Category: Accounting

Types of Accounting

Accounting is a vast and dynamic profession and is constantly adapting itself to the specific and varying needs of its users. Over the past few decades, accountancy has branched out into different types of accounting to cater for the diversity of needs of its users.

Financial Accounting

Financial accounting is the process of producing information for external use usually in the form of financial statements. Financial Statements reflect an entity’s past performance and current position based on a set of standards and guidelines known as GAAP (Generally Accepted Accounting Principles). GAAP refers to the standard framework of guideline for financial accounting used in any given jurisdiction. This generally includes accounting standards (e.g. International Financial Reporting Standards), accounting conventions, and rules and regulations that accountants must follow in the  in the preparation of the financial statements.

Management Accounting

Management accounting produces information primarily for internal use by the company’s management. The information produced is generally more detailed than that produced for external use to enable effective organization control and the fulfillment of the strategic aims and objectives of the entity. Information may be in the form budgets and forecasts, enabling an enterprise to plan effectively for its future or may include an assessment based on its past performance and results. The form and content of any report produced in the process is purely upon management’s discretion.

Cost accounting is a branch of management accounting and involves the application of various techniques to monitor and control costs. Its application is more suited to manufacturing concerns.

Governmental Accounting

Also known as public accounting or federal accounting, governmental accounting refers to the type of accounting information system used in the public sector. This is a slight deviation from the financial accounting system used in the private sector. The need to have a separate accounting system for the public sector arises because of the different aims and objectives of the state owned and privately owned institutions. Governmental accounting ensures the financial position and performance of the public sector institutions are set in budgetary context since financial constraints are often a major concern of many governments. Separate rules are followed in many jurisdictions to account for the transactions and events of public entities.

 

Tax Accounting

As the name implies, tax accounting refers to accounting for the tax related matters. It is governed by the tax rules prescribed by the tax laws of a jurisdiction. Often these rules are different from the rules that govern the preparation of financial statements for public use (i.e. GAAP). Tax accountants therefore adjust the financial statements prepared under financial accounting principles to account for the differences with rules prescribed by the tax laws. Information is then used by tax professionals to estimate tax liability of a company and for tax planning purposes.

Forensic Accounting

Forensic accounting is the use of accounting, auditing and investigative techniques in cases of litigation or disputes. Forensic accountants act as expert witnesses in courts of law in civil and criminal disputes that require an assessment of the financial effects of a loss or the detection of a financial fraud. Common litigation where forensic accountants are hired include insurance claims, personal injury claims, suspected fraud and claims of professional negligence in a financial matter (e.g. business valuation).

Project Accounting

Project accounting refers to the use of accounting system to track the financial progress of a project through frequent financial reports. Project accounting is a vital component of project management. It is a specialized branch of management accounting with a prime focus on ensuring the financial success of company projects such as the launch of a new product. Project accounting can be a source of competitive advantage for project-oriented businesses such as construction firms.

Social Accounting

Also known as Corporate Social Responsibility Reporting and Sustainability Accounting, social accounting refers to the process of reporting implications of an organization’s activities on its ecological and social environment. Social Accounting is primarily reported in the form of Environmental Reports accompanying the annual reports of companies. Social Accounting is still in the early stages of development and is considered to be a response to the growing environmental consciousness amongst the public at large.

 

Characteristics of financial accounting

• It is historical/backward looking in nature. Transactions are recorded after they have occurred.
• It is monetary. All transaction are recorded in money terms
• It is highly regulated by accounting legislation/rules like G.A.A.P.
• It is mandatory to prepare and disclose financial accounting information.
• It is more useful to external users of financial information. The category of users most targeted by Financial Accounting is that of the shareholders.
• It reports on the performance of the entire organisation.
• It is subjected to audit or independent external examination.
• In financial accounting, cost classification based on type of transactions, e.g. salaries, repairs, insurance, stores etc. In cost accounting, classification is basically on the basis of functions, activities, products, process and on internal planning and control and information needs of the organization.
• Financial accounting aims at presenting ‘true and fair’ view of transactions, profit and loss for a period and Statement of financial position (Balance Sheet) on a given date. It aims at computing ‘true and fair’ view of the cost of production/services offered by the firm.
• In financial accounting, classification of items is based on type of transactions, e.g. salaries, repairs, insurance, stores etc.
• Financial accounting aims at presenting ‘true and fair’ view of transactions, profit and loss for a period and Statement of financial position (Balance Sheet) on a given date. It aims at computing ‘true and fair’ view of the firm

 

Limitations of Financial Accounting

Financial accounting is the only branch of accounting and it is not prefect. There are large numbers of limitations which open new way to use other tools of accounting. To know what are the main limitations of financial accounting. It is very necessary for accountants . Accountants are often blind to these limitations. So, I am covering its limitation a lot of ground.

