Category: Bookkeeping

QuickBooks Online Tips for Small Businesses

If you’re running a small business and new to accounting, then QuickBooks Online is an excellent tool to keep track of your finances. It is a cloud-based accounting software program that allows you to manage your business finances and have a record of each transaction. You can use it to view all of your financial information in one place, pay bills, send invoices, track expenses, and much more. Whether you are a new business owner or just new to using QuickBooks, there are a few things that will help you hit the ground running with QuickBooks Online.

Here are 5 quick tips that will help you get started:

1. Create Your User ID and Password

The first step to getting started with QuickBooks Online as a business owner is to set up your User ID and password. With this, you can access the software from anywhere on any device. To create an account, you need to enter your name, email address, password, and security question. After that, you can log into your account. You can change your password anytime and you can also set up reminders to help you remember your login details. This way, you won’t have to worry about forgetting them when you want to check your accounts or make changes.

2. Set Up Your Company File

The first time you log in to QuickBooks Online, a setup wizard will prompt you through the process. You’ll enter your basic company information (business name, address, contact information.) Then you’ll be prompted to enter more details for your business. These include your industry, the product or service you sell, and your company type. You can add information for your accountant or bookkeeper now to give them access, but you can also skip this and fill out this information later on. You’ll also have the option to import data from QuickBooks, Windows, or MYOB. You can also choose your payment method and select your preferences (cash, check, PayPal, direct deposit, etc.)

Once you click next, the setup wizard will create a list of customized features for you to use. Because this is a customized list, know that there are more feature options and you always have the ability to turn any feature on and off. The suggested customization is based on the information you enter, so it can be helpful to use when you are first starting out and getting to know the QuickBooks Online tool.

You can further tailor your settings by choosing the Company Settings option under the Cogs Company Preferences menu on the upper right hand side of the screen. The Company Settings window will show you four tabs that can be edited for your business requirements. From the Company tab, you can upload your logo, edit your business name and contact details, add your ABN, select your language preference (which is defaulted to English), and more.

From the Sales tab, you can customize your forms, set up default sales invoice terms, and shipping and inventory information, and create default messages for emailing invoices and other business forms. You can also create custom fields and custom transaction numbers from the Sales tab.

The Expenses tab is pretty self-explanatory, but this is where you can track expenses and items by customers, turn on purchase orders, make items and expenses billable, and enter default bill payment terms.

The Advanced tab allows you to manage more complex actions. You can enable account numbers, discounts, automations, and time tracking. You can choose the first month of your financial and tax year. You can close your Books to lock the period down if needed. You can select your currency. You can also enable warnings so that you are notified if duplicate check or bill numbers are used.

The gear icon is also where you’ll find a number of additional tabs that will help you in completing the setup process. The Chart of Accounts tab lets you set up accounts for your industry. The Products and Services tab, which allows you to add services, inventory, and income amounts. From the Manage Users tab you can go in and add your accountant or bookkeeper and other members of your staff. You can use the Transactions>Banking tab to add bank accounts, credit cards, and set up your bank rules. The Employees tab lets you turn on and off payroll. The Customers and Suppliers tabs allow you to add accounts for people in those categories. The Customer Card Information screen allows you to manually add in and save customer pay information and preferences. From the gear icon, you can also customize your Style, Appearance, Header, Activity Table, and Footer.

Finally, the gear icon allows you to Import Data, which is an important step if you are transferring business information into QuickBooks Online. You can import both customer and supplier information, your chart of accounts, and your products and services from another software. You can access these options from gear icon>Tools>Import Data.

If you don’t already have some sort of contact list setup within QuickBooks, you may find it helpful to import a CSV spreadsheet containing customer names and addresses. For payroll purposes, you might consider importing employee transaction records from a separate system like Gusto.

3. Learn How To Use The Software

When you first open QuickBooks Online, the welcome screen will offer links to tutorials, support resources, and other useful tools. After that, these items can be found via the link labeled “Help & Training” at the bottom left corner of the homepage. This will lead you directly to a series of instructional videos designed to walk you step-by-step through all aspects of running your business using QuickBooks Online.

As intuitive and user-friendly as QuickBooks Online is, making use of these training videos and quick-start guides gives you a head start and makes sure you understand all the tools that this software has to offer. You can review the videos anytime you wish, although we recommend scheduling time to watch one per day and familiarize yourself with each new tool before moving on to the next. Building this learning time into your daily routine will help you quickly familiarize yourself with the software.

And there’s no better way to learn how to use QuickBooks than by actually doing it! After you watch videos about basic features like entering transactions, creating reports, or setting up payroll, do your “homework.” Make use of that knowledge while it is fresh and set up those aspects of your business in QuickBooks Online as soon as you complete each video or training.

4. Access Your Reports

Once you’re logged in and have your company file set up, you can access your reports from the left side of the screen. Available features include charts, graphs, and the ability to generate PDFs for your reports. You can choose between a variety of standard reports such as Balance Sheet, Profit/Loss Statement, Income Statement, Cash Flow Analysis, Accounts Receivable Aging Report, Sales By Customer, Expenses By Vendor, Purchases By Employee, Inventory Valuation, and Budgeted vs Actual Spending.

Whatever service or product your small business provides, there are likely several standard reports that will get you the information you need to run your business. QuickBooks Online also provides the ability to create custom reports tailored specifically to your needs, and you can set up any report to run automatically at certain times, saving you time and allowing you to work efficiently as a business owner.

5. Get Help With Specialized Needs

QuickBooks Online offers specialized services geared towards helping a variety of small businesses manage their finances efficiently.

For example, if you sell products over the internet, you may find value in QuickBooks Point Of Sale. POS allows you to track inventory levels, calculate taxes, accept payment, and much more. If you operate an eCommerce store, then you might benefit from QuickBooks Merchant Services which includes similar functionality plus credit card processing capabilities. And if you provide accounting services, then Intuit Business Solutions can assist you with bookkeeping tasks including invoicing clients, tracking expenses, generating financial statements, and preparing quarterly income tax returns.

If you feel like you can’t find specialized options that work well for your particular situation, don’t worry – just contact customer service and ask them what else could possibly fit your needs. QuickBooks Online offers 24/7 support services so you have on-call support anytime you get stuck or have questions about the features.

Sound Accounts is an expert in supporting small business accounting needs. We can help you get the most out of QuickBooks Online to support your growing business needs. Contact us today for a free estimate of services.

November 17, 2021
What is the Average cost of accounting services for small business?

