Small businesses are making the leap into digitalization to respond to evolving consumer behavior and expectations, adapting to new working norms, putting data to work to drive performance and building business resiliency.
There are a lot of things people don’t tell you about being a small business owner before you get started. Between serving customers, managing employees, keeping your books up to date, and struggling to build the reputation of your brand, it’s a constant process of learning on the job.
Also, you probably didn’t realize that opening your own business would require you to become an accountant by default. Accounting is essential for every business, and you get thrown into the deep end when you start a new company.
Without training in this field, accounting terms can feel like a foreign language. While we can’t provide an entire accounting education in this article, we can address one common issue – how to tell debit vs credit accounting transactions. If you have been struggling with how to understand credit vs debit in accounting, the content below should put you on the right track.
Let’s make this very clear – for the non-accountant, debits and credits can be confusing. If you can’t seem to get your mind around this topic, don’t worry – you are far from alone. We’ll try to break it down as simply as possible to give you a basic understanding of what’s going on here.
Before we talk debits and credits, let’s quickly talk about the underlying accounting system in question – double-entry accounting. This method is used nearly universally, and it requires that each transaction will involve two accounts (thus the double-entry name). So, whether money is coming or going, each transaction is going to be marked by two entries in the ledger that balance each other out. We’ll offer an example later in this article to help clarify this concept.
So, back to debits and credits. Your double-entry accounting system is organized into a variety of accounts. In your accounting system, you can see the accounts you have established in your “Chart of Accounts”. When money is going into one of those accounts, that’s known as a debit. If money is going out of an account, that’s a credit. On the most basic level, that’s what you need to remember – debits are adding to accounts and credits are taking away from those accounts.
Let’s walk through a quick example to help you fully understand how debits and credits work in practical application. For this example, we are going to assume that you have decided to purchase $2,000 worth of inventory for your business. This purchase is going to be made with cash out of the business account.
When you make that purchase, two entries will be required – one debit and one credit. The debit is going to be placed in the inventory account because it is being increased (you have added to your inventory). So, a debit of $2,000 is applied to the inventory account.
The complementary entry is a credit of $2,000 to the cash account. This subtracts from your cash account the amount of money that has been spent. So, after both entries have been made, you are left with an accurate picture of what this transaction meant for your business – you own $2,000 more inventory, and you have $2,000 less cash in your account.
You’ll need to reverse your thinking when it comes to liability accounts. The liability accounts your business uses will depend on how you operate, but one common example for small businesses is accounts payable. This is a liability because balances in this account represent money that you owe to your suppliers and other vendors.
A debit applied to a liability account is going to have the opposite effect as a debit applied to an asset account. So, the $2,000 debit we applied to inventory in the example above increased the value of the inventory account, since that account is an asset. However, if a $2,000 debit were applied to accounts payable, the balance of that account would decrease, since it lives on the liability side of the ledger.
It’s a good idea to add to your accounting knowledge as a business owner, so dealing with topics like what is debit vs credit in accounting is a worthwhile endeavor. With that said, you don’t want to be spending your time in the back office, buried in the books. Instead, you should be out front, helping your business grow by offering valuable products and services to your customers.
How can you make that vision a reality? Turn to xendoo. Our accounting and bookkeeping services will streamline your operations without breaking the bank. With xendoo on your side, you won’t need to turn yourself into an accounting wizard – just hand the books over to us and rest assured that they will be done correctly month after month. Let’s get started!
Editor’s Note: This post was originally published in November 2019 and has been revamped and updated for accuracy and comprehensiveness.
As the owner of a new real estate business, you’re probably aware of the unique characteristics of your industry. You take a personal interest in the real estate market, and you are excited to do great work for your clients, whether buying or selling pieces of property.
But here’s the thing—running a real estate business is about more than making great deals. Accounting plays a major role in staying organized, managing taxes, and making smart decisions in any business.
Setting up your real estate accounting system the right way will enable you to minimize the labor and stress involved in large-value transactions, extreme income fluctuations, employee pay formulas, and government regulations.
