What are the Differences Between Employees and Independent Contractors?

When you need additional workers for your business, you have the option to choose between hiring employees or engaging the services of independent contractors. Even though the services might seem similar, there are distinct differences that need to be addressed in the way each worker engages with your company. It is important that you consider your overall goals for the hire, as well as the way you want to be engaging with the worker.

In this article, we are going to talk about the differences between employees and independent contractors. Additionally, you can review the pros and cons of different classifications, to determine the structure that will work best for your business.

Examining the Relationship Between the Business and the Worker

What is the relationship that will be formed between your company and the worker? This relationship is the determining factor that shapes how the person should be paid. The IRS has specific guidelines and rules that need to be followed to ensure that you are using the right classification and payment structure for each person.

As a general rule of thumb, a person is classified as a contractor if the employer doesn’t have any say or control over what is done and how it is done. Instead, the business hires the contractor for specific deliverables that need to be met. The working relationship is only based on the result of the work, not the specifics of the day-in-day-out activities that are performed.

Here are a few considerations to help you determine if the worker is an employee or contractor:

  • Management: When an employer-employee relationship is formed, the business can control and direct the work that is performed by the worker. This includes instructions that are provided regarding when the work is completed and where the person can work. On the other hand, a contractor completes the deliverables with less management and control from the business.
  • Training: Usually, independent contractors leverage their own methods for the completion of the work, without specific training or guidance from the business. If the worker receives periodic or ongoing training about skills or task completion, then they likely fall within the category of employee.
  • Equipment: Contractors are responsible for supplying their own equipment, including computers, phones, office supplies, furniture, office space, and more. On the other hand, employees are provided all of the tools and equipment needed to complete the job. It is more common for contractors to incur unreimbursed expenses.
  • Profit or Loss: Employees are paid based on an hourly or salary structure, which means that they do not carry the risk of profit or loss. An independent contractor could be facing the potential of losses or profits, depending on the cost of supplies and the amount of time that is dedicated to the project.
  • Payment Structure: When someone is working as an employee, they are guaranteed a specific wage for the time that is worked. Paychecks are calculated based on hourly or weekly employment engagements. Most often, contractors are paid a flat fee for the work that is completed.
  • Benefits: Employees can receive benefits in addition to wages. Common benefits include insurance, paid time off (vacation and sick days), retirement contributions, and more. Independent contractors are provided payment only without benefits.
  • Length of Time: What is the permanency of the working relationship? If the person is offered work indefinitely, then it likely falls within an employee classification. On the other hand, contractors are often hired for a specific period or project without an indefinite promise of work.

Paying Your Workers

Worker classification matters because it determines how you will pay the person and whether you need to withhold taxes for income, Medicare, Social Security, and unemployment. When a person falls in the category of employee, then the employer is required to withhold the applicable taxes. Additionally, appropriate paperwork and timely tax payments need to be completed according to the deadlines set by the IRS.

On the other hand, your business is not responsible for the tax withholdings for independent contractors. Payments are made in full for the services provided. Then, the person receiving the earnings is responsible for taxation in their own filings and paperwork.

Be Careful to Avoid Misclassification

It is easy to get confused about the differences between an employee and a contractor. As an employer, it is your responsibility to stay current on these classification differences and ensure that you are handling payment structures correctly. The IRS has tests that can be used to determine a person’s working status.

The IRS has serious consequences for employers who hire workers as contractors but treat them as employees. You can’t choose a contractor classification for the sole purpose of avoiding employment taxes. If you choose to hire a freelancer or contractor, then you need to be sure the person is treated as such.

Sometimes, the agreement starts with clear expectations and structure – then it begins to shift over time. For example, the contractor might have flexibility in work times and how the work is managed in the beginning. Then, the expectations are changed as the employer increases demands regarding the management of the project. If the working relationship shifts into the category of an employee instead of a contractor, then you need to change the payment structure to match.

