Two people counting money and writing amounts on paper

The Small Business Guide to Revenue vs. Profit

When running a small business, you’ll want to track revenue and profit. What is revenue vs. profit? Is one metric more important than the other?  

While revenue and profit measure your business’s financial performance in different ways, the two metrics are closely intertwined. They are often used to gain a better understanding of your overall financial health. 

What precisely is the difference between revenue and profit? Read on as we take a closer look at these two key metrics and explore how you can use them in your business.

What is Revenue? 

Revenue, also known as gross sales, is the total amount of money your business brings in through sales of products or services. 

For example, you’d find your annual revenue by adding up the total sales for the year. It would only include the income derived from your business’s primary activities. It does not include other types of income, such as investment returns or earnings from other sources. Revenue is included in your income statement, along with gross income and net income. 

Revenue and Cost of Goods Sold (COGs)

When calculating revenue, you should also consider the cost of goods sold (COGS), which are the direct costs associated with producing your product or service. 

Deducting COGS from your revenue will give you your gross profit, which is the amount of money you have left after subtracting all the costs associated with creating your product or service. Since COGS is a cost of running a business, it’s recorded as a business expense on your income statement. 

Revenue and Net Income

Since revenue represents the big number at the top of your income statement, it is often referred to as the “top line”. Net income, on the other hand, is known as the “bottom line”. In basic terms, net income is revenue minus expenses.

While revenue alone can’t tell you much about your business’s overall financial health, it is a valuable starting point. You can use it to understand your performance, particularly when compared to other businesses in your industry.

How Do You Calculate Revenue? 

To calculate your revenue, you need to start with the average price of your product or service. Then, multiply this figure by the number of units sold. With this revenue formula, you can calculate the total revenue for the period in question.

Revenue = (average price per unit sold) X (number of units sold)

Your bookkeeper or accounting software will typically handle this calculation and report it on your company’s income statement. You will have the net sales(gross revenue minus any returns), cost of sales, and net revenue on your revenue report. By subtracting the COGS from the net sales, you will have the net revenue for the period.

For example, suppose you own a bakery that sells scones for $5.00 each, and you sell 1000 scones over a month. To calculate the gross revenue for the month, you would multiply 1000 by $5.00 to get $5,000 in total revenue.

  • Example: (1,000) X ($5) = $5,000 gross revenue

You will need to deduct the direct cost of sales associated with producing the scones from gross revenue to get the net revenue. Suppose the cost of flour, sugar, eggs and other ingredients used to make the scones is $1,500 for the month.

  • Gross revenue – direct cost of sales = net revenue 
  • Example: ($5,000) gross revenue – ($1,500) cost of sales = $3,500 net revenue

Dividing the net revenue by the gross revenue will give your business’s gross profit margin, which is an extremely important metric for evaluating profitability.

What is Profit? 

Profit, or simply net income, is the amount of money your business is left with after subtracting all expenses from revenue. In financial slang, it’s called the “bottom line” since it’s represented by the last figures in an income statement. 

While revenue is a critical metric for evaluating the success of your business, profit is what ultimately determines whether or not your company is sustainable in the long run. This is because profit is what’s left after you’ve covered all your costs and expenses. 

You can use it to reinvest back into the business, pay dividends to shareholders, or pay yourself a salary. The higher your profits, the more successful your business will be over the long term.

How Do You Calculate Profit? 

While Xendoo sends you a monthly report with your business’s updated profit and loss statement, understanding how to calculate profit is an essential part of being a small business owner.

To calculate your business’s profit, you need to start with your total revenue for the period in question. Then, deduct all expenses from this figure to get your net income.

  • Net income formula: total revenue – total expenses = net income

When you dig into expenses, it can get more complex. For example, you may go a step further and factor in the EBIT (earnings before interest and taxes), depreciation, amortization, rent, and business taxes into the equation. This will give you your business’s net profit for the period.

For example, let’s say your business had total revenue of $100,000 in a year. COGS accounted for $10,000. You had $5,000 in depreciation expense, $5,000 in interest expense, and $18,500 in business taxes. 

To calculate the EBIT, you’d do this: 

  • $90,000 net revenue – $5,000 depreciation= $85,000 EBIT

Therefore your EBIT for the year is $85,000.

  • Net profit = taxable income – business taxes
  • Net revenue – interest: $85,000 – $5,000 = $80,000 (taxable income)
  • Example: ($80,000) taxable income – ($18,500) business taxes =  $61,500 net profit 

Revenue vs. Profit: What is the Difference? 

In the simplest terms, revenue is a business’s total income, while profit is the amount of money a firm keeps after subtracting all costs. 

Revenue is important because it indicates whether or not a business is generating income. However, profit is what’s left after all expenses have been deducted. It indicates the overall success of a business.

If you’re running a small business, it’s critical to understand the difference between revenue vs. profit to make informed decisions about how to grow your business. A business can be generating a significant amount of revenue but still be operating at a loss if it is spending a lot of money on expenses. 

While a single dip in revenue or profit is common, a long-term trend of high revenue but low profit is much more dangerous. If profit is consistently low, it could indicate that your business model is not sustainable. Without a strong understanding of revenue vs. profit, it can be challenging to assess your business or make smart decisions about how to invest in its future.  

Revenue vs. Profit Example 

To help you better understand the difference between revenue vs. profit, let’s take a look at some examples. When public companies release their annual reports, many feature their revenue numbers prominently on the first page.

Revenue 

To understand revenue, let’s look at Microsoft’s financials for 2021. In their annual report, Microsoft reported total revenue of $168,088 million from product and service sales.

Microsoft's annual report

Product revenue accounted for $71,074 million while service and other accrued $97,014 million totaling the $168,088 million. Microsoft’s revenue increased by 17.5% from 2020 when they reported $143,015 million in product and service sales.

Profit 

To understand revenue vs. profit, let’s look at Microsoft’s annual report again. Only this time, we’ll look at net income. The figure appears at the bottom of the income statement, which indicates how much profit a company has earned after accounting for taxes and all expenses.

Microsoft’s net income was $61,271 million in 2021. This was an increase from 2020 when they reported $44,281 million in net income. But how did Microsoft get to this number?

To calculate net income, we take the total revenue and subtract the cost of goods sold (COGS), operating expenses, interest expenses, and taxes. Microsoft reported these numbers (in millions):

  • Total revenue: $168,088
  • Total cost of revenue: $52,232
  • Gross margin: $115,856
  • Research & Development: $20,716
  • Sales and marketing: $20,117
  • General and administrative: $5,107

Subtracting this from the gross margin gives you an operating income of $69,916. But they also had other income of $1,186, so total income before taxes accounted for $71,102. Provision for income taxes totaled $9,831.

To get the net income, we subtract the provision for income taxes from the total income before taxes, which gives us our final figure of $61,271 million.

As you can see, revenue is just the first step in understanding how much profit a company has earned. To get an accurate picture of your business performance, you need to look at revenue and profit.

Although Xendoo provides profit and loss statements to all its customers, it’s crucial to understand where these numbers come from and what they mean for your business. 

Keep in mind that Microsoft is a huge public company. Revenue and profit for a small business will likely be much simpler. 

How Do You Increase Revenue? 

While increasing your small business revenue is an excellent way to grow and boost your bottom line, it isn’t easy.

Every business is unique, and there is no one-size-fits-all solution to increasing revenue. However, a few proven strategies can help you increase your revenue.

  • Increase your prices –  If you are priced below competitors, or your prices haven’t increased in a while, it may be time to consider a price increase to drive more revenue. However, avoid very high prices as they might scare away your customers and reduce revenue.
  • Boost sales quantity – In most cases, increasing your sales volume is the best way to grow your revenue without necessarily having to increase your prices. You can run a marketing campaign, boost brand awareness and outreach through online advertising, or hire a salesperson to help you close more deals.

How Do You Increase Profit? 

In addition to focusing on revenue, focus on profit margins and work towards increasing them. It is relatively easy to increase profit compared to revenue, and you can do it in several ways.

