If you operate a small business, you know that you need a decent, working accounting system, right?
Decent accounting means you know things like whether or not you’re making money. And such a system lets you make better decisions about the products and services you sell and which customers and employees you want to work to keep.
Unfortunately, small business accounting isn’t always easy or straightforward. Accordingly, consider these five tips to simplify your business’s bookkeeping.
Tip #1: Don’t Incorporate
Incorporation complicates your accounting. By incorporating, for example, you’ll automatically add payroll accounting to your bookkeeping duties–even if you’re the only employee.
What’s more, by incorporating, you’ll typically have to provide more information when you do your tax return than is the case if you operate as a sole proprietorship. A corporation tax return is several pages long, for example, as compared to the typical one or two page sole proprietorship tax form.
If you want to incorporate for legal reasons, by the way, you should know that you have another option for limiting your liability. You can set up a one-owner limited liability company. A one-owner business operating as a limited liability company is treated for tax accounting purposes as a sole proprietorship.
Tip #2: Don’t Depreciate
If your business is profitable or if you or your spouse have earned income from wages and you’re operating as a sole proprietorship, you may be able to use something called the Section 179 election to avoid dealing with depreciation.
Rather than go to the bookkeeping burden of allocating a $500 desk as “depreciation” expense over seven years, for example, you can use the Section 179 election to just immediately write off the entire $500 furniture cost in the year you purchase and begin using the asset.
Not all states allow Section 179, so you’ll want to confer with your tax advisor. But by simply writing off asset purchases, you greatly simplify your accounting. You don’t, for example, find yourself a few years down the road doing the depreciation calculations for, say, several dozen or several hundred items you’ve purchased. Ugh.
Note: Most assets that a small business purchases can be immediately expensed using the Section 179 election. Some assets can’t, however, including real estate.
Tip #3: Don’t Combine Business and Personal Items
Another tip for keeping your business accounting simpler: Don’t combine business and personal items. For example, setup a separate bank account for the business and use that account only for business deposits and withdrawals.
Another example… Don’t go try to buy a car, call the purchase a business expense, and then attempt to deduct a portion of the car’s price and operating expenses.
A general rule about tax accounting: Any deduction that’s been abused by taxpayers in the past is probably closely watched by the IRS and the state revenue folks. And that close monitoring almost always means that in order to take the deduction you need to go to a bunch of extra bookkeeping work. That extra bookkeeping work not only costs you time and money, the extra work also tends to truly complicate your accounting.
With a car, for example, deducting some portion of your auto expenses will require you to carefully track all of your car expenses (fuel, service, insurance, and so on) and also your business, commuting, and personal use of the vehicle. Furthermore, whenever you trade-in your “business vehicle,” you or your accountant will also probably have to do the tax accounting for a like-kind exchange.
Seriously, small businesses commonly make the mistake of deducting items like cars only to find (if they’re honest with themselves) that after all the wailing and gnashing of teeth (and perhaps a bit of dishonesty, too) the deduction saves only an extra two to three hundred dollars.
Tip: Do keep track of any business miles so you can claim the easy standard business miles deduction. That deduction, for many businesses, is an easy tax deduction.
Tip #4: Do Consider Using Cash-basis Accounting
Tax laws don’t allow all businesses to use cash-basis accounting. For example, if your business resells inventory or manufactures items, you probably can’t use cash-basis accounting.
However, service businesses typically can use cash-basis accounting. And cash-basis accounting, while a little frowned upon by accountants, should always been considered if the resulting accounting lets you prudently run your business.
Cash basis accounting simplifies your accounting because you don’t have to setup and then work with an accounts payable system. And because you don’t have to do accrual journal entries at the end of each month and year.
Note: The popular small business accounting program QuickBooks lets you do both cash-basis accounting and accrual-basis accounting.
Tip #5: Do Consider Outsourcing
A final quick tip that’s especially applicable once you have employees: You should consider outsourcing your accounting, or some part of your accounting, once you’ve got employees or too little time to do the job yourself.
And this outsourcing option is actually very simple, straightforward, and even economical as compared to the options of letting your books turn into a mess or hiring a modestly competent full-time bookkeeper.
You can typically pay a service bureau a couple of thousand dollars a year, for example, to do your payroll. And a few hundred dollars a month is often enough to pay for a general bookkeeping service.