These tips are for you if your business is:
Another reason to keep accurate financial records is that you will probably have to show them to interested parties at some point. These entities include:
There are many motivations to keep accurate books. And, contrary to popular belief, doing so does not have to be a major headache or hassle. With a service like xendoo, you can outsource your bookkeeping and tax work to focus on what you do best. For more information, check out this post on how to choose the right software to simplify your real estate accounting.
Did you know that it is not just real estate transactions that local and state commissions oversee? These bodies also oversee the financial management of a real estate business, so playing by the rules is essential. Therefore, it’s a good idea to familiarize yourself with their requirements before making any decisions about your bookkeeping system. If the language is unclear, consult a professional accountant who specializes in real estate. It’s far better to spend extra time setting up your accounting procedures properly at the start than trying to untangle a mess when you run into trouble later on.
For real estate professionals, the most viable options are:
Hiring an accountant to work in-house is undoubtedly a powerful approach, but it will be costly and likely beyond the scope of many real estate businesses. On the other end of the spectrum, acquiring accounting software to manage the books yourself or amongst your team might be difficult if no one has proper accounting training or the time to dedicate to ensure your books are up to date. Even minor accounting mistakes can add up to bigger ones down the road.
It’s the middle ground – outsourcing accounting tasks to a third party like xendoo – that will make the most sense for many real estate agents and brokers. This option keeps the costs down while still freeing up your time and utilizing experts to make sure the work is done properly.
You have two choices: cash basis or accrual. Once you make a choice, you must stick with it, unless you submit a change request to the IRS. (Your first tax return shows the IRS which one you chose in the beginning — you don’t have to submit any forms for that.)
Cash basis accounting is often preferred by small businesses because it’s easier to maintain, and it tells you how much money you actually have in the bank on any given day. Accrual accounting is usually the choice of larger companies because it portrays a more accurate portrait of your real estate business’s financial performance. Accrual accounting also allows you to better your long-term plan, which is helpful if you are thinking about expanding your business.
This complete index of your company’s transactions is essential for knowing how you stand. It will save you many hours of work when you need to measure performance, generate a report, locate past transactions, or prepare tax returns.
The chart of accounts is organized into categories for easy sorting and retrieval. These categories can be anything you need. Under Assets, they might include Cash, Accounts Receivable, and Vehicles. Under Liabilities, you might have sub-accounts such as Accounts Payable, Loans, and Payroll.
Don’t fall into the bad habit of pulling out your business credit card or checkbook to pay personal expenses — or vice versa. Without fail, it will cause more problems than it solves, including inaccurate books, tax mistakes, and cash flow issues.
Real estate accounting shouldn’t be complicated, and this is one of the golden rules that can keep things simple—don’t make personal purchases with business accounts. Opening a separate bank account and a credit card strictly for your business will also make you look more professional to your customers, creditors, and investors.
Collecting payments that are owed is one of the biggest headaches for small businesses. Prevent delayed and missed payments with an automated invoicing system that:
With an automated system in place, you’ll save time and avoid missing out on revenue that slipped through the cracks when you were too busy to track it down.
Reconciling your bank account means checking that the transactions listed on the bank statement match what you have in your books. This process will identify any discrepancies so you can figure out why they happened and make a plan for avoiding those issues in the future.
Usually, it’s something simple like a financial transaction that’s recorded in your books, but the bank hasn’t processed it yet. However, it could be a more severe problem such as data entry error, misunderstandings of using the bookkeeping system, or even theft.
Your business may pay one or more of these types of compensation:
Ideally, you’ll have payroll software that can calculate them all, as well as track them for income tax withholding. Fees to independent contractors may be handled separately by accounts payable since these workers are not, by definition, your employees.
It’s not only the fees that you have to be aware of but also the proper paperwork for each type of employee. You’ll need to learn which tax forms to collect from employees (W-2) and contractors (1099) and how to report their income to the IRS.
