What is the Difference between Income and Profit?

As you see your business generate money throughout the year, it can feel good to see that your business is succeeding. But, don’t be fooled by assuming that you can do whatever you want with the money in the bank. It is important that you understand the difference between income and profit so that you can manage the cash flow for your company. It is important to keep and maintain your record. It us recommended to do a review or to get with your accountant every month. If you are meeting with your accountant it doesn’t have to be face to face. A quick phone call or even in a virtual meeting such as GoToMeeting or Google Hangouts works well. This way you can view financial statements and go over things so you know where your money is going, before it becomes a bigger problem.

If you don’t have an accountant you can give us a call at  (888) 620-0770 and we would be happy to talk to you or you can do a quick Google search for “accounting for small business” etc, but make sure you read the reviews and make sure to ask them questions about your type of business and obviously make sure they are a good fit for your business.

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Income vs. Profit

The terms “profit” and “income” are often used as synonyms, but you need to distinguish the difference between these two numbers. Income is the top-line revenue. This number is calculated by tallying every penny that came into the company during a given period. Income is commonly referred to as “Gross Revenue.”

On the other hand, profit is the amount that is left over after the expenses have been paid. To calculate this number, figure out your gross revenue and subtract the cost of goods that were sold as well as the expenses. Profit is also often called “Net Revenue.”

Why You Need to Know the Difference

Why does it matter if you know the difference between income and profit? It comes down to cash flow and financial decisions. For example, you might look at the income number without considering upcoming expenses, and mistakenly spend the money on something without saving enough to cover bills that are due. This problem commonly happens with tax bills or the cost of inventory management.

When the money hits the bank account, then business owners make the mistake of making business decisions based on the current balance instead of planning for the future.

Working with Your Accountant

Before you make any sizeable financial decisions, it is important that you consult with your accountant about the financial health of your company. Together, you can analyze a Profit and Loss Report to get a feel for the way the money is flowing through your company. This financial strategy is essential to ensure that you have the cash flow to pay for future capital expenditures, payroll, or perhaps an upcoming tax bill.

Ongoing financial record keeping is critical so that you know that your P&L report is current. Make sure that you are staying consistent with tracking all of your company’s income and expenses throughout the year.

At Easier Accounting, our goal is to simplify the accounting process so that you can focus on the other responsibilities of owning a business. Contact us to learn more about how our team can help your company: (888) 620-0770

What Happens if Your Company is Audited?

The mention of an audit strikes fear in the hearts of small business owners, even if they are proactive to be compliant with the laws and regulations. As a business owner, there is no reason to worry about an audit if you have the right team of bookkeepers and accountants in place to help.

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Do you know what is involved with an audit? Most small business owners don’t know a lot about the auditing process, which means that they fear the unknown. Here is a little information to educate you about potential audits that might occur:

Potential Types of Audits

Being audited doesn’t necessarily mean that someone from the IRS will be knocking on your door. There are several types of audits that can occur, and your accounting team can help with all of these scenarios. Potential audits might include:

  • Mail Audit: If the IRS needs more details about your tax return, then they might send a letter in the mail requesting specific documentation.
  • Correspondence Audit: This type is similar to a mail audit, except the communication could happen through an electronic channel of communication. Typically, a correspondence audit happens when the IRS is collecting unpaid taxes or needs supporting documentation to back up claims made on the business tax filing.
  • Field Audit: The type of audit that has given the name a bad reputation. In this situation, an IRS employee will come in person to view your business records.
  • Examination/Interview Audit: In this situation, you might be asked to visit the IRS office to provide documentation or receipts to back up claims.

Just because an audit is happening, doesn’t mean that your stress levels need to go through the roof. You can relax if you know that your records are in order. The best way to stay on top of the financial tracking required to protect you in an audit is to have a professional accountant helping with your business management.

Accounting Services to Prevent an Audit

Instead of waiting for an audit to happen, there are a few things that you can do to reduce the likelihood of an audit. An experienced accountant will be able to offer specific recommendations catered to your personal situation. So, it is important that you have an experienced accounting team by your side throughout the year.

At Easier Accounting, we are experienced with small business accounting. If you are interested in more information, then you are invited to contact us right away: (888) 620-0770

Should You Use a Desktop Software or an Online Program for Your Accounting System?

Whether you are setting up an accounting system for the first time or you are updating an old system, it is important to consider how the software will carry your company in the future. Having the right accounting system provides a foundation that impacts many aspects of your company. If you don’t have the right financial tracking program in place, then it is possible that you might be hindering potential business growth.

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Desktop Software vs. Online System

For years, accounting software programs were designed to be installed on a desktop computer. The software program could be run using the processing system on the computer, and all of the files were stored on the hard drive. This system was revolutionary compared with the old manual processing systems that were used before computers were invented.

