals to define an effective system for setting goals that will work. Keep these simple tips in mind as you are creating your business intentions for the New Year:

  • Specific: Choose goals that are clear and deliberate. This goal should be concrete, instead of a vague idea about what you want to improve. For example, setting a goal to “improve your small business bookkeeping system” is too vague to know if you actually achieve the goal. Instead, define guidelines about what needs to be achieved, such as: “I will hire a new bookkeeper by January 15th and have a new accounting software in use by February 15th.”
  • Measurable: Next, you need to be sure that there is a way to measure your progress and success with the goal. For example, if you want to improve your consistency with bookkeeping and accounting, then you need to be able to measure the actions that are being taken. You might set a goal to spend 5 hours per week on accounting tasks, with specific measurement points regarding when reports run and analyzed.
  • Achievable: Setting goals that are too lofty could be creating a high probability of failure in the future. While it’s important to aim for big results, attempting to take a step too fast could result in frustration and a lack of achievement. For example, setting a goal to increase your profits by 500% in 2020 isn’t likely achievable without specific business-building strategies in place. On the other hand, you could set a reasonable growth goal based on the trends of past years, giving yourself room to stretch just a little more.
  • Relevant: Consider how important the goal is and how much it will impact your business. Are you choosing this goal for the right reasons? Setting a goal to outsell your competitors might have too much of an outside influence, making it hard to find the internal motivation to keep pushing forward. Instead, look at specific points of success within your business that you can build on, or identify weaknesses that need to be improved.
  • Time: You need to have a clear timeline about how progress will be achieved and when you will reach the goal. Give yourself enough time to meet smaller, stepping-stone goals that will help you achieve a greater purpose in the future. Focusing on these small wins will create an environment so you are prepared to achieve bigger possibilities.

Combining these five principles can create the perfect solution that will help your business grow.

Ideas for Small Business Goals in 2020

What are the specific goals that you should be setting for your business in 2020? If you are looking for ideas, then these are some of the options that might be beneficial for your company:

  • Review 2019: It’s hard to create effective goals if you don’t know where your starting point is. Consider the current financial health of your company so you can identify areas of improvement that need to be addressed. Being aware of what is going on means that you “take off the rose-colored glasses” and look at the reality of your current situation. Evaluate cash flow, profitability, the effectiveness of marketing campaigns, business debt balances, and more. The overall goal should be to look at income earned as well as the money that you paid for vendors and suppliers. Getting clarity on these details will help you choose goals that will be perfectly catered to the needs of your company.
  • Tap into Professional Services: You are carrying a lot of responsibility if you are trying to manage the bookkeeping, tax preparation, payroll processing, and more. Instead of fumbling your way through accounting and bookkeeping tasks that you don’t know much about, consider the option to hire professional accounting services for your small business. An experienced small business accountant will be able to offer recommendations about tax strategy, as well as the right systems that can be used to track your financial information and stay ahead of all of the reports.
  • Set Aside an Emergency Fund: Even if your business is booming right now, it is important that you are proactive about preparing for a rainy day. The economy can change and all industries often experience slow seasons and busy seasons. When the sales are flowing in, create an emergency fund that can be used in case cash gets tight. Set a goal for a specific amount that you want to have in savings by the end of the year.
  • Sales Objectives: If you are looking for ways to boost profits, then consider setting a goal about your sales objectives for the year. Are your sales currently trending upward? Then you can identify ways to leverage the growth as much as possible. Are your sales currently trending downward? Then it might be time to reevaluate and set a goal to bring sales back to the levels previously achieved. Break down the numbers to see how many sales need to be made, so you hit your desired profit margins for the year.
  • Payroll Processing: Are you calculating payroll through an outdated system? Then it might be time to update your payroll processing system. Set a goal to implement a new software that provides automatic calculations. Or, better yet, outsource payroll processing to your bookkeeping and accounting team so you no longer need to worry about the busy work every time payday rolls around.
  • Collections Systems: One area of improvement that commonly needs to be addressed among small business owners is to create a better system for follow-up regarding outstanding invoices. Outstanding customer invoices will take a toll on your cash flow, which can have a domino effect on inventory management and your ability to pay overhead costs. Design and implement an efficient system to track invoice due dates and follow-up when the payments are overdue.
  • Increase Deductions: If you are like most business owners, then it is common for expenses to slip through the cracks. Whether you lose a receipt or you don’t stay current with data entry, it can be easy to overlook transactions that could be used as business deductions. Set a goal to be more diligent about tracking these details. For example, your goal might be to set aside an hour on Fridays to update your expenses and review the money that was spent during the week.

Improving your business accounting system can be easy when you leverage the services of an experienced accounting team. If you are looking for support with your 2020 small business goals, then our team is here to assist. Contact us at Easier Accounting to learn more about the range of available services. We keep our focus on small business accounting services, giving you specialized services that will help your company thrive. Call right away so that you are ready to achieve your 2020 New Year’s resolutions: (888) 620-0770.

Will Santa Bring Your Business Bookkeeping and Accounting Services This Year?

As you are finishing up your holiday shopping for family and friends, have you considered putting together a wish list for your business? This time of year is the perfect opportunity to evaluate the things that you need and want. While you probably won’t have a jolly old man in a red suit show up in your office, you can take steps to get started on an important gift for yourself: investing in bookkeeping and accounting services.

Accounting Gift for Yourself

Christmas gifts don’t always have to fit in a box. And you don’t need to wait for other people to cover the things that are needed for yourself and your business. Consider giving yourself a personalized gift by hiring an accounting team to assist with your business finances in the New Year.

This gift is a great way to reduce your stress and improve overall results in 2020. Here are a few reasons why you deserve this gift of accounting services:

  • More Time: As a business owner, you have a to-do list that seems to never end. These tasks can be enjoyable, but sometimes it can be a challenge to keep up with all of the responsibilities that need to be addressed throughout the week. If you aren’t already using the services of an accounting and/or bookkeeper, then it means that your precious time is being wasted on busywork. Instead of dedicating your limited hours on data entry and tracking transactions, let the financial team handle these details so you can turn your attention to other important matters within the company. Not only will you have extra hours available for business work, but you can also free up more time to spend with your loved ones.
  • Lower Stress: How often do you feel stressed and concerned about the stack of invoices that needs to be addressed? You might have a hard time keeping up with the data entry or find it challenging to stay current with bills and invoices that need to be paid. As a result, these outstanding tasks are increasing your stress levels and taking up your precious energy. Hiring an accountant is one of the most effective ways that you can reduce your stress and feel more peaceful about your business progress.
  • Clear Financial Reports: A good accounting system will give you a clear picture of the current financial health of your company. Too often, entrepreneurs get behind on their financial data, which means that they are making important business decisions with limited information. An accounting team can help you stay current with the necessary reports, which means that you always have accurate data regarding your cash flow and overall financial health of your company.
  • Better Skills: High school or basic college-level math courses aren’t sufficient for the level of accounting that is needed to help your business thrive. If you don’t have formal training in the bookkeeping and accounting industry, then it is likely that you are overlooking important details by attempting a DIY financial system. As a result, you are probably missing out on possible tax deductions or strategies that can be used to improve your profit margins. An accountant can bring years of experience to the table, making it easy for you to tap into a proven system.
  • Prepare for the Future: If you don’t know the current financial health of your company, then you are missing out on growth opportunities. Reviewing the numbers and data can be important to identify the best areas of the business that need your attention. As you evaluate these reports, consider the areas where you are succeeding. This information can be used to help you maximize the systems that are working so that you can boost growth and success. At the same time, look for holes or weak points that need to be addressed. Finding the business systems that aren’t working optimally will help you patch up the gaps so you can avoid potential problems in the future.

