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Category: Bookkeeping

Bookkeeping for Restaurant

Bookkeeping for Restaurant Owners: A Comprehensive Guide

Running a restaurant is a dream for many, but it comes with its fair share of challenges, particularly in the financial realm. Proper bookkeeping for restaurant owners is essential for the success and longevity of your business. In this comprehensive guide, we’ll delve into the intricacies of restaurant accounting, food costs, labor costs, and more to help you maintain your restaurant’s financial health and make informed business decisions.

Understanding Restaurant Accounting

Restaurant accounting is the backbone of any successful eatery. It involves meticulous record-keeping and financial management to ensure the business stays profitable. Let’s explore the key aspects:

The Basics of Bookkeeping for Restaurant

The Basics of Bookkeeping for Restaurant

In the realm of restaurant bookkeeping, accuracy is paramount. At its core, this process revolves around meticulously tracking financial transactions to ensure a seamless financial operation. From recording sales data through a POS system to managing payroll and supplier payments, every financial aspect demands precise attention.

Additionally, a vigilant eye is essential to spot and rectify any accounting errors that may arise, preventing potential discrepancies that could affect your business’s financial stability. Moreover, staying compliant with sales tax regulations is crucial, and this responsibility often falls within the purview of a dedicated restaurant accountant who ensures that the restaurant meets its tax obligations promptly and accurately.

The Importance of Financial Statements

It plays a pivotal role in the world of restaurant bookkeeping, serving as invaluable tools for gauging your establishment’s financial health. They offer a comprehensive view of your restaurant’s performance, encompassing vital aspects such as food sales and cost of goods sold. By carefully examining income statements, you can gain insights into your revenue and expenses, including the costs directly related to food sales. This analysis is pivotal in optimizing profitability and identifying areas for improvement.

Balancing the equation, the balance sheet provides a snapshot of your restaurant’s financial standing at a specific point in time, including assets and liabilities. Meanwhile, cash flow statements offer an intricate perspective on the inflow and outflow of cash within your restaurant, helping you manage fixed costs efficiently. This trio of financial statements forms the cornerstone of restaurant bookkeeping, equipping you with the knowledge needed to make informed decisions, control expenses, and ultimately thrive in the competitive restaurant industry.

Controlling Food Costs

Food costs are a significant expense in the restaurant industry. Keeping these restaurant expenses in check is crucial for profitability.

Calculating Cost of Goods Sold (COGS):

Calculating the Cost of Goods Sold (COGS) is a pivotal aspect of restaurant bookkeeping that requires precision. COGS represents the direct costs incurred in producing the food and beverages your restaurant serves, and it significantly influences your gross profit margin.

Accurate COGS calculations are vital because they provide a clear picture of how efficiently your restaurant is managing its raw material costs. This knowledge allows you to make informed decisions about pricing, menu offerings, and supplier negotiations, all of which can significantly impact your restaurant’s profitability.

Managing Inventory Costs:

Effective inventory management is a linchpin in the intricate machinery of restaurant bookkeeping. It serves as a potent tool for reducing wastage, controlling costs, and ensuring that you always have the right ingredients on hand when your kitchen needs them. By minimizing wastage and spoilage, you not only cut down on food costs but also contribute to better cash flow management.

One effective strategy in managing inventory costs is implementing a first-in, first-out (FIFO) system, where older inventory is used before newer inventory. Regular inventory checks and audits are also essential to identify any discrepancies and potential areas of improvement.

Efficient inventory management not only reduces food costs but also ensures that you’re prepared to meet customer demands without over-purchasing or understocking, ultimately contributing to the financial well-being of your restaurant. It’s a practice that aligns closely with accurate COGS calculations and, when combined, can significantly enhance your restaurant’s profitability and sustainability.

Managing Labor Costs

Labor costs are another substantial expense for restaurants. Effective management is essential to optimize your budget.

Understanding Labor Cost Components:

In the world of restaurant bookkeeping, labor costs are a substantial chunk of expenses, and it’s crucial to dissect their components for effective management. Labor cost components encompass various aspects, with the primary ones being wages, benefits, and payroll taxes.

Wages: This constitutes the basic pay that your employees receive for their work, such as hourly wages or salaries. Understanding wage structures, including overtime rates, can help you create efficient schedules that optimize labor costs.

Benefits: Beyond wages, benefits include perks like health insurance, retirement plans, and paid time off. These elements can significantly impact your labor costs. It’s essential to evaluate the necessity and sustainability of the benefits offered while considering their influence on employee retention and morale.

Payroll Taxes: Payroll taxes include deductions made from employees’ paychecks to fund government programs like Social Security and Medicare. Employers are also responsible for paying payroll taxes, such as unemployment taxes. Understanding the tax obligations associated with your workforce and staying compliant with tax laws is critical.

Payroll Liabilities and Taxes:

Payroll liabilities and taxes constitute a critical aspect of restaurant bookkeeping, and vigilance in this area is paramount. Restaurant owners must stay on top of various payroll tax obligations to maintain compliance with tax regulations and avoid potential penalties.

Payroll Tax Obligations: These obligations encompass a range of taxes, such as federal and state income taxes, Social Security taxes, and Medicare taxes. Employers are responsible for withholding these taxes from employees’ paychecks and remitting them to the appropriate tax authorities.

Managing Payroll Taxes Efficiently: To manage payroll taxes efficiently, it’s essential to accurately calculate and withhold the correct amount from each employee’s paycheck. Timely remittance of these taxes is crucial to avoid penalties and interest charges.

Handling Operating Expenses

Beyond food and labor, there are various operating expenses that you must account for to keep your restaurant afloat.

Handling Operating Expenses

Fixed Costs vs. Variable Costs:

In the realm of restaurant bookkeeping, understanding the fundamental difference between fixed and variable costs is pivotal for effective financial management. Fixed costs remain constant regardless of your restaurant’s sales volume, encompassing expenses such as rent, insurance, and equipment leases.

In contrast, variable costs fluctuate with your restaurant’s activity, including ingredients and labor. To optimize profitability, restaurant owners should strategize ways to reduce expenses without sacrificing quality, identifying opportunities to trim fixed costs through negotiations, lease reviews, or space optimization, while efficiently managing variable costs through inventory control and labor scheduling.

Accounts Payable Process:

The accounts payable process is a crucial component of restaurant bookkeeping, influencing your relationships with suppliers and your restaurant’s financial stability. Implementing efficient accounts payable practices involves meticulous record-keeping, setting clear payment terms with suppliers, and utilizing digital tools for invoice processing and payment automation.

Implementing Restaurant Accounting Software

In the digital age, accounting software is a game-changer for restaurant owners. Explore the benefits of restaurant accounting software and how it can simplify your financial management.

Choosing the Right Accounting Software

Selecting the appropriate accounting software for your restaurant is a pivotal decision that can significantly impact your financial management efficiency. With a multitude of options available, it’s crucial to assess your restaurant’s specific needs and budgetary constraints.

Making an informed choice in accounting software can streamline your restaurant’s financial processes, reducing errors and saving valuable time that can be better directed toward enhancing customer experiences and overall business growth.

Leveraging POS Systems

Point of Sale (POS) systems are indispensable tools in modern restaurant operations, and when integrated with accounting software, they become a dynamic duo for financial management. These systems not only simplify sales data entry but also facilitate real-time tracking of revenue and expenses, providing accurate insights into your restaurant’s financial health.

