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What Should I Be Doing Weekly For Bookkeeping Tasks For My Business?

What Should I Be Doing Weekly For Bookkeeping Tasks For My Business?

by | Mar 10, 2022 | Accounting, Bookkeeping, Bookkeeping Software, Business, Financial Services, Outsourced Accounting

Bookkeeping is a time-consuming skill, and not one you can neglect. In fact, over 40% of small businesses managers and owners say their bookkeeping tasks are often pushed into the background. This is understandable, because small business owners have so much on their plates. From a business perspective, however, you must keep up to date with your bookkeeping tasks, or you risk shortchanging your business, which could mean a business loss. Here are some guidelines for tasks you need to finish by the end of each business week.

Those Annoying Bills

No one likes to pay bills, but as a small business owner, there are many bills that you need to pay in order to continue to do business successfully. In general, most bills fall into these categories:

    • Taxes: federal, state, local and payroll taxes are examples of tax bills. As a small business owner, you may want to pay your taxes monthly or quarterly, based on what works best for you.
    • Utilities: these are paid monthly, and they include internet, phone, electricity, and water.
    • Suppliers and inventory: most of these are upon receipt, net 10 days, or net 30 days.
  • Payroll
  • Rent or mortgage payment for your business: usually paid monthly

As a small business owner, it is very important that you stay on top of your bills. Here are some suggestions for making sure you pay bills on time.

First, you need to make sure all of your bills are entered into your accounting/bill pay software. Be sure and note all of the due dates from your bills, and add them to your software. You may want to keep a running calendar of when each bill is due. After you pay it, you can check the bill off.

Another suggestion you may want to try is to update your bills and pay dates on a regular basis, such as the close of the business day. While you’re updating, be sure you determine which bills are due upon receipt, and which bills are net 10, 30, or 60 days.

When you are able to keep careful track of your bills, you are ensuring your business stays open for years to come.

Control the Money: Incoming and Outgoing

One of the reasons businesses fail is because the business owner cannot keep records of cash flow effectively. Often, this happens because a business owner doesn’t keep accurate records of his or her cash flow. For example, a person who owns an automated car wash doesn’t keep their business account and their personal banking accounts separate, which leads to confusion and debt.

You need to control the money going out of your business. You can do this effectively on a weekly basis. Not checking the cash flow out of your business can cause trouble down the road. One hint: it never hurts to do an opening balance for your cash flow each day, and a closing balance each evening.  That way, you know exactly how much money is coming in and going out each day.

Many businesses run cash-only, while others don’t have cash deposits at all. If you are doing a cash business, you may want to make small deposits daily or three times per week. However, if you run an all-cash business, you will likely want to make daily deposits, so that your business doesn’t become the victim of a robbery. Cash is incredibly hard to track, and thieves take advantage of that to rob business owners.

Keep up with your invoices. You will want to send out invoices weekly, especially if you have customers who are slow about paying. If you know exactly what’s due, you’ll be able to manage your business money more easily. One way to help track your money more effectively is to have a special category for clients or customers who are frequently delinquent payers. In fact, you may want to hire someone to manage invoices of customers who are behind, and follow up with phone calls or emails to ensure payment.

Label Everything

If you are incredibly organized, you may already have a strategy for money management. Each pot of money you have to put aside for your business needs a label. This will make it easier to track your spending. Not sure how to accomplish this? Here are some ideas for how to label your money effectively.

One great idea to track spending is to give each item detail a color. That way, it will be easier to figure out your business expenses. This is a great idea for people who are visual learners, but the notion of color coding can work for many business owners.

Many platforms (such as Microsoft and Google) offer templates for business expenses. If you use a premade template, don’t forget to make the categories specific to your business. For example, if you don’t do payroll, there’s no reason for it to be one of your spending categories. Creating your own categories can make keeping track of your money easier.

Protea Financial Bookkeeping Tasks

Tracking Inventory Is Key

If you buy or sell anything—including services—you have inventory of some kind. Inventory is another area that directly impacts your business success. If you aren’t sure what inventory you have, and what inventory you have sold, you will not be in business for long. You need to keep track of your inventory, because your inventory is a money generator for many business owners. For example, if you have a popular product, you will need to keep it in stock to satisfy your customers. You may want to try a simple inventory form to help you keep your inventory current.

Also, there are different types of inventories. You may have raw materials that you use to make other products to sell. You may also have already-made goods to sell. If you have a very popular item for sale, you may order excess inventory to meet the demand. You need to keep track of each type of inventory you have at your business. If you have trouble keeping track of the types of inventory you have, it may be a good idea to keep a spreadsheet with all of your inventory types in one place.

There are also inventory control programs available for small business owners who are tech-savvy. However, many small business owners don’t feel they have the time to use a program to track all their inventory. While tracking inventory can be difficult and time-consuming, it is extremely important to your business. Tracking inventory gives you control of both your accounts receivable and payable, as well as protecting your business from fraud.

Run Reports Weekly

Be sure you run reports each week on your accounts payable and receivable. This report will help you project your week ahead. If you get behind on running reports, you may lose valuable business, which no business owner ever wants to have happen. Running weekly reports acts as a check up to see how your business is doing.

You may want to set aside a part of the day at the same time each week for report running. You may want to block that time off on your calendar so that it is dedicated to your business’ finances. If you have a time blocked off on your calendar, you will probably be more faithful with running your reports. Many business owners close their doors so that their employees don’t disturb them while they are working. 

