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Accounting vs Bookkeeping: What’s the Difference?

Accounting vs Bookkeeping

Accounting vs Bookkeeping: What’s the Difference?

December 23, 2022

Accounting vs Bookkeeping

peakreliance

Accounting, Bookkeeping

Bookkeeping and accounting are often confused, but they are two distinct processes that support a business in different stages of its financial cycle. Bookkeeping is focused on recording financial transactions, while accounting involves analyzing and interpreting that information to provide insights into the financial health of the business. While both bookkeepers and accountants have the common goal of helping businesses manage their finances, their roles and responsibilities differ. This guide will explore the differences between bookkeeping and accounting, as well as the roles of bookkeepers and accountants.

What is Bookkeeping?

Bookkeeping is the process of recording, classifying, and summarizing financial transactions in a systematic and consistent manner. It is a crucial part of running a successful business, as it provides the necessary financial information to make informed decisions.

Bookkeeping involves several tasks, including:

  • Recording financial transactions, such as sales and purchases
  • Posting debits and credits to the appropriate accounts
  • Generating invoices for customers
  • Preparing financial statements, such as balance sheets, income statements, and cash flow statements
  • Maintaining and balancing subsidiary ledgers, general ledgers, and historical accounts
  • Completing payroll duties

The complexity of a bookkeeping system depends on the size and scope of the business, as well as the number of transactions it handles on a daily, weekly, or monthly basis. It is important to keep accurate records and maintain supporting documents for certain business transactions, as required by the IRS. This can be done using specialized software, computer spreadsheet programs, or manual methods like lined sheets of paper.

What is Accounting?

Accounting is a higher-level process that involves analyzing and interpreting financial data compiled by a bookkeeper or business owner to provide insight into the financial health of the business. Unlike bookkeeping, which is primarily transactional, accounting is more subjective and involves making judgments and decisions based on the financial information available.

Some of the tasks involved in accounting include:

  • Preparing adjusting entries, which are used to record expenses that have occurred but have not yet been recorded in the bookkeeping process
  • Reviewing company financial statements, such as balance sheets and income statements
  • Analyzing the costs of operations to identify areas for improvement
  • Completing income tax returns
  • Providing guidance to the business owner on the impact of financial decisions

Accounting plays a key role in helping business owners make informed decisions by providing a comprehensive understanding of their financial position, forecasting future performance, and offering strategic tax planning guidance. Accountants are often sought out by business owners for their expertise in these areas.

The difference between the roles of bookkeeper & accountant

Bookkeepers and accountants both play important roles in the financial management of a business, but they have different skill sets and responsibilities. Bookkeepers are responsible for recording financial transactions and maintaining the organization’s financial records. They are typically focused on the day-to-day tasks of bookkeeping, such as recording purchases, sales, and expenses. Accountants, on the other hand, have a more advisory role, providing consultation and analysis based on the financial data compiled by bookkeepers. They are often more qualified to advise on tax matters and have a deeper understanding of accounting principles and financial analysis. While there is some overlap in their duties, the primary difference between bookkeepers and accountants is the level of expertise and responsibility they bring to their work.

Bookkeepers Responsibilities:

Bookkeepers are responsible for accurately recording financial transactions and maintaining the financial records of a business. They do not typically need to have any formal education or professional credentials, but it is important for them to be detail-oriented and knowledgeable about financial topics. While a bookkeeper’s work is often overseen by an accountant or the small business owner, they cannot call themselves an “accountant.” Instead, their job is to support the work of accountants and ensure that the financial records are accurate and up-to-date.

Accountants Responsibilities:

In order to qualify for the title of accountant, an individual generally must have a bachelor’s degree in accounting or a related field such as finance. In addition to their education, accountants may also seek additional professional certifications to further their skills and expertise. One such certification is the Certified Public Accountant (CPA), which is a widely recognized accounting designation. To become a CPA, an accountant must pass the Uniform Certified Public Accountant exam and have professional experience in accounting. The requirements for becoming a CPA, as well as an accountant’s level of education and experience, can affect the cost of their services.

How can Peak Reliance help you?

Peak Reliance is an online bookkeeping solution that provides access to a team of skilled bookkeepers who handle your financial records for you. We offer an affordable alternative to traditional bookkeeping firms, thanks to the use of software automation that reduces the amount of manual work required. Our bookkeepers can also take care of your tax preparation, which can save you money by reducing the workload for your accountant (or even eliminating the need for one if you don’t have one already). In addition, we can handle your tax filing if you don’t have an accountant. Want to learn more about how our team of professional accountants and bookkeepers can support your business? Visit our pricing page to see our competitive rates, or contact us by email at hi@peakreliance.co or call us at +1 (718) 218-5558 to discuss your specific needs. Our team is ready to help you take control of your finances and reach your business goals.

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Accounting, Bookkeeping

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6 Essential Small Business Accounting Tips for Maintaining Balanced Books

A woman working on accounting documents at a desk, with a tips icon on the right side.

6 Essential Small Business Accounting Tips for Maintaining Balanced Books

December 21, 2022

A woman working on accounting documents at a desk, with a tips icon on the right side.

peakreliance

Accounting, Bookkeeping, Taxes

As a small business owner, it’s important to prioritize accounting in order to ensure the success of your business. Maintaining balanced books allows you to better understand your past financial performance, including where you made and lost money, which can help you make more accurate financial forecasts. Here are some key accounting tips to keep your small business on track:

  1. Stay on top of your receivables

    Managing your receivables is crucial for the success of your business. Instead of letting them accumulate, it’s important to track them as they come in. This will prevent you from being overwhelmed at tax time with many customer deposits to reconcile or, even worse, no payment at all. Being proactive in managing your receivables can save you time, money, and hassle in the long run. It’s important to remember that revenue doesn’t always equal cash.

