Get an overview of the essential small business bookkeeping tasks that you need to be doing now to avoid a tax-time scramble. By FINSYNC You wear multiple hats to run a successful small business. You’re not only the CEO, but you’re also head of human resources, customer service representative, a salesman, a marketer, and a bookkeeper. Juggling all of these roles can be exhausting, and bookkeeping is often pushed to the side, as many small business owners view keeping the books as the task least related to the core of their business. Bookkeeping is, however, one of the most important jobs that must be done well in order for a small business to thrive. Keeping accurate books ensures that you get paid on time and that you’re filing all of the necessary paperwork at the correct time. If you don’t stay compliant with local, state, and federal taxes and regulations, you and your business could be fined and penalized.  Stay on top of your small business bookkeeping by putting these simple checklists in place to remind you what you should be doing every week, month and quarter.

Weekly Small Business Bookkeeping

  • Record Client Payments
This task can also be done on a monthly basis, but it will save you time and headaches if you do it on a weekly basis. If your accounting software is not connected to your bank, go over your bank statement and record every payment. Doing so will allow you to see which clients are late paying you. That’s money that should be in your bank account!
  • Pay Your Vendors
Review your accounts payable and make sure you have enough funds to pay all your vendors. It's smart to use accounting software to keep copies of vendor invoices, regardless of how you actually make payments to your vendors. Paying your vendors on time and in full ensures that your supplies of the materials you sell or services you need are always available.
  • Sort or File Receipts
It can be tempting to put all your receipts in a drawer or a box to deal with later, but come tax season, you’ll have a mountain of receipts to deal with. It's better to organize them while your memory is fresh and you remember the details about the events. If you run a paperless office, use your accounting software to scan and file paper receipts. Doing this task weekly will ensure a far easier tax season.

  Monthly Small Business Bookkeeping

  • Payroll
Compensating your employees for their time is important. Make sure you have the correct tax tables, and you've added any potential bonuses and overtime pay. If you’re using accounting software like FINSYNC, the tax withholdings will be made automatically. You’ll also need to pay federal payroll taxes, which you can choose to pay monthly or bi-weekly. Many payroll providers can automate these tax payments as well
  • Send Invoices to Clients
This task is pretty straightforward. Gather up all of the information needed to invoice your clients, including timesheets, extra costs, etc. If you use FINSYNC’s Projects module, you’ll be able to simply generate the invoice from within the project and the appropriate costs will carry through.  Make sure you have the correct invoice information for all your clients, including the correct due dates and payment terms. One of the most important factors in managing your cash flow is understanding when you’ll get paid by your customers. 
  • Follow Up on Unpaid Invoices
Go over unpaid invoices and decide what to do. You may want to follow up with an e-mail or a phone call, or it may be time to send those invoices to a collections agency. 
  • Pay State Withholding Taxes  
If you operate in a state with income tax, you need to pay these taxes monthly. The amount and procedure will vary from state to state, so talk to your accountant to figure out the details.
  • Reconcile Bank and Credit Card Accounts
This is important for making sure your bookkeeping records match your actual bank balances. It's also a form of internal control to catch any fraud or payment anomalies.

Quarterly Small Business Bookkeeping

  • File a Form for Federal and State Income Tax
Your payroll provider can help you file your income tax forms. Most small businesses will have to file a Form 941, Employer's Quarterly Federal Tax Return each quarter. This form is used to report income taxes, social security tax, or Medicare tax withheld from employee's paychecks. For state tax filing, check with an accountant. Your payroll provider will calculate taxes automatically and automate your tax returns to streamline this process. 
  • Take Distributions  
Depending on your business structure, you might want to take distributions or payout quarterly dividends. 
  • Evaluate Annual Profit and Loss Estimates
Once every three months is a good time to check in to see how your business is doing: how much money you’re making, how your net assets are doing, the difference between revenue and expenses, how well the profits are spent, etc. All of these factors will tell you if you need to make adjustments to improve sales and margins.

Yearly Small Business Bookkeeping

  • Close Your Books for the Year
Make sure all financial information is documented, and save a copy of your year-end balance sheet, P&L statement, and cash flow statement. 
  • File Any Necessary Forms  
Your payroll provider will ensure that you file any necessary forms, including a 1099-MISC form or a W-2 with the social security administration and the state. You also need to file either an IRS Form 1120 or an IRS Form 1120S for your business income taxes. Of course, you’ll need to file a personal income tax return as well. 
With proper planning, bookkeeping doesn't have to be a time-consuming task, and we hope this checklist helps along the way. To get organized with your bookkeeping, take advantage of FINSYNC’s all-in-one payment platform, which automates many of these time-consuming tasks so you can spend less time buried in spreadsheets and more time running your business. Need some bookkeeping help? Get virtual bookkeeping assistance with a small business bookkeeper in FINSYNC’s Service Network.      
Outsourcing work to skilled contractors saves small businesses time and money, allowing small business owners to benefit from skilled talent without the expense of full-time employees.  By FINSYNC Some days, small business owners feel like superheroes, completing countless disparate tasks at the same time. However, sometimes there are jobs even the most accomplished multi-tasker can’t do on their own.  For many small businesses, this signals a time to start hiring, but hiring can come with challenges of its own. In fact, according to one survey, 50% of small businesses reported hiring to be their top challenge. From the recruiting and vetting process, to the time and expenses associated with onboarding new employees, hiring is a huge undertaking, especially for small businesses with limited resources.  So, what to do when your small business needs help? Outsourcing work to freelancers or independent contractors can help small businesses get the expert support they need to grow. All of this while saving time, money, and minimizing risk. From freelance bookkeeping and accounting outsourcing to on-demand support with HR, independent professionals can help small businesses run more efficiently. 

