How Do I Pay Myself and My Taxes as an S-corporation?
When businesses are born, business owners are likely not daydreaming about taxes and payroll. Yet, they still face the unique challenge of figuring out how to pay themselves, file their taxes, and maximize their tax savings. As their business grows, many business owners opt for S-corporation Election due to the tax advantages it presents, but they must be mindful of how much they pay themselves, in order to remain compliant in the eyes of the IRS. Unless they moonlight as an experienced accountant, self-payment and tax filing can be confusing and stressful for small business owners – understandably so! Like most things involving taxes, it gets complicated. That is why we have created this comprehensive guide to help business owners pay themselves and maximize their savings as an S-corporation! How to Pay Yourself as an S-corporation: Salary and Distributions Under other business structures, you simply take a share of company profit as your payment. In an S-corporation, you have the option to pay yourself in two ways: Salary, your wages or reasonable compensation. This is considered taxable income to the payee by the IRS. Distributions, the earnings that are paid as distributions to you as the owner. These are not employee wages and are not taxed as self-employment income in an S-corporation. For example, if your business produced $100,000 in profit, you could take a reasonable salary of $40,000, and the remaining $60,000 as a distribution. It may seem strange to receive payment in two different forms, but it comes with significant tax savings, which will be discussed shortly. How Much Do I Pay Myself as an S-corporation? The short answer is, it depends. S-corporation shareholder-employees are required to receive a reasonable salary, which is generally defined as at least what other businesses would pay someone in that role for similar services. Every business is different, so the exact amount that business owners pay themselves will vary. To determine your reasonable salary, you can start with the U.S. Bureau of Labor Statistics, which provides insight into compensation across different industries. This will give you an idea of what you should be paying yourself based on your field and the profit you produce. Some of the factors the IRS considers to determine a reasonable salary are: Training and experience Duties and responsibilities Time and effort devoted to the business Distribution history Payments to non-shareholder employees Timing and manner of paying bonuses to key people What comparable businesses pay for similar services Compensation agreements Use of a formula to determine compensation You must be careful to pay yourself a reasonable salary. Paying yourself a salary that is too low (or none at all) can draw scrutiny from the IRS, as it is considered an attempt to avoid paying self-employment taxes. The good news is that you do not have to figure it all out on your own! The xendoo team is more than happy to help you determine your reasonable salary. Speak to one of our online accountants to learn more. How Do I Pay My Taxes as an S-corporation? The first step is to elect to be taxed as an S-corporation. To qualify for S-corporation status, your business must meet the following requirements: Your business must be incorporated in the United States. Your business may only have certain types of shareholders, including individuals, and certain trusts and estates. They may not be partnerships, corporations, or non-resident alien shareholders. Your business cannot have more than 100 shareholders. Your business can only have one class of stock. Your business cannot be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations). If your business meets all of this criteria, you can move forward by filing Form 2553, and sending it to the IRS. If your company has multiple shareholders, each of them must sign and submit this form as well. Once approved by the IRS, you will file your S-corporation taxes using Form 1120S. To minimize error and maximize tax savings, partner with an online Tax CPA at xendoo. We file your taxes for you so you can focus on growing your business. What are the Tax Advantages of Filing as an S-corporation? No Double Taxation C-corporations are taxed twice, with the business paying corporate income taxes, and shareholders paying taxes on their share of the income. On the other hand, S-corporations are not subject to corporate income tax. Instead, shareholders file a Schedule K-1 along with Form 1120S, which reports their share of the company’s profits or losses. This allows S-corporations to avoid double taxation. No Self-Employment Taxes (on Distributions) Another key advantage of S-corporations Election is that the distributions owners receive are not subject to self-employment taxes! Every small business must pay self-employment taxes to fund social security and medicare. If your business operates as an LLC, you are required to pay self-employment taxes on your entire share of the profit, regardless of how you use the money. On top of that, you will also be taxed at your personal income tax rate. As the owner of the S-corporation, you only pay self-employment taxes on your reasonable salary. The distributions you take are exempt from self-employment tax! To illustrate, let’s revisit the example from earlier: Your business makes $100,000 in profit. As a single-member LLC, you will pay $15,300 in self-employment taxes. If you file the S-corporation Election, you pay yourself a reasonable salary of $40,000. The remaining $60,000 is taken as a distribution from profit. You will pay $6,120 in self-employment taxes only on your salary. The remaining $60,000 is exempt, resulting in a tax savings of $9,180 compared to the LLC! For quick reference, take a look at the chart below: S-corporation Election is a simple, yet effective, way to maximize your tax savings. Are you ready to take the next step? Schedule a free consultation with a xendoo accountant today! xendoo is Here for You You are not alone as you navigate the waters of self-payment and tax filing. xendoo Online Bookkeeping, Accounting,
How Much Does a Bookkeeper Cost?
