Tuesday, December 30, 2008


Tax time is a dangerous time. It's all too easy to miss a trick and overpay. There is nothing worse than preparing Income Taxes and finding that there were many deductions you could have taken advantage of to lower tax bill. Not keeping track of deductions can be very costly. It is essential to follow an organized bookkeeping and accounting for the entire year to avoid the last-minute rush during tax-filing. The IRS offers a multitude of ways to lower your tax bill. The key is to find which deductions and credits are available -- then taking advantage of them. Below are list of deductions which are generally missed out by business owners:

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Personal Assets Converted to Business Use: If business owners have contributed personal assets, such as a computer, find the fair market value of these assets and claim it as a business deduction. This is subject to depreciation limitations, beginning with the date of conversion.

Business Startup and Organization Costs: Business owner may be eligible to deduct some of their business startup costs up and organizational costs. Again there are limitations on this deductions and needs to be checked by professional tax advisor.

Disability Access Costs: Incase improvements or remodeling has taken place for business facility to accommodate customers and employees, business becomes eligible for a deduction for these expenses.

Research and Experimental Costs: Costs of research and experimentation may be deductible if it is chosen not to list them as capital (long-term) expenses. There are many restrictions and qualifications relating to this deduction.

Carrying Charges: Carrying charges are fees and interest on property. Some carrying charges may be deductible if they are not capitalized.

Home Office: A home office must be a separate room in business owner’s home to do business and accounting. Part of a living room or bedroom will not count. A percentage of utility Bills, home owners insurance, property tax, mortgage interest, refinance fees, repairs and maintenance, cleaning supplies, office decor, etc. are deductible. Find out the percentage by dividing the square footage of the office by the square footage of the entire house.

Mileage or Vehicle: There are two ways to take a vehicle expense. One is to take the mileage basis use when picking up product, supplies, office supplies, meetings, handing out advertising or business cards, meals and entertaining clients, etc. The other way is to take the expense of using the vehicle: fuel, parts, mechanics, oil changes, etc. Along with taking expenses, one can also depreciate the vehicle.

Retirement Plan Costs: As owner of a small-business and having recently established a retirement plan for the business, the business may be eligible to receive a non-refundable tax credit for expenses incurred to implement the plan. The tax credit may be claimed for a maximum period of three years for retirement plans established after 2001.

Advertising & Promotion Cost: Business cards, newspaper ads, information packets handed out, free samples, flyers, product testing, videos and CD's all can be claimed under business expenses. Money paid to hire temporary help with promotional activities like delivering flyers, product, stuffing envelopes or for even cleaning office and car, etc. can also be claimed under business expenses.

Dues and Subscriptions: Dues to professional organizations and magazines that have to do with particular trade or business can be part of deductions.

Educational Expenses: Classes or seminars that improve business can be claimed under deductions.

Gifts: Gifts to clients and associates are deductible.

Laundry and Cleaning: This includes uniforms and Protective clothing and also owner’s clothing when they go out on touring for business purpose.

Travel expenses related to business: Hotels, airfare, cab-fare, parking, and cleaning while away from home, trip log is required to claim these deductions.

Communication expenses: Cell phone, long distance calls on home phone, extra phone lines into home for business, fax or Internet can be claimed as deductions.

Items such as paper clips, bank charges, credit card charges and home office expense seem small and unimportant at the time, but multiply those little things over a year or two and then multiply it times 35% and it can add up to quite a bit of money that should be in your pocket rather than in the federal fund.

Remember there are hundreds of deductions throughout the tax laws, and many can be quiet difficult to grasp. It is advisable to seek help from a qualified tax consultant with sufficient experience to determine which deductions apply specifically to your business.

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Wednesday, October 22, 2008


If you are a business owner from a non-accounting background, you need to be aware of the 7 deadly sins you need to avoid while handling your bookkeeping and accounting task:

  1. Do not try to do it all yourself or hire unqualified help:
    Time equals money. If you try to do everything, you will obviously slip and forget important things. Especially with bookkeeping, if you are not qualified to handle this type of work, your struggling will be useless since it will not give you the results desired while preventing you from carrying more revenue generation activities. Similarly seeking unqualified help of spouse, family, friends, and neighbor can harm your business growth. It is much cheaper to get qualified online bookkeeping and accounting help if you do not have the budget to hire in-house bookkeeper or accountant.