Read below and understand

Financial accounting is of historical nature

Net effect of transactions are recorded in financial accounting which has happened in past. These accounts is just postmortem of all events of business in past .These record does not help for future planning and other managerial decisions. Financial accounting shows the profitability of business but it is failure to tell that is it good or bad. Financial accounting is also failure to know the reasons of low profitability position.

Financial accounting deals with overall profitability

Accounts of business are made by a way which shows only overall profitability .It does not shows net profit per product , or per department or according to job . Thus to find difficult to all activities which do not give profit. So, it creates inefficiency in business activities.

Absence of full disclosure of facts

In financial accounting we record only those activities and transactions which we can show or describe in money. There are many other facts of business which are non financial and non monetary like efficient management, demand of products of firm , good relations in industry , good working environments which can not be known by financial accounting .

 

Financial reports are interim report of business

Financial statements made by financial accounting is the interim report of firm’s all business work but financial position and profitability which are shown in it is not fully true . Due to adopting cost concept, all transactions are recorded on it real cost but by changing in the time; it is the need of time to adjust cost of assets and liabilities according to inflation of market. Because, financial accounting does not records according to inflation so its result does not show true position of business.

Incomplete knowledge of cost

From cost point of view, financial accounting is incomplete. In financial accounting, accountant does not calculate each and every product’s total cost. So, financial accounting does not help to determine the price of product of business.

No provision of cost control

Financial accounting does not help business organization for controlling the cost. Because, there is no provision of controlling cost in it. In financial accounting, we write cost, if we paid any expenses. Thus there is no provision of improvement in financial accounting. Except this, there is no any other way to inspect all expenses.

Financial statements are affected from personal judgment

Many events of financial statements are affected from personal judgement of accountant. Method of calculating depreciation, rate of provision of doubtful debts and stock valuation method are decided by accountant. Thus, financial statements do not show true and fair view of business.

What is the process of bookkeeping?

When starting in business it is good to have a bit of an idea about bookkeeping.  Although you most likely will hire someone to either keep the books for you inside or outside the office, it is still important to have an overall idea about the steps taken in this process as well as an overall idea as to what is being done. There are generally five steps in the book keeping process:

• When a transaction occurs there is some original paperwork involved such as an invoice, a credit note, a receipt or petty cash voucher, etc. This original documentation must be retained and filed away where it can be easily found and referred to if necessary.
• Details from the original paperwork are recorded in the “original books of entry”.These are records such as the cash book, purchases book, sales book, petty cash book or sales returns book.
• The details written into the books of original entry are transferred to the ledger. The ledger is the main book of accounts which records all debits and credits in the business operations.
• A trial balance can be made when required by adding the debit column and adding the credit column, and comparing the two additions to determine the current state of financial affairs. If credits are greater than debits, then you are making money; but if debits are greater, you are losing money.
• The ledger is used to prepare a set of final accounts at the end of a given period…normally at the end of each financial year. These final accounts include such things as a Profit and loss account, a Balance sheet and a Trading account. These accounts may be necessary for taxation or other purposes.

 

What is the bookkeeping equation?

The bookkeeping equation for a sole proprietorship is assets = liabilities + owner’s equity. The bookkeeping equation for a corporation is assets = liabilities + stockholders’ equity. The bookkeeping equation is also referred to as the accounting equation.

In the bookkeeping equation:

• assets are the resources owned by the business
• liabilities are the amounts the business owes
• owner’s equity is the amount the owner invested plus the net income of the business minus the amounts the owner withdrew for personal use (all since the business began)

Often it is said that the liabilities and owner’s equity are the claims against the assets. It can also be said that the liabilities and the owner’s equity are the sources of the assets.

 

There is a difference between the two terms bookkeeping and accounting

• Bookkeeping is concerned with the recording of financial transactions whereas accounting involves recording, classifying and summarizing financial transactions.
• Bookkeeping is clerical in nature and usually is the junior staff performs this function whereas accounting requires skills of accountant and knowledge of various accounting policies.
• The Bookkeeping is the base for accounting. Accounting starts where the bookkeeping ends and is thus broader in scope than bookkeeping.
• Bookkeeping is in accordance with the accounting concepts and conventions. Whereas, the accounting methods and procedures for analyzing and interpreting the financial reports may vary from entity to entity.
• Financial statements do not form part of bookkeeping. Thus, these are prepared from the accounting process.
• The accounting reports help in ascertaining the financial position of an entity, however not bookkeeping records.

 

Relationships Between Financial Statements

Income Statement

The Income Statement is also called the Earning Statement or the Profit and Loss Statement, sometimes shortened to the P&L, but no matter what it is called, net income or loss is always the bottom line. This bottom line flows to the next statement, the Statement of Owners’ Equity. That is why it is the first statement to be compiled from the adjusted trial balance.

Statement of Owners’ Equity

The Statement of Owners’ Equity reconciles beginning capital to ending capital. Remember that the Balance Sheet shows that assets are equal to liabilities plus equity. Ending capital and equity are synonymous, so the bottom line from the Statement of Owners’ Equity, ending capital, flows to the next statement—the Balance Sheet.

