Handling Hard Copy

The biggest difficulty with either outsourcing your accounting department entirely or letting them telecommute is that there are more pieces of physical paperwork in the accounting department than in any other part of the office. Checks, receipts, tax forms and other paperwork build up and someone will have to deal with all of it.

But if you’re willing to make a commitment to reducing all that hard copy, it’s possible. Services such as Shoeboxed can automate the process of scanning in your organization’s receipts and putting them in a form that a virtual bookkeeper can handle easily. It may just be a matter of adjusting how your mailroom operates: Invoices, receipts and other such paperwork needs to be scanned and then filed. It’s a simple transition, although it may take a little work to set up.

There is a question of security — you don’t want your employees’ tax forms floating around the Internet — so you’ll need to ensure you use a secure system.

Outsourcing Accounting Functions

Moving your bookkeeper and other accounting staff out of your office isn’t necessarily that difficult proposition, but a question of location will come up if you want to outsource. Increasingly, firms are offering extremely inexpensive accounting and tax preparation services using staff based in countries such as India and the Philippines. Such outsourcing may be less effective for financial work than for other parts of your business, however. When it comes to your company’s finances, it’s important to make sure that you’re working with a staff deeply familiar with the regulations in the U.S. (or wherever you’re based). It’s even better if you can find someone up to speed on your state’s requirements. Otherwise, come tax time, you can find yourself facing a lot of trouble. There are enough ways for a problem to creep into your taxes that it just doesn’t make sense to add the potential problems of working with someone who isn’t local.

It comes down to striking a balance, if you want your accounting staff to be able to telecommute or if you want to let someone outside your company entirely handle the function. Payroll firms and other specialist companies make it easy to outsource the process, but you’ll still want to make sure that you’re working with a local team, even if you never see them face-to-face.

Photo courtesy Flickr user Le Petite Poulailler

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In my review of bookkeeping and tax prep service Outright back in April, I highlighted not only its ease of use, but also its ability to play nicely and communicate with other apps. As a bookkeeping app is just a part of the chain of tracking income and expenses, these connections to your existing data are critical and keep data entry times to an absolute minimum.

I’m thrilled to hear that the Outright folks are extending this reach, with two major additions to the list of apps that Outright is compatible with being released today. Both should really help the typical small business keep finances and expenses in check.

I would imagine it’s safe to say that the majority of small businesses use a credit card for purchasing supplies and for most of their day-to-day expenses. The convenience, delayed payments and rewards programs make them a favored option. This new partnership with Expensify, which we covered while it was in beta a few weeks back, allows you to now directly import your credit card transactions right into Outright on a nightly basis. It even puts your expenses into the appropriate Schedule C categories.

Also announced today is the ability to directly access your PayPal information from within Outright. Given the number of small businesses that use PayPal for payment processing (both expenses and invoicing), this should make tracking those transactions considerably easier.

The authentication methods differ for these integrations. The Expensify authorization requires you to input your user name and passwords for your bank sites. This information isn’t retained by Outright, while Expensify is a full PCI Compliant application with permissions to only read your data, not to perform any transactions.

The PayPal integration, on the other hand, uses a method similar to the OAuth protocol used by Twitter. When initiating the connection, you are taken to the PayPal site to log in which then passes back an authentication token back to Outright delegating the proper permissions.

I make the distinction because while I believe all necessary precautions are considered and in place for either method, I appreciate how Outright is pushing for easier and more secure data connection processes and using those whenever possible.

These new integrations add to the existing hooks already in place with Freshbooks, Shoeboxed and eBay, providing a wide spectrum of data connections to get the bulk of your data directly into Outright without duplicating your data entry efforts.

Also revamped is the reporting and graphing engine used in Outright. If I have had any criticism of Outright in the past it was that, other than the outstanding Schedule C report it generates, the reporting options have been lacking. It has always been somewhat difficult to view the data in any format other than the defaults. The new graph formats are much more comprehensive, and data filtering options allow for a more customized experience.

