Corporate finance

How you manage your business finances can make or break your business.
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Manage business finances FAQs

Keeping your books straight is often not the "fun" part of doing business, but it is one of my most important parts of running your own business. Managing your business finances well will help you avoid tax issues, monitor sales trends, stay on budget, and more.

Is accounting software expensive? What about online bookkeeping services?

Accounting software or online accounting software used to be expensive. Now, most accounting software companies offer low priced subscription options. You can find simple online versions for as low as $10 per month. Using basic accounting software, you can make invoices, receipts and estimates, as well as track sales, expenses and sales tax.

Online bookkeeping services are becoming increasingly popular and cost much less than hiring your own full-time bookkeeper ($100+ per month). Most online bookkeeping services will work with the accounting software of your choice and may offer additional services such as payroll, bill paying, tax assistance, reconciliations and more.

Do I need to hire an accountant or CPA?

Many small business owners can manage their own business finances. But you may reach a point when you either cannot or choose to seek help with managing your business finances. Even those who manage their business throughout the year, hire an accountant or CPA to manage their taxes.

You may choose to get help managing your business finances if you are,

  • Missing payments or need help collecting payments
  • Facing an audit
  • Preparing to seek financing or capital investment
  • Experiencing rapid growth
  • Paying employment and/or quarterly taxes
  • Buying or selling your business

Whether you hire an accountant or CPA is up to you. An accountant is someone who performs accounting duties, who may or may not have a degree. A CPA usually has a formal education, is licensed and complies with continuing state education requirements. As you'd expect, CPAs cost more than an accountant in most cases.

The complexity of your business financial needs will dictate whether you need to hire an accountant or a CPA. Even if your business is simple, you may benefit from having an accountant set up your books and help you navigate tax laws that may affect your business.

Do I need an Employer Identification Number (EIN)?

An EIN is your business's tax identification number, similar to an individual's Social Security number. Not all businesses need to apply for an EIN.

If you fit any of the following situations, you DO need to request an EIN:

  • You have employees
  • Your business is a corporation or partnership
  • You file these types of taxes: employment, excise, or Alcohol, tobacco and firearms
  • You withhold taxes for a non-resident alien
  • You have a Keogh plan

Or, you are involved with:

  • Trusts (non-exempt types)
  • Estates
  • Mortgage investment conduits
  • Non-profits
  • Farmers' cooperatives
  • Plan administrators

You can apply for an EIN online, by fax or by mail. Online applicants can often receive their number instantly. Fax applicants process within four business days and mail applicants within four weeks. International applicants can apply by telephone.

What is a merchant cash advance?

A merchant cash advance is a type of loan that provides businesses a loan in return for a portion of future credit and debit card sales or agreed upon scheduled payments. Merchant loans can be costly and often much more expensive than a standard bank loan. If you feel your options are limited and you need capital to grow your business, you may be wondering if this is a good choice for your business. Because these loans can be quite expensive, you should explore other options first. In addition, you should carefully evaluate your ability to pay back the loan based on past sales, not optimistically projected futures. It would be beneficial to consult with your accountant before taking on this type of loan.

My small business is being audited, do I need a lawyer?

In most situations, you do not need a tax lawyer to help you with an audit. Keep in mind that many audits are chosen randomly, and you may not have a problem with the IRS at all. Hopefully, you've kept meticulous, organized records and you'll likely manage the audit with no problems. The first thing to do is to find all records that justify everything included in your business return. Gather copies of your,

  • Electronic transactions records
  • Bank statements, canceled checks and receipts
  • Accounting ledgers and journals, if you have them
  • Business calendar and appointment books
  • Records for partially claimed items such as mobile phones and your personal vehicle
  • Travel and expense records, if any

The better organized you are, the better off you'll be and the faster the audit will go. If the audit brings up legitimate issues and you need to appeal your audit, you may want to hire a tax lawyer or CPA to help you navigate the appeal.