Accounting for RE Investors - AMH Bookkeeping, LLC

September 23, 2019September 30, 2019

New SBOs & Bookkeeping

Congratulations on starting your new business venture! It is challenging and rewarding and no day is the same. The key to making it all work is to automate and delegate when and where you can. One of the best things to both automate AND delegate is your bookkeeping.

Starting your business with good bookkeeping practices early, will take a large load off your plate down the road. It is easier to catch mistakes in the beginning than it is to catch them in the end. These mistakes can be extremely costly and come with other consequences such as jail time or seized property if not caught and corrected in time.

Do not be worried about having the money to pay for a professional regularly. My recommendation is to find a professional that understands your industry first. Be intentional. The goal is to find YOUR bookkeeper/accountant. Explain to them what you are looking for and what you need starting out and sign on to work with them.

For example: You are starting an Etsy store and you have some inventory just recently purchased for the products you make.

What you need: A bookkeeper/accountant who understands e-commerce, particularly the Etsy space and 3rd party merchants that work with Etsy. In this scenario, the bookkeeper/accountant can create an Excel workbook for you that includes a place for customers, inventory tracking, cost of goods sold, additional items list, and your reports so that when you are ready to move to a sophisticated accounting system, the transition will be seamless; all while monitoring the workbook for errors, omissions, categorization errors, etc.

The professional bookkeeper/accountant can set up your accounting system, create your chart of accounts, and input all the information from your spreadsheet into your accounting system; giving you your historical data as well as the current data. Your chosen professional is there to advise you on the financial health of your business, offer cost/benefit analysis on any new endeavors, keep you abreast of all the new tax laws, and do their best to help lower your tax liability and increase your profits.

As new business owners, you may not think you need the accounting right now. You may even have others in business that you know tell you that they waited. Do not let them distract you. It is always better to have this system set up right in the beginning when the chances of IRS audits are low than to spend thousands of dollars getting the mistakes corrected because you are being audited.

AMH Bookkeeping, LLC can help. Schedule your discovery call now and let us get you started on the right foot with your financial management.

August 1, 2019November 17, 2019

SBOs Shouldn’t Commingle Business and Personal Funds

As a bookkeeper, one common issue that I see with small business owners is the commingling of personal and business funds. It usually begins as a small purchase being made for the business accidentally with personal funds or vice versa. This is not a big deal if it is a one-time thing. When it becomes common place, larger issues can arise and the following questions need to be answered:

For those personal purchases made using the business funds, are they being paid back to the business?
Is the business paying the owner back for expenses made using personal funds?
Are those business expenses that were made via personal funds being treated as an equity investment instead?
Are the personal expenses paid for by business funds being treated as an owner draw?
How will they affect the business and personal tax deductions?

Aside from answering the above questions, deciphering what was a personal expense and what was a business expense so that your business receives optimal tax deductions and credits is CRITICAL. The time it takes your CPA or EA to do this can cost you thousands. In situations like these, having a bookkeeper handle your day to day financial data entry is beneficial. Your bookkeeper can catch these transactions and handle them accordingly so they do not cause long term issues with your financials as well as establish systems to prevent the commingling from happening again.

The best way to prevent the pitfalls of commingling is to stay away from this practice completely. Here are a few ways to make sure your business and personal funds remain separate.

Have separate checking accounts.
Do not maintain your personal financial records in the same accounting software file as your business.
Leave your personal cards at home or locked in a file cabinet when working on your business and vice versa.
Review your bank and credit card statements regularly and notify your accountant or bookkeeper of any misclassification of transactions.
Become proactive with your bookkeeping. Taking part in the data entry or reconciling of your financial records gives you a detailed view of how clustered things can become when funds are commingled.

You do not have to tackle this alone. AMH Bookkeeping, LLC is here to help you sort through things and get you back on track with accurate, clean, and current financial records. Schedule your consultation today!

June 26, 2019June 26, 2019

7 Reasons to Reconcile

One of the most recurring themes I have noticed as a bookkeeper is most business owners have not reconciled their bank or credit card accounts. I think this is due to the fact that some of them may not understand how powerful a simple task like this is AND how much information it can tell them about their businesses.

Here are 7 reasons why this task is so crucial to the overall financial health of your business.

Errors - Performing a reconciliation of your bank accounts every month can help locate errors made by you or the bank. Not to mention can catch illicit transfers performed within your accounts. This is especially essential if you have set up bank feeds in your accounting software.
Prevention - Unauthorized charges by the bank, check fraud, and other serious issues can be identified AND corrected. Miscellaneous charges and large, out of the ordinary purchases are some prime examples.
Powerful Decision Making - When you know where your money is coming from and where it is going, when you know all transactions are accurate and that balances are correct, you as the owner can make some very powerful decisions in regards to your company. You can determine if that new office building is obtainable for starters.
Financial Fitness - Performing a bank reconciliation is like going to the doctor for a regular checkup. With frequent monitoring, any issues that arise can be solved quickly before things get out of hand. And it is a great, built in checks and balances to ensure all transactions have been recorded.
Saves Money - Bank errors can sometimes mean thousands of dollars are misplaced leaving your account in dire straits. Transposition of numbers when entering a check is an example of how large sums of money can be misplaced by the bank. (This is rare).
Mitigating Risk - When errors are found and reported to the bank in a timely fashion, the financial risk is transferred from your company to the bank. Translation: You do not have to pay for their error.
Peace of Mind - There is no substitute for the relief knowing that your finances are accurate and every income item and expense transaction is accounted for.

Double deposits and checks still outstanding 1 year after being mailed? All of these issues can be identified with frequent account reconciliations. With online banking being what it is today, business owners, you know longer have to wait until the month is over and you are mailed a statement to reconcile. You can simply log in to your online bank account and download transaction data to reconcile daily or monthly; giving you faster response time on catching errors and fraudulent activity.

For more information on the power of reconciliation, schedule a consultation or email us at [email protected].

AMH Bookkeeping, LLC. Your books. Clean and simple.