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Category: Business Accounting

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.

The Ultimate Guide On How to Write Off Vacations On Your Taxes

Can I Write Off a Vacation as a Business Expense: Your Ultimate Guide

Can I Write Off a Vacation as a Business Expense: Your Ultimate Guide

One of the perks of being a small business owner is the tax deductions you can take advantage of, including how to write off a business trip or vacation. You just need to know your motives before you go!
To begin, you need to understand your trip needs to have a business purpose for it to be eligible as a tax deduction. The key element to writing off your trip is that its primary purpose is business.

When it comes to the topic of how to write off vacations—and all business expenses—the IRS requires your trip to be both ordinary and necessary to be deductible.

In IRS lingo, ordinary means it’s an expense “that is common and accepted in your business,” while necessary means “an expense that is helpful and appropriate for your business.”

Keeping those ideas in mind, here are some key tips for writing off your vacation.

Common Business Activities That Require Travel

Common business activities that you should consider on your trip include:

  1. Attending a convention or seminar: Take a look at the calendar and see if there is a convention or seminar that would be beneficial for you to attend in an area where you can also enjoy some needed rest and relaxation.
  2. Meeting with clients, partners, or potential customers: As you are traveling to new destinations, consider the customers, potential clients, or partners you might have in the area. Set up times to meet with them to gain new insights for your business.
  3. Meeting with vendors: Research the area to see if there are any vendors or potential vendors or partners you would want to meet with. Then, set up appointments in advance.
  4. Conducting business research: This can be a bit of a grey area, so make sure your reasons are sound. As you prepare for a trip, see if there are any research opportunities you can take advantage of in that area. Traveling to Hawaii just to do some research on Google will not be a compelling enough justification in case of an IRS audit. Scoping out a local market, meeting with researchers, or taking advantage of resources specific to that area will create a much stronger case.

Business Expenses That Are Tax-Deductible

Business expenses that are tax-deductible include:

  • Plane tickets
  • Rental cars
  • Gas
  • Taxis or other transportation expenses
  • Seminars
  • Conventions
  • Meals
  • Research expenses
  • Employee expenses
  • Hotel rooms or other accommodations
  • Business activities

It’s best if you pay for these expenses using your business bank account to avoid comingling your accounts. That way, all your trip expenses are in one place and easy to find. However, if you do pay for some things with a personal card, you can still get the tax deduction. Just make sure to keep good records and keep track of your receipts and notes in case of an audit. Learn what to do after you file your taxes.

Business Expenses That Are Tax-Deductible

IRS Requirements: Knowing How to Write Off Vacations

The IRS has several requirements that each small business owner must abide by which are important to know when learning how to write off vacations, including:

  1. Majority: The majority of the days of the trip must be business-related. However, it’s important to note business days include weekends, travel days, convention or seminar days, and days you meet with clients or conduct research.
  2. Planning: Make sure conventions and appointments are planned in advance and meetings with vendors are scheduled. This will help demonstrate the intention of your travel was business. Save emails or documents that could help demonstrate this in case of an audit.
  3. Documentation: Save all your receipts over $75.00 and any lodging expenses (even under $75.00).
  4. Notes/minutes: Hang onto brochures or keep notes of business meetings. These will provide proof that you attended these business activities during your travels.
  5. Reasonable: Keep in mind that all expenses need to be reasonable to write-off.  The main write-offs include travel (plane tickets, rental cars, gas, taxis, etc.), accommodations (hotel rooms), employee expenses, business activities (conventions, seminars, employee activities, etc.), and meals (groceries, restaurant receipts, etc.).

So you’re probably wondering, “Where does the vacation come in?” Let’s look at an example:

Enjoying Vacation with Business

If you wanted to visit a friend in Chicago and stay for a few days, take a look at your schedule.  You could travel by plane on Thursday (business day), attend a seminar Friday (business day), and visit your friend on Saturday (business day) and Sunday (business day) since weekends are automatically considered business days. You could them take Monday, Tuesday, and Wednesday for vacation days before traveling home Thursday (business day). The majority of the days were considered business days and all your flights, meals, and accommodations are deductible.

  • 2 Travel Days = Business Days
  • 1 Seminar Day = Business Day
  • 2 Weekend Days = Business Days
  • Mon-Wed = Vacation Days

4 Business Days + 3 Vacation Days = Business Trip

Common Mistakes to Avoid

International Vacations and Increased Deductions

Examine if it would be beneficial for you to travel internationally for your business. You can increase your national network as well as develop your cultural understanding of another country.