It is a wonderful thing when your small business grows to the point that you need to add support staff. And one of the best investments you can make in support staff is to hire outsourced accounting services. Outsourcing your bookkeeping to a professional service provider can free up your time and allow you to focus on growing your business. It also ensures that you have an expert accounting professional who can manage your small business finances with accuracy.

But how do you know what to budget for when it comes to accounting services? Let’s break down the different ways you can look at the cost of accounting services so that you can make the best financial decisions possible for your small business.

How to calculate the cost of accounting services

Accounting expenses should be included in your businesses’ overhead costs. These are costs that do not necessarily turn a profit, but are nevertheless necessary for the function of your business. Other examples of overhead include software, rent, licenses applicable to your industry, shipping, and legal expenses. When you understand that accounting services are a necessary part of your overhead, it is easier to budget an appropriate amount for that line item.

The fees for accounting services vary based on your business size, needs, and even your business structure. For example, if you ship a physical product, your accounting services will need to keep track of incoming and outgoing inventory, warehouse stock, shipping costs, and more. If you have a large staff, your accounting services will have to factor in payroll management. Are you a sole proprietorship who just needs occasional support to keep all your invoices straight? Can you manage basic bookkeeping tasks, but need help to create accurate financial reports and forecasts? These are all different needs that may have different prices associated with each task.

If you hire a part-time bookkeeper or business accountant for simplified accounting tasks, then you will likely pay an hourly rate for their services. As your needs increase, you can add on more hourly work as needed. The hourly rate for outsourcing a bookkeeper runs between $25.00 and $300.00 an hour depending on several factors, especially if services involve more complex accounting practices.. Keep in mind that this is a national average, and the average in your city may differ. A skilled and experienced bookkeeper will usually land on the higher end though it would still be a worthwhile investment because of the expertise they bring to your small business.

If you run a larger or more complicated business, you may need to pay a monthly retainer for a fixed number of tasks and services from a freelance accountant. The average price of outsourcing your bookkeeping can range from $500 a month to $2500 a month, depending on the amount of work and the complexity of the bookkeeping you need.

Or you may choose to go the route of accounting software, which can streamline your bookkeeping and provide similar reports and insights that a bookkeeping professional can. In that case, your costs will be based on the accounting software you choose, whether it is a one-time desktop software purchase or a cloud-based monthly subscription. You may also have different subscription options where your monthly fee will depend on the size of your business or the number of software users.

PCMag.com did a 2021 round-up comparing ten top accounting software systems, which includes not only specifics and benefits for each but a cost comparison. If you were to choose from those options, you could pay anywhere between $3.99 a month to $60 a month. Within that price range, you have a wide array of options to suit your needs and find the product that gives you the features you want at a price you can afford. Just be mindful that you get what you pay for, and you still may end up wanting to hire a bookkeeper to manage the software for you.

If you have a large business or run multiple businesses, it may be most valuable to have an in-house bookkeeper. But if you go that route, you’ll be adding a full-time staff to your payroll and possibly including benefits, making this the most expensive option if you are just comparing dollar amounts between the above options.

The cost of not having an accountant

The flip side of this is, of course, counting the cost of not having an accountant. That may not seem as straightforward or tangible as looking at the hard numbers of hiring an accountant. But consider the following questions:

How many hours a month are you spending on bookkeeping, and what is your hourly rate? How much are you investing in managing your small business accounting yourself? How much time are you putting into it? Could that time be better redirected to other areas of your small business, such as pursuing growth opportunities, improving your marketing, or coming up with new products and services? Is your time more valuable as a bookkeeper and managing reports, or as a visionary for your small business? What is the return on investment when you are your own bookkeeper vs. hiring a bookkeeper?

You know your small business best, and as a business owner you are already juggling multiple priorities. Does hiring a bookkeeper help you better realign your priorities in a way that promotes growth? If so, the cost is a worthwhile investment, no matter which option you choose.

FAQ’s

What are the benefits of bookkeeping services?

You’ll get peace of mind, knowing that a bookkeeping expert is managing your small business accounts, maintaining your financial records, and providing tax preparation and other tax services. You’ll benefit from their experience and skill at maintaining detailed records. You’ll also have more time to devote to managing and growing your business. A bookkeeper can also give you a clear picture of your cash flow management and the overall financial health of your business. This gives you the knowledge to make wise financial decisions as your business grows.

What can I expect from a bookkeeping service?

Bookkeeping services can include invoicing and bill pay, bank and credit card reconciliations, financial reporting, financial statement preparation, accounts payable or receivable management, sales and sales tax reporting, tax planning, filing business taxes and more. A bookkeeping service can also help clean up your existing financial files, adding financial information to a new bookkeeping software, and even training on bookkeeping software.

So how much will bookkeeping services cost my small business?

The short answer, it depends! Do you need support on a monthly basis, or just in advance of quarterly tax returns? Do you want to hire a bookkeeper, get an accounting software subscription, or a combination of both? There are many affordable options out there that will fit your needs and budget. Most experienced bookkeepers and accounting software services offer options for a flat rate per month. Your annual costs for bookkeeping will be easier to plan for when you can break it down into cost-per-month.

If you are ready to expand your business and outsource your bookkeeping, Sound Accounts is here to help. We offer both monthly and quarterly bookkeeping services so you can get the support you need that fits in your budget. Contact us for a free assessment today!

October 27, 2021
What Does a Bookkeeper Do Exactly?

Bookkeeping is the process of recording financial transactions and other information related to a business or organization. This includes keeping track of income and expenses, payroll, accounts payable, accounts receivable, and more. But more than that, what a bookkeeper does is give you peace of mind. When you hire a bookkeeper, you get an expert at managing business accounts, tracking expenses and income, and ensuring that your quarterly taxes are paid accurately and on time. But that’s just the short answer. Let’s get down to the nitty gritty of what a bookkeeper can do for your small business.

What can a bookkeeper do?

Most bookkeepers are no longer keeping hard copy “books” and ledgers to track financial statements and other transactional information for business owners. To manage bookkeeping services, they may use spreadsheets, accounting software, and even bookkeeping apps that connect bookkeeping software to banks and other financial institutions to make tracking income and expenses easier. They perform a variety of bookkeeping tasks all designed to help you manage your small business finances in a healthy and prudent way.

Bookkeepers use these tools to complete data entry and record transaction details for both income and expenditures. They’ll track credits (incoming money) and debits (outgoing money) for each account of your small business. They can manage both paying bills and employee payroll. Bookkeepers can create a balance sheet, income statement, cash flow statement, statement of changes in equity, and many other types of financial statements that help you understand where your business is financially. Each detailed report can highlight a different snapshot or key metric of your businesses’ financial health at any given time.

