10 Small Business Liabilities that Every Owner Should Know About

Where is your company at risk because of small business liabilities you are overlooking? Even if you are proactive in business systems and processes, it’s possible that a few holes could be putting your cash flow at risk. Every business owner needs to be proactive in identifying these potential issues before they become more serious financial problems in the future.

What are Small Business Liabilities?

Liabilities are any obligations that you owe money on. Sometimes, liabilities require current payments, such as loan installments or credit card monthly payments. At the same time, these obligations can be owed in the future, depending on your agreement with the lender.

Liabilities are recorded on the right side of your accounting balance sheet – indicating that it’s money that you owe. Examples of small business liabilities might include:

  • Accounts payable
  • Loans
  • Mortgages
  • Bonds
  • Accrued expenses
  • Warranties
  • Mortgages
  • Payable dividends
  • Interest owed
  • Employee wages

Any time you have an agreement with another business or provider, and this contract isn’t paid for yet, it falls in the category of small business liabilities. These liabilities can fall in the short term category (typically less than 12 months), or the long term category (a payment schedule that extends beyond a year).

Another possible form of small business liability you might have is products or services owed to others. For example, if you have promissory agreements for the delivery of certain services or products, then it would be considered a liability since it impacts your cash flow in the future.

Type of Small Business Liabilities

The only time a business might not have liabilities is if the company only pays with cash and only accepts cash payments. Since we live in a digital business environment, it’s nearly impossible for a company to thrive on cash alone. As a result, it is common for small businesses to have liabilities. These liabilities aren’t a bad thing – as long as the liabilities and cash flow are managed correctly.

Small business liabilities fall into three categories:

  • Current Liabilities: Examples include accounts payable, credit lines, loans and salaries. Anything that needs to be paid within a few months (up to a year) is considered a current liability. Since these liabilities need to be paid quickly, they are watched closely to be sure that you are managing your cash flow and current liquidity. Your accounting team can assist in keeping an eye on current liabilities so you always have enough to cover both immediate obligations and upcoming payments.
  • Long Term Liabilities: On the other hand, certain liabilities require ongoing payments over an extended period of time. Examples of long-term liabilities include large equipment purchases, mortgages, or bonds. Long-term liabilities play a role in the solvency of a business in the future. For example, immediate capital can be obtained through financing to purchase equipment or real estate. Eventually, these financial obligations need to be paid, which means that a business could be facing serious financial issues if cash isn’t available when these long-term obligations become due.
  • Contingent Liabilities: Certain costs only need to be paid based on specific outcomes, so these liabilities fall in the contingent category. An example of when a liability depends on a future event is the outcome of a lawsuit or legal case. For example, you could potentially have a liability that needs to be paid out if the ruling is not in your favor at the end of the legal proceedings. From an accounting perspective, contingent liabilities are only recorded in the books if you have a reasonable estimate for the amount and there is a high likelihood that the liability will come through in the future.

Assets and Liabilities – What You Need to Know

Both assets and liabilities affect your business balance sheet, so it’s important that you understand how these two factors work together. When the numbers are accurate and up-to-date, you can run accounting reports to see the overall financial health of your business.

Assets are things that your business owns that bring value to the company. Examples of assets include real estate, equipment, cars, accounts receivable, etc. Assets can fall into several categories:

  • Current Assets: These assets are things that you could turn into cash quickly if needed. For example, if cash flow was tight, then you could sell more inventory to bring in the money that is needed. Another example of a current asset is your accounts receivable – the outstanding invoices that will be paid by your customers.
  • Fixed Assets: Anything that you will own for a long time falls in the category of fixed assets. Examples include computer equipment, construction equipment, vehicles, tools, real estate, etc.
  • Intangible Assets: You don’t have to receive a physical item or service to consider something an asset for your business. Intangible assets are resources that have financial value without a physical form, such as brand recognition or a copyright held by the business.

If you want a clear picture of the financial standing of your company, then it’s important to calculate the assets and subtract the liabilities. Additionally, consider how ongoing expenses will affect your cash flow right now and in the future.

How are Liabilities Different than Expenses?

It’s easy to assume that “liabilities” and “expenses” are synonyms. But there are distinct differences between the ways these costs are recorded and managed in your accounting system. An expense is a category used for anything that is required for the cost of operations. If you need to spend money to generate revenue, then it would be considered an expense (not a liability).

Examples of expenses include office supplies, rent, utilities, employee payroll, or anything else that needs to be paid so your company can stay in business. These expenses are typically paid quickly in cash. If any of these payments are delayed because you are offered credit from a provider, then the line item shifts from an expense to a liability. The simplest way to see the difference between these categories is by looking at how you pay for something that is needed for your business. If you are paying the bill from the cash in your checking account, then it is an expense. If you need to borrow money or use credit for the purchase, then it creates a liability.

Revenue and expenses are shown on your income statement, but they aren’t listed on a balance sheet that compares your liabilities and assets.

Accounting Formula for Your Balance Sheet

Do you want to know how much your business is worth? Whether you are looking to bring on investors or you might be selling the business in the future, you need to have a clear idea of the value of your company. This value can be calculated by looking at your small business liabilities and assets. The calculations show the current financial strength of your company.

The “basic accounting equation” (also known as an accounting formula) can be used to calculate the net worth of your company. You can figure out this amount by using this formula:

  • Assets – Liabilities = Equity

First, you need to calculate total assets and total liabilities. Then, subtract the liabilities from the assets to see how much equity is left. If you have more liabilities than assets, then this equity number will be negative. If you have more assets than liabilities, it shows that your business has good financial health because you are in the black.

While business debt is sometimes required, the goal is to maintain positive equity. The higher your equity number, the better financial health your business is experiencing. If you do this calculation and see that you have a negative number on your balance sheet, then it is an indication that your company is in trouble that you need to be proactive about turning things around. The principles are the same, regardless of your industry: increase assets and pay off liabilities whenever possible.

Professional Accounting Services for Reviewing Your Balance Sheet

It’s smart to review this balance sheet regularly so you have a clear understanding of the current health of your business. You need to know your financial standing before making bigger decisions related to hiring, inventory management, and more.

The best thing you can do is hire an experienced accounting team to review your balance sheet periodically. We can make sure your small business liabilities aren’t growing faster than your assets. Watching the trends over time can be an important step in catching potential cash flow issues in the earlier stages – then you can make changes right now to improve your balance sheet in the future.

Trusted Accounting Services for Small Businesses

If you need accounting support for your small business, then Easier Accounting is available to assist. We focus on small business services, giving you the peace of mind to know that you are working with a team that understands your business needs. We offer more than balance sheet calculations – our team can also help with tax strategy and preparation, payroll processing, and more. You can learn about these services by calling us for a consultation: (888) 620-0770.

Preventing and Preparing for Sickness in the Workplace

How are you changing workplace practices because of the COVID-19 health concerns? The Centers for Disease Control (CDC) and other government officials are encouraging all businesses to be proactive in minimizing the risk of spreading this virus. One positive case might seem simple initially, but the virus can spread quickly and affect other employees and customers.

It’s always been important to keep your business safe by practicing good health and prevention in the office. Now, these practices are more important than ever – with a long list of guidelines that need to be followed.

How Sickness Can Affect Your Team

If you have a small business and just a few employees, bringing sickness into the workplace can lead to negative business outcomes because everyone needs to quarantine. Even in a medium or large size company, this virus can affect many people and take a toll on your daily productivity and results.

Unlike the common cold, COVID-19 might require a person to stay home for many days. These lost workdays not only results in a loss of income for the employee, but also makes it hard for your business to keep up with current demand.

Not only is your staff affected, but there is a risk of spreading the sickness to customers who are visiting your location. News stories have reported that some businesses have been shut down temporarily due to the spread of COVID-19. Not only does this situation require immediate action to determine how far the virus spread, but the business also needs to spend significant amounts of money on cleaning and sanitation.

Instead of waiting for an outbreak in your workplace, it’s better to be proactive with the proper safety measures to prevent health issues among your employees and customers. Keep reading to learn more about the best practices for workplaces of all sizes.

Who Needs to be Screened for COVID-19?

Using multiple checkpoints in the workplace is an important step to prevent the virus from disrupting your business. Even though it seems like a hassle to monitor symptoms and check in with employees, it’s a necessary step so you can avoid a business closure. Additionally, these health screenings can save you a substantial amount of money when you consider the expenses that would be required for professional disinfecting and cleaning services.