The accounting industry has continued to transform, and now many accounting programs offer a cloud-based platform for your business finances. Instead of storing the files on your computer, all financial details are tracked on a cloud software that can be accessed from any location.

Advantages of an Online Accounting System

It is important that you keep up with the times, which means that you should implement a cloud-based software program if you don’t already have one in place. Here are a few of the advantages of using an online accounting system instead of a desktop software:

  • Easy Access: You can be anywhere in the world and have easy access to your financial reports and transactions. These cloud-based programs allow you to manage your finances from many different devices. All you need is an internet connection.
  • Protect Your Files: If the accounting files are stored on your computer, then it is possible that you could lose the information if something happens to the computer. A loss of financial records can be very damaging to your company. Protect your files by using a cloud-based system that maintains backup records of your files. If your computer crashes, then it’s no big deal because you can still access the information from another computer.
  • Online Accounting Services: Instead of handling all of the financial management in-house, there are benefits to bringing on an outsourced accounting team. You can save money and still have access to top-notch accounting services for your company. To take advantage of these services, you must have an online accounting system in place.

As you can see, there are many benefits to online accounting. If you are planning to implement a new system, then make sure that you have a team of professionals to get it set up right. Call Easier Accounting for more information about the services that we offer: (888) 620-0770

4th Quarter: How to End the Year on a Good Note

2016 flew by, and many small business owners are scratching their heads wondering how the year slipped away so quickly. October marks the beginning of 4th quarter, which is a great time of year to assess your current financial progress and make goals for the rest of the year.

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Evaluating Progress this Year

As you look over the year, ask yourself this question: did I accomplish all of my goals for the year? Even if you didn’t meet specific business goals, it doesn’t mean that time is up! October is the perfect opportunity to dig in and boost your results a little more this year. Take action right now before the holiday season sets in.

Talk with your accountant to see details about the revenue that has been brought in, how much was spent on expenses, and whether the numbers are matching up the projections for the year. If the numbers don’t match what you had in mind, then you can look for ways to adjust workflow and strategy to set your business up for success in the future.

Preparing for Tax Season

The beginning of the year marks the beginning of tax season for small businesses and individuals. It can be hectic to gather all of the necessary information that your accountant will be asking for. Get a head start right now so that you can easily collect the information that will be needed.

During the first month of the year, you will need to provide details about payroll for employees and payments to contractors. Your accountant can prepare the tax forms that need to be provided to employees and contractors so that you can meet the January 31st deadline.

Use Technology for Financial Tracking

If you don’t already have the right bookkeeping and accounting system in place, then right now is a great time to implement a new system. Getting started before the end of the year will give you the opportunity to work through any potential kinks before the New Year starts.

Once you have the system in place, you can be happy to have a full calendar year tracked within the software. Planning ahead can make it an easy transition. Make sure that you work closely with your accountant if you are going to implement a new bookkeeping system.

Here at Easier Accounting we are working hard to help your small business succeed. If you are interested in learning more about how accounting services can be beneficial, then we invite you to contact our team right away: (888) 620-0770

How to Avoid the Headache of Small Business Accounting

How do you feel when it is time to manage the accounting tasks for your business? Most small business owners don’t have experience with financial management, and they dread the thought of tracking financial details, reconciling the accounts, or preparing tax paperwork.

If you get a headache just thinking about these accounting tasks, then right now is the perfect time to hire an experienced accounting team to help. By outsourcing the accounting, you can focus your time and efforts on other responsibilities within the company instead.

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Here are a few things that you need to do to avoid some of the common problems that cause accounting headaches:

Outsource the Accounting Tasks

There is no reason that you need to handle the accounting on your own! Hiring an experienced team can make a big difference to free up your time. At the same time, you will have higher quality financial reports and details about the health of your company. This information can be very important when you are making big financial decisions.

Get Rid of the Papers

Is your filing cabinet overflowing with old papers like bank statements and invoices? This information can be a hassle to keep up with, especially if you have a lot of paperwork moving through your office each day. Consider implementing a digital system to keep track of all of the transactions using technology. Then, certain invoices, receipts, and other documents can be printed if you need to keep a physical file on hand.

Ignoring Cash Flow

What do you do when it is time to cut paychecks, and there isn’t enough cash in the bank? If you aren’t proactive to manage the financial health of your company, then you might be facing big cash flow problems. These moments can be stressful! Even if you have payments coming in later this month, it won’t help at the moment when employees want to deposit their paychecks. Talk with an accounting team to learn more about cash flow management so that you can avoid these stressful situations.