Bookkeepers also produce and/or pay invoices for inventory orders, services, outgoing transactions, and other bills. They can manage accounts receivable, accounts payable, and employee payroll services. This ensures that your bills get paid, your employees get paid, and you get paid on time. Their attention will ensure that you don’t have any overdue accounts, and that any debt payments happen on time. They can ensure that you have a healthy cash flow throughout high and low-volume cycles of your business.

Because they have the full financial picture of your small business, your bookkeeper can help you make better budgeting decisions, identify patterns, and understand the seasonal flow of your income and business expenses. They can help you understand the metrics of your company’s financial health, monitor debt levels, keep you up to date on any tax code changes, and report on issues as they come up. They can highlight the financial impact of business decisions and provide the best value recommendations for a financially sound future.

Beyond the practical services that a bookkeeper provides, their value also lies in the efficiency they bring to your small business. As a small business owner, you obviously have the acumen for managing the financial details of creating and owning a business. Still, hiring a bookkeeper means you have a financial expert keeping an eye on the bottom line, helping to ensure that all your choices lead to a more focused and successful financial makeup within the framework of your business. Even freelancers can benefit greatly from the organizational and financial benefits of a good bookkeeper.

One of a bookkeepers’ most important tasks is to monitor financial records to ensure they are accurate, which means reconciling and reporting any discrepancies found in the bookkeeping records. They’ll be able to minimize and correct errors to ensure that your financial reports and data are accurate. The peace of mind and attention to detail that a bookkeeper brings can be invaluable if your business is audited. Having accurate bookkeeping records can make the auditing process go much more smoothly than if you have incomplete records.

They also free up your time and allow you to focus on the areas of business ownership that you excel at or enjoy the most, such as planning for future growth, focusing on customer and user experience, or creating new products and services. And as your business grows and your accounting needs increase or become more complex, your bookkeeper can also train additional bookkeeping staff to meet the changing needs of your professional objectives. One of the best financial decisions you can make is to hire an expert bookkeeper who can support the financial health of your business and train other employees to do the same.

Sound Accounts provides bookkeeping, payroll, and licensing services for small businesses. Contact us to see how we can best support your growing business.

For quick answers to a few of your bookkeeper inquiries, check out our frequently asked questions below.

FAQ’s

What does a bookkeeper do?

A bookkeeper records and reconciles all financial aspects of your small business. They can maintain financial records, manage invoicing, bank reconciliation, payments, and payroll. They manage day-to-day accounting tasks in addition to generating both annual and monthly reports to keep you up to date on the financial health of your business. And their experience can simplify the process of paying small business taxes each quarter.

How can a bookkeeper help my small business?

They can take the load of making and recording financial transactions off your plate. Their expertise can give you peace of mind and free up your time to manage other areas of your small business. They can also help you understand the overall health and seasonal patterns of your small business, provide business recommendations, and help you make wise financial decisions through accurate reporting.

Can I just use a bookkeeping software instead of hiring a bookkeeper?

Bookkeeping software or cloud-based bookkeeping services are fantastic resources, but they are only as good as the information you put into it. It can store your business transactions, but it can’t make intuitive business decisions, identify growth areas, or catch mistakes and reconcile errors in the same way that a person can. Hiring a bookkeeper is an investment that will pay off for your small business.

October 20, 2021
How to choose the best Virtual bookkeeping services

Whether you are just thinking about starting a business or are in the early stages of running your small business, one top priority should be to decide how to manage your bookkeeping. Keeping your business finances organized, especially in the first year, is vital to the success and health of your growing business. Here are our top tips for how business owners can choose the best virtual bookkeeping services. For quick answers to some of your most important questions, check out our FAQ (frequently asked questions) at the end of the article.

What is virtual bookkeeping?

There are really two answers to this question, but both essentially have to do with recording, categorizing, and reconciling your business transactions, producing financial reports virtually, and even managing payroll. The difference is in whether you choose to do it yourself with accounting software, or hire a dedicated bookkeeper to manage your business finances virtually.

There are more options than ever for business owners, both in terms of software options for do-it-yourself bookkeeping and with bookkeeping companies and freelancers who can bring both bookkeeping and small business experience to your company.

Virtual bookkeeping software is designed to take the guesswork out of expense tracking, inventory tracking, reconciling monthly transactions, and creating cash flow statements. Whereas hiring a virtual accountant means you have a real person who understands the nuances of accounting and bookkeeping. Online accountants can answer questions in real time and be on call when you need support and advisory services.

Why choose a virtual bookkeeping service?

One of the most obvious benefits of virtual bookkeeping is how it organizes your record-keeping. Picture this: relying on paper files means you have to take the time to create an easy-to-navigate file organization plan, follow through on that organization so that you can conveniently find the information you need, and manage an ever-growing storage system to stay on top of your records.

On the flip side, virtual bookkeeping organizes all your small business data and information in the cloud. Not only do you have robust search engines that help you find important information in a fraction of the time, you’ll probably free up an enormous amount of physical space in your office. Virtual bookkeeping is secure and simple to navigate, and makes tax season that much easier.

But staying organized doesn’t just help you when tax filing needs to happen; the robust reporting tools that come with virtual bookkeeping products allow you to identify areas of improvement, make healthy financial decisions, and think ahead about when and how to scale up your business sustainably. Choosing a good virtual bookkeeping service can help you accomplish these aspects of running a small business while keeping an eye on the bottom line.

Choosing a dedicated bookkeeper to manage your small business finances provides peace of mind for business owners. Whether they feel nervous about reconciling business accounts, or feel they don’t have the time needed to manage the volume of monthly reconciliations, a dedicated account manager or virtual bookkeeper can provide accurate accounting and additional services as needed.

Using a virtual bookkeeping business or hiring an experienced freelance bookkeeper also provides affordable bookkeeping services, as compared to hiring someone full-time to manage your books in-house. Many professional bookkeepers offer competitive pricing with either a flat rate, monthly rate, or custom pricing based on your individual needs, making this an excellent option for small businesses or companies that are just starting out.

What are the options for virtual bookkeeping services?

The most important thing that any bookkeeper will do for you is keep track of your books on an ongoing basis so that they know what’s going on with your money. This means keeping accurate records of transactions as well as tracking income, expenses, and payroll over time. If you’re looking for online bookkeeping services, there are three options: cloud-based solutions, desktop software, and hiring a virtual bookkeeper. Cloud-based solutions offer many benefits including ease of use, flexibility, scalability, security, and cost savings. Desktop software offers similar features but also includes more robust reporting capabilities. Both options have their pros and cons, which we’ll discuss below.