By leveraging POS systems, you can ensure the seamless flow of financial information into your accounting software, resulting in up-to-date, error-free financial records. This integration not only enhances efficiency but also allows you to make data-driven decisions that optimize your restaurant’s profitability and overall success.

Monitoring Financial Performance

Your restaurant’s financial standing depends on continuous monitoring and analysis of key financial metrics.

Gross Profit and Net Profit

Understand the difference between gross and net profit, and how these metrics reflect your restaurant’s overall financial performance.

Financial Reporting and Analysis

Learn how to create and interpret financial reports to gain insights into your restaurant’s strengths and areas for improvement.

Outsourcing Payroll and Accounting

Outsourcing Payroll and Accounting

Managing restaurant payroll and accounting can be overwhelming. Outsourcing these tasks can save you time and reduce the risk of errors.

The Role of Restaurant Accountants

Discover how restaurant accountants can help you maintain financial accuracy and navigate complex tax regulations.

Benefits of Outsourcing Payroll

Explore the advantages of outsourcing payroll, including cost savings and compliance with payroll tax regulations.

Maintaining Financial Records

Accurate record-keeping is a fundamental aspect of bookkeeping for a restaurant. Learn how to maintain organized accounting records for your business.

The Importance of Account Reconciliation

Regular account reconciliation ensures that your bank accounts and financial data align, preventing discrepancies and potential financial errors.

The Role of Chart of Accounts

A well-structured chart of accounts simplifies financial reporting and aids in tracking specific expenses and revenues.

Enhancing Business Strategy

Beyond day-to-day financial management, your bookkeeping efforts can inform your long-term business strategy.

Using Sales Data for Strategy

Analyze sales data to identify trends and opportunities that can inform your menu, pricing, and marketing strategies.

Benchmarking Against Industry Averages

Comparing your restaurant’s financial performance to industry averages can help you set realistic goals and expectations.

In this comprehensive guide to bookkeeping for restaurant owners, we’ve covered essential topics, from restaurant accounting and food costs to labor management and financial reporting. By mastering these aspects, you can enhance your restaurant’s financial standing, make informed decisions, and ensure the long-term success of your business. Remember that accurate bookkeeping is the key to understanding how much revenue your restaurant generates, managing expenses, and ultimately thriving in the competitive food and beverage industry.

For further insights and resources on restaurant accounting, consider consulting industry experts, exploring dedicated accounting software, and staying informed through resources like the National Restaurant Association. With the right knowledge and tools, you can take control of your restaurant’s finances and achieve lasting profitability.

Elevate Your Restaurant Business

Elevate Your Restaurant Business with Vyde’s Expert Bookkeeping!

Unlock the full potential of your restaurant with Vyde’s professional bookkeeping services. Get detailed financial insights at your fingertips and let our team of accountants take the hassle out of your bookkeeping and taxes. With Vyde, you can say farewell to the endless hours of dealing with spreadsheets and the chaos of receipts. We’re here to ensure your financial management is as smooth and efficient as your kitchen, giving you the freedom to focus on creating culinary delights. Streamline your bookkeeping, minimize accounting headaches, and keep your attention where it belongs – on your restaurant’s success. Choose Vyde for financial clarity and peace of mind.

 

Saving Receipts for Taxes

Why Saving Receipts for Taxes Is Crucial: Tips and Strategies

Tax season is a time of year that many people dread, but it doesn’t have to be so anxiety-inducing. One of the most effective ways to ease the stress of tax filing during tax time and potentially save money is by diligently saving your paper receipts. Whether you’re a small business owner, self-employed individual, or simply a taxpayer looking to maximize deductions, understanding which receipts to keep and how to manage them is crucial. In this comprehensive guide, we’ll explore why it is important to save receipts for taxes and provide you with valuable tips and strategies to streamline the process.

Learn Which Small Business Receipts to Keep

When it comes to small businesses, accurate record-keeping is essential. Keeping track of your expenses through receipts can help you determine your taxable income and ultimately reduce your tax liability from your gross income. But which receipts should you keep? Here are some common types of receipts that you should definitely hold onto for tax purposes:

Small Business Receipts to Keep

Receipts To Keep for Small-Business and Self-Employment Taxes

Expense Receipts

Expense receipts refer to documentation or records of expenditures made by individuals or businesses for various purposes.

These are vital records of expenditures incurred by individuals or businesses. They serve as tangible proof of various types of spending, including personal purchases, business expenses, travel expenses, transportation expenses and charitable donations. These receipts are instrumental in budgeting, financial record, and, most importantly, for tax purposes.

Taxpayers rely on it to determine their deductible expenses, which can significantly reduce their taxable income. Properly organizing, categorizing, and retaining these receipts is essential for maintaining financial accuracy and compliance with tax regulations.

Purchase Receipts

Purchase receipts are essential financial documents that provide a detailed record of items acquired for business purposes, such as inventory, equipment, or assets. These receipts play a pivotal role in a company’s financial management by serving as concrete evidence of business-related transactions. They help in accurately calculating the total cost of acquiring assets, which is vital for determining a business’s financial health and evaluating its profitability.

Moreover, they are invaluable when it comes to tax writes-off and asset depreciation. Businesses can claim deductions on the cost of purchased business assets, or office expenses gradually reducing their taxable income over time. The information contained in these receipts is instrumental in ensuring accurate financial reporting, complying with tax regulations, and optimizing tax strategies.

Furthermore, purchase receipts facilitate comprehensive asset management and tracking. They allow businesses to keep an updated record of their assets, which is crucial for assessing their value and depreciation over time.

Childcare Expenses

You might be eligible to receive a tax credit for expenses related to caring for your child or dependent. These expenses can include payments made to a babysitter, daycare, day camp, after-school program, or another care provider. If the care is provided in your home, you may also qualify for additional expenses, such as hiring a maid, cook, or housekeeper to care for your child or dependent.

To qualify for this credit, you must have paid these expenses to allow yourself (and your spouse if you’re married) to either work or actively search for work. Both you and your spouse need to have earned income, unless your spouse is disabled or a full-time student, in order for these expenses to be eligible.

You can claim this credit if you have one of the following types of dependents:

  • A child under 13 years old whom you claim as a dependent.
  • A disabled spouse or dependent who is unable to care for themselves due to physical or mental reasons

Unreimbursed Work-Related Expenses:

If your job requires expenses that your employer doesn’t reimburse, these receipts can be valuable for tax deductions.

If you’re someone who itemizes deductions and anticipates work-related costs, it’s advisable to keep a record of those receipts for taxes. These tax professional deductions encompass expenses like tools, equipment, supplies, mandatory work uniforms unsuitable for non-work settings, protective gear, professional dues (such as union memberships or professional organization fees), subscriptions to professional publications, and even costs incurred during a job search within your current field.

Moreover, you had the potential to deduct expenses associated with specific training and educational endeavors relevant to your profession, as well as expenses linked to using your home for business purposes and personal vehicle mileage related to work duties (excluding commuting). It’s worth noting that some individual states still permit deductions for these types of expenses

Personal Income Tax Receipts:

Receipts to Retain for Personal Income Tax Records It’s not just business owners who should be diligent about preserving receipts; many taxpayers are eligible for tax writes-off that may necessitate proof in the form of receipts.