Tips for Choosing the Right Provider

Now that you can see the benefits of accounting and bookkeeping services, it’s time to select the provider that is a good fit for your company. You can write Santa a letter and ask for a new accounting employee, but hiring another full-time employee might not be the best decision for your company. Consider the overhead costs that will need to be carried, as well as the time and effort that it takes to go through the recruiting, hiring, and onboarding processes. Plus, you will be left without support if the person quits in the future.

On the other hand, outsourced accounting offers a more stable way to leverage the accounting services that you need. You can hire a team that provides small business accounting services, with the peace of mind to know that you have multiple providers working on your project.

As you are selecting an accounting team, take time to evaluate your options. Have a conversation with the various providers you are considering. Not only do you need to look at the available accounting services, but you also need to be sure that the company culture is a good fit for your personality.

Our modern business world means that you can tap into the services offered from many locations. In the past, small businesses were limited to the services provided by accountants in their local area. Don’t limit yourself by only interviewing accounting firms in your city. Instead, look online to find a firm that has an excellent reputation. Outsourced accounting services can be both affordable and effective. Our team can provide full-service support for businesses across the nation due to online, cloud-based access to the accounting systems.

Access to Top Systems and Experts

One of the greatest benefits that comes from hiring an outsourced accounting team is that you can access some of the best experts in the industry, for a fraction of the price you would pay for an in-house employee. Your accountant can offer recommendations regarding the systems and practices that will work best for your company.

In the beginning, there might be a bit of a learning curve if you are changing accounting software programs. But it is worth the growing pains to ensure that you are prepared for whatever might come in the future. An effective financial system means that you will have a strong foundation that can support your business needs, regardless of the changes that might be coming up in the industry.

Prepare Your Business for Growth

Every entrepreneur wants to see their business grow and thrive. These opportunities are available, but only if you have the right systems in place to support business growth. Too often, businesses start to expand, but get stuck because they didn’t build in options for scalability. The financial reports can help you see when it is time to cut back or expand, without the hassle of sorting through piles of outstanding paperwork.

It is essential that you are staying current with all aspects of your financial system. As a result, you will have the information available if you decide to talk to potential investors in the future. Having an organized, structured accounting and bookkeeping system means that investors will be interested and willing to explore potential investment opportunities. Then, you will have access to the cash that is needed when it is time to expand inventory or invest in business development and marketing.

Even if you aren’t planning for major growth in the New Year, it is important that you are always prepared for whatever might come in the future. Creating a strong foundation right now means that you will be able to jump on potential business opportunities when they are available.

Personalized Bookkeeping Services for Your Business

You can be the “Santa” for your company by bringing good cheer through effective business systems. Hiring an accounting team might be the best investment that you will make all year! You deserve to have a solid financial system for your business, which is why it makes sense to leverage the services available from an experienced team you can trust.

Whether you are looking to create a new accounting system for your small business, or it is time to upgrade your current systems, be deliberate about choosing a team that can help. Hiring a general accountant might not be the right solution since they won’t be able to provide the specialty services you need. Instead, find an outsourced account that specializes in small business services.

Our team at Easier Accounting is always just a phone call away, available to assist with your small business goals. If you are ready to upgrade your accounting and bookkeeping systems in the New Year, then we invite you to contact us for a consultation about the available services. We will design a custom plan based on the unique needs of your company, making it easy to start fresh in 2020. Call today to learn more about the available services offered for small businesses: (888) 620-0770.

9 Year-End Tips for Small Businesses

December is here, which means that the end of the year is just a few weeks away. Depending on your industry, it might be the busiest or slowest time of year for your business. Those companies in the retail space are often busy keeping up with customer demands as families are shopping for gifts to put under the tree. On the other hand, some service providers slow down during this last month, giving them a lull to enjoy the holiday season.

Regardless of your workload this month, don’t overlook the importance of preparing your business for the essential year-end tasks that need to be addressed. Most businesses are run based on the calendar year, which means that there are a few details you will need to wrap up to bring the year to a close.

It’s hard to keep track of all of the required paperwork and year-end tasks that need to be addressed. Today, we are going to share some tips to help you get started. One of the best solutions is to talk to an accountant about your situation to get personalized tips based on the unique aspects of your company.

Here are a few year-end tips you might consider adding to your to-do list:

Tip #1: Review Annual Reports

Even though the year hasn’t come to a close yet, these reports can give insight into how things went for your business in 2019. If you were consistent about keeping up with accounting and bookkeeping tasks throughout the year, then it is simple to run a report and get a snapshot of your standing for the year.

Not only will this information provide insight as you are going into the New Year, but it can also help you see if your books are accurate and up-to-date. Having an accountant can be helpful as you are running these reports and analyzing the data.

Tip #2: Set Goals for 2020

Now that you’ve had a chance to look at the numbers, December is the perfect opportunity to evaluate how you are going to improve your success in 2020. It is common for individuals to set New Year’s goals for weight loss or habits they want to develop. In the same way, you should look for potential areas of improvement within your company.

Your accounting reports will show where your business came up short. These weak points could be where you choose to place your focus for the annual goals in 2020. Additionally, look at the things that were working well in 2019. It’s smart to put more resources into the things that were already working so you can maximize the proven systems.

For example, if you can see that most of your new business came through customer referrals, then it might make sense to budget more of your market money to reach out and build stronger relationships with your current customers. Determine your ROI on these investments to find the optimal ways that you can help your business move forward.

Tip #3: Income Deferment

Every penny you receive by December 31st counts as income for 2019. If you have payments that are delayed into January, then that money will be counted as income in 2020. Depending on your earnings this year, it could make sense to push some of those payments into the New Year so that you can manage tax brackets and other factors that affect your tax burden.

Various factors should influence your tax bill, and it isn’t always the right choice to delay payments for tax purposes. If you are considering this strategy, talk to an accountant about your options and how income deferment will play a role in the amount that needs to be paid in taxes. Additionally, be ready to have conversations with customers about their payment timelines if you need to delay the income a bit.

Tip #4: Charity Donations

It’s no surprise that the holiday season is a time of year when people tend to be more charitable with their donations. If you are looking for ways to help other people during this time of year, then it might be a good time to reach out to your favorite charity or donation center.

Yes, it’s a kind thing to help others during the holidays. At the same time, there is also something in it for your business: this money can be used as a deduction on your taxes. You can donate money if that is your preferred donation of choice. Or, you can donate other goods, such as toys and clothing, with the deduction based on the fair market value of those items. Make sure to get a receipt for the items that were donated.