In a world wide web stuffed full with billions of web pages you, as a small webmaster, have some distinct challenges to overcome. But you can overcome these challenges in two steps that I call the sizzle and the steak of internet marketing.
Making a success of your website comes down to two basic things. The first thing you have to do is get people to your website. And the second thing you have to do is to solve their problems clearly and effectively.
Getting people to your website means you have to show them a little sizzle. You are, after all, vying for the same attention that a lot of other websites are vying for. And peopleâs time is valuable. You have to attract attention to yourself somehow. There are a lot of traditional marketing techniques you can use to do this. Make sure your articles have catchy and unusual titles. Make sure your anchor links also have catchy titles. Show an unusual point of view in your writing. You can even use unusual, funny, or viral marketing techniques. The important thing is that you stand out from the crowd. But never sacrifice quality (Steak) for flashiness (Sizzle). Make sure you also deliver real content and real solutions to your web visitors problems.
Getting people to your site is meaningless unless you get them to take the actions that benefit both them and yourself. These actions could be anything from purchasing a book to downloading your software. Whatever the desired effect is sizzle wonât cross this threshold. To get this result you have to provide your visitors with some real steak. Really take a hard look at your visitors and understand what problem they are trying to find a solution for. Then go ahead and do your absolute best to solve that problem. Make it the focus of all your energy. Give them the steak â and make it the biggest, juiciest piece you can make.
Giving your visitors real solutions to their problems has the added effect of reinforcing your relationship with them. You can bet that they will come back again. You have begun to build a solid relationship with your web visitor. And this is where you can excel against even the biggest conglomerate of web sites. You can build a solid and personal relationship based on trust. You used a little sizzle to get their attention and then you served them a big old piece of steak and that will keep them coming back for more.
It is quite ok to use sizzle in order to get people to your website. But thatâs where it should end. When they are on your site donât continue with the sizzle. It just ends up to be perceived as more hype and hyperbole. Once they are on your site deliver them the steak. You will end up with a web visitor that is satisfied and happy, with a high probability of converting into a long term frequent visitor.
As a small business, you’re probably already aware of the importance of your website as a great marketing tool. However, if you want to increase traffic and potentially generate more sales, you might have also thought about doing some advertising. The question is, do you go online or stick with the tried-and-trusted medium of print?
Online Vs Print Advertising
Although expensive, print has traditionally been one of the most effective mediums in which to advertise products or services. However, it looks like the internet is now taking over. The internet has many advantages over print advertising; it is cheaper, reaches a larger audience and can be more versatile. This makes it ideal for small businesses that want maximum exposure for a minimal cost.
Google and Online Advertising
Google are the undisputed leaders of online advertising, pioneering the ‘Pay Per Click’ method of advertising. This advertising method allows small business to explicitly target their ideal clients and – as the advertiser only pays for the customers who have actually clicked on their online advert – it is also an affordable way of advertising for smaller companies. However, online advertising certainly doesn’t end with Pay Per Click.
Advertising on Social Networking Sites
Arguably the most popular websites in the world today, social networking sites such as Facebook and Myspace are also massively popular with advertisers. They offer a huge audience of young web users, rendering them ideal for advertising new music, films, beauty products and fashion.
Because they boast such potent advertising power, social networking sites are constantly looking for new ways to offer space to potential advertisers. Myspace is currently in the process of testing Community Builder, a new advertising platform that will maximise the potential of their advertising space.
Myspace Community Builder
Myspace’s Community Builder has been designed to let advertisers build and manage their own brand profiles on the site. MySpace had previously let advertisers promote their brands by featuring profiles on the site, but it had handled both the creation and the updating of these profiles on behalf of the advertisers.
The site’s Community Builder platform is different, as it will allow advertisers to have more control over their own profiles, allowing them to update content and features without Myspace’s involvement.
By making a Myspace profile for their products, advertisers can attract Myspace users to visit them online and perhaps even add their product or service as a MySpace friend. Having a Myspace profile for a product or service also allows Myspace users to interact with the brand by playing videos, entering competitions, and listening to songs.
There are a number of other websites who are keen to build on the success of internet advertising, so small businesses who are looking to advertise their products or services online will soon have more options than ever to do so.