  2. Do not let your filing system slide into chaotic disarray:
    Be advised that crumpled receipts in a shoe box do not constitute a filing system. A proper filing system should be broken out by receivables, payables, bank statements and tax records. Depending upon your business needs, you might also want to keep a set of file folders by job. At year-end closing, the year’s non-permanent files should be bound together and archived in a safe location. Keeping multiple years’ worth of receipts together in one file drawer leads to wasted time filing and retrieving records. In addition annual archiving helps tremendously in the event of an audit or even a lawsuit.

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  3. Do not use improper accounting structure:
    One of the common problems non-accounting owners struggle with is finding the right expense category, cash flows, retained earnings, capital etc. Don’t let the technical terms bog you down. Seek help from an expert accountant or bookkeeper to set up the right kind of infrastructure for your business records which can be followed smoothly for a long time.

  4. Do not be afraid to use time saving accounting software:
    Another issue to tackle is having the right accounting software in place. The move towards a paperless existence will be beneficial in saving time and resources in the long run. Educate on the popular accounting software available and select the right one for your business. You can also search for a professional accounting service provider who can set up the software for you and help you optimize and customize it to your requirements.

  5. Do not fail to have a proper back-up system in place:
    Never ever forget to take back up of your accounting and bookkeeping systems. Systems do get attacked by virus, and sometimes crash. Have a disaster recovery plan in place to ensure you are equipped to deal with the worst case scenario.

  6. Do not forget to have separate personal and business accounts:
    Have separate accounts and credit card for business and personal expense. Never merge them. It can create unnecessary confusions and problems while filing tax and during an audit.

  7. Do not forget to set up written bookkeeping policies and accounting procedures:
    Last but not the least, take time to sit down and write rules and procedures for bookkeeping and accounting transactions which should then be systematically and consistently followed. Developing policies and procedures “on the fly” allows you to only correct problems after they have occurred, rather than anticipating potential issues in advance. Poor or incomplete procedures can result in real dollar losses to your company as well as exposing it to fraud risks. Remember, unwritten procedures are useless. To hold employees accountable and eliminate any confusion you must maintain written policies and procedures. Often small business owners are simply too busy to do this, so they let it slide without realizing there are accounting experts who can develop the policies and procedures for them.

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Monday, October 20, 2008


This Halloween what is the scariest thing you are facing as small business owner?Economy Crisis
  1. Is it the economic crisis haunting your business, dogging your every step?

  2. Are you scared of the suddenly tight fisted clients who are not buying?

  3. Has your banker suddenly turned into a mean tight fisted goblin?

  4. Is planning your budget giving you the creeps?

  5. Do you feel like taking a knife and carving out the rot that has set into the economy and bring back the bullish time just as you would do with a pumpkin while designing the good old jack o’ lantern?
Yes, things have turned ugly and businesses are bleeding this Halloween. Businesses are closing down, people are losing jobs, and liquidity has frozen. But my dramatic musings apart, are you getting hysterical in your obsession with the bad times? Or are you planning to trick the ghouls and march ahead to win the battle?

While you bemoan every lost opportunity and focus on a door that has slammed shut, you might miss out on the tiny crack showing you the way out. As a small business owner, you stand a better chance of slaying this evil monster since you can be quicker, faster and are flexible to tide this bad time over. Get innovative, let those creative juices flow.

Which are the core pillars of your business?
It is bookkeeping, accounting, tax and finance?
Is it Technology?
Is it marketing?

Find how you can make these pillars stronger. Find how you can do all tasks associated with the above 3 domains faster without bearing additional costs or hiring new people. Fear is no excuse, being small is also no excuse. You need to stand up and get cranking.

