Part 1: Understanding the Role of Accounting in a Small Business

Before knowing when to hire a professional, it’s important to understand why accounting matters so much for small businesses.

What Accounting Really Means

Accounting is more than just adding numbers. It involves recording, tracking, and analyzing your financial activities. Proper accounting shows how much you earn, how much you spend, and whether your business is making a profit.

It includes:

• Tracking income and expenses
• Managing payroll
• Preparing tax documents
• Creating financial statements
• Planning budgets

Why Accurate Accounting Is Essential

Accurate accounting helps you make smart business decisions. When your books are organized, you can clearly see where your money goes and how to grow. Poor accounting, on the other hand, can lead to cash flow problems, missed tax deadlines, and even legal trouble.

The Common Mistake of Doing It All Yourself

Many business owners try to manage their accounts alone to save money. This may work in the beginning, but as the business grows, transactions increase, and tax rules change, mistakes become costly. Handling accounting on your own for too long often creates more problems than it solves.

Part 2: Signs It’s Time to Hire a Professional Accountant

Here are the most common signs that your small business needs a professional accountant.

1. You Spend Too Much Time on Accounting Tasks

As a small business owner, your time is valuable. If you find yourself spending hours every week entering receipts, reconciling bank statements, or preparing invoices, you’re losing time that could go into marketing or improving your services. When accounting takes over your schedule, it’s a clear sign that it’s time to bring in a professional who can do it faster and more accurately.

2. Your Business Is Growing Quickly

Growth is a great sign for any business, but it also means more transactions, more invoices, and more financial decisions. If your sales are increasing but your recordkeeping isn’t keeping up, you might miss key details like:

• Outstanding payments
• Tax deductions
• Vendor balances

A professional accountant can handle this growth efficiently and make sure everything stays accurate.

3. You Don’t Fully Understand Financial Reports

Many business owners look at financial statements and feel confused. If you struggle to read your balance sheet or income statement, you’re not alone. But these reports are the foundation of business planning. Without understanding them, it’s hard to know if you’re truly making a profit or losing money.

An accountant can prepare these reports correctly and explain them in simple terms so you can make confident decisions.

4. You Miss Tax Deadlines or Feel Stressed About Taxes

Taxes can be complicated especially when laws and deductions change every year. If you find yourself:

• Filing late
• Unsure about what you owe
• Paying penalties

Then you’re likely ready for professional help. Accountants stay updated on tax laws and ensure your filings are correct and on time. They also help you find deductions that can save you money.

5. You’ve Made Errors in Your Books

Even small accounting mistakes can cause big problems later. For example:

• Entering wrong numbers
• Forgetting to record expenses
• Misclassifying income

If you notice that your books don’t match your bank statements or invoices, you may already have errors building up. A professional accountant can review your records, correct mistakes, and set up better systems to prevent them in the future.

6. You’re Applying for a Loan or Seeking Investors

Banks and investors need clear, accurate financial statements before they can approve funding.
If you’re unsure how to prepare these reports or present them professionally, it’s best to hire an accountant. They know exactly what financial institutions want to see and can prepare reliable documents that build trust.

7. You Face Frequent Cash Flow Problems

If you often run short on cash or struggle to predict your monthly income and expenses, your accounting system may not be working. A professional accountant can help you analyze cash flow, identify problems, and build a plan to maintain financial stability.

8. You’re Expanding or Changing Business Structure

When your business moves from a sole proprietorship to a partnership or corporation, accounting becomes more complex. Each structure has different tax rules, and a professional accountant ensures compliance with the law while minimizing your tax burden.

Part 3: What a Professional Accountant Can Do for Your Business

Hiring an accountant is not just about recording numbers. A skilled accountant adds value in many areas.

Bookkeeping and Record Management

They manage your books efficiently, keep all records updated, and track every transaction. This helps you stay organized and ready for audits or tax filings anytime.

Tax Planning and Compliance

Accountants don’t just prepare taxes they plan them throughout the year. They make sure:

• You follow all tax regulations
• You pay the correct amount
• You take advantage of every legal deduction

This proactive approach prevents surprises and reduces stress during tax season.

