Small-Business Bookkeeping Basics: Here’s What You Need to Know

Small-Business Bookkeeping Basics: Here’s What You Need to Know

If you own a small business, accurate bookkeeping is vital for your finances. It can impact the success and growth of your business. Bookkeeping is not just one function, but it encompasses a variety of tasks, from data entry to managing accounts. Make bookkeeping a priority for your business. Here are a few things you need to know about bookkeeping basics for small businesses.

 

What Is Bookkeeping (and Why Is It Important)?

In basic terms, bookkeeping is keeping track of all your financial records and transactions. For small businesses, bookkeeping is part of their accounting system. A well-managed bookkeeping system should include records for operational costs, business transactions, and other expenses. All of these entries must be accurate and up-to-date.

 

Without these records, you will not know whether your business is making a profit or taking on losses. You also need the proper records so that there are no issues when it comes time to pay taxes or payroll. You can quickly fix any discrepancies by catching them early. However, you will not know about those issues unless you have maintained your financial records.

 

Choosing a Bookkeeping Method

When it comes time to choose a bookkeeping method, you have two choices: single-entry or double-entry. Before you can start keeping your financial records, select one of these methods. These bookkeeping systems determine how and where you record every financial transaction.

 

If you want a simple bookkeeping option, consider the single-entry method. You will need to record every financial transaction only one time. These transactions will be listed either as income or an expense. The single-entry process is excellent for smaller businesses that don’t have equipment or inventory included in their finances. However, single-entry recording is often less accurate than double-entry.

 

With the double-entry method, all transactions are entered twice in the record. They are recorded as either debit or credit. When you think of “balancing the books,” this is the method used. While double-entry procedures are more complicated, they prevent costly errors in recording transactions. You will be able to catch any mistakes before they lead to significant financial problems.

 

The entry system method that you choose will impact how your bookkeeping processes will work in the future.

 

Don’t forget about choosing an accounting method. Like bookkeeping, there are two options: accrual-based or cash-based accounting. Accrual-based accounting records, bills, and invoices even when money has not been exchanged. For the most part, accrual-based accounting is the primary method for most businesses. Cash-based accounting records all transactions where the funds have changed hands. With this method, invoices or outstanding bills are not recorded until paid.

 

General Ledgers, Payrolls, and Taxes

Years ago, many small businesses would record all financial transactions in a physical book called a general ledger. Today, these ledgers are digital, allowing business owners to enter and organize all transactions with accounting or bookkeeping software.

 

When you send an invoice, pay a bill, or make a sale, these financial transactions should be recorded in the general ledger. There are several ways to set up a ledger. You can use a spreadsheet or ask for help from a small business accounting services company. In any case, you need to keep track of these transactions, or you could find yourself in financial trouble.

 

After setting up a general ledger, think about your payroll system. If your business has hired anyone as an employee, you need a system for payroll. Your bookkeeper can help to establish a payroll schedule. With that, you can ensure that your business is withholding the right amount of taxes.

 

Don’t forget about those independent contractors. While they might not be an official employee of the company, you still need to track your payments to them. At the end of the year, you could be required to file 1099s for each contractor.

 

A well-managed bookkeeping system is needed to help with taxes at the end of the year. If you neglect to record transactions, you could be scrambling to file taxes on time, causing you to miss deductions or pay penalties. Bookkeeping can help keep all of your financial records up-to-date. Some states require you to track any taxes you may have charged to clients. If you don’t have these records, it can lead to fines and other financial headaches for your small business.

 

Is Bookkeeping the Same as Accounting?

Many people refer to accounting and bookkeeping interchangeably. While they both work hand in hand, they are two different operations. Accounting usually carries more responsibilities than bookkeeping. Accounting professionals are highly trained and will have a CPA license. Bookkeepers focus on record-keeping duties, such as maintaining a general ledger.

 

On the other hand, an accountant focuses on a broader range of activities and can create more complex financial reports. A bookkeeper can help file payroll taxes during tax time, while an accountant will assist with business and personal tax filings.

 

Find High-Quality Professionals

As a business owner, you could tackle record-keeping duties by yourself. However, think about outsourcing these responsibilities to a group of professionals. With a little extra help, you can focus on your business and leave the recording to others. First, you may want to hire a bookkeeper who can help manage all day-to-day records, categorize expenses, track accounts payable, and account records, and reconcile all books.

 

If you want more in-depth help, consider an accountant for those financial duties. These professionals will be able to advise you at different stages of your business, help file taxes, manage payroll, and create financial statements. Bookkeeping is not hard work, but it can get away from many people. When that happens, you could struggle to manage your financial records.

 

Let Us Help With Your Bookkeeping and Accounting

At TMD Accounting, we have over 40 years of experience. We are an affordable, reliable, and flexible option when you need bookkeeping and accounting services in Gloucester County. Many small business owners struggle to manage those financial records. Our team is ready to help you. If you need an accountant for your small business, schedule an appointment by calling 1-856-228-2205.

 

Smart Accounting Practices for Independent Contractors

Smart Accounting Practices for Independent Contractors

Under current tax law, an independent contractor is classified as a business. Independent contractors need to pay taxes and keep accurate bookkeeping records. While you probably become an independent contractor to get away from the typical workday, it doesn’t mean that there are no responsibilities. Keeping track of your finances can help grow your business. Here are a few smart accounting practices you should use as an independent contractor.

 

How Independent Contractors Differ from Employees

Anyone who works a traditional job for a company is classified as an employee. The company will withhold and report a portion of its employees’ wages. Social Security, Medicare, unemployment, and tax liabilities are withheld from the employees’ checks. At the end of the year, all the taxable income is documented on a W-2 form filed with the IRS.

 

As an independent contractor, you are not classified as an employee. The opposite is true. Yes, there is a lot more freedom with this type of work, but you are responsible for keeping track of expenses, paying quarterly taxes, and maintaining all bookkeeping. Most employers will pay workers’ compensation, unemployment taxes, and payroll taxes. In addition to that, the company contributes to a 401(K) and pays some health insurance premiums. When you are an independent contractor, you must cover all those costs.

