As a small business owner, your taxes won't get taken out of your paycheck. If your business owes more than $1000 at tax season, the IRS will require you to pay them by making quarterly tax payments. You pay the IRS and your state government taxes four times per year, based on your estimated annual tax. If you pay these taxes late, you'll incur penalty fees. Your state also requires similar quarterly payments, unless you live in a state without state taxes.
Starting a new business is an exciting time, full of possibilities. At every juncture, there will be choices to make and one of the decisions to be made in the very beginning is how the accounting will be handled. It's imperative that the company's income and expenses are properly documented. Businesses have the choice of two basic accounting methods, cash accounting or accrual accounting. This decision is often based on the company's resources as well as its financial goals.
Tax season is here, and it's time to start getting your business ready to file. Taxes for entrepreneurs and business owners tend to be more complicated than for employees, so we recommend using an accountant to help you file. However, even if you work with an accountant, there are ways to prepare your finances using basic accounting skills that make the process easier and help lower your filing-related costs.
Here are four things we recommend doing before meeting with your accountant:
It's closing time on the last day of a long string of seemingly endless busy days. The last customer walks out the door. As the lock clicks behind them, there is a collective sigh of relief. Another great holiday season is wrapped up (pun intended) and high-fives abound!
As wonderful as that is, the work for an owner/manager is far from done. Now is the time to begin planning how to make next season just as spectacular. With so many things yet to be done, there are certain priority items that need to be checked off the list before you start right in on the next go 'round. Listed below are 3 top items to invest in after the busy season.
Small businesses focus most of their energy and resources on saving time and ensuring that none of their resources go to waste. As much as this is beneficial to them, when it comes to finances, it takes more than savings for these businesses to thrive, and failure to give this aspect due consideration is detrimental to the operations of the firm. Here are some of the common accounting mistakes companies make.
Mixing business and personal finances
It’s easy to grab the wrong card and make a personal purchase on your business card, but don’t make a habit of it. Using your business accounts for personal use, or not creating a separate account will make tracking cash flow a challenge and could suck profit out of your business. Separate your accounts and write yourself paychecks, but don’t mesh your accounts together.
It is no secret that cash-strapped businesses opt for cheap solutions when hiring employees, purchasing technology and buying products, but in the end this becomes expensive for them. When you don’t pay employees enough you will see turnover, which is expensive. Buying low quality technology means having to buy everything again sooner rather than later.
Going it alone
The assumption that one can manage everything in their business either to save on cost or as a passion is a total misconception. Divided attention becomes the order of the day, and this affects operations. If you can’t afford an employee you need to enlist a mentor or someone to run ideas by.
Failure to keep a backup
With so much living in the cloud or as digital files it’s easy to forget to create a backup. When it comes to financial information, client contact information and other important data you want to keep a backup. Data can be lost through computer crashes, accidents and more. Prevent yourself from saying “I should have” and backup today.
Failure to maintain records and receipts
There is a lot of money in and out of business, and you need to know where it’s going. Keep your receipts and keep track of your expenses. Using a bookkeeping service can help to keep you in the black and ready for tax season. It may sound like a lot of work up front but in the end keeping your books up to date will save you time and money.
If you’re ready for help with your business, get started today!
Every business must cope with the issue of keeping track of the budget and money flow both in and out of the company. The best way to handle what can sometimes be a complex, time-consuming job is with a good accounting software, but the options seem endless and the variety of software is astounding. So how can you choose the accounting software to best fit the needs of your business? Here are some tips to get you started.
1. Set a budget
Before you even begin to look at accounting software options, you need to set a budget. Available software ranges in price from less than $100 to more than $1000. You’ll need to decide what your business can afford. If you own a small business, for example, you may be fine with a less expensive option, but if you have a large business with a large amount of accounting needs, you’ll want to budget more. Do not simply go with the least expensive option, but do know your limits.
Wouldn't it be nice to simplify the back-office so other parts of the business can be focused on? Small business owners may find themselves in between hiring a comprehensive CPA service and using their own unique systems, neither fitting their businesses' needs very well. Really, saving time is the same as saving money, and making workflow processes easier saves time and energy. This is how cloud-based accounting software simplifies the back office.
Properly handled finances are crucial for business success. It’s tempting to try to operate without keeping a close eye on cashflow but be careful. Just because there is money in the bank doesn’t mean you can spend it. You want to keep a good amount of runway to help you grow your business. It’s important for a business owner to be familiar with basic accounting.
