Bookkeeping is essential for Amazon sellers because it helps organize your small business's financial transactions and keep them that way. There are several benefits to bookkeeping that can save your business money and time […]

Group 10879.png

Amazon Seller Accounting and Bookkeeping Guide

Small business owners wear many hats and have a lot going on as they build their businesses. So, it's understandable that some tasks and priorities are pushed to the side in favor of what they deem to be more pressing aspects of their work. Typically, accounting and financial tasks are among the priorities relegated to the sidelines, but they shouldn't be. You should always prioritize tax and financial considerations, as they can significantly impact your liabilities owed to the IRS. That's why we created this handy list of<a class="link" href="https://1800accountant.com/blog/year-end-accounting-tips"> accounting tips for your small business</a>. These tips touch on some of the most critical accounting tasks and processes you should be aware of, helping to give you vital financial insights and an edge over competitors.&nbsp;&nbsp;



<h2 class="wp-block-heading">9 Small Business Accounting Tips</h2>



<ol>
<li>Expenses. While it isn't mandatory, separating personal and business expenses has numerous advantages. Instead of rushing and stressing during tax season, which takes away from your core business activities, you'll be organized and ready to<a class="link" href="https://1800accountant.com/blog/9-things-small-business-owners-forget-to-claim-on-their-taxes"> claim every deduction</a> your business is entitled to at tax time. As you begin the separation process, business bank accounts, business credit cards, and phone lines are great areas to focus on.&nbsp; </li>



<li>Budgeting. If you've just established your business, it's understandable that you have yet to create a budget. However,<a class="link" href="https://1800accountant.com/blog/budgeting-tips-small-business-owners"> creating a budget</a> detailing your business revenue and expenses for a certain period should be prioritized as soon as possible. You always want to have a firm grasp of your business's financial health, and budgeting helps you achieve that goal. </li>



<li>Bookkeeping. Another method to better understand your business performance is to track all of your income and expenses,<a class="link" href="https://1800accountant.com/blog/6-easy-bookkeeping-tips-entrepreneurs"> which is called bookkeeping</a>. You'll need a high attention to detail and a lot of time to do your own books. Bookkeeping can give you the real-time data you need to make important business decisions when done correctly. Make a mistake, and it throws off everything that depends on your bookkeeping system,<a class="link" href="https://1800accountant.com/blog/manage-small-business-finances"> including financial forecasts</a> your accountant is tasked to generate. You might be able to handle your books initially. Still, as your business grows, the process becomes more complex and time-consuming, which is why so many owners and entrepreneurs outsource this work to professional bookkeeping services. </li>



<li>Business records. Recordkeeping's scope goes beyond bookkeeping’s narrower focus. Recordkeepers document and store financial records, contracts, and legal documents, among other types of records. If you're just starting out, focus particularly on tracking your expenses, gross receipts, and fixed assets. You should store these records for a minimum of three years. </li>



<li>Accounting methods. You can choose to track your transactions using one of the two accounting methods: cash or accrual. Use accounting software to help manage and automate whichever method you choose. If you use the cash method, you will add revenue when your business receives cash and deduct expenses when your<a class="link" href="https://1800accountant.com/blog/calculate-small-business-taxes"> business pays an expense</a>. While the cash accounting method is more straightforward, it has a downside. This method doesn’t include accounts payable or accounts receivable. If you use the accrual method, each business transition matches its expenses and revenue. You’ll list your business expenses and revenues as they occur, meaning you’ll list expenses when paid and revenue when earned. While the cash<a class="link" href="https://www.asbn.com/fund-your-business/finance/25-accounting-terms-every-business-owner-should-know/" target="_blank" rel="noreferrer noopener"> accounting method</a> doesn’t use accounts payable or accounts receivable, accrual accounting does. This gives you a more complete view of your business's financial standing. </li>



<li>Maintaining cash flow. Maintaining the health of your business and creating sustainable growth requires careful cash flow management. You have to spend money to make money, which means ensuring you have funds available when you need them. That’s where your cash flow statement comes in. It is a document collecting all of your business data from day-to-day operations to report on your liquidity and financial health at any given moment. </li>



<li>Investments and credit. How you manage your financial information can impact your access to investment capital, loans, and credit. Before you're fortunate enough to receive additional funding, individuals and institutions will want details about your business's financial health before they invest. They will most certainly want to see your books, among other documentation, providing further incentive to maintain accurate and detailed financial materials at all times.&nbsp; </li>



<li>Tax compliance. Your business should always strive to remain tax-compliant to avoid penalties and increased IRS scrutiny.<a class="link" href="https://www.business.com/articles/business-taxes-matter-all-year/" target="_blank" rel="noreferrer noopener"> Business owners who handle</a> their own financial work risk tax non-compliance, which includes claiming the wrong<a class="link" href="https://1800accountant.com/blog/small-business-tax-deductions-checklist"> tax credit or tax deduction</a>, among other issues non-compliance can impact. A simple mistake can lead to numerous headaches, which is why so many businesses work with financial experts to remain compliant. This peace of mind allows owners to focus on building aspects of their businesses while their financial experts handle the rest. </li>



<li>Financial forecasts. Financial forecasting helps you predict future business performance based on past financial information. It can also assist you with predicting your budget and revenue. There are two types of financial forecasting: qualitative forecasts and quantitative forecasts. If your small business lacks historical data, you may prefer qualitative forecasts. You may prefer quantitative forecasts if you need to examine extensive historical data to figure out patterns or trends. Financial forecasting is one area where a dedicated accountant or CPA can make a sizable impact.&nbsp;</li>
</ol>



<h2 class="wp-block-heading">Work With Small Business Accounting Professionals</h2>



These accounting tips provide you with a foundational understanding of essential financial<a class="link" href="https://1800accountant.com/blog/bookkeeping-for-independent-contractors-6-tips-to-keep-in-mind"> tasks like bookkeeping</a>, business practices, and tax compliance. Without them, your business is unlikely to reach its full potential, which is why so many owners and entrepreneurs work with 1-800Accountant, America’s leading virtual accounting firm for small businesses.



Whether it's<a class="link" href="https://1800accountant.com/services/small-business-taxes"> business tax preparation</a>,<a class="link" href="https://1800accountant.com/services/business-tax-advisory"> tax advisory</a>, or any of our professional accounting services, we have the affordable pricing solutions you need to ensure your business remains compliant. Schedule a quick consultation – usually 30 minutes or less – to learn more.

Small business owners wear many hats and have a lot going on as they build their businesses. So, it&#8217;s understandable that some tasks and priorities are pushed to the side in favor of what they deem to be more pressing aspects of their work. Typically, accounting and financial tasks are among the priorities relegated to [&hellip;]

A person writes in a notebook while holding a pen. An orange triangle with text reading "Small Business Accounting Tips" is displayed to the right side.

small-business-accounting-tips_blog-header

9 Accounting Tips to Safeguard Your Small Business

9 Important Accounting Tips to Safeguard Your Small Business

Of all the financial tasks small business owners must address, bookkeeping might be one of the most consequential and time-consuming.<a class="link" href="https://1800accountant.com/blog/bookkeeping-101-keep-good-financial-records"> Do your books right</a>, and you'll gain important insights into your finances that will help you make critical, time-sensitive business decisions. Do them wrong, and it might hinder your ability to compete in the marketplace and ultimately lead to closure. If you've<a class="link" href="https://1800accountant.com/blog/create-simple-bookkeeping-spreadsheet-business"> run into issues while doing the books</a> for your business, it might be time to look to professionals for help. A professional bookkeeper will save you time and money, but identifying the right one for your business needs can be a challenge. Use this guide to learn all you need to know about evaluating and hiring<a class="link" href="https://1800accountant.com/blog/6-easy-bookkeeping-tips-entrepreneurs"> the right bookkeepe</a>r for your business.&nbsp;



<h2 class="wp-block-heading">Essential Bookkeeping Tasks</h2>



Some bookkeepers are generalists, while others are more specialized. Whichever you choose, ensure they can deliver the following basic bookkeeping tasks.



<ul>
<li>Payroll</li>



<li>Expense tracking and classification</li>



<li>Account reconciliations</li>



<li>Managing vendors and accounts payable/receivable</li>



<li>Paying bills</li>
</ul>



<h2 class="wp-block-heading">How Much Does a Bookkeeper Cost?</h2>



When it comes to using a professional bookkeeper, you have the option to hire or outsource. The cost of bookkeeping will differ depending on your needs.