Outsourcing Saves Time

Whether you’re still trying to do it all or you already have a staff. There are often more jobs to get done than there are hours in the day. Hiring freelance talent frees you and your staff up to focus on critical business needs.  Contractors often have a specific expertise that can be outsourced while you work on the industry-specific needs of your business. If you own a landscaping business, you probably have a green thumb and want to focus your time (and that of your employees) on beautifying outdoor spaces. Outsourcing back-office tasks such as bookkeeping and HR frees you up to get back to (professionally) smelling the flowers.  Some times of year are busier than others for small business owners. Outsourcing is an ideal solution for seasonal and project-based needs. For example, it might not make sense to hire a full-time accountant year-round. Working with a contractor during tax season can ensure that your business saves the most money on taxes. Working with contractors rather than hiring also saves small businesses on the time it takes to recruit and vet potential employees. Hiring can be quite an undertaking (although if you do need to hire full-time employees, we have some tips for you.) For many small businesses, it just requires too much time and money, especially without dedicated HR staff. It can take an average of 36 days for a company to fill a job opening, according to a study by the Society for Human Resource Management Even with all that time spent, it can be difficult to choose the right candidate. By working with pre-vetted professionals from FINSYNC’s Service Network, you can ensure that the contractor you hire is right for the job. Fill out a quick questionnaire about your needs, objectives, industry, and budget. Then we’ll match you with the right professional for your business. 

Outsourcing Saves Money

Not only does hiring cost small businesses time, it can also be expensive. The average hiring cost for the vetting and negotiation process in 2016 was $4,425 per hire. Hiring can be a full-time job in and of itself, and your time is money. If you have to stop working on your business to write a job description, figure out where to post it, monitor and sift through responses, screen candidates, set aside times to schedule and conduct interviews, you’ve already lost valuable time and money before even hiring.  Outsourcing work also allows small businesses to save money on payroll. Because contractors are generally not full time, businesses pay them for hours worked. This saves on the expense of a full-time salary. Small businesses are not required to pay taxes or provide benefits such as healthcare for freelancers. Their hourly rate is exactly what you pay. This is significant because with taxes and benefits alone, businesses pay 1.3 to 1.6 times the base salary for each employee. Many freelance workers are also remote, meaning businesses can save on office space and supply costs.

