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Miscalculations can be Costly

Author: Keith Huggett

Income and expenses - the monthly life of your business.  How do you keep straight which portion of your income is actually yours?  With the many different portions of your business whittling away at your proceeds, are you keeping your funds straight?  It's very easy to get bogged down, confused, or to let your bookkeeping go when it is not your favorite thing to do.  Here are some tips to help you keep your business accounts up to par:

1. Outsource! Don't try and do everything by yourself.  Hire a qualified tax professional to handle the in's and out's of your business bookkeeping and taxes.  If accounting isn't your field, then find someone whose field it is and hire them.  A tax professional is well versed in accounting practices, is aware of the available credits and deductions, the annual changes in tax law that affect your business, and when and how to make your estimated payments and other regular tax deposits. Missing a payment will cost you penalties and interest.  The cost for missing a deduction or credit or worse, claiming a deduction or credit you don't qualify for, can be high. 
2. Payroll Taxes! You want to be sure you are making your payroll tax payments on time. You are required to withhold the employee's share of Social Security and Medicare taxes, as well as any requested income taxes, from their wages each payday. You must deposit the income tax withholding, your portion as an employer and the employee's share of Social Security taxes at least monthly using the Electronic Federal Tax Payment System (EFTPS). Failure to make accurate, prompt, payments will result in penalties of up to 100% of the payment due each pay period.
   
   Pay the taxes you are responsible for, all of them, on time every time, and don't get caught in the trap of filing late and paying the additional penalties and interest that can result if you get behind.  Hiring a professional payroll company can alleviate some of the stress involved with payroll taxes.
3. Tax Day! April 15 always arrives far too quickly for most business owners.  No one wants to deal with filing and paying your taxes. If you are a small business you are required to file a Schedule C or Form 1065 (Partnership) prior to April 15. If you are a corporation (either a subchapter S or a regular C), you must file Form 1120S or Form 1120 by March 15. The IRS charges a penalty of 5% per month, up to a maximum of 25%, of the taxes due until you file your tax return. In addition, the IRS charges a 0.5% late payment penalty, up to a maximum penalty of 25%, each month you owe taxes, even when you are paying your taxes.  Hiring a qualified tax professional can ease the burden and complexities of filing your business or individual return.  And don't forget that if you file an extension, you only get an extension in "time to file" not "time to pay."
4. Record Keeping! What can I say here except keep good records.  Use your smartphone, scanner, and computer sytem to keep track of your receipts, mileage, etc., so that you have the information handy should it become necessary.  Just to note, in addition to keeping receipts for all the items you purchase for your business you must provide additional documentation for many of your deductions. Additional documentation includes information such as who a gift was purchased for, who joined you for a business meal and what the nature of the business was during the meal, keeping a daily mileage log that shows where you were going when you traveled and the number of miles for each trip. Being prepared can save your deductions.
5. Employee vs. Independent Contractor! Are you classifying your employees correctly? An error here can cause disqualification of deductions and cost you 100% of the unpaid employment tax deposits you should have made and your state may also have stiff fines and penalties based on unemployment compensation and worker's compensation insurance requirements. Both the IRS and the EDD have distinct definitions of the difference between an employee and an independent contractor.

Keeping Proper Books is a Must

Author: Keith Huggett

When you are just starting out with a new business or building up a new purchase it pays to have a good set of books.  The problem is not everyone is good at, or likes doing the bookkeeping.  This can be a problem in many ways.  Sometimes it's just a factor of being too busy doing other things to get to the books or sometimes it's dreading the task, but either way the bookkeeping gets sidelined until it become a huge undertaking that is often more problematic than doing it regularly would have been.  Here are some reasons why keeping your bookkeeping on track is a good idea.

1. Legal Issues. If you need or want to bring in investors having a good set of books is a must.  It is illegal to have a set of books that provides different information from what is actually your true financial situation. You should be aware that most operating agreements contain ironclad consequences for bad bookkeeping, including dissolving or liquidating the company or handing over majority shares to a business partner or shareholders.
2. Audit. Being able to prove your income and expenses is a must when it comes to surviving an audit intact.  Without this proof, you are easy prey for IRS auditors.  If you cannot prove your income, you may find that you will be paying out fees, penalties, and interest in the future.
3. Cash Flow. Without knowing how much money you have available to you at any given time, it is impossible to know how much you can use to promote or invest in your business.  You are unable to purchase items that may need repair or replacement.  You are unable to hire employees that you may need and you may be forced to layoff necessary employees due to overspending. With a concise picture you will be able to decide where to allocate your resources for the biggest ROI.
4. Relationships. By not keeping control of your books, it can be difficult to keep control of your office relationships.  When you do not know if you can make payroll this month, you put a strain on the relations with your staff. Hiring the right people can be difficult enough without causing unecessary stress and strain. It is key to make sure that your staff is being paid on time and that the proper payroll tax withholdings are being accounted for.
5. Recovery. When you have a bad set of books, recovering from them is a timely task.  Why is this? As you try and correct your bookkeeping errors, more and more transactions accumulate, compounding the problem.  You end up with a monster bookkeeping project.  The best solution at this point may be to outsource your bookkeeping to a qualified bookkeeper.