When should you use COVID-19 screenings? For employees, customers, and visitors, depending on your industry:

  • Employee Screenings: Every person should complete a screening questionnaire before coming into the workplace. Consider a policy to encourage people to stay in the office for the entire day instead of leaving for a lunch break (so you can avoid the need for a second screening).
  • Customer Screenings: It’s not always necessary to complete customer screenings. Consider your workplace environment and how close the customers are coming in contact with employees. For example, grocery stores and retailers aren’t choosing to use customer screenings since there is enough room for social distancing. On the other hand, COVID-19 screening is recommended for industries where people are in close proximity, such as medical appointments, massage therapy, salons, legal services, and other similar situations.
  • Visitor Screenings: If anyone else is coming onsite for services or as a visitor, then you should have that person complete a health evaluation as well. Alternatively, some businesses are limiting or prohibiting visitors to avoid the need to complete health screenings for people who aren’t required to be in the workplace.

Clear Sick Day Policy

One way to minimize the risk of someone coming to work with COVID-19 is to encourage a lenient sick day policy so employees feel comfortable staying at home. If someone is exhibiting symptoms, then encourage them to get tested or to stay home until the symptoms subside.

Additionally, these sick days should be offered for employees who have family members with symptoms. For example, parents need to be able to stay at home when their children are sick. Or, if a spouse or roommate has COVID-19 symptoms, then it’s possible that your employee could also be infected and bring it into the workplace.

Have a written sick day policy and share information about the time off options with your employees. Even though it means that you might be running a little tight on your staffing schedule, it’s worth having one employee stay home so you can prevent the spread to other employees.

Also, consider how these sick days fit in your benefits package. Talk to your accountant about how the sick days are calculated on payroll so that your books are handled correctly when it’s time to distribute paychecks.

Flexible Cancellation Policy

Not only do employees need flexibility with their schedules, but it’s also important to allow flexibility for customers as well. Having a flexible cancellation policy is important so people feel like they can change their appointment if symptoms arise.

Consider your industry and the way appointment changes might affect your schedule. Even if you have the cost of a few missed appointments here and there, it’s worth the disruption to avoid bringing COVID-19 into your workplace.

Daily Health Evaluations

Before each person steps foot in the workplace, you should have them fill out a health questionnaire. These check-ins can slow the spread by identifying potential symptoms in the earliest stages. One evaluation at the beginning of each workday is sufficient, although some businesses are requiring a second check-in if the employee leaves campus for lunch or another appointment.

Specific evaluation recommendations vary depending on your location. For example, some cities and states have strict guidelines about how employees need to be monitored when coming into the workplace.

A digital form is the simplest way to monitor employee health each day. You can have a form online that they fill out with their name and employee number. Then, have basic questions to evaluate potential symptoms that might indicate COVID-19.

Examples: Health Screening Form

Here are some examples of questions that you might use on your health screening form:

  • Do you have any of these symptoms? Check all that apply:
    • Cough
    • Fever
    • Shortness of breath
    • Sore throat
    • Loss of smell or taste
    • Muscle aches
    • Headaches
    • Vomiting
    • Nausea
    • Diarrhea
    • Fatigue
  • Are any of your household members experiencing any of the symptoms listed above?
  • Have you traveled to any high-risk areas in the past two weeks?
  • In the last 14 days, have you come in contact with anyone that has tested positive for COVID-19?
  • Are you or a family member currently waiting for COVID-19 test results?

These questions cover the most important points that help you decide whether the employee or customer should be coming into the workplace. Many businesses are also choosing to implement a temperature check when people arrive on campus. For example, employees might have their temperature check when they walk through the front door – before going to their workspace.

Workplace Policies for Protecting Employees

A few other policies can be implemented in your workplace to limit the potential spread if an asymptomatic person comes into the building:

  • Social Distancing: Spread out the workstations so people have distance between employees. If there isn’t enough room for everyone to social distance, then you might stagger the work shifts or adjust working conditions. For example, plexiglass barriers can be placed between desks as an extra layer of protection.
  • Cleaning: It’s important that you ramp up your cleaning efforts. Have a cleaning schedule throughout the day to sanitize areas in common spaces. Cleaning should focus on any surfaces that might be touched by multiple people, such as bathrooms, tables, doorknobs, equipment, and more. If possible, limit the number of people that have access to these rooms and facilities.
  • Ventilation: Do you have good ventilation in the workspace? It might be a good time to upgrade your HVAC system with high-quality filters that can pull small particles out of the air. If the weather is nice outside, you can increase air circulation by opening the doors and windows.
  • Break Room: Encourage employees to eat at their desks instead of congregating in the break room. Or, people might choose to spend time outside social distancing while they share a meal together. Many companies are limiting exposure by discouraging the sharing of food. If you want to provide a meal for your team, then order from a restaurant that provides individually-packaged meals (instead of large serving trays that everyone shares).

Other Considerations for Your Business

COVID-19 is impacting your business financially in ways that you couldn’t have expected. More than ever, it’s important that you have a trusted accounting team to help with your financial strategy during these challenging economic times.

If you are looking for ways to weather the current difficulties, then Easier Accounting is just a phone call away. We offer accounting services for small businesses, including tax support, payroll processing, and more. Call today to discuss how these personalized services can be beneficial for your business: (888) 620-0770.

6 Qualities that Make a Small Business a Success

Success leaves clues. If you want to build a thriving small business, then the best approach is to look at other successful businesses in your industry – and start doing what they are doing. As you study other small business owners, you will see that many of them have certain things in common.

Even though every industry is unique, you can find trends and traits that build a foundation of success for every business. Here are some of the most important qualities that will impact whether your small business takes off, or sputters to a stop in just a few years:

#1: Customer-Focused Approach

Are you so focused on the profitability of your company that you overlook the needs of your customers? If you want to keep people coming back to buy again and again, then you need to create a crowd of raving fans. These are customers who love your products and services so much that they are happy to share your website with friends and family.

Prioritizing customer satisfaction is an effective way to be sure you are delivering the products your customers want to buy. When your goal is to deliver high-quality results for every customer, then you can be confident that your products will keep selling in the future. On the other hand, your business will struggle if you don’t have a list of loyal customers.

It’s important to understand that customers have higher expectations when it comes to customer service. A personalized touch can go a long way t creating the “wow factor” that keeps people coming back. Here are a few details to consider to ensure that you are building life-long relationships with satisfied customers:

  • Ease of communication
  • Highly trained customer service representatives
  • Efficient service
  • Fast shipping
  • User-friendly website
  • Product development and improvements
  • Listening to customer feedback

Start by creating a strong culture with the customers in the center of all initiatives. Is there anything you can do to improve products or processes to better serve the needs of your target demographic? Fostering customer satisfaction is an important step that fertilizes the soil for business growth.

#2: Leverage Business Resources

When a small business is high-performing, it means that you are using tools and resources to your advantage. Even the smallest decisions can add up to big profits or losses in the future. If you are getting sloppy with expenses or you are leaving money on the table in the sales process, then you could be losing out on thousands of dollars every week.

Yes, it’s important to invest money in your business. But consider your current resources before you start burying money into new projects. Ultimately, you can maintain operational efficiency that creates lean systems for long-term results.

At the same time, you need to make sure that all departments and business systems are aligned. If there are any areas of redundancy, then it’s time to implement a new system that puts a stop to the repetitive activities.

#3: Create Accountability

You can lead from the top with good management, but your efforts are limited to the tasks that you can complete personally in a single day. Instead of trying to do everything yourself, it’s more effective to pass responsibilities to other team members and employees. This process of creating accountability means that your business systems will keep running, regardless of whether you show up at the office each day.

Creating small business systems won’t be effective if your employees aren’t trained and held accountable for following those systems. This process starts by sharing your vision and maintaining strong communication with the team. Implement a good training structure and be clear about who holds the responsibility for specific actions that need to be happening regularly.

Finally, have a system of accountability so you can measure results through performance and consistency. You can’t improve a system that isn’t being measured. Checking in on the responsibilities of all team members can build a company culture of accountability – which improves productivity, and has a significant impact on overall results. The success of your business starts with the productivity and motivation of your team members.