Hire an online bookkeeping and accounting vendor to save 30-50% cost. A professional back office service provider will take care of all your multitude bookkeeping, accounting and tax work at unbelievable hourly rates of as low as 15$. Why would you not want to take benefit of such an opportunity?

If you don’t have a website, don’t you think it’s high time you got one? Did you know you lose out a major chunk of clients who are searching for services/products you offer online? People want to shop online, do you know why? It’s convenient, time saving and saves gas money. Give them that convenience. Hire a website solutions company who also provides option of search engine optimization within the package.

Take benefit of non-conventional, marketing practices like search engine marketing. You can run permission based email campaigns, write newsletters to connect to your clients, provide them opportunity to interact through your blogs. There are so many unexplored features of internet marketing and best of all its mostly free. You only need to devote regular time to do the grunge work. If you don’t have that time, there are SEO professionals ready to do such tedious tasks for you and at flexible affordable budgets to suit your pocket.

This Halloween don’t let the economy scare you. Slay those ghosts and monsters pulling your down and march ahead to a successful future!

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Thursday, September 18, 2008

Is the liquidity crunch shackling down your business?

The burning question on every business owner’s mind will be the impact of the current economic recession on their business. ML, Lehman Bros., AIG… what darkness awaits in future?

Small businesses, for the most part, are on a strict budget and do not have a lot of expendable capital. Smart tactics one can adopt to wait out and survive the severe downturn cycle in the economy:

  • Rethink Existing Business Model: The business model followed during stable or growing economy might not bear the burden of the financial crunch. Check out how you can make the business model leaner. That means cutting out the extra flab and making the business compact and better able to survive the rough tide. A part time CFO/Controller can help you help you overhaul your business model

  • Never Alienate Customers: There is obvious liquidity crisis and budgets are on tight leash. This is actually not the right time to reduce marketing budget drastically. Sit down and plan the areas wherein you can control cost which will not have negative impact on existing customer or for finding new prospects. Your survival depends on steady stream of customers. Shifting from traditional marketing to outsourced internet marketing can probably help your save costs.
  • Focus More on Revenue Generation Tasks: Try 80:20 principal for your business. Spare 80% of your resources for core revenue generation and outsource bookkeeping, accounting, tax, repetitive SEO work, email marketing work, website tweaking and maintenance etc. Outsource back office support that does not require on hand presence. Time saved will equal to more time for revenue generation tasks.
  • Increase Business Cash Flow: Get your billing cycles tighter by timely collections. For this bookkeeping and accounting statements needs to be clear and in order. A professional bookkeeping and accounting vendor can help you get your billing cycles in place by sending statements well in advance and making collections procedure smooth.

  • Keep Positive Attitude: Economy runs in a cycle. So after this downturn, economy will stabilize and it will have start climbing up. The time gap is uncertain. Small business owners need to keep a positive attitude get disciplined and flexible to manage the downturn.

Entrepreneurs must understand markets in order to fashion business plans and strategies that can be effectively implemented as per the current environment. You will feel more empowered once your business survives and continues to grow beyond this phase.

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Friday, September 12, 2008


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Business record management or bookkeeping might be of low priority compared to other revenue generation activities, however regular record management not only makes business reports more sensible, but can prove a real stress relief during tax submission. Here’s what you can do to make record management easy:
  1. Maintain separate accounts for business and personal provisions. It is very essential to differentiate the two and it is not simple. Verify and find out legitimate business expenses and which cannot be put under business expenses.

  2. Get receipts or invoices for all business expenses and keep them in a monthly file – at the end of the month attach these to your bank statement, and make sure none are missing. Use this information to enter into you record keeping system or to give to your expert book keeper.

  3. Use a separate credit card for business related expenses. It will be easier for management of records.

  4. Maintain proper order and filing system for all records. It will be waste of time to hunt and search of document before the tax preparation season. Get organized before the start of fiscal year and keep year wise records of all financial and business relevant transactions.

  5. Keep proper documentary record of assets purchased which might include vehicles, equipment, real estate etc relevant for business.

