Shop Smart for Small Business Accounting Services
All small business accounting services are not the same. Thinking that way could cost you a lot of money over time. Another common mistake that costs money is thinking that you can piece together services through multiple providers and get the best result.
Sure, you can find an amazing bookkeeper, another super person providing tax preparation services, and a third accountant, for tax advice and planning. Each may be great at their job, but when tax time comes, it becomes a round-robin transfer of information. Often decisions made based on once-a-year collaboration can fall short of the best solution for minimizing business and personal taxes.
What should the best small business accounting services provide in the way of services to business owners? Accounting as defined by Merriam-Webster:
Definition of accounting: the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results, also: the principles and procedures of this system.
That’s a satisfactory overview definition, but expanding the meaning of the terms recording, summarizing, analyzing, and reporting places the accounting function into every facet of a business. It also bleeds over into the personal lives of business owners, as their taxes on business profits are a byproduct.
Small business accounting services reach into every activity of the business mostly through the analyzing and reporting functions. Through the analysis of financial data, planning and decision-making are improved. Reporting includes tax returns reporting the finances of the business to the government. When reviewing small business accounting services, consider if a single resource has the expertise and staff to provide the following services.
Bookkeeping
Of course, bookkeeping is the foundation for many of the other accounting functions. Only by setting up and maintaining an organized system of financial activity data capture and recording can you count on accuracy in the results. Bookkeeping should coordinate with other functions to assure that the income, expense, and other financial data is properly categorized and reported.
Tax Preparation
Using the data from bookkeeping and other resources in this group of services, the tax preparation function is tasked with keeping up with current IRS forms and reporting requirements. Only with accurate input from bookkeeping can the tax preparers produce tax returns that reduce the likelihood of an IRS audit.
Tax Planning
Waiting until the end of the year to consider financial data and make tax return decisions will cost you money. Tax planning is one of the most important small business accounting services. Decisions that benefit from tax planning include:
- When to make major purchases.
- When to defer or accelerate income or expenses.
- The best depreciation methods for tax minimization.
Tax planning is an ongoing function that is constantly analyzing financial data and helping owners to make major business decisions.
Audit Avoidance and Representation
The accounting and tax expert is quite important to the business and tax minimization. However, even more important is their advice on how to do things and how to report to the IRS in ways that help a business to avoid audits. No matter how well things are done, at times the IRS will have questions or possibly even order an audit. Having an appropriately licensed tax professional authorized to practice in front of the IRS and prepared with the other services to do so can stop negative consequences in their tracks.
All these services under one umbrella improves results. The takeaway is that small business accounting services are not small in importance.