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SMEs and one man band companies need to make sure that their financial affairs are being dealt with by expert accountants. This kind of scenario is also applicable to all IT contractors and freelancers. Like all other businesses, they must also sign up with a reputable, specialist accountant that will handle their financial and accounting needs.

Dealing with numbers and vat and payroll issues is not the job for an IT contractor and it is not part of their expertise. They may have the depth of knowledge to deal with financial issues and paper work but instead of dealing with it, it is better to hire a reputable accountant to do all this for them.

Here are some of the tips that contractors can consider in looking for an accountant.

First of all, make sure to hire specialists. Before looking at anything else, you need to look for a team of specialist contractor accountants. Of course, you will most definitely want to hire an accountant that understands tax issues involved in a contracting business. You should look for firms who dealing with the contractor /freelance market.

Second, look for additional services that they offer. Like any other businesses, accountants for contractors also offer packages to their clients. This may include things such as completion of your annual self assessment return and IR35 contractual advice. If you are just about to begin your contract, your accountant can also help you with some issues in setting up your own company. They can help you register for VAT and any other services that will require their expertise.

Third, check the fees they are charging. Usually, contractor accountants may provide a complete accountancy service for a fixed monthly fee. However, you must fully research the services that the packages includes. Make sure that the amount that you will pay will be equal to value of the service that they will provide. Usually, the monthly packages include dealings with the tax authorities, PAYE and NI calculations, completion of TAX returns and year-end accounts.

Fourth, you must give some thought to their knowledge of tax legislation. They must be knowledgeable of IR35, managed service companies and income shifting since each of these issues has a big effect on the majority of contractors.

Fifth, you must consider the services that they provide. Like what is mentioned earlier, you must be aware of the services that they provide. You can contact several contractor accountants and find out about the services that they provide. You can compare the services that they provide including the fees that they incur and select the best contractor that will suit your needs.

Sixth, give some thought to personal recommendations. Among the other tips, this is the best way to look for a good firm of contractor accountants. With the help of other contractor colleagues, you can find the best accountants that can help you. They already have experience in dealing with them and you can be sure that they can provide the services that you need based on the testimonials of your colleagues.

By: Jimmy Haines

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Running a one-person business? Tired of the huge hit you take at tax time? Want to save money on your accounting and taxes? Consider these simple tips and tricks…

Tip 1: Use an accounting system

Oh sure. This sounds obvious. But unless you have a decent way to track both your income and your deductions, you not only won’t know how much money you’re making until tax time, you’ll also miss or forget about tax deductions.

Something like Quicken or Microsoft Money will work just fine. If you need more bookkeeping horsepower than these checkbook programs provide, look at stepping up to QuickBooks or Microsoft Small Business Accounting.

Tip 2: Don’t Incorporate

New business owners often rush to incorporate. But incorporation rarely makes sense for small businesses. And incorporation totally complicates your taxes and accounting.

What’s a new business owner to do? Form a limited liability company instead. A limited liability company, or LLC, gives you all the same liability protection. But without the tax complexity of a corporation.

An LLC with just one owner, for example, gets treated for income tax purposes as a sole proprietorship. Which means to report your business activity to the IRS or state revenue folks, all you do is file a simple, one- or two-page schedule with your regular individual tax return.

Tip: Consider hiring your kids

If you have minor children and they help you out in your business-doing real work-consider hiring them. As long as they earn less than $5,000, they won’t pay any income taxes on their wages nor any payroll taxes. Yet, you’ll still get to write-off the amounts you pay them as business expenses. (This might be a neat way to save for a kid’s college expenses.)

Tip 4: Consider hiring your spouse

While medical insurance is a deduction for income-tax purposes for sole proprietors, you can save far more in taxes by hiring your spouse and then setting up what’s called a Section 105(b) plan. Such a plan lets you treat all of your family’s medical expenses (insurance, out of pocket, deductibles and so on) deductions for both income tax purposes and self-employment tax purposes.