If you are traveling internationally, you may be able to deduct more expenses than a vacation located in your domestic country. International vacations need to have a quarter of the time dedicated to business. However, if your vacation doesn’t consist of mostly business you can still write off a percentage of your trip.

Taking Your Family on a Business Trip

What happens if you take your family on a vacation but still attend business activities? Do you miss out on all the tax deductions?

If the trip still meets the criteria above, you can still take advantage of writing off your trip, but calculating the write-off might be a little trickier. For example, you can write off your plane ticket but not your family’s plane tickets.

Here are the expenses you can still write off:

  • Your hotel room or accommodations
  • Your rental car, gas, and transportation
  • Your plane ticket
  • Your portion of the meals
  • Convention or seminar passes and expenses
  • Research expenses
  • Employee expenses
  • Business activities

Other expenses you can’t write off include:

  • ‌Souvenirs
  • Family or friend plane tickets
  • Family or friend meals
  • Family or friend additional hotel rooms or accommodations
  • Excessive expenses

Again, it’s best if you can pay for business expenses with a business card, so separate restaurant checks or buy plane tickets separately where possible.

What if a family member is an employee?

If a family member is an employee and goes on the trip with you, you can write off their travel expenses as long as they attend and contribute to planned business activities. For example, they could attend the convention or seminar, participate in business conversations with clients, engage in research, etc.

This goes back to the discussion about ordinary and necessary. Would it be commonly accepted for a business in your line of work to send multiple employees to an event like this? Is it helpful and appropriate for your business? If so, then you can write off both of your expenses.

International Vacations and Increased Deductions

Common Mistakes to Avoid

Now that you know the expectations for a business trip and the expenses you can write off, let’s review a few common mistakes small businesses make when trying to take a tax deduction on a trip:

  1. Not having a strong business tie or plan ahead of time.
  2. Not keeping receipts, travel plans, business notes, brochures, and other documentation.
  3. Not using a business bank account to track business expenses. Again, you can still write off expenses paid with your personal account, but this is not ideal.
  4. Trying to write off expenses that are excessive and unnecessary. This can raise a red flag for the IRS.
  5. Not taking advantage of the fact that weekends are automatically considered business days, whether or not you conduct business activities on those days. Extend your trip to include weekends if you want to enjoy a little extra vacation time!

If you haven’t fully documented your business-related reasons for travel or had a spontaneous lunch with potential clients or business partners, you may still be able to write off some expenses related to that trip. Tax deduction rules allow 50 percent of entertainment and meals to be written off when your vacation has a small portion of business-related activities.

Instead of thinking, “how can I write off my vacation?” think “how can I add a vacation to my business trip?” As a small business owner, you want to save money, and what better way to save than planning a trip around your business!

If you have additional tax tips or questions, reach out to our team today or sign up for a 30-day free trial with Vyde! We are here to save you time, money, and stress by handling your small business bookkeeping and taxes.

 

FAQs:

What qualifies as a deductible business trip or vacation?

Your trip must primarily serve a business purpose and meet IRS requirements of being both ordinary and necessary for your business. Weekend days automatically count as business days.

What are common business activities that require travel?

Attending conventions, seminars, meeting clients or partners, meeting vendors, and conducting business research are examples of activities that can justify a business trip.

Which expenses can be tax-deductible during a business trip?

Expenses such as plane tickets, rental cars, gas, accommodations, meals, seminars, and research costs can be deducted. However, excessive or personal expenses like souvenirs are not deductible.

Can I write off a family vacation if I conduct business activities during the trip?

Yes, if the trip meets IRS criteria and you maintain proper documentation. You can deduct your portion of expenses related to business activities, but not those of family members.

What are common mistakes to avoid when attempting to write off a business trip?

Common mistakes include lacking a strong business purpose, failing to keep proper documentation, not using a business bank account for expenses, attempting to deduct excessive expenses, and not considering weekends as business days.

Interested in Learning More?

Schedule a free consultation with our team!

Top 4 Numbers That Drive Your Business Success

Are you looking to build your business?

As small business owners, it is easy to get distracted by the length of our to-do list and lose sight of the important factors that drive our business’ success. It’s also easy to ignore financial reports when we don’t know how to translate the numbers on the report into key insights about the health and value of our business.