At xendoo, we can also help with payroll processing as an add-on service to our real estate accounting. You won’t have to worry about issuing and filing your W-2s or1099s, which means one less thing keeping you from focusing on your business.
If all this seems overwhelming, consider outsourcing to financial professionals. xendoo specializes in small business accounting. We’ll relieve you of all that work and worry with services that range from real-time bookkeeping to timely financial reports to preparing your tax return.
See for yourself with a one-month free trial.
Editor’s Note: This post was originally published in September 2019 and has been revamped and updated for accuracy and comprehensiveness.
As a busy restaurateur, it’s easy to push restaurant bookkeeping tasks to the bottom of your priority list. After all, you have better things to do – right?
Not so fast. Restaurant bookkeeping is an essential function for businesses large and small, as accurate, reliable numbers are essential for sound decision making. Also, there is the whole matter of taxes to consider. Safe to say, it’s better to get things right the first time with bookkeeping, instead of paying for your mistakes later on.
To help get your restaurant accounting processes on the right track, we have assembled the following five tips.
It’s dangerously easy to fall behind on recording your sales. In fact, one of the reasons that bookkeeping for restaurants is often a mess is simply because owners and managers fall behind on basic tasks.
To stay up to date, make a habit of copying or importing the sales from your POS system into your accounting software each day. What you’re aiming for are books that correlate with your bank statements. If you save up all those credit card charges for a weekly or monthly deposit, you’ll have a hard time doing analysis later.
Ideally, your accounting software and POS system are integrated so that this is done automatically. At xendoo, we integrate your bank transactions with your books, so data entry is always up to the minute. Automating this process not only saves you the time of doing the work manually but also greatly improves accuracy.
Yes, your bank statements should be reconciled every month. No, it’s not a good idea to let them sit around for 3, 4, 5, or more months. If you’ve forgotten to enter a payment or a sale in your books, but that payment or sale has been processed by your bank, it will be easier to correct the error if you catch it quickly. In an extreme case, not knowing how much you really have in the bank could lead to bounced checks.
For every account that you receive a monthly statement — bank, credit cards, lines of credit, and loans — compare what their statement says with what your books say. If there are discrepancies, track down what happened and fix it. Of course, if you outsource bookkeeping to a service like xendoo, you can keep up with this task while keeping your personal schedule open for other responsibilities.
Vendors love customers who pay on time – or even early. Doing so will get you better deals and early payment discounts. On the flip side, being late will rack up interest charges. Staying on top of your bills, along with managing labor costs properly, are keys to keeping your financial house in order.
To make sure this happens, you should have a reliable Accounts Payable process in place. Your A/P system will record invoices, pay bills online with a credit card or digitally generated checks, and automatically enter the expenses in your books. Record new invoices once or twice a week and make payments once per week to stay current.
Anyone can quickly glance at the bottom line of a financial report—but those numbers only tell a portion of the story. It’s the details that you need to understand, and those can be gathered if you take the time to read through your restaurant bookkeeping reports carefully.
Your profit & loss statements and balance sheets can reveal crucial statistics for a restaurant business such as:
Profit margins are notoriously tight in the restaurant industry. Having current information about your financial health is just as important as creating tasty food or offering great service. That’s why xendoo guarantees delivery of your P&L statement by the 5th business day of every month.
It’s worthwhile to track down as many tax tips for restaurants as you can find since taxes make up such a notable expense every month. One of the best ways to stay on top of taxes and avoid paying more than is necessary is to keep detailed, accurate records of everything that takes place in your business.
Payroll processing can be quite time-consuming, especially given the complex shift scheduling of most restaurants. It also comes with high penalties if you make mistakes in calculating payroll taxes, or don’t file the taxes on time.
Payroll services are generally affordable, and can often be bundled with other accounting services. xendoo offers packages that include payroll processing for a budget-friendly flat monthly fee.