#4: Design Business Objectives

How are you going to get to the finish line if you don’t know where you are going? If you want to achieve small business success, then you need to have a clear vision about the results you want to create. Setting a goal to “make more money” isn’t good enough – it’s too vague and doesn’t include action points that will lead to the results you desire.

Successful business owners have systems in place that include big goals, as well as stepping-stone goals that need to be met along the way. Here is an example of how you might break it down for your business:

  • Design a 5 Year Plan: How do you want your business to be performing in 5 years? If you are working out of your garage and doing it all yourself, then you might have a goal to hire 20 people and have a certain amount of annual revenue by the 5-year anniversary of launching your business. Take time to dial in your 5-year goal, because this plan is the foundation that affects other smaller goals.
  • Break it Down to Annual Milestones: Now that you can see where you are heading in five years, it’s time to look at specific milestones that need to be met annually. Remember that business growth doesn’t happen equally over five years. Often, things start slow… then you build momentum over time. Consider the most effective steps that need to be followed that will lead to your longer-term results. It’s smart to map out these annual goals right now. But be ready to re-evaluate and change annual goals at the beginning of each year, based on the progress and performance of the previous year.
  • Identify Quarterly Actions: Focusing on your annual goals is important, but you may miss the ongoing actions if you are always looking ahead on the calendar. How often have you set New Year’s resolutions, only to find that you have minimal progress when Thanksgiving rolls around? Instead of procrastinating your annual approach, treat each quarter as if the end of the year was happening at the end of the quarter. This method gives you four smaller chunks of 90-days. Then, you can re-evaluate each quarter to identify how things need to change so you can improve your results.
  • Look at Monthly Initiatives: Once you know where you want to be at the end of the quarter, now it’s time to look at the monthly milestones that will help you meet quarterly goals. It’s amazing how much you can get done in a month if you focus your efforts!
  • Refine to Weekly and Daily Activities: The real foundation that sets the stage for future business growth is in the activities you are following on a daily and weekly basis. These small actions might seem trivial, but the smallest steps snowball into huge results down the road. The best way to set your small business up for success is by understanding how your daily and weekly goals lead to results that are achieved months and years down the road.

The approach listed above shows how you can reverse-engineer the steps and goals that need to happen to reach higher levels of success. But remember that each business is different, which is why you need to identify the action steps that are most effective for your business and industry.

#5: Solid Marketing Strategy

While the goal is to have a great list of customers that continue purchasing products from your company, this won’t happen without bringing in new customers. It doesn’t matter if you have the best product in the world – people won’t buy if they don’t know about the products you are offering.

A good marketing campaign doesn’t mean that you are spamming the internet with ads. Instead, hire an experienced marketing team that can refine your strategy. The best way to leverage your marketing budget is by prioritizing your funds on the platforms where your target demographic spends the most time. For example, if your ideal customers are over the age of 65, then SnapChat or Instagram ads probably aren’t the most effective marketing method. Instead, you might focus on search engine optimization or Facebook ads that allow you to choose age groups and demographics.

Adapt your marketing plan when you find strategies that work. Also, focus on creating valuable content online if you are going to have real, engaging interactions with your customers.

#6: Solid Financial Plan

You can apply all of the above strategies, and still fail at your business efforts if you aren’t focusing on profits and losses. Creating a solid financial plan starts with common bookkeeping and accounting, then you can implement new financial strategies that boost the bottom line.

At Easier Accounting, we provide the small business accounting and bookkeeping services you need. As you are looking to build the future success of your company, we are here to help you achieve your goals. Call to learn more about the ways that we can help your small business: (888) 620-0770.

How to Catch Accounting Mistakes

Even if you are careful with data entry and tracking your business transactions, it’s inevitable that mistakes will happen in your bookkeeping. The problem is that these seemingly small accounting mistakes might seem trivial right now… but the long-term effects can be disastrous on your company.

Accounting mistakes throw off your reports and balances, which means that you are looking at inaccurate information when evaluating the current standing of your company. When you are making important business decisions, you need to be confident in knowing your current cash situation and how your decision will affect things in a few months or years. The only way you can have confidence in these critical financial decisions is by ensuring that your bookkeeping is accurate… which comes down to minimizing and correcting accounting mistakes whenever possible.

The truth is that mistakes are unavoidable. But they don’t have to be the downfall of your small business. The following tips will help you minimize the likelihood of mistakes, help you correct the issues when they arise, and save you the headache of inaccurate financial reports.

Tip #: Update Your Accounting System

Any time you are working with manual calculations, you can know that there is a high risk of accounting mistakes. Small businesses often start with DIY financial tracking, such as spreadsheets or handwritten notes. We live in a modern world with great accounting tools, which means that you are missing out on a variety of features if you haven’t already implemented a good accounting system.

The first step to reducing mistakes is to reduce the manual data entry and calculations that are occurring. Modern accounting software programs simplify the bookkeeping process by automating the transactions as they move through your bank accounts.

When you are using a proven accounting and bookkeeping system, then you can have confidence knowing that the software is carefully designed and proven to improve overall results. Plus, you have the benefit of being able to access your financial information from any location since many of these programs are hosted in the cloud.

Tip #: Separate Business and Personal Spending

One reason you might be overlooking accounting mistakes is because of the mix-up of transactions between personal and business spending. If you are mixing these transactions, then you are setting yourself up for problems in the future. Even if you are just getting a new business off the ground, make it a priority to set up a new business account as soon as possible. The goal is to keep the funds separated so you don’t have crossover between your business and personal spending.

When personal and business transactions are mixed, it is the perfect environment for confusion and disorganization… which inevitably leads to accounting mistakes. These small mistakes can be costly to your company if you file your taxes incorrectly or miss out on potential deductions.

Creating a separate business account offers a long list of benefits you will enjoy in the future. You always know how much money is in your business account, making it easier to avoid overspending. Plus, you won’t be tempted to spend the extra business money on personal costs. Instead, keep the money separate so you have money set aside to reinvest in the future of your business.

Tip #: Save Printed Documents

We understand why you are looking for ways to move to a paperless accounting system. But don’t throw out the paperwork and receipts until you have verified that the transactions are correct. These transactions can be digitized, but you also need to maintain the records in case of an audit in the future.

The best way to protect your business is to hang onto these records for at least three years. Design an effective filing system so you can refer to the records if needed. For example, if questions come up about potential accounting mistakes, then it can be helpful to refer to your documentation to clear up the issues.

Tip #: Always Reconcile Your Accounts

One of the biggest mistakes you can make is assuming that your reports and records are always accurate. Mistakes happen, which is why you need to build in checks and balances to identify and correct these issues as soon as possible. The chances are high that you’ll make a few accounting mistakes here and there, and your accountant can help you catch these mistakes before they turn into serious issues.

Small accounting mistakes are easy to find through account reconciliation. This process requires that you compare external records to the numbers in your books. For example, you might compare bank statements with the numbers showing in your accounting software.

This reconciliation should happen regularly. It’s common for businesses to have reconciliation schedules for monthly, quarterly, and annual checks. Large corporations might have reconciliations happening more frequently, while small businesses can have semi-regular reconciliations since there are fewer transactions to evaluate.

Don’t stress because accounting mistakes are identified on the account reconciliation. Instead, use this opportunity to identify the issue. Then, you correct the problem right away to minimize the long-term effects. Additionally, look for ways that you can improve your systems if needed, helping to reduce the likelihood of the same mistake being made again in the future.

Tip #: Double Check Everything

When you are inputting information in your books, dedicate a little extra time to double check the work you are completing. A few extra minutes can go a long way to catch typos and small accounting mistakes. You need to be sure that what you enter into the software program matches the records you have for each transaction.

Watch out for these common mistakes:

  • Categorizing the transaction under the wrong spending code
  • Recording the transaction to a different account
  • Transposing numbers or misplacing a decimal point
  • Entering the wrong numbers
  • Flip-flopping entries
  • Marketing accounts payable as accounts receivable
  • Forgetting to record an invoice

Remember that a few small accounting mistakes lead to disastrous results in the future. Even if you are short on time, it’s worth the investment to spend a few extra minutes double-checking your entries.

Tip #: Maintain Consistency with Your Schedule

Mistakes are more likely if you are crunched with time at the end of the month – trying to get your books caught up from all of the transactions that came through in recent weeks. Instead of procrastinating until the last minute, you need to implement a consistent process to ensure that you are staying on top of everything that is moving through your business.

