10 Reasons Your Small Business Needs a Bookkeeper
Are you behind on your books? Losing track of your expenses? Do you need someone who can help you file your taxes and stay compliant? A small business bookkeeper or bookkeeping service can support you with everything from simple bookkeeping to offering more in-depth tax filing services and business consulting. A skilled bookkeeper will save you time and money, set you up with systems that will simplify running a small business, keep you tax compliant and ready, and ensure you are always in-the-know when it comes to your financials. Save time Whether you’re filing your taxes or just doing simple data entry, it is incredibly easy to make mistakes when you aren’t a professional bookkeeper and these mistakes can cost you a lot of time. When it comes time to speak with a lender, make a big decision, prepare your taxes, or just wrap up your monthly reconciliation you might end up having to undo an entire month’s worth of data entry – or likely even more due to one little mistake. One simple slip-up in your books can have a huge ripple effect and cost a busy business owner like you a massive amount of time that would be better spent elsewhere. Save money Small business bookkeepers and bookkeeping services can save small businesses money in many different ways. Since one simple slip-up in bookkeeping can have a huge ripple effect and cost you a massive amount of time as you try to fix your problems – you know you’ll be saving money by trusting a professional with your books from the start. A very popular option with small businesses is an accounting service that charges a fixed amount every month. It’s easy to budget for, and it can cost less than half what you would pay an hourly accountant for the same amount of service. xendoo bookkeeping service plans come with a dedicated team of bookkeepers who are committed to helping you grow your business. xendoo offers a variety of packages because we know not all business owners are created equal, so you can choose the package that works best for you and your business. A great place to start is the Hustle plan – it’s made for self-employed small business owners like you and starts at $195/mo. You’ll get expert bookkeeping and on-time financials – and you won’t stay up at night worrying about catching up. Gather Information Bookkeepers can help you with the big picture aspects of running a small business, such as reviewing options for how to finance your business. Whether it’s how to apply for loans and which ones to apply for in the first place, to exploring options for lines of credit, bookkeepers can help you navigate how to grow your business. Big picture bookkeeping services can include financial analysis, tax reporting, year-end tax projections, and so much more. Keep you up-to-date When you don’t have up-to-date books during the year, you can’t use monthly or quarterly financial statements to guide your business decisions. One of the most essential services a bookkeeper can provide for a business owner is to keep the company’s books accurate and up-to-date. Being able to quickly and easily review the status of your finances is crucial to short and long-term success for any business owner. When you know the health of your finances, you can make decisions quicker concerning everything from who to hire next, to what marketing strategy recently worked best. It truly informs all aspects of a healthy business. There’s no need to play catch up when you have a professional bookkeeper keeping you up-to-date every step of the way! Keep you organized A small business bookkeeper helps everyone stay organized. They help you categorize expenses correctly, reconcile your accounts, and even help you keep your business and personal accounts separate. In small businesses especially, you’ll often see bookkeepers paying bills, cutting checks to employees, invoicing clients, and making deposits. Just like a small business owner, a small business bookkeeper wears many hats! xendoo will keep you organized – we provide on-time monthly reports and data for your business. You’ll receive monthly balance sheets and profit and loss statements that you can easily access from your desktop or mobile, as well as weekly reconciliations so you have clear visibility of your business’s financial health. Payroll A small business bookkeeper can save you time and money by managing your business’s payroll – and many choose to use online payroll services such as Gusto. With Gusto, you can schedule payroll to run automatically each pay period, and even reimburse employees for out-of-pocket expenses at the same time. They take care of all the employee management involved in payroll, too, like setting up direct deposit, online onboarding, digital paystubs, and tracking vacation and sick time management. Financial reports Small business owners who have access to up-to-date financial statements are more confident and quick in their decision-making. Every kind of decision, from what kind of inventory and equipment to invest in, to who to hire next, is made easier when you have a recent profit and loss statement and balance sheet in hand. As you grow you may want to borrow money or open a line of credit. Your lender will want accurate financial statements, and ideally, you aren’t scrambling to create them right then and there. With a professional bookkeeper on your side, you can quickly access all financial statements necessary as soon as you need them. A small business bookkeeper can help you report sales taxes on time with a system that accurately tracks sales amounts, so you don’t accidentally overstate your sales and remit too much sales tax – a surprisingly common error that bookkeepers can prevent. File your returns A small business bookkeeper will set up a tax recording system for you and submit government reports – like employee tax and sales tax – making it simple for an accountant to regularly file your returns. Work with accountants Bookkeepers focus on the everyday tasks that
The Best Bookkeeping Service For Your Small Business