Additionally, make sure to keep the following documents:

  • Receipts for purchases that qualify for special tax benefits, like those eligible for an educator expense deduction.
  • Supporting receipts and documentation for eligible home improvement expenses on real estate.
  • Receipts for qualified medical expenses and dental costs, including out-of-pocket payments for medical services, hospital stays, prescription medications, and expenditures associated with traveling to and from medical appointments, which encompass parking fees and tolls.
  • Documentation verifying tax-deductible donations, regardless of the amount, in the form of cash, checks, or other monetary gifts.
  • Receipts for dependent care expenses if you’re a working parent or if you incurred these costs while actively seeking employment.
  • Receipts for energy-saving home improvement projects.
  • Receipts indicating state and local sales tax payments made on purchases, particularly if the sales tax surpasses your state income tax withholding or if you reside in a state with no personal income tax.
  • Receipts for qualified education expenses, such as tuition, fees, books, and supplies.

By keeping these receipts, you can better document your expenses, leading to potential tax savings.

Business Expense Receipts

Your business expenses encompass the various costs associated with operating your business, excluding your purchases. Seek expert guidance on which receipts for taxes are essential for your business tax records.

At times, simply having canceled checks may not suffice as evidence for a deduction, as explained by Lee. For instance, a check written to Costco may not serve as proof of a business expense, as it could be for groceries or personal items.

Similarly, credit card charges related to a business trip to Maui might appear to be a vacation unless you can furnish additional documentation supporting the business purpose. Therefore, it’s crucial to save receipts, business conference flyers, and other relevant documents to substantiate the business nature of these expenses, as advised by Lee.

Here are the types of tax documents you should retain for tax purposes:

  • Canceled checks
  • Cash register tapes
  • Account statements
  • Credit card receipts and statements
  • Petty cash slips
  • Invoices

Donations to Charitable Causes

Donations to Charitable Causes

Whether you’ve given clothing or food supplies to a nearby shelter or provided monetary contributions to support veterans, you have the opportunity to claim tax deductible donations. It’s important to note that deductions can only be claimed for donations made to organizations that hold tax-exempt status.

Specifically, if an organization possesses a 501(c)(3) designation, you are eligible to deduct your contributions. In cases where the organization doesn’t have this status, you can still claim deductions, but you must first confirm with the IRS. If required, don’t forget to request a receipt, especially if you intend to itemize your tax return.

Healthcare Expenses

Make sure to retain documents reflecting proof of paid bills or medical expenses for yourself, your spouse, your children, or any other individuals you claim as dependents.

Furthermore, you can also claim deductions for various medical items, including but not limited to medical equipment, breast pumps, eyeglasses, contact lenses, and more. 

In fact, the IRS includes the following medical expenses in a comprehensive list of eligible tax deductions:

  • Expenses for Guide Dogs
  • Costs Associated with Medical Examinations and Tests
  • Acupuncture and Chiropractic Services
  • Occupational and Physical Therapy
  • Sessions with Psychiatrists and Psychologists
  • Weight-Loss Programs (Only if Prescribed by a Doctor for a Diagnosed Condition)
  • Nursing Care
  • Hospitalization Costs
  • Expenses for Transportation to and from Medical Appointments
  • Lodging Expenses for Out-of-Town Medical Treatment

Other Expenses

There are a few more types of receipts that you should consider retaining, depending on your individual tax circumstances. In certain cases, it can be advantageous to claim a deduction for the state and local sales tax you paid on your itemized deductions, instead of the total amount of state and local income taxes you incurred throughout the year.

Typically, this deduction for sales tax is most beneficial for individuals who made one or more significant purchases during the tax year, such as a car, boat, RV, or home extension, resulting in a higher sum of sales tax paid compared to their income tax withholding.

It is also relevant when you reside in a state that does not impose a state income tax. If your situation aligns with this description, it’s prudent to retain all sales receipts.

Saving receipts for taxes is a crucial part of responsible financial management . By understanding which receipts to keep, embracing digital record-keeping, and maintaining an organized filing system, you can not only make tax time less stressful but also potentially unlock significant tax savings. Remember that while this guide provides valuable tips and strategies, it’s always wise to consult with a tax professional for personalized advice tailored to your specific circumstances.

Stress-Free Tax Management Awaits You at Vyde!

Say farewell to tax worries and unexpected costs. With Vyde, experience seamless tax completion, catch-up bookkeeping, and overdue tax assistance. Our commitment to year-round service guarantees maximum savings on your tax bill. Don’t wait – let Vyde take the helm of your business taxes today!

Frequently Asked Questions:

  1. Why is it important to save receipts for tax purposes?

    Saving receipts is crucial for tax purposes because they serve as proof of your business and personal expenditures. These receipts can help you determine your taxable income, claim deductions, and potentially reduce your tax liability, leading to significant tax savings.

  2. What types of receipts should small business owners keep for tax season?

    Small business owners should keep receipts for all business expenses, including expense receipts, purchase receipts for items like inventory and equipment, and any receipts for business-related travel. Additionally, documentation for unreimbursed work-related expenses, charitable donations, and healthcare expenses should be retained.

  3. Can personal expenses ever be deducted on taxes?

    Yes, certain personal expenses can be deducted, such as qualified medical and dental costs, childcare expenses for working parents or job seekers, donations to charitable causes, and significant purchases that may offer special tax benefits or credits.

  4. How long should I keep my tax receipts?

    The IRS recommends keeping tax records for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. However, if you file a claim for a loss from worthless securities or bad debt deduction, keep records for seven years.

  5. What is Vyde, and how can it assist with tax management?

    Vyde is a service that offers seamless tax completion, catch-up bookkeeping, and assistance with overdue taxes. It provides year-round service to ensure maximum savings on your tax bill, aiming to make tax management stress-free for its clients.

Finding the Right Bookkeeper for Your Business

Are you looking for reliable bookkeeping services for your business? Like many business owners, you may not know where to start. When you are passionate about your business but the numbers are overwhelming and challenging for you, competent and professional bookkeeping services can easily take care of the dollars and cents on your behalf. If you would like to be truly profitable and successful, you have to keep tabs on your business finances.

As a small business owner, if you do not know where you stand on a monthly, quarterly, or annual basis, your chances of surviving and growing can decrease considerably. There is no doubt that a bookkeeper can help manage your finances, provide valuable insight, and can have a big impact on the trajectory of your small business.

Here are five things you should consider when hiring the right bookkeeper for your business.

1. The Right Experience and Expertise

When you start researching potential bookkeepers or bookkeeping companies, find out about their experience level. It is no secret that every industry has its unique quirks when it comes to financial record-keeping. Check to see if the company or candidate has experience and confidence that they can navigate the ins and outs of your industry.

In addition, make sure you have the right experience for the right role. Instead of having one person try to tackle all your finances, look for a team of specialized individuals who work well together. Having someone who specializes in bookkeeping focus on your books and an accountant who specializes in tax do your taxes can improve accuracy and save you money.

While a company website will certainly offer some valuable insights into their experience, you should ask a few important questions. Some of them are:

  • How long has the candidate or company been in the bookkeeping industry?
  • What type of clients do they serve?
  • Do their services meet your business needs?