Financial Analysis and Advice

Accountants can study your financial data and give practical advice. They might help you:

• Identify unnecessary expenses
• Improve profit margins
• Plan budgets for future growth

This type of guidance helps you grow your business in a smart and stable way.

Payroll Management

As your team grows, managing payroll becomes a full-time job. Accountants ensure that:

• Employees are paid correctly and on time
• Taxes are deducted properly
• Payroll records remain compliant with labor laws

This reduces the risk of fines or employee dissatisfaction.

Business Strategy Support

Professional accountants also help with long-term strategies. They can prepare forecasts and financial models that help you plan expansion, hire staff, or launch new products based on real financial data.

Part 4: Benefits of Handing Over Your Accounting to a Professional

Outsourcing your accounting can bring many benefits that go beyond just saving time.

You Get More Time for Core Business Tasks

When you delegate accounting, you can focus on operations, customer service, and marketing the activities that actually grow your business.

You Reduce Stress and Avoid Mistakes

Accounting professionals use reliable software and double-check data to minimize errors.
You can stop worrying about miscalculations or missed deadlines.

You Save Money in the Long Run

Although hiring an accountant costs money, they often help you save much more by identifying deductions, avoiding penalties, and improving cash flow.

You Gain Clear Financial Insights

With proper reports and analysis, you’ll know exactly where your money goes. This clarity helps you make informed decisions and spot opportunities early.

You Stay Compliant with Laws

Regulations change frequently, and non-compliance can lead to fines. Accountants keep track of tax laws and ensure your business always follows the rules.

Part 5: Choosing the Right Accountant for Your Small Business

Finding the right professional is just as important as deciding to hire one.

Look for Proper Qualifications

Make sure the accountant holds relevant certifications like CPA (Certified Public Accountant) or equivalent. Qualified accountants understand complex rules and can represent you during audits.

Check Their Experience with Small Businesses

Choose someone who has worked with small companies in your industry. They’ll better understand your specific challenges and accounting needs.

Ask About Their Tools and Software

Modern accountants use digital tools like QuickBooks, Xero, or FreshBooks. These tools allow you to access reports anytime and keep your data secure.

Discuss Their Communication Style

You’ll want an accountant who explains financial terms clearly and answers your questions quickly. Good communication ensures a strong, long-term partnership.

Review Costs and Services

Ask about their pricing structure whether they charge hourly, monthly, or per project. Also, make sure you understand what’s included in their services (bookkeeping, tax filing, financial planning, etc.).

Part 6: How to Prepare Before You Hire an Accountant

Before hiring, take a few steps to make the transition smoother.

1. Organize Your Financial Documents

Collect all receipts, invoices, bank statements, and previous tax returns. This helps your accountant understand your current situation.

2. Identify Your Accounting Challenges

List the areas where you struggle most such as tax filing, payroll, or expense tracking. Sharing this list will help the accountant focus on your key pain points.

3. Set Clear Expectations

Decide what you want your accountant to handle and what you’ll continue managing yourself.
Clear boundaries prevent confusion later.

Part 7: Common Myths About Hiring an Accountant

Many small business owners hesitate to hire an accountant because of common misconceptions. Understanding the truth behind these myths can help you make smarter financial decisions for your business.

Myth 1: Accountants Are Only for Big Companies

Many small businesses believe accountants are a luxury. In reality, they are valuable at every stage even if you’re a one-person business.

Myth 2: It’s Too Expensive

The cost of an accountant often pays for itself through tax savings, efficiency, and better decisions.

Myth 3: Accountants Only Do Taxes

Accountants provide far more than tax help they assist with strategy, growth, budgeting, and compliance.

Part 8: How to Work Effectively with Your Accountant

Hiring an accountant is a partnership. To make it successful:

• Share information on time
• Keep receipts and documents organized
• Ask questions if you don’t understand something
• Meet regularly to review performance and goals

This open communication helps your accountant support your business better.

Conclusion

As your business continues to grow, your financial responsibilities naturally increase as well. Managing invoices, expenses, and tax filings can quickly become stressful and time-consuming. When you start feeling overwhelmed or uncertain about your financial records, it’s a clear signal that you need professional help. A qualified accountant not only ensures accuracy in your books but also provides valuable financial insight, reduces errors, and helps you make informed decisions. By letting a professional handle your accounting, you save time, avoid costly mistakes, and gain the freedom to focus on what truly matters growing and improving your business.

