Why Cash Receipts are Important for Your Business

Many businesses operate using only debit cards, credit cards, and checks, which leave a digital paper trail in your bank account, but that isn’t necessarily the case when buying and selling with cash. Whether your small business makes an occasional cash purchase or relies on cash as a primary method of doing business with customers, it’s important to keep close track of the details using cash receipts.

If you have not been keeping track of cash transactions in the past, it’s not too late to get started. Here’s a closer look at how cash receipts may work for your business and why it’s so important to track every dollar that goes in and out of your company.

What are cash receipts?

Cash receipts are documented records of the amount of cash that has changed hands in a transaction.

You’re likely familiar with them, but if you need a refresher, go to your local retail store and buy something with cash. You should automatically get a receipt explaining the purchase details, including a line indicating how you paid (cash) and how much you paid in total. While this is likely the most common type of cash receipt you’ll encounter on a day-to-day basis, cash receipts may also play an important role in your business.

Cash receipts don’t necessarily need all the details that are automatically included on receipts from big-box retailers. To qualify as an official record, they only need to record that cash changed hands, who was involved, when the transaction took place, and details of what was purchased. However, more details can be helpful later on.

Cash receipts can be computer printed, handwritten, or digital. What’s most important is that they contain a clear record of key transaction details.

What are cash receipts used for?

Cash receipts are used to create an official record of a cash-based transaction. They may also be used when payment is made via check or store credit. But, as the name implies, you’re most likely to see them when a transaction uses actual cash.

To better understand how they work, here are two examples:

Purchase Transaction

Let’s say your business makes hand-made crafts to sell online. You like to buy supplies from a local vendor that works as a cash-only seller. Every time you make a purchase, it’s crucial to get a cash receipt to record what you spent on supplies. These records will come in handy later on when you’re reconciling your accounting records and may be important if there are any questions about your taxes.

Sale Transaction

Pat lives on a large property with a small orchard and likes to sell organically grown, local produce at weekend farmer’s markets in the area. Pat makes most sales using a mobile debit or credit card reader, but many customers prefer to buy in cash. Pat uses a tablet-based digital cash register to track cash-based sales to understand which products are performing well and how many were sold.

How to use cash receipts

Cash receipts play a critical role in business bookkeeping and taxes. It’s necessary to track every transaction and dollar that goes in and out of your business, both for tax reporting purposes and making the best financial decisions for your business. Follow these steps to use cash receipts as a seller:

Generate a cash transaction: First, your business must make a sale where the customer wants to pay with cash.

Create a cash receipt: When the sale occurs, create the cash receipt in your sales system. If you don’t have one, it’s okay to create a sales receipt by hand. It doesn’t have to use a fancy form, but branded receipts make your business look more professional. Provide a copy to the customer and keep a copy for your business. If the customer has paid using a check (remember, those count as cash for these purposes), be sure to note the check number on your copy of the sales receipt.

Enter the receipt in your bookkeeping system: If it doesn’t happen automatically, you’ll have to type the receipt details into your bookkeeping and accounting system so you can create accurate financial reports.

Deposit your cash payments: Make sure your bank deposit slip amount matches your cash receipts journal (more on this in the next section). Hang on to your deposit receipts in case of any discrepancies.

If you use a point-of-sale (POS) system, your cash receipts may be recorded without having to do any additional work. Companies that frequently make cash sales and don’t use a cash register should consider keeping a cash receipts journal to ensure they don’t miss recording a sale.

Benefits of tracking cash receipts

While creating and tracking cash receipts takes some effort, there’s a big payoff. Here are some of the most significant benefits of tracking cash receipts:

• Proof of sale: The first benefit of tracking cash receipts is having proof of a sale. If there’s a dispute with the customer or a refund, having a record of past cash purchases may be very helpful.

• Accurate accounting records: Accurate accounting records help you make sound business decisions. They are also needed to generate an accurate tax return, which is required by law. Without cash receipts, you could under-report sales, which would lower your taxes and get you in trouble with the government, or you could under-report expenses, which would mean over-paying your taxes.