Cloud-Based Solutions

A cloud-based accounting system works by storing data online instead of using local hard drives. The advantage here is that this type of setup makes accessing information easy because everything happens through the internet. You don’t need to worry about backing up files or having them physically stored somewhere else. It also helps if you want to access your accounting records from anywhere since you won’t need to download anything onto your computer. However, one downside to cloud-based systems is that they aren’t always secure. They may not encrypt sensitive documents like bank statements, making them vulnerable to hackers who might steal personal information. Another drawback is that some companies charge monthly fees for storage space. These costs add up quickly, particularly if you run multiple businesses.

Desktop Software

If you prefer working with traditional methods such as spreadsheets and paper forms, then desktop software is probably right for you. With desktop software, you get full control over every aspect of your accounting processes. For example, you can create custom reports, enter new transaction details manually, and even print invoices directly from within the program itself. One major benefit of desktop software is its ability to integrate with other programs. So, if you already use QuickBooks Online for payroll processing, you could easily import employee hours into QBO while still maintaining separate entries for each individual. In addition, you can sync your inventory between different locations via barcode scanning technology.

Virtual Bookkeeping Personnel

You can also choose to outsource your bookkeeping and hire a dedicated bookkeeper to manage your accounting virtually. This is someone who has access to and can manage and reconcile your financial transactions. They’ll provide accounting expertise and take the guess-work out of filing your quarterly and annual taxes. You may even be able to find someone that has significant experience in your industry, meaning they can provide expertise and knowledge beyond number-crunching.

Think about the unique benefits that cloud-based solutions, desktop software, and virtual bookkeepers can each provide your small business. Your decision may just come down to personal preference, but think about what makes your small business or industry unique.

Are there services and benefits that make one option more attractive than the other? How does cost factor into your decision? Do you want to have robust options for scalability as your small business grows? Can you invest better in your small business by managing your accounting and transactions yourself or by outsourcing your bookkeeping?

Your answers to each of these questions can help you narrow down the options and make the best choice for your virtual bookkeeping services.

What makes a good virtual bookkeeping service?

When it comes to software, every option is going to offer basic bookkeeping services and accounting support. But the best ones go above and beyond that with added tools that make small business management easier and more efficient.

Some systems offer project management and communication tools, allowing a high-level of collaboration that is ideal for businesses with a lot of employees. Other tools have processes for tracking and managing inventory and shipping, which is great if your small business produces a physical product. Some services will give you the option of creating custom reports, while others offer a variety of reports but no custom build-out options. And some software providers offer efficient solutions for automating regular processes, such as monthly reconciliations and quarterly financial statements. Again, a big factor in your decision-making should be deciding what bells and whistles are specific to your small business needs and necessary for your success.

One specific service to research when looking into managing your own finances through bookkeeping software is customer service or customer support. When you are looking at virtual bookkeeping services, find out if they offer training videos, troubleshooting, or a 24/7 hotline that you can call anytime you need help with the software. The more responsive they are to customer needs, the better your experience will be in using their virtual bookkeeping software. You can also check out online reviews of their customer service.

When looking for a virtual bookkeeper to manage your accounts, ask about their experience, how long they’ve been bookkeeping, how they will communicate with you, if they offer payroll services, and the accounting tools that they prefer to use. Check to see if they have their own website, or if there are online reviews of their bookkeeping services. If you feel like you can manage the majority of your accounting yourself and just need help around tax time, ask about their fees for quarterly tax services.

Going with a virtual bookkeeper (rather than managing bookkeeping software yourself) can provide business owners with real-world advice on the best software and tools for their unique business needs.

Sound Accounts offers virtual bookkeeping, payroll, and licensing services to small businesses in a variety of industries. Contact us for a free consultation to see if our services are a good fit for your company.

Learn more about virtual bookkeeping with our frequently asked questions and answers below.

FAQ’s

What is a virtual bookkeeping service?

A virtual bookkeeping service is a cloud-based software used to track transactions, prepare monthly income and expense summaries, file taxes, and generate various types of reports. Business information is entered into the system so it accurately reflects the company’s finances.

What is a virtual bookkeeper and what do they do?

A virtual bookkeeper is an online accountant who works remotely from home. They take care of all aspects of running your books including: entering transactions, reconciling bank accounts and financial records, preparing financial statements, analyzing data, generating reports, and providing tax advice. A virtual bookkeeper also helps clients file taxes on time so they don’t incur penalties. Virtual bookkeepers typically charge hourly rates based on how many hours per month they work.

What are the benefits of hiring a virtual bookkeeper vs. using bookkeeping software?

There are several reasons why you might want to hire a virtual bookkeeper instead of doing this task yourself. They save time by taking the task of entering transactions manually off your plate. Hiring a professional means you won’t have to worry about mistakes being made because no one else has access to your personal files. Finally, working with a virtual bookkeeper allows you to focus on other parts of your business rather than spending valuable time tracking down errors and trying to figure out where things went wrong. Bookkeeping software is a great tool, but it is only as good as the information you put in it. If you have concerns about accuracy, or feel you may not have the time to devote to tracking all your transactions, then hiring a virtual bookkeeper is a wise investment for your small business.

October 13, 2021
Everything You Need to Know About Sales Orders in QuickBooks

A sales order is simply a document used by businesses to record transactions with customers. It contains information about products sold, prices charged, payment terms offered, and shipping details. A sales order includes all the necessary information needed to complete a sale transaction between two parties: buyer and seller. For example, if the product you sell is a widget and you sell online, then you would need to have a sales order created so that buyers could place their orders. Once they do, you send out invoices based on the amount paid per widget. If you are selling more than just widgets, then you may also want to use other types of documents, including vendor bills of lading, delivery tickets, packing slips, and more.

How to Use the Sales Order Option

It is important to know that Sales Orders are only available in QuickBooks Desktop Premier and QuickBooks Enterprise versions. But if you have one of those versions, you’ll be able to use the sales order tool to save time and manage your inventory more efficiently.

To turn on the Sales Order feature once you are in QuickBooks, go to the Edit menu and click on Preferences. Select Sales & Customers and then go to the Company Preferences tab. From there you can select the Enable Sales Order checkbox and then click OK.

Go back to the QuickBooks Home screen or the Customers menu and click on Sales Orders/Create Sales Orders. You can select a customer or customer job from the Customer: Job drop-down, or Add New if your customer is not on the list. Fill in the form with relevant customer and sales information. If you select or add an item you already have in QuickBooks, then the description and amount can be set to automatically populate when you make your selection. Otherwise, you’ll have to take the time to fill in that information yourself.