 

Why Bookkeeping Is Essential for Independent Contractors

As you can tell, you have a big obligation as an independent contractor. That is why you need to keep up-to-date and accurate records for your business. It can be easy to fall behind on these duties. You could get involved in a project or forget to add an entry.

 

However, you must properly record every expense and payment in your books. Otherwise, you will have difficulty determining your payments during tax season. Proper bookkeeping will allow you to set up financial reports so that you can plan for the future. Organized books ensure that every invoice is sent and all bills are paid.

 

If you need help with bookkeeping, consider hiring a company specializing in small business accounting services. These professionals can help manage your bookkeeping and assist with other accounting responsibilities. With that, you can save time and prevent any problems with incorrect entries in the future.

 

Smart Accounting Practices

Now that you know the importance of good bookkeeping and accounting, here are a few smart accounting practices to incorporate into your business.

 

Choose Your Accounting Method Wisely

As an independent contractor, you have two accounting methods: cash-based or accrual-based accounting. A cash-based method is simple. It tracks your income when you receive it and documents those expenses as they are paid. Accrual-based accounting records your income when earned but not received. With that, you can account for the money when a project is finished, giving you a better look at your future finances. If you want to know which accounting methods will work for your business, reach out to a trusted accountant. They can help you find the process that will work for your independent company.

 

Pay Estimated Taxes

As an independent contractor, you need to pay self-employment taxes to the IRS for Medicare and Social Security. These taxes are paid when you file a Schedule SE. The schedules are included with your Form 1040. Before filling out the SE, you need to calculate the total income/loss with a Schedule C.

 

When you complete more than $600 of work from a client, they need to file and send a copy of Form 1099-MISC. The client should also send all of that information to the IRS. Independent contractors are responsible for saving money to pay taxes on a quarterly basis. Paying those estimated taxes can help you avoid any unexpected tax liabilities. You should save between 30% to 40% of your income for taxes.

 

Track Expenses

If you don’t want to deal with financial surprises, you need to track everything. You must document all the money sent in and out of your account. All that documentation can protect you in the event of an audit. Today, there are many ways to track your expenses and income. You can hire someone or use a software program. Whatever method you choose, select one that you can use on a daily basis. It is vital to record everything, including:

  • Equipment purchases
  • Hours spent working on a project
  • Hours billed to a client
  • Invoices paid to you
  • Phone and internet bills
  • Bank transfers
  • Office supplies
  • Accounting software and other costs
  • Web hosting and design costs

Don’t Mix Personal with Business

Remember to keep those finances separate. You should open a bank account specifically for your business. With that, you can separate your finances from your personal accounts. Along with helping to ease the bookkeeping duties, a business banking account can help prove that your expenses are tied to the business.

Ask for Help

You might want to handle these duties by yourself, but it is okay to ask for a bit of assistance. A professional bookkeeper or accountant can help manage those books and finances. With their help, you will have the most accurate data for your records. All of that goes a long way to help with your taxes and plan for a brighter future.

 

Bookkeeping and accounting can be overwhelming, especially when you have other responsibilities. These services will ensure that all invoices are sent, and you are paid. Most importantly, they can maintain order and accuracy in your books. Yes, you could try to keep up-to-date on these records, but it can be a time-consuming task. With help from a professional service, you can benefit from their expertise whenever you need it.

 

Need an Accountant For Your Small Business?

At TMD Accounting, we understand it can be challenging for small businesses to take care of those accounting and bookkeeping responsibilities. For over 40 years, small and large companies have trusted us for their payroll, taxes, and bookkeeping services. We are a reliable and affordable way to manage your financial health. Schedule a consultation by calling 856-228-2205.

 

How to Pay Yourself From an LLC

How to Pay Yourself From an LLC

When you have an LLC (limited liability company), paying yourself can be complicated. How you take out money will depend on whether you are a multi-member, single-member, or corporation LLC. Here is how you can pay yourself through an LLC and make sure those earnings meet the IRS guidelines.

 

What Is an LLC?

An LLC is a business structure that combines the features of a sole proprietorship and corporation. Like a corporation, LLCs have limited protection against personal liability and debt. You will report business profits and losses on a personal tax return rather than a business one. There are three types of LLCs: single-member, multi-member, and corporate.

 

Single-member LLCs will have only one member. The IRS views single-member LLCs in the same way as sole proprietorships for tax purposes. Multi-member LLCs have more than one member. For tax purposes, the IRS treats these LLCs as a partnership.

 

Finally, there are corporate LLCs. In these situations, the LLCs are taxed as a corporation. If you want to establish your business as a corporate LLC, you must make a formal request to the IRS.

 

How LLCs Are Taxed

There are different ways that the IRS taxes an LLC. If you have an LLC, you will want to work with a company that specializes in small business accounting services. They can help simplify the process as your tax situation becomes more complex with an LLC.

 

Sole proprietorships and single-member LLCs are considered “disregarded entities.” That means the company’s losses, profits, deductions, and other financial information are reported on a Schedule C with a personal tax return.

 

Multi-member LLCs are a bit different. These partnerships do not file separate tax returns. Instead, they file a return with Form 1065 or Schedule K-1. These forms detail each member’s guaranteed payments and distributions for the year.

 

After that, the members will report their income with a K-1 on Schedule E for the tax return. Plus, they must report all self-employment tax on Schedule SE. Single- or multi-member LLCs do not pay corporate taxes. Keep in mind that single owners and LLC members are responsible for income tax on the company’s income. Along with that, they must pay a self-employment tax on their withdrawals for the year.

 

If the LLC is a corporation, the business must file Form 1120. All of the standard corporate tax rules apply. If the LLCs have elected to be considered an S corporation, all owners must report their portion of the corporate income, and the company needs to file Form 1120S.