• Evidence if audited: If you wind up on the wrong side of an Internal Revenue Service (IRS) audit, you’ll be glad you have detailed records. You may need to provide your receipts as evidence that your taxes are correct in this situation. Source

What Is The Difference Between 1099 vs W-2 Employees?

What is a W-2 employee?

A W-2 employee is a worker employed at your small business in either a full-time or part-time capacity, and participates in company benefit programs, vacation or PTO, health insurance, and overtime pay. While this type of employee is largely on salary, if they’re paid hourly, they need to at least be receiving minimum wage. W-2 employees are hired for an indefinite period for a role that has consistent, on-going work. This employee type must adhere to company rules around scheduling. 

What is a 1099 employee?

On the other hand, a 1099 employee is a contractor without a fixed company. They’re not expected to perform or show up in the same way as a full or part-time employee. A 1099 employee can be categorized as a freelancer, contractor, gig worker, or a consultant. They don’t get the same benefits as a W-2 employee, like health insurance or paid time off. This worker is usually hired for a specific task or project. They’re often self-employed, and you don’t need to handle their taxes. A lot of 1099 vs W-2 employees come down to tax differences for your employee and your business, managing these employee types, and the benefits these employees are eligible for—or not. 

Taxes

If you’ve got a W-2 employee, you’re going to withhold income tax, and withhold and ensure payment of Social Insurance and Medicare taxes. You’ll also need to factor in unemployment wages for your W-2 employee. 

Employee management

This is a fairly simple difference, but the freedom and flexibility of one employee type over another is still confusing. 

W-2 employees are your direct employees. They report into specific people at the business, have set hours, benefit from programs set-up for professional success and career development—among lots of other things. On the other hand, 1099 employees aren’t full or part-time contract or permanent employees. Because their role is often designated to a specific project or sprint, they don’t have the same schedule, more often than not, they set their own hours, and aren’t required to follow the same performance metrics. 

Social benefits

Because 1099 contractors are more or less deemed as self-employed, they don’t need the same benefits a small business may provide. This includes health or lifestyle benefits, perks, or vacation time. Your W-2 employees, on the other hand, are required to have some kind of social benefit—be it paid vacation time, health benefits, or additional perks specific to the business. 

What are the benefits and challenges of W-2 employees?

Why you’d elect to have a W-2 employee over a 1099 contractor is entirely up to the needs of your business and financial bandwidth. There are a lot of benefits that come with having W-2 employees at your business, but there are some challenges, too.

Below, we have a few pros and cons of the W-2 employee type to help you make an informed decision. 

Challenges of W-2 employees

• Having resources on hand

Depending on what your business needs are, you’re more likely than not going to have to supply this employee type with tools to perform their job. This could be anything like physical tech, like laptops or monitors, to retail resources like training sessions. These employees are generally going to be based on-site at your business (again, depending on industry type and need) so you’ll need to ensure there are sufficient supplies for them to perform their work—along with everyone else at the business. 

• Potentially high costs

W-2 employees are more of an investment. Not only are paying them their salary, but you’re tasked to pay for health insurance, benefits, perks, and perhaps paid sick leave. Not only do social benefits come at a cost that you need to factor in, what about professional development opportunities? This can be added to the cost too, if you intend to offer it. 

• Managing employees

Managing W-2 employees is both a benefit and a challenge. Scheduling, training, and paying W-2 employees can be fairly time-consuming as a small business owner. There’s a big difference between doing the actual work you need to do and managing employees. Ensuring your employees are on task, on schedule, and properly prepped and trained for their shifts or work for the day becomes more of your job than any other task. 

Benefits of W-2 employees

• Company loyalty

In a lot of ways, having W-2 employees will speak to your company’s commitment to workers and your workers to your company. Employees tend to have more company loyalty and affection if they have more permanent, scheduled employment opportunities. Workers strongly identify with their job and the tasks they perform day-to-day, and lean toward jobs that are more personally fulfilling and have more financial security.