Documentation is the name of the game in accounting, yet many restaurants – and businesses in other industries – fall short when doing their own bookkeeping. Working with xendoo is a big step in the right direction when it comes to documentation and record keeping. And, of course, xendoo can manage your tax filing as well, so there is nothing lost in translation when going from one service to the next. As an all-in-one bookkeeping and tax filing solution for your restaurant, tax season will no longer feel like the nightmare it once was
Editor’s Note: This post was originally published in June 2018 and has been revamped and updated for accuracy and comprehensiveness.
Let’s face it, bookkeeping for a business in the real estate industry is complicated. That holds true whether your niche is sales, management, construction, or tax and legal services. Unlike some other types of business, you must deal with variables like fluctuating income, expenses, payroll, and property values, not to mention a heavy load of government regulations.
All these factors must be accounted for completely and accurately to control profit margins, satisfy clients, and be prepared for tax filing. It’s a big hassle if you’re doing it the old-fashioned way, creating custom spreadsheets and writing down transactions in a ledger. However, the right real estate accounting software will do many accounting tasks for you automatically, leaving you free to focus on your core business.
Processing payroll is a core function for any business. Using accounting software that takes some of the hassles out of completing payroll each period can save you time and keep your records accurate year after year.
Your business may have one or more of these types of workers:
• Commission
• Salary plus commission
• Salary
• Independent subcontractors
As it relates to real estate accounting specifically, choose software with a payroll feature capable of calculating commissions and tracking those amounts for income tax withholding. Similarly, you should categorize payments made to independent contractors, as those are typically not subject to withholding.
Whether your people are out on a building site or showing homes to prospective buyers, a cloud-based management app will give them access to the office. At the same time, the office is tracking their activities. Info on everything from materials used to schedule changes can be updated and shared with everyone in real-time.
A system that integrates all departments saves time and money for workers and managers. It also means that data from the field is incorporated into the books automatically, eliminating duplicated effort and potential errors for the accountant. The inherent challenge with real estate accounting is the many moving parts involved—everything doesn’t happen in the same place. Leveraging technology to automatically collect all of this information and incorporate it into a bookkeeping system is sure to lead to better results.
The topic of taxes will come up again and again in the search for the right real estate accounting software—and for a good reason. Taxes aren’t only necessary because they are a legal requirement but also because they can represent such a significant expense. If your real estate business holds properties, for example, the property taxes alone can take a big chunk out of your bottom line.
You can’t get away from paying taxes, of course, but you can use good accounting software and a tax filing service like xendoo to make sure you don’t pay more than your share.
One of the best real estate accounting tips you can receive is to enter all of your transactions each day. Suppose you wait until a week before your tax return is due to get your books updated. In that case, you’ll be facing a major headache and the likelihood that there will be errors beyond tax filing. Keeping your figures up to date will also reveal when and where you’re losing money. This makes it easier to make sound decisions and avoid spending too much time on a losing endeavor.
Consider accounting software that integrates with your bank, recording every transaction automatically and saving you a great deal of time and paperwork. Plus, you’ll be ready for an audit any day of the year. Many real estate professionals – and professionals in other industries – feel like they are constantly behind on accounting. The key to getting ahead of the game is not to spend more of your precious time on the task but rather to streamline it using the right real estate accounting software.
Using cloud-based software allows you to see your financial reports or share data with your accountant anytime, anywhere. And with no need for in-house servers to store your data, you’ll mitigate the risk of losing your data and bring down IT expenses as well. If you are currently storing all of the financial data for your business on a single computer in your office, you are playing with fire in terms of data loss risk. Turning to the cloud leaves you with off-site storage that is backed up and secure.
Most real estate businesses won’t need to take their accounting software search beyond two of the market leaders—Xero and QuickBooks Online. Each of these options includes all of the features you are likely to need to keep the financial side of your business in order. And, as an added bonus when working with xendoo, we can provide you with a discount on either one of these two excellent accounting platforms.
xendoo believes that cloud-based accounting is the right choice for any real estate business looking to increase growth while reducing inefficiencies. By automating bookkeeping chores, we eliminate the hassles, the mistakes, and more than half the costs of traditional accounting. Our real estate accounting service will leave your business ready at every moment to meet challenges and seize opportunities for success.