Protea Financial Weekly Bookkeeping Tasks

Don’t Forget About Payroll

Unless you are your only employee, chances are you have to pay several employees—or hundreds of employees—on a regular basis. How do you manage payroll? Many small business owners leave their payroll to a payroll service, or to a software program. Even if you have payroll software, that doesn’t mean you can neglect checking your payroll. This is important for employee satisfaction as well as to prevent fraud. Small businesses lose millions of dollars yearly due to payroll fraud.

While you are running your accounts payable and accounts receivable reports, you may want to run a payroll report as well. Finding and fixing payroll mistakes early will save you time and headaches down the road.

Let Protea Financial Help with Your Bookkeeping Tasks

Small business owners have a lot of demands on their time. You are constantly looking for new employees to hire, marketing to customers, plus using social media to increase your brand loyalty and customer satisfaction. However, while you are running around making sure you keep current on customer service and marketing, you can’t neglect the financial aspects of your business.

If you find that you don’t have enough time to take care of the everyday finances for your business, you may want to think about streamlining your financial work. You can hire a company that can manage your payroll, your invoicing and your inventory. If you’re considering assistance for your business finances, contact Protea Financial. We can work with you and your business to make it run smoothly and efficiently. 

Do You Need Help with Weekly Bookkeeping Tasks?

Here at Protea Financial, we have multiple types of financial experts who can help with your daily, weekly, or yearly bookkeeping tasks. Let us take them off your plate so you can focus on your business!

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Best Bookkeeping Software for Small Business

Best Bookkeeping Software for Small Business

by | Feb 24, 2022 | Accounting, Bookkeeping, Bookkeeping Software, Business, Financial Services, Outsourced Accounting

Understanding profit and loss is important for any business, but it’s especially vital for small businesses with tight budgets. Spending too much can quickly put these small businesses in danger, while miscalculating profits can lead to overdrawn accounts. That’s why as a business owner, you need to know exactly where your accounts stand. Opting for one of the best bookkeeping software options is one way of tracking your income, expenses, and accounts receivable/payable.

There are many different types of bookkeeping software out there, though, so selecting one may seem daunting. Understanding why you should use this software, what to look for, and the benefits it offers can help you narrow down your options.

 

Why Use Bookkeeping Software?

There are several reasons why using bookkeeping software can help you more effectively run your business. First, you need some way of keeping track of all of your income and expenses. Writing them down in a notebook may work at first, but you will have to do all of the math yourself. This method can also quickly become unorganized. If you lose the notebook or any paper version of your accounts, you likely won’t have any type of backup. Even if you do try to keep two written copies, it can be easy to forget to record a transaction in one of them.

One step up from using a paper accounting method is using software such as Microsoft Excel or Google Sheets. These spreadsheet programs provide some benefits. They can do the math for you, and you can back them up to your personal cloud or to a flash drive. However, they aren’t full accounting programs. They don’t have features such as reconciliation or account management. While they’re better than using an accounting book, they aren’t perfect.

Bookkeeping software is designed specifically for accounting. Other spreadsheet programs can be used for a variety of different tasks, but bookkeeping software cannot. It includes all of the features and functions you’ll need to keep your accounts, vendors, employees, taxes, and more accurate and up to date. Information can be easily backed up and even shared with your accountant or other financial advisors.

 

What Should You Look for in Bookkeeping Software?

When you begin your search for bookkeeping software, you may feel overwhelmed. There are many options, and some of them may look almost identical. You will find many of the same features across the board, but that’s to be expected. These are the accounting and financial tools you’ll need in order to keep your accounts accurate.

One of the first things you’ll want to look for as a small business owner, though, is software that is specifically aimed at your needs. Small businesses do not have the same bookkeeping needs as large corporations. You may not need software that handles payroll, hours billable, inventory management, or other options. Make a list of the features you need in an accounting program in order to help narrow down the field. You may need to do some research into this if you’re not familiar with accounting. Sometimes, it can help to see what accounting programs offer so you can decide if you need those features.

In addition to features, price is certainly going to be a factor. You may find that some software is simply too costly for you. However, most accounting programs aimed at small businesses are affordable. Software has become even more affordable thanks to SaaS, or Software as a Service. Instead of buying the license for software, you subscribe to it. As long as you have an active subscription, you can use the software on any computer. Just download it and log into your account.

This means your books are available anywhere, too, because they’re stored in the cloud. You can make backups to your personal computer, of course, but the information will also always be synced with your online account. You’ll always have access to your accounts.

Protea Financial Bookkeeping Software Helps Small Businesses

 

Benefits for a Small Business

Once you’ve found the right bookkeeping software for your small business, you want to make certain you’re getting the most out of it. There are many benefits you will want to take advantage of. For example, most software available today, especially cloud-based software, works on mobile devices. This means you can complete a transaction and immediately invoice the customer. You can take photos of receipts or bills and immediately upload them. You can track the time you spend on a job and invoice for the time right away. You may be surprised at how convenient it is to have your bookkeeping software available wherever you are.

Another benefit is that accounting software will track all of your taxes. You input the correct rates for your location, and your software does everything for you. It will automatically insert the right amount of sales tax on your invoices, note how much tax you owe and how much you’ve paid in, and more. It makes filling out your tax forms and making payments incredibly easy. This also helps ensure that you are being compliant with all federal, state, and local tax laws.