  2. Make cash flow statements

    A cash flow statement can give you a clear picture of the cash moving in and out of your business. By creating cash flow statements on a regular basis, such as weekly or monthly, you can better anticipate expenses and allocate income effectively. Regular cash flow statements can also help you plan for the future financial trajectory of your business.

  3. Keep track of expenses

    It’s important to record every business purchase you make. One way to do this without adding extra work is to use one credit card for all business expenses. Another option is to take pictures of receipts and store them in a designated location. By keeping track of your expenses, you can avoid surprises or uncertainties about charges on your bank statement and prevent various cash flow, accounting, and tax issues.

  4. Keep personal and business accounts separate

    Many small business owners use the same bank account and credit card for both personal and business expenses. However, this can make it difficult to track important business transactions. To make it easier to manage your finances, it’s recommended to have separate bank accounts and credit cards for your personal and business expenses. This can help you, your bookkeeper, and your accountant clearly see how you’re spending your money.

  5. Hire a tax professional

    Nobody enjoys tax season, but it’s important to pay taxes properly. While doing your own tax preparation may seem like a good idea, it can end up costing you a lot of money in the long run if you make mistakes. Unless you are a tax expert, you may miss out on deductions or pay more or less in taxes than what you actually owe. Tax laws are constantly changing, so it’s important to stay up-to-date to avoid income tax penalties. Consider hiring a tax professional to help you navigate the process and ensure that you are paying the correct amount of taxes.

  6. Stay in regular communication with your accountant and bookkeeper

    Even if you are busy, it’s important to maintain regular communication with your accounting team. Treat them as trusted business advisors who can provide valuable guidance and answers to any questions you may have about taxes, cash flow, budgeting, and more. Do not hesitate to ask for clarification if you receive an email or document with a term you do not understand. Power comes from knowledge!

At Peak Reliance, we specialize in helping small businesses like yours succeed. Our business accounting services are tailored to meet your specific needs and can include historical cleanup, bill pay, actuals-to-budget reporting, grant account management, 1099 processing and filing, and more. For more information on how we can help with your small business accounting needs, please visit our pricing page or give us a call at +1 (718) 218-5558. You can also send us an email at hi@peakreliance.co with any questions or inquiries you may have. We look forward to assisting you!

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Accounting, Bookkeeping, Small Business

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How to Prepare for a Smooth Year-End Bookkeeping and Accounting Process for Small Business Owners

Year End Bookkeeping and Accounting Checklist for Small Business Owners

How to Prepare for a Smooth Year-End Bookkeeping and Accounting Process for Small Business Owners

December 4, 2022

Year End Bookkeeping and Accounting Checklist for Small Business Owners

peakreliance

Accounting, Bookkeeping

As a small business owner, it’s important to stay organized and on top of bookkeeping and accounting processes. At the end of each year, it’s especially important to ensure that all of your financial information is up-to-date and accurate. Taking the time to properly prepare for your year-end bookkeeping and accounting process can make a huge difference in the overall success of your business. It’s a great way to ensure that your records are complete and accurate and that you’re in good financial standing with the IRS. With the right approach, you can make the most of your year-end bookkeeping and accounting process and have peace of mind that everything is in order. Read on to learn more about how to prepare for a smooth year-end bookkeeping and accounting process for small business owners.

Understanding the importance of year-end bookkeeping and accounting

Every business needs to have proper documentation of all financial transactions. Bookkeeping and accounting keep track of income and expenses so that you can properly report this information to the IRS. Your financial records are also used to create financial statements, such as balance sheets and profit and loss statements. The year-end bookkeeping and accounting process is an excellent opportunity to take a step back and look at the bigger picture. As a small business owner, you may find yourself so focused on daily operations that you may lose sight of the bigger picture. During your year-end bookkeeping and accounting process, you can take a step back and look at the bigger picture and find ways to improve how your business is run.

Gather financial documents

The first thing you’ll want to do during your year-end bookkeeping and accounting process is gathering all of the financial documents related to your business. You’ll want to gather documents such as receipts, invoices, payroll information, and tax records. Your receipts are a great place to start. Many small business owners use cash or a cash register, but keeping an accurate record of your cash flow can be tough. Having a record of your expenses is important, particularly if you plan on claiming these as deductions on your taxes. With an online accounting platform, such as Xero, you can easily record all of your receipts with the click of a button. You can even set up your receipts to be automatically uploaded to your books so you don’t have to worry about losing track of them.

Review financial statements

After you’ve gathered all of your financial documents, it’s time to review them. You’ll want to review financial statements such as your profit and loss statement, your balance sheet, and your cash flow statement. You can use these documents to gain a better understanding of how your business performed during the year. These documents can help you identify areas of your business that may require improvement. For example, if your cash flow statement indicates a significant increase in cash outflow, you may want to review your financial records to see if you can identify a reason for this. Your profit and loss statement is an excellent way to view your business’ profitability at a glance. You can use your balance sheet to get a better understanding of the company’s financial health, including assets, liabilities, and equity.

