Unless you’ve been under a rock the past 5 years, I’m sure you’ve noticed the era of cloud-based apps has far outpaced its desktop counterparts. We like cloud-based apps a lot—for good reasons that are too many to go into here. You can check out this BLOG POST to see a previous post about cloud-based apps. We like them so much that we’ve completely transitioned our business to using cloud apps for us and our clients. We spend lots of time vetting out the ever growing list of cloud-based apps, and have come to rely on 3 core apps. These apps are our top pick to make our “PowerPack” of apps that we set up with each client.
Xero touts itself as “beautiful accounting software”, and we agree. From the first time you log in, you can tell right away that Xero has taken design pretty serious. But that doesn’t mean that it lacks in power and functionality. Features include: invoicing, quotes, purchase orders, A/P (bills), document management, real-time cash flow tools, contact management, powerful reporting, and much more. Perhaps one of it’s best features is the eco-system of software add-on’s that integrate with Xero.
Trust us, we know how daunting it is to manage all the paper for running a business! Hubdoc solves this issue with automation and storage. The idea behind the system is:
- To be a repository for your bank and utility statements by connecting to your online accounts and pulling the statements automatically
- To serve as an easy way to get the information from receipts, into your accounting system. Simply snap a pic of any receipt using the mobile app on your device, and Hubdoc will read the date, amount, and vendor.
By integrating with Xero, Bill.com, and Google Drive, you can have a completely paperless system that allows you to automatically keep bank, utility statements, and store digital copies of your receipts.
Expensify – Expense Reports and Mileage Tracking
Expensify has revolutionized the way you track and submit expenses for reimbursement. From single to a team of several employees, expense reports for mileage, personal expenses, and travel can easily be imported into Xero and even reimbursed via ACH straight from within the app. For most of our single-owner businesses, it works perfectly for keeping track of money you spend on personal accounts. Enabling GPS on their mobile app makes it a breeze to track your auto mileage as well.
Want to know more about these “Power Hitter” apps? Leave a comment or reach out to see how they can benefit your business and even get them for free as part of one of our monthly service plans.Read More
If you’ve been in business for any amount of time, you’ve probably heard something about keeping your receipts. And we’ve heard some good myths about when and when you don’t have to keep them. We’re here to set the record straight and tell you exactly when you need to keep receipts.
First, let me explain that there are different suggested records for different types of transactions. For example, what you keep to prove the purchase of inventory is different than gas for your car. We’re going to explore two categories today: General, and Travel/Entertainment expenses. But there are many more that we’re not discussing today.
What are they?
General expenses are things like paper, utilities, cell phone, etc. Those types of expenses must be be proved with a bank/credit card statement, receipt, or invoice that shows the date, amount, and busienss purpose.
How long should I keep records for?
Generally speaking, you’ll want to keep records for at least 3 years from when you claimed them on your tax return. The good news is that you can keep them in paper form, or electronically. We’re a big fan of using the mobile app for Xero to take a snapshot of the receipt, and recording the transaction right on the spot when it happens. You can also use other systems like Evernote, Google Drive, Dropbox and Box to store your records. If you choose to keep paper, then have a good file system organized by year and type of expense, at the very least.
Travel & Entertainment Expenses
What are they?
Just as it sounds, expenses you incur to travel, take clients out to lunch. It also covers lodging, rental cars, transportation, and a host of other things. See IRS Publication 463 that is referenced below for more things that qualify as travel and entertainment expenses.
How should I keep records and for how long?
The trick here is to have “adequate” records. There are 4 main points that you must prove in order to have a deemed adequate expense in this category:
- Time (for travel)
- Place or Description
- Business Purpose
What that basically means is that you must have a receipt, log book, or some kind of record that proves those 4 main points for each expenses you deduct. Estimates don’t count. The long and short of this is: that you keep all receipts/invoices for each expense in this category. There are only a few exceptions, one of them being that if your expense in under $75 (except lodging), you can simply provide bank statements to prove you expense. Of course there are more exceptions, but we don’t have time to go into them in this post.
And like above, you should keep these records for 3 years after you file the tax return for the year you’re taking the deduction in.
The IRS has some pretty elaborate articles and publications on this topic. We referenced IRS Publication 463. Feel free to check it out if you need to dive in a bit deeper. Or, leave a comment and reach out to us and we can help you navigate the murky waters of business deductions.
“My bank says I have $5000, but my Profit and Loss says I made $10,000… huh?!”
Ever asked this question?
With this post, let’s dive into one of the most mis-understood and under-used reports that you have in your accounting software arsenal: Statement of Cash Flows (aka Cash Flow Statement). This statement will answer the very question may have plagued you for some time now.
In short, this report follows one of the most important things in your business: CASH. It tracks where the cash came from, and where it went. The report breaks up your income and spending into three different categories: Operating, Investing, and Financing activities.
Here’s a brief explanation of each:
- Operating Activities: this is income and expenses from regular revenue and expenses in your business. For example, sale of services/products that you provide, and money spent on supplies.
- Investing Activities: this is money spent on selling and purchasing assets. For example, you buy a new computer and sell an old vehicle that the business owns.
- Financing Activities: this is money that you or an investor infuses into the business, or money taken out by owners. For example, you contribute money into the business to cover expenses, or you take money out of the business to pay your self as an owner/shareholder.
Now, let’s show you what a statement looks like. For this post, we’re using a statement from Xero. QuickBooks will give you one that looks a little bit different, the differences are minor, and it tells you the same thing.
Or, here’s a downloadable version of the same report:
This report answers the question “where did my cash go?”, and will show you where the cash went. At the very least, this report should help you understand your business activities so that you can make better decisions. If you need further help making sense of this, or maybe your business has a unique situation, please don’t hesitate to reach out and contact us.