Differences in the Management of Employees and Contractors

The business relationship should differ depending on the classification of the worker. Here are some of the most notable differences:

  • Employment Laws: Contractors aren’t protected under labor and employment laws. But employees have certain workplace protections under these laws.
  • Hiring Process: When hiring an employee, the person submits an application and resume to the Human Resources department and goes through an interview process. When a job is offered, the new employee must provide details about citizenship status, date of birth, and marital status. On the other hand, a contractor works directly with the person overseeing the project. A proposal is submitted, then a contract is created based on the scope of work that will be completed.
  • Payment Timing: Employees are paid based on the payroll schedule, usually weekly, biweekly, or monthly. Employment laws require that payroll checks are distributed based on the agreed payment timeline. In comparison, contractors provide an invoice to the Accounts Payable department for the work completed. The terms of the contractor dictate the payment timelines and the amount that is distributed.
  • Payment Calculations: Employees are paid based on salary or hourly earnings. Contractors typically have a flat-fee agreement that is calculated based on the work that is performed.
  • Tax Reporting: Certain withholding and reporting activities need to occur for employees, as listed earlier in this article. Employers are responsible for both state and federal unemployment filings and payments. In a contractor relationship, the business is not responsible for these reporting activities.
  • Tax Documents: Employee income is reported on a W2 Form, while contractor payments are reported on a 1099 Form.

Which is Better: Contractor or Employee?

When you need more help in your company, it is better for you to hire a contractor or employee? This decision should be determined based on your overarching goals and the specific needs that will be filled.

For example, if you are looking for ongoing help and need assistance 20 to 40 hours a week, then it is likely that the worker classification will fall into the category of employee. On the other hand, if you need assistance with certain tasks and don’t require to have someone in the office at specific times during the day, then this business relationship will likely fall in the category of a contractor.

The benefit of hiring an employee is the opportunity to manage when, where, and how the job duties are completed. There are times when it makes sense to have a worker on-site for specific needs.

At the same time, there are benefits to hiring a contractor instead of an employee. One of the main benefits is the reduction in overall expenses for the work that is provided. The company doesn’t need to carry the burden of overhead costs for equipment, office space, and benefits.

Additionally, the agreement for an independent contractor can be structured for a short-term engagement. You might choose to bring these services onto the team during the busy season or for specific projects that need to be completed. This agreement can save money compared to paying the fully-burdened costs of bringing on another full-time employee.

Questions about Payroll or Contractor Payments?

If you have questions about the right way to structure the classification with your workers, then it is best to talk to an experienced team that can offer guidance along the way. At Easier Accounting, we offer much more than basic tax preparation services. Our accounting team is here to provide recommendations and implementation for payroll processing, invoice management, financial systems, and more. We partner with our clients throughout the year to ensure optimal accounting services that support the unique needs of each company.

For more information about these quality services, contact us at Easier Accounting: (888) 620-0770.

January Accounting To-Do List for Small Businesses

Staying ahead of essential accounting and bookkeeping tasks is a never-ending process for a small business owner. As each year comes to an end and the new year begins, it is a good opportunity to evaluate the financial details for your company. Not only do you need to look at the numbers that will affect your success going forward, but there are essential tax deadlines that need to be met in the next few weeks.

January Tax Deadlines for Small Businesses

Every year, businesses have a few to-do items that need to be done by the end of January. These forms need to be completed and filed or as required by the IRS:

  • W2 Forms for Employees: When you have employees on payroll, you are legally required to provide every person with copies of form W2 (Wage and Tax Statement). Not only does this form need to reflect wages that were paid in 2019, but it should also show the total value of special gifts or accrued bonuses.
  • W3 Form for the Social Security Administration: Additionally, a form W3 needs to be submitted to the Social Security Administration, outlining the wages, tips, and other compensation employees received. The data on Form W3 should match up to the total numbers on the distributed W2 Forms.
  • Form 1099 Misc Income: If you paid any contract workers, freelancers, or service providers more than $599 in 2019, then they need to be provided with a copy of Form 1099 Miscellaneous Income.
  • Form 1096 Summary: Additionally, the information on distributed 1099 Misc Forms needs to be summarized on Form 1096 (Annual Summary and Transmittal of U.S. Information Returns). This document is filed with the IRS to report non-employee compensation. This form isn’t due until February 28. But it’s worth mentioning here with the January deadlines since it relates to the 1099 forms that are distributed. Many businesses find that it is convenient to complete this form and send it at the same time as the 1099 Misc documents.

Forms W2 and W3

When payments and wages total $600 or more in a calendar year, then you are required to provide a Form W2 or 1099 Misc to the employee or contractor. Even if the individual is no longer working for your company, it is still necessary to send the form with applicable income information.