Tip #5: Retirement Contributions

Whether you already have a retirement plan, or you are considering your options to set up a new account, certain retirement strategies can help manage your taxable income each year. This account should be set up by December 31, although certain strategies will allow you to make 2019 deposits up until the tax deadline in April 2020.

Don’t overlook the benefits that come from maximizing your contributions. With the right type of account and a smart retirement strategy, this money can be added to the retirement plan tax-free. Talk to your accountant, as well as a financial advisor, for more information about the strategy that is a good fit for your needs.

Tip #6: Save for Upcoming Tax Payments

It is easy to procrastinate your tax preparation for the year. But, the sooner you know how the numbers are going to play out, the better prepared you will be to make the payments that will be required. When tax payments are due, it can cause cash flow challenges for many small businesses.  Even though you know that taxes roll around every year, it’s easy to forget about the necessary money until the last moment.

Dedicate time right now to ensure that you have the cash flow available for the money you are going to need for your payments. Not only do you have the annual balances that need to be paid, but you should also consider the quarterly payments due in January and April. Set aside the estimated amount of cash that will be needed so you won’t be stress about the cash flow when the payment time rolls around in April.

Tip #7: Year-End Purchases

Another tax strategy that might be considered is getting in a few big purchases before the year is over. Not only can you find great holiday prices on furniture, electronics, and office equipment, but this spending might be needed to boost your write-offs for the yar.

Don’t spend money for the sake of spending money. Instead, be strategic with your approach. If you have equipment that needs to be upgraded or office supplies that need to be restocked, then it might be a good strategy to purchase these items no later than December 31.

Tip #8: Inventory Evaluation

Two factors need to be considered for your inventory. First, if your inventory has experienced a drop in market value, then you might be able to claim the difference as a deduction on your taxes. This strategy varies depending on the type of inventory that you carry and the current/previous value of the items.

Also, consider the amount of inventory that is currently in stock, compared to what will be needed in the New Year. For example, if you are in the retail industry, then you might need to restock the shelves because of the increased sales during the holiday season. But it is common that you won’t require as much inventory in January and February since these months tend to be times when customers spend less.

On the other hand, if your business specializes in health products or weight loss services, then January might be your busiest time of year. People are motivated to maintain their goals in the New Year, which means that customers are often ready to spend money on products and services. Make sure that your inventory shelves are stocked, so you are prepared to maximize the profits as the sales start rolling in.

Tip #9: Line Up Bookkeeping and Accounting Services

Do you already have a good accounting and bookkeeping service you are using to help your small business? If you aren’t leveraging these services, then right now is an optimal time to get started. An accountant can offer year-end advice to help with your strategy as you are wrapping up in 2019. At the same time, you can leverage these services into the New Year to ensure that you are prepared for the things that are coming in 2020.

The start of a calendar year can be an ideal time to make this transition. For example, if you need to implement a new accounting software program, then it can be simple to make a move at the beginning of the year. Even though these changes can be implemented at any time, it can simplify the process when you have a clean break with a new month or year starting on the calendar.

If you need assistance with accounting and bookkeeping, then you are invited to contact us at Easier Accounting. We specialize in small business accounting services. Call today: (888) 620-0770.

Don’t Be Fooled by These Common Myths About Small Business Taxes

Owning a business can be advantageous when tax time rolls around because you have many options for tax write-offs and deductions. The problem is that the tax code can be quite confusing, making it hard to know how to maximize these write-offs while still staying within the guidelines established by the IRS. Too often, business owners find themselves in challenging tax situations due to an attempted DIY tax filing, often including improper deductions or other issues that could result in auditing and fines in the future.

The costs can add up if you cross the regulations set by the IRS. Not only are there penalties for mistakes on tax filings, but the late fees and other charges can really take a toll on your bank account. The best thing that you can do is make sure that you always pay your taxes on time, and be careful to avoid writing off deductions that aren’t qualified for your business.

On the flip side, don’t make the mistake of overlooking deductions that you are entitled to, which could result in an overpayment of your taxes. There is no reason to pay the IRS more money than what is needed each year! Hiring an accountant is the most effective solution to find the sweet spot with your tax filing and payments. Your small business accountant can offer advice to maximize deductions while staying within the guidelines set by the IRS.

When it comes to business taxes, there are a variety of myths floating around. Here are some of the most common myths

Myth #1: Over-Pay Your Taxes Will Help You Avoid Auditing

Some people think that fattening out their tax payments can make their business “audit-proof” in the eyes of the IRS. The truth is that red flags will fly for underpayment, but the IRS doesn’t care if you pay the right amount or if you overpay. The best way to avoid the scrutiny of the IRS is to pay the exact amount due, based on your business calculations for the year.

What happens if you overpay? If you are making quarterly payments and you send the IRS more than the amount needed for the year, then it means that you will likely get a tax return when tax time rolls around.

You can minimize the risk and impact of an audit with good recordkeeping, documentation to back up your deductions, and accurate calculations on your tax filing each year. An experienced tax accountant can provide the guidance and information you need to ensure accuracy on your tax calculations.

Myth #2: It’s Awesome to Get a Big Tax Refund

It can feel like Christmas in April to see a big check show up from the IRS. Many people plan their vacations or big purchases around their tax refund money. But, before you spend that cash on electronics or something frivolous… remember that the refund is coming because you overpaid on your taxes.

Receiving a tax refund could be a sign that you aren’t using the right calculations to estimate your tax payments. Overpaying on your taxes means that you are sending the IRS money that isn’t needed. Essentially, you are giving the government a free loan!

The best solution is to pay the right amount on your tax payments, so you have the money on hand to pay for the business expenses that need to be covered throughout the year. Your tax accountant can help you find the “sweet spot” for your payments, making it easy to dial in the right numbers without underpaying or overpaying.

Myth #3: Home Office Deductions Increase the Risk of an Audit

Are you scared to take a home office deduction because of the potential increased risk of being audited? Just because you are taking home office deductions, doesn’t mean that you will trigger something in the IRS system that causes you to be audited.

Home-based businesses are quite common in the digital world that we live in. Whether you are working at home as a freelancer or you have a new startup running in the basement or garage, don’t be scared to leverage the home office deduction to manage your expenses. Follow the recommendations of your accountant and make sure that you only write off the portion of the home that is being used for business purposes only. For example, your office should be a room used only for the business… you can’t use the room as both an office and guest bedroom.

Myth #4: All Start-Up Expenses Should Be Deducted Immediately

It costs money to start a business. Not only do you need to put cash into business development and inventory purchases, but other expenses add up when it comes to website design, marketing, and more. Many of these costs need to be paid before the business opens, and might include both organizational and structural costs.

If you put money into office equipment or machinery, then that asset can be written off in full in the current year of taxes. Sometimes, it is a better strategy to amortize costs for equipment and other expensive purchases. Talk to your accountant about the equipment that was purchased, the overall costs of the start-up purchases, and your tax strategy to decide if the expenses should be deducted immediately or spread out over time.

