How to Keep Your Accounting in Check

The accounting profession has changed drastically in the last five years and cloud-based solutions such as Xero, SageOne and FreshBooks have emerged, allowing accounting professionals and their clients a real-time view into their financials.

If you were to ask entrepreneurs what their favorite part about their job is, odds are, doing taxes is at or near the bottom of the list. Despite this, keeping good financials is paramount to run an effective business. And fortunately for entrepreneurs, accounting is becoming more streamlined and easier than ever.

Additionally, the cloud has enabled many financial systems such as payroll and time tracking to be automated and integrated into accounting platforms, making number crunching not so daunting. These innovations combined have enabled accountants to do what they do best -- provide up-to-date financial counsel to their clients so they can focus more on growing their business.
While these developments are a benefit to small businesses and accountants, there are still preparatory tactics SMBs can employ to make the best use of these tools and benefit their bottom line.

Here are a few tips and best practices to help small business owners keep their visionary outlook, while enabling their accounting partners to serve them with the most accurate financial counsel.

Spread out tax payments. If you have trouble saving for your quarterly estimated tax payments, set aside funds each month instead. Treat it like any other monthly operating expense, that way it won’t seem like such a chunk when payment comes due.

Back to the future. It’s good practice to live in the “now,” but in business, as well as in life, you should be thinking about and planning for, the future. As a business owner if you’re not looking three to five years into the future, you are behind the competition.

It’s not personal, it’s business. Have a dedicated business checking account and business credit card. If your business checking is low on funds, it's easier to account for making a loan to your business than it is to account for business expenses paid from a personal account.

Monitor and measure. Look at your company's financial performance regularly and use backwards-looking financial statements to project forward revenue, expenses and cash flow. You can't manage what you don't measure. Having this knowledge will help you make better decisions.

The time is now! If you have dragged your feet about hiring an accountant or bookkeeper for your business get one today.  Not just because it makes good financial sense to have an accountant lined up before the tax crunch, but also because accountants rosters fill up the closer it gets to tax time, making it hard to take on new clients. If they do take you on, chances are it will be at a much higher rate than if you'd started working with them earlier.

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Ref: entrepreneur.com/article/231409#ixzz2tebf3H5

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Read This, Before Hiring a Tax Accountant

When it's time to look for a tax accountant, you want one who not only can help save you money and avoid potential trouble with the IRS, but also can provide useful information for your business. "We tend to think of accountants as numbers people, but a good accountant does more than just figure the numbers," says Ed Lyon, co-founder of the American Institute for Certified Tax Coaches. "A good accountant will communicate what the numbers mean to us."

So shop around, interview accountants and figure out which one is the best fit for you and your business. Here are 10 key questions to help you make the decision before hiring a tax accountant:

1. What kinds of clients do you work with?
You want to make sure your accountant understands your type of business. A restaurant will have certain rules to follow for wages and tips, for instance, just as a construction business must deal with issues related to contract workers and a real estate development firm will have certain criteria about how income is reported. You need an accountant who has worked with other businesses like yours and knows the ins and outs of the industry.

2. Are you available year round?
Some accounting firms shut their doors after April 15 and only reopen for the following tax season. But when you're running a small business, you're going to need help all year, says Melissa Labant, director of taxation at the American Institute of CPAs in New York. "If something comes up, you don't want to wait until tax season in order to get your issue addressed."

3. What's your experience with the IRS?
Often people will tell you it's important to hire a certified public accountant rather than an EA, or enrolled agent, because CPAs have more comprehensive certification requirements. While CPAs are state-certified and have training in such areas as financial planning and bookkeeping, EAs are certified by the federal government specifically to handle taxes and are often former IRS agents with extensive experience dealing with audits. "They've been in the belly of the beast. They may have more inside knowledge of how the IRS really works," Lyon says. On the other hand, a CPA will likely have more experience with broader financial planning issues. Rather than focusing on certification, Lyon says, focus on how your accountant's experience is relevant to your business.

