Payroll Taxes and the Small Business Owner: Let the Good Times Roll

As a small business owner, it is likely that you will have more involvement with different types of taxes than the average individual, and this is certainly true if you have employees working for you.

If this is the case, then you have to worry about the taxes that you have to deduct from your payroll.

Take a shot of caffeine before you read this article, but try and make it through - because understanding and properly filing payroll taxes is going to be an important part of your small business’ success.

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Beyond Dollars and Cents...Using Recordkeeping to Manage Your Business

Too often, employees, managers and owners of businesses think of a recordkeeping system purely as a means to measure financial performance. While financial statements such as income statements and balance sheets provide a standardized measure of financial standing and offer a basis for comparison against comparable businesses, perhaps their greatest value is as a management decision-making tool.

While there is value in electronic bookkeeping systems, the real value is in maintaining a record system that allows the business to make informed decisions about the future direction of operations.

I was instructing a series of courses on financial management recently, and two of the participants owned a retail/service operation. Their system of record-keeping was pencil and paper, but they were conscientious about keeping track of their data, and they had all the information they needed to make managerial decisions. They simply didn't realize they had it. They told me they had been waiting 15 years for someone to provide the tools they needed to make good decisions.

Capital budgeting, inventory purchasing and hiring decisions are just a few examples of management decisions that are aided by an accurate system. Imagine trying to make a decision about whether to invest in a piece of equipment without having any idea about pay back period, break even sales point on the purchase price and so on.

In the paragraph above, I noted that the recordkeeping system itself is more important than whether or not you use a software package. However, software programs have some definite advantages:

• They generally take less time for entry than manual systems;


• They allow for "click of a mouse" reporting;


• They reduce the time spent on repetitive tasks;


• They make inventory tracking much quicker;


• They simplify payroll processing; and


• They automate tax computations and processing.
• 
  

I get questions about which software system to use, but I don't make those recommendations. Each one has its own set of benefits. The bottom line is that you should choose one that looks beyond simply meeting tax reporting requirements and allows for the provision of management decision-making data.

For assistance in creating a system that works for you, see your local SBDC. Find a location near you by visiting www.missouribusiness.net.

Authored by: Mick Gilliam, business specialist with University of Missouri Extension.
Date reviewed: 8/15/08

Source: http://www.missouribusiness.net/docs/beyond_dollars_cents.asp

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Keeping Your Biz Finances Under Control

Top 10 Ways to Keep Your Biz Finances Under Control

10.

Separate your business and personal finances. Many new business owners, and especially sole proprietors, fail to set up separate banking, bookkeeping and other systems to keep track of their businesses, causing confusion and potential tax headaches. Using money from your business to pay for personal expenses, for example, can get you in legal hot water, and at a minimum complicates your recordkeeping.

9.

Reconcile. No, I’m not talking about making up with a spouse you’ve neglected due to business demands. Rather, review your bank statements and balance your accounts regularly. Don’t just toss statements into a stack. If you let days or weeks pass without updating records, you’ll soon be lost and errors may go unnoticed.

8.

Don’t delay; do it daily. If your business finances change daily, you should have bookkeeping systems that update daily as well. This should include daily sales, purchases and other transactions, and especially any cash transactions.

7.

Hire a bookkeeper. You don’t need to pay an accountant’s higher professional fees to handle routine bookkeeping chores. Many small businesses have part-time bookkeepers to help keep things in order. The American Institute of Professional Bookkeepers offers helpful information on how to evaluate a bookkeeper before you hire one. Visit http://www.aipb.org/ and click on “For Employers: Free Bookkeepers Hiring Test.” Or consider an outsourced solution that combines online convenience with professional accounting and bookkeeping services. BalanceYourBooks.com is one such choice.

6.

Use calendar month timing. Most business owners find it helpful to account for money on a calendar month basis. But things don’t always line up. For example, if your bank statement isn’t based on a calendar month, ask for it to be changed. Most banks can make that accommodation.

5.

Be pro-active with your accountant. One reason you need to keep good books is so you can provide accurate and timely information to an accountant to prepare your business taxes. Get their advice on how best to set up your books and organize your financial information. You might also ask them to periodically check your books, adjust entries or prepare financial reports for your review.

4.

Use a payroll service if you have employees. Once your business has employees, your finances take a quantum leap in complexity. Outsourcing to a payroll service such as Paychex, Sure Payroll or ADP places the recordkeeping burden on them, and makes your end vastly easier.

3.

Keep it simple and consistent. Bookkeeping is all about columns, and by keeping the same column headings all the time, you will avoid the frustration of mismatches. And if you avoid over-categorizing income and expenses, you’ll also save yourself time. Often it’s just not necessary to break things down into great detail.

2.

Automate your invoicing. Online billing services that can effortlessly issue your invoices and keep track of everything are one of the most helpful web-based small business services to appear recently. Check ‘em out, and put ‘em to work for your business. Look at Bill.com and FreshBooks.com in particular. The services are cheap and can help clean up a billing mess in an instant.

1.

Get the right software. Don’t even think about keeping your books manually or with spreadsheets. Low-cost, easy-to-use financial software for small business such as QuickBooks, or the free version QuickBooks Simple Start (both at www.intuit.com) are perfect for keeping everything in order. New web-based solutions such as Netbooks (www.netbooks.com) are also great.

Source: http://whatworksforbusiness.wordpress.com/2009/01/06/keeping-your-biz-finances-under-control/

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