If you outsource accounting services to a Minnesota based firm you gain two major advantages. First, you can take advantage of a company that specializes in nothing but accounting. Secondly, your money is being handled by people familiar with the ever changing tax codes and statutes of Minnesota.

Why Consider Outsourcing?

1. Lowers costs with Greater Benefits

Outsourced accounting firms can provide state-of-the-art infrastructure that assures superior results. As a result, you no longer have to purchase expensive software, additional computers, or hire personnel to maintain them. Because, an outsourcing firm specializes in nothing but accounting it can offer superior results in less man hours. The result for a small business means more profitability.

2.  Allows you to Focus on what you Do Best

By transferring accounting needs to outside specialists, business owners can focus on what they do best – run their business. Both management and employees are freed to focus on the most essential and pressing issues in their business. A business that chooses to outsource its accounting services also saves the time and capital that would have been required to hire, train, and pay accounting personnel.

3.  Increases Productivity Level

Time spent on running your accounting system is time lost to creating and implementing your business plan. Accounting, by nature, can be tedious and time consuming.  Resources needed for improving customer relations, creating better products, and providing better services can be tied up by the day-to-day requirements of good accounting procedures. Small businesses in particular simply do not have the personnel to properly keep up with innovations in accounting and changes in Federal and State tax regulations.

4. Takes Advantage of Real Time Tracking

Good accounting software is expensive and requires trained users. But it also can provide the kind of real time information normally relegated to large business. When you outsource your accounting to a firm you will have access to minute-by-minute information about your receivables and payables that make the difference to your bottom line.

5. Provides Greater Control for Business Owners

Business owners often hesitate at placing their accounting offsite because they fear losing control of their financials. The opposite is actually true. By placing your financials in the hands of a reliable accounting firm you will have time to use the data they provide to make good business decisions. Information will be available in an orderly manner as compared to having to process raw data on your own.

6. Effective Tax Calculation

Calculating your taxes properly is essential to the overall profitability of any business. Overpaying taxes obviously drains resources. However, failure to file and pay proper taxes can result in costly penalties. Often times such penalties can be avoided if financials are placed in the hands of someone with up-to-date training and knowledge of changes in the tax codes.

Most accountants are well qualified to do basic bookkeeping and handle your taxes.  So how do you know which one to choose? As in any business relationship, it comes down to compatibility of interests, outlook, and experience. To help you make the process of choosing a small business accountant simpler, here are some questions your prospects should be ready to answer.

Are you a Certified Public Accountant?

There are a many non-CPAs who do extremely well at small business accounting and financial consulting.  But depending on the nature and size of your business, you may need a CPA. CPAs have reached a certain education level, passed state-administered tests, and must re-certify on a regular basis. Some instances like audits and most loan applications will require a CPA’s involvement. A CPA charges higher fees and can be brought in for specific needs. Business owners have to determine which is best for their needs.

Who are your other clients?

It is important than an accountant understand your specific kind of business. Reputable accountants will gladly provide a list of current clients. If some of those clients are businesses like yours, that is a good indicator this accountant may be for you. It is also essential to determine if the prospects can handle the work load of another client in your type of business. Will they have the time resources to support you adequately?

Are you tech-savvy?

Accounting packages like QuickBooks are only as functional as the person who installs and runs the applications.  Do a little homework if you aren’t tech-savy so you can ask the right questions. For example, ask how they will incorporate your computer files with the technology in their office. What role will the Internet play in keeping in touch and interchanging financial information? Their readiness and ability to answer these questions indicates if they are the right accountant for you.

What kind of business advice will you offer me?

Ask the candidate to offer a couple of quick ideas on how your business could save money right now. Ask them for examples of how they offered useful business advice to other clients. Look for something beyond tracking numbers. Having a creative business mind is a huge asset towards helping companies grow and profit.

Are you active in the local business community?

Active accountants are interconnected in the local banking and business community. Determine if the person you are interviewing can introduce you to prospective customers, bankers, investors, and suppliers. Ask the accountant for examples of introductions they’ve made in the past for other clients and how those introductions played out.

How do you calculate your fees?

If they use a time-based fee structure, make sure you know their hourly rate, as well as all fees for expense reimbursement. Does a two-minute phone call or a one page fax mean an hour of billable time? If so, keep looking. Quality accountant will have a fixed fee structure and be able to present it to you in a clear and concise manner.

Small business owners have more important things to handle than keeping their own books. The best bookkeeping and accounting services in Minneapolis can handle your books, freeing you up to run your business, satisfy your clients and customers, and make a reasonable profit.

