6 Reasons why you need a Bookkeeper for your business!

I cannot stress this enough! Check out my previous posts…


Whether you’re in the development, start-up or growth phase, you need a bookkeeper! 

Bookkeepers are needed when business owners face tough decisions regarding their business. Should I hire a contractor? Which product or service is driving my income? How much will I have to pay in taxes? When can I potentially make $10,000 a month?

Most business owners feel they can’t afford a bookkeeper. That’s never true! With the internet you have more resources to advisors with rates as low as $20/hour or per task to $400 a month. As a business owner you can do your own bookkeeping. Especially with Biden’s proposed tax laws and financial regulations that effect your business, now’s the best time to look into outsourced bookkeeping.

1. Bookkeepers Help You Save Money!

Bookkeepers minimize unnecessary fees like accidental overdrafts, high maintenance and service fees, insufficient funds, wire transfer, excessive transactions and even interest. These business expenses might not mean much but they add up quickly and can effect your cashflow.

Next, taxes! They play a major role in business and personal decisions. By having a bookkeeper, they help mitigate the overall liability owed to the government. With opportunity costs, it’s effectively cheaper for busy business owners to outsource their Bookkeeping, as opposed to doing it alone.

2. Bookkeepers Alleviate Stress!

It’s okay to admit, if numbers just aren’t your thing. No longer do you need to handle your business or even personal books, hand them over! By seeking the help of a Bookkeeper, you get rid of the headache that comes with financials.

Because Bookkeeping may require extensive research and knowledge to the average business owner, it’s better to save your energy spent on finances. Having to learn something new on top of being the busy business owner you are, can lead to other issues.

3. Bookkeepers Help Manage Cash Flow!

Cash Flow! This is the number one issue I’ve seen small businesses struggle with. Good cash flow is having enough assets to cover your liabilities with some to spare and not be in a bind. This is known as cash flow positive. Most businesses find themselves in the negative. Cash flow is the money coming in and out of your business!

A good cash flow isn’t just making more money than you spend or having cash on hand; it’s about being able to make normal business decisions that don’t drastically impact your business health.

4. Bookkeepers Are Experts!

Bookkeepers are experts, certified and educated. They may not go through the necessary education requirements as Accountants would, but they are pros! It’s always better to know and understand the expertise a certain Bookkeeper offers. Some are only specialized in a certain field, niche or industry.

5. Bookkeepers help Mitigate Error!

By having someone with experience handle your books, you get rid of the risk of having errors. Challanges and issues are known to arise when there’s one person doing alot. As a business owner, you’re used to handling things all on your own but it may be time to wave your flag!

Youtube videos can’t teach you everything and your buddy who’s good with numbers may not have the time to save you!

6. BOOKKEEPERS SAVE YOU TIME!

Instead of having to allocate time out of your already busy schedule, by not doing it at all. you leave more time for getting new client, more sales and new strategies that will help your business grow or scale.

Your worst enemy is lack of sleep!

When to Outsource Bookkeeping: “Call it Quits”

When is it time to call it quits?

  1. If your books require daily or weekly attendance
  2. Spending too much time doing it yourself
  3. Separation of Duties
  4. Numbers make me nervous or anxious
  5. I hate bookkeeping

Always think in terms of Opportunity Cost, the time spent doing one thing is a potential loss from doing the other. Business owners face this reality daily! As one grows, the apparent need to outsource bookkeeping becomes prevalent. One should always spend more time retaining and acquiring clients and not handling payroll, financials and other accounting services.

It’s time to hire a Bookkeeper when you’re too busy to do it yourself. When you start to get behind, that’s a sure sign to “call it quits”. Or even if you never started, it’s never too late to establish financial success for your business.

Not having the patience, energy or mental capacity is the next sign. Some find it to be boring and tedious, so why endure the pain any longer? If you’re not doing it well; bank recs, categorizing, math… then move on. Outsourcing ensures your business is in compliance and reduces internal fraud and misappropriation. As business owner, you should feel confident that your books are covered!

Lastly, you’re losing the will! If you strongly dislike bookkeeping it’s time to “call it quits” outsource. Assist And Align will gladly alleviate your stress, anxiety and burden of organizing your finances.


You should know as a Business Owner…

  • How much did I make in the month of July?
  • How much should be set aside for taxes?
  • Can I pay myself “x” amount?
  • How much should I put aside for Retirement?
  • What’s my 6 month’s average?
  • What is the total of my business expenses last month?

If you don’t, it’s alright! Look for a Bookkeeper who can tell you this information in the click of a button, a quick phone call or provide you with the statements for you to decipher yourself.

