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The Bookkeeping Mistakes Small Businesses Often Make

8 bookkeeping mistakes small businesses should avoid

Accurate bookkeeping requires consistency and experience, which a business and its team may not possess. Even with an in-house bookkeeper, certain mistakes still occur due to a simple lack of awareness about what is important and what isn’t for bookkeeping and tax filing. Accurate Tax & Bookkeeping Services discusses the common errors businesses make while preparing their books and how they can impact them.

1. Not recording small purchases  

Every small purchase that a business makes can slowly add up to a significant amount that can get overlooked if not recorded. Saving receipts of purchases below $75 is also necessary to present during an audit, while some of these purchases can be used to claim tax deductions during tax filing. Businesses can use online and digital accounting programs or third-party apps to store a digital copy of the receipt.

2. Losing track of reimbursable expenses

Keeping track of reimbursable expenses is important to keep track of the business's financial health, to enable tax deduction claims, and to have a clear paper trail available for auditors. It is important to keep track of these expenses and keep the record up to date. 

3. Poor classification of employees

Misclassifying employees such as independent contractors, consultants, and freelancers is an invitation to an audit. An accountant must be consulted to correctly classify employees and avoid unpleasant surprises such as penalties and lawsuits during tax filing.  

4. Poor communication with a bookkeeper 

Sometimes business owners make decisions that impact finances and accounting but forget to communicate them to the bookkeeper. For instance, outsourcing work to a professional or buying supplies and not informing the bookkeeper about these decisions and associated costs will lead to errors in the books. 

5. No reconciliation 

To keep a constant eye on the business's financial health, it is important to reconcile the books with the bank statements consistently. This reconciliation helps business owners understand the cash flow and catch bank errors before they spiral into big mistakes. To ensure an accurate reconciliation, businesses can hire a bookkeeper to manage this complex task.  

6. No paper backup

Digitization has made documentation easy, but it is important to keep a backup of the papers. Why? Firstly, it is important to have a paper backup in case of a technical glitch. Secondly, the taxing authorities may want to see the paper trail of all transactions. Businesses should ideally keep a backup of the financials for at least seven years.

7. Not collecting or deducting sales tax

Businesses, especially eCommerce businesses, often fail to deduct sales tax from the total sales. This leads to substantial tax burdens during tax time. Moreover, constant changes in laws regarding sales tax for online businesses in different states must be tracked by an experienced bookkeeper to ensure compliance. 

8. Lack of petty cash policy 

Creating a petty cash policy, designating a petty cash custodian, and keeping track of petty cash receipts are important for businesses to stay out of trouble. A custodian ensures accountability and mitigates the risk of theft or fraud. A receipt for documentation must accompany every purchase. After purchase, the receipts and remaining petty cash should equal the original dollar amount designated to the fund. Once the fund is over, a check can be written to cash to reset the original petty cash amount. 

To ensure that a business’s books are accurate and up to date, business owners can contact professional bookkeeping services such as Accurate Tax & Bookkeeping Services.

About ATBS

Accurate Tax & Bookkeeping Services specializes in handling financial needs for businesses of all sizes.

Greg J. Menia founded the tax preparation service company in 2010, having worked in business tax services since 1995. The team performs tax services for small businesses and large businesses alike, serving all areas around Tampa, FL.  

Call (813) 655-9702 today for “accountants near me” in Brandon, Florida. Alternatively, contact Greg and the team at Accurate Tax & Bookkeeping Services by emailing greg@brandonaccountant.com or visiting the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.

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The Benefits of Hiring a Bookkeeper for Small Businesses

Benefits of working with a bookkeeper

A new business usually requires minimal bookkeeping and can be managed by maintaining a simple spreadsheet. However, as a business expands, the business owners will struggle to keep the books accurately. Accurate Tax & Bookkeeping, a tax preparation service, lists the signs that a small business needs a bookkeeper and the benefits of hiring one. 

 

Signs a business needs a bookkeeper:

1. If the books are never up to date
2. If the sales have increased but not the profits
3. If the cash flow is unpredictable
4. If the DIY bookkeeping takes more time than can be afforded 

 

How will hiring a bookkeeper help a small business?

1. Prevent errors

A lack of experience and excess bookkeeping tasks can overwhelm a business owner whose core skill is not bookkeeping. Mistakes such as data entry errors, missing entries, double entries, and mixing personal and business expenses can make tax filing a nightmare. Business owners can ensure that their expanding business accounts are error-free by hiring a professional.   

2. Pay less in taxes

An experienced bookkeeper can quickly identify the ordinary business expenses tax-deductible in a particular industry. Moreover, the cost of hiring a bookkeeper is also tax-deductible. 

3. Focus on business expansion

When business owners have to spend a majority of their time on keeping the books error-free, they cannot invest time in achieving their core business objectives. Business owners need to invest time in networking, marketing, managing, purchasing and supplying, selling, and communications to pursue business expansion. 