If you are interested in this, confer with a local tax practitioner. Section 105(b) plans can be a little tricky to understand if you haven’t used them before.

Tip 5: Take the home office deduction

Hey, if you regularly and exclusively use some portion of your home for your business, go ahead and take the home office deduction.

Don’t worry about this deduction being an audit flag. Or a hassle. The deduction is meant for people like you.

Tip 6: Set up a pension plan

If you want to save more than a regular IRA allows, set up a pension plan for your business. You can easily set up something like a SEP-IRA which will allow you to contribute up to twenty of your profit to a tax deferred account.

Example: If you make $50,000, you could use a SEP-IRA to contribute $10,000 to your pension account. And there are other good low-cost options available, too, such as SIMPLE-IRAs and one-person 401(k) plans.

To get more information on small business pension plans, contact the Vanguard Group at http://www.vanguard.com or Charles Schwab at http://www.schwab.com.

Tip 7: Learn and then use TurboTax or TaxCut

A final tip: In most cases, the taxes of sole proprietorship are pretty simple. So, rather than come to someone like me (a CPA) or an enrolled agent or one of those nationwide tax preparation firms, try doing your return yourself using tax software.

Programs like TurboTax and TaxCut work great for simple-situation sole proprietors.

By: Stephen Nelson

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For some business owners, a third party accountant just seems like a waste of time and money. Sure, they can minimize the amount of time you spend calculating taxes and duties, but when you’re high on time and short on financial resources, the overall cost of an accountant can seem to be too high to have any purpose. While this is sometimes true, for the vast majority of businesses accounting services have the exact opposite effect; you actually end up saving money by using them.

There are several different types of business currencies out there. Of course, money is known as the universal business currency, and it is for trading and purchasing. However, there’s another currency that’s worth just as much to millions of businesses: time. Without time, there’s no way to achieve your annual sales goals, grow your business and meet your business targets. While the global recession has made more businesses starved for money, even during points of economic prosperity businesses are troubled by limited time.

This is where accounting services can prove highly useful. Hiring in-house accountancy staff is incredibly expensive, especially when you take the health costs, legal hiring expenses and time costs into account. While having extra employees adds manpower and time to your business, the cost associated with it is often too high. Accountancy services can save you both time and money in this regard. By minimizing the accountancy workload for your team, you can focus on more direct and important goals. Of course, by using an outside contractor rather than an internal employee, the amount of paperwork surrounding your accountancy dealings decreases tremendously.

Of course, the benefits of using accounting services for your business aren’t just limited to time. Many people associate outside contractors and services with extra costs, but for accountants this can be a misguided and inaccurate way to judge them. Accountancy services can save you money, and the cost of using an accountancy firm is easily made up in the amount that you’ll save on taxes, duties and government rates. Think about it this way – when you’re taking care of your own taxes, you’re in a financial world that’s completely foreign. As such, some things get passed over and some boxes are left un-ticked. However, by using accounting services to manage and calculate your taxes, you’re putting the job in the hands of an experienced specialist, who knows exactly what they need to do to save you money.

It’s the old cost vs. time dilemma, and a lot of business owners fall for the wrong metric. Time saved is money saved, regardless of whether it comes with a direct cost or not. If your business has the potential to earn $1000 per hour with your full attention, spending your time on accountancy tasks that can be outsourced for just a fraction of that is a waste of both time and money. Opportunity cost factors for a lot in business, and by focusing on what is important you’ll end up saving a bucket load of income.

So next time you’re about to embark on a complicated tax mission using your internet employees, or even your own time, think about the opportunity cost involved. Juggling taxes and payments with a major project could end up costing you the quality of both, which means extra costs on both sides. Whenever possible, stick to the direct services of your business, and let your accounting services provider take care of the rest. You’ll save money, save time, and grow your business without having taxes, payments and accounts bother you.