Watch Out for Bad Bookkeepers

You need a Bookkeeper that has a clear understanding on how to help small businesses. What makes one a bad Bookkeeper? It’s fairly simple…

Things to Watch Out For…

Takes a While to Respond Back

There’s nothing more frustrating that someone not getting back to you in a timely manner. It should not take your Bookkeeper more than 3 business days to get back to you! There are some exceptions like, vacation, emergencies, things of that nature, but if your Bookkeeper is not meeting your needs in a good time, they may be doing the bare minimum, something unethical, etc. It’s okay to demand transaprency, especially when it comes to your money!

Don’t Know the Ins and Outs of Bookkeeping

It’s imperative that you don’t choose the cheapest person you can find, becuase you may “get what you pay for”. Finding an experience Bookkeeper may be harder than one knows. Bookkeepers are not “one size fits all”, just as not all businesses are the same. Getting a professional who is an expert in your field is your best option. Make sure they’re certified, educated or experienced.

Don’t Give Access to See Your Books

This is a major red flag! As the business owner, you should have access to the software and your books regardless of if you pay the subscription. It’s not safe to work with a Bookkeeper that gatekeepers or is so secretive of their work. It makes transparency impossible!

Photo by Daniel Frank on Pexels.com

Not asking the Right Questions

There should be a system in place to ask necessary questions. Question along the lines of identifying the problem or challenge , type of business, more detail about business, number of accounts and types, and expectations…

Slow to Produce Financial Statements

Your Bookkeeper should provide access to financial statements for the prior month, no later than the middle of the next month. This is important, because it can become annoying to ask your Bookkeeper for these statements when you need them and they take a while to produce them. You Bookkeeper is doing their job when you know when to expect these documents without having to ask.

Don’t Provide Suggestions

Businesses should provide better business practices willingly, because happy client makes a happy bookkeeper. Its their job to consult with you on new policies that may affect your business as well as ways to save your money.

Photo by Sizwe Shabalala on Pexels.com

Accounts Aren’t Balanced, Organized and Updated

By this point, the is a deal breaker. If your account aren’t ready for the next cycle by the middle of the next month, you’re better off keeping the fee you pay your Bookkeeper and paying your kid to do it for you. It’s never okay to be behind on your books! Your business can’t grow or scale if you don;t have clean books; you’d have to wait to get funding, wait to find out your sustainability and you won’t be able to plan for the future.

This is the overall goal of Bookkeeping! This information should be stored in a server from start to finish, or to when the business started making money.

Miss Deadlines

Deadlines = Efficiency! When Bookkeepers are inable to work in certain paramaters, it shows that maybe they’re not in the right profession. Missing deadlines can cause late fees, penalties and a loss of business. This will slow the business down tremedously.

Are Bookkeeping Fees Tax Deductible?

Deducting Legal & Accounting Fees

Yes, you can deduct your bookkeeping fees as a business expense on your tax return. These expenses lower your taxable income, meaning the less money you’re liable to pay to the IRS.

Check out my Downloadable File for common business deductions!

TIME IS MONEY!

When you’re reaching out to professionals to help you with your business, the consultation, the meeting, any other factors that made the conversation possible, is tax deductible. Let’s say you use your personal cell phone for business, that business percentage of your phone is tax deductible.

So what does that look like?

By using your data plan and phone to reach out to professionals, customers and vendors for your business, the business portion of the total usage is deductible. This applies to a home office, car + car expenses, health insurance, and so much more.

Everyone wants to pay less money in taxes, to best achieve this, seek the professional guidance from tax, accounting and bookkeeping experts! By consulting with an advisor, they will save you money and the money you pay them will lower your taxable income! It’s a win, win!

Check Out the IRS updated link, on all business expenses that you can report!

https://www.irs.gov/publications/p535#en_US_2020_publink1000208843

It’s Coffee Day!

Did you know you can get free coffee today!

Today only, coffee shops and franchises have promo codes and offers on COFFEE!

iS cOFFEE a tAX DEDUCTION?

As a small business owner, you CAN deduct coffee as a business expense if:

~ Coffee is reasonable and necessary
~ You are tracking coffee expenses
~ Coffee is a fringe benefit employees
~ Purchased and provided to business employees
~ Coffee is provided to improve productivity
~ You host a business meeting in person over coffee
~ Coffee is provided to provide a better work environment
~ You’re Buying for your home office

Coffee for the office is tax deductible!

Now, if you’re a w2 wage earner, coffee is not a tax deduction. If you get coffee on the way to work, it’s not a business expense.

For 2021, it’s 100% deductible!

What Does Bookkeeping Entail?

What is Bookkeeping?