Most bookkeeping software comes with a variety of different reporting and analytic tools. These tools will help you see where you’re spending your money, what your main source of income is, what type of spending trends your customers exhibit, and more. It can be incredibly helpful in maximizing profits while keeping your expenses under budget. Be sure you look at all of the different analytic options. You may find your software can generate reports you never thought of that provide key insight into your spending habits.

Finally, of course, a major benefit of using software is that it’s accurate. You don’t need to do any math by hand, nor do you risk making errors in transcribing numbers from a calculator to your software. The only thing you have to do is make certain you’ve entered the numbers accurately. Your software will do the rest.

 

The Four Best Bookkeeping Software Options

There are many different software options out there, but here are four of the best bookkeeping software options that many small businesses should be using to improve efficiency and accuracy:

 

Quickbooks

Quickbooks by Intuit is one of the most well-known accounting software packages available. Many businesses of all sizes use it. For small businesses, Quickbooks Online is a great option. It is designed to be scalable, so it will continue to work well for your business as you grow. It’s also widely used by accountants and other financial experts, so anyone you work with will likely understand Quickbooks. It makes use of cloud-based backups, has a mobile app, and can integrate with many third-party apps.

 

Gusto

Gusto provides great support to bookkeeping software, with it’s primary focus is being a payroll service provider. For small businesses with employees, it’s a great option. The software assists with tracking time, calculating insurance withholdings, and much more. Gusto is quite affordable for small businesses, too. Gusto can also help with your payroll tax filings, benefits for your team and much more!

 

Bill.com

Bill.com works with Quickbooks and other bookkeeping programs to bring automation and other features to your software. This creates one single platform you can use to handle your payments, invoices, and other tasks. The goal is to create a more efficient method of bookkeeping while keeping all of your information synced across platforms. Bill.com has tools developed specifically for small business users and provides a process for capturing and approving bills allowing you from passing paper around desks at your company.

 

Expensify

Expensify helps you track your employees expenses. This tool is very affordable, so small business owners will have no problem budgeting for it. However, it can be scaled up for mid-sized and large companies. They offer options such as optical character recognition for invoices, the option to integrate with other tools, and a variety of other functions. Using Expensify you’ll find it helps make your accounting much more efficient.

Protea Financial Which is the Best Bookkeeping Software for Your Business?

 

Which Combination is Right for You?

You’ll want to look at these four bookkeeping options plus others and compare them to your list of tools you need. Take your time and read plenty of reviews. Some applications also offer free trials, so take advantage of those as well.

 

Protea Financial is Here to Help Your Small Business Pick the Best Bookkeeping Software for Your Needs

While using bookkeeping software can certainly be helpful, it won’t be able to answer all of your questions or provide you with helpful suggestions. For that, you need a bookkeeper. That’s where Protea Financial comes in. We’re a team of virtual bookkeepers who specialize in helping small businesses with all of their accounting, bookkeeping, and other financial needs. Because we’re virtual, it doesn’t matter where you’re physically located. We’re here whenever you need us. We work with you via email, phone, and video chat.

While we do offer bookkeeping, we can also assist you with taxes, inventory management, payroll, compliance, and all other aspects of accounting. We will work closely with you and your team to accurately keep your accounting records, file your taxes on time, and assist in improving any areas of your company that are out of compliance. To learn more about how Protea Financial can help you or to get a quote for our services, contact us today.

Best Bookkeeping Software Options

Let the experienced professionals here at Protea Financial help you discover which bookkeeping software title will suit your needs!

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Tips for Improving Your Accounts Receivable Process

Tips for Improving Your Accounts Receivable Process

by | Feb 10, 2022 | Accounting, Bookkeeping, Business, Financial Services, Outsourced Accounting

Your accounts receivable is essentially a list of all the money your clients or customers owe you. While retailers typically receive payment for their goods when the customer purchases them, this isn’t always true. Companies that provide services often don’t receive full payments when those services are rendered. Instead, they invoice their clients. This creates a period where you’ve already supplied the goods or provided the services but have not been paid for them. You know the money is coming, but you don’t have it yet. Keeping track of your accounts receivable gives you an idea of how much money you will have to spend soon, plus it tells you which clients still need to pay.

Many new business owners aren’t experienced with dealing with accounts receivable. That’s because individuals rarely have outstanding income. However, tracking your accounts receivable is vital to making important business decisions. Here are a few ways you can improve your accounts receivable process so you can leverage that money without overspending.

 

Invoice as Soon as You Can

Why wait until the end of the month, quarter, or other period of time to send out an invoice? If you have an agreement with a recurring client that you will invoice at specific times, that’s different. However,  if you do not have such an agreement, you can invoice as soon as you provide the goods or services. Invoicing quickly puts your bill on the customer’s radar. While some may wait until the first of the month to pay, others may process payment as soon as they receive the invoice. That means you get your money much faster. If possible, send out invoices at least weekly, if not a few times a week. You may even be able to prepare and send out invoices at the end of every day. The bottom line is that the faster you invoice, the fast you start the clock, the faster you get paid.

