Let’s face it, most small business owners did not start their passion project with accounting experience, if any. When outsourcing your accounting is the best fit for you and your small business here are three tips to start a smooth transition of your books.
1. Using Your Business Account for Personal Purchases
Sometimes the line between your professional life and personal life can be blurred when you are a small business owner. Most remote or small business owners bring work home or handle family tasks during work hours. When you're running a business, you have the freedom and flexibility to mix work with life.
Instead of being tempted to use business funds, make sure you regularly take a salary or profit distribution. It's easy to set up an automated lump-sum transfer weekly, bi-weekly or monthly. That way, you won't have to dip into business funds if you need cash for yourself. Open a business credit card and checking account to pay for business expenses. This will help you at tax time by making it easy to generate reports.
Four reasons to never mix your personal and business expenses
· Professionalism
· Legal issues
· Taxes
· Cash flow
2. Buying New Vehicles or Equipment Without Notifying Them
This isn’t implying that you need to have purchases approved by your accountant beforehand, just a friendly reminder to always notify them once the purchase has been made. Section 179 is a government tax incentive for purchasing business equipment and vehicles. This incentive is made specifically available to all small and medium-sized businesses. Almost all types of business vehicles and equipment qualify for a 179 deduction.
Section 179 allows you to deduct the entire purchase price of any qualifying equipment, software, and vehicles that you have purchased for your business during that tax year. Section 179 deductions can be taken no matter what method of payment you use for the purchase.
How does IRS Code Section 179 Boost Your Cash Flow?
By using Section 179 for equipment, you can keep money in your pocket for other expenses (like payroll and consumables) when you finance the equipment. You get to keep even more money when you reduce your tax liability with a Section 179 deduction. The main benefit of combining Section 179 with equipment financing is that you save cash by financing the equipment or vehicle and reduce your tax liability. This tax credit will be slowly faded out after the 2023 year, so take advantage now and speak with your bookkeeper or accountant!
3. Not Keeping Receipts or Customer Deposit Information
Good records can increase the likelihood of business success.
You need good records to prepare accurate financial statements. Along with keeping profit and loss statements and balance sheets, keeping receipts is crucial to keeping a paper trail for your accountant to process the most beneficial tax return for your business that year.
Unless you record them when they occur, you may forget expenses when you prepare your tax return.
You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.
Keeping records of receipts and customer deposits can:
· Monitor the progress of your business
· Prepare your financial statements
· Identify sources of your income
· Keep track of your deductible expenses
· Prepare your tax returns
· Support items reported on your tax returns
· Monitor the progress of your business
Do you have questions or concerns about your taxes or accounting records? Reach out to Check & Balance to schedule a free consultation today or give us a call at 603-541-7485. Our experienced accountants will be happy to guide you through the tax credits, deductions, and other benefits available to you.
Tags: BusinessAccount PersonalPurchases BusinessPurchases CustomerDepositTracker BookkeepingReceipts Accounting SmallBusiness