I have to say, I am somewhat surprised when someone tells me that they just provide a spreadsheet with their income and expenses to their accountant or tax preparer.  My first question is always “Why?”

Usually the answer is that they don’t have enough volume, don’t like the available software and don’t want to deal with the never ending upgrades, which also results in additional hardware and software costs. 

Once they answer me, my response is usually, “Stop it.  Now.  Save yourself the time, and aggravation.”

I can say this because I have lived through the use of column pads and pencils.  And lots of erasures.  Then we evolved to spreadsheets.  And, then, we got accounting software.  And now, we have a lot options. None of which should be a spreadsheet that you do by hand. 

Here’s a few of the reasons why you should make the New Year a time to bring your accounting into the 21st century. 

·          Errors!  I have rarely ever seen a spreadsheet of transactions, etc that was error free.  You missed something, a wrong formula, cell reference errors….

·         Time – it takes way too long. 

·         Actually, the list would be way too long if I listed the negatives, so I’m not even going to waste time.  Just doing what I recommend to others – Stop.

Because I really don’t believe in perpetuating negativity, here are the more positive reasons, in no particular order, that you should have up to date accounting software, regardless of your size and transactions. 

1.       Most banks and credit card companies will feed directly into your software = less work for you.  You will still have to reconcile but your posting time is significantly reduced.

2.       Having access to daily cash and revenue reporting – not only do you have a better idea of your financial position, but you also stand a better chance of heading off fraudulent charges when (not if) they happen. 

3.       Better reporting – why wait until the year end.  Anyone wanting to improve their financial health will need accurate and timely numbers to be able to make decisions, adjustments and also to measure their progress. 

4.       Your tax preparer will be much happier with you.  While this is unlikely to reduce your tax preparation costs, you could see better quality because they have more time to review rather than recreate your (incorrect/incomplete) work. 

5.       There are really great, easy to use options out there, a lot are cloud based.  Some are actually free. 

6.       If you go with cloud based offerings, you are not limited by your computer hardware.  Just make sure you have a secured modem and router.  The cloud software companies update their software and you don’t have to do anything.  And, you can see your accounts 24/7, wherever you are, via computer, cell phone or tablet. 

(I could keep going on about cloud based services, but that is another topic for another day.  If anything here struck a chord with you, feel free to contact me for more information. )

We all have a finite amount of time and energy.  Why spend extra time and energy doing something that could be done in for you in fraction of the time that it took you to do by hand input?  To put another spin on it – add up the time that it takes you to do by hand and multiply that by what you value your hourly rate to be.  Considering that the national average for bookkeeping is $66 per hour, this would have to be your minimum rate.  Once you have your number, what would you have rather spend that money or time doing?  Even half of that time, spread out over a year, I suggest would give you greater happiness than sitting at your computer, doing something that you clearly don’t want or like to do. 

 I would say, make it a goal this year of doing less of the input and use the data to make better and faster decisions.   And, even better, doing something that makes you happier.  

It's that time of year again.  When businesses are scambling to get out their 1099's.  And, for some, it may seem to be easier to just let it slide, and choose not to send them out at all.  Maybe because they want to be nice and not report that they paid someone.  Possibly the information is not available or the recipient is unwilling to provide it.  Or, maybe they don't know the rules.  But, when you think about it, there are more reasons than not to make sure that you do accurately and timely send them to qualified recepients.  (Under tax audit, you could be penalized for each recipient that you failed to file/send a 1099, you could lose the expense, etc)

There are a couple of easy methods to get the info needed.  One seems to be a lot more trouble and less likely to produce good results, but is most common.  

1. (Most Common)  
In November and December, your office or bookkeeping staff will start to go through their records and determine from whom they need W-9.  Then, it's a push to send out, receive and enter that info.  
Once January rolls around, they do another look at the list, maybe try to followup and then get out the 1099's.  

This method works, but could be better-you are dealing with year end close, other planning demands, holidays and generally reduced output.  And, since you have already paid the recepients, if they don't want to return the W-9 back to you, thinking that you won't send a 1099 if you don't have their tax id number, there is little that you can do.  

2.  Here is what I like to do.  And it has worked wonders when I have streamlined accounting processes, departments and gone into audits (income, sales tax, bank, etc)

Yes, do the annual review.  But, create the process and discipline at the beginning of the year - starting with new vendors.  Make it a rule and stick to it.  

• As part of any new vendor setup, send them a W-9.  Inform them nicely that you are required to have one on file for every vendor.  Then, if they send it back to you quickly-GREAT!  Thank them for taking care of it so quickly.  
• If they lag, but send you their invoice and ask for payment, tell them that it is your policy to have received the completed W-9 back before payment may be issued.  If you stick to it, and do not pay them until you recieve the W-9 back, you would be surprised at how much more compliance you get.  
  

You will find, that because you have done this practice all year, the year end review and getting out the 1099's is so much easier, even for the very small, sending out only a couple of 1099's.  

3.  I almost forgot this one- have your bookkeeper or accountant do it.  This works really well when you only have a few, but don't ask them on the last day of January.  

The IRS has a good information page on the Small Business section, and the instructions for the W-9 and F1099's are actually pretty easy to follow.  

Here are the basics: 

• If you paid $600 or more in a calendar year for rents, services, prizes and awards, to anyone who is not a corporation, send them a 1099.  
  
• If you paid at least $10 in royalties or broker payments, send them a 1099.
  
• If you paid an attorney (gross) $600 or more, (no matter of entity type), plan on sending them a 1099.  
  

There are different boxes on the Form 1099-Misc.  The most common ones are: 
1. Rents
2. Royalties
3. Other Income
7. Nonemployee Compensation
14. Gross proceeds paid to an attorney

The form you need to send to vendors and other service providers is the W-9.  The best thing here is to use the updated form that the IRS publishes.  It is updated every year or so, and there is a new one dated Dec 2014 on the IRS website, which has additional disclosures on it regarding required FATCA reporting, so it's a good idea to send this to vendors each year.  

There are other 1099's that you should be aware of.  If you pay interest, even on a shareholder/member note, then you need to send the recipient a 1099-INT, and not a 1099-MISC.  

PS-Don't forget that the deadline for recipients to get their 1099's is Jan 31!

Payroll is one of those tasks that most people have difficulties.  It is such an important responsibility that business owners must address, and is often handed off to other employees or outsourced payroll providers. The the myriad of regulations in each state regarding payroll and employee time requires someone with the knowledge needed to properly take care of employees.  Just like you review your insurance carrier or bank, it is a good idea to compare services to make sure that you are getting what you need.  

A few important things to consider are errors, customer service, and integration with your accounting system. Notice, that I have not included cost.  Cost is very important, but I think, not the top priority.

For a list of 8 of the top items to consider when evaluating your current and your future payroll processing needs, please email me for a free whitepaper on this topic.