  6. Maintain clear employee compensation records.

  7. Keep your tax records year wise and up to date. It is easiest to keep these broken down by month, and file them in plastic sleeves in a ring binder or in manila folders.

  8. Keep a log of your business travel in your vehicle. Note the kilometer reading on the odometer at the beginning of the financial year and then enter the kilometers by date each time you use the vehicle for a business purpose.
All of the above activities are required to avoid mistakes and penalties when preparing accounts. Set aside few hours every week to maintain systematic records. Like a lot of the administrative business related to running a business, they just require establishing good habits and persistence. But if you apply these rules of good record management now and follow through, it will create a positive difference during tax season and your accounting will be easier all year long.

If you are still very pressed for time, outsource bookkeeping work for as low as 15 to 20$ hourly charges to get the required back office support to get your business organized. Established bookkeeping service providers offer these services online too and you can have access to your data 24x7 from anywhere. This could be easy to maintain and manage.

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Monday, August 25, 2008

Do you know how much a BOOKKEEPER will COST you?

Accounting and Bookkeeping ServicesWhile doing some research I came across payscale.com which allows you to make search of salary/compensation basis multiple categories. These are the findings on bookkeeper’s salary.

Role Wise:

Experience Wise:

Type of Company:

The above data are rough estimates basis the information filled during search. But it throws an overall idea of how much it would cost to employ someone to handle your bookkeeping and accounting. Sure was an eye opener. Such high expenses might be out of reach for a small sized firm, but bookkeeping & accounting is too crucial an area to be ignored without detrimental repercussions.

Here’s a smart alternative. Hire Finance and Accounting Outsourcing (FAO) provider. They can be a great cost-saving resource right from your basic bookkeeping, accounting to even financial reporting, tax preparation and audit. You can even hire them as your part time CFO services whenever required. It is important to scrutinize all options available and select the best plan for the success of your business.

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Monday, August 18, 2008


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Most small business start ups are focused on surviving the initial tough years. As an owner you neither have the time or energy to hire talented skilled employees nor the budget to accommodate them on regular basis. The result is you end up compromising. This means either doing the accounting work yourself whenever you get some time or taking help from somebody you know and trust, usually a relative or a neighbor who does your bookkeeping for you. Even if this person doesn’t have experience in bookkeeping (or very little) but as they are more skilled than you, you thank your lucky stars that you have at least some help for the time being.

Well this is fine as a stop gap arrangement, but have you ever thought that your business has outgrown such green horns handling your accounting work?

As your business expands, so will the complexities involved with a growing business. You need to realize when such a stop gap arrangement of hiring part time help to manage books just won’t work. This means your business is in dire need of professional accountants who can take your business to the next level. A bookkeeper is more focused on basic tasks, while other crucial financial objectives stay neglected.

In such a situation no one is managing cash, or monitoring profitability, or keeping tabs on how to build relationships with lenders and various business vendors. Key Performance Indicators (KPIs) are ignored which cause irreplaceable damage to business.

Be alert and recognize when you need professional help before it’s too late. If hiring a qualified CFO or controller is not within your budget, don’t worry, relief is available in the form of FAO services. FAO which stands for Financial and Accounting Outsourcing vendors are equipped with various levels of skilled personal to help you manage all your bookkeeping, accounting, financial reporting and tax preparation needs. You can now hire part time CFO or controller services when required at very affordable rates without any compromises on quality. Best part of partnering with a FAO vendor is that they don’t need you to train their staff, no set up costs are involved; there are no additional infrastructural requirements while you have a readymade team at your disposal anytime you need 24x7.

They will automate your processes along with providing much needed controls with the help of financial statements and budgets which are essential tools to help your business expand and prosper. Meanwhile your existing staff/help can be trained to other functional roles much suited to their capabilities while you can also focus all your attention to developmental activities required to grow your business.

Your accounting operations directly impact the profitability and growth of your company. If you don’t feel confident that existing help is poised to take your company to the next level, it’s time to call in a professional FAO services.

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Wednesday, August 6, 2008

Is managing your Accounts Receivable and Accounts Payable always a hasty job?