Getting Expert Support Helps Businesses Grow

Working freelance or what is now commonly known as “gig economy” work is becoming more common, with more expert professionals throwing their hats in the ring. In fact, 56.7 million Americans freelanced in 2018, and that number is only growing. This means that by hiring freelance talent you can get access to expert advice without paying the expensive full-time price of a highly skilled professional or executive.   Small businesses that don’t need the year-round support of a financial professional can benefit from a yearly or quarterly check-in. This is to ensure that their books are in order and their business is optimized for growth.  Of course, tax time is another prime opportunity to get insight from a financial professional. Not sure which expenses you can write off? Curious if there are any recent changes or little known tax codes that could save you some money? Don’t bother wasting your time and money with guesswork when you can hire a freelancer to help you get the most out of your tax return.  Freelancers are hired on an as-needed basis. This way you can scale your workforce up and down to fit the demands of your business. If your business is ready to grow, but you’re not sure you’re ready to hire more full-time employees, freelancers are perfect to fill in while you scale.  Does your business no longer need the particular expertise you hired contractors for, at least for now? You can easily pause a contract, knowing that you’ll be able to re-engage a freelancer should you need them again.  Outsourcing tasks to professional freelance talent allows small businesses to save time and money. Also to scale their workforces up and down to fit business needs. Bringing in highly skilled professionals also allows you to benefit from high-level expertise without the expense of hiring full-time employees. Does your small business need help with bookkeeping, accounting, financial analysis, corporate strategy or human capital management? Get matched with a financial professional in FINSYNC’s Service Network that’s best suited to help your business grow.
Learn about the most beneficial and critical tax deductions for your small business in 2020.  By FINSYNC  Deductible business expenses can significantly reduce the cost of running a business. Most entrepreneurs know about general deductions, but many categories have limitations. We sat down with accountant Juan Llantin, a member of the FINSYNC Services Network, who shared eight key tax deduction areas for small businesses.  Meals and Entertainment  Do you ever take out current or potential clients for a business lunch or dinner? You can deduct 50% of those meals on your taxes, given that they aren’t too lavish or extravagant. Beware that meals purchased together with entertainment events cannot be deducted unless they are on a separate bill from the cost of the entertainment event.  For example, if you invite a client to a football game, you may deduct 50% of the cost of any hotdogs or beverages you and your client enjoy during the game, but not the cost of the tickets. If client dinners are common in your business, be sure to save all receipts. Juan says, “Some people have trouble remembering the details about the meals. This makes it difficult to claim those meals as a deduction later on. Make sure to save the receipts and take notes on them.” Travel All travel expenses, including airfare, hotels, rental cars, tips, dry cleaning, meals, etc., are deductible for a small business. For a trip to qualify as a deduction, it must:
  • Be necessary for business. This can be a business meeting with a client or an investor, or a tour of a potential supplier.
  • Take you out of your local area, which for most business owners means outside of their home city.
  •  Last for more than a normal workday, which means that day trips don’t qualify.
“It’s better to stay the night and then come back in order to deduct the expenses for that trip,” says Juan. Vehicle If you have a vehicle you only use for your small business, the deduction process is very straightforward: you can deduct 100% of your expenses related to that vehicle. However, if you use your vehicle both for personal and business purposes, you need to split the expenses. There are two ways you can do that. Calculate your expenses using both methods, then choose the one that provides a greater tax benefit for your business. The first method entails calculating how much you use your vehicle for your business, and then multiplying that percentage with all vehicle-related expenses. That includes gas, repairs, oil, tires, washes, insurance, and registration.  The other method entails taking the same percentage and multiplying it with the standard mileage rate. For 2019 that rate is 58 cents per mile, while for 2020, the rate is 57.5 cents per mile. Home Office If your business is home-based, you can deduct home office expenses as long as your office is not bigger than 300 square feet. For every square foot, you can deduct $5.  It’s important to make sure that the room you are using for your home office is solely dedicated to your business, which means you can’t use your dining or living room. When it comes to office supplies, you can deduct the total costs. Technology Many businesses invest in software in addition to physical assets. In those cases, the software expenses can be amortized over three years. For example, if you’re an architect and you just invested in design software that costs $1,000, you divide that cost by three and write off the software as $333 a year. Internet is another essential expense that all small businesses can deduct. If you also use your phone a lot for business purposes, you can deduct 50% of your total phone bill. Financial and Insurance  If you use a debit or credit card for your small business, you can deduct any card or service fees that you incur. If you have business loans, you may also deduct the interest paid on those loans. Many businesses also have different types of insurance, which are fully deductible as well.  Depreciation Small businesses that own a lot of assets, which have a determinable useful life over one year, can depreciate those assets over the course of their useful life. However, there are a number of rules that dictate what can and can’t be depreciated. For example, you own a piece of land with a building from which you run your coffee shop. You can depreciate the value of the building, but not the value of the land. Education and Training Sometimes the investments you make in your small business do not look like equipment or software. You need to take courses or workshops to maintain your professional expertise or improve your skills to stay current in the market. As long as the training adds value to your business, you can deduct all of the expenses.  How to Get the Most Out of Your Deductions  The one thing Juan Llantin stresses above all else is to be organized. Every expense you want to deduct on your business tax statement needs to be well-documented, especially for tricky areas such as vehicle expenses. Sync up your business finances with software like FINSYNC to keep track of all your expenses digitally, which can help you stay organized and save you hours of work at tax time.
Learn how this year’s tax reform will affect your small business in 2020. By FINSYNC When the most recent tax reform went into effect in 2018, many taxpayers received a surprise. The amount of taxes they had to pay changed, even though their financial situation did not.   Individuals were not the only ones who were affected. The Tax Cuts and Jobs Act (TCJA) also included a few dozen tax law changes that applied to businesses. Some of these changes can be confusing for small businesses, but they can also present new opportunities.  We sat down with accountant Juan Llantin, a member of FINSYNC’s Service Network, to help shed light on the changes. In this article, we will cover some of the most significant tax changes for small businesses in 2020. 

Qualified Business Income Deduction

If you operate your small business as a sole proprietorship, partnership, or S corporation, you can deduct up to 20% of your qualified business income. You can also deduct 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. C corporations are not eligible for this deduction. For example, if you are a single-filer, sole proprietor with a taxable income (adjusted gross income (AGI)) of $100,000, you can deduct $20,000. 

Deduction of Net Operating Losses

Starting from Dec. 31, 2017, only 80% of any net operating losses may be deducted for the previous tax year. This means that the two-year carryback rule for net operating losses is no longer in effect. Only a few farming and insurance-related businesses are exempt from the new regulations. For businesses that experience losses, you will see a decrease in deductions associated with these losses. 

Business Expense Deductions

There have been a few changes to the kind of expenses that are considered deductible business expenses. Any expenses that are for the purpose of entertainment, amusement, or recreation can no longer be deducted. This excludes food to some extent. As long as the meals are not lavish or extravagant, you can deduct 50% of the cost. When it comes to interest expenses, any business that has average gross receipts of 25 million or less can deduct all of their interest expenses. According to Juan, “This is a good deduction to utilize if your company has many loans.”

Fringe Benefit Deductions

Deduction of fringe benefits has also been changed to a certain degree. First, reimbursement for transportation related to commuting can no longer be deducted. However, you as an employer can deduct qualified bicycle commuting reimbursements. In addition, moving expenses must now be included in employees’ salaries. For example, if one of your employees is reimbursed for daily travel expenses, these do not qualify as a deductible expense for your business. However, if you cover an employee's moving expenses if they relocate for the job, these expenses are deductible as part of the employee’s salary.

Changes in Employer Credit for Paid Family and Medical Leave

Small business owners can now claim a credit for a percentage of paid wages related to any leave employees take because of their own health or the health of their family. The credit can be between 12.5% and 25%. The exact percentage depends on the amount of paid wages in a tax year. For example, an employee with a monthly salary of $2,500 takes two weeks off as a medical leave. If you pay only 50% of their wage ($625), you may deduct 12.5% of that sum. However, if you pay 60% ($750), you may deduct an additional 2.5%, making a total of 15%.   To claim this credit, a small business must:
  •     Have a written policy about family and medical leave
  •     Offer at least two weeks of paid family and medical leave
  •     Pay at least 50% of the wages normally paid to the employee
Only leave taken by full-time employees can be used in the calculation of the credit. Benefits for part-time employees must be prorated.