Running a small business is a big job and you may not have the time or experience to manage your own books. If you’re considering hiring an online bookkeeping service, one of the first things you’ll want to know is how much does a bookkeeper cost? Below is an overview of small business bookkeeping and how much it costs. Do You Need a Bookkeeper for Your Business? Although bookkeeping may not be the most exciting part of running a business, it’s arguably one of the most important. Accurate and timely bookkeeping allows you to make sound financial decisions. Bookkeeping can help you maintain your financial records, track expenditures and revenue, and provide an up-to-date snapshot of the growth and overall health of your business. With an organized bookkeeping process, you’ll have all your financial documents in order and be better prepared for tax season. Is a Bookkeeper Cheaper Than an Accountant? Accounting and bookkeeping sometimes get lumped together. However, when talking about bookkeeper costs, it is important to note their differences. For one, a bookkeeper is generally cheaper than an accountant, because they have different functions, expertise, and qualifications. Bookkeepers manage the day-to-day financial functions of a business. The types of services bookkeepers may perform include: Managing your accounts payable and receivable Paying vendors, suppliers, and other bills Tracking customer invoices and payments Aiding with payroll Reconciling bank accounts Managing online bank fees Performing cash flow analysis Financial reporting Accountants can do those functions and also provide big-picture business financial reports, strategies, and insights. In addition, accountants can help you prepare and file business tax returns. Now, you may have an accountant that also completes the tasks of a bookkeeper, but not the other way around. Accountants must meet specific education and certification requirements that vary slightly by state. In general, accountants usually need a bachelor’s degree in accounting and pass a CPA exam in their state. Because of the extra training, what accountants charge differs from bookkeepers. A bookkeeper might charge you anywhere from $30 to $90 an hour. CPAs charge even more. If you’re wondering, “How much does a CPA cost?”, you may be surprised to find them considerably higher than a bookkeeper. CPA costs can fall in the $150 to $450 hourly range. (xendoo’s Boost plan and up include accounting tax and CPA services as well as bookkeeping so you can get both in one flat monthly fee.) How Much Does a Bookkeeper Cost? The average cost of a bookkeeper ranges anywhere from $500 to $2,500 a month. However, there’s no set cost for hiring a professional to manage your business’s finances. It varies depending on the type of financial expert you hire and the particulars of your business. Some factors that affect how much a bookkeeper costs are: The size and complexity of your business The number of monthly transactions Type of bookkeeping services and hours you need A bookkeeper’s location, expertise, and experience How much a bookkeeper costs also depends on the payment arrangement. You’ll usually pay for bookkeeping services in one of the three ways—hourly, salary, or a flat fee. How you pay your bookkeeper depends on whether they are in-house (full-time or part-time employees), freelance, or an online bookkeeping service. Let’s look at the costs and considerations for each. In-House (Salary) Most businesses pay in-house bookkeepers on a salary basis. Although, some may pay hourly, especially for part-time employees. How much does a bookkeeper cost if you hire in-house? The short answer is much more than an online bookkeeping service or freelancer. According to Salary.com, the average bookkeeper salary in the United States is $45,816. That does not include benefits such as healthcare or location. It also assumes the bookkeeper is entry-level with no specialized experience or qualifications. The salary of an entry-level bookkeeper in Brooklyn, New York, is estimated to be around $55,117, but it ranges from $55,000 to $70,000. Add in years of experience, benefits, and cost of living and it gets more expensive. It might make sense for a large business with complex bookkeeping needs year-round to have an in-house bookkeeper. However, for most small businesses, an online bookkeeping service is a better option. Hourly Pricing (Freelance) Based on a recent Bureau of Labor Statistics (BLS) report, the median hourly rate for a bookkeeper is $21.90 per hour. Again, this doesn’t account for location, expertise, or services. Most bookkeepers that charge an hourly rate are freelancers, but not always. Hourly pricing is a great option when you only need help with the books occasionally. You can hire someone to come in on a per-project basis and only pay for the time they spend on the project or for an agreed-upon time. While this makes it easier to control your bookkeeping costs, most small businesses require consistent services to keep their books straight. Hourly may seem like the cheaper option, but it isn’t always the case. If you need more bookkeeping than you expected, those hours can add up fast. Flat Fee (xendoo) Flat fee bookkeeping is the simpler of the three options. It allows you to pay a set price each month for an unlimited amount of work. While some months may not require much from a bookkeeper, others are inevitably going to be busier than others. This makes it easier to manage your business bookkeeper costs by factoring in a consistent monthly rate. At xendoo, finding the perfect flat fee plan is easy, so you aren’t paying more for the specific things you need. xendoo pricing takes into consideration the varying needs of businesses by offering a range of plans based on your monthly expenses. Depending on your bookkeeping needs, you can pay as little as $275 a month (when billed annually). In addition to bookkeeping and tax advice, plans come with accounting software like Xero and Quickbooks, mobile apps, and profit and loss statements. While this may look like another added expenditure for your business, this monthly cost pays for itself. If you had to do your
How Your Small Business Can Prepare for Florida’s Minimum Wage Increase