When bookkeepers take over the tax filing and bookkeeping tasks, business owners can be assured that their books are in the right hands while investing their time in jobs worth their money. A survey shows that, on average, companies’ profits increase 16% after they hire bookkeepers. 

4. Access to critical financial information

A bookkeeper can show a business owner the accurate financial picture of the company. When a bookkeeper keeps track of the expenses and profits, business owners can discern their budgets and spending. Any confusion regarding the books can be instantly clarified when businesses work with a bookkeeper. 

5. Pay less in accounting fees

When business owners cannot manage the monthly financial statements across the year, they are forced to hire an accountant to file taxes. This would require an accountant to prepare a report for the year. This is a bookkeeper’s task for which a small business will end up paying substantially much more to an accountant. 

Therefore, hiring a bookkeeper at the beginning of the financial year ensures there are no last-minute expenses to manage the books and file taxes.

With a bookkeeping service like Accurate Tax & Bookkeeping, small businesses can save a lot of time, money, and stress when the tax filing season arrives. The accuracy with which a bookkeeper will operate will ensure that business owners can focus on business expansion and profits instead of filing taxes.

 

About ATBS

Accurate Tax & Bookkeeping Services specializes in handling financial needs for businesses of all sizes. 

Greg J. Menia founded the tax preparation service company in 2010, having worked in business tax services since 1995. The team performs tax services for small businesses and large businesses alike, serving all areas around Tampa, FL. 

Call (813) 655-9702 today for “accountants near me” in Brandon, Florida. Alternatively, contact Greg and the team at Accurate Tax & Bookkeeping Services by emailing greg@brandonaccountant.com or visiting the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.

Tax Preparation Service & Bookkeeping Service Images - 5/11/2022

 

Demystify Some of The Important Tax Deductions For Small Businesses

Important tax deductions for small businesses 

Every small business owner who has raced against time to file taxes or struggled with tax credits and deductions knows taxes are a complicated matter. Irrespective of the complexity, it is crucial to take out the time to leverage all the right deductions to save thousands of dollars each year. Accurate Tax & Bookkeeping, a tax preparation service, breaks down some tax deductions that small businesses must not miss out on. 

1. Educational expenses

Training and upgrading skills is a necessity for the growth of a business and sometimes it is a legal requirement for some businesses. The expenses borne by a small business to upgrade its employees’ skills and knowledge through seminars, workshops, and other means can be leveraged. These expenses that are directly related to a business are tax-deductible.

2. Regulatory and licensing fees

Businesses that require state and local permits, licenses, and other regulatory documentation or practices are necessary business expenses that are tax-deductible. 

3. Home office costs

Whether it is a stand-alone space or a home, small businesses operating out of either can take advantage of deductions such as rent, utility bills, insurance, and painting & repairs. However, businesses operating out of homes need to meet certain criteria as per the IRS documentation. One of the requirements is that the office space must be used exclusively for work only. Secondly, this space must be the primary place of business. 

4. Wireless phone service bills

Cell phones are the main and popular means of communication for most businesses. While many businesses may invest in another phone number dedicated to business purposes, others may continue using their phones for business calls. Despite this overlap of business and personal usage, businesses can still deduct a portion of the cost on their business taxes.

5. Petty cash purchases

Unplanned and minor expenses such as a few coffees for a morning meeting or an out-of-cycle purchase can slowly add up to substantial amounts over a year. Such purchases are often made using petty cash, traditionally stored in a till but now these expenses can be conveniently made using “petty cash” cards. These expenses are deductible if the receipts are saved.

6. Professional & consultant expenses

Necessary expenses such as fees paid to lawyers, tax professionals, or consultants generally can be deducted in the year they are incurred. However, if the work relates to future years, the expenses must be deducted over the life of the benefit received from the lawyer or other professionals. 

7. Automobile expenses 

Deductions on mileage and gas expenses are a well-known fact. However, many small business owners fail to deduct things like maintenance, registration, tolls, and parking fees. Keeping track of such related expenses incurred to travel for business can help in substantial deductions. 

A solid documentation system or diligently storing the receipts and saving transactional information of expenses can make tax preparation a breeze later in the year. Businesses can consult with tax preparation services such as Accurate Tax & Bookkeeping to determine what receipts and documentation are worth keeping.

About ATBS

Accurate Tax & Bookkeeping Services specializes in handling financial needs for businesses of all sizes.

Greg J. Menia founded the tax preparation service company in 2010, having worked in business tax services since 1995. The team performs tax services for small businesses and large businesses alike, serving all areas around Tampa, FL. 

Call (813) 655-9702 today for “accountants near me” in Brandon, Florida. Alternatively, contact Greg and the team at Accurate Tax & Bookkeeping Services by emailing greg@brandonaccountant.com or visiting the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.

Brandon Florida Accountants Images - 4/22/2022