There are different types of bookkeeping services for small businesses. You can handle it all yourself, utilizing software like Quickbooks and Xero; hire a part-time small business bookkeeper; or opt for a full-service bookkeeping service like xendoo that can handle it all for you. What are the different types of bookkeeping services for small businesses? You may choose to handle all of your small business bookkeeping on your own, but keep in mind that it’s more than just simple data entry. You’ll need to familiarize yourself with your software of choice, such as Quickbooks or Xero and set up your Chart of Accounts among other things – and of course make sure your records are always as up-to-date as possible. A popular option for small business owners is to hire a part-time bookkeeper. This is a great solution for small business owners who have enough time to take on some of the bookkeeping work themselves or who have someone on staff who can manage it. One important aspect of hiring a part-time bookkeeper to keep in mind is that you will still need to oversee and be involved with the part-time bookkeeper’s work. You’ll need to review their data entry, monthly reconciliations, and any communication they have with your accountant. Additionally, you will need to organize receipts, invoices, and any other financial paperwork for them and make sure to stay organized on your end. As a small business owner, you wear many, many hats. From sales and marketing to employee management and not to mention, your specialty – the good or service you set out to provide in the first place – whether it’s operating a small bakery, selling home goods, or running a childcare center – you do it all. When you are ready to catch up on your bookkeeping and make sure it always stays up to date, you can opt for hiring a full-service bookkeeping service like xendoo. xendoo is proud to support thousands of small business owners with their financial needs to help set them up for success and provide financial peace of mind. It’s one important thing you can take off of your to-do list, and you can rest easy knowing your financials are being properly handled throughout the year by professionals – no more worrying about when you’ll do your bookkeeping, and no more playing catch up when tax time rolls around. When should a small business hire a bookkeeper? It is estimated that small business owners spend as many as 120 working days per year on administrative tasks and bookkeeping. That’s almost four months! This is time that could be spent doing the work you love that led you to start a small business in the first place. Perhaps you set out to own and operate a dog grooming business – you never thought you would end up spending all your days at your computer with piles of paperwork! Small grocers, massage therapists, photographers, dentists, even nail salon owners – every small business owner is different, yet they all need someone to handle their bookkeeping. An excellent time for a small business owner to consider hiring a bookkeeper is when you see that your small business is growing. Perhaps your bookkeeping tasks are taking more time than you can afford, and your books are never up to date. Maybe you recently added on a new location, hired more team members, or have seen a sharp increase in sales – whatever the case is, it looks like your small business is growing. As your business continues to grow, your bookkeeping workload will also increase, so if you’re posting more and more transactions each month, entering data on a regular basis can make bookkeeping more difficult and time-consuming. Even when you use online bookkeeping software solutions such as QuickBooks or Xero, a bookkeeping service for small business service can help you manage and maintain your books accurately and save you a large amount of time and money. A bookkeeper will keep your company’s financial records accurate and up-to-date by performing basic bookkeeping services, that in the end can take hours and hours that a busy small business owner just doesn’t have. This includes regularly reviewing source documents such as your monthly bank and credit card statements, invoices, expense reports, payroll, and receipts, and recording basic accounting information for you – such as your data entry and monthly reconciliations – in your company’s books. Small business owners notoriously spend a large amount of time on administrative work, like employee scheduling and management, preparing payroll, reviewing invoices, and especially hours and hours of bookkeeping. When you find you can’t afford to spend your precious time on administrative work like bookkeeping any longer, you know it is time to delegate and outsource the work to a bookkeeping service for small business. Are there bookkeeping packages for small businesses? xendoo offers bookkeeping services for small businesses packages of all shapes and sizes. No matter the plan, each one comes with a dedicated financial team – you will have a dedicated bookkeeper assigned to your account who is supported by a full team of bookkeepers that have your back, and are available to talk, text, or email with you as you navigate your busy workday. xendoo offers five different bookkeeping service for small business plans for small business owners to choose from – and even offers custom plans. To determine which bookkeeping package is right for your small business, check out the pricing page on the xendoo website. You’ll see that the five different packages are determined by the amount of your small business’s monthly expenses. We know every small business is unique, so when necessary, we work with our customers to create custom bookkeeping packages to suit their specific needs and goals. And it’s easy to change your xendoo plan if you ever need to! Perhaps your monthly expenses have increased and you need to bump up to a more robust plan, or maybe you are in a
Best Online Bookkeeping Software for Small Business