  • Reduce your costs – Evaluate your business expenses and work towards reducing them without compromising on quality or hurting your bottom line. You could renegotiate contracts with vendors, cut down on unnecessary expenses, or automate specific processes to reduce your costs.
  • Manage your debts – Debts can significantly drag your profits and hurt your business’s bottom line if not managed properly. Work towards reducing your debts and interest payments by refinancing high-interest loans, consolidating multiple debts into one loan, or exploring government grants and tax incentives.
  • Outsource tasks and services – In some cases, it might be more cost-effective to outsource certain tasks and services rather than doing them in-house. This could help you save on costs and increase your profits. For instance, you can outsource your accounting and bookkeeping to a professional service rather than hiring an in-house accountant.

Revenue and profit are two metrics that every small business owner should track. There are important differences between revenue vs. profit. While revenue is a valuable indicator of how much business you are doing, profit determines your long-term sustainability. 

It is crucial to understand the key strategies and tactics that can help you increase both your revenue and profit margins. Whether it is increasing your prices, boosting sales quantity, or reducing costs and debt, there are several ways that you can grow your business’s top line and bottom line. The key is to stay focused, persistent, and diligent without losing track of your profitability goals.

If you want to better understand your business’s financials, Xendoo is here to help you. We are an online accounting and bookkeeping service that can help you understand your revenue and profit margins. Contact us today to get your free trial and let us get bookkeeping hassles off your plate.

Two people exchanging receipts and money

Free Small Business Expense Tracking Spreadsheet

Small business expense tracking can be a tedious task. But, it’s one that all companies–from “mom and pop” shops to international enterprises–must do. Fortunately, business expense tracking apps make the job easier. If you have a business with many employees, sales, and tax considerations, an app is ideal.

For some small businesses, however, paying a subscription fee for an expense tracker may not be feasible in the beginning. In this case, small businesses can use a free business expense tracker or template. While expense tracking will remain manual, it will keep your finances organized in one place. 

We’re sharing a free business expense tracking spreadsheet that you can use. You can jump to the spreadsheet here and scroll further to learn how small businesses can keep track of expenses for free or at little cost.

Why do you need to track small business expenses?

As you may know, you’re required to file taxes each year. Come tax time, no one wants to sift through old receipts to account for each expense. 

Once you start expense tracking on a regular basis, you can eliminate such hassles. Moreover, up-to-date records ensure that you file tax returns accurately. Therefore, you won’t have anything to worry about should the IRS audit your company. Besides saving you time, you’ll also want to track expenses to take advantage of tax deductions and better financial health.

Tax Deductions

Everyone has to deal with taxes every year–companies and individuals. You may be eligible for tax deductions for certain expenses or activities. If you qualify for a deduction, you can lower the tax amount you owe and use the savings to grow the business. 

While it may come as a surprise, many small business expenses qualify for tax deductions. However, only a small proportion of small business owners benefit from them. This is primarily due to inadequate expense tracking practices and not knowing how much you can save.

With reliable accounting software, you’ll have expense reports. These will give you a complete picture of your spending and tax deductions. If you’re not sure what counts as a deduction, you can review our list of over 20 tax deductions for small businesses.

Financial health

Data from the Bureau of Labor Statistics (BLS) shows that 20% of small businesses fail within the first year. This figure rises to 50% by the fifth year. But, there’s a silver lining. 

Most of these businesses do not fail because there’s no market. Surprisingly, some companies make a lot of money and still fail. Some of the reasons for this include:

  • Financial mismanagement
  • Cash flow issues
  • Unsustainable growth
  • Poor planning

As you can see, all those factors are related to finances. By ironing up your expenses tracking processes, you can significantly increase the chances of success for your business. You’ll be able to quickly spot unnecessary, unusual, and fraudulent activity that may bring your business down. 

This way, you can limit business expenses to necessary expenses and prevent costs from going overboard. In addition, you can learn how to read and interpret financial statements. 

What are common business expenses?

Businesses in varying industries have different expense profiles. Even still, there are expenses that almost all businesses have. In the expense tracking spreadsheet, you’ll find areas to record each of these expenses, including: 

  • Advertising and marketing – Costs associated with hiring a marketing agency or a consultant.
  • Auto expenses – If you use your car for business, you can expense repairs and mileage.
  • Bank charges – Fees and costs for a business bank account and credit cards.
  • Commissions – If you pay out sales commissions, they would be recorded here.
  • Contract labor – This is for businesses that hire freelancers or contract employees. 
  • Interest – If you have a business loan, the interest on it is considered an expense.
  • Legal & professional – Consults with lawyers, accountants, and other professionals.
  • Merchant fees – These are costs that merchants like Shopify and Amazon charge.
  • Payroll, payroll taxes, and processing – Expenses related to paying employees and processing those payments.
  • Recruiting & HR – Costs associated with finding and hiring employees.
  • Training & education – Expenses related to furthering your or your employees’ business education.
  • Software and tools – Many tools that you use for your company are expenses (and tax-deductible).
  • Rent or lease – If you have a physical store or office, you can add it as an expense.
  • Utilities – Many utilities including the Internet are business expenses.

These are just a few examples. You’ll find more inside the small business expense tracking spreadsheet. 

What is the best way to track expenses for small businesses?

At this stage, you know why it’s important to track business expenses, but how do you track expenses? In this regard, you have two options–business expense tracking spreadsheets or apps. 

1. Business expense tracking apps

When it comes to business expense tracking, the best options available are expense tracker apps. These solutions sync to your bank accounts and business credit cards and categorize your expenses for you. This eliminates most of the manual work and automates the process of inputting the costs yourself in a spreadsheet. As a result, the only expenses you usually add manually are those you pay for in cash.

Aside from maintaining expense records, such solutions also generate expense reports. These help you understand your spending habits and how they impact cash flow and financial health. And you don’t have to set time aside for this. Using a mobile app, you can review your expenses while on the go. Overall, they reduce the amount of time you spend on expense records. 

Some business expense tracking apps include: 

  • Mint
  • Quickbooks (integrates with Xendoo)
  • Xero (integrates with Xendoo)
  • Zoho Expense
  • Expensify

To learn more about each app and if it’s a good fit for your company, you can view our guide to expense tracking apps here

2. Business expense tracking spreadsheets

While business expense tracker apps may be ideal, they’re sometimes not accessible to small businesses. There may be a learning curve. Your company may not have many employees or complex expenses or the budget to afford a subscription. Whatever the reason, you’ll still have expenses to manage and report. 

Using this free business expense tracking spreadsheet is the ideal option. Expense tracking spreadsheets use standardized templates to help you track various business expenses and key details. It’s the perfect middle ground between expense tracker apps and other inadequate methods. 

Instead of worrying about how to record expenses, you’ll have a simple outline to follow. And you’ll have key insights such as:

  • The amount of money spent
  • The purpose of spending money
  • What the money was spent on
  • Who spent the money

The good thing about spreadsheets is that they give you flexibility. Along with the general expenses spreadsheets, you can have spreadsheets to report particular expenses. For example, this may include: 

  • Mileage reports, especially if you reimburse employees for mileage
  • Travel expense reports for long business trips

Although, it is ideal to keep everything in one central place. Otherwise, it becomes harder to manage and you might not have the full picture of your finances. 

While the purpose of each expense spreadsheet may vary, they’ll have similarities. These include:

  • Columns for filling in data such as expense descriptions, date, unit cost, vendor, and method of payment
  • Rows for each expense item
  • Columns with formulas that automatically calculate total expenses

In fairness, updating expense tracking spreadsheets requires commitment and can be tedious. However, if you are just starting out with a low budget, they can help you stay organized. Most entrepreneurs move to accounting software as their business grows because it will integrate with other tools like those for eCommerce stores, payroll, and inventory. 

Small business expense tracking spreadsheet

You can get the Google sheet for small business expense tracking here. To use the sheet, you’ll first make a copy and edit the copy. 

When you’re tracking expenses or any finances, you’ll come across accounting terms like gross revenue, net income, and gross income. To use this spreadsheet, you’ll want to be familiar with them. 

