What You Need to Know: Payroll Tax AuditsPosted on September 5th, 2018
Employment classification is often a point of contention between IRS auditors and businesses. Many employers who have their paperwork in line find themselves receiving audit notices, all because their contractors could be classified as employees. As intimidating as the IRS is, records and sound arguments can prove them wrong.
It’s essential for business owners to consult with their accountants or CPA firm to successfully navigate the employment audit. Doing so without expert assistance may result in penalties and costs. These audits are intimidating, but it is possible to fulfill the requirements, stay compliant, and protect your business.
The Two Kinds of IRS Investigations
The IRS performs two kinds of audits: a compliance check and a full audit.
The compliance check is not as in depth and will be less involved for business owners. The IRS will review all federal tax forms and interview you. They will then consider whether you have violated any policies.
Full audits are time-consuming and in-depth. All financial records for the year in question will be reviewed, and multiple interviews may be required before the IRS is satisfied with what they find. If a full audit is initiated, the auditors have a good idea that employment laws have not been followed, either due to actual violations or incorrect records.
In any case, it’s important to cooperate with the auditors. Answer their questions, provide requested records, and meet with them when required. When dealing with a full audit, however, working with a CPA can help you resolve the issues correctly.
How to Avoid the Full Employment Audit in the First Place
It’s frustrating to know that the IRS can initiate an audit at any time, even when you have all but guaranteed your records are valid. Have your accountant review all federal employee and contractor policies, and make sure yours comply. For example, an employee who serves in one role and a contractor that performs the same task can be flagged. Re-classify where necessary.
The key to reducing the risk of an audit is controlling the factors that could cause one.
Need Help with Payroll Services or an Audit? Call Us!
Contact Davis & Associates, Certified Public Accountants to resolve your Employment Audit. We serve Naples, Cape Coral, and Bonita Springs.
How Tax Planning Encourages Business GrowthPosted on August 27th, 2018
Business owners who want to minimize their expenses should look no further than their taxes. Although the amount owed cannot be reduced to zero, lowering it will result in greater financial freedom for the business. With more freedom comes the opportunity to invest in new areas of profitability. The only way to be in control of your business’ taxes is through careful planning.
Tax Planning Needs to be Part of Financial Planning
Taxes take up a large percentage of the budget, so factoring in how much is owed for the year will help owners assign resources accordingly. Either using previous years’ return, online tools, or through meticulous estimation, you can accurately predict what will be paid to state and federal tax agencies. Then, you should set aside enough money throughout the year to pay it off completely.
Precise accounting is key to achieving a successful business, as it protects it from losing money. Similarly, tax planning protects the venture from audits and penalties, which affect the company’s and owner’s financial standing. Anxiety can plague owners who do not have a handle on their finances. Feeling confident that the business has a stable cash flow means that you can have peace of mind, year-round.
Extra Capital for Long-Term Growth
Your sales goals, whether it’s in products or services, need to be met. It’s not possible to meet those goals if margins aren’t consistent or unforeseen expenses limit progress. Taxes are one of the few requirements that can be predicted and taken care of ahead of time. Reducing the number of variables that can affect your profits bolsters your ability to meet those goals.
Tax planning allows you to look ahead to deductions and credits that apply to your business and prepare for them. The extra cash you can save with these rebates can be directed to critical areas of business operations.
Contact Davis & Associates, Certified Public Accountants for a Tax Plan
We help businesses minimize their tax burden every year, supporting their long-term growth. We provide tax planning services to Naples, Bonita Springs, and Cape Coral. If your business needs to improve its tax standing, correct previous year’s issues, or learn how to estimate tax expenses properly, call us today.
How to Organize Your Records for Efficient Tax PlanningPosted on August 6th, 2018
When preparing tax returns, the goal is reporting accurate numbers. This way, you don’t over or underpay, minimizing the issues you must deal with once tax season is over. Keeping your records neat and tidy isn’t a once-a-year event, but instead takes daily planning and attention.