Myth #5: File an Extension if You Can’t Make the Tax Payment

As April 15th draws near each year, do you ever find yourself in a cash crunch? Even though tax time is still a few months away, you should start thinking about cash flow right now, so you have enough money in the account to cover the required costs for both state and federal taxes.

If your tax filing isn’t ready by April 15th, then you might consider filing for an extension to buy a little more time for the final calculations. Sometimes, an extension makes sense – but you should always make this decision based on the recommendations of your small business accountant.

Remember this important aspect of tax extensions: buying a little more time to file your taxes doesn’t mean that you get more time to come up with the cash that is needed. When the IRS grants permission for a tax extension, you are still required to pay the anticipated amount of taxes on the day they are due.

Myth #6: Incorporate for Better Tax Breaks

You can choose from various structures for your business entity, including Sole Proprietor or a Corporation. Don’t mistakenly think that incorporating your business is essential in the early stages. In fact, this cost is unnecessary in the beginning. It can cost thousands of dollars for accounting and legal fees to set up the corporation… and you won’t likely make enough money in the first few years to make it worth the expense.

Setting up a corporation prematurely might increase the amount of taxes you pay overall since you need to pay for corporate taxes. These expenses can be avoided in the beginning by sticking with a self-employment structure, especially if your business isn’t profitable yet.

Self-employment allows you to enjoy the same deductions, without going through the hassle of setting up an official corporation. Once your profits hit a certain annual threshold, then the real tax benefits of incorporating will kick in. Talk to your accountant about the entity strategy to determine the right timing for setting up your business corporation.

Myth #7: Paying an Accountant for Tax Filing is the Best Tax Planning Advice

No doubt, your business will benefit from the tax preparation and filing services offered by an experienced small business accountant. But, talking to your accountant once a year isn’t enough to put together a strong tax strategy for your business.

Tax preparation services are limited to taking the annual information that you provide and compiling it into the tax return paperwork that needs to be filed. Once that filing is complete, then you won’t likely hear from your tax preparer until the next tax season rolls around the following year.

If you want to be proactive about your tax strategy, then you need to be working with an accountant on an ongoing basis. The best solution is to maintain open communication with a tax professional throughout the year. You can use their advice and recommendations as you are making decisions about your business. Remember that tax planning should be an ongoing process. Your business financial information needs to be evaluated in real-time, so you can make changes and adjustments to your spending and profit strategy when it is most effective.

Talk to the Small Business Accounting Experts

Are you considering the benefits of hiring an outsourced accounting team? If you are ready to make the changes that are needed for your tax strategy, then our team is here to assist. We provide ongoing accounting and bookkeeping services, helping to keep your business up-to-date throughout the year. These services are always customized, based on the unique needs of every company.

For more information about these outsourced accounting services, call us at Easier Accounting: (888) 620-0770.

The Pros and Cons of Small Business Loans

Cashflow can be a challenging detail to manage in your business, which is why it can be helpful to have credit cards and/or a line of credit available to get you through the lean months. The way you structure the credit should depend on the needs of your company and the financing options that are available. For example, small business loans might work for some people, but others prefer to use credit cards.

Small Business Loans: Getting Started and Business Growth

There are two points when a small business loan can be quite valuable to your business:

  • Getting Started: When you are trying to get the company off the ground, cash is needed to help you get things rolling. Some people have personal funds that are put into the business, but this money will only get you so far. Not only do you need money for marketing, website design, inventory, and more, but you need to be sure there is enough cash to keep you going in the beginning. Small business loans can be used upfront so that you can get your company launched. The bank that provides the loan will use your personal credit score and reputation in determining the amount of money that is available and the terms of the loan.
  • Future Growth: If you have an established business, you might face cashflow issues when it is time to grow. Expansion requires money, which can make it a tricky situation to navigate if you don’t have the cash in the bank. Future growth is much easier if you have a loan to tap into for the funds that are needed. This money can be used for business development, marketing, inventory expansion, and more.

Sometimes, the loan is structured as a set dollar amount that is paid to your business, and then you can use the money as you see fit. Another common option is to use a small business line of credit. This solution works similar to a credit card with a balance that can go up and down over time. The difference is that cash is available to ensure that you have the money when it’s needed.

What Do Lenders Want?

Small business loans aren’t automatically handed out to every person who has a business idea. When you talk to the bank, they will determine the risk of the loan and how much money will be available. The goal is to ensure that you will be able to pay the loan back in full. So, the lenders will be looking for a few key points to ensure that you are a safe and reliable customer.

Since the primary concern of the lender is that the loan is paid back in full, they are going to look at your personal credit history and track record. If you want to qualify for a business loan, then it is helpful to have a good personal credit score to show that you have a track record of paying back the money.

Additionally, the bank will ask for your business plan and other details about your company. You might need to show how the money will be coming in from customers, and potential details that you should anticipate in the future.

Each lender will set the terms of the loan based on your risk and qualifications, which means that there are various possibilities for interest rates, loan caps, and repayment schedules. If you are a high-risk borrower, then it is likely that you will have a high interest rate and a lower amount for the loan. One option is to shop around with various banks and credit unions to find the best terms that you can qualify for.

Also, don’t feel disheartened if one lender rejects your application. If you receive a rejection, then talk to the lender to learn why the loan wasn’t approved. This information can be valuable so you can change your future applications to increase the likelihood that you will be approved. Some lenders will let you reapply after the concern has been fixed. Or, you can use the feedback to improve your application with other lenders.

Paperwork to Provide with Your Business Loan Application

What are the specific requirements that will be requested by your lender? You need to be prepared with paperwork and other information when you are completing the loan application. These are some of the most common requirements that lenders might request:

  • Purpose of the loan
  • Desired amount for the loan
  • Personal credit score
  • Business credit score
  • Business plan
  • Time in business
  • Type of entity
  • Industry
  • Business permits and licenses
  • Bank statements
  • Accounting reports
  • Tax returns (both personal and business returns)
  • Rent or lease agreements
  • Business ownership information
  • Disclosure of current debt
  • Proof of collateral
  • Legal agreements or contracts currently in place

The best thing you can do is put yourself in the lender’s shoes. What are they looking for? How can you show that you are a reliable borrower? The more information you provide, the better you can show that you are a great customer for their lending business.