What is gross revenue?

Along with the primary revenue stream, your business may have several sources of revenue. Gross revenue is the total of your business’s revenues over a given time period. It is not the same as gross profit. 

Gross revenue solely focuses on earnings. As such, it does not account for the expenses incurred, such as the cost of production. Therefore, tracking gross revenue is important as it shows the potential of a business to grow and generate profits for shareholders. 

Gross revenue is also known as the “top line” because it usually appears at the top of the income statement. Similarly, gross revenue is at the top of our free expense tracking spreadsheet. It’s important not to confuse gross revenue with net revenue. Along with the total earnings, the latter also accounts for expenses.

What is gross profit?

Unlike gross revenue, gross profit accounts for the costs of goods sold. To calculate your gross profit, you take the costs of goods or the cost it takes to produce, and subtract it from the total gross revenue. The calculation will look like this:

  • Gross Revenue – Cost of Goods Sold = Gross Profit

What is total net income?

For this, you’ll need to calculate net income (NI), also known as earnings. It refers to the business’s total amount of money (gross revenue) minus total expenses. Your expense items are on the left column of the sheet–marketing, bank charges, interest payments, etc. 

To calculate total net income, you have to subtract all your expenses from the total gross revenue or the amount earned.

  • Gross Revenue – Total Expenses = Total Net Income

In simple terms, net income is the money the business remains with after paying for all the expenses. Keep in mind that the cost of goods sold or (COGs) is often considered a necessary expense. It should also be subtracted when calculating your total net income.

Total net income vs. total expenses

The two most important numbers for expense tracking are total net income and total expenses. It’s important to know how they’re related and how they differ.

Total expenses refer to the sum of all the costs your business incurs. On the other hand, total net income refers to the money that’s left once you deduct total expenses from gross revenues. Therefore, to calculate total net income, you first need to know the total expenses. 

How to use the sheet

With our free expense tracking template, you won’t have to worry about building your own and figuring out the categories to include. It comes with a list of the common small business expenses and sections for other expenses, gross revenues, refunds, and total net income. 

Depending on the expense you want to record, all you need is to find the right category and add it. The sheet will automatically calculate the total gross revenue, expenses, and net income for each month.

Tracking business expenses is a task every business must do. However, paying for an expense tracking app may not be an option. Also, while it’s possible to track expenses manually using a spreadsheet, you may want to focus on other business activities.

If that sounds like you, Xendoo is exactly what you need. We have a team of virtual bookkeepers and accountants who can manage all your accounting needs. Moreover, you can also integrate Xendoo with software like Gusto, Stripe, Quickbooks, Xero, and more.

 

A man in an oxford shirt looks at his bookkeeping on his laptop

How to Outsource Bookkeeping – A Guide

Since starting your business, you’ve likely filled multiple roles–from product and customer service to bookkeeping and sales–at some point. However, as your business has grown, you may have felt like you don’t want to spend your time doing some of those tasks. 

For instance, you’ve probably asked yourself: Should I outsource bookkeeping?

Whether or not to outsource is a common question many small business owners face. Tasks like bookkeeping are ideal to hire outside help. Others like sales may be better to manage in-house. There are a few ways that you can hire a bookkeeper. Primarily, businesses choose virtual bookkeepers or local bookkeepers.

In this guide, we’ll dive into everything related to outsourced bookkeeping from what it costs to how to outsource it. You can click to go to a particular section below or scroll down to start from the top. 

When should I outsource my bookkeeping?

If your business is new and you don’t have significant revenue or budget to hire outside help, you’ll probably try DIY bookkeeping first.

However, most businesses prefer to outsource their bookkeeping, especially as they grow. These are some of the top signs that it is time to outsource your bookkeeping:

  • You’re spending several hours each week doing accounting and bookkeeping tasks yourself.
  • You plan to get funding through investors or business loans and need accurate financial statements.
  • Your books are behind, and you need to catch up.
  • You’re spending a lot of money hiring full-time, in-house bookkeepers or a local bookkeeper.
  • You aren’t sure about your current cash flow or financial health.
  • Tax season is coming up, and you don’t feel prepared to file your taxes.
  • You simply have no desire to learn bookkeeping or to do it yourself.

Why should I outsource my bookkeeping?

At first, you might be hesitant to trust an outside bookkeeper with your financial data. There are so many benefits to outsourcing your bookkeeping, as long as you choose a trustworthy CPA or bookkeeper. The top benefits of outsourcing your bookkeeping include:

Up-to-date books and more time for business

Small business owners are notorious for spending a large amount of time on administrative work, like employee scheduling, preparing payroll, and bookkeeping. It is estimated that small business owners spend 120 working days per year on administrative tasks like bookkeeping. Still, nearly 25% of businesses are behind on their books. 

Hiring a bookkeeper allows you to free up more time. With the time saved, you can focus on the tasks that excite you most as a business owner. Although bookkeeping it’s extremely important to the health and success of a business, it is not necessarily a task that most entrepreneurs enjoy doing.

Cost-effective bookkeeping

If you’ve attempted to do small business bookkeeping on your own, you already know that it can take a lot of time and money. Even if you utilize programs like Quickbooks or Xero, you can’t automate all your bookkeeping needs.

If you’ve hired an hourly bookkeeper or accountant, the cost per hour adds up fast. Xendoo offers pricing plans with a flat-rate monthly fee, so you can easily budget for your bookkeeping each month.

Business loan and funding preparation

As your business grows, your bookkeeping and accounting needs grow too. If you want to take out a loan or open a line of credit, your lender will want accurate financial statements. It can take hours to do this on your own, and it might not be accurate.

Bookkeepers have experience doing this for multiple clients, so they can put financial statements together quickly in a way that’s presentable for your potential lender.

Experienced bookkeepers can also help you by:

  • Advising you on tax savings. You’ll have a better idea of what you can deduct and how to reduce your taxes.
  • Providing answers to your financial questions. Bookkeepers can help you learn about financial reports, cash flow, depreciation, and more.
  • Identifying opportunities to improve profitability. They’ll have a clear picture of where you improve your business finances.
  • Keeping you tax-compliant and secure. Bookkeepers are familiar with tax laws and other legal considerations, so you won’t miss deadlines or have noncompliance penalties.

How do you outsource bookkeeping?

There are two primary options to outsource bookkeeping–virtual bookkeepers or local bookkeepers.

Virtual bookkeepers

If you hire a bookkeeper online then that would be considered a virtual bookkeeper.  Xendoo, for example, is a virtual bookkeeping service. Our team of bookkeepers works with you virtually, no matter where you a located in the United States. 

However, there are some differences between Xendoo’s bookkeeping services and other virtual bookkeepers. For instance, you might hire a freelance virtual bookkeeper that performs the same tasks that a regular bookkeeper would–they just do them online. 

The drawback of hiring an individual freelance bookkeeper is that they tend to be more expensive. Like an in-person, local bookkeeper, freelancers usually charge an hourly rate vs a set monthly payment.

They also may not have as many resources as a bookkeeping firm or company. For instance, when you get a Xendoo plan you also get perks like access to accounting software like QuickBooks and Xero. 

Another advantage of virtual bookkeepers is that because they work online, they tend to be familiar with different eCommerce platforms, payment processors, and other online financial services. Therefore, they can help you integrate your business banking account, expenses, and other financial data into a secure accounting system. With that, you can view your financial health, prepare for taxes, or plan for your business future at any time. 

Local bookkeepers

If you hire a bookkeeper that has an office or business location near you, that would be considered a local bookkeeper. Local bookkeepers usually charge by the hour and it tends to be expensive.

For instance, it is not cost-effective if you need to book more than one or two hours a month. This might make sense if you are booking an hour for a bookkeeping consultation a month. However, in this case, you would still be responsible for doing your own books.

If a local bookkeeper is managing your books and you have a complex business with many employees and revenue streams, it’s probably going to take more than a few hours a month. Those hours can get expensive.