 

Switch to Prepayment

If possible, switch from an invoicing model to a prepayment model. Your clients will pay when they order or when they come in for services rather than paying once you invoice them. Some customers, especially individuals, may be on board with this. However, if you are providing goods or services to another business, they may insist on being invoiced and paying later. That’s because they may have the same issue—their cash is tied up in accounts receivable, and they simply cannot pay you until their clients pay them.

Smaller businesses that haven’t fully moved to an accounts payable/accounts receivable accounting method are more likely to agree to prepaying or paying at the time of service. However, medium to large businesses may not be so agreeable to that agreement. You may be able to work on a prepayment model while you are a smaller business, but as you grow and begin taking on larger clients, you may need to switch to invoicing and accounts receivable.

 

Protea Financial Accounts Receivable

Offer Automatic Payments

If you have regular clients who have you on retainer or have subscribed to a specific monthly plan, you may want to consider offering automatic billing. Many payment processors have implemented this option. Instead of invoicing and waiting for the client to pay, the client provides their banking details and opts into auto-billing. Rather than invoicing the client, you may make a payment request through the processor, and that processor automatically debits the client’s account and transfers money to you.

The advantage here is that you get paid almost immediately. You don’t have to wait for the client to process your invoice and release payment. This is a much faster way of invoicing, so you aren’t waiting weeks or even months for your money. You may have to pay a small fee to the payment processor, but that fee is typically very low and won’t impact your profit margins much. 

You may have to do a little extra work—your clients will likely still want a copy of their invoice, so you’ll still have to prepare and send it to them in addition to submitting the payment requests. However, getting your money more quickly often outweighs this small amount of extra work.

 

Make Use of Automation

While using auto-billing may make a little extra work, implementing certain accounting software can reduce work and actually create a net gain for you. This software can be set up to do tasks such as automatically prepare an invoice for recurring charges. If you have clients who subscribe to your services every month, you won’t need to manually make an invoice for them. This software will do it for you, so all you have to do is send it out. You may not even have to do that—some programs can interface with your email and send invoices, payment reminders, and other messages automatically.

If you have most or all of your clients on a recurring subscription or retainer, investing in accounting software with these features can essentially eliminate the need to prepare invoices. Everything can be done automatically. You may even find software that works with your payment processor, so you don’t even have to submit payment requests. The more automated your system is, the less time you have to spend doing these tasks.

 

Avoid Dealing with Unpaid Accounts

By moving to a prepayment model or by enabling automatic drafts, you will be better able to avoid dealing with clients who do not pay their invoices timely. Sometimes this can truly be a matter of the client simply forgetting about an invoice or having some sort of emergency. In that case, a reminder email is usually enough to get them to pay. If they’re still late, you may want to reach out via phone.

However, you may have a client that dodges your attempts to communicate and goes months without paying. When that occurs, you have two choices: write off the invoiced amount as a loss and blacklist the client or, if the amount is significant, employ a debt collection agency to attempt to recover some of the funds. You may even sell off some debt to immediately recoup at least some of the costs you incurred. Either way, you’re not going to make any money when a client doesn’t pay. At best, you’ll break even or take a small loss.

Because of this, it’s a good idea to encourage clients to sign up for auto-drafts. Some businesses even offer a small discount or other benefit for clients who do. Even if you don’t, you can point out that auto-drafts benefit your customers. If you invoice monthly, you can allow them to set the day the payment is processed so they always know when the payment occurs. They also don’t have to do anything to initiate the payment, so even if they forget, it still goes through. They avoid any late fees or other costs.

 

Protea Financial Accounts Receivable Processes Your Business Needs

Avoid High Credit Usage

By better leveraging your accounts receivable, you’ll be able to avoid the temptation of making purchases on credit. Many businesses, especially new businesses, tend to make high use of credit. Once your accounts receivable are automated and you have more cash on hand, you want to make smart decisions regarding your credit.

Ideally, you’ll begin reducing your debt. While you may need to make use of credit for large or unexpected purchases, you do want to do your best to decrease your reliance on it. When you do have to dip into your credit, you should now be able to more quickly pay that debt off. You may also want to use your stronger cash flow to reduce any high-interest debt you have. The fewer claims on your cash you have, the better you can leverage your income to grow your business.

 

Call the Experts at Protea Financial to Help Improve Your Accounts Receivables 

You have a lot of work to do leading, maintaining, and growing your business. You’re also probably not a financial expert, so dealing with your accounts receivable, invoicing, and following up with clients who haven’t paid isn’t exactly something you want to focus on. Dealing with your finances in general, may be something you took on because you’re the head of the business and someone has to do it. You may not be ready to hire someone full-time to serve as your chief financial officer or accounts expert, either.

That doesn’t mean you can’t have a professional on your team, though. Here at Protea Financial, we provide virtual bookkeeping, accounting backup, payroll, compliance, and other solutions to companies that don’t need someone in-house but still want an expert to handle things. Whether you only need a few hours here and there for invoicing and payroll or want the advice of a virtual CFO, we’re here for you.

As a virtual bookkeeping team, Protea Financial is available when you need us no matter where you are. We work with you via email, phone calls, and teleconferencing, and we can take on as much or as little of your bookkeeping tasks as you’d like. We work with everything from small businesses to those that have grown to include multiple sites or have locations in several states. If you’re in need of an expert to help you organize your accounts receivable and improve your processes, contact Protea Financial today.

Learn the Differences

Learn the Differences Between Cash and Accrual Accounting Today!