In recent years, we’ve seen a reopening of the debate over minimum wage. Advocates are currently pushing for an increase to $15.00 per hour by 2026, with the door open to possible increases in the years after that. If you’re a worker, this is good news. A slight bump in the Florida minimum wage can increase the pay you receive, compensating for rising costs of living and other expenses. However, if you’re a small business owner, this wage increase can lead to tough decisions. Unless you’re a corporate giant, it can be tough to maintain your current roster of employees if you have to pay them more. In this post, we’ll help you to prepare for the coming changes in the Florida minimum wage. We’ll also provide suggestions about the best ways to navigate the road ahead. What is the Current Florida Minimum Wage? As of January 1, 2021, Florida’s minimum wage has increased from $8.56 per hour to $8.65 per hour. Tipped employees have seen a recent increase in their wages, rising from $5.54 per hour to $5.63 per hour. According to federal law and in some states, like Florida, employers may pay tipped workers less than the mandated minimum wage. This is called a “tip credit” as employees earn enough in tips to make up the difference. The “credit” is the amount the employer doesn’t have to pay. So for employers, the applicable state or federal minimum wage minus the tip credit is the least amount the employer pays tipped employees per hour. If an employee doesn’t make enough tips during their shifts to earn the hourly minimum wage, the employer has to pay the difference. Are There Plans to Change the Florida Minimum Wage After 2021? These changes will not stop in 2021. In November of 2020, Florida residents voted to raise the Florida minimum wage to $15.00 by 2026. The minimum wage increases will take place in a phased approach, raising the minimum wage each year on September 30. The proposed schedule will run as follows: $10.00/hour on September 30, 2021 $11.00/hour on September 30, 2022 $12.00/hour on September 30, 2023 $13.00/hour on September 30, 2024 $14.00/hour on September 30, 2025 $15.00/hour on September 30, 2026 While there are no specific plans after 2026, the minimum wage increase may increase based on changes to the federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region. How Should Small Business Owners Prepare for Florida Minimum Wage and Paid Leave Increases? If you’re a business owner, don’t panic. At xendoo, we understand the unique challenges facing today’s small business owners. Here are some suggestions on ways that your business can prepare for changes in the Florida minimum wage: Audit Your Expenses How much are you already spending on overhead, supplies, and operating costs? You may be able to cut a few corners with certain expenses or by eliminating wasted spending. The money you save can be channeled into your human resources budget. Determine Your Budget Using these increased wage figures, calculate your new operating budget. Forecasting your operating expenses will let you know what you’re dealing with and provide an idea of what your income needs to be to maintain your profit margin. Update Your Tech Stack A tech stack refers to the digital tools you need to run your business. An update can help you to automate your social media presence, streamline scheduling, or integrate automated forms into your company’s website. These improvements optimize your business without the need for additional personnel or work hours. Check Your Employee Classifications How many full-time employees do you need? How many part-time employees do you need? Of course, you don’t need to start considering downsizing, but at the same time, it can be helpful to consider what your future needs may be. Staff Accordingly You may find that in the future, you can get by with fewer staff members. Perhaps you can rely on part-time staff to fill roles that you currently staff with full-time employees. Gradually Increase Prices Your new operating costs will probably push you to increase your prices to maintain your profit margin. However, raising prices slowly will give your loyal customers time to adjust while still ensuring you get the revenue you need. Outsource Your Back Office Are you still handling your own bookkeeping and accounting? Paying an employee to handle these specialized tasks may put a strain on your operating budget. Instead, outsource these tasks to a company like xendoo. We can keep your company up and running without allocating your employees to do the job. Contact xendoo Today The increase in the Florida minimum wage might mean big changes for your business. At xendoo, we can help you stay ahead of the curve, adapt to these changes, and remain healthy and profitable. We understand the challenges that Florida small businesses face. We can provide small business owners with Florida bookkeeping services that ensure accuracy and efficiency so that you don’t have to allocate precious resources to maintaining the books. We can also help you with your Florida tax preparation, helping you to navigate the laws and changes that are likely to come your way in the immediate future. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
Selling on Amazon vs. eBay: What you need to know
Ready to start selling your products online? Or have you already built a web presence and you’re looking to expand? From marketplaces like Etsy to building and hosting your own website on Squarespace or Shopify, small businesses have plenty of platforms to sell their products online. But eventually, most professional sellers find themselves asking: What are the pros and cons of Amazon vs. eBay? Amazon vs. eBay: Who has the biggest market for selling potential? By the sheer number of visitors, selling on Amazon is the winner here: 214.8 million people visit Amazon each month, compared to 106.9 million for eBay. However, both of these numbers represent huge potential audiences, so to really make the right choice about selling on Amazon vs. eBay, you’ll want to break it down. eBay’s audience is more international than Amazon: 57% of its revenue comes from international operations. Amazon doesn’t release these figures, but analysts estimate about 33% of its sales are international. eBay is also known for having “niche” customers searching for specialized products and second-hand goods. The real winner here depends on what you sell and who you sell it to. Amazon vs. eBay: Which channel is more competitive? Amazon is much more competitive than eBay. Amazon rewards sellers with the highest-quality items at the lowest price. There are far more sellers on Amazon, and you may be competing with factory-direct prices from China or even with Amazon itself. On the other hand, eBay follows an auction format that will show shoppers many different options, conditions from new to used and shipping options, allowing sellers more opportunities to reach them. eBay advertising is also less competitive and therefore cheaper. Amazon vs. eBay: Which channel offers the best shipping and fulfillment? Winner: Amazon. When sellers opt for fulfillment by Amazon FBA, they’re able to use the retail giant’s warehouses, shipping, and customer service – for a fee, of course. They’re also eligible for Amazon Prime and the benefits that come along with it. Just remember that you may have to pay sales tax in those states if you use Amazon’s warehouses. Make sure you follow eCommerce