<ul>
<li>Part-time bookkeeper. Typically, a<a class="link" href="https://1800accountant.com/blog/freelance-bookkeeping"> part-time bookkeeper</a> or freelance bookkeeper will work less than a full-time counterpart and have fewer day-to-day responsibilities, such as focusing mostly on accounts receivable or data entry, that aren't as complex. A part-time bookkeeper could start at an hourly rate of $20 and up.&nbsp;</li>



<li>Full-time bookkeeper. Hiring an in-house bookkeeper can be a great decision if your business has more intricate bookkeeping needs. There are two major drawbacks to bringing on a full-time bookkeeper. They're only one person, so you might have to audit their work from time to time as a precaution to ensure it's correct. They'd also become a full-time employee,<a class="link" href="https://www.allbusiness.com/small-business-finances-bookkeeper-costs-120795-1.html" target="_blank" rel="noreferrer noopener"> with all associated costs</a>, such as healthcare and<a class="link" href="https://ciolook.com/the-benefits-of-hiring-a-bookkeeper-for-small-business/" target="_blank" rel="noreferrer noopener"> other benefits</a> that you would need to cover. That's on top of an average salary of $50,000 per year.  </li>



<li>Outsourced bookkeeping. Outsourcing involves<a class="link" href="https://1800accountant.com/blog/how-to-find-a-virtual-bookkeeper"> a qualified external firm</a> handling your business's bookkeeping needs. They might offer different pricing tiers, sometimes as a monthly fee, with a basic plan costing the least and a more fully featured plan costing the most. They might also be able to tailor a plan to your precise needs. An outsourced bookkeeper is usually as qualified as a full-time in-house bookkeeper but is more cost-effective. And they might also have a team backing them up and checking their work to ensure it's error-free. Because outsourced bookkeepers are typically offsite, you lose the immediate access of someone working onsite.&nbsp;</li>
</ul>



If hiring a bookkeeper isn't currently in your budget, but you have employees, consider using an outsourced payroll service for now.



<h2 class="wp-block-heading">Bookkeeper Cost Variations</h2>



There are cost variations to keep in mind when it comes to selecting the best bookkeeper for your business. For example, location will make an impact if you're interested in hiring a full-time bookkeeper. The salary and benefits required to hire a full-time bookkeeper in Kansas will likely be less than hiring a full-time bookkeeper in New York City. This is one issue to keep in mind during the evaluation process, but there are other considerations and questions you should be asking. Do specific educational requirements or certifications matter? That might cost more. Are you looking for a generalist or a bookkeeper with a particular focus? That might also cost you.



Regardless of the variations in cost, there are many scenarios where you can get the expertise you require while staying within budget.&nbsp;&nbsp;



<h2 class="wp-block-heading">Hiring a Bookkeeper vs. Bookkeeping Service</h2>



If you feel as though you're in over your head or aren't moving the needle as effectively as you had hoped, perhaps it's time to hire a bookkeeper. But<a class="link" href="https://www.business.com/articles/should-you-hire-a-bookkeeper/" target="_blank" rel="noreferrer noopener"> which is best</a> for your business? If you're torn between hiring a full-time in-house bookkeeper and outsourcing to a qualified film, consider the following comparison.



<figure class="wp-block-table"><table><tbody><tr><td></td><td>Outsourced bookkeeper</td><td>Full-time bookkeeper</td></tr><tr><td>Cost-effective</td><td>✔</td><td></td></tr><tr><td>Specialized team&nbsp;</td><td>✔</td><td></td></tr><tr><td>Onsite</td><td></td><td>✔</td></tr><tr><td>Licensed and certified&nbsp;</td><td>✔</td><td>✔</td></tr><tr><td>Tailored price tier</td><td>✔</td><td></td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Bookkeeping vs. Accounting: What’s the Difference?</h2>



<a class="link" href="https://1800accountant.com/blog/bookkeeping-vs-accounting">Accounting and bookkeeping are processes</a> that businesses use to ensure their financial information is accurate and complete. CPAs and bookkeepers both work with financial data and require a basic knowledge of accounting practices. Because of this, you might think they’re the same, but they're not.&nbsp;



Bookkeeping and accounting can be used in conjunction. For example, businesses can use both to generate financial statements. A financial statement serves as the backbone of your business’s financial reporting. These statements, including the income statement, cash flow statement, and balance sheet, are crucial in understanding your business’s performance, liquidity, and overall financial health. Bookkeeping provides the data necessary to create these statements, while accounting ensures their accuracy and completeness. Often, bookkeepers and accountants work closely with each other. Without properly maintained books, accountants wouldn’t have the data they need to create financial models.



<figure class="wp-block-table"><table><tbody><tr><td>&nbsp;</td><td>Accounting</td><td>Bookkeeping</td></tr><tr><td>Skills</td><td>Requires the ability to quickly absorb technical information and analytical thinking.</td><td>Requires attention to detail and in-depth financial knowledge to execute the position.</td></tr><tr><td>Objective</td><td>Analyzing the financial situation of a business in order to make projections and suggestions.</td><td>Keeping thorough financial records for businesses by identifying and recording transactions.</td></tr><tr><td>Advisory</td><td>Advising businesses on their best tax strategies and creating financial projections.</td><td>Bookkeepers do not provide advisory for businesses, as their role is recording more than analysis.</td></tr><tr><td>Tasks</td><td>Analyzing and interpreting financial data to provide advice and support to businesses of all sizes.</td><td>Recording and updating financial information in a general ledger.</td></tr><tr><td>Certifications&nbsp;&nbsp;</td><td>Accountants can become CPAs or Enrolled Agents (EA) when they pass the appropriate exam.</td><td>Bookkeepers can become Certified Bookkeepers, but it is often not required.</td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Why Should You Hire An Expert For Bookkeeping?</h2>



Hiring the right bookkeeper to fulfill your business needs can be a decisive advantage over the competition. But you can't just pick anybody to keep accurate records and save your business money. You need small business professionals intimately familiar with your state's and industry's inner workings. You need the full-service bookkeeping experts at 1-800Accountant, America's leading virtual accounting firm for small businesses. Whether it's<a class="link" href="https://1800accountant.com/services/bookkeeping"> bookkeeping</a>,<a class="link" href="https://1800accountant.com/services/small-business-taxes"> small business tax preparation</a>, or <a class="link" href="https://1800accountant.com/services/payroll">payroll</a>, we have the solution you need at a price that fits your budget so you can get back to building your business. Schedule a quick consultation – usually 30 minutes or less – to learn how we can handle your books.

Of all the financial tasks small business owners must address, bookkeeping might be one of the most consequential and time-consuming. Do your books right, and you&#8217;ll gain important insights into your finances that will help you make critical, time-sensitive business decisions. Do them wrong, and it might hinder your ability to compete in the marketplace [&hellip;]

A man wearing glasses and a blue sweater is sitting at a desk, looking at a laptop. The text on the image reads "How Much Does a Bookkeeper Cost?.

how-much-does-a-bookkeeper-cost_blog-header

How Much it Costs for a Small Business Bookkeeper

How Much It Costs to Hire a Bookkeeper for Your Small Business

Great bookkeeping plays a critical role in the success of every business. But not all bookkeepers are the same. Inaccuracies caused by poor bookkeeping can have serious tax ramifications and put you at a disadvantage by not having the data you need to make important business decisions.



When looking for a bookkeeper for your business, it's important that you know what questions to ask. This article examines the benefits of good bookkeeping and makes recommendations for finding the best bookkeeper who suits your unique business needs.



<h2 class="wp-block-heading">What a bookkeeper can provide for your business</h2>



Bookkeepers record a business’s financial transactions and might also perform day-to-day tasks such as recording sales and invoices, paying bills, and processing payroll.



While recording transactions is the first thing that comes to mind when envisioning bookkeeping, a bookkeeper can provide much more value to your business.



<ul>
<li>Saves you time. If you're like other owners who<a class="link" href="https://1800accountant.com/blog/bookkeeper-vs-diy"> prefer to do your business’s bookkeeping yourself</a>, you know how difficult and time-consuming it can be. By hiring a bookkeeper, you can save time and focus on other aspects of your business while they handle bookkeeping duties for you.&nbsp;</li>



<li>Saves legal headaches. Accurate financial information can keep you out of trouble with federal, state, and local tax authorities. There could also be other compliance standards you must adhere to, such as creating timely financial statements as you pay back a business loan. A bookkeeper will ensure the data used to create your financial statements are accurate.</li>



<li>Fraud protection. Your business should have at least two sets of eyes looking at every transaction. The person who reconciles your bank account(s) should not be the same person who has access to cash or authorizes transactions. A bookkeeper can serve as this second set of eyes to help ensure you avoid fraud and other unpleasantries.</li>



<li>Helps create management reports. You’ve got all your transactions accurately recorded - money coming in, money going out. A bookkeeper can use this information to create reports and key performance indicators that can help you better manage your business by giving you up-to-the-minute information.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">How to Know if You’re Ready to Hire a Bookkeeper</h2>



The chances are that<a class="link" href="https://1800accountant.com/blog/outsourced-bookkeeping-guide"> you’re wondering if you need a bookkeeper</a>. Here are some guidelines to consider when deciding whether it’s time to start the bookkeeper hiring process.



