Since we’ve started with the “vs.” theme in my “EA vs. CPA” post, let’s continue! We’ll go through a list of pros and cons for having an on-site bookkeeper compared to a remote or contract bookkeeper. There are a couple of things that need clarification. By onsite bookkeeper, I’m talking about a full or part-time bookkeeper who is a regular employee of your business. The remote or contract bookkeeper is a bookkeeper where you send your information and they prepare your books and give you the finished product (remote) or when the bookkeeper comes to your place of business on a regular basis and prepares your books (contract). continue reading this article »
Every year we have clients that need tax estimates so that they don’t have to pay an underpayment penalty when they file their taxes. It’s not a difficult thing to prepare, but if you’re self-employed and your income varies from year to year, the form can be a little confusing. There are a couple of options for figuring out how much to pay. continue reading this article »
As an accountant, I would love to tell you that you always need a bookkeeper–it keeps my profession alive. However, it’s simply not true. Here are several things that you need to ask yourself to determine if you need one.
1. Do I understand basic bookkeeping?
Can you balance your personal checkbook? Do you understand what is an asset compared to an expense? Do you feel comfortable with numbers? If the answer to all of these is no, there are a couple of options: you can take a class in accounting at your local community college or online. You can get advice from a bookkeeper and pay them to teach you how to prepare your own books. Or, the easiest, but not the cheapest option: you can hire a bookkeeping company.
2. Do I understand financial statements?
All of us want to build a successful business. Why else would we be in business? Financial statements are important: banks will require them for you to get a loan, you’ll need them to prepare your business taxes, and most importantly, you need them to determine how well your business is doing. A lot of people get along just fine without them, but there might come a time when you really need to have some financials prepared. Having an accurate set of books is important–it opens up your options for financing, your flexibility on determining how to run your business, and allows you to determine quickly what you have available for cash and credit and what expenses are coming up. (And it’ll save on your tax preparation bill.)
3. Am I comfortable with new software?
Quickbooks is a wonderful product. My colleague and I use Quickbooks regularly for preparing financial statements. It’s very user-friendly and can answer basic accounting questions. If you feel that you can take on Quickbooks and have some understanding of accounting, go for it. However, if you answered “no” to all the questions listed above, then you might not want to take the leap. Not only that, but if you really don’t understand bookkeeping, go to a professional–you can really screw up Quickbooks and it will cost you more when you tax preparer has to figure them out.
4. Do I want to do my own bookkeeping?
This is probably the biggest question of all. continue reading this article »
My colleague and I have begun doing “virtual bookkeeping.” It’s worked out well so far, with clients who are comfortable with technology being the best fit for this service.
Essentially, a set of QuickBooks is kept remotely and updated anytime information is received. When we receive a bank statement, mileage log, expense log, or credit card statement (sent in pdf format via email or through snail mail), we break it out, categorize it correctly and can generate reports from the info. It’s great for small companies that don’t want a bookkeeper on site and don’t want to pay a monthly fee—we bill by the time we actually spent on the project.
The other service that’s added at no charge is evaluating the tax situation—something that most remote bookkeeping companies are not able to do. It’s an important service that saves time and money when you actually have to file your tax return. When the bookkeeping is clean and keeps you from having to spend additional time with your accountant (not to mention averting potential tax problems.) We charge the same as other bookkeeping companies but it’s the additional tax service that’s added in that makes the difference.
Okay, enough self-promotion for today.
My husband is a freelance User Interface Developer. When we set up his business, which is currently a sole proprietorship, I applied to the IRS to get him an EIN (aka Employer Identification Number). Why did I do this?
It’s pretty simple, actually. If you have a freelance contract and you earn over $600, you should receive a 1099-MISC form stating that you received X amount in non-employee compensation. The same is true if you sub-contract out some work and pay more than $600. In order to win in an audit and claim that expense, you need to issue a 1099-MISC to the person whom you paid. For the IRS to track all these payments, the 1099-MISC has 2 identifying tax numbers on it–the social security number or EIN of the issuer and that of the recipient. If you don’t have an EIN, you MUST give out your Social Security number. And who wants to do that with all the identity fraud going around?
Luckily, it’s really simple to get an EIN and it can be obtained online. You get the number instantly when you’re done with the form and can begin using it for any requests that you get for a business-related Social Security number. Another option, if you don’t want to use the online form, is to fill out form SS-4 and fax or mail it into the IRS. If you really crave human contact, you can even call the IRS Business and Tax Specialty Line at (800) 829-4933.
I know, it’s an awful cliche. I have to say that now I’m learning a new office’s procedures, I’m realizing the major difference between an office where they want to challenge you to learn more and an office where they just want to save the time of having to correct your mistakes. I almost felt like I was being babied and that the work was easy where I worked before. I was right. Here, I have a chance to work on things that were saved for folks who had been there a couple of years. I’m learning new things–and that’s good. There isn’t the emphasis on be quick and just cranking out the work, it has to do with making me a better accountant.
This was my original gripe with the place that I interned at–I was insulated from the horrors of review notes–they didn’t want to try to train me to work there, they just wanted to have me complete the work and then if there were problems, they would fix it.
To a lesser degree, the place I was at right before this new place did the same thing–there was one person who did a TON of work and she was gunning for partner…so she was constantly busy–to the point where lower level accountants didn’t get as much. It didn’t give us a chance to shine and take on new things and it seems that’s what she wanted.
I truly believed she thought the addage “sleep when you’re dead” was true.
