Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous posts delve into the benefits of a 529 savings plan and just what cryptocurrency is. If you’re saving for your education or your child’s education or would like to understand the recent tax provisions concerning cryptocurrency, our latest articles will tell you everything you need to know! 
 
Bookkeeping has come a long way since the “olden days,” when business records were recorded in ledgers. That said, electronic bookkeeping systems still refer to account sheets as “General Ledgers.” Personally, we think bookkeeping would be much cooler if it were still done in red and black ink! When you boil bookkeeping down to its basics, that’s what it’s for: determining whether a business is in the “red” or the “black,” as well as just how far a business is in either debt or profit, respectively. 
 
Bookkeeping is an essential part of any small business. From online-only stores from the living room to full-fledged brick and mortar shops on busy streets—bookkeeping allows businesses to reach their full potential and make informed decisions. Understanding the moving mechanisms of your business on a basic level enables you to assess the overall financial health of your business and improve spending. 
 
So, what is bookkeeping? 
 
Bookkeeping is the precursor to accounting. Bookkeeping is the detailed input of financial data into a system which allows for oversight, review, and analysis. You might feel intimidated by P&Ls, cash flow statements, and balance sheets, but the truth is that bookkeeping is done one transaction at a time. It doesn’t have to be complicated, which is why today we’re taking the time to explain some of the basics. 
 
Questions Bookkeeping Can Answer
 
Where does a majority of the money your small business brings in come from? How much did you spend on office supplies last year? How does your last quarter compare to the quarter prior? Where is your company hemorrhaging money and, more importantly, how can you staunch the losses? Bookkeeping can give you the means to answer these questions. 
Habitual expenses, such as automated purchases and services, can eat up a budget and add to expenses. As you isolate the areas where money is being wasted on things your business no longer requires, you can begin to tighten the purse strings. Adjusting your budget and applying new numbers allows you to think ahead and plan for the future. 
 
Only 2.5% of small businesses are audited, which means you aren’t likely to receive a visit from the IRS, but you should be prepared to answer potential questions nevertheless. In an audit, the IRS will want to know about profits, losses, tax deductions, and tax returns. All of these figures and more are underneath the bookkeeping umbrella. Which means, if you’ve been keeping accurate records, you can answer the IRS’s questions and send them on their way without delay! 
 
Then, when tax season rolls around, you can use the data you have from bookkeeping for your tax write off. Exact figures are often better than using the IRS’s substantiation rates. Bookkeeping can help you determine quarterly tax returns, to ensure you’re paying the adequate amount throughout the year. 
 
If there are mistakes with employees or customers, bookkeeping provides an accurate reference to clear up discrepancies. 
 
As a small business owner, you can anticipate certain seasons when expenses will need to temporarily increase. Bookkeeping will allow you to assess whether your current assets will stretch far enough or you need to apply for a business credit line or loan. 
 
Types of Accounts
 
Bookkeeping is split up by account types. The five types of bookkeeping accounts are: assets, liabilities, revenue, expenses, and equity. Assets are resources which add value to your business. Liabilities are obligations which take value from your business. Revenue is another way of saying income, while expenses are another way of saying spending. Finally, equity is the value left over after the liabilities have been subtracted from the assets. Here are some examples of common subtypes of accounts within these categories: 
 
    Assets

• Accounts Receivable
• Cash
• Equipment 
• Inventory
• Real Estate
• Supplies

 
    Liabilities

• Accounts Payable
• Interest Payable
• Unearned Service Revenue

   
    Revenues

• Interest Income
• Rental Income
• Sales Income

 
    Expenses

• Insurance Expense
• Interest Expense
• Rent Expense
• Salaries and Wages
• Supplies Expense
• Utilities Expense

 
How To Set Up Accounts
 
Now you know what the account types are, you’ll need to go ahead and set up the accounts in a system. As we mentioned at the beginning of this article, at one time, businesses kept their records in a ledger. Now, there are numerous options available online. You could use a spreadsheet, like Excel, although it’s not recommended. There are dedicated bookkeeping platforms, such as QuickBooks, which allow businesses ease-of-use when bookkeeping. That said, outsourcing a bookkeeper is much more time- and cost-effective than having an in-house bookkeeper. Paying someone to set up and manage your accounts ensures everything is done right and you can rest easy knowing a professional is handling your bookkeeping. 
 
However, you should still understand the basics of bookkeeping, even if you outsource. This is your business, and being able to understand the numbers will help you make decisions. 
 
Before you set up your accounts, you’ll need to decide which type of bookkeeping you’re interested in doing. Single-entry bookkeeping is just as it sounds—you enter each transaction just once. This type of bookkeeping works best for simple business with few cash transactions, little inventory, and even less equipment. An example of single-entry bookkeeping would be for an earring shop on Etsy. The owner makes the jewelry to order. When she buys supplies, she places a single value in the Supplies Expense account. When she receives an order, she places a single value in the Sales Income account. See? Simple. 
 
Now, double-entry bookkeeping is a bit more complicated, but it's actually the more commonly used method of the two. This type of bookkeeping works well with complex businesses, with lots of moving parts (e.g. employees, inventory, multiple forms of transaction). With this method, as the name suggests, you would record two entries for each transaction. The first entry is entered on the left-hand side of the account and is referred to as the debit (Dr). The second entry is entered on the right-hand side of the account and is referred to as the credit (Cr). Don’t think of debit and credit in their normal way. Here’s an example: A lawn care business invests in a $3000 lawn mower. They’ll enter a $3000 debit on the left of the Equipment account, and a $3000 credit on the right of the Cash account (since $3000 has been taken from the businesses assets to add to their equipment). Because each value is balanced by an opposite value, you know precisely when profits are beginning to drop off. 
 