Changes to Depreciation Deductions

The new depreciation laws are much more generous. In general, small business owners can now expense more, because:
  •     The maximum deduction increased from $500,000 to $1 million
  •     The phase-out threshold increased from $2 to $2.5 million 
The new law also allows you to deduct the improvement of nonresidential real estate properties, with a few minor exceptions. Improvements that can be deducted include changes to the exterior of the building, as well as roofs, HVAC, fire protection systems, alarm systems, and security systems. First-year bonus depreciation was increased from 50% to 100%, which is now also applicable to used property. To qualify for this bonus depreciation, the property must be acquired and placed in service between Sept. 27, 2017 and Jan. 1, 2023. The allowed depreciation deduction for luxury automobiles and personal-use property has also been reduced, both when the first-year bonus is applied and in general. 

How to Prepare for Next Tax Season

In order to maximize your deductions next tax season, it’s important to prepare. “Make sure you document any deduction you want to include,” says Juan. “It’s very important to keep all the details about the deductions in case of an audit.” With FINSYNC, you can track all your expenses in a complete general ledger, which makes it easy to access any necessary documentation when you need it for tax purposes. If you’re unsure what deductions are applicable to your business, talk to your bookkeeper or accountant. They will be able to help you figure out the correct documentation and fill out the correct forms. Need tax help? Get matched with an independent accountant that’s best suited to help your business grow through FINSYNC’s Service Network.
Learn about the different corporation types and their advantages and disadvantages for your small business. By FINSYNC Many small business owners consider incorporating their business, and for good reason. From tax benefits to name protection, there are many benefits to incorporation.  There are five types of corporations you can choose from. When you’re trying to figure out which one fits your business the best, consider the following questions: 
  •     To what extent do you need protection from legal liability?
  •     What form of taxation fits your individual situation and the goals of your business?
  •     How much are you willing to spend on the formation and administration of your business?
  •     How much flexibility in ownership structure do you and your business partners need?
  •     Will you raise capital or need a bank loan?
Consider what your business might look like in 3-5 years. The advantages of some business structures might turn into disadvantages down the line. Let’s take a closer look at the five types of incorporation for small businesses. 

C Corporation 

C corporations are the business structure that most small businesses start with when they get incorporated. A small business might get incorporated for the sake of limited liability, raising capital, deduction of certain expenses, or ease of operation. The owners of C corporations bear no legal responsibility for the liabilities of the company. In addition, C corporations can deduct fringe benefits from their taxes, such as insurance and medical expenses not covered by insurance. Employees are exempt from paying taxes on these benefits as well.  Lastly, C corporations are easy to manage in terms of stock ownership. Stocks can transfer between owners or to new owners fairly easily, and the company doesn’t have to dissolve when one of the owners passes away.

Limited Liability Companies (LLC)

LLCs are a hybrid business structure that has features of both a corporation and a partnership or a sole proprietorship. The owners of an LLC are called members. There are few restrictions on who can become a member. In addition to individuals, corporations, and foreign entities, and even other LLCs can be members.  In general, LLCs offer the following advantages:
  •     Members are not personally liable for the company’s liabilities.
  •     No double taxation because LLCs don’t pay taxes. Profits or losses appear on members’ tax returns.
  •     Good for holding appreciating assets.
LLCs require a bit more paperwork to run, and some states also impose more rules on LLCs compared to partnerships. 

S Corporation

S corporations are often recommended to small business owners because it offers the same liability protection and tax benefits as an LLC. Owners may receive dividend payments, which are not subjected to self-employment tax, in addition to their salaries. Additionally, S corporations are simple to manage as stocks are easily transferable compared to ownership in an LLC. There are, however, many more restrictions on who can form an S corporation, which includes individuals, estates, and certain types of trusts. Companies often start out as some other type of incorporation and then switch to an S corporation once they fit the criteria. Furthermore, S corporations cannot have more than 100 owners or issue more than one type of stock.  While an LLC might be easier to set up, S corporations are the right choice for business owners who plan on getting outside capital or issuing stock in the future. In those cases, the best scenario is to form a C corporation and then make the S corporation tax election.

Sole Proprietorship

A sole proprietorship is the simplest business structure. It’s inexpensive to run, has minimal mandatory reporting, and very simple tax reporting. It is ideal if only one person will be running the business. There is no double taxation on sole proprietorships, as all business net income is taxed as personal income.  On the downside, sole proprietors are personally responsible for all business liabilities, meaning their assets might be seized to cover any business debts or legal claims. It’s also difficult to raise capital or get a business loan as a sole proprietor.  