Why you Need a Bookkeeping and Accounting Service

Income Statement

Also known as a profit and loss statement, the Income Statement gives you an itemized reconciliation of expenses and revenues for your business during each time period. An accurate and detailed income statement enables you as a business owner to:

• Track expenses and revenues so you can verify your business’ performance.

• Discover areas of your business that are either over-budget or under-budget.

• Recognize unanticipated expenditures such as added utility costs, Internet services, or shipping costs.

• Flag unwarranted increases in product returns or costs or as a percentage of overall sales.

• Precisely calculate tax liability.

Bank Statement Reconciliation

Many small business owners are more than capable of balancing a bank statement but find it much more cost effective to have an outside expert handle this task. Reconciling your checking account on a monthly basis enables you to keep your accounting procedures, bank accounts, and taxes up to date. A bookkeeping and accounting service will ensure that:

• Any excessive or inappropriate bank charges are detected and steps are put in place to prevent any future wrongful charges.

• Lost deposits and checks are identified.

• Transactions are properly posted by your financial institution.

• Should any embezzlement of funds occur within your company, it is detected quickly.

• Cash and assets are effectively managed.

• Fraudulent or unauthorized checks presented to your financial institution are detected in a timely manner.

• Accounts are properly reconciled and you are protected from possible fraud.

Balance Sheet

A properly prepared balance sheet provides a clear perspective of your business’ financial condition for any specific moment in time. This allows you to:

• Identify and analyze trends in receivables and payables.

• Recognize the financial strengths and capabilities of your business in a timely manner.

• Make intelligent decisions about future business endeavors like planning for expansion.

• Identify the need for and steps to guarantee improved cash reserves.

• Recognize possible cash shortages and enact plans to respond to them.

General Ledger

A business’ general ledger is the heart of its financial records. Since every transaction of your business flows through your general ledger, it is critical for it to be clean and trustworthy. By reviewing a business’ general ledger system on a monthly basis, your bookkeeping and accounting service can identify discrepancies such as double billing or unrecorded payments and correct your books accordingly.

Consultation

One of the greatest needs of any small business owner is to have someone they trust and can consult with about business decisions. Part of the role of the best bookkeeping and accounting services in Minneapolis is to become a silent partner in making your business work the best it can.

If you are considering starting a business, a small business advisory service can become the unseen partner that ensures success during those critical first months of operation. Among other things your small business advisory service in Minneapolis can help:

• Develop business plans
• Identify and assist you in applying for sources of capital
• Work with you in developing marketing strategies for expanding your customer base
• Set up record-keeping systems
• Analyze and develop better financial performance
• Identify and help in the bidding process for government and corporate contracts
• Conduct research on a diversity of topics geared to the specific needs of your business

To make the best use of the time you will have in your first consultation, take the time to answer the following questions.
 
1. Why do you want to start a business? (Check all that apply to you.)

• I have experience in my industry and feel that I can work for myself.
• I am currently out of work and am looking for a way to earn income.
• It has been a lifelong dream to start my own business.
• I am unhappy with my current employment situation.
• Other______________________________________________________________

2. What type of business do you want to start? (Circle one and describe.)

• Retail/Wholesale__________________________________ (type of product)
• Construction (residential, commercial, both)
• Service____________________________________________(type of service)
• Manufacturing____________________________________(type of product)
• Invention_________________________________________(describe)
• Other____________________________________________(describe)

3. How much funding will your business require to start? (estimate) ______________

4. When do you plan to start the business? (month, year) _______________________

5. Estimate your first year sales? $ ______________

6. How do you plan to finance the start-up of your business? (Check all that apply.)

• Savings
• Bank Term Loan/Line of Credit
• Investors
• Friends, relatives
• Other_________________________________________________(Identify)

7. How much money do you have available to invest in the business?

8. What is your current occupation? ___________________________________________

9. Which industry do you work in? _____________________________________________

10. How would you rate your credit history? (check one)

• Excellent
• Good
• Satisfactory
• Less Than Satisfactory

11. Which legal structure are you considering for the business? (Choose only one.)

• Sole proprietorship
• Partnership
• Corporation
• Limited liability partnership (LLC)
• Unsure at the present time

12. Have you registered the name of your business? _____________________

13. Do you currently have a draft of your business plan? _________________

14. Is anyone currently providing the same or similar services/product as your business?

• Yes (Identify two companies if possible) __________________________________
• No

15. Do you have any collateral (real estate, inventory, equipment, vehicle, CDs, stock)?

• If yes, identify type(s) of collateral____________________
• No

16. Is your business home-based? _______

• If No, have you found a location for your business? ________

17. Have you ever worked, or are you currently working in, the industry?

• Yes. If so, for how long? ___________
• No.

