New trends in bookkeeping emerge every year. Prosperity Bookkeeping strives to keep up-to-date on the latest bookkeeping compliance, technology, and service trends. Here are a few bookkeeping trends that we see shaping the future of the industry.
1. Remote, Shared Access of Cloud-Based Accounting
Because of its flexibility, scalability, and convenience, cloud-based accounting systems are growing in popularity. With cloud-based accounting, organizations maintain their business financial data online. Thus, business owners can view and track their finances at anytime from anywhere. Businesses can grant access to multiple users who can collaborate remotely online. To ensure the confidentiality and security of the financial data, users can be granted limited authorization. Cloud computing gives Prosperity Bookkeeping and our clients 24/7/365 access to financial data from anywhere in the world.
Business owners thrive on the DIY mentality. Consequently, many small business owners think they should be able to do it all, including keeping their books and financial records. After all, user-friendly software like QuickBooks makes DIY bookkeeping attractive. So, it’s no surprise that business owners find it especially difficult to let go of DIY bookkeeping and hire a bookkeeper, like Prosperity Bookkeeping. Let’s look at 5 reasons why DIY bookkeeping doesn’t work for many small business owners.
Do you really want to spend your precious time on bookwork?
Bookkeepers handle a range of financial activities for a business, from bill payment to payroll and tax filing. All of these business activities take time. Business owners who spend time in the office with DIY bookkeeping aren’t pursuing new accounts, managing employees, or engaging with customers. Bookkeeping takes the boss away from working on business growth. Plus, who wants to spend their nights and weekends playing catch-up when accounting gets put off too long?
As a small business owner, you have so many irons in the fire. Because of this, it is easy to push your bookkeeping to the back burner. We understand, because we’re business owners, too. But be forewarned! “I’ll catch up later” only works for so long.
Dangers of Delayed Bookkeeping
Lackadaisical and delayed bookkeeping can affect a business owner’s ability to:
Make smart business decisions
Take advantage for all available tax deductions
Secure capital for growth
Catch outstanding receivables, so you’re not leaving money on the table
Avoid underpaying taxes which can result in costly interest and IRS penalties
Promptly fix bookkeeping errors that might otherwise snowball and lead to inaccurate tax filings and financial statements
Simple acts of kindness contribute to a more positive, optimistic, and happier community. Many companies set a budget for charitable giving at the start of the year. Philanthropy serves a number of purposes – most importantly, to positively impact the community. At Prosperity Bookkeeping, we support causes in a wide range of areas, including ending poverty (Circles USA - can you spot me in the video?), inclusivity (myTeam Triumph and The Privilege Institute), appreciation for the arts (The Art Garage), and so many more.
Benefits of Charitable Giving
Companies benefit in many ways from donating to charities. First, donations support the mission of the nonprofits that you, your employees, and your customers care about. Second, employees feel good about working for an organization that gives back, so charitable giving is a vital part of the corporate culture. Third, when you give a charitable donation, you affiliate your company with the recipient, opening new avenues for collaboration. And don’t forget, giving to charity is good PR. So, consider sharing donation photos and information on social media, newsletters, and other marketing platforms. From a marketing standpoint, this is a two-way relationship. The charity can also publicize your charitable support, giving your organization recognition and credibility.
With today’s unprecedented labor shortage, small business owners are doing all they can to recruit, hire, and retain quality workers. They’re even becoming more creative in ways to engage workers. An employee bonus is an employment perk that motivates and rewards workers and inspires loyalty. Bonuses come in two general categories: performance-based bonuses, to acknowledge employees for specific achievements, and non-performance bonuses, for general appreciation and goodwill. Here are nine of the most common types of employee bonuses.
As the end of the year draws near, many small business owners are considering bonus pay for their employees. Companies have plenty of good reasons to provide this employment perk. When the company is having a good year, employers have the flexibility to award bonuses; employees share in the wealth. Or on the flip side, employees share in the pain if the company isn’t having a good year and doesn’t issue bonuses.
