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Does tax time sneak up on you, leaving you feeling unprepared and stressed? Are you so on running the day to day operations of your organization that you lose sight of planning for the financial future? Do you need help navigating through the many forms and documents nonprofits are required to file? If you answered yes to any of these questions, a CPA may be just the answer to what your business or nonprofit needs.

A certified public accountant (CPA) is in charge of monitoring and maintaining financial records for individuals, businesses and nonprofit organizations. A CPA may work on their own or as part of an accounting firm. In order to become certified, a CPA must meet certain requirements imposed by the American Institute of Certified Public Accountants (AICPA), pass a CPA exam and have a particular amount of work experience before practicing as a CPA. These requirements ensure that when you hire a CPA, you are hiring an experienced professional in the field of accounting.

While a CPA can bring nonprofits much-needed relief during audit and tax time, many companies and organizations would benefit from hiring a CPA year-round to make sure their finances stay in order. While most accountants are hired on a long-term basis, there are some accountants that are hired solely to prepare tax returns. CPAs are trained to complete multiple federal and state returns, as well as the various forms nonprofits are required to file yearly.

When hiring a CPA, nonprofits should consider the amount of experience or qualifications a particular CPA has in their industry. Although many individuals feel more comfortable working with a local CPA, there are many accountants that work for successful firms or operate their own personal accounting business nationwide. Each business or nonprofit will have to make their own decision as to what type of CPA they wish to hire for their company.

From addressing your ever-changing and growing needs to helping you establish effective business operations and plan for maximum profitability, a certified public accountant (CPA) can be an essential partner to your business or nonprofit organization. Learn more about choosing a CPA for your business or organization here.

Whether you are an employee or business owner, we are all looking for ways to excel in our business. The key to excellence is looking outside of your immediate world and adopting practices that other businesses and organizations are doing well. While many companies stick to seeking advice from similar businesses, looking outside the business world will offer an even greater insight. Nonprofits are often overlooked by businesses who think they are solely “nice people doing nice things”. However, most nonprofits are also corporations striving to deliver better results, maximize revenue and increase productivity. The following are three lessons businesses can learn from nonprofit organizations:

1. Focus  on mission before quarterly profit. Requiring management to meet measurable financial goals in an allotted period of time can certainly result in productivity gains. However, if employees are only focusing on the goal for the near future, they will miss the heartbeat of the company.A nonprofit’s focus is on mission, not profit. By focusing on the mission before the profit, nonprofits are able to produce amazing results with the little resources they possess. When you focus on your mission, such as creating products that exceed customer expectations, your profit will soon follow.
2. Tap into experience of the board of directors. Just as the board of directors in a for-profit board offers experience, perspective and contacts, a nonprofit board offers the same wealth of information. However, most nonprofit boards do not pay their members to serve on the board. Members of a nonprofit board are volunteers and have a personal commitment to the organization’s mission.Because most nonprofits lack financial and human resources, they have learned to utilize the strengths of their board members. For example, when nonprofits need to make a decision that will have a long-term impact (such as outsource certain aspects of their back-office work or enter into a new project), board members offer insight and help the organization come to a decision. When the organization has made the decision, board members can often identify the consultants and contractors the nonprofit needs.Boards serve as highly competent advisors to a nonprofit organization. As any need arises, the organization has instant access to the board’s highly-trusted advice and insight. A for-profit that adapts this method will not only benefit internally, but they will also gain a competitive advantage.
3. Collaborate as both a means and an end. Nonprofits leverage their limited resources by collaborating with people in the community to accomplish their mission. In the language of for-profits, this is called the formation of strategic alliances.Nonprofits have learned that collaboration can be an end to itself. With the barriers between the organization and the community gone, many nonprofits find that collaboration produces many benefits that are not otherwise achievable. For example, a nonprofit’s mission could be to reduce the length of time a person might be homeless. While collaborating with the circle of stakeholders that are needed to make improvements, the nonprofit can turn to businesses, labor unions, government officials and community activists. The stakeholders can create bonds that carry influence and reduce unproductive conflict in future interactions. Through this process, the larger community becomes aware that there is a process available to address problems, questions and concerns. In turn, the community acts more cohesively and responds better in circumstances.

