1. Different Bookkeeping Methods

The most basic method for maintaining business bookkeeping is via a manual spreadsheet of revenues and expenses. With this method, a business records incoming money and then keeps a receipt for each expense. At the end of the year, the calculating owner hands everything over to their accountant to file taxes. What can be frustrating about this method is that the company does not know how well it is doing throughout the year. Instead of remaining in the dark, with the right type of accounting software, a small business can maintain accurate records and even file taxes online. With this software, revenues can be recorded and taxes can be filed throughout the year, helping a small business owner see how well they are doing while remaining ready for tax day.

Tax season will be here before you know it! You’ve been keeping your records throughout the year, right? Are you using an Excel spreadsheet or are you paying an accounting service to handle your Texas business bookkeeping? When starting a new business, simple business bookkeeping is easy to manage with a simple sheet. As time passes, though, revenues increase and so do the ‘bits of information’ needed to accurately maintain a business’s bookkeeping. Utilizing an accounting service, though, can be expensive even for the small business owner. Thankfully, there are several accounting software types available that will streamline your business bookkeeping throughout the year and greatly reduce the amount of guesswork assembled at tax time.

1.1. Cash Accounting and Its Impact on Tax Filing

In addition to simplicity, cash accounting can provide tax benefits to small businesses. Due to the simple nature of cash accounting, it’s far easier to manage when providing quarterly or annual reporting requirements. When it’s time to file taxes, your records will closely resemble actual cash activity. For a business filing on a fiscal year basis, they are required to file annually on the 15th day of the 4th month after the end of the fiscal year. If filing on a calendar year basis, the business will file annually on the 15th day of the 3rd month following the end of the fiscal year. If cash accounting serves your business well and you don’t need the additional tax benefits of an accrual method (perhaps you have heavy expenses that would best be recognized in a future period).

When considering the best bookkeeping method for a small business, small business owners will need to consider their type of business, revenue figures, and overall objectives. For many, cash accounting provides the most efficient and effective method for managing a company’s accounting records. Unlike a cash accounting business, an accrual accounting business recognizes revenue at the time of a sale regardless of whether payment is received. For example, if you own an auto garage and you fix a car but do not receive payment in cash, you would still recognize the income that day. Conversely, you would also recognize the expenses that day as well, even if you didn’t get a bill. As you can see, this method is the “opposite” of cash accounting and typically adds many levels of complexity to managing the accounting routine.

1.2. Accrual Accounting and Its Impact on Tax Filing

So how does an accrual-based balance sheet differ from a cash-based balance sheet? The primary differences occur through four actions: accounts receivable, inventory, depreciation, and accounts payable. The net effect of accounts receivable is that it acts like a form of accounts payable for your customers. You support their purchases and they must pay at a later date. Inventory is a bit trickier because it’s nearly always associated with a corresponding accounts payable amount. The reason inventory doesn’t raise red flags for the taxing authorities is that it’s relatively self-liquidating. In other words, over time, inventory will be converted into accounts receivable, then cash. Depreciation represents smooth, steady depreciation of assets that are already on your balance sheet. Finally, accounts payable is just like accounts receivable in reverse. In this case, you needed to pay for something and were given a grace period to pay.

In the United States, businesses often use accrual accounting to record their transactions. In a simplified understanding, accrual accounting puts your income and expenses into the same time period in which you earn the income or use the item. This is different from cash accounting that uses the actual cash flow in and out of your business. Using accrual accounting can have a huge impact on your balance sheet. Although accrual accounting doesn’t require that the company hold cash whenever revenue is booked, your income taxes assume that everything booked is also translating into cash. In other words, if your business can’t pay its income tax assessment because you spent all the cash booked as revenue paying business expenses, you’re in big trouble.