You can also create discount items so that when you select them, the discount auto-populates into the Sales Order. To do this go to the QuickBooks Lists Menu and select Item List. Right-click so that an option box opens and click New. In the New Item window, choose the Type drop-down and then click Discount. You can then enter the Item Name or Number, a Description, Sales Tax, and other necessary information for the customer. Then in the Amount or $ area you can enter the discount amount or the percentage of cost savings. Click Save and Close when you are done.

If you provide estimates to your clients, you can also create sales orders from those estimates. Just find the correct estimate and click Create Sales Order at the top of the estimate form. You can then edit the information if needed before clicking Save & Close.

QuickBooks has a great visual tutorial for how to create Sales Orders from scratch, so check that out if you get stuck.

How Sales Order Stages Update Your Inventory Levels

The other thing to know about creating Sales Orders is that it can update your inventory items’ stock level based on the stage of the Sales Order. This is a great way to keep track of product inventory.

Stage 1 is the Draft stage. Some users choose to bypass this, but it can be helpful if you want to use a Draft as an estimate sheet for a customer. Creating a draft will not affect your stock record. Stage 2 is Active, where you have assigned stock to an order but it has not been deducted from your stock yet. On an Active Sales Order click Finalize to move to the third stage which is, of course, the Finalized stage or Stage 3. From here you can start fulfilling your order, which will mark the stock as committed but not yet deducted from your total. Stage 4 is Fulfilled, which is when you ship the order and your stock will update to show the reduction in inventory values. This inventory tracking method ensures that you aren’t still counting inventory that is already out of your warehouse and in the shipping process.

Using the Sales Order Stages is one of the best inventory tracking models and an excellent way to keep an accurate count of your inventory quantities. Using this tool will help you make the most cost-effective business decisions because you will always have an accurate count of your product inventory values.

Integrating Your e-Commerce Channel with Your Sales Orders

QuickBooks Commerce allows you to integrate your e-Commerce with QuickBooks so that you have a central hub from which to manage your orders. The way this is managed will be different based on your e-Commerce channel. Whether you deliver your product through a B2C or B2B e-Commerce channel, an Online Marketplace, a Consignment Location, or a Point of Sale System, QuickBooks can integrate with those systems so that your records sync up and your inventory tracking methods stay accurate.

QuickBooks has tutorials for each of the above e-Commerce channels so no matter how you’ve set up your sales, it only takes a few steps to integrate these channels with QuickBooks Commerce. And while QuickBooks Commerce may be a better choice for larger businesses, it is a good idea to see what solutions it offers when you are ready to scale up.

How to Use the Sales Order Fulfillment Worksheet

QuickBooks provides a Sales Order Fulfillment Worksheet to give you a simplified process for reviewing all aspects of the sales order. To get started, go to the QuickBooks Edit menu and click on Preferences. On the left side, click on Items & Inventory and then go to the Company Preferences tab. Click on the Advanced Inventory Setting button and then go to the Site Operations tab. From there, check the Sales Order Fulfillment Worksheet box. Now you can start managing and fulfilling your sales orders by selecting the Customers menu and then the Sales Order Fulfillment Worksheet.

The Sales order Fulfillment Worksheet has three tabs, titled Dashboard, Pick, and Pack. On the Dashboard tab, you can see an overview of your sales orders and their statuses. You can also perform actions from the tab, such as Send for Packing or Print Shipping Label. You also have the ability to sort each column within the Dashboard. The Pick and Pack tabs allow you to manage your picklist and your packing orders.

You can also choose between one of three processes for fulfilling sales orders. The process that is best for you will depend on how big your company is, your sales order volume, and your operations. Your options are: 1. Pick, Pack, and Ship, 2. Pick and Ship, and 3. Ship. Again, QuickBooks has a great visual training page for setting up and managing these workflows so you can find the perfect solution that fits your small business needs.

When you know how to manage Sales Orders in QuickBooks, keeping your sales records straight is easy. When you need support in managing all your financial statements during tax time, Sound Accounts is here to help.

October 6, 2021
Top 5 Mistakes Small Business Owners Make with Quickbooks

QuickBooks is a cloud-based accounting software program used by small businesses. It allows you to manage your finances, prepare financial reports, and generate customized invoices. It can keep track of your business expenses, sales, payroll, inventory, time and attendance, and more. It also helps you organize your books, prepare business tax forms, and manage your quarterly tax payments. This makes things easier and less expensive overall, since employees don’t have to spend hours tracking information across multiple systems. Plus, it also helps eliminate data entry errors.

But there are some mistakes that small business owners often make with QuickBooks, particularly if they are new business owners. These mistakes can cause problems and frustration for your accountant, or you if your business is small enough that you need to manage your business accounting by yourself.

Here are 5 of the most common mistakes that small business owners make with QuickBooks, and how to address them.

Mistake #1: Not understanding how to work with QuickBooks properly

When you start using QuickBooks, you may think that everything is easy. QuickBooks is designed to be intuitive and user friendly, but that doesn’t mean it is without a learning curve. If you don’t know how to use it well, then things could go wrong quickly.

If you don’t take the time to learn all the tools and functions correctly, you can easily make an accounting error that is difficult to reconcile. If you don’t know how to record the details of your transactions correctly, then it can be very hard to prove anything if a discrepancy or audit comes up. This can snowball into creating inaccurate reports and not being able to accurately compare figures over long periods of time. You’ll lose the ability to spot trends or identify areas where improvements can be made for the financial health of your business. Not only that, but not learning the full functionality of QuickBooks means you could also be missing out on great features that can improve efficiency and accuracy for your small business.

If you’ve invested in QuickBooks, you owe it to yourself to learn how to use it properly. It is well worth the time to ensure that you get everything you are paying for.

Mistake #2: Not Updating Your Business Transactions In a Timely Manner

QuickBooks Online is a fantastic tool for a variety of business needs. You can track inventory, manage orders and sales, maintain timesheets, and manage payroll. But it is still a system that needs to be updated and reviewed to maintain the integrity of your financial records. Any action that you take for your business needs to also be reflected in QuickBooks Online. That means committing the time needed to make sure that your business transactions and other records are entered or updated as soon as possible.

It’s easy to get excited about a shiny new piece of technology, especially with all the promises of efficiency, accuracy, and ease that QuickBooks Online truly does deliver on. But if you are a smaller company or a freelancer, it can be difficult to make the mental switch and build the habit of updating your records online rather than putting them away in a file cabinet or a massive Google Drive folder. It is also easy to fall into the habit of thinking “Oh, I’ll remember to update this new sale tomorrow”, and then forget.