Manual Accounting

Spreadsheets and handwritten books are a thing of the past. Instead of manually entering each line item, it is better to have a good system in place that will digitally track your expenses and income. There are many software programs designed to help small business owners, and you can talk with your accounting team about the right software program for your company.

Right now is a great time to put away the headache medicine and call an accountant instead. Contact us at Easier Accounting to learn more about how we can help your small business: (888) 620-0770

Hiring an Accountant vs. Do-It-Yourself Tax Filing

Every dollar counts for small businesses and start-ups. If you are getting your company off the ground, then it is likely that you are looking for ways to conserve cash flow and save money. Many small business owners fall into the trap of working long hours because they are trying to handle everything on their own.

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It is smart to be careful with your spending. But, there are a few areas where it can be beneficial to outsource the tasks that need to be handled. Accounting is one area where you can reduce your stress and busy work by letting a professional handle it for you.

Before you decide that a do-it-yourself tax filing is a right solution, consider some of these factors:

Time and Busy Work

If you don’t have a thorough understanding of tax law, then it can take a lot of time to sort through the necessary paperwork. Tax filings get more and more complicated each year, and most small business owners don’t put in the necessary time to understand the changes.

You don’t have to read through the current laws and sift through mounds of paperwork. These tasks are often a waste of time because they pull you away from other important responsibilities within your business. Instead of trying to manage everything on your own, it is better to hire a professional accountant to help.

Mistakes and Overlooked Paperwork

The risk of a tax mistake goes up if you handle the tax filing on your own. It is much easier to avoid the potential problems by getting the paperwork done right. When these mistakes occur, you might receive information from the government later on that you need to fill out additional paperwork or pay more in fines and fees.

Missed Deadlines

There are several tax deadlines throughout the year that needs to be addressed. Sometimes payments are required, other times tax paperwork needs to be submitted to the government, your employees, or contractors that you have hired.

Do you feel confused by all of the deadlines during the year? Missing these deadlines can result in stressful penalties and other problems. Instead of overlooking the problems, it is better to hire an accounting team who will manage the deadlines for you.

Here at Easier Accounting, we offer affordable tax filing and other types of accounting services. Our goal is to make it easy and affordable for you to outsource your small business accounting needs. Call our company today to learn more about the services that we offer: (888) 620-0770

3 Biggest Mistakes Business Owners Make with their Accounting

The quality of your accounting system will have a direct impact on every aspect of your business: current cash flow, future growth, and long-term business success. If you are a business owner or entrepreneur, then it is essential to make sure that you have a quality accounting system in place.

Even if you have an accounting system, it doesn’t necessarily mean that all of the essential tasks are done. These are some of the common mistakes that we see in small businesses:

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Mixing Business and Personal Expenses

Even though you have a home based business, it is essential to keep the finances separate between your personal life and business spending. Blurring the lines between business expenses and personal needs can lead to confusion when tax time rolls around.

Make it a point to set up a business bank account and credit card, and don’t let the lines blur between your business and personal spending. Whenever a business expense comes through, it is important to document the transaction so that you can use it as a tax write-off. Keep a file of receipts and share the transaction details with your accountant.

Missing Tax Deadlines

It is easy to overlook a tax deadline or paperwork that needs to be submitted. Many business owners have too much going on, increasing the likelihood that they forget to send a payment or fill out necessary tax paperwork. These deadlines are important! If you miss the deadlines, then you are at risk of fines from the IRS.

On the other hand, meeting the deadlines will keep your business blended in with the group. Do the best that you can to stick to the deadlines so that you can avoid putting your company in a situation where you are being audited by the IRS.

Hiring an Inexperienced Accountant

If you are going to spend money on accounting services, then make sure that you hire someone who has experience in the industry. A new graduate right out of college won’t be able to offer the experiences available from a team of seasoned accountants. You need to tap into that experience to increase the future success of your company. So, find someone who knows the best practices in your industry.

Here at Easier Accounting, we know what it takes to help your business experience financial success. If you need a professional team to help with accounting and bookkeeping, then we invite you to contact us for more information about the services that are offered: (888) 620-0770

How to Improve Cash Flow Management in Your Company

Your company is growing and expanding, and products are flying off the shelves… so why do you have a hard time managing the cash flow each month? Cash flow is a big issue for many small business owners, resulting in a situation where there isn’t enough cash to keep the company in business. In fact, cash flow management is one of the biggest stumbling blocks encountered by business owners.

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Don’t let your company sink because you don’t have the cash readily available! Instead, it is better to plan for the future with proactive cash flow management. Here are a few things that you need to understand about managing the flow of cash within your business:

What is Cash Flow?