Accounting and bookkeeping is not an easy science. So, for a business that is starting out or growing, you need to have somebody who has been successfully doing this job for quite some time.

2. Communication is Key

If you are not good with numbers, you need a professional who will help you understand and appreciate the numbers. So, it is important to make sure that your communication style and the communication style of your bookkeeper work well together.

Some bookkeepers or bookkeeping companies charge extra for financial reviews or consultations. Ask about potential additional costs and be sure to factor those into your budget. It’s good practice to meet with your bookkeeper or accountant at least once per quarter to get a better gauge on your business finances.

Your bookkeeper needs to present your business finances in a simple way that makes sense and also keeps you informed at both the frequency and level that you prefer.

3. They Must Have Attention to the Detail

Numbers can be challenging and tricky to deal with. Keep in mind that even a small error or mistake in figures could impact your company. Look for a bookkeeping company or individual that has a thorough review process so you can have confidence your reports are accurate. A bookkeeper’s ability to give attention to the smallest details can ensure that mistakes or errors are minimized.

4. Look for Transparency and Trustworthiness

When it comes to bookkeeping, transparency must be among the first things that you should look for in a candidate. The bookkeeper you choose should be able to give you an instant and reliable quote for their services without any hidden fees that may pop up after several months of working together. There is no doubt that this is the type of transparency and honesty that you need in the bookkeeper who will be handling your business finances.

Also, note that any bookkeeping professional that you hire should be a reliable and trustworthy candidate. You will entrust this professional with confidential and sensitive financial details of your business. Choosing an individual or company that you could rely on and trust would give you peace of mind.

5. Up to Date on Tech

The financial industry is continually evolving, and while the principles of bookkeeping and accounting might not change, there are ways your bookkeeper can make your financial data more accessible and digestible than ever before. Look for a bookkeeper who is open to adopting innovations and can keep up with changing technology to provide you with the best experience.

The right bookkeeper for your business should be adept at using standard bookkeeping software and tools, and they should also have an innovative mindset to help you have better insight and make informed business decisions.

There is no doubt that hiring a bookkeeping professional or company can be an important decision for your business. An excellent bookkeeping partner will be with you and help you every step of the way as your company grows.

Accountant

What to Look for in an Accountant

Accounting and tax software have made it possible for small businesses to get along without having an in-house accountant. Depending on the business’s complexity and the owner’s appetite for accounting tasks, small businesses can thrive for years with just an occasional phone call with an accounting software’s customer support line.

However, as businesses grow, accounting issues get more complex, and tax filings become too cumbersome for owners to handle. That’s when you hire an accountant — either a firm or an employee — to take on the financial tasks that eat up your spare time.

Accountants can alleviate the administrative burden of running a business, leaving owners with more time to focus on doing what they love. But with so many options available for accounting services, how do you know what to look for in an accountant and what’s best for your business needs?

Follow these tips and get your small business accounting in order with the right accountant!

Overview: What Does a Small Business Accountant Do?

With all the help accountants can provide, it’s no wonder why accountants are a business owner’s best friend. A small business accountant can maintain the books, analyze financial results, file business taxes, and consult with owners to expand the business’s bottom line.

Small business accountants are best known for carrying out day-to-day bookkeeping. They track sales and expenses, and keep an eye on cash flow. Some small business accountants also run payroll.

At the end of the accounting period, accountants produce financial statements — balance sheets, income statements, and cash flow statements — to give you an overall picture of your company’s financial health. Experienced accountants use the financial data to prepare your business taxes, a task most business owners would be happy to get off their plate.

Aside from rote bookkeeping and tax filing, the most significant value-add from a small business accountant is financial analysis and teaching basic accounting concepts. Through financial ratio analysis, accountants pinpoint the areas where your business could improve efficiency, boosting your bottom line. Business owners lean on their accountants to suggest changes to the business model that can yield profits.

Budgeting also falls within a small business accountant’s wheelhouse. Integral to creating a realistic growth plan is a financial forecast to reel in your unwieldy dream sequence. A small business accountant tends to be a jack-of-all-trades able to answer most financial questions you have. However, you can find accountants who specialize in the areas that meet your business needs. For example, if you need someone to maintain your accounting software, you’ll want to hire an experienced bookkeeper. If you’ve decided you’re never filling out another tax document, find yourself a small business tax accountant.

4 Things to Consider When Looking for a Small Business Accountant

Ask yourself the following questions before starting your search.

1. What Accounting Services Are You Looking For?

Make a priority list for the tasks you’d like the accountant to take on. Searching for an accountant is easier when you have a job description for the role.

A small business accountant’s task list could include:

  • Audit preparation
  • Day-to-day bookkeeping
  • Accounts payable
  • Accounts receivable
  • Tax preparation
  • Payroll
  • Financial statement drafting
  • Financial planning and analysis
  • Budgeting

Consider not only your company’s current needs but also those in the near future. For example, don’t search for a bookkeeper when you think you’d eventually like to turn over payroll duties to someone else. You can likely combine these two tasks into an accounting clerk position.

2. Hiring a Firm or an Employee

You’ll want to determine whether you want an in-house accountant or a firm to manage your business’s accounting workload. Each has benefits and drawbacks, and it comes down to how much accounting help you need.

For example, hiring an in-house accountant, either part-time or full-time, ensures a certain dedication of your accountant’s time. However, small businesses that don’t have a constant need for accounting work might find that a firm can bring 360-degree service at a fraction of the cost. Hiring an employee can be costly when you add wages, employer payroll taxes, and other benefits.

If you’re unsure which route to take, put your feelers out to firms first. You can test-drive a firm by giving them just a portion of your total accounting workload before deciding whether to continue. Hiring an employee requires commitment.

3. Determining Your Budget

Knowing your budget might also help to answer my previous question. As you search for an accountant, consider how much you’d like to spend on accounting services.

Your budget should reflect the services and expertise your business requires, considering the complexity of its accounting issues. Where your business is located also influence the going rate for accounting services.

Research is the best way to build a budget for accounting help. If you’re looking to hire a firm, get some quotes. When looking for an in-house accountant, check out websites such as Glassdoor.com to see what accountants in similar companies earn. Another way of gaining information is asking a peer or other small business owners and gaining insight through them.

4. How Software Can Lighten Your Accounting Workload

If your business doesn’t already have accounting, payroll, and tax software, now might be a great time to introduce it. Software can take on most of the automated aspects of accounting.

It’s not a perfect solution: There will still be many aspects of your accounting you will have to manage yourself. It might be worth paying extra to have a professional handle your financial statements and taxes to ensure accuracy and save you the hassle.

How to Find an Accountant For Your Small Business

Like in all professions, reputation is paramount. Ask your trusted family, friends, and colleagues for accounting firm recommendations.

Make sure you’re talking to people who have hired these accountants to do similar work. For example, a great personal tax accountant might not have the specialty or interest in running your S corporation’s payroll.

Use the local society of CPAs directory.

If you’re looking for the expertise of a CPA, check out the website of your local society of CPAs. They commonly have directories of local individuals and firms with filters to help you find professionals with a specialization in your industry who can meet your accounting needs.

Search online.

Perhaps nobody you know has a recommendation. You can still find a great accountant for your business with an online search.

If you’re looking to hire an employee, create a recruitment plan and post your job description on a few online job boards.