4. Who will be doing the work?
Accountants will often outsource work to a third party. This doesn't mean their services are bad, but you want to be sure they are forthright about who is doing the work, says Kerry Kerstetter, a Harrison, Ark., CPA. If you want to talk with someone familiar with your bookkeeping and that's a third party, it likely will be difficult to speak with him or her directly, Kerstetter says.


5. Are you a conservative or more aggressive accountant?
Some accountants want to write off everything they possibly can, while others take a more conservative approach. It's important to figure out where you fall on the spectrum and find an accountant who agrees with your philosophy, Lyon says. If accountants tell you they specialize in finding red flags that could trigger audits, they may be hesitant to maximize your deductions. For example, some accountants believe taking a home office deduction might be a red flag to the IRS, Lyon says.

6. How do you bill for your services?
Some accountants charge by the hour; others bill a flat rate. If you want to take a more hands-on approach to your bookkeeping, an hourly rate might be better because you won't have as much continuous work for an accountant, Kerstetter advises. Regardless of the billing approach, be sure to get an estimate of an accountant's likely fees. Provide a copy of your previous year's tax returns so the accountant can familiarize himself with your business before giving a quote, Labant says.

7. How do you handle working with multiple entities?
If you have more than one entity under your name, be sure the person you hire can manage them simultaneously--a skill not all accountants possess. If you own rental property as an LLC and a retail store registered as a C-corporation, for example, you'll need an accountant who can coordinate and track money moving between those entities, Kerstetter says.

8. What can you tell me about the medical expense reimbursement plan?
This question may seem technical, but not all accountants will know about this plan, which allows you to deduct your family's medical expenses on your return, Lyon says. If the accountant you're speaking with is unfamiliar with such plans, you should be wary because that might be a red flag that he or she isn't well versed in deductions that could save your business money.

9. What tax program do you use?
You shouldn't choose accountants based on the tax program they use, but it's a good detail to ask about. QuickBooks is commonly used for small businesses, which means your information would likely be easily transferred between different accountants, Kerstetter says. Hiring an accountant who uses more obscure tax software won't affect the quality of the work, but it might make it tricky to switch accountants.

10. How often will we communicate about tax issues?
Every accountant will be different when it comes to frequency of communication for tax planning purposes. Ask about a prospective accountant's approach and be sure you're satisfied with the degree of communication, Labant says. "You want to feel comfortable calling them with issues relating to your taxes."

Ref: http://www.entrepreneur.com/article/225378#ixzz2fLhaHC5K

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When to Hire a Accountant or Bookkeeper

With user-friendly software such as QuickBooks available, many business owners feel they should be able to do keep their records on their own, even as they wrestle with finding the time and wonder if they're doing things correctly.
 Do everything you can yourself and don't pay for anything new until you have absolutely have to. It's especially difficult to justify hiring financial help like a bookkeeper.

Deciding about "hiring a bookkeeper is something I struggle with all the time," says Randy Mitchelson, owner of National Web Leads, an Internet marketing company in Estero, Fla. While he finds basic accounting easy to do, it takes him away from working on his business. Meanwhile, his accounting and tax planning have become only more complicated in the six years since he founded his business.
Entrepreneurs who hire accounting help usually discover they weren't doing nearly as well on their own as they thought they were.

Zalmi Duchman, chief executive of The Fresh Diet, a meal-delivery company based in Miami, lasted five years without a bookkeeper then hired one three months ago. The new employee cleaned up records that incorrectly mingled expenses and assets, reviewed employee purchases for duplications, and took over the mundane but critical task of paying bills. Duchman estimates his company is saving $500 to $1,000 in late fees every quarter. "I definitely have been able to make better and more educated decisions," he says.
So what are a small-business owner's options for professional help with financial tasks? Here is a primer:

Do I Need a Bookkeeper or an Accountant?

His bookkeeper spends a few hours a week sorting it all out. As a result, Sylvan has a better idea about how his expenditures stack up against his budget. He knows he won't bill clients incorrectly or miss important payments.
"Knowledge is power," even when it comes to the small details, Sylvan says. "If you don't have a bookkeeper, you're probably not being as strategic as you could be in how you spend your money."