As a certified public accountant and founder of Vyde, I wanted to provide you with some of these key insights that can drive your business success.

1. Sales

Let’s start with the business basics—sales, also known as revenue. As business owners, we understand that the money we generate is our lifeblood. This is what allows us to function from day to day, earn a comfortable living, pay our employees, and invest in growing and improving our business.

But what do we do with those sales numbers after we see the reports? Increasing sales and revenue is important, but if that is the only number we focus on, we could run into problems in the long run. Driving up sales will not impact the bottom line if we have to increase spending to get there. That’s why the next numbers are important to evaluate as well.

2. Gross Margin

When you look at a profit and loss statement, you will see your revenue, your variable expenses (also known as cost of goods sold or cost of sales), your fixed expenses (expenses that don’t change from month to month, such as rent), your total expenses, and your net profit.

Gross profit is what you are left with when you take your total revenue and subtract your variable expenses. In effect, you are taking your sales and subtracting what it costs to make and sell your product or service. While this is an important number to keep tabs on, a much more telling number is your gross margin.

Gross margin helps you gauge your efficiency so you can work toward a healthier bottom line.

You can figure out your gross margin by dividing your gross profit (total revenue minus cost of goods sold) by your total revenue and multiplying that by 100 to get a percentage.

Gross Margin = (Total Revenue – Cost of Goods Sold)/Total Revenue x 100

A low gross margin means you will want to make some adjustments to reduce your costs; a high gross margin means you are maximizing your profits.

Another way you can calculate gross margin is to simply divide your cost of goods sold (or variable expenses) by your revenue. You can then subtract that number from 1 and multiply it by 100 to get your gross margin.

Gross Margin = 1 – (Cost of Goods Sold/Total Revenue) x 100

As both your gross profit and gross margin increase, you will start to see improvement in your business. There is no one percentage that represents the ideal gross margin. Driving your gross margin higher at the expense of quality or customer service will have negative repercussions. As you are setting your goals, research healthy gross margins in your industry and look at the ways other businesses improve their efficiency. Understanding these numbers will help you set goals and work toward a healthier bottom line.

3. Net Profit

This is your bottom line. Your profit and loss statements should provide you with a net profit, but you can also easily calculate this by subtracting all your expenses (variable and fixed) from your revenue.

Net Profit = Revenue – All Expenses

Your net profit is the money you have available to pay yourself and invest in future ventures. It is also the money you will be taxed on at the end of the year, which leads us to the fourth number you should be tracking.

4. Taxes

One problem many first-time business owners run into is not properly preparing for their taxes. No one wants a surprise bill come tax season.

The best way to prepare is to meet with a tax professional to create a plan. We encourage all our clients at Vyde to meet with us twice per year to plan for the upcoming tax season. There are many variables that go into calculating your taxes, including spouses, dependents, what other jobs you hold, self-employment tax, deductions, tax credits, your tax bracket, etc. That’s why you can make a more accurate plan by sitting down with a professional. However, if that is not an option for you, the general rule of thumb is to set aside 25% to 30% of your net profit for taxes.

As you track these four different numbers over long periods of time, you will start to generate month-over-month and year-over-year comparisons that allow you to identify trends, strengths, and weaknesses in your organization.

Evaluating these numbers regularly will help you drive your business success to the next level.

Have questions? We’d love to answer them and talk to you about setting up a financial strategy for your business. Contact us today! 

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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home office

Taking Advantage of the Home Office Deduction

Are you self-employed and using your home for business? If so, you may qualify for the home office deduction. Here at Vyde, we want to help all of our clients stay compliant, stay organized and save on taxes. Here are some guidelines and tips to help you take advantage of your home office to maximize your tax savings:

Can you claim a home office deduction?

There are requirements you need to meet to qualify for a home office deduction: Do you use an area of your home regularly and exclusively for business? Are you self-employed?

If you answered yes to both questions, you likely qualify. It’s important to note your workspace does not need to be a separate room or even an office to qualify. For example, if you use half of your basement to create and ship custom word-working projects and that space is dedicated to your business, you could claim a home office deduction for that workspace.

How do you calculate your home office deduction?

There are two ways to calculate a home office deduction: the simplified and standard methods. For either option, you will need to know the square footage of the dedicated workspace in your home.