Create a Centralized System
Keep all hard copies of records, statements, receipts, etc. in one place. This may require a large filing cabinet or many, but it’s worth it to have easy access to paperwork. Separate sections of the cabinet by year and divide that year into the months. Further divide those month sections into the different types of files you have, such as tax documents, statements, accounts receivable, payable, and so on. Although it seems granular, the more detailed each section, the easier it will be to find the items you need.
The files themselves should be tidy, with receipts and loose papers being bundled up in clearly-marked folders. Make a routine for yourself and your employees to ensure that record management is part of the daily regimen. Once someone returns from a company lunch, you should scan and file the receipts. Do so for every kind of physical paperwork you receive; it’s much easier to file it away right when it enters the office or is printed out.
Use Accounting Software
An organized filing cabinet is only part of the record keeping puzzle. Your digital records also need to be in order, but this may be a bit more challenging if all you have are spreadsheets, online statements, and more. Implementing accounting software gives you a platform for tying your digital paperwork together.
Tools like QuickBooks allow you to categorize transactions and connect third-party services for bill payments and other functions, enabling you to combine your business’ computer records. These resources also allow you to generate earnings reports and analyze accounts, delivering unique insight into your organization.
Need Help Streamlining Your Paper and Digital Records? Call Us
Even when you have a reliable paperwork system and robust accounting software, the records might still be in a mess. Davis & Associates, Certified Public Accountants can help you organize your books and establish a system that makes sense to you. Call us today for accounting and bookkeeping cleanup!
Three Reasons to Outsource Your BookkeepingPosted on August 1st, 2018
Although many functions are vital to a business’ operation, bookkeeping is essential to financial success. Managing cash flow, balancing accounts, tax preparation, and straightening out bank statements rely on detailed and precise bookkeeping. These tasks are challenging and time-consuming and take your attention away from the rest of your business.
Outsourcing your accounting, however, is a straightforward and practical solution. It’s affordable and can reduce your workload significantly. Davis & Associates, Certified Public Accountants, provides the following benefits to clients who rely on our teams for bookkeeping.
Experts Are on the Job
Protecting your company’s bottom line is the goal. Accountants sift through the numbers and explain the business’ financial standing so that you can make the right decisions for your budget. Questions like “Am I spending too much on this,” or, “Do I have extra money around to invest in that,” are easily answered by someone who can see the big picture. Additionally, you will know exactly how much you owe in taxes, allowing you to plan.
You’re Free to Focus
Business owners are all-in for their enterprise, which means their energy and time is precious. Imagine not having to manage accounts on a regular basis, or spending endless hours organizing records. With accountants taking care of the time-intensive aspects, you are free to shift your attention to the things that are most important to you, including your personal life. You are still involved in your business’ accounts, but you don’t have to be weighed down by the intricacies of bookkeeping.
You Gain Unique Insight
Besides the routine bookkeeping, accountants can perform a variety of services to expand your understanding of the business. Their reports allow you to see the business’ potential over the next few years, or help you make long-term decisions that will enhance your profitability. With an independent team at your side, you have access to knowledge and experience beyond your own.
Need to Improve Your Bookkeeping? Contact Davis & Associates
We serve new and existing businesses in Naples, Cape Coral, and Bonita Springs. Our CPAs are experts in managing your books and much more, giving you the tools to compete in the modern marketplace. Call us for a consultation, and we will help you achieve accounting success.
Understanding Gross Profit MarginPosted on July 24th, 2018
The main goal of most small businesses is to produce goods or services to make a profit. Several financial ratios can help evaluate how your business is performing financially. One of the most important indicators of the health of a business is the gross profit margin. It indicates how much money is available to expand and increase sales. Any small business that intends to grow needs to show a high gross profit margin.
What Exactly is a Gross Profit Margin?
Gross profit is the amount of money left after you subtract the cost of producing whatever you are selling from your total sales. Gross profit margin is the gross profit expressed as a percent of total sales. It is calculated by adding the total sales for the fiscal year and subtracting the cost of labor, materials, and production overhead. Divide this result by the total sales figure and multiply it by 100.