Balance Sheet

Net income from the Income Statement flows to the Statement of Owners’ Equity, and the ending capital balance flows from the Statement of Owners’ Equity to the Balance Sheet.

Statement of Cash Flow

Finally, the statement of cash flows reconciles beginning cash and cash equivalents from the balance sheet (ending cash from the prior set of financial statements) to ending cash from the current balance sheet, effectively reconciling accrual basis accounting to cash basis.

 

Close the books

Bring the bookkeeping for the fiscal year just ended to a close and get things ready to begin the bookkeeping process for the coming fiscal year. Books is the common term for a business’s complete set of accounts. A business’s transactions are a constant stream of activities that don’t end tidily on the last day of the year, which can make preparing financial statements and tax returns challenging. The business has to draw a clear line of demarcation between activities for the year (the 12-month accounting period) ended and the year yet to come by closing the books for one year and starting with fresh books for the next year.

A Beginner’s Guide to Small Business Bookkeeping

Part of the accounting cycle, bookkeeping is the act of tracking, managing, and recording all financial transactions for your business. If the thought of bookkeeping is frightening, rest assured, there are a variety of small business accounting software applications on the market today that make the process easy, even if you’ve never recorded a financial transaction before

Overview: What is bookkeeping?

Bookkeeping is the proper recording of all financial transactions for your business. Bookkeeping involves a lot of attention to detail; everything from properly identifying and coding invoices, purchase orders, and vendor bills, to ensuring that bills are paid promptly

What is a bookkeeper responsible for?

Bookkeepers are responsible for accurately recording all financial transactions for a business.

Why your small business needs bookkeeping

It’s next to impossible to manage your business properly without bookkeeping. Imagine trying to run your business without knowing how much you’re spending on expenses each month, or not knowing how much money your customers owe you. Imagine not accounting for those expenses properly and then trying to prepare your tax return the following year.

You need to know how much money you have

Once you start a business, you become responsible for a lot of things. As a business owner, you need to know how much money your customers owe you and how much has been received. You also need to know how much money you need to spend in order to keep your business running smoothly.

 

How to Choose a (Great) Bookkeeper

Finding a good bookkeeper is an investment in your business

Many small business owners see their bookwork as an obligation to stop the taxman knocking. In fact it’s an integral part of running and managing a successful business. Your accounts, bookwork and transaction history, when accurately recorded, provide an important tool for all planning and decisions you make in your business and without it, you’re running blind

BAS Agent Certification

This is without a doubt the most important thing to look for in a bookkeeper. The Tax Practitioners Board holds a register of all qualified bookkeepers in Australia. Qualified bookkeepers must prove they have sufficient knowledge, qualifications, experience, insurance and ongoing professional development to sufficiently serve their clients. It is illegal to provide BAS services including entering GST transactions, Payroll and bank reconciliations without being registered

Experience

There are some things you just can’t teach and being a good bookkeeper is one of them – a good bookkeeper should have sufficient experience to answer your questions, know their way around accounting software, know where to go to get answers to the tricky questions and know when to refer to your accountant.

Skill Set

What range of business and accounting software can they use? Do they have a sound understanding in more than just the basic MYOB and Reckon (prev. Quickbooks AU). There is a huge range of software available and in many cases these out-dated program’s may not be the most time or cost-effective software for your business. If you’re going to change things up, will your bookkeeper be able to handle it?

Education

All registered BAS agents must hold a bookkeeping or accounting qualification. You should ask a potential bookkeeper what qualifications they hold so you know their level of understanding of the accounting systems. Ensure you have a bookkeeper who understands the important relationships between transactions and Profit & Loss and Balance Sheet. Holding additional or extended qualifications shows they have a varied or higher knowledge base.

 

How to Choose the Right Accountant for Your Business

Deciding that it is finally time to look for an accountant is a big step for any growing business, but you will have to make sure that your financial information — one of the most important areas in your business — is in the right hands

Certification and Experience

Passing the CPA exam is a difficult process — intentionally so. While all CPAs are accountants, not all accountants are CPAs. Make sure your accountant is trained well enough to meet the expectations and demands of today’s accounting profession. Although they got through some rigorous courses and exams in the past, they should also be taking continuing education and professional development courses to remain certified, licensed and on top of changing rules and regulations within the accounting landscape

Technology

Thanks to the rapid advances in technology, accounting software has become more robust — adding automation and tons of time-saving features — transforming accounting into a fast-paced and dynamic industry. Accounting software, like Xero and QuickBooks Online, helps improve productivity by performing tedious accounting tasks while reducing one’s margin of error with a single click of the mouse

Business Growth

Finding an accountant who has an empathetic ear and can truly connect and understand your business is essential. It is crucial that your business receives all the support it needs and that you are comfortable with the people handling your accounts. Remember that your CPA’s role does not stop at tax planning and preparation — they are your trusted business advisors. They can be your source of light when your business is facing uncertainties and they can help you make the right financial decisions when you need some guidance. Look for an accountant who would treat your business affairs as they would treat their own.

