If you are a small business owner, and you are using QuickBooks, Xero, Wave, FreshBooks, or another bookkeeping tool, NOW is the time to review your 2019 business records. Here is are 10 items you should review when looking at your records:
- Check bank account connections. Are all bank entries flowing to your records? If not, you do not have a complete set of records.
- Are your bank accounts reconciled every month? If not, you may be missing mistakes, either by you or by the bank. Be sure your (or your accountant) are reconciling all bank accounts each month.
- Are you categorizing each entry as 'business' or 'personal'? Do this each day (or at a minimum, each week) to keep track of your expenses.
- Are all business items categorized properly? In other words, are all advertising expenses marked as 'advertising'? Do this weekly. If you wait more than a week or two, it is easy to make a mistake ("now, what was that $200 for?")
- Mileage - are you using an app like MileIQ or QuickBooks Self Employed to track your mileage? If not, you could be losing $0.58 every mile you drive!
- Sales Tax - If you are required to pay Sales Tax to your state, are you up to date? If not, file and pay any outstanding payments, then contact your state sales tax office to ensure you are on track.
- Estimated Self Employment Tax - This is the one item that many people seem to overlook throughout the year, but will cause penalties if not paid when due. Be sure your Self Employment Tax is paid to date, to prevent any unpleasant surprises in 2020.
- Have a 'Ask My Accountant' account, and use it! - Throughout the year, things will come up that you have questions about. When I set up a system for a new client (QuickBooks, Wave, etc.), I always create an account called "Ask my Accountant" or "Ask Phil". If you are not sure about something, just put it in the "Ask my Accountant" account. Then, send off a quick email to your accountant or bookkeeper, something like "I just spent $65.00 on business cards. Should I use Advertising or Office Expense?"
- Ask BEFORE you do something! At the end of the day, it is your business, and you will do what you want. However, I STRONGLY recommend that you consult your accountant first.
Here is an example (and this is a really simple example, but illustrates the point):
- You want a new vehicle for your business.
- You have an option to lease or purchase the vehicle.
Which is the best option, for your business at this particular time? If you don't know the answer, then consult your accountant. Together, you can weigh the options and see which option will provide the best outcome for your business.
10. Employees vs. Contractors
For some businesses, there is a decision to be made: is this new person an employee or a contractor? It depends. And, how you treat them can determine how they are viewed (from the IRS point of view), and what tax you are liable for.
I recommend you speak to your accountant before taking on any new help (whether employee or contractor). There are a number of forms to complete, as well as a number of guidelines to follow. Missing on any of these may result in you owing more tax than you had anticipated.
If you are unsure about your business records, please contact us TODAY.