by Blair Butters | Feb 2, 2024 | Accounting, Bookkeeping
As a small business, one of the biggest challenges you face is maintaining the essence of who you are, and how you serve your community, while also staying competitive as an employer and keeping up on the endless stream of bookkeeping, accounting and tax related needs. Most small businesses on American land are in this middle squeeze spot where you have several employees and accounting and bookkeeping related needs, such as ensuring that those people get paid accurately and on time every week! But your needs don’t justify having a full-time in-house team member. So, what is a small business to do? This is where an outsourced or contracted accounting partner can be a great fit! Outsourced bookkeeping, also called on-site bookkeeping, is one of the fastest growing trends in the bookkeeping and accounting world. It gives you the flexibility to have someone on the inside of your operations and your bookwork, but without you having to take them on as a full-time team member when it’s not necessary! Here are 4 signs that it’s time for you to get the help of an on-site bookkeeper: You’re falling behind or making mistakes: If you find yourself getting overwhelmed with a too-long-to-do list or making mistakes in areas like managing profit and loss statements, expenses, and payroll, this is a sign it’s time to consider getting an on-site bookkeeper. Your staff is growing. Have you recently expanded your team and the number of employees supporting your business? This is a good indicator to bring in someone from the outside to support your team and business so that you can keep...
by Blair Butters | Jul 22, 2022 | Accounting, General Tax and Accounting Information, Tax Planning
If you keep inventory in stock, it’s important to ensure that it’s accounted for properly. Inventory can affect your company in many ways, impacting cash flow, cost of goods sold, and your profit. Today, we’re diving into two popular inventory accounting methods and the ways you can value your inventory or assets. What is Inventory Accounting Inventory accounting values and accounts for changes in the inventory a company holds during a given period. It determines the value of assets during the three stages of production: raw goods, in-progress goods, and finished goods ready for sale. Each item in stock has a value recorded separately. In manufacturing processes, the value of an item can change depending on the stage of production. The sum total of all inventory item values is recorded as a company asset. The accounting method you choose has a direct impact on the cost of goods sold calculation for the accounting period, and on net income earned. Companies use cost of goods sold (COGS) to determine the direct cost of producing the goods sold without taking overhead costs into account, and generally includes only direct materials and labor costs. To calculate the cost of goods sold, add the beginning inventory and purchases, then deduct the ending inventory from that number in the following way: Cost of goods sold = beginning inventory + purchases – ending inventory. Accounting Methods The method businesses use to cost their inventory directly guides the income and inventory value they report on their financial statements. Two popular methods to compute the cost of goods sold and ending inventory for a period are First...
by Blair Butters | Jun 20, 2022 | Accounting, General Tax and Accounting Information
As a small business owner, there are many decisions to be made, particularly when you’re just starting out, to ensure everything runs smoothly and efficiently. One important decision to make is selecting an appropriate accounting method for your business. Accounting methods are simply the rules your business will follow when reporting revenues and expenses. Today, we’ll dive into the two primary accounting methods — accrual vs cash-based accounting — what they mean, and how to choose between the two when setting up your business. Before we get started, it’s important to note the IRS requires taxpayers to choose an accounting method that accurately reflects their income and to be consistent with their choice of accounting method from year to year. This is because switching between methods could potentially allow a company to manipulate its revenue to minimize its tax burdens. To change your accounting method, you must receive approval from the IRS, typically with Form 3115. It’s important to choose your method carefully; if you’re unsure which method would work best for you, consult with a tax advisor before launching your business. Cash-Based Accounting Method We will start with the cash-based accounting method, as it is the method most used by many small businesses. Cash-based accounting recognizes revenue when cash is received and when expenses are paid. For example, when you receive a bill from a vendor that is due next month, that expense is not recognized until it is paid. This is a simpler method because there is no need for accounts like Accounts Receivable or Accounts Payable – only cash accounts are required. This option is...
Recent Comments