Pros and Cons of Small Business Loans

Is a small business loan the right solution for your situation? Here are a few pros and cons to help you decide if you should move forward with the loan:

  • Pro – Additional Capital: What could you do if you had access to additional capital for your business? This financing can be essential to help you stay afloat during the lean months and build your business when things are going well. Many business owners have trouble with cash flow, which is why a loan or line of credit can be essential in the hard times. The money can be used for business costs as needed.
  • Con – Interest Accrual: Whenever you are borrowing money, it is going to cost you in the form of interest expenses. The lender is offering the money with the purpose of making a profit on the deal. Interest expenses aren’t always a bad thing if you can leverage the cash to help your business grow. But if you aren’t careful with money management, then these interest costs could start eating into your profit margins.
  • Pro – Cashflow Management: It is common for small businesses to have ups and downs. For example, companies in the retail business refer to “Black Friday” as the turning point of the year when the real profits start to flow. Then, sales often start to slow down in January. If you are worried about cash flow management in the future, then a business loan can give you the peace of mind for those difficult months.
  • Con – Money Management: Just because money is available through your small business loan, don’t let that be a reason that you make poor money management decisions. Some business owners find that they are more risky with their money because they have a credit line to tap into. If you put your cash into a questionable business investment that falls through, then you might find yourself between a rock and a hard place when you can’t get access to the cash that is needed for paying the bills.
  • Pro – Build Business Credit: Did you know that your business can build a credit history, just like your personal credit score? Borrowing money through your business can help you establish a reputation that opens up options for more loans in the future when needed. Even if you don’t need access to the cash right now, it is smart to build your business credit so you are ready with the money when things get lean during your slower months.

Can You Get a Loan if You Have Bad Credit?

Just because you have no credit history or a bad credit score, it doesn’t mean that you won’t be able to qualify for a loan. But it might be necessary to offer collateral – giving the bank something to fall back on if you miss the payments.

Collateral can be offered in the form of property. For example, if you own an office building and hold equity because the mortgage has been paid down, then the building could be offered as collateral. You need to know the consequence if the loan isn’t repaid. Often, the lender will place a lien on the building, so the repayment will occur when the building is sold in the future.

Also, consider alternative lenders if you can’t get a loan through the bank. Sometimes, angel investors are willing to put up the money for a share in the business profits. Connect into some of the business networking groups in your area to see if you can find people who are interested in investing.

Manage Your Business Finances

Staying ahead of your financial tracking and management is key to protect your cash flow and help you position for a small business loan if needed. When you have accurate bookkeeping and accounting records, it shows the bank that you are responsible with your money, which increases the likelihood that they will be willing to lend the cash to you.

Our team at Easier Accounting is here to help with your financial management. If you are interested in learning more about the bookkeeping and accounting services that are offered, then you are invited to contact us today: (888) 620-0770.

Take a Holiday Break: How to Automate Your Business

Many employees enjoy the holiday season because of the time away from work for both Thanksgiving and Christmas. On the other hand, the time-off during the holidays depends on the industry. For example, retail employees and managers often find that this season is the busiest time of year. But office employees and managers can take a much-needed break to focus on time with their families.

As a business owner, is there a possibility to take some time away from your computer this season? You deserve a break, but it’s not as easy as clocking out at the end of the day. Since you are running a company, a few details need to be arranged to ensure that everything can continue moving forward while you are gone. Business automation is key so that you can relax without worrying about the details in the company.

Why Time Off is Essential

Do you find that the natural inclination is to check your phone throughout the day, in case emails, calls, or text messages come through about your business? Most business owners have a hard time stepping away completely. It’s amazing to live in a digital business environment, but that means that your business follows you… even if you are on the beach in a tropical location.

Whether you are taking a few days away from the office to spend time with family or you have a fun vacation planned at a distant destination, is it likely that your phone, tablet, and/or laptop will come along so you can stay connected? It’s nice to have the convenience of staying in touch with employees and customers. But you need to consider how this habit is affecting your mental health.

In fact, scientific evidence shows that time away from work is essential so you can maintain good physical and mental health. Some researchers have been bold enough to say that a good vacation actually increases productivity at work. Yes, it is important to make sure that things are going well for your business. But if you want to show up as your best self, then you need to ensure that you are giving yourself a break every now and then for the mental health benefits.

Don’t Opt Out of Vacation Time

It is estimated that more than 40% of Americans will go an entire calendar year without taking a day off. Among those people who choose to take a vacation, many of them continue working while they are away.

Even though the vacation days are available, it’s easy to get pulled into deadlines and responsibilities in the office. Are you getting caught in the trap of prioritizing your work life over relationships, hobbies, and personal activities? Then it might be time to change your habits so you can find more balance in these activities. The holiday season is the perfect time of year to help you get started.

Instead of pressuring yourself to stay tied to the computer, you can be proactive in creating a business environment that will keep going while you are away from the office. Not only will you enjoy the break, but it is helpful to ask your employees to carry a bit more of the day-to-day responsibilities.

Set a goal to spend more time with your family over Thanksgiving and Christmas this year. If you want to meet this goal, then you need to prepare right now so that you can step away from the office for a bit.

Small Business Automation Tips

Here are a few simple strategies that can be used to improve automation in your small business. By improving your systems, it will free up your time so you are available to take more time off. Owning a business means that you have the benefit of schedule flexibility, so you might as well take advantage of this opportunity!

Keep in mind that these tips don’t apply to every business. Each industry is unique, so it’s important to consider the needs of your company as you are making changes. A personalized approach is the best way to ensure that you are creating a system built to last.

  • Repetitive Tasks: What are the small tasks that eat away at your time each week? If there are activities that you do over and over again, look at options to build a system so that you don’t have to put in the manual work all the time. For example, if you are spending time on purchase orders every week, there might be a way to set up an auto-ship agreement with your supplier. Or, adjust your requests so that you can order 1 – 2 times a month instead of weekly. Certain tools can be used to track your current inventory and reorder when needed, such as PurchaseControl, which consolidates all relevant information in a single place.
  • Outsource Payroll: When you have employees, payroll processing is a task that never goes away. If you want to maintain the right company culture, then it is essential that your employees are paid on time when payday rolls around. Sometimes, payroll processing falls to the company owner because they don’t want to hand over the financial information to an employee. Instead of spending a few hours every-other-week on payroll calculations and check printing, consider hiring a payroll processing service. This service is well worth the cost if you are looking for ways to automate your business.
  • Task Management: How often do you manage small, busy-work tasks because you don’t want to take the time to explain the details to someone else? It’s nice to have the assistance of employees and/or freelancers, but you probably aren’t leveraging these services to the fullest extent. Not only do you need to know who is working on which tasks, but you need to be able to keep track of project progress and deadlines that are coming up in the future. Consider using a tool such as Trello or Asana that makes it easy to create assignments, set due dates, and manage the overall workflow. Task management tools can assist with delivery dates that will need to be met while you are away from the office.
  • Bookkeeping Services: Management of accounts payable and accounts receivable can be a handful, especially when you are juggling this busy work with other business responsibilities. Bookkeeping is one of the first things you should outsource if you are looking for ways to free up your time. A great solution is to hire a bookkeeping service that pairs automated accounting software with the services that are offered. This cloud-based bookkeeping and accounting system helps to streamline the transactions as they are moving through your bank accounts. Then, the bookkeeping team can complete reconciliations and oversee the process to catch potential errors or issues that pop up.
  • Hire an Assistant: Hiring an assistant could be one way to free up your time, allowing you to focus on strategy instead of the menial tasks throughout the day. The right assistant can help with calendar management, phone calls, and administrative work like photocopies, vendor coordination, and more. It is important that you find someone who is proactive in their job. If the assistant is always waiting for instructions from you, then you might run into problems. The ideal solution is an assistant who is looking ahead and helping you stay on top of the tasks that need to be addressed.
  • Email Messages: When you are stepping away from the office for a few days, set up an autoresponder that notifies people when they send you an email. This message should list the dates you are gone, as well as a back-up point of contact if they need immediate assistance. Setting up the automated message allows you to ignore your inbox while having the peace of mind to know that someone is available to pick up the slack.

