Small Business Accounting

One of these headlines may sound familiar to you:

  • “Passionate Big Thinker Starts and Grows Business but Loses Touch with the Day to Day Operations and Faces Devastating Business Failure”
  • “Smart, Energetic Business Owner Calls it Quits After Many Years of Stagnation and Frustration”
  • “Lack of Business Clarity Brings Financial Surprises and Tough Times, Lead Frustrated Business Owner to Sell”
  • “Charismatic Leader Runs Successful Business for Many Years but Never Quite Gets the Results She Wants”

Don’t let this be you.

Running a business is a multi-faceted endeavor with many moving parts and one person cannot do them all effectively. In fact, a successful business owner should focus on one or two high-value activities and delegate the rest. They should build a team of professionals such as attorneys, accountants, insurance agents, bankers, etc. to support them and serve as their unofficial “board of directors.”

This is where we come in. At Innovative Solutions, we provide strategic accounting services to help our clients be the business owners they have always wanted to be, and to get the results they want. Click here to request a consultation.

A business owner faces new challenges and situations daily. They must make quick decisions and they need quick answers to make those decisions. Some common questions facing business owners include:

  • “Is it better to lease or buy this building or piece of equipment?”
  • “What’s the best entity for my business: an s-corporation, c-corporation, LLC, partnership, or sole-proprietorship?”
  • How do I get money out of my business?
  • Do I pay my property taxes out of my business or personal bank account?
  • “How do I put money into my business?”
  • “How can I minimize by taxes?”
  • “What tax form do I use for my business?”
  • “Can I deduct my car in my business?”
  • “Do I qualify to deduct a home office?”
  • “Can my company rent space from me?”
  • “How am I doing financially compared to my peers?”
  • “Can I deduct my golf club membership?”
  • “What’s the best way to account for my inventory?”
  • “If I don’t sell my inventory does it count as income for me?”
  • “How do I calculate overhead?”
  • “What do I do with obsolete inventory?”
  • “Why am I paying so much in taxes?”
  • “How much cash should I keep on hand?”
  • “What’s the best accounting software for my business?”
  • “Can I pay my kids through my business?”
  • “How should I reimburse my employees for mileage they’ve driven or conferences they’ve attended?”

The list could go on forever. Business owners need answers to these questions right away, so they can make decisions and move forward. With the wrong accountant, it can be hard to get answers to these questions. But we have a solution that works very well for our small business accounting clients.

First, all our packages of small business accounting services come with unlimited consultation. Our clients can pick up the phone or send us an email at any time to get a quick answer to their urgent questions. And they will never get a surprise bill from us, so they don’t have to fear asking that important question. Plus, we respond to all client emails in 24 hours.

Second, as strategic accountants, we meet with our small business clients periodically throughout the year. This helps us keep up to date on everything that’s going on in our clients’ businesses and lives. We generally are aware of major business decisions our clients are planning to make, before they happen. Once tax time comes, it’s too late to plan in advance to take advantage of tax reduction opportunities. There are a few last minute things that can be done to reduce taxes, but compared to what can be achieved with proactive planning, they don’t amount to much.

Our combination of unlimited consultation and periodic business advisory meetings help us serve as trusted advisors to our business clients. We function more as integral players on their teams, rather than as outside consultants.

We’d like to join your team. Click here to request a free initial consultation to find out whether we’d be a good fit for each other.

We are certified public accountants. We have CPA offices in Sacramento and Fairfield, CA. But that doesn’t mean that our accounting clients only come from Fairfield and Sacramento. If you live in Sacramento or Fairfield and you Google, “Certified Public Accountant Near Me,” “CPA offices near me,” “CPA Sacramento,” or “Fairfield Accountant,” hopefully, we will come up, but the reality is that we provide accounting and tax services to clients from all over. We have clients from the Bay Area, Napa, Vacaville, Roseville, Rocklin, Yuba City, West Sacramento, and so on. Our accounting firm is very technologically advanced and we can work with business clients anywhere in the United States and still provide the same personalized service. In fact, we have accounting and tax clients from as far away as Austin, TX and Illinois.