Bookkeeping is recording financial transactions or information that pertains to business operation. It entails creating a filing system that categorizes income to the appropriate accounts as well as differentiating types of expenses.

Businesses and individuals need bookkeeping! People do this without even realizing it’s bookkeeping. Examples are when someone creates a budget or system that tracks money going in and out of the account, so they can be better prepared during tax season.

In most cases a business has a bookkeeper to stay in compliance, manage cash flow, perform multiple clerical duties and tell how the business is performing. By tracking the money that comes in and out, it leaves little room for error and fraud. Bookkeeping tells the business owner and individuals how much they will owe or get back from taxes. Not only that, bookkeeping is the proof behind the numbers.

Bookkeeping also entails knowing some tax laws; what’s tax deductible, what are the limitations, and usually paying payroll taxes. Bookkeepers prepare invoices, financial statements, pay bills on behalf of the business, reconcile bank and loan amounts to provide up-to-date balances.

Bookkeeping is a subcategory of Accounting. Bookkeeping as apposed to Accounting doesn’t deal with auditing . There is a common misconception that bookkeepers don’t do taxes, and some do, some don’t. According to the law, anyone over the age of 18 can prepare tax returns. Taxes are complex and require extensive research, knowledge and understanding.

Two Types of Bookkeeping

  • Single Entry
    • One entry is made for each transaction into a journal or log.
    • Only one account is affected; the account balance will increase. or decrease.
    • It’s easy to maintain with little requirements; favorable among small businesses.
  • Double Entry
    • Two entries are made; a debit and a credit.
    • Two or more accounts are affected and the entry must balance.
    • These are usually called Journal Entries.
    • This is a great system to avoid error.

In Summary

Bookkeeping is necessary in every business! It’s the recording of a business’ financial transactions from accounts having anything to do with business. Bookkeeping and Accounting work closely together to ensure your business is in compliance and ready for tax season. With software like QuickBooks, single entry bookkeeping makes managing your books easier!

The Different Business Entities + Their Benefits

If you’re looking to start or have recently started a business, you’re probably wondering…

~ How do I, if I need to register my business?
~ What are the different business types?
~ Which business structure should I choose?
~ What are the pros and cons of ________?


There are numerous business entity types; sole proprietorship, partnerships, limited liability company, corporations, non-profits, cooperative and more. Choosing correctly matters because the main factors correlate with how you plan to grow and develop your business. Before we get into differentiating there are a few more things to consider…

  • Difficult to set up or operate
  • The tax advantages and disadvantages
  • Potential Legal Liabilities
  • Difficult to Liquidation Business
  • Raising more money as business
  • Regulations to keep business active
  • How much bookkeeping is required
  • What happens to business upon death of owner

Sole Proprietorship

This is simplest type of business, sole pros are operated by one person and they’re so easy to set up! This is for people who don’t see the need to worry about personal liability. But, the downside here is THERE IS NO separation from business and owner. Sole Pros are most chosen!

~ It’s easy because it doesn’t require the filing of any papers
~ You’re only taxed once on the personal tax return 
~ Unlimited legal liabilities 
~ Harder to establish business credit and capital (lenders)
~ Banks are hesitant, you’d have to use personal funds 

Partnerships

This is for businesses that have more than one owner and at most 20 people. Just like sole pros, they’re easy to form. Its always advisable to get partnership agreements in the case one partner dies and for distribution purposes. Partnerships are usually successful when its clear who brings what to the table. There are two different types of partnerships: General & Limited.

~ General: A general partnership is one in which all of the partners have the ability to actively control and manage the business. In this instance, every partner is allowed to make business and legal decisions (if there’s no partnership agreement), THERE’S EQUAL AUTHORITY. There’s no limit on personal responsibility for business debts, similar to a sole pro. For example, a partner could lose more than just their investment. 

 ~ Limited: REQUIRES A PARTNERSHIP AGREEMENT. The business and sometimes info on the partners has to be filed with the secretary of state. The difference between the two partnerships is that limited has both general and limited partners. Limited is the one who does not have total responsibility for the debts of the partnership. The most a limited partner can lose is his investment in the business. Technically, they’re more or less an investor in the business, they don’t make management decisions or have authority to run the business. 

In a limited partnership, they also must have at least one general partner. The general partner(s) is responsible for running the business. They are the ones with control over the day-to-day management of the business. They’re the ones that have the authority to make legally binding business decisions. General partners are also subject to unlimited personal liability for the debts of the business, just like sole pros!