Keeping Up Can Help You Spot Errors

Author: Keith Huggett

Have you ever wondered why reconciling your bank accounts is so important? By reviewing your transactions in your bookkeeping software, QuickBooks, Intaact, Xero, and comparing them to your bank statements and/or credit card statements, you are able to make certain that all of your transactions are accounted for so that everything matches and is accurate. Reconciling your accounts should be a monthly process, allowing you and your books to stay up to date.

To simplify the reconciliation process, keep these tips in mind:

• Match the beginning balance in your software to your statement's beginning balance. It is important that these two figures match. If there is a discrepancy, contact your bookkeeper and ask why.
• Keep it simple. Once you have your beginning balance input, move forward by inputting the ending date, ending balance, and any interest income or charges. Now it's just a matter of checking off those transactions that are matched with your software and bank account.
• Make sure you are recoding your transactions in the correct place.  Using the correct income and expense account is critical.
• Should trouble arise during your reconciliation, either make posts to the "Ask My Accountant" or contact your bookkeeper directly. 
• Use your software's report function.  Print out and save a copy of your reconciliation report.

Virtual Accounting Offers Flexibility in Bookkeeping

Author: Paul Cantelli

Remember when you finally moved from paper-based manual accounting to a desktop software solution like QuickBooks? Your efficiency and productivity improved dramatically. You understood your financial situation much better and saved a lot of time.

Next up: cloud-based accounting. This new wave of Internet-based technology will bring about equally dramatic changes, with less effort on your part.

Cloud computing lets you access both software and data remotely, so you can access them from any computer with an Internet connection. QuickBooks and other providers of accounting solutions are rapidly adapting to offer cloud-based alternatives to desktop-based software.

Although it can be daunting to change systems, the benefits of virtual accounting far outweigh the potential challenges of the brief transition period. They include:

1. Mobile flexibility - Have you ever been in a meeting and needed to quickly access sales data or other financial information? Cloud-based accounting solutions allow you to retrieve or update information from a laptop or smartphone, and you will always get current data.
2. Data security - If you keep QuickBooks on a single laptop or desktop computer, data may be lost if the computer is lost, stolen or damaged. Even if you regularly update your company file, any data entered between the last backup and the incident will be lost. Virtual accounting solutions store the data on remote secure servers, so no matter what happens to your computer, your information is protected.
3. Real-time updates - When you send a copy of your QuickBooks company file to your accountant, certain functions are restricted until your accountant is finished. Virtual accounting means that both you and your accountant can get real-time data anytime. 
4. Easier IT setup - When QuickBooks updates, you don't have to modify every copy. It's already done for you in the cloud. Everybody always has the same version.

If you're interested in exploring virtual accounting for your business, call the cloud specialists at The Tax Office to learn more. Outsourcing your bookkeeping to our certified specialists can help you save time and focus on growing your business. With our online bookkeeping services, you'll have access to your data anytime, anywhere. Contact us today to schedule a consultation.

Are You Certain of Your Answer?

Author: Keith Huggett 

If you are an owner of a small or medium sized business, you may think you are certain of your answer. But for most of us, the answer is often "No, I am not certain of my answer."  The reason for this is because we often hand over the controls to our financial department to what we consider to be our "financial staff" which consists of one or two trusted individuals and never think twice about it.  This can lead to employee theft. We're not saying that it always will, just that it can. Like everyone else, we like to look on the bright and shiny side of life too, and hope that the people we work with are honest and dependable, but you never know what can happen. Sometime life throws you something bad, and people are driven to desperate measures. So today, we have some tips for you that may help you prevent employee theft.

• Match up your client payments to your client invoices.
• Call your clients to make certain that payments haven't been sent that haven't been credited against their account.
• Use an expense account for each employee.
• Use online banking.
• Don't share passwords.
• Watch for dates being changed on transactions.
• Keep track of inventory by holding random inventory checks.
• Keep complete vendor records. Collect W-9s from each vendor prior to making payments to them.  Having complete W-9s is a good policy for tax time as well, as you may need this information at the end of the year should you need to send out 1099s.