New users to the service will be greeted with a nice wizard-like process to get up and running quickly. If you arrive armed with the account information you need, it shouldn’t take more than a few minutes to get your accounts connected and have an almost immediate glimpse into your business financial health. Existing users can access these new connections from their account management screen.

In the big picture view, this is really just an another incremental step for Outright as integration with other apps is at the forefront of their strategy. Outright and the other members of The Small Business Web are doing wonderful things together to make our day-to-day experiences using web software easier and more productive.

Registration and use of Outright is free, although there are plans to offer paid plans in the future.

Do these new hooks into Expensify and PayPal make Outright a more attractive option for you?

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As we’re at the midyear point, now is a good time to evaluate how prepared you are for tax preparation, rather than wait for year end. To sweeten the deal a bit, the folks at Outright have partnered with Network Solutions to offer a free domain name and business profile page for one year to new signups. The promotion runs through until the end of July.

If you don’t already have a web presence, this might be a great way to get yourself online, and to get the bookkeeping and tax preparation benefits of Outright. Just register as normal with Outright and they’ll send you the details on how to get your domain name. It is estimated that 50 percent to 60 percent of small businesses do not yet have an online presence; offers like this can give people the ability to take the plunge and move their business to the web.

What I really like about this offer is that it is very much in the spirit of the Small Business Web movement that I think is tremendously important for the long-term success of web services. While not an integration move, it shows how service providers can work together to bring a real benefit to their small business users. I’ve watched these interactions and relationships develop online and am thrilled to see real benefits coming out of these partnerships.

Is your business online? Could you use a free domain name?

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Types of Accounting & Bookkeeping Careers

People in this career can handle payroll and business operations, manage personal finances and balance books. Careers in accounting and finance can vary as illustrated by the following examples.

Accountant: Ruth Perryman of The QB Specialists is an accountant with a virtual office who uses GoToAssist to remotely access client QuickBooks files instead of sending files back and forth. She sets up her clients to electronically process documents as well as getting them to use online banking for checking and credit cards. Her business relies on Intuit’s Merchant Services and Billing Solutions for processing invoices and credit card payments, Intuit’s Assisted Payroll for payroll processing and SmartVault for paperwork.

Many accountants report that clients expect them to come into their offices to get their invoices paid. Ruth Perryman works around this by charging more for onsite work. Her clients grow more comfortable with remote work after learning the process. For times when a client needs to send a printed bill, Perryman can process the bill and print it on the client’s printer. All the client has to do is grab the print out, put it in an envelope and mail it.

Certified bookkeeper: Collette Aurand of Black River Bookkeeping is a certified bookkeeper servicing small business. She has several clients to which she provides remote bookkeeping services by connecting to their computers and entering data into their files. She relies on remote control apps like GoToMyPC and LogMeIn. “The key to successful remote access is to actually work as a team with your client. For some of my larger clients, I will work with an administrative assistant and for some of the smaller clients, I will work directly with the owner or partner,” Aurand says.

Tax preparation: Eve Rosenberg, the TaxMama, handles income tax returns and tax planning, writes about taxes and teaches classes to tax professionals. Tax preparation can also be a career for folks who only want to work on a seasonal basis. Becoming a tax preparer does not require having an accounting degree or any kind of finance background as there are schools like The Income Tax School that can get you on board.

Bookkeeping Education: With small businesses looking for ways to save money, more do their own bookkeeping. People like Martha L. Chase of Paper Chase Accounting teaches clients how to enter invoices, receive payments and do bank reconciliations.

How to Qualify

Take accounting courses at the local college or online, get certified in QuickBooks and find a CPA who can be a mentor. Those with business degrees often take accounting courses as part of the requirement.

For example, Brigitte A. Thompson, president of Datamaster Accounting Service, LLC has a business degree and expanded on it by attending QuickBooks training, taking Small Business Administration (SBA) tax workshops through the local Internal Revenue Service (IRS) and attending H&R Block tax courses. Thompson also reads many books on the subject as well as IRS publications.