2. Automating Bookkeeping Processes and Record-Keeping

This one is a little indirect, but it’s to prepare for future tax seasons — automate your business debt and equity transactions. I’ve been around long enough to see wonderful businesses fail because it turns out you couldn’t just run something for years without it being legally incorporated. But entity formation professionals are expensive. To help our clients, we created a network of legal professionals in Texas, but mostly Austin. LeanLaw Texas (Austin) Professionals can help you legally form your entity at a rate they agree upon individually because associated professionals who disagree with their pricing in relation to the work they are proposing get the boot. This is not sponsored by LeanLaw or anything. I am just putting this here because I can personally vouch for these folks. If you can’t afford entity formation yet, start automating saving for it with a bank sweep account like ACH Canopy.

There are ways to automate most of your bookkeeping processes and record-keeping, and QuickBooks is a no-brainer for business owners. But Zapier, the app automation platform, can really take your user experience to the next level. Every time you upload a receipt into QuickBooks, the app records the expense, but the image doesn’t go in as part of the transaction. By setting up a Zapier action that when you take a picture with your phone it goes to a specific Dropbox folder, QuickBooks records the expense and links the image to the transaction. I am not a QuickBooks partner, I don’t get a commission for QuickBooks, but I would implore you to switch to QuickBooks or any bookkeeping system with an additional integration if you are using something that doesn’t capture transaction images.

2.1. Tips for Automating Bookkeeping Processes

Many thanks to the concept of automation. In any business, automation has its place. In accounting, the basic explanation is the acceleration of procedures and workflows that help to reduce the use of space plus human resources. It also enables easy data management by mitigating the possibility of errors and can eliminate loads of dull work. However, some of the pretty powerful advantages of streamlining your Texas accounting systems are always overlooked. With automated processes, which allow these software programs to add a professional touch, you can develop an accurate and meaningful insight into the opportunities for your company than one that just captures monetary transactions. Use this information to plan for the future of your company. Employ it to develop consumer relations and better alliances with company stakeholders. Eyes squeezed tight, everyone, and I’m thinking here’s the valuable part!

Whether you use software, a temporary team member, or bookkeeping services in Austin, streamlining your Texas business accounting can be easy and provide many benefits. An ace real estate broker, for example, who handed her business’ bookkeeping duties to a team member, soon noticed that the records were off. Her plan led to employees scarfing down pizza every day and failed to select the right accountant to help her find and claim the break. Manual data entry and the absence of a reconciliation procedure were causing the bookkeeping troubles. She correctly chose to automate and streamline her Texas business’ accounting activities. A result was that she expanded her bottom line by removing the extra income she was putting in by alienating consumers with her poorly delivered and inferior service.

2.2. Tips for Efficient Record-Keeping

If you have to request missing paperwork, allocate some time for it. Vendors are usually good about providing another copy of an invoice or receipt. However, if you contact a vendor for a missing expenditure report or document, you most likely will not get it immediately. An occasional strategy for recognizing missing paperwork is to sort through the financial records and discover gaps in the file. Some businesses also deliver account statement summaries even before year-end documents are completed. Duplicate copies of invoices and receipts are also commonly uploaded to supplier websites or may be delivered within the detail of credit and debit card statements. Even if files are spread out, it is a good idea to link files together with a master Excel spreadsheet. To further augment organizing documents, separate copies of the paperwork for every 3 to 6-month increments. After each tax-season file compilation, this step is very helpful. This is easily done by setting up for the period-total revenue and expenses rows within the federal tax form and establishing sub-totals on the indexes. The added category headers of income and expenses should be distinctly documented in the file name.

The IRS wants you to retain financial records to prove the information reported in tax returns. The number of years that records must be stored is dependent on what is documented on the forms. The tax season survival guide for small business provided by Bankrate serves as a helpful reference for determining the amount of time records must be maintained. Keeping records in a central location is less time-consuming compared to hunting for documents in various areas. In addition to local storage, consider scanning paperwork for electronic storage. Along with allowing for easier access, electronic storage allows traveling business people to carry financial data without the need to take the original paperwork. Records for trademarks, copyrights, patents, and other types of legal support should be stored for the life of the rights plus another 7 years. But if records are destroyed due to theft or any other form of disaster, remember that contacting the IRS can help.