If you don’t already have a system in place, now is the time to create a new accounting process. The development of solid financial and accounting systems is a valuable addition to protect your business in the future. These systems make it easier to stay ahead of ongoing financial responsibilities, which means that you will be more effective in avoiding accounting mistakes.

Tip #: Get an Outside Perspective

Getting a second set of eyes on your books is an important step to catching accounting mistakes when they pop up. Even if you’ve looked over the numbers 10 times, it’s possible that you might be overlooking details that can be spotted by someone else.

Not only does an outside service provide valuable insights into your financial systems, but outsourced accounting support builds in the checks and balances that are needed to catch potential mistakes. You have the benefit of tapping into professional resources, while also ensuring that you are avoiding common accounting errors.

Let the Pros Catch Your Accounting Mistakes

You are a busy small business owner, which is why it can be a challenge to stay current with your books. As you are juggling all of the daily responsibilities of running your company, it’s important to consider how much you can benefit from hiring an outsourced team of accounting experts for assistance. You don’t have to carry the responsibility by yourself. Let our team do the heavy lifting so you can focus on other daily activities related to running your company.

Investing in outsourced accounting not only reduces the risk of accounting mistakes, but it also relieves the stress you are experiencing. It’s worth the investment! Instead of bringing on a full-time accountant, save money by bringing on an outsourced accounting team – then you can put your time and money back into activities that build your business.

Easier Accounting provides the trusted accounting services you need. Our team focuses on the ongoing financial tasks that keep you ahead of reporting, taxes, payroll, and more. This personalized approach is always catered to the needs of your company, ensuring that you have a solid financial foundation to help your company grow.

If you are interested in learning more about the ways we can reduce accounting mistakes and improve your business financial systems, then reach out to us for a consultation. We are happy to answer your questions and help you find the accounting and bookkeeping services that are a good fit for your unique needs. Call Easier Accounting at (888) 620-0770.

6 Steps to Setting Up Payroll for a Small Business

Are you taking the first steps to get your new business off the ground? Or, maybe you have launched a small business, and you are looking for solutions to grow the company. Regardless of the current size or age of your business, it’s critical that you establish systems to manage the financial details of your company. One of the most important things you can do is to set up a payroll system for a small business.

Payroll is a critical factor that affects employee satisfaction. When you have a reliable system for payroll management, then your employees feel confident knowing that they can always count on their paychecks coming through at the right time. On the other hand, inconsistency with payroll for a small business is one of the fastest ways to lose your staff members.

Setting up payroll for a small business for the first time can be an overwhelming experience – especially if you don’t have a financial background. Even with high-quality accounting software, payroll setup can be confusing and complicated. The best solution is to lean on the support of a reputable bookkeeping and accounting service. This way you don’t have to manage the details of a payroll system without tapping into support from a professional team.

If you are getting to attempt a DIY process for setting up payroll for a small business, make sure to follow these essential steps:

Step #1: Review Federal and State Employment Laws

One of the most challenging parts of payroll management is keeping up with the changing laws. These regulations are set on both a federal and state level, with some cities also implementing payroll rules that need to be followed.

As you are setting up payroll for a small business, you need to have a clear understanding of which rules apply to your business. For example, here is a quick overview of laws that might impact your payroll management:

  • Minimum wage laws
  • Family and Medical Leave Act
  • Overtime rules and limits
  • Employment tax rates
  • Tax payment timelines
  • Benefits administration

The laws vary depending on your location, as well as the size of your business. So, make sure you are thorough in researching the applicable information so you can stay in compliance with the payroll laws that affect your business.

Also, you need to know about the requirements for Federal withholding and reporting of these funds. These calculations are figured into the payroll processing system, so you don’t have to do manual calculations each week.

Step 2: Choose a Payroll Software

Gone are the days when you could pull out a checkbook to manually pay an employee. We live in a digital world, and it makes sense that you should leverage these online tools to support your business efforts.

Cloud-based accounting and bookkeeping software makes it easy to stay current with payroll processing and reports. Plus, you have the benefit of accessing this information from any location – even when you don’t have your computer with you. The simplicity of cloud-based payroll processing can’t be beat, which is why it makes sense for every small business to make this transition as soon as possible.

If you aren’t familiar with available payroll software programs, then your accountant can offer recommendations for the system that will match the needs of your business.

Step 3: Set Company Payroll Policies

Creating an employee handbook is an important step in communicating the right information to your team. This book of guidelines shares information about how payroll and benefits are managed. Not only is employee communication essential for creating a strong business relationship. But this information is also important to keep you protected against certain liabilities.

Be careful that the employee handbook doesn’t have language that indicates a contractual agreement between your business and your employees. Instead, share administrative information, such as the payroll schedule, benefits administration, and more.

Setting a payroll schedule is an important business policy that needs to be in place as soon as possible. For example, you need to decide how often employees will be paid, and how the payments will be administered. It is common for businesses to have bi-weekly, monthly, or bi-monthly payroll schedules. Decide on the frequency that works best for your needs and the needs of your employees as well.

Step 4: Get a Federal Employer Identification Number

Even if you are using your Social Security Number for tax filing purposes, you need to have an Employer Identification Number (EIN) to use on payroll forms and documents. As soon as you start your business, it’s a good idea to set up your EIN right away. This federal number will be used in a variety of ways over the years.

It’s simple to apply for an EIN if you don’t already have on. Just follow the instructions on the IRS website. Then, use this EIN for payroll paperwork and any other associated forms.

Step 5: Assign Responsibility for Payroll Administration

One of the most common reasons that payroll processing and other bookkeeping tasks slip through the cracks is because you don’t have a system in place that assigns the responsibility to a specific person. As the business owner, you will likely find it challenging to keep up with these requirements because you already have a long list of responsibilities you are juggling throughout the week.

Instead of trying to DIY with payroll for a small business, it’s smart to delegate this responsibility to someone you can trust. You might bring on an employee to help with payroll processing, financial tracking, invoicing, and other administrative tasks. Or, consider an outsourced accounting and bookkeeping service.

Outsourcing is usually much more affordable than bringing on an in-house bookkeeper. These costs are worth the investment when you see how much support you will receive from these necessary skills that are needed for your business.

Step 6: Organize Employee Paperwork

Hiring an employee requires a stack of forms and paperwork during the onboarding process. When you find the right candidate, then you need to be sure that you are sticking within the legal guidelines for federal and state employment laws.

Here is an overview of some of the hiring requirements that need to be followed for accurate, legal payroll processing:

  • Completed W4 Form: This form calculates the amount of federal withholding tax you need to take from each paycheck. The employee fills out their personal information, then you need to hold this W4 Form on file in case of an audit. This withholding amount can carry from one year to the next. If the employee puts “exempt” on the form, then you will need to have the employee fill out a new form at the beginning of each year.
  • Identification: Not only do you need to have the correct tax form filled out, but it is also your responsibility to ensure that the new employee is can work in the United States legally. Review Form I-9 and be proactive in following the rules regarding the acceptable forms of identification for employment. When you gather identification from new employees, take a photocopy of these documents and keep them on file.
  • Social Security Verification: You can be proactive to ensure the payroll calculations and reporting are accurate by verifying a person’s Social Security Number as soon as possible. The Social Security Administration offers a free checking service to help you avoid name and SSN mismatches.
  • New Hire Report: Most states have a requirement for a new hire report to be completed and submitted. Check your local state laws to know if this step needs to be included in your new-hire process.

Need Help Setting Up Payroll for a Small Business?

Going through the process of setting up payroll for a small business can be stressful. The good news is that you don’t have to do it all by yourself. Instead, look at the benefits of hiring a bookkeeping and accounting provider so you can outsource these important responsibilities to a professional team.

Once your payroll system is set up, it is a big step: a sign that you are on track to building the business of your dreams. The right payroll system should reduce your responsibilities because you have automated systems and skilled services to help you stay on track each month.

Additionally, outsourced payroll services give you access to a knowledgeable team if you ever have questions about payroll administration. It’s important that you know where to turn when questions come up along the way.

At Easier Accounting, our pro payroll team is here to assist with your business systems. We’ve been serving the industry for years, offering quality systems for setting up payroll for a small business. We invite you to reach out to schedule a consultation if you are interested in learning more about your business will benefit from these services. Not only can we help with payroll processing, but we also offer a range of other financial services, such as tax preparation, reporting, and more. Call us today: (888) 620-0770.