Accounting & Bookkeeping Tools

Accountants and bookkeepers working online rely on QuickBooks, QuickBooks Payroll, SmartVault, Excel, Pro Series for taxes, email, social network sites, IRS.gov and large file-sharing sites like YouSendIt.

Find Clients

Bookkeeper Karen Jager takes advantage of social networking by staying active on Facebook, LinkedIn, Plaxo and  Twitter. “In today’s market, people go online to find everything and anything they need, so having an online presence is crucial. Besides the social networking sites, I also post ads on craigslist. I try to drive traffic to my web site using ads and the social networking tools,” says Jager.

Linda Campanelli of Campanelli & Associates, CPA LLC, has sent postcards to businesses new to the area and offered a coupon in a local advertising catalog. These cost a bit, but paid for themselves. She also sent letters to friends and associates requesting referrals, and then followed up with phone calls and invitations to meet for coffee. This strategy involved a minimal amount of cost and paid off the most. She plans to publish a quarterly newsletter that provides valuable information and keeps her in her clients’ minds.

No matter how much experience or skill you have, turning in the first financial reports to your clients comes with some anxiety, but as you do more your confidence and expertise will grow.

Would you consider bookkeeping or accounting as a web working career?

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While there’s no shortage of accounting programs available, with varying levels of complexity and pricing, it can be difficult for a small shop to find the right solution. Focusing on ease of use and integration with other web apps, Outright is a great choice for web workers.

In reality, the accounting needs of the average solo web worker are usually pretty modest. Record the money in (income) versus your money out (expenses) and be prepared to pay your taxes when they’re due.

At its core, Outright is a basic web service designed to allow you to easily track your expenses and income. Using a familiar check register interface, you enter in transaction details and get quick and simple access to the general health of your business.

As a member of the Small Business Web initiative I wrote about recently, Outright integrates well with FreshBooks, the invoicing app, and Shoeboxed, the receipt organizer (both also SBW members).

In fact, it is when used in conjunction with these other apps that Outright really stands out. While it has all the right things to make data entry easy, like auto-complete and keyboard shortcuts, nothing could be easier than having your existing invoice and expense data imported automatically. When connected to your Freshbooks or Shoeboxed accounts, all transactions are updated nightly and even maintain a link connection so you can get to the original source quickly.

There are some challenges with this integration, though. For example, Outright exclusively uses the categories from  Schedule C but since Shoeboxed doesn’t have that limitation, there are instances when it is necessary to manually re-assign a category to synced records.

I think the folks at Outright don’t stress enough the tax preparation angle when describing the usefulness of their service. With email reminders when quarterly payments are due, estimated payment amounts and a really handy Schedule C printout, using Outright just for the tax preparation functionality alone might make great sense.

If you’re already using Freshbooks or Shoeboxed, then getting an Outright account is almost a no-brainer. But even if you’re not using these apps, then Outright is still a very good choice for basic expense and income tracking.

oDesk integration was also recently added, and I imagine support for other apps is coming soon, so it might be a good idea to check in occasionally and see if they are supporting your app of choice.

Outright is free during the beta period and works wherever you have a browser and Internet connection.

How do you manage your books?

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Now, I’m not a CPA, and the closest I’ve come to taking accounting is being a professor’s assistant in an online graduate program course. However, I must do something right as I’ve been on my own for over four years and my business tax payments remain on target. So here I’m going to share what I do, as it might work for you or give you ideas on how you can keep on top of your business finances.

I keep it simple by having just two tools in my accounting toolbox: QuickBooks and Electronic Federal Tax Payment System (EFTPS). Substitute QuickBooks with your favorite accounting application to make this process work for you. I tend to pick up new software fast, but not so with QuickBooks. Regardless, it takes care of all of my invoicing, expensing and tax needs. But we won’t go into that. My way is just one way; check the comments on this post to see a bunch of great ways to handle your taxes.

There are two things you need to do:

• Track income and expenses.
• Pay quarterly taxes (otherwise known as 1040-ES).

