Accounting
One
of the top reasons for business failures is lack of accounting and
feedback from those numbers. Many small companies have no accounting
system in mind. They simply open a bank account and start spending.
They write checks out of a check book and after three months collect
a shoe box full of receipts and have a file folder of bank statements
with cancelled checks. As long as they still have money in the account
they are happy. Then comes time to pay taxes and they frantically
look for an accountant or CPA to help them with their taxes. Many
attempt to do it on their own and make many mistakes.
Usually
these people are upset when the accountant or CPA tells them how
much it will cost to reconcile their bank statement for the last
12 months to complete a tax return. Their records are in a mess.
Typically, they file an extension to deal with it later and usually
file late. This is no way to run a business.
You
may be saying I am a one-person business and I do not have time
for all this. It can be difficult at first. Here are some tips for
success:
- Use
software like quickbooks from day one that your business starts.
- Use
computerized checks that force you to enter each check into the
computer and start a record keeping process.
- Make
an appointment with 2-3 three accountants/CPAs to determine what
they will do for you to help you with your monthly accounting.
Then make a decision based upon service and over all value. What
you may be looking for them to do is:
- To
reconcile your bank statements each month.
- To
set up a chart of accounts for your business in quickbooks (quickbooks
will do this for you but it is worthwhile for it to be reviewed
to keep you on track.
- To
set up a system for petty cash.
- Use
one separate credit card for business. An American Express business
card would be ideal.
- Take
care of payroll for you. Many companies use a separate payroll
service like ADP.
- Help
you with sales tax if that applies to your business.
- Help
you with a monthly budget.
- Review
your financial progress once a quarter, especially during the
first couple of years. You may have to adjust the amount of money
you pay yourself (if you are able to at this point).
- Set
up a system in your office to keep track of your records.
- Use
a system like Sandy Botkin’s Tax System to understand how to maximize
your business deductions and how to keep your records in a journal
format.
- Meet
with your accountant about a month before the end of your tax
year to determine what is your business tax picture.
- Complete
your first year tax return. Do not complete the first year return
yourself if at all possible. There are critical questions on the
back of a return for a corporation that will cast the dye in the
future on how you will be looked at by the IRS. You do not want
to casually answer these questions if you think they have no bearing
on you this year because your business did not make much money.
Typically
you are looking for a monthly fee for them to support you. You will
want to know what they charge to prepare and file an end of year
tax return. Find out if they give you any tips throughout the year
or do you just show up and they file a return?
The
bottom line is to make sure you have a strong accountant or CPA
to help you with your business’s taxes. You will be much happier
you did and keep on track!
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We
feel the first step in your
new business is a critical one. Which
entity is best for you? Please call us at
(888)
466-7566,
and ask for a free consultation with a Senior
Consultant.
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