bookkeeping tips to keep your records in order. While domestic sellers are responsible for their own packing and shipping on eBay, the company does offer its Global Shipping Program. This allows sellers to use its “hubs” to ship internationally, with eBay taking care of the customs forms and import fees and providing tracking. This is another reason eBay is so popular with international sellers. Amazon vs. eBay: Whose fees reign supreme? Overall, most sellers find that eBay’s fees are lower. But this doesn’t tell the whole story. Both platforms’ fees depend on what’s being sold, the type of account you have, and more. On Amazon, you’ll likely want a Professional Seller account, which will run you $39.99 per month. You’ll also pay a 15% commission on Amazon, plus a closing fee. If you go with Amazon FBA, you’ll pay those fees as well. On eBay, you’ll pay about $0.35 for each listing you create. With a $28-per-month Basic Store account, you’ll get 250 free listings. Once your item sells, eBay takes only a 10% commission. However, this doesn’t include payment processing, while Amazon does. You’ll also then need to figure out the shipping yourself. Once again, the answer to the age-old question of selling on Amazon vs. eBay depends on your sales volume and type of product. Here’s one point for eBay, however: One survey found that eBay was ranked number one by sellers in terms of ease of use, customer service, and profitability – while Amazon came in seventh. The verdict: Amazon Pros: Reach a large audience Amazon FBA is a convenient option for most sellers Easy to use interface and tools Cons: Highly competitive Slightly higher fees Less freedom over branding, product descriptions, and policies Which eCommerce sellers are Amazon right for? Sellers with a high volume Sellers with high-profit margins Sellers of non-specialty items The verdict: eBay Pros: Easier international sales and expansion Control over branding, listings, and return policies Lower fees Cons: No domestic shipping program Smaller audience Less straightforward user interface Which eCommerce sellers are eBay right for? International sellers Sellers of used and customized items, collectibles, and niche products Sellers who desire more freedom over the selling process You can even decide to settle the Amazon vs. eBay debate by selling on both platforms. No matter what you choose – and especially if you decide to sell on both – you’ll need expert eCommerce online bookkeeping to keep your books in order and ensure you keep up with sales tax laws. At xendoo, we work with eCommerce sellers on both platforms to manage bookkeeping and accounting, so they can focus on what’s important: selling!
Online Bookkeeping Services for Small Business Owners
Author’s Note: This post was updated on February 23, 2022, with new information, links, and resources. Bookkeeping is vital to the success of every business, but business owners rarely have the time (or desire) to manage it themselves. Many small businesses save time by partnering with an online bookkeeping and accounting team. However, there are some key features to consider when selecting online bookkeeping services for your small business. What Is Online Bookkeeping? Online bookkeeping, also called virtual bookkeeping, means managing your bookkeeping remotely. A virtual bookkeeper works directly with your business to manage your company’s accounting and financial reporting. Typically, your company’s financial activity, records, and transactions will be stored in cloud-based accounting software that you are able to easily access. An online bookkeeper will initially undergo a consultation with you to understand the needs of your business and your regular financial activities. Then, they can set up a system to generate sales invoices, manage accounts payable, and process payroll. With the right online bookkeeper, you can regularly view your company’s financials and make strategic business decisions. How do you choose the right financial partner for your business? There are many options available, ranging from traditional CPAs to tech-savvy online providers. Today, we will take a look at two popular options: xendoo Online Bookkeeping and Bench. Both provide quality bookkeeping and tax services, but there are some key differences in features that may tip the scale for you: Online bookkeeping and tax services Additional services Accounting software Free trial In this blog post, we will explore these differences so that you can make the best choice for your business. Online Bookkeeping Services and Taxes xendoo’s online bookkeeping and tax packages start at $395. We reconcile your books weekly, and deliver your reports as early as the 5th business day of the month, depending on the plan you select. What Services Do Virtual Bookkeepers Offer? You may also want to consider what other financial services your business needs. A virtual bookkeeper offers a wide range of services. These may include any of the following: Cash Reconciliation Your company may have many cash transactions throughout the month. These can include payments, receipts, and other items. A virtual bookkeeper can connect your cash and lines of credit with your accounting system to record transactions as they occur automatically. Accounts Receivable Management As a business owner, you likely don’t have a lot of time to chase down overdue payments from your customers. Instead, your focus is on growing and managing your business. A virtual bookkeeping service can assist you with client account collections and ensure that any significantly overdue accounts are brought to your attention immediately. Accounts Payable Management Rather than relying on what you think you have incurred in expenses for the month, you can allow a virtual bookkeeper to record actual and expected expenses. This approach allows you to strategically plan your outgoing cash flow for the upcoming weeks. Cash Flow Management Cash flow management tracks the money that you have coming into and out of your business. Online accounting services should provide a clear picture of your cash flow. Simply put, money coming in from revenue should be greater than money going out for employee pay, vendors, tools, and other expenses. Financial Reporting Accurate financial reports are an important part of the monthly accounting process. xendoo’s financial reports include profit and loss statements and balance sheets. Plus, you can view reports from anywhere with the mobile app. Tax Preparation Frequently, online bookkeeping services will offer tax preparation services. This service can save you a lot of time and effort. You can also make sure that your tax return will be completed by someone who understands your company and its financial performance. What if you are behind on your bookkeeping? Outside of the ongoing subscriptions, xendoo and