Schedule Vacation Time on Your Calendar

You know that the holidays are coming up, which means that right now is the time when you need to block out the calendar so that you can have a break. Schedule the days that you are planning with your family, then honor your commitment to take those days off. It might be tempting to fit in a quick phone call or meeting on one of those open days, but you need to remind yourself that it is important to honor your desire to take a break.

Even though there are high-priority tasks that need to be handled in the office, these things will still be waiting when you get back from your vacation. So, take time to share holiday traditions with your loved ones, without the worry about work getting in the way.

If you need help with business outsourcing, then our team is here to assist. At Easier Accounting, we provide small businesses with financial solutions that work. Contact us any time to learn more about the way we can personalize your bookkeeping and accounting systems to help you automate your business. Call our team at Easier Accounting to learn more about the available services for your small business accounting needs: (888) 620-0770.

Small Business Accounting: How to Choose a Service Provider

One of the most important steps a business owner can take is hiring a pro to help with small business accounting. Not only will you have confidence knowing that your records are up-to-date at all times, but it is important to tap into the financial strategy available from someone who has industry experience.

Don’t Wait for Small Business Accounting

If you don’t already have a small business accountant to help with your financial records, why wait? Sometimes people make excuses about the cost of the accounting services. Even though you will need to add another expense to your business records, it is well worth the investment when you see how much money can be saved.

Here are a few reasons why you should consider small business accounting services as soon as possible:

  • Ongoing Tax Strategy: Your accountant can provide tax support throughout the year to ensure you are on track for the upcoming annual tax filing. Business taxes are more than crunching a few numbers before April 15th. You need to be strategic with your spending, business entity, and overall financial strategy if you want to minimize your tax burden. Since taxes are necessary for every business owner, it makes sense to enlist a tax specialist as soon as possible so you can minimize the impact on your bottom line.
  • Free Up Your Time: It is common for business owners to find it hard to step away from their offices. You are wearing many hats during the day to keep your company running. All of these responsibilities are important, but it can be burdensome to keep up with everything. If you are still managing your books, then it is time to hand the bookkeeping and accounting responsibilities over to a pro. Hiring the right accounting team will free up your time so you can turn your attention to other requirements within your company.
  • Optimize Profits: Owning a business can bring personal fulfillment, but the ultimate goal is to bring in a profit. You wouldn’t be running the company if you can’t take a paycheck home! Yes, there are times when you need to be careful with your spending, especially in the start-up stages of owning a business. With time, the right financial strategy can help you increase your profit margins so you can enjoy the full benefits of being a business owner.

Options for Accounting Services

Many business owners don’t know much about the accounting industry, which can make it overwhelming to hire a service provider. Not only do you need to know the difference in the various financial specialties that are available, but you also need to consider the specific services that are offered for your business.

Some of the most common accounting services offered for small businesses include:

  • Bookkeeping: These services focus on the ongoing financial tracking to ensure your records are up to date. Software programs can be used to automate banking transactions; then, the bookkeeper keeps track of the transactions to identify potential issues or errors that might need to be addressed.
  • Taxes: Hiring a tax accountant can be beneficial when you need to file paperwork for the IRS. The topic of tax accounting is huge since the forms vary depending on the way your business is structured. As a business owner, you don’t need to worry about tax laws and rules. Instead, let your CPA do the tax accounting. This service often includes both paperwork preparation and strategy that can be used to reduce your tax liabilities each year.
  • Strategic Services: As your business grows, it can be helping to have a financial expert who offers advice about management accounting. These services are focused on the financial data within your company, helping to create a long-term strategy that will ensure sustainable growth. These services can be expensive, but are worth the investment to ensure you are prepared for the future.

What are the Unique Needs of Your Company?

Before hiring a small business accounting expert, it can be helpful to determine which services will be a good fit for your needs. What are your business goals? Where are you falling short when it comes to your financial systems? You might not have specific answers to these questions until you have a conversation with an accountant.

Keep in mind that an experienced accountant can help you avoid common problems that arise with business growth. You don’t have hands-on experience with these aspects of business management, which means there are pitfalls that might be encountered without someone who can help you avoid these issues.

Talk to your accountant about your priorities and goals for the business. Then, ask about the best accounting services to fit your needs. Also, open the conversation to learn more about accounting services that might fill in the gaps for issues that you could potentially be overlooking.

Characteristics of a Great Small Business Accountant

We live in a digital business world, which means that you aren’t limited to hiring an accountant who is close to home. You can look online to find service providers, but it can be a challenge to choose from the many accounting firms located across the United States.

As you are researching your options, here are a few things that will help you choose the right small business accounting service:

  • Experience: For optimal results, it is beneficial to work with an accountant who has been in the industry for years. While book-smarts can be useful, nothing beats the skills that come from the day-in-day-out application. Find an accounting team that offers specialized services focused specifically on small business accounting.
  • Professionalism: Customer service matters because you need to be sure that your accountant will respond when you need to have a conversation. Not only does professionalism indicate the service you will receive, but you also feel good knowing that they will be detail-oriented with your tax return and ongoing services. Consider the interactions you have with the company to get a feel for the level of professionalism you can expect.
  • Credentials: In the United States, specific education and certification requirements need to be met before someone can offer accounting services. Just because someone knows how to use Quickbooks doesn’t mean that they are qualified to offer small business accounting advice. It is smart to check your accountant’s credentials before selecting their services.
  • Recommendations: Consider the option to talk to business contacts for accountant recommendations. Conversations with other business owners can help you find a trusted provider.
  • Accounting Team: While you can get the required services from a single accountant, there are bigger benefits that come from hiring an accounting team. You always have access to talk to someone for accounting advice, even when your point of contact is out of the office. Plus, an accounting team means that you are tapping into the experience and specialized skill sets of various industry pros, which can help to optimize the overall results that are achieved.
  • Cost: Small business accounting services are an investment. While it is worth the cost to bring in a team of experts to help with your business finances, make sure that you aren’t overpaying for the services. Compare the costs of the available services with other providers. Make sure that you are making similar comparisons – for example, the rate should reflect the same scope of provided services from each accounting team.
  • Software: One of the most effective ways to design your accounting system is by using a software program that can automate various aspects. For example, the software can pull in bank account transactions and other financial information. Then, your accountant can reconcile the numbers and use this information to help your business as needed. Ask your small business accountant about their recommendations for software programs.
  • Ongoing Services: Ask questions about the frequency of reporting, how often you will be in contact, and what the ongoing services will entail. Setting this expectation in the beginning will ensure that your needs are met throughout the year.

