Accounting Advisory Services and How They Help Managers Be Better Managers

Advisors are part of your long term success strategy

Something many business owners don’t like to share is how difficult it is to own and operate a business. When they worked for someone else, they could focus on just a few basic responsibilities. As owners, they do not have that luxury. All of the responsibilities ultimately come back to them. Being the boss can be stressful, overwhelming, and confusing.

Business owners and managers always have something to do and something new to learn, but never enough time to do it all. Many start off thinking they can just get by looking at their bank balance, but soon learn that it’s not enough. As the business grows, finances become more complex and confusing, taking more and more of the manager’s time and causing other areas to suffer. Brightleaf recognized this early on when we first started providing accounting services. This is why we’ve always partnered with our accounting clients and worked as a member of their team to help them achieve their goals.

Our role is to help business owners understand the story being told by their numbers and to assist them in using that information to guide their business decisions. This is the key to our Accounting Advisory Services.

As advisors, we provide professional knowledge and expertise to assist business owners and managers make better, more informed decisions to adjust and improve the company. Ways that advisors help are:

• Help identify what’s going well and what could use improvement

• Identify risks to the business before they become problems

• Assist with tax planning and strategy

• Streamline accounting processes to improve operational efficiency

• Identify ways to decrease costs as well as improve cashflow and profitability

• Share the big picture and, when needed, focus on the details

• Suggest tactics and strategies for your business

• Provide reports and details to be shared with employees or investors

Partnering with an advisor means managers don’t need to learn how to do the detailed work and can use that time to refocus their attention where it’s needed. More importantly, they’ll have the insights and expertise of accounting professionals to aid them in making decisions, directing employees, and leading the organization to greater success. Using our Advisory Service may not make your job easy, but they will make it easier to be better at your job.

- John Thrush

Are you ready to file your 2023 taxes? Of course not!

Which Form 1099 should be filed?

Tax time is still a long way off, but it’s never too early to start preparing. The best way to prepare is to start using several basic processes to save a great deal of time and later. We’ll share several of these in future posts, but today we’re going to talk about 1099s as they’re among the first tax related filings each year.

Businesses are required to complete and file a Form 1099 for various types of payments made during the tax year. Companies must issue a 1099 to any individual or unincorporated business (such as a sole proprietor or partnership) paid at least $600 for:

• Services performed by non-employees for company work (e.g., independent contractors or freelancers.)

• Services performed by other companies (e.g., law firms, accounting agencies, cleaning services, etc.)

• Rent payments

• Interest and dividend payments.

• Other types of payments, like royalties or broker payments in lieu of dividends

A Form 1099 must be provided to the individual or company by January 31 of the following year that the service was performed. The IRS must also receive this information, so It’s generally a good practice to submit these at the same time; however, the actual deadlines for filing with the IRS are usually February 28 (if filing on paper) or March 31 (if filing electronically).

To complete a 1099 will require the following information from the recipient:

• Name of individual or company

• Address

• Taxpayer Identification Number (TIN) for a company or Social Security Number (SSN) of an individual

• Amount paid

There are also different versions of Form 1099 for different types of payments (e.g., 1099-NEC for non-employee compensation), so be sure to use the correct form for the type of income you're reporting.

One of the reasons to get started on this process early is because failing to provide 1099s to recipients or to the IRS on time can result in penalties. Those penalties depend on how late the forms are filed, if all the information is provided and correct, and whether the failure is intentional or not. This means it’s very important to keep accurate records and to have all of the required information before it needs to be filed.

So what are some basic processes to make filing 1099s easier?

1. Collect recipient information before the first time you pay them

2. Keep accurate financial records of all payments

3. Keep a list of all recipients who’ve been paid $600 or more per year

4. Schedule time on your calendar to file 1099s at the beginning of the year

The government makes it very easy to collect this information from your recipients with the Form W-9. You can share this link with recipients to have them complete and send the information to you. It’s also a good idea to, as one of those basic processes, request a W-9 before you issue any payments to new contractors or other potential 1099 recipients. You’ll be surprised how many of these individuals or companies are slow or resistant to respond when it’s time to file.

Keeping accurate records is made much easier by using accounting software like Xero or Quickbooks, but the software alone won’t help much if it’s not set up or used properly.

Brightleaf works with our clients where they are to help them get where they want to be. We provide full service bookkeeping, accounting, and advisory services for our more advanced clients; however, we realize that newer or smaller businesses don’t have the same needs as larger companies… or the same budget. This is why Brightleaf offers a reasonably priced package to set up your accounting software for your specific business along with training so you can do your own bookkeeping. Part of this training is working with the business owner or manager to understand how the software works with actual banking transactions for the company followed by a check-in several weeks later to check on additional transactions to make sure it’s being done correctly. We also answer questions for the business and provide additional tips based on what the business’s needs are.

Running a business is complicated and time consuming and there are always issues that come up that may not be easy to solve. Getting your 1099s filed properly and on time is just one of those issues. If you need help getting your accounting problems solved, have business questions you want answered, or even want to hand that work off to a team of professionals, reach out to the professionals at Brightleaf so you can focus on what you’re best at!

- John Thrush

"Witchful Thinking in Accounting"

Debunking common myths in the accounting industry

It’s just about a week until Halloween, so we’re continuing with the theme of things to watch out for in business. This week, we’re looking at accounting and debunking a few myths that people have about it.

Accountants and Accounting Only Deal with Taxes

While taxes are an important part of accounting, accountants serve a far larger purpose and provide a wide range of financial services, including financial analysis, budgeting, and advising on business strategies. All of these help business owners and managers understand how the company is operating and can help with making decisions to improve the business.