18. Have you identified your target market? __________

19. Do you plan to contract with local and federal government agencies? _________

20. Do you plan to export? __________

21. Do you have an accountant? ________

22. Do you have a lawyer? _________

23. Will you need to hire employees for your business?

• Yes. How many in the first year (estimate)__________________
• No

24. Do you have a recent (within the last year) copy of your credit history report? _________

25. Have you filed bankruptcy within the past ten years? ________

26. Have you ever owned a business before? ________

If your tax return is complicated, you are best served by choosing a Certified Tax Accountant. If you own a business, have just gone through a complicated divorce, or handle extended family business, you should find a Certified Public Accountant that specializes in taxes. CPAs are licensed and certified to deal with a wide range of accounting issues. A Certified Tax Accountant carries that one step further by focusing on the ever changing rules of the IRS and the State of Minnesota.

Before you Choose a Certified Tax Accountant

Your first step should be to consult with a Certified Tax Accountant and assure yourself of several things:

Qualifications – What is their Preparer Tax Identification Number? New IRS regulations require all tax preparers that receive a fee to have a valid PTIN. Does this person hold a current CPA? All CPAs are required to retest every few years to maintain their certification.
History – Check with the Better Business Bureau to ensure they have been no complaints against them. It is also wise to check with state boards of accountancy for certified public accountants and the IRS Office of Professional Responsibility for enrolled agents. This will assure you there are no disciplinary actions and the tax accountant’s license is valid.
Fees – Do not use Certified Tax Accountants that base their fees on a percentage of your refund. One should also be cautious when they make claims to be able to obtain larger refunds than other Certified Tax Accountants.
Availability – Ensure that the Certified Tax Accountant will be accessible. Will you be able to contact them after your return has been filed should questions arise? You should have a sense this is a person who will be there for you should you require representation before the IRS.
Questions – Reputable Certified Tax Accountants will request you to provide appropriate records and receipts. They will ask an array of questions to properly determine your income, qualifications for expenses, deductions, and all other necessary information.

Once You Have your Certified Tax Accountant

Never sign a blank return
Oversights can happen, but a tax preparer should never let you leave without signing all forms. Conversely, avoid Certified Tax Accountants that ask you to sign a blank tax form.

Review the entire return before signing it
Read everything and ask questions about anything you don’t understand. If there is anything recorded that makes you feel uncomfortable, don’t sign until those issues are addressed.

Make sure your Certified Tax Accountant signs the form and adds their PTIN
Paid preparers are required by law to sign returns and include their Preparer Tax Identification Number. Your Certified Tax Accountant must also give you a copy of your return for your records. Do remember: it is your responsibility to ensure all information provided is factual and accurate.

Education

An employer can provide as much as $5,250 per year in educational aid when you enroll in undergraduate or graduate courses. As long as your employer doesn’t mind, the IRS makes no requirements the education is job related. That means you can take advantage of continuing your education with what amounts to a tax-free pay raise.

Public Transportation or Parking

If you use public transportation to go to work an employer can purchase fare tickets, tokens, or passes for you. Up to $230 per month is tax free for funds spent on the bus, subway, train, vanpool, or ferry. If you commute by car to work and pay parking fees, up to $230 per month can be reimbursed tax free by your employer. If you ride a bicycle to work your employer can reimburse you $20 a month, tax-free, towards the cost of repairs, maintenance, and storage.

Carpool

If you own your car and use it to carpool fellow employees to work, you can deduct commuting expenses from your tax bill. This does not apply if you travel alone. But any monies paid to you by your fellow carpoolers for gas, repairs, and other operating costs are not counted as taxable income. Unlike the other deduction mentioned here, this is not tax free income paid by your employer but rather by passengers in your car pool.

Health Insurance Premiums

If you aren’t insured by your employer and your insurance premium is $3,360 annually, or $280 a month, your real cost is much higher than that. With this premium, the actual cost would be $4,480 per year. If you are insured through your employer, you both achieve the same benefit. The employer pays less in salary and your income increases because the insurance payments are fully deductible. Additionally, payroll taxes on insurance premiums do not apply.

Term Life Insurance

An employer is allowed to pay premiums for your term life insurance coverage, up to $50,000. The employer can deduct the cost and you gain tax-free income.

