Accountants working with small businesses often play the role of business advisors, especially when it comes to educating their clients about tax regulations and reducing their tax bill by taking all legitimate factors into account.
We’ve gathered five tips that accounting professionals can use as a check-list to give to their small and mid-size business owner clients looking to make better financial decisions this year.
1. Separate personal and business expenses
It is one of the most important rules of accounting: business expenses must be separated from personal ones. Usually, two different credit cards can help with that, but problems arise when an expense might be partly personal and partly business-related.
A common example: a freelancer using one room in her house as a home office. In this case, we would measure the square footage of the home office and of the entire house, and find the percentage. This percentage would be used to count the business portion of shared expenses such as rent, utilities, and insurance. The business portion of such expenses would become part of the home office deduction, unlike the rest of the expenses.
This is a good example showing that even though generally you cannot deduct personal expenses, if you do have an expense for something that is used partly for business and partly for personal purposes, you can divide those parts and deduct the business part (consult IRS, Publication 535, Business Expenses).
A vital bookkeeping rule of thumb is to keep track of all expenses. That way, your clients can review their expenses or ask for professional advice to see if any of them might be tax-deductible.
2. Use online accounting software to generate profit and loss statements
Accounting programs such as QuickBooks can generate profit and loss reports. These reports help analyze how the business is doing, whether it is profitable, and how the money is being spent. Having these reports helps tax accountants to expedite the preparation of tax returns.
They can be quickly run to generate income statements for any period you need using QuickBooks. If you need to track your operating income, you may find quarterly or monthly statements more helpful. If you need to report your income for a loan application, annual income statements are usually asked for.
3. Connect your bank to QuickBooks for automatic categorization
Did you know that you can save an average of 40 hours by simply connecting your or clients’ bank accounts as well as their online payment processors (such as Stripe, PayPal or Square) to QuickBooks? This will automatically import and categorize transactions for bookkeeping and tax purposes, saving a lot of time previously spent on manual data entry.
Connecting online payment processors to QuickBooks is crucial in order to make sure every online transaction is accounted for, and processor fees are separated and categorized as business expenses, making them deductible.
In doing so, make sure you are using the most trusted tool. You want to be able to have an overview of all transactions, easily undo any action, bring in every single transaction, and have all business expenses neatly categorized.
Using accounting automation apps, such as Synder can help easily import online transaction data into QuickBooks Online, QuickBooks Desktop, and Xero.
Check out, "How to Download and Categorize Online Payment Transactions in QuickBooks", our webinar sponsored by Synder by CloudBusiness and presented by Polly Sidoruk, on February 25 at 12:00 p.m. Eastern Time. Register here.
4. Opt for a cloud-based POS
Whether your clients are running an inventory-based business, or providing services, it is highly likely that a cloud-based POS system will be able to save them a lot of money and time.
By nature, they are more affordable than traditional points of sales, as they don’t require on-site servers that are expensive to not only purchase but also maintain. They allow instant access from any device, at any time, which helps SMBs manage multiple locations and be more productive, while maintaining peace of mind, having a clear overview of their financial situation.
From the accounting point of view, cloud-based POS brings in greater transparency, as most of them have straightforward integrations with major accounting platforms, whether built-in or using a third-party integration. This is a real game-changer, as it allows your clients to not only have a clear picture of their finances and the state of their business in their POS but to have it directly transferred to their accounting file. A great example is the clarity you get while selling on Square and connecting it to QuickBooks Online using Synder. You can also use Synder with traditional point of sales, it will connect your PayPal, Stripe and/or Square directly to QuickBooks/Xero, saving hours each week.
5. Benefit from automation solutions
If you were to choose only one resolution to keep sticking to in 2020, make it this: get the most of automation available on the market. Whether it’s connecting Stripe to QuickBooks Online and therefore making Stripe fees deductible and saving time on categorizing transactions, or preparing Profit and Loss statements that help accountants expedite preparation of tax returns, automation is the name of the game.
Definitely, it is not the full list. Every professional has their own best practices that help them address their client’s needs. To have more details on the crucial issues that bookkeepers and CPAs face doing accounting for their clients and the ways to solve them, please join the webinar with leading specialist Polly Sidoruk for several applications for QuickBooks and Xero experienced in researching different accounting flows and guiding custom integration for customers. Her expertise helps people to simplify their accounting workflow and save loads of time.
Author Bio: Michael Astreiko, Founder & CEO of CloudBusiness. Being an architect of business automation solutions and having a diverse software engineering background of 10+ years, Michael founded CloudBusiness to help accountants and SMBs resolving their daily workflow challenges by integrating cutting edge software solutions into their routine tasks.