References

1. https://www.accountingdepartment.com/blog/5-signs-its-time-to-outsource-your-business-accounting
2. https://cfohub.com/5-signs-your-business-needs-professional-accounting-services/
3. https://digits.com/blog/when-to-hire-an-accountant/
4. https://www.thesmallbusinessexpo.com/blog/small-business-accounting/
5. https://www.patriotsoftware.com/blog/accounting/signs-you-need-to-hire-an-accountant-for-your-small-business/
6. https://hayes.cpa/insights/when-to-stop-doing-your-small-business-accounting-and-hire-a-pro/
7. https://blazejaccounting.com/when-should-a-small-business-look-for-accounting-services/
8. https://www.coursera.org/articles/small-business-accounting

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For many small business owners who don’t have an accounting department, however, it can seem as if the information provided by setting up a management accounting system is not time well spent. After all, the odds are that management and the chief accountant at a small firm are one and the same. Is it worth it to generate a separate set of reports if only one person is looking at them? It might be if an easy way to organize and sort data makes decisions a lot easier.

In conventional accounting, every incoming check and expenditure are recorded so that they can be reconciled. Using management accounting, however, it becomes easy to spot major trends that may affect the business. For a business owner who can quickly get bogged down with the minutiae of the day-to-day, being able to take a step back and see the overall health of a company is essential.

It is critical to start with very accurate financial data. While most accounting software programs can produce reports that use management accounting techniques, these reports are only as good as the data that is provided to the program. That data, viewed in management reports, can pinpoint areas for analysis and review.

With management accounting techniques, a small business owner can get a clear picture of how his or her business is doing as a whole. Instead of focusing on every individual expense associated with a client, a management accounting approach would look at the total amount spent and earned from a client in order to determine if the work being done is truly profitable. Reviewing detailed data on overhead costs might be necessary in order to pay all the bills, but considering the total cost of office space over a period of several months is the report that a business owner needs in order to make a decision about renewing a lease. It is this analysis of relevant costs that can steer a small business owner toward sound decisions.

It is important to realize that management accounting is designed to provide the big picture. From that, it is possible to see if areas of a company are not profitable, which ones are making money, which ones are growing, and which are shrinking. For example, these techniques can identify which specific clients are most profitable, which areas of the operation need to be streamlined or improved, and which capital expenditures might be most useful.

Similarly, management accounting tools can be used to make decisions about the future of a company. While financial accounting will tell a business owner how much he or she spends on personnel costs, management accounting will compare the theoretical cost of a new employee to the expected benefit gained from his or her work. Future budgeting, financial statement projections, and identification of productive areas on which to focus improvements are all activities that can be assisted by management accounting techniques.

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The blog at StoreYa has collected a very definitive list of 44 accounting tools and software for small business. We are sharing the first 10 of those tools and software listed by StoreYa below:

All-In-One Inventory Management, Business Management, and Financial Accounting Tools and Software

1. Brightpearl

Price: Customizable plans starting from around $375 per month for 3 users

Best for Small to medium omnichannel and eCommerce businesses and retailers

Platform: Cloud-based

Integrates with: Shopify, Magento, BigCommerce, eBay, Amazon, Shipstation, UPS and more

Brightpearl’s eCommerce management system is a full-service platform that integrates accounting with back-office inventory and warehouse management. It integrates with your shipping systems, and like other platforms such as FreshBooks, it is mobile-optimized and offers APIL developers options for easy integration.

Key features include:

• CRM
• Order management
• Batch processing and supplier ordering
• Payment management

2. NetSuite

Price: Varies, at it offers build-your-own package options; but their rough base-license costs are around $999 per month with access costs of $99 per user, per month.

Best for: Any sized, fast-growing business that sells physical products

Platform: Cloud-based

Netsuite offers a variety of comprehensive online financial, accounting and business management solutions. But if you’re looking for a full solution, then their ERP package includes everything you need to run a successful commercial business including cloud financial management and warehouse and fulfillment warehousing.