But the great thing about QuickBooks Online is that, in addition to being an effective solution for any business need, it is also user-friendly and easy to navigate even for beginners. It can also give you an accountability boost, knowing that you’ll make the best use of the system by maintaining meticulous records. Take advantage of the free training available and build time into your weekly routine to do “housekeeping” and ensure that the business actions you take in real time are recorded in QuickBooks Online.

Mistake #3: Not Reconciling Your Accounts

When you work with QuickBooks Online, you should set up automatic reconciliation so that you won’t miss out on savings. Automated reconciliation only takes minutes per month, yet not reconciling is one of many accounting errors small business owners make.

When you use automated reconciliations, you get access to real-time information. This allows you to see exactly what needs to happen before you pay bills. For example, you might receive a bill for $1,000, but when reconciling your accounts, you realize that your payment owed is $500 less than that amount. Or your automated reconciliation catches a late invoice, allowing you to check in with a client before too much time passes. By using automated reconciliation, you are able to catch errors right away, which improves the accuracy of accounting and reduces your accounting mistakes overall.

Mistake #4: Not Reviewing Your Profit and Loss Statement

You may think that reviewing profit and loss statements isn’t important, but it actually plays a huge role in keeping your finances accurate. For certain industries, the profit margins are very small. And if you are a new business, you need to get in the habit of reviewing your profit margin equation. Your profit and loss statement is vital to getting an accurate picture of your overall finances. QuickBooks makes it very easy to review profits and losses, so why not take advantage of it?

When businesses fail to review their P&L statement, they can easily fall into the trap of assuming that things are fine since they haven’t seen a major change in recent months. Unfortunately, this assumption leads to an inaccurate grasp of the financial wellbeing of your business. It doesn’t matter whether you own a restaurant or a construction firm; you still need to look at your profits and losses at least a few times a year.

Mistake #5: Not Creating or Updating User Roles & Permissions

User roles and permissions play a big role in ensuring that everyone has an appropriate level of access to your QuickBooks account, based on their position in your company. Without these roles and permission settings, someone could potentially gain access to sensitive data without permission. That means that they could steal money from your bank account or even delete records. To avoid these issues, you must create user roles and assign appropriate permissions. Otherwise, you could find yourself dealing with serious security risks down the road.

This should also include having employees use strong passwords and also updating them regularly, in addition to deactivating old permissions for former employees that have moved on from your company.

Whether you are a sole proprietor who is new to managing business accounting or a seasoned small business owner with a robust understanding of bookkeeping, QuickBooks is an excellent system for maintaining financial records and giving you peace of mind. Sound Accounts can help you take the guesswork out of managing your business finances through QuickBooks.

September 29, 2021
QuickBooks vs Xero: What’s the Difference?

QuickBooks is a popular business accounting software that is used around the world. Xero is a newer but also a popular business accounting software that is more geared towards larger companies. They offer similar services, but there are unique differences between them that you and your accounting department should consider. In this article, we will go over the differences between these two products and help you decide which one is right for your business.

What Is QuickBooks?

QuickBooks allows users to manage their finances in an easy-to-use interface that can be accessed from anywhere with internet access. It is available as both QuickBooks Online, which is a cloud-based service, and as QuickBooks Pro which is their desktop version. This makes it perfect for any type of company, whether they have employees or are a sole proprietor.

If you run a payroll service, QuickBooks helps you easily set up paychecks, calculate tax deductions, connect bank accounts, manage banking transactions and online payments, and get everyone on the company payroll with ease. It also manages timesheets and allows employees who work overtime to log extra hours directly onto tasks, making it easier to track wages accurately. You can easily manage your business taxes and your quarterly taxes.

If you sell items online, the inventory management system allows you to keep track of your inventory levels at all times. You can import inventory orders, add new items, update existing inventory, view sales history, and compare current inventory stock levels to previous years. You can easily view your balance sheet and expense tracking with this business accounting software.

QuickBooks’ customer relationship management system allows you to organize customer information into categories such as contact details, purchase histories, and more, making managing customers easier than ever before. Billing and Invoicing is generated automatically when certain events occur. For example, if you receive payment, you can generate an invoice immediately and it will calculate shipping costs, tax rates, and other fees associated with selling goods. There is also an invoice template if you are new to creating them and want to make sure you have included all the necessary information. Expense reporting is also simplified through categorized transactions based on location, category, date, and amount. You can quickly find specific expenditures using filters and search criteria. The ease of expense reporting and the search functions take away a lot of the guesswork and frustration with accounting, bank reconciliation, and business taxes, even for established accountants.

What is Xero?

Similarly, Xero is cloud accounting software designed specifically for businesses. Its main focus lies in helping companies save time and money by automating processes. In addition to this, it offers robust security measures to protect sensitive financial data.

The most obvious advantage of Xero over traditional desktop accounting programs is speed. Since it runs entirely in the cloud, there are no downloads required; all updates happen instantly. There are no installation steps either, which means less downtime during setup. Once installed, Xero takes care of itself. No more worrying about backups, upgrades, or system crashes! QuickBooks Online also benefits from automatic upgrades and backups without the need to initiate these on your own. However, while both systems are free from the worry of local problems that come with desktop, laptops and other devices, they are still sometimes vulnerable to network crashes since they depend on a consistent internet connection.

Another major advantage of Xero is scalability. Unlike desktop applications, Xero doesn’t limit growth. As long as you’re connected to the Internet, you’ll always have access to updated versions of your software. New features come along regularly, so unlike some legacy systems, your business won’t be left behind.

Xero was designed with simplicity in mind. It is easy to use and does not require any technical knowledge. It is suitable for small businesses and individuals, though their main customers do tend to be larger businesses. With their app, you can check your account anytime, anywhere, and access your account from any device. It is compatible with Android, iOS, Windows, Mac, and Linux operating systems, and seamlessly integrates with Google Drive and other third-party apps.

Xero also has comparable invoicing and billing systems to QuickBooks. It allows users the ability to customize reports for specific needs besides adding images, graphs, charts, and tables to their reports. The customizability of their reporting is an excellent feature if you have highly specific reporting needs.

Another big benefit to Xero are its powerful security features. Data encryption ensures that nobody but you can read your personal information. User authentication keeps unauthorized people off your computer. And user permissions prevent others from accessing areas of your account that aren’t meant for public viewing. You can add second factor authentication to your accounts, requiring each employee to login using both a password and a phone number to access Xero. Xero also includes automatic back-ups, giving you an extra level of protection for your small business data.