In most cases, you don’t need a local bookkeeper unless:

  • You want to meet with your bookkeeper in person on a regular basis.
  • You keep your financial information in physical records only. 

Whether or not you use a local bookkeeper is based on your preference. Today, most accounting and bookkeeping tasks are performed online anyway. Therefore, the majority of businesses prefer online bookkeeping, because it’s more accurate, cost-effective, and easier.

How much does outsourced bookkeeping cost?

The size of your business and the number of monthly expenses you incur play a large role in the pricing for outsourced bookkeeping services. To get a better idea of how much outsourced bookkeeping costs, let’s compare it with some other bookkeeper options.

In-house bookkeeper cost

An in-house bookkeeper is usually considered a full-time employee, which means they would get a salary and benefits package. According to Salary.com, the cost to hire a full-time entry-level bookkeeper is $45,446. That is just the base salary and doesn’t include benefits or bonuses.

Of course, the cost rises in cities that have a high cost of living. It also increases when hiring bookkeepers with more years of experience. For example, in San Francisco, the living wage is higher. The average annual salary for business and finance professionals is $84,198, according to MIT. 

Most small businesses don’t have enough bookkeeping needs to justify paying a bookkeeper year-round for their services. They may consider a freelance bookkeeper or an hourly bookkeeper, however, that might be just as costly.

Local or freelance bookkeeper cost

If you look at any freelance marketplace you’ll find that the cost for freelance bookkeepers ranges widely.

It’s not unusual for the hourly rate for freelance bookkeepers to range from $21 per hour to $60 per hour.  However, more experienced freelance bookkeepers will charge upwards of $75 or more per hour, especially if they are doing complex bookkeeping or accounting tasks.

If your business has a lot of bookkeeping needs, a local or freelance bookkeeper who charges by the hour usually is not cost-effective. When you only get an hour of their time, you probably won’t get all your bookkeeping questions or concerns answered.

Outsourced bookkeeper cost

Of all the bookkeeping options, outsourcing tends to be the most cost-effective for small businesses. This is because you’re not hiring a full-time staff member or being charged an hourly rate.

Outsourced bookkeeping services usually charge a set monthly fee. These are popular with small businesses because the bookkeeping services come in packages based on your needs. 

It’s easier to budget for a monthly cost that’s the same each month. Plus, it costs half of what you could end up paying for an hourly bookkeeper. That’s why Xendoo offers this pricing structure with a variety of package options to fit your specific company’s needs. 

How does outsourcing with Xendoo work?

If you choose to go the outsourced bookkeeping route, you’ll be paired with a dedicated bookkeeper. Plus, because we are a team of financial experts, you’ll also get access to a CPA and an accountant. 

Your expert bookkeeper will set up a digital accounting system for you if you don’t already have one. This means that we’ll take your sales and revenue data, expenses, payroll, etc, and put it all together in one financial dashboard. You’ll be able to access it anytime–desktop or mobile–and get monthly reporting with balance sheets and profit-loss statements. If you’d like to learn more, you can schedule a consultation with our team here.

 

A young female business owner works on her laptop in her studio, surrounded by mannequins and fashion design projects

The Top 7 Reasons Why Every Small Business Needs an Online Presence

Having a powerful online presence is crucial to the success of every small business. Not having an online presence makes it nearly impossible for people to discover a business when searching for products or services. A user-friendly website and active social media presence quickly connects brands with their ideal audience – whether locally, globally, or both! 

Small business owners have everything to gain by making their business known and accessible online. In this blog post, we will highlight the top 7 reasons business owners need an online presence! 

1. An Online Presence Levels the Playing Field  

In the past, it might have been difficult for small business owners to purchase a full-page magazine ad or produce a commercial for local TV. Today, social media giants like Facebook and Instagram enable small business owners to target their ideal audience for a fraction of the cost!   

The average cost per click (CPC) for an Instagram ad is between 2 and 20 cents, with the cost per 1000 impressions (CPM) about $6.70. Facebook has an average CPC of 97 cents and a CPM of $7.19. These numbers make it possible for small businesses of any size to reach new customers in a timely and cost-effective way.

2. An Online Presence Expands Your Audience  

One of the main reasons why businesses love promoting their brands online is that they can reach people around the world. An online presence can take your business anywhere, for a fraction of the cost of traditional local advertising. If your goal is to grow outside of your local arena, online is the way to go!  

Here are a few tips to expand your audience through your online presence: 

  • Run paid ads to reach highly targeted audiences. 
  • Post consistently on social media to stay top-of-mind. 
  • Keep your site up-to-date by posting content regularly. 
  • Make your site extremely easy for visitors to navigate. 

The best part? If new and existing customers are satisfied with the experience you provide, they will likely tell others about your business, either through social media, leaving a Google review, or even by word of mouth! With an effective online marketing strategy in place, your audience is sure to grow.  

3. Customers Expect Businesses to Be Online 

Where do customers immediately go after hearing about a new product that has caught their attention? Do they look up the company in the phone book, or head to a nearby store and hope to find it there?  

Not anymore… customers simply Google the product and find everything they need to know about it. This is another reason why business owners need an online presence!  

When potential customers show interest in your business, products, or services, it is crucial to get in front of them as quickly as possible. Because the customer journey often begins online, a compelling internet presence is the key to seizing new opportunities to grow your customer base.

4. Marketing is a 24/7 Salesperson 

Small business owners fulfill multiple responsibilities within their business if not all of them. At times, some duties may take precedence over others, and cut into the time that could be spent actively making sales. An online presence makes it that much more convenient for businesses to sell their products and services.  

A highly informative and well-written landing page might be all it takes to persuade visitors to hit the “place order” button. While marketing is not a set-it-and-forget-it effort, it does take some of the sales work of the business owner’s shoulders. By meeting users where they are online, you can educate them about your company, address their pain points, and share your unique selling proposition all before they convert! 

This is also convenient for the customer. The internet changed the way that businesses sell products and services, and consumer behavior changed with it. Customers prefer online communication – meeting them where they are, on the platforms they use – as found by SalesMSG, an SMS marketing provider. A strong online presence meets customers wherever they are, at any hour of the day, so business owners can increase sales, even when they’re off the clock. 

5. Ease of Communication with Customers 

With a website and social media presence, business owners can communicate with customers as efficiently as possible. Websites and social channels can be updated constantly to share the latest products and services, sales and events, and the latest company news. Customers can send direct messages via the website or on social media, and business owners can answer questions on-the-fly. 

Plus, Google loves websites that publish content regularly. The more frequently you update yours, the more frequently a search engine stops by to check out your website. This means greater odds of ranking higher and staying in front of your audience!   

6. Potential Tax Credit 

You read that right. An online presence may make you eligible for a tax credit

The IRS rewards up to a $5k grant in tax credit to businesses with ADA-compliant websites. These are sites that are functional for users with physical impairments, such as visual and auditory disabilities. 

A positive website experience benefits both the customer and the business owner. By creating a website that meets customers’ unique needs, business owners can reach an even wider audience! 

7. Actionable Insights for Streamlined Reporting 

Having direct access to digital marketing performance enables businesses to identify the behaviors of their ideal audience. This understanding of customer needs and preferences provides the perfect opportunity to tailor content that keeps them engaged.  

By evaluating website performance through platforms like Google Analytics, business owners can pinpoint what digital marketing strategies are most effective and discover new growth opportunities. This enables business owners to create data-driven marketing strategies that are proven to drive sales and help grow the business!  

Give Your Business a Boost

In this digital revolution, small business owners deserve creative, data-backed marketing solutions that drive decision-making and business growth. 

What digital solutions are you looking for? Digital Resource provides responsive web design, search engine optimization, and expert digital marketing services that are proven to increase brand awareness, increase search engine ranking, and convert clicks into customers.

Click here to get started!   

