How bookkeepers can save the day

Hiring a professional bookkeeper can save you a lot of money in the long-run. Here are a few examples of where they can help:

Not Understanding What the Final Result Should Look Like

Joe owned a small consulting business. He did his own bookkeeping using QuickBooks Online and received payments from customers via check and Pay Pal. Unfortunately, Joe set up the Pay Pay account wrong and so income was not showing up on his profit & loss statement. He filed his tax return with an incorrect income amount and a year later, received a letter from the IRS stating that the income that Pay Pal reported to the IRS didn’t match his tax return. Joe ended up paying the additional tax due plus interest and penalties to the IRS and he had to amend his state return and pay interest and penalties to the state too.

If Joe had a professional bookkeeper, they would have posted the income properly and reconciled his accounts to be sure nothing got missed. He would have filed an accurate return and avoided interest and penalties. Also, if he had filed on time with the correct information, he could have made a retirement contribution to reduce his tax bill.

Using the Bank Balance to Manage Your Business

Jane ran a small construction business that had 5 employees. One day Jane decided she needed to buy a new trailer. She looked at her bank balance and saw that she had $10,000 in the bank so she wrote a check for the trailer and brought it home. Unfortunately Jane didn’t remember that the payroll for her 5 employees was going to come out of her bank account the next day. The next day, all of her payments were rejected due to insufficient funds. Her employees were very upset that they didn’t get paid on time and Jane was penalized by the IRS for having her payroll tax payment fail.

If Jane had a professional bookkeeper she would have been able to look at her financials and see that there were large balances in her liability accounts which meant that money was scheduled to go out for other things. A bookkeeper would have helped Jane keep her employees happy by paying them on-time and would have helped her avoid penalties.

Missed Opportunities that needed Real Time Financials

Tony did his own books each year. At year-end, he would add up all his income and expenses for the prior year and type it into an Excel spreadsheet and give it to his tax preparer. During COVID, the government announced programs that provided business owners money to help them get through the pandemic. Many of those programs were income-based so the business needed to show the government a current set of financials and/or they had to show how their income had changed compared to a similar quarter in 2019.

Tony wanted to participate in the program but he had no financials for the current year and his financials for the prior years were just annual totals rather than showing income by quarter. So the only way Tony could participate is if he recreated his financials for the prior year. Tony was having a hard enough time keeping his business afloat. He didn’t have time to go back and re-do his financials. Unfortunately, Tony missed out on the opportunity to get hundreds of thousands of dollars from the PPP and ERC programs.

If Tony had a professional bookkeeper, he would have had a comprehensive and real-time set of financials over multiple years. So at a moment’s notice he could have run the required reports to receive the cash needed for his business in those lean times.

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