• Consistent support

Contractors work for a specific time frame on projects or tasks, while W-2 employees work for as long as you both mutually decide—which could be years! You can count on your employees to see your business through all levels of activity—from seasonal spurts to regular sales. With this ongoing, consistent support, you can count on your longer tenured employees to have past context, too, that will help in ensuring customers’ needs get met and the business doesn’t suffer. 

• Control over their work

Control over this employee type’s work is where the benefit comes in. Managing employees can take a toll, but there is a sense of relief in reliability around scheduling and task management, among many other things. 

What are the benefits and challenges of 1099 contractors?

There comes a certain degree of flexibility and cost-efficiency when it comes to 1099 employees. You only really need to have this type of worker for a specific period of time or project. But if you’re going to use 1099 contractors, get to know what some of the other benefits and challenges may be. Below are the common pros and cons of 1099 contractors. 

Challenges of 1099 contractors

• Less control 

Small businesses that have permanent or longer-term contract employees have a stronger degree of control over how those workers perform and show up for those tasks. 1099 contractors, on the other hand, don’t have to follow the same set of rules. They usually work for the business for a short amount of time. That business isn’t usually their primary commitment for finances, so contractors don’t need to follow the same degree of loyalty. 

In a lot of ways, employers must work within the schedules and availability of 1099 contractors. 

• Insurance management 

If a 1099 contractor is required to do physical labor, in the event of injury, the small business doesn’t provide coverage for them. W-2 employees are covered by the business, and are entitled to worker’s compensation. It’s important to look into what coverage a 1099 contractor may have on their own independently, and what your small business may need just in case. 

• Legal considerations

While 1099 workers don’t follow the same set of rules or controls that W-2 adhere to at a business, they do usually sign a contract and follow those obligations. 1099 workers are also considered freelance or self-employed. They may have their own documents to ensure they’re covered in case of a breach of contract.

In any case, consider what legalities need to be covered before onboarding a 1099 worker. 

Benefits of 1099 contractors

• More flexibility

A 1099 worker’s flexibility is one of the most essential benefits for both them and an employer. They are ideal for employers who seek out workers for specific tasks—which can include project-based work or seasonal employment. You can set out the parameters of the opportunity based on your business need and how long you estimate the project running for. Then hire and end contracts when you see fit. 

• Cost-efficiencies

With W-2 employees, there are added costs that goes into hiring, training, and retaining them. 1099 workers don’t have the same expectations. Because they’re not your traditional employees, you don’t need to worry about training costs, professional development funds, or even withholding taxes from them. Contractors are paid based on a set contract, often per project, per piece, or per hour. This means you don’t need to worry about salary or hourly wages that run yearly. 

• Expertise and specialization 

A 1099 worker is usually less of a generalist. That makes them ideal to hire out for specific projects. 1099 workers specialize in niche fields that make them desirable for specific tasks. Source

Living Paycheck to Paycheck? Here Are Some Tips for Avoiding Extra Fees...

Living paycheck to paycheck is exhausting. As soon as your paycheck comes in, you have to spend it all on necessities like rent, utilities, insurance, and paying off debt. There’s usually little, if anything, left for savings or recreational activities. 

Then, something even worse happens: you’re hit with a fee. You might have missed a payment deadline, overdrawn your account, lost your credit card, or encountered a different situation that decided your wallet needed another gut-punch. It might only sound like $12, the cost of a cheap meal out, but it’s $12 you don’t have and desperately need for something else. 

You might feel dread toward these impending fees when you pay a bill, or they come at you from out of nowhere. If you live paycheck to paycheck and want to make sure as much of your hard-earned money goes where it should, follow these seven tips for avoiding unnecessary fees. 

Avoid Banks that Charge Maintenance Fees 

Bank “maintenance fees” are particularly sinister. Financial institutions charge them if you don’t meet specific requirements, such as holding a minimum balance in your account ($1,500 in the case of many big banks) or making frequent direct deposits over a specified amount. You might not even be aware of them unless you check your billing statement. 

It’s not fair that banks charge you money for not having enough money. Maintenance fees are often monthly and can accumulate over time — Americans paid $3.5 billion in maintenance fees in 2017. These fees perpetuate the poverty cycle because if you live paycheck to paycheck or have irregular income (like freelancers), of course you don’t have $1,500 in your account at all times. 

