Proper Bookkeeping for a Solid Business Future

Tax Act

Business owners would agree that a proper bookkeeping system is not only essential, but it’s also the foundation that will secure your company’s financial future.

Running a business means more than just keeping your clients happy; it requires proper systems that are in place to secure your company’s future, whether this is looking after your employees, providing top-notch customer service, or maintaining a decent set of books. Bookkeeping is one of the most important aspects of managing an organization and failing to look after this important part of your office can ultimately lead to a financial disaster.

The Basics of Bookkeeping

The main purpose of bookkeeping is to keep an accurate record of a company’s financial transactions. This can be done in-house, but you may also find a bookkeeper from an external source to handle your company’s books. The person does not necessarily need to be qualified, but he or she should be very knowledgeable regarding the functions of a bookkeeper and the specific guidelines and State laws that your company should adhere to.

Bookkeeping also entails proper record keeping of the company’s various spending and income activities; such as supplier payments, customer payments, employee salaries and advertising costs. These items should be categorized and properly filed, in a way that the records are easy to find. Financial statements are also an important aspect of every company’s books, and they give you an accurate overview of your performance, and they are reliable measuring tools when comparing your performance against those of your competitors.

Budgeting is equally important and allows you to set sustainable financial goals and constantly guard against overspending. Comparing your budgets against your actual spending also gives business owners a good indication of the goals accomplished, and the areas that can be improved. If you are looking to hire an individual that can accurately prepare budgets on you company’s behalf, try to find a bookkeeper that has significant experience and sufficient knowledge to assist you.

Complying with tax laws is also an area that every business needs to focus on. Filing tax returns is very important and if your financial system is in order, it will make this task so much easier. Your tax returns need to accurately reflect your company’s profit, turnover and spending. This is best done by a professional and it is advisable that you hire such a person to oversee these activities.

The Importance of Record Keeping

Document retention is something that every business should adhere to, and it can help a company with litigation and to ensure that all State laws and regulations are met. Here are the basics that every business owner should be aware of:

  • Records can refer to both hard- and soft copy documents; for example a physical receipt for goods purchased, or an email from a customer.

 

  • The length that you keep these records will differ, for example sales receipts are only valid up to the time the limitations expire. Important documents such as cancelled checks, duplicate bank deposits and employment records should be kept for a few years.

 

  • Documents are kept to avoid the burden of proof in the future. Documentation would need to be provided in case any issues or claims arise a few years from now.

 

Anthony Azevedo, CPA is the managing member of EZCFO, an accounting and bookkeeping company specialized in payroll, human resource and employer solutions.

Making the Right Decision for Your 401k Investments is Important

One really important thing to remember about your 401k investments is that the IRS, through the tax code 401k, will give all qualifying employees an immediate tax reduction along with an upside market potential for your savings. So, with that information alone it’s something you really should consider taking advantage of.

When thinking about 401k investments you should figure out how much of your gross not your net income that you can save by following the current limits that are set by the IRS. You should sit down and probably talk with a benefits counselor as well. Your company will have one or they should at least be able to get you the information that you need so you can set up your retirement account.

Before you do anything else you need to study the various savings as well as investment options that are available for you, this is generally going to be mutual funds. Then you can determine how you are going to want to have your regular contribution dispersed into those options.

If you feel like you need more information, find out when an investment adviser might be coming to visit your place of employment so that you can get more in depth information on certain kinds of investments. A really important thing to find out is if your account is portable and if so how much can you take with you. You will also need to find out when you will be vested.

You might want to visit your library as well and go up to the reference librarian and find out where you can find the most current resources that might give you information on the different investment choices that you have available to you. If you don’t want to do that you can always look this kind of information up on the Internet.

Once you feel comfortable with your 401k investments then you should go in and sign all the needed paperwork so that your contributions can start to be deducted from your paychecks each time you are paid.

Which Is Best for My Small Business? a SEP IRA or SEP 401k?

Tax Act

A retirement plan for a small business can be tricky to find. You would want a plan that has low contribution minimums and affordable administration fees without sacrificing the benefits that your employees may receive. Of all retirement plans available for small business proprietors and self-employed individuals, the SEP IRA and SEP 401k plans are the top choices. What is a SEP IRA and what are the SEP IRA rules? A SEP 401k? What are their similarities and differences? Which is better for my business?

A SEP IRA is a retirement plan that allows the employer an easy method of contribution to the employee’s IRA. When to make contributions and how much will be contributed is all up to the employer. The limits of contribution are generous: $49,000 or 25% of the worker’s annual salary. The contribution to be made will be the lesser of the 2. An advantage of this plan is that it can include a big number of employees under the SEP.

Similar to a SEP IRA, the SEP 401k contributions are also employer discretionary. Contribution limits for this plan are: $15,500 maximum from employee’s salaries plus an additional 25% of the employee’s compensation as employer contributions. The catch is that this plan is only for the account older and his or her spouse, any employee cannot be part of the plan.

Of the two, the SEP 401k can potentially have a bigger contribution allowance. Say for example, an employee is receiving $100,000 a year. In a SEP IRA, maximum contribution possible would be 25% or $25,000. For a SEP 401k, that would be $15,500 taken from the salary, plus an employer contribution of 25% or $25,000. That would amount to a maximum possible contribution of $40,000fot the SEP 401k. The only drawback of the SEP 401k is that employees are not catered in the plan, so if you plan to expand your business and hire more to work from you, then the SEP IRA is the obvious choice.