In order to become successful, businesses and nonprofits can learn from each other. By blending together both worlds, businesses can strive to make a profit and focus on the mission of their company at the same time.

Starting a business can be an exhilarating and complicated experience. While you are excited about the idea of starting your own business, you may be overwhelmed with what you do not know. Rather than trying to go at it alone, consider hiring a small business advisor. Whether you are just starting your business endeavor, or if you have been in business for some time, a small business advisor can help and advise you in running your business efficiently and prosperously. Their years of experience and expertise can help you boost your business’ performance and profit, as well as give you some peace of mind.

Selecting your small business advisor is very important. Your advisor should be efficient and trustworthy. An advisor will help you start from the ground-up, offering suggestions and aiding you in the decision-making process. Select an advisor who has worked with businesses similar to yours and make sure to get references. Speaking to businesses who have worked with the advisor in the past will shine light on to the type of advisor you will be working with. Did the other businesses trust this particular advisor? Did he improve their business and boost their profit? Was he experienced enough to offer guidance? Don’t be shy to ask questions. After all, this advisor will be helping you get started running your business; you want to do it right!

After you have selected and begun working with your advisor, keep track of the progress of the business through financial reports. Creating financial reports periodically (primarily weekly and monthly) will help you monitor the progress of your business since hiring your small business advisor. Take each report into consideration and ask yourself the following questions: Is my profit increasing or decreasing? Have things improved since hiring the advisor? What is the state of my company finances?

These reports will not only help you monitor the state of your business since hiring your advisor; they will also give you insight into the areas that need your attention and improvement. These reports are an insight into the health of your company; treat them with such importance. Go over these reports with your business advisor and see if they can offer you suggestions for further improvement.

A small business advisor has the ability to transform your company into a revenue-producing success. Knowing what to look for in an advisor will ensure that you choose the right advisor for your business and guarantee success. While an advisor does not bring the sales to you, he or she can advise you on how to run your business so as to increase sales and, ultimately, boost your overall profit.

If you would like more information about choosing a small business advisor, contact us today.

Many businesses get overwhelmed by the tax preparation process. Uncertain about the documents they will need in order to file, they often scramble around trying to piece together various records. What those businesses don’t know is that taxes do not have to be so complicated. The right tax preparations can make all the difference between a chaotic tax filing and a simple tax filing situation. The following checklist will help prepare your business for tax time:

Income
– Gross receipts from sales or services
– Sales records (for accrual based taxpayers)
– Beginning inventory (if applicable)
– Ending inventory (if applicable)
– Items removed for personal purposes (if applicable)
– Returns and allowances
– Business checking and savings account interest (1099 INT or statement)

Transportation and Travel Expenses
Local
– Business trip (mileage) log
– Contemporaneous log or receipts for public transportation, parking and tolls

Travel Away from Home
– Airfare or mileage (actual expense if drove)
– Hotels
– Meals and tips
– Taxes and tips
– Internet connection (hotel, internet café, etc.)

Additional Expenses
– Advertising

Commissions paid to subcontractors
– File Form 1099-MISC and 1096 as necessary

Depreciation
– Cost and acquisition date of assets
– Sales price and disposition date of any assets sold

Fringe benefits
– Employer-paid pension/profit sharing contributions
– Employer-paid HSA contributions
– Employer-paid health insurance premiums
– Cost of other fringe benefits

Business insurance
– Casualty loss insurance
– Errors and omissions
– Other

Interest expense
– Mortgage interest on building owned by business
– Business loan interest
– Legal fees

Office supplies
– Pens, paper, staples, etc.
– Other consumables

Rent expense
– Office space rent
– Business-use vehicle lease expense
– Other

Wages paid to employees
– Form W-2 and W-3 Federal and state payroll returns (Form 940, etc.)

Other expenses
– Repairs, maintenance of office facility, etc.