Don’t use banks that charge maintenance fees. Many big banks do, but examples of financial institutions that don’t include Ally Bank, Capital One Bank 360, and FNBO Direct. 

Deposit Money the Long Way 

Deposit money into your account the long way, if possible. This process means being patient when getting paid, especially if you’re a contractor or freelancer that relies on services like PayPal. 

PayPal offers multiple bank transfer options, including Standard Transfer and Instant Transfer. The former is free and takes one to three business days, but the latter costs 1% of the transaction up to $10. Opt for the Instant Transfer option when you can, or use mobile deposit with a physical check. 

Use Apps that Don’t Charge Minimum Fees 

However, the pay cycle is notorious for delays that make living paycheck to paycheck even more difficult. It’s entirely possible that you need your money now, not later — but what can you do about it? You can’t exactly force direct deposit to go faster. 

One solution is to use financial apps that allow you to access your paycheck without having to wait weeks for it. One such app is Earnin, which you can use to access up to $100 of your paycheck per day, up to $500 per pay period. The app deducts the amount you took out on payday without mandatory fees or interest. Earnin is community-driven, so you can pay however much you think is fair as a thank you for its service. 

Set Up Auto Pay 

Are late fees the bane of your existence because you regularly forget to pay a bill on time? Apps like Earnin can help you avoid late fees, but consider setting up auto-pay on your credit card and other if you can afford to do so. This way, you never have to remember payment deadlines; your account will pay what you owe automatically. 

Sign Up for Low-Balance Alerts 

If you cannot risk auto-pay because you’re worried about insufficient funds, then sign up for low-balance alerts with an app or through your bank. Low-balance alerts will notify you when your account balance has dipped below a certain number — possibly of your choosing, depending on the service — so that you know when it’s time to replenish your account with additional funds or to watch your budget before bills are due. 

These alerts aren’t perfect because banks can be slow to share information with external apps. However, they can help avoid bank overdraft fees, which financial institutions charge if you opt-in to its overdraft protection service. While the ability to overdraw your checking account and complete transactions regardless of funds seems convenient, there are other pros and cons to consider (you can also open a checking account with no overdraft fees). 

Use Your Bank’s ATMs

ATM fees are one of the most-hated fees in the U.S. You incur these fees if you want to access your money from a machine that’s not in your bank or credit union’s network. 

Only use ATMs within your financial institution’s network when possible. If none are around, you can obtain cash at a supermarket that offers cash back options with a small purchase (which sounds like a fee in itself, so only buy something you need!). 

Opt-Out of Paper Communications 

Your bank is going to communicate with you, and you would be wise to pay attention. Unfortunately, many banks default to mailing paper communications instead of using digital means — and then charge you for it. Log into your online account or call your bank’s customer service line to opt-out of paper notifications and save yourself some cash. 

Unnecessary fees make it extra challenging for people living paycheck to paycheck to save money. If you want to lose as little of your money as possible to predatory financial institutions, research what fees your bank (or prospective bank) charges and which they are most likely to make you pay, depending on your situation. Source

5 Bookkeeping Challenges (And How to Tackle Them With Confidence)

It might feel relatively straightforward at first, but the intricacies of bookkeeping can quickly creep up on you. Common bookkeeping challenges—tax compliance, record-keeping, cybersecurity, and more—can have costly implications for your small business.

Staying on top of your bookkeeping is just as important to your company’s financial health as sales, marketing, and customer retention. By identifying and resolving bookkeeping challenges, you can spot profitable opportunities, avoid costly errors, and guide your business toward long-term success. 

So, what are the main bookkeeping and accounting challenges facing small businesses today? And, more importantly, how can you resolve them?

Challenge 1: Lack Of Employee Skills and Expertise

There are a few reasons why your business might find itself with inexperienced bookkeepers.

Small businesses that have built their company from the ground up may find themselves with employees who are simply unable to handle the increasing pressures of a growing business. Some bookkeepers might lack industry-specific knowledge. Or, your bookkeeper could be struggling to move on from outdated accounting methods or technologies.