Key features include:

• In- and outbound logistics product management
• Full accounting services
• Billing
• Financial planning and reporting
• Supply chain management
• Order management

3. ProfitBooks

Price: On request

Best for: Small, growing businesses

Platform: Cloud-based

Integrates with: Amazon, QuickBooks, WooCommerce

ProfitBooks works seamlessly with QuickBooks to offer you an all-in-one accounting and inventory management platform for your business. You can do anything from creating invoices to managing branch-level sales transactions, while you manage your stock, purchases and sales orders all from one convenient platform.

Key features include:

• Purchase workflow simplification
• Stock control and adjustments
• Product batch maintenance
• Multiple warehouse maintenance
• Multiple currencies

4. QuickBooks

Price: Free 30-day trial then starts at $15 per month

Best for: Small to medium growing eCommerce businesses

Platform: Cloud-based

Integrates with: ProfitBooks

QuickBooks has a variety of solutions catering to any size business. It’s their Plus Plan that offers you the most flexibility with its inventory tracking and advanced accounting options. However, if you are a complete accounting novice or won’t have an accounting service provider, you could find their system a little hard at first.

Key features include:

• Sales, expenses and profit tracking
• Invoice creation and sending
• Sales tax tracking and management
• Bill payment and management
• Inventory tracking
• Profitability tracking

Budgeting, Profit Management and/or Admin Accounting Tools & Software

5. Apache OpenOffice

Price: Free

Best for: Budgeting and planning for small or new business owners

Platform: Windows, Linux, OS

If you’re looking for an alternative (free) software option to Microsoft Office, then Apache’sOpenOffice is an easy-to-use solution for your spreadsheet needs. Their library of templates has hundreds of small business templates from budgeting to project planning sheets. In short, OpenOffice offers a cheap, user-friendly alternative for planning your new budget across all areas of your business.

Key features include:

• Budgeting sheet templates
• Project planning
• Timesheets

6. DeepMine

Price: 60-day trial and then from $10 per month

Best for: For small to medium Shopify store owners

Platform: Shopify app

The DeepMine Shopify app allows you to view accounting information (such as sales, tax, shipping, costs, etc.) in real-time from one dashboard. They are also busy beta testing a new feature that will enable you to set up and pay vendors and royalties. DeepMine gives eCommerce store owners access to vendor, SKU, order status and best-selling product reports while also enabling you to set up the cost for each product, automate email reports and remit partner percentages.

Key features include:

• Order status (paid, authorized, pending, refunded, voided, abandoned)
• Fulfillment status (unshipped, partial, shipped)
• Cost of product setup
• Automated email reports

7. Delirious Profit

Price: Free 7-day trial then $7 per month

Best for: Shopify store owners

Platform: Shopify app

The Delirious Profit Shopify app enables you to quickly and efficiently calculate your profits and margins on Shopify. Giving Shopify users an overview of earnings over time, it allows you to add your cost price (COGS) to variants and is super easy to set up.

Key features include:

• Top products
• Inventory stock costs and profits per product, month, vendor, category and channel
• Discount performance reports

8. Profiteer ‑ Cost of Goods Sold

Price: Free 3-day trial then $15 per month

Best for: Lean eCommerce store owners wanting a complete look at product costs

Platform: Shopify app

Profiteer is a handy Shopify app that will show you your real profits on total sales in real-time. In short, it records the cost price of each product as it’s sold, having costs adjusted automatically as that currency fluctuates against the USD.

Key features include:

• See the total value of your unsold inventory at any time
• Changing cost and retail prices
• Profits and margins report

9. SimplyCost

Price: Free 14-day trial then $4.99 per month

Best for: Small to medium Shopify store owners

Platform: Shopify app

SimplyCost is a Shopify app that allows you to add COGS (cost of goods) to your Shopify store thereby enabling you to calculate profit in real-time. Taking into consideration any current discounts, refunds, shipping and taxes, it helps users automatically calculate and track their profitability.

Key features include:

• A variety of profit reports by time, channel, location, SKU and more
• Cost price bulk upload
• Supports additional costs: shipping, handling, etc.
• Export reports

Day-to-Day Business Management and Accounting Tools & Software

10. Adminsoft Accounts

Price: Free

Best for: UK-based business owners

Platform: Windows

Adminsoft is a free, downloadable Windows accounting program that offers a complete money management toolkit. This program is particularly useful for business in the UK, as it will be MTD compliant for VAT as of April 2019. That’s not to say that you can’t use it if you’re not in the UK since they include other currencies as well.