The worker classification (employee or contractor) depends on the relationship they had with the company. For example, if the person was on payroll and your business deducted income taxes, Medicare, FICA, or Social Security taxes, then these numbers need to be reflected on Form W2 and provided to the individual by January 31st. Multiple copies of Form W2 should be created:

  • Copy A is sent to the IRS
  • Copies B & C are provided to the employee (or former employee)

You also must keep a copy for your business records. This information is summarized on Form W3 and provided to the IRS. Form W3 lists the number of W2s that were distributed, as well as total numbers paid and withheld during the calendar year. Form W3 is submitted along with the copies of W2s.

Form 1099 MISC

Non-employees receive payments, but you are not required to withhold taxes. The individual or service provider holds the responsibility of calculating and paying applicable taxes, including estimated tax payments, Social security, Medicare, and FICA. As a business owner, you are required to report taxable income on this document, then the totals from all W3s need to be summarized in your 1096 Summary submission.

Each employer is responsible for managing the classification of employee vs. contractor. For example, employees and contractors can provide similar work – but there are clear legal differences that classify the relationship with the worker. Some companies choose to maintain contractor relationships instead of hiring employees. As a result, the employer doesn’t have the overhead costs of withholding calculations, employee taxes, and more.

If you choose to pay a provider as a contractor, certain qualifications must be met:

  • You don’t control what the worker does or how the job gets done
  • Business aspects of the position are not managed by the company, such as supplies, equipment, expense reimbursement, dedicated office space, etc.
  • Benefits are not provided, including vacation pay, insurance benefits, or retirement
  • This relationship may be a short-term agreement, based on the contract determined for the work that needs to be completed

For more information about employee vs. contractor classifications and payments, you can view the distinguishing details on the IRS website.

Other Upcoming Deadlines for Small Businesses

  • Estimated Tax Payment: The schedule for estimated tax payments (1040ES) falls with one of the quarterly payment deadlines in January. By January 15th, you should have paid the amount that your accountant listed on the payment voucher. This estimated payment is applied to your overall tax calculations, with all of the details of the year being calculated before the tax date coming up on April 15th.
  • Employment Taxes: Review the due dates for employment taxes this year. Make sure that your calendar is marked so that you don’t overlook any of these important deadlines. Follow the applicable deposit due dates to ensure you are keeping up with the requirements set by the IRS. Your schedule is determined by the tax liability reported on Form 941. Keep in mind that the schedules for depositing taxes and reporting taxes are different. Your small business accountant can provide guidelines and support to determine the right deposit and reporting schedules based on the unique needs of your company.

Why Payroll Compliance Matters

Why does it matter if you submit all of these payment forms on time? It’s easy for the paperwork to get lost in the shuffle because other business responsibilities take priority. Keep in mind that the IRS has strict guidelines for deadlines and payment structures, and every business owner needs to maintain the responsibility of abiding by these guidelines.

For example, failing to distribute W2 Forms by January 31st means that you could be facing fees and penalties from the IRS. It is considered a federal violation to miss these deadlines. Additionally, you need to consider how the failure to distribute the forms will impact employees. Each person needs their income details to complete their tax filing for the year. The W2 form is one document that will be required when the person is completing and submitting their annual income tax forms.

In order for the tax forms to be completed “on-time,” they need to be delivered or postmarked by the applicable due date. For example, if the tax forms are due by January 31st, then the postmark date should be on or before January 31st.

Don’t Wait Until the Last Minute

Just because a deadline is a few weeks away, doesn’t mean that you should wait until the last minute to complete the necessary accounting preparations. Being proactive gives you the advantage of completing these documents with plenty of time to spare. Not only do you have sufficient time to ensure the accuracy of the calculations, but you also have a buffer in case something goes wrong and you need a bit of time to correct the issues.

Additionally, consider the benefit you can enjoy due to lower stress levels. It can be a nail-biting experience if you wait until the last day to complete the necessary tax forms. It’s not worth the stress to delay these to-do list items until the last minute.

Finally, preparing ahead of time gives you the option to hire an accounting team to assist with the calculations and preparation of all tax forms. As a busy business owner, you are already carrying a lot of responsibility to oversee the day-to-day functions of the company. Let a professional team take care of the paperwork so that you can keep your focus on other tasks that matter. January doesn’t have to be a busy month when you engage the services of an experienced outsourced accounting team for assistance.

Looking Ahead for the Rest of the Year

Once these deadlines are met, and the tax forms are done, don’t be fooled into thinking that you are off the hook for the rest of the year. Financial planning and tax strategy should be an ongoing process to optimize your systems, increase profits, and minimize overhead expenses. One of the best investments you can make for your company is to leverage the services offered through an experienced small business accountant.