Unlike employee raises that commit employers to long-term, cumulative expenditures, bonuses are one-time perks. Thus, bonuses are easier to control and introduce in manageable levels. Bonuses come in a variety of forms and can be used in addition to raises to compensate, reward, and retain quality workers.
Picture yourself with a shopping cart full of school supplies at the checkout – and you grab the wrong credit card to pay for them. Oops! You just paid for your kid’s backpack and everything that goes inside with your business credit card. Mistakes like these happen. In order to maintain the integrity of your financial statements, you need to go through a fairly painless process to adjust your accounting records. But if this school supply scenario is more than just a one-time glitch, we need to have a serious conversation.
Commingling personal and business accounts is a big no-no for any business owner, but especially if you’re operating your business as an LLC, S Corp or C Corp and not simply as a sole proprietor. (For advice about choosing a business structure, read this article link to https://www.sba.gov/business-guide/launch-your-business/choose-business-structure by the U.S. Small Business Administration.) By mixing business and personal funds, you’re acting as if you and the business are the same entity. Therefore, you put your personal bank account and assets at risk. Your business entity loses the legal liability protection that comes with its corporate structure.
Every industry has its own language and terms. These words and phrases can be confusing to anyone who is not part of the daily operations of a specific sector, and the bookkeeping business is no exception.
One of the fastest ways to decrease small business expenses is to cut overhead costs. It takes less time to optimize everyday overhead expenses than to address labor, supply and inventory issues. By definition, overhead costs are business expenses that support operations but don’t directly generate revenue. Business overhead refers to fixed costs such as utilities, interest payments, and office leases or mortgages. These expenses must be paid, regardless of a company’s sales revenue or incoming cash flow.
Overhead Costs Affect Profitability
Although overhead costs don’t generate revenue, they absolutely affect profitability. Businesses use a percentage of their sales each month to pay their overhead costs. Overhead costs aren’t based on what you make, and overly high overhead expenses will eat into profits and threaten the viability of your small business. To maintain a thriving business, companies should shoot for an overhead rate of less than 35%. Here’s how to calculate your Overhead Rate:
Anyone who buys eggs, bacon, and sweet rolls for Sunday brunch quickly realizes that inflation is hitting their pocketbook. Consumers are paying more for products and services in 2022, compared with 2021. The Consumer Price Index rose 8.3% from August 2021 to August 2022, according to the Bureau of Labor Statistics. Small businesses are not immune to inflation. Today, it costs more to borrow money, travel, rent office space, buy insurance, and pay for other business expenses. A tight labor market is pushing wages higher. How is your small business responding to inflation? Have you raised prices to cover these…
In a small business, every penny counts. Even the smallest cost-cutting strategies can positively affect a company’s profitability. Oftentimes, simple, common-sense changes can instantly boost your bottom line. Cost-reduction strategies can save you a lot of money in the long run. By reducing the average cost of one product or service, you’ll earn extra cash to get more done in your small business. Here are 7 smart ways for a small business to cut costs.
1. Cut Software License Costs
Software licenses can be a big expense for small businesses. If you can find an app that does basically the same thing as a software license, for less money, it is worth making a change. The savings go straight to the bottom line.
2. Negotiate Prices with Suppliers
If you make widgets, maybe a new supplier that sells the same raw material is willing to negotiate on the price to get your business. After you have success with one raw material, continue to look for replacements and negotiate on other materials, also. Improve your negotiation skills and learn helpful negotiation tips that can lead to an enormous pay-off.
As a small business owner, you know how you go about paying your bills or sending invoices. But do you do these bookkeeping tasks the same way every time for maximum efficiency? Do you sometimes miss a step? Can someone on your staff easily take over these bookkeeping responsibilities and get the same results as you do?