 

Taxes can be tricky for LLCs. Some of the rules are different depending on your LLC structure. While you can use software to figure out your taxes, consider hiring a professional accountant for the job. With their help, you can make sure you pay the right amount of taxes for your LLC.

 

How You Pay Yourself as an LLC

The business structure of your LLC will determine how you can pay yourself. Even if you are an employee of your business, you need to find the proper way to pay yourself to avoid tax liabilities.

 

Single-member LLCs will function as sole proprietorships. According to the IRS, these companies are considered a “pass-through” business, which means the income “passes through” the partnership to be taxed under the owner’s personal income tax. As a result, an owner of a single-member LLC or sole proprietorships can pay themselves using the owner’s draw method. With that, you write a check from your LLC to your personal account.

 

The pass-through designation also extends to multi-member LLCs. According to each partner’s ownership percentage, all partners are taxed on the LLC’s income. In some cases, the partners will receive an owner’s draw. That income is considered a prepayment for profit distribution, and these draws can happen at the end of the quarter or year.

 

Other owners prefer a steady salary and will take a guaranteed payment. These payments are paid out even if the business has income loss. Guaranteed payments are considered business expenses, and they will increase the company’s net income. Multi-member LLCs will pay their members with owner’s draw, guaranteed payments, or a combination of these options. Once again, an owner’s draw is simply writing a check. The owner’s draw payments are subject to the self-employment tax.

 

Some LLCs have elected to be treated as an S corporation or C corporation. In those situations, the payout can be more complicated. With these tax classifications, the owners cannot take an owner’s draw, and they must be treated as an employee of the LLC. The owner-employee must receive reasonable compensation. You must issue all payments through a payroll system that withholds employee taxes. Along with that, the owner-employee can take a dividend or distribution of the company’s yearly profit. Those payments are considered taxable income.

 

Guidelines for Paying Yourself

While you might want to forgo paying yourself to help the business grow, you will still be taxed on the total amount of business income. Remember to pay yourself. You want to follow some basic guidelines when forming your payment structure.

 

If you have a partnership, always establish a guarantee payment amount or dividend schedule for the other members. You can set this up using your articles of corporation or partnership agreement.

 

You will want to work with an accountant to figure out your estimated tax payments. Ensure there is always a paper trail for your payments, whether guaranteed payment or owner’s draw. Record the payments in your company’s books so that you are protected in the event of an audit.

 

Understand Payouts for Your LLC Situation

As you can tell, LLCs do protect you from debts and liabilities, but they can lead to complications for tax time. At TMD Accounting, we can ensure your small business is covered for tax season. We have over 40 years of experience helping small and large companies with their taxes, payroll, and bookkeeping. When you need an accountant for your business in South Jersey, schedule a consultation by calling 856-228-2205.

 

How to Find the Right CPA for Your Small Business in South Jersey

How to Find the Right CPA for Your Small Business in South Jersey

When you operate a small business in South Jersey, you have plenty of things on your mind. However, you might not be thinking about the accounting side of operations. Your business needs money to thrive so that you can offer services and products to those customers. You need a professional to help keep track of that money, and a Certified Public Accountant (CPA) is the person for that task. Finding a qualified CPA for your small business can be challenging. We have some tips for finding the best CPA for your South Jersey small business.

 

Why You Need a CPA for Your SMB

You already know that you need to maintain your small company’s finances. While you could handle those responsibilities by yourself, consider hiring an accountant for your small business. A professional accountant will take care of those little financial details. They can help with bookkeeping, prepare profit-and-loss statements, and file tax returns.

 

A CPA is an accountant who has met all the experience and educational requirements for the state of New Jersey. They have also passed the Certified Public Accountant exam.

 

When you work with a CPA, your finances are in good hands. Remember that a CPA does not make your business decisions, but they can provide you with the best advice to make an informed one.

CPAs can help with:

 

Keep in mind that a CPA can do more than file taxes or update your books. Running a small business is complicated. You have many responsibilities on your plate. While you might want to handle the financial side by yourself, it can be overwhelming. A CPA will ensure that all of your records are up-to-date and accurate. With their help, you can take some of those duties off your list.

 

What To Look for in a Small Business CPA

Before you start searching for a CPA, you need to decide what duties you want them to handle. Will you need a full-time financial advisor or just want them to take care of payroll? Once you have decided what you need for your small business, you can begin the search.

 

Many people turn to the internet for a reputable CPA. With an online search, you will have a list of CPAs in the area. Make sure to check all of their credentials. Online searches are notorious for having inaccurate information. You may think you are working with an experienced accountant, but they might not be an official CPA.

 

It is crucial to find a person who has passed the exam for a Certified Public Accountant. You need to know that they have met all the requirements and are licensed. Along with the exam, CPAs must continue to fulfill their education requirements to stay up-to-date with local, state, and federal tax laws. If you hire them to prepare your taxes, they must have a Preparer Tax Identification Number (PTIN).

 

After that, make sure the CPA is someone you can trust. Remember, you are counting on them for financial help and guidance. A trusted CPA will have established an excellent reputation in the community. These small business accounting services are the ones that have helped local businesses with their accounting needs. Find someone with a stellar record to assist with your taxes, payroll, or bookkeeping.

 

Once you have narrowed down your search, don’t be afraid to meet in person, especially since they will handle your money. If the accountant does not want to meet, you might want to find someone else for the job. CPAs know it is a big responsibility to manage someone’s financial records. They want you to feel confident in their abilities and will gladly meet to discuss your needs.

 

Some small business owners are hesitant to schedule a meeting. Bring a trusted friend or mentor to get an unbiased opinion about the CPA if you don’t want to meet alone. You can determine if you want to proceed with a working relationship by scheduling a consultation.

When you have found a CPA, always bring a few questions to the meeting.

 

Questions To Ask a CPA Before Hiring

For the meeting, you will want to have some questions on hand. Ask about the size of the team, their accounting services or specialties, and their experience. Here are a few other questions to get you started.