Whatever the case, employees who lack the necessary skills and expertise to manage your books can execute poor decision-making, generate lost revenue, and hinder business growth. 

But slow down—there’s no need to fire your loyal employees. This common bookkeeping challenge is easily managed through upskilling.

Solution: Provide Comprehensive Training On Bookkeeping Principles

You can mold your employees into knowledgeable, skilled bookkeeping experts by training and upskilling them. Refine their knowledge of the primary principles of bookkeeping and educate them on the newest trends and technologies. Armed with the resources they need to succeed, you can encourage employees to reach their full potential.

By “reaching their full potential,” we mean more than providing accurate financial reports. Knowledgeable, empowered bookkeepers can unlock pivotal financial insights and improve sales and marketing strategies.

Challenge 2: Security Threats And Data Loss

With the cost of a data breach at an all-time high, protecting your business from data loss and threats has never been more important. Of all your business departments, accounting and finance should be a key focus in your cybersecurity strategy.

Your accounting teams and systems handle incredibly sensitive employee, customer, and company data. This makes them a likely target for malicious phishing attacks, malware attacks, and more. 

But it’s not just external threats you need to worry about. Accounting systems are especially prone to insider threats.

Insider threats are carried out by people within, formerly within, or associated with your company. Accounting systems are at risk of insider threat attempts because of the financial information they hold. Unsurprisingly, financial gain is the malicious motivator that most businesses (59%) are most concerned about.

Solution: Implement Data Security Measures And Access Controls 

Implement strict cybersecurity best practices to safeguard your data from unauthorized access and loss. Doing so prevents severe financial damage and protects your company from any reputational or legal consequences. You must also pay attention to crucial compliance measures, such as SOX.  

Here are some data security measures that you should put in place;

• Enforce strict password rules: Make it a rule that employees must use complex passwords, change their passwords frequently, and avoid sharing passwords with colleagues. 
• Make multi-factor authentication (MFA) mandatory: MFA prevents anyone who knows or guesses your password from accessing your accounts, making it a vital security measure.
• Backup your data: This will prevent data loss and permit business continuity in the case of an emergency.
• Set up access controls and permissions: Access controls dictate who can view and use different company resources. This can be executed on individual, role, and group levels to prevent unauthorized access. 
• Use secure cloud technologies: Storing data in the cloud is more secure than storing it on your local network. Plus, cloud technologies come with built-in security features designed by cybersecurity experts, protecting your data from threats.
• Encourage the use of VPNs: If you have remote workers, make sure they always use a VPN while traveling when they’re connected to Public Wi-Fi. Suggest verified, reliable VPN solutions, such as Surfshark or ExpressVPN.

Challenge 3: Staying Tax Compliant

Tax compliance is one of the most stressful bookkeeping challenges small businesses face. The penalties for non-compliance imposed by the Internal Revenue Service (IRS) can be severe, ranging from fines to jail time. And yet, businesses still owed over $120 billion in back taxes, penalties, and interest in 2022. 

The reason for this is simple. Staying on top of your taxes is hard. Managing your many tax documents while staying current with changing tax legislation can be grueling. Bookkeepers who don’t possess the resources or knowledge they need to file taxes correctly risk making mistakes. Tax calculation errors, missing deductions, late filing, and missing quarterly estimates are all issues that result from poor tax compliance practices. 

Solution: Utilize Accounting Software With a Built-in Compliance Feature

Inefficiencies plague paper-based tax filing. Lost receipts, data input errors, siloed financial data—the list goes on. To rectify these issues, businesses are turning to accounting software that has tax compliance built into its functionality. You can hear an incredible story of a peer working through automating their tax processes here.  

Accounting software can streamline the tax filing process in several different ways. For example, the software:

• Acts as a central storage system for all your receipts and invoices, allowing you to locate data for filings and audits quickly.
• Automates data entry, mitigating the risk of typos and miscalculations.
• Automates record-keeping, providing you with reliable income and expense records.
• Performs updates in alignment with your country’s specific tax laws, securing compliance.
• Sends automatic notifications so that you never miss another tax deadline.
• Electronically stores and sends tax returns for added convenience.  