Young cafe owners sitting at table, working on their catch up bookkeeping

The Top 5 Benefits of Catch Up Bookkeeping

Whether they coach chess players or sell organic puppy food online, every small business owner shares a common driving force: a passion for growing their business. Increasing sales and gaining new customers is one part of the equation. Consistent bookkeeping provides the financial insight needed to strategize for long-term success. With so many obligations resting on the business owner’s shoulders, it can feel like there are not enough hours in the day to accomplish every task, and eventually the books may fall behind. 

Even if the books are only behind a few weeks, up-to-date records are crucial for the financial well-being of every business. Catch up bookkeeping accelerates business growth by increasing financial visibility, which enables business owners to make decisions based on accurate information and remain tax-compliant throughout the year! In this blog post, we are exploring the top 5 benefits of catch up bookkeeping!   

Reliability in Your Opening Balance

The Opening Balance is the amount of money in your bank account at the beginning of a new financial period, such as the start of the month. Be aware that your bank account does not necessarily reflect the exact amount of cash that is available to spend. For example, if your Opening Balance states that you have $50,000, but $20,000 worth of checks have not cleared yet, the actual balance is $30,000. The best practice is to consult your updated accounting software or financial statements, which provide insight into your true financial position.

The financial statements report revenue, expenses, and profitability, all of which contribute to the Opening Balance. They also guide decision-making and reveal opportunities for business growth. The more up-to-date your books are, the more reliable your financial statements (and Opening Balance) will be! 

If your bookkeeping is behind, there will be little to no financial data for that time period, which means you will not know your true Opening Balance for today. For example, if your account was reconciled in January, but February was skipped, the Opening Balance would be incorrect for March. This could skew your numbers going forward, and costly choices could be made based on inaccurate data. This could also affect future bank account reconciliation, as well as the balances in your revenue, costs, and expenses. It is a vicious cycle.

Catch up bookkeeping corrects these issues and provides clarity and accuracy in your financials. Once your books are caught up, keeping them up-to-date becomes second nature.

Financial Accuracy Through Bank Account Reconciliation   

A bank account reconciliation is performed to confirm that your accounting records match the information in your bank account. It is an opportunity to identify and correct any bookkeeping errors before the financial statements are finalized, as well as detect and prevent fraudulent activity in your bank account. Bank account reconciliation also ensures that you are accurately reporting your income to the IRS. The best practice is to reconcile your bank account once a month. 

Proper bank account reconciliation can only be accomplished when the books are up-to-date. By getting your books caught up, you can ensure the reliability and accuracy of your financials each month. 

 

Cash Flow Management

Catch up bookkeeping can have a significant impact on cash flow. When your books are caught up, you can pinpoint how and when cash enters and leaves your business each month. This delivers a deeper understanding of your cash needs, so you can create a plan for cash flow management. 

For example, as your books are caught up, you may uncover past due invoices, or find that you are sending out vendor payments before you receive the cash needed to cover them. 

With this insight, you can monitor your Accounts Receivable to ensure you are paid in a timely manner going forward, and find solutions for the timing of your own payments. You can also forecast future cash needs to be confident you have what you need for continued operations.   

Click here to learn more about cash flow.  

Insight into Net Income

Keeping your books up-to-date plays a vital role in calculating your bottom line, or Net Income, which is the profit that remains after all costs and expenses are subtracted from revenue. In order to know your true Net Income, all business expenses must be accounted for through accurate and timely bookkeeping. This understanding of your Net Income provides the opportunity to increase your bottom line. 

Getting your books caught up is also essential when applying for loans. Creditors and investors examine Net Income when deciding to invest in a business, as it highlights the business’s ability to pay back loans efficiently. Catch up bookkeeping determines your bottom line, so you can understand and increase the profitability of your business, meet loan requirements, and secure funding for your next venture!     

Click here to learn more about Net Income.   

Tax Compliance

As tax season draws closer, a concern that many business owners have is under or over reporting their earnings, and missing out on deductions. They may also experience a back and forth with their Tax CPA over missing documents and gaps in their financials. Breathe a sigh of relief – catch up bookkeeping takes the headache out of tax season!

By getting (and keeping) your books caught up, you can identify the deductions you qualify for, maximize your tax return, and stay compliant all year long! 

Get Your Books Caught Up with Xendoo

Behind on your bookkeeping? You are not alone! 25% of business owners are behind on their books. Get a fresh start with catch up bookkeeping services from Xendoo, so you can take your time back and focus on the future of your business. 

Let’s chat! We would love to get to know you and your business. Click here to schedule a free consultation.

A young black woman works on a laptop to prepare her small business for the new year

How to Prepare Your Small Business for the New Year

Business Resolutions Start Now

The end of the year is a bustling time for small business owners. Between skyrocketing holiday sales, extended hours, and juggling multiple duties, it can be difficult to find a moment to stop and think about preparing for 2022. 

Where do you start? What metrics can be used to predict and measure success? What steps can be taken to effectively prepare your business for the new year? 

Planning for the new year may seem overwhelming. Xendoo can give you your time back. In this blog post, we will help you strategically chart your path for success, so you can be ready for a new year of growth!

Review Financial Performance

To prepare for the future, take a look at the past year. Analyze your business’s performance from the previous year by reviewing your key financial statements.

  • The Balance Sheet summarizes a business’s assets, liabilities, and equity at a specific point in time. This statement provides insight into cash, inventory levels, Accounts Payable (money owed to others) and Receivable (money owed to the business owner), credit card and bank balances, and the equity in the company.
  • The Profit & Loss Statement outlines the revenue and expenses a business incurred during a specific period, which provides insight into the business’s profitability. It can be used to track and strategically plan for financial trends, such as seasons of high and low demand.  
  • The Cash Flow Statement provides visibility into when cash flows into and out of a business, and how cash balances have changed over a specific time period. It can also be used to project and prepare for the cash needs of the business.

These financial statements illustrate how your business performed throughout the year and reveal hidden opportunities for growth. The best practice is reviewing the financial reports on a monthly basis, as they gauge your business’s financial health and provide insights to timely decision making. 

Click here for more details on the financial statements. 

Forecast Cash Flow and Create a Budget

Cash flow represents the money that flows into and out of your business over time, and is crucial for ongoing business success. For more information on cash flow, click here

Like the financial statements, look at the past to plan for the future. Your cash flow history can be used to create a cash flow forecast, understand and predict upcoming cash needs, and create a budget for the new year. 

Healthy cash flow ensures that you will have the cash you need, when needed.

Understanding your cash needs and budgeting accordingly enables you to meet your financial goals and obligations, and continue to grow your business. 

Prepare for Tax Season Now

The earlier tax preparation starts, the greater the savings will be when tax season arrives. Start by taking a look at your financial statements and tax bills from previous years, which will provide an idea of what will be owed this year. From there, you can start setting aside money to reduce tax season surprises.

Up-to-date bookkeeping allows for tax-readiness throughout the year. Having income and expenses organized will save time and prevent confusion and stress when tax season arrives. 

Lastly, consider partnering with an online accounting service. Get access to an expert team that provides all-in-one bookkeeping, tax preparation, filing, and consulting, so you can make informed business decisions and maximize your savings all year long!

Outsource Your Bookkeeping 

Small business owners cover multiple responsibilities, one of the most stressful and time-consuming of which is bookkeeping. If you would like to take back 4 to 6 hours a month to focus on growing your business, now is the time to outsource your bookkeeping!

An online bookkeeper takes bookkeeping off your plate, so you can spend your time actively working on your business. They also provide monthly financial statements, delivering financial visibility and the actionable insight needed for long-term business growth. 

Online bookkeepers also provide catch up bookkeeping services to get previous years’ books in order. Whether you are behind a few months or years, Xendoo will bring your financials up to date so you can strategically plan for the future.

Spend the New Year with Xendoo

It is time to crush your business resolutions! Xendoo has your back with online bookkeeping, accounting, and tax services. Allow us handle the hassles while you focus on what you love to do: growing your business, all year round!

We would love to get to know you and your business. Schedule a call with one of our online accountants to get started.

