Evaluating Your Accounting Needs





For many small business owners accounting is a fairly foreign concept. Sure, you know you have to pay taxes and you know you have to track expenses, but what does your business need to flourish? And a lot of small business owners are wondering, is it something you can do yourself? Let's start by talking about the various accounting tasks that go into running a business and then discuss how to determine what your small business needs.


Bookkeeping

Recently there has been a huge influx of bookkeepers into the accounting world. But what is the difference between bookkeepers and an accountant? Bookkeeping is a small segment of accounting. It is the act of recording the transactions, but often times a bookkeeper will not file your taxes or help you understand what the financial information means. A simple bare bones bookkeeper typically enters your transactions into an accounting software and reconciles your accounts to make sure they're accurate. Reconciling is the process of comparing your records for an account from your accounting software to records from another source such as a bank statement. This ensures that your records reflect all of the transactions. A bookkeeper may also do some other tasks such as preparing financial statements and invoicing. This is more in line with a full charge bookkeeper.


Accounts Receivable

Accounts receivables just refer to clients who owe you money. Accounts receivables management encompasses entering and sending invoices, preparing an aged receivables report, recording payments, and collecting on past due accounts. It may also include starting a formal collections process for uncollectable accounts. Many clients find themselves comfortable handling their accounts receivables and sometimes only require help with uncollectable accounts. I also prepare an aged receivables report monthly for any clients who have outstanding invoices. This allows the small business to identify past due accounts in a timely manner. Many clients chose to outsource their accounts receivables when they find that managing them themselves is less cost effective than hiring someone to do so.


Accounts Payable

Accounts payable is similar to accounts receivables except payables are items that you owe your vendors/suppliers. These are bills that you receive. They then need to be varified for legitimacy, entered into the accounting software, and paid in a timely manner. Again clients are often comfortable managing their payables and only chose to outsource them when it is more cost efficient to do so. An aged payables report should be run monthly to help identify any bills that have not been paid to maintain a good relationship with vendors/suppliers.


Payroll

Payroll is the act of paying employees. Payroll is complicated by the requirement to withhold taxes, unemployment, benefits, etc. Payroll is something that some small business owners do on their own, however as a word of caution, it is imperative that payroll is calculated properly and withholdings are paid to the appropriate government entities. If a small business owner choses to do their own payroll I recommend having an accountant look over it annually to make sure everything has been prepared properly, at least for the first few years.


Taxes

Taxes are probably one of the hardest and most out sourced accounting tasks for small businesses and for good reason. Filing fraudulent taxes can result in hefty fines from the IRS. I recommend working with an accountant if you own a small business, the expertise of an accountant often identifies opportunities for limiting your tax liability that often pays for the majority of the cost of tax preparation anyways. Not to mention it saves you time which is better spent elsewhere.


Other Services

The above tasks are the most common that small business owners worry about. There are a few others you may want to be aware of as well. Financial statement analysis turns your financial statements into useful information, especially when compared to prior fiscal periods. Tax planning can also be incorporated into your services throughout the year. It evaluates your business activities and finds your best options to limit your tax liability. Cost accounting helps you examine your pricing structure and various business costs to help you maximize profits. There are many more accounting services that are helpful for specific markets or businesses, but the ones listed above are where I advise my clients to start.


So What Can I Do Myself?

This is one of the most common questions I hear and my answer is always, "It depends." You can do whatever accounting task you chose. You can learn to do your bookkeeping, your payroll, taxes, etc. But you need to evaluate what is the most cost effective for your business. If you chose to do your bookkeeping, but not your taxes you want to make sure you're doing the bookkeeping properly. Handing your accountant unorganized and incorrect books means your taxes could be wrong and/or cost you more for cleaning up your records. Is learning to perform the tasks associated with your accounting needs worth the time you must focus on learning versus running your business and the added risk of performing those tasks with less training than a professional? For some small business owners it is, others feel that it is not. In the end each small business is unique as are the needs of the business.

614-526-9354

Whitney@MariettiAccountingServices.com

Dublin, OH 43017

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© 2018 by Marietti Accounting Services, LLC. 

We do not provide assurance services and therefore do not meet the definition of a public accounting firm in the state of Ohio.

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