Challenge 4: Poor Organization And Record-keeping

If you’re a small business experiencing growth, bookkeeping can quickly descend into disorganized chaos—especially if you do it all manually. Managing increasing expenses, payroll, and tax demands via manual spreadsheets will only burn out your employees, resulting in data entry errors and misplaced information.

Sloppy organization and record-keeping processes also reduce visibility into your business’s financial health. It can lead to inconsistencies between your business accounts and books, decreasing cash flow and impairing the accuracy of financial decisions. Plus, you run the risk of data privacy and tax compliance issues.

So, it’s critical to maintain updated, organized records. But throwing more employees into the mix isn’t the answer. 

Solution: Utilize Cloud-based Accounting Software

Cloud-based accounting software stores, organizes, and updates your financial records, leveraging automation to streamline your record-keeping processes. For example, automated billing features can create, send, and track customer invoices, while automated expense tracking can record and track your expenses. 

So, no more forgetting to record an expense or send an invoice. No more misplacing or mistyping critical financial information. Accounting software infuses organization and accuracy into the core of your accounting processes. 

There are a series of steps you can take to think through how you automate your finance tech stack to handle these issues:

• Understand where you sit in your process maturity lifecycle
• Plan out your tech stack, similar to how you plan out building a house
• Know your billing use case
• Anticipate integrations between tools
• Begin with the end in mind on what data you need to report and forecast upon

Challenge 5: Difficulty Managing Accounts Receivable And Accounts Payable

Accounts receivable (AR) and accounts payable (AP) are two of the most fundamental components of accounting. Poor AR and AP management causes invoicing and billing errors, missed payments, and other issues that lead to critical cash flow delays, impeded business growth, and poor customer satisfaction. 

Accounts receivable refers to the funds owed to you by customers who have received invoices but have yet to pay for your product or service. Accounts payable refers to any short-term debts your business owes to vendors, suppliers, or creditors. Upon sending an invoice (AR) or receiving a valid bill (AP), the figures are recorded as journal entries and posted to the general ledger. A ledger in accounting is a bookkeeping record that centralizes and stores balance sheets and income-statement transactions. AR would be recorded as an asset, while AP would be recorded as an expense.

Sounds fairly simple, right? So why do so many businesses need help managing AR and AP? Just like record-keeping, AR and AP management grows more demanding as your business grows. Bookkeepers can quickly become overwhelmed, causing them to forget, misplace, or mistype information.

Solution: Implement An Organized Invoicing And Billing System

Being more diligent about AR and AP management can save your businesses from losing money. But even if you start monitoring AR and AP more closely, creating a truly streamlined, organized invoicing and billing system is impossible if you’re still relying on outdated technologies. 

So, ditch the Excel spreadsheets and automate invoicing, billing, and reconciliation using advanced accounting software. And leverage AI into your processes to speed up data entry, error reconciliation, and cash forecasting. Yet another benefit of cloud-based technology is your ability to automate your entire AR and AP process. For example, with accounts payable software for small businesses, you can eliminate data entry risks with automated invoice capture and streamline workflows with approval routing. Source

5 Qualities of a Good Bookkeeper

Hiring a professional bookkeeper is the easiest, most profitable way to gauge how well your company operates while continuing to grow your business. But not all bookkeepers are the same.

The one you hire can be the difference between success and struggle. As you research your options, consider these five non-negotiable qualities of a good bookkeeper.

1. Trustworthy

Trustworthiness is one of the most vital qualities of a good bookkeeper. So, trust is a crucial factor when hiring anyone for your company. But when you rely on that person to manage your business's financials, a whole new level of integrity is expected.

After all, your bookkeeper will be handling a lot of important information they must keep confidential—not only because it's beneficial to your company but because you have a legal obligation to your customers to keep all their records, including account balances, private.

Before signing a contract with a new bookkeeper, do your homework. Include a real-life scenario in your interview with prospects accompanied by "What would you do?" questions.

