Accounts Receivable Services for a More Efficient Business

Accounting

Are you looking to become a more profitable and efficient business? Accounts receivable services may be able to help. Small business accounting services can streamline your billing process, ensuring that payments are received on time. Additionally, outsourcing these accounts receivable services allow you to focus on other parts of your business. Here is how accounts receivable services can help you have a more efficient business.

What Are Accounts Receivable?

Accounts receivable is the money a business has a right to receive because it provides services or goods on credit. In short, it is the money customers owe for services or products that have not been paid. For example, if your business sells a product on credit, a customer will have a certain period to pay you for the product. In many cases, the time frame is 30 days.

Your business must record the sale as an account receivable on the balance sheet. Once the company reviews the money, the account receivable would be removed from the balance sheet and replaced with cash. As you may tell, these accounts play a vital role in your bookkeeping since they represent future revenue. Accounts receivable will give your company insight into your overall cash flow and when you can expect timely payments from customers.

Generally, companies with higher amounts of accounts receivable could have more difficulty collecting payments from their customers than those businesses with fewer accounts. Customers who owe a large amount of money could default on their payments, meaning you could lose out on that income.

What Are Accounts Receivable Services?

You can track your customers’ payments and manage your cash flow with a professional accounts receivable service. These services handle many tasks, such as collections, invoicing, and customer service. An account receivable service will also allow you to gain insight into your customers’ behaviors. Also, accounts receivable services can optimize your billing and collection process, helping identify or correct trends. All these services can streamline the billing process, helping improve your bottom line.

Why You Need an AR Service

Using accounts receivable services will provide your business with the resources and tools to streamline invoicing, collections, and payment processes. There are plenty of benefits, and they include:

 

Reduce Administrative Costs

With an AR service, your business can save time and money by allowing them to handle all aspects of collections and invoicing, including sending payment reminders and following up with customers.

Improve Cash Flow

These AR services can help you get money faster into your account by using automated invoice processing that can optimize your cash flow.

Keep a Focus on Your Business

Managing accounts receivable can be time-consuming, especially if there is no dedicated person or staff to handle these responsibilities. Outsourcing your accounts receivable tasks allow you to free up time to operate your business. With that, you can help grow your company and generate more revenue.

Increase Insight Into Your Customer Base

These AR services will give insight into your customers’ behaviors, including payment trends and patterns. With this information, you can improve your business planning and customer relations. You can see these trends to understand your clients’ spending patterns so that you can tailor your services and products to their needs.

Choosing an Accounts Receivables Service

These professionals are here to help improve and manage your cash flow. Along with that, they can help you reduce the time you spend on administrative tasks. Most AR services will cover a few areas in accounting and bookkeeping, such as reporting, invoicing, collections, and customer services. An AR service can reduce administrative costs, improve cash flow, and increase efficiency.

There are several things to consider when it comes time to choose an accounts receivable provider. First, when it comes time to find an accountant for my small business, they should have the experience and reputation to handle most of these tasks. You need to choose a company that can meet your specific needs. Some accounts receivable services will be able to provide you with generalized services. However, others may only specialize in a particular area. Choose one that will work best for your business operations.

Accounts Receivable Services Offer Many Benefits

When you need to keep your company’s financial accounts up-to-date and accurate, consider choosing an accounts receivable service for your business. Without help, tracking invoices or transactions with customers can become difficult. Selecting a professional AR service provider is essential to pursuing a healthy financial future.

Accounts receivable management is essential to all businesses, but it doesn’t have to be a hassle. When you want to ensure timely customer payments, you need to consider outsourcing these services. With that, you can save time, money, and headaches. Think of these services as an investment in your business. Your AR team will take care of those critical tasks as you manage other aspects of the business. By partnering with a reputable accounts receivable company, all of your invoices will be paid on time and in full.

Looking for a South Jersey Accountant?

If you are ready to choose a professional AR team for your business, reach out to TMD Accounting. We have over 40 years of experience helping companies with their accounting needs in the Gloucester County area. We are a family-owned and -operated business. We pride ourselves on being an affordable, reliable, and flexible solution for your accounting needs. Our team wants to help your business grow. One way to do that is by outsourcing your accounts receivable services. Schedule a consultation by calling 856-228-2205.

Understanding Your Small Business’s Financial Statements

Small Business

Your business’s financial statements can be a key tool for managing your business. However, many businesses are confused by financial statements and don’t know what they mean or how they can be used. Here is some information from the professionals at TMD Accounting about your financial statements and how they can be used.

What Financial Statements Include

A financial statement tells you where your business money is, including its origin, how it was spent, and the current financial standing of your company. You can see this information by using the three primary types of financial statements, including your income statement, balance sheet, and cash flow statement.

These documents give you the following information:

  • The assets you currently have
  • Your business’s liabilities
  • The value of your ownership
  • Total sales/gross revenues
  • Losses and expenses
  • Net income
  • Cash flow, including the sources of money and how it has been used
  • Cash on hand at the start and end of a period

All of these types of information are crucial for your business so that you can make better decisions. Financial statements are an important component of running a financially stable and profitable business.