Partnership

A partnership is any for-profit venture undertaken by two or more parties. Governments, nonprofit enterprises, businesses, or private individuals can enter a partnership. There are two types of partnership: general and limited.  In a general partnership, all parties share profits and financial liability equally between themselves. In limited partnerships, each party is held liable individually, meaning you won’t be held responsible for the malpractice of your business partner. Partnerships are a common business model for professionals, such as lawyers, accountants, or architects. If you are still unsure what type of corporation is right for your business, talk to your accountant and lawyer. They know the details of your business and may be able to advise what business model will benefit your particular business the most.
Does your marketing agency have a clear goal for gross profit margins? Learn from successful agencies and accountants what your goal should be and how to track and attain it. By FINSYNC  Setting a healthy gross profit goal is the first step towards the success of your marketing agency. It can help you price your marketing services more strategically, track how well you’re using your company’s resources to deliver your services, and assess your sales and marketing spending. However, setting a goal isn’t enough. You have to track it on a monthly basis as well. That way, you can spot problems and notice trends in your business. A change in gross margin can indicate several things, such as a problem with a particular client or cost overruns for the company as a whole. It can also show profitability trends and how your business measures against industry standards. Essentially, setting a gross profit goal will give you an understanding of how successfully you’re running your marketing agency. But how high should you set your gross profit goal? 

The Average Gross Profit for Marketing Agencies

Gross profit margins for marketing and advertising agencies have been fairly stable in the last couple of years. In 2019, the average gross profit margin was 23%, only a little bit higher from the margin of 21% in 2018.  Mike Rowan, CEO of KPI Target, says their ideal gross profit is close to the industry standard, landing between 20%-25%. This margin encompasses all the costs that go into running a marketing agency. “When you’re working with an agency versus an independent contractor, we have the cost of office space, the cost of employee salaries, equipment, software — quite a few factors that go into what we are providing. While an agency is in its purest form is essentially outsourced marketing, behind the scenes there are a lot of real costs that go into that. So we factor all of those things into our blended hourly rate.” Mike also points out that many agencies forget some important expenses that drive the burn rate up and eat away at the gross profit. Technology is one of those expenses. One of the big benefits you offer your clients is that they don’t need to invest in things like data providers, marketing automation systems, CRM systems, and other marketing solutions. However, for you as a marketing agency, these software solutions can result in thousands of dollars in expenses every month, which can increase your burn rate significantly. To ensure profitability in your business, make sure to factor technology expenses into the rate you charge your clients.   

The Importance of a Healthy Gross Profit

A healthy gross profit will put you on the path to a good net income, and enable you to cover all other costs of running a business, such as salaries, office rent, insurance, and other overhead costs. It will also leave room for investing in sales and marketing.  Sales and marketing activities are crucial for the profitability and growth of your business. Yet, some marketing agencies neglect to invest properly in these activities, despite recommending it to their clients. KPI Target does the opposite.  “Because we drink our own Kool-Aid,” says Mike, “we run our own sales and marketing programs, and we recommend that clients do the same because we recognize the ROI from it, and it helps us grow.”  Once you’ve set your gross profit goal, you can calculate the level of sales you need to aim for. After that, you and your team can put together a list of actionable tasks that can boost sales. It might be helpful to ask yourself the following questions: 
  •     Am I charging customers enough?
  •     Have I included all expenses into the rate?
  •     Am I allocating enough funds to sales and marketing?
  •     Are there any services that are underperforming?
It can be very useful to reach out to past and existing customers to ask about their purchasing intention and future marketing needs. The responses might provide you with good indications of where to focus on future sales.

How FINSYNC Can Help You Achieve Your Gross Profit Goal

One of the key aspects of achieving your desired gross profit is good cash flow management. With FINSYNC, you can analyze and forecast your cash flow for the months ahead so that you can make insightful business decisions based on real data. “The beauty of FINSYNC is that it’s obviously not just bookkeeping software,” says Mike. “Their ability to provide things like cash flow analysis and cash flow projections provides you with the visibility you need to make intelligent business decisions so that you avoid either overspending or not spending enough. It allows you to make better business calls on where you need to allocate funds moving forward into the future.” FINSYNC’s project tracking is especially helpful for marketing agencies, as it allows you to track the profitability of specific projects in real time. This can help you make adjustments as needed, and keep you on track to reach your overall gross profit goal.
Learn how to plan for retirement as a small business and decide which is the right choice, so you can leave yourself and your business in strong financial shape. By FINSYNC  Whether you work alone, with business partners, or trusted employees, a retirement plan can help you take care of yourself and your team. A retirement plan can also offer tax breaks, attract employees, and help build personal wealth. 

How to Decide Which Plan to Pick

As a small business owner, you can choose between three types of retirement plans: 
  •     Simplified Employee Pension Plan (SEP IRA)
  •     Savings Incentive Match Plan for Employees (SIMPLE IRA)
  •     Self-Employed 401(k) (SBO 401(k)) plan
All three plans have their own benefits. The plan that’s best suited for your business will depend on: 
  •     How many employees you have
  •     If you currently work alone, and whether you plan to hire in the future
  •     Who will contribute to the plan (you, the employees, or both)
  •     How much you want to contribute
  •     How much time and money you can spend on setting up and maintaining the plan
If you already have employees, the Self-Employed 401(k) plan is not an option for your business as the plan does not include “common law” employees. The same applies if you have any future hiring plans.  Let’s take a look at all three plans in greater detail. 

SEP IRA

This type of retirement plan is the only employer-sponsored plan of the three. You can choose this plan if you are: 
  •     Self-employed
  •     Small business with employees
  •     Sole proprietor
  •     Partnership
  •     Corporation
  •     S corporation
The 2020 contribution limit for this plan is as follows: 
  •     Up to 25% of employees’ salary or $57,000 (whichever is less)
This limit is flexible, which means that you can change the contribution from year to year, depending on the financial situation of your business. This is a great opportunity for businesses that go through years of fluctuating income, or for newly established companies. However, the percentage you choose to contribute to the plan cannot be different from what you contribute to your own retirement plan as a business owner.  This type of retirement plan is free to set up and maintain. There is also no need for filing a Form 5500. For each tax year, you have until April 15th of the following year to make the contribution. All SEP IRA contributions are tax-deductible. 

