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Everyone wants to know how they’re doing. As a small business owner, this is critical to your survival. Because franchises often operate on tighter margins, knowing where to pull back on certain expenses (for example, marketing) or where to negotiate harder (for example, leasing property) or where to invest (buying new equipment) matters. If you’re not comparing yourself against your peers, you’re flying blind. And that might mean you’re making mistakes.

Find out these ways to compare your franchise against your competitors.

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Bookkeeping for Business Success

What were the last job’s earnings for your small business? How much did you spend on your recent business upgrade? If you seek to keep accurate financial records, you must know the significance of bookkeeping.

What is Bookkeeping?

Bookkeeping is a useful process that tracks the financial performance of your company. It is vital to any company and without it, business owners will not be able to confidently prepare for the future. For certain businesses, it might mean the difference between success and failure.

Running a business is difficult, as every small business owner knows. The majority of small business owners learn to multitask and choose to perform their own bookkeeping rather than hiring a professional to do it to save money. As a result, bookkeeping frequently takes a back seat in the chaos of keeping everything in order, and that is dangerous.

Small businesses can use bookkeeping to organize, store, and analyze financial data. Using this financial data, you can accurately conclude your company’s financial security.

Without professional bookkeeping, it can be challenging to maintain track of and submit the required data to the federal government. Not to mention that filing incompletely or with false information may result in penalties and fines.

Now that you are aware of the significance of basic bookkeeping for small businesses, consider the following benefits:

1. Budgeting

Bookkeeping helps in financial planning and budgeting. Any small business needs bookkeeping because it makes budgeting much easier. Reviewing your financial resources and costs is straightforward when your income and expenses are organized properly. With transparent, organized, and accurate records, you may review previous information to build a strategy for moving forward.

Did you have a great year? Were sales slow but consistent? Did your suppliers raise their prices, affecting your cost of goods sold during the year? All of these factors influence how you plan for the coming year.

When it comes to budgeting, you must have a thorough understanding of how your company performed in the past. Overspending during the year is recorded in your accounts, as are cost-cutting efforts. Accounting will inform you if you are over budget, as well as if you are under budget.

2. Keeping Records Organized

Last-minute stress from trying to track down an important piece of business might lead to missed deadlines and minor errors slipping in. Businesses of all sizes cannot afford to make mistakes, and regular bookkeeping can help with that.

No matter what is going on in your business, keeping your financial records organized is essential. When it comes time to create a budget, file a loan or grant application, or check to see whether you are making a profit,  bookkeeping allows you to quickly discover the information you need. Bookkeeping compiles all of that data into a single, easy-to-read system.

Moreover, having organized financial data can also make it easier for you to schedule bill payments. By knowing when your bills are due, you can manage expenditures on your calendar.

3. Attracting Investors

To succeed, businesses require funding. Investors, business loans, grants, and owner equity are all possible sources of finance. But before investing, investors must have a solid understanding of your company.

Investors cannot assess the success or failure of your firm without accounting documents. They require accurate information that is updated. Additionally, this data must be easily accessible. If you do not use bookkeeping, the information might not always be available when you need it.

4. Keeps You Tax Prepared

Businesses must file their taxes at the end of the tax year, no matter how inconvenient it is. If you have a bookkeeping system in place, you will have financial data prepared for tax season and the taxman will not be on your tail.

You can provide your accountant with detailed records rather than having them sift through a filing cabinet full of various documents, invoices, and receipts. This will free up time for both you and your accountant. In addition, you could even be able to spot potential tax deductions.

5. Provides Extra Peace of Mind

Unorganized books, issues with taxes, and approaching tax deadlines can all cause a lot of stress and anxiety. The last thing that business owners need is to worry about bookkeeping matters on top of their regular duties.

By having the best bookkeepers, you will not be awake at night worrying about your books after they are finished and organized. Knowing that the financial data for your company is prepared for examination frees you from worrying about financial issues. You may concentrate on other aspects of your business since your mind will be at ease.

The Takeaway

As you can see, there are many reasons why bookkeeping is so important for your business. Although not everyone is an expert when it comes to managing their own company’s finances, getting started and maintaining it is easier than you can ever imagine.