When searching for an accounting firm, make sure to checkout clients’ online reviews before you call for a quote. But take online reviews with a grain of salt: People usually only find time to share glowing and hateful reviews, with little to nothing in between. But if you find a firm with nothing but bad reviews, consider striking it from your list.

3 Best Practices When Hiring a Small Business Accountant

Keep these tips in mind when hiring your accountant.

1. Look For Experience That Fits Your Needs Now and In The Future

Say you need a bookkeeper today, but you know that tax season is coming up. Hire an employee or accounting firm with the skill set to do both.

You want an accountant who can grow with you and help you tackle any accounting needs that may come your way. When you’re interviewing potential accountants, ask them about the type of accounting software they’re comfortable using and what they do to stay up to date with the latest accounting and tax laws.

Business owners who’ve aced Accounting 101 can ask targeted questions during an interview to assess whether the candidate is ready to take on all they’re looking for.

2. Shop Around

Interview at least three firms before choosing one. Accounting firms can differ greatly on price, and you don’t want to get into a situation where you realize only years later that you’ve been overpaying for services.

Likewise, interview multiple candidates before hiring an in-house accountant. Make sure you’re making the job posting widely available so people from different backgrounds can apply. A diverse pool of applicants is essential in any hiring process.

3. Conduct Background Checks and Check References

Accountants have access to your business’s most private information, from employee records to bank account information. You’ll want to run a background check and ask for references before turning your books over to someone new.

Get Back to Business By Hiring an Accountant

Not everyone is like us at Vyde and loves talking about and practicing accounting. That’s probably for the best. By hiring an accountant, or using accounting services, you’ll be able to get back to doing what you love and have more time to focus on growing your business. If you’re still unsure of where to start, here’s an easy option: try Vyde free for 30 days and see why hundreds of businesses choose our services everyday!


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How to Catch Up on Bookkeeping in 6 Simple Steps

How to Catch Up on Bookkeeping in 6 Simple Steps

 

Small businesses owners have many tasks to juggle just to be able operate their business efficiently. These tasks can include: daily operations, marketing, sales, products, processes, management and more. Those tasks can quickly become overwhelming for small business owners. While many day-to-day activities of owning a small business differ based on industry, bookkeeping does not.

Gather Your Receipts

Every business involves bookkeeping. Delayed or inaccurate bookkeeping can swiftly become a financial disaster for any business. How can you grow your business, secure capital, or even file taxes correctly without accurate and up-to-date books?

Suddenly, your finances are a mess. You’re wondering how you got here and how to catch up on bookkeeping fast. Sound familiar? Investing in bookkeeping services like Vyde streamlines your bookkeeping processes and helps you grow your business. You can also take steps now to start climbing out of the financial mess into which you’ve somehow fallen. 

Bookkeeping services aside, if you’re eager to learn how to catch up on bookkeeping alone, you can follow these six simple steps to get the ball rolling.

1. Gather Your Receipts

If your receipts are scattered all over, it’s time to call them in. You’ll need to gather all of the receipts, invoices, and other financial documents related to your business, including records like:

  • Bank statements
  • Credit card statements
  • Business expenditures
  • Business revenue
  • Customer accounts
  • Bad debt expenses
  • Vendor accounts
  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

Additionally, if you have customers who are overdue on their payments, we recommend sending out pending invoices to those customers to avoid potential bad debt expenses.

2. Reconcile Bank Accounts

Next, it’s time to double-check your records. Take time to sit down with your credit card and bank statements. These statements should always match your business records, vendor accounts, and customer accounts. 

If you find a discrepancy or if they don’t add up, locate the error before moving on to step three. Unfortunately, discrepancies and human error are common problems for business owners who aren’t using a team of experts. 

3. Separate Personal and Business Expenses

An essential step to knowing how to catch up on bookkeeping is to take measures to prevent your books from becoming messier in the future. If you already separate your personal and business expenses, great. You can move on to step four. If not, you’ll need to separate those expenses to keep your books up to date. 

We always recommend keeping personal and business accounts separate, including bank accounts, credit cards, and other finances. Accounts that are tangled together create unnecessary stress when doing your bookkeeping or filing your taxes. Additionally, you could potentially be held personally liable for any loans for your business. 

If you’re unsure what purchases or expenses qualify as a business expense, review what items the IRS considers to be in that category. 

Separate Personal and Business Expenses

4. Go Paperless 

Going paperless will make your life easier whenever it’s time to update your books. Now’s a good time to start because you’ve already gathered your documents and receipts. Create digital records of all these financial documents independently or by using online tools, software, or a Vyde account.

5. Collect Tax Documents 

Tax season is an important time of the year for all American workers, but most businesses need to file additional forms for the tax year.

Did you pay an employee or independent contractor this year? You’ll likely need to file at least one of the following forms:

Employees: W-2 Forms

You must file a W-2 for all your employees for the tax season.

Independent Contractors: Form 1099-MISC and W-9

You’ll only need to file additional forms for independent contractors that you paid more than $600 during the tax year.

Your independent contractors must complete a W-9 form and return it to you. This form contains their taxpayer information, which you’ll use on the 1099-MISC form. The 1099-MISC form is required to track your payments to independent contractors and ensures they receive their tax documents. Get your tax documents in order, including what you’ll need for the above forms. Then, once your bookkeeping is up to date, keep it updated.

6. Have Everything Reviewed by a Tax Professional 

Now that you know how to catch up on bookkeeping, we strongly recommend using a tax professional. A tax professional removes much of the stress of tax season and can verify your financial information related to your return.

Additionally, using a tax professional will ensure that your business receives the tax deductions to which you’re entitled. Most tax professionals provide guarantees in the event of an audit and will represent you, speaking to the IRS on your behalf.

Catch Up on Your Bookkeeping With Vyde

Catch Up on Your Bookkeeping With Vyde 

As a business owner, you have plenty of obligations outside of bookkeeping, and you’re likely not an expert. You wouldn’t handle your legal work, so why go at bookkeeping alone?

Vyde provides flexible business solutions that fit your needs and budget. We make bookkeeping for small businesses simple so you can focus on what you do best. The peace of mind about bookkeeping and taxes that we provide help you save time, stress, and money along the way. Contact us to start on your path to getting caught up on your business’s bookkeeping today!

Frequently Asked Questions: 

1. Why is bookkeeping important for small business owners?
Bookkeeping is essential for tracking business finances, ensuring accurate tax filing, and making informed financial decisions. Without it, businesses can quickly face financial problems and lose track of revenue and expenses.

2. What happens if I delay my bookkeeping tasks?
Delaying bookkeeping can lead to disorganized finances, missed tax deductions, inaccurate financial reporting, and even potential tax penalties. It’s crucial to stay on top of your books to maintain financial health.

3. How can I prevent mixing personal and business expenses?
Keep separate bank accounts and credit cards for your personal and business transactions. This not only helps in accurate bookkeeping but also protects your personal assets from business liabilities.

4. What documents should I gather to catch up on bookkeeping?
You should collect receipts, bank statements, credit card statements, invoices, and any other financial documents related to your business. These are crucial for accurately recording income and expenses.

5. Should I hire a tax professional after catching up on my bookkeeping?
Yes, hiring a tax professional ensures your financials are reviewed for accuracy, helps you maximize deductions, and protects you in case of an audit by the IRS. A professional can provide peace of mind during tax season.