Why Financial Statements Are Important

Your financial statements will provide you with your business’s operational results, its current cash flow, and its current financial standing. They are important for all of the following reasons:

  • Documenting your business’s financial activities
  • Summarizing important accounting information about your business
  • Providing stakeholders with an accurate picture of your company’s financial situation

Lenders use financial statements to assess your level of risk when determining whether to extend credit to your business. They also include information that might be required under accounting standards and the law and contain the data that you need to complete your business tax returns.

What Is In Each Type of Statement?

You can analyze how your company is performing by using your financial statements.

The income statement will include information about your business’s total revenues, the cost of the goods or services sold, and other costs during a set period. It will then provide information about your company’s net income or a net loss.

Your balance sheet will provide data about your total assets, liabilities, and equity.

Your cash flow statement gives you information about your company’s financing, operations, inflows and outflows, and long-term debt.

How to Use Your Financial Statements

When you receive your financial statements, take a look at your income statement and treat it as a report card for your business. This might also be called a profit-and-loss statement and tells you how your business is doing over time. In the income statement, you can see the expenses your company has incurred and the revenue it has generated during the relevant period.

Income Statement

Your income statement can be used to gain an understanding of your business’s profitability and the steps that you can take to increase its profits. For example, you might see that you should cut back on some unnecessary expenses or focus on more profitable products or services. If you are searching for funding, investors will want to see your income statement to assess your degree of risk when deciding whether to give your company credit or venture capital.

However, your income statement won’t reveal the overall strength or weakness of your financial condition, show a list of your assets and liabilities, or show how money is flowing in ad out of your business.

Balance Sheet

Your balance sheet lets you see how strong or weak your business’s current financial condition is. Many investors typically begin by reviewing a business’s balance sheet to get an understanding of its financial condition. Your balance sheet includes key information on a specific date rather than your business’s profitability over a set period. It helps to show your business’s stability and how much liquidity it has. A balance sheet will include a list of your business assets, its liabilities, and the equity you have in it. The information included in a balance sheet can help show your business’s net value, your debt, how well your assets are being managed, and whether you are easily able to convert assets into cash when necessary. You can also see changes in your equity, earnings, inventory, and accounts payable and receivable by comparing information from your balance sheets.

Cash Flow Statements

You can use your cash flow statement to determine whether you have enough money coming in to sustain your business operations. Even if your business is profitable, it can still fail if you have cash going out of your business faster than it’s coming in. Reviewing your cash flow statement can help you to better manage where your money is going to increase your business’s chance of success.

Investors want to see cash flow statements to see evidence you can manage your business’s cash and have the resources to handle times when gaps in the in-flow of cash occur.

Find an Accountant for My Small Business

TMD Accounting offers small business accounting services and can help you set up and understand your business’s financial statements. Working with our experienced South Jersey accounting professionals might help to improve your business’s profitability by identifying areas that need work. To learn more, schedule a consultation by calling us at 1-856-228-2205.

What Financial Statements Does A Small Business Need?

Small Business

Many business owners are intimidated by those financial statements. However, you need to learn some of the basics of these statements to get a clearer picture of your financial health. No matter how big or small your business, these three financial reports are vital to your success. The balance sheet, income statement, and cash flow statement are must-haves for your business. Let’s break down how these sheets work and affect your small business.

Balance Sheet

The balance sheet is also called the statement of financial position. This financial statement tracks your liabilities, assets, and owner-held equity. The balance sheet can indicate the approximate cash value of the business. Lenders will look at your risk and collateral, which can affect if you will receive funding for your business when you need it. There are two vital parts of the balance sheet: assets and liabilities.

Assets are everything that a business owns. For example, some assets can include signed service contracts or showroom stock. There are two types of assets: short- and long-term. Short-term assets will last for one year or less and can include cash, prepaid expenses, and inventory. On the other hand, the business must own its long-term assets for over a year. These examples include tools, property, and equipment. A company may also own intangible assets such as trademarks, copyrights, and patents.

Liabilities are everything that the business owes to a vendor or creditor. A liability may include a business loan balance. Like assets, there are short- and long-term liabilities. A business must pay all current liabilities within a year, including small business loans, payroll, and lines of credit. Long-term liabilities, including deferred income tax and mortgages, are paid over longer periods.

Along with assets and liabilities, owner-held equity is equally important. This equity is the cash value of the company. It is calculated as the assets minus those liabilities. The amount left over is the owner-held equity.

Income Statement

The income statement is often called a profit and loss statement. This statement accounts for the business’s revenues, gains, expenses, and losses. With this statement, you can gauge the profitability of the current operations. You can also use this statement to decide whether to cut or expand operations.

There are several parts to an income statement. Revenue is the income from operations and accounts. You can gain revenue from primary activities or secondary activities. Some primary activities include services rendered or product sales. Secondary activities include rent from a vacated space or accruing interest from an account.

Gains come from other future income, such as selling your assets. Expenses are derived from operations. Like revenue, these expenses can come from primary or secondary activities. Primary activities include expenses incurred from maintaining normal operating revenue. Secondary revenue often includes expenses incurred outside of the operating revenue. Losses are the value loss from selling assets, such as settling overdue taxes.