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Major Differences Between Cash and Accrual Accounting

Major Differences Between Cash and Accrual Accounting

by | Feb 3, 2022 | Accounting, Bookkeeping, Business, Financial Services, Outsourced Accounting

One important thing a business owner has to do when setting up their business is determine how they are going to handle their accounting. Many people operate their business accounting like a checkbook, but that’s not always the best option. A checkbook typically follows the cash accounting method, but for a business, using the accrual method may be a better option. Before you decide which method works best for you, let’s take a look at how cash accounting and accrual accounting work and in what ways they’re different.

 

What Is Cash Accounting?

While both methods of accounting are valid and can be used, cash accounting does seem to be the default for new business owners. This is because it is essentially how most people keep their checkbooks or online banking. It’s an easy method to use.

Cash accounting simply adds to the account when you receive a payment and deducts from the account when you pay something. It doesn’t take into account any invoices, bills you haven’t paid, or anything other than cash you have on hand or have actually spent. It doesn’t deal with account payable or accounts receivable at all.

When you look at your account, you will know exactly how much money you currently have on hand. You don’t need to do any math or take into account any outstanding invoices or bills—you know exactly what resources you have on hand. Cash accounting is easy for most people to understand and perform, especially for those who don’t have a degree in accounting and have a relatively small business.

However, cash accounting isn’t perfect. One of the biggest downsides is that it only looks at what you have currently spent. If you have bills for several thousand dollars that you haven’t paid yet, those expenses aren’t considered. This means if you spend too much, you may not have the funds on hand to pay those bills. You also aren’t taking into account outstanding invoices and other money that’s coming in. You could avoid making a necessary purchase because it looks like it would run your account low, when in actuality, you have a large amount of money coming in soon and could make the purchase.

 

What Is Accrual Accounting?

Accrual accounting, on the other hand, tracks expenses and income when they are billed or invoiced for. In other words, when you ship out a product with an invoice to a customer, you record that invoice as income right away. You don’t wait until the customer pays that invoice. Transactions are recorded when they occur, not when they are paid for. While the cash accounting method may seem more intuitive to new business owners, when all businesses are taken into account, most use the accrual method.

There are a few different reasons for this. First, it gives you a larger, more accurate idea of where you stand. You know what expenses you’ve committed your funds to, so you don’t have to worry about spending so much that you can’t cover your bills. You also know what you have coming in, so you can make purchases or payments as needed knowing that you have money coming in.

However, on the downside, you do have to keep an eye on your actual bank account. You may have thousands of dollars in outstanding invoices on your books, but if those clients haven’t paid you yet, your actual cash on hand may be much, much less. You could easily overdraw your account if you spend based on what you will have rather than what you currently have. You will need to carefully keep an eye on your accounts and on your actual cash flow to make certain this doesn’t happen.

Protea Financial Accrual Accounting

How They Differ  

Now that you have an idea of what cash accounting and accrual accounting are, let’s look at how they’re different. Cash accounting is focused on the money you actually have on hand and transactions that have occurred. Accrual accounting, on the other hand, looks at revenue you’ve earned or debt you have committed to, even if money hasn’t actually traded hands yet.

 

Example:

Let’s look at an example of how these two methods would treat a set of transactions. Assume that for one month, your business sent out an invoice for $2,000, received a bill for $500, was paid $1,000 from a previous month’s invoice, and paid $100 on a bill from the previous month.

If you were using the cash accounting method, you would only look at the cash that actually came in or went out from your accounts. This means your ledger would show a balance of $900. That considers the $1,000 payment you received from the previous month’s invoice and the $100 you paid out on the bill. The invoice sent for $2,000 and the bill you received for $500 aren’t recorded because you haven’t received that money or paid that bill yet. They will be recorded when that money actually comes in.

On the other hand, a business using the accrual method would show a profit of $1,500 for this month. That’s because it would look at the $2,000 invoice and the $500 bill you received. This method wouldn’t record the $1,000 payment for the previous month’s invoice or the $100 bill. Those two items would have been recorded in the previous month, so they would already be on your books.

 

Analysis of the Example:

In the accrual method, your overall account balance would show $2,400 to date because it would include the previous month’s invoice/bill, the recently sent invoice, and the recently received bill. However, the cash method would show $900 to date because the two unpaid items would not be included.

As you can see, this is a fairly large difference. However, both of these methods have their use. Let’s say you want to buy a new business laptop for $1,200. You would buy it right away, so there wouldn’t be a bill to pay. If you use the cash method, you wouldn’t make the purchase because you would see you only have $900 cash on hand. With the accrual method, though, you could make the purchase. It would instantly overdraw your account by $300, though, if you didn’t look at your cash on hand first.

On the other hand, if you need to buy something for $1,200 that will be billed, you may hesitate if you only have $900 on hand. If you know that you’ll have $2,400 once all outstanding invoices/bills are dealt with, though, you may feel more comfortable making the $1,200 purchase since you’ll know you will have the cash to pay that bill later.

Protea Financial Cash and Accrual Accounting Differences

How Each Method Impacts Taxes

The two methods impact your taxes differently. When you use the cash method, you report all income you actually received during the standard tax year. Likewise, you deduct any expenses that you actually paid. However, if you use the accrual method, you report income you’ve received plus any income you can “reasonably estimate.” This means if you invoice for a specific $1,257, you include that as income during the current tax year even if that money is not in hand. However, if you aren’t certain of the exact amount, you may need to make an adjustment. If you estimate $1,300 for income but actually invoice a client for $1,250, you will make the adjustment of $50 in the next tax year. The same is true of expenses. Include any expenses for debt that you have committed to, and make any adjustments during the tax year those adjustments occur.

