Thursday, April 30, 2009

Small business tips: the basics of bookkeeping

Good bookkeeping practices are essential to keeping your business running smoothly.

Regardless of the size of your company, good bookkeeping practices are essential to keeping your business running smoothly. Accurately kept books do more than make it easy to file your annual tax returns. Banks may require you to submit a profit and loss statement or balance sheet
so they can determine your credit-worthiness. A quick review of your books can show where you need to spend more or less money; who gives you the most business and who takes the longest to pay you; how much you're paying out in commissions compared to how much you're selling.

Here are some general terms that are helpful to know.

ASSETS are things that you own or are owed to you: bank accounts, inventory, loans made to other companies or individuals, company cars, etc.

LIABILITIES are things that you owe: loans, accounts payable, payroll taxes, etc.

EQUITY is net income (sales less expenses), capital stock, and owners/officers distributions.

EXPENSES are things you pay for: business meals, gas for company cars, professional services
, postage, etc.

REVENUE is money you earn from the sale of services or product, or from interest earned on a bank account, investment, or a lease or loan of your equipment or property.

COST OF SALES is any expense directly related to earning revenue: product purchases, freight or delivery, sales tax expense, etc.

One of the most valuable resources you can have for a small business is a public accountant. Even if you only take your books in at tax time, having someone to give you specific advice and answer your bookkeeping questions is important. Find an accountant whom you like and trust. If you're having difficulty finding one on your own, talk to other people with similar businesses for recommendations.

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Friday, April 24, 2009

UPDATE 3-H&R Block does fewer tax returns as economy weighs

  • Tax returns prepared fall 3.1 percent
  • Online tax preparation soars as customers cut costs
  • Shares slightly lower (Adds analyst and Breeden comments, share price, byline)

By Jonathan Stempel

NEW YORK, April 24 (Reuters) - H&R Block Inc (HRB.N), the largest U.S. tax preparer, said it prepared 3.1 percent fewer tax returns as customers sought cheaper alternatives in a recessionary economy.

The company prepared 21 million returns between Jan. 1 and April 15, down from 21.7 million a year earlier. Tax preparation fees edged up 0.5 percent to $2.82 billion.

The data are critical because Kansas City, Missouri-based H&R Block generates the bulk of its annual profit and revenue in its fiscal fourth quarter, which ends on April 30. The quarter encompasses most of the main U.S. tax filing season. H&R Block did not immediately return a call seeking comment.

Scott Schneeberger, an Oppenheimer & Co analyst, wrote that results were consistent with expectations and that "an improving economy coupled with further cost-reduction efforts should support solid year-over-year improvement." He rates the company "outperform."

H&R Block prepared 15.1 million returns in retail offices, down 5.7 percent from a year earlier. Partially offsetting this was a 21.5 percent increase, to 5.1 million, in the number of returns prepared online and with software, which can cost less. Online returns jumped 45.5 percent.

The average fee per return prepared in retail offices rose 6.7 percent to $187.17.

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Thursday, April 23, 2009

Bookkeeping Outsourcing: Leading the World to Higher Profits

Bookkeeping, as we all know it is a very mundane task. What people think is that bookkeeping is the same as accounting but they are very different. Bookkeeping means recording of the transactions in various books. Daily transactions like a sale has a multiple transactions, first it going in the sales book and gets recorded as sales, then it gets deducted from the inventory that one has, third it should go into the cash account if its cash sales or should go into the debtors accounts if it is credit sales. All this makes the task not only tedious but also if one forgets on small detail like entering the numbers into a particular book the entire balance sheet would go for a spin. All this makes book keeping a very minute task and hence makes it mandatory for business houses to opt for bookkeeping outsourcing.

The reasons why business houses would opt for bookkeeping outsourcing are plenty. A few of them are explained as under.

First book keeping requires the staff to minutely record all entries and if they are lethargic or bored or absentminded then they could make a mistake of recording a wrong amount or recording the entry in the wrong book. This would turn out to be added work for the owner and create stress and tension. Hence the staff should be able to concentrate at all times. This does not happen as there are various distractions in the work place.

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Friday, April 17, 2009

A few Investment Real Estate Tax Tips

All of these tax tips are current and in effect at the time of this writing. However, as with all matters tax-related, verify with your tax advisor before attempting to use them – you know how Washington loves to tinker with things.
  • In order to claim many of the tax benefits associated with owning investment real estate, you must be actively involved in the property's management. Actively involved – according to the IRS – means that you set the rents, approve tenants, and decide on capital improvements. It doesn't mean that you can't hire management help; it simply denotes that you must remain in control.
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Thursday, April 16, 2009

Bookkeeping Tips for Small Business Owners

Small business owners are so involved with other aspects of their business that they often neglect keeping accurate bookkeeping records. Up to date books are essential for the long term growth and sustainability of your business. Some of these tips may sound trivial, but you will be surprised how often they can be neglected, and before you know it, you are months behind on your bookkeeping!