Reduce the Cost of Materials and Labor
To properly analyze your gross profit margin, it’s important to look at your cost of production. The two most important expenditures will be the cost of materials and labor. If you can reduce these costs, you will raise your gross profit margin. To reduce the cost of materials, look for the best price possible, change suppliers as needed, and look for cost-effective materials. Train your employees efficiently and invest in more efficient equipment.
Consider Increasing Sales or Prices
If you can increase prices while still maintaining sales, your gross profit margin will rise. By the same token, if you can increase sales without increasing prices, you stand to save on costs because you will be producing higher volumes. Production overhead will not increase as quickly as your volume of production rises.
Should I Hire a Chief Financial Officer?
Want to see your gross profit margin increase? Consider hiring a Chief Financial Officer (CFO). A CFO can help your company grow smarter and faster. Many business owners and managers don’t consider hiring a CFO because they fear it will be too expensive. What they don’t realize is that they are already spending that money in lost profits and a stagnant gross profit margin.
A CFO will look at your business with an educated financial point of view, and take charge of the financial future of your company. A high gross profit margin will give your company the flexibility to be creative and innovative to grow. One of the smartest decisions you can make to increase your gross profit margin is to hire a CFO. At Davis & Associates CPA’s, we work with entrepreneurs in Bonita Springs, Naples, and Cape Coral to help them grow their capital so their business can thrive. We provide CFO services along with full-service accounting. Give us a call today to set up a consultation.
Three Reasons Why Your Business Needs a Part-Time CFOPosted on July 24th, 2018
Achieving measurable growth and stability is increasingly difficult in today’s fast-paced economy. Whether you own a small shop or operate a burgeoning IT business, staying on top of changing trends is crucial to remain profitable. For many owners, the challenge of effectively managing daily activities, balancing the books, and looking out for new opportunities is too much to handle. A part-time CFO can be a partner to owners who are struggling to juggle too many roles and burdensome tasks, at a fraction of the cost of a full-time CFO.
Supporting Long-Term Stability
Businesses require stability to achieve growth and maximize profits, but many factors impact a business owner’s ability to create balance. A part-time CFO can determine these factors and implement new policies or systems that reduce human error or increase an owner’s financial awareness. Internal factors such as imbalanced accounts, irregular payroll function, poorly regulated internal controls, or ineffective inventory systems are often the cause of instability. External influences can also throw a wrench in an otherwise efficient operation. These include tax law changes, cultural and economic trends, and fluctuating prices for goods and services. With an experienced part-time CFO providing expert advice and balancing accounts, your business can adapt more appropriately to all kinds of factors and stay ahead of the competition.
Improving your Bottom Line
Sometimes all a business needs is an outside perspective. An independent CFO can look at both your big picture goals and the details of your daily functions to see how they line up. If your business efficiency is not optimized, or your financial data is not accurate, you may be hindered in achieving your grand vision. Many owners undervalue the necessity of thorough fiscal data, which is the key to understanding what can be done to make the business more profitable. CFOs develop reporting system that detail your business performance, revealing where owners need to tweak processes or adjust their goals to match figures.
Taking Advantage of New Opportunities
When successful businesses have achieved stability, or have matured to a certain point, it may be time to acquire a new product or to sell the operation. A CFO can perform many essential tasks for these complex business activities, including due-diligence, valuation, and merger facilitation. A dedicated CFO can ensure the merger or acquisition is done properly and effectively to keep your business running smoothly. Valuation assistance helps owners understand the full value of a business and can reveal factors such as debt and profit and loss.
Call Davis & Associates CPA’s Your Expert CFO in Bonita Springs, Naples, and Cape Coral
John J. Davis and Stephen J. Minosky have extensive experience providing CFO services. Whether you need this role filled for a large project, merger, or to achieve your fiscal goals, our team can deliver.