Understanding how the two different methods affect your taxes can be confusing. The IRS has a number of regulations for each method. The best thing you can do is talk to a professional accountant or bookkeeper so you fully understand how to report your taxes every year. Better yet, retain the services of a professional so you know your tax reporting will be done accurately.

 

Which Option is Right for You?

Both methods are valid ways of accounting. However, typically, small businesses and other companies that do not actually sell products or have an inventory use the cash accounting method, while larger companies with inventory or that make a large amount of money per year should use the accrual method. Again, if you have any questions about which method would be the best for you, ask a professional.

Where can you find an experienced bookkeeper to ask? Here at Protea Financial, we have a staff of experts who are ready to assist you. Our virtual bookkeepers, payroll experts, compliant professionals, and others can help you with accounting and taxes. We will ensure that you are compliant with all IRS rules, report the correct income in the correct year, and take all deductions you are legally entitled to.

Our virtual bookkeeping services are perfect for small businesses that don’t need to hire someone full-time but still need an expert. If that’s what you need, give Protea Financial a call today to learn more about what we offer and how we can assist you with all of your financial needs.

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Protecting Your Small Business from Cyber-attacks …and Developing a Stronger Approach to Cybersecurity in 2022

Protecting Your Small Business from Cyber-attacks …and Developing a Stronger Approach to Cybersecurity in 2022

by | Dec 9, 2021 | Accounting, Bookkeeping, Bookkeeping Software, Business, Outsourced Accounting, Wine Industry

In a recent study by the Small Business Association (SBA), 88% of small business owners felt their business was vulnerable to a cyber-attack – malicious emails, attacks and phishing campaigns to name just a few. And business owners have good reason to be concerned. According to the FBI, the cost of cybercrimes reached $2.7 billion a year in 2020.

But what can a small business owner do? Most small business owners, especially with wineries where the owner wears so many different hats, simply don’t have the time or the resources to devote to reducing their cybersecurity threats.  Often, they don’t know where to begin.

Protea recently spoke with John Comfort, President of Linked MSP, a Northern California based Managed Services Provider, specializing in Outsourced IT and Cybersecurity. Linked MSP is John’s second successful IT Solutions company, and this company focuses increasingly on guiding wineries, service providers and small businesses to develop effective cybersecurity strategies and processes.

Here are the highlights of our recent discussion with Linked MSP:

John’s Insight to Cyber Threats to Be Aware Of

According to John, there are four primary types of Cyberattacks: Malware, Viruses, Ransomware, and Phishing.

  • Malware: Software intentionally designed to cause damage to a computer system (servers, computers, networks, clients). According to Purplesec.com, 92% of malware is primarily delivered by email. Dataprot (a software development and consulting company) says there are over half a million new pieces of malware detected every single day.
  • Viruses: Programs that are designed to “infect” and spread to devices connected within a network. The primary purpose of a virus is to cause temporary damage to software and give cybercriminals access to valuable data you store about your clients, your business or other professional or personal data.
  • Ransomware: A specific type of malware that “hijacks” your computers and network until you pay some ransom, as demanded by the cybercriminal. This type of malware attacks in many different ways, seeking out vulnerabilities in your network or your cybersecurity processes. The costs to pay “ransoms” are skyrocketing. According to a Sophos survey, the AVERAGE cost of remediating a ransomware attack in 2021, was $1.85 million …twice as much as just one year earlier. The primary purpose of ransomware is to exfiltrate sensitive intellectual property as well as extort money from businesses in order to regain access to data that was encrypted. Most ransomware is delivered via the web, but initiated through email.
  • Phishing: Cyber-attack that uses emails or websites to infect machines with malware, viruses or ransomware or to initiate social engineering via email, phone, texting, etc. Phishing emails fool the reader into thinking they are a legitimate sender, to entice the reader to click on the link. Once that occurs, the virus infection takes place.

Moreover, cyberattacks are extremely difficult to prevent with a near 100% success rate.  And because their impact can be so devastating, it is vital that companies take steps to reduce the likelihood of cyberattack and the impact of an attack if it does take place.

 

Protea Financial Cybersecurity Threats and Proactive Protection

 

Cybersecurity Recommendations to Keep Your Business Safe

Linked MSP has adopted the recommendations of the National Institute for Standards and Technology (NIST) that brought together the greatest companies and cybersecurity experts in the world to develop a 5-step approach to direct and support a company’s cybersecurity strategies and plans. The five steps are: Identify, Protect, Detect, Respond, Recover.