By: Josh Ing

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Part Two of Cash to Cash Cycle Series

Next: Sales

We’ve already found $250,000…so let’s find another $250,000…

Laying the Foundation

Last week, we raised the question: what would your business do with $1,000,000? To lay the foundation we introduced inventory as the first of four areas that will lead toward our million dollar goal. And you saw exactly how to achieve the first $250,000 in cash savings by avoiding delays with an increase in velocity, as well as an increase in discipline and competency. But how exactly? With time – as you saw with inventory and as you’ll see this week.

Tackling Accounting Procedures

Let’s continue that crucial theme of time with another major source on your balance sheet – specifically, accounts receivable (A/R). If you have $500,000 or more in accounts receivable then STOP! We have found it again.

Reducing Average Days Collection

Why? Because if we focus on reducing your average days collection by 50%, then your accounts receivable balance will fall to $250,000 and the result will be an extra $250,000 in your bank account. And just like that, we’re halfway to our $1,000,000 goal.

So now, let’s see how this actually works in a real-life business scenario.

Accounting Procedures Service Business Example

A service organization with $700,000 in average A/R balances needed assistance. So we examined their A/R function to understand and quantify the workflow and workload issues. Then we designed and implemented a process to improve the A/R performance.

The metrics we developed reduced their “over 60″ accounts receivables by 85% and their overall A/R balance by 50% within 90 days of implementing the new procedures. With these new processes and reports, the company now tracks Average Days Collection and past due rather than just Days Sales Outstanding (DSO) as the measure of their collection effectiveness.

The result: an extra $350,000 in cash. And, again, we explicitly see the crucial role of time and how an increase in velocity and discipline directly yields an increase in efficiency and cash savings. So how can you use time to your advantage?

Methods to Design the New Accounting Process

Decrease collection cycle. Examine customer accounts that go beyond your terms. Do not wait until twice the net terms to take action.

Tighten credit policy. Examine credit process for slippage. Do you have a credit approval process? Do you perform credit checks? What standards are used to extend credit?

Reduce credit terms. Change the credit terms you offer your customers. If you offer terms of net 45, reduce it to net 30. You might offer a discount of 1% if paid within 10 days else net due in 30 days. This is equivalent to 18 % annual interest and most businesses will take those terms.

Shorten the invoice process. Bill your customers immediately. This is a big one. Many service organizations wait until the end of the month to tally billable hours and determine customer charges. Do not wait until the end of the month. This could reduce your day’s receivable by as much as 15 days right there. Email or fax your invoices to save another day or two (e.g. QuickBooks accounting software contains this feature).

Reduce billing errors. Most customers delay payments because of invoice errors. Customers won’t recognize the invoice until it is corrected and may not even notify you, the vendor, of the error until you call for collection. Again, avoiding this delay in error and time will amount to cash savings.

Train Accounts Receivables personnel. Make sure that all personnel involved are training to understand the performance metrics for their jobs. For example, a company will manage $500,000 in monthly A/R balances (that’s $6 Million a year!) using an A/R clerk who makes $30,000. But then the supervisor uses nothing more than On-The-Job (OJT) training for the clerk. Then the CFO thinks that he or she (the CFO) is really managing the money. But, in reality, that’s not the case; the clerk is managing the money day-to-day. So shouldn’t the A/R clerk receive enough training to manage such a significant amount?

After all, it only takes a 6% change in A/R in one month to equal the A/R clerk’s entire annual salary. Isn’t the A/R savings worth a little extra time in training?

Maximizing the Accounting Process. With the Accounts Receivable department you should use each element of the process to gain the most benefit for your business. And with time-saving procedures set in place, you will let your efficiency work for you.

Grabbing Your Policy Goal

With well-defined processes and procedures in place, you will increase efficiency by reducing your Average Days Collection. And of course a reduction in Average Days Collection means your Accounts Receivable balance will also fall, creating more cash on hand. And just like that we’re halfway to our $1,000,000 goal. All you have to do is grab it.

