If you are a small business, listen up! The Small Business Administration (SBA) has some great news for businesses that are still struggling through the pandemic. In December 2020, Congress voted to allocate an additional $284 billion to the Paycheck Protection Program (PPP). The PPP is a forgivable loan program established by the CARES Act. The SBA and the Treasury Department have reopened the PPP loan portal, so small business owners, like you, will be able to apply for extra aid. You’ll have to act fast, though, because the deadline for new loan applications is March 31, 2021. Learn more.
My business books are a mess! Help!
It can affect my Loan Forgiveness under the CARES Act
By Andrea MacDonald, CPA
If today’s business struggles with COVID-19 have taught us anything, it has shown the importance of keeping your business books up-to-date and accurate. They need to be in order to apply for loan forgiveness under the CARES act.
When someone asks you what your favorite part about owning or running a business is, you probably don’t say bookkeeping. However, bookkeeping is essential for keeping accurate financial records of your business and analyzing your success. While bookkeeping may seem like a daunting task, it is crucial for preventing headaches and frustrations down the road, including applying for loans.
Keeping accurate and up-to-date books is essential to keeping other areas of your business functioning. Some of the most common areas bookkeeping impacts include:
Every year you file taxes for the business as well as yourself. Overestimating your profits when filing taxes needlessly increases your taxes owed, while underestimating them can lead to an audit and fines. Even miscategorizing assets and expenses can lead to paying more in taxes than you need to. Rather than scrambling for receipts, invoices, and other financial information from the past year, proper bookkeeping keeps all of this information neatly organized in one central location with documents needed to complete your taxes.
It should be no surprise that payroll is affected by bookkeeping accuracy. You may be over- or under-compensating employees on their paychecks or with benefits, and not even know it! An error that carries over to an employee’s W-2 from your own records can cause tax problems for them and your business!
Loan or Financing Approval
Well maintained books make it easier for business owners to receive outside financing, such as a Business Loan. They are often the most important records required by loan providers and investors. Let’s face it, when you are in the midst of a critical cash flow problem requiring assistance, you do not want to slow down receiving help because you have to gather all of your financial data.
Filing taxes late or having exemptions, expenses, or deductions that don’t add up raises red flags for the IRS. Even with proper documentation and accurate deductions, the tax process can be time-consuming. With an audit added on top of that and no clear business booking to back it up, you are opening the door for a painful process with multiple irregularities and penalties to arise.
Similar to the payroll issue, messy business books can lead to issues with your overall business plan and budget. You may think you are sticking to your budget or even under budget, when in fact you are not properly tracking various expenses your business is incurring. Or worse, you may be accounting for payments from clients you have not received making your earnings smaller than you accounted for.
Payment Cycles and Accounts Receivables
Without accurate records, you won’t be able to keep straight who owes you what. Making the process to organize and send invoices much longer. And the longer it takes you to invoice outstanding accounts and get paid, the longer you’ll go without those funds. Ensuring you are being properly compensated in a timely fashion is one of the best things you can do to prevent a cash flow crunch from threatening a viable business.
If you’re only updating your books a few times a year, you’re potentially missing out on crucial insights that can help you achieve business success. Without accurate bookkeeping, you’re often forced to be reactive, as you’ll only become aware of problems when they become too obvious to miss. Established bookkeeping allows you to be proactive.
Now before you begin to go into full-on panic mode thinking about areas your business might be taking a hit, we are here to help. To avoid things like tax issues, payroll oversights, missing client payments, loan denial, IRS audits, and more, start cleaning up your bookkeeping today. You can certainly clean up your books by yourself, however, the benefits of using a professional may be worth the headache prevention and time you will gain back. Because as we all know, time is money.
Hiring professionals will not only free up large chunks of your time and alleviate stress, but they can also save you money. Bookkeepers and Certified Public Accountants are trained and qualified to record financial transactions, categorize financial data, and reconcile accounts. Ultimately, hiring a professional can ensure your books are accurate in an efficient manner.
Don’t miss the opportunity for loan forgiveness through the CARES Act or let your business fail because of poor bookkeeping. Take the first step to cleaning your messy books, whether that means working with a consultant or tackling the project on your own time. Either way, don’t wait. You, your clients, and your employees will all thank you in the long run.
If reading this has created more questions, contact our office. Call (757) 420-1539
Andrea MacDonald, CPA is the owner of Pro Tax & Accounting in Chesapeake, Virginia. For nearly two decades, she has been working with businesses on their bookkeeping, accounting and taxes. She also works with individuals and families on their tax returns. Andrea is a Certified Public Accountant (CPA) and a qualified bookkeeper and tax professional. She is well-versed in tax law, which makes her an invaluable resource for any business.
At Pro Tax & Accounting, we keep you from breaking the bank!
Pro Tax & Accounting is your go-to resource for businesses bookkeeping, accounting services, payroll, QuickBooks Consulting and tax services. President and owner, Andrea MacDonald, CPA, is a Certified Public Accountant. Andrea and her team have the education, knowledge and experience and work with businesses throughout the Hampton Roads Virginia cities of Chesapeake, Norfolk, Virginia Beach, Suffolk, Newport News and Hampton, north into Williamsburg and throughout the mid-Atlantic region. And thanks to technology, Pro Tax & Accounting can work with clients anywhere in the world!
Call today and free up the time you need to run your business, and leave the bookkeeping and accounting up to the experts!
Call Pro Tax & Accounting for your
Bookkeeping & Accounting Services. (757) 420-1539