Track Income and Expenses

How do you invoice customers and track payment? What about tracking things you buy for your business? Applications like QuickBooks make it easy to create reports to see your income and expenses by quarter, year, fiscal year or customized period.

Keep all of your receipts for expenses related to your business. Don’t worry about organizing them. Grab a cheap expandable folder and throw them in there. Write or label it, “Business receipts.” For electronic receipts, create a folder in your email account with the same name. Or if you’re an organized freak like me, scan your receipts and save them in a folder.

Remember that anything related to web working counts as an expense, including your home office space (but verify this with your accountant) and family printer, along with its toner or cartridge replacements. Any time you take the car to buy supplies or to attend an event where you meet with folks on business, track the car’s mileage. Tax law allows you to deduct a set amount for mileage (again, check with an accountant as this varies per year). Paying for parking at the event also counts. Magazines and books related to your profession make the cut as expenses. Add the cell phone, landline phone and any other communications services. Record all purchases in your accounting software on a regular basis so you can deduct the expenses when quarterly tax time rolls around.

Pay Quarterly Taxes

It definitely helps to have a good accountant you can go to, especially for advice on state laws. Or you can brave it and do the research yourself (but I’ll wish you luck decoding bureaucrat-speak). My family has relied on an accountant since before I went into business for myself. They can find deductions you might not think about. A good accountant is worth way more than what you pay them.

Unless you’re a full-time employee with a company that already does the deductions for you, you need to pay federal taxes (1040-ES) on a quarterly basis. EFTPS Online makes it very easy for American web workers to pay online or over the phone. The service costs nothing, stays open 24/7 and accepts payments in advance.

According to the IRS:

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

As a sole freelance web worker, I pay 1040-ES on a quarterly basis. The due dates for the quarterly payments are as follows, along with the periods they cover:

• April 15: Jan. 1 – March 31
• June 15: April 1 – May 31
• Sept. 15: June 1 – Aug. 31
• Jan. 15: Sept. 1 – Dec. 31 of the previous year

For those payment days falling on a weekend or holiday, the payment is due the following Monday.

EFTPS lets you set up an account with your taxpayer identification number, which is either your social security number (SSN) or employer identification number (EIN). You also provide your bank account information so you pay your taxes directly without writing a check. I’ve been doing this for years without problems.

So how do you know how much to pay? My method is simple, but it may not apply or work for you. For me, I base the amount owed on my household’s tax bracket. Here’s an example for someone who falls in the 20 percent bracket.

1. Figure out earnings for the quarter. From Jan. 1 – March 31, you bring in an income of $10,000.
2. Figure out the expenses for the same quarter: $500.
3. Take the income and subtract the expenses for the final number of $9500.
4. Multiply the final number by the bracket. Here it’s 9500 x .2 (20 percent) = $1900.

$1,900 is what Mr. Example owes for the quarter on April 15. I use this formula and it has yet to fail me. Your tax bracket may change, as it has for me. Just change the percent part of the formula as needed. The IRS web site also provides illustrated examples using its worksheet.

Take advantage of your accountant’s time and find out your tax bracket percentage and what deductions to consider for the next tax year. For example, if your family plans to take a summer trip (lucky you! May I come?), find a way to do business while on the trip so you can deduct parts of it.

How do you manage your taxes?

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Of course, like just about everything else, you can also track your expenses online. The latest service in this field is expens’d, a simple and free web application. The folks behind expens’d say they were trying to avoid simplicity, and they succeeded: you get instant signup and your own subdomain for free (additional users move you into paid plans), and a way to track name, note, date, and amount for expenses. You can also tag expenses (though I don’t see any tag search yet) and create reports, which can be sent by email to anyone – perhaps the best feature here.

expens’d is entering a fairly crowded field – we looked at Xpenser last year, and more full-featured bookkeeping services like Mint and Freshbooks also offer expense modules. The most promising thing about expens’d is that it’s the first part of a planned suite of SAAS applications – so it’s worth monitoring to see if you can get useful tie-ins to other things.

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