Democratic-Socialist congresswoman Alexandria Ocasio-Cortez wore a gown emblazoned with "Tax the Rich" to the 2021 Met Gala.
NY Post Article by Kirsten Fleming | AOC Met Gala Dress

LLC (Limited Liability Company)

This business type is the commonly chose when separating business from personal. Unlike Sole Pros, their assets are protected in the instance of legal liability. The owner of the LLC goes to the IRS and chooses how they want to be taxed (sole pro, partnership or corporation).

~ Not required to have annual meetings, board of directors or a limited number of shareholders
~ Some disadvantages: legal and accounting costs are higher than proprietorships. LLCs have to file articles of incorporation with the state 
~ In most cases an LLC will no longer exist when the owner dies, unless stated otherwise in the operating agreement

Suppose your business is growing and you need to attract more lender and investors. A corporation is a legal entity that’s completely separate from the shareholders who own stock in the company. It has the authority to enter into contracts and buy and sell property. A corporation can sue other parties but can also be sued. 

Corporation

There are two types of corporations, s-corps and c-corps!

~ C-Corp: Double taxation refers to how income earned by a regular corporation is technically taxed twice: once when the corporation earns income, and again when it distributes dividends to its owners (who then pay taxes on those dividends. Why mention it? Because C-Corps get taxed twice! The flat tax rate is 21% for C-Corps!

Fun Fact: The closest tax rate to 21% for W2 Wage Earners is 22%

Out of the two, C-Corps are the most complex! YOU NEED A LAWYER TO GET ESTABLISHED. Owners don’t have personal liabilities for debts of their corporation. A shareholder only risks the amount of their investment in the company. 

~ Has more access to financial resources
~ A corporation can sell stock to raise capital
~ Can obtain bank loans or issue bonds for long-term financing
~ Better able to attract more talented and skilled employees than proprietorships 

~S-Corp: S Corporations combine the tax benefits of proprietorships and LLCs with the liability protection of C Corps. They avoid double taxation by passing income through to the owners. The structure of an s-corp protects the personal assets of the shareholders. Lenders are more willing to make loans to S corps.

~ Must file articles of incorporation with the state
~ Can’t have more than 100 shareholders
~ Can only have 1 class of stock
~ Fringe benefits provided by the company to shareholder-employees are taxable as compensation
~ Must pay Income taxes (Self-Employed: 15.3%)

Be sure to look at my business starting checklist!

When it comes to spouses who want to do business together, the IRS is like… do whatever you want to do, call it what you want just make sure if you want to be a partnership, then file a 1065 (which is…), in most cases if they don’t incorporate or form an LLC, then it’s a general partnership, treated like a sole pro. In some cases one person is seen as the sole pro while the other spouse is legally an employee. Another option is the qualified joint venture, basically a sole pro with two owners. Only for sole pros who are married filing jointly!

In Summary

So, I said all that to say this, choose wisely! But if you don’t you can always change it for the next year, you just can go back to what you originally chose for 5 years. My opinion, if its just you and you’re just seeing how it goes, form a sole pro but if you want to protect yourself cause life is unpredictable, then form an LLC or a corporation. 

Difference between Bookkeepers & Accountants


Not all businesses need an Accountant and not all businesses need a Bookkeeper.

I’m going to break it down in the way that I understand, Bookkeepers are the Paralegals while Accountants are the Lawyers. Bookkeepers are the Nurses, while the Accountants are the Doctors. Bookkeepers are the Graphic Designers, while Accountants are the Software Developers.


Education Requirements

Bookkeepers

  • No federal regulation requirement

Accountants

  • Bachelors Degree is required

Cost of Service

Bookkeepers

  • Charge $35-$75+/hour

Accountants

  • Charge $150-$400/hour

Roles

Albeit similar, they are far from the same! Bookkeepers manage the daily financial tasks of business transactions, recording and categorizing financial transactions, create financial statements, process payroll, pay bills, reconcile bank accounts, invoices to client and classify deposits. For some companies, bookkeepers partner with Accountants within the client’s company.

While on the other hand, Accountants are the experts. There are numerous specialties in Accounting; Tax, Financial, Government, Management, Forensic, Cost, Public, Audit & etc. Accountants manage and oversee the bookkeeping set up. There are two types of Accountants; Non-CPA & CPA accountants.


In Summary

A bookkeeper can not call themselves an Accountant! There is a lot of confusion when it comes to taxes, but Bookkeepers can prepare and file taxes for small businesses to the IRS. Although they are both two different functions, some Bookkeepers can efficiently and effectively manage both your taxes and your books! Which is primarily why it’s important to find a someone who knows about your type of business.

According to the IRS, to legally prepare taxes for others or businesses, one needs a PTIN from the IRS. A PTIN is necessary to become an enrolled agent as a tax preparer in the United States. A PTIN stands for Preparer Tax Identification Number.