Services

As a business owner, time is money, and choosing the right CPA can buy you more time, allowing you to focus on achieving your goals. Some accountants are willing to do bookkeeping and payroll for example, on top of the usual services they provide.  Other accountants stick to the core stuff only, like financial statements and tax filings. You’ll need to evaluate where your strengths and weaknesses are and what your pain points are — so that you can free up your time to run and grow your business.

Security

Although the digital age has opened the gates to faster and more convenient methods of handling information, it also brought along new risks and threats. Find someone who is proactive in taking regular security methods to keep their clients’ sensitive information safe. Do they use encryption software to handle your private information? What are their practices for data integrity and security? It is crucial that your CPA guarantees security that is “airtight” and has a very low risk of facing a security breach.

 

How to Hire Bookkeeping Help

Is it time to hire a bookkeeping service for your small business? Perhaps your business is growing, or you don’t have time to do it all on your own anymore. Whatever the reason, there are plenty of bookkeepers out there ready to help you keep your books in order.

Why Hire a Bookkeeper?

According to research by Clutch, almost half of small businesses (45%) don’t employ a bookkeeper, and a quarter of small businesses still record their finances on paper instead of a computer. Doing your bookkeeping by yourself isn’t easy. It can be easy to make errors or miss something important. Manual bookkeeping can also put your data at risk from damage or theft.

Hiring a Freelance Bookkeeper

Freelance bookkeepers can benefit your business in many ways. Because they typically work from home, their overheads are low and their fees competitive. Rates can range from $15-$50 per hour depending on the nature and range of work you want them to do—and you only pay for the hours you use. Freelancers are also business owners and stake their reputation on meeting deadlines and taking their work seriously.

Working With a Bookkeeping Firm

Bookkeeping firms may cost more than a freelance bookkeeper but for good reason. They bring a range of experience to the table, access to a larger team of experts, and guaranteed coverage. Unlike a freelance bookkeeper, if your dedicated bookkeeper takes a vacation or is otherwise unavailable, someone else can seamlessly step in

Understand the Difference Between a Bookkeeper and an Accountant

In your search for bookkeeping help, don’t confuse bookkeepers with accountants or CPAs. Many accountants provide bookkeeping services, but they can also prepare detailed financial statements (profit and loss statements, balance sheets, etc.).

 

What is the best way to find companies needing bookkeeping and accounting services?

To find companies who are need of bookkeeping and accounting services we need to market our company and reach through different mediums of marketing. Those companies who really need bookkeeping and accounting services can contact outsourcing companies, they can search from the internet and other mediums. If you have marketed your company good then there are more possibilities of getting selected. The other fact is that the outsourcing company should be genuine and provide professional services at competitive rates.

It is not an easy decision to take when looking for an accounting or bookkeeping service. You could be facing a dilemma of choosing an offline service over an online one. However, with the shortage of availability of good accounting services offline, it is recommended that you choose online accounting services

Industry Experience and Certified Staff – Make sure you are hiring an accounting and payroll agency with expertise and specialized knowledge of your industry

Cloud or Web-Based Service Architecture – Find an accounting agency that can provide you with immediate access to your own financial data anytime, anywhere using any devices

Metrics for Quality Assurance – The main reason you are hiring a third party accounting outsourcing agency is that they offer core functions that you lack

What Should I Look for in a Good Payroll Company?

When it’s time to drop everything and run payroll, even the most experienced small business owners can find themselves grinding their teeth. In fact, SCORE discovered that owners (and the people helping them) spend one to five hours on payroll every month. And even when they’re careful, 40 percent of small employers make a payroll mistake each year, resulting in average fines of $850.

You’re good enough and you’re smart enough, and gosh darnit, you’re gonna get payroll straight. When you set off down the path to payroll paradise, there are two ways to do it: You can sharpen your pencil and slip on your green visor, or you can find the best payroll service to automate parts of the process and free you up to focus on everything else your business needs

How much do payroll services cost?

For a lot of small businesses, the first question that likely springs to mind is: How much does payroll cost? Because there are different pricing structures, it’s not always easy to compare apples to apples. Most payroll companies charge a flat monthly fee, plus an additional fee for each employee. Typically these fees start at around $5 to $10 per employee per month

So what do payroll companies provide?

First of all, payroll services give business owners peace of mind. Those late-night payroll runs, emergency calls to your accountant, and energizing (not!) visits to the IRS website will likely become a distant memory if you pick the right provider

Support and switching payroll providers

Because payroll never takes a vacation—and neither your employees nor the government are okay with errors—it’s crucial for any good payroll company to offer strong support when you have problems or questions

 

Payroll Tips You Should Know

Determine whether your employees should be salaried or paid hourly.