Identify any discrepancies

One of the main reasons to review your financial documents during your year-end bookkeeping and accounting process is to identify any discrepancies. If you notice any discrepancies, you want to address them as soon as possible to avoid any issues with the IRS. Why take the time to identify and address any discrepancies? Let’s break it down:

  • Your financial records are used to report your taxes. If you don’t correct an error or discrepancy, it may result in inaccurate or incorrect tax information.  
  • Your financial records are used to apply for loans. If you don’t correct an error or discrepancy, you may not be approved for a loan. 
  • Your financial records are used to apply for grants. If you don’t correct an error or discrepancy, you may not be eligible for grant funds. 
  • Your financial records are used to apply for investors. If you don’t correct an error or discrepancy, you may lose interested investors.
Prepare financial forms and reports

As you identify discrepancies and make changes to your records, you’ll want to prepare financial forms and reports. The first financial form you’ll want to prepare is a profit and loss statement. Keep in mind that even though you’re preparing your profit and loss statement at the end of the year, you want to include information from the entire year. Your profit and loss statement is great for seeing how your business performed over the entire year. You’ll also want to prepare a balance sheet and a cash flow statement. You’ll also want to prepare a list of your business expenses. This is sometimes referred to as an outflow statement. Keep in mind that for expenses, you want to record the date and the amount you spent.

Review bank reconciliations

During your year-end bookkeeping and accounting process, you’ll want to take the time to review your bank reconciliations. A bank reconciliation is simply a review of your bank statements to make sure that your records and your bank statements are in sync. You can use your bank statements to make adjustments to your records if necessary. Your bank reconciliations are an excellent way to make sure that your financial records are up to date. If there are issues with your bank reconciliations, you want to address them as soon as possible.

Update accounts

Next, you’ll want to update your accounts and categorize your financial documents. You want to make sure that your accounts are updated with your financial information so that you can easily access it at any time. Your accounts should be set up in a way that makes sense for your business. You want to make sure that your information is easy to find and easy to understand.

File taxes

The final step in your year-end bookkeeping and accounting process is to file your taxes. At this point, you should have all of your financial information, such as financial statements, withheld taxes, and income and expenses documented. You can use this information to file your taxes. If you use accounting software such as Xero, you can prepare your taxes automatically. This means you can get them out of the way early and have them filed and in the hands of the IRS before the year ends.

Prepare for next year

During your year-end bookkeeping and accounting process, you can also take the time to prepare for next year. Make sure that all of your financial information is up-to-date and accurate.  Identify areas of improvement and make changes to your business operations accordingly. Organize your financial records so that they are easy to find and understand. These are excellent steps to take to ensure that your business is in great shape for next year.

Get help from an accountant if needed

While the year-end bookkeeping and accounting process is beneficial for small business owners and entrepreneurs, it can be challenging to do it all on your own. If you feel like you would benefit from additional help, you can consider hiring an accountant. An accountant can help you gather your financial information and prepare your taxes. Hiring an accountant is an excellent way to get help with your financial records, particularly if you’re new to business ownership and accounting. An accountant can help you save time and stress and make sure that your records are accurate. They can also help you identify areas of improvement and find ways to run your business more efficiently. Overall, hiring an accountant can be a great way to get additional help during the year-end bookkeeping and accounting process and make sure your financial records are in tip-top shape. At Peak Reliance, you can rely on qualified and experienced accountants and bookkeepers to keep your finances in good standing with the IRS. Check out our pricing plans or call us at +1 (718) 218-5558 for more information. You can also email us at hi@peakreliance.co

Conclusion

There is no better time than the end of the year to take a step back and reflect on your business. You can use this time to make improvements, organize your financial data, and file your taxes. The year-end bookkeeping and accounting process is an excellent time for small business owners to get ahead and stay on top of their accounting so that they can focus on running their businesses.



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Accounting, Bookkeeping, Small Business Owners

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5 Best Bookkeeping Software Tools for Small Businesses

5 Best Bookkeeping Software Tools for Small Businesses

5 Best Bookkeeping Software Tools for Small Businesses

November 21, 2022

5 Best Bookkeeping Software Tools for Small Businesses

peakreliance

Accounting, Bookkeeping

The perfect accounting software assist small business owners to conveniently track their accounts and expenses, prepare for the upcoming tax season, and stay on top of their finances. For numerous small businesses, engaging a third party to handle taxes and payroll is a more cost-effective option. But with so many options on the market today, choosing can be difficult. That’s why we’ve rounded up our top 5 accounting software for small businesses so you can instantly find the right solution.

What is Accounting & Bookkeeping Software?

An accounting/ bookkeeping software can be used to keep track of a business’s’ finances. The best options to choose from are those that offer the following:

  • Set-up accounts and make journal entries.

  • Can get linked to your company’s bank account.

  • Pay bills automatically and meet all deadlines.

  • Generate invoices & send them when due.

  • Log all payments & expenses.

  • Run reports and provide accurate data for audit.

There may be other additional functions you need depending on the nature and size of your company. You want a software that makes the work of running a business easy and spontaneous, freeing you up, as the decision maker to do other more significant things.

Who Can Benefit from Using Accounting and Bookkeeping Software?

Any business can benefit a great deal from automating their finances and using accounting and bookkeeping software. Regardless of the nature and structure of your business, there are financial procedures that can be simplified with the right software. For example, in case you need recurring invoices for a client, having a software enables you to generate specific ones in no time. These can be configured to run automatically in your bookkeeping and bookkeeping software.
Businesses of every size can, benefit from using accounting software. It can be used to incorporate data entry, track payables and receivables, handle payroll, and modernize journal entries. It’s also excellent for running reports that help you meet your short-term and long-term business goals.

Are Automated Accounting & Bookkeeping Software Secure?

Some of the most common questions circulating around about online accounting software are related to the topic of security. It is fair enough for business owners to be worried about this aspect as financials is a sensitive and confidential matter for everyone. If you are going to store your accounting information in the cloud, you need to be confident that your data is safe.

Online accounting software and accounting software are safe. The companies analyzed here take all precautions to protect their customers’ information. In numerous ways, keeping data in the cloud is more secure than storing it on your device. If your device fails or you lose your laptop or tablet, you can wipe the device storage. With cloud storage, you can access your information from anywhere, on any device.

