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Why You Should Hire a CPA for Your Small Business

October 1, 2014

If you run a small business, you have a lot on your plate.  You are trying to juggle all the day-to-day demands of running your business, and you could probably use a little help.  Let us help.  Consider these top reasons why your small business should hire a CPA instead of an accountant.

Save time by hiring a trained professional to handle your bookkeeping.

Save time by hiring a trained professional to handle your bookkeeping.

What’s the Difference?

Many small business owners don’t know the difference between a CPA and accountant, so we’ll clarify that for you.  An accountant is a broad term that is used to describe a financial professional who complies with a standard set of accounting principles.  CPAs are accountants, too, but they have also passed a state licensing examination.  Basically, a CPA is an account who has additional credentials.  There are lots of small businesses that use accountants, and many of them are quite competent.  However, in certain situations, it may be beneficial to take advantage of the services of a CPA.

Licensing

A CPA has been licensed by the state through a rigorous examination process.  An accountant has not.  As part of their licensing, CPAs are required to stay current with the tax code.  There are continuing education requirements that must be met in order to maintain licensure.  These requirements do not apply to accountants.  This means that you can trust that a CPA is up to date on financial regulations and tax codes, but you have no guarantee that an accountant has received any continuing education.

Taxes

Not every CPA specializes in small business taxes.  However, generally speaking, CPAs are more well-versed in tax laws than accountants.  Much of the licensing exam and yearly continuing education courses taken by CPAs is devoted to the tax code, so they are quite familiar with the current rules.  In addition, an accountant is considered an unenrolled tax preparer by the IRS.  This means that the accountant can prepare and sign your tax returns, but cannot represent you before the IRS.

Financial Analysis

There are several types of professionals who can handle your daily financial duties.  A bookkeeper can take care of recording business income and expenses.  An accountant reviews this information and prepares financial reports, like balance sheets and profit and loss statements.  CPAs provide a more comprehensive financial analysis and offer advice on financial and tax matters.

Audit Support

As was previously mentioned, a CPA can represent your business before the IRS, while an accountant cannot.  This alone is an important reason to use a CPA rather than an accountant.  An accountant, as an unenrolled tax preparer, is only permitted by the IRS to represent clients in a very limited manner.  If your business were to be audited, you need to be able to rely on your tax preparer to represent you before the IRS.  When you choose a CPA, that person has full authority to represent you to the IRS.

Many small business owners are reluctant to hire a CPA because it costs more than a bookkeeper or an accountant.  You don’t have to choose between them; you can do both.  Use a bookkeeper to handle the day to day financial duties, like inputting income and expenses.  Use an accountant to prepare regular financial reports.  Use a CPA to prepare your yearly taxes.  Many firms offer all three of these services so that you can get the help that you need on the most cost-effective basis.

If you own a small business and need the support of a financial professional, contact Acceler8.  We are your small business advisors, and we can provide the tax and financial support that you need.

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4 Common Bookkeeping Mistakes that Put Your Small Business at Risk

September 17, 2014

Bookkeeping errors can stunt the growth of your small business, regardless of the strength of your business plan.  Despite the gravity of those errors, they happen all the time. If you are new to owning a business, you are particularly at risk. Fortunately, you can learn from the mistakes of others. Check out these four common bookkeeping mistakes that put your small business at risk, and how to avoid them.

Failing to Track Receivables

No matter how great your business idea is, it will not be successful if you aren’t making sure that you are getting paid. This means that the drudgery of tracking receivables is essential for your success.  Every time you send out an invoice, you record a receivable.  This simply indicates that a customer owes you money.  You can then check your listings of receivables to see whether customers owe you money. When you receive a payment from a customer, you should mark the invoice as having been paid.  Seems simple enough, right?  Well, the practice often gets neglected because small business owners are so busy taking care of so many other things.  Those checks get left in a pile on the desk, and the receivables aren’t always marked down in a timely manner.

As a result, you end up with a bunch of money deposited in your account, and you don’t know where it came from. This can be a real nightmare at tax time. Staying on top of your receivables as you receive payments will make things a lot easier in the long run.

Failing to Keep Records of Expenses

Keeping receipts for all business-related expense purchases is extremely important. You may have a credit card statement for your business expenses, but how will you remember what each charge is for? Try keeping an envelope in your car or bag where you can stash receipts, and make a standing appointment once a week to scan those receipts and store them in the cloud. You can even use a mobile app to scan and store digital copies of those receipts as you go.