For most employers, putting employees on salaries is easier to manage. Salaries take the stress out of determining how much your employees are paid each month and keeps everything consistent.

Decide how often you’ll pay your employees.

Every employer needs to decide on a pay period for their employees. Pay periods can be weekly, bi-weekly, or monthly. This will help you stay organized and make payroll run more smoothly.

Classify your workers.

Another important payroll tip to follow is properly classify your workers. Whether you hire full-time employees, independent contractors, or interns, if the person is performing work for your company, they typically should be classified as an employee

Pick the best software for the needs of your business.

When choosing payroll software for your company, try to select an option that’s hosted on the cloud. This will make it easier to access all of your payroll information in one place, whenever you need it.

Simplify your process to save time and money.

According to the National Business Association survey, 27 percent of small business owners report spending three to five hours per month on payroll; one-third of employers are spending more than $500 month on their services

 

onsiderations to Make While Choosing A Payroll Service

Determining how to choose a payroll service for your business can be difficult. There are many payroll software providers and features from which you can choose

Whether this is your first time looking for payroll software or you want to switch software programs, you need to know what to consider. Knowing what to look for in a payroll service can help you make a good purchase.

At Patriot Software, we want you to make an excellent payroll service choice the first time. That’s why we created affordable payroll software that is easy to use. But, we also want you to make superior business decisions, which is why we created a guide about how to choose a payroll service.

A few of the points you can learn about in this guide include types of payroll software, software costs, and software security.

When you download and read our guide to choosing payroll software, you can prevent a bad payroll software decision. You don’t want to be locked into a contract or discover hidden fees for the features you need. You should purchase payroll software that you like on the first try.

 

Looking for Payroll Services? Here are Things to Consider

What kind of customer service can I expect?

Businesses run at all hours and so should your payroll provider. Because questions and issues can come up at any time, look for a company that offers 24/7/365 support. It’s also worth looking for a company that provides Single-Point-of-Contact Support. Save yourself time and hassle with dedicated support who knows your story rather than starting from the beginning with someone new every time you reach out.

Is their technology in step with current trends?

Technology is always changing, and you need a payroll provider who is on top of the latest trends. There are more options to getting money to employees these days. Physical checks, direct deposit, and reloadable debit cards are all options to consider when researching companies. In addition to that, you need to look into how user friendly their software is. Cloud-based options make it easy for you and your employees to keep track of and update important information from any internet connected computer instead of submitting requests that can take days to process

How safe will my business’ and my employees’ information be?

Sharing sensitive data with an outside company can be scary. Breaches and crashes have been in the news more often so it’s imperative you look in to how your data is stored. Look for a company who can provide round-the-clock security and has a comprehensive disaster recovery system in place

ho is responsible for any penalties incurred from inaccurate tax filings?

As was stated before, errors in tax filings have resulted in billions of dollars in fines levied on an annual basis. It’s possible that some of these errors came from professional payroll services. While everyone will promise accuracy, you should look for a provider who puts their money where their mouth is. If mistakes do happen, find someone who will pay for their own gaffes instead of passing the fines on to you. An extra point to consider: A company will be more invested in doing things right the first time if it’s their money on the line instead of someone else’s.

Can they do more for me than just payroll?

While many payroll providers include HR services with their offerings, it’s worth asking if there are other business solutions they offer to help with the management and growth of your business. Payment processing, employee benefits, insurance, technology, and loans are all needs that you may have to address at some point. Finding a company who houses all those options under one roof can simplify your life even more.

 

How to Choose the Best Payroll Service for your Company

Every company has to pay their employees. Sometimes the most experienced business owners can find themselves spending a large amount of time trying to process payroll monthly. Outsourcing this function to a payroll provider can be very beneficial and help reduce costs. However, finding the right one, can be challenging

Checklist: Before choosing a payroll provider, you will want to make a checklist of what your company needs. This will help you prepare questions to ask a provider once you start researching your options. Some questions to ask yourself are: Do you need a payroll provider that can process multi-state payroll and handle different state taxes? How many employees will they be processing payroll for? Do you need additional HR services such as benefits, onboarding, etc.? It is important to be open to other options. They may offer a service you didn’t know you could benefit from.

Ask a lot of questions: It is important to ask a lot of questions when researching a payroll provider. You will want to essentially interview them to make sure they are the best fit for your company. Review your checklist and make sure you are asking questions that cover all of your company’s needs. Make sure to ask questions that touch on the provider’s pricing, software capabilities, taxes, reports, customization, etc.

Reduce Cost/Risk: By being the employer of record, the payroll provider will reduce your company’s risk.

Offload Duties: The payroll provider can assist with the onboarding process, benefits and payroll processing. Offloading these functions will allow your HR team to focus on other functions & projects that are important to your organization.

