You have probably heard the expression “Cash (flow) is King”. This is precisely why you want to operate your business in real time and be able to view a dashboard of accurate balances every day!  Otherwise, how do you know if you can afford to pay your bills next week, cover payroll, or purchase that next big item? Follow these three steps to see how you can operate your business in real time. 1. Use an accounting tool that is streamlined to save you data entry time. This can’t be stressed enough. If you are using a system meant for a larger business you could be wasting precious time. To correct entry errors in that large system can be daunting. You don’t have time for that!  If you view your current system as a time waster, you are less apt to use it. If the snowball keeps getting bigger and bigger, consider using a more streamlined and small-business-oriented system like Big E-Z. 2. Enter data as it happens. Whenever you write that check, record it in your accounting system that day. Whenever you make that deposit, record it that day. Whenever you transfer that money or put a purchase on that credit card, record it that day. Once your data entries are categorized and reconciled, be assured your balances are accurate. In reality, daily data entry can be time-consuming and difficult to accomplish. However, this is a very necessary task if you plan to meet with an accountant to forecast and budget for next year. 3.  View your dashboard for daily accurate balances. If you choose to record in real time, your dashboard will have daily accurate balances including a list of all pertinent totals to help you stay in control of your business. Examples include your current cash available, direct cash flow amounts, assets, liabilities, and profits, etc. You can view an example dashboard displaying daily accurate balances using our Big E-Z Sample Company Demo. Congratulations! Now you are operating in real time. Your records are completely up-to-date and you are totally in charge of your finances! You know exactly where you stand and can make better business decisions.

If you work from home, you should know about the home office deduction, which may allow you to reduce your tax liability.

What is the home office deduction?

The home office deduction is a type of tax deduction that allows you to deduct the portion of your home expenses that are directly related to your home office. The deduction reduces your taxable business income. This lowers your tax liability, getting you a smaller tax bill (or larger tax refund). However, it’s important to follow the IRS guidelines and keep accurate records of your home office expenses to ensure you’re claiming the deduction correctly.

All the Big E-Z accounting systems add your industry specific deductible category lists to make financial recordkeeping E-Z for you.

Am I eligible?

To be eligible for the deduction, you must be using your home office “regularly and exclusively for business.” That means you don’t use your home office for non-business activities (within reason—a good rule of thumb is to avoid activities that wouldn’t be permitted in a corporate office). Remember, this deduction is all about the expenses you’re paying to maintain an office in order to run your business. That leads into the second requirement: it must be your business. Employees are not eligible. It is not required that your office be in a separate room of the home (it can be in the same room as your bed, for example). However, you’ll still need to define the office area within that room, for the purpose of deduction calculations.

Calculate your deduction

There are two ways to calculate your home office deduction, referred to by the IRS as the simplified method and regular method.

The simplified method

The simplified method is the easier way to calculate your home office deduction. You simply deduct $5 per square foot of your home office space, up to a maximum of 300 square feet. So, for example, if your home office is 150 square feet, you can deduct $750 (150 square feet x $5) from your taxable business income.

The regular method

The regular method is more complex, but it may give you a larger deduction if your actual home expenses are high. You deduct a portion of all your home expenses, proportionate to the size of the office space in your home. Your home expenses include rent, mortgage interest, property taxes, utilities, insurance, repairs, and maintenance. To use the regular method, you need to calculate what portion of your home is used for business, by area. For example, if your home is 2,000 square feet and your home office space is 200 square feet, your home office is 10