Bookkeepers and bookkeeping services can be a small business owner’s best investment. Bookkeepers save small businesses money by keeping their books in order and providing accurate financial reports – giving the small business owner more time to do what they do best. Bookkeepers handle a wide range of duties, including recording financial transactions, maintaining accurate records, and balancing the books of a business. Bookkeepers can manage accounts receivable and accounts payable for small businesses – they can create and send invoices, accept payments, and so much more. They use small business accounting software to reconcile bank accounts and lines of credit, and create vital reports such as Profit & Loss statements and Balance Sheets. Bookkeepers can track and manage inventory, provide payroll services, and even track time. The key financial statements that they prepare can help prepare you for tax time, and their assistance in translating the reports into layman’s terms can help you make smart business decisions. Making the switch to using an online bookkeeping software like Quickbooks Online or Xero is an ideal choice for small business owners who are looking for more accuracy in their books and reporting – when you just need someone to keep your books in order, working with a bookkeeper who uses one of these cloud-based bookkeeping software solutions is the perfect choice. Online bookkeeping is also great for our remote entrepreneurial lifestyles – since Quickbooks and Xero are cloud-based, you can keep tabs on the financial health of your business anytime from anywhere – office to the beach! What does bookkeeping software do? Bookkeeping software allows bookkeepers to accurately manage the finances of a small business. Software such as Xero or Quickbooks Online are all cloud-based and perform a wide variety of bookkeeping functions – creating reports like your Profit & Loss statement, working in Accounts Payable and Receivable, and balancing your books. Online bookkeeping programs like Xero and Quickbooks Online connect seamlessly with your bank accounts to import transactions. This not only helps save time over entering transactions manually, but it also reduces the human error element that comes with manual data entry and can provide up-to-date financial reports. The software even knows how to categorize your transactions to match your Chart of Accounts. It makes reconciling your accounts every month a breeze! Main functions of online bookkeeping software: Importing & categorizing transactions from your bank Reconciling bank accounts Accounts payable Accounts receivable General ledger Preparing key financial statements Managing inventory and purchase orders Our picks for the best bookkeeping software Xero Xero provides fast, simple, powerful bookkeeping software that your users can access simultaneously, regardless of their different locations or operating systems. They offer a wide range of easy-to-use features to help you manage your bookkeeping, such as paying bills, claiming expenses, and accepting payments. Xero is a great choice for small and mid sized businesses – and it’s even a great choice for businesses that are growing – they make it easy to create a plan that meets your changing needs since their software integrates with more than 500 third-party apps, plug-ins, and products. With over 2 million global subscribers, Xero is a leader among online bookkeeping software options, and for good reason – their software and customer support are an excellent choice when you’re looking to choose a bookkeeping program for your small business. Quickbooks Online Quickbooks Online is the cloud-based version of Intuit’s classic bookkeeping program. Quickbooks Online does it all – reconcile your bank accounts, create and send invoices, accept business payments, manage and pay bills, and even manage payroll. It is one of the most popular bookkeeping software options for small and mid sized businesses and is one of the most trusted bookkeeping software options out there. Sage Accounting Sage is known for being easy to use and set-up. Sage gives you control to automate your business finances, speed up payments, manage cash flow, and track expenses. Their real-time tracking feature lets you know the minute your invoice is viewed and paid. AccountEdge Pro – AccountEdge offers full-featured accounting software for your small business, via their desktop application – and with no monthly subscription. Their command centers help you run and report on all aspects of your business: sales and invoicing, purchases, payroll, inventory, time billing, and more. Wave Wave offers free accounting, invoicing, and receipt scanning software. But these kinds of free software tools have fewer features, and will not be able to scale as your business grows. NetSuite NetSuite offers an entire suite of enterprise-grade applications that reach well beyond the needs of accounting & finance. Companies use NetSuite for enterprise resource planning (ERP) and to manage inventory, track their financials, host e-commerce stores, and maintain customer relationship management (CRM) systems. It’s a flexible platform that can be applied to a wide range of business applications. Freshbooks FreshBooks is a cloud-based accounting software solution designed for freelancers and small business owners. It is a simple and intuitive solution, so accounting isn’t intimidating. You can create professional invoices, capture your expenses and track your time towards projects. Why you should hire a professional bookkeeper Keeping your company’s books accurate and up-to-date takes up a lot of valuable time as a small business owner. And as your business grows you’ll find you don’t have enough hours in the day to accurately manage your own small business bookkeeping. Hiring a professional bookkeeper becomes essential to keeping your finances on track. With a bookkeeper on your team, you can then easily review your finances, make smart decisions fast, and grow your small business. xendoo’s online bookkeeping service plans utilize Xero and Quickbooks Online software, and come with a dedicated team of bookkeepers and accountants who are committed to helping you grow your business. xendoo offers a variety of packages because we know not all business owners are created equal. You can choose the package that works best for you and your business. Conclusion Online bookkeeping software makes doing your own books possible, however paying a monthly