SIMPLE IRA 

With the SIMPLE IRA, you as a small business owner can set up retirement plans both for your employees and yourself. The rules of who can open a SIMPLE IRA are a bit different than a SEP IRA. The following are eligible to open a SIMPLE IRA:
  •     Companies with less than 100 employees
  •     Sole proprietor
  •     Partnership
  •     Corporation
  •     S corporation
The contribution limits are quite different compared to the SEP IRA. You can choose between:
  •     Option 1: You match up to 3% of your employees’ contribution. The 2020 contribution limit for employees is $13,500.
  •     Option 2: A 2% contribution of your employees’ salary regardless of whether they contribute or not. The maximum contribution for 2020 is $5,700.
The only difference between the options is whether you, as a business owner, will be required to contribute to the plan. If you go with option 1, you can lower the matching contribution percentage to 1%, but that’s only allowable for 2 out of 5 consecutive years. In terms of cost and time management, SIMPLE IRAs have a plan fee as well as a participant fee. They don’t require you to file a Form 5500, but you will have to submit annual employee notifications. As a business owner, you can deduct your contributions to a SIMPLE IRA plan.

Self-Employed 401(k)

As stated earlier, this option is only available for small businesses with no “common law” employees. However, if you have business partners who have shares in the company, all of you can be covered by the plan. Spouses can be included in this plan as well.  With a self-employed 401(k) plan, you and your business partner can contribute to the plan both as employees and employers. The contribution limits are the most generous of all plans:
  •     As an employee, you can make a salary-deferred contribution of up to $19,500 for 2020. If you are over 50, that limit is $26,000.
  •     The business can contribute up to 25% of your annual salary or $57,000 (whichever is lower). If you are over 50, that limit is $63,500.
If you and your business partner don't have any plans to hire in the future, this is the best choice for your business. SBO 401(k) is simple to set up and has no maintenance cost. You will be required to file a Form 5500 annually after the plan’s total contribution exceeds $250,000. Both types of contributions to Self-Employed 401(k) are tax-deductible. If your business is not incorporated, you can deduct contributions for yourself from your personal income. If your business is incorporated, the contributions are considered a business expense.

Next Steps in Retirement Planning

Now that you’re familiar with your options, it’s time to start planning. Take some time to consider a few factors: 
  • Are you planning on hiring in the future? 
  • How important is it for you to contribute to your employees’ retirement? 
  • How much do you, as a business owner, wish to save in retirement?
Answering these questions will help you decide which plan suits your business now, and in the future.
How consolidating control of payments, invoicing, payroll and other financial tasks can optimize your business to save you time and money. By FINSYNC  One of the first realizations that strike entrepreneurs when they set out on their own is just how much multitasking is required to operate their small business day to day.   You have to explore ways to grow your revenue, maintain existing customer relationships, and ensure you’re managing costs. All while staying on top of payments, invoicing and myriad other key accounting tasks.   That's a tall order, especially when you’re running the show alone or with a handful of employees. Often the technology businesses rely upon to help streamline their accounting tasks end up complicating matters.  It can be time consuming enough to learn how to navigate a typical bookkeeping program, never mind when you add on other software for making payments, managing payroll and invoicing. Pretty soon, the time it takes to switch between multiple interfaces just to get a handle on whether you have enough cash flow to cover expenses at the end of the month begins to add up. Even the most skilled multitaskers will be hard-pressed to keep up with that approach. Of course, there's a far better option. Consolidating all of your financial accounts and tasks within a single software operating system. That's what you get with FINSYNC's integrated accounting and cash flow management platform.   Centralizing control of your financial tasks within a single platform will optimize a large swath of your responsibilities. It will save you time and money. All while providing you with insights into how you can grow your business that would be far harder to come by with a decentralized accounting approach.  

One-Stop Accounts Management 

Streamlining financial tasks begins with consolidating your various accounts under one software platform. Once all your accounts are linked, essentially talking to each other, you can automate a variety of back-office tasks, including making payments, sending out and tracking invoices, and even processing payroll.    This means you can quickly confirm whether a bill was paid or a customer received an invoice. A system like FINSYNC also automatically sends out invoices and email reminders to customers whenever their payment is past due.   Every transaction, regardless of which bank or credit card account, is easily accessible. No more bouncing around from one application to the next and struggling to keep passwords straight.   More importantly, the integration of your accounts makes it possible to set your bills to be paid automatically. This consolidated approach also generates an accurate, electronic data trail of all your payouts and accounts receivable.   Payroll is another area that can be greatly optimized by linking it to your other accounts within a platform like FINSYNC. An employee time-tracking feature can slash your processing time and minimize mistakes when calculating payroll. A time-tracking application can also eliminate the data entry associated with physical methods of keeping tabs on employee work hours, and ensures that your payroll is in compliance with employee tax withholding requirements. This not only saves you time — and stress — it saves you money. Consider that FINSYNC customers, on average, save 30% on payroll alone.  