Tips for Better Small Business Bookkeeping

Are you one of those small business owners who just love poring over spreadsheets? Me neither. Yes, your business’s books are a scorecard of how well you’re doing—but if you’re not a “numbers person,” doing your bookkeeping may sound as appealing as a root canal. Still other business owners mean to go over their business finances but get caught up in the day-to-day and never get around to it. No matter how you feel about bookkeeping, it’s one of those tasks no business owner can avoid forever.

Separate business and personal finances

Co-mingling expenses and income is a common mistake in small business bookkeeping—and one that will cause huge headaches for your business in the future. Open a business bank account as soon as you decide to go through with your startup, and get a separate business credit card. This not only separates your accounts, but also helps your business build its own credit rating.

Automate whatever you can.

Entering data into spreadsheets and reconciling numbers manually is so old school. Use cloud-based bookkeeping software, and do your business banking online. That way, you can sync your bookkeeping software with your business bank account so you always have accurate, up-to-the-minute records. Plus, with the cloud, your critical financial data is backed up safely off-site.

Ask a pro

Talk to your accountant to figure out if you can use off-the-shelf accounting software or if you’d benefit from customizing it. Your accountant should be able to not only offer advice but also set up the software for you and show you how to use it

Perform regular financial checkups.

If you put off bookkeeping too long, you end up with bounced checks, overdue invoices or figures that don’t add up. Go over your books weekly to make sure everything is ship-shape.

 

tips for good bookkeeping

Get into a routine

Set aside some time so you can concentrate on bookkeeping for your business. We suggest you do this either once a week or month. And, if Making Tax Digital affects you, then getting into a routine like this will help you make the transition to digital tax returns easy. By getting into a routine, it will also help you to see your income and expenses each month and monitor invoice payments from clients.

Ensure any paperwork is kept safe

Use the latest apps to scan your receipts and invoices. This will help you make the transition to Making Tax Digital and keep all documents in documents in one place and will make finding them a lot easier! Online accenting software such as GoSimpleBooks will allow you to view your books from anywhere. One of the great benefits of accounting software is that it allows you to view your books on the go meaning you can benefit from secure, remote data storage.

Keep business and personal bank accounts separate

It is absolutely essentials that you keep your private and business accounts separate. If you’re a director of a limited company, then you can’t spend the company’s money for your own purchases, unless they are a business expense. If you’re self-employed, you can take money from your business, but you should still have a separate bank account to help balance the books at the end of the month. Keep track of your finances easily by keeping your business and personal finances separate.

Budget for tax

Dealing with tax and paying the tax can sometimes be difficult for small businesses, therefore it’s vital to start budgeting. It is easier to budget for tax as you go so that you are more prepared for the end of the tax year. You could open a business savings account and put at least 25-30% aside for your tax bill. The process of budgeting and putting away a dedicated sum for taxes will ease the worrying and stress when the self-assessment approaches.

Use online accounting software

Using good, cloud-based software will save you time and money. Online accounting software can allow you to create invoices, track payments, report VAT and manage stock levels. There are many benefits of online accounting software as it allows you to keep track of all your financial information in one place.

 

How to Hire the Right Bookkeeper for Your Small Business

Freelance, firm, and remote bookkeeping

Unless your business has roughly thirty or more employees, or over a million dollars annual revenue, you probably don’t need to hire a full-time, in-house bookkeeper.

Hiring a freelancer

A freelance bookkeeper is the most affordable option if your finances are simple, and you’re okay with your bookkeeper not being available for you every single business day.

Price

On average, freelance bookkeepers charge lower rates than firms do, since they have less overhead. A freelance bookkeeper will charge either an hourly or flat rate.

Process

A local freelance bookkeeper should be able to visit your business in person in order to collect and organize your paperwork. If you have a paperless office with digitized documents, you may find you’re comfortable hiring and working with a freelancer online

Schedule

One drawback of working with a solo freelancer is they may leave you hanging if they go on vacation or get sick unexpectedly. Also, bookkeeping has its busy season. This typically comes at the end of the financial year, when clients’ books need to be “closed” for tax season. Your bookkeeper may not be able to devote as much attention to your business during this time of year as they normally would

 

Questions to Ask Before You Hire a Bookkeeper

What is the scope of the bookkeeping work

This may sound like a simple question, but there is a big variation between the services that bookkeepers offer. Your requirements will also vary depending on your own skills and the scope of the work your accountant completes. Some bookkeepers act as management accountants and can help to interpret the figures and other bookkeeper’s skills are limited to data entry

Are they registered and qualified

You will find that some bookkeepers will have a diploma, accounting degree or may even be Chartered Accountants or CPAs. If your bookkeeper is going to be lodging your BAS in Australia then, at a minimum, your bookkeeper should be a Registered BAS agent. BAS agents are registered with the Tax Practitioners Board.

What is their level of expertise

You want your bookkeeper to process your accounts accurately and on-time and to communicate with you in a way that doesn’t take up much of your time. You don’t want to get to the end of the financial year and have to pay your accountant to clean up a mess. You probably aren’t an expert bookkeeper, so sometimes it can be hard to work out what level of expertise the bookkeeper you are engaging is.