Our team is here to assist with report generation, data analysis, and other financial strategies that can improve your results in 2020. Whether you need assistance with the preparation and filing of W2 and 1099 Misc forms, or you are looking for a long-term accounting strategy, we invite you to call us to learn more about available services.

At Easier Accounting, our specialty is small business accounting. We understand the unique challenges that need to be addressed for startups and small businesses in a variety of industries. We’d love to assist with your financial system this year. For more information, you can contact us for a consultation: (888) 620-0770.

Start 2020 Right with These Small Business Accounting Goals

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

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

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

Reasons Resolutions Fail

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

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

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

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

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

Creating SMART Goals for Your Business

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

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

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

Ideas for Small Business Goals in 2020

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

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

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

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

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

Accounting Gift for Yourself

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

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

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

Tips for Choosing the Right Provider

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

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

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

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

Access to Top Systems and Experts

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

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

Prepare Your Business for Growth

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

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

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

Personalized Bookkeeping Services for Your Business

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

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

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

Take a Holiday Break: How to Automate Your Business

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

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

Why Time Off is Essential

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

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

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

Don’t Opt Out of Vacation Time

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

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

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

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

Small Business Automation Tips

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

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

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

Schedule Vacation Time on Your Calendar

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

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

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

Small Business Accounting: How to Choose a Service Provider

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

Don’t Wait for Small Business Accounting

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

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

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

Options for Accounting Services

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

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

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

What are the Unique Needs of Your Company?

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

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

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

Characteristics of a Great Small Business Accountant

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

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

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

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

Easier Accounting Offers Quality Business Services

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

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

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

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

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

Annual Tax Filing: How it Works

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

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

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

Underpaying on Your Estimated Payments

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

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

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

Common Tax Return Mistakes

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

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

Talk to an Experienced Accountant to Avoid Tax Return Mistakes

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

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

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

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

Business Owners: Avoid These Common Cash Pitfalls

Cash flow matters at all stages of business ownership. Whether you are trying to get a new business venture off the ground, or you’ve been in business for years, it is common to rush into cash pitfalls that can drain your bank account. But these problems can be avoided if you are proactive with your financial system.

A good accounting and bookkeeping team, such as Easier Accounting, can offer the ongoing cash flow support that you need throughout the year. Our team has worked with many small businesses, and we’ve seen the trends that often happen within growing companies. This experience gives us the insight to help our clients sidestep some of the common issues that impact cash flow.

Why Cash Flow Matters

It seems obvious that you need money on the bank to keep your business running. But there are times when you know that the money will be coming through receivables, so it might seem like a good idea to tap into credit if you have immediate expenses that need to be covered. This short-term strategy can lead to a domino-effect of financial issues in the future, especially if you don’t have a good bookkeeping and accounting system in place.

Not only do you need to be looking at the money that comes into your business when customers buy your products and services, but you also need to be looking ahead to the future to see how much money needs to be spent on expenses. For example, a big tax bill can sneak up on you if you aren’t tracking the flow of money, causing you to be cash-poor and unable to keep up with the costs of running your business.

When the bills need to be paid, and you don’t have any money in the bank, the cash flow issues could potentially result in business failure. Rent needs to be covered, employee paychecks need to be paid, inventory needs to be restocked, and you have a long list of other expenses that are required to keep your company running. Make sure that you have enough cash in the bank to cover these expenses each month.

Common Cash Pitfalls

Learning about common cash pitfalls can be an effective way to bring awareness to your business practices, helping you avoid these issues. You can learn from the mistakes of other business owners so that you don’t have to walk the same difficult path of cashflow problems.