Key features include:

• Invoice, statement and quote management and creation
• Customer and supplier list creation and management
• Supplier payments, control stock, and purchase order management
• Profit, loss, budgeting, and cash flow tracking
• Payroll management

To see the full list of all 44 accounting tools and software that the StoreYa blog covered, follow this link. Our only objection is that StoreYa did not mention one of the best tools on the market to help with your small business, and that is the PDF financial file converters from MoneyThumb. Your small business can quickly and seamlessly convert financial statements of every kind to help with your accounting and taxes, saving you time and money.

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Below we have listed the other main reasons small business owners make the decision to hire a professional accountant:

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To help you cross those particular hurdles, today we would like to share some advice from financial gurus on handling the finances and accounting of your small business. We hope the following tips will help you get a better handle on the finances of your small business:

1. Focus on Meaning, Not Money

"We meet with entrepreneurs all the time and they tell us what they think we want to hear, that they want to make money. When we hear that, it's so depressing. It took me 20 years to come to this understanding, but the companies that are successful are the ones who create meaning. Create the next curve; don't improve on sameness."

-Guy Kawasaki, Chief Evangelist at Canva

2. Remember That Your Team Defines Your Business

"Investors put their money in people, not a business. The better the team you have, the more money you will be able to attract. Get people on your team that have industry expertise and that have been there before. Investors want track records."

-Barry Moltz, author of Bounce! and How to Get Unstuck

3. Prioritize Proper Accounting Methods

"Every business owner wants to run a profitable business, but few entrepreneurs dedicate enough time to measuring actual results. The only way to do this is to have a dedicated accounting function. Just as sales can't happen without paying attention to prospects, good financial decisions cannot happen without paying attention to the numbers. It might seem like you can "get along" without accurate accounting during the good times, but it is impossible to navigate lean months without clear financial records."

-David Worrell, author of The Entrepreneur's Guide to Financial Statements

4. Hire Professionals (It's Worth the Cost)

Small business owners aren't expected to be an expert in the finance, accounting, and legal side of the business, which is why there are professionals like accountants, bankers, and lawyers out there. Money spent wisely on a good CPA or lawyer will be returned in multiples of extra profit.

-Ken LaRoe, Founder and CEO of First Green Bank

5. Know When to Say No

"Don't be afraid to say no to projects. Prove that you're serious about specialization by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you'll get to people who need your product or service."

-John Warrillow, author of Built to Sell

The Rules of Thumb blog from MoneyThumb hopes the above tips from financial gurus will help you with the finances and accounting for your small business. Another way to make your small business stand perform at its optimum level is by using the best PDF financial file converters on the market. Quickly and seamlessly convert bank statements using these tools from MoneyThumb.

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5 Essential Online Tax Tools for Small Business Owners

The website of the IRS has numerous online tools designed specifically for small business owners. The Rules of Thumb blog has listed below 5 essential tools that IRS.gov offers small business owners.

1. IRS Virtual Tax Workshop for New Small Businesses

The IRS Virtual Small Business Tax Workshop is a self-paced interactive online tax information and training tool that can help new small business owners understand and navigate their tax obligations year-round. The workshop consists of nine stand-alone lessons that cover such topics as:

• An explanation of federal tax obligations for new business owners
• How to set up and run your business so paying taxes isn’t a hassle
• How to set up a retirement plan for yourself and your employees
• How to manage payroll withholding

2. IRS Video Portal for Small Business Taxpayers

Enter www.taxes.gov in your browser and you’ll find the IRS Video Portal (the official URL is www.irsvideos.gov). Here you’ll find quick video clips and webinars designed to explain a variety of tax topics (from audits to deductions to changing your business). The small business section is a great resource, particularly if you are an employer.

3. IRS Retirement Plans Navigator

Finding and managing the right retirement plan for your business is a big undertaking that involves understanding the law as well as the options that fit your needs. The IRS’ online Retirement Plans Navigator helps small employers find and compare a variety of retirement plan options based on their particular requirements. The tool also helps you maintain your plan in accordance with changing tax laws. You can make appropriate plan changes without having to notify the IRS.