With this statement, you can see the profitability of the company. Income statements are formatted in two ways: single-step or multi-step. In a single-step statement, there will be one category for income and the other for expenses. However, these statements are not always reliable as they cannot calculate the profitability and efficiency ratio. For that reason, many small businesses use multi-step statements to separate the expense account based on their functions. Multi-step statements give owners a more rounded view of their financial health.

Cash Flow Statement

The cash flow statement is a detailed accounting of the cash generated by the business. How does a cash flow statement differ from an income statement? The income statement shows what the businesses have generated on an accrual basis. The cash flow statement will show the actual funds that have come into the business accounts. With these statements, you will know how much money is available to pay expenses or invest in the business. Any significant discrepancies between the cash flow and income statements could mean problems in business operations.

There are critical points in the cash flow statement. The operating cash flow statement is the cash paid from and to your account from the actual business operations. The income and expenses from selling and buying assets are called the investing cash flow. Investing cash flow can include buying operating equipment or selling real estate assets.

The cash actions related to the company’s stocks and bonds are called the financing cash flow. This cash flow might include paying dividends to the owners of repurchased stocks. When an owner draws on a small business account, that is known as a financing cash flow.

Cash flow statements can include other details, including document losses and gains of non-cash assets and miscellaneous cash actions. When you put this information together, you can see the location of the cash and how it moves in your business.

Understanding your financial statements can be complex. Finding reliable small business accounting services can help you to create and decipher these statements for your business. Knowing your finances is vital for any business. Without these statements, you will not know the financial health of your small business.

Need a South Jersey Accountant for My Small Business?

At TMD Accounting, we have small business solutions for you. Our family-owned and -operated South Jersey accounting firm has helped those businesses in Gloucester County for over 40 years. Whether you need help with payroll, taxes, accounting, or bookkeeping, we are your flexible and affordable way to manage your business. Schedule your consultation by calling 856-228-2205.

Types of Errors in Small Business Accounting

Accounting, Small Business

When you have a small business, you do not want to make any type of accounting errors. These errors could throw off your books and lead to penalties from the IRS. If there are errors, it is crucial to spot and correct them. Here are some of the types of errors found in small business accounting.

Error of Duplication

Sometimes, you may have recorded a debit or credit twice in the books. Many of these errors are made when several people handle the bookkeeping duties. Also, when more than one invoice is sent to your business, you may put a double entry in the books. While many duplicate entries are minor, those significant amounts can seriously impact your business, leading you to understate or overstate your income.

Error of Omission

On the other hand, if you fail to enter a financial transaction in the books, that is known as an error of omission. These errors can overstate or understate your income and affect the balance sheet. For those errors of omission in the accounting process, it can significantly impact the trial balance, which is the report for the accounts in the general ledger. Anytime you misplace an invoice or receipt, it can lead to those errors of omission in your accounting books.

Error of Original Entry

This type of error means that someone entered incorrect information into the books. A receipt or invoice should back up all entries. In this case, an individual made the original entry, but the bookkeeper may have transposed the numbers. Like other errors, this one can have a significant impact on the books.

Error of Commission

In some cases, the numbers do not make it to the right place. Errors of commission occur when the item is entered in the wrong spot. For example, you could post the items to the accounts receivable account rather than the account payable, or someone had applied a customer’s payment to another invoice. These errors can affect the balance sheet and income statement.

Compensating Error

In some situations, one account error is balanced out by an error in another account. For example, an incorrect entry in the inventory and a corresponding error in the account payables may cancel each other. These errors do not affect the trial balance since they are both opposite and equal, but they are still errors in your books.

Error of Principle

When an accounting error is made on both sides of the transaction, that is known as an error of principle. Often, these errors happen when the individual recording the transaction does not grasp the basic accounting principles. For example, a fixed asset purchase is entered as an operating expense. These errors will not affect the trial balance. One way to correct these issues is by hiring a professional to handle your books.

Error of Entry Reversal

You may find those reversing entries at the end of the accounting period. In some cases, a credit will be posted as debit, or an invoice is listed in the accounts payable instead of accounts receivable.

Preventing Business Accounting Errors

You can prevent those accounting errors with a few tips. First, you always want to have someone capable of understanding accounting and bookkeeping in charge of the entries. They should be accurate with their typing. In many cases, transposing numbers can throw off an entire ledger. Your would-be bookkeeper needs to understand those financial statements and know where to enter the entries.

While it may be tempting to handle the bookkeeping and accounting yourself, hiring a professional team can make life easier for everyone. An experienced firm understands the basics of the bookkeeping and accounting world. By using professional services, you can ensure there will be no entry mistakes in those books. You can save money using a friend or family member, but an experienced and reputable accountant must adhere to specific guidelines to produce accurate reports for your small business. Get some peace of mind and hire a professional for the job.

When you hire a professional bookkeeper, they will compare bank accounts to the accounting ledger. With that, they will correct any errors before those mistakes lead to big problems. Bookkeepers will also help you stay on track. Hire those small business accounting services for the job. They will track all your financial transactions, whether big or small.