It is important to keep your bookkeeping precise, timely, and consistent. And if you want to prioritize the role of bookkeeping in your company, you must act fast. Apply for online bookkeeping services now to start saving time for what matters most—growing your business!

Ready to offload your bookkeeping tasks? Contact the best accountants in LA today to have your books organized for the coming fiscal year!

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Bookkeeping Mistakes Made By Small Businesses: How To Avoid Them

Small and Medium-sized businesses are eager to grow, but they often miss the fundamentals like understanding the value of Bookkeeping which may undermine business procedures.

Accounting is often overlooked by business owners who consider it easy. Incorrect accounting and bookkeeping processes may adversely impact any company’s finances. Recurring bookkeeping errors can actually bankrupt your business.

Bookkeeping Mistakes

Keeping financial records is a very important part of running a business, big or small. Bookkeeping that is accurate and well-organized makes sure that your financial records are up-to-date and precise, which helps you make good decisions and compliance with legal policies.

There are however some mistakes that small businesses often make with their books. Here are some of these mistakes.

Failure To Keep Records

Some small businesses fail to keep accurate financial records, which can lead to confusion and errors. Record-keeping is an essential process in organizing your financial records. Adopt best practices and create a system for organizing and storing your financial documents. These relevant documents may include invoices, receipts, and bank statements. It is helpful to consider using accounting software to automate the process and centralize everything.

Irregular Reconciling of Accounts

Failure to reconcile your bank and credit card accounts on a regular basis can lead to inconsistencies and inaccuracies. Reconciliation entails matching your financial records with your bank and credit card statements. Reconcile your accounts on a regular basis and resolve any discrepancies quickly to avoid problems.

Combining Personal and Business-Related Finances

It is critical to separate your personal and business finances by avoiding using personal accounts for business transactions. This can complicate bookkeeping and make it difficult to accurately track expenses and income. You must establish a separate business bank account and use it solely for business transactions.

Inconsistent Categorization

It is critical to properly categorize your income and expenses for accurate financial reporting. Refrain from inconsistent or ambiguous categorization, as it can make evaluating of your company’s financial health a lot more difficult. It will be helpful to create a chart of accounts with distinct categories that correspond to your field of business and use it regularly.

Neglecting Cash Transactions

Small businesses often transact in cash, which can be overlooked easily and not properly recorded. To ensure that cash transactions are accurately accounted for, use cash registers, petty cash logs, or digital tools. Better yet, set up a system for keeping track of and documenting all cash transactions, including sales and expenses. 

Failure To Keep Track of Receivables and Payables

Failure to maintain track of unpaid invoices (accounts receivable) and bills to be paid (accounts payable) might jeopardize your cash flow and client-vendor relationships. Use accounting software with invoicing and payment tracking features to implement a structured strategy for monitoring and following up on both receivables and payables.

Mishandling Payroll 

Payroll can be complicated, and mistakes can have legal and financial ramifications. Keep up with advances in payroll requirements, calculate wages and taxes accurately, and make timely payments to employees and tax authorities. To ensure accuracy and compliance, consider adopting efficient payroll software or you can also outsource payroll duties. 

Failure To Keep Backup of Records

Financial records might be lost because of corrupted data, hardware failure, or other unanticipated factors. Back up your financial data on a regular basis and keep it secure. Cloud accounting software can back up your data automatically to add an extra degree of security. 

Neglect To Track and Remit Sales Taxes

If your company is obligated to collect sales taxes, it is critical that you track and remit them appropriately. Understand your sales tax duties, register with the proper tax authorities, and maintain accurate sales and tax collection records. To simplify the process, consider employing seamless sales tax automation software.

Doing-It-Yourself

This is a critical error that can have serious consequences for your company. Because bookkeeping is a complex process, it is best to seek professional help from a bookkeeper or accountant to set up and review your bookkeeping system on a regular basis. They can assist you in avoiding mistakes, providing financial insights, and ensuring tax compliance.

You can reduce the likelihood of these frequent errors and retain accurate financial records for your small business by being proactive and following appropriate bookkeeping practices with the help of expert bookkeepers and record-keepers.