Develop a Baseline for Day-to-Day Tasks
Organization is a key component of the success of a small business. Companies that lack structure often experience problems that lead to disgruntled customers and stressed-out employees. To help their company run like a well-oiled machine, small business owners need to create a framework for operations. Standard Operating Procedures (SOPs) help to maximize efficiency and create a baseline for how to perform day-to-day tasks. Small business owners have so many responsibilities that it would be impossible to write an SOP for every business practice they complete. So, why not start with just one Standard Operating Procedure for an important bookkeeping task you perform regularly?
When starting a business, you don’t just hang a sign outside the front door and announce, “We’re open!” If only it were that simple! Entrepreneurs don’t just wake up one day and start working in their new business the next. Instead, they must carefully lay the foundation for their new enterprise – and they won’t go it alone. They need outside experts to get the business up and running. One of these experts just might be a bookkeeper … um, like me!
Unless you are running a tech startup that was designed to burn heavily through cash to grow as quickly as possible, the stream of money you have dictates how well the business is performing.
These problems happen to small and large businesses alike. They can hit us without warning or slowly drain the life out of our company. We could have customers who always pay, but they settle invoices on their own schedule. A common source of pain is slow-paying clients. It’s easy for us to overlook the problem as long as the money eventually arrives.
Here are a couple of ideas to follow to ensure your cash flow remains positive:
In my years as a professional bookkeeper, this scene played out all too often. A small business owner chooses DIY bookkeeping. That decision works if – and only if – the business owner has the know-how, time, and technology to keep accurate records. I’ve seen the alternative! A business owner gets occupied by so many other responsibilities that bookkeeping falls to the wayside. They tell themselves, “I’ll get to my bookkeeping next week,” and weeks turn into months. Stacks of invoices, expense receipts, and paperwork pile up. At tax time, they spend their weekends feverishly playing catch-up, trying to remember and recreate past financial transactions. Their procrastination leads to stress and frustration, and potentially, inaccuracies that can result in costly tax penalties and overdraft fees.
For small business owners, long-term financial success hinges on a steady cash flow. Balancing the ebb and flow of cash in an organization contributes to a business’ growth and sustainability. Learn cash flow tips by requesting our free report, 105 Ways to Speed up Cash Flow in Your Small Business. In service industries, one of the most important financial decisions that business owners make is where to set their prices. Charge too much and they’ll l lose business because clients will find cheaper services elsewhere. Charge too little and they curb cash flow, making it more difficult to remain viable in the long run.
The pricing of services tends to be a subjective task. Business owners typically base service fees on the value being provided to the client. Owners consider factors like the service provider’s education and skill that’s necessary for the job, the time involved, the client experience, and other factors. They look at the direct and indirect costs associated with their services. For more advice regarding setting prices for services, check out How to Price Your Business Services by the U.S. Chamber of Commerce.
When you run a small business, past due payments can slow your cash flow to a trickle. Stale invoices and late customer payments may make it difficult to pay employees, vendors and suppliers. No business owner looks forward to collecting late payments. Reminding clients that they’re late on their invoices is a tedious and oftentimes awkward task. Business owners walk a thin line. They respectfully request immediate payment while also trying to avoid conflicts that damage business relationships. Charging a late fee or cutting off products or service delivery puts all parties in an uncomfortable, unfortunate business situation.
To get paid faster and avoid business conflicts, business owners need a few accounts receivable strategies. One strategy that works for Prosperity Bookkeeping is to follow up with payers every week. It is perfectly acceptable to send friendly reminders to clients to ask about their invoices. Reminders aren’t just for overdue or late payments. On the contrary, reminders work great as notices that a deadline is approaching.
Help Wanted signs are everywhere! In almost every sector of the economy, companies are scrambling to find workers. In today’s tight labor market, job seekers are in the driver’s seat. The U.S. unemployment rate was just 3.6%-4% in early 2022. This equates to nearly two available jobs for every unemployed person. As a result, employers have to compete harder to attract and hire the talent they need to be fully staffed. One way to attract job seekers is to pay well.