Our team at Easier Accounting is here to guide your financial decisions and help you avoid some of the problems that we’ve seen over the years. Here are some of the most common cash pitfalls that we’ve encountered:

  • DIY Accounting: When a business owner chooses a DIY approach for accounting and bookkeeping, they are usually motivated to save the money that would have been spent on accounting services. The truth is that taking on these financial responsibilities might be one of the costliest mistakes you can make as a business owner. Not only are important financial details often overlooked with DIY accounting, but you don’t have the experience to dig into the financial statements and see what is coming in the future. You need clear insights for your expenses and income so you can optimize your business practices, which in turn will help to boost your profit margins.
  • Using the Right Tools: Excel can be a great tool for many projects within your company, but you are making a huge mistake if you are still using a spreadsheet to track your income and expenses. It is important that you have a robust accounting software that can generate reports and help you see a clear picture of your business profits and losses. The right accounting software will help you avoid mistakes that often come when the numbers are calculated manually.
  • Training and Application of Accounting Software: Not only do you need to be using the right accounting software to match the needs of your company, but it is also important to be sure that your team is trained on the most effective strategies for the use of this software. The simplest way to be sure that you are leveraging the full power of a financial software is to hire an experienced accounting team to assist with the setup and ongoing maintenance of your system.
  • Overlooking Accounts Receivables: Having unpaid invoices for current sales can inflate your numbers, but don’t count on the income until you have money in the bank. Too often, small business owners have a gap in their accounts receivables system. Make sure you have a strategy in place to follow-up on outstanding invoices. Late or unpaid invoices can have a major impact on your cashflow.
  • No Rainy-Day Account: Don’t make the mistake of spending every penny that comes into your business bank account. There are always opportunities to spend money on marketing and business development. While these expenses are good investments, it can be harmful to your company if you don’t have money set aside for a rainy day. It is common for small businesses to have slow seasons, which means that you need to have enough cash on hand to cover the costs when sales are trickling through. Set up a savings account designed for emergencies only. Ideally, this fund should have a minimum of three months of expenses.
  • Too Much Spending: It doesn’t matter how much money you are bringing in, you won’t be able to make a profit if you are spending more you are collecting. Often, businesses get bogged down with unnecessary subscriptions and services that eat into the cash flow and profitability each month. Take time to discuss your expenses with a financial pro, such as an experienced accountant. Find line-items where you can cut costs to protect your cash flow. Remember that a little bit can add up… saving $100 per month results in $1,200 in savings each year.
  • Excess Inventory: It is important to be sure that you have product on hand when the customers are ready to buy. But holding onto too much inventory can tie up your cash and make it difficult to keep up with ongoing expenses. If you have a warehouse stocked with products, then you need to dial in the sales trends and fine-tune your ordering. The goal is to have stock on hand for the shortest amount of time before it is sold. Your inventory can be managed by evaluating sales volumes, forecasts, supplier turnaround time, and available cash on hand. Have a system that takes care of ongoing inventory monitoring so you can reorder when needed, helping you avoid the loss of clients if something is out of stock.
  • Realistic Future Forecasting: While you are working to create opportunities for business growth, don’t bank on the money until the sales have actually occurred. One of the common cash pitfalls that we see is when business owners spend money now, assuming that they will have the necessary income needed in the future. You shouldn’t count on a sudden boom in your business in the future. The best solution is to evaluate your business records and data so you can see the trends that are normal for your industry.
  • Large Debt Burdens: Too much business debt can eat away at your profit margins because of the cash flow that is tied up in interest costs. Look for ways that you can manage your cash flow to pay off debt. Lowering these balances can reduce the amount of money that you are paying for late fees, overdraft costs, and interest expenses.

The Simplest Way to Avoid Cash Flow Problems

We’ve found that the most common reason business owners encounter cash flow problems is because they don’t have effective systems in place. It is important that you know the current cash position of your company, as well as upcoming expenses that will need to be paid. If you are just going with the flow and hoping that the money will be there at the right time, then it is likely that you will encounter big problems in the future!

As a business owner, you don’t need to take accounting classes or spend hours on YouTube watching accounting tutorials. The fastest and most effective solution to ensure that you are managing your financial reports and cash flow is to tap into the services offered by an experienced accounting team.

At Easier Accounting, our goal is to reduce your stress by creating a financial system that helps your business succeed. We offer years of experience in the industry. You can tap into our expertise and insights to find the right solutions that will support your long-term financial needs. We want to help your business with financial strategy, and we have proven experience that can be used to optimize your financial systems.

If you are interested in more information about business accounting systems, then we invite you to contact our team right away. Easier Accounting is here to answer your questions and help you find the right solutions to meet the unique needs of your business. We’ll explain the available services so you can see the benefits available for your company: (888) 620-0770.

Modern Accounting: How to Ensure Your Business is Staying Current

Technology has improved the way business is done, making it possible to connect with customers and business contacts through the internet. If you want to maximize the success of your business, then you need to be sure that you are using modern accounting tools to support your financial tracking. What resources are used in your business systems? It’s a great time to talk to an outsourced accounting team to learn more about the processes that can be used to improve your business systems.