Free Accounting & Bookkeeping Software

If you run a small business, you may need to consider the price first when it comes to choosing an appropriate bookkeeping software. If your business is in its beginning phase you may be looking out for cost-effective options or considering if there are any free options.

Good news! Many auto accounting software have free versions!

However, the thing to keep in mind is whether you’re getting the features and functionality you need with free software version. If you need basic assistance until you can afford the premium software, it is recommended to use the free version.

How Much Does Accounting & Bookkeeping Software Cost?

Accounting and bookkeeping software costs vary by product. As mentioned, there are free options with limited functionality. Many of the options we reviewed have tiered pricing, from budget options for small businesses with only a few users to enterprise-level pricing for larger organizations. Many companies offer discounts on the monthly fee if you pay annually in bulk. This is something to keep in mind if you need to limit your spending.

Accounting Software:

  1. QuickBooks Online

QuickBooks Online is a solid accounting software with quite a lot of exceptional features. It was developed to be intuitive and easy to use. The process of setting up an account is simple because of the user-friendly interface. It is laid out in an organized manner, making it easy to find whatever you are looking for. Best part is that the software doesn’t entail you to have accounting experience.

Although QuickBooks Online isn’t quite as resourceful as QuickBooks Pro, it has everything a small business needs and is cloud-based. The software is updated by the company regularly, with new features being added constantly, it is easy to share information with your accountant.

  1. Xero

Xero’s cloud-based program offers account management, billing, expense reporting, and payroll. It also integrates with thousands of other apps, so you can add more functionality as you need it. The interface is clean and user friendly. The company updates the product every 3-6 weeks based on user feedback through community forums. They also offer excellent customer service. Xero is headquartered in New Zealand but supports US customers. The software is cloud-based, so there is no need to download the program to your computer. The company targets small and medium enterprises. They facilitate importing data from other accounting systems.

  1. Zoho Books

Zoho Books is not only easy to set-up and use, but its focus on automation makes it easier to manage than most tools. Its robust features include a one-time and recurring billing, online and offline payments, banking reconciliation, automatic tax calculation, reporting, 1099 contractor management, and more.

Zoho also offers add-ons such as add users and advanced automatic scans.

With such a wide range of features, this tool has almost everything you need to manage your business finances now and in the future.

  1. FreshBooks

FreshBooks offers an easier way to generate and manage millions of bills and if this sounds at all relatable, this could be the tool for you. It offers a higher level of customization than most other accounting programs and software and requires little experience to use as well.

Freshbooks’ customizable features make it easy to send quotes, manage project budgets, automatically add late charges, customize unlimited invoices, send payment reminders, accept deposits and payments. It allows you to bill your customers in multiple currencies, languages, subscription or retainer bases. You can also integrate tax apps, filing tools, and other tools like Gusto, GSuite etc. with FreshBooks.

  1. Sage

Sage Business Cloud Accounting, like the others mentioned so far, is a cloud-based accounting software that does not require accounting knowledge to use. In fact, we recommend this as one of the best accounting solutions based on your industry, company size, and unique business needs.

Sage enables its users to:

    • Generate and track invoices, track and forecast cash flow, accept and make payments, automate admin, manage inventory, track expenses, and much more.

    • Scale with add-ons such as human resources management and estimating.

    • Augment multiple users such as employees to your account, as well as share real-time access with your accountant at no extra cost.

    • Sync information from your bank and apps such as Miro, and Gmail.

 

 

Post Tags :

Accounting, Bookkeeper, Bookkeeping Software, Outsource Bookkeeping

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Why Outsourcing Your Bookkeeping is a Great Idea

Why Outsourcing Your Bookkeeping is a Great Idea

Why Outsourcing Your Bookkeeping is a Great Idea

November 20, 2022

Why Outsourcing Your Bookkeeping is a Great Idea

peakreliance

Accounting, Bookkeeping, Taxes

Being the head of a small-scale business, you spend the majority of your time overseeing daily operations. Performing a number of activities is likely a source of great pride for you, including the task of bookkeeping.

Performing these tasks singlehandedly might be a personal achievement for you as a business owner, however the task can quickly start to feel like a mountain of work after a busy work-day. This becomes even more daunting when you factor in other financial responsibilities like the mandatory tax filing deadline that needs to be met or the monthly bank reconciliation. Sooner than later, it’s better to start thinking of alternative ways of bookkeeping. 

The Best Time to Hire a Bookkeeper

At the early stages of your business, it may make sense to manage bookkeeping by yourself, given that the client numbers and subsequent transactions would be at the tip of your fingers.

The key is to know at what point must you begin looking for a professional bookkeeper. The following conditions might help you as a guide in reaching that decision within a good time-frame.

  • Unlike before, book management takes up more and more of your time.
  • Profit margins, cash flow and expense calculations and records are pending and there is minimal clarity on finances. 
  • Like clockwork, this leads to a barrier against your ability to make important business decisions since you don’t know the clear financial standing of the company. 
  • Inevitably, without proper records, you struggle in doing your income taxes.

When this becomes a norm and your finances are all over the place, it is imperative to start looking for a professional bookkeeper or an accountant. 

Fortunately, there are a number of ways to get around this, otherwise messy, task of bookkeeping. The following are some of these ways:

DIY Accounting Software

If you feel that you must do the bookkeeping yourself, there’s good news. There are plenty of accounting software options which provide tools that help you lay out and manage incomes and expenses along with generating financial statements for you.  Of course, learning how to use accounting software can be a challenge in itself, and your first couple of entries may include errors, thus wasting your efforts without expert oversight. 