You can research various accounting firms to find potential providers, but don’t overlook the importance of finding a provider that has the right personality to match your preferences. Personality fit matters, especially when you will be working with the person throughout the year. You need to be sure that you get along with the accountant so that you are comfortable talking to them about your questions and needs.

Easier Accounting Offers Quality Business Services

We are dedicated to providing high-quality services for small business owners and entrepreneurs. Our team offers years of experience in the accounting industry and a proven system that works. When you choose our team for accounting services, you can have the peace of mind to know that you are working with a group that cares about your success.

Customer satisfaction is a high priority for us, which is why we are happy to customize your services based on your individual needs. If you have questions about available services, then you are welcome to contact us at any time. Reach out to have a conversation with us at Easier Accounting: (888) 620-0770.

Accounts Payable: Best Practices for Small Businesses

Two essential aspects need to be addressed for maintaining your books: the money coming in (Accounts Receivable) and the money that is going out (Accounts Payable). Most small business owners are familiar with these two phrases, and they understand the general concept. But it can be a challenge to know how to implement the right bookkeeping system to track these numbers.

Whether you are looking to rework your bookkeeping and accounting system, or you need to start from scratch for your new company, it can be valuable to tap into advice from an experienced outsourced accounting team.

Accounts Payable: What Does it Mean?

Sometimes, products and services are paid on the spot. For example, if you go to an office supply store to purchase items that are needed for the office, then you will likely pull out a credit card or cash and pay for the items immediately.

There are times when businesses share relationships that allow products and services to be provided on credit, then the vendor will send you an invoice for the amount due. These outstanding balances fall into the category of “Accounts Payable” (AP). If you add up the AP balances for your business, then it is the total amount currently owed to suppliers and vendors.

AP invoices can be small with local vendors. Or you might have outstanding credit card bills that you are paying for each month. Regardless of the type of debt, you need to be sure that you consider the amount due so that you can work these details into your budget. It is essential to ensure that you are planning ahead, so you’re prepared with sufficient cash flow in the future.

Accounts Payable vs. Accounts Receivable

If you are on the receiving end of the money that is due, then it is marked down as “Accounts Receivable” (AR) in your books. For example, you might be anticipating payments for products or services that have been provided. The AR value in your accounting system shows the total due from your customers.

Tracking both AP and AR is essential because these numbers affect your current cash flow and what you can expect in the future. The most stress-free way to run a business is to stay current with both AR and AP, to ensure that the money is flowing in from your customers so you have the cash available to pay your bills.

Managing your accounting and bookkeeping system might be one of the most important things you can do as a small business owner. Your cash flow management is based on your tracking system and cash availability. If you aren’t keeping up, then you will likely miss vendor payments, which means that your product and service providers could lose patience… which will eventually have an impact on your business success.

Accounts Payable Tip #1: Automate as Much as Possible

It takes valuable time to manually calculate the invoices that need to be paid. Additionally, a manual system can be quite burdensome when it comes to tracking the payments that have or haven’t been finished. Whenever manual calculations are occurring, there are points where human error could interfere with the accuracy of your numbers.

You don’t need to spend your limited time crunching the numbers. Instead, invest in a good accounting system that will automate this process wherever possible. Accounting software has come a long way in recent years, making it easier than ever to keep your books current and accurate.

Accounts Payable Tip #2: Go Paperless

Yes, going paperless can help you save the trees. But this recommendation isn’t about rainforest protection. Going paperless is a way to save both time and money by streamlining your system. If you want to have a truly automated accounting and bookkeeping system, then you need to eliminate the stacks of paperwork that can pile up on the desk.

Not only is a paperless system more convenient, but it reduces the workload that needs to be managed in your office. Eliminating paperwork means that you don’t have to have big filing cabinets, paperwork tracking systems, and office space to manage these documents.

Plus, a paperless accounting system enables you to leverage the services of an outsourced accounting team more effectively. Your accountant will be able to see your numbers remotely, which means there is no need for in-person meetings that cut into your schedule. At the same time, you have the freedom to access your business numbers from any location: in the office, at home, or even on vacation if needed.

Accounts Payable Tip #3: Checking for Errors

Even if you automate your bookkeeping and accounting system, there is always a risk of errors along the way. Small bookkeeping errors might seem insignificant, but they can have a big impact on your financial reports. When you are making financial decisions, you need to be sure that the numbers are an accurate reflection of what is currently in your bank account, and the AR payments that will be expected soon.

Building in safeguards to catch errors not only helps you detect mistakes, but it also shows the red flags if fraud is occurring. The best way to build trust and minimize the risk of losing money internally is to have checks and balances in place. Don’t assume that the accounting software is always accurate. You need to have a third-party who can run internal audits to ensure that everything is adding up.

Additionally, regular account reconciliations are essential to staying ahead of these small errors. This step is one that is often avoided by small business owners because they find it burdensome and boring. You don’t have to crunch the numbers on your own. Instead, let an experienced outsourced accounting team oversee this process.

Accounts Payable Tip #4: Watch Invoice Due Dates

Maintaining good relationships with your providers is critical to ensuring that those products and services will continue to be available when you need them in the future. If you miss payment deadlines, then that vendor will likely be hesitant to work with you again.

So, it is important to watch the due dates and prioritize payments based on the calendar. Not only does avoiding late payments help you maintain good business relationships, but you can also avoid extra costs that are often added on for late fees and interest charges.

Accounts Payable Tip #5: Maintain Open Communication with Vendors

Things happen in business, which means that you might be facing cashflow issues that prevent you from timely payments. If you are dealing with cash flow issues, then it is smart to stay in contact with your vendors. Talk to them about a payment schedule. Be sure to prioritize payments to vendors who are essential for revenue generation within your company. For example, you might be able to live without professional office cleaning services, but you won’t be able to keep the company going without restocking the inventory.

Accounts Payable Tip #6: Negotiate the Terms

When you’ve established a good relationship with the right vendor, you might have the chance to adjust the payment terms if needed. You will have more opportunity to negotiate when you’ve already built trust with the provider.

Everyone makes money when you can maintain a good relationship. So, it’s in the interest of all parties involved to make sure that it is a win-win situation. You might find an opportunity to negotiate better terms for the products or services that are needed. For example, talk to your main vendors to see if they offer discounts for early payments.

Accounts Payable Tip #7: Stay on Top of Outstanding Invoices

It’s easy to let unpaid invoices slide for a while, especially when you are busy working on other responsibilities within the business. But even the smallest invoices can add up, resulting in a lot of unpaid money that is owed to your providers.

You need to be sure that you have an effective system in place to follow up on the Accounts Payable invoices that are due. Not only do you need to send these payments on time, but make sure that your vendors received the payment. For example, if a provider sits on a check for a few months, then it could cause problems with your cash flow when the check is cashed unexpectedly in the future.

You need to have an accounting system that shows which payments are still pending. Don’t hesitate to reach out to a vendor if a check hasn’t been deposited yet. Sometimes payments get lost in the mail or end up at the bottom of a stack of paperwork. You can avoid these issues by having a follow-up process in place to reach out to vendors when needed.