 

“How Long Have You Been a CPA?”
This answer should be straightforward. While you may want to give someone a start in their career, you should hire a CPA with at least two years of experience.

 

“Are You Available Year-Round?”
If you need a CPA for a one-time job, this answer might not seem like a big deal. You should hire someone who works as a CPA as a full-time job. When you have a question, you want to know that they are only a phone call away.

 

“Can You Represent Me in an Audit?”
Most CPAs are called Enrolled Agents. If you get in trouble with the IRS, they have the authority to speak for your business and represent you. In the event of an audit, you will want someone in your corner.

 

“How Many Employees on Staff?”
Many CPAs will have staff members who assist them. You will want to know who will handle your account, learn about their qualifications, and find the best ways to communicate with them.

 

“How Much Do You Charge?”
Always ask about how they bill and the fees associated with those services. Some CPAs might bill hourly, while others charge a straight fee for their services.

 

Looking for a CPA for Your Small Business?

Now that you have all this information, it is time to find a qualified CPA for your small business. At TMD Accounting, we are a family-owned business that has served Gloucester County for over 40 years. We are an affordable, flexible, and reliable option for your accounting needs. Schedule a consultation by calling 856-228-2205.

 

What Are The 5 Types Of Accounts In Accounting?

What Are The 5 Types Of Accounts In Accounting?

Documenting the financial information for your business can help you understand your profits, costs, and overall value. By reviewing your accounts, you will know your company’s financial health and make plans for the future. There are several types of accounts that can help with this task. If you are ready to have a clearer outlook on your financial picture, let’s look at the five types of accounts found in accounting.

 

What Is an Account?

In basic terms, an account is a specific record in your balance sheet or financial ledger. These reports will document the financial activity in your business, such as verifying cash on hand or reporting daily transactions. Companies will use several accounts to keep track of their financial records. Some of the most common accounts include assets, expenses, liabilities, equity, and income. These accounts are used for different purposes, and you must update them daily or weekly.

 

Five Types of Accounts in Accounting

Now that you know about the most common account types, let’s take a deeper look at them.

 

1 – Assets

You must include your company’s tangible and intangible items in the asset account. For example, if you have business laptops, those are known as tangible assets. These are physical items. Design patents would fall into the intangible category. Intangible items do not take a physical form. Other tangible and intangible assets could include:

  • Vehicles
  • Equipment or machinery
  • Property or office buildings
  • Trademarks or copyrights

If you want to find the asset value of these items, gather a few pieces of information. First, you need to know the current value of your assets. For example, an antique store could have:

  • $30,000 in cash
  • $200,000 in property
  • $400,000 in antiques

To find the value, use this simple formula:

  • $30,000 + $200,000 + $400,000 = $630,000

By adding these values together, the antique store has an asset value of $630,000.

 

2 – Expenses

Another vital account focuses on those expenses. The expense account can include purchased services or products that helped generate income for the company. For example, some of these purchases may have helped boost the productivity of distribution or manufacturing operations. Common expenses can include:

  • Marketing costs
  • Employees salaries
  • Facility costs

If your company sends employees on a business trip, you must document those costs in the expense account. However, you never want to include personal expenses in these accounts. Otherwise, you will need to separate these expenses, which can turn into a bookkeeping nightmare. Use this example to find your expenses:

 

A pet grooming company wants to calculate the value of its costs. First, the company needs to look at all of the expenses from the past year, including:

  • $12,000 in pet shampoo and conditioner
  • $1,000 in other grooming supplies
  • $350,000 in employee salaries
  • $1,000 marketing costs
  • $24,000 facility costs

Add all those expenses together to find the value:

  • $12,000 + $1,000 + $350,000 + $1,000 + $24,000 = $388,000

By looking at these values, the pet grooming company had $388,000 in expenses for the past year.

 

3 – Income

If you want to know whether you have a successful business or not, you must record your income. An income account records all of your company’s money from selling services or products. Some income accounts will even include business dividends from investments. Keep in mind that you should record actual investments in the asset account. An income account is a place where you will maintain all the data about the company’s profits. If you want to find the income value of a business, take a look at this example:

 

An industrial roofing company wants to calculate the income from the recent quarter. The sales are:

  • $150,000 in roof installations
  • $350,000 in new roof sales
  • $79,000 in roof repairs

By adding all of those values together, they can find out the income value:

  • $150,000 + $350,000 + $79,000 = $579,000

The most recent income from the quarter is listed at $579,000.

 

4 – Liabilities

The liabilities account will include payment obligations, outstanding debts, and other scheduled payments. Some examples of liabilities include:

  • Account overdrafts
  • Late utility bills
  • Business loans
  • Outstanding maintenance costs

Make sure to document all liability costs that apply to your business. When you record them, you need to account for any interest costs that can accompany these current liabilities. Take a look at this example:

 

A property management company wants to find its liabilities over the year. They owe:

  • $500,000 in property mortgages
  • $77,000 in business loans
  • $600 in late utility bills

Once again, add these values to get the liabilities:

  • $500,000 + $77,000 + $600 = $577,600

As you can see, the property management company has $577,600 in liabilities.

 

5 – Equity

Finally, we can look at equity accounts. These accounts show the value of your assets after you have deducted liabilities. The value can represent the current worth of your business. If you want to find the equity account’s value, you need to create a balance sheet with an itemized list of the assets and liabilities. Take the total costs of the liabilities and subtract that from the total assets. Once you have that figure, you can understand the current equity level of your business. Look at this example:

 

A delivery company wants to calculate its equity. Their liabilities and assets are listed as:

  • $865,000 in assets
  • $411,000 in liabilities

Subtract the liabilities from the assets to find the equity value:

  • $865,000 – $411,000 = $454,000

The current equity value for this company is $454,000.

 

Keeping These Accounts Can Be Challenging

Even with the above examples, it can be hard to keep track of all accounts. Consider using small business accounting services. You will not have to figure out complicated formulas or try to manage records. All of that is handled for your business. Plus, you will know that these accounts are up-to-date with accurate records.