Record Everything 
 
Data is no good if the numbers aren’t right. Accurate information will allow you to make the best decisions for your business and anything else could send you spiraling down the wrong track. This is why it's important to invest in a professional if you aren’t confident in your record keeping capabilities. Bookkeeping isn’t the time or place to guess, or estimate. Here, you want precise figures which correlate to real life sales and expenses. Do not leave out expenses because they’re small and “don’t count.” Every dollar counts (as the IRS would say)! Expenses include materials, services, payroll, and income from both clients, customers, investments, and dividends. You may not even be this meticulous with your personal finances, but bookkeeping for your business is a different endeavor altogether. Hopefully, booking for your business will inspire you to pour the same attention into your own finances! As well, you want to make sure you enter everything in the proper account and (if you’re doing double-entry) the proper corresponding account. This helps to ensure your books stay balanced, which we’ll discuss in more detail in the next part. 
 
 
We hope you’ll tune in for the next part of this series on Bookkeeping Basics! As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading!

Are you utilizing your time properly and working as much as you need to be? Thanks to some easy to use tools and apps, you can monitor this with ease!

As we get back into a normal routine, returning to business and productivity as normal can be a little daunting. With so much happening in our community while we are adapting to many new changes, we wanted to share some of the best tips and tools on how to keep your small business productive.

TRACK IT
Make sure you know exactly how much time you and your employees are spending on each client and project. There are multiple ways to track this progress with apps, a dial-in program on your work phone database, computer programs, and more. Make sure to review this time with your employees, and see if they are working wisely. Discuss with them if time needs to be added or if they're spending too much time on certain things. If they are spending too much time on certain projects or tasks, offer suggestions on how to use their time better. If their time is exactly what is needed to get every task and project done properly, make sure your clients are paying the correct amount for the hours you're working for them. Tracking hours like this can help you adjust your fees accordingly and to guarantee you and your employees are getting compensated properly. Toggl, Tsheets, and ResueTime are great examples of tools that can help you with this.

TO DO LIST
Managing your time is very important and so is managing your projects and everyday tasks. Being proficient in this will help keep your current clients very happy, help with getting the word out about how professional your company is, and be a huge draw to new potential clients. Being able to give very accurate timelines and project estimates is essential, and following through with them as promised will guarantee a happy client. Knowing what projects and tasks you have on your plate, knowing what order they need to be finished in, what their completion dates are, and which ones must be done right away are important to keep your sanity and productivity intact.  Efficiency is a key proponent to the growth in any small business. Don't worry, there are many different kinds of task management software out there for you to use. You just need to find the right one for your companies particular workflow. When you're in the market for this kind of software, try out a few versions for free before committing to anything. This can save you a lot of time and hassle. Make sure you pick software that allows your whole company to use it and communicate in, and one that allows a calendar to be uploaded into it so deadlines can be set. Pick one that has an operating system that is flexible to your personal needs, and doesn't take a long time to learn. Pick one that can sync with your current applications, software, and with your website and social media platforms if needed. Trello, Basecamp, and Asama are three great examples to start with.

THE FILES
Make sure that once your small business is up and running that you have a solid program manager that allows you to control your website domain, emails, Eblasts, documents, and more. This will allow you to be in control of your domain and be able to manage your website without stress. It will allow you to send out eblasts, gather and store clients' emails for easy use and promotional purposes, and to keep all of your online documents organized and accessible. Squarespace, GoDaddy, MailChimp, and WordPress are great examples to start with. Also, use Google to your advantage. Their business tools are outstanding, easy to use, easy to access, and free!

DAY TO DAY
Social media management is a key player in your advertisement world. This can become very time consuming having to not only create all of your content, but also needing to remember to post at the correct times every day. Thankfully, there are plenty of programs available to you that allow you to schedule your posts ahead of time once they're created. You can also choose what platforms your content is being posted to, what times, how often, and more. Buffer, HootSuite, Agoraplaus, and Facebook Creator Studio are good choices to look into. Make sure when choosing the correct platform, that it allows you to post on all the social media sites you use. Some don't allow posts to Instagram, while others only allow you to post on Facebook and Instagram. Make sure to read the fine print, try it out for free if you can, and only invest in a plan that you need. Your plan level will depend on how many accounts you're running, what platforms you're posting to, and how many posts you'll be posting every month.

NOTES
Everyones ability to remember their ideas, tasks, projects and activities vary from person to person. You might believe that you can remember everything without writing it down. When working for or owning a small business, that's a difficult place to put yourself into. Avoid putting yourself into these situations and skip the possibility of forgetting something. Even if you're not someone who likes writing a list or keeping a handwritten planner, tons of wonderful apps can help you with this. Your smartphone is a great place to start, as it might already have a built-in calendar and note-keeping app. Google is also a great place to begin. They have a fantastic interface for both your computer and your smartphone. Other great apps to keep your to-do lists and notes organized are Evernote, Wunderlist, and Todoist.

Staying organized, communicating, and using your time wisely are three of the most important things to keep your small business productive. We hope these tips and suggestions help your company grow. If you have any questions or comments, never hesitate to reach out to us. We are here to help our Goose Creek family and stand with you during these difficult times. Remember if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!