Our focus is on helping business owners.

Small business owners have many things to keep track of at one time. They wear many different hats.

For one thing, they have to manage payroll. They must have employees fill out W-4 and I-9 forms, collect time cards, process the payroll, keep track of sick and vacation pay, make sure payroll tax deposits are made on the proper schedule, and file quarterly and annual forms with the federal and state governments. No matter the size of the business, we recommend using a payroll service to perform most of these frequent, deadline-driven functions.

There are some great full-service payroll companies out there. If you need handholding, or your payroll situation is complex, you might consider a company like ADP or Paychex.

If your payroll is fairly simple, or you are a do-it-yourselfer, you might try Gusto payroll. Gusto is an online full service payroll company with great technical support. Intuit also has several payroll options that integrate directly with their QuickBooks accounting software.

There are also some helpful time-keeping apps available today that can replace hand-written time cards and send time information directly to the payroll software. Small business owners have much better things to do with their time than worry about the complexities of payroll. Additionally, using a payroll service shifts most of the liability for errors to the payroll service. Without fail, eventually, a letter will come from the IRS or the state employment department, saying that money is owed. It can take a long time to research and figure out what the error is and how to fix it. Leave that to the professionals at the payroll companies.

Small business owners also have to keep track of their profits and their estimated tax liability for the year. The government wants its share of your profit, known as taxes, throughout the year, not just at tax time. That’s why they require business owners to make quarterly estimated tax payments. If your business and personal situation are stable year to year, you may be able to rely on the estimated tax payment vouchers that your CPA provides you with your tax returns. If your business is growing rapidly, or your financial situation is changing, you may have to adjust the quarterly estimated payment amounts you send in. If you underpay during the year, the government will charge you underpayment penalties. If you overpay during the year, you are sending too much money to the government in advance and essentially giving them an interest free loan.

It’s wise to know your tax liability in advance to avoid underpayment or overpayment. Knowing your tax liability in advance also helps you plan. It helps you set aside just the right amount of money to pay taxes and frees you up to spend or reinvest the rest. Our business customers always know their tax liability in advance, and we work with them throughout the year to reduce it. They have great peace of mind. Click here to find out how we might help you gain some peace of mind around taxes.

Employees. Just hearing the word makes many small business owners cringe. Employees can be wonderful, helpful, and necessary, and at the same time, managing them can be one of the most difficult aspects of running a business. Business owners must hire, fire, evaluate, promote and train employees while complying with many government regulations.

Sales and Marketing. Every business owner must put energy into sales and marketing. In today’s competitive environment, a business that doesn’t invest time or money into sales and marketing will surely perish. It’s well known that referrals from great customers make the best new prospects and clients, but even referral marketing takes time.

Also, in today’s digital world, people check you and your business out on the web before engaging you, so you have to keep your web presence up. People check Google Maps, Yelp, Angie’s List, and other sites for reviews. They look at your website to see who you are and what you do, and more importantly, what you will do for them. If your website is full of helpful information that sets you apart from the crowd, you build trust with your potential clients. Today, most of a new client’s buying decision has been made on the web before he picks up the phone to call you. Managing all this properly takes a significant amount of time.

A business owner also has to worry about the rent she pays. Is it fair? Is it in line with that of other comparable buildings in the area. Is it the appropriate percent of revenue? If she owns the building can she save taxes by having her corporation rent from her? Should her building be in her name or in an LLC?

If a business has inventory, the owner has to determine whether he has the appropriate amount of inventory. He has to figure out where to store it, how to count it, how often to count it, and what to do with obsolete inventory.

An owner has to make sure the business has enough supplies to operate.