Here are some tips that should help:
  1. Keep track of receivables and payables

    Bill your customers promptly once an agreement has been fulfilled, and follow up regularly to ensure timely payment of the debt. Record receipts regularly in your ledger so that receivables are up to date. As for payables, come up with a filing system to keep track of your receipts. For example, sort them by date or by category so they are easy to retrieve when needed. Again, record receipts regularly in your ledger so that payables are up to date.

  2. Watch cash flow

    Since the flow of money into your business can be on a different schedule than the flow of money out of your business, you need to be well aware of cash flow at any given time in a month. If you are able to detect this as a problem early on, it will give you enough time to arrange for alternate methods of financing to cover any shortfalls. Monitoring cash flow regularly will allow you to plan ahead and adjust your collections and payment policy if need be.

  3. Compare Earnings and Expenses

    How is your business performing? It is a good habit to regularly compare earnings and expenses, since it will help you identify which areas of your business are profitable, and which could require some more of your attention. Depending upon the size of your business, you could perform this task weekly, monthly, or quarterly.

  4. Go Online

    Having well maintained and accessible bookkeeping records will greatly help your small business. The trend in recent years has been to move away from conventional methods of doing business and move to more tech friendly methods using the internet. If online banking causes you to become more organized and efficient, why not apply the same to your bookkeeping.
Source :

Thursday, April 9, 2009

Book-keeping Basic Tips

Reasons for keeping books

Legal Requirement - under the new system of self assessment, the keeping of books is a must and it's illegal not to.

Control of Business - It's almost impossible to know whether you are winning or losing, have to pay bills, people owe you money, etc if you don't keep books

Cheaper Accounts - well presented books will reduce accountants bills but check with them that the method you intend to use is the best for both of you - often they may have a system that they prefer or software they can download to your computer to use.

If you Sell the Business books are necessary to indicate the value and worth of the business

Finance - If you require loans or finance you will need to show books

VAT / PAYE - records need to be kept for inspection

Methods for keeping books

Patented System - such as Simplex, Everite, Collins, etc. usually 52 weeks plus Profit and Loss Account as summary

Analysis Book - Can be adapted to own requirements

Double Entry System - Involves Ledger Cards and works on the same system as computerised accounts

Computerised Systems - a wide variety available such as Sage, MYOB, DO$H, etc a download of a free, single user book-keeping system is available through

Your Own Method - using a note book or folder. Just ensure that al incoming go on the Left side of the book and all outgoings are entered on the Right side of the book.

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Friday, April 3, 2009

Today’s tax tip: Some relief for people with tax debt

Twice weekly on Tuesday and Friday from now until April 15, we will bring you tax tips from PBS Tax and Bookkeeping Service. Howard Abrams and PBS have been providing income tax and bookkeeping services to the trucking industry for more than 25 years. OOIDA features Howard’s column, “Tax Tips,” in each issue of Land Line Magazine.

Today’s tax tip is: Some relief for people with tax debt. If you were rejected for an “Offer in Compromise” – an agreement to settle your tax debt for less than you owe – because you had home equity, the IRS will review those rejected applications, because the equity may now be gone.

If you were on an installment payment plan with the IRS previously, all the debt was due if a payment was missed. Now you might stay on the payment program even if you skip a payment or send a reduced amount. Each case is different.

If you have suffered financial hardship, such as loss of work, the IRS may postpone collection action temporarily. Contact the IRS.

Previous tax tips
Net operating loss carryback. New Rule: In this horrible economic period, many of you will have losses (operating losses) that appear on your 1040 Schedule C where your net income usually is. Prior law allowed net operating losses (NOLs) to be carried back two years and carried forward 20 years. For 2008, a new law allows you to carry back up to five years. This allows you to possibly realize much-needed cash. An election must be made on your 2008 tax return or, if already filed, you must submit a new election by April 17, 2009.

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Thursday, April 2, 2009

A Bookkeeping Solution for Freelancers

A lot of people got into freelancing and sole proprietorships last year. Since the job market tanked, many people took their skills into the open market. That's what America is all about right? Anyone can make money!

But now its tax time. Many of these same freelancers are finding themselves in a pile of debt with Uncle Sam. Poor record keeping has led to disaster because there are no ways to prove expenses, even if they were known. Fear, uncertainty, and doubt has filled the minds of these freelancers.

If you are one of those people, I have a 3-website solution for you:
  1. Freshbooks. This site will handle your invoicing. It keeps things very simple, secure, and accurate. You can invoice based on time and materials, fixed fee, or however else you see fit. You can set up automatic invoicing, and automatic payments. Invoices can be online or the site will snail mail your customers. According to their own data, users get paid an average of 14 days faster than using their old system (whatever that was).
  2. Outright. This site is to keep track of your income and your expenses. It integrates with Freshbooks, so your income side sort of takes care of itself. The expenses are conveniently divided into IRS Schedule C categories, making your life a lot easier at the end of each quarter. Speaking of taxes, they actually estimate your tax payments for you! The site has a "taxes" tab. At the end of each quarter, it will calculate both your self employment (social security and medicare) tax and your business income tax (based on 10% marginal rate on your profit). They are probably on the high side, but its better to be safe and get money back, right? Another great feature is the 1099 calculation, based on you using the "contractors and freelancers" expense category. The site will then make a list of all the contractors you paid at least $600.
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