Identify 

“Develop the organizational understanding to manage cybersecurity risk to systems, assets, data, and capabilities.”- NIST

Protect

“Develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services.” -NIST

  • Limit employee access to data and information
  • Install surge protectors and uninterruptible power supply (UPS)
  • Patch your operating systems and applications
  • Install and activate software and hardware firewalls on all your business networks
  • Secure your wireless access point and networks
  • Set up web and email filters
  • Use encryption for sensitive business information
  • Dispose of old computers and media safely
  • Train your employees

Detect

“Develop and implement the appropriate activities to identify the occurrence of a cybersecurity event.” -NIST

  • Install and update anti-virus, anti-ransomware, and anti-malware solutions
  • Maintain and monitor logs
  • Review anomalies and other events
  • Create and implement detection processes

Respond

“Develop and implement the appropriate activities to take action regarding a detected cybersecurity event.” -NIST

  • Develop a plan for disasters and info security incidents
  • Communicate to key stakeholders immediately and completely
  • Mitigate impact of attacks
  • Develop and implement improvements

Recover

“Develop and implement the appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cybersecurity event.” -NIST

  • Make regularly scheduled backups of important business data/info
  • Ensure backups are recoverable at least annually
  • Consider cyber insurance
  • Make improvements to processes/procedures/tech

 

Six Small Business Steps to Improve Your Cybersecurity Protection

To get 2022 off to the right start, in terms of Cybersecurity protection, John shared SIX specific steps that small businesses can take immediately, to reduce or prevent email fraud.

Step One: Be cautious opening unexpected emails.

  • Verify the domain and the username
  • If there are links within the email, hover to verify
  • If still not sure, ask your IT professional to review with you

Step Two: Be vigilant opening expected emails.

  • Expected emails may actually be malicious
  • If sender is real and they are compromised
  • If sender appears real but is actually a look-alike
  • If there are links within the email, hover to verify
  • Contact the user via phone or a separate email to verify
  • Ask your IT professional to review with you

Step Three: Use strong passwords with two-factor authentication.

  • Protects against account compromise
  • Compromised accounts can be configured as forwarders
  • Two-factor option is to use password-less approval prompt

Step Four: Implement an email phishing training platform.

  • Increases awareness of email content
  • Aids in preventing unwanted clicks

Step Five: Implement a web content filtering platform.

  • This prevents access to known bad websites
  • Can stop an attack if a malicious link is accidentally clicked

Step Six: Implement an Endpoint Security platform.

  • This is a last catch to malicious content
  • Endpoint security may not catch everything
  • Provides protection when malicious websites are not blocked
  • Reduces the capability of attack

In summary, cybersecurity is no longer a “nice to have” when it comes to managing risk in your business. Companies must take proactive and ongoing steps to maintain vigilance when it comes to protecting their information, customer records, critical networks, trade secrets – virtually all data that is available on any device in your network. It is no longer a matter of “if” you are attacked, but “when” you are attacked. According to Norton, there is one cyberattack in this country every 39 seconds.

What You Get Out of Proactive Cybersecurity Protection

As John points out, however, the good news is that proactive cybersecurity can accomplish several key things: 1) minimize the number of attacks that can “get through”, 2) minimize the impact of an attack, and 3) dramatically increase the speed in which you can recover data and be back fully operational in the event a successful attack does occur.

By following the 5 NIST recommendations (Identify, Protect, Detect, Respond, and Recover) you will reduce your risk and increase your peace of mind, knowing you are doing all you can to protect your business. John’s six recommendations to reduce or prevent email fraud can be addressed by any company.

Benjamin Franklin famously wrote: “By failing to prepare, you are preparing to fail.” When it comes to cybersecurity, take the beginning steps now to prepare and fortify your IT ecosystem, so that you are not preparing for its failure.

We encourage you to meet with a cybersecurity specialist today to get an expert’s recommendation on how you can be prepared. If you would like to contact John Comfort, he welcomes the opportunity to speak further. As an IT cybersecurity expert, John’s company focuses on wineries and other small businesses.  He can be reached at:  John.Comfort@LinkedMSP.com or call him directly at 833-546-5336.

 

For Help with Your Accounts, Reach Out to Us Here at Protea Financial!

What Are 1099s?

What Are 1099s?

by | Dec 2, 2021 | Accounting, Bookkeeping, Business, Financial Services, Outsourced Accounting, Tax

If you do any type of contract or freelance work for a company, that company may be required to send you a form 1099. This is a tax form required by the IRS to report income for those who are not employees but still do work for and are paid by a company. However, while contractors often receive 1099s, they are not the only people who may get this document. Let’s go over the various types of 1099s, what one contains, why you may get it, and what you do with this document.

 

What Is a 1099?

Any time you are paid for work by a company, that company is required to report your payments to the IRS as income. Typically, this is done through a form W-2 because most, if not all, of the company’s payments go to employees. However, some companies do hire contractors or freelancers. These individuals work on specific projects for a set amount of pay. They typically receive no benefits such as insurance or paid time off. However, they are often free to work at home and on their own schedule. Once the project is complete, they receive their payment and move on to their next job, though they and the company may also agree to a new contract for further work.

When a company pays one of these contractors, the income is reported on a 1099. It’s similar to a W-2, but there are a few significant differences. The size of the company, their industry, or the type of project does not play any part in a 1099. All companies, even small businesses, must issue 1099s to a contractor who did work for them. 

However, according to IRS rules, a company only has to issue a 1099 if they pay a contractor more than $600 within the calendar year. This means a company that paid a contractor $500 is not required to send them a 1099. Contractors who receive one of these forms do need to include that income in their annual tax return just as they would report income earned on a W-2.

In addition to receiving a 1099 for contract work, you may also receive a 1099 for capital gains distributions, interest payments, dividends, and other income. The type of income will determine the type of 1099 form that you receive. There are a number of types of 1099s, including the 1099-MISC, 1099-R, and 1099-C.