Accounts Payable Tip #8: Choose a Reputable Small Business Accountant

One of the best investments you can make for your small business is to hire an experienced outsourced accounting team to assist with your financial details. If you are looking for support with Accounts Payable and Accounts Receivable, then Easier Accounting is here to help. Call any time to learn about the services that will be a good fit for your business needs: (888) 620-0770.

IRS Red Flags for Business Owners: Tax Return Mistakes to Avoid

Taxes are one aspect of running a business that most entrepreneurs dislike. Not only do you need to be sure that the cash is available when tax time rolls around, but it can be a burden to keep up with the tracking and paperwork required for tax preparation and filing.

Taxes are unavoidable, both for businesses and individuals. Even though it seems like taxes are cutting into your profits, it is essential that you maintain proper systems to ensure accuracy in your payments. If tax return mistakes are made with your quarterly payments or annual filing, then you could be paying a lot more in fines and fees charged by the IRS.

Annual Tax Filing: How it Works

The IRS requires that you submit an annual tax report. But this once-a-year paperwork isn’t the only time of year that you need to think about taxes. Often, other reports and payments need to be made throughout the year, such as payroll taxes, quarterly estimates, sales tax, and more.

When mistakes are made on your tax return, then you can expect the IRS to charge fines for the error. Additionally, interest costs are often accrued on the unpaid amounts – usually calculated monthly for the length of time the mistake went uncorrected.

When you file your taxes each year, the IRS is thorough about analyzing your income and deductibles. Potential mistakes are easy to avoid. The key is to stay away from a DIY approach with tax preparation and filing. Instead, it is best to hire an experienced business tax accountant so you can avoid these common tax return mistakes. The small fee paid to an accountant is worth the peace of mind in knowing that your tax paperwork is accurate and ready to be filed with no mistakes or errors.

Underpaying on Your Estimated Payments

When employees are receiving regular paychecks, taxes are withheld and paid through the payroll processing system. As a business owner, you have to make sure that these taxes are paid on time to avoid potential penalties. Even if you aren’t paid a salary paycheck through your company, it is still essential that you are current with your quarterly estimated payments.

If the IRS finds that you underpaid on your taxes during the year, then you could be facing penalties for the underpayment. Not only do you need to pay the difference, but it will be a bigger amount due because of the consequences of underpaying. When the underpayment is seen as an act of fraud or negligence, then the fines are much higher compared to an innocent mistake.

An experienced tax accountant can help with accurate estimates, making it easy to dial in the right amount that should be paid when quarterly deposits are due. The goal is to pay enough to avoid penalties, without overpaying. If your quarterly payments are more than you owe, then you will receive a refund when the annual taxes are finalized. But, the extra money is essentially a free “loan” to the IRS. A good business accounting team can help you dial in the “sweet spot” by looking at your expenses and income to determine the estimated amount that needs to be paid.

Common Tax Return Mistakes

These are some of the most common mistakes that are experienced by small business owners:

  1. Numbers Don’t Match Up: Not only will the IRS look at the numbers on your tax return, but they also compare the data with Form W-2 and Form 1099 in their records. If the income sources don’t match up, then you could be running into a problem. If you report a smaller amount than is listed on the W2 or 1099, then you could receive a bill for the unpaid taxes, along with interest and penalties. The best thing you can do in this situation is to review the numbers with your business accountant to determine if the calculations are accurate. If needed, your accountant can help you with a tax amendment submission.
  2. Failure to File the Right Forms: The necessary tax forms vary depending on the structure of your business. For example, sole proprietors don’t have to fill out some of the forms that are required for certain types of corporations. Make sure that you are working with a small business accountant who understands the various tax forms. This personalized approach can be designed to optimize your tax strategy and ensure that you don’t miss the forms that need to be submitted to the IRS throughout the year.
  3. Timing of Tax Filings: Deadlines matter to the IRS. It is important that you are consistent with submitting the paperwork and payments before the listed deadlines for each of the forms. Serious, expensive consequences might be faced for missing a deadline. Keep in mind that you always have the option to file for a tax extension if you don’t think your tax filing will be ready by the due date. Your small business accountant can assist with the submission of Form 4868 to request the extension. Just because you file an extension, doesn’t mean that you can delay your payment. This process only gives you more time for tax filing, but the payment is still due by April 15th each year.
  4. Record Keeping Issues: You can’t play it fast and loose when it comes to small business accounting. It is important that you are diligent with record keeping throughout the year. This system needs to track both income and expenses down to every penny that is sent and received. In the unlikely case that you are facing an audit, your records need to show how the tax return numbers match up to the transactions that moved through your bank account. These records should include everything from miscellaneous office expenses to the petty cash drawer and cash tips that were received.
  5. Quarterly Taxes: As mentioned above, business owners have an obligation to make estimated tax payments throughout the year. These estimated payments need to be paid on a quarterly basis, instead of waiting for tax day to roll around on April 15th. As a self-employed business owner, you need to file your estimated taxes four times a year. Then these numbers are calculated into your final tax filing for the year. These estimated payments should total at least 90% of the taxes that you need to pay for the year.
  6. Tax ID Mistakes: When one number is off on the Social Security Number or Employee ID Number, it can throw a wrench when the IRS is finalizing your filing for the year. Always check and double-check tax forms to ensure there aren’t any errors in the numbers. If a mistake is made by listing the wrong SSN or EIN, then you might need to refile the full tax return for the year. Another common mistake is a misspelling in the name.
  7. Account Numbers: Another number you need to pay attention to is the account numbers submitted for your bank. Whether you are paying an amount that is owed or receiving a refund, it can be a disaster if the money is moved from the wrong bank account. Make sure you are using the right bank account number and routing information to avoid the tax refund mistakes that result in a refund being deposited into a stranger’s account.
  8. Accuracy of Filing Status: Every person must list their filing status since it impacts the amount paid. For example, employees need to choose single, married filing separately, married filing jointly, head of household, etc. As an employer, you need to require new hires to fill out W4 forms which indicate the person’s filing status. Tax calculations need to correspond at all times. You also need to ensure that your personal filing status is accurate.

Talk to an Experienced Accountant to Avoid Tax Return Mistakes

Most small business owners and entrepreneurs don’t have formal training in accounting, which means that a DIY approach often results in tax return mistakes. Even if you are detailed-oriented and thorough with your filing, there are common mistakes that can be avoided by working with a tax professional.

Hiring an accounting team to assist with tax filing means that you can avoid these tax return mistakes and save money at the same time. Yes, you will need to pay for the accounting services that are provided. But it is a great investment when you consider the money saved through strategic tax strategy and by avoiding expensive fines and fees that will add up if mistakes are filed in the paperwork.

You don’t need to stress over the tax paperwork and financial tracking throughout the year. Let the experts assist with all necessary accounting and bookkeeping services so you can focus your attention on other responsibilities that come with being a business owner.

Easier Accounting is here to offer the full-service accounting systems that you need. Our team focuses on small businesses, which means that we have the hands-on experience you deserve. Contact us today to learn more about the ways your business will benefit from these available services: (888) 620-0770.