In-House Bookkeeping

When your bookkeeping becomes a job itself, your best bet might be to just hire an in-house bookkeeper; an employee who will take care of all that financial workload without you having to worry. 

The costs of that do come along, however, as not all small businesses can afford personal bookkeepers. You would need to provide office space for your new employee, along with a computer to work on. We haven’t even mentioned the mandatory holidays and medical insurance that will have to be ensured for the bookkeeper, along with retirement perks. A cost-benefit analysis will have to be done before you, as a small business, make this decision. 

Accounting Services

Large businesses often hire accountants or CPAs that help them in navigating with taxes, business planning, strategic financial decisions and forecasting. 

However, if all you require is bookkeeping assistance, an accounting firm might not be the best choice. In general, bookkeepers are more involved in administrative tasks, whereas accountants provide knowledgeable strategic help. They can manage your books, of course, but that knowledge frequently comes at a price that a small business might not be able to afford.

Outsourced bookkeeping

You may get professional support without having to hire a full-time staff by using outsourced accounting services, which are frequently the ideal middle ground between DIY and in-house bookkeeping.

All of your bookkeeping needs can be met by the knowledgeable professionals at outsourced bookkeeping services. They’ll manage all of your accounts payable, receivable, and credit card transaction entries as well as the preparation of your financial reports, including balance sheets.

  • Save staffing and payroll costs

You would wind up spending more on insurance, perks, and training if you hire a bookkeeper. Even if your internal bookkeeper is working on part-time basis, it wouldn’t save you from high payroll expenses given that employment taxes will have to be paid. 

When you outsource your bookkeeping, whether on a weekly or monthly basis, you only pay for the job that is accomplished. By doing this, you might avoid paying a staff bookkeeper who might work longer hours between busy seasons.

  • Access a pool of experts and resources 

An internal bookkeeper frequently works alone, which may see them running into unexpected delays, leaving them helpless without the help of necessary resources to seek help from. Additionally, they can lack the expertise needed to modify bookkeeping systems to accommodate additions and modifications you make to your company.

When you outsource your bookkeeping to a trustworthy company, you get access to a larger knowledge base of seasoned financial professionals. An outsourced bookkeeper is more likely to keep up with state and federal regulatory changes that could affect your company now or in the future because they frequently manage the books for a range of clients.

  • More time to focus on your business 

Often, small business owners learn the hard way how time-consuming and difficult bookkeeping is. In fact, the average small business owner puts in a full day’s worth of labor keeping their books each month. You can focus on expanding your company once you have outsourced this duty.

  • Enjoy a stress-free tax season

It is a blessing to be on top of the game long before the tax filing deadlines approach. Having an accurate record maintained and having the satisfaction of a stress-free audit in case IRS decides to carry it out is completely worth the cost you will be paying to an outsourced accountant. 

  • Take advantage of the latest technology

Since an outsourced bookkeeper’s career depends on maintaining effective procedures, they are more likely to make technology investments to speed up their job and ensure the accuracy of your data. The majority of outsourced bookkeepers utilize systems that automatically import transactions, necessitating less input on your part as the business owner. Without needing statements or receipts from you, your bookkeeper can organize and reconcile your books. Many also use cloud-based platforms like FreshBooks, Xero etc., which make it safe and simple to access your information from any device, at any given time and place.

  • Scale your books with your business

Your organization will require additional bookkeeping assistance as it expands. Recruiting and educating a second bookkeeper increases payroll expenses significantly and reduces your profit margins.

 

What happens if your business experiences stagnation? The bookkeeper on your staff continues to get paid while working less and still obtaining the same benefits. Even with less money flowing in, your obligation to pay employee taxes stays the same. Outsourced bookkeeping services are adaptable and simple to scale to changes in your company’s requirements. This is especially practical if your business is seasonal because the service is flexible enough to meet your demands.

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Accounting, Bookkeeper, Bookkeping, Online CPA, Outsource Bookkeeping

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All About Automating Your Bookkeeping

Automating Your Bookkeeping

All About Automating Your Bookkeeping

November 19, 2022

Automating Your Bookkeeping

peakreliance

Accounting, Taxes

Keeping a track of all the finances and managing accounts can be extremely overwhelming, especially if you’re a small business owner. Bookkeeping eventually can become majorly time and energy consuming and since money matters need to be accurate to avoid legal problems, it’s best to ensure that and automate finances. Automating your finances can reduce the bookkeeping burden and make it more efficient. 

What does it mean to Automate?

Accounting and bookkeeping can be automated by using an appropriate accounting app or software. It means that you will not need to make any calculations by yourself or keep any hard records, the app or software will do all these for you, give you your company’s current financial status, maintain records, maintain all necessary financial statements and will do so along with saving you tons of effort and time. 

Features of an automated bookkeeping system:

  1. Expense management and transaction classification

Many modern accounting software can be classified as automated bookkeeping programs and their operations are fairly simple to grasp. These softwares basically need data that they can apply formulas to and work with. You will need to put in numbers like your total sales, expenses, bank account details etc. for the software to generate relevant statements.

Properly sorting and recording your transactions helps you catch more deductions, which makes your life easier in case you get audited by the IRS, and generally makes looking through your financial records a much less painful experience. With an automated system, you need not worry about errors and that some audit pressure off your chest.

Automated bookkeeping software’s like Mint and Quickbooks Online are some of the first apps offering this kind of service. Some recent and newer tools like Expensify and Bench have become preferences among start-ups and small business owners looking for low-cost automated bookkeeping solutions.

  1. Generate financial statements

Expense tracking is just one part of bookkeeping. Whichever automation software or bookkeeping service you choose should be able to generate financial statements for you, like balance sheets, income statements and cash flow statements.