Bench offer catch up bookkeeping services so you can get previous months’ books in order! Accounting Software There are a number of online accounting software systems available. The most popular include QuickBooks Online and Xero. Both of these services are cloud-based, with modern user interfaces that are easy to interpret. They integrate with a number of third-party applications, which gives them greater functionality. Prices for both systems are much less than you would pay for a full ERP. However, both systems allow for a wide range of reporting tools that are perfect for small business accounting. They have the ability to reconcile cash accounts and provide accurate accounts receivable and payable reports. You may also generate a full set of financial statements for monthly reporting purposes. The biggest difference between xendoo and Bench is the software used to do your bookkeeping and accounting. xendoo works with both Quickbooks Online and Xero. The biggest advantage of these two programs is that you own the software. Working with Quickbooks Online and Xero, you will always have access to your financial records, no matter who does your bookkeeping. Bench only uses its proprietary software, which does not integrate with any other accounting programs. If you ever need to leave Bench, your records will not go with you and your financial history will have to be rebuilt. If you want to be able to hold onto your data, Bench may not be the best choice for your business. Try Us Out xendoo offers a free trial. The online accounting team completes your books from the previous month and provides a Profit and Loss Statement and Balance Sheet. What happens if xendoo is not the best fit for you? In that case, we will gladly connect you with others in our network so you can find your ideal financial partner. The completed books and financial reports are yours to keep in your QuickBooks Online or Xero subscription! If you decide not to work with Bench, you can hold onto the financial reports, but you will no longer have access to the previous month’s bookkeeping as it is done in their proprietary software. We’ve done a detailed xendoo vs Bench comparison, but we’ve highlighted key differences in
Six Signs You need to Hire a Bookkeeper or an Accountant
Owning a small business requires you to make a constant stream of decisions, one after the next, day after day. While you might have little trouble making decisions on the things that are core to your business – like what products to stock or what services to offer – other choices are outside of your comfort zone. How to deal with accounting is a choice that you might not want to face, but you have to deal with nonetheless. This is an essential function for all businesses large and small. Should you hire a bookkeeper or hire an accountant? Or should you do it all yourself? Making the wrong choice here won’t necessarily sink your business, but it sure can make things a lot harder. Many business owners consider handling accounting on their own to cut costs, but the 8 ways DIY accounting costs more than it saves highlights how this decision can actually be more costly in the long run. Six Signs You Need a Bookkeeper or an Accountant As you read through this list, think about your own business and how these points apply to your operations. If a few of them hit close to home, it might be time to outsource this important task. #1 – It Takes Too Much Time No matter how committed you are to seeing your business succeed, there are only so many hours in the day. You can’t make more time for yourself, so at some point, it is going to be necessary to offload some of your duties. Bookkeeping and accounting are great targets for outsourcing, as they can be extremely time-consuming and they probably aren’t your area of expertise. Keep track of how much time you are spending using your bookkeeping software each month and it will quickly become clear if outside help is required. #2 – Your Books Are Always Behind Most small business owners are familiar with the stress that comes along with being behind on the books. When your bookkeeping lags behind, it’s hard to make the right decisions to guide your business forward. After all, you won’t have accurate, up-to-date information available, so what will your business decisions be based on? Struggling to keep up with the books isn’t a sign that you are a bad business owner – it’s a sign that you have too much to do and you need some help. #3 – You Have Bigger Goals If business is going well and you have been thinking about expanding, it’s unlikely that you will have time to grow your business and keep doing the bookkeeping at the same time. Also, your books are going to get more complicated as the business gets bigger, so bringing in professional help can make sure they remain accurate and reliable. #4 – Sales Are Strong, Profits Are Not One of the most frustrating situations for a small business owner is when sales are going strong yet profits don’t seem to be rolling in as they should. Accurate accounting is the best way to solve this problem. Having detailed records of all of your financial transactions will give you the clear picture you need to figure out what changes are needed to optimize profits. #5 – Google is Your Accountant Is your search history filled with accounting-related questions? Whether you are trying to correct your QuickBooks mistakes or you’re just trying to get a better grasp on how accounting works, countless hours can be wasted with search after search. Don’t go down this rabbit hole day after day when a better solution is readily available. Also, don’t waste time trying to settle the debate of bookkeeper vs. accountant for your business – both roles are important, and both can be covered by an outsourcing service like xendoo. #6 – Cash Flow Problems Are Constant Small businesses often struggle with cash flow. If your business is healthy overall but you are having trouble meeting your cash flow needs, this is another area where a qualified accountant can help. It’s one thing to keep accurate books, but it’s another thing entirely to understand those books and what they mean for how your business operates. With an accountant on your side, you can get insight into the bigger picture and finally understand your cash flow once and for all. A Simple Solution Once you reach the conclusion that a bookkeeper or accountant would be a big help for your business, one question is sure to come next – where do I turn? xendoo is the easy answer. With our bookkeeping and accounting services, you’ll spend less time deep in the books and more time serving your customers. Whether you don’t have the time to keep up with the books or you just aren’t sure that you’re doing it right, xendoo can help. Get in touch today to learn more or to get started with our services.