4. IRS Small Business for Businesses and Self-Employed

Navigating the tax year as a business owner is no mean feat, and whether you’re a freelancer, a start-up or a growing small business, the tax landscape is ever changing. This is where the free IRS Calendar for Businesses and Self-Employed can help. Available as a desktop or online application, the calendar logs key business tax dates and reminders. Plus, the calendar is updated every year to include tax, financial and business management tips – specifically for small business owners.

5. Small Business and Self-Employed Tax Center

To access the above tools and more, check out the IRS’s Small Business and Self-Employed Tax Center. Subscribe to regular e-newsletter updates; find out about small business tax workshops in your state, and, of course, access information and forms related to small business tax requirements.

We hope these five essential online tools for small business owners will help you stay on track with your taxes. Another way to be a more efficient small business owner is by taking advantage of the best PDF financial file converters on the market. You can seamlessly handle your taxes for your small business by using these MoneyThumb tools, as well as the above tools from the IRS.

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3 Mistakes Small Business Owners Make by Doing Their Own Accounting

The main responsibility a small business owner should have is that of building their business, not taking care of their accounting. By choosing to handle your own accounting you are taking precious time away from that job. Along with the neglect of your their main responsibility, small business owners who handle their own accounting usually make one or all of the following mistakes:

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1. Open a Bank Account

After you’ve legally registered your business, you’ll need somewhere to stash your business income. Having a separate bank account keeps records distinct and will make life easier come tax time. Note that LLCs, partnerships, and corporations are legally required to have a separate bank account for business. Sole proprietors don’t legally need a separate account, but it’s definitely recommended.

Start by opening up a business checking account, and then any savings accounts that will help you organize funds and plan for taxes. For instance, set up a savings account and put a percentage of each payment you receive as your self-employed tax withholding. Before you talk to a bank about opening an account, do your homework. Shop around for business accounts and compare fee structures. Most business checking accounts have fees that are higher than personal banking, so pay close attention to what you’ll owe.

In order to open a business bank account, you’re required to have a business name and be registered with your state. Check with the individual bank for what documents to bring to the appointment.

2. Track Your Expenses

The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return.

Right from the beginning, you should establish a system for organizing receipts and other important records.

There are five types of receipts that you should pay extra attention to:

• Meals and Entertainment: Conducting a business meeting in a cafe or restaurant is a great option, just be sure to document it well. On the back of the receipt, record who attended and the purpose of the meal or outing.
• Out of Town Business Travel: The IRS is wary of people claiming personal activities as business expenses. Thankfully, your receipts also provide a paper trail of your business activities while away.
• Vehicle-Related Expenses: Record where, when, and why you used the vehicle for business, and then apply the percentage of use to vehicle-related expenses.
• Receipts for Gifts: For gifts like tickets to a concert, it matters whether the gift giver goes to the event with the recipient. If they do, then the expense would be categorized as entertainment, rather than a gift. Note these details on the receipt.
• Home Office Receipts: Similar to the vehicle expenses, you need to calculate what percentage of your home is used for business and then apply that percentage to home-related expenses. You’re able to deduct the portion of your home that’s used for business, as well as your internet connection, cell phone, and transportation to and from work sites and for business errands. Any expense used partly for personal life and partly for business must reflect the mixed use. For instance, if you have one cell phone, you can deduct the percentage you use the device for business. Gas mileage costs are 100% deductible, just be sure to hold on to all records and keep a log of your business miles (where you’re going and the purpose of the trip).

3. Develop a Bookkeeping System

Bookkeeping is the day-to-day process of recording transactions, categorizing them, and reconciling bank statements. Accounting is a high-level process that looks at business progress and makes sense of the data compiled by the bookkeeper by building financial statements. As a new business owner, you’ll need to determine which bookkeeping method works best for your small business. You can choose to go the DIY route and use software like Quickbooks orWave. Alternatively, you could use a simple Excel spreadsheet. When your business is big enough you can opt to hire a bookkeeper and/or accountant.

4. Set up a Payroll System

As a new online business owner, you’ll likely be a one-person show. However, maybe you’ll hire a part-time employee to help you out, or a freelancer to design your logo. Right away, you need to establish whether that individual is an employee or an independent contractor. For employees, you’ll need to decide on a payroll schedule and ensure that you’re withholding the correct taxes; there are lots of services that can help with this. For independent contractors, be sure to track how much you’re paying each person. You will be required to file 1099s for each contractor at the year end.