 

Small Business Payroll 101 The W-2 Explained

Do I Need a Bookkeeper? 5 Signs Your Business Needs a Professional Bookkeeper

Entrepreneurs and small business owners are good at wearing multiple hats. They’re the marketing department, the production assistant, the CEO, the customer service rep, and much more. If you’ve been in business long, odds are you’ve learned quite a bit about finances (or you want to) and you might have even gotten pretty savvy at handling your books. However, doing it all starts to wear on you eventually, and it can even impact the growth and success of your business. Many entrepreneurs ask themselves the simple question, “How do I know when I need to hire a professional bookkeeper?” 

Need a Professional Bookkeeper

Do I Need a Professional Bookkeeper?

A bookkeeper does the day-to-day, hands-on tasks so you won’t have to. If you’re asking yourself, “why should I hire a professional bookkeeper?”, consider all the tasks they would take care of for you. Make sure new employees file all the right paperwork for the business’s payroll, promptly submit and follow up on invoices, and pay bills. That’s just the tip of the iceberg.

Though you may still be at a point where you can handle all of that, so let us give you the warning signs of when you should finally tell yourself, “I do need a professional bookkeeper, this is too much.”

Here are a few tips on how to know when to stop doing it yourself and start giving it to a professional bookkeeper. If you find yourself nodding your head in agreement with what you read below, let’s talk. We’d love to learn about your business and see if our services would be a good match.

It Might Be Time to Hire a Professional Bookkeeper If. . 

1. Your Books Are Never up to Date

We get that it’s hard to sit down and wade through the paperwork that makes up your company’s finances. But if your books aren’t up to date, you can’t be financially aware of where your business stands. That means you’re operating more on risk than you have to. Knowledge is power. Having your books up to date means you have the information you need to gauge the current health of your business and make smart, data-informed decisions.

2. Bookkeeping and Finances Take Up Too Much of Your Time

Running your business means you’ve got to keep tabs on a lot of different moving parts. We’re always impressed with the entrepreneurs and small business owners we work with; they can manage a lot. But it’s not worth running yourself into the ground and losing your passion for your business. According to a report by Sage, small businesses spend an average of 120 working days per year on administrative tasks. Another study found that a majority of entrepreneurs say the administrative burden of managing federal taxes is worse than actually paying taxes.

If you’re finding that you’re spending more time in areas that you don’t love (say the bookkeeping and invoices) and less time doing what got you started in the first place (customer service or creating your products), then it might be time to admit to yourself that “I do need to hire a bookkeeper”, and hand it over to a professional.

Look online to see what options are available. Be sure to take into consideration pricing and fees. There are many affordable solutions that can help you handle your bookkeeping and taxes for a flat monthly fee. You’ll have a better handle on what it might cost to hand your bookkeeping over to someone else and you’ll also know what you’ll be able to gain from using their services as well. That’s a win!

You don't know what your cash flow is

3. You Don’t Know What Your Cash Flow Is

If you’re still saying to yourself, “I still don’t see why I need to hire a bookkeeper”, there are two words to change your mind: cash flow. Cash flow is how much money you have moving in and out of your business at any given time. Knowing that number means you’ve got a good handle on the success and potential of your business. You’re aware of how much you’re spending and earning, and you’re keeping tabs on bills you need to pay as well as invoices you’ve sent out that need payment.

With a professional bookkeeper keeping track of your finances, you should have access to your cash flow number at any time. That might not be the case if you’re doing your books yourself or if they’re not currently up to date. Not knowing where you stand financially might not be hurting you, but it’s not helping you grow your business. A professional bookkeeper will provide you with financial reports and data that are essential to strategically expanding your business.

If you’re looking for a reason as to why you should hire a bookkeeper, bookkeeping is it. The time and resources saved by constant bookkeeping and detailed records are invaluable.

4. You Handle Your Books at the Same Time You Handle Your Taxes

Here are a few reasons you should consider doing your bookkeeping throughout the year, instead of during tax season:

  • Accountants or CPAs usually charge more per hour than a bookkeeper does. That means you’re paying more for them to do a task that could cost you more than half that much.
  • Books that aren’t up to date aren’t helping you make good business decisions and that means you’re taking more risks in your business. Having quarterly or monthly financial statements at your disposal means you can quickly track how your business decisions impact your bottom line.
  • Accountants who do retroactive bookkeeping don’t always provide you with month-to-month records. These detailed records are often necessary to secure loans, or attract investors, not to mention help showcase the value of your business if you’re looking to sell.

5. Your Sales Have Increased, You’re Busier Than Ever, but You Aren’t Making More Money

It happens more than you might think. Your business is growing, you’re busier than ever, but your net income is not growing or it’s tied up so you can’t invest it back into your business or pay it out to yourself or your employees. If your revenue is increasing but your bottom line doesn’t seem to budge that means you need to increase your profit margins.

The documents and reports that you’d receive from a bookkeeper will help show you where to cut costs so you can make your business more profitable.

For more details about profit margins and other numbers you should track as a business owner, watch this helpful video:

Do I REALLY Need to Hire a Bookkeeper?

The answer is, at the end of all this, it’s up to you. If you feel confident in your skills at managing all of those tasks for your small business, perhaps not. However, we strongly suggest not taking those signs lightly as, if left unchecked, they can leave huge negative impacts on your business. It’s better to ask the question, “Why should I hire a bookkeeper? Is it worth it?” than “Why didn’t I hire a bookkeeper? It would have been worth it!”.

If you have questions or are looking for bookkeeping solutions, we’d love to chat about your business. We’re here to help!

FAQs about Hiring a Professional Bookkeeper

1. Why should I consider hiring a professional bookkeeper for my business?

A professional bookkeeper can handle day-to-day financial tasks, such as payroll, invoicing, and bill payments, allowing you to focus on core business activities. They provide timely, accurate financial records crucial for making informed decisions, improving financial awareness, and managing risk effectively.

2. How do I know when it’s time to hire a professional bookkeeper?

Several signs indicate the need for a bookkeeper:

  • If your books are consistently not up to date, hindering your financial awareness.
  • When bookkeeping consumes excessive time that could be better utilized in core business functions.
  • If you lack a clear understanding of your cash flow, impacting your ability to gauge business success.
  • When handling books simultaneously with tax preparation becomes overwhelming and affects business decisions.
  • If sales are increasing, but your net income remains stagnant, indicating a need for profit margin analysis.

3. What benefits can I expect from hiring a professional bookkeeper?

By hiring a bookkeeper, you gain access to organized financial records, allowing you to make informed decisions, understand cash flow, and track business performance more effectively. Moreover, it can potentially save costs compared to hiring accountants for similar tasks.

4. How can a professional bookkeeper help improve my business’s profitability?

Bookkeepers offer detailed reports that enable you to identify areas to cut costs, enhance profit margins, and reinvest earnings back into the business. Their insights can guide strategic decision-making for sustainable growth.

5. What happens if I delay hiring a bookkeeper for my business?

Delaying hiring a bookkeeper may lead to financial disorganization, reduced awareness of the business’s financial health, missed growth opportunities, increased risk due to inadequate financial tracking, and potential difficulties in securing loans or attracting investors.