A Consolidated, Comprehensive View  

Perhaps the most important benefit of combining all your back-office tasks under a single platform is that you gain a real-time, accurate view of your business' financial condition. This enables you to optimize how you manage your cash flow. You can spot potential funding shortfalls well in advance.   Need to make sure you have enough cash coming in to cover a big expense later in the quarter? FINSYNC enables you to set the time schedule for your customer invoices. This is so that you can allow enough time to increase the likelihood that revenue will be coming in on time to help cover your costs.   Consolidating your accounts within FINSYNC's platform also helps make it easier to keep your company in the black. With built-in time and expense monitoring and tools that can more accurately deliver project cost estimates. You can even track expenses and profitability on a task, phase and project basis.  

More Payment Options 

A platform like FINSYNC can also help you manage your cash flow. By giving you the option of using credit cards to cover costs for goods or services even if the recipient doesn't have a merchant account.   The platform allows you to send and receive payments with full remittance details with an email address alone. That means you can send anyone a payment using a credit card. Your customers or vendors won't ever see your credit card details. If you use a credit card that offers cash back or other rewards, you'll accrue rewards any time you send a payment using the card.   The ability to use credit for all types of payments can come in handy. Especially when you're trying to preserve cash.  You have a lot of important tasks to juggle as a small business owner. Why struggle with tasks that can be handled more efficiently with a simplified, all-in-one approach? See how FINSYNC can help you consolidate your efforts with a free 7-day trial.
With a little planning based on your business’s unique data and analysis, small business owners can use these budgeting tips to keep the doors open and the business stable. By FINSYNC Budgeting for a small business comes down to timing and planning. Understanding your finances and making adjustments to fit your business can be the difference between business as usual and a budget shortfall. Being prepared for anything and building up a financial cushion can get your business through all manner of unexpected twists and turns. 

Optimize Timing of Accounts Payable and Receivable 

If you’ve ever watched the clock waiting for an invoice to be paid, you know that ensuring you have enough cash in the bank often comes down to timing. While a business may very well have the ability to pay suppliers, payroll, and other operating expenses, cash flow can fall short if expenses pile up before an expected payment comes in.  The first step to building a budget is to study the ledgers. Many expenses and incoming payments or sales follow patterns, making them somewhat predictable. If you’re not using a turnkey cash flow management software solution, you can analyze these patterns manually by inputting all accounts payable and receivable as well information into spreadsheets.  For a streamlined view of all your business’s financial information, try FINSYNC’s cash flow management solution, and take the guesswork out of timing expenses to line up with payments. Once you link your accounts, your past, present, and projected cash flow are automatically presented in easy-to-read charts and graphs. There's no need for spreadsheets.  Whether you prefer to take a manual or streamlined approach to analyzing your company’s financial patterns, avoid budget shortfalls by timing what’s going out with what’s coming in. 

Access a Line of Credit Before You Need It

Apply for financing when your finances are strong. Rather than when you’re scrambling during a tight month to shore up funding for when you need it. Lenders look for positive and growing cash flow. Applying when your books are in a good place puts you in a better position to access funding. You will be able to lock in the best interest rates and terms.  It can be difficult for new and small businesses to qualify for a loan. Applying before an unexpected downturn can help improve chances. While traditional lenders often require 1-2 years of financial data, along with collateral, alternative lenders often look at as little as three months of your finances and are much more likely to extend a line of credit to small businesses, even without collateral. That’s why applying for financing during a good stretch is your best bet. Find the loan option that best fits your business’s needs in a matter of minutes with one simple application from FINSYNC's lending network Preemptively securing a line of credit also means avoiding having to use personal funds if cash flow fluctuates. According to the Federal Reserve’s 2019 Small Business Credit Survey, 69% of firms used personal funds to pay operating expenses, purchase inventory or meet other financial challenges.   This doesn’t mean you should apply for a big loan you don’t need and might have trouble paying off. Using flexible funding sources such as a line of credit to pay regular expenses that your business is already incurring is a great way to build business credit and relationships with lenders that could pay dividends down the road. 

Anticipate and Plan for Downswings 

The best way to prepare for downswings is by regularly monitoring your business finances and having a plan in place based on your unique data. Small business owners are busy. Keeping track of cash flow can easily get stuck on the bottom of the to-do list. It doesn’t have to be daunting.  Keeping an eye on your company’s income and expenses no longer requires endless spreadsheets and hours of manual entry. With FINSYNC’s cash flow management software, you can see all of your business’s finances in one place on an intuitive, user-friendly dashboard. Armed with this data and knowledge, it’s easy to visualize and analyze patterns in cash flow.  Past cash flow can be a good indicator of regular expenses and payments as well as seasonal trends. Cash flow projections allow you to plan and anticipate potential downswings, and to make adjustments accordingly. 

Build Up an Emergency Fund

Even profitable businesses can run out of cash when more money is going out than coming in. Regardless of how good the business looks on paper. Shortfalls can wreak havoc: 82% of businesses ultimately close their doors because cash flow falls short. The more “just in case” options a business has for any unexpected fluctuations or upheavals, the better. Aim to build up cash reserves to cover at least three to six months operating expenses. From recessions to natural disasters to cyberattacks, unforeseen calamities may have nothing to do with the health of your business but wreak havoc nonetheless. Staying open in the face of anything is vitally important; according to FEMA, 90% of businesses that are unable to re-open within five days of a disaster fail within the year.  Small businesses can take control of their finances by keeping a close eye on cash flow management. This helps with finding ways to set money aside for emergency funds. Need some more ideas? Contact a financial professional for guidance on preparing your cash reserves.