When to Bring in a Bookkeeper

In his running a half-dozen businesses the past 15 years, Sylvan has typically hired a bookkeeper for a few hours a week within a few months after starting a new venture. For the first six to nine months, he's usually too busy to focus much on recordkeeping, then "things begin to stabilize," he says. "Then you can see trends and you can start to think strategically about where your money is going and where you can save." And this is when a bookkeeper becomes valuable. Since Sylvan has fewer than a dozen employees at each new company, the bookkeeping takes about one day a month, he says.
The rates for hiring a bookkeeper on a part-time basis in the U.S. can range from $15 to $60 an hour, depending on location, the workload and whether work is done at the company's office or from home.
Sylvan typically sees his accountant once a year, at tax time. But business owners requiring capital or frequently negotiating credit with a bank are likely to contact their accountants more often.

When to Hire a Staff Accountant or Bookkeeper

Many small entrepreneurs can probably stick to outsourcing accounting or bookkeeping services for quite some time. The typical service business can often outsource its chief financial officer tasks and bookkeeping until its revenues rises well above the $1 million mark -- or until it has about 30 employees. Until then, most businesses usually don't have enough work to keep a full-timer busy every day.
It's time to hire full-time help, though, when you're calling your accountant often enough that you wish he or she were in the office all the time. Bring in a full-time bookkeeper when your part-timer is spending two or three full days in the office and still falling behind.
Most new business owners find a staffing solution somewhere along the continuum that ranges from trying to go it alone and paying for full-time help.

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Accounting Tips to Start Your Business

Unless you're an accountant, the word "accounting" probably strikes fear in your heart -- or a little bit of nervousness, at least. For young entrepreneurs, the feeling is probably amplified. After all, poor bookkeeping out of the gate not only can set a project back in the short term, it can really come back to bite you over the long haul. Even young entrepreneurs get audited, you know. That said, it is possible to avoid the ire of the IRS.

Here are 4 Start-Up Accounting Tips for the Young Trep by:

1. Start off on the right foot. In the same way that you go through your email every morning, or in the same way that you do an inventory review each week, make your business accounting a habit. Set a recurring alarm on your calendar: "Review books!" The frequency is up to you, but you should carve out some accounting time at least once a month, if not more.
    
2. Learn the lingo. The cumbersome terminology of accounting is sometimes the biggest hurdle. Chart of accounts? General ledger? Cash vs. accrual? Accounting lingo isn't natural -- and ignoring what's what won't help you. So take some time to understand the basics. The U.S. Small Business Administration's Small Business Development Centers are a good place to start, as are accountancy groups like the American Institute of CPA's and the Association of Chartered Certified Accountants.
    
3. Find software that fits you. Find the accounting software that's right for you. Don't simply opt for what your friends use. If you're always at a desk, a desktop solution, like QuickBooks Desktop might make sense. If you're like most entrepreneurs and on the go 24/7, something mobile like Xero may make more sense. If you're running your business from your iPad, go with a cloud-based accounting software package like Easy Books or Kashoo, which both offer iPad apps.
    
4. Value good advice. Chances are, if you spend enough time trying to figure out an accounting issue, you could. But the reality is, you've got a business to run. And considering that you'll need to file taxes quarterly -- not just annually -- there should be a certain degree of urgency involved. For help, look into local resources such as entrepreneur-focused groups for advice. (In Vancouver, where I'm based, we have resources like the British Columbia Innovation Council and the Vancouver Entrepreneur Meetup. Scour your local community for co-working groups as they’ll usually have a schedule of talks and classes specifically for entrepreneurs. WeWork Labs in New York is a great example.) Also, ask former bosses and fellow entrepreneurs to see who they use. Usually, there's great value in an accountant or bookkeeper who specializes in small business. If nothing more, they'll be a voice of comfort if you receive some alarmingly confusing IRS mail.

In the end, accounting isn't really that scary. If you start off right, it can actually be fun. After all, that's where you're going to see your fortunes grow.

Src: http://www.youngentrepreneur.com/blog/4-start-up-accounting-tips-for-the-young-trep/#ixzz2d8d3fXtY

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