Accounting Is Just Math

While math is a fundamental skill in accounting, the reality is that accounting is more about knowing the rules, regulations, and laws. This becomes very important when deciding whether to use contractors or employees, selling products or services over state lines, looking into entering new industries or territories, and many other issues. Modern accounting also relies heavily on software and technology for data analysis, automation, and financial reporting. Finally, communication and problem-solving skills are equally important.

All Accountants Are CPAs

Not all accountants are Certified Public Accountants. CPA is a specialized designation that requires passing a rigorous exam and fulfilling specific education and experience requirements. Many accountants have other certifications or degrees, but practical experience and a current knowledge of the rules and regulations are equally valuable. CPAs definitely have their purpose, but that leads to our next myth...

Only CPAs Can Do Accounting

Many business owners believe that all accounting must be done by a CPA; however, most of the day to day financial work like bank reconciliations, tracking expenses and revenue, payroll, sales tax, really requires a bookkeeper or lower level accountant. CPAs charge far more for their time than bookkeepers, so it’s best to reserve them for more detailed accounting issues such as long term strategy or dealing with investors.

Accountants Are All the Same

Accountants often specialize in various practice areas (e.g., tax, audit, forensic accounting, management accounting, public, and others) as well as industries. When operating in various industries (e.g., health care, government contracting, construction, real estate, retail sales, etc.,) it’s also important to work with accountants that have relevant industry experience as there are details and steps that must be followed for accurate financial reporting. This is why it's important to choose an accountant with expertise that aligns with your specific needs.

Software is a Substitute for Professional Accountants

While software has simplified the process of bookkeeping and accounting, it falls short on explaining accounting rules and business regulations. Further, unless used properly, the software won’t explain what is really happening with the business. Accountants help with accurately tracking the financial aspects of the company, ensuring compliance with regulations, forecasting, and tax planning. This ultimately results in saving money, time, and preventing costly mistakes.

Being a business owner and manager is difficult and time-consuming. Being able to rely on an accountant or accounting team that understands the needs and targets of the business can make a huge difference in achieving your company’s goals. Give Brightleaf a call to see if we’re the right fit for your business and let us help you reach your goals!

- John Thrush

4 Scary Financial Mistakes That Small Businesses Make!

It’s two weeks until Halloween, so it’s time to talk about some things that can keep small business owners awake at night! We explore four financial mistakes that small businesses frequently make as well as steps to take to avoid them.

Inadequate Record Keeping

The first mistake businesses make is not keeping accurate and organized financial records. Many small businesses, especially new business owners, neglect this aspect, leading to confusion and errors in financial reporting, especially around tax time. Inadequate record-keeping can result in difficulties in securing loans or investment, losing out on deductions on your taxes, and regulatory compliance issues that lead to fines or even inability to legally operate your business.

How to Avoid It:

Spend some time designing a filing system and getting your accounting software set up correctly. It’s generally a good idea to hire a professional bookkeeper or accountant to help with this as well as provide some training to make sure things are being done right… a small investment now will save a ton of time and money later. Keeping meticulous records of all income and expenses, maintaining a separate business bank account and debit card, and reconciling your accounts regularly will help immensely. This level of detail ensures that your financial records are not only accurate but also readily available for decision-making and tax purposes.

Neglecting Budget Planning

One of the most common financial mistakes small businesses make is failing to establish a structured budget. In their eagerness to jumpstart operations, business owners often bypass this process and run into money shortfalls such as overspending, misallocation of resources, and insufficient funds for critical business functions.

How to Avoid It:

Take the time to develop a comprehensive budget that includes all expenses - operational costs, marketing, legal, accounting, taxes and licenses, payroll, etc. If you’ve been in business a while, you can look at past expenses and tax returns; but, if you’re a new business, it makes sense to talk to a professional to think things. It’s important to regularly review and update this budget as your business evolves so you can plan your growth and have a good idea about financing needs. Having a clear financial roadmap will make you better equipped to make informed decisions and ensure that your business remains financially stable.

Ignoring Cash Flow Management

Cash flow management is the lifeblood of any small business. Many entrepreneurs and small business owners underestimate the importance of maintaining a positive cash flow, which can lead to severe financial difficulties. This is especially true when you have employees and payroll to meet. It’s also absolutely critical in businesses that have long payment terms between when the products or services are delivered and when the payment is received.

How to Avoid It:

Implement a robust cash flow management system and keep a close eye on who you owe as well as who owes you. If you identify an issue with paying suppliers, reach out and let them know sooner rather than later as they’ll be more likely to extend payment terms. Likewise, be proactive in following up on overdue invoices and sending friendly reminders. It may also be sensible to establish a line of credit to provide a safety net during cash flow fluctuations. Working with a professional to help understand the impact of cash flow can give tremendous peace of mind.

Overlooking Tax Planning

Taxes can be a significant financial burden, especially LLCs and S-Corps that pay business taxes on personal returns. Many small businesses and entrepreneurs only focus on their tax obligations during tax season, which can lead to costly mistakes. Failing to plan for taxes adequately can result in unexpected expenses, large payments or fines, and missed opportunities for tax savings.

How to Avoid It:

Work with a firm that’s experienced in structuring your operations in a tax efficient manner. Create a tax strategy that can structure your expenses, optimize deductions and credits, and find ways to reduce taxable income while remaining compliant with tax laws. Regularly review your financial statements and consult with your advisor to ensure that your business is well-prepared for tax season.

In conclusion, small businesses can thrive when they avoid common financial mistakes. By diligently planning their budgets, managing cash flow effectively, prioritizing tax planning, and maintaining accurate financial records, entrepreneurs can build a strong financial foundation for their businesses. Steering clear of these errors is crucial for long-term success and growth.

- John Thrush