Ready to start selling your products online? Or have you already built a web presence and you’re looking to expand? From marketplaces like Etsy to building and hosting your own website on Squarespace or Shopify, small businesses have plenty of platforms to sell their products online. But eventually, most professional sellers find themselves asking: What are the pros and cons of Amazon vs. eBay?
By the sheer number of visitors, selling on Amazon is the winner here: 214.8 million people visit Amazon each month, compared to 106.9 million for eBay. However, both of these numbers represent huge potential audiences, so to really make the right choice about selling on Amazon vs. eBay, you’ll want to break it down.
eBay’s audience is more international than Amazon: 57% of its revenue comes from international operations. Amazon doesn’t release these figures, but analysts estimate about 33% of its sales are international. eBay is also known for having “niche” customers searching for specialized products and second-hand goods. The real winner here depends on what you sell and who you sell it to.
Amazon is much more competitive than eBay. Amazon rewards sellers with the highest-quality items at the lowest price. There are far more sellers on Amazon, and you may be competing with factory-direct prices from China or even with Amazon itself.
On the other hand, eBay follows an auction format that will show shoppers many different options, conditions from new to used and shipping options, allowing sellers more opportunities to reach them. eBay advertising is also less competitive and therefore cheaper.
Winner: Amazon.
When sellers opt for fulfillment by Amazon FBA, they’re able to use the retail giant’s warehouses, shipping, and customer service – for a fee, of course. They’re also eligible for Amazon Prime and the benefits that come along with it. Just remember that you may have to pay sales tax in those states if you use Amazon’s warehouses. Make sure you follow eCommerce bookkeeping tips to keep your records in order.
While domestic sellers are responsible for their own packing and shipping on eBay, the company does offer its Global Shipping Program. This allows sellers to use its “hubs” to ship internationally, with eBay taking care of the customs forms and import fees and providing tracking. This is another reason eBay is so popular with international sellers.
Overall, most sellers find that eBay’s fees are lower. But this doesn’t tell the whole story. Both platforms’ fees depend on what’s being sold, the type of account you have, and more. On Amazon, you’ll likely want a Professional Seller account, which will run you $39.99 per month. You’ll also pay a 15% commission on Amazon, plus a closing fee. If you go with Amazon FBA, you’ll pay those fees as well.
On eBay, you’ll pay about $0.35 for each listing you create. With a $28-per-month Basic Store account, you’ll get 250 free listings. Once your item sells, eBay takes only a 10% commission. However, this doesn’t include payment processing, while Amazon does. You’ll also then need to figure out the shipping yourself.
Once again, the answer to the age-old question of selling on Amazon vs. eBay depends on your sales volume and type of product. Here’s one point for eBay, however: One survey found that eBay was ranked number one by sellers in terms of ease of use, customer service, and profitability – while Amazon came in seventh.
You can even decide to settle the Amazon vs. eBay debate by selling on both platforms. No matter what you choose – and especially if you decide to sell on both – you’ll need expert eCommerce online bookkeeping to keep your books in order and ensure you keep up with sales tax laws. At xendoo, we work with eCommerce sellers on both platforms to manage bookkeeping and accounting, so they can focus on what’s important: selling!
In recent years, we’ve seen a reopening of the debate over minimum wage. Advocates are currently pushing for an increase to $15.00 per hour by 2026, with the door open to possible increases in the years after that. If you’re a worker, this is good news. A slight bump in the Florida minimum wage can increase the pay you receive, compensating for rising costs of living and other expenses. However, if you’re a small business owner, this wage increase can lead to tough decisions. Unless you’re a corporate giant, it can be tough to maintain your current roster of employees if you have to pay them more.
In this post, we’ll help you to prepare for the coming changes in the Florida minimum wage. We’ll also provide suggestions about the best ways to navigate the road ahead.