How to Outsource Bookkeeping – A Guide
Since starting your business, you’ve likely filled multiple roles–from product and customer service to bookkeeping and sales–at some point. However, as your business has grown, you may have felt like you don’t want to spend your time doing some of those tasks. For instance, you’ve probably asked yourself: Should I outsource bookkeeping? Whether or not to outsource is a common question many small business owners face. Tasks like bookkeeping are ideal to hire outside help. Others like sales may be better to manage in-house. There are a few ways that you can hire a bookkeeper. Primarily, businesses choose virtual bookkeepers or local bookkeepers. In this guide, we’ll dive into everything related to outsourced bookkeeping from what it costs to how to outsource it. You can click to go to a particular section below or scroll down to start from the top. When should you outsource bookkeeping? Why should you outsource your bookkeeping? How do you outsource bookkeeping? How much does outsourced bookkeeping cost? When should I outsource my bookkeeping? If your business is new and you don’t have significant revenue or budget to hire outside help, you’ll probably try DIY bookkeeping first. However, most businesses prefer to outsource their bookkeeping, especially as they grow. These are some of the top signs that it is time to outsource your bookkeeping: You’re spending several hours each week doing accounting and bookkeeping tasks yourself. You plan to get funding through investors or business loans and need accurate financial statements. Your books are behind, and you need to catch up. You’re spending a lot of money hiring full-time, in-house bookkeepers or a local bookkeeper. You aren’t sure about your current cash flow or financial health. Tax season is coming up, and you don’t feel prepared to file your taxes. You simply have no desire to learn bookkeeping or to do it yourself. Why should I outsource my bookkeeping? At first, you might be hesitant to trust an outside bookkeeper with your financial data. There are so many benefits to outsourcing your bookkeeping, as long as you choose a trustworthy CPA or bookkeeper. The top benefits of outsourcing your bookkeeping include: Up-to-date books and more time for business Small business owners are notorious for spending a large amount of time on administrative work, like employee scheduling, preparing payroll, and bookkeeping. It is estimated that small business owners spend 120 working days per year on administrative tasks like bookkeeping. Still, nearly 25% of businesses are behind on their books. Hiring a bookkeeper allows you to free up more time. With the time saved, you can focus on the tasks that excite you most as a business owner. Although bookkeeping it’s extremely important to the health and success of a business, it is not necessarily a task that most entrepreneurs enjoy doing. Cost-effective bookkeeping If you’ve attempted to do small business bookkeeping on your own, you already know that it can take a lot of time and money. Even if you utilize programs like Quickbooks or Xero, you can’t automate all your bookkeeping needs. If you’ve hired an hourly bookkeeper or accountant, the cost per hour adds up fast. xendoo offers pricing plans with a flat-rate monthly fee, so you can easily budget for your bookkeeping each month. Business loan and funding preparation As your business grows, your bookkeeping and accounting needs grow too. If you want to take out a loan or open a line of credit, your lender will want accurate financial statements. It can take hours to do this on your own, and it might not be accurate. Bookkeepers have experience doing this for multiple clients, so they can put financial statements together quickly in a way that’s presentable for your potential lender. Experienced bookkeepers can also help you by: Advising you on tax savings. You’ll have a better idea of what you can deduct and how to reduce your taxes. Providing answers to your financial questions. Bookkeepers can help you learn about financial reports, cash flow, depreciation, and more. Identifying opportunities to improve profitability. They’ll have a clear picture of where you improve your business finances. Keeping you tax-compliant and secure. Bookkeepers are familiar with tax laws and other legal considerations, so you won’t miss deadlines or have noncompliance penalties. How do you outsource bookkeeping? There are two primary options to outsource bookkeeping–virtual bookkeepers or local bookkeepers. Virtual bookkeepers If you hire a bookkeeper online then that would be considered a virtual bookkeeper. xendoo, for example, is a virtual bookkeeping service. Our team of bookkeepers works with you virtually, no matter where you a located in the United States. However, there are some differences between xendoo’s bookkeeping services and other virtual bookkeepers. For instance, you might hire a freelance virtual bookkeeper that performs the same tasks that a regular bookkeeper would–they just do them online. The drawback of hiring an individual freelance bookkeeper is that they tend to be more expensive. Like an in-person, local bookkeeper, freelancers usually charge an hourly rate vs a set monthly payment. They also may not have as many resources as a bookkeeping firm or company. For instance, when you get a xendoo plan you also get perks like access to accounting software like QuickBooks and Xero. Another advantage of virtual bookkeepers is that because they work online, they tend to be familiar with different eCommerce platforms, payment processors, and other online financial services. Therefore, they can help you integrate your business banking account, expenses, and other financial data into a secure accounting system. With that, you can view your financial health, prepare for taxes, or plan for your business future at any time. Local bookkeepers If you hire a bookkeeper that has an office or business location near you, that would be considered a local bookkeeper. Local bookkeepers usually charge by the hour and it tends to be expensive. For instance, it is not cost-effective if you need to book more than one or two hours a month. This might make sense if you are booking