There are many more tips and tricks to keeping track of the employees handling your financial data. For more in depth information, you can download this free whitepaper To Catch A Thief, Is Your Bookkeeper Stealing? Because small businesses are just that, small, they often lack the large financial staff and sophisticated controll systems inherent with large companies which makes it easier for employees to steal.  The United States Chamber of Commerce estimates that $50 billion dollars are lost annually to employee theft.  The FBI arrested 21,300 people in 2012 for embezzlement.

If you are concerned about the numbers shown above, and you suspect that maybe you have encountered theft in your office, now is the time to act.  The bookkeeping specialists at The Tax Office, Inc. can help you.  We specialize in outsourced bookkeeping, where you will have 24/7 access to your financial data. Contact us today.

The Cutting Edge Security of Cloud Servers

Author: Paul Cantelli

Have you hesitated to switch to cloud-based bookkeeping because you're concerned about data security? While you are right to be concerned about the safety of your financial data, cloud-based bookkeeping may actually be more secure than your current methods. What if the computer with your QuickBooks file crashes, or your office servers get destroyed in a fire?

Switching to any new system can be scary, especially when your company's financial data is concerned. However, consider these four security benefits of the cloud as you weigh the pros and cons:

1. Cloud servers are more physically protected than yours. If you host your data on an on-site or local server, it is nowhere near as safe as it would be in the cloud. Cloud servers have world-class security systems that no small business can match.
2. Cloud servers are more virtually protected than yours. You have antivirus software, firewalls and scanning programs, but cloud-based data centers have cutting-edge security that can fend off even the most savvy hackers.
3. Cloud-based security is more cost effective. Even if you can't match the security measures that the cloud provides, you can implement very effective systems for your business. However, the more robust the security system is, the more expensive it is. Using cloud-based systems allows you to get the benefit of their world-class security built into the price of your subscription.
4. Working in the cloud is more efficient. Switching to cloud-based bookkeeping frees up more time for you to focus on your business not only because you have more flexibility, but also because you don't have to spend the time implementing and maintaining your own security measures. You also don't have to worry about installing software and upgrading to new versions because it is all done automatically in the cloud.

QuickBooks Can Improve Business Resources

Author: Keith Huggett

Maintaining good cash flow is important for all companies, but particularly for small businesses that struggle to make ends meet each month. Doing a QuickBooks cleanup can help you use the resources you already have to improve cash flow and ensure that you have enough money in the bank to cover expenses.

Follow these five QuickBooks cleanup tips to boost your cash flow:

• Merchant services: If you do not already accept credit cards, adding Intuit's Merchant Services will allow you to accept immediate payment from clients who prefer to pay with credit cards. This gets you cash faster and reduces late payments from customers.

• Online bill pay: Reduce labor, postage and materials costs by paying your vendors online. You can also set up automatic payments to avoid late fees and keep your vendors happy. Online payments are also immediately posted to your account, so you don't have to wait for checks to arrive in the mail and be cashed by the vendor, enabling more accurate cash flow reporting.

• Use electronic statements: Most banks and credit card providers allow you to download transaction information directly into QuickBooks. This allows you to keep real-time records and get accurate cash flow information whenever you need it. Data entry errors are also reduced, ensuring that your financial information is correct.

• Forecasting tools: Predicting and planning for future expenses can be challenging, but QuickBooks has built-in tools to help. You can create cash flow forecasting reports for any period of time that include your receivables, payables and recurring expenses. Running these reports regularly will help you flag potential cash flow problems and keep your budgeting on track.

• Dun & Bradstreet: QuickBooks allows small businesses to report financial data to D&B in exchange for a free credit report and invoice stickers that indicate your participation in the program. These stickers promote faster payment and add credibility to your business.

For more QuickBooks cleanup tips or expert advice on any tax or bookkeeping issue, contact the professionals at The Tax Office Inc. We can help your small business with all of your tax and accounting needs.

 Mistakes Like These Can Be Costly

Author: Keith Huggett

Many small business owners opt to do their business bookkeeping in-house with the help of administrative staff. This makes sense when you're on a tight budget or when you don't have enough work to justify hiring a full-time bookkeeper.