As of January 1, 2021, Florida’s minimum wage has increased from $8.56 per hour to $8.65 per hour. Tipped employees have seen a recent increase in their wages, rising from $5.54 per hour to $5.63 per hour.
According to federal law and in some states, like Florida, employers may pay tipped workers less than the mandated minimum wage. This is called a “tip credit” as employees earn enough in tips to make up the difference. The “credit” is the amount the employer doesn’t have to pay. So for employers, the applicable state or federal minimum wage minus the tip credit is the least amount the employer pays tipped employees per hour. If an employee doesn’t make enough tips during their shifts to earn the hourly minimum wage, the employer has to pay the difference.
These changes will not stop in 2021. In November of 2020, Florida residents voted to raise the Florida minimum wage to $15.00 by 2026. The minimum wage increases will take place in a phased approach, raising the minimum wage each year on September 30. The proposed schedule will run as follows:
While there are no specific plans after 2026, the minimum wage increase may increase based on changes to the federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region.
If you’re a business owner, don’t panic. At xendoo, we understand the unique challenges facing today’s small business owners.
Here are some suggestions on ways that your business can prepare for changes in the Florida minimum wage:
How much are you already spending on overhead, supplies, and operating costs? You may be able to cut a few corners with certain expenses or by eliminating wasted spending. The money you save can be channeled into your human resources budget.
Using these increased wage figures, calculate your new operating budget. Forecasting your operating expenses will let you know what you’re dealing with and provide an idea of what your income needs to be to maintain your profit margin.
A tech stack refers to the digital tools you need to run your business. An update can help you to automate your social media presence, streamline scheduling, or integrate automated forms into your company’s website. These improvements optimize your business without the need for additional personnel or work hours.
How many full-time employees do you need? How many part-time employees do you need? Of course, you don’t need to start considering downsizing, but at the same time, it can be helpful to consider what your future needs may be.
You may find that in the future, you can get by with fewer staff members. Perhaps you can rely on part-time staff to fill roles that you currently staff with full-time employees.
Your new operating costs will probably push you to increase your prices to maintain your profit margin. However, raising prices slowly will give your loyal customers time to adjust while still ensuring you get the revenue you need.
Are you still handling your own bookkeeping and accounting? Paying an employee to handle these specialized tasks may put a strain on your operating budget. Instead, outsource these tasks to a company like xendoo. We can keep your company up and running without allocating your employees to do the job.
The increase in the Florida minimum wage might mean big changes for your business. At xendoo, we can help you stay ahead of the curve, adapt to these changes, and remain healthy and profitable.
We understand the challenges that Florida small businesses face. We can provide small business owners with Florida bookkeeping services that ensure accuracy and efficiency so that you don’t have to allocate precious resources to maintaining the books.
We can also help you with your Florida tax preparation, helping you to navigate the laws and changes that are likely to come your way in the immediate future.
Becoming a third-party seller on Amazon is an exciting opportunity for many small businesses. After evaluating the pros and cons of selling on Amazon, you may decide to go with an Amazon FBA (Fulfilled by Amazon) account. You’ll pay a fee to use Amazon’s warehouses, packaging and shipping, and customer service. One thing that isn’t included? Accounting for Amazon sellers.
Amazon FBA offers plenty of benefits for small businesses, including eligibility for Amazon Prime and saving you time that could be better spent on management and growing your business. But there are a few extra considerations when it comes to Amazon FBA accounting:
Effective accounting for Amazon sellers doesn’t have to be difficult. You can use accounting software or leave it to the professionals. Let’s go over the DIY steps so you can decide which choice is right for you.
You may be an Excel genius, but you need to ditch the spreadsheets if you want to do your Amazon accounting right. The best online accounting software is easy to use and secure, integrates with your bank account and other business and financial software, has good customer service and as a bonus, works with Amazon Seller Central. With software like Xero and QuickBooks Online, you can start small and increase your subscription as your sales grow, so you don’t break the bank.