Errors Can Be Costly

As a small business, you need to understand your costs. All businesses need to know whether they are operating at a loss or profit. With those mistakes, you could underestimate or overestimate your costs, leading to financial problems down the road. One error can cause many headaches for your business, making it a nightmare to straighten out. Plus, you can even face penalties from the IRS if that mistake leads to filing incorrect taxes.

While mistakes can happen, and no one is perfect, you need accuracy with your financial statements, balance sheets, and the rest of your books. Hiring a reputable and experienced bookkeeping and accounting firm can help you avoid those mistakes.

When you need a South Jersey accountant for my small business, reach out to TMD Accounting. We are a family-owned and -operated business that has been serving the community of Gloucester County for over 40 years. Our team has helped many small businesses in the area. We are your flexible, reliable, and affordable choice when you need accounting, bookkeeping, and tax services in the area. Schedule your consultation by calling 856-228-2205.

Understanding a Restaurant Cash Flow Statement

Accounting

Some restaurants might raise money with outside financing or by selling assets. However, the majority of the cash should come from its cash flow. Why is understanding cash flow necessary for your restaurant? Here are a few things to understand about these cash flow statements.

What Is Cash Flow?

This term is the amount of money you have made from food and beverage minus what you spent on operating costs. Understanding the restaurant’s cash flow can help budget for expenses and allow investors to see the potential in your business. If you want to calculate your restaurant’s cash flow, you can use the following formula:

Cash Inflow – Cash Outflow = Total Restaurant Cash Flow

However, there are a couple of things to take into consideration. You will need to know your inflow and outflow of cash. For the inflow, you need to add up all the money that comes into your restaurant during a specific period, including food and beverage sales. You can also include merchandise sales, received loans, catering and event money, and other items your restaurant has sold. That is known as your cash inflow.

Next, you need to determine your cash outflow. During this stage, you will want to add your operating costs for the same period. These expenses include utilities, inventory, rent, insurance, payroll, restaurant furniture, kitchen supplies, and appliances. Adding all of those expenses will give you the cash outflow.

With those two figures, you can calculate your total restaurant cash flow.

Reading the Restaurant Cash Flow Statement

There are three crucial statements for restaurants that help manage finances: the balance sheet, income statement, and cash flow statement. The restaurant’s cash flow statement will determine whether your company is financially healthy. These cash flow statements are broken into three categories:

  • Cash flow from operating activities
  • Cash flow from investing activities
  • Cash flow from financing activities

However, the two most important aspects of the cash flow statement are financing cash and net income.

Financing cash will show that your restaurant has borrowed money or raised funds by selling stock. To an investor, your financing cash will show whether you have the money to pay dividends.

As you may have guessed, the amount of money the business produces is called the net income. This figure does not tell the whole story. Instead of relying on a single number, investors will look at the cash flows. If the restaurant’s cash flow is smaller than the net income, it could be a sign that the company is losing money.

Restaurant Cash Flow Management Tips

Now that you understand the basics of a restaurant’s cash flow statement, how can you properly manage your cash? First, you may want to work with our small business accounting services. We can provide advice to help manage those expenses and assets.

Aside from that, here are a couple of tips for your business.

Have a Restaurant Cash Flow Forecast

By analyzing your restaurant’s point of sales system, you can guess the amount of cash flow for the upcoming year. While sales can always change, you will have a little more insight into what you should be making for the forthcoming year. You can then decide whether to cut back on spending or invest more money into the business. A restaurant cash flow statement allows you to create seasonal budgets. With that, you can navigate those ups and downs in the industry.

Streamlining Your Costs

If you are unhappy with your restaurant’s cash flow, you might want to reduce overhead costs. Take time to talk to vendors and utility providers about whether you can lower your payments. You may want to remove low-profile or less popular items from the menu. Also, you could reassess your schedule and cut down on staffing hours.

Don’t Rely on Credit

When you have to pay back those debts, it can take a massive chunk out of your restaurant’s cash flow. Instead of relying on credit, you might want to talk to vendors about getting a discount when paying in full.

Get Those Books in Order

While bookkeeping is not a glamorous part of the job, you must stay on top of your books and accounting. A clearer picture can give you a more accurate look at your financial health. If you don’t want to handle this responsibility, consider hiring a professional to take on the bookkeeping and accounting tasks.

Diversify the Vendors

When you rely on one vendor, it may be convenient, but it can put you in a bad situation if something happens to their business. You can get the best deal and negotiate on those prices by working with multiple vendors. Plus, you will always have a fallback if a company goes out of business or runs out of an item.

Save for Emergencies

With a large cash flow, you might want to spend it on something big for the restaurant. However, take a portion of that money and set it aside for emergencies. If you are prepared for expenses, you will not scramble to take out a high-interest loan or pay on credit in an emergency.

A restaurant cash flow statement is vital to understanding the financial picture of your business. Without it, you will not know whether you’re making money or spending too much of it.

When you need an accountant for your small business, reach out to TMD Accounting. Our family-owned and -operated business has been serving the community of Gloucester County for over 40 years. We are a flexible and affordable way to keep track of your restaurant finances, including those cash flow statements. Schedule your consultation by calling 856-228-2205.

