How Financial Statements help you plan for 2021

financial statements

Creating financial statements can seem tedious and complicated, but preparing these documents is a vital part of planning for the year ahead. Financial statements make up a large part of the projections and planning for your business’s future and can give you strategic guidance on crucial changes to make to ensure sustained success. 

How financial statements can help you plan for the year ahead 

While you are preparing your financial statements, you will become more aware of the status of your business’ finances, the progress you are making towards your goals, and will give you a clear view of any issues you might face down the road. 

Financial status overview 

Keeping close tabs on the financial status of your business is a must. The financial statements offer a summary of your business’s financial position. They can provide you with the information you need to help you set goals and understand where you might need to change your budget. If you regularly work through your financial statements, you will pick up any issues at an early stage, and you can make small changes before the finances go off the rails. 

Relating business goals into specific business targets 

The financial status overview is a powerful tool to help you create specific targets that will drive your business strategy towards achieving the goals you have set out for any given year. The adage goes that failing to plan means planning to fail, and it holds true in a business context. 

Measured targets will help to keep your business on track and will provide employees with structured outcomes to work towards. By creating specific targets, you can practically set out a roadmap that will lead your business to its goals, instead of making decisions on the fly without proper planning to back up actions. Through specific targets, you will be able to create a sustainable pace for the business while leaving room for direction changes necessitated by external factors that influence the business strategy. 

Measuring progress

Your financial statements contribute to most planning and strategic decisions and can help you measure the progress within your set of goals. If you have carefully set out specific business targets, the progress measurement process will be easier to manage. The business’s financial statements can give you a higher-level overview of the progress, even if you do not measure specific targets. When comparing the financial statements across several years, you can track how the business is progressing towards its goals on a year-by-year basis, giving you valuable insights into the overall development of the company. 

Identifying potential issues 

When you study the financial statements for the previous years, you can compare the financial situation to your business forecast to see if you might run into problems relating to cash flow and inventory, among others. It is especially important to use your financial statements when planning the goals you want to achieve in the business to identify shortfalls and plan out budgets to cover the activities you plan to undertake for the following year. 

If you need assistance from our accounting service experts on your financial statements, taxes, and other financial planning activities, contact Georgen Scarborough Associates, PC, for more information. 

Five Accounting Tips for Startups

Accounting tips

Business accounting does not have to be a daunting process with these practical and straightforward accounting tips. At Georgen Scarborough Associates, PC, we have helped small businesses to get their financial statements, tax preparation, and payroll off to the best start. Here are our top accounting tips for startups:

Top accounting tips for managing a startup  

There are countless resources online with tips and plans for getting your start up’s accounting in order. Not all of these tips have been created by accounting service experts, and the wrong advice can cost you time and money and get you into a lot of trouble with the law. Here are the tips you need to keep your books in tip-top shape.

Keep business and personal finances separate

You might be tempted to put everything together in the same account and treat your business accounting like your personal accounting. Mixing the two is a quick way to create a lot of trouble in the long run. We recommend opening a dedicated business account from day one. The little bit of extra effort, in the beginning, will help you to keep everything in order and will save you a lot of frustration as your business grows.

Record expenses, income, and payments meticulously

Now that you have a dedicated business account, it will be much easier to keep a thorough record of income, expenses, and payments you make for the business. If you deal with a lot of physical paperwork, you should invest in a filing system to keep your records organized and safe. We recommend that you read up on record keeping requirements in your industry and area so that you don’t unknowingly expose sensitive information to unauthorized parties. 

Stay on top of financial matters

If your records are in order, it will be a reasonably simple task to stay on top of your finances. Remember to stay updated on regulations, legal requirements, and developments that might impact your business accounting. For business owners, this requirement is especially critical when it comes to taxes and payroll matters that affect employees.

Use professional software tools

Modern digital accounting tools can make the accounting process incredibly simple for startups. We recommend using a cloud-based accounting tool that will help you organize your accounting process and access your information anywhere. We recommend that you research a few different options and reach out to an accounting service expert before investing in a paid plan for your business. 

Hire an expert

Suppose you are unclear about your business accounting, or you don’t want to spend your time managing your accounting. In that case, we recommend reaching out to one of our accounting service experts. We have the knowledge, experience, and resources to assist you with all your business accounting needs. Our professional staff members provide a variety of services for your startup, from payroll to taxes. 

For more accounting tips or help with your startup accounting, contact Georgen Scarborough Associates, PC, in Virginia for more information. 

Tax Tips: The Best Ways to Spend Your Tax Refund

Getting your tax refund is exciting and although you may want to spend it on something fun, our tax tips will help you to make the most of your return to improve your financial wellbeing and set yourself up for a future that is a little less stressful. 

saving in piggy bank

Tax Tips to Help You Make the Most Out of Your Tax Refund: 

1. Pay off your debt 

This should be the priority whenever you have something extra at the end of the month or if you receive your tax refund. Debt can get out of control very quickly, and you should aim to pay off the bills with the highest interest first. Paying off your debt as soon as possible leaves you in a more secure position financially, and it will help you to avoid the stress of debt collectors knocking on your door.