Automated bookkeeping services are designed for full-scale bookkeeping and accounting. 

  1. Generate tax-ready financials

Accounting automation and bookkeeping software can radically cut down the amount of time you devote to getting your business taxes ready in general. They do this by:

    • Automatically classifying and marking potential deductions for tax filing.
    • Keeping all tax records in one place.
    • Reducing the amount of time spent hunting down receipts, invoices and other important tax relevant records.

Benefits of Automating

  • Cuts Down Human Calculation Errors:

Recording, classifying, and reconciling transactions requires moving large amounts of data from one place to another. No matter how careful you are with this task, there is always the risk of making simple errors. This is where automated accounting solutions come in and shine.

Automating accounting adds an additional layer of security to the accounting process by reducing human error and providing more reliable financial information and security.

  • Provides Financial Insight:

Auto Accounting is not only dependable it’s also fast. Instead of waiting until the end of the month, automated solutions present you real-time insight into your financial health so you can make critical business decisions faster and more confidently.

It can provide insight on the following:

    • Accounts payable/accounts receivable
    • Bank reconciliation
    • Billing and invoicing
    • Cash management
    • Collections
    • Expense tracking
    • Fixed asset management
    • Payroll management
    • Revenue recognition
    • Reporting
  • Saves Valuable Time:
    Automation is about allowing software do repetitive tasks and freeing them up to run your business and automation is no exception.

    If you’ve been doing manual bookkeeping in the past, you probably spend some time each week or month doing bookkeeping.

    Auto Accounting reduces the time you spend copying and pasting numbers into spreadsheets, helping you prepare financial statements, assess overall business health, and make strategic business decisions that impact long-term performance. You can spend more time on higher value tasks such as decision making. – term success.

This introduction to Auto Accounting is just the beginning of what is possible. As you begin to explore what else it can do, you can’t help but wonder how you would have run an accounting firm without Automated bookkeeping!

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5 Ways an Accountant Can Help Your Small Business

5 Ways an Accountant Can Help Your Small Business

5 Ways an Accountant Can Help Your Small Business

November 17, 2022

5 Ways an Accountant Can Help Your Small Business

peakreliance

Accounting, Bookkeeping, CPA

Having your own business is a great way to follow your passions and see a return on all that work you put in. But when it comes to numbers, many small business owners feel like they’re stuck in second gear.A certified public accountant (CPA) can help you get back on track with all things accounting related. An accountant can assist with financial reporting, tax preparation, and audit services. They aren’t just useful for big businesses. Small businesses also stand to benefit from hiring an accountant. Here are six ways an accountant can help your small business grow and thrive.

  1. Stay on top of your financial responsibilities.

    Accountants are highly trained professionals who can help you stay on top of your financial reporting and payment obligations. Whether it’s sales tax, payroll taxes, or filing your quarterly financial reports, your accountant can assist with all of these. Every state has its own set of rules for businesses to follow, and even a simple oversight could lead to fines and penalties. Having someone on your team to help keep you current and compliant can save you a big headache in the long run.

  2. Help you understand your company’s financial position.

    An accountant can help you understand your company’s financial position. This includes everything from your current assets and liabilities to your ongoing cash flow. The better you understand your current financial position, the better you can plan for the future. Hiring an accountant can help you identify the best path forward. From cash flow forecasts to long-term debt obligations, your accountant can help you understand all aspects of your financial position. This can also help you see where you may need to make some changes to improve your financial standing.

  3. Help you spot red flags in your company’s financial reporting.

    As you work with your accountant to create your financial statements, you can work together to identify any potential red flags in your financial reporting. This can include missing information or errors in your company’s financial reports. This can help you spot issues early and correct them before they turn into major problems. A quick audit of your financial reports from your accountant can help you catch issues before they cause major problems for your business.

  4. Assist with tax planning and preparation.

    Your accountant can also assist you with tax planning and preparation. This includes assisting you with choosing the best accounting method for your company and identifying any write-offs that you qualify for. But it also includes helping you plan for taxes in the future. Your accountant can help you forecast your company’s taxes and identify tax savings and breaks that you qualify for. Tax planning is a year-round process that can help you reduce your tax liabilities and improve your cash flow.

  5. Provide auditing services to make sure everything is in order.

    Depending on your company’s size and needs, your accountant may also be able to provide auditing services. An audit is a thorough review of your company’s financial statements to make sure everything is in order. This can include a review of your bookkeeping records, financial statements, and financial controls. An audit can help you identify issues early and correct them before they become major problems. This can also help you correct issues that were not caught during your financial reporting process. An audit may be required for certain government contracts, industry types, or for your company’s growth. Your accountant can help you determine if you need an audit and can assist with the process.

While it may not seem like an accountant can do much for a small business, the reality is that these professionals can actually help you save money and prevent problems from arising in the first place. If you’re not sure if hiring an accountant is right for you, ask yourself these questions first. Do you feel like you’re always behind on your financial obligations? Do you have no idea how to forecast your company’s financial position? If you answered yes to either of these questions, then it might be time to hire an accountant.

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All About IRS: Tax Filing and Audit

All About IRS and Filing Taxes

All About IRS: Tax Filing and Audit

November 15, 2022

All About IRS and Filing Taxes

peakreliance

Accounting, Bookkeeping, CPA

What is IRS?

The Internal Revenue Service also famously known as the IRS is a bureau of the US Department of Treasury. The IRS is responsible for collecting tax revenue and assessing finances for companies operating in the US.

The IRS has gone through several reorganization and modernization changes, over the years since it’s foundation back in 1862, during this time it was renamed and experienced a change in authority by being placed under the Department of Treasury, USA.