It has been said that cash flow is the lifeblood of business. But, many business owners don’t understand this term! “Cash flow” is the movement of cash in and out of the business. It is normal to have money that is collected and spent for expenses, and this movement needs to be tracked.

When a company has a positive cash flow, then it means that more money is coming in than is going out. If there is a negative cash flow, then it means that there isn’t enough cash coming in to cover the monthly expenses.

The Difference between Profit and Cash Flow

Most business owners know the top-line income and profit of the company. But, they don’t read between the lines to see how the money is moving in and out of the company. It is essential to look at the patterns that are occurring on a daily, weekly, and monthly basis. These patterns give the insight to ensure that there is enough money to buy inventory, pay employees, and cover the payment for the office space and utilities.

Profit is the overall amount of money that is earned throughout the year. Cash flow is whether the money is available at the right times when the bills are due. Timing is the essential aspect of cash flow that needs to be evaluated.

Fix Your Cash Flow Problems

Do you feel like you are dealing with cash flow problems that are making it difficult for you to manage your company? By fixing these issues, you can decrease your stress levels and set your company up for future success.

We invite you to talk with our team here at Easier Accounting. We have experience helping small businesses improve their cash management. We are here to offer the assistance that you need! Call us right away at: (888) 620-0770

Why is it Important to Categorize Expenses in Your Business?

Have you set up a business financial system to track expenses and income? When this system is put in place, it is important to be careful about the categories that you are using for business expenses. These costs are inevitable, and the right tracking system can give you full transparency about how the money is being spent.

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What are Expense Categories?

Expense categories are general topics that can be used to group transactions for tracking purposes. These expenses can range from rent and utilities to employee wages or office supplies. It might seem tedious to set up multiple categories for your company. But, a little work in advance can be very beneficial for long-term success.

Take some time to evaluate the way the money is spent, and look at the major categories of spending. Make a list of the expenses that you have a regular basis, and identify how these things can be grouped together or separated into unique categories.

If you are having a hard time identifying the right categories for your company, then you will find it beneficial to work with an experienced accountant who is familiar with best-practices. An accountant can be invaluable to help you set up the right system and manage the ongoing financial tracking for your company.

Categories Show Financial Transparency

To maximize profitability, you need to know where the money is coming from and how it is spent. Without this information, it is difficult to make effective decisions for your business.

For example, you might have a number that shows the total amount of money that was spent last month. But, you are missing a lot of information if you don’t have a breakdown of how the money was spent. It is possible that you are over-spending in certain categories, and this overspending could easily be curbed if you were informed about the spending patterns.

These categories are also beneficial to help you set up a budget and stick to it. Make sure that you are spending less than you are bringing in and review the financial reports to see if there are any areas where you can cut back spending.

At Easier Accounting, we are here to assist with your business financial needs. We know that it can be a hassle to manage the accounting tasks within a company, which is why our team offers the assistance that you are searching for. Let us take care of the financial system and tracking, so that you can focus on other responsibilities within your company. Call us today for more information about the services that are offered: (888) 620-0770

3 Tips for Preparing a Budget for Your Business

Are you missing out on potential business profits because you don’t have a budgeting system in place? Budgeting seems like a tedious task, but it is essential to stay proactive with the financials of your company. Implementing a budget and sticking to the budget can make a difference in the long-term success of the business. Here are a few tips to help you prepare a budget plan:

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Add Up Income and Expenses

How much money are you bringing in each month? This number matters because it has a direct impact on the amount of money that is available to spend. Take a look at the top-line numbers to assess all of the cash that is coming into the company.

Next, take a tally of the monthly expenses to see where the money is going. Put together a list of recurring costs as well as one-time bills that you have paid over the past few months. It is essential that you account for every penny that is spent so that you know the total expenses for the business.

Find Ways to Reduce Costs

Once you have gathered information about income and expenses, now it is time to evaluate the way the money is spent. Go through the line items to determine if the costs are necessary. Find areas where you can decrease the costs or even eliminate the bill altogether. It is also a good idea to look for ways to quickly increase revenue, which will provide more cash flow to help you pay off debts or any other balances that need to be addressed.

Put together a plan for the amount of money that you will be spending on an ongoing basis. The best thing that you can do is put this schedule together and then continue tracking your spending each month to be sure that you are sticking to the plan.

Hire a Financial Professional to Help

There are many benefits to hiring an accountant to help with your budgeting goals. It is beneficial to get an outside perspective, especially from someone with a financial background. These accounting services can be invaluable to improve the long-term results that you can achieve.

At Easier Accounting, our goal is to help your small business by improving your financial systems. We know that it is important to implement a good business budget, and we are here to help. Contact us to learn more about financial advice for small business owners, as well as the other services that are available from our company: (888) 620-0770