Bookkeeping and accounting are terms that are often confused. Even though they have slightly different meanings, they share two basic goals when it comes to a business’ finances:

• to keep track of your income and expenses, in order to improve your chances of making a profit
• to collect the necessary financial information about your business to file various tax returns and local registration papers

These two basic goals can serve as the starting point for cleaning up your records. Rather than getting overwhelmed by the details of financial management, sort through your books and keep the information that will contribute to the keeping track of income and expenses. There are no requirements to keeping your records a certain way; however, organizing your books with these two goals in mind will keep you sane when trying to find important information. As long as your records accurately reflect your income and expense management, the IRS will find them acceptable.

The process of keeping your books is actually an easy process to grasp; you just have to know what it is your books need to be focusing on. Whether you do your accounting by hand on ledger sheers or use accounting software, the following principles will help you clean up your books:

1. Keep receipts or other acceptable records of every payment to and every expenditure from your business. The accounting process requires that you keep comprehensive summaries of your business’ income and expenses. These summaries, however, cannot just be created. Each sale and purchase must be backed by a record containing the amount, date and other relevant information regarding the sale.Legally, there is not right method to keeping your receipts. Whether you store your receipts in a box or electronically is up to your business. You just want to be sure that the system you choose fits your business needs. Smaller businesses may get by with a “bare-bones” approach; however, larger businesses need a better receipt filing system as they handle more sales and expenditures. Choose a filing system, or adapt a current one, to meet your needs.
2. Summarize your income and expenditure records on a regular basis (generally daily, weekly or monthly). Start by setting up and posting ledgers. A ledger is a summary of revenues, expenditures and everything else your business is keeping track of (entered from your receipts according to category and date). These summaries will answer specific financial questions about your business, such as whether or not you are making a profit and, if so, how much.If you do your accounting by hand, you will start off with a ledger sheet. If you electronically keep track of your books, your ledger sheet will be a computer file of empty rows and columns. On a regular basis, you should transfer, or “post”, the amounts from your receipts to the ledger. How often you do this will depend on how many sales or expenditures your business makes or how detailed you wish your books to be. The more sales you do, the more often you should post to your ledger. It’s important to see what’s happening everyday and not fall behind when your business generates a high volume of sales.
3. Use your summaries to create financial reports that will tell you specific information about your business, such as how much monthly profit you’re making or how much your business is worth at a specific point in time. Financial reports are important to the health of your business. Reports bring together key financial areas of the business and give an insight into how well, or poorly, the business is performing. Your ledger may tell you that your business brought in a substantial amount of money, but until you measure that income with your total expenses, you will have no way of knowing whether or not you made a profit. Financial reports combine the data from your ledgers and form it into a comprehensive picture of your business.

Nonprofit organizations are the heartbeat of the nation. Without them, many people would go without the help and support they need. Since these organizations receive most of their funding through individual donors and are exempt from paying taxes, nonprofits are held accountable to their donors and the government as to where they spend their funds. Auditors will examine your books closely, and it’s best to be prepared for their questions. The following is a checklist that will successfully prepare you for a financial audit:

Accounting Practices
A nonprofit organization’s accounting practice is the main scrutiny of a nonprofit auditor. The accounting system will be carefully analyzed to look for unethical accounting practices or mistakes. The Internal Revenue Service (IRS) or an independent financial auditor will analyze the policies and safeguards put in place to protect the organization’s cash and financial records from theft or mismanagement. Auditors will also compare metrics, such as the number of reporting errors, from the current year to past years. By ensuring that your accounts are running according to code, you will save yourself a lot of time, and stress, when an audit comes around.

Financial Reporting
Make sure that you have copies of every internal report and financial statement shared with the supervisors and managers during the period after the previous audit. These reports, which were produced to keep those higher-up in the organization up to date with the financial climate of the organization, will be the focus of an auditor’s attention. The auditor will also investigate the organization’s management information system to ensure that it is sharing financial information and communicating according to standards.

Nonprofits are also required to submit periodic reports to the government, including the IRS. The audit will review these reporting procedures to ensure accuracy and make sure the reports are submitted in a timely manner.