Start-Up Businesses: Do these Accounting Tasks FirstPosted on June 26th, 2017
Starting your own small business is an exciting time, filled with plenty of activities to keep you busy. To get started the right way, consider your financial objectives first and take the following steps:
Select a Business Structure
The type of business entity you choose plays an important role in many processes, especially taxation. Consider whether you would prefer a pass-through entity, where income and losses are reported on your personal tax return, or a corporation, that is considered a separate, taxable entity. Selecting the right structure for your business helps to minimize your tax liability and avoid the burden of double taxation.
Obtain an EIN
Your employer identification number (EIN) may be required as a part of the business set up process, depending on the entity type you choose. It is a good idea to obtain an EIN immediately. You will need an EIN to pay employee wages and distribute funds for retirement plans. Some clients will even need an EIN to establish business bank accounts. You can easily obtain an EIN online at irs.gov
Get your Records Organized
While you don’t have to create a sophisticated system to manage your paper trail, it is important to starting keeping track of information as soon as possible. This includes sales tickets for income earned, receipts for expenses paid, bank statements, and any other documents that demonstrate cash flow into and out of your business. While a lot of banking and money transfers into and out of your business are completed online, you should collect and organize any physical paperwork that you do accumulate. These can be easily stored in binders or folders with plastic sheet covers.
Create a Bookkeeping System and Accounting Method
With your records now organized, you will need to develop a system to track income and expenses. The simplest way to do this is by recording income on a daily basis and expenses on a weekly or monthly basis. Consider if you’ll use an accrual or cash method of accounting. Under the cash basis, income is recognized when it is received, and expenses are recognized when they are paid. Under the accrual method, income is recognized when it is earned and expenses are recognized when they are incurred. As a small business, the cash method may best serve your needs. Efficient and informative bookkeeping and accounting strategies are essential for everyday operations and successful tax reporting.
If you need help getting your business established and profitable by implementing sound financial strategies, contact Davis and Associates today. Our small business professionals are experienced in helping entrepreneurs make smart choices for long-term success.
Pooling vs. Straight-Line Funding: Which is Best?Posted on June 5th, 2017
Carefully managing reserve funding as a board member of a condo association is a complicated balancing act. You want to make sure that your members and owners are getting the repairs and updates their properties need, while ensuring a conservative but flexible approach when necessary.
The goal for anyone planning a funding method is making smart choices about repairs, upgrades, and planning ahead to ensure those are provided. While the straight line method of determining project funding has been used for years and is common among condo associations, the pooling method has become more prevalent recently.
Both approaches include calculations for interest and rising cost of repairs as years progress but are unique in their methods and provide benefits.
The Argument for Cash Flow Funding (Pooling)
With this strategy for managing reserve funds, money is set aside in one overall pot for completing projects. All projects draw out of this central pool for funding. With proper accounting methods, less money will need to be added overall to accurately provide timely upgrades or fixes with this approach. The central benefit of pooling is greater flexibility in terms of allocating money for projects. If money needs to be moved around between projects, this is easily accomplished and does not require a member vote.
This method of funding does require careful planning and accounting, however, which is often best handled by an outside professional who can ensure that there is enough money in the general pool to support cost of repairs.
The Argument for Straight-Line Funding (Competent Method)
Straight-line funding establishes different buckets for different projects. For example: roofing, painting, ceiling repair, and pool maintenance each have their own dedicated funds, and adequate money is placed in each before they could be completed. While this can prove to be a hurdle when repairs need to get done earlier or faster, this method provides for more control and conservative use of funds. If money allocated for one project is needed for another, a vote has to be conducted on whether funds can be shared across projects. Some condo associations prefer this elevated sense of control over reserves.
Ask us about Accounting for Condo Associations
If your board is having trouble determining how to set aside money for a fund repair and improvement projects, contact our HOA/CIRA accountants today. We are skilled in providing accurate depreciation calculations and providing guidance on how to look ahead in supports project costs.
Contact Davis & Associates today for your consultation!
What is a QuickBooks ProAdvisor?Posted on May 16th, 2017
When you own a small business, 50% of your work is doing what you love. The other 50% is managing the tasks that keep your business running, like payroll, client invoices, or vendor payments. The majority of small business owners use QuickBooks, the top-rated financial accounting software tailored for their needs. However, navigating all the available features to find the version that’s the best fit for the needs of your business and specific industry may be a little overwhelming.