 

What Information Is on a 1099?

A 1099 includes much of the same information as you would find on a W-2. This includes the following:

  • The contractor’s full name, address, and social security number or taxpayer identification number.
  • The company’s name, address, and FEIN (or SSN if they are paying as an individual).
  • The total amount of money paid throughout the year.
  • The account number.
  • The total amount of federal and state income tax withheld, if any (typically this is zero for a 1099).
  • The state or payer’s state number.
  • The amount of state income.

As with W-2s, the company will fill out the 1099 and mail a copy to both the contractor and the IRS. The contractor will need to review the information and contact the company right away if there are any mistakes.

 

Protea Financial 1099 Form

Why Are 1099s Issued?

Any contractor or individual who receives over $600 a year from a business, financial institution, or other payer will be issued at 1099. The IRS requires this income to be reported, and there are no exceptions. A company or other payer who fails to submit a 1099 form will face fines from the IRS. Individuals who do not report this income may be subjected to audits and fines as well.

Individuals who own stocks, receive interest on accounts, or are paid other types of income that is not classified as a wage will also receive a 1099 if they made more than $600. Typically, these forms will come from the payer. However, starting in 2021, some online payment processors such as PayPal may issue a 1099 to those who receive over $600 from the same payer. There are still many questions about how this will affect contractors, businesses, and others who receive payments through these processors.

 

How a 1099 Differs from a W-2

The main difference between a W-2 and a 1099 is that a W-2 lists out the various taxes, social security, and other withholdings from an employee’s paycheck. While a contractor may have taxes withheld on a 1099, typically this is not that case. That means the contractor or other individual will need to pay taxes on that money as part of their annual income tax return.

The two forms are similar in that both W-2s and 1099s are generated and sent out in January. Contractors, individuals, and employees should receive these forms by February first. If they do not, they will need to contact the payer. Contractors may receive 1099s from every company they have worked with over the year, while individuals may receive 1099s from every financial institution that paid them interest or dividends.

It’s also possible for someone to be an employee and do contract work. In this case, they will have both a W-2 and at least one 1099 to file.

 

How Do the Types of 1099s Differ?

There are many different 1099 forms. All of these forms are used to report income other than wages earned as an employee. However, each one is slightly different in what income it is used to report. Here are some of the most common types of 1099s:

  • MISC – The 1099-MISC was the form used to report payments made to contractors and other freelancers. However, the form was also used to report other payments, including prize money, payments made to attorneys, rent, and other miscellaneous income. It is no longer used for contractors as of 2021.
  • NEC – The 1099-NEC replaced the 1099-MISC for contractor payments starting with tax year 2021. It lists all non-employee income received in exchanged for services. This is the form that contractors and other freelancers will typically receive. Contractor payments were split out from the 1099-MISC to address certain loopholes.
  • DIV – Individuals who own stock or other types of securities and are paid more than $10 in dividends or distributions will receive a 1099-DIV to report that income to the IRS.
  • INT – The 1099-INT is issued by banks and other financial institutions. It reports interest of over $10.
  • R – Those who receive distributions from a retirement account such as a 401(k) or a Roth IRA will receive a 1099-R stating the total amount of the distributions taken that year.
  • C – This is a special type of 1099 that is only used when an individual settles debt with a credit issuer for less than the amount owed. Typically, this is done during the bankruptcy process, although it could also be done via other types of negotiations. This form shows the amount of forgiven debt, which is not typically taxed as income. However, it still must be reported.
  • Q – A 1099-Q is used to document income received from a 529 educational plan or Coverdell ESA. This form is
  • G – The 1099-G form is used to report several different types of payments. It’s commonly used to report unemployment compensation, but it can also be used to document income tax refunds from the state or local government as well as agricultural payments and income from taxable grants.
  • SSA-1099 – Those who receive social security payments will receive a SSA-1099 form every year detailing the total amount of SSA payments they received that year. This is one of the few 1099 forms in which the identifying letters come before the form number.
  • K – A 1099-K is issued by a third-party payment processor such as PayPal when an individual or business has more than 200 online payment transactions that total over $20,000. Credit card payment processors may also issue 1099-K forms.
  • B – Individuals who sell stock will receive a 1099-B from their mutual fund company or brokerage. This form details the date the stock was sold, the cost of it, and the amount it was sold for.

Protea Financial Understanding a 1099 Form 

As a Business, You Need to Have Your 1099 Forms Prepared Correctly

It goes without saying that any business that issues 1099s must make certain that the forms are prepared correctly and are issued on time. Being late can result in fines, while sending out incorrect forms can cost you time and money in correcting and resubmitting them. Fortunately, most businesses will only need to deal with one or two types of 1099s.

While a 1099 is a fairly simple form to fill out, you will still need a professional bookkeeper on your side to make certain you submit the correct payment amount to the right contractor or other individual. If you don’t have a bookkeeper of your own, you may want to work with a virtual bookkeeper. These experts are just as skilled and knowledgeable as local bookkeepers.

The team here at Protea Financial is ready to assist you with all of your bookkeeping and other financial needs. We can track contractor payments, assist with 1099s, and much more. Contact us today to discuss how we can help you.

Let Us Know if You Have Questions

If you still want help understanding a 1099 or what it is used for, then reach out to us here at Protea Financial. We are here to help!

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