How to Do Catch-Up Bookkeeping Services for Small Businesses
Author’s Note: This was updated on Dec 13, 2021, with new information and resources for small business owners. Nearly 25% of businesses are behind on their books and nearly 41% of business owners try to do their bookkeeping themselves. It happens easily— you fall a month or two behind, then by the time you look up, an entire quarter has gone by, and your books haven’t been updated. With inaccurate and out-of-date books, you might have late invoices, end up over-extending your small business, and not be able to dial in your operating cash flow. You might even be in danger of being non-compliant with the IRS. Perhaps nothing bad has happened yet, but you know it’s time to catch up on bookkeeping. For more guidance, explore these bookkeeping tips for small businesses which can help you stay on top of your financials more effectively. One of the most essential services a bookkeeper can provide for a business owner is to keep the company’s books accurate and up-to-date. Being able to quickly and easily review the status of your finances is crucial to short and long-term success for any business owner. When you know the health of your finances, you can make quicker decisions concerning everything from who to hire next to what marketing strategy recently worked best. Reasons to catch up/reconcile Besides being a smart business practice, catch-up bookkeeping provides additional benefits grow growing companies. Such as: Smart/quick decisions: A bookkeeper will review vendor payments and record expenses to manage your spending, helping you manage your cash flow. A bookkeeper will track your sales, so you know what’s most profitable and can focus on what works. Tax compliant: With up-to-date, accurate records, a bookkeeper can assist you during tax season – helping you maximize deductions and stay compliant. Loan: As you grow, you may want to borrow money or open a line of credit. Your lender will want accurate financial statements, and ideally, you aren’t scrambling to create them right then and there. What is catch-up bookkeeping? A bookkeeper will review source documents such as your monthly bank and credit card statements, invoices, payroll, receipts, and record basic accounting information for you, such as your monthly reconciliations, in your company’s books. The end goal is to bring your financial records fully up-to-date. Outdated books only create problems when it comes to long-range business strategy and tax preparation. In the worst-case scenario, your outdated books can leave you in the dark when it comes to your cash flow, jeopardizing your ability to cover expenses, payroll, and more. Catch-up bookkeeping isn’t just for those who neglect their books. Anytime you migrate data or need to reconcile your accounts, it’s helpful to give yourself an audit to ensure you’re working with the latest data. Catch-up bookkeeping therefore offers peace of mind and the confidence you need to focus on your company’s future. How do I catch up on my bookkeeping? In fact, the more you can prepare and organize before you start the process, the smoother things will go. Don’t limit your timeframe to when your books started to unravel. Many business owners discover that their books decline in accuracy over the course of time. You’ll therefore want to make sure your catch-up process covers a sufficient number of weeks to ensure total financial accuracy. Understandably, many business owners want to catch up on their books themselves. We can’t blame anyone for wanting to cut costs, but isn’t that what got you into this situation to begin with? Busy entrepreneurs often get behind in their books because they’re trying to handle their administrative tasks, as well as their core business. It’s unlikely that you’ll be able to find the time to perform catch-up duties, at least not with the speed and accuracy your business deserves. That’s why you should seek out an accounting team that specializes in catch-up bookkeeping. Admittedly, this will cost your company money, but most small businesses discover the cost is negligible compared to the peace of mind that comes from having a team of experts to bring their books up to date. During the catch-up bookkeeping process, a skilled accountant will help you do the following: Gather your paperwork Some of the paperwork and documents you will need to gather for your bookkeeper are: Receipts Bank and credit card statements Invoices Debt collections Business expenses Vendor accounts This is an important part of the process, as it will provide a clear record of all of the income and expenses that apply to your business. The first benefit will be immediate. You’ll discover whether your business has any outstanding invoices that your customers have yet to pay, which can later be used to track down delinquent accounts and make arrangements to write off bad debt. It can also let you know whether you have any outstanding debts you need to pay. These receipts will also be useful during tax season, providing a record of any business expenses that can be used as tax deductions. Reconcile your bank accounts Each month you need to reconcile all of your bank and credit card accounts. First, make sure all transactions for the month have been entered. Using your bank statements, you can make sure all of the transactions in your books match the transactions in your statements. This allows you to find any errors in your books and ensure your records are accurate. It’s easy to fall behind on reconciliation, especially if you come across reconciliation errors that need fixing. If you are too far behind on your monthly reconciliations, the bookkeeping team at xendoo can help you get organized, reconciled, and caught up. Collect W-9s, 1099s, and W-2s W-9s are IRS forms that all business owners must keep on file for any self-employed workers (such as freelancers and independent contractors), to keep track of their external team members. If you employ subcontractors, you’ll need to make sure you are collecting these important forms. When a small business pays an