5. Investigate Import Tax

Depending on your business model, you may be planning to purchase and import goods from other countries to sell. When importing products, you’ll be subject to taxes and duties. These are fees that the US imposes on incoming goods. Take the time to learn about importing goods into the US and the associated taxes, so that you know the rules from the get-go. Also, if you are importing goods, the Duty Calculator can help you estimate the fees in your own business and plan for costs.

6. Determine How You’ll Get Paid

When sales start rolling in, you’ll need a way to accept the payments. If you want to accept credit card payments you’ll either need a merchant account or you can use a third party payment processor like PayPal. A merchant account is a type of bank account that allows your business to accept credit card payments from customers. If you use a third party payment processor, the fees are generally around 2.9% + $0.30 per transaction.

7. Establish Sales Tax Procedures

The world of eCommerce has shaken up sales tax regulations and they are admittedly a bit confusing due to location issues. When a customer walks into a brick and mortar retail shop, they pay the sales tax of whatever state they make the purchase in, no matter if they live in that city, or they’re visiting from across the world. However, when you sell online, you’re often selling to customers who live in different states/provinces, and even countries.

Selling to international customers can be easier than domestic sales because you often don’t need to charge sales tax when selling to out-of-country customers. For American store owners, international purchases are tax exempt as well. However, this can get a bit complicated depending on the state you live in, so check for detailed information about your specific state’s regulations regarding international sales tax.

8. Determine Your Tax Obligations

Tax obligations vary depending on the legal structure of the business. If you’re self-employed (sole proprietorship, LLC, partnership), you’ll claim business income on your personal tax return. Corporations, on the other hand, are separate tax entities and are taxed independently from owners. Your income from the corporation is taxed as an employee.

Self-employed people need to withhold taxes from their income and remit these to the government in lieu of the withholding that an employer would normally conduct. You will need to pay estimated quarterly taxes if you’ll owe more than $1,000 in taxes this year.

9. Calculate Gross Margins

Improving your store’s gross margin is the first step towards earning more income overall. In order to calculate gross margin, you need to know the costs incurred to produce your product. To understand this better, let’s quickly define both Cost of Goods Sold (COGS) and gross margin.

Cost of Goods Sold (COGS): These are the direct costs incurred in producing products sold by a company. This includes both materials and direct labor costs.

Gross Margin: This number represents the total sales revenue that’s kept after the business incurs all direct costs to produce the product or service.

Here’s how you can go about calculating gross margin:

The difference between how much you sell a product for, and how much the business actually takes home at the end of the day is what truly determines your ability to keep the doors open.

10. Constantly Re-evaluate Your Methods

When you first start out you may opt to use a simple spreadsheet to manage your books but as you grow you’ll want to consider more advanced methods like Quickbooks. As you keep growing, it’s good to continually reassess the amount of time you’re spending on your books, and how much that time is costing your business. The right bookkeeping solution means you can invest more time in the business with bookkeeping no longer on your plate and potentially save the business money. Win-win!

MoneyThumb Helps Small Online Businesses

Starting a business can be an overwhelming process, but if you follow this list, you’ll have your new online business finances in order from the beginning. From opening the right type of bank account to determining how much you’ll bring in per product, these tasks will all contribute to your business’s success, now and as it grows. By using our financial file converters as part of your small online business strategy and implementing the ten steps above that MoneyThumb has offered, your success is virtually guaranteed!

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Addressing the Challenges of Accounting for E-Commerce Clients

E-commerce has eliminated so many barriers and connected consumers and companies worldwide. But as traditional boundaries between towns, states and countries have disappeared- and as e-businesses have created new revenue models that involve service-by-subscription-new challenges have arisen for accountants and bookkeepers.

Here's a look at the two of the most prominent such challenges accountants face when dealing with e-commerce clients finances:

Collecting Sales Tax

This is by far the biggest issue facing e-commerce merchants and their accountants and bookkeepers. For a traditional brick-and-mortar business, there are clear jurisdictions for sales-tax liability that are defined by its physical location: city, county, state, federal. As e-commerce expands a business' reach, though, it also expands potential sales-tax exposure to an almost overwhelming degree.