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Accounts receivable and accounts payable (AP/AR) is about business credit. Credit makes the business world go ‘round. The vast majority of businesses cannot get by as all-cash operation. If you give credit to your customers, you have to track your accounts receivable, managing and collecting the money owed to your business by your customers. Having accounts receivable means you need to track invoices and credit notes issued to your customers and deduct payments they make. You also need to make miscellaneous adjustments, such as interest charges on overdue accounts, charge back for not sufficient funds checks, and so forth.

Accounts payable, on the other hand, involves managing what your business owes to others. AP can mean all your short-term payment liabilities, including payroll and taxes, trade payables, normal business expenses such as raw materials, products for resale, and services.

Managing accounts involves a comprehensive spectrum of transaction processing and administration handling along with keeping tabs on too many papers like invoices, bills, documents etc. However change is possible with more and more control and coordination leading to a shift in resources responsibilities from mere clerical to more analytical level. Generally it’s a month end panic or tax season panic when small business owners suddenly go on spring cleaning session to tackle all the bills, invoices and miscellaneous business documents to make sense out of them. This will lead to chaos, increased risks and missed opportunities.

As a small business owner you are more focused on strategies to grow your business rather than spend time doing routine things like managing your accounts receivables and payables. But is a very important part of your business. You do need to pay your bills on time if you want to have good relationship with vendors and you do need to keep track of who all owe you money. What if you want to do all this without hiring bookkeeping or an accountant?

Outsourcing Accounting and outsourcing bookkeeping is a cost-effective option for small to mid-sized business owners.

Major benefits from outsourcing back office bookkeeping and accounting tasks:
  1. Save enormous amount of time and costs
  2. Analysis of reports generated by outsourcing partner of historical patterns of spending and receivables shows the trouble spots to avoid in future
  3. Benefit from the significant increase in process efficiency, profitability and financial control

Hiring the right Finance Accounting Outsourcing (FAO) partner will ensure that your accounting systems and processes are smoothly managed to increase profitability. Timely reports will ensure well informed decisions are made to increase ROI. Outsourcing provides an opportunity towards successful conversion of transaction management, documents management, eliminating duplication leading to increased efficiency and productivity gaining an edge over competitors.

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Thursday, July 24, 2008

Quick Accounting Tips for Small Business Owners

Those business owners who lack formal information in accounting might lack the required flare to maintain proper books and would consider bookkeeping least desired task to undertake. They would rather spend time developing their product line or growing their client base but accounting is the radar which will indicate where your business is heading.

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Few tips that can help small business owners:
  1. Accounting is more than just numbers: Accounting is not just numbers on how much money you made or spent. If understood carefully, accounting is an important tool to identify trends in sales and expenditures, it even highlights the problem areas and helps in making right decisions to boost profitability index. Changing the way you view and realizing the importance of accounting will make it more desirable activity to be undertaken regularly.

  2. Regular and Meticulous records: Once you understand the importance of accounting services for business growth, you will be encouraged to maintain regular and meticulous records. No matter how weak or strong your understanding of accounting rules and principles might be, it is very essential to maintain meticulous and timely records. It can act as a life saver incase documented proof is required to solve disputes with regards to finances.

  3. Understand the Basic Concept: Accounting is peppered with jargons and fancy terminology. Don’t get disheartened if you do not understand all of them. Spare some time to get accustomed to the basic concepts. Take professional help if required. But educate yourself to understand the basic concept to avoid costly mistakes.

  4. Keep your personal and business accounts separate: It is a very bad idea to mix your personal account with business. Keep them totally separate. Even if you are the sole owner of the business and it is all your money, still it is a good idea to keep the personal and business transactions and records totally separate. This will help during filing tax returns and planning your budgets and forecasts. These all are including in tax services.

  5. Maintain Consistency: It is important to maintain consistency on the accounting methodology followed. It will give totally wrong picture if accounting methodologies are changed frequently. Taking professional help is advisable at predetermined intervals to review your books and rule out possibilities of inconsistency and maintain accuracy.