The Profit and Loss Statement as a Planning Tool
The monthly P&L statement you receive from xendoo is a great snapshot of how your business has performed in the recent past. But did you know that it can also help you strategize for future success? Its numbers can guide you to answers for frequently asked questions like these: Am I Meeting My Profit Margin? If your Net Income is very small (or worse, a loss) and there are no external influences such as a normal seasonal dip in sales, your profit margin is too low. To figure your profit margin, use this formula: Gross Profit ÷ Total Revenue = Profit Margin (usually expressed as a percent) Example: $25,000 Gross Profit ÷ $100,000 Total Revenue = 0.25 Profit Margin (25%) Is that percentage the one you determined when you set up your business plan? If not, look for areas that may need improvement in both the Revenue and Cost of Sales sections of your profit & loss statement. Consider raising prices, trimming expenses, or doing some of each. Do I Have Money to Reinvest in the Business? Look at the “bottom line” — your Net Income. This is how much you have left of your total sales after you pay both direct and indirect costs of operating the business. You should keep some cash available as a cushion against unexpected setbacks, such as an interruption in cash flow. If the net income is more than that, you can think about ways to use it to grow your business, such as buying new equipment. Can I Afford to Expand? Unlike the previous question, this one is about increasing your ongoing operating expenses — hiring additional employees, moving to a larger space (with higher rent), and so on. To make this decision: 1. Plug the increased numbers into the relevant lines in your in Other Income and Expense section on the P&L statement (i.e. Payroll). 2. Add up the section to get a new Total Other Income and Expense. 3. Calculate Gross Profit – Total Other Income and Expense = your new projected Net Income. Now you can easily see whether the business can tolerate higher operating costs. We suggest that you use year-to-date figures rather than the results for the previous month. They are a more reliable indicator of how your business is likely to be performing in the future. Should I Get a Business Loan? Here again, the costs of paying back the loan will be reflected in the Other Income and Expense section of the profit and loss statement. Use the same steps in the paragraph above to decide whether this is a smart idea. As a general rule, using a business loan to cover overhead expenses such as payroll is only digging yourself deeper into the hole. Go back to the first question for suggestions on how to improve profit margins so that you won’t need to seek loans. Also, be aware that potential lenders will look at your P&L statements to judge whether you are a good risk. These financial professionals will be able to tell whether your business model is working and how efficient your operation is. Make sure you know those things yourself, so you can address any issues they might bring up with you. Have more questions about the numbers on your profit and loss statement? Just ask your xendoo accounting professional. And remember, xendoo guarantees delivery of the statement by the 5th business day after the end of the month, so you can rest assured you’re acting on timely information [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
6 Ways Profit & Loss Statements Help Small Businesses Succeed
The most obvious benefit of your monthly P&L statement is that it shows whether you made more money than you spent — in other words, your net income (or loss). But that’s just the beginning. Here are 6 more ways to use that accounting report to keep your business on track for success. 1. Check up on company expenses. Like most accountants, we believe that operating and administrative expenses should not be more than 20% of gross revenues. To find your percentage, subtract expenses (not including cost of goods or sales) from revenues, then divide that amount by revenues. Example: Step 1. $100,000 gross revenues – $80,000 expenses = $20,000 difference Step 2. $20,000 difference ÷ $100,000 gross revenues = 0.2 (20%) If your percentage is too high, you’ll need to look closely at every line in your expenses column, from advertising to utilities, for cost-cutting opportunities. 2. Analyze the cost of goods or sales (COGS). Many business experts say that COGS should not be more than 75% of your gross revenues. With both cost of goods and gross revenues shown on your P&L statement, this percentage is easy to calculate. If it’s more than 75%, the next step is to do something about it. Look for ways to reduce COGS by cutting production costs, finding better prices on supplies, and so on. Conversely, consider increasing gross sales, perhaps by raising prices. 3. Prepare for tax season. By regularly updating your P&L statements, you’ll also be keeping your books current. Everything will be ready to prepare your return, and you’ll spare yourself the giant headache of trying to catch up on months’ worth of backlog all at once. 4. See how much you can reinvest in the business. Is it the right time to move to a larger facility, add more staff, expand your product offerings? The answers are right there in your bookkeeping reports, such as the profit and loss statement. 5. Prove you’re a success. When the day comes that you need a business loan, a new investor, or a buyer for your business, your P&L statements will be a valuable negotiating tool. They provide concrete, chronological record of exactly how well the business has done since its beginning. 6. Compare yourself to your industry standard. Two important ratios show how you stack up against your competitors. Gross Profit Ratio reveals how much income your business generates on sales. A high ratio means you have a healthy profit margin, and won’t be wiped out by unexpected increases in expenses. The formula: Gross revenues – COGS ÷ gross revenues = GPR Return on Equity measures how much investors have gotten back from what they put into your company, and is a good predictor of future returns for anyone thinking of investing in you. The formula: Net income ÷ shareholder’s equity = ROE As you can see, the profit & loss statement is essential to making informed, timely decisions. That’s why xendoo guarantees delivery of P&L statements to our clients on the 5th business day of every month. It’s all part of our real-time bookkeeping service that moves at the speed of business and lets you get back to doing the work you love. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