Whether you are looking for options to improve your tax strategy or you need to systematize payment collection from your customers, a few good accounting tools can go a long way to improve your results. Investing in the right accounting and bookkeeping software will help you tap into the resources that can be used to amp up your financial systems.

What is Modern Accounting?

Before the invention of computers and the internet, business owners tracked their transactions by hand. These accounting ledgers were used to record money/products that moved in and out of the business account, and most of the transactions were paid in cash. If you go back thousands of years in history, it is possible to find ancient records that show accounting and business tracking in the most basic forms.

Now, the business world has changed. Technology is a foundational aspect of supporting the needs of a company. If you don’t accept digital payments, then it means that your customers are likely going to head to your competitors. Not only do you need to integrate technology into your business systems, but you need to be sure that you are using the tools that are the right fit for your industry and individual needs.

Modern accounting means that you are using technology and accounting software programs to systematize your financial tracking. Every transaction that moves in and out of your account needs to be recorded. There’s no need to write these things down by hand. Instead, you can leverage the automation of modern accounting software programs that take care of the tracking for you.

Even the accounting systems that use the most advanced technology available in the accounting industry are designed with double-entry bookkeeping systems. This approach means that there are always two entries for every transaction: debits and credits. Double-entry accounting dates as far back as 1494, but it’s only been in recent years that these systems have been automated through software programs.

Accounting is the Language of Business

The best way to communicate detailed information about your business is to have the option to run financial reports regarding the profitability of the company. These financial details are required if you are looking for investment money or partnering with other businesses. At the same time, these modern accounting reports can also be used to assess the current snapshot, giving you information that will support decisions that are made regarding cash flow, spending, and hiring.

As the accounting industry continues to evolve through technology, it is impossible to know how these business practices will change in the future. We can’t even imagine the possibilities that lie in the future! The most important thing that can be done is to ensure that you are keeping up with current accounting trends so that you are on track with the way systems are changing with time.

Using a modern accounting approach for your business doesn’t mean that you are on the cutting-edge of all payment technologies. Sometimes, being the first to implement new technology might not be the best investment if others aren’t using the new systems yet. So, the best thing you can do is work with an experienced accounting team and payment processing service to ensure that you have the right balance between staying current without leading out too far in the industry.

Digital Accounting: Key to Business Tracking

When the term “digital accounting” is used, it refers to the electronic format of the formation, data, and transmission of financial information for your business. The math is always the same: money coming in will increase your account balance, and payables decrease your account balance. But you don’t need to balance the checkbook in the way that was done 30 years ago. Now these modern accounting systems automate the math and calculations.

This automation is key to free up your time. There’s no reason to spend hours of your day doing manual calculations. Instead, you can lean on the support that comes through the right accounting software. These programs are beneficial for improving accuracy and optimizing productivity for your team. When digital transactions are moving through your account, you can rest assured to know that everything is recorded because you are using a digital accounting system to record the information.

In addition to the basic bookkeeping and tracking required for every business, digital accounting also offers powerful solutions for data analysis. Collecting financial information doesn’t mean anything unless you have reports that showcase the financial health of the company. These digital, modern accounting systems have enhanced the reporting options. For example, the technology can report and interpret data more quickly than ever before. Plus, the information is more effective and efficient, giving you hands-on application that can have a dynamic impact on your business decisions.

Taking it to the Cloud

When digital accounting first started, there were still manual aspects required for calculations. For example, using a 10-key calculator allowed faster computing, but the numbers were still limited because of the possibility of typos or human error.

Then, the digital tracking moved to computers. Software programs could be installed on computer systems, giving business owners the option to enter transactions and track results. This step upgraded the digital accounting industry because the history could be stored digitally. The main weakness was that the accounting system was limited to a single computer, or an elaborate networking system needed to be implemented to share information on multiple devices. If the local hardware malfunctioned, then the accounting information would be lost.

One of the greatest benefits of our current, modern accounting systems is that information can be stored in the cloud. When transactions move through the accounting software, the data can be viewed on your computer. At the same time, all information is stored securely on an off-site computer. This cloud-based accounting solution minimizes the risk of losing all of the accounting data due to a system malfunction.