Here are 5 basic accounting tips for small business owners:
When I talk to anyone considering change, I always ensure they are in the right mindset and understand the pain this transition might bring. I like to ensure everyone is fully prepared for the change they are about to undertake and ensure nothing has been underestimated. It really is a mindset change.
Mike Tyson once said, "everyone has a plan until you get punched in the face."
Going to the Gym
As a regular gym goer, I compare the move to Xero like going to the gym for the first time.
Take for example the Christmas and New Year period. You have spent the summer eating and drinking, relaxing and enjoying time to yourself. You’ve more than likely gained a few extra kilos and become complacent. Because why the hell not? Your friends and family are off work for the holidays, so you let your hair down. This is comparable to using your current method of accounting; it is familiar and comfortable, as you have used it for sometime.
Then reality hits and it’s time to set New Year’s resolutions. You have all these fantastic intentions and set some huge goals. More than likely one of them is to get back into shape. You sign up for the 21-day trial at your local gym and pump yourself up for the new you. In the accounting world, this is you realizing you can do things better, faster and more efficiently. Perhaps you have heard great things about Xero from friends or other businesses using it. Or maybe you are just fed up with your current method of accounting and know there must a better way.
So, when you finally stop procrastinating and haul yourself to the gym, it is a very uncomfortable experience. You feel super awkward (and a bit fat) in these foreign surroundings. Everyone appears to know what they are doing, looking good and acting all confident. Meanwhile you can’t even find the changing rooms! This is how it feels when you first log in to Xero. It is all very foreign and looks so different to what you’re used to. Perhaps you feel like you’re wasting time and could do this in half the time in your old system.
Back at the gym, you’ve had your induction and you are ready to give it a go. You get stuck in using machines that look familiar, like the treadmill and the bike. You wait until it is a little quieter before you move on to weights, as you don’t want to look like a fool floundering around clearly not knowing what you are doing. Similarly in Xero, you need to do some training and get up to speed on how this new system works. So you jump onto Xero TV and Xero U, and start watching training videos. So far so good. You’re feeling a little more comfortable and you have completed the bank reconciliation no problem. In fact, it was kind of fun.
Just like the gym, using our cloud accounting software gets easier with time. Soon you will shake your head at the idea of using a pen and paper to keep your books! Ready to get started? Contact us today!
*Content edited from Xero
Any good entrepreneur knows the importance of cash flow. Having to front costs for a project while waiting for a customer to pay can be painful, like the blood of your company is being drained. Solidifying a payment system protects you and the customer. You don’t want to be the nag always asking for payment, so instead use new tech to your advantage.
Here are our 3 tips for getting your invoices paid on time:
It's so tempting for small business owners to just throw all the bills and receipts at their bookkeeper or CPA. While that system can work, we want you to remain in business for many years which requires you to understand what your business's numbers mean even though you can't and shouldn't track every penny.
Here are our 5 basic accounting concepts for every small business owner:
For a lot of people, accounting looks like a big ball of confusion. A maze of spreadsheets and receipts can overwhelm even the most number savvy business owner. We hope that explaining some of the key terms of accounting will help to calm your fears.
Here are some definitions of accounting terms for non-accountants:
Debits and Credits - A debit is money coming out of an account and a credit is money coming in. When you subtract debits from credits you get the balance of your account. If you have more debits than credits, well, you’re in the red.
The Profit and Loss Statement (aka Income Statement) - A summary of all operating transactions that occurred within a specific period of time – usually a calendar month. In other words: sales minus expenses. This report lets you know if your business is profitable during that period of time.
For a lot of small business owners, accounting can be tedious and time consuming. Unfortunately it’s non-optional as a business owner. It’s best to stay organized and up-to-date with everything to lower the burden.
Here are our 10 Tips for Small Business Accounting:
Keep it simple:
Don’t over complicate the matter. Keep your spreadsheets or software and organizational systems in line and easy to follow.
The cloud has quickly evolved from an IT tool to a mainstream concept that is now a regular part of business conversation. Companies of all sizes are beginning to explore the benefits of moving their operation to a cloud-based system. So what potential does it hold for your business?
Moving to the cloud means that technology functions such as large applications, data, software and more can be housed remotely and accessed through an Internet connection. The top five benefits of using cloud-based services are worth considering, regardless of your company’s size: cost-savings, mobile access, scalability, disaster protection, and security.