The Importance of Financial Planning for Small Businesses

Small Business, Tax Planning

One of the driving factors in ensuring your business is successful is whether you have a strong financial plan. The plan you create should control how you operate your business over a set period that depends on its projections. Financial planning is a process through which you assess the competitive environment, the goals you have for your business, the resources you need, your budget, and the risks that could arise. In other words, your financial plan helps to prepare you for the future. Regardless of the industry in which your business operates, financial planning is essential. The accounting team at TMD Accounting is prepared to assist you with the process no matter your business type.

How a Financial Plan Can Benefit Your Business

There are multiple benefits of financial planning for small businesses. Below are some of the key advantages planning can offer.

1. Helps to Define Your Goals

Having clearly defined goals can help you understand what your business wants to achieve over the next year or more. For example, if you are trying to create a product to fill a market need, you use your plan to create benchmarks to ensure you are on target. No matter what the goals for your business might be, having them clearly defined in your financial plan can help to provide a roadmap to guide your actions.

2. Helps to Manage Cash Flow

In your financial plan, you will include information about your business’s expected cash flow. While you’ll likely initially spend more than you have coming in, you will have to determine the expense level that is acceptable and establish ways to keep your business on track by easily measuring its cash flow.

3. Assist You With Setting Your Budget

During the financial planning process, you will set your business’s budget. Starting with your overall budget for the quarter or year, you will then break it down into specific, smaller budgets for different areas of your business while ensuring that how much you allocate to each is ordered in importance. A budget helps each team to understand its constraints and the resources it has available to meet its goals. Setting individual budgets for different teams can also help you to track the progress of your company and its spending overall.

4. Identifying Areas for Cost Reduction

Financial planning helps you identify areas in which you can save money. If you’ve been in business for a while, you can first review what you’ve spent and how quickly your business is growing. Identify unnecessary expenses and those that are over-inflated, and trim them accordingly in your budget for the upcoming year.

5. Mitigating Risks

A great aspect of financial planning is that it helps you to identify and mitigate risks that your company could face. You should include controls for inefficiencies, losses that can be covered with insurance, and protection against internal theft or fraud. A part of financial planning involves identifying the risks that apply to your particular type of business, ordering them in their order of priority, and determining strategies to implement to mitigate risks to help to reduce your chance of losses.

6. Managing Crises

Having a plan in place can be helpful whenever your company faces a crisis. During a crisis, you should review and rework your financial plan accordingly to include your response and which strategies to employ.

7. Easier Fundraising

If you need capital funding from an investor or bank, one of the first things you will be asked for is a copy of your business plan. Investors want to know what your plan is for growing your business, the risks you face, and how you will use your money wisely.

Your financial plan should provide all of these types of information to prospective investors so that they can get a clear idea of your business goals and the projections you have about the future. Even if you are not currently looking for funds, having a plan can come in handy if and when you are.

8. Serving as a Roadmap for Growth

Your financial plan helps you assess your business’s current situation and project where you see your business going in the future. Your larger business plan will accomplish these goals on a broad level and discuss information about your target markets, how many employees you need, and the services or products you plan to offer.

The financial section of your plan should include data showing how you will work to reach your goals and what you will need to invest to get there. Determine how much you expect your business to grow, the expenses you’ll have, and how much revenue you project to come in.

9. Building Trust Through Transparency

The financial planning process can help your company to build trust with both investors and your staff. When you are transparent with your employees, it helps to build their trust in you and your business. Employees want to know that the company they work for is managed effectively and working to be successful. You can share your financial plan with your employees in meetings so that they can also offer input from their experiences.

Talk to a South Jersey Accountant for My Small Business

If you are searching for small business accounting services and help with your financial planning, speak to the professionals at TMD Accounting. We are a full-service accounting firm that serves companies in many industries. Call us today to schedule an appointment at 1-856-228-2205.

Tax Deductions for Small Business Owners Working From Home

Small Business, Tax Planning

Many small business owners have a space inside their homes where they work. These business owners can make certain deductions on their taxes. Remember, there are a few rules from the IRS concerning these write-offs. If you want to know what tax deductions you can take, here are a few points to consider.

The “Exclusive Test”

While you may work out of your home, not all spaces can be claimed as a home office. According to the IRS, you must be able to show that a portion of your home is a principal place of business. You must exclusively use that space to work. If you don’t have a dedicated space in your home, you cannot take the home office deduction. This is known as the “exclusive test” by the IRS.

For example, a spare room in your home can be claimed as a business office and deducted from your taxes. However, you cannot claim a living room or bedroom because those areas are used for personal purposes. There are a few exceptions, such as individuals using their home as a daycare or businesses storing inventory in the home.

You must also be an independent contractor or registered business owner to take the home office deduction. Anyone working from home as a business employee is not eligible for the deduction. The IRS rules about this deduction can be confusing. If you have questions, our small business accounting services can help to address your concerns.

Will These Deductions Cause an Audit?

Some people worry whether taking the home office deduction will cause the IRS to audit their returns. Yes, the IRS does have strict rules, but you will not get an automatic audit with these deductions. There are ways to reduce your chances of an audit.