<ul>
<li>Transaction backlog. Your transactions should be recorded on a daily basis, or at the very least, on a weekly basis. Your bank accounts should also be reconciled monthly at a minimum. If you’re starting to fall behind on keeping your accounting record up-to-date, then you’re probably ready to hire a bookkeeper.</li>



<li>Your accountant is starting to help with bookkeeping. While many bookkeepers can help with accounting-related tasks, the opposite should never be the case. While<a class="link" href="https://1800accountant.com/blog/reasons-you-need-accountant-self-employment"> accountants can most certainly perform bookkeeping tasks</a>, this isn’t the best use of their time — or your money — because accountants typically cost more than bookkeepers. If your accountant is starting to do more bookkeeping work, then you’re ready to find a dedicated bookkeeper.</li>



<li>You don’t know where your money is going. Many small business owners are so focused on day-to-day operations or providing client services that they don’t regularly monitor their bank accounts. Maybe you’re in a similar situation — you’re not sure when money goes into your bank account, and you’re not always sure where the money goes when it comes out. If you feel like your money is always disappearing (not because of fraud or stealing, per se, but more because you don’t track it on a regular basis), then that’s a sign that you need someone to help you monitor cash coming into and going out of your business.</li>
</ul>



<h2 class="wp-block-heading">10 interview questions to ask when looking for a bookkeeper</h2>



It’s important to have bookkeeper interview questions ready for prospects to help you pick the one who’s the best fit for your business. Here are some questions to consider asking during your bookkeeper interview process:



<ol>
<li>Describe your work experience. Why did you decide to become a bookkeeper? When did you decide that being a bookkeeper was the right career path for you?</li>



<li>Tell me about your industry certifications and accreditations. Do you have any experience with my business’s industry?</li>



<li>Can you provide me with any testimonials, references, or case studies from previous clients or employers?</li>



<li>How do you approach working with a business for the first time? How would you familiarize yourself with my business? Do you need access to spreadsheets or tax returns?</li>



<li>Do you prefer working remotely or on-site when performing bookkeeping services?</li>



<li>What's your approach to time management, and what is your typical response time to follow up on client emails and phone messages?&nbsp;</li>



<li>Some bookkeepers are generalists, while others are specialists. Which of these would you consider yourself to be?</li>



<li>Do you provide an engagement letter that clearly outlines what services you will be performing for my business?</li>



<li>What security practices do you follow to make sure my confidential information and financial data remain secure?</li>



<li>What is your fee rate? Do you prefer to work by the hour or charge a flat fee?</li>
</ol>



<h2 class="wp-block-heading">Traits of an experienced bookkeeper</h2>



These are the top traits you’ll want to make sure that your bookkeeper possesses.&nbsp;



<ul>
<li>Attention to detail. Nobody’s perfect, but you want your bookkeeper to have a very strong focus when doing their work. They should display a high degree of accuracy.</li>



<li>Ability to understand business strategy. A bookkeeper should be able to think beyond the numbers. After recording your business’s transactions, a bookkeeper should be able to provide, at the very least, some general recommendations on business strategy. For example, being able to recommend where to cut back on expenses, alert you to when you’ve got too much cash in your checking that you should transfer to a higher-yield account, or when revenue is increasing to the point when it might make sense to hire another employee.</li>



<li>Display people skills. Your bookkeeper doesn’t need the personality of a charismatic politician, but you should feel comfortable enough around him or her that conversations come naturally. Soft skills are nearly as important as technical knowledge! It’s important for your bookkeeper to be able to clearly communicate to you what they see happening financially in your business.</li>
</ul>



You can look for these traits and use these other great<a class="link" href="https://smallbiztrends.com/2023/10/hire-a-bookkeeper.html" target="_blank" rel="noreferrer noopener"> suggestions for finding a bookkeeper</a> for your business.



<h2 class="wp-block-heading">A good bookkeeper can help your business grow and thrive</h2>



Finding the right bookkeeper can help your business grow, and hiring the wrong bookkeeper can result in a major setback. You need a problem-solving bookkeeper who is a detail-oriented expert in handling your financial records, income statements, bank statements, cash flow, and more. You need the bookkeeping services from 1-800Accountant, America’s leading virtual accounting firm for small businesses. Whether it's<a class="link" href="https://1800accountant.com/services/bookkeeping"> bookkeeping</a>,<a class="link" href="https://1800accountant.com/services/payroll"> payroll</a>,<a class="link" href="https://1800accountant.com/services/business-tax-advisory"> tax advisory</a>, or any of our professional accounting services, we have the affordable pricing solutions you need to help your business stay compliant with an experienced bookkeeper familiar with your state and industry. Schedule a quick consultation – usually 30 minutes or less – to learn more.

Great bookkeeping plays a critical role in the success of every business. But not all bookkeepers are the same. Inaccuracies caused by poor bookkeeping can have serious tax ramifications and put you at a disadvantage by not having the data you need to make important business decisions. When looking for a bookkeeper for your business, [&hellip;]

A person in business attire is sitting at a desk, talking on the phone, and using a laptop. Text beside them reads, "Hiring a Bookkeeper? What Questions to Ask.

hiring-a-bookkeeper-what-questions-to-ask_blog-header

10 Questions to Ask When Hiring a Bookkeeper

You've had that Eureka moment and founded a small business to realize that vision. You've even made it official by <a class="link" href="https://1800accountant.com/blog/6-tricks-to-choosing-the-best-entity-for-your-small-business">forming as a limited liability company</a> business entity, commonly known as an LLC. Congratulations! Now what? Now it's time to consider taxes and whether your LLC needs an accountant. Because if you don't, you could be leaving money on the table. Many small businesses pay up to double what they should in taxes in their first year of operation. Why? They didn't take the necessary steps to minimize their tax burden, just one area where an accountant can make a substantial difference. Use this guide to determine whether you need an accountant, the right time to hire one, and the benefits, all in an effort to empower you with the information you need to make the best decision for your business.&nbsp;&nbsp;



<h2 class="wp-block-heading">Do LLCs Need Accountants?</h2>



Hiring an accountant or certified public accountant (CPA) is not required, but almost every successful business in America wouldn't operate without one. Free DIY accounting software or apps alone don't typically meet their needs. So, generally, yes, LLCs need accountants and CPAs. Accountants and CPAs are typically financial experts who also handle the preparation and filing of tax returns and the <a class="link" href="https://1800accountant.com/blog/9-things-small-business-owners-forget-to-claim-on-their-taxes">identification of deductions</a>. They produce financial reports to help you better understand your profitability, cash flow, and financial path. Business owners often work with accountants to better grasp their finances at a high level for tax planning, forecasting, and advice. LLCs might use an accountant or CPA for the following functions: 



<ul>
<li>Analyzing financial information</li>



<li>Financial modeling</li>



<li>Tax preparation and filing</li>



<li>Financial advisory</li>



<li>Preparing financial statements</li>
</ul>



<h2 class="wp-block-heading">When to Hire an Accountant for your LLC</h2>



It's best to hire an accountant as soon as you launch your new business, but that's not always possible for many reasons. Some owners might hold back due to a lack of budget, while others may take a wait-and-see approach due to the likelihood of <a class="link" href="https://www.investopedia.com/financial-edge/1010/top-6-reasons-new-businesses-fail.aspx#:~:text=Data%20from%20the%20BLS%20shows,to%2015%20years%20or%20more." target="_blank" rel="noreferrer noopener">new business failure</a>. Roughly 20% of new businesses fail within two years of launch, with 45% failing during the first five years. 



Signs that it might be time to hire an accountant include:



<ul>
<li>You own a multi-member LLC</li>



<li>You cover health insurance premiums for your employees</li>



<li>You recently altered your business tax classification</li>



<li>Your LLC earns $10,000 or more annually&nbsp;</li>



<li>You’re upgrading to new bookkeeping systems</li>



<li>You have concerns about maintaining strict financial records</li>
</ul>



<h2 class="wp-block-heading">Steps for Hiring an Accountant for Your LLC</h2>



A couple of steps are required to identify the accountant that's right for your LLC.