Do a Balance Sheet Health Check for Fast Answers
If someone asked you, “How’s Business?” — what would you say? You’d be surprised how many small business owners don’t know. Or they think they know, but are forgetting some costs or not recognizing early warning signs. What’s on the Balance Sheet? Basically, you’ll see three lists: assets, liabilities, and equity. The total assets will be the same, or balanced with, total liabilities plus equity — hence the name “balance sheet.” Assets include cash/cash equivalents, accounts receivable, property, equipment, and some types of intangible assets. Assets are usually reported at their original cost or lower to allow for depreciation and other factors. Liabilities are any money owed, such as business loans, taxes, accounts payable, and accrued expenses. Equity is the money invested by the owners plus any company earnings that you chose not to withdraw as dividends or distributions. Health Check #1: Assets to Liabilities Ratio Current Liabilities ÷ Current Assets = Debt to Equity Ratio This number shows you whether the company is able to pay its bills — it has more current assets (cash or convert to cash within one year) than current debts (payable within one year). If the ratio is more than 1, congratulations, your business is healthy. If it’s 1, you’re breaking even. If it’s less than 1, you’re in trouble. Health Check #2: Debt to Equity Ratio Current Liabilities ÷ Total Equity = Debt to Equity Ratio This reveals whether you’re too deeply in debt; in other words, you have too much financing from loans as compared to investments from owners or stockholders. A high ratio number might be a sign that there will be problems with debt repayment. It also tells prospective lenders or investors that the business is a higher risk. For most small and medium-sized businesses the maximum acceptable debt to equity ratio is 1.5 to 2 (15% to 20%). Health Check #3: Asset Turnover Ratio Net Sales ÷ Average Total Assets = Asset Turnover Ratio (Net Sales: see your income statement) (Average Total Assets: from the last 2 years’ beginning and ending balance sheets) This tells you how efficiently your business generates sales from its assets. The higher the ratio, the better. On the other hand, a low ratio may point to management or production issues. What’s considered a “good” asset turnover ratio varies widely by industry. Therefore, it’s best to compare your ratio with similar companies in your field. The balance sheet is just one of the essential documents xendoo provides our clients, giving them the information they need to avoid the pitfalls and seize the opportunities for growth and success. Contact us to learn more about our affordable, real-time financial services for small businesses. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
Bookkeeper or Accountant: Which One Do You Need?
What’s the difference between bookkeeping and accounting? For most people, they mean the same thing — the experts responsible for a company’s finances. Traditionally, though, bookkeepers and accountants have different duties and skills. Let’s take a look at those differences. Bookkeeper Bookkeepers handle the day-to-day recording and implementation of financial transactions. Depending on your type of business, their tasks may include: • Record sales • Accounts receivable — send invoices and track customers’ payments • Accounts payable — verify, record and pay invoices from the company’s suppliers • Pay overhead expenses — rent, utilities, etc. • Pay debt installments — credit cards, business loans • Reconcile bank statements • Track inventory to prevent too much or too little on hand • Prepare payroll • Submit government reports — employee tax, sales tax, etc. • Record capital expenditures such as buying equipment • Record asset depreciation No special education or qualifications are necessary for these basic data entry tasks; with the right software, anyone can do it. However, you may want to bring in a professional bookkeeper for the following scenarios: • Implement software tools to improve workflow • Train employees to use bookkeeping software correctly • Find and resolve mistakes in the books • Get you caught up if you’re behind in your bookkeeping • Set up a tax recording system Accountant These professionals have the title of Certified Public Accountant (CPA) and offer a higher level of financial analysis. They interpret the data recorded by the bookkeeper to make business decisions. Their services include: • Prepare financial statements • Identify red flags and growth opportunities • Prepare and file taxes • Plan capital purchases and other investments • Strategize for scaling the business The New Joint Task Force So the answer to this article’s headline — which one do you need — is that you need both. The good news is that now you can have both in one convenient, affordable package. As we stated above, there are traditional distinctions between accountants and bookkeepers. However, the industry is now moving toward merging those two roles into one service. Thanks to software advances, basic data entry is to a large extent automated, eliminating human labor (and error). As a result, the bookkeeper has fewer functions, while the accountant has a greater capability for business analysis. What’s more, the latest cloud software makes it easy for business owners to stay in the loop, with online access to their financial reports at any time. xendoo is at the forefront of this evolution with state-of-the-art software that streamlines processes and keeps our rates reasonable for small businesses. Our flat monthly fees — which include both bookkeeping and accounting services — cost less than half what a by-the-hour accountant typically charges. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