Management of Contributions
Nonprofits are not only expected to, but they are required to, use their funds from contributors in a responsible manner. Managers within the organization must pay careful attention to the way they distribute contributed funds. A comprehensive nonprofit audit analyzes the way contributions are used. Auditors compute the relative percentages of each type of income distribution and compare it to the results of other organizations serving similar areas of need. The salary levels of top managers will be reviewed. Additional expenses, such as bonus pay, vacations and other incentives, will also be reviewed to ensure organizations are spending their contributed funds wisely and appropriately. Auditors will also analyze any investments held by the organization and determine, through review of the historical and expected future returns, whether the organization is investing its funds wisely.

Nonprofit audits can bring about many emotions in an organization; however, if you prepare for the audit and provide the auditor with the information he needs, you will find yourself less stressed when audit time comes.

A company’s biggest security threat does not come in the form of outside sources such as break-ins or malware. More likely than not, it comes from employees inside the company. A lost laptop containing confidential company and employee information or a misplaced disk with account information can be detrimental to a company’s security. Protect your company against such internal threats and loss of information by taking specific measures to reduce potential risks.

Diminish the risk of a possible security breach by taking preventative steps such as these:

• Conduct background checks on every employee. An exhaustive employee screening, including reference, credit and background checks, should occur before every hiring. These screenings give the employer a better understanding of the person they are hiring and a heads-up to any potential problems.
• Establish a social contract. People are not as loyal to their employees as they once were. Part of the reason for this is that the employee no longer feels valued or appreciated by their employer. One way to establish a loyal work force is to paying attention to the way employees are treated on a regular basis. Good treatment of employees can boost the company morale and diminish security breaches.
• Make employees aware of confidentiality policies. Periodically inform employees of the company’s confidentiality policies, especially in regard to email. While including this information in an employee handbook is valuable, go a step further and make sure that employees are trained on under these policies.
• Adapt company policies to new technologies. Keep up with technology. Stay informed about the trends and adjust your policies accordingly. Cell phones with cameras and external hard drives that can easily download company information are such technologies. Protect your company against potential security breaches by periodically updating your policies to include new forms of technology.

Read more about the biggest threat to your company’s security here.

Does the idea of a tax audit cause you to lose sleep? Are you worried that you will be unprepared for a tax audit when it comes? Does your staff show signs of anxiety in anticipation for the auditors to walk through your company’s doors?

If any of the above scenarios sound familiar, take heart. The four tips below will help you successfully prepare for a tax audit.

1. Be Ready.
   Ask your auditor for a list of items they will need during the audit, with deadlines for each item. Discuss any questions you have with the auditor before the fieldwork. If you will not be ready before the agreed-upon dates, let your auditor know right away.Know beforehand that you will be required to provide some information on the spot. This may include requests for specific expense reports, journal entry support, or program reports. Prepare for these surprise questions by collecting the information you may need throughout the year.
2. Be realistic.
   Be realistic with your expectations of the audit. Your contract with the auditing firm should set your expectations. It should discuss what the audit will accomplish and your responsibilities.Take note that there is a clear line between accounting and auditing services. Consider hiring a different firm if you need help performing accounting tasks that you are not comfortable performing. However, if you are capable of owning the process, your audit firm can assist you with certain analysis and adjustment information outside of the audit.
3. Minimize Your Risks Year-Round.
   Review and revise your accounting and procedures manual. If you do not have an accounting and procedures manual, develop one. Self-assess internal weaknesses and determine the necessary internal controls to diminish those weaknesses. Revisit your organization’s policies and procedures periodically and determine whether they are being followed.Discuss any changes in operations with your auditor during the year and update your policies and procedures accordingly.
4. Be Prepared to Deal with Any Control Deficiencies.
   Be prepared for your auditor to apply risk standards during your audit. Once your auditor has reviewed the risk and internal control information you’ve assembled, he or she could determine there is a “significant deficiency” or, more serious, “material weakness”.Prepare a written response for any matter identified in the auditor’s SAS 115 letter. Include whether you have taken or intend to take any action in response to the finding.

For more information about preparing for a tax audit, read our blog “SecretsSharedforIRSTaxAudits”.

1. Lack of basic financial information. The main pitfall of companies is that financial information is not shared in a timely manner throughout the organization. For information to be valuable, it must be shared within a realistic time frame. More often than not, the information exists but is not provided in a timely manner to those who need it.