  6. Purchase Accounting Software: Try using small business friendly accounting software available in the market to save time and increase accuracy. Some of the popular softwares available are QuickBooks, Peachtree, Microsoft Office Accounting Professional etc. Enroll for seminars or research online to learn more on how to use such software to your business advantage.

  7. Hire Professional Help in time: As your business grows, the financial issues become more complex and time consuming. Learn to recognize when you need help and hire professionals to take over such tasks so that you can concentrate on doing what you know best.
A business owner can never afford to turn a complete blind eye even if a trusted professional is hired to take over the accounting tasks. Always ask for regular updates, reports and understand the basics so that nobody can take you for a ride. It is after all your money and business. It is essential to train and develop instincts to spot trouble or frauds heads on before it’s too late.

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Friday, June 27, 2008

OUTSOURCING YOUR BOOKS - The smarter way to save money

The importance of maintaining proper books and accounts is not just to file proper taxes, but essential to check the financial pulse of your business. The survival of your business depends on efficient, timely, well ordered financial reports providing timely updates and alerts on problem areas of business. Correct diagnosis and subsequent remedies depends on identifying the problem and finding right solution at the right time.

Although Bookkeeping and Accounting is not as hard as Rocket Science that would require extremely qualified professionals, it does require necessary skills, analytical ability, and complete concentration to maintain accuracy to avoid serious and expensive problems. This might translate for most of us into being tedious, boring, and time consuming frustrating task. However, this bull needs to be taken by its horns. It’s a necessary evil, which is why services of bookkeeper/accountant/CPA are sought.

But is there a smarter way to tackle your books and accounts?

It may sound noise to some ears, but Outsourcing can really work for even the small businesses too. If it means significant cost savings, you can always argue that it is a default advantage and well touted by all vendors. But there are few other not so obvious benefits too.

It is no secret that large companies have been sub-contracting or outsourcing their non-core functions to expert vendors to take advantage of economies of scale. This option was not readily available to small firms earlier. But economic slump is inducing more and more companies to look at this option. And if you have a local Outsourcing vendor who can provide an on demand one-to-one support, most of your fears regarding Outsourcing can be put to rest.

The obvious advantages of outsourcing accounting, bookkeeping and tax services are::..
· Pay only for reasonable time taken to render services. Rates are generally charged on hourly
· Saves up to 40-50% of operational costs as this does not require infrastructure or related support
· Quick turnaround of work
· 24x7 online access to your books and records
· Flexible and fully scalable modules
· Move towards a paperless office
· Reduces burden of staff and who can then be channelized to other productive activities
· Last but not the least, more time to strategize and concentrate on core functions

The not so obvious benefits of outsourcing are::..
· Access to ‘on demand’ qualified talent
· Access to service and client oriented vendors, since their existence depends on satisfying you.
· Flexibility towards changes and improvements demanded by your growing business which might be difficult to implement with in-house staff who are prone to resisting changes.
· No headache of retaining staff or training newbies. Time saved equals to money saved at the end of the day
· No requirements of any additional capital investment so there is reduction in total investment risk. More opportunities to invest in income generating areas.
· Outsource additional burden during busy time without adding costs of hiring new people.
· Save on add on costs like sick leave, benefits, bonus, promotions, training, house allowances etc without compromising on quality while getting work done faster.

However before jumping the band wagon and enjoying all the fruits from outsourcing, some essential points for consideration:
· Research the vendor thoroughly. Check credentials from other clients, networking and referral sources
· Partner with vendors having ethics and integrity instead of just being cost-oriented
· Vendor must be conversant with bookkeeping and accounting standards of your country
· Check the security and confidentiality policy of the vendor
· Check the quality standards and non-performance penalty clause of vendor
· Check how and where the disputes arising will be resolved
· Check whether your liability insurance covers outsourcing

The decision ultimately depends on business owner’s choice.

Do what is more appropriate for your company and reap long term benefits. The ultimate benefit of outsourcing if done right, leads to significant improvements in efficiency, cost savings and growth in the core functions of the business.

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