Simplified Method

To calculate the home office deduction for the simplified method, multiply the square footage of your office space by $5. That’s it!

Is your home office 300 square feet? Great! The IRS gives a $5.00 deduction per square foot for any space that is used exclusively for business (maximum of $1,500 for a 300-square-foot space). For example, if you are using an office that is 150 square feet, with the $5.00 deduction, that amount would be $750.00.  It’s that simple!

Standard Method

With this method, you deduct the actual expense of your office. For expenses that only impact your office (such as paint, office decorations, repairs to your office, etc.) you can deduct 100%. For other expenses (such as depreciation, rent or mortgage, property taxes, home insurance, utilities, maintenance, and general repairs), you can deduct a percentage of those expenses. To calculate this percentage, divide the square footage of your office by the square footage of your home. This tells you what percentage of your home your office takes up. For example, if you have a home that is 2,000 square feet and a home office that is 200 square feet, you could deduct 10% of your utilities, rent, repairs, etc.

Still have questions?

At Vyde, we help businesses save time, money, and stress by taking care of their bookkeeping and taxes. If you have additional questions about the home office or other deductions, our team would love to help! That’s our specialty. Reach out to our team or try our services for free to schedule a consultation with one of our accountants.

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.

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. 

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 

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!

Need Accountant

Do I Need an Accountant for My Small Business?

Why do you need an accountant for your small business? Your business does not have a lot of cash flow or many employees making filing taxes easy, right?

As a small business owner you might think filing your own taxes on top of all the other tasks you juggle will be easy, but filing your own taxes is a huge responsibility for small business owners.

Take it from us, though: after a certain amount of progress as a company, doing your own business accounting isn’t likely worth your time, especially if your background isn’t in finance. The truth is that small mistakes in your finances can add up and may cost you a lot in the long run. Here’s why you need an accountant for your small business and when you’ll know it’s time to find one.

Should I Hire an Accountant for My Small Business?

If you’re asking this question and your small business is already doing well, the answer might be “Yes.” Accounts do much more than just your taxes every year, although that is arguably one of the most valuable services any accountant has to offer your organization.

The world of business finance can be complicated, even if your scope of operations isn’t exactly titanic. Running into trouble with the IRS will usually end up being an absolute nightmare, even for very small infractions—hiring a business accountant early is one way to prevent trouble before your books have a chance to get ahead of you. However, this won’t always be an affordable option for some.

The power of an accountant on your team is undeniable, which then begs the question: when do I need an accountant for my small business? At what point does the payoff outweigh the costs associated with a professional accountant?

When Is the Right Time to Hire an Accountant for My Small Business?

After your business begins to flourish, your finances may become significantly more complicated. This is especially the case as you begin to make more new hires and earn more income—and, of course, spend more money, too.

Your job as a leader is just as important as any job you can delegate to somebody else. Small business owners will usually be excellent multitaskers by nature. Eventually, your stack of hats will become so tall and unwieldy that it’s likely to fall over. 

As soon as your finances begin to overwhelm you daily or weekly—losing track of receipts and invoices, for example, or simply not having time to document every transaction required for a complete account of your company’s activity—the time to hire a dedicated company accountant or bookkeeper has probably come to pass.

You may have an external bookkeeper preparing your finances early on for tax season. However, the investment in a certified accountant may eventually end up paying for itself. An internal accountant will be more familiar with tax codes and regulations and will be worth having if an audit comes along.

Why Do I Need an Accountant for My Small Business?

Are you running your finances for your business on your own? It may seem like a practical role to take on at the beginning of your venture, which is why so many small business owners end up giving it the ol’ college try.

After a certain point, however, a lack of expertise and even simple naïveté may cost you dearly. An innocent mistake may compound into something much more expensive in the long run—why waste your time trying to wade through something an accountant will have no trouble doing perfectly for you?

A business accountant can save you more than money in the event of an audit; they’ll also save you a lot of time as they take the minutiae of your finances off of your plate as a small business owner. 

