What are the differences between a P&L and a Balance Sheet?
A balance sheet is a snapshot of your business at a specific moment in time. It tells you the value of your assets and liabilities so you can tell your financial position. A profit and loss report shows the performance of the business over a period of time. How much money per month came in, and how much went out. The balance sheet tells you where you are. The P&L tells the story of how you got there.
Why do I need a Chart of Accounts?
A Chart of Accounts allows you to organize all of the financial transactions that take place during the course of business. By breaking down all your transactions into categories and then subcategories, you can more clearly see the financial health of your business at any given time. By separating your revenue, expenses, assets, and liabilities, you gain insight into the effectiveness of different areas of your business.
Do I have to keep receipts for everything?
Every transaction may be important in hindsight. It is essential to keep the documents that back up those transactions because they support the entries in your books and on your tax return. Receipts for purchases, invoices, paid bills, account statements, deposit slips, and canceled checks all have some information you need to record in your books. The IRS even says that you should keep them “in an orderly fashion and in a safe place.” If it involves your business, you should save the backup. The worst that can happen is you don’t need them in the future.
What is Dext Prepare, and why do you require that your clients use it?
Dext Prepare with Receipt Bank is the paperless, nearly effortless solution we use that allows for digital document storage. Instead of keeping piles, bags, or boxes of paper documentation, Dext keeps these documents secure and in the cloud. It’s how we can help you disaster-proof your back up. It is also the first step for many of the automation routines that help us save you time and effort in processing those receipts.
Can I write on the receipts?
Writing on receipts is an excellent way to provide context and detail directly on the document image. It is also very convenient since you usually just signed a copy.
Why do I need to get W9s from my vendors?
A business is required to obtain a taxpayer identification number (TIN) from any vendor to whom it makes payments that require the issuance of a Form 1099-MISC. A Form W-9 facilitates obtaining this information.
When you pay $600 or more to a vendor for services, and that vendor is not a corporation, you must issue Form 1099. You can be subject to severe penalties for filing Form 1099 with missing or incorrect information.
Why can’t I use my company funds for personal use and let the company claim the expense?
For an expense to qualify as deductible to a business, it must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.
Maintaining separate accounts will allow for more straightforward accounting of what may be a deductible business expense or preparing a Schedule C. More importantly, you may be crossing ethical and legal lines.
What’s the difference between cash and accrual accounting?
The fundamental difference between cash basis and accrual accounting is all in the timing of recording income or expenses in your books. In accrual accounting, you record income and expenses immediately when they arise – even if you have not yet paid or received any money. Bookkeeping on a cash basis means you record your income or expense when there is actually an inflow or outflow of cash.
Why does my asset/liability transaction not appear on my P&L?
An asset or liability is something with a positive or negative value. It is part of the current snapshot of your business, and you’ll see it on the balance sheet. The transactions that adjust the value of the asset or liability are visible on the P&L report that describes the business operating results over a period of time.
FAQs: Working With Us
How do I know if I’m ready to hire a bookkeeper?
Do you find yourself working late into the night yet still feel like you cannot keep up with all the paperwork? Does the thought of bookkeeping make your heart beat just a little too quickly? Do you already know that your books are a mess? Yes? It’s probably time to hire a bookkeeper. And it’s likely that the earlier you make the investment, the less money it will cost. Cleaning up past months of bookkeeping tends to cost more than moving ahead with clean books. Also, it’s often easier to start from the beginning than to pick up somewhere in the middle. It’s best to start early to avoid paying more in taxes than you need to or paying more than you would have otherwise to clean up the books.
What are the benefits of outsourcing my bookkeeping?
Outsourcing allows you to make the most of someone else’s years of experience without going through the learning curve yourself. It can be a highly effective way to grow your business while saving you money in the long run. It’s like going to an experienced mechanic when your car needs work or seeing a doctor when you’re sick. Outsourcing enables you to focus on the things that only you can do as a business owner, like spending time with your clients or more time on sales.
For more info on the benefits of outsourcing your bookkeeping, check out https://hireeffect.com/why-outsource/
Do I need to hire a bookkeeper if I already have someone preparing my taxes?