2. Lack of comprehensive financial information. A comprehensive analytics report should be produced by each company and organization. This report should relate each balance sheet, revenue, and expense item. Providing calculations, such as length of time in the receivables and inventory departments, can enlighten the company to problem areas and unfavorable trends.

Provide statistical information, trend reports and extensive calculations, such as cost per unit and gross margin by item. These reports are crucial to the proper management of a company and offer valid insight into the health of that company.

3. Inaccurate or incomplete information. Accurate and complete information is crucial in financial reporting; however, most companies prepare financial reports with information that is both inaccurate and incomplete. If you find dramatic variances in the inventory, cash and accounts receivable balances versus your actuals, you need to take a look at the information. Often, these discrepancies can be explained. The reasons may include data entry mistakes, returns not being entered into the system or the balance sheet not reflecting all divisions.

4. Lack of future-focused reporting. Many companies are familiar with looking back through the financials and reporting on past trends; this is called historical cost accounting. To produce effective financial reports, companies must look ahead and make projections about the future. Reports such as cash flow calendars can predict upcoming cash flow balances for a three month period and can signal advance warnings so the company can take immediate, and preventative, action.

Many companies run into obstacles because they are constantly looking backward instead of forward. Looking to the future can provide valuable insight as to where the company is headed, as well as alert you to upcoming obstacles. Continue to make projections throughout the year and incorporate those projections into your financial reports.

5. Lack of event-triggered reporting. Today’s accounting systems have the ability to alert you to drastic changes or undesirable outcomes in your financial information. These systems continuously perform calculations and compare the results to the criteria you have defined. For example, accounting systems can warn the appropriate people when cash balances far too far, when inventory levels are too low, or when gross margins for a particular products have fallen below the acceptable level. An email is typically sent out when instances such as these occur so the correct personnel can take appropriate action.

Taking the time to establish criteria and set up trigger-event notices will help you become more proactive in managing your financial data. For more information about effective reporting, click here.

While it may not seem to be the most important task on your radar, budgeting is crucial to financial success and stability within your business. According to recent research, many business owners refer only to their bank statements to track cash flow and develop business budgets. This means that most business owners are not developing their budgeting skills to the necessary degree for maximum returns.

If businesses do not monitor where their money is going, they could end up spending more than their capabilities. This lack of knowledge could be detrimental to the company. Help your business avoid unexplained income and expenses by developing and maintaining a strict budget. By facilitating your company’s wealth, you are freeing up your costs to invest in the most important asset of all – your business.

Effective budgeting requires extensive planning and preparation, but, in the end, it will save your business time and money. The following tips are designed to help you create and maintain your budget.

1. Write it down.
   On a blank sheet of paper, write out all the income and expenditure of your business. Make sure you write down everything. Once all of your expenses have been determined, enter them into a spreadsheet. This will enable you to easily track what is going in and out of the business’ financials.
2. Determine essentials and non-essentials.
   Like developing a personal budget, your company budget must take into account needs vs wants. Determine the essentials and non-essentials of the company’s overheads. Find cheaper alternatives for non-essentials that do not directly contribute to business operations or eliminate them altogether.
3. Create monetary goals.
   Establish measurable goals within realistic time frames. For example, one of your goals could be to cut spending by a certain percentage for any given month. Your goals should be challenging and achievable while making sure not to conflict with any other goals. These goals should motivate you and your company, not discourage you.
4. Create a realistic budget.
   Avoid creating a stringent budget that will be impossible to follow. Your budget does not have to account for all of your money, and it should allow for unexpected expenses or cash emergencies.
5. Ask for help.
   Developing a budget for your business is difficult. You should have no shame in turning to various resources for help. Accounting software, such as MYOB or Quicken, can walk you through the process of creating an effective budget. Your accountant can also give you valuable advice. Both resources will help you develop a template for your business budget and train you to expand your own budgeting skills.Keep in mind that while it is beneficial to learn from others, do not depend upon their knowledge. Make the effort to understand the principles behind any advice so that you can have a working knowledge of budgeting. This will ensure your success for constructing and maintaining your budget.

If you would like professional advice before you tackle constructing your budget, contact us today and let us aid you in your journey toward business success.