That’s where our certified QuickBooks ProAdvisors at Davis & Associates, CPAs can help.
What is a QuickBooks ProAdvisor?
ProAdvisors are generally experienced accountants, bookkeepers, or small business professionals who enroll in the ProAdvisor program sponsored by QuickBooks’ parent company, Intuit. Applicants are rigorously trained on each version of the software. Once their training is complete, they must pass detailed exams in order to be certified as a QuickBooks expert, also known as a ProAdvisor.
QuickBooks ProAdvisors can earn certification in one or all of the following programs:
• Basic QuickBooks Certification
• QuickBooks POS (Point of Sale) Certification
• QuickBooks Enterprise Solutions Certification
• QuickBooks Advanced Certification
How can a ProAdvisor help me with my small business?
ProAdvisors are trained to help business owners make the most of any QuickBooks program. At Davis & Associates, CPAs, we can show you how to customize your best-matched program to meet the unique requirements of your business and its practices, whether you need job costing reports, credit card processing and point of sale assistance, or specific inventory tracking. Specialized QuickBooks knowledge allows our team to best service clients from a range of industries, including restaurants, home owners associations, and restaurants create the right bookkeeping system for their entity and vertical.
We walk you through the set-up process so you can get your business information organized and coach you on how to simplify your regular transactions. With our help, you can efficiently run comprehensive financial statements, track accounts receivable, and regularly reconcile accounts. Our ProAdvisor is also trained to troubleshoot and help you fix or eliminate any issues you’re having with setup, use, or function.
Work with our ProAdvisor and Business Accountant
If you have questions about the benefits of working with an experienced QuickBooks accountant and what our ProAdvisors can do to customize setup for your nice business, contact our firm today.
Construction Accounting: How to Depreciate Tools and VehiclesPosted on May 2nd, 2017
Buying the assets you need to get your business started and keep it going can be costly. While there are many easy write-offs to save money, such as certain travel expenses conferences, home office deductions, and office supplies, the bigger the asset the more complicated the write-off.
Depreciation is a smart way to get money back on a big purchase, including large hardware, furniture, property, and cars. But there are plenty of things to keep in mind for proper depreciation:
- Follow GAAP – Generally Accepted Accounting Principles are standard methods of operation that dictate how bookkeeping processes are handled. This allows governing organizations to ensure streamlined reporting.
- Spread out cost – While you can write off the full amount of the asset in the first year, up to a certain dollar limit, dispersing the cost of the asset across several years allows you to reap the long term benefits from your investment.
- Calculate cost – It’s more than what you simply paid for it. The cost of an item includes the taxes you paid on it and what it costs to operate. If the asset is a car, upkeep and maintenance can be factored into cost as well. After the asset is outside of the window of use, it’s helpful to know its worth after-the-fact, called salvage.
Is it a Fixed Asset? If the item is designed to be used over the long-term it’s considered a fixed asset. Cars, furniture, and property are considered fixed. If something can be used and depleted during the course of standard business operations, such as office supplies, it is not a fixed asset.
How Long is the Equipment Useful? – At some point, your fixed asset may no longer prove useful for your business. Tools can break or become damaged and cars can cease to function dependably. The IRS provides a timetable of usage periods for items like vehicles to incorporate into your depreciable asset calculations.
When to Record Assets – How long do you expect to use it? If you plan to use the asset for 5 years or 10 years, or however long the item will prove useful, spread the cost out on financial statements over that time period.
Determine Method of Depreciation
There are formulas involved in each method of depreciation — and even the more straightforward method can prove to be a significant amount of number crunching and figure-finding. If you need help depreciating the cost of fixed assets over their useful life or using accelerated depreciation formulas, please contact Davis and Associates today. We specialize in accounting for specific verticals, including construction, and are adept at depreciation accounting to provide the most tax benefits.