Outsource Bookkeeping to Avoid Unnecessary Stress

Running a business can be stressful, especially with the recent economic events that are impacting all industries. If you are looking for ways to reduce your stress during these unprecedented economic times, then you might consider the option to outsource bookkeeping services so you can decrease your busy work.

Running a business requires a lot of paperwork and busy work that needs to happen behind the scenes. The glamorous part of being a business owner is having the flexibility of being your own boss. But you can’t enjoy this process if you are tied to the desk because of never-ending paperwork. Not only do you oversee the marketing campaigns and product development, but it can be a burden to keep up with expenses and invoices.

It’s common for entrepreneurs to feel like they are being stretched – with limited time in the day to get everything done. If you can’t squeeze in the most important tasks, then it might be time to hire outsourced services for assistance. Delegation is a great way to take your time back, giving you more control over your schedule.

Bookkeeping and COVID-19

Bookkeeping is more important than ever with all of the changes happening in the business world. Some businesses are facing serious cashflow problems after their stores were closed for a few weeks with the quarantine lockdowns. Other businesses have been booming as consumers have been changing their shopping habits in this pandemic.

No matter what is happening in your business right now, it is a great time to outsource bookkeeping if you are looking for a way to manage your finances more effectively. Here are some of the reasons why bookkeeping is a necessary service for all business owners during this pandemic:

  • Business Relief Loans: Many business owners accepted federal loans through the stimulus packages offered for COVID-19 economic relief. This money was made available through the Small Business Administration, but it comes with certain requirements that need to be met by business owners. If you want to receive forgiveness for any part of the loan, then you need to document spending requirements for the money you received. A bookkeeping service can help with the transaction tracking and details that will be required for your loan forgiveness. Up to $100,000 of these loans can be forgiven, depending on the situation of each business.
  • Managing Unexpected Growth: Some companies, such as online grocery ordering and other digital services, have experienced a huge surge in growth because of the pandemic. Since people aren’t visiting brick and mortar stores, shoppers are turning to digital options for the products and services that are needed. If your business has seen an increase in sales, then it’s a good idea to outsource bookkeeping services so you can accommodate the financial changes. Managing these profits right now will set your business up for higher levels of growth in the future.

Bookkeeping and accounting were important business services before the pandemic started. As the business climate has changed, it is easy to see that these services are continuing to be essential for managing the finances of companies – both small startups and big corporations.

Outsource Bookkeeping: How it Will Reduce Your Stress

Hiring outsourced services might be the best thing you can do during these changing times. Many business owners can see that they need additional support and staffing. But they are worried about bringing on more employees because of the overhead costs and potential cost burdens they will be facing in the future.

If you need help with financial tracking and ongoing cash management, then it’s smart to outsource bookkeeping services. Here are a few ways that your bookkeeper will reduce your stress:

  1. Tracking Profit Margins: Do you know how much your business is profiting after you calculate in the cost of expenses? Profit margins can be thin, especially in the first years of running a small business. Professional bookkeeping services help you stay ahead of all of these transactions, so you know exactly how much money you have leftover to reinvest in the business again.
  2. Full-Service Solutions: One of the benefits of hiring an outsourced bookkeeping team is that you can get assistance with a variety of financial tasks. For example, your bookkeeper can help with everything from monitoring your monthly transactions, to handling payroll, paying the bills, and keeping up with invoicing.
  3. Free Up Your Time: What would you do with an extra 5 or 10 hours a week? Handing off the responsibility is a great way to increase your free time, giving you an opportunity to focus on the projects that are sitting on the backburner. For example, when you decide to outsource bookkeeping, you might find that you are able to turn your attention to the development of a new product or a new marketing campaign to bring in more sales.
  4. Manage Tax Burden: Paying taxes is an unavoidable part of running a business. But just because you need to pay taxes, doesn’t mean you shouldn’t have an aggressive strategy for reducing your tax burden as much as possible. The combination of outsourced bookkeeping and accounting services can be a powerful way to keep track of every penny that can be calculated as a write-off. Even the small transactions can add up over time, helping you save a bunch on your taxes in the future. DIY bookkeeping often results in overlooked write-offs because some of these transactions slip through the cracks.
  5. Flexibility of Services: Hiring a full-time employee means that you need to have enough work to keep that person busy throughout the month. Often, bookkeeping tasks don’t require daily attention, so it doesn’t make sense to bring another employee onto your team. When you outsource bookkeeping service, it means that you have access o these services on-demand – only paying for the exact services you need. Many business owners find it more affordable to hire an outsourced team instead of a full-time employee.
  6. Peace of Mind: You can’t put a price tag on the peace of mind that comes from professional financial services. When you know the reports and you can have confidence that these numbers are on track, then you don’t need to wake up at night wondering if your business is going to succeed. Outsourced bookkeeping services offer a great solution to stay ahead of business financial tracking, so you can enjoy the benefit of improved good health.
  7. Updated Information: It can be a lot of work to keep up with the changing laws and regulations that impact your business. Instead of spending your free time reading the small print of the tax laws, outsource these services so you can maintain accuracy in the forms and paperwork. Outsourced bookkeeping and accounting are important for keeping up with the rules that are constantly changing. Plus, you can keep your books current with the latest trends in the accounting industry, such as cloud-based systems and optimal reporting.
  8. Accurate Financial Information: How many times have you run a financial report, only to realize that the report is worthless because the transactions aren’t current? If you can’t rely on the accuracy of your financial reports, then it’s a surefire sign that you should outsource bookkeeping services. Having a dedicated team to keep up with these transactions is a great way to give you the ability to make sound financial decisions when opportunities arise.

Outsourcing vs. Staff Bookkeeping

Each business is unique, which is why outsourcing isn’t always the best answer. But it is common for business owners to find that outsourced services are much more affordable and effective compared to hiring a part-time or full-time staff member.

Consider the amount of money you will spend on an employee. Not only do you need to cover the costs of the person’s salary and benefits, but a variety of other expenses are incurred for recruiting, onboarding, training, and turnover. It can be a burden on a small business to keep up with these required expenses.

Instead of adding to your stress by going through the hiring process to bring in another employee, look at the benefits of outsourcing. For example, when you outsource bookkeeping, you can have confidence knowing that the bookkeeping team is already trained and ready to implement the most effective strategies for your small business. You don’t need to worry about ongoing training and management of an employee.

Plus, outsourced bookkeeping services are often a fraction of the price that you would pay for an in-house employee. The cost savings alone often make it worth it to outsource instead of hiring an employee.

Professional Bookkeeping Services You Can Trust

At Easier Accounting, our team understands the challenges you are facing in running a small business. Often, financial management and bookkeeping can be difficult to keep up with among your other business responsibilities. If you are looking for ways to get the support that you need, then our team is just a phone call away.

We specialize in bookkeeping and accounting services for small businesses. Contact us right away if you are ready to outsource bookkeeping tasks to the professionals: (888) 620-0770.

Why is Inventory Management Important for Your Small Business?

If you are running a small business, then inventory management is an important factor that affects everything from cash flow to product availability. You want to have products on hand to meet the demands of your customers. But too much inventory can cut into your bank account and make it hard to keep up with ongoing costs. There is a fine balance to decide on the right amount of inventory you should have on hand.

Thinking Ahead: Inventory Tips

Problems with inventory management can result in a variety of avoidable issues. Here are some of the potential issues you might face if you don’t have a good inventory management system in place:

  • Cost Increases: Some business owners need to increase the pricing of the product to cover the overhead expenses of too much inventory. Your per-unit pricing might change depending on availability from your suppliers and the timing that you need these products. For example, if you run short on inventory and need to rush an order, then you can expect to pay more per-unit for this last-minute request.
  • Product Depreciation: Even though you might get a price break on a bulk order, it’s possible you will encounter price depreciation if the items sit on the shelves for too long. This depreciation is especially true in industries where new products and versions are released frequently. Are you selling electronics? Then there will be a significant product depreciation when the upgraded model is released in the future.
  • Insurance Costs: The amount of inventory on-site will impact the level of insurance needed. Holding a lot of expensive inventory in your warehouse means that you need more insurance coverage to pay for the losses if something goes wrong. Your insurance provider will need details about the value of products on-site, and you can expect your monthly premiums to go up the more inventory you need covered on the policy.
  • Storage Space: Also consider the amount of storage space needed for your inventory. When the shipment arrives, do you have a place to put a few pallets of 50-pound boxes? Consider the placement of this storage and how it will affect day-to-day logistics. You will lose money if employees need to work extra hours for inventory management or if the inventory storage interferes with daily productivity.
  • Organization: Bringing in a bunch of inventory is just the first step. Do you have a system in place to find the right products when they are needed? If you are going to keep inventory on-site, then it’s critical that you have a solid system to organize the products for easy access.