Failing to Track Cash Expenses

It’s easiest to track your business expenses by using a credit card or debit card, but sometimes you have to pay for things in cash. If you don’t keep track of those cash expenses, you can miss out on the opportunity to deduct them on your tax return. You might also overstate your cash expenses because you don’t have a record to verify them. Be sure to get receipts from vendors when you pay in cash, and consider logging cash expenses into cloud accounting software immediately if possible.

Failing to Hire a Professional Tax Preparer

Many small business owners think that doing their taxes themselves is an easy way to save some money. However, that often is far from the truth. A professional tax preparer has the expertise to get you all of the available deductions and make sure that no errors are made, which can have a significant impact on your total tax liability in the end. Go ahead and spend a little more up front to hire a professional to handle your taxes. It will make your life simpler and net you a bigger refund.

If you run a small business, you can count on Acceler8 for bookkeeping advice. We are your small business advisors. We can help you with everything from taxes to accounting, so give us a call today.

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Tax Deductions for Small Businesses

June 18, 2014

When you are running a small business, finances can be tight. You probably don’t want to give up any more of your profits to taxes than you absolutely must. Fortunately, there are many tax deductions available to small businesses that can help to minimize your tax burden. Read on to discover some of the most common tax deductions for small businesses.

  1. Home Office Deduction: Many people are reluctant to take a home office deduction because they fear that it increases the possibility of being audited. However, that isn’t necessarily the case. You just need to be careful that you define your home office according to the terms of the IRS. Your home office must be devoted solely to your business and not used for any other purpose. For example, a guest bedroom with a computer in the corner is not a home office. However, a home office doesn’t have to be an entire room; it can be a portion of a room. The key is to only claim your work area as a home office, so measure out your work space and divide it by the total square footage of your home.
  2. Office Supplies: You can deduct the cost of your office supplies even if you don’t claim a home office deduction. Save your receipts.
  3. Office Furniture: There are two ways that you can deduct office furniture. First, you can deduct the entire cost of the furniture in the year that it was purchased. This deduction will be applied in Section 179. The limit for tax year 2014 is $25,000. The second option is to deduct a portion of the cost of the office furniture over a period of seven years. If you do it this way, you must use the IRS chart to calculate the amount of the deduction each year.
  4. Office Equipment: Office equipment means things like computers, printers, and fax machines. Office equipment can be deducted 100% in one year or depreciated over a period of five years.
  5. Software: Computer software that has been purchased off-the-shelf can be deducted over a period of three years.
  6. Business Publications: Business related magazine subscriptions can be deducted 100% in the year that they were purchased.
  7. Mileage: It is important that you keep track of all business-related miles that you drive so that you can deduct them. Keep a log of date, mileage, purpose of the trip, tolls, and parking fees. There are two ways that you can deduct mileage. The first option is to calculate the mileage by multiplying the number of miles by the 2014 rate, which is 56 cents per mile. Then add your tolls and parking fees to determine your deduction. The other option is to measure business use of the vehicle versus personal use. Then you can deduct that portion of your auto expenses, including fuel, repairs, and insurance. Include lease payments. If you have a loan for the purchase of the vehicle, you can deduct interest and depreciation.
  8. Travel: Much of your business travel is deductible. You can deduct the entire cost of transportation and hotel stay, even things like tips for the housekeeper. While you are traveling, your meals are deductible at a rate of 50%.

These are some of the most common tax deductions that are available to small businesses. If you own a small business and could use some help figuring out your taxes, contact Acceler8. We are your small business advisors. We offer tax, accounting, and business advice, so get in touch with Acceler8 to learn more today.

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Basic Bookkeeping Tips for Small Business Owners

June 16, 2014

Bookkeeping is an important and necessary part of owning a small business. However, you probably weren’t a bookkeeper before you became a small business owner. You are bound to make some mistakes along the way. Fortunately, most of these mistakes are pretty easy to fix. Use these basic bookkeeping tips for small business owners to help you learn the ropes and avoid errors.

