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Online Bookkeeping Solutions Blog

The Online Bookkeeping Solutions Blog is an timely collection of interesting and helpful information for those companies who want to outsource their bookkeeping solution and utilize bookkeeping services by subscription. Outsource your bookkeeping to a cloud based solution backed by experienced CPA's.

Understanding Sales Tax

Just because you are a business owner does not mean you are a tax expert. But it behooves your overall business if you understand some sales tax basics to ensure your business remains tax compliant — especially since it is the business’s responsibility to collect all sales taxes owed to the government.

Sales tax is defined and applied differently in every state in the country.  Its various forms include:

  • Gross Receipts Tax — levied on all sales of a business
  • Excise Tax — levied on certain goods as alcohol or tobacco products
  • Use Tax — levied on items used within a certain county but bought elsewhere
  • Value Added Tax — levied at each stage of production based on the value added to the product at  that stage

The most common sales tax however is the Retail Sales Tax.  It is generally applied as a separate charge, to a sale, based on a percentage imposed by the city, county, state or sometimes a combination of all three that is tied to the geographic location of the business where the sale is made.

One of the problems this presents is to be sure the rate charged is correct for the locale.  Cities in Cook County, IL are an example of the complications that may arise as there are many layers of Retail Sales Tax rates within the different sections of the county.  Some border cities that cross county lines might have two different tax rates in one city.

Unless they have a physical presence in a state, online retailers are exempt from paying sales taxes. And, not surprisingly, record-breaking Cyber Monday sales this year were 22 percent higher than last year, according to Internet research firm comScore. The rise of online shopping may impact future tax legislation because of the negative impact this has for city revenues everywhere.

Tax rates change from time to time and a business owner should always be aware of the current rate for their location.  January 1st is a day when many rate changes occur.

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Accounts Receivable—The Business Lifeline

Every business needs to accumulate and then collect their accounts receivable, or A/R.  The sales these A/R represent are the culmination of the business’s profitability; it’s entity.

With the advent of electronic bookkeeping, A/R tracking is relatively easy compared to the “old days” of writing everything down in a list and crossing off items when collected. Every business needs to accumulate and then collect their accounts receivable, or A/R. The sales these A/R represent are the culmination of the business process, the sale.

As businesses progress forward into electronic A/R solutions, it is important to maintain this key benefit from the more old-school ways of tracking A/R, which is the efficiency of writing down notes in one place and having access to all necessary information when the A/R is delinquent.

I suggest establishing an electronic folder using Excel or a similar program that you can reference at your fingertips when talking to a customer. It needs to have all pertinent data, including the invoice number, the amount, and the date. If you make any phone calls to discuss your A/R situation, be sure to note the contact name, date, and any resolution agreed upon.

Another way to expedite collection time is to use a lockbox at the bank.  Collections enter your account faster and time is saved in the office opening mail and then making deposits.

Lastly, be sure your business is set up to accept credit card payment. Some customers won’t deal with businesses that don’t take credit cards. In recent years, credit card companies have developed cards tailored towards small businesses, so be sure to find the credit card company that offers the most benefits to your business. Also, be sure the fee is calculated when determining your sales price.

Happy collecting!

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Accounting Solutions – Is It Time For The Cloud?

I recently attended a conference that dealt exclusively with electronic accounting solutions and the future vision of bookkeeping processes. Intuit, Sage, and the AICPA sent representatives to the conference. Each had a unique approach regarding the implementation of cloud-based accounting solutions.

By far taking the most aggressive approach, Intuit is already promoting the cloud computing side of their business in deference to desktop solutions. This is based on their belief that most businesses will be in the cloud within the next five years.

Sage and the AICPA are not being quite as aggressive in their approach towards migrating to the cloud. While the cloud is certainly in their future, Sage is still maintaining their desktop software and working towards a softer transition, believing that businesses cannot just “flip a switch” and be in the cloud. The monthly costs of cloud computing are certainly better than investing in more servers and data storage. However, Sage is taking the stance that asset costs already expended cannot be overlooked. As time goes by, rather than replacing hardware and software, Sage plans on transitioning users to the cloud.

The AICPA’s small business division, CPA2Biz, summed up their vision of the future by showing the many ways social media and the advent of lighter and faster netbooks can be used, along with dashboards prepared by accounting and bookkeeping professionals. CPA2Biz believes this will keep business owners highly in touch with their business, even when they’re not in the office.

As this issue is in a state of flux, I advise consulting your professional to review cost benefits and detriments as they pertain to your business.  As to the speed and accuracy of getting relevant data, I say: BRING ON THE CLOUD!

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