Here are some additional reimbursements you can receive from an employer that are considered tax free:

• $5,000 for child care assistance
• Adoption assistance and reimbursements
• Meals provided at the workplace
• Athletic facility privileges
• Cash rebates from dealers or manufacturers
• Health Savings Account contributions
• Gifts, bequests, and inheritances
• Worker’s compensation
• Welfare benefits
• Retirement planning services
• Court-awarded compensatory damages

Again – Be sure and check with your tax preparer about all of these to make sure they apply to you!

Your Options

Since Minnesota does not mandate licensing requirements it is important to ensure the tax preparer you choose can handle your needs. Options to choose from in a professional tax preparer include:

• Chain and local storefronts – Nationally advertised chains such as H&R Block and Jackson Hewitt as well as locally owned storefront operations are often manned by preparers with a wide range of qualifications. Some are credentialed CPAs while others may have no certification at all. Should you be audited, the person that prepared your tax return may not be authorized to represent you before the IRS.




• Certified financial planners – Many organizations now offer certification for a “certified financial planner.” Tax preparers with this designation often have expertise in investments, financial planning, and taxation. But such certifications do not guarantee expertise in tax preparation and representation.




• Enrolled agents – An enrolled agent must pass an exam strictly on taxes administered by the IRS. An enrolled agent is certified to represent you before the IRS and in tax court.
• Certified Public Accountants – Many CPAs specialize in taxation and can represent you before the IRS. Be sure and choose a CPA who specializes in tax preparation.

Always Ask Questions

Whoever you chose as your tax preparer will become your front line of representation before the IRS so be sure and ask some probing questions before making your choice. When choosing a certified tax preparer in Minneapolis, be sure and get the answers to the following questions.

• Do you know the requirements of all the states where I am required to file? – If you have just moved from another state, live in Minnesota but operate a business in another state, or have any financial interests in others states, this is the first question a tax preparer must answer.
• How much experience do you have with my type of return? – If you have a simple 1040, then almost any qualified tax preparer will do just fine. But if you have a family trust, a partnership, or other business ventures, makes sure the tax preparer you choose has current experience with your particular needs.
• Can you represent me if I am audited? – Not only will this answer if this person should represent you, but it will allow you to find out how often his or her clients have been audited. Someone who generally prepares normal 1040s should have very few audits. While business and certain high-risk taxpayers will received more audits, the percentage of audits should still be relatively low.
• What and how do you charge? – Find out if charges are by the hour or by the form and what extra fees apply to organizing your records. Also ask if such charges will be specified in writing.

You’re the Boss

Remember; the tax preparer you choose is working for you. Don’t hesitate to establish what you expect. Good communications is essential, so make sure your preparer is ready to call you should questions arise. You don’t want anyone jumping to conclusions without calling you first. If a tax preparer has to make a judgment call in a complex return, insist it be made known to you in writing.

What many tax payers do not understand is that an audit is not personal. Most audits are initiated as the result of an IRS computer system score in which a taxpayer has a high likelihood of inaccuracy. If an IRS official reviews such a return and agrees it should be examined then an audit will follow. Such audits are intimidating because the burden of proof rests on the taxpayer. The person audited must prove the information on their return is accurate and the taxes paid were appropriate.

It isn’t sufficient for your return to be accurate. You must prove its accuracy. Because this is so important you must respond to an auditor the best way possible. Here are some things to remember if you are contacted by an auditor.

NEVER

Panic – Reacting with anger or panic to an IRS audit is only natural. We have all heard horror stories of how an auditor dealt with a business. But, negative emotions are only counterproductive and can lead to bad judgment.

Represent Yourself – People facing audits often only turn to a professional after first attempting to represent themselves. A CPA or Enrolled Agent will often charge more if you have already attempted to represent yourself because of the time they will spend in undoing damage already done.

Charge an IRS Auditor with Harassment – Unless the auditor is completely out of line such charges usually cause more harm than good. If an auditor is acting inappropriately, you should have your certified representative take a complaint directly to the auditor’s group manager or supervisor.

Misrepresent or Lie – Though lying to an auditor may not lead to a criminal referral, it almost always will increase the likelihood of an unfavorable resolution of your case and may expand the audit to earlier tax years.

Sign Anything without Consulting With a Qualified Representative – Never sign anything for an auditor without first speaking to an attorney or a certified tax representative. Auditors or required by law to permit you to consult with a tax advisor whenever you ask for it and particularly before you consent to any tax adjustments or extensions or waivers.

ALWAYS

Respond Immediately – Cooperation always counts in your favor! Whenever you avoid or defy the process, an auditor will assume you have something to hide.