At TMD Accounting, our team has helped small and large businesses in Gloucester County with their accounting, bookkeeping, and tax needs. If you need an accountant for your small business, schedule a consultation by calling 856-228-2205.

 

Understanding Healthcare Accounting Practices

Understanding Healthcare Accounting Practices

Knowing the fundamentals of hospital accounting is important for several reasons. First, it can help the accounting team understand what systems are needed for record-keeping purposes. Secondly, accounting allows executives to invest in their facilities’ tools, equipment, and staff. As a result, accounting can help provide better healthcare for patients in the community.

 

Why Is Accounting Important in Healthcare?

There are many reasons why healthcare accounting is vital for the medical industry and the community. Accounting practices can impact the day-to-day operations of hospitals, medical offices, and healthcare facilities. Without the proper staffing or supplies, it can affect the staff’s ability to do their jobs.

 

How does accounting play into this scenario? With the proper accounting methods, administrators can set a budget to ensure that the medical staff can help their patients. The facility will have enough supplies and equipment to give proper medical treatment to their patients. Plus, there will be enough nurses, doctors, and other medical personnel on staff.

 

A healthcare budget goes beyond the necessary supplies, equipment, and staffing. When there is no budget in place, it can impact all aspects of healthcare. Patient satisfaction can be affected by poor accounting. If you cannot offer the proper services, they will go elsewhere for their healthcare needs.

 

Proper accounting can also impact the facility’s life. Any healthcare facility that doesn’t adequately monitor its money flow or set a budget will not be in business for long. Accounting helps to bill clients, process claims, and manage revenue cycles. Healthcare managers need to understand their accounting practices so that the facility can bring in revenue to support a long-term operation.

 

Accounting practices can also maintain compliance with regulatory agencies. Healthcare facilities need to follow strict guidelines and regulations, including specific tax laws. For example, the Internal Revenue Service specifies that Form 990 must be filed for each tax year. If the forms are not filed or have incorrect information, the facility could face fines.

 

Generally Accepted Accounting Principles (GAAP)

When establishing an accounting system for a hospital, that system must adhere to the Generally Accepted Accounting Principles (GAAP). There are universal rules of accounting that are used in many industries, including hospitals. All of these procedures and standards help maintain consistency in reports and statements. GAAP covers balance sheet classification, materiality, and revenue recognition. The goal of GAAP is to ensure financial statements are comparable, complete, and consistent. For seamless management, a few essential elements need to be followed. These principles include:

  • Principle of Regularity – adhering to GAAP regulations and rules
  • Principle of Consistency – applying the same standards for the reporting process
  • Principle of Sincerity – providing an accurate and impartial depiction of a financial situation
  • Principle of Permanence of Methods – giving consistent financial reporting
  • Principle of Non-Compensation – reporting both positives and negatives without compensation
  • Principle of Prudence – emphasizing fact-based financial data representation not clouded by speculation
  • Principle of Continuity – assuming the business will continue to operate while valuing assets
  • Principle of Periodicity – reporting revenue in its relevant accounting period
  • Principle of Materiality – fully disclosing all accounting information and financial data in reports
  • Principle of Utmost Good Faith – remaining honest in all transactions

 

Now that you understand GAAP, it is time to find the best accounting method. GAAP can help the medical facility’s planning, controlling, organizing, and decision-making processes. You can handle these accounting measures by yourself or hire a company specializing in small business accounting services to adhere to these principles.

 

In the healthcare industry, accrual accounting is the standard. With that, all expenses and incomes are recognized when they happen rather than when the funds change hands. Accrual accounting can accurately reflect the current financial health of the facility.

 

Medical Offices and Accounting

A proper accounting system is essential for the success of any medical office or healthcare faculty. When all of the guidelines by GAAP are followed, it can save money by eliminating any fines or charges. In addition to that, it can help boost the reputation of the medical office. The number one goal of a medical office is to treat the patient and deliver care that meets specific standards. A medical office needs to provide cost-effective treatment for the patients. Accounting helps patients receive exceptional care without breaking their budgets.

 

Accounting can help manage payments, income, expenses, and taxes with revenue cycle management. Without these funds, the medical office could not treat their patients. Revenue cycle management looks at payments, medical claims, and revenue generation. In other words, it manages the patient’s revenue cycle in the medical office. Accounting for medical offices focuses on:

  • Collecting the co-pay
  • Determining patient financial eligibility
  • Collecting all payments
  • Tracking claims
  • Following up on denied claims
  • Coding all billing correctly

You might think that all healthcare accounting is the same, but medical offices and hospitals have unique financial considerations.

 

Hospitals and Accounting

Hospitals have a few special considerations for their accounting needs, especially their accounts receivable. They can be paid by private insurers, patients, charitable organizations, or government programs. Payment terms can vary, and there are numerous ways to bill for services. All hospitals must track this money and allocate the payments to the proper accounts.

 

These hospitals also need to handle credits that can occur on an account. In some cases, the patient may have a credit due to a billing error, insurance claim adjustment, or overpayment of the bills. Hospitals must also use allowances to keep track of their accounting statements. An allowance is a separate line that adjusts revenue to what the hospital expects to collect from the bill. Accounting can organize all of the hospital’s revenue streams, credits, and billing.

 

Healthcare Accounting Is Complicated

While healthcare accounting is necessary, it can be challenging to do without the proper help. At TMD Accounting, we have been in business for over 40 years. Our accounting firm is a family-owned company that understands the needs of small and big businesses. If you are a healthcare facility, medical office, or hospital needing accounting, payroll, or tax help, we are there for you.

Need an accountant for your small business? Schedule a consultation at 856-228-2205.