Xero also comes with 24/7 customer support via phone, email, chat, and social media. They offer free employee training and ongoing support through a customer service team that can answer any questions at any time.

So what’s the difference?

The main difference between the two comes down to the pricing plan and customization options based on your needs. QuickBooks has both a cloud and a desktop-based version, while Xero runs solely in the cloud. Both are user friendly and each accounting dashboard is attractive and simple to navigate. Managing bills, expenses, invoicing, connecting your bank, and managing other financial transactions is comparable between the two programs, giving you an accurate picture of your business transactions and your overall financial health.

Both provide multiple plan options where the pricing is based per month per person. Each option also offers a robust array of integration with various third-party apps, such as Google Drive, CRMs (customer relationship management software), time tracking tools, email marketing, project tracking, and ecommerce. You will need to compare and verify that your existing systems will work with QuickBooks and Xero, which can help you make a final decision on a software for your business bookkeeping.

In terms of pricing and scalability, QuickBooks is popular with freelancers and small businesses because of the low cost. QuickBooks Online offers three versions based on the number of users, going from $25 a month for one user up to $180 a month for 25 users, though they also regularly offer promotions to start using QuickBooks Online for half-price for the first three months. QuickBooks Pro offers an annual desktop subscription for $299.99, with a similar promotion for 50% off in the first three months. QuickBooks gives you an incredible amount of value at even the lowest price point, allowing you to access all the key features of their accounting software at a reasonable cost.

Xero is attractive to more mid-level companies with up to 1000 employees due to its scalability. Xero offers three pricing tiers from $11 per month with limited features to $62 a month with full functionality. They regularly offer joining discounts similar to QuickBooks Online, and also give you the option of an add-on feature, Payroll with Gusto, for an additional monthly fee. The difference between their cheapest plan vs. QuickBooks Online is that there is a limit to how many invoices per month you can process. These limits make the basic plan with Xero a better choice for freelancers or entrepreneurs with side hustles. Where Xero has the advantage is in its scalability, with additional features that can grow as your business and budget grow. It also has an excellent user experience and intuitive design. In fact, one of Xero’s marketing taglines is “beautiful accounting software”, and it really is both beautiful and easy to navigate.

So QuickBooks or Xero? The short answer is still, it all depends. But both are excellent options and you won’t go wrong with either choice. Think about the needs of your business now, both in terms of the functionality and budgetary restrictions, but also consider the future you envision for your business. Which option is going to best support the growth that you see. Finally, it never hurts to check in with your accountant for advice. They may have experience or a preference that helps you decide what is best for your growing business.

Sound Accounts provides bookkeeping, payroll, licensing, and notary services. Contact us for a free business assessment and consultation on what software best fits your small business needs.

September 22, 2021
Mistakes Business Owners Should Avoid

Starting a business can be challenging and often marked by a lot of mistakes. Entrepreneurship has been so romanticized that many people forget the hard work, years of obscurity and business mistakes that go into building a successful company. In fact, it’s so tough that few businesses make it past their first birthdays.

Don’t fret, though. You can own a successful business, but for that to happen, there are certain pitfalls you must avoid.

Skimping on a Legal Team

There will be a wide range of circumstances in which you will have standard questionnaires, which means reviewing documents. You may not know what your rights are and how to protect your interests. Before you start up a business, hire a business attorney to help you make important decisions and commit to legal agreements.

Forgoing the Partnership Agreement

Everything from the birth of your business idea to its future as a billion dollar company and in-between is dependent on your partnership agreement. So don’t make the mistake of taking it for granted. From the very start, have a lawyer draw up an agreement between you and your partner. This singular action can save you and your business lawsuits and a great deal of stress later on. Fundera has a great blog article on finding the best lawyer for your business.

Too Many Investors

Every startup needs investors. While you’re preparing to visit investor firms with your ideas, remember to retain an air of exclusivity. Investors like to buy into exclusive concepts, so the fewer investors you visit, the more your exclusivity.

Research and pick your investors well before you present them with your idea. Don’t just throw out a big net hoping to snag a few investors.

A Missing Business Plan

Without a plan or structure on how to run your business, you’ll run it into the ground. One of the first things you should do after having a decent idea is to make plans. Have a business plan drafted from the information you must have gathered on your target customers and from researching your idea’s profitability.

Skipping the Marketing Plan

You could have the best products in the world, and no one would know your business exists because you don’t have a marketing plan. This is a common business mistake.

Don’t just have a business plan outlining the business structure, have a plan to reach your consumers. It’s better to have these two things ready from the get-go.

Having Too Many Expectations

The quicksilver rise to fame of certain startups is to blame for the great expectations that most business owners have. Rome wasn’t built in a day, and neither would your business be in a year. Keep your expectations realistic and numbered so you can focus your resources towards them and feel accomplished when you achieve them.

Reinvesting Everything

Many business owners seem to act like this is the true mark of a long-suffering entrepreneur. On the contrary, it makes your business look unstable when you can’t afford to pay yourself. In the books, it looks like your business isn’t growing well enough to turn out a profit.

Surrounding Yourself With the Wrong People

As stressful as it is to own a business, it’s exciting and fulfilling as well. Most business owners want to get everything done in record time. That’s understandable, but you must apply caution when doing certain business activities.

Hiring people who will work with you is one of them, especially in the early stages of every business. Hiring the right people can give your business a leg up or a leg down. Be intentional and careful with your hiring process. Surround yourself with people who are skilled, able to think deeply and who can contribute ideas to it. Contact us if you would like to talk about hiring a bookkeeper or payroll provider.

Maintaining a Fixed Mindset

Earlier, we talked about having a business plan and why it is vital to have a business structure. However, it would help if you also learned to be fluid. A good business owner has a plan and knows when to veer off. While a plan gives your business structure, remain fluid enough to take advantage of growth opportunities. One of the mistakes business owners make is continuing to do things because that’s the way they’ve always done them.

Not Using an NDA

Ever heard of the saying… “nothing new is under the sun”? Well, it’s true; your idea or invention might be the exception to this rule. As a business owner, you need to protect your intellectual property. Before disclosing any new ideas or inventions, be sure that everyone signs an NDA.

These business mistakes seem a bit too simple, but you’ll be surprised how many business owners make them. Hopefully, you’ll be more careful to avoid any business mistake that could be fatal.

January 15, 2021
Everything You Need for a Successful 2021 Tax Day
Tax day 2021 is almost here. It’s essential to start preparing ahead rather than wait until the timing becomes too tight to plan in a well thought out way. Here are some things you need to achieve a successful tax day in 2021:

Adequate Records

Before your filing day, you need to get your incomes, expenses, and other information ready. Make sure the documents and receipts show your income and expenses clearly. You can also hire a bookkeeper to help you do the work to ensure you keep accurate records. (We just happen to know some great ones!)