How familiar are they with your industry

If the bookkeeper is unfamiliar with your industry there may be a learning curve while they familiarise themselves. We recommend asking whether they have any other clients in your industry (past or present) and ask them to give a few examples of common bookkeeping issues that come up related to your industry and how they would resolve them.

How do they communicate with their clients

Processing the day to day transactions in your accounting software is one element of bookkeeping. It is likely that you are going to be communicating regularly with your bookkeeper, especially in the first few months of working together. As a business owner, your time is valuable and working with a bookkeeper who takes up hours of your time with ineffective communication will slow down your business growth.

 

APPROACHES TO BOOKKEEPING: TIPS AND TRICKS TO HELP YOU BECOME A PRO

TEACH YOURSELF

Out of necessity, most small business owners start by doing their own books. It’s certainly the most cost-effective method—after all, you can carefully control costs when you’re the one doing the job. DIY bookkeeping is also a way to keep a close eye on costs and expenses. When every cent matters, there’s a certain sense of confidence that comes along with managing your own books.

HIRE A BOOKKEEPER

The easiest way to handle receipts, payroll, and taxes for your business is to hire a bookkeeper. A trained bookkeeper can do all of the essential functions that you no longer have time to handle when your business scales up. Already hired a bookkeeper or accountant? See our easy-to-follow guide on how to add an accountant in QuickBooks Online

AUTOMATE THE PROCESS

There is a more affordable and scalable option than hiring a bookkeeper or teaching yourself: automation. Services like Botkeeper allow small business owners to take a hands-off approach to bookkeeping without sacrificing quality. Using an AI bookkeeper will cost you far less than hiring an employee to do the same tasks. As a bonus, with Botkeeper, you can select a service that comes with a certified CPA backing up and checking the work of the AI

Important Things a Payroll Service Should Do For Your Company

Make running payroll a breeze

The right service should do everything they can to help reduce the stress and hassle of running payroll by helping you to:

Centralize your record keeping so you’re not maintaining employee data in separate systems

Minimize the amount of data you need to enter to ensure greater accuracy

Ensure you never over-contribute and are confident employee cost-sharing programs are always on target

Eliminate all of your reconciliation headaches

Give you warnings on potential errors before you finalize payroll

Save time

Your time is valuable, and that means you should be able to save time and pay your employees faster. That means your payroll service should help you to:

Settle payroll discrepancies swiftly with your employees

Create time-saving formulas to handle commissions, benefits deductions, bonuses and RRSP matching

Automate your T4s, remittances, and ROEs

Integrate seamlessly with other mission-critical applications, including HR, benefits, and time and attendance, so any change you make to employee data is reflected instantly everywhere with no extra effort on your part

Reduce your risk

Another reason for choosing a payroll service is to reduce your overall risk. Your provider should make it easy to:

Accurately calculate, file, and pay payroll taxes

Ensure you are always remitting taxes accurately and on time according to federal and provincial laws

Align with employment standards with 100% compliance for vacation, overtime, and statutory holiday pay

Get a clear picture of your business

Your payroll solution should provide you with a high degree of visibility into your business. That means you should be able to:

Access unlimited payroll reporting whenever you need it to help you better understand your results, inform better practices, and forecast more effectively

Create your own detailed reports that help you dig deep into your data to uncover actionable insights (including both your financial and people data)

Easily export your payroll results into your workforce management system or other mission-critical systems

 

Tips for Choosing a Payroll Service

Ease of Use and Accessibility:

Most payroll services today allow access to a secure site for employees to view their individual payroll history. Having a password-protected website to view and print pay stubs, review payroll history and keep track of sick, personal and vacation days provides a better service for your employees. Having this information at their fingertips will also decrease the number of payroll questions you have to answer.

A web-based payroll system, though commonplace, is not the only way you can provide the information for payroll. Some payroll services require phone-ins at a specific date and time which can be very inconvenient for the ever-changing schedule. There is also the option to fax or e-mail. But being able to enter information anytime, anywhere from a web browser gives you an opportunity to double-check that all the information is correct and easily make adjustments. Once you determine which medium of communication works best for you, find out whether the provider can accommodate those needs. Providing information for the payroll service should not be complex and a hassle but easy and convenient. Remember a payroll service is supposed to alleviate stress.

Responsibility and Customer Service:

A payroll service that is frequently making mistakes can be the source of great frustration. And although you should only sign with a provider that guarantees they will absorb the costs of their mistakes, you do not want to worry about whose check will be incorrect next payday. As mentioned previously you should ask each payroll service for references from similar accounts. Check with these companies the accuracy, integrity, response time, professionalism and customer service of the provider.

Everyone makes mistakes; even the best payroll services can make a mistake at some point in time. What defines the company is how they react to their error and whether or not responsibility is taken. Ask them how quickly new checks will be provided if a mistake is made. And make sure the payroll service is liable for tax mistakes since the penalties for such a mistake can be very steep.