Another benefit of modern accounting is that multiple devices can access the financial reports from any location. Storing the data and systems in the cloud means that the information can be reviewed from any location, as long as the person has permissions and access to look at the reporting. For example, a business owner can see the business transactions in real-time, even when located in another part of the country or on the other side of the world. The internet allows the information to be shared and distributed, giving full access to anyone on your team. You can decide who is collaborating in the accounting and bookkeeping systems.

One Hub for All Financial Needs

A modern accounting system makes it easier than ever to keep up with financial responsibilities. Since your business records and financial information are stored in one location that is easy to access, you can view your accounts with the touch of a button. You can be on the road for a business meeting, and keep up with invoicing and payments from any location.

Additionally, digital accounting opens up opportunities for you to hire outsourced bookkeeping and accounting teams. There’s no need to have an accountant in your office when an outsourced accounting team can access your business financial information from their own office. Many businesses are moving to outsourced accounting solutions to save money and improve overall results, without the need to have a full-time accountant on the payroll.

As you can see, the internet has opened up many options that can improve your business systems. If you haven’t implemented modern accounting in your business, then it’s time to take action so that you can upgrade your financial tracking and improve overall results for the company.

Talk to Our Team About Modern Accounting Solutions

Are you exploring options to improve your business accounting systems? Our experienced team is here to answer your questions and assist with anything that you need. Working with an experienced, outsourced accounting team means that you can hand over the financial tasks that need to be addressed. Outsourcing bookkeeping and accounting can be an effective way to free up your time so that you can focus on other business responsibilities. There is no reason for you to spend your time on busy work when you can let the pros take responsibility for accounting support instead.

At Easier Accounting, we offer high-quality, personalized business accounting services. Our team specializes in small business solutions. We invite you to call at your convenience to learn more about the support that is available for your company: (888) 620-0770.

The Small Business Owner’s Guide to Self-Employment Taxes

Self-employment taxes are a necessary and unavoidable part of being a business owner. Building the business feels fun and glamorous, but many entrepreneurs agree that taxes can be both stressful and burdensome. The key is to plan ahead for the tax burden you will be carrying, so the costs and paperwork don’t catch you off-guard. The right financial plan can make it easy to keep up with your self-employment taxes, ensuring that you have money set aside when it is time to make the payments.

Do You Fall in the “Self-Employment” Category?

It is important to understand the IRS’s definition of self-employment to see if these taxes apply to your situation. Knowing the federal regulations and guidelines means that you won’t skip past the tax obligations by mistake.

If you have the goal of bringing in money through work that you do for yourself, then you are considered self-employed. The work that you complete falls in the category of self-employment when you are not a shareholder or an employee.

Keep in mind that your business doesn’t need to actually be profitable for you to be considered self-employed. When you have the goal of earning a profit, and you are putting in regular work towards that goal, then the IRS views your efforts as self-employment. Even if you work as an employee for another company (either full-time or part-time), you still fall under the category of self-employment if you do work outside of your regular job to earn money on the side.

It’s one thing to be paid for a one-off day of work helping a friend with manual labor. A one-time opportunity to earn a bit of extra cash isn’t regular enough to fall in the category of self-employment. But, if you are consistently putting in the effort to engage in activities that bring in a profit, then you are self-employed.

Overview of Self-Employment Taxes

The tax rates can change from one year to the next, which is why it is best to work with a financial professional who will ensure that you are paying the correct rates. Self-employment taxes are calculated by combining your requirements for both Medicare and Social Security taxes.

Both self-employed workers and employees need to pay Social Security and Medicare. When you are working as an employee, your employer pays 50% of the tax burden, and the other half is deducted from your paycheck. On the other hand, self-employed workers need to pay the full 100%.

These self-employment taxes are calculated based on the profits of your business efforts. This is the calculation that is used:

  • Gross (total) revenue – qualifying tax deductions = profit that can be taxed

Since the taxable amount is calculated without the deductions, many business owners look for ways to leverage the deductions as much as possible. It is important to stay within the legal guidelines, and your small business accountant can offer guidelines and recommendations that apply to your situation.

Classifications: When Self-Employment Taxes are Required

You tax classification plays a role in whether you are obligated to pay self-employment tax. If one or more of these classifications apply to your tax filing, then it is smart to talk to a tax accountant for information about self-employment taxes:

  • Independent contractor (freelancer)
  • Sole proprietor
  • Member of a partnership
  • Member or partner of an LLC (single, or multi-member organization) and you haven’t changed your default tax classification

Income Tax vs. Self-Employment Taxes

Don’t mistakenly think that income taxes and self-employment taxes are the same time. Even though there is a difference in the way self-employment taxes are calculated, income tax works the same for everyone.