<ul>
<li>Identify your accounting needs. What are your financial pain points? Identify accountants who can cater to your unique requirements.&nbsp;</li>



<li>Do research. Seek word of mouth and read reviews to find reputable accounting candidates familiar with the potential peculiarities of doing taxes in your state and industry.</li>



<li>Book consultations. Identify top accounting candidates and book consultations promptly. Be sure to bring along materials and have plenty of questions. Unsure how to prepare? Use <a class="link" href="https://1800accountant.com/blog/how-to-prepare-for-a-small-business-tax-consultation">this guide</a> to help get you ready.</li>
</ul>



Once you've selected the best accountant for your LLC, there will be an onboarding process that helps ensure your ongoing accounting requirements are addressed.&nbsp;



<h2 class="wp-block-heading">Benefits of Having an Accountant for an LLC</h2>



There are numerous benefits to using an accountant for your LLC. An accountant can <a class="link" href="https://1800accountant.com/blog/calculate-small-business-taxes">calculate and submit</a> your quarterly estimated taxes, do your annual taxes, generate insightful financial reporting, provide strategic advisory, and more. This helps your LLC stay compliant while giving you the financial clarity you need to grow your business. Your accountant also keeps up on the latest <a class="link" href="https://1800accountant.com/blog/small-business-tax-changes">changes to tax law</a> that can impact your industry and state. They will also advise you on time-sensitive decisions that can lead to substantial tax savings. But the ultimate benefit is a minimal tax burden, keeping more of your hard-earned money in your pocket. With a great accountant at your side, you'll never pay more than you have to.   



<h2 class="wp-block-heading">What Type of Accountant Is Best for Small Businesses?</h2>



Many accountants are generalists who can serve the needs of a diversity of clients, while others are more narrow in their focus. The best type of accountant for small businesses, including LLCs, is calibrated to exclusively serve their needs by providing the financial services and expertise required to grow. Accountants for small businesses do this by minimizing your financial tasks while maximizing your tax savings.   However, not every accounting firm for small businesses is created equally. So read reviews and do your due diligence to ensure you've selected the best firm for your LLC. 



<h2 class="wp-block-heading">Bookkeeper vs. Accountant: Do LLCs Need Both?</h2>



The role of an accountant typically involves advisory, but they can also do your <a class="link" href="https://1800accountant.com/blog/business-taxes">business taxes</a>, among other duties. Bookkeepers maintain business records, handle payroll taxes, and create invoices. They also handle the critical task of financial reconciliation– ensuring your bank statement matches the records in the general ledger. It isn't advisable, yet some LLCs operate without a bookkeeper, accountant, or both. Bookkeepers and accountants are best used in tandem. But if you’re in a scenario where you have enough budget for one or the other, choose the accountant or bookkeeper who can address your immediate needs. If you need support with strategic budgeting to meet IRS requirements and get your tax return done, hire an accountant. Hire a bookkeeper if you need help with your general ledger or tracking your financials. When searching for an accountant, you'll want one who specializes in small business accounting. They'll be able to improve various aspects of your business, prepare and file taxes, provide tax advice throughout the year, not just tax time, help you establish a business bank account, and evaluate your business structure to identify additional tax savings. 



<h2 class="wp-block-heading">Manage Your LLC's Business Finances and Taxes with 1-800Accountant</h2>



Managing a small business LLC's finances and taxes full-time can be challenging, especially when owners wear multiple hats. That's why so many small business owners, entrepreneurs, and sole proprietors trust 1-800Accountant, America's leading virtual accounting firm for small businesses, to handle their business needs. Whether it's <a class="link" href="https://1800accountant.com/services/business-tax-advisory">tax advisory</a>, <a class="link" href="https://1800accountant.com/services/quarterly-estimated-taxes">quarterly estimated taxes</a>, <a class="link" href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, <a class="link" href="https://1800accountant.com/services/entity-formation">entity formation</a>, or any of our professional accounting services, we have an affordable pricing solution to help your business stay compliant. Schedule a quick consultation – usually 30 minutes or less – to learn more.

You&#8217;ve had that Eureka moment and founded a small business to realize that vision. You&#8217;ve even made it official by forming as a limited liability company business entity, commonly known as an LLC. Congratulations! Now what? Now it&#8217;s time to consider taxes and whether your LLC needs an accountant. Because if you don&#8217;t, you could [&hellip;]

Two women are discussing something on a laptop. One holds a clipboard. Text in the image reads, "Do You Need an Accountant for Your LLC?" Shelves with items are visible in the background.

do-you-need-an-accountant-for-your-llc_blog-header

Do You Need an Accountant for Your LLC?

Accounting and bookkeeping are vital processes that small businesses use to ensure their financial information is accurate and complete. Bookkeepers and accountants work with financial data, and both professions require a basic knowledge of accounting practices. Because of this, small business owners might think they’re one and the same. Regardless of their similarities, the functions of accounting and bookkeeping are distinct and equally important for businesses of any size. Use this guide to understand all you need to know about these essential business processes.&nbsp;<h2>What’s the difference between bookkeeping and accounting?</h2>Use this <a class="link" href="https://1800accountant.com/services/bookkeeping">side-by-side comparison</a>&nbsp;to understand top-line skills, objectives, certifications, and more for accountants and bookkeepers.&nbsp;<h3>Bookkeeping vs. Accounting Comparison</h3><div class="rte-table-container"><table><thead><tr><th></th><th>Accounting</th><th>Bookkeeping</th></tr></thead><tbody><tr class="table-data-container"><td class="cell-0">Skills</td><td>Requires the ability to quickly absorb technical information and analytical thinking.</td><td>Requires attention to detail and in-depth financial knowledge.</td></tr><tr class="table-data-container"><td class="cell-0">Objective</td><td>Analyzing the financial situation of a business in order to make projections and suggestions.</td><td>Keeping thorough financial records for businesses by identifying and recording transactions.</td></tr><tr class="table-data-container"><td class="cell-0">Advisory</td><td>Advising businesses on their best tax strategies and creating financial projections.</td><td>Bookkeepers do not provide advisory for businesses, as their role is recording more than analysis.</td></tr><tr class="table-data-container"><td class="cell-0">Tasks</td><td>Analyzing and interpreting financial data to provide advice and support to businesses of all sizes.</td><td>Recording and updating financial information in a general ledger.</td></tr><tr class="table-data-container"><td class="cell-0">Certifications</td><td>Accountants can become CPAs or EAs when they pass the appropriate exam.</td><td>Bookkeepers can become Certified Bookkeepers, but it is often not required.</td></tr></tbody></table></div>Bookkeeping and accounting can be used in conjunction. For example, businesses can use both to generate financial statements. A financial statement serves as the backbone of your business’s financial reporting. These statements, including the income statement, cash flow statement, and balance sheet, are crucial in understanding your business’s performance, liquidity, and overall financial health. Bookkeeping provides the data necessary to create these statements, while accounting ensures their accuracy and completeness.Often, bookkeepers and accountants work closely with each other. Without properly maintained books, accountants wouldn’t have the data they need to create financial models.&nbsp;<h2>What does a bookkeeper do?</h2><h3>Advantages</h3>The&nbsp;<a class="link" href="https://1800accountant.com/blog/bookkeeping-101-keep-good-financial-records">function of bookkeeping</a>&nbsp;for a small business is to ensure that all financial data is properly recorded by creating a general ledger. The general ledger is where information such as debits and credits are recorded. Maintaining the ledger is detail-heavy work, with its thorough information providing the best tools for financial data interpretation, decision-making, and forecasting.&nbsp;The role of a bookkeeper doesn’t typically involve advisory, and they’ll never do your taxes. Bookkeepers maintain the records for a small business, as well as handling payroll and creating invoices. They also handle the important task of financial reconciliation – which entails ensuring your bank statement matches the records in the general ledger.Main bookkeeper tasks include:<ul><li>Creation and maintenance of the general ledger and balance sheets</li><li>Tracking of sales and expenses</li><li>Financial reconciliation&nbsp;</li><li>Running payroll</li><li>Creating and tracking invoices</li><li>Tracking financial transactions&nbsp;</li></ul><h3>Required Credentials</h3>Bookkeepers aren’t typically required to have a bachelor’s degree or credentials. There’s no bookkeeping equivalent of a CPA. Bookkeepers can&nbsp;<a class="link" target="_blank" href="https://smallbusiness.chron.com/types-bookkeeping-48070.html">seek certification</a>&nbsp;and become certified bookkeepers, but that is done at their discretion. A bookkeeper needs financial knowledge and strict attention to detail to execute the position successfully.<h2>What does an accountant do?</h2><h3>Advantages</h3>Accountants use the financial information compiled by bookkeepers to produce financial reports. These reports are designed to help business owners better understand their profitability, cash flow, and financial path. Often, business owners turn to accountants for help understanding their finances at a high level for tax planning, forecasting, and advice.Accountants are&nbsp;<a class="link" href="https://1800accountant.com/blog/different-types-accounting">typically financial experts</a>&nbsp;who also handle the preparation and filing of tax returns.Main accounting tasks include:<ul><li>Analyzing financial information</li><li>Financial modeling</li><li>Tax preparation and filing</li><li>Advising business owners on financial decisions</li><li>Preparing financial statements</li></ul><h3>Required Credentials</h3>Unlike bookkeepers, accountants are usually required to have a formal education and some kind of certification or credential. Accountants are required to hold a degree in accounting or finance. They can become CPAs via certification with their state or EAs by being certified at the federal level.<h2>Do you need both a bookkeeper and an accountant?</h2>Small businesses benefit the most from using a bookkeeper and accountant in tandem. The bookkeeper compiles the detailed information an accountant needs to generate financial insight that helps business owners understand where they are today and aids in future growth. Some small businesses operate without a bookkeeper, without an accountant, or without both. It isn’t advisable even if you’re comfortable handling these duties. For example, you might be detail-oriented enough for the&nbsp;<a class="link" href="https://1800accountant.com/blog/6-easy-bookkeeping-tips-entrepreneurs">bookkeeping process</a>, but tracking financial transactions is also incredibly time-consuming, taking you away from important business functions. Aspects of a business can suffer when ownership wears too many hats. If you’re in a scenario where you have enough budget for one or the other, choose the accountant or bookkeeper who can address your immediate needs. If you need support with strategic budgeting to meet IRS requirements and get your tax return done, hire an accountant. Hire a bookkeeper if you need help with your general ledger or tracking your financials.&nbsp;<h2>1-800Accountant for your bookkeeping and accounting needs</h2>Working with the right bookkeeper and accountant can be a decisive advantage over the competition. But you can’t just pick anybody. You need small business professionals intimately familiar with your state’s and industry’s inner workings. You need the experts at 1-800Accountant, America’s leading virtual accounting firm for small businesses.Whether it’s&nbsp;<a class="link" href="https://1800accountant.com/services/small-business-taxes">small business tax preparation</a>,&nbsp;<a class="link" href="https://1800accountant.com/services/business-tax-advisory">advisory</a>, or&nbsp;<a class="link" href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, we have the solution you need at a price that fits your budget. Schedule a quick consultation – usually 30 minutes or less – to learn how we can address your business needs.