Know Your Correct Due Date

If you are a new business owner, don’t assume all forms are due simultaneously. Based on your business’ structure, you due date may be earlier than expected. For example, businesses with a partnership or Limited Liability Company are usually due a month before corporate companies.

Square Up Your Business Information

Aside from your business name, you’ll require some necessary information to complete your filing. You may need to dig up some of these. Some required information includes:
- EIN or social security number
- Business name, address, and start date
- Accounting method (cash or accrual)
Get Your Paperwork Organized

The tax process will require a lot of paperwork. To make the process less stressful, get all the essential documents ready before filing your tax. Some documents you may need include:
- Forms W-2 and other income records
- Records of all expenses
- Previous year tax returns
- IRS tax statements received in the mail
- Medical expenses and Health insurance
- Childcare Expenses
- Educational Expenses
- Record of mortgage and property taxes
- Records of Charitable donations
Max Out Your Tax-Advantaged Accounts

Your tax rate will depend on your income range. However, you have the option to reduce your taxable income through deductions.

For example, if you spent a lot on medical expenses last year, you may be able to get some relief.

Below are some deductions you can claim;
- Business Deductions
If you’re a self-employed individual, you can claim deductions like travel expenses and home office deduction if you work at home.
- Charitable Deductions
CARES Act allows you to deduct up to 100% of your adjusted gross income (AGI) in qualified charitable donations.
- Medical Deduction
You can also claim a deduction if you spent a lot of medical bills. Currently, you can deduct medical expenses above 7.5% of your adjusted gross income (AGI).
- Child Expenses
You can claim up to your $2000 (per child) with the child tax credit if you have kids. However, there’s an income limit to claim this tax: $200,000 for single parents and $400,000 for married parents.

There are many more deductions you can take, depending on your situation. It’s best to speak with a professional to help you figure out the deductions applicable to your situation.

Develop and Incorporate Tax Strategies

Develop and incorporate some tax strategies to help you make informed decisions with your wealth plan without affecting your next tax payment in 2021. We highly recommend sitting down with a trusted CPA.

Make Tax Deductible Investments Early

Big investments should be made before your financial year ends to help with your tax deductions. Investments like buying equipment or furniture for the office can increase your deductions, and you can only claim them if you invested before the end of your financial year.

Pay Your Debt

If you owe IRS money, you will need a plan on how to pay. You can pay in instalments or employ other payment option that’s convenient for you.

Sign Up for IRS News

Sign up with the IRS to get all the support and information needed to file your returns.

Hire a Professional

Being a business owner doesn’t automatically make you a tax expert. You don’t have to do it yourself; you can seek professional help to help you navigate the tax process, gather documents, prepare your income tax returns and offer financial advice. With a tax professional, you will save a lot of time and money,

In conclusion, the 2021 Tax season might come with a few challenges, especially for business owners. However, with proper preparation and working with the tips above, you will find the process easy.

If you need help getting your records in order or need recommendations for a good tax preparer, please reach out to us. Not only do we have a vast network of people we recommend, but we can help you get your records cleaned up before you send them to the CPA.
December 15, 2020
Red Flags That Could Trigger a Tax Audit

Nobody wants to pay more taxes than they must. However, there are things you can do to limit your risk of an audit. Doing one’s taxes requires an attention to detail. An attempt to minimize your tax liability by getting into the IRS’s grey areas can cause you more problems later on.

So it seems avoiding an IRS audit is impossible, but naturally, the chances that your tax return will be audited are very minimal. For the record, the IRS only audited 0.4% of personal tax returns in 2019. The good news is that many of the examinations or audits were done via mail, and taxpayers (individuals) had no reason to physically meet with an IRS agent. The bad news is that you will inevitably hear from the IRS if you refuse to identify the red flags in your return.

Here are a few red flags that may cause the IRS to audit a business.

Failure to Report All Taxable Income

The IRS has copies of the 1099s and W-2s you receive, and therefore, you have to report that income on your return. If there is a mismatch, indicating a red flag, expect to hear from the IRS.

You Make a Lot of Money

Only about one of 250 returns on individual audit happens. However, the odd increases with the income, especially if such an individual has business income.

For instance, a 2019 IRS statistic shows individuals with incomes between $200,000USD – $1million USD who file a Schedule C tax form only had a 1.0 percent audit rate. The more income your return shows, the higher your chances of alerting the IRS.

Mathematical Inconsistency

Whatever form of filing you do- electronic or paper form- you’re sending your information into a computer. If things do not add up, a red flag could be raised. While a math error won’t automatically bring the IRS auditor to your door, it will cause unwanted attention.

Overstating Business Expenses

Depending on your job type, you may not be reimbursed for numerous legitimate expenses as an employee. As a business, it is possible to be tempted to write off just an extra, which could be genuine deductions. But to avoid raising this red flag, ensure you do not deduct something that is not included on the approved list.

Home Office Cuts

The IRS has strict rules on what you can claim on home office deductions and how much. An attempt to claim too much raises a red flag.

Large Charitable Gifts

It is okay to be charitable, and there is no particular legal limit to how much money you can give away. But you have to be careful, making sure that your donation syncs with the norm; else, it will raise a red flag.

Home Businesses That Do Not Yield Much

If you are a sole proprietorship and you file a Schedule C tax return year in and out, and it shows a loss, a red flag becomes inevitable. Even with a profit but unreasonably small margin, it will get the IRS’s attention.

Inaccurate Reporting of the Health Premium Tax Credit

With the premium tax credit, individuals can pay for health insurance gotten via the marketplace. The IRS will certainly pick on individuals who receive the advance subsidies and refuse to file returns or erroneously report the credit.

Your Claim for Rental Losses

IRS auditors are on the lookout for large rental losses. Many taxpayers are being audited in the real estate profession because, according to the rules for claiming rental losses with no limit, a taxpayer must spend at least 50 percent of their working hours and over 750 hours in a year contributing and participating materially in real estate as a broker, landlord, or a developer.

In a nutshell, as a taxpayer, you have rights to the examination, appeal, collection and refund processes of your tax. But it is imperative to avoid certain red flags to steer clear of unwanted IRS attention. Having a team of bookkeepers to help you avoid those red flags will go far in alleviating the stress of an audit. Contact us today for a free assessment of your books!

If you would like more information on the topic, the IRS has a great deal at this site.

November 16, 2020