First, you will want to ensure you qualify for all those deductions. Maintain accurate records of your purchases and expenses. You will want to keep those personal and business expenses separate. The IRS has a system that can detect any red flags. For example, the system will compare your situation with others in your industry. Making higher claims than the average person in the industry could signal a problem with the IRS. Remember that IRS audits are rare, but you should always be prepared with the proper paperwork and documentation for your deductions.

Tax Deduction for a Home-Based Business

Those home office-related deductions are based on the percentage of space that you use for the business. You will need to divide your office’s square footage by your home’s total square footage. With that number, you can deduct the right percentage of each home expense. Sometimes, you can deduct your office’s homeowner’s insurance and association fees, mortgage insurance, and cleaning service. Utilities can also be deducted from your business taxes, including electricity, water, phone, and internet.

If you make upgrades or repairs to the space, then you can write those expenses off. However, the amount of the write-offs will depend on whether the repairs benefitted your office or the entire home. While you may want to deduct every expense for your home office, you really need to hire a professional to look over your business taxes.

Over the years, the IRS has been cracking down on fraudulent deductions. You want to make sure that these deductions are appropriate for your situation.

Other Business Expenses

What else can you deduct from your taxes? There are plenty of standard deductions for other business expenses. For something to be qualified as deductible, that expense must be considered “ordinary and necessary.” What does that mean? The expense must be common and also helpful for your industry. For example, you cannot take a lavish vacation and deduct the expenses, claiming it was a necessary part of your business.

There are some common business expenses for your taxes.

If your business manufactures products or purchases items for resale, then you can deduct the cost of goods sold. You may write off direct labor costs, factory overhead, storage fees, and the cost of the raw products on your taxes.

Capital expenses are the costs that are required to operate your business. There are three types of capital expenses: business assets, improvements, and startup costs.

You may deduct certain car expenses if you use the vehicle as a part of the business. Like the home office write-off, you can deduct a certain percentage of the car’s usage. For example, business owners can calculate the miles driven for business purposes to receive a deduction.

You might be able to deduct rental expenses if you do not own the business property. In some situations, the interest could be deducted if an owner borrowed money for the business. You can also deduct state, local, federal, and foreign taxes from your taxes.

Travel expenses are also eligible, but you can only claim them if you reimburse those costs under an accountable plan. Once again, travel expenses must be related to the business and not for personal use.

Any supplies or materials are deductible from your taxes. Plus, professional services are also considered a business expense. You can write off those fees from a lawyer, bookkeeper, or an accounting firm.

Finally, all of your business development and marketing expenses are eligible for a write-off. These business expenses are used to find and keep clients. With that, you can deduct them from your yearly taxes.

Many people are hesitant to take some deductions off their taxes. The IRS provides detailed explanations of these expenses on their website, which can help you determine what is eligible for a deduction. Completing your taxes can be challenging, especially for small business owners working from home. You may want to find an experienced accountant for your small business to help make the correct deductions on your taxes.

Need a South Jersey Accountant for Your Small Business?

At TMD Accounting, we have over 40 years of helping small businesses in the Gloucester County area. Our team can assist with your taxes, payroll, and bookkeeping needs. When you need a flexible and affordable option, we are here to help. Schedule a consultation by calling us at 856-228-2205.

What Is Financial Planning Why It Is Important In Business?

Tax Planning

Do you need a financial plan for your small business? Creating these types of plans is a crucial step for any business owner. Financial planning can help you to make daily decisions for your business. By comparing numbers to actual results, you can make those crucial decisions regarding your financial future. Even with a one-person company, you should have a financial plan in place. Why are financial plans so important? Keep reading to learn more.

Financial Planning for Your Business

Financial planning is very vital to the success of your business. This planning usually allocates funds to specific areas of your business. Also, financial planning will determine how a company can achieve different objectives and goals. While you might think establishing a business is hard, creating a financial plan can be just as challenging without the right help. Businesses in all industries need to focus on financial planning. However, many small businesses will not use a financial planner because they think those services are too costly.

Financial planning is essential to the overall business operations. Small businesses can’t be financially stable and operate without confidence in their financial plans. Unfortunately, many companies will fail. In some situations, those failures are tied to a lack of financial planning.

What Can Financial Planning Do for Your Business?

There are many ways that a financial plan can affect your business. Small business accounting services can help implement a plan for you. Here is a look at a few of these benefits to financial planning.

Cash Management and Budget

When you have a financial plan in place, you can help organize your short-term budget. Many small businesses will experience variations in revenue on a monthly or seasonal basis. In simple terms, that can translate to a period when there is strong cash flow or a time when a shortage occurs.

Budgeting is a critical task for any business. When you plan out a budget, you can make those financial decisions and allocate funds for different projects. A smart budget will help generate profits while cutting losses and costs. Creating a reasonable budget without a financial plan can be challenging.

Financial plans can assist those struggling small businesses in getting a handle on their budget. Additionally, that financial plan gives companies deeper insight into funds, making it easier to see the bigger picture. You can even break down a complicated budget into more manageable, smaller steps.

