Many in-house, mid-size business bookkeepers are not actually bookkeepers at all. They may be office managers, administrative assistants or receptionists with enough downtime that they can also manage your business books. Ideally, they have working knowledge of QuickBooks bookkeeping software, so they don’t require any training. But that doesn’t mean they are effective bookkeepers for your growing mid-sized business.
As your business grows, and annual revenue increases to $25 million or more, these type of part-time bookkeepers might be in over their heads. There’s a lot to understand when it comes to the accounting and bookkeeping needs of fast-growing companies. Here are three accounting secrets your current bookkeeper may not know.
Accounting Secret #1: Following the Generally Accepted Accounting Principles (GAAP) requires using the accrual method of accounting, rather than the cash-based method.
As a fast-growing company, you want your accounting to be GAAP-compliant. But many in-house small business bookkeepers (who aren’t really bookkeepers, remember) don’t know the GAAP standards. GAAP-compliance has to do, primarily, with the way expenses and income are logged on the balance sheets. But there are a number of other principles that must be followed, ensuring accuracy, honesty, timeliness and usefulness of the financial data.
Accounting Secret #2: Payroll taxes can be complicated if your employees cross state lines.
In states that don’t have reciprocity agreements, employers must withhold payroll taxes in both the state where the employee lives and in the state where they work.
If an employee, for instance, lives in Tennessee but commutes to work in an office in Kentucky, this is a usual occurrence and would most likely be set up when the employee first takes the job. But certain employees may live in same state they work most of the time, but commute to another state for make sales and service calls. This happens frequently in the contracting industry, when teams of builders and installers might do work in a neighboring state.
While your payroll company should take care of this, your bookkeeping records must also reflect the situation accurately.
Many mid-sized businesses have errors in their books when it comes to withholding taxes across state lines. The errors can add up and lead to a tax audit, in a worst-case scenario. You might be shorting your employees out of money if you withhold payroll taxes inaccurately. Then they would face the added hassles of filing a tax return in the other state in order to claim their refund.
As experts in bookkeeping for mid-sized, fast-growing businesses with employees who often work across state lines, the accounting and bookkeeping service professionals at AccountingDepartment.com can help clarify the withholding tax and reciprocity puzzle.
Accounting Secret #3: Timely and accurate financial data can help a company reduce costs and increase profitability.
Maybe this last “accounting secret” isn’t really a secret at all, but it’s something that many mid-sized business owners don’t realize until they call an outsourced accounting firm to replace their in-house bookkeepers and notice their balance sheets look a lot better.
It’s not just because our bookkeepers may have caught errors in your books, or even spotted cases of employee fraud (although that may be part of it).
By implementing the proper processes and procedures for your bookkeeping, we can give you accurate financial statements. From there, your financial controller will review those statements with you, and you can look for opportunities to reduce costs. Basic bookkeeping services like job costing, which your virtual bookkeeping department will perform, can help an organization increase profitability.
Accounting may seem easy with user-friendly bookkeeping software like QuickBooks, but if you don’t have the benefit of financial controllers and professional bookkeeping services, you could be missing out.