As they confront the issue of e-commerce and sales-tax liability, state and federal courts have struggled to define what it means for a company to have a nexus, or a "sufficient physical presence," in a given state for sales tax to apply. Some states have redrawn the parameters to describe an "economic nexus," which basically argues that any company achieving a certain level of online sales in a given state should have to pay sales taxes, even if the company has no physical presence in that state.

The situation is very fluid. For example, Amazon recently announced "it will start collecting sales taxes on purchases in the last four states where it wasn't doing so," according to CNN. Meanwhile, a new state law in South Dakota aims to try to get the U.S. Supreme Court to settle the issue at a federal level, declaring that "it is necessary for [South Dakota] to pass this law clarifying its immediate intent to require collection of sales taxes by remote sellers, and permitting the most expeditious possible review of the constitutionality of this law."

Accounting for Subscription Services

E-commerce has also sparked a rise in the number of businesses that offer services by subscription. But there are potential pitfalls for companies that don't understand the regulations regarding subscription revenue.

For example, suppose you start a business assisting those who wanted to increase their presence on social media and gain more followers. If you collect the subscription fee at the beginning of the month, that money doesn't legally belong to you until the service has been rendered — in other words, at the end of the month. Your accounting needs to reflect this. And if you sell one-year subscriptions, you have to wait 12 months to apply that revenue.

Stay in Compliance

Given the complexities of the regulations governing e-commerce, and the potential penalties for noncompliance, it is imperative for any company that does business over the Internet to have capable bookkeeping and back-office support. Make sure you're covered.

To help you as an accountant, bookkeeper, or small business owner handling e-commerce accounting, MoneyThumb invites you to download this FREE special report from Thomas Reuters, The Tricky Intersection of E-Commerce and State Corporate Income Taxes. This special report addresses some of the many corporate income tax issues that “pure e-commerce transactions” raise.

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Are you thinking of starting your own company? If so then you need to make sure you have your finances in order before hanging up your Open sign. The following small business accounting checklist is a great guideline to make sure you’re ready for your Grand Opening.

Open business accounts.

Co-mingling your business and personal finances is dangerous, and it can lead to problems down the road. While it might seem like a hassle to keep a separate checking and savings account for your business and your personal life, you’ll be glad you took the time to set this up when orders start rolling in.

Create your forms.

Receipts, invoices, and everything in between is how you’ll communicate with your customers about money issues. Make sure these documents are professional and in proper legal standing before the first orders start coming in.

Find a good tax consultant and/or accountant.

Depending on your business plan, you may only need one of these professionals, but you want to find the right one before you need him or her. Waiting until you’re over your head with tax documents and bank forms is not a good time to start interviewing candidates.

Select your business structure.

Most small businesses begin as sole proprietorships, using the social security number of the owner to identify itself. Once your business grows and requires employees, you might want to incorporate and at that point you will need an EIN. This section of the IRS site may be helpful to determine the best structure for your business.

Set up your accounting software.

A lot of programs will guide you through the process of setting up data forms and spreadsheets. They can also produce the forms you need to conduct business on a professional basis (see item #2). Becoming familiar with your accounting program while you’re still getting set up for business is a much better option than waiting until you’re about to be audited or your tax preparer is asking for your documents. By getting things set up now, you’ll be able to start your first day of business with a system in place to track every order and account for every penny of income.

Establish accounts with vendors.

Depending on the supplier, it may take a few minutes or even a few weeks to get these accounts set up. Start now so that you’ll have materials ready to go. Also remember to set up business accounts for your utilities and other recurring expenses. Set these up under your business name, not your personal name, so that your accounts are not co-mingled.

Use your business plan to develop goals.

Based on your business plan, create a set of goals, or benchmarks, for your new business. Knowing how much you need to make in sales each month will give you more than just motivation; it will also allow you to judge your success.

MoneyThumb saves you time with financial file converters that automate your small business and personal finance file conversion tasks. Convert scanned and image based .pdf bank statements straight into QuickBooks with pro products like 2qbo Convert Pro+ and pdf2qbo Convert+, or choose among our wide range of other converters designed especially for the small business or personal accounting application that you use.

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