Customer service is also key. You do not want to hold for 20 minutes on the phone only to reach someone unfamiliar with your account and therefore unable to answer your question. Find out if there are other options besides calling to receive help or answers. Perhaps they can respond sooner to e-mails?

Who Will Handle Your Account?

Last but certainly not least is to find out who will be handling your account. You may have met with the experienced head honcho as you signed the dotted line but once you leave he assigns your account to an inexperienced intern. Once you find out who will be in charge of your account make sure it is someone you feel comfortable with, and someone who encourages you to ask questions. You will be dealing with this individual on a regular basis and you do not want to work with someone who makes you feel uncomfortable every time you do not understand something.

 

How to Choose a Payroll Service

How to Choose a Payroll Service: Where to Look

A simple Google search of “payroll service” yields about 485,000 results, and with so many options to choose from, narrowing down those results can be just as difficult as crunching numbers yourself.

Adam Spiegel, a certified public accountant and partner with Morrison, Brown, Argiz & Farra LLP, says getting a referral from someone you trust is the smart way to start your search. “You’ve got to discuss what you’re doing with a controller, a CFO, an outside CPA or an attorney who can advise you,” he says.

You might also try getting references from other similar businesses in your area. Pat Carson, founder of the San Jose-based bookkeeping and accounting firm Carson & Crew, says, “There will be folks who absolutely love the service they have and would be very willing to recommend people.”

The larger services Carson suggests are Intuit Online Payroll, ADP and Paychex, but, she warns, it’s important to realize that some large services may try to bundle your payroll package with additional services that you might not need, like human resources capabilities. This could drive up your monthly costs.

To make sure you’re not getting over-served, Carson suggests mapping out a list of services you expect your company will use over the course of a year. Ask yourself questions like how much you plan on growing, how many full-time, part-time and contract employees you’ll have on your payroll throughout the year, and if anyone is due for a raise or bonus. Decide whether or not you’ll need a company that can handle different state and federal taxes. Do you need human resources services in addition to payroll? How much can you afford to pay the service? Will you be offering employees 401(k)s and other deductions? How often do you want to issue paychecks?

 

How to do Payroll Taxes and Process Payroll Yourself

How to Process Payroll Yourself

Summary: Low cost but time consuming and prone to errors.

If you’re tax savvy, you may be able to take on a DIY approach to paying your employees. But given all the payroll mistakes you can make (and nasty fines you can incur as a result), make sure you’re completely comfortable with everything you need to do before you dive in.

To get started:

Step 1: Have all employees complete a W-4. To get paid, employees need to complete Form W-4 to document their filing status and keep track of personal allowances. The more allowances or dependents workers have, the less payroll taxes are taken out of their paychecks each pay period. For each new employee you hire, you need to file a new hire report. Note that there is a new version of the Form W-4 for 2020, so this is the form you should have new hires fill out starting January 1, 2020.

Step 2: Find or sign up for Employer Identification Numbers. Before you do payroll yourself, make sure you have your Employer Identification Number (EIN) ready. An EIN is kind of like an SSN for your business and is used by the IRS to identify a business entity and anyone else who pays employees. If you don’t have one, you can apply for an EIN through Square using our free EIN assistant. You may also need to get a state EIN number; check your state’s employer resources for more details.

 

Tips for Successful Payroll Management Services

Implement A Paperless Payroll Process

The first and foremost rule is to opt for paperless payroll management services.

By eliminating paper processing, payroll companies can save time as well as resources. The cost of issuing one paper check is estimated at $3. So if you are looking for ways to cut costs and at the same time, maintain the security of company data, then going paperless is the best way to achieve that.

Install The Right Software

With the advent of technology, you can now easily automate most of your payroll management services. Managing payroll has become easier than ever.

However, the trick lies in selecting and installing the right software suited for your business. There are many types of software available in the market — you can either choose directly from the shelf or have bespoke software developed as per your business needs.

Align Your Different Pay Schedules

When you are looking to effectively manage your payroll processes, it’s essential to stay organized.

Many companies maintain a different pay schedule, mainly weekly, biweekly, semi-monthly, and monthly. You can even pay more frequently if you desire. But in practice, it leads to more errors and increases the likelihood of duplication of multiple processes.

Get Proper Training in Payroll Management Services

The process of payroll management is constantly evolving, and you might especially see a variety of changes in federal and state laws.

Streamline Your Payroll System With Other Existing Systems

The first rule of buying a payroll software is to check whether it will be compatible with your already existing systems. If not, then it can create several problems for you.

For starters, the payroll system must integrate with your accounting system. It makes it easy to calculate and process the payments accurately.HR professionals need to continually educate themselves on the critical aspects of their role. They need to stay up-to-date with the technology progresses, demands on the HR department shifts, and several other related services.