Hello everyone, Joe Gormley, CPA here to answer your financial questions. One common observation I’ve seen about mid-sized businesses is that many prefer to cut corners when trying to save money on their bottom-line. While it is good business sense to reduce your overhead costs and make sure you aren’t hiring too many employees, mistakes can be made on some of the most essential tasks in a business. This is especially true for bookkeeping services.
The fact of the matter is the most in-house bookkeepers aren’t trained Accountants at all. Most often, bookkeeping is handled by office managers, receptionists, and even administrative assistants with a surfeit of downtime. This is unfortunate, as having a working knowledge of Quickbooks and TurboTax are no replacement when looking for Tax Professional for Bookkeeping Services. (Not to mention that seeing others’ wages can open up a can of worms!)
With your business growing and your revenue increasing, these “part-time bookkeepers” may be overwhelmed by the immensity of services best served by a professional. Mistakes can be extremely costly and there’s a lot to understand in accounting and bookkeeping. This is why it is important to find a tax professional for bookkeeping services that isn’t collating reports for the office!
In this article, we’ll take a look at some common accounting methods that non-professionals will often miss. At the end, we’ll provide some information to have your business thriving.
Using the Accrual Method of Accounting for Accounting
You may not know it, but there are standards and practices for accounting that go beyond what’s normally just considered in the cash-based method of accounting. Instead, professionals follow what is known as the Generally Accepted Accounting Principles (GAAP), which requires an accrual method of accounting instead of cash-based methods. GAAP-compliance is primarily focused with how expenses and income should be logged on balance sheets, but GAAP extends further into best-practices by providing accurate, honest, and useful data for your financials. In fact, most growing business that are looking for outside revenue sources are typically red-flagged by investors if they aren’t GAAP-compliant. Not implementing this in your business could cause your business to miss out on growth and stagnate.
Payroll in Different States
Does your business have employees on your payroll that are employed across stateliness? Then you may not know that some states in the US don’t have reciprocity agreements, where you as the employer must withhold payroll taxes in two places: where the employees live and where the employees work. This can be a nightmare for a novice Accountant in a business that borders state lines.
As an example, if you have an employee that lives in Missouri, but commutes to work for your office in Oklahoma, your payroll will be set up at the time in which the employee was hired. However, if you have employees living and working in the same state that make service calls and sales in bordering states, your payroll must reflect this. This is common in business like construction or consulting, where work is not focused in the same area. Your payroll company may be reflect the adjustments made, but do your bookkeeping reflect this accurately?
The problem with this is that businesses will have errors when tax withholdings are calculated, often not compensating for each state’s rules. If these are errors aren’t caught, it can reflect badly on your company in the eyes of the IRS, possibly leading to a time-consuming and expensive audit. Also, your employees may be entitled to more money from their tax returns than is on the erroneous books. Those employees would then have to file an additional tax return in the other state(s) in order to rightfully claim their refund. Both of these reasons should convince you about how important it is to Find a professional Tax Preparer.
Data Reduces Costs and Increases Profits
Knowledge is power. Perhaps this may seem like an obvious statement, but having accurate data can offer significant insight into your business that error-filled balance sheets will lack. Usually, this occurs when a business finally “caves,” decides to hire a professional to look over the books, and the resulting numbers don’t match up—sometimes by large amounts. To find that you’ve been steering your business in unprofitable ways and suffering from hidden costs may have been stifling growth for years! Worse, you may discover that your business has been suffering from employee fraud and waste.
Professional bookkeepers give an outsider’s perspective of how your business is running, without bias that in-house bookkeepers may be prone to. By working in conjunction with our services, you are provided with accurate financial statements to reduce costs and look for opportunities for profit growth. If you’ve notice a lack of growth that lacks an easy explanation, one look at your data will elucidate just where changes need to be made. Having an expert look into your tax data may offer new ways to reduce overpayment, discover loopholes that have gone unused, and find ways that your business may implement to be remain competitive.
Joseph J. Gormley CPA