Streamlining bookkeeping processes when taxes are due makes it easier to pull everything together and file the reports on time. It can seem daunting, but there are some things Texas business owners like you can do to make your bookkeeping activities more efficient and accurate. Drawing on a broad collection of business financial management articles, take advantage of these tips to organize your business and keep your business exempt from reporting errors.

3. Benefits of Outsourcing Bookkeeping Services

It’s no surprise that when companies think they “lack” certain business abilities like creating financial statements, tax preparation, financial analysis, and matters related therein, they will bring in bookkeeping help for better full disclosure. However, as we’ve pointed out when it comes to current operating trends, businesses that see value in their time can benefit greatly from outsourced bookkeeping service help. These companies will value not having to commit to other essential financial reporting requirements when other areas within the organization need their attention. Furthermore, it is in these companies’ best interest to remain focused on business operations—in certain sensitive areas—instead of trying to be “jack of all trades, master of none.” For example, would a medical insurance company want to perform their bookkeeping (a highly sensitive area) when they must chair the ongoing resolution to make legislative changes to make healthcare in America more affordable? Not likely. Would they instead consider hiring bookkeeping help so that their management can put together reports containing financial analysis that is useful to their business stakeholders—especially financial stakeholders interested in the bottom line as it relates to investors’ equity? The answer would be yes.

Outsourced business bookkeeping services can be an asset to businesses who lack in-house expertise or those who can benefit from more efficiency in their small business tax filing process. At ATBS, it is our primary goal to enable Texas businesses to maintain more accurate and timely records with improved financial insight. As a result, we are in a position to help make tax season more bearable for our business clients. Save valuable time and hassle by leaving the work to us while you stay focused on your business success. There are added benefits to hiring bookkeeping services specifically for small business owners who seek value in their time. The intention behind hiring outsourced financial help is to provide the business owner with “more time and the relevant data to make better decisions.” But setting aside these goals, the better question is to consider how a small business can benefit from outsourced bookkeeping help. Alternatively, there are benefits that will appeal to even non-business owners. This article will discuss three significant ways that business bookkeeping services can be beneficial.

3.1. Advantages of Outsourcing to a CPA Firm

Untangling the differences between a CPA, EAs, and attorneys who specialize in taxes shouldn’t keep you from prepping for the next round of business taxes. CPA firms are slightly less versatile than a smaller firm led by a single owner, while the CFO services and personal wealth management offered under a single roof at many smaller firms. In addition, the range of professional consulting services and ISO 9001-2014 QMS Certification eleven of Texas’s many CPA firms offer far exceed the ad hoc professional consulting and business expansion services a solo CPA can offer. However, business bookkeeping tax services quality, the time you’ll have to sit down with your accountant and go over your past year’s taxes or develop your future business expansion strategy, highly efficient personal communications with your tax accountant, and how likely a Texas business will be to recommend their accountant and/or business bookkeeping to family, friends, and business associates increase, according to the same sources and the information we’ve gathered with Patrick Accounting over the years.

One of the greatest advantages of outsourcing to a CPA firm is the multidisciplinary approach your Texas business bookkeeping benefits from when the CPA firm offers a wider range of professional accounting and consulting services. Patrick Accounting’s more than 720 clients also receive national and international resources and support. This radically increases a small or mid-sized business’s accounting depth with access to the industrial expertise, knowledge, and experience needed to ensure the person or team managing your Texas tax preparation isn’t in over his or her head. Why is it so important to work with a tax consultant who really knows your business? According to Deloitte, 44% of small businesses say a lack of communication was the biggest mistake made by their accountant. A national or international accounting firm with Texas-based and other clients faces the same potential problem. However, a well-chosen CPA firm allows you to pick your Texas business’s tax professional from a larger talent pool in accordance with your criteria.