The right accounting software goes a long way, but there may still be gaps you need to fill in. For example, breaking down those consolidated deposits is a notoriously tricky part of accounting for Amazon sellers. However, an add-on like A2X hooks up to Seller Central and automatically categorizes all the fees and reimbursements. There are also automation solutions like Avalara and TaxJar, which manage your sales tax returns and payments.
Photo by Karolina Grabowska from Pexels
It’s tempting for small business owners to check their bank account, see that big Amazon FBA deposit and assume their company is growing. But thorough Amazon FBA accounting means keeping track of the following:
Reconciliation is the process of comparing two different sources, such as internal financial records and bank statements, to ensure they match up. If the software you use to keep track of your finances has the wrong information, those mistakes will compound over time. Double-entry accounting software, like those mentioned above, can help you with this. However, you’ll still want to run a reconciliation report at tax time to double-check your reporting.
Amazon FBA sellers use Amazon’s warehouses, packing, and shipping, so they may not even see their inventory. Amazon’s reports will tell you what you’ve sold, but it’s up to you to properly categorize your inventory and look for trends, so you know what to put on sale, what to keep on the shelves and how to deal with shrinkage. And don’t forget to use the matching method for the cost of goods sold: rather than recording a lump sum cost when you buy the inventory, do not record the COGS until the item is actually sold.
With warehouses in many states, cross-border trade, and varying sales tax laws, accounting for Amazon sellers can get complex. This is where sales tax compliance for Amazon FBA sellers comes in. Most FBA businesses sell “tangible goods,” which are taxable in nearly all states, with some exceptions for clothing or groceries. You’ll also need to consider whether you have “substantial nexus” in a state – and having inventory in an Amazon FBA warehouse may be enough.
If you’re feeling confused, we don’t blame you. Sales tax compliance alone can be tough to keep up with, and penalties and fees can kill a small business. Accurate, up-to-date recording is essential, as well as basic knowledge of financial statements. Of course, you could do it all yourself, but remember, time is money. xendoo is here to help, providing expert Amazon bookkeeping and accounting services and leaving you more time to focus on what matters: Growing your business.
Florida is among the most tax-friendly states in America and has seen huge growth, especially in their tech economy. If you have a small or midsize business in the state of Florida, you may be shielded from many typical forms of small business taxes. But how can you know which tax laws apply to your business? This post will cover some of the more common tax questions related to taxes for small businesses in Florida.
Florida business owners should be aware of the following:
Because so many businesses are exempt from Florida state income tax, many small business owners can benefit from having their business shielded from traditional tax liabilities. Below, we’ll go into greater detail regarding the rules for taxes for different types of business entities in the state of Florida.
In Florida, S Corporations are not treated as traditional corporations when it comes to taxes. Thus, S Corporations do not pay the state’s 5.5% corporate tax. S Corporations are also exempt from federal income tax.
How is this possible? With an S Corporation, the income earned by the business goes directly to the business owners. The owners are then expected to pay federal income tax based on the income they receive from their company. However, this income is not subject to Florida state tax.
An LLC can be classified in one of two ways. Typically, LLCs are designated to be partnerships or disregarded entities. However, in this case, the LLC does not pay Florida income tax simply because it is not classified as a corporation.
However, some LLCs can be classified as incorporated. If they are classified as an incorporated business, the LLC must pay the standard 5.5% Florida state income tax—or at least the 3.3% alternative minimum tax. LLCs classified as corporations will file Form F-1065 if one or more of its owners is a corporation.
The actual business owner does not have to pay tax to the state of Florida for the income they personally receive from the business, except in those cases in which the LLC is incorporated.
Business partnerships can be classified as general partnerships, limited partnerships (LPs), and limited liability partnerships (LLPs). Regardless of these specific designations, none of these partnerships are required to pay state income tax in Florida.