We believe that it is best practice to separate the duties between a bookkeeper and a tax preparer. Not only does that allow for proper checks and balances, but the fact is their job responsibilities are also different. Their obligations to you are different. A bookkeeper lives in the details, the minutia of each transaction you make. A bookkeeper looks for anomalies and asks questions before those anomalies become problems. A good bookkeeper will be in your books every week. A tax preparer looks at the big picture – profits and losses for the year. Of course, your tax preparer will also review your expenses, looking for acceptable business deductions and tax credits. Still, they want totals, not line items. It’s your bookkeeper who will notice that you have online subscriptions to tools you don’t use or that you got charged twice for that last trip to the office products superstore.
For more info on the difference between a bookkeeper and a CPA, check out https://hireeffect.com/bookkeeper-or-cpa/
Do you do taxes?
No. Again, we believe it is best practice to keep bookkeeping and tax prep seperate. Your tax preparer will file your Federal and State Income taxes, along with your franchise taxes. Although we do calculate and file your sales tax when applicable, and often your payroll taxes, too.
Do you do payroll?
Yes! Our payroll and human resources specialists are here to help. We can work with your current payroll provider, or we will recommend the right payroll solution for you. We can also manage employee benefits administration, workers’ comp insurance, payroll tax filing, and all new hire state reporting when working with our primary payroll partners. We’ll even manage your year-end W2s.
Is my data secure?
Yes! We take data privacy and security very seriously. Our infrastructure is built in the Microsoft Secure Cloud using multiple security features combined with operational best practices. We use a portal that is HIPPA and bank compliant, so sensitive information is never emailed. We use a password manager that allows us to control our employee’s access to clients’ accounts, and we never write passwords down. You can rest assured that with us, your data is safe.
What are your fees? How do you price your service?
We base our fees mainly on the volume and complexity of your monthly transactions, not on your revenue. Just because you make more doesn’t mean bookkeeping should cost you more. We know that every business is different, so we prepare a custom proposal for you after conducting a thorough assessment of your books. We typically charge a small set-up fee, a clean-up or catch-up fee, and a fixed monthly service rate. And there are no surprises, no unexpected charges, and no bills for the time we spend answering your questions. That’s why we’re here.
Can I speak with a real (live) person if I have questions?
Yes! We are virtual but also very relational. We match you with a member of our team who acts as a member of your team. All our team members are US-based. We leverage automation but rely on our experience. We know your industry and take the time to understand precisely how you do business, so we can provide all the support you need. And you also have an open invitation to contact anyone in our organization for help.
How often will I get my financial reports?
We work in your books weekly, giving you as close to real-time access to your financial information as possible. We then reconcile and provide your reports by the 15th of the following month. If you need special reporting, let us know. We are happy to provide that for you, too.
Will you work with my CPA/tax professional?
Yes, we work with CPAs all over the United States, and they love working with us. We provide a nice set of clean books at year-end that makes their job easier. We can even tailor your Chart of Accounts to your CPAs specifications.
My books are a mess, and I’m embarrassed. How do we even start?
First of all, it’s ok to feel that way. Many other business owners have felt that same way. Bookkeeping is not intuitive for most, especially if you don’t have a background in accounting. We wouldn’t attempt to build our own houses or dig our own pools. We can’t provide our own therapy sessions or act as our own attorneys. And we don’t expect you to do your own books.
Bookkeeping that is not only compliant but also helps you make critical business decisions is possible, and we can help. Contact us today: https://hireeffect.com/contact/
I have disorganized piles of paper, and I don’t even have a good spreadsheet. Can you still help?
Yes! We are experts at making sense of piles of paper. Whether you’ve got a shoebox, a travel cup, file folders, or storage boxes, we’re here for you. No spreadsheet, no problem. There’s a chance we wouldn’t have used it anyway.
Why do you need access to my bank and credit card accounts? Will you be able to use them to buy things?
Account access allows three things. First, access will enable us to review specific transactions to learn more about them to classify them correctly in your books. Second, with access, we can retrieve the statements we need to perform monthly reconciliations. Third, account access allows us to connect the accounting technology vital to many of the time-saving tools we use. Overall, access to your accounts increases the value you get from working with us. And, no. We don’t use that access to buy anything.