However, if you choose to keep the books yourself, be aware of these 9 common business bookkeeping mistakes:

1. Failure to reconcile transactions with the bank: Your cash flow depends on more than just payments received and expenses. You may also incur bank service or interest charges that should be entered into your books on a regular basis.
2. Classifying your accounts incorrectly: Having a clean, clear chart of accounts will save you a lot of time when preparing year-end taxes.
3. Recording transactions under the wrong account type: Transactions such as  business permits should be considered assets, not expenses. Using incorrect account types can muddy your balance sheet.
4. Not using accounts when appropriate: This mistake is most common when withholding taxes; the amount withheld should go into its own account so that the original account is accurate.
5. Failure to monitor petty cash: Unrecorded transactions can lead to discrepancies and confusion down the line.
6. Allowing employee advances to slide: If you allow employees to take advances against their payroll, it is important to make sure the funds get replenished at the agreed upon time.
7. Incorrect dates: Whether entering new bills or sending invoices to customers, having the correct dates on transactions will help maintain good cash flow and ensure more accurate reporting.
8. Not tracking reimbursable expenses: Reimburse out-of-pocket expenses to maintain a more realistic income statement.
9. Failure to communicate: When business owners make verbal agreements and fail to mention them to the bookkeeper, transactions can be recorded incorrectly.

Cloud-Based Bookkeeping has Strong Advantages

Author: Keith Huggett

Whether you're a sole proprietor doing your own accounting or the manager of a company large enough to have its own dedicated bookkeeping person or staff, keeping your financial records up-to-date and accurate poses constant challenges.

QuickBooks can help, but the technology that supports it can cause its own problems. And the analytical information it provides is only as good as the data its users enter. So you're constantly battling potential accounting crises like:

• Software problems. You must install regular updates, keep company files from becoming corrupt, guard against viruses and malware, and maintain backups.

• Inaccurate recordkeeping. QuickBooks may be easy, but accounting is hard. If you or your staff don't have the proper training or knowledge of double-entry accounting, your accounts receivable and payable, payroll and tax filings may suffer from costly errors. You face unpleasant customer relations, potential loss of business and IRS penalties.

• Staffing difficulties. Your financial workflow never stops, even if the personnel responsible for it are sick, on vacation, traveling for business or otherwise unable to be in the office.

Accounting in the cloud can solve all of these problems. Often referred to as virtual accounting or online bookkeeping, it's a convenient, safe, cost-effective way to ensure that your financial records are processed accurately and in a timely fashion. Your service provider keeps a current version of your QuickBooks version  -- along with your data -- on its own secure servers. You can access it from any computer that has an Internet connection, 24/7.

The benefits of accounting in the cloud are clear. You have the flexibility to work from anywhere, anytime. You don't have to worry about software or network maintenance, and since your provider is an expert in both QuickBooks and accounting procedures, your financial books will be maintained accurately.

The experienced professionals at The Tax Office, Inc. can take on your virtual bookkeeping tasks. We have decades of experience in accounting, tax and payroll management, and we can simply help you run your business more efficiently. Contact us for a free consultation, and we'll work with you to provide just the services you need.

How to Maximize Cloud Technology in Bookkeeping

Author: Keith Huggett

You might already use cloud-based technology to store documents or access your email from any computer, but have you thought about how cloud-based bookkeeping can benefit your company? Rather than installing accounting software on every computer terminal in the office, you simply assign user IDs to staff who need to access your financial records.

Because the accounting program is hosted on a remote server, you don't have to worry about version compatibility, installing updates or other IT issues. This means that you and your staff can spend time on more important business functions. Consider these three benefits of cloud-based bookkeeping and imagine how they would impact your business: 

• Increased mobility - You can have up-to-date financial reports at your fingertips, even from mobile devices like tablets and smartphones. You can also enter data from the road, such as business travel expenses and bills.

• Better data security - If your computer fails, your data may be lost or corrupted. Even if you have a file backup system, data that has been entered since the last backup will be lost. Because cloud-based bookkeeping systems store both the software and your data on remote servers, your information is safe and protected no matter what happens to your computers.

• Efficient workflow - If multiple people need to access your accounting files, either to enter information or to run accurate reports, a traditional system can create lag time or possible errors when the data isn't synced properly. Cloud-based systems allow all users to access real-time data simultaneously, improving workflow and increasing efficiency.

Another great benefit of using cloud-based bookkeeping is the ability to easily outsource your business accounting function. Both you and your accountant will have constant, real-time access to your financial data, so you can always run accurate reports and they don't have to wait for you to send an accountant's copy of your files.

With decades of experience, our professionals can expertly handle your books -- so you don't have to. If you're ready to transition to cloud-based bookkeeping or just want to learn more,  contact us to schedule a consultation.