4 Signs Your Business Needs Online Bookkeeping
Bookkeeping is Holding You Back Business owners know their companies like the back of their hands. They are the head of every department and perform the work of multiple people. Of all the roles they play, our customers express that the bookkeeper role is their least favorite. DIY bookkeeping holds business owners back from fully focusing on their business, which is why they decide to outsource it. Is it time for you to do the same? Let’s take a look at 4 signs that it could be time to hire an online bookkeeper! #1. Bookkeeping Takes Time Away from Your Business… and Your Life Assess what bookkeeping is costing you. Is it taking significant time away from running your business? Let’s break it down. Suppose your time is worth $200 per hour, and you spend 10 hours per month doing your books. That costs you $2,000 per month just for bookkeeping! How much could you increase your sales? What else could you accomplish with that time? How does bookkeeping affect your personal life? Before partnering with us, many of our customers were up late at night and missed out on time with loved ones due to bookkeeping. Whether you are closing sales or enjoying a family dinner, your time is valuable. DIY bookkeeping does not make sense when you could be spending your time on the things that matter to you. #2. Your Books are Behind It is impossible to evaluate your business’ financial health when your books are behind. Old data cannot predict cash flow, track your revenue, or indicate if you are profitable. Out-of-date books may prevent you from making the best financial decisions for your business. A professional bookkeeper can bring your books up to date. Bookkeepers input and classify your monthly activity. They also generate vital monthly reports such as Profit & Loss statements and Balance Sheets, which display your total income and expenses and your assets and liabilities, respectively. They also provide actionable insight to the current state of your finances. xendoo bookkeepers reconcile your books weekly to keep you on track for future success. Guess what! You are not alone. 25% of business owners are behind on their bookkeeping. Whether you are behind a few months or a few years, xendoo will bring your finances up to date in no time. To get your books caught up, click here. #3. You are Not Sure if You are Doing Your Books Correctly DIY bookkeeping leaves room for error, especially in the hectic life of a business owner. It is rarely anyone’s area of expertise (or passion). If your numbers are not adding up, do not wait until tax season to figure out why. Bookkeepers connect the dots between your sales, expenses, and profits to ensure business growth. They know how to properly categorize your transactions, keeping your books compliant and ready for tax season. At xendoo Online Bookkeeping, you can rely on your dedicated team of finance experts to deliver accurate statements and financial peace of mind year-round. #4. Tax Season is Chaotic When tax season rolls around, do you drop off a 30-pound box of receipts at your accountant’s office and hope for the best? After all the back and forth, are you disappointed by your tax refund? A chaotic and unrewarding tax season is a surefire sign that it is time to hire a bookkeeper. Your bookkeeper’s meticulous organization of your finances sets you up for smooth sailing during the most dreaded time of the year. Best of all, because your bookkeeper understands your business and your finances, they recognize every opportunity to maximize your tax savings! You will never have to worry if you pay too much in taxes. With a bookkeeper on your corner, you can walk into tax season prepared – and you will walk out knowing you maximized your tax savings! The Importance of Bookkeeping Bookkeeping is vital to the success of every business. It provides insight into your financial health and drives your decisions. When your books are in order, you can strategize effectively and plan for growth. Keeping your books compliant and up to date is crucial throughout the year so that you are ready for tax season. Consistent bookkeeping habits maximize your deductions and make an otherwise stressful time, a breeze. Bookkeeping is preventative care for your business. It puts a microscope on your finances to help you catch small problems before they snowball. A professional bookkeeper can take the stress of bookkeeping off of your plate so you can fully focus on running your business. xendoo Does it for You Bookkeeping does not have to be an uphill battle. Let xendoo’s expert online bookkeeping and tax team handle the hassles so you can have more time for what you love! Schedule your free consultation today! [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
8 Benefits of Online Bookkeeping
You’ve put your heart and soul into your business. So why does it feel like you’re spinning your wheels, trying to keep up with your core business and your administrative overhead at the same time? When you first started your company, it might have made sense to try to handle your own bookkeeping and accounting needs. After all, it kept costs down. But it may not have taken long to realize that you could use some help. Why not rely on an online accounting service to take these tasks off your plate so you can focus on your business? Today, we’ll take a closer look at the business benefits of online bookkeeping and see how these services can help you to get your head out of the books and back in the game. Business Benefits of Online Bookkeeping Traditionally, businesses would hire a staff member to handle their books. They might even consider hiring a full-scale accounting department, depending on the size of their company. But these days, more and more companies are going digital, opting to use online accounting and bookkeeping services to handle their needs. This is happening for good reasons, as online bookkeeping offers a host of benefits. We’ll explore some of these benefits in depth below. 1. Specialized Experience Today’s businesses require specialists, not generalists. Increased regulation and the unique needs of individual businesses often demand a specialized set of skills. It’s rare that a staff accountant has experience in the kinds of niche areas that your business needs. Conversely, an online accounting firm can often provide experience in such areas as: Personal financial planning and assistance Forensic Accounting Managerial Accounting IT auditing Non-profits Tax Preparation Some of these tasks tend to be cyclical, such as your annual tax preparation. It makes sense to consult with an online accounting firm that can provide the services you need when you need them without the overhead of hiring a full-time CPA. 2. Accurate Books and Low Cost One of the greatest business benefits of online bookkeeping is a reduction in cost. According to the Journal of Accountancy, the average salary for a full-time CPA is over $100,000 per year. The cost of a full-time bookkeeper is cheaper, but your business may still be looking at paying over $40,000 per year for their services, according to the U.S. Department of Labor Statistics. Don’t forget that these salaries are only a starting point. Hiring a full-time employee also demands that you provide employment benefits. You may even have to make adjustments to your facilities in order to provide an office or similar workspace. Time is another factor to consider. Who will be in charge of hiring and managing your employees? Unless you have a human resources department, these responsibilities might fall on your shoulders as the business owner. Sure, hiring a CPA means you won’t be handling the books, but instead, you’ll have the task of hiring an additional employee. Why swap one responsibility for another, when you can simply outsource your needs to an accounting firm? Online bookkeeping services can be surprisingly affordable, eliminating the overhead associated with hiring a regular employee. By relying on an online solution for your financial needs, you won’t have to worry about diverting valuable space to set up an office or workstation,, allowing you to cut costs in every imaginable capacity. 