Of course, reputation also goes a long way too. Consider contacting your potential bookkeeper's professional references for additional testimony.

2. Knowledgeable

A well-qualified bookkeeper will be knowledgeable in everyday bookkeeping practices. But they will also understand how those practices apply to your specific industry. In addition, they should be able to track your company's financial progress, compare it to your competitors, and report noteworthy trends or differences.

Also, just like your business strategy is ever-evolving, so is technology. For example, the Cloud has changed how businesses run and keep financial records. This being said, your bookkeeper should be up to speed on these advancements so you can take advantage of them, saving you time and money.

3. Organized

Accurate reporting is ultimately rooted in good organization. Therefore, your bookkeeper should have a well-oiled system for interpreting data, preparing reports, and storing files. This will increase their work's efficiency and your company's profitability.

A bookkeeper who works in the Cloud and keeps digital records of your finances will also help you reach your business goals more effectively.

With the time they're not spending flipping back and forth between piles of paperwork, they can research helpful financial tactics, analyze your account more thoroughly, and point out areas of growth or opportunity.

4. Detail-oriented

One misplaced comma, period, or mistaking a zero for an eight could influence a judgment call and seriously damage your company. With that in mind, your bookkeeper must be very detail-oriented.

They will deal with the numbers you use to make critical financial decisions. A bookkeeper familiar with how your company operates will be able to detect patterns in your financial records and prevent mistakes.

Be sure to discuss your accountant's review policy and ask what safety nets they have to catch numerical mistakes.

5. Client-centric

So, what separates a "good" bookkeeper from the "best" bookkeeper? Much of this comes down to their perspective on customer service and client relationships.

Being skilled in mathematics, knowledgeable, or organized is not enough. Your bookkeeper should have a respectful attitude during your interactions. But they should also be willing to go above and beyond to help you implement a solid business financial strategy. Source

Understanding the Difference Between Accountants and Bookkeepers

If you’ve ever found yourself puzzled by the terms accountant and bookkeeper, you’re not alone. When it comes to finance, these titles often get tossed around interchangeably, leading to confusion about their actual roles. You can think of them as the dynamic duo of financial management, each bringing their unique set of skills to the table. While both are crucial for maintaining a healthy financial system within a business, they serve distinct purposes. 

So, let’s begin by understanding what accountants and bookkeepers mean, followed by what sets them apart and how they work together to keep the financial gears turning smoothly.

Accountants and Their Responsibilities

An accountant is a financial professional responsible for analyzing and interpreting financial information. They help businesses make informed decisions while ensuring compliance with regulations. Their primary responsibilities include:

• Financial Analysis: Accountants examine financial data to assess the financial health of an organization, identifying trends, patterns, and areas for improvement.

• Financial Reporting: They prepare financial statements like balance sheets, income statements, and cash flow statements, summarizing the financial performance and position of the company.

• Budgeting and Forecasting: Accountants assist in creating budgets and forecasts. They do this based on historical data and future projections, guiding resource allocation and financial planning.

• Tax Planning and Compliance: They provide guidance on tax implications and help implement strategies to minimize tax liabilities. Thus, ensuring compliance with tax laws and regulations.

• Audit Support: Accountants may assist with internal or external audits, reviewing financial records and processes to ensure accuracy and regulatory compliance.

• Financial Advisory: Some accountants offer financial advisory services, providing insights & recommendations to clients on investments, mergers, acquisitions, and other financial decisions.

Bookkeepers and Their Responsibilities

A bookkeeper is a financial professional responsible for recording and maintaining financial transactions within an organization. Their primary responsibilities include:

• Recording Transactions: Bookkeepers accurately record financial transactions into the accounting system. This includes sales, purchases, receipts, and payments.

• Maintaining Ledgers: They maintain general ledgers, including accounts payable and accounts receivable, to track the flow of money in and out of the organization.

• Reconciling Accounts: Bookkeepers reconcile bank statements with internal records to ensure accuracy and identify discrepancies.

• Preparing Financial Reports: They assist in preparing financial reports, including income statements and balance sheets, by organizing and summarizing financial data.