Pay Yourself as a Business Owner

The Best Way to Pay Yourself as a Business Owner

Knowing how to pay yourself as a small business owner may seem simple, but there are quite a few options when it comes to doing it right. The information below will help you learn the basics of how to pay yourself as a small business owner, but we highly recommend talking to a tax or financial expert (we’d love to chat with you!) when it comes to the specifics of your business.

Establish Your Business Type

Before we get into the money side of things, it’s important to know what type of business entity you have so you know what your options are for getting paid. Because you’re the owner of your small business, it seems simple enough to just withdraw money from your business account and go on your way – but selecting the best way to take your pay and being consistent with that method will make things easier in the long run when it comes to the financials.

Business entities include, sole proprietor, LLC, or a partner in a partnership. You’ll want to verify which entity type you have if you don’t know already and then read on to see what options you have based on your business type.

Salary or Draw?

If you’re not quite sure what the difference is between a salary or a draw, we’ll tell you.

A salary is a fixed amount being taken out each pay period.

A draw, also known as a owner’s draw refers to an owner taking funds out of the business for personal use.

The benefit to the salary option is that tax withholdings and benefit payments come out of your gross pay automatically, whereas with a draw they don’t. A draw of company profits is taxable income on the owner’s personal tax return, and owners are required to pay estimated tax payments as well as self-employments taxes on draws. So additional personal tax planning may be required to make the draw method a benefit.

Another benefit to a draw is that a business owner can not only withdraw profits generated by the business, but also can take out funds that were previously contributed to help run the company. Many new business owners who are just starting out choose to use the draw method because they can pull additional funds they originally invested if needed while they work to build their company and build a stable monthly income.

Knowing which option is right for you takes looking at your personal circumstances and the happenings within your business. If you’re not sure which option provides you with the best advantage – that’ the time to seek out expert advice. 

How Much Should I Pay Myself?

No matter which way you decide to pay yourself or even what type of business entity you have – the most frequently asked question we hear is How much should I pay myself? And that’s a very good question.

When it comes to deciding how much to include in your paycheck you need to think about the the amount of money that is needed to keep your business operations moving forward as well as if you’re willing to do more personal tax planning by using a draw method rather than paying yourself a salary. Weighing your options will help you decide which is the best fit and also help you decide just how much you’re willing to pay yourself so you get the most benefit.

What other questions do you have regarding paying yourself as a small business owner? We’d love to chat and provide you with custom advice unique to your business. 

How To Know If Your Small Business Needs an Accountant

How To Know If Your Small Business Needs an Accountant

When you’re starting out as a business owner, you’ve got to be scrappy. There’s no shame in trying to save a few dollars by managing multiple aspects of your business yourself. However, as your business grows, you’ll find that an endless list of “to-dos” makes it hard to do it all. You may find yourself dropping balls that shouldn’t be dropped.

The accounting side of your business is easy to fumble—especially if your mind is on a million other things. If you don’t have the time to devote or you don’t know what to look for, you could be making mistakes that drastically impact your business.

Risks of Being Your Own Accountant

Incorrect Data Entry:

When you’re busy, rushed, or distracted, it’s easy to enter incorrect data into your books. 

Missed Deductions:

Because you’re a business owner and probably not an accountant, you may not know all the things you can deduct. Missing deductions costs your business money.

Missing Revenue:

Incorrect books can cause you to have revenue that is unaccounted for and you may never know.

Unpaid Invoices:

When your books are not in order, you may not notice an unpaid invoice—by you or someone who owes you.

Underestimate Tax Bill:

When it comes to paying taxes, no one likes to be surprised by a larger number than what they were expecting. Incorrect books can cause a miscalculation and underestimation of your tax bill.

Reporting is Unreliable:

How can you make business decisions with incorrect data? When your books are wrong, your reports will be too.

There are potential risks of DIY-ing your accounting, so how can you determine when the risk of being your own accountant becomes too much? When do you know it’s time to hire an accountant?

When you have no time.

When your schedule becomes too full to handle, you may find the need to delegate tasks to others to lighten your load. By investing in accounting services, you’ll be able to hand off the detailed job of bookkeeping to someone who can focus on it and get it done quickly and correctly. This way, you can spend your time worrying about other important things—like growing your business.

Risks of Being Your Own Accountant

When you don’t know what to do.

You may have tried being your own accountant, but question after question kept coming up.  When you feel as though you don’t have as much knowledge on bookkeeping or business taxes to confidently manage your business’ books, you have two options: learn it or delegate it. By hiring an accountant, you’ll be able to benefit from their in depth knowledge and know that your books are being taken care of. 

When your books are messy.

If your books are unorganized, you could be making costly mistakes for your business. Things like missing revenue, unpaid invoices, and tax deductions all directly impact your business’ revenue. Having well kept books also ensures that you can pull correct reports—which help you to make data driven decisions about your business.

The decision to hire an accountant depends on where you are in your business, but remember—accountants exist to help you keep track of (and save) your business’ money. If you feel like you’re in over your head, it may be time to hire someone to tackle your bookkeeping for you.

FAQs:

1. What risks come with being your own accountant?

Common risks include incorrect data entry, missed deductions, overlooked revenue, unpaid invoices, and underestimating tax bills.

2. How does having incorrect books impact a business?

Incorrect books can lead to unreliable reporting, hindering your ability to make informed business decisions based on accurate data.

3. When is it time to hire an accountant?

Consider hiring an accountant when you lack time to manage your books, feel uncertain about bookkeeping tasks, or find your business’s financial records are messy and disorganized.

4. Why should I delegate bookkeeping tasks to an accountant?

Delegating to an accountant ensures that detailed bookkeeping is handled quickly and correctly, freeing up your time to focus on essential aspects of growing your business.

5. How can an accountant help if I don’t have much knowledge about bookkeeping or taxes?

An accountant brings in-depth knowledge to manage your books effectively, providing expertise in navigating complex aspects of business taxes and bookkeeping.

Bookkeeping Habits

4 Bookkeeping Habits That Keep You On Top Of Your Task

Small business owners wear lots of hats. You’re a marketer, a creator, a production assistant, a salesman, and you’re also in charge of bookkeeping. Bookkeeping may not be the most exciting aspect of your business, but it’s pretty important. If you’re looking to learn how to up your game, you’ll find 4 habits below that will help you increase your bookkeeping skills and help you see your business grow.

Habit No. 1 – Work on Your Books on the Same Day, Time, & Place

It’s sage advice when it comes to creating habit, consistency is key. We’ve found that the most practical advice we can give when it comes to staying on top of your finances is to be consistent in overseeing them. We get that it might not be fun (although as accountants we might beg to differ) but getting into your financial on a regular basis will turn results faster than anything else. Depending on how much financial activity is happening, you may be able to go longer, but on average most small businesses should be working on their books weekly.

Set aside a specific day, time, and even place for reviewing your finances and making your books current. Sometimes that means coming in early or staying late at the office, or maybe you take your books with you to a favorite lunch spot or cafe. No matter what, start looking at this appointment as a moment where you can get a realistic snapshot of how your business is doing rather than just another hour where you’re forced to crunch the numbers.

Put all your Receipts

Habit No. 2 – Put all your Receipts (& Other Financial Stuff) in One Place

This habit is probably a no brainer, but you’d be surprised how often we hear new clients tell us that they’ll have to “look into that”. When we hear that phrase, we know that it probably means they’ll be searching around their office, digging in their filing cabinet, or scrolling through their inbox trying to drum up whatever invoices, paperwork, or receipts we’ve requested.

