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Bookkeeping records are required for every small business. These records are for tax purposes and need to represent income, profit and expenses. For every business there are three ways in which they can complete these records. They can do it themselves, they can hire a bookkeeper or they can use special software. For a small business owner to take care of their own bookkeeping they need to be well versed in tax laws and be able to work well with numbers. The hardest part will usually be knowing the financial regulations for whichever country they are within but once this is understood the process itself can be relatively easy for somebody who is able to successfully run a business already. The major disadvantage of a small business keeping manually looking after their records that documents can get lost, mislaid or misinterpreted. If this happens, and they end up wrongly declaring their profits or tax liabilities, then they may well find themselves facing a fine or some kind of penalty. It should that businesses doing their own bookkeeping will not be fully aware of all of the ins and outs of taxation law, and will probably find that with good advice and regular reviews they could probably pay less tax.
Using bookkeeping software is a good option for some people. The right software will lead you through the bookkeeping process, telling you exactly what information you need to input into each field. After everything is completed reports will be created in the proper format with everything you need arranged in the exact place it should be. However, bookkeeping software although designed to be as easy as possible can still be a complicated affair, particularly for somebody who has not used it before or is not well versed with computers. There is also the possibility you will make mistakes, although you are told what information needs to go where, the software is not able to determine if the information you have input is a mistake or not, which means you can suffer the same fines and penalties for mistakes as you would if you had done it manually and made mistakes. The final option you have is usually the best, the cost for employing a bookkeeper will usually cover itself over the years by the amount of money they can save you with their knowledge of tax regulations and the amount saved by not having to pay fines or penalties for making mistakes with your records. With this in mind, although it will cost you the most initially, having a bookkeeper on your payroll or employed as and when you need it, can be the most cost effective route to take.
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Tags: Accounting, bookkeeping, Business, finance, small business
Posted in Accounting · July 15th, 2010 · Comments (0)
Every business owner has to face the challenge of handling the accounting for their business. However, not every business needs the same thing when it comes to their bookkeeping. Depending on the industry, bookkeeping can be very straight forward and as simple as entering in bank transactions where other industries rely on much more detail. In later posts we will discuss the bookkeeping requirements for specific industries and business needs, however, in this post we will stick to more general aspects of evaluating your business.
The first step in evaluating what you need is to get a better understanding of what goes into bookkeeping and what your expectations are. I have met too many people who make assumptions about bookkeeping and then make decisions that our based on misconceptions; do some research. The first thing I always tell people is you will pay for what you get. Bookkeeping is like anything else there are a lot of people claiming they are professionals and few are really worth it. Entrepreneurs need to know what questions to ask when interviewing accountants.
The next step is understanding your business model and industry. As I have mentioned I will be going into detail about different industries and models in later posts. Your industry and model dictates many aspects of your business and your accounting is one of those aspects. Lets say you are a retail location and you need a POS, a shift management system, and commission tracking. If you do not plan well you will end up with three completely different systems that do not integrate and will end up costing you money in the long run.
Understanding your expectations is very important as well. There are two sets of expectations; the detail of information you require and the amount of money you’re willing to dedicate to your bookkeeping. You can not expect to have CFO level work at administrative prices. The more detailed accounting and accuracy you require the more qualified person will be necessary.
Where does all this leave you? An educated decision that is well thought out will give the best result. Business owners are faced with two options; hiring an employee or a Business Bookkeeping Service provider. Even though outsourcing is becoming a more popular alternative there is still quite a bit of hesitation when coming down to making that decision. Hiring an employee is always the first thought when considering this need. However, a quality employee that you can rely on can be very costly.
Even though these options come across as limiting if you’re creative you can find the right fit for you. I have seen business owner manage a multi-person bookkeeping department, outsource the entire department, outsource lower level tasks, or even outsource the management of the department. The ability to choose and mesh these different solutions gives you an avenue to meet your goals.
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Tags: bookkeeping
Posted in Accounting · June 13th, 2010 · Comments (0)