What exactly does a small business accountant do? Their duties may cover any and all of the following essentials:

  • Bookkeeping: Documenting every fiduciary transaction passing through your small business is an enormous responsibility. All purchases, sales, payments, and paper trails must be maintained and kept up to scratch.
  • Payroll: This may include helping you oversee and carry out payments, filing your employees’ and contractors’ tax documents correctly, and, as mentioned, documenting all of the above.
  • Tax preparation: Unless you would rather outsource the professional responsible for closing out your books at the end of the year, you’ll need a small business accountant to create your reports and prepare your affairs to file. A great accountant will also be a lifesaver in an IRS audit—if you’re following the rules, they’ll be able to find the mistake and rectify it, incurring as few penalties as possible.
  • Insight, analysis, and interpretation: Unless you’re a financial expert, it always pays to have somebody who knows what they’re talking about behind the wheel. They may be able to help you navigate problems like overspending, helping you spot issues in your financial statements throughout the year. You might also find that they have a lot of helpful advice on where you could be investing more generously for the sake of growth and your future.

No matter what line of work you’re in, these generalized responsibilities will apply to any small business, whatever stage of development it’s in. You may know the trade better than anybody on your staff, but without the right partner to guide your hand as you make essential investments in your enterprise, your business might end up not seeing its full potential—or simply fall flat.

The need for a business accountant after finding your place in your industry is more than obvious—what about for brand-new businesses, though? Should start-ups hire a business accountant if they can afford it? To us, it’s simply another way to win.

Do I Need an Accountant for My Small Business Start-Up?

Depending on how established your small business is, your accountant might become a vital part of your organization as you scale. Defining your business goals is one thing—making it all happen realistically and practically is another matter entirely.

A great accountant can offer guidance at these pivotal intersections—helping you choose the right business structure, for example, and ensuring that everything you plan on accomplishing is feasible and compliant with every relevant body of authority (including the IRS!). They’ll also be extraordinary resources to lean on when applying for business loans, working with angel investors and other investments, and perhaps even when applying for small business grants.

A sudden windfall will do nothing for you if you have no idea what to do with it. Business accountants act as trusted confidants and will be able to help you manage your money wisely. Investing in yourself is another critical skill to master. An objective set of professional eyes will lead you to smart financial moves you might not have considered on your own.

What Can the Right Small Business Accountant Do for You?

Why do I need an accountant for my small business? For the same reason, you hire a professional to manage your IT systems. Are your business’s tax problems perplexing you? A small business accountant is almost certainly the solution. The time to delegate has arrived. 

If you’re unsure where to begin, contact us for advice on all things financial. The earlier you get our team involved, the more we’ll be able to do for you once tax season finally rolls back around. 

Financial Records

How Long to Keep Financial Records

Have you ever wondered how long to keep financial records such as receipts, bank statements, and credit card bills? You’re not alone! Rather than keep everything forever and let the stacks of paper reach the ceiling, develop an organized system of keeping receipts for the recommended amount of time.

Remember, the IRS recommends keeping tax-related documents for at least six years. An audit can be performed up to six years after filing if an error is suspected, and you’ll want proof of your purchases if that happens.

How Long to Keep Financial Records and Why

Determining how long to keep financial records depends on several factors, including the record type and whether it’s for personal or business documentation. Whether you’re keeping the record for one month or 10 years, record-keeping best practices dictate you should store documents electronically (go paperless when you can), and always backup your files by saving them in the cloud. At Vyde, our accounting experts help our clients save and organize important financial information in a secure online portal so the information never gets lost and is easily accessible.


Below is a detailed summary of how long to keep financial records, categorized from the least amount of time to the most.

KeepItFor-01

1 Month

The key to successful record retention is staying organized. Set up an efficient monthly system and you’ll be more likely to stick with it. For instance, write the type of expense on each receipt and put it in a dedicated file each month. You’ll want to keep utility payment receipts, bank withdrawals, and deposit slips until you receive your monthly statements. After you’ve had time to review your statements, you can dispose of the receipts.  

Keep the following documents for one month:

  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

1-3 Years

You will need proof of payments and any business financial activity in case of disputes, identity theft, or fraud. Therefore, create a file for all banking and investment records for both your personal and business accounts. 

Keep the following documents for one to three years:

  • Paystubs
  • Bank records
  • Insurance policies
  • Investment statements
  • Mortgage statements
  • Receipts for charitable contributors
  • All business-related documents

7+ Years

You might be wondering how long to keep bank statements. Err on the side of caution. This will be helpful if you claim a loss or a bad debt deduction. 