Putting all your receipts, invoices, & other financial records in one spot makes life easy. If organization is your thing, you might even try color coding the different paperwork types with folders, tabs in your inbox, or even the good old sticky note.

Habit No.3 – Record & Categorize Transactions Each Week

It’s not just enough to open up your files and review your cash flow. We get that the most tedious part of the job is recording and categorizing transactions, but it’s what will show you where your money is going and that’s what makes your business tick. Keep a folder if you’re got physical papers from transactions or merely note in your book the week you’re recording and then reference where the receipt or invoice can be accessed fi you’re working online.

Once it’s logged, don’t toss it just yet. Keep all paper work, both physical and digital in an easy to access, and labeled, location. You’ll need it come tax time and will want to hang on to it even longer so that you have it on hand in case you’re audited by the IRS.

Habit No. 4 – Review Invoices & Expenses

You’ve logged. You’ve categorized. You’ve looked at the cash flow. But now it’s time to put a little elbow grease into creating a strategy. If you’re new to bookkeeping you’ll spend the first few months just looking at what categories seem to have the highest expenses and which seem to bring in the most cash. Once you’ve got a handle on that, it’s time to start forecasting a bit. Review your invoices and future expenses. Are there months where you can push more sales? Can you last longer without ordering more supplies? The answers to these questions and more come through reviewing your invoices and expenses. So start looking at your books like you’re having a brainstorming session for growing your business. Then you can look to see if your new ideas are working in the months to come!

What other tips or habits do you find useful when it comes to bookkeeping for your small business? We’d love to hear them in the comments.

Review Invoices & Expenses

FAQs for Small Business Bookkeeping Habits

1. Why is consistency important in bookkeeping? Consistency in overseeing finances yields faster results. Set a dedicated day, time, and place weekly to review your finances for a realistic business snapshot.

2. How can I streamline receipt and paperwork organization? Centralize all receipts and financial records in one spot, employing folders, color-coding, or digital tabs for easy access and organization.

3. Why is recording and categorizing transactions crucial? Recording and categorizing show where money goes, vital for business. Maintain a folder for physical papers or note details for digital records, essential for taxes and audits.

4. What’s the significance of reviewing invoices and expenses? Beyond logging and categorizing, analyzing expenses helps strategize. Evaluate high expenses, profitable categories, and forecast future cash flows for business growth strategies.

5. Any additional bookkeeping tips for small businesses? Share your useful bookkeeping tips or habits in the comments to foster a discussion on effective small business financial management.

Operating at a Loss

What to Do if Your Business is Operating at a Loss

It happens to everyone. Small businesses, entrepreneurs, and even giant corporations have products that fail, launches that never happen and spreadsheets that show tanking finances and little to no cash flows. It’s important to make smart choices but a savvy businessperson knows that even the best decision making can still sometimes lead to operating at a loss.

The important thing is to know how to come back from it.

So what do you do if your business is operating at a loss? We’ll, we’ve got 3 simple answers – but first lets talk about what operating at a loss really means.

How do I know if my business really isn’t making money?

business really isn't making money

Simply put, your business is operating at a loss if you’re spending more money than your business is bringing in. Most businesses, especially small businesses fall into this category at the beginning and many do so during periods of growth. Operating at a loss for a short period of time, really isn’t a problem if you’ve got enough cash flow to cover your expenses until your income starts to grow.

In fact, you’ve probably heard experts or even other entrepreneurs talk about cash flow problems – which is just a business-like way of saying they’re short on cash or that their money is tied up in product, office space, and equipment. The real issue comes when you operate at a loss for too long – but how is a small business owner or entrepreneur supposed to know when that is?

Well, if you projected start-up costs as you started out there shouldn’t have been many surprises on what your business was going to cost. If you did project start-up costs, you hopefully also put together a cost analysis that includes the general cost of rolling out your product/service or starting your business. In that same line of thinking you should be looking to estimate or project the number of sales you’ll be making. Where those 2 lines cross will be your break even point (where the income from additional sales is profit as opposed to covering the costs you incurred while setting up your business).

Understanding the technical side of things is good, but focusing on how you can bring in more cash flow is the best thing you can do.

So what do you do if your business is operating at a loss? We’ve got 3 simple answers.

No. 1 – Reduce Your Expenses

All businesses, even those that are strictly service-based or online, have some business expenses. One way to help free up some cash is to go back through your operating costs and see if there are places you can eliminate the expense or at least cut back significantly. Keep in mind that while cutting costs is an effective way to loosen up your cash flow, you won’t want to cut back so far that it’s difficult to do business or handicaps your abilities to provide quality service and marketing of your product.

Increase Your Sales

No. 2 – Increase Your Sales

Before we talked about that line on your start-up projects that estimated the number of sales (and the associated revenue) you thought you’d bring in. When you’re tight on funds, looking to increase your sales is always a surefire way to increase your bottom line. Taking a hard look at your projected sales numbers will help you decide a couple of things:

  • whether or not you can do a promotion to drum up sales an still bring in more cash
  • if you’re  hitting your sales goals and if those goals need to be raised to insure a steady cash flow
  • if you need to adjust the price of your product or service

If you’ve got employees, it might be the right time to introduce a little friendly competition and award the winner with the most sales a special prize – which may even be the bragging rights of having the top numbers or a coveted parking space.

No. 3 – Seek Advice from an Expert

We live in a world where the DIY approach is becoming more and more common. But there are times when seeking expert advice will make things simpler in addition to making sure they’re the best long term strategy. When it comes to operating a business at a loss, seeking expert advice from your accountant will ensure you’ve got all the financial answers you need. In addition, they’ll be able to help you turn your finances around so you’ve got more cash flow and even help you figure out what deductions you can take come tax time.

Remember, it’s normal to have cash flows be slow or even non-existent at first. Just keep up the good work and make sure you’ve got a handle on your sales numbers, your operating costs, and how they effect your bottomline.

Have more questions about operating your business on a loss? Send us a note – our experts are more than willing to answer your questions!

Seek Advice from an Expert

FAQs for Operating at a Loss in Business

1. How do I determine if my business is operating at a loss? Your business operates at a loss when expenditures exceed income. It’s common initially or during growth phases, manageable with sufficient cash flow until income increases.

2. How can I gauge when operating at a loss becomes problematic for my business? Monitor your start-up costs, project expenses, and sales estimates. Recognize your break-even point where additional sales generate profit, not just cover initial costs.

3. What strategies can help a business dealing with a loss? Reduce Expenses: Assess and cut non-essential expenses without hindering operations or service quality. Increase Sales: Revisit sales projections, consider promotions, adjust prices, and foster healthy competition among employees to boost sales. Seek Expert Advice: Consult with an accountant or financial expert to strategize, manage cash flow, and identify potential tax deductions.

4. How vital is it to focus on increasing cash flow during a loss? Increasing cash flow is paramount. Balancing operating costs and sales figures aids in ensuring financial stability and sustained business growth.

5. What should I do if my business continues to experience slow cash flow? Persistently manage sales figures, operating costs, and seek expert guidance to optimize finances. Maintaining vigilance helps weather initial challenges in business operations.

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Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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