Accounting and bookkeeping are vital processes that small businesses use to ensure their financial information is accurate and complete. Bookkeepers and accountants work with financial data, and both professions require a basic knowledge of accounting practices. Because of this, small business owners might think they’re one and the same. […]

A person using a calculator at a desk with papers, overlaid with text "what's the difference between bookkeeping and accounting?.

difference-between-bookkeeping-and-accounting

What’s the Difference Between Bookkeeping and Accounting?

Truckers, as owner-operators, have a lot on their plates with the constantly evolving trucking industry. Between long-haul deliveries, managing their schedules, and maintaining their vehicles, there isn’t always much time to dedicate to bookkeeping. However, bookkeeping for truckers is just as important as it is for independent contractors in other industries. The bookkeeping process is very detailed, requiring your documents, receipts, and transactions to be organized. With proper bookkeeping, you can ensure your trucking company or trucking business complies with all of the rules and regulations for tax season.There are ways to keep your finances and business expenses in order without doing it all in one sitting. By organizing bookkeeping and finances, truckers can avoid some tax-related issues and be aware of tax returns, IFTA, and other crucial financial information relevant to their small business. This article will discuss why bookkeeping is essential for trucking businesses, the top five bookkeeping tips to help keep your tricking books in order, and how bookkeeping services and an accounting system can help you stay on track.<h2>What’s the process for truckers to manage their bookkeeping?&nbsp;</h2>Truck drivers must record their transactions, listing them as credits and debits. This form of bookkeeping is<a class="link" href="https://1800accountant.com/blog/bookkeeping-101-double-entry">&nbsp;double-entry bookkeeping</a>. Double-entry bookkeeping aims to maintain balanced books and accurately record all debits and credits to avoid unexpected problems.<h2>Do truck drivers need bookkeepers?</h2>Truck drivers may need bookkeepers depending on their specific circumstances and preferences. While some truck drivers may have the skills and time to manage their own bookkeeping, others may enjoy the benefits of consulting with a professional who specializes in<a class="link" href="https://1800accountant.com/services/industry/trucking">&nbsp;bookkeeping for truckers</a>&nbsp;and has access to innovative bookkeeping software. Truck drivers<a class="link" target="”_blank”" href="https://www.smart-trucking.com/record-keeping-for-truck-drivers/#:~:text=Collect%20your%20receipts%20and%20put%20them%20in%20a,together%3B%20then%20place%20them%20back%20in%20the%20folder.">&nbsp;must keep records</a>&nbsp;of documents throughout their travels, such as:<ul><li>Expenses&nbsp;</li><li>Maintenance records</li><li>Parking</li><li>Receipts</li><li>Repair records&nbsp;</li></ul>Working with a bookkeeper allows you to remain organized, identify your cash flow, streamline your business accounting, be mindful of IFTA reports, and maximize your tax deductions to help you save money.&nbsp;<h2>5 Tips To Help Keep Truck Driver’s Books In Order</h2>As a trucker, the following tips can help you keep your<a class="link" target="”_blank”" href="https://ratings.freightwaves.com/bookkeeping-for-truckers/">&nbsp;books in order:</a><ol><li>Keep a logbook&nbsp;</li><li>Review your finances&nbsp;</li><li>Keep your business and personal accounts separate</li><li>Save all of your receipts&nbsp;</li><li>Update your books regularly and often</li></ol><h3>1. Keep a Logbook</h3>The first tip to keep your trucker finances in order is to keep a logbook. You can keep a digital or physical copy, whatever is more convenient. If you keep a digital logbook, ensure it’s backed up properly. Business owners, such as trucking owner-operators, can use a logbook to provide safe recordkeeping with spreadsheets with all their financial statements.A logbook contains the following information:<ul><li>Carrier’s main office address&nbsp;</li><li>Name of carrier</li><li>Total driving miles&nbsp;</li><li>Total hours driven</li><li>Truck number</li></ul><h3>2. Regularly Review Your Finances</h3>You can review your finances as often as possible if you do it regularly. As a trucker or trucking business, you must do this for several reasons:<ul><li>You’ll likely have many financial documents and receipts to review.&nbsp;</li><li>These records contain information about credits and debits, which will streamline your bookkeeping needs later.</li><li>When reviewing your finances, you want to ensure that your credits and debits balance each other.&nbsp;</li></ul><h3>3. Keep Your Business and Personal Accounts Separate</h3>The third tip to keep your finances in order is twofold: keeping your<a class="link" href="https://1800accountant.com/blog/manage-bank-accounts-self-employed">&nbsp;business and personal accounts separate</a>. Not only does this simplify cash flow, but it will also make it easier to track business deductions and expenses. Paying off your business credit card expenses before they accrue interest also helps you build your credit.<h3>4. Save All of Your Receipts</h3>Fourth, you’ll want to save all of your receipts.&nbsp;Receipts showing your expenses will simplify tax season. You’ll likely have dozens or even hundreds of receipts as a truck driver. To avoid losing receipts, you’ll need an organization system:<ul><li>When you collect your receipts, place them in a file or folder.</li><li>Group your receipts by their category or purpose, such as fuel, maintenance, parking, or tolls.</li><li>After you sort your receipts, write the number of receipts in each category.</li><li>Count your receipts in each category and write the total when the month ends.</li></ul>The IRS may request additional documents three to seven years after filing taxes.&nbsp;There are ways you can avoid difficulties in finding receipts later:<ul><li>You can choose how to store your receipts. You can keep copies for future tax purposes or the original receipts within your truck.&nbsp;</li><li>Adding dates to your receipts is another way to keep them organized to prepare for further bookkeeping needs.</li><li>Saving digital copies is also useful if your physical receipts become damaged or illegible. You can make digital copies to have access to many receipts quickly.</li></ul>Sometimes, you can’t receive physical copies of your receipts, which may complicate your bookkeeping. When this occurs, you can use receipt management apps to organize your digital copies further, sorting them by the purpose of the receipt and tagging them.&nbsp;<h3>5. Update Your Books Regularly and Often</h3>The last tip to keep your records in order is to schedule a recurring time to update your books. You may update your books as often as you want, and it may prevent costly mistakes, such as overdrafts and underreporting.To make sure you’re updating your books frequently, establish a routine. You can utilize accounting software, QuickBooks Online, and spreadsheets to keep track of business expenses, accounts receivable, and other important financial information attached to your bank account. There’s a way to update your books consistently by doing a month-end close. This process involves reviewing and reconciling your transactions at the month’s end to ensure your records are balanced in real-time.<h3>Consult a Professional&nbsp;Bookkeeper&nbsp;</h3>Above, we provided bookkeeping tips to help you save time while adhering to important deadlines. However, the best way to keep up with your accounting is to utilize bookkeeping services through an accounting professional. Bookkeeping is essential to any job, including truckers and trucking, and it’s essential to. After compiling your documents and records, you’ll need bookkeepers with experience and bookkeeping software to avoid issues.As a truck driver, you’ll want to work with experts to meet your industry’s specific bookkeeping needs and answer all of your specific questions relevant to your small business. Work with the<a class="link" href="https://1800accountant.com/services/bookkeeping">&nbsp;bookkeeping professionals</a>&nbsp;at 1-800Accountant for your<a class="link" href="https://1800accountant.com/services/industry/trucking">&nbsp;tax needs as a truck driver</a>.

