Deciding Between Bookkeeping Software and Bookkeeping Service

Bookkeeping - the record of day to day financial transactions such as sales, purchase, income and payments by an individual or an organization. These records needed to be produced at the end of every financial year. From small to medium to large business, maintaining financial records is a mush which therefore necessitates bookkeeping process.

The choice of preparing and producing the accounts: organization basically have three options: one is to prepare and maintain records manually; next can be to employ the bookkeeping services and the last option is to use bookkeeping software system.Each has its own advantages and disadvantages. What ever may be the employed method, the ultimate thing is to produce accurate accounting information needed on time.

As the recorded financial transaction is very important for financial decisions and knowledge over the business performance, efficiency and accuracy over the recorded transactions becomes the major concern. Further, the accounting information is the accumulation of documents such as sales invoices, purchase invoices and possibly bank records during the financial year and after the end of the financial year for tax purposes.

Improper records of the above said data (as financial records) leads to unwanted penalties, simply administrative burdens. In analyzing the choices: keeping and maintaining manually may lead to data lose, inaccuracies, fines and penalties thus leading to severe issues at the end of the financial year.

Manual bookkeeping needs regular and periodic evaluation of the data. In going for the choice of having a bookkeeper, trust and knowledge over the operation becomes the mandatory thing for any organization. Also periodic and regular tracking of the works and records maintained is necessary. Having bookkeeper, it is also partially includes in manual work where accuracy level is still depends on the knowledge of the bookkeeper.

The third choice of installing bookkeeping software also has few disadvantages. But these are overruled by its wide advantages. The major advantage is the reduction in paper work and 90% of reducing the manual work thereby achieving accuracy and efficiency. By having bookkeeping software, no one other than the business owners and the authorized person know the financial status which can be called as the security over the accounts.

So by having the gist in hand, the advantages and disadvantages over the choices can be analyzed as discussed above. It can be said with proof that accounting software provides better financial control and performance over the others: manual bookkeeping and having bookkeeper. Thereby administrative burden can be reduced and the organization can focus on its core activities.

How your bookkeeping can boost your tax deductions

Bookkeeping is the key way to bring one’s tax strategy in full circle. It’s the best way to know what is deductible and how to maximize your business deductions. Here is a checklist that make sure bookkeeping is maximizing travel, meals and entertainment deductions. Since these are the three ways where everyone doesn’t have restrictions to themselves. Everyone have to consider these 3 things as major constraints in bookkeeping in order to boost your tax deductions.

Get reimbursed for business expenses that you pay for personally.
Have you ever been to a restaurant that only takes cash? Or traveled in taxi that only accepts cash? Or have you misplaced your business credit card and had to use your personal credit card? These are just some examples where we have to pay our business expenses with personal funds. We could easily miss these expenses so keep an file handy and put all of your receipts in that file. So that you have got a handy report that you have spent from your personal fund.

Have separate account for code meals that are 50% deductible in order to keep them distinct from other expenses that are not subject to this 50% rule. Many times we could see just one meal account in the chart of accounts. The problem with this is that while meals are generally only 50% deductible, some meals are 100% deductible. The mistake that we see most often when reviewing a prospect's prior year tax return, is all meals are treated as only 50% deductible (because they are all coded to one account) and we don’t have any strategy to identify meals that are 100% deductible.

Always maintain your travel expenses separately from your meals and entertainment expenses. As business travel is 100% deductible so separate it out as part of your bookkeeping system. Otherwise, you will have to sort through that account at the end of the year, or worse, you may sometimes forget to sort through that account and everything in the account is treated as only 50% deductible!

Use a separate section in your online bookkeeping software to make notes about who, what, when, where, how much and the business purpose of your travel, meals and entertainment expenses. By proper bookkeeping it is easy to boost your tax deductions, particularly for travel, meals and entertainment. This is an area where deductions are regularly missed and not properly documented, but once you know the rules and use my system, you'll find more and more deductions.