Keep the following documents for seven or more years:

  • Income tax returns (federal and state)
  • W-2s and 1099s
  • Medical bills
  • Contracts
  • Receipts for tax-deductible items
  • Mileage records
  • Canceled checks
  • Real estate tax forms
  • Credit cards statements that contain purchases used as tax deductions
  • Retirement plan contributions

Forever

Why should you keep some items permanently? Some documentation has no expiration date, such as birth certificates and social security cards. Plus, these documents can serve as proof of identity. For paperwork like auto titles, or other purchases, store the related documents for as long as you own those items. 

Keep the following documents permanently:

  • Birth certificates
  • Social security cards
  • Passports
  • Education records
  • Auto titles
  • Investment statements
  • Home improvement receipts*
  • Receipts from major purchases*
  • Wills
  • Current insurance policies
  • Medical records
  • Pension / retirement contracts
  • Property agreements
  • IRA contribution records
  • Mortgage documents
  • Life insurance policies
  • Safe deposit box inventory

*for insurance purposes

Where to Store Your Financial Records

Where to Store Your Financial Records for Safekeeping

Keep vital personal documents, like birth certificates, passports, marriage certificates, etc., in a secure place, such as a home safe, fire-safe container, or a bank’s safe deposit box. 

Documents such as tax returns, receipts, bank statements, or pay stubs can also be kept in a safe deposit box or simply a locked file at home. For electronic documents, store them in a password-protected folder on your desktop or another secure location.

At Vyde, we help our clients save and organize important financial information in our secure online accounting portal. We not only complete your bookkeeping and taxes, but we also provide easy access to tax returns and other important business documents.

Why You Should Shred Discarded Documents

You may be tempted to toss old financial records in the trash. But if any of those documents contain sensitive personal information, like your account or social security numbers, you’ll want to shred them first. This reduces the risk of identity theft. 

Shred any document that contains:

  • Social Security numbers
  • Account numbers
  • Personal signatures
  • Birthdates
  • Phone numbers
  • Email addresses
  • Confidential information (medical, financial, or legal)

The Benefits of Record Keeping

Knowing how long to keep financial records is important because it can help you stay organized. This is crucial if you’re a business owner, as you’ll want to have everything readily available should you be audited or need to go to court. Organizing your records can also help you prepare accurate financial statements and tax returns, stay compliant, access important reports, apply for loans, and plan for the future. 

Vyde Can Help!

Need help organizing your business financial records? At Vyde, we can help with your business accounting and taxes. We’ll handle your books throughout the year so we can keep you organized and maximize your tax savings, all for a minimal monthly fee. Contact us today!

1. How long should I keep financial records for utility payments and bank transactions?

Maintain utility payment receipts, bank withdrawals, and deposit slips for at least one month. Review your monthly statements and dispose of these receipts afterward.

2. What financial records should I retain for one to three years?

Preserve documents like paystubs, bank records, insurance policies, investment and mortgage statements, receipts for charitable contributions, and all business-related documents for one to three years.

3. Which documents should I retain for seven or more years?

Keep income tax returns, W-2s, 1099s, medical bills, contracts, receipts for tax-deductible items, mileage records, canceled checks, real estate tax forms, and credit card statements used for tax deductions for seven or more years.

4. What documents should I keep permanently?

Essential documents like birth certificates, social security cards, passports, education and medical records, auto titles, investment statements, wills, insurance policies, property agreements, and certain receipts should be kept permanently.

5. Where should I store financial records for safekeeping?

Keep vital personal documents in a secure place at home or in a bank’s safe deposit box. For electronic documents, store them in a password-protected folder or secure location. Vyde offers a secure online portal for organizing and storing financial information.

Advertising Expenses

Top 20 Common Advertising Expenses Examples for Small Business Owners

Top 20 Common Advertising Expenses Examples for Small Business Owners

You’re probably spending a fair amount of money on advertising your small business to potential clients and customers. Did you know most of your marketing and advertising can be written off as a tax deduction to lower your tax bill? Whether you’ve got a whole marketing team running the show or you just purchased your first  ad, most money spent on promoting your small business is tax deductible.

According to the IRS, the criteria that your advertising expense must meet to qualify as a deduction is that it is ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). Marketing and advertising are both essential to growing and promoting your business, which makes them ordinary and necessary.

Just because the IRS terms an advertising expense as “ordinary” doesn’t mean you can’t be creative when it comes to ways you advertise. As long as the purpose is to bring in new customers and keep existing ones, you should be covered. Just be sure you know and document the business purpose.