Truckers have a lot on their plates. Between long-haul deliveries, managing their schedules, and maintaining their vehicles, there isn’t always much time to dedicate to bookkeeping. However, bookkeeping for truckers is just as important as it is for independent contractors in other industries. The bookkeeping process is very detailed, requiring you to have your documents, […]

Bookkeeping for truckers: 5 tips to help keep your books in order.

Bookkeeping-for-Truckers_blog-header

Bookkeeping for Truckers: 5 Tips to Keep Your Finances In Order

You have a vision for helping others. Your non-profit can make a difference – if you can finish all the paperwork.&nbsp;You know you need to keep your receipts and records, but you’re slowly finding that bookkeeping is more complex than simply tracking expenses. Bookkeeping for non-profit organizations requires a specific skill set because the rules differ from for-profit bookkeeping rules.&nbsp;This article will cover the differences between non-profit and for-profit bookkeeping. We’ll also cover non-profit reporting requirements and our best practice recommendations.&nbsp;<h2 class="wp-block-heading">What Is Non-Profit Accounting?</h2>Non-profit accounting is a set of principles for recording non-profit organizations’ financial activities.&nbsp;Non-profits must file annual reports to maintain <a class="link" href="https://1800accountant.com/blog/how-to-file-501a">tax-exempt status</a>; non-profit accounting supports these filings. Non-profit financials are publicized to help government agencies and donors understand how the organizations operate. Donors expect your non-profit to use funds toward its stated mission.Bookkeeping is critical to supporting the accounting function.<h2 class="wp-block-heading">What Is Non-Profit Bookkeeping?</h2>Non-profit bookkeeping is the practice of maintaining <a class="link" href="https://1800accountant.com/services/bookkeeping">detailed, accurate records</a> of all revenues and expenses. Accountants rely on accurate bookkeeping for financial reporting and analysis.&nbsp;Non-profit bookkeepers perform recordkeeping activities such as the following:&nbsp;<ul><li>Categorize revenues and expenses</li></ul><ul><li>Record in-kind donations</li></ul><ul><li>Record transactions</li></ul><ul><li>Verify general ledger balances</li></ul><ul><li>Reconcile bank accounts</li></ul><ul><li>Create invoices and purchase orders&nbsp;</li></ul><h3 class="wp-block-heading">How Is Non-Profit Bookkeeping Different from For-Profit Bookkeeping?</h3>The main difference between non-profit and for-profit bookkeeping is the application of <a class="link" href="https://www.fool.com/the-ascent/small-business/accounting/articles/nonprofit-accounting/" target="_blank" rel="noreferrer noopener">fund accounting principles</a> for non-profit organizations.&nbsp;Both non-profit and for-profit organizations follow generally accepted accounting principles (GAAP). Non-profit bookkeepers need to understand and apply GAAP rules and fund accounting principles.Non-profits prepare annual financial statements, which report detailed fund activities to the public. In contrast, for-profit organizations don’t need to track or report activities by fund.<h4 class="wp-block-heading">How Does Fund Accounting Work for Non-Profits?</h4>Non-profits receive funding through donations or grants. Some organizations also generate income from business activities such as selling merchandise. Each revenue source represents a separate fund.&nbsp;Non-profits categorize and track each source of receipts and related expenses.&nbsp;For example, imagine that your <a class="link" href="https://1800accountant.com/blog/4-types-of-non-profit-organizations">non-profit organizes a fundraiser</a>. Your non-profit bookkeeper should set up a fund for the event. The event fund will reflect all related financial transactions, including donations from attendees and the cost of renting event space.&nbsp;In addition to tracking each source of receipts as a separate fund, non-profits must categorize donations and expenses.&nbsp;Donors can choose to designate donations for specific programs. Non-profits should categorize funds into the following donation categories:<ul><li>Permanently restricted: The non-profit must use the donation for a specific program and cannot use funds for unrelated expenses.</li></ul><ul><li>Temporarily restricted: The donation will expire, and the non-profit must use it for a specified program before its expiration.&nbsp;</li></ul><ul><li>Unrestricted: The non-profit can use the donation for any expense, including administrative costs.&nbsp;</li></ul>Expense categories include the following:&nbsp;<ul><li>General &amp; administrative expenses: Amounts spent on day-to-day operations, such as administrative and back-office employee wages. </li><li>Program expenses: Costs to run the non-profit’s programs that support its cause. </li><li>Fundraising expenses: Costs of soliciting donations or grants from contributors, including advertisements and mailing costs.&nbsp;</li></ul>As you can see, fund accounting rules add complexity to non-profit bookkeeping. Don’t let the nuances intimidate you – <a class="link" href="https://1800accountant.com/services/industry/nonprofit">1-800Accountant can help your non-profit with professional bookkeeping services</a>.&nbsp;<h3 class="wp-block-heading">What Are the Major Differences Between Non-Profit Accounting and Non-Profit Bookkeeping?</h3>The terms bookkeeping and accounting are used interchangeably, but the roles have different responsibilities.Bookkeepers perform detailed tracking and categorization activities. Proper bookkeeping includes entering financial transactions and ensuring accurate ledger balances. Your bookkeeping activities support your compliance with fund accounting rules.Accountants rely on accurate bookkeeping to prepare annual financial statements and tax returns. Non-profit accounting includes financial analysis for presentation to owners and the board of directors. Accountants often obtain advanced degrees and CPA (certified public accountant) licenses, requiring deep technical knowledge.&nbsp;Do you need to decide whether your non-profit should hire a bookkeeper or an accountant? The following table compares the roles to help you determine the skillset you need.&nbsp;Depending on the non-profit’s size, there may be some overlap in responsibilities, such as reconciling accounts or tracking expenses.&nbsp;<figure><table><tbody><tr><td>Non-Profit Bookkeeper Responsibilities</td><td>Non-Profit Accountant Responsibilities</td></tr><tr><td>Categorize revenues and expenses Record in-kind donations Record transactions Verify general ledger balances Reconcile bank accounts Create invoices and purchase orders</td><td>Prepare financial statements Prepare and file tax returns Analyze financial trends Analyze budget-to-actual differences Monitor tax rules and deadlines Assist with planning and forecasts</td></tr></tbody></table></figure>By the way, <a class="link" href="https://1800accountant.com/services/industry/nonprofit">1-800Accountant can support your non-profit with professional bookkeeping and accounting services</a>. Schedule a free call to get expert help with your compliance.<h2 class="wp-block-heading">Bookkeeping for Non-Profits: Requirements and Best Practices</h2>Your non-profit must prepare annual financial statements to report its activities. Your non-profit tax return should include data from your financials.Compliance with non-profit reporting requirements is critical, or your organization could risk losing its <a class="link" href="https://1800accountant.com/blog/form-1023">tax-exempt status</a>.&nbsp;<h3 class="wp-block-heading">Non-Profit Financial Statements and Reports</h3><h4 class="wp-block-heading">Statement of Financial Position</h4>A non-profit statement of financial position should reflect all restricted, temporarily restricted, and unrestricted assets held at a given date. The statement should also report liabilities (amounts owed).&nbsp;Unlike a for-profit balance sheet, the non-profit statement of financial position doesn’t report retained earnings or equity in the organization. Since non-profits cannot distribute profits to owners, total assets less liabilities represents net assets.&nbsp;<h4 class="wp-block-heading">Statement of Activities</h4>Similar to a for-profit income statement, the non-profit statement of activities reflects annual revenues and expenses.Your statement of activities should categorize revenues into restricted, temporarily restricted, and unrestricted. Total revenue less expenses represents the change in net assets.&nbsp;<h4 class="wp-block-heading">Statement of Functional Expenses</h4>The statement of functional expenses offers a detailed view of a non-profit’s spending during the year.&nbsp;Do you remember the non-profit expense categories we mentioned earlier? Your non-profit’s functional expense statement should detail all general &amp; administrative, program, and fundraising expenses.&nbsp;<h4 class="wp-block-heading">Statement of Cash Flows</h4>The non-profit statement of cash flows should list cash inflows and outflows during the year. Your non-profit should summarize the total cash received or used for operating, investing, and financing activities.&nbsp;<h4 class="wp-block-heading">Revenue and Expense Budget</h4>Non-profits should forecast expected income and expenses for the year ahead.Your non-profit should estimate all funding it expects to receive. For example, imagine your non-profit has a long-standing relationship with a local company. You might anticipate donations from the business each year; you should include the estimate in your annual budget.When estimating your expenses, consider all employee salaries and part-time wages. Estimate the costs of annual fundraisers and charity events your non-profit organizes.<h4 class="wp-block-heading">Form 990</h4><a class="link" href="https://www.irs.gov/charities-non-profits/churches-religious-organizations/filing-requirements-for-churches-and-religious-organizations" target="_blank" rel="noreferrer noopener">Tax-exempt non-profit organizations</a> should file <a class="link" href="https://www.irs.gov/pub/irs-pdf/f990.pdf" target="_blank" rel="noreferrer noopener">IRS Form 990</a>, Return of Organization Exempt From Income Tax. (Small non-profits can often file simpler forms, depending on their annual gross receipts. <a class="link" href="https://www.irs.gov/charities-non-profits/form-990-series-which-forms-do-exempt-organizations-file-filing-phase-in" target="_blank" rel="noreferrer noopener">Review the IRS guidelines</a> to determine which form you should file.)&nbsp;Your non-profit financials support the information on Form 990. The lengthy, complex return requires specialized knowledge, and <a class="link" href="https://1800accountant.com/services/industry/nonprofit">we recommend consulting non-profit bookkeeping professionals</a> to help you prepare and file the form.&nbsp;<h3 class="wp-block-heading">Best Practices for Non-Profit Accounting</h3>Fund accounting rules leave plenty of room for error – especially if you’re new to bookkeeping. We put together our recommendations for non-profit accounting best practices.&nbsp;<ul><li>Set up a separate bank account for your non-profit and keep your personal finances separate.</li></ul><ul><li>Update and monitor your budget monthly so you can catch errant spending.&nbsp;</li></ul><ul><li>Implement proper internal controls for all financial duties.</li></ul><ul><li>Organize your tax return information early and make sure to file on time.</li></ul><ul><li>Outsource bookkeeping services to professionals if your employees need more industry expertise.</li></ul><h2 class="wp-block-heading">Non-Profit Bookkeeping Solutions</h2>Non-profits can choose from several bookkeeping solutions, including purchasing accounting software, hiring a full-time bookkeeper, or outsourcing to professionals.&nbsp;Accounting software can help non-profits with tracking and categorization activities. For example, Quickbooks offers non-profit functionalities to help with fund accounting complexities.&nbsp;&nbsp;When should a non-profit organization hire a full-time bookkeeper?&nbsp;National or large non-profits may prefer to hire bookkeepers and accountants. Full-time staff can consistently track spending, monitor budgets, and prepare bank reconciliations. Additionally, full-time bookkeepers become intimately familiar with the non-profit’s activities.&nbsp;When should a non-profit outsource bookkeeping services?&nbsp;Many small non-profits have a modest budget or minimal operating activities. If your non-profit can’t hire an employee with specialized experience, consider outsourcing to third-party professionals. Bookkeeping professionals can help your non-profit maintain accurate records and comply with reporting requirements.<h3 class="wp-block-heading">Work with a Professional for Your Non-Profit Bookkeeping</h3>Non-profits need to comply with many complex rules. If your non-profit lacks the bandwidth or expertise to keep up with fund accounting rules, you could risk paying fines or losing your tax-exempt status.&nbsp;&nbsp;The good news? You don’t have to manage your bookkeeping alone.&nbsp;1-800Accountant has many resources for non-profit organizations. Our bookkeeping and accounting professionals can offer full-service support at a reasonable rate.&nbsp; Schedule a free call with <a class="link" href="https://1800accountant.com/services/industry/nonprofit">1-800Accountant</a> to learn more about working with America's leading virtual accounting firm for <a class="link" href="https://1800accountant.com/services/industry/nonprofit">non-profit accounting services</a>.