How to Avoid Bookkeeping Errors

To avoid bookkeeping errors some proactive steps must be taken by small business owners. This may include familiarizing yourself with basic bookkeeping principles and practices to help you navigate your financial records effectively and make informed decisions. 

This can be further established by using a good bookkeeping system coupled with reliable accounting software. As a business owner, it is important to invest in a reputable accounting software solution that suits the needs of your business and reduces errors. 

In addition, it is important to reconcile accounts regularly to ensure your financial records match financial statements to help identify discrepancies and errors promptly.

Keep meticulous records by maintaining detailed records of all financial transactions and accept that it is always best to seek professional assistance from reliable bookkeepers and record-keepers who specializes in small business finances. 

By implementing these practices, small business owners can reduce the likelihood of committing bookkeeping errors while maintaining accurate financial records. 

The Bottomline

When you own a company, you put yourself in a position to take advantage of many different possibilities, including the chance to learn from your errors. When it comes to making mistakes, the key to success is to steer clear of those that are readily apparent and cut down on others as much as you possibly can. Remember that good bookkeeping and record-keeping practices contribute to informed decision-making and long-term business success.

Consider this list seriously and implement its suggestion so you will be well on your way to running your business in profitable ways and expanding it in all ways possible.

There is more that you can achieve with the most reliable team of professional bookkeepers and record-keepers. Visit us now and get started!

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Bookkeeping and recordkeeping are not only needed but are important in healthcare industries. These processes are critical aspects of managing their financials. Proper bookkeeping and record-keeping help healthcare institutions track their income, expenses, and other financial transactions while providing insights into the overall financial health of the organization.  We will be happy to serve! Visit us!

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When Should You Hire a CPA?

There are critical times when your small business requires the services of a CPA (Certified Public Accountant), from selecting a company structure that allows you to save the most money on taxes to offering advice on a significant business move.

As a small business owner, you may find it challenging to determine when to outsource tasks and when to manage them yourself. This is especially true if you’re looking for a certified public accountant (CPA), if you’ve recently established your business or if it’s grown beyond expectations.

While you can easily handle day-to-day accounting on your own, especially if you have decent accounting software or a bookkeeper, there are times when the knowledge of a CPA may help you make wise business decisions, avoid costly mistakes, and save you time.

When to Hire a CPA

#1 When Your Business is Starting Off

Accountantscan assist a small business at different stages of growth. To get your business off to a good financial start you need to consult a CPA. Your accounting and tax reporting responsibilities will be determined by how you register and run your business for the rest of your career.

A CPA may evaluate your business plan, ensure its financial viability, and assist you in preparing a budget to carry it out. If you intend to manage your day-to-day bookkeeping at first, a CPA will also point you in the direction of the best software choices for your specific business plan.

#2 When Filing Taxes or Being Audited

Whether you run a sole proprietorship or a corporation it is a given fact that tax season is a business burden. It is full of risky and expensive mistakes when done incorrectly. Long before the deadline for filing, business owners need to have a second pair of eyes to review their tax forms.

You can assign your tax-related tasks to an accountant, tax preparer, or a CPA who can perform both of these functions in order to spare yourself the hassle. CPAs handle both personal and business taxes, and they are skilled at navigating tax season, reducing your responsibilities, and protecting your company in the event of an error or tax audit. Also, it is best to hire an accountant before an audit happens, especially if you can find one who would provide audit insurance.

It is essential to be reminded that not allaccountantsprepare taxes so before outsourcing a professional be sure to find out whether tax services and protections are provided.

#3 When You Apply for a Loan, Grant, or Other Funding

Even for business owners with a track record of profitable operations, applying for a business loan and other forms of funding can be difficult. Establishing credibility is the first challenge, which is particularly challenging for new firms and startups. However, aCPAcan help you in staying on top of things and navigate the rough waters.

They will assist you in evaluating various strategies for establishing business credit and directing you to low-risk options. Even better, a CPA can help you in narrowing the field of loan options to those that are best suited to your budget such as choosing between a microloan or a standard term loan.

#4 When You Require Assistance with Financial Planning and Analysis

Planning and analysis are two areas where accountants thrive. One of the main advantages of employing an accountant is having access to their depth of financial knowledge.