Ideally, you should have just enough inventory on hand to meet customer needs, with scheduled shipments to restock at the perfect time.

How Much Extra Inventory is Costing You

Did you know that costs increase by as much as 35% for small businesses carrying extra inventory? The extra expenses might seem small, but they really add up over time – and cut into your profit margins. Carrying too much inventory might be one of the costliest mistakes you can make in your company.

Instead of buying inventory based on good intentions to sell everything as quickly as possible, you need to be deliberate in anticipating inventory needs and matching customer demand.

Looking Ahead to Anticipate Needs

Figure out the best timeline for ordering based on anticipated busy seasons and slower times of the year. For example, if you often sell a lot of product during 4th quarter (the holiday season), then make sure your inventory comes in before the sales start to increase. It doesn’t make sense to buy a lot of inventory in January if sales tend to be slow at the beginning of the year.

Every business is different, so it can be helpful to look at your annual trends in past years. Also, keep notes about your inventory management. When you find best practices, it’s smart to record your preferences so you can remember the most effective solutions for the future.

Accounting and Cash Flow Management

The most important reason you need to manage inventory is because of the way these purchases will affect your financial situation. Every business needs to reinvest profits to help the company grow. But if you reinvest too much in inventory that doesn’t sell, then you will be faced with cash flow challenges. When your money is tied up in too many boxes sitting the warehouse, then you might not have enough to pay for expected costs such as payroll, rent, utilities, and taxes.

Most business owners don’t have formal accounting or bookkeeping training. So, it’s a good idea to invest in professional accounting services to tap into advice from a team that understands how to manage business finances. Small systems can go a long way to help you stay in control of your financial situation and minimize the impact of cash flow issues that often affect business owners.

Just because you have extra cash in the bank, doesn’t mean that you should buy more inventory. Talk to your accountant to look at upcoming expenses, then decide on the best ways to reinvest a certain amount of profits. For example, if you have a lot of inventory sitting in your warehouse right now, then it might be better to spend money on marketing and promotions before you buy more products.

Tips for Improving Inventory Management

Here are a few things to consider if you are looking for ways to manage your cash flow by improving inventory management:

  1. Define Par Levels: The term “par level” references the least amount of product you need at any given time. When you have clarity about these par levels, then you can improve efficiency by knowing when it is time to restock the inventory shelves. A good strategy with par levels reduces the likelihood of reactive inventory purchases, helping to reduce unit costs and optimize your profits. Set a benchmark so your ordering practices are automatic. When inventory reaches a certain par level, then it’s a cue that you need to order the next shipment. Par levels can be set by comparing anticipated sales with shipment schedules. For example, if you sell an average of 800 widgets in the month of July and inventory is shipped weekly, then set a par level of 300.
  2. Anticipate Potential Issues: Always have a backup plan in place in case you experience issues with inventory access. Common inventory problems include selling out a certain product, a big delivery showing up early, or not having enough cash on hand to pay for the next shipment. Pay attention to your history and see if you notice patterns of the same issues coming up over and over again. Find the areas where you have the highest risk so you can create a plan to avoid these possible issues.
  3. Inventory Management Software: Consider investing in a good inventory management software so you always know how much product is on hand. Keeping track of inventory in real-time is important for preventing product shortages. The right software program can be integrated into your digital financial system, including your point-of-sale system and even financial tracking and accounting programs.
  4. First In, First Out (FIFO): As you are designing your inventory management system, be deliberate in implementing a FIFO system: first in, first out. FIFO is critical if you are selling perishable items, such as food, beauty products, or anything else with an expiration date on the package. Even nonperishable goods should be moved out with the FIFO strategy to avoid having stock that is unsellable because it is out of date. When new shipments come into the warehouse, it’s best to keep the new items in the back with the older items placed in the front.
  5. Inventory Auditing: Set specific times during the year to audit your inventory. Counting the actual number of items on-site is important to make sure the inventory matches up with the reports in your inventory management software. Additionally, pay attention to the products that aren’t selling. If you have a lot of inventory that’s been sitting on the shelf for 6 – 12 months, then it’s a good sign that you should clear the stock and minimize orders of that item in the future.

Accounting Advice to Manage Your Cash Flow

When it’s time to reorder inventory, you need to be sure that enough cash is available for the purchase. Working with an experienced accounting team is an essential step to look ahead and see how the money will flow based on your unique needs.

At Easier Accounting, we understand the financial challenges you are facing as a small business owner. If you are looking for strategies to improve cash flow and support your inventory management goals, then our team is just a phone call away! Reach out to us to schedule a consultation and learn more about these quality accounting services that can be used to support your small business needs: (888) 620-0770.

Does My Small Business Need an Accountant or a Bookkeeper?

New business owners who don’t know a lot about financial services often make the same mistake: thinking that bookkeeping and accounting services are the same. Before you hire a financial expert to assist with your business needs, it’s important to understand the distinct differences so you know whether to hire an accountant or bookkeeper.

Managing Your Business Financial Operations

In the earliest stages of getting a business off the ground, it’s common for business owners to handle financial details such as invoicing, payments, payroll, and other financial activities. Usually, the motivation is to reduce expenses so more money is available to reinvest in the areas where the business needs extra support.

The problem is that most business owners don’t know the specific strategies for business financial management. Even if you are doing your best to keep up with financial tracking and invoicing, you might be making mistakes that cause long-term issues with your reporting. Seemingly small mistakes, like overlooking an expense or entering the wrong invoice amount, can cause a domino effect. For example, if you run a financial report and the numbers are incorrect, then it could result in cash flow issues because you are making business decisions based on false information.

Invest in an Accountant or Bookkeeper

You are already carrying a lot of responsibility as you oversee the ongoing activities within your company. There is no reason why you should be caught up in the day-to-day busywork, such as data entry and report generation. Instead, hiring an accountant or bookkeeper is a great investment that can help your company grow.

The more you resist delegating busy work to others, the more YOU will be the bottleneck that slows your business growth. Handing off certain responsibilities, such as accounting and bookkeeping, gives you more time during the week. Use this extra time to focus on activities that help your company grow in the future.

In fact, outsourcing might be one of the best investments you can make for your business. If you want to maximize your time, then it’s essential that you have quality systems in place – and a good support team to keep up with the ongoing work to manage and maintain those systems. Accounting and bookkeeping are the foundation that ensures you have the cash to keep everything else running in the company.

What is the Difference: Accountant or Bookkeeper?

Here is an overview to help you understand the difference between an accountant or bookkeeper:

  • Bookkeeper Role: Hiring a bookkeeper means that you are bringing on a team member who is responsible for managing data in your books. Not only does a bookkeeper stay current with the ongoing transactions, but these tasks are completed often to keep the records up to date. Bookkeeping services are focused on transactions, including all expenses and income. Additionally, bookkeepers help with ongoing financial tasks, such as payroll, invoicing, and more. The foundation of bookkeeping services is based on ensuring that the accounting system is populated with accurate data at all times. These services support the overall financial system so reports can be pulled and bills are paid at the right time.
  • Accountant Role: Sometimes, small business accountants handle some of the bookkeeping duties listed above. Or, an accountant often oversees the bookkeeper to ensure transactional data is correct. Other accounting responsibilities might include general ledger entries, billing, payroll reconciliation, and a review of accounts payable activity. While a bookkeeper is focused mostly on the transactions moving through the accounts, an accountant works more on the side of cash flow management, tax preparation, and other details needed for managing the financial health of a business.

If you need all of the services listed above, then you might be better hiring a team that offers financial management – including both bookkeeping and accounting in the same service.