The few exceptions include expenses that are used primarily for personal use or gain, not business promotion. In addition, though donating products or money to a community event or charity are tax deductible, donating services or time are not. Again, be sure to know and be able to show how the expense benefits your business. When in doubt about a specific advertising expense and if it’s tax deductible, ask your accountant.

20 Common Tax-Deductible Advertising Expenses for Small Businesses

Here’s a list of the top 20 most common advertising expenses for small business owners to keep in mind come tax season. All of these are tax-deductible:

  1. Website set-up, design, and maintenance
  2. Pay-per-click ads and online advertisements (Google, Facebook, LinkedIn, YouTube, etc.)
  3. Social media promotions
  4. Promotional materials with your logo such as t-shirts, mugs, pens, notepads and more
  5. Graphic design fees: logos, business cards, brochures, signs, printed or online advertisements, flyers, or other promotional materials designed professionally
  6. Printing of promotional materials: business cards, flyers, postcards, brochures, and coupons
  7. Storefront signs
  8. Vehicle signs or vinyl decals for windows
  9. Giveaways and promotions
  10. Radio advertisements
  11. Magazine or newspaper advertisements
  12. Television commercials
  13. Balloons, decorations, refreshments, and any other expenses incurred for parties or open houses promoting your business
  14. SEO services
  15. Packaging, design, and materials for your products

Tax-Deductible Goodwill Advertising Expenses

Tax-Deductible Goodwill Advertising Expenses

The following are considered goodwill advertising expenses and are tax deductible as well. Goodwill advertising is any type of promotion that keeps your small business in the public eye.

16. Sponsoring a youth sports team in your community such as little league baseball or soccer

17. Money donated to a school, charity, or local cause

18. Participating in a parade to promote your business, such as handing out flyers, candy, frisbees, pens, or shirts

19. Giving away products or samples

20. Advertisements encouraging people to donate to a certain charity, like the Red Cross

Are you feeling overwhelmed by tax and bookkeeping tasks for your small business? Don’t let the stress get to you. Reach out to the tax experts at Vyde today. Vyde handles the paperwork so you can focus on what matters most—growing your business. Your own accounting department, all rolled into one. Don’t hesitate, contact Vyde now!

 

FAQs about Tax-Deductible Advertising Expenses for Small Businesses:

What qualifies as tax-deductible advertising expenses for my small business?

Advertising expenses must be ordinary and necessary for your industry. This includes various marketing efforts aimed at promoting your business.

Can I get creative with my advertising strategies and still claim them as deductions?

Yes, as long as your creative strategies aim to attract new customers or retain existing ones, they can be tax deductible. Ensure you document their business purpose.

Are there any exceptions to tax-deductible advertising expenses?

Expenses primarily for personal use or unrelated to business promotion aren’t deductible. Donating services or time is also non-deductible.

How can I determine if a specific advertising expense is tax deductible?

Consult with your accountant if uncertain about the deductibility of a particular expense. Ensure you can demonstrate how it benefits your business.

What are some examples of goodwill advertising expenses that are tax deductible?

Examples include sponsoring local sports teams, donating to schools or charities, participating in community events, giving away products or samples, and promoting charity donations.

Interested in Learning More?

Schedule a free consultation with our team!

Financial Reports

What Your Financial Reports Really Tell You

 

Financial reports can be an incredibly helpful tool for small businesses. They can help you determine how much money you can pay yourself each month. Or they can help you decide if it’s time to expand your business. As helpful as financial reports are, they can only help you if you understand how to read them.

Luckily, Ben Sutton, Vyde’s co-founder and CPA, took the time to explain how an income statement and balance sheet work. It’s not the same as getting a 5-year accounting degree, but it’s going to give you the knowledge to make smart business decisions. Watch the video below for a great in-depth example of how financial reports work or keep reading to learn more.

Financial Reports Start with a Bank Statement

One of the things we ask our clients to send us each month is his or her business’ bank statement. This is so that we can begin to build your profit and loss, or income statement, and balance sheet. We’ll go through the bank statement to look for expenses and income. Expenses can come from a variety of places such as:

  • Marketing costs
  • Supplies
  • Food & entertainment
  • Business equipment
  • Auto expenses
  • Loan payments
  • Owner distributions

Income is simply what money your business generates. Customer payments are the most common form of income.