Smiling young Asian business owner working on computer and drinking coffee during the holidays

Year-End Bookkeeping and Accounting Checklist for Small Business Owners

The end of the year is a hectic time for small business owners. Between catching their breath after tax season and managing holiday traffic and sales, year-end bookkeeping and accounting tasks understandably fall to the bottom of the to-do list. 

Xendoo is here to help you avoid the year-end scramble. Check out our checklist to organize your finances and successfully wrap up the year! 

Get Your Books Caught Up

The first step toward new year readiness is ensuring that your books are up-to-date, which can be done by:

  • Accounting for all bills and invoices, even if they have yet to be paid. 
  • Reviewing bank and credit card statements to confirm that they match. 
  • Recording any expenses that were paid for using personal funds. 

Accurate records ensure reliable financial statements. If your books are behind a few months, or even years, you are not alone. 25% of business owners are behind on their books. Xendoo is here to help. Our online bookkeepers provide catch up bookkeeping services, so you can focus on the future. 

Collect the Necessary Forms 

Once January arrives, your accountant will request certain forms in order to close your books and file your small business taxes. Be sure to collect them as soon as possible to ensure a smooth start to the new year.

 

Form W-2

Form W-2 is used by business owners to report salary information for their employees, as well as the taxes that are withheld from their paychecks. Employees need this information to file their personal tax returns. 

 

Business owners are responsible for sending this form to the IRS. Employers are required to provide the form to their employees no later than January 31st, so that employees have enough time to file their taxes.

 

Form W-9 

If you worked with an independent contractor or vendor, and paid them $600 or more, you will report those payments to the IRS using Form 1099-MISC. The information needed to complete this form is listed on Form W-9, which can be collected from your contractors.

If any W-9s are missing, be sure to reach out to your independent contractors and have them complete the form before the end of the year.

 

Schedule K-1

CPAs provide the Schedule K-1. It is used by S-Corporation shareholders and partnership members to report their share of the business’s profits and losses, and is included with your personal tax return.

 

Form 1009-K

The 1099-K tracks the payments received through third-party payment networks, like eBay, Stripe, Shopify, PayPal, and others. You will receive one 1099-K from each of the Online Payment Networks you use, and you are required to complete each one. Your gross receipts must be reported to be at least as high as the amount reported on your 1009-K.

The 1099-K shows gross sales, which is the amount before fees are deducted. What appears in your bank account is the Net Amount, the amount after fees are deducted from the Gross Amount. The sales from each vendor must be reported as the Gross Amount, which is what appears on the 1099-K.

Click here to download our Tax Documentation Checklist.

Follow Up on Past-Due Invoices

Review past-due invoices to see what you are owed. If there are any outstanding payments, reach out to your customers before the end of the year to successfully close your books. 

Account for Inventory

If your business stores inventory, perform an end of year inventory count to make sure your totals match your Balance Sheet and your books. This review will provide insight for waste and loss management, as well as reduce inaccuracies in inventory counts and receivings.

Consider utilizing an inventory management software to streamline inventory creation and order fulfillment.   

Review Your Financial Statements

Once your bookkeeping is completed, review your financial statements to confirm your numbers are correct and that you are utilizing accurate data. You can also take that time to review how your business grew over the course of the year. Was there a steady increase in profits? Can you identify connections in your costs and sales? The financial statements provide visibility to confirm that you are on track to meet your goals, make projections, and prepare for the future.

Click here to learn more about the key financial statements. 

Reach Out for Help

Everyone deserves a supportive team of people who care. If the year-end scramble has you feeling overwhelmed, reach out to an online bookkeeping service. It is an excellent resource for accurate financials and time-saving solutions! 

Xendoo’s bookkeeping and accounting team provides consistent monthly bookkeeping and timely, accurate financial reports, delivering financial visibility all throughout the year. This provides the insight needed to make the most informed decisions for your business.

Ring In Success

Now that the year-end bookkeeping and accounting checklist is complete, you are ready to welcome a new year of successful growth! We would love to partner with you as your online bookkeeping, accounting, and tax team! 

Schedule a call with one of our online accountants to get started. 

Two men go over real esate regulations at their desk.

A Complete Guide to Reading Financial Statements

Two men go over real esate regulations at their desk.

You’ve been in business for a while, and your next steps require you to obtain a small business loan. Your lender responds to your request favorably but asks to see your company’s recent balance sheet. 

With little experience in reading financial statements, this request makes you freeze in your tracks, uncertain of how to express the success of your growing business.

If this scenario sounds in any way relatable, it’s time to become more familiar with the process of reading financial statements. The better you understand these documents, the better you’ll understand your business. We’ll help you learn to read and interpret your financial statements and show you how they impact your company.

What Financial Statements Are

If knowledge is power, then the strength of your small business lies in your ability to generate and analyze financial reports. Think of these documents as the “report card” for your company. 

That analogy might conjure up some unpleasant memories for some, but the point is simple: just as a report card shows areas of strength and weakness, your financial statements show areas where your business is thriving, as well as highlight areas that could use some attention.

Your financial statements, therefore, contain valuable information about your company’s financial health. You can use this information to learn from the past and devise a strategy for your company’s future.

What sort of business financial statements will you be expected to read as a business owner? Typically, your company will rely on three basic types of financial statements. These are:

  • Balance sheets
  • Income statements (also called “profit and loss statements”)
  • Cash flow statements

Each of these documents describes your company’s finances, just through a different lens. The process of reading financial statements can help you better understand where your money came from, how much money you have at the moment, and any liabilities you have moving forward.

Why Leveraging Understanding of Financial Statements Is Important 

While accountants and financial professionals use these statements all of the time, small business owners need to be familiar with the core documents that govern their finances.

In this article, we’ll provide a beginner’s guide to reading financial statements. We’ll cover the three main documents you should be familiar with and touch briefly on shareholder reporting.

Balance Sheets

Your company’s balance sheet is one of the most basic and comprehensive financial statements you’ll be reading. Accounting software will set up a balance sheet according to the following equation:

Assets = Liabilities + Shareholders’ Equity

Typically, your company’s assets will be listed on the left side of the balance sheet, while liabilities and the shareholders’ equity will be listed on the right. However, it’s not unusual for some companies to list these categories from top to bottom. Let’s explore each of these three elements in greater detail. 

Assets refer broadly to anything your company owns. Assets include your company’s money, as well as anything you own that can be sold or converted into cash. Naturally, this includes cash and extends to various types of physical and even non-physical property. Assets can include such items as:

  • Physical property/retail space
  • Product inventory
  • Commercial vehicles
  • Trademarks/patents
  • Business investments

Assets can be further broken down into current and noncurrent assets. Current assets include anything that your company can convert to cash within a year. 

Non-current assets refer to items that a company does not anticipate converting to cash. This category would include “fixed” assets, which are those things needed to run the business.

Liabilities, by contrast, refers to money your company owes to others. This category contains financial obligations that include:

  • Money borrowed from a bank
  • Rent owed for the use of a building or commercial space
  • Money owed to vendors for supplies and materials
  • Payroll money owed to employees
  • Taxes
  • Costs for environmental cleanup projects
  • Any obligations to provide products or services for customers.

Liabilities can also be broken down into current and long-term liabilities. Current liabilities generally refer to money owed within the year, while long-term liabilities refer to money owed over longer periods.

The difference between a company’s assets and liabilities is referred to as the shareholders’ equity, sometimes called the “book value” or simply the net worth.

Thus, your balance sheet forms a comprehensive snapshot of your company’s finances at any given point in time. When reading financial statements, you’ll likely start with your balance sheet and then turn to other sources of information for more detailed reporting data.

Income Statements

An Income statement (also known as a “profit and loss statement”) records the impact of revenue, financial loss, and business expenses over a given period. While this period is often a year or a full quarter, larger enterprises might regularly generate them to keep ahead of any noticeable trends. 

Your income sheet is commonly included as part of a quarterly or annual business report and has two general uses. First, an income statement can be used to evaluate your company’s overall profitability and may highlight areas for improvement, such as areas where you should minimize overhead costs for the sake of the business.