 

Accounting for New Jersey Restaurants: A Step-By-Step Guide

Accounting for New Jersey Restaurants: A Step-By-Step Guide

Many people dream of operating a restaurant, but without help, that business can fail. In some cases, these entrepreneurs focus on the food rather than the accounting side. While it might seem like a flashy business, proper accounting is vital to running a successful restaurant. If you have a restaurant in New Jersey, here is our step-by-step guide to help with those accounting duties.

 

Establish Your Accounting Practices

If you don’t know what you are doing with accounting, get some help. Find someone who has experience in the food and beverage industry. It will be better for your bottom line when your accountant knows the basics of the cost of goods sold, inventory management, and business operations. Many small business accounting services can help you with various practices, from tax services to payroll.

However, you need to keep all of those initial records in the proper order. Think about purchasing software that can track your expenses and profits. Some software is designed for restaurants. These programs allow you to create invoices, generate profit and loss statements, review cash flow, and track your revenue. With that, you can keep ahead of any surprises while accessing this information on demand.

 

Track Your Cash Flow With a Chart of Accounts

Your accountant might set up a chart of accounts to manage liabilities, expenses, assets, revenue, and equity. All of those items are broken down into categories. That information helps you to track the most critical areas of your business. If you don’t know what to track, your accountant can help you with these items.

 

Select the Right Point-of-Sale System

When you use the right point-of-sale system, you can tie all aspects of your restaurant together. These programs do more than create receipts or place orders. They can help with sales reporting and inventory management. Remember to find a system that your entire team can use.

 

Track the Right Information

Restaurants have different metrics that need to be tracked. Otherwise, you don’t know what is happening with your food costs, labor, and profits. You need to keep an eye on inventory. Consider implementing an inventory management system that can help you understand your business. Some systems can calculate which items are selling the best. When you track your inventory, you can take advantage of supply and ingredient discounts, avoid wasteful spending, and better understand your economics.

Any restaurant business is concerned with sales. You need to understand how much money is generated through different business areas. Some restaurants make more on food items than alcoholic beverages. You can also determine whether diners patronize your business for breakfast, lunch, or dinner when you track your sales.

Your restaurant stays in business by the amount of cash coming into the establishment. For that reason, you need to manage your money. Check your cash every day. You should run these reports on a weekly and monthly basis. With that, you can see trends in sales and make payments to vendors.

Speaking of vendors, they must be paid on time. While payments can be challenging to meet initially, you want to ensure that you receive goods from these suppliers. You can track expenses with accounting software. These programs can help you schedule payments so that you never miss another invoice.

One of the keys to a restaurant’s success is the quality of the employees. If you want to keep these valuable members of your business, you need to pay them. Tracking payroll can be challenging. Staff members are on different wage structures, and you have to think about those tax processes. Whether your employees are full-time, part-time, hourly, or salaried, you must ensure that they are always paid on time.

Finally, reconciliation is significant. This process makes sure that you account for everything in your business, including bank accounts, payroll, loans, and credit card bills.

 

Remember Reporting and Analysis

If you don’t have experience in the restaurant industry, there are specific calculations for accounting. These calculations can help generate financial statements and reports. When you work with a professional accountant, they can help you better understand some of these terms.

 

Cost of Goods Sold

With this calculation, you know how much it costs to make the food. You can calculate this by adding your initial inventory with your purchased merchandise. After that, subtract your existing inventory. When you have an accurate inventory, you can determine your exact costs of goods.

 

Prime Costs

This metric includes the cost of goods sold and the amount of labor. Your labor costs will reflect all of the benefits, payroll taxes, and wages for your staff. In general, those total labor costs should be less than one-third of your total revenue.

 

Food Costs

This metric might seem the same as the cost of goods sold, but it is different. Food costs are a ratio that is divided by the number of items needed to prepare a dish. If you want to determine these costs, you need to split the cost of goods sold by your total revenue. Take that number and multiply by 100.

 

Overhead

There are other costs that you need to operate a business, such as electricity, equipment costs, and rent. You can break down these costs on a daily or monthly billed basis. These costs must be paid whether your restaurant is successful or not.

 

Gross Profit

After calculating all of your sales and expenses, you can find gross profit by subtracting those expenses from sales.

Tracking your income and expenses is the least glamorous part of operating a restaurant in New Jersey. While you can handle some accounting responsibilities, think about seeking professional assistance. With an accountant, keep track of all areas in your business so that you can make solid financial decisions.

 

Looking for an Accountant for Your Small Business?

TMD Accounting has over 40 years of helping small businesses throughout Gloucester County. We can assist with payroll, taxes, and other financial matters. We want your restaurant to stay on track. Schedule a consultation by calling 1-856-228-2205.

 

What You Need to Know About New Restaurant Expenses in South Jersey

What You Need to Know About New Restaurant Expenses in South Jersey

Starting a restaurant business might seem fun. You can experiment with recipes and share those culinary delights with the community. Unfortunately, there are not-so-fun parts, such as applying for business licenses, planning for operating expenses, and adhering to local regulations. There are plenty of new business expenses to consider in South Jersey. Here are a few things to keep in mind before opening that new restaurant.

 

 

Overview of State, Federal, and Local Requirements

If you are thinking about opening a new restaurant, you need to follow some rules. You can’t open up the doors and serve customers. Before that first plate is passed over to the customer, you need a license to serve food. The local health department must inspect the space to ensure your business meets public health laws and regulations. You can find a checklist on the New Jersey Health Department’s website for what is needed to pass the food safety inspection.

Speaking of food safety, you will want to ensure that all of your managers and staff are up-to-date on the latest standards. In many cases, your employees will need a Food Handlers Certification. Some counties might offer a free program for food safety, but you often have to pay for the certification. ServSafe provides fee-based training to food managers and other restaurant employees.

Now that the food side is covered, you need to think about your business. You will need to form a corporation, professional corporation, or limited liability company with the New Jersey Division of Revenue & Enterprise Services (DORES). With that, you can withhold taxes from employees and apply for state grants. Plus, it makes you a legal business in New Jersey. All businesses must register for tax purposes.