Recipe for Success: 5 Must-Have Ingredients of Restaurant Bookkeeping
Editor’s Note: This post was originally published in September 2019 and has been revamped and updated for accuracy and comprehensiveness. As a busy restaurateur, it’s easy to push restaurant bookkeeping tasks to the bottom of your priority list. After all, you have better things to do – right? Not so fast. Restaurant bookkeeping is an essential function for businesses large and small, as accurate, reliable numbers are essential for sound decision making. Also, there is the whole matter of taxes to consider. Safe to say, it’s better to get things right the first time with bookkeeping, instead of paying for your mistakes later on. To help get your restaurant accounting processes on the right track, we have assembled the following five tips. 1. Record Sales Daily It’s dangerously easy to fall behind on recording your sales. In fact, one of the reasons that bookkeeping for restaurants is often a mess is simply because owners and managers fall behind on basic tasks. To stay up to date, make a habit of copying or importing the sales from your POS system into your accounting software each day. What you’re aiming for are books that correlate with your bank statements. If you save up all those credit card charges for a weekly or monthly deposit, you’ll have a hard time doing analysis later. Ideally, your accounting software and POS system are integrated so that this is done automatically. At xendoo, we integrate your bank transactions with your books, so data entry is always up to the minute. Automating this process not only saves you the time of doing the work manually but also greatly improves accuracy. 2. Reconcile Bank Statements Every Month Yes, your bank statements should be reconciled every month. No, it’s not a good idea to let them sit around for 3, 4, 5, or more months. If you’ve forgotten to enter a payment or a sale in your books, but that payment or sale has been processed by your bank, it will be easier to correct the error if you catch it quickly. In an extreme case, not knowing how much you really have in the bank could lead to bounced checks. For every account that you receive a monthly statement — bank, credit cards, lines of credit, and loans — compare what their statement says with what your books say. If there are discrepancies, track down what happened and fix it. Of course, if you outsource bookkeeping to a service like xendoo, you can keep up with this task while keeping your personal schedule open for other responsibilities. 3. Pay Your Bills Promptly Vendors love customers who pay on time – or even early. Doing so will get you better deals and early payment discounts. On the flip side, being late will rack up interest charges. Staying on top of your bills, along with managing labor costs properly, are keys to keeping your financial house in order. To make sure this happens, you should have a reliable Accounts Payable process in place. Your A/P system will record invoices, pay bills online with a credit card or digitally generated checks, and automatically enter the expenses in your books. Record new invoices once or twice a week and make payments once per week to stay current. 4. Take a Close Look at Your Financial Reports Anyone can quickly glance at the bottom line of a financial report—but those numbers only tell a portion of the story. It’s the details that you need to understand, and those can be gathered if you take the time to read through your restaurant bookkeeping reports carefully. Your profit & loss statements and balance sheets can reveal crucial statistics for a restaurant business such as: Profit margin: gross profit ÷ total revenue Sales vs. cost of goods sold ratio Prime cost: ideally food + beverage + labor = 60% – 65% of total sales Compare current profit & loss to previous months and years Profit margins are notoriously tight in the restaurant industry. Having current information about your financial health is just as important as creating tasty food or offering great service. That’s why xendoo guarantees delivery of your P&L statement by the 5th business day of every month. 5. Nail Your Taxes. It’s worthwhile to track down as many tax tips for restaurants as you can find since taxes make up such a notable expense every month. One of the best ways to stay on top of taxes and avoid paying more than is necessary is to keep detailed, accurate records of everything that takes place in your business. Extra Ingredient: Outsource Your Payroll Payroll processing can be quite time-consuming, especially given the complex shift scheduling of most restaurants. It also comes with high penalties if you make mistakes in calculating payroll taxes, or don’t file the taxes on time. Payroll services are generally affordable, and can often be bundled with other accounting services. xendoo offers packages that include payroll processing for a budget-friendly flat monthly fee. Documentation is the name of the game in accounting, yet many restaurants – and businesses in other industries – fall short when doing their own bookkeeping. Working with xendoo is a big step in the right direction when it comes to documentation and record keeping. And, of course, xendoo can manage your tax filing as well, so there is nothing lost in translation when going from one service to the next. As an all-in-one bookkeeping and tax filing solution for your restaurant, tax season will no longer feel like the nightmare it once was [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