3. On-time Reporting Staying on top of the details is a full-time job in and of itself. But the more information you have about your business, the better. As a business owner, you want access to trends like: Losses Profits Tax information Personnel and payroll data Insurance payments Procurement Online bookkeeping ensures that you have access to the latest information, with reports available with unparalleled speed. This data is useful for highlighting areas of your business that could stand to be improved, which is why you need access to these reports in a timely manner. Since these reports are generated online, you’ll also save on paperwork. In addition to internal reporting, online bookkeeping services can speed up your invoicing process. By streamlining your entire financial department, you’ll be in a better position to send invoices to clients and maintain your overall cash flow. Faster reporting can accelerate this process even further by monitoring your income and alerting you to clients that have outstanding payments that need to be collected. In addition, virtual accounting services can help you to manage your inventory. xendoo, for example, can help you integrate your platforms and inventory with software like Xero, which has a number of basic inventory management features, as well as other third-party platforms that can help you optimize your ability to keep track of your inventory. These tools can be a great help when it comes to keeping your shelves stocked and your orders flowing. This increased efficiency doesn’t just save you a headache; it can help grow your business, too. Having access to the latest data increases the rate at which you can invoice clients and receive payments. The data you receive from an online bookkeeper can even help you plan for the future, which can be helpful when it comes to tasks like managing your inventory and looking for ways to expand your business. 4. Accurate Books While CPAs typically have an advanced degree in addition to their certification, there are no advanced professional standards when it comes to bookkeeping. That’s not meant to be a slam against bookkeepers, as many of them do an excellent job. But if you try to cut corners by hiring a junior accountant or a financial novice, you could end up with errors creeping into your books. That’s also true if you try and handle the books yourself, especially since it’s unlikely you’ll be able to give your books your full, undivided attention. Why is accuracy so important? For starters, accurate books can eliminate accounting errors. Maintaining accurate books can be essential for the efficient management of your business. But when it comes to tax
Best Small Business Invoicing Practices
Is getting people to pay their invoice balance a challenging part of running your own business? You are not alone. According to a report in Entrepreneur, on average, small businesses had $84,000 in unpaid invoices. Waiting weeks and sometimes months for the checks to arrive and managing cash flow in the meantime can be daunting, to say the least. Since invoicing isn’t the most exciting aspect of your business, we want to share these tips for small business invoicing to help you get paid faster, increase client relations, and save time and money. What is an invoice? An invoice is a bill generated by a vendor that lists details and costs for goods and services provided. You’re likely already invoicing your clients, but don’t forget it is a legally binding contract. Making sure your small business invoicing system is up to snuff can save you headaches down the road. Setting Expectations Review your contract template and make sure you set expectations for invoicing. Likewise, make sure your invoice aligns with what is in the contract. Include payment schedule, estimated totals, and project milestones for payment. Consider your software As you strategize for creating, sending, and organizing your invoices, we recommend automating as much as possible. Your accounting software likely offers a way to do this. At xendoo, we use QuickBooks Online and Xero, which both have invoicing solutions and are known for being the best accounting software options. If you’re considering an invoicing program separate from your accounting, ensure the two integrate and consider online payment processing. Clients love having the option to quickly pay online, so make sure your software can integrate with payments. The easiest method is the simplest—at xendoo we offer solutions with online bookkeeping services, accounting, invoicing, and integrated payment processing all in one. Make sure you include these basics in your invoices Dates: Include invoice creation date. Consider including the date the good or service was delivered in the summary. Unique invoice number: Especially important when sending multiple invoices to the same client. Client’s P.O.: During the contract phase, find out if your client uses Purchase Orders (P.O.s). A P.O. is an agreement between a vendor and a customer that outlines the purchase details and is issued by the client before work is performed. Contact information for all parties involved: Include name, address, phone, and email for both companies’ project and accounting contacts. Payment terms: Terms indicate how long the client has to pay you and are determined initially. Net 30 (due in 30 days), Net 60, and Due Upon Receipt are popular terms. Summary description of goods/services provided: Make it concise! A common way to summarize is to refer to completed milestones that were outlined in your contract. SKU numbers: If your company uses SKU numbers for goods/services, make sure to include them. SKUs are helpful when you need a pricing breakdown and to determine what goods are taxable. Totals: Include the cost for each line item, subtotal, taxes or discounts, and the final total. Late/early payment details: Consider charging an added percentage if the payment is late and a discount for early payments. Method of payments accepted: Indicate all options for how to pay and details. Let them know who to make a check out to and where to mail it, and include a link to pay online. Be straightforward Make your summary description brief while ensuring the client will understand how you arrived at the total. Do everything you can to make it easy for your client to pay