Be Respectful – No taxpayer ever won by making enemies of an auditor.

Consult with your Tax Preparer – After promising to deal with the auditor in a timely fashion your next step is to have the person that prepared your taxes to go over your file with you. Look for detailed explanations of how the preparer arrived at the figures on your return. Reputable preparers will not charge you for this in the case of an audit.

Assemble Organized Records – Preparation and organization enhances your chances of a favorable outcome.

Consult with a CPA or Tax Lawyer – Handling an audit by yourself is unsafe because the risks in the process are too great.

• First, determine what type of tax accounting needs your business has. Look for a tax accountant that specializes in dealing with businesses similar in size and operation to yours. A small business has different demands and needs than of a large corporation. The right tax accountant is one that understands your kind of business.
• The tax accountant you choose needs to be comfortable dealing with the unique financial demands presented by your business. If you are a high volume seller with multiple vendor and customer accounts, your tax accountant should have experience in dealing with such complexities.
• Choose a tax accountant like you would any other employee or independent contractor. Interview multiple candidates, ask directed questions, and check out credentials to find the person most qualified to manage your tax records and filings.
• Certification is essential! The Internal Revenue Code outlines strict rules of tax accounting as found in Section 446 of the IRC. Those rules stress consistency in tax accounting and call for the use of recognized methods of financial accounting. Certification ensures a tax accountant is current with the complexities of those tax codes. An interview should begin with determining if your candidate is certified by a recognized public organization. Qualifications and certifications should be easy to find on every tax accountant’s web site.
• A prospective tax accountant needs to have a good understanding of annual changes to tax laws and codes. Choose a tax accountant that has significant experience handling business tax preparation. The very last thing your business wants or needs is an audit by the state or Internal Revenue Service.
• Determine how much charges will be and whether payments are scheduled on an hourly rate, monthly work, or an annual fixed fee. Be sure and ask what is included in the accountant’s basic rate plan and what services might cost extra. The lowest rate does not always mean the right choice for you.
• Always ask for and check client references. This not only ensures a candidate’s qualifications but also gives you a grasp of the kind of clients he or she is used to working with.
• Make sure the tax accountant you choose is comfortable with the type of accounting software you use.

By following these simple guidelines you will find the right tax accountant for your Minneapolis business. It is important to take the time to find an accountant you are comfortable with because this is one person you will depend on heavily throughout much of the business year. You are opening up the financial heart of your business to someone outside the business so it is important you see your choice as someone you are willing to build a bond of trust with for well into the future.

Exit Planning

One example of what a business advisor will think of that most new business owners will not is exit planning. Most people associate starting a new business with a dedicated entrepreneur, high expectations, and a lot of hard work. Many don’t realize that one of the best ways to start your business smart is by making the decision to begin formulating your exit plan before the doors even open.

As a business takes off it is easy to become so wrapped up in its daily affairs that thoughts of the future are pushed to the back burner. As one wise sage put it, “The tyranny of the urgent chokes out the truly important”. Before that happens, you can begin to at least consider the questions that will need to be answered one day in your exit plan.

Whether your business is family-owned and run or a small to medium business with employees, the time to evaluate where you currently are and where you want to be in the future is now. From day one, with proper guidance, you can begin to lay the groundwork for a winning exit plan whether the time to sell happens next year or when you retire.

Asking the Right Questions

Every business owner has short-term and long-term goals. The central goal should be to guarantee the future success of the business and ultimately to ensure it remains profitable when it passes on to whomever you desire. Some of the questions you will need to answer as your business progresses are:

• Who do you want to have control of your business in the future?
• How can you ensure against the forced sale of valuable business assets if you leave or sell the business?
• If you have children, how can you maintain the balance between distributing business assets to those who are active in the business and maintaining equity to children that are not active in the business?
• How will you balance the future success of the business with a comfortable retirement?

A Plan for the End Game

Whether your goals and those for the next generation of owners are simple or complex, the best time to prepare is from the very beginning. For you as a business owner and your family, an Exit Plan is a comprehensive review of your personal and business interests. A qualified business advisor can help you structure a plan at the very beginning of your business venture that will serve to guide your business decisions for years to come.
Some of the components of a winning Exit Plan include:

• Creating a summary of the main goals and creating a timetable.
• Formulating a workable contingency plan should unexpected things happen.
• Financial planning
• Tax Planning
• A business valuation
• Having several exit plan options and deciding on the best
• A team to execute the plan
• Identifying key employees
• Estate planning
• Reviewing insurance needs
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