Get Expert Insight 

Every business can benefit from expert support. Whether building up cash reserves or taking stock of the business overall. Regular check-ups with a financial expert can help keep your books and budget in tip-top shape.  Forward-thinking small businesses run day-to-day financial operations with automated software. Having expert advice helps take financial planning to the next level. Adding employees is costly and time-consuming. Contractors are often a more realistic and affordable choice for small businesses.  With contractors, the size and expertise of your finance team can fluctuate based on business needs at any given time. Get matched with the best partner for your business through FINSYNC’s network of financial professionals by answering a quick questionnaire assessing your budget, industry, objectives and needs.  Knowledge is power when budgeting for your small business. Understanding your company's financial patterns and making adjustments accordingly prevents cash flow issues and helps businesses plan for downswings.  Building up a financial cushion in an emergency fund and accessing a line of credit can support your business when unforeseen circumstances inevitably arise. With the advice of a financial professional, small business owners can tie all of this together and develop a real plan to ensure financial stability.  
Companies can maximize their profitability in the coming year by embracing tech-driven tools that optimize accounting tasks.  See what fintech trends are boosting growth in 2020. By FINSYNC   The pathway to growth for most small and midsize businesses is not without its obstacles, surprises and mistakes. It's also never been more accessible.   Trends in Fintech, the combination of technology and financial services, have helped streamline how smaller businesses operate. Providing them with more financial flexibility and other benefits. Usually, those enjoyed by bigger companies with access to more favorable banking relationships.   At the core of these trends is the concept of linking a business' financial accounts so that everything can be done more efficiently. This includes customer invoicing, paying bills and processing payroll, which helps lower unnecessary costs.   This also leads to better business intelligence. Enabling you to more accurately assess and project the key factor in ensuring steady profit growth: your business' cash flow.   Few strategies are likely to help boost your business growth in the coming year as much as improving how you manage your cash flow. Consider that more than 80% of businesses fail because they simply run out of money.   Here are some of the ways that you can leverage Fintech tools such as FINSYNC's accounting and cash flow management platform to maximize your business growth next year.  

Close Funding Gaps

Every small business runs into funding needs from time to time, and FINSYNC makes handling this easier than ever. One example is FINSYNC Pay, which enables firms to use their credit cards to pay bills that might otherwise only be payable with cash or check.   Users can make payments over email, without the need to share sensitive credit card information. This opens the door for cash-strapped businesses to tap their credit to cover the cost of rent or any other expense without the need for the recipient to have the means of processing a credit card payment. Another way technology is helping give small businesses more financial flexibility is with invoice financing. This is when you borrow against the amount that your customers owe you.   Also known as accounts receivable financing and factoring. These loans are typically processed in less than a day, with lenders generally advancing around 85% of your invoice immediately. This beats waiting 30, 60 or even 90 days for your customers to pay you. And with FINSYNC, all it takes is one click to turn your invoices into cash.   Online lending companies offer a great alternative to traditional lenders when it comes to tackling bigger financing needs. These Fintech-powered lenders have capitalized on the gaps in financing left by conventional lenders in recent years, emerging as a reliable source of financing for small businesses.  Why? Because their loan application process is typically far less onerous and lengthy than a traditional bank. In addition, alternative lenders will also consider small businesses with higher risk profiles. Roughly 32% of all business loan applications last year were handled by alternative lenders, up from 24% in 2017, according to data from the Federal Reserve. Traditional lenders are increasingly funding loans through alternative online lending platforms, a trend that's expected to continue growing next year.   Businesses that use FINSYNC's all-in-one platform can easily apply for a loan free of charge. They immediately receive offers from lenders offering the best loan options. Whether it's an alternative lender or a bank or credit union.  

Automate Invoicing, Payroll & More  

Innovations in digital banking have brought about more transparency, automation and speed to fund transfers. And if you're not incorporating new technology into how you invoice your customers and pay your bills, you’re incurring unnecessary costs. The timeworn approach to invoicing is probably familiar. You provide a product or service to your customer and then submit an invoice right away via snail mail, unless you don't, and it ends up not going out for a day or three, or a week.   Then you hurry up and wait, as they say, until your customer pays the invoice. It could be 30 days, it could be longer. Multiply this scenario across several customers. This could leave you with a severe cash crunch while you wait for the funds to arrive.   Of course, invoice financing is an option, but you can also avoid payment delays by automating your invoices. FINSYNC links up your various financial accounts and can automatically send out invoices on a time schedule that will make it more likely for you to be paid faster and in a way that supports your upcoming financial needs.   The system also reminds your customers automatically with email alerts whenever their payment is due or behind schedule.   Automation is also a game-changer when it comes to making payments. By syncing up your bank and card accounts, you can set your bills to be paid automatically, all while keeping an accurate tally of your expenses. No more wading through receipts in physical or electronic formats to try to sort out whether a bill was paid. Most businesses can also improve their profitability by using automation to process payroll. Software that automatically tracks your employees' hours and generates the required payroll saves money because it's more efficient and minimizes errors.   This comprehensive approach to tracking and leveraging your own data is going to continue to give your small business an advantage in an increasingly competitive marketplace. All it takes is placing your business accounts under a single digital ecosystem like FINSYNC's cloud-based accounting platform.