Next week, we will look at finding still another $250,000 in the Sales function – which will give us $750,000 toward our goal of $1 million in cash savings. So, again, not only do you aim to reap the rewards of extra savings to your bottom line, but also see more cash in the bank – $1,000,000 cash to be exact.

By: Chris Anderson

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With the passing of time, sapling businesses are getting too much importance. These days, an evident thing is the upcoming of various sapling businesses and that is only because funds for establishing these businesses have become readily available in the market. Therefore, one does not need to struggle a lot to open up a new small business. However, the one thing that they need to understand is the fact, that running a business, whether big or small, is not a very easy task. One needs to be very careful while running a business and needs to take the entire task of running a business seriously.

Establishing and running a small business is indeed a difficult thing because one needs to start the thing from scratch and this has to be carefully because if the base or the root is not strong, then it becomes a problem in the future. In such circumstances, taking the help of small business accounting firm is definitely a good move.

Taking the help of a small business accounting firm helps a small business to understand the various techniques and strategies that can be implemented to help the business earn good profit right at the start of establishing it. The main thing behind establishing and running a business is to earn good profit and make the organization grow.

When a business becomes a loss making firm, many problems crop up. If these problems get aggravated, then the business can even get shut down. Therefore, it is very important to strategize things and implement them accordingly. This is indeed needed and a small business accounting firm knows all the strategies that need to be implemented for a small business to turn into a profit making organization.

Accounting is a huge domain and involves many things. All these things need to carefully done and the people who are associated with this department need to be thorough in their work. The work associated with this department of any firm is hectic and a bit monotonous and the people who do this work need to be good with numbers. Therefore, taking the help of a small business accounting firm helps businesses to outsource the services of professionals who are thorough with their work and who know all the aspects of this huge domain. Moreover, one needs to be careful while entering numbers in any of the books of the accountancy because one small error in entering the number could result in huge losses in the future. Therefore, accuracy is crucial for people who work in this department.

There are many firms who provide the services of small business accounting to small businesses. Their basic motto is to help these businesses grow and to help them earn profit. Earning profit is the basic necessity of any business owner and this is given full importance. Once anyone wants to establish a business, it is evident that the person wants to earn money from it. Therefore, it is important to understand the means from where profit can be earned and to eradicate all the means of incurring losses. Once these points can be understood, it becomes easy for any firm to earn profit and avoid losses.

By: Alvis Brazma

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Accounting software is of great benefit to your company if it is successful in meeting the business needs. This software helps to restructure the entire accounting process along with an easy to understand audit trail. But accounting software not always works wonders for your business. It can also lead to complication of your business strategy and process causing frustration among the users. This makes it important to very clearly evaluate and analyze the software that you would be using for your business’s current and future requirements. It is also vital to check if the software integrates well with all your business practices.

Prior to purchasing the accounting software it is essential to first determine the needs of your business. The functions of this software vary depending on the kind of business establishment. For instance, a retailer would benefit from the software function of tracking inventory whereas those in the service sector find the time tracking functionality more beneficial due to the nature of the work. In fact, there are certain account software’s that are crafted specially for certain industries, the features of which are not available in a general accounting software. This is why the need to examine the business requirements is so significant.

The other important function of this software is to polish the procedure of recording transactions. Any small business wanting to get the maximum out of this kind of software should choose one which promotes integration of all the important information along with the standard accounting methods. Customized business forms like purchase order number, invoices should be easily provided by this accounting business software. The software should be able to access the names, phone numbers, contact address of the customer and the vendor. In order to make the process of payroll checks easier all databases that contain the employees’ names, contact number, address and tax information should be connected and automated simply by the software. The key aspect of accounting software is to automate maximum accounting process and integrate vital business data.

It is essential for all small business owners to ensure that the accounting software grows with their own businesses. To completely begin working with a new software package to expand business can become a very costly affair. Hence you should always select that accounting business software which is able to provide you with additional features and can be easily upgraded. Software with a great track record and a trademark of a reputable company is an ideal choice.

By: Chase Lane

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