Small business owners can consider these cycles by building a solid financial plan. During those slow times, these businesses can monitor those expenditures for low revenue periods. In many cases, poor cash management results in negative consequences, such as not making payroll for your employees.

You should structure your financial plan to have a cash cushion in case of downtimes. With a cash cushion, your small business can take advantage of special opportunities, including purchasing reduced-priced inventory from suppliers.

Long-Range View

On a daily basis, your small business may have to deal with issues or crises. It can be easy to focus on those problems, but that leaves you not thinking about any long-term goals. Unfortunately, that can take away from planning for the future, preventing businesses from growing. A financial plan allows a small business owner to see what expenditures are needed to keep the company on track and stay ahead of the competition. Think of a financial plan as a blueprint to implement the company’s performance for both short- and long-term goals.

Spot Trends

Over the course of a month, a business owner must make critical decisions. Often, it can be hard to tell if those decisions were successful. When you prepare your financial plan, you can set those quantifiable targets to compare with actual results throughout the year. For example, the owner can see if their increase in advertising expenditures led to more sales for the business. These sales trends for individual products can help the owner make decisions about allocating money for marketing.

Prioritizing Expenditures

When you allocate your capital and conserve those financial resources, it can lead to a successful business. These benefits of financial planning can help owners identify their most important expenditures, which can help improve efficiency, productivity, and marketability. Those decisions are often only made when cash is plentiful for the business. Even those well-capitalized corporations will prioritize their expenditures.

Measure Progress

During those early stages of the business, many owners will deal with numerous changes and have to work long hours. Sometimes, it can be difficult to tell whether any progress is being made or if serious problems are on the horizon. Seeing those actual results help small business owners to feel more confident in their decisions. On the other hand, if there is an issue, the owner can take the appropriate steps to correct it. A chart displaying steady revenue growth for each month is a great motivating factor for both new and experienced business owners.

Talk To an Experienced Accountant

If you need help with your financial planning, turn to TMD Accounting. We are a family-owned and -operated business that focuses on helping companies in all industries plan for the future. We offer a flexible, affordable, and convenient way to handle those financial responsibilities. You need to focus on growing your business, and we are the ones to help you.

Need a South Jersey accountant for my small business? Our accounting team is ready to help. Schedule your consultation by calling 1-856-228-2205.

Why Does my Small Business Need an Accountant?

Small Business

You just started your own business. Do you need an accountant, or should you handle those responsibilities yourself? Many successful companies work closely with an accountant. These professionals will be able to guide your business through every financial stage. Here are a few reasons why your small business needs an accountant.

When To Work With an Accountant

Working with an accountant saves small businesses from lost time and money. Plus, they can alleviate some of the headaches when tackling financial responsibilities. Business owners should ask for help right from the start. Take a look at these vital points in your business when you need an accountant.

Forming Your Business

You should work with an accountant during those first stages of your business. These professionals can help you write a business plan. A plan can put your goals down on paper rather than taking the wait-and-see approach. Along with that, the accountant can advise you on the best entity structure for your business. You might think that a sole proprietorship is the best option, but an LLC could have additional benefits. Many accountants can even assist with bookkeeping services or help you set up the right software for the job.

Compliance and Tax Issues

After you have your business plan and bookkeeping software, you still need help from an accountant. Many businesses have to worry about compliance issues. These problems can be stumbling blocks for many owners. You might want to ask for assistance from an accountant. Sales tax compliance is a sore spot for many businesses. You must comply with local tax laws if you are shipping any products over a state line. While some bookkeeping apps can help, you need an accountant to get started.

Payroll is another consideration for many businesses. Labor and wage compliance issues have been known to sink profitable companies. Tax programs and apps can ensure you are always compliant with these issues. However, you will want an accountant to check in on a quarterly basis.

There are other reporting requirements to consider. You must send those reports to local licensing agencies or creditors. For those with complex tax issues, you might be liable for other types of taxes or fees. If you need to report on your financial position for credit purposes, make sure to work with a firm offering small business accounting services.

Do You Need an Accountant?

You might think that you can handle these responsibilities by yourself, but accounting is not a DIY task. Small businesses are more successful when they work with an accountant. Yes, you might be able to take on those basics, but you should consider working with an accountant for those complicated matters. These individuals are financial professionals who can help keep your business on track as you plan for the future.

You will want to work with an accountant throughout the year, not just during tax time. Many accountants will meet with you at the end of the year. They will go over your finances and discuss any issues concerning your taxes. Tax planning is not the only reason an accountant needs to meet with you. Specific compliance issues, such as payroll tax underpayments, are easier to fix before filing those year-end reports.

Don’t forget to take advantage of your accountant’s expertise throughout the year. Planning for your business should be a year-long process. It could be too late to prepare your small business for penalties or fees when tax time is nearing.

Accountants are there to help every step of the way. You should meet with your accountant on a quarterly basis. These meetings will ensure that everything is on track and that your business is growing correctly. Sometimes, a company can grow too fast, leading to problems down the road.

