So you started a Small Business – What to do about Bookkeeping?
One of the huge advantages of having your own business is tax write-offs. Tracking them is an entirely different story!
Without proper bookkeeping and record keeping, a lot of the expenses of running your own business will never be recorded and instead of deducting those expenses, you will be paying tax on them.
Many startup businesses are not keeping proper records and thus paying far too much in taxes.
Finding a bookkeeper
The average small business begins looking for an accountant and asks the accountant about bookkeeping. Of course, the accountant will offer to do that for you at prices far above what you need to pay. The average hourly rate for a bookkeeper in the USA is between $40-60.00 with some charging as high as $100 an hour.
What is the difference between a bookkeeper, an accountant, a tax preparer and a tax advisor?
Bookkeeper – a person who records the accounts or transactions of a business. A bookkeeper does NOT have a 4 year accounting degree.
Accountant – A person who is skilled recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results. An accountant has a 4 year degree.
Tax Preparer – A person who prepares the tax returns for a business or person. A tax preparer does not necessarily have an accounting or other degree. The IRS attempted to regulate Tax Preparers; however following losses at the lower court and the appellate court which held that IRS did not have the authority to regulate preparers, the IRS dropped the matter. A Tax Preparer is required to have a preparer tax identification number (PTIN).
Tax Advisor – (or tax consultant) is a financial expert specially trained in tax law. Tax advisers use their knowledge of tax legislation to provide advisory and consultancy services to clients, ensuring that they pay their taxes in the most efficient way and benefit from any tax advantages and exemptions. A tax advisor normally has at least an accounting degree and many have both a legal and an accounting degree. They keep up to date with changing tax laws and explain complicated legislation and its implications to their clients in simple terms.
Depending on your goals, you might use none, one, two, three or all of these professionals.
Most small businesses when they start off should be at least consulting an accountant to get advice about how to save on taxes. Additionally, a small business owner should know that there are a lot more ways to keep your records than the way your accountant may tell you. He wants to do your bookkeeping and your accounting. He also wants to get business just like you do. But having your bookkeeping done by your accountant is not necessarily a good idea.
There are many accounting resources available to a new small business and many accounting packages that will help you keep your books.
The 500 pound gorilla in the resource pool is Quickbooks by Intuit.
If you haven’t looked at Quickbooks, now is a good time.
Proper bookkeeping means properly setting up your books and Quickbooks makes that easy. It also means tracking your expenses and Quickbooks makes that very easy with an App that can be downloaded to your smartphone and used on the go to do many functions your business needs.
Quickbooks will also process your payroll for you and ensure that the proper taxes are paid keeping you out of trouble with the IRS.
Even without an accounting degree or a bookkeeping background, most small business owners can quickly learn Quickbooks, but it helps to have a trained bookkeeper who is experienced with Quickbooks to help you set up everything the right way first and keep track of everything after that is done.
Outsourcing your bookkeeping overseas
Many small businesses have found out that outsourcing their bookkeeping overseas is not only convenient, but saves them a lot of money.
While Tax Advice and Tax preparation is better done in the USA, bookkeeping can be outsourced at prices far below USA prices. Rates in the Philippines are as low as $15 an hour and your books are handled by a trained bookkeeper.
If your bookkeeper is doing their job properly then you will not need to spend more than $100 an hour with an accountant just to have proper records. Overseas bookkeeping companies should be working the same hours that you are and so are readily available. They will also speak excellent English and can be reached by calling an American phone number. You will begin to forget that your bookkeeper is even overseas.
Outsourcing the bookkeeping part overseas saves you money to spend on a better Tax Advisor or accountant giving you tax advice and filing your properly prepared tax return at the end of the year.
At the end of the day, if your books are properly kept and you are getting proper tax advice, then you are most of the way there. Outsourcing your bookkeeping and using solid proven accounting software like Quickbooks will not only save you time and money for bookkeeping and accounting, but save you more money on taxes as well.
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