Why Your Business Needs Bookkeeping
By Bonnie Lee
Published January 17, 2014 Taxpertise FOXBusiness
When you own a small business, it is imperative that you keep a good set of books that are consistently and contemporaneously updated. The tax man will not be satisfied with records that were thrown together at the end of a year.
Tax preparation is a key reason to maintain a detailed set of books, but there are other factors at play. It’s important to know how much money your business is bringing in along with how and where the money is being spent. Compare your results to industry standards to determine where you need to improve your business model. You should also compare this year’s sales and expenses to the prior year(s) to note your progress in the business world. Reviewing this year’s balance sheet accounts (cash, receivables, liabilities, etc.) to prior years will also help establish profit and sales goals.
Another reason to have current financial statements is to satisfy a lender who will certainly require them in order to evaluate your qualification for a business loan.
This means that your business needs to employ software more sophisticated than a simple spreadsheet format in order to obtain current as well as comparative data. My software will pull up 10 years of profit and loss statements side by side in one report so that I can compare key elements whenever I need it.
For me it’s a given that every serious business owner follows these rules. So imagine my surprise when I received an email from Greg Jones, founder and chariman of BookKeeping Express, making the following claim: “Bookkeeping is a painful and expensive part of operating a business. And while there are more than 30 million small businesses in the US, 74 percent do NOT employ full-time or part-time accounting help according to a June 2012 article published by AccountingToday.com. Consequently, many small business owners are attempting to figure this out on their own without the necessary background, taking away valuable time from running their business.”
Going at it alone might save money at first, but if you aren’t qualified to do the work, you could end up landing in more trouble. Tasks such as posting payroll properly, tracking credit card usage and reconciling accounts can be tricky. Just knowing which account to post a particular transaction isn’t always clear.
I must admit that I have seen my share of inaccurate books over the years. Throwing data into QuickBooks without knowing the key elements of the bookkeeping process can create some disastrous results. And those results may adversely affect your tax return. Not only that, but a subsequent IRS audit may result in additional tax liabilities as well as open up other years for examination.
Experts will tell you to seek out professional help in all areas of your business in which you are not competent.
Jones says, “In the past, small business owners have had three options when it comes to business bookkeeping: handle themselves, utilize online bookkeeping programs or outsource to a CPA. Small businesses embrace online tools for their lower dollar cost, but without accounting expertise, spend valuable time trying to figure out tasks in desperate need of a human being for guidance. CPAs, on the other hand, are expensive and localized.”
So try going the middle route. There are many qualified bookkeeping services that don’t charge as much as a CPA but can deliver exactly what you need. The trick is to be sure the person or agency you engage knows what they are doing. You may want to have your tax professional or a qualified CPA refer you to someone who can help you or review their preliminary work to determine if they are handling your books accurately and completely.
What Is Virtual Bookkeeping?
by Amanda Banach
Virtual bookkeeping allows an accountant or bookkeeper to provide accounting services for a client remotely. Telecommuting positions are becoming more common as businesses seek creative ways to find a balance between staffing arrangements and workloads. A virtual bookkeeping arrangement can be beneficial to both the business and the bookkeeper in terms of flexibility and cost.
Virtual Bookkeeping Defined
Virtual bookkeeping allows a bookkeeper to telecommute instead of physically working at a client’s office. Aside from the work location, there is not much difference between regular bookkeeping services and a virtual arrangement. A virtual bookkeeper uses computerized bookkeeping software to post financial transactions, review and update statements and reconcile accounts.
How It Works
To enable virtual bookkeeping, the business grants the bookkeeper remote access to its server, software and financial documents. The bookkeeper signs onto the company’s secure network from his home computer and accesses the documents just as he would if logged onto an on-site company computer and installs the company’s bookkeeping software onto his computer. Depending on the arrangement, either the worker or the client may purchase and register the software, but both must use the same program and version to ensure proper transfer and communication of the files. If the bookkeeper is employed by the company, she will be paid according to the employer’s payroll policies and cycle. If the bookkeeper is working as an independent contractor, she will invoice the business for the services performed and the client will remit payment in accordance to its contractor payment policy.
A virtual bookkeeper may be appealing to a company because of the cost savings and flexibility associated with this arrangement. Virtual bookkeepers do not require office space or supplies, and those working as contractors require no insurance, benefits or employment taxes -- a huge savings for the employer. Virtual bookkeepers offer flexible availability and can work as little or as much as the business needs; this can be especially beneficial for small businesses that may not need a full-time on-site bookkeeper or whose financial services needs fluctuate.