You have a vision for helping others. Your non-profit can make a difference – if you can finish all the paperwork.&nbsp; You know you need to keep your receipts and records, but you’re slowly finding that bookkeeping is more complex than simply tracking expenses. Bookkeeping for non-profit organizations requires a specific skill set because the [&hellip;]

A pile of papers with the words bookkeeping for non-profits.

bookkeeping-for-non-profit_blog-header

Bookkeeping for a Non-Profit: What You Need to Know

You may be wondering: "Why create a chart of accounts?" Even a basic chart of accounts is an excellent way to view your <a class="link" href="https://1800accountant.com/blog/bookkeeping-101-keep-good-financial-records">business's finances</a>. The purpose of a chart of accounts is to aid in decision-making for your small business by tracking transactions and organizing the results in an easily digestible format. In this blog, we'll go into detail about what a chart of accounts is, how to create one for your business, critical real-world examples, and other helpful information that provides you with a comprehensive picture. 



<h2 class="wp-block-heading">Understanding the small business chart of accounts</h2>



<h3 class="wp-block-heading">What is a chart of accounts?</h3>



Your chart of accounts allows you to view multiple <a class="link" href="https://1800accountant.com/blog/common-bookkeeping-terms">financial transactions</a> along with a description, identification number, and name of each. You're able to view the chart of accounts categories within a general ledger, which includes:&nbsp;



<ul>
<li>Assets</li>



<li>Liabilities</li>



<li>Shareholder’s equity</li>



<li>Revenue</li>



<li>Expenses</li>
</ul>



<h3 class="wp-block-heading">Main chart of accounts components</h3>



Assets What your business owns are called assets, and you'll track two types: current and noncurrent. The assets section in your chart of accounts will begin with the account number "1000." Current assets include assets your business will use in the next year, such as:



<ul>
<li>Accounts receivable&nbsp;</li>



<li>Cash</li>



<li>Inventory</li>



<li>Prepaid expenses</li>
</ul>



Noncurrent assets or long-term assets are assets that will be used for longer than one year, including the following: 



<ul>
<li>Accumulated depreciation</li>



<li>Buildings</li>



<li>Furniture and fixtures</li>



<li>Leases&nbsp;</li>



<li>Plant and equipment</li>



<li>Vehicles</li>
</ul>



Liabilities Your business owes liabilities. This section begins with the account number "2000," and like your assets, you'll track both current and noncurrent liabilities.



Current liabilities, or short-term liabilities, include liabilities that your business will use next year. Current liabilities include:&nbsp;



<ul>
<li>Loans and mortgages payable</li>



<li>Payroll taxes payable</li>



<li>Sales taxes payable</li>
</ul>



Noncurrent liabilities or long-term liabilities are liabilities that will be used for longer than one year, including:&nbsp;



<ul>
<li>Loans payable</li>



<li>Mortgages payable</li>
</ul>



Equity Equity refers to shareholder equity in your chart of accounts and will begin with the account number "3000." Common examples of equity found in your chart of accounts include: 



<ul>
<li>Common stock</li>



<li>Preferred stock</li>



<li>Retained earnings</li>
</ul>



Revenue Revenue is the income your business makes, primarily or secondarily. There are two revenue types that begin with the account number "4000" in your chart of accounts: operating revenue and non-operating revenue.



Operating income is the income that your business primarily makes. Non-operating revenue is revenue that your company makes indirectly. This form of revenue can come from:&nbsp;



<ul>
<li>Asset write-downs</li>



<li>Dividend income&nbsp;</li>



<li>Foreign exchange gains or losses</li>



<li>Interest income</li>



<li>Profits or losses from investments</li>



<li>Rental income from property</li>
</ul>



Expenses There are two expense types: operating expenses and non-operating expenses, which will begin with the account number "5000."



Operating expenses are expenses that occur to cover operational costs. You may have expenses from the following:&nbsp;



<ul>
<li>Equipment&nbsp;</li>



<li>Insurance</li>



<li>Inventory costs&nbsp;</li>



<li>Marketing</li>



<li>Payroll</li>



<li>Step costs</li>
</ul>



Non-operating expenses are expenses unrelated to business operations. These include:&nbsp;



<ul>
<li>Amortization&nbsp;</li>



<li>Depreciation</li>



<li>Interest charges</li>
</ul>



<h3 class="wp-block-heading">Importance of structure and organization&nbsp;</h3>



There are two critical areas where your chart of accounts is vital for your business. 1) Structure. How your chart of accounts is structured allows you to view all of your business's financial transactions based on the general ledger. This allows you to search transactions swiftly. 2) Organization. A second benefit to the organization of a chart of accounts is that you can use this information for investment opportunities. This lets prospective investors or shareholders determine your business's financial health via the financial information provided. 