Secondly, income statements can help identify financial trends. For instance, there may be periods of seasonal demand for certain products and services, which can be planned for in the future to capitalize on these financial patterns.

When reading financial statements of this type, it’s extremely important to understand both the structure of the document and its vocabulary. At the top of your income sheet, you’ll find the total sales revenue made during a given accounting period, let’s say a year. 

Then you go down the sheet, making deductions for each item on your list. At the bottom of the sheet, you’ll find the final amount that your company earned (or lost) during this period.

Yes, this final figure is known as the “bottom line.” But if you want to change this last figure, you’ll have to understand the types of deductions that you’ll find between your gross and net profits. Understanding your income statements will require you to understand the following key terms:

  • Revenue: How much money your company has received
  • Expenses: How much money your company has spent
  • Cost of Goods Sold (COGS): How much it costs to make your products
  • Gross Profit: Total revenue minus COGS
  • Operating Income: Gross profit minus operating expenses
  • Income Before Taxes: Operating income minus non-operating expenses
  • Net Income: Your pre-tax income, minus the amount paid in taxes
  • Earnings Per Share (EPS): Your net income divided by the total number of shares
  • Depreciation: How much value your assets have lost over time
  • EBITDA: Earnings before interest, taxes, depreciation, and amortization

If this list seems overwhelming, just look closer. You’ll see how most of these terms simply depend on one another. 

For example, calculating your gross profit will allow you to calculate your operating income, which will let you calculate your income before taxes, which you will then use to determine your net income.

In other words, as you work your way through your income statement, each step builds on the one that precedes it until you finally arrive at your bottom line.

Once you gain more experience with reading financial statements, you’ll appreciate this level of detail. Your income statements will reveal how each line item described above directly impacts the overall profitability of your business and will also highlight ways in which you can refine your business processes to minimize loss and drive revenue.

Cash Flow Statements

Cash flow statements record the movement of cash in and out of your company. This recording is a bit different from your income statement, which illustrates total profitability.

Your cash flow statement describes how much actual money your company has to work with, cash that you can need for purchasing new assets, making new investments, or simply paying the bills.

There are three distinct sections of your cash flow statement, based on the type of financial activity that it describes:

  • Operating activities
  • Investing activities
  • Financing activities

Understanding each of these sections will help you understand your cash flow statement as a whole.

Your operating activities refer to your cash flow resulting from net income or loss. Accounting for operating activities will require you to reconcile your company’s net income with the actual cash you either received or used during your operating period.

This calculation means that your cash flow statement will need to adjust your net income for non-cash items such as depreciation and other expenses, as well as record any cash used for other operating expenses or liabilities.

The result shows the movement of cash within your company during the specified period. Most software can generate cash flow statements for any given period, though they are typically prepared either quarterly or annually.

 Next, your cash flow statement records the cash movement associated with investing activities. 

This calculation generally means two things. First, it can mean purchasing long-term assets, which include property, equipment, inventory, or the purchase of securities. You would record all of these purchases on the cash flow statement to represent cash leaving the hands of a company.

Second, it can reflect a company selling any of these assets. Again, your company’s assets include anything that you can convert into cash. When this happens, your cash flow statement will record the change in the section on investing activities.

Finally, your cash flow statement will include cash flow based on financing activities. What types of activities does this include? This section can include selling your company’s own stocks or securities or borrowing from banks and other financial institutions. 

These activities are recorded as cash flowing either into or out of your company. For example, when you pay back a loan, it would be recorded here as the use of cash flow.

How Your Books Influence Your Financial Statements

Earlier, we compared your financial statements to a report card. But the reporting data will be meaningless if it’s not up-to-date and accurate. Yet because many business owners have to juggle multiple responsibilities, it’s easy to fall a little behind.

Getting caught up in your bookkeeping is the first step. Having accurate, up-to-date books will ensure that you’re able to generate meaningful financial statements. Using caught up books will let you create each of these types of reports with precision and pinpoint accuracy.

Remember, the financial reports we’ve discussed aren’t just important for evaluating your company’s past; they can be useful for drawing a roadmap for your company’s future. You should use only the best and most reliable data for generating these reports, which can then be used to refine your strategy moving forward.

 Otherwise, you’re going to be faced with quite a few headaches. Not only will you be unable to assess the financial strength of your company, but your lack of reliable reports will jeopardize your eligibility for small business loans. 

If you don’t get your books caught up by tax season, you could find yourself faced with additional tax penalties for failing to accurately report income. For this reason, many business owners discover that reading financial statements becomes a lot more reliable when they outsource their financial processes to an online firm. 

Relying on a team of experts can ensure that your books are up-to-date, accurate, and can be used to generate the kinds of reports you need to make informed business decisions.

Better Reporting, Better Business

Reading financial statements gets easier with time and experience. Soon enough, you’ll wonder how your business ever survived without these important documents. You’ll also wonder how you can improve the accuracy and immediacy of your reporting procedures.

The answer is to partner with one of the best accounting firms in the industry. Xendoo can help you catch up on your books, provide ongoing accounting services, and even provide access to advanced reporting features, so you always stay in the loop regarding your company’s financial performance.

See for yourself by signing up for our no-obligation free trial. You’ll get access to the features that can take your business from good to great and improve your trajectory for the future.

tracking business expenses on paper

The Top 8 Expense Trackers for Small Businesses

tracking business expenses on paper

Tracking business expenses is one of the smartest things you can do to take control of your company’s finances. With better organization, you’ll find that your business is more streamlined and profitable, and you’ll be dealing with fewer headaches when tax season rolls around. 

If you ever find yourself facing an IRS audit, proper tracking provides the documentation you need to validate your income and deductions.

Thanks to the many business expense trackers available, tracking small business expenses is easier than ever. You’re probably already familiar with some of the top choices on the market, but let’s take a closer look at the top 8 expense trackers for small businesses.

Expensify

Tracking business expenses often starts with saving your receipts. Expensify allows you to scan your receipts and import the details into the app. You can then organize expenses by category and create reports to highlight trends in your company’s spending patterns.

Employees can use the app to easily send reimbursement requests to supervisors and business managers, and staff will appreciate the rapid, next-day reimbursement feature offered through the app.

Expensify provides an ideal receipt-capturing solution for tracking expenses on the go, and the app can even handle foreign currency. You can also sync your company credit card, so company expenses are pulled in automatically.

 The free version of Expensify allows for a certain number of receipt scans, after which the service costs $4.99 per month.

Mint

Mint is a great free tool for independent contractors and freelancers. Mint lets you scan your bank and credit card statements and upload them directly into its expense-tracking platform.

The app lets you set budgets and financial goals, as well as track your credit score. Mint also allows users to set alerts and reminders for big purchases or remind them of due dates for time-sensitive expenses such as utility bills.

Admittedly, Mint’s features are limited, but this system can be ideal for smaller companies or the self-employed.  

QuickBooks

As a small business owner, you may already be familiar with Intuit QuickBooks as an accounting software platform. Admittedly, QuickBooks is a powerful tool and can be used to manage literally every financial aspect of your business. You can use QuickBooks to perform such processes as:

  • Running payroll
  • Accepting online payments
  • Tracking bills and expenses
  • Tax planning and preparation

The QuickBooks app also allows you to scan your receipts and import this data into the system. You can later use this data to generate expense reports and track sales tax. Business owners can expect to pay at least $12.50 per month for QuickBooks’ basic package, though this price will rise with the addition of advanced features.

Few tools are as powerful as QuickBooks, but that tends to be a double-edged sword for most small business owners. QuickBooks can be ideal for those who already have some knowledge of how to use the software or for businesses that have a team devoted to tracking business expenses and keeping up with the books.

Excel

Sometimes, the tried-and-true method works best. Microsoft Excel can be a simple, straightforward way to manage your company’s expenses without the bells and whistles of other tracking systems on this list.

The program already contains bookkeeping templates that you can start using for your small business, with spaces for recording income and expenses. Excel users can take advantage of automated formulas to perform calculations with the click of a mouse.