After that, you will obtain a Federal Employer Identification Number (EIN), which will serve as your Federal Tax ID number. After doing that, you can meet all of the state tax obligations. Failure to register your business and meet food safety standards will lead to hefty fines and legal consequences.

Finally, think about insurance. What happens if someone falls in the restaurant or becomes sick from the food? A patron could hold you liable for any damages. At the minimum, you want a general liability insurance policy that protects you from an accident or bodily injury claim. Over time, your insurance needs could change. No matter what, you need insurance before welcoming customers into your establishment.

 

 

New Restaurant Start-Up Costs in South Jersey

Remember that there is a difference between costs and expenses. Small business accounting services can help you figure out the difference between the two.

A restaurant expense is a recurring payment. These expenses include food costs, payroll, utilities, marketing, and rent. On the other hand, a restaurant’s costs are considered one-time expenses, such as furniture, kitchen equipment, and dishes. These costs will fluctuate depending on several factors, such as the type of equipment, renovation projects, and other expenses needed to open the business. In general, the most common restaurant costs and expenses in South Jersey include:

  • Commercial space – leases or mortgages
  • Renovations and decor – decorations and new construction
  • Kitchen supplies and equipment – cooking equipment, bar accessories, and tableware
  • Restaurant technology – point of sale (POS) equipment
  • Licenses and permits – food service, liquor license, and food handling permits
  • Marketing – restaurant’s website design, advertising, and logo design

 

 

Fixed Expenses for a New Restaurant

Fixed expenses rarely change, making them easier to work into your budget. All restaurants need to pay for their commercial spaces. Your rent or mortgage costs are unlikely to change from month to month.

Along with that, license fees do have an initial cost. In many cases, you will need to renew them annually, but these expenses will not change every month.

Remember that insurance coverage? You need it to run your business and protect you from any liabilities. There are several insurance policies to consider, such as product liability, liquor liability, workers’ compensation policies, and loss of income insurance. All of these expenses have a set cost for the month or year. Always review your insurance to see whether you have the right one for your business needs.

Marketing is another fixed expense. If you are paying for ads or working with a marketing company, you probably have a set amount for your monthly expenses. Unless you have a monthly contract with an advertising firm, these expenses should have a set cost.

 

 

Variable Expenses for New Jersey Restaurants

Now that you understand those fixed expenses, look at your variable ones. These expenses are harder to project because they fluctuate from month to month. The cost of goods sold (COGS) is the cost of the materials and ingredients used to make a dish. Depending on your menu, these costs can vary.

Utility bills are known to fluctuate. Huge usage of water and electricity can send your monthly utility bills skyrocketing. Remember that a big commercial space will require more electricity, water, and gas.

Payment processing fees can sneak up on any restaurant owner. These processing fees will vary depending on the payment provider. These fees are based on a percentage of the transaction, and they can include interchange, card brand, and processor fees.

 

 

Mixed Expenses

Finally, there are always mixed expenses for your restaurant. These expenses can be both variable and fixed. For many South Jersey restaurants, labor costs are a big concern. Whether the employees have a salary or hourly wage, the labor cost can fluctuate. New restaurant owners need to make a budget and keep those labor costs under control. If you are not careful, you could struggle to pay your staff.

It takes a lot to start a new restaurant in South Jersey. Hopefully, these tips can get your business off on the right foot.

When you need an accountant for your small business, contact TMD Accounting. We have over 40 years of experience helping individuals and business owners throughout Gloucester County. Our family-owned business offers a flexible, reliable, and affordable solution for your tax and payroll needs. Schedule a consultation by calling 856-228-2205.

 

Do I Need to Keep Every Receipt for My Bookkeeper?

Do I Need to Keep Every Receipt for My Bookkeeper?

Like most business owners, you are keeping receipts for tax time or bookkeeping purposes. Do you really need to hold on to them? They are valuable, but you don’t have to keep every receipt. Yes, your bookkeeper needs documentation, but there are better ways to organize your receipts. Here are a few tips about tracking those expenses for your business.

 

 

A Quick Look at Tax Deductions

You want to keep a document trail for your taxes. If you have struggled to save every receipt from the past year, you can relax. The IRS does require receipts for your business expenses, but you don’t need physical copies of them.

Why do business owners keep those receipts? Tax deductions. Your business is considered a taxpayer by the IRS. Every year, you must file income tax returns and pay any taxes owed to the IRS. That amount is determined based on how much your business earns minus any business expenses or tax deductions.

You can reduce the tax burden by deducting qualified expenses and purchases from your business earnings. For example, if you bought a new computer for your business, you can subtract that amount from your earnings. All of those deductions will reduce your income. In turn, that lowers your tax obligations to the IRS.

Business owners can take a tax deduction in various areas, provided with the required documentation. Some deductible expenses can include:

  • Office furniture
  • Technology
  • Business travel expenses
  • Meal expenses
  • Marketing expenses
  • Contractor fees

A receipt is not enough proof that your expense is a legitimate business one. If you want to deduct these expenses from your taxes, they must be “ordinary, necessary, and reasonable.” Taking a tropical vacation is usually not a business expense. Writing it off as a deduction might raise some eyebrows from the IRS.

 

 

What Is a Business Tax Receipt?

If you want to include those business expenses as a deduction on your tax return, the IRS requires you to have supporting documentation. This documentation will show how much you paid, what you bought, and when you purchased it.

Why keep receipts? If the IRS has questions about your tax return or you get audited, those records can help prove that you needed the expenses for your business.

A few individuals confuse these receipts with a business tax receipt. These are two different types of documents. A business tax receipt is legal permission to issue sales tax in a particular state, while a business tax receipt is your documentation of a business-related expense. They both have the same name but two different purposes.

 

 

What Business Receipts Do I Need To Keep?

