Capitalizing versus expensing purchases is a common question for small business owners. The way purchases are accounted for can sometimes make the difference between a year-end income statement that shows a profit and one that shows a loss. Having a Capitalization Policy will help your bookkeeper easily enter transactions into your QuickBooks or other financial software.
Many small businesses choose to do their own bookkeeping for a variety of reasons, including perceived cost savings. Others hire a cheap bookkeeper or hire inexperienced staff to cut costs. The truth is, bad bookkeeping is costly; here is why:
It’s nearly the fourth quarter and year-end is just around the corner. A lot of small business owners wait too long to get their financials in order. Closing the books for the year doesn’t have to be a race to the finish, it can be a jog. Below are a few things you can do now:
Do you know where your business’ money is going? If not, it’s time to look further. A great way to find out is by using the cash flow statement, or statement of cash flows. Along with the balance sheet and income statement, the cash flow statement will identify where your revenue is coming from and where it’s going.
Every small business has experienced the client with a difficult account. Each week they bring a new last-minute request that was “due yesterday,” and like most business owners, you do it. After all, they have been a client for a while. There is also the client who you diligently work for each month who routinely complains that the bill is too high. They are not happy, nor are you. Instances like these also affect your profit margins. What do you do?
I recall my first experience as a bookkeeper in a dental practice. I met the dentist and of course the hygienist. It wasn’t until I began working at various dental practices that I realized how much non-dental related work the hygienist does.
For example, I have seen the hygienist responsible for receiving payments, preparing and sending past due invoices, dealing with insurance-related matters, scheduling patients, and managing accounts payable. This work is in addition to the dental work which he or she is trained to do.
Cash flow management and reducing accounts receivable aging are important factors to small business owners. Sending an invoice isn’t always enough to get paid. Sometimes your client needs a nudge in the form of a late fee to pay your invoice.
Providing a retirement program for your employees is an important benefit to attract and retain employees. We have found that simple 401(k) plans initiated by small organizations are easily funded and compound annually to provide valued employees a nest egg at retirement. What feels like small contributions each year result in meaningful retirement benefits over time.
Most dentists use proprietary software to manage their practice. As you might imagine, there are countless dental-specific programs, the most popular being Dentrix, Ace, and Dovetail. The primary focus of these programs is to manage patient care and set appointments with very minimal, if any, focus on accounting. To keep track of transactions and provide financial information, dental practices really benefit from using an accounting program like QuickBooks.
Many small business owners start out doing their own bookkeeping. As business grows, there is often little time to manage the books and the search for an internal bookkeeper begins. While QuickBooks is user-friendly, it’s important to hire a candidate that knows their way around the software.