<h2 class="wp-block-heading">Components of a chart of accounts</h2>



The information you record in your chart of accounts provides the data necessary to create your business's financial statements. All of your accounts will appear in these statements, with the chart of accounts determining which statement they should appear in. If your chart of accounts is outdated or incorrectly structured or organized, your statements won't be correct, either. The financial statements include the following:&nbsp;



<ul>
<li>Income Statement. Also known as a profit and loss statement, this statement focuses on your business's revenue and expenses.&nbsp;</li>



<li>Cash Flow Statement. This statement records the total cash from various sources, including petty cash, and cash going out of your business in support of your operations.&nbsp;</li>



<li>Balance Sheet. This sheet records your business's assets, liabilities, shareholder equity, and debt.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">How to create a chart of accounts</h2>



To set up your chart of accounts, you'll create three columns to help you categorize: an Account Name, Type of Account, and Description.



<ul>
<li>Account Name. You’ll list your account names in this column.&nbsp;</li>



<li>Type of Account. This column, to the right of Account Name, will list the account that you’re adding. You can select from an asset, cost of goods sold, equity, expense, income, or liability.</li>



<li>Description. The final column, to the Type of Account's right, describes the transaction that occurred.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Real-world examples of standard chart of accounts</h2>



Medical practice chart of accounts (chart of accounts example 1)



<figure class="wp-block-table"><table><tbody><tr><td>Account Type</td><td>Account Code</td><td>Account Name</td></tr><tr><td>Assets</td><td>1010</td><td>Cash - Operating Account</td></tr><tr><td>Assets</td><td>1020</td><td>Cash - Savings Account</td></tr><tr><td>Assets</td><td>1030</td><td>Medical Supplies Inventory</td></tr><tr><td>Assets</td><td>2010</td><td>Medical Equipment</td></tr><tr><td>Assets</td><td>2020</td><td>Office Furniture</td></tr><tr><td>Assets</td><td>2030</td><td>Accumulated Depreciation - Equipment</td></tr><tr><td>Assets</td><td>2040</td><td>Accumulated Depreciation - Furniture</td></tr><tr><td>Liabilities</td><td>3010</td><td>Accounts Payable</td></tr><tr><td>Liabilities</td><td>3020</td><td>Payroll Liabilities</td></tr><tr><td>Liabilities</td><td>3030</td><td>Unearned Revenue</td></tr><tr><td>Equity</td><td>4010</td><td>Owner's Capital</td></tr><tr><td>Equity</td><td>4020</td><td>Retained Earnings</td></tr><tr><td>Revenue</td><td>5010</td><td>Patient Service Revenue</td></tr><tr><td>Revenue</td><td>5020</td><td>Miscellaneous Revenue</td></tr><tr><td>Cost of Goods Sold</td><td>6010</td><td>Medical Supplies Expense</td></tr><tr><td>Expenses</td><td>7010</td><td>Salaries &amp; Wages</td></tr><tr><td>Expenses</td><td>7020</td><td>Rent or Mortgage Expenses</td></tr><tr><td>Expenses</td><td>7030</td><td>Utilities</td></tr></tbody></table></figure>



Restaurant chart of accounts (chart of accounts example 2)



<figure class="wp-block-table"><table><tbody><tr><td>Account Type</td><td>Account Code</td><td>Account Name</td></tr><tr><td>Assets</td><td>1010</td><td>Beverage Supply Inventory</td></tr><tr><td>Assets</td><td>1020</td><td>Food Supply Inventory</td></tr><tr><td>Assets</td><td>1030</td><td>Prepaid Expenses</td></tr><tr><td>Assets</td><td>2010</td><td>Kitchen Equipment</td></tr><tr><td>Assets</td><td>2020</td><td>Dining Furniture</td></tr><tr><td>Assets</td><td>2030</td><td>Accumulated Depreciation - Kitchen Equipment</td></tr><tr><td>Assets</td><td>2040</td><td>Accumulated Depreciation - Dining Furniture</td></tr><tr><td>Liabilities</td><td>3010</td><td>Accounts Payable</td></tr><tr><td>Liabilities</td><td>3020</td><td>Payroll Liabilities</td></tr><tr><td>Liabilities</td><td>3030</td><td>Loans</td></tr><tr><td>Equity</td><td>4010</td><td>Owner's Capital</td></tr><tr><td>Equity</td><td>4020</td><td>Retained Earnings</td></tr><tr><td>Revenue</td><td>5010</td><td>Dining Revenue</td></tr><tr><td>Revenue</td><td>5020</td><td>Miscellaneous Revenue</td></tr><tr><td>Cost of Goods Sold</td><td>6010</td><td>Food, beverage, and employee Expense</td></tr><tr><td>Expenses</td><td>7010</td><td>Salaries &amp; Wages</td></tr><tr><td>Expenses</td><td>7020</td><td>Insurance</td></tr><tr><td>Expenses</td><td>7030</td><td>Depreciation Expense</td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Maintaining and updating a chart of accounts</h2>



You will make adjustments to your chart of accounts as time goes on. But before you start, here are a couple of things to keep in mind.&nbsp;



<ul>
<li>First, if you want to add an account to your chart of accounts, you should do so before it becomes a problem. While you can add transactions at any point in the year, you don’t want to delay adding transactions and their accompanying information. If you wait, then you may need to adjust other entries in related categories or subcategories, causing more issues.</li>
</ul>



<ul>
<li>Second, if you add an account, it is helpful to designate a name for it. The name most commonly used for newly added accounts is Miscellaneous Expenses. You should use this name whether you have one uncategorized transaction out of the year or multiple uncategorized transactions.&nbsp;</li>
</ul>



<ul>
<li>Third, if you add a Miscellaneous Expense to your account, provide a more detailed explanation than usual. Even though you’ve already added a description, you want to explain how and why this expense differs. As you add accounts to this category, make adjustments as needed.</li>
</ul>



<ul>
<li>Finally, and most importantly, you shouldn’t delete any accounts until the end of the year. If you delete the accounts earlier, that can create additional disruptions.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Partner with professionals who understand the chart of accounts</h2>



Financial data and financial reporting are an important addition to any small business and can be harvested from many areas, including the following: 



<ul>
<li>Expense accounts</li>



<li>Asset accounts</li>



<li>Balance sheet accounts</li>



<li>Equity accounts</li>



<li>Financial accounts</li>



<li>Liability accounts</li>



<li>Revenue accounts</li>



<li>Sub-accounts</li>
</ul>



A chart of accounts isn't required, but the valuable insights it provides can contribute to critical data-backed decision-making for your small business. However, creating and managing a chart of accounts is often too much for many busy owners and entrepreneurs to handle, which is why so many of them trust 1-800Accountant, America's leading virtual accounting firm for small businesses, <a class="link" href="https://1800accountant.com/blog/outsourced-bookkeeping-guide">for their needs</a>.



Whether it's <a class="link" href="https://1800accountant.com/services/business-tax-advisory">tax advisory</a>, <a class="link" href="https://1800accountant.com/services/bookkeeping">bookkeeping for the chart of accounts</a>, robust <a class="link" href="https://1800accountant.com/blog/catch-up-bookkeeping">educational content</a>, or any of our professional accounting services, we have the solution you need at a price that fits within your budget. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help.&nbsp;

You may be wondering: &#8220;Why create a chart of accounts?&#8221; Even a basic chart of accounts is an excellent way to view your business&#8217;s finances. The purpose of a chart of accounts is to aid in decision-making for your small business by tracking transactions and organizing the results in an easily digestible format. In this [&hellip;]

chart-of-accounts-a-comprehensive-guide_blog-header

Chart of Accounts: A Comprehensive Guide with Real-World Examples

Excepteur sint occaecat cupidatat

JOIN NOW!

Your small business resource for accounting, bookkeeping, and taxes from our experts.

Accounting, Bookkeeping, & Tax Blog

Screenshot_2023-08-14_at_1.36_1.png

CLP_JoinUs_Testimonial_WomanBlueBackground_3.png

Huong T
“Excellent first call, very informative. This is my third business … this time  I will ease the burden and use 1-800Accountant [for accounting]”

By clicking "Confirm My Appointment" you agree to our <a href="https://1800accountant.com/terms-of-services" target="_blank">Terms of Service</a>. This includes permission to communicate with you about your appointments via phone, email, or SMS. If you prefer to opt-out of SMS communications you may uncheck this box