Outsourced Bookkeeping Helps Business Owners Manage Taxes
Business owners often find that, in the early years, they “wear many hats” around the office to reduce costs. According to the Clutch Accounting Report, 45% of small businesses do not employ a bookkeeper or an accountant. However, bookkeeping and accounting duties require a significant time commitment, and they often become increasingly complex over time. At some point, the administrative burden and potential risks will overshadow any initial cost-savings, which means it is time to delegate. Outsourced booking and accounting services can be cost-effective solutions.
Focus your time and energy on growing your business.
Keeping your focus on lead generation, networking, product development, and other profit-generating activities is vital. According to BLS data, nearly 50% of small businesses fail within the first five years, mainly due to a lack of planning and cash flow complications. When you are caught up in the thick of it, posting journal entries, reconciling bank statements, and trying to interpret tax law, it is challenging to focus on the other aspects of your business. By outsourcing, you can let go of the process and shift your focus back to generating profit without jeopardizing the accuracy of your financial information.
Leave tax compliance - and the stress that comes with it - to the experts.
At tax time, if your financial records do not represent your financial standing accurately, it could lead to misguided business decisions, missed tax savings opportunities, and higher income tax liabilities. Even a seemingly minor mistake can significantly impact your business’s financial health. Outsourcing your bookkeeping to a CPA firm gives you access to a professional team with technical knowledge and experience in accounting, tax, and bookkeeping across various industries.
Add an extra layer of risk detection and prevention.
As you add employees and your business grows, it is time to take internal controls, such as the segregation of accounting duties, seriously. Suppose the same employee that pays your vendors also reconciles your bank statements. In this case, there are improper checks and balances. Only one set of eyes passes over each side of the transaction, meaning there is no balance in place to help you avoid costly mistakes and instances of fraud. CPAs are well-versed in fraud risk and prevention, as they follow the industry’s ethical and professional standards, such as the American Institute of CPAs Code of Professional Conduct and their state society’s bylaws. Outsourced bookkeeping provides the proper separation and additional review.
Automation also helps reduce the risk of fraud and error. Because most outsourced bookkeeping service providers take advantage of systems that automatically import transactions, less manual input is required. Additionally, many CPAs work with cloud-based systems that encrypt data, which means your information will be secure.
Rest assured that your books, budget, and forecasts account for evolving and new legislation.
Taxes are constantly changing, and keeping up can be a challenge. Another professional and ethical standard for CPAs is a commitment to continuous learning and professional improvement. You can count on your team to stay up-to-date with general and industry-specific developments and state and federal regulatory measures that may affect you and your business.
When your CPA also provides your bookkeeping services, you can address potential tax issues well ahead of time. For example, in 2021, CPAs worked with clients to align their financial data to facilitate Paycheck Protection Program (PPP) loan forgiveness, claim employee retention credits (ERCs), and navigate the interplay between all other forms of COVID-19 relief funds they received to maximize the benefits and avoid double-dipping.
Looking ahead, the IRS is implementing a new tax form in 2022: Form 1099-K, Payment Card and Third Party Network Transactions. CPAs can help small business owners and self-employed individuals understand the use of the form and do not double-report income.
Enjoy professional services and expert advice without new-hire expenses.
When you hire a full-time employee, you take on the cost of payroll, payroll taxes, worker’s compensation, and other employee benefits. Even if you hire a part-time employee, you take on the cost of payroll and payroll taxes. Onboarding and training can also be costly. An outsourced professional does not add to your costs for payroll taxes, medical coverage, worker’s compensation, PTO, or any other employee benefits. Since CPAs know the ropes already, you will not have to spend as much time and money to bring them up to speed on your finances and operations.
Contact Livingston & Haynes
The team at L&H provides bookkeeping, tax, accounting, and advisory services to privately-held companies, including construction, manufacturing, technology, entrepreneurial, and emerging growth firms, and also serves nonprofit organizations, healthcare providers, and individuals. If you have questions or would like to learn more about L&H’s outsourced bookkeeping services, contact us today.
by Steven J. Haynes, MBA
Steven Haynes, MBA, is an administrative partner at Livingston & Haynes. Steve’s firm, Emerging Business Partners (EBPI), became an affiliate of L&H in 2007. Steve specializes in bookkeeping, payroll, and business advisory services, including tax, M&A, and funding and equity transactions, for technology, entrepreneurial, and emerging growth firms.