IRS is very clear in its mission. The bureau’s work is to “Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”

What does IRS do?

IRS aims to carry out the tax laws in the US. It evaluates and collects taxes, assists taxpayers understand and meet their tax responsibilities and helps implements tax law to ensure everyone pays what they rightfully owe the state.

The IRS executes three main functions:

  1. Administer tax laws
  2. Process tax returns and collect revenue
  3. Taxpayer service
  4. Tax law enforcement

Collecting taxes

One of the most significant responsibilities of the IRS is to assess and collect taxes on behalf of the government. The sum consists of income taxes, employment taxes, business income taxes, excise taxes and estate and gift taxes etc.

Along with the timely collection of taxes, they are also in authority for issuing tax refunds, which an individual or business can collect as a result of the overpayment of the due tax amount.

Providing services to taxpayers

Another central responsibility of the IRS is providing services to taxpayers in the form of guidance and help regarding tax laws and legal matters. These services can be availed through the IRS website, its telephone helplines, IRS Taxpayer Assistance Centers and volunteer tax assistance.

Enforcing tax laws

A final responsibility of the IRS is the implementation of tax laws. The IRS identifies and pursues those who have underpaid/not paid their taxes, whether as a result of a calculation error or deliberate criminal activity. These examinations typically take the form of either correspondence or field examinations. They carry out criminal investigations and supervise tax-exempt organizations and qualified retirement plans. It is the responsibility and accountability of the IRS to ensure all companies and individuals pay their fair share on time and accurately.

The IRS and Audit

As part of its tax law implementation mission, the IRS audits a hand-picked portion of income tax returns each year. In the fiscal year 2020, the agency audited 509,917 tax returns.

The reasons for an IRS audit vary according to some factors which may also increase the chances of examination for some companies. The chief amongst these is higher income levels. Other factors that may prove to be red flags for an audit include; not declaring the right and accurate amount of income, claiming a higher-than-normal number of business-related deductions, making excessively hefty charitable donations compared to income, and claiming rental real estate losses. However, no single factor determines who does or does not face an IRS audit each year.

The IRS and Taxes

Companies can pay their due taxes to the IRS through the following ways:

  1. An electronic funds transfer from your bank account
  2. A debit/credit card
  3. A same-day bank wire or
  4. An electronic funds withdrawal at the time of e-filing your return.

There are other payment options available as well for businesses and individuals who cannot mare electronic payments. They can pay through:

  1. A personal check
  2. A cashier’s check, or
  3. A money order in the name of the US Treasury.

 However, they need to be sure that it contains the following information:

  • Company’s name and address
  • Phone number
  • Social Security number (where applicable)
  • Employer identification number (where applicable)
  • Tax year
  • Related tax form or notice number

Businesses can even pay in cash if they wish however, with each payment method all terms and conditions must be followed to avoid any future problems or delays as this is a sensitive legal matter.

Out of all of these options, the best and most efficient, quick and safe way is to use on of the electronic payment methods to clear the payment.

Do we really need IRS?

IRS claims to be one of the worlds most efficient tax administrators. The taxes that they collect are used to fund public utilities like national defense, aid for veterans, Social Security, medical care services, foreign affairs, community development and other services that the government provides.

IRS performs an important function for the US government, keeping all organizations, companies and business individuals in line with the tax laws. The bureau collects the necessary funds that the state needs to provide public services to its inhabitants and makes the functions of the entire federal government possible.

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How to Hire an Appropriate CPA for Your Business

How to Hire an Appropriate CPA for Your Business

How to Hire an Appropriate CPA for Your Business

November 11, 2022

How to Hire an Appropriate CPA for Your Business

peakreliance

Accounting, Bookkeeping, CPA

What does a CPA do?

Usually, when a business is just starting out, the financial tasks fall squarely on the owner’s shoulders. As tempting as it can be to maintain that arrangement once the money starts to flow, not only to avoid paying someone else to do it but also to avoid allowing someone else to have access to the information, it can become a tiring and mundane task in the long run.   

Hiring an accountant at the right time through the journey to establishing a successful business is an integral step towards victory. It is a great idea to hire an online CPA when it comes to this. A CPA is a tax expert with a sound knowledge of tax laws and legal processes. CPAs can take a good legal care of your business’s taxes, answer important financial questions and potentially save your business a lot of money. They, unlike general accountants have passed the challenging Uniform CPA Exam that tests their understanding of tax laws and standard accounting trials. Through this exam they attain a state license. 

 The kind of exposure and skill that a CPA has can improve your overall tax representation.  

Some of the tasks that they can help you with include: 

  • Addressing legal requirements: tax return filing, compliance documents, audits.
  • Preparing yearly financial statements, statements of accounts, and reports.
  • Presenting a breakdown of company’s financial conditions.
  • Evaluating financial decisions about the company progress.

CPAs are equipped with hands on skills to help small businesses and start-ups with a lot of technical financial matters. 

Is your business ready to hire a CPA?

Every owner of a small business should consider hiring a professional accountant before the need even arises. Accounting services are extremely vital for the health of your business, so as soon as you start to feel overwhelmed by managing your finances, that is the best time to hire an accountant or a CPA. However, taking other factors into consideration, hiring one at the wrong time can slow down your processes as well. 

Here are a few appropriate instances to hire a CPA: 

  1. At the beginning of the fiscal year to ensure you start right. 
  2. At the end of a month and going into newly reconciled accounts to maintain a fresh set of financial statements and records. 
  3. When it’s time to file your taxes. 
  4. When you as the owner feel overwhelmed by bookkeeping and financial record maintaining and other areas that need your dedicated time and focus are being over looked. 

Hiring a CPA can help you keep your business agile regardless of the economic or societal changes that may occur around you. 