2. Create an emergency fund 

Life can go very wrong, very quickly. Accidents, medical emergencies, car troubles and loss of income can ruin any person financially if there is no emergency fund to cover unexpected expenses. To avoid this, you should build an emergency fund that will help you to cover your living expenses for at least three months, but ideally up to six months. Even if you can’t put such a large sum away, any little bit will be beneficial when misfortune strikes. 

3. Increase your insurance coverage 

Protecting the lives of your loved ones as well as your property is always a sound investment. If you are financially sound in other ways, you can put your tax refund to good use by increasing your insurance coverage to include all property and the lives of your dependents. Accidents, damage and theft, are traumatic experiences which are made even worse by not having adequate insurance coverage. 

4. Boost your retirement

It is never too early to start putting money away for your retirement. Even if you already have a retirement fund, your tax refund can help you to grow it even more. Most Americans are not saving enough for their retirement. 22% of Americans don’t even have $5000 set aside for their retirement. Don’t gamble with your future, instead use your tax refund to prepare for your retirement.  

5. Start a savings fund

Whether you have your eye on a new car, a family vacation or if you’re putting money aside for your children’s education, you can use your tax refund to start saving for those big financial goals that you want to achieve. If you get into the habit of saving instead of getting into debt, your overall financial wellbeing will be much more sound than the average person.

6. Invest 

If you’re already in a sound financial position, you can use your tax refund to improve your situation even further by making a sound investment. Whether you decide to invest in stocks or use the money to upskill yourself, your tax refund can give you the push that you need to set yourself up for financial prosperity. 

7. Make improvements to your home 

The key is to make improvements that will increase the value of your home, help you to save on expenses or that will improve your quality of life. Avoid making improvements that will end up costing you more over the years, like installing a swimming pool that needs constant maintenance. Instead, you may want to improve the insulation in your home to bring down your heating bill or give your house a fresh coat of paint to enhance the aesthetic of the property.  

8. Replace an item that cost you money with a more efficient model 

If you own an appliance that gets used regularly, but it’s not a very efficient model, you can use your tax refund to replace it with something a little more modern. Old refrigerators, washers and dryers tend to use more energy to run, which can make your utility bill soar. Investing your tax refund in a newer appliance can help you to save money over the long run. 

9. Donate to charity 

If you’re in the fortunate position where you have financial stability, you can use your tax refund to help those who are less fortunate than you. Do a bit of research into charities in your area and consider donating to a cause that you feel passionate about.

For more tax tips and information on your tax refund, contact accounting service experts, Georgen Scarborough Associates, PC. today.

Tax Tips for Summer Jobs from Georgen Scarborough

When you think of your summer job, or if you’re starting as an entrepreneur, taxes might not be at the top of your priority list, so here are tax tips that you need to keep in mind. This guide from Georgen Scarborough Associates, PC will help you to make the most out of your summer earnings without getting into hot water with the taxman.

Tax Tips for Summer Jobs and Entrepreneurs from Accounting Service Experts summer

Understand your type of income 

How your income is classified will have a significant effect on your taxes, so it is essential to understand whether you are self-employed, or if a business or company actually employs you. 

There are many forms of self-employment, including being an independent contract worker that performs services such as babysitting, cleaning services, dog walking and many more. Skilled workers such as writers, photographers and designers can also be self-employed as freelancers. The basic premise of self-employment is that you have the power to decide on work you accept, clients you want to work with and the terms of the contract. 

If you’re self-employed, your income will be reported on Schedule C or Schedule C-EZ (profit or loss from business). Self-employed taxpayers can claim business expenses that you may not even be aware of, and that differ from industry to industry. That is precisely why you need the services of a certified public accountant who knows the rules and understands the laws surrounding tax expenses and claims for different industries. 

If you are an employee of a business, your employer will deduct tax from your paycheck, instead of you having to pay estimated taxes to the IRS every year. 

Reporting Income 

Regardless of your employment status (whether you are self-employed, or employed by a company), you will have to report income from all sources on your tax return. There is a threshold for income that you need to cross before you start paying taxes, but even if you don’t cross the limit, you still need to file a tax return. When reporting your income, remember to include income from any side jobs, self-employment opportunities as well as formal employment. 

A source of income that is often overlooked is barter income. This is a form of income where you are paid in goods or services in exchange for the work that you do. For example, if you spend time teaching someone’s child to swim, and they give you a gift card to get your car washed at their car wash business, it is considered income from self-employment and needs to be reported. 

File your tax return 

You should always file a tax return, no matter your income. Sometimes, your income won’t exceed the minimum gross that is set for filing requirements, but even in such an event, you may still want to file if taxes have been withheld from your pay. Your tax return may entitle you to claim money back, or it generates a tax refund if you’re eligible for a refundable tax credit such as the Earned Income Tax Credit or the American Opportunity Tax Credit. 

Although you need not know all the tax rules, if you are self-employed or an independent contractor, you need to keep a record of your income and expenses such as mileage, and materials purchased to perform your job. To make it simple, use a service such as QuickBooks so your information can be exported at tax time.

For more tax tips and information on your summer job taxes, contact accounting service experts, Georgen Scarborough Associates, PC. today.