Keep in mind that as we move on these expenses will be split between the profit and loss statement and balance sheet. This is where the accounting rules come in. An accountant can determine what pieces of information belong on a profit and loss statement and what belongs on a balance sheet.

What Does My Profit & Loss Statement Tell Me?

A profit and loss statement (P&L) shows the revenues, costs, and expenses for a certain time period. We like to provide our clients with a monthly or quarterly P&L statement.

The P&L is only going to show the exact income and expenses that your business had that month. Accounting rules tell us which expenses belong on the P&L and what belongs on the balance sheet.

First, you will count any income your business had. Customer payments, as we said before, count as income. One confusing point would be any loans that you have taken out during the month. It may seem like income because money is coming into your account, but it isn’t. A loan is a liability and doesn’t belong on a P&L

Before we move on to regular expenses, we’ll want to look for the cost of goods sold. Cost of goods sold is what you spend on items that are required to produce your business’ services or products. This isn’t a required section on a P&L, but it’s useful for management to see what they’re spending directly on their services.

Next, are the monthly business expenses. Expenses are any other purchases that you make for your business. These include food, entertainment costs, auto expenses, and marketing costs. Some of the other expenses we listed in the first section aren’t part of the P&L. For example, business equipment and owner’s distributions aren’t part of the P&L. They are part of the balance sheet.

Once you have determined the income, the cost of goods sold, and the expenses, you total that to determine if you have a net loss or a net gain for the month. The P&L isn’t going to tell you how much money you have left in the bank. It’s simply telling you if you spent more than you brought in that month.

What Can I Learn From a Balance Sheet?

A balance sheet gives a company a quick glimpse at its assets, liabilities, and equity. The balance sheet will be broken down into those three categories: assets, liabilities, and equity.

The assets section starts with how much cash your business has on hand. Then you list your physical assets. If you bought equipment for your business during the month, like a computer or other purchases generally over $2,500, they go in the fixed assets category. To determine your total assets, you add your cash with your fixed assets.

Next, we’re going to go through our liabilities. Liabilities refer to money that we owe and include business loans, credit cards, auto loans, and more. After we’ve determined your business’ liabilities, we can move onto equity.

Equity is usually the most complicated part of the balance sheet. In the equity section, you’ll enter your owner’s distribution, or what you paid yourself that month. You’ll also see your retained earnings. The retained earnings are calculated by either adding the month’s net income or subtracting the month’s net losses from the last month’s total retained earnings.

Finally, you’ll add your liabilities and equity together. If you’ve done everything correctly, it should add to the same amount as your assets. That’s why it’s called a balance sheet. Because your assets should always equal your liability and equity.

Why Do I Need to Understand My Financial Reports?

Before we address the conclusions you can draw from your financial reports, we want you to understand how the P&L differs from the balance sheets. The P&L shows a period of time. Whereas, the balance sheet shows a point in time. So, the P&L can show you what you made, or lost, in your business in one month, and the balance sheet shows you overall where your business is at the end of the month.

Lesson 1: Don’t Manage Your Business Off of the Cash Balance. Manage it Off of the P&L.  

Without looking at both the P&L and the balance sheet, you can’t make smart business decisions. If you just look at the balance sheet, you may see that your business still has money, so you may try to pay yourself more, or make a big purchase. However, if you see that your P&L shows a net loss for the month, you might hold off on those decisions. The two go hand in hand when it comes to making a decision. You have to look at both to get an idea of where your business is truly at.

Lesson 2: Don’t Estimate Your Tax Liability on Your Owner’s Distribution  

Your financial reports are also going to give you an idea of what you owe in taxes. The biggest misconception small business owners have is that they are taxed on whatever money they pull out of the business, the owner’s distribution we’ve talked about. However, this isn’t true. The Internal Revenue Service (IRS) actually taxes you on your business’ net income. The IRS isn’t going to tax you unless you’ve made a profit on your business. In order to determine your net income, you’ll want to look at those income statements (the P&L) and determine if you had a net profit or loss. Once you know that, you can determine your tax liability.

I know the process can seem overwhelming at times, but analyzing both your P&L and balance sheet regularly can help you better manage and grow your business. If you are struggling to stay on top of your accounting and finances, reach out to our team at Vyde to see how we can help!

 
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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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