If you require services to look at the longer “big picture” financial perspective of your company, then you might benefit from the services of a Chief Financial Officer (CFO). Outsourced CFO services can be helpful in helping the business thrive based on in-depth financial management and strategy implementation. CFOs also oversee other financial responsibilities, like capital structure, investments, equity, and debt.

Education Requirements for an Accountant or Bookkeeper

It’s also important to note that there is a difference in training for an accountant or bookkeeper. Anyone can become a bookkeeper with on-the-job training and no formal college degree. On the other hand, accountants are required to have a minimum of a four-year college degree. These education requirements mean that an accountant has a higher level of both experience and expertise compared to the services you receive from a bookkeeper.

An additional credential can be earned after the four-year degree is complete. If you hire a Certified Public Accountant (CPA), then it means that the person has met requirements for additional education and testing to earn this certification.

Separating Duties and Hiring the Right Team

While all of the duties listed above fall into the “financial management” category, it’s essential that you have a clear separation of duties and an understanding of where the responsibilities lie. Building the right team gives you access the skills that are needed. Additionally, this separation of duties minimizes the risk of fraud in your company.

For example, if you have a bookkeeper paying the bills, then they should not be the same person reconciling the accounts every month. When at least two people are involved, it reduces the likelihood that someone will be able to steal money or adjust the accounts for financial gain. Always have solid checks and balances in place when you have an accountant or bookkeeper helping with financial tracking and responsibilities.

Here’s a quick example of how you might separate the duties to build checks and balances into your financial system:

  • The bookkeeper is responsible for entering the data.
  • The accountant is responsible for reconciling the work completed by the bookkeeper.
  • A business owner, CFO, or controller is responsible for supervising the work of both the accountant or bookkeeper.

Changing Business Needs as Your Company Grows

In the earliest stages of launching a business, your accounting and bookkeeping needs are basic. It’s still valuable to hire an accountant or bookkeeper at this point so you can build a solid financial foundation to support potential growth in the future. Having good systems in place increases the likelihood that you will be able to minimize growing pains when you are ready to expand.

But don’t get stuck in the rut of assuming that your current services are always right for your changing business needs. It is common for accounting and bookkeeping systems to shift as the company expands. When you bring on new employees, increase your business offerings, or expand to another location, then make sure you have the financial support to track all related expenses through these growth stages.

In the beginning, you might benefit from an outsourced accountant who takes care of tax strategy and filing throughout the year. As your business grows, it can be helpful to hire a bookkeeper who takes over more of the financial responsibilities. A growing business means that you only have so much time during the day to keep up with expanding responsibilities – so it’s critical that you invest in the right services to support your needs over time.

Outsourcing vs. In-House Hiring

When you can see that you require services from an accountant or bookkeeper, you might consider the option to hire another employee so these duties are handled in-house. Before you bring on an employee, consider the salary requirements and overhead costs that will be incurred. Most of the time, small businesses don’t have the budget for a full-time financial employee.

But just because you are in the early stages of growth, doesn’t mean that you don’t have access to professional accounting or bookkeeping services. Outsourcing can be a great way to manage your monthly costs while still tapping into the financial support needed for your business.

Outsourced accounting is a fraction of the price you would pay for a full-time employee. You can benefit from these professional services without carrying the financial burden of paying a full-time salary.

Easier Accounting Specializes in Small Business Accounting

Our team at Easier Accounting offers the outsourced accounting services you need. If you are a small business owner and you are considering your options to hire an accountant or bookkeeper, then we invite you to reach out and learn more about the full range of services we offer.

By specializing in small business accounting, we are confident that our services are a good fit for startups and entrepreneurs. Contact us to learn more about the available services to see if our team is the right solution to meet your business needs. We offer a proactive approach to managing small business finances, including accounting and bookkeeping services custom-designed to your requests. Learn more by calling us to talk to a financial pro about your options: (888) 620-0770.

9 Small Business Tips to Maintain Your Budget

If you’re like many individuals and business owners, the topic of budgeting makes you squirm. Budgeting can be a challenge for families and businesses alike, but the process of setting financial goals and sticking within the numbers is important. Not only do you need to identify your financial structure, but it’s also important to maintain your budget going forward.

Every Business Needs a Budget

Why does it matter if you set a budget for your small business? The financial picture looks rosy when the profits are rolling in, but then things quickly go downhill if revenue is affected for some reason. Budgeting can feel like a burden, especially if you are confined to tight numbers. But it is an absolute essential if you want to protect the future of your business.

Regardless of your opinion about budgeting, when you set and maintain a budget you are creating a foundation of financial security for the future. Creating and honoring your business budget means that you have guidelines for spending. When difficult decisions come related to cost and cash flow, you can look to the numbers to determine the right choices based on the current needs of your company.

Here are a few reasons why budgeting should not be optional for businesses:

  • Know Your Goals: When you are throwing a dart, you don’t toss it without having a clear idea of where you want it to land. The target has colors and marks to indicate the accuracy of the throw. In the same way, a budget acts as the target for your company, giving you short-term and long-term financial goals that you should be aiming for at all times.
  • Determine Your Priorities: Another reason you need to maintain your budget is to keep business priorities at the top of mind. Every decision you make should have a purpose or meaning, which is why it is important to evaluate priorities when determining the right way to move forward. Budgeting keeps you focused on “true north,” outlining the decisions that should be made – and eliminating potential issues along the way.
  • Team Effort: At the same time, budgeting keeps all team members on the same page. When managers and staff members know the spending limits in specific categories, then they will work to honor the boundaries. As a result, detailed planning can be used to manage the funds available for each category, helping to leverage ROI and increase the overall outcome of the spending.
  • Measuring Your Progress: You can’t determine the true measure of your business success without measuring where you came from and where you are now. In addition to implementing good bookkeeping and accounting practices in your ongoing systems, it’s also smart to have checkpoints throughout the year to measure progress along the way. For example, audits need to be done to evaluate cash flow while also checking monthly and quarterly spending.
  • Protecting Profits: Even if sales are high and you are bringing in a lot of money, it can be hard to hold onto the cash if your spending is high. Good business management needs to focus on both AR and AP. Budgeting ensures that you are always spending less than you are bringing in.

If you are having a hard time seeing the reasons why it is essential to maintain your budget, then talk to an accountant about your concerns. Any financial professional will tell you that budgeting is one of the most important aspects of protecting your business profits. Without a strategic budget, you are setting your company up for failure in the future. Even though designing a budget and sticking to it can be difficult, it is a necessary step as a business owner.

Tips to Maintain Your Budget

Here are a few things that every business owner needs to keep in mind when it comes to bookkeeping and budgeting:

  1. Know Where You are Starting: As hard as it can be to look at the current situation, it is essential that you know your starting point. How much money are you spending in various categories right now? What are your current cash flow requirements? Getting a clear picture of your current situation, then creating a plan to fix potential problems, is one of the most valuable things that you can do to protect your business interests in the future.
  2. Identify Your Goals: Now that you know your starting point, what are your goals? When you maintain a budget, there is room to set immediate goals and long-term goals as well. Having these targets creates motivation to help you stay on track, even when things get rocky. Sit down with your accountant to map out a plan so you have a clear idea about the goals you should be reaching for.
  3. Be Realistic with the Numbers: How many times have you attempted a new budget, only to find that it’s hard to maintain because you were overly optimistic about your goals? If you don’t have realistic numbers, then it is nearly impossible to maintain your budget. When it comes to accounting and bookkeeping, slow and steady wins the race. Look for incremental changes that can be made to stay on track without putting undue pressure on the business. It’s always best to stick with conservative projections for both your income and expenses.
  4. Be Flexible When Needed: Just because you’ve set a budget, doesn’t mean there is no room for adjustments in the future. Sometimes, needs arise that require a bit of flexibility. If you don’t build in a bit of wiggle room, then it could result in potential failure when hard times come in the future. One option to maintain your budget while keeping a bit of flexibility is by having an extra fund to cover the gaps. Leaving a certain amount unallocated will allow you to see where the money is needed as you move forward with your new plan.
  5. Break Spending into Cost Categories: Find the most applicable categories that should be included in your budget, then look for ways that you can streamline spending and transactions in these categories. Some of the costs are fixed (such as your rent or insurance premiums), while others are variable costs that might change based on the current pricing of material and labor. It’s a good idea to build in a bit of flexibility for the variable categories.
  6. Create Responsibility and Accountability: Creating the best budget on paper doesn’t mean a thing if your team isn’t willing to stick to the plan. Not only do you need to assign responsibility for managing the numbers and spending, but it is also essential to build in systems of accountability for the future. People often have good intentions in the beginning, but things start to change through the day-to-day activities and stressors that come up. A critical step for ensuring the success of your new budget is to make sure that all individuals are held accountable for their part in the plan. This process needs to be a top-down approach, with managers who hold their teams accountable.
  7. Access Professional Services: Even though you have great business ideas or have a good knack for marketing, it doesn’t mean that your business savvy gives you the necessary experience needed to maintain your budget. More often than not, business owners have no formal history or experience with accounting or bookkeeping, which means a DIY approach can be disastrous. Investing in an accounting and bookkeeping team can be one of the best decisions you will make to manage your cash flow and stay on track with budgeting.
  8. Ongoing Consistency and Systems: How do you plan to check in your budgeting progress in the future? It is important to invest in the right budgeting and accounting software programs. These plug-and-play solutions are proven to keep the numbers organized, so you can stay on track with everything that is going on. But you need to be committed to creating the systems that will work best for your company – then maintain the consistency required for everything that is happening from one week to the next. When it comes to budgeting, accounting, and bookkeeping, the reports don’t mean anything if you don’t maintain consistency.
  9. Assess Ongoing Needs: Smart business owners reassess their budgets regularly. While the budgeting system can be a set-it-and-forget-it approach for a short time, it’s important to check in to determine how the systems are working. Often, a range of variables are impacting your spending and cash flow, so regular check-ins ensure that you are staying on track as things are shifting. Ideally, revisit the budget monthly to see where things are going well, and where you can identify areas of improvement.