This is especially true if you work with a CPA who has experience in your field or industry. You can involve them in any financial decision or goal, such as buying property, merging with a rival business, or cutting operating expenses.

#5 When You Need to Save Time

Managing your time can be challenging, especially when you’re facing many deadlines, clients, and complex client tasks.

If daily duties like tracking expenses, verifying transactions, data entry or processing receipts are taking up your time, a bookkeeper could be the right fit for the job. However, if you require a front-line professional to analyze your company’s operations, trends, costs, and revenue on a regular basis, it may be time tohire a CPA.

Time is an important resource, and hiring an accountant may simply come down to how much time your business can save.

The Bottom Line

As you can see, accountants can assist you at every level of your company’s growth. The right accountant should make your life easier so you can focus on what you love.

There is no exact science to knowing when to hire an accountant. However, there are some clear cases where it makes sense to use their skill set. When starting or growing your business, creating a financial plan, evaluating business reports, or applying for funding, consult with an accountant.

Understand your financial situation and make your money work for you and your business. Outsource experts from The Bookkeepers R Us and get those stress off your shoulders! Call us!

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How much is your franchise actually worth: Balance sheet versus income statement

To understand how well your small business is doing, you need to know both how it’s doing on a particular time frame (e.g., every month and quarter) as well as how it’s doing overall (how much it is actually worth). If you’ve ever thought of selling your franchise, this really matters.

Getting a holistic picture of your business’s financial health is critical so that you’re not blindsided by bad news—you thought you were doing well because you had a great few months… but when you want to sell your franchise, you suddenly find out that it isn’t worth as much as you thought. 

Think of it like going to the doctor. Maybe you haven’t gained weight in the past six months (yay!) and you think you’re in great shape. But if you look back since your early 20s, you’ve put on an extra 30 pounds and your blood pressure is too high. If you simply track your weight month to month, you only get a limited view. If you examine other factors and your health overall, you know that you need to make a few changes.

How to gauge what your business is really worth

Let’s discuss how we can look at the overall health of your business. To start, let’s look at the differences between income statements and balance sheets, and what you can learn from them.

An income statement is what most small business owners tend to look at most. 

As you know, it shows you how much you’re bringing in (revenue) and how much you’re spending (expenses) over a specific time period (e.g., monthly or quarterly). There’s a bit more to it (for example, to be accurate you need to organize everything by categories) but that’s the gist.

The income statement shows you your bottom line, which is your revenue minus expenses—profit—during a specific period. It’s a great way to see the impact of certain costs (e.g., looking at your biggest expenses) on your bottom line.

But just knowing dollars in, dollars out, and what’s left over every month won’t tell you what your company is actually worth. To do that, you need your balance sheet to show you the big picture.

Using the balance sheet to get the big picture.

The balance sheets pulls together three things: what your business owns (assets like property, equipment and inventory); what it owes (liabilities including loans, expenses, payroll); and what’s left after liabilities (your equity as an owner). 

In addition to tracking assets, liabilities and the resulting equity, the balance sheet shows the total worth of a company, not just how it’s doing on a particular time period (like the income statement).

Looking at both your income statement and balance sheet is super important. It can show you red flags, like the fact that perhaps your liabilities are higher than your assets. To a potential buyer of your franchise, that would show a weak financial position. But if you knew that because you were keeping up to date and accurate books, you could make important changes to put yourself in a better position.

The bottom line for small business owners who want to understand the true value of their business?

Start with your books. Keep your financials current and accurate. One of our clients recently told us that they immediately valued a business twice as much if its books were current and accurate. To investors or potential buyers, how you keep your books is a sign of how the business is valued.

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Is accounting essential for your business? Learn from the bookkeepers r us blog! Read on!

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SMBs foster healthy competition in markets while sustaining the local economy. This makes them a crucial component of the entrepreneurial ecosystem, which encourages innovation and economic growth. Find out how we can help them thrive! Read on!

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Luck is great, but most of life is hard work. -Iain Duncan Smith. 😀Celebrate hard work! Celebrate St. Patrick's Day☘️! 🥂Cheers!

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