However, the partners of these businesses are required to pay federal income tax on the money they receive from these businesses, based on standard income tax rates. But because Florida does not tax ordinary income, business owners of partnerships are not required to pay Florida state income tax.
Florida treats a sole proprietorship like a partnership. The only difference is that the state looks at the distributed income to one proprietor instead of many partners. Thus, like partnerships, sole proprietorships are shielded from traditional state income tax.
This also means that the proprietor is expected to pay tax on any business income he or she receives, though only to the federal government. Since it is considered to be personal income, the individual does not pay state income taxes.
For most organizations, there are no required taxes for small businesses in Florida. However, if you own a business in Florida but earn money from another state, you are considered to have a nexus in those states. Therefore, in these situations, your business may be subject to the tax laws in those states.
Because different states have different state tax laws, this can be confusing. If you earn money in multiple states, it may be prudent to review nexus rules to see how they may impact your business.
Looking for Florida bookkeeping services? xendoo can help. We understand the rules regarding taxes for small businesses in Florida and help you keep your books up-to-date. We can even help with Florida tax preparation. When you have questions, contact the experts at xendoo.
Is getting people to pay their invoice balance a challenging part of running your own business? You are not alone. According to a report in Entrepreneur, on average, small businesses had $84,000 in unpaid invoices. Waiting weeks and sometimes months for the checks to arrive and managing cash flow in the meantime can be daunting, to say the least. Since invoicing isn’t the most exciting aspect of your business, we want to share these tips for small business invoicing to help you get paid faster, increase client relations, and save time and money.
An invoice is a bill generated by a vendor that lists details and costs for goods and services provided. You’re likely already invoicing your clients, but don’t forget it is a legally binding contract. Making sure your small business invoicing system is up to snuff can save you headaches down the road.
Review your contract template and make sure you set expectations for invoicing. Likewise, make sure your invoice aligns with what is in the contract. Include payment schedule, estimated totals, and project milestones for payment.
As you strategize for creating, sending, and organizing your invoices, we recommend automating as much as possible. Your accounting software likely offers a way to do this. At xendoo, we use QuickBooks Online and Xero, which both have invoicing solutions and are known for being the best accounting software options.
If you’re considering an invoicing program separate from your accounting, ensure the two integrate and consider online payment processing. Clients love having the option to quickly pay online, so make sure your software can integrate with payments. The easiest method is the simplest—at xendoo we offer solutions with online bookkeeping services, accounting, invoicing, and integrated payment processing all in one.
Make your summary description brief while ensuring the client will understand how you arrived at the total. Do everything you can to make it easy for your client to pay you. Keep your invoice to one page.
An invoice should be sent promptly when the project has been completed. Your client will use the invoice as the first step in processing your payment and likely has internal steps to take before paying you. Therefore, the quicker you send the invoice, the quicker you get paid.
Consider including a “Pay Now!” button on digital invoices. Clients love the convenience of online payment and often take immediate action. And these online payments can sync with your accounting software and help you avoid the “checks in the mail” scenario. If you are issuing an international invoice, indicate which currency you accept.
Frustrations aside, you must send professional follow-ups when you haven’t received payment. Consider making a schedule for follow-up emails in advance and writing templates, customizing them for each client. This might make the process quicker and less frustrating.
Also, consider using read receipts. They are a great way to track when your communication was received and when to follow up.
When a few emails aren’t enough, call your client. A brief, friendly call gives you another opportunity to connect with your client. They are likely receiving invoices from multiple vendors. Stand out by offering a friendly, professional demeanor.
Once you’ve received payment(s), send a thank you note. It’s an opportunity to remind your client what a positive experience it was to work together.
Consider your invoice a branding opportunity! Xero and QuickBooks offer customizable options to add to your logo, colors, and fonts. If you’re planning to mail a thank you note, keep it on-brand, too.
Streamlining your small business invoicing process can help you retain customers, increase cash flow, and increase stability. In addition, your customers will remember your professionalism and gratitude. Sign up for xendoo today, and let us help with bookkeeping and accounting for your small business.