The data in your Excel spreadsheet can easily be migrated to other programs to allow you to create reports and share data with business partners and lenders or simply monitor your company’s finances over a long period.

The flipside to Excel is that it offers no receipt-scanning capabilities or other advanced features. This limit means that you (or your employees) will have to manually enter your expenses as they occur, which increases the possibility of data being overlooked or entered incorrectly.

Xendoo

As a small business owner, tracking business expenses can become a distraction from your core business activities. So why not outsource your books to a team of financial professionals? 

This approach, of course, is the philosophy of Xendoo, who can provide expert-level online bookkeeping services for a fraction of the cost of an in-house accountant.

How can Xendoo help you keep track of your expenses? First, the Xendoo team understands that busy entrepreneurs can sometimes get a little behind. It’s not unusual for business owners to have an envelope full of business receipts that haven’t been recorded in the books.

Getting behind in the books once in a while is perfectly understandable, but it can keep you in the dark when it comes to your company’s health, and it can become a total nightmare when you need to file taxes. 

Xendoo’s catchup bookkeeping services can help you catch up on your expenses, ensuring that your books are accurate and up-to-date.

But Xendoo can help with much more than this. When you partner with Xendoo, you’ll gain access to a team of experts who can provide ongoing services to manage all of your bookkeeping needs. 

This service can be a great help when it comes to tracking business expenses, and the Xendoo reporting tools allow you to keep your finger on the pulse of your company.

Wally

Wally is a budgeting app that has largely been marketed toward millennials. The eye-catching, colorful graphics and social networking feature mask the true power of this tool. Wally uses artificial intelligence AI to integrate your financial accounts and provide insight into your spending habits.

This tool has largely been marketed for individual use, offering young adults a snapshot of their financial priorities and helping them develop better financial discipline. But the features of this app could easily be translated to the world of business and may be great for freelancers and solo entrepreneurs.

That’s not to suggest that you can’t use Wally with teams. Wally allows you to set up groups of users and pool data, which could be useful when collaborating on projects and tracking business expenses. Wally also enables users to set due dates and send reminders, ensuring your bills are always up-to-date.

The AI reporting features could also highlight trends and patterns in your company’s finances, providing insight that can help you refine your strategy and adjust spending for future goals and projects.

Wally offers a free version, though its advanced account-linking features will require a monthly fee, starting at $3.99 or $32.99 when billed annually.

Goodbudget

As the name suggests, Goodbudget is a software platform that allows you to create and manage a budget. Goodbudget relies on what’s called “the envelope method.” This method means that you’ll develop a series of expense categories and then deduct your expenses from the appropriate category as they occur.

For example, if you have an “envelope” for supplies, you would set a monthly budget for that envelope, then subtract from that category the next time you buy printer ink. The goal, of course, is to stick to the budget for each individual envelope.

This approach makes Goodbudget one of the simplest tools for first-time users. Suppose that you’re new to the business world. In that case, Goodbudget’s intuitive “envelope” system can help you think more carefully about how to categorize your expenses and how to manage the budget of each individual category.

Unfortunately, this might mean that the app requires more attention than other services on this list. You’ll not only have to manually enter your expenses as they occur, but you’ll also have to input data into respective categories. 

Similarly, reporting features are fairly minimal, which means that you won’t be able to spot trends when tracking business expenses. This minimalism makes Goodbudget a great tool for solo entrepreneurs and freelancers but a bit lacking for growing companies.

Zoho Expense

Zoho has already been a big name in the small business community, offering a library of great tools for entrepreneurs. Zoho Expense is their solution for tracking business expenses, with some great features that make it ideal for companies of any size.

Zoho Expense allows you to scan receipts and input data as expenses occur, and you can use the built-in GPS to track mileage for your business trips. This design makes it great for business owners or employees who are on the go, and you can also set per diem rates for employees.

The reporting features are also quite advanced, offering you the ability to pin receipts to expense reports and sort expenses by category. 

The app also syncs with business credit cards to keep track of all of your business transactions. If you use other Zoho products for your business, you can integrate data to provide a powerful financial tool for your small business.

 Zoho Expense starts at $5.00 per user per month, though you’ll need a minimum of three users to deploy their service.

Do More than Keep Track

Tracking business expenses is the foundation of a good financial strategy. That’s why Xendoo offers cutting-edge solutions for today’s modern businesses. 

Our accounting services can help you stay caught up with your books and provide advanced analysis to help you optimize your business. Experience our free trial, and see why countless business owners have trusted Xendoo for their accounting needs.

A business owner working with a laptop and calculator to determine his tax savings

Tax Savings for Small Business Owners: Bonus Depreciation and Section 179

When making a major purchase for your business, you are expected to spread the tax deduction out over the lifespan of that purchase, which provides small tax savings over the years. But, why wait? Business owners can take advantage of Bonus Depreciation and Section 179 to invest in their businesses, resulting in an enormous tax break! 

In this blog post, we will explain how the deductions work, and how you can use them to maximize your tax savings. 

How Do the Deductions Work? 

Section 179 allows you to deduct the full purchase price from a qualifying new or used business asset, while Bonus Depreciation allows you to deduct a percentage. Currently, Bonus Depreciation is being offered at 100%, so both options will allow you to write off the entire cost of your purchase in the same year. 

There are certain criteria that the asset must meet to qualify for the deductions:

  • Tangible Items. This includes, but is not limited to, physical items such as office furniture, equipment, computer software, and business vehicles exceeding 6,000 pounds. 
  • Interior Improvements. While land and buildings do not qualify for Section 179, interior improvements do. Examples include, but are not limited to, fire alarms, security systems, roofing, and HVAC. To qualify for Bonus Depreciation, qualified improvements must have been completed after the building became operational. Building enlargements, elevators, escalators, and any internal structural framework changes are ineligible. 
  • Used for Business. Assets must be used for business purposes more than 50% of the time to qualify for Section 179 and Bonus Depreciation.

There are many major purchases that business owners can make, and claim these deductions. If you have made or plan to make a major purchase for your business and are unsure if it qualifies, speak with an online accountant at Xendoo to learn more. 

Are There Limits to the Deductions?

For 2021, Section 179 is limited to a maximum deduction of $1,050,000, and the total equipment purchased by a business cannot exceed $2,620,000. Bonus Depreciation is currently being offered at 100%, but is scheduled to decrease to:

  • 80% after December 31, 2022 and before January 1, 2024.
  • 60% after December 31, 2023 and before January 1, 2025.
  • 40% after December 31, 2024 and before January 1, 2026.
  • 20% after December 31, 2025 and before January 1, 2027.

If you are considering utilizing Bonus Depreciation, now is the time to do so, as the percentage you can claim will start to decrease soon. 

Section 179 allows you to split the deduction over time. For example, you could write off half of the purchase up front and spread out the rest over the next few years, allowing for greater flexibility on your deduction. It should also be noted that your business must have a taxable profit to claim Section 179, as the deduction is limited to your business’s net income. 

For example, if you have a net income of $60,000, and you purchased $70,000 worth of equipment, the deduction will be limited to $60,000. You can carry the remaining $10,000 deduction into the next year, as long as your income allows for it.

Bonus Depreciation requires that you deduct the entire cost within the year. However, there are no income restrictions on this deduction, unlike Section 179. Even if you make a purchase that exceeds your net income, there will not be a limit to the deduction, as it covers 100% of the purchase.  

Business owners can claim both Section 179 and Bonus Depreciation, but Section 179 must be taken first. They must also be applied to different purchases. For example, you could claim Section 179 for a business vehicle, and Bonus Depreciation for office furniture. Consult with one of Xendoo’s online Tax CPAs to discuss all your options.

Maximized Taxes. Minimize Stress. 

Bonus Depreciation and Section 179 can provide substantial tax breaks for your business. The Xendoo team is here to help you maximize your tax savings with these incredible opportunities! 

Let Xendoo handle the hassles while you put more money in your pocket and take your time back. Our expert bookkeepers, accountants, and CPAs can help you navigate your financials throughout the year!

Schedule a call with one of our online accountants to get started.