An owner has to make sure all business financial transactions are recorded and categorized. This is bookkeeping. An electronic accounting software such as QuickBooks, Xero, Peach Tree, or Great Plains should be used for this. There are many choices out there, but only one or two are probably the perfect fit for your business. Some business owners do their own bookkeeping. Others hire an internal bookkeeper or an external bookkeeping service to perform this function. Businesses without good bookkeeping can only guess at their success because they don’t have up-to-date financial statements to show them their financial results and guide them in their decision-making.

Accounting and bookkeeping are similar, and the field of accounting encompasses bookkeeping. As mentioned earlier, bookkeeping means recording and categorizing transactions. Accounting takes this to the next level by adding knowledge. An accountant knows about the tax effects of the categorization of transactions. An accountant makes adjusting journal entries to account for non-cash items such as depreciation and amortization. An accountant adjusts the loan balances on the books to make sure they tie to the amortization schedules provided by the bank. This ensures that the remaining loan principal balance is accurate and the correct amount of interest appears as a deduction on the income statement. An accountant reconciles the books to the monthly bank statements to make sure no transactions are missed. An accountant records the purchase and sale of assets in the books. She adjusts for payroll that has been earned by employees but not yet paid out. She accounts for payroll taxes that are due to the government in the near future but have not yet been paid.

Essentially, she improves on the bookkeeper’s work by adjusting the information in the books to produce useful financial statements. Then the accountant uses those financial statements to compare current results to past performance and predict results in the future. She calculates informative financial ratios and looks for trends and red flags. She also makes sure the books are set up in the best way for the business owner to use them to monitor and improve company performance and minimize taxes in the short and long term. She points out to the business owner, the things she sees and guides him to success.

Many people say they “look at” financial statements, but experienced accountants “read” financial statements like a book. It actually takes years to learn how to read financial statements effectively, so if you want guidance on using your numbers to run or grow your business, hiring an experienced accountant, really does matter. We are experienced accountants. Click here to see if we might be a good fit for each other.

Business owners also must file income tax returns. Usually they turn this daunting task over to a professional. Certified Public Accountants (CPAs) can prepare tax returns, but so can tax preparers. What’s the difference? Sometimes, other than more educational requirements and a better knowledge of the tax law, there isn’t much difference. Some CPAs just prepare their clients’ tax returns once a year with no other contact during the year. These are transactional CPAs. They just put the numbers that business owners give them into the tax return. This is exactly what a tax preparer does.

There isn’t much difference between a transactional CPAs and a tax preparer, but there is a huge difference between a strategic CPA and a tax preparer. Strategic CPAs are tax advisors, not just tax preparers. Nowadays, people can use online software to prepare their tax returns. The software prepares tax returns that comply with government filing regulations, but it doesn’t give quality tax advice.

A tax advisor or strategic accountant has an ongoing relationship with his clients and knows their situations well. He knows when they are considering buying a piece of equipment or renting a building. He knows when they will no longer be able to claim their kids as deductions on their tax returns. He knows what tax credits they may qualify for. He knows, and can communicate to them, in advance, the upcoming changes in the tax law. He helps them plan proactively to reduce their tax burden as the tax law changes.

Business owners must think about retirement and succession planning. All business owners exit their business at some point. They may plan to sell the business to a third party, pass it to a child, or just let it fade out and die. Poor planning often leads to the fade out and die method of business dissolution. With proper advance planning, however, business owners can get top dollar for their business, which they can use to supplement their other retirement assets. Our strategic accounting and financial planning services help business owners achieve this goal.

There are many other activities not listed here that a small business owner must address so it’s easy for a small business owner to spin her wheels day after day tackling small tasks. But that’s not what a small business owner should do. A small business owner needs to focus on one or two high-value activities that help her grow and succeed in business. She must turn the rest over to her team. Her team should include a mix of employees, outside contractors, and consultants. She should have a relationship of trust with her team members. The team members should be responsive and communicative, believe in her vision, and help her achieve it. We serve as the strategic accountant on our business clients’ teams. We help them get the results they want and be the business owners they have always wanted to be. Click here to see how we can help you get the results you want.