Are you looking for ways to improve your current budget? Or do you need to start at the beginning to create a new budget for your business? One important aspect to maintain your budget is to ensure that you have a trusted accounting team to assist. For more information, talk to our experienced team at Easier Accounting. Call for a discussion about your business needs: (888) 620-0770.

Cash Flow Risk Management in Small Business

Even the greatest business ideas fail at times because entrepreneurs fail to account for cash flow risk management. You can launch a new business and connect with potential customers, but you need to be proactive in identifying possible areas of risk.

The truth is that money is flowing in and out of your company daily. As the cash ebbs and flows, you need to be sure that there is always a reserve for whatever might be needed in the future. Sometimes, future costs are anticipated, such as tax payments or payroll expenses. Other times, these costs fall into an emergency line-item, such as repairs after a natural disaster or inventory loss.

You can’t predict the future and avoid all risk. At the same time, you can be proactive right now to ensure that your business will withstand whatever might happen to your business. Being smart with your cash flow is essential for keeping your small business running through the good times and bad. This is where cash flow risk management comes in.

Cash Flow: What You Need to Know

Do you feel overwhelmed at the idea of taking control of your cash flow? Even though it seems like a daunting task, it doesn’t have to be hard. The simplest solution is to work with a team of accounting professionals to identify areas of risk and opportunity for your company. Then, you can create a plan for cash flow risk management and optimize systems to ensure that you have a little saved for a rainy day,

Keep in mind there is a big difference between cash flow and profits. Just because money comes into your bank account, doesn’t mean that you have the freedom to spend it on whatever you feel like buying in that moment. Instead, the funds are often marked for a specific purpose – upcoming expenses that need to be paid. Cash flow means that you always have the money available when it is needed.

In comparison, business profits are the funds that are left over after expenses have been paid. Just because the cash is flowing through your business, it doesn’t necessarily mean that you have healthy profit margins. Improving cash flow can be beneficial for boosting profit margins because cash flow management can be an integral part of budgeting and spending. As a result, you might find it easier to decrease your spending, which in turn can boost your profits if there is more money coming in than going out.

Negative Cash Flow vs. Positive Cash Flow

Cash flow is the process of how money is moving through your company. At any given point, you likely have money coming in and money going out for necessary expenses. The trick is to learn how to balance the flow so that you can control what is happening in your bank account.

If you have a positive cash flow, then it means that more cash is coming into your accounts than the expenses that are flowing out. On the other hand, negative cash flow means that you are spending more money than what is coming in.

Remember that it is natural for businesses to fluctuate between positive and negative cash flow. For example, retailers often have a positive cash flow during the holiday season when everyone is shopping for holiday gifts. Then, cash flow will drop in January after the holiday rush comes to an end.

Just because the cash flow fluctuates from one month to the next, doesn’t mean that you can’t keep your business running. Cash flow risk management means that you are proactive in managing your immediate cash, while also preparing for these anticipated fluctuations in the future. In the accounting industry, separate financial documentation is used for cash flow (known as your cash flow statement). This report summarized all financing activities, including investments, operations, and costs.

Why Cash Flow Risk Management Matters for Investors

One of the reasons why cash flow risk management is an important thing to consider in your business is because these numbers can have an influence on whether others are willing to invest in your business. When you are consistent with your accounting records and you can show a positive long-term cash flow, then it is an indicator of the health of the company. Additionally, positive cash flow speaks volumes about your stability, creditworthiness, and the overall value offered through your business efforts.

New business owners might feel that investors are still far in the future. But you never know when your business will hit a new opportunity and need more investment capital. Start managing your cash flow right now so you are ready to tap into new potential by bringing in investors in the future.

Cash Flow Risk Management Tips

Where should you start if you need to improve your cash flow risk management? Here are a few tips to help you get on track with these goals:

  1. Identify Your Plan: You can’t take a passive approach when it comes to financial reporting and ongoing tracking. It’s important to not only identify your plan, but work with financial experts to determine the right steps needed for your business. Creating a strong financial plan guides your decisions, and also helps you maintain a clear vision of the possibilities in the future. This business plan works as the guiding star for your budgeting and strategy.
  2. Control Your Debt: While credit is often unavoidable for both new and established businesses, you need to be deliberate and careful in the way you are managing this debt. Whenever possible, it’s best to pay for expenses upfront instead of financing unnecessary costs. At the same time, it can be helpful to have credit available in case you encounter an emergency situation. Even if you don’t need credit right now, consider applying for a business line of credit or another type of business loan, giving you access to funds if/when they are needed in the future. Then, be careful to keep those balances low so you don’t have a heavy debt load. Whenever possible, make sure that you are paying the credit lines in full each month to avoid carrying balances from one month to the next.
  3. Choose the Right Insurance: Even though insurance premiums might seem like a heavy cost right now, they are an essential part of protecting your business. One accident or natural disaster could be the end of your business! Investing in the right insurance coverage means that you have a back-up plan in place in case the unexpected happens. Insurance should be an integral part of your cash flow risk management because it means that you have support available to get through the hard times.
  4. Diversify Your Business Efforts: Having all your “eggs in one basket” can be risky in business. Make sure that your money is coming from multiple sources, so you aren’t left in a difficult situation if one of the income sources runs dry. If you have an established business, then you might look for ways to expand your offerings so you have multiple streams of income.
  5. Watch the Market: Economic changes and various market conditions can play a role in the success of your company. It’s important to identify potential areas of risk within your business, then stay proactive in watching the changes that are happening in your specific industry – as well as the market as a whole. Instead of putting all of your cash into investments, it’s smart to have strategies for liquidity when needed.
  6. Hire Professional Services: Sometimes, you don’t know what you are missing because of a lack of experience in certain aspects of running a business. As a business owner, you are carrying a lot of responsibility at the same time: product development, marketing, accounting, employee management, and more. Instead of trying to handle everything by yourself, it’s important to hire professional services where it makes sense. For example, these pros can help you uncover potential areas of risk, then identify strategies that will mitigate that risk.

Accounting Services for Minimizing Cash Flow Risk

A solid accounting plan is an important step to take care of the financial health of your business. When you have consistency with the reporting and a clear plan for the future, then it’s easier to make the difficult cash decisions when they arise. Instead of hoping for the best, now is the time to take control of your cash flow to ensure that you are poised to help your business grow.

If you are looking for ways to improve your cash flow, then it can be helpful to talk to an experienced accounting team. At Easier Accounting, we provide outsourced accounting and offer personalized services for small businesses. Our team specializes in the strategy and care needed for startups, entrepreneurs, and small business owners like you. We invite you to reach out for a consultation to see how we can help with cash flow risk management and other necessary accounting services: (888) 620-0770.