Tips for finding an appropriate CPA:

1. Do background research by looking for referrals and reviews

It’s a good idea to start by asking around for recommendations from other experienced people and companies in your area who have a CPA onboard. This is a chance to use your connections. Ideally, you should be able to find a valuable referral for a new CPA through your bank, realtor, or employees. 

In case your local referrals aren’t working, you can search online for accountants in your area and use online reviews about their services to help you make a decision. Forums and other online platforms like Yelp, LinkedIn, or Facebook groups can be helpful resources. Making sure you find a skillful and dignified CPA is an integral part of the process because of the responsibilities that they will be looking after for you and your company. 

2. Evaluate your needs and their quality service

CPAs specialize in many different services. Some choose being a tax preparer for numerous companies, while others would rather assist a handful of small business owners steer financial decisions year-round. Some offer bookkeeping services and will prepare the company’s tax returns, and others will prefer intricate compliance cases. 

As part of your preliminary consultation with an accountant, inquire about the services they provide to their clients. Also, discuss how they tend to work with their clients and how much experience they have in your industry.  

It is important to be clear about the kind of services you need to avail from a CPA before you bring them on board. 

3. Examine their qualifications

CPAs specialize in many different services. Some choose being a tax preparer for numerous companies, while others would rather assist a handful of small business owners steer financial decisions year-round. Some offer bookkeeping services and will prepare the company’s tax returns, and others will prefer intricate compliance cases. 

As part of your preliminary consultation with an accountant, inquire about the services they provide to their clients. Also, discuss how they tend to work with their clients and how much experience they have in your industry.  

It is important to be clear about the kind of services you need to avail from a CPA before you bring them on board. 

4. Meet with prospective accountants

Once your background checks are complete, you need to set up meetings and have a more meaningful conversation with each of your shortlisted accountants. You can consider focusing on the following things when interviewing them: 

  • Questions about licenses, certification, relevant qualifications or professional organizations.  
  • Their experience working in your industry.  
  • Their rates for several services like tax preparation fees.  
  • Do they use outsourcing and if yes then for which services?  
  • The kind of accounting software they use.  
  • Their E-file policies for tax return.  
  • Their communication policies (Email, phone etc.)  
5. Determine your level of comfort

The right choice for an accountant will be a professional whose financial and legal advice will direct you through long-term decisions for your business. Their advice will be your direction every year through legal statutes at tax time. 

A talented accountant will not only formulate your tax documents but will also sign them with their credentials. They will represent you if any tax questions or issues arise throughout their tenure. You, as a business owner, want to be confident in your decision with giving access to information this sensitive and essential to an outsider. 

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Reclaiming Home Office Deductions: Tips and Tricks

Reclaiming Home Office Deductions Tips and Tricks

Reclaiming Home Office Deductions: Tips and Tricks

November 10, 2022

Reclaiming Home Office Deductions Tips and Tricks

peakreliance

Accounting, Bookkeeping, Taxes

“The first mistake people make when it comes to home-office deductions is they fail to claim them,” says Bob Meighan of San Diego, a lead CPA for a famous company in USA. 

Many business owners with home offices waive off the tax breaks because they fear that the write-offs will trigger a tax audit and bring accountability on their shoulders. Tax experts say that now home offices no longer set off alarms at the IRS (Internal Revenue Service). Although, there are some parameters one needs to examine, when it comes to checking if you are eligible for the home-office deduction. Millions of Americans have shifted to worked from home this year, due to the COVID-19 pandemic. 

The endorsed tax break is generally only available for the people who are self-employed, gig workers or independent contractors. As a small business owner, whichever industry your business may belong to, you can by all means claim this deduction while filing your taxes. 

Expenses You Can Claim

There are two types of expenses that you can deduct:

The first, direct expenses, lets you deduct 100 percent of costs linked specifically with your home office. It includes everything from hiring someone to paint/ renovate your room to buying equipment like work computer, office supplies or cell phone dedicated for the home-based business.  

Businesses can also write off remodeling, if the home office is being used to meet with clients or customers. This is because, logically, the appearance of the house is important to the success of the business. 

The other deductible home-office expenses are indirect expenses. These are proportioned equally, based on the dimensions of the home office space including your utility bills, property insurance, mortgage and a home security system.  

The write-off amount can be calculated in two ways. First is calculating the portion of the house that is being used for office work. That is then taken as a percentage of the whole house area and the business owner is eligible to write-off that percentage. 

Second method is counting the total number of rooms and taking the number if rooms as a portion of the house used for home office. The business owner can write-off that portion only. Out of these two, the percentage method is more widely used.  

However, the monthly charges/ fees for the primary phone line in your home cannot be deducted, though long-distance calls for work, call waiting and call forwarding can be claimed. Also, if you have only one cell phone being used partly for work and partly for personal things, it’s a gray area that needs to be discussed with a tax advisor. 

Tips and tricks for claiming the deductions: 

Taxpayers and business owners must solely and regularly use the dedicated part of their home as their primary place of business-related work. This means, a place where you greet clients or customers and have meetings, conduct your business, store supplies and inventory etc.  

The good thing is that you don’t have to be the homeowner to claim the deduction — apartments, mobile homes, boats or other property are also eligible according to the IRS. 

Another possibility is to claim only a part of the deduction, which accounts for the time the business spent being operated in a certain location. The business owners must have proper documentation for all home office spaces that were used within a tax year. What better documentation can there be than an actual picture of the work space. This was, once the deduction has been claimed and IRS initiates an audit, owners can have a solid proof. 

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Accounting, Bookkeeper, Bookkeping, cpa, Home office deductions, Online CPA, Tax Deductions, Taxes

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