This income tax rate is also based on the taxable profits, using the calculation listed above. Once the taxable income is determined, then tax credits and personal deductions are calculated in to determine the amount that needs to be paid.

50% of your self-employment tax can be used as a deduction, which helps to reduce the total taxable income for the income tax calculations.

The filing status and tax rates vary, depending on the tax bracket in which you fall. These federal brackets can change each year. In 2019, the progressive range of income tax rates falls between 10 – 37%.

Why You Shouldn’t Kick Taxes to the Backburner

W-2 employees don’t have much to worry about regarding ongoing tax calculations and payments, because these amounts are automatically deducted from their paychecks by their employers. On the other hand, self-employed individuals don’t have the convenience of automatic tax calculations and deductions. It’s your responsibility to ensure that you are keeping track of what you owe and staying current with paying these amounts on time.

You already have a lot to worry about with business-building efforts, marketing, employee management, and more. It might be tempting to push self-employment taxes to the back-burner. But don’t be fooled into thinking that you can deal with taxes at a later date. If you want to avoid a stressful and costly audit by the IRS, then you need to be sure that Uncle Sam is getting his share of your profitable income.

Also, consider the consequences of incorrect tax filings. If you don’t have experience with tax calculations and paperwork, there is a high risk that you might make a mistake. In the case where that mistake is discovered by the IRS in the future, it means that you could be facing expensive fines, interest costs, and penalties. Save yourself time, money, and stress by ensuring that your taxes are calculated, filed, and paid correctly the first time around.

How Often Do Self-Employment Taxes Need to Be Paid?

Most people only think about taxes once a year: in April when the tax filing deadline happens each year. But, if you owe more than $1,000 on the tax return filing, then you will be required to make quarterly tax payments. So, you need to be prepared to pay taxes four times per year.

These payments are calculated by looking at your previous year’s taxable income, then calculating the amount that will need to be paid each quarter. Of course, you can’t predict the exact amount you will earn in a given year, which is why these quarterly payments are called estimated tax payments.

This is the payment schedule for estimated tax payments. You will need to send the payment before or by the end of the day on:

  • Jan 15th
  • April 15th
  • June 15th
  • Sept 15th

Sometimes, these calendar dates fall on a weekend or federal holiday. In that situation, the due date for estimated taxes is pushed to the next day that is not a weekend or holiday. Small business accounting services makes it easy to keep up with these tax deadlines because you will receive estimated tax payment vouchers that list the specific dates for each calendar year.

Other Taxes for Business Owners, Entrepreneurs, and Start-ups

Keep in mind that the IRS only oversees the enforcement of federal taxes. It is possible that you will need to pay state and/or income tax depending on where you live. A few of the states don’t charge personal income tax, so you might consider moving your business efforts to those locations if you have the flexibility of an online income.

Other tax burdens need to be considered as well. For example, if you have employees, then you will need to pay and manage the paperwork for employer payroll taxes. Also, sales tax might need to be calculated on the products and services that are sold, depending on your location.

Be Prepared for Future Payments

With self-employment, it’s easy to make the mistake of confusing take-home pay with the gross revenue. Even though the money is coming into your bank account, it doesn’t mean that it is all yours to pocket. Too often, self-employed business owners spend the cash, then face big cash flow issues in the future when it is time to pay the IRS.

Never make the mistake of making big business decisions based on the money sitting in your bank account, without considering upcoming tax obligations. A good small business accounting software can help you stay current with financial reports and upcoming costs. Use this information to gain a clear picture of the true profits of your business efforts, helping you avoid the pitfalls of not having enough to pay the bills when tax time rolls around.

One of the best things that you can do is set aside a percentage of your money for future tax bills. Since self-employment income is often variable, you can create a system that automatically saves your tax money in a separate account.

Find an Outsourced Accounting Team to Help

Not only is it stressful to keep up with the deadlines for tax payments, but the government forms can be intimidating. Most self-employed business owners choose to hire the help of a local accountant or outsourced accounting services through a reputable provider. Our experienced team at Easier Accounting is always here to assist. If you need help designing the right financial system to keep up with your self-employment taxes and business reports, then we invite you to contact us right away: (888) 620-0770.