you. Keep your invoice to one page. Send invoices as soon as possible An invoice should be sent promptly when the project has been completed. Your client will use the invoice as the first step in processing your payment and likely has internal steps to take before paying you. Therefore, the quicker you send the invoice, the quicker you get paid. Give your customer multiple ways to pay your invoices Consider including a “Pay Now!” button on digital invoices. Clients love the convenience of online payment and often take immediate action. And these online payments can sync with your accounting software and help you avoid the “checks in the mail” scenario. If you are issuing an international invoice, indicate which currency you accept. The Art of the Follow-up Frustrations aside, you must send professional follow-ups when you haven’t received payment. Consider making a schedule for follow-up emails in advance and writing templates, customizing them for each client. This might make the process quicker and less frustrating. Also, consider using read receipts. They are a great way to track when your communication was received and when to follow up. When a few emails aren’t enough, call your client. A brief, friendly call gives you another opportunity to connect with your client. They are likely receiving invoices from multiple vendors. Stand out by offering a friendly, professional demeanor. Don’t Forget to Say Thanks! Once you’ve received payment(s), send a thank you note. It’s an opportunity to remind your client what a positive experience it was to work together. Communication Strategy and Branding Consider your invoice a branding opportunity! Xero and QuickBooks offer customizable options to add to your logo, colors, and fonts. If you’re planning to mail a thank you note, keep it on-brand, too. Streamlining your small business invoicing process can help you retain customers, increase cash flow, and increase stability. In addition, your customers will remember your professionalism and gratitude. Sign up for xendoo today, and let us help with bookkeeping and accounting for your small business. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
Pros and Cons of Putting Your Small Business on Amazon
Ecommerce is booming. Total revenue will reach nearly $4.6 billion in 2021 and grow at an annual rate of 4.6% over the next five years – reaching $5.6 billion by 2025. It’s easy to see why owners of small and medium businesses are asking themselves how they can get a piece of the eCommerce pie. One popular option—the Amazon small business marketplace. In the first quarter of 2021, 55 percent of the units sold on Amazon were from third-party sellers. For a company with sales of more than $300 billion, that’s more than pocket change. But what are the pros and cons? And is it worth the trouble? What is Amazon marketplace? The Amazon marketplace is an eCommerce platform that allows independent vendors and sellers to sell their goods on Amazon. The platform allows Amazon to forego the typical retail model, where it sources materials, then produces and stores each of its products until shipment. Instead, third-party vendors put products on Amazon and take care of the details, while Amazon gets a cut of the profits. What are the pros of selling on Amazon as a small business? There’s no question that Amazon is popular with small businesses: In 2018, nearly three-quarters of Amazon sellers had between one and five employees. And Amazon for small business does have plenty of benefits, like the following. You can reach a larger audience One of the biggest benefits of selling products on Amazon is that it can connect you with a wider audience: There are more than 200 million Amazon Prime members worldwide, and that’s not counting site visitors who don’t subscribe to Prime. That’s a huge audience for Amazon small businesses. Amazon can take a lot of the work off your plate Getting set up with Amazon marketplace is relatively easy: Just sign up and add products to the catalog. If you want Amazon to do more work for you, you can sign up for Amazon FBA, or Fulfilled by Amazon, which allows you to use Amazon’s warehousing, packaging, shipping, and customer service. Amazon has tools to help you sell In addition to Sponsored Ads – which actually make Amazon the third-largest digital advertiser behind only Google and Facebook – Amazon small businesses have access to MerchantWords, a proprietary keyword research tool. It uses actual Amazon data to help you optimize your product names, descriptions, and ads. Amazon provides technical support Amazon Seller Central is the platform’s support team for Amazon small businesses. It’s available 24 hours a day, although most sellers will be required to submit a request and wait for a callback. Still, most sellers receive a prompt response and are happy with the support they receive What are the cons of selling on Amazon as a small business? Amazon Marketplace sounds pretty great, right? For many small and medium businesses, it is. But it also has a few drawbacks you should be aware of. It can be expensive With charges for selling, referral fees, and Amazon sales tax, the cost of selling on the marketplace can quickly add up. Sellers without a monthly plan will pay 99 cents per item sold, while those with a Professional Plan pay $39.99 per month. If you opt for extra features, like Fulfilled by Amazon, expect to pay more fees. If you are looking to start selling online there are options to secure ecommerce funding. It can be time consuming Getting set up with Amazon Marketplace is easy – understanding how to be successful there can be more time-consuming. Diving into the tools Amazon provides and optimizing your product take time. Plus you’ll need to figure out Amazon bookkeeping and accounting, inventory management, and more. The competition is fierce There were 1.1 million active Amazon marketplace sellers in the United States alone in 2019. Amazon Marketplace is also incredibly popular with Chinese merchants, some of whom sell products at super-low, factory-direct prices. You’ll even compete with Amazon’s own private label brands. And fake reviews abound on the platform, with competitors using bots to write thousands of five-star reviews at once. It’s Amazon’s world, you’re just selling in it Some Amazon small businesses feel they don’t have much power over the selling process. There are reports of Amazon punishing businesses for selling at lower prices on other marketplaces, or pressuring them to sign up for extra services. Should I use Amazon for my small business? There’s no one-size-fits-all answer to whether you should sell products on Amazon. Certain categories, like personal care, beauty, and home goods, seem to have greater success on the platform. Businesses with high margins, who can afford to give Amazon its cut, can also do well. However, success with Amazon for small business depends more on your ability to figure out what works for you than on the type of business. xendoo can help dive into your books and help you make a sound decision on whether to sell on Amazon Marketplace. If you’re already a seller, we can ensure your books are in order – allowing you more time to focus on selling. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