When you need supporting documents, it can be a broad category. Remember, you need to have itemized proof of those business purchases. In many cases, this is a printed receipt, but it can also include:

  • Bank statements
  • Credit card statements
  • Canceled checks
  • Itemized invoices of digital payments
  • Real estate closing statements

While you need to prove your business expenses, you also must track your income. Always keep those receipts of income, such as:

  • Receipt stubs
  • Cash register receipts
  • Invoices with digital payments
  • Canceled or cleared checks
  • IRS 1099 forms
  • Bank statements

 

 

How Long Should I Keep Business Receipts?

You need to keep those business receipts for three years in most cases. In some situations, the IRS might require you to hold on to those receipts for six years. Always keep records on hand if you have underpaid your taxes by more than 25 percent. While you can always download documents and statements from an online source, many financial institutions will not keep them after a year or two.

You can always store receipts by digitally downloading PDFs and saving them to the folder for the month and year. Remember to back up that folder and keep it in a place where you can access it for several years to come. With an organized filing system, your bookkeeper will thank you when it comes time for taxes.

 

 

Managing Business Tax Receipts

An audit is very unlikely, but they do happen. In that event, you must have all documentation on hand. While small business accounting services can help with those bookkeeping tasks, you should take steps to manage the receipts.

Think about storing those documents and receipts with a digital app. You can track all of that required information for the IRS through your credit card statements, digital bank statements, online banking records, and purchase history. Paper receipts for large cash purchases don’t have to be stored as a physical document. Most financial apps allow you to snap a picture of the paper receipt and store it in a document tracking system.

According to the IRS, digital copies are sufficient proof to document your tax deductions. If you want to store your records, download those digital statements and keep them in organized folders. When it comes to tax time, you can locate all relevant paperwork for your business.

You will want to keep a close eye on cash and reimbursements. For most business owners, cash purchases can be harder to track. When you pay with cash, you will not have a generated purchase statement. It is up to you to keep the physical receipt of the purchase. Large cash expenditures should come with an itemized receipt for tax purposes.

It is not uncommon for business owners to use a personal credit card or bank account to make a business purchase. After the transaction, the owners usually pay themselves. That is known as a reimbursement. If you want to track your reimbursements, keep all of your receipts. You will need to show the original payment method and proof that you paid yourself for the purchase.

 

 

Keep Track of Your Expenses

With these tips, you can manage and save all receipts for your bookkeeper. As long as you have proof of your purchases, you don’t need to keep boxes of physical receipts for tax time.

Need an accountant for your small business? Reach out to TMD Accounting. We have been helping the Gloucester County community with their tax and payroll needs for over 40 years. You can schedule a consultation by calling 856-228-2205.

How Long to Keep Your Business Receipts

How Long to Keep Your Business Receipts

When you prepare your business tax returns and claim deductions, you likely understand the importance of gathering your receipts to substantiate the expenses you claim. While you likely know that you need to keep copies of your returns for several years, you might wonder how long you should also keep your receipts. Here is what you need to know about keeping copies of your receipts from our accountants at TMD Accounting.

 

 

What is Considered a Business Receipt?

Whenever you conduct a business transaction, you are either given a receipt or give one to the other party. Receipts normally show the items or services purchased, their purchase date, and the cost of each item or service.

Receipts are important for your business. They give your customers proof that they bought their items and own them. They also include information that can help you resolve issues your customers might have by allowing them to make returns or exchanges. Finally, business receipts are important for tax reasons. They help to substantiate your transaction history and support the information you report on your business tax returns.

 

 

How Long to Keep Business Receipts

Trying to figure out how long you should keep copies of your business receipts is not difficult. It’s best to be safe and keep them for a long time just in case you are audited. In general, you should keep copies of your receipts for as long as you might be audited. The statute of limitations for audits is generally three years, but it can be extended to six years if the IRS finds you have made substantial errors on your returns. You should keep your receipts for at least three years to substantiate your expenses and your sales in case you are audited.

Some other reasons why you should keep your receipts for a longer time include the following:

  • If you didn’t file a return
  • If you claimed deductions for worthless securities or bad debt
  • If you underreported income on your return

You should speak to an accountant if you are uncertain about how long you should keep your receipts. If you are concerned about the ink on receipts fading away, you can always scan them into your computer and store them electronically or take digital pictures of your receipts.

 

 

Exceptions to the Rule

The thought of keeping every last receipt might seem overwhelming. However, the IRS has stated that you are not required to save every single receipt for your business.

Some of the types of receipts you don’t need to keep include the following:

  • Expenses under $75 unless for lodging
  • Transportation costs for which receipts aren’t available

If you claim expenses on your tax return for items under $75, you should still specify the expense’s date, amount, purpose, and location.

 

 

Why You Should Keep Business Receipts

Keeping track of business receipts and organizing your paperwork can be a hassle. However, saving your business receipts helps to keep your business’s books current and accurate. Even though the thought of keeping your receipts for three to six years might seem like an overwhelming amount of paperwork to save, you can take photos and store them in digital form. Business receipts can help your business by providing the following benefits:

  • Ease the preparation for an audit
  • Substantiate the information you have reported on your tax returns
  • Make it easier to balance your books and maintain their accuracy
  • Help you to identify all deductions for which your business might be eligible

If you receive a notice from the IRS of its intent to audit you, having your receipts for the targeted return can help you prepare. During an audit, the auditor will look for inconsistencies in your tax return. If you do not have business receipts, it is harder to show the auditor that the information on your return is accurate. You should always keep records to substantiate your tax returns in case you are audited.

Saving your receipts can also help you when you are reconciling your books and your accounts. If you do not have receipts, your books might be off. Record your receipts on a regular basis to maintain the accuracy of your books. Add the information from your receipts in your books as soon as possible so that you can have a realistic financial snapshot of how your business is doing.

 

 

Find an Accountant for Your Small Business

Saving your receipts does not have to be a hassle but should instead be a routine part of your business operations. If you can make a habit of taking a quick picture of your receipts at the time you receive them and uploading the photos into your accounting software, the process can be much simpler. For help with small business accounting services, contact TMD Accounting today by calling us at 1-856-228-2205.

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