You always have to worry about your quarterly tax payments. As the income increases, so do tax liabilities. Your initial estimated tax payments may not be sufficient if you experience a surge in your business. By scheduling regular meetings with an accountant, you can avoid those underpayment surprises at tax time.

Often, business owners are too close to some problems. Yes, business owners know their company better than anyone, but looking past those blind spots can be difficult. With an accountant’s help, you can take a look at the big picture, which can help the business continue to grow.

Find a Small Business Accountant

Now that you know the importance of working with an accountant, you need to find the right one for the task. Even if you want to handle your finances by yourself, you should have an experienced accountant on hand to get solid advice. Think of an accountant as a small investment for your business. With their help, you can make the right decisions for your business. Remember, many successful companies work with an accountant for their financial needs. Now is the time to find a qualified accounting professional to assist with those financial duties for your small business.

Need an Accountant for My Small Business?

At TMD Accounting, we understand the needs of small businesses. Our family-owned and -operated accounting firm has been serving the residents of Gloucester County for over 40 years. We provide you with affordable, reliable, and convenient options for your small business accounting needs. Our team can help with taxes, bookkeeping, and payroll services. Don’t handle those essential responsibilities by yourself. Schedule your consultation by calling 1-856-228-2205.

Where Can I Find Accountants in South Jersey that Specialize in Small Business?

Small Business

Do you need an accountant for your small business in New Jersey? Some owners might think that a software program or an app is the less expensive alternative. However, you need a seasoned professional to help with those expenses. An accountant helps save you money and makes your life so much easier. Now that you know the importance of a small business accountant, where can you find one in South Jersey?

Finding an Accountant That Specializes in Small Businesses

There are a lot of reasons for hiring a business accountant. When it comes to finding one that specializes in the needs of a small business, it can be a challenging task. You want to work with someone who has your best interests at heart. Also, they need the right experience to help manage those finances.

Search for a Small Business Accountant

If you do a quick Google search, you will see plenty of ads for small business accountants. While the internet can help kickstart that search, you don’t want to see the first person and hire them. An experienced accountant needs to provide you with sound advice about how to manage your business and money. You need the right type of small business accountant for those vital duties.

Consider looking for an accountant through referrals. You can ask your lawyer, banker, or business advisor to recommend a great accountant. Remember that not every accountant is a Certified Public Accountant (CPA). For an accountant to be a CPA, they must pass a specific exam. When you work with a CPA, you can be confident that the person is experienced and well-trained. CPAs need to renew their certification regularly. Those re-certifications provide their clients with the best up-to-date knowledge.

Hire Someone With Small Business Experience

Yes, hiring someone with small business experience makes all of the difference. Managing the finances of a small business can be complex. When you work with a business accountant, they can help you handle any complications that come with a small business.

Also, you will want to know if the accountant has experience in your particular industry. Some accountants will specialize in certain types of businesses. If your business is in a specific sector, you want to work with an advisor who can meet those needs. Always ask if the accountant has experience working with structured companies like yours. LLCs, sole proprietorships, and corporations all have different accounting requirements.

Ask About Other Services

Many accounting firms will offer both tax and auditing services. However, others may assist customers with bookkeeping, budget, payroll, risk assessment, and business valuation. Some highly qualified accountants will do more than those basic services.

You should think of your accountant as a valued advisor for your business. Professional small business accounting services become beneficial advisors. They can help you understand your financial capacity. When you work with an accountant that understands your small business, they can create a financial model from the beginning, helping expand your business in the future.

Discuss Billing

Finally, you need to know how much the accountant will bill for their services. Some will charge by the hour, ranging from $100 to $275. On the other hand, a few accountants do work on a monthly retainer. Like a business purchase, you can always shop around for options. Yes, accounting firms do quote their services. Take those quotes to look for the best one for your needs. Keep in mind that an expensive option is not always the best. However, when an accountant charges more, that individual will usually provide you with more services.

Hire Your Business Accountant in South Jersey

After talking to a few South Jersey accountants, you can move on to the next steps. If you have shopped around, you might be able to negotiate the fees. Remember that many accountants have a set pricing structure. Asking for a special rate is fine, but don’t expect it.

Once you have agreed on the price, consider drafting out the terms of an agreement in writing. With this document, you can outline the exact services, fees, and duration of work provided by the accountant. Detailing the terms will define the relationship between the accountant and your business. That document allows both parties to know what to expect from each other.

Finally, you can grow your business with the help of your accountant. If you want to make the most of your business relationship, make sure to communicate on a regular basis. You should try to talk to your accountant at least once a month. Following up with them can prevent any issues or surprises down the road.

Choose the Right Business Accountant for Your Small Business

With these steps, you can find the right small business accountant to help you save money and provide valuable financial advice. You could try to manage your finances by yourself, but that can take away from growing your business. A small business accountant will help with financial management, taxes, and many more business duties. You can invest your free time in improving and growing your business with their assistance.

Do I need an accountant for my small business? The answer is yes. At TMD Accounting, we offer flexible, reliable, and affordable ways to manage your small business finances. We have been in business for over 40 years in the Gloucester County area. Small businesses throughout South Jersey trust us with their financial services. You can schedule a consultation by calling 856-228-2205.

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