• Managing Payroll: Bookkeepers may handle payroll tasks, including calculating wages, withholding taxes, and issuing paychecks or direct deposits to employees.

• Assisting with Budgeting: They provide support in budgeting processes by supplying accurate financial data and assisting in monitoring expenses against budgeted amounts.

• Maintaining Financial Records: Bookkeepers maintain organized and up-to-date financial records. Thus, ensuring compliance with regulatory requirements and facilitating audits.

While accountants and bookkeepers share the common goal of managing financial records, their roles, responsibilities, and skill sets differ significantly. 

Accountants are strategic advisors, utilizing advanced analytical skills and expertise to provide insights and guide decision-making. On the other hand, bookkeepers are meticulous record-keepers focused on accurately recording and organizing financial transactions. 

Understanding these distinctions is important for businesses seeking to optimize their financial management processes and leverage the unique contributions of both professionals. By recognizing the complementary nature of these roles, organizations can ensure effective financial management and compliance with legal and regulatory requirements. Source

How Hiring a Bookkeeper Can Strengthen Your Business

Hiring a bookkeeper depends on what stage of growth your business has reached and how comfortable you are doing your own bookkeeping. So, when should you hire a bookkeeper?

If your business is new and your bookkeeping is minimal, you may be able to do your own bookkeeping with a simple spreadsheet. But as your business expands and becomes more complex—and profitable—it’s time to consider professional assistance.

When you begin weighing the pros and cons of hiring a bookkeeper, consider the following questions:

• How much time do you spend on bookkeeping each month? And how much time do you have to spare?
• Does the thought alone of bookkeeping add extra stress to your day?
• Are you behind on your bookkeeping, or unsure of your accuracy?
• Do you ever feel unsure whether your financial records or tax filings are correct?

Your answers will give you an indication of how urgently you need to bring on a bookkeeper.

The benefits of working with a bookkeeper.

If you’re unsure whether you’re ready to hire a bookkeeper, consider these major benefits and how they can positively affect your work days and business success. Here are 5 main points to help you consider hiring a bookkeeper for your business;

1. You get “mission critical” info.

Every month, your bookkeeper prepares a balance sheet and an income statement, and—depending on what style of accounting you use—a cash flow statement. These financial statements give you the essential info you need to run your business and file taxes.

When a qualified bookkeeper is on the job, financial statements are prepared properly and according to accounting standards—so your accountant can quickly and easily file your taxes.

2. You gain the potential to pay less in taxes.

When a bookkeeper is experienced with businesses in your industry, they understand common expenses—and can let you know which business expenses are tax deductible.

For instance, a bookkeeper who works with other yoga studios can tell you whether the cost of additional training for one of your instructors can be deducted on your taxes.

Plus, the cost of hiring and working with a bookkeeper is also tax-deductible.

3. You could pay less in accounting fees.

Suppose you went all year without preparing monthly financial statements and then handed off your business records to an accountant to file your taxes. They’d have to go back and prepare financial statements retroactively—effectively, doing a bookkeeper’s work.

Since accountants generally charge more for their time than bookkeepers do, it means you’ll end up paying more. If you have a bookkeeper do the job properly in the first place, you’ll save money in the long run. Even if you prepare your own monthly financial statements and deliver them to your accountant come tax time, you risk being charged extra if they need to correct any errors. A qualified, professional bookkeeper should be able to deliver flawless books on your behalf.

4. You’ll save time.

When you spend less time on administrative tasks like bookkeeping, you’ll enjoy more time to focus on your clients and business success. If you’re self-employed, it can be hard to put a price on your time. Use an online calculator to determine how much your time is worth. This can help you better determine whether bookkeeping is worth the hours it takes you to complete on your own.

5. You might even increase your profits.

One survey shows that, on average, companies’ profits increase 16% after they hire bookkeepers. One reason for this is that bookkeepers have the experience to efficiently manage your bookwork, giving you more time to focus on other areas of your business (like increasing profit). Source

Welcome To Our New Blog

 

Welcome to our new blog!

Thanks for stopping by. We will be sharing valuable information that may be of interest to you. 

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