  1. Choose the best accounting system for your business. There are two main options – cashed based accounting or accrual based accounting. In a cash based accounting method, you count your income when you get it and count your expenses when you pay them. With the accrual based accounting method, you count these things when they happen instead of when they are paid. So what’s the difference? Well, there will be a difference for your business if you keep an inventory or make transactions on credit. If this is true for your business, the accrual method may be a better choice for you. In fact, the IRS may require a business to use the accrual accounting method if they keep an inventory or have more than $5 million in sales. If you don’t keep inventory or deal with credit transactions, a simple cash based accounting system should work just fine for you.
  2. Keep daily records. This is simple, but extremely important. Make an accurate daily record so that you are aware of the financial situation of your business. It doesn’t matter what system you use; just choose one and stick with it. Once your system is in place, it will only take a few minutes to keep up with it each day.
  3. Treat checks with as much care as cash. You probably write a lot of checks, and you get envelopes full of canceled checks back from the bank. It’s easy to fall into a routine and pay little attention when writing checks, but take a moment and slow down. Review all of your checks carefully. If you make a mistake, it is your mistake, not the bank’s mistake. You will have to deal with the fallout. Review cancelled checks personally; this way, you will be aware of any unauthorized checks before anyone else gets the chance to remove them.
  4. Request a bank statement that cuts off at the end of the month. This is useful because it syncs your bank statement with your other monthly records, so you are comparing matching time frames. It’ll be a lot easier to balance your statements and track expenses this way.
  5. Leave a trail. You should be able to retrace your company’s financial activities easily. Keep business and personal accounts separate. Keep your checks and invoices in order, and don’t skip numbers. If you need to go back and check something later, it will be much easier this way.
  6. Use software. Even for a very small business, using a bookkeeping software program will make your record keeping much simpler and more organized. Let’s face it – the time of the old ledger and pen system has come and gone. You can do everything you need to do, and even back up all of your important records, if you do it on your computer.

These basic bookkeeping tips for small business owners are a great starting place for entrepreneurs. If you could use a little small business advice, contact Acceler8. We are your tax, bookkeeping, and small business advisors. Call Acceler8 to learn more today.

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How to Set Expectations for Your Bookkeeper

June 12, 2014

As a business owner, you are probably used to being pulled in a million different directions. You can only do so many things and do all of them well; at some point, you have to decide which tasks you are willing to delegate. For many business owners, the best choice is to hire a bookkeeper. This can be a great way to make sure that all of the important details are attended to while taking a little bit off your own plate. Before you hire someone, though, you need to set some expectations. Use these guidelines to help you set expectations for your bookkeeper.

  1. Your bookkeeper needs to understand the basic terms that are commonly used in bookkeeping and accounting. There are five basic types of accounts: assets, liabilities, equity, income, and expenses. Your bookkeeper needs to know the differences among all of them.
  2. Your bookkeeper needs to be detail-oriented. Bookkeeping is all about the details, and it doesn’t do you any good to hire a bookkeeper if you have to watch his every move. Your bookkeeper must be able to deal with all the little details that are involved in your financial operations.
  3. Your bookkeeper needs to get the big picture. There’s more to it than simple math. When the time comes to make a big purchase, like a piece of equipment, your bookkeeper needs to know how to set up asset and liability accounts and allocate the payment to interest expense and liability principal reduction.
  4. Your bookkeeper needs to follow through. Once again, you can’t check up on them all the time or track down every detail. You need to know that you can rely on your bookkeeper to take care of the details and complete all aspects of your financial projects.
  5. Your bookkeeper must have financial statements ready on time. The balance sheet, profit/loss statement, and cash flow statement should be ready by the 10th of each month.
  6. Your bookkeeper must be able to do job costing appropriately. All costs should be tracked by item and job detail so that you know how much your projects actually cost.
  7. Your bookkeeper must understand your industry. Most of the skills used by bookkeepers carry over from one industry to the next, but your bookkeeper should have at least a basic understanding of your particular industry. There are always some aspects to the job that are specific to your industry.
  8. Your bookkeeper needs to have good communication skills. He should be able to work independently, but speak up when he has questions or needs clarification. This is essential for the office to run smoothly and you to be aware of how the financial matters are being held.
  9. Your bookkeeper must have good computer skills. The days of keeping paper books are long gone. Your bookkeeper must be proficient in your bookkeeping software as well as general office software, like Word and Excel.
  10. Your bookkeeper must be committed to your business. Many small businesses hire a part-time bookkeeper who isn’t able to devote sufficient time or attention to their business. Choose a bookkeeper who makes your business a priority.

When you are searching for a bookkeeper, use these tips to help you set some expectations for that person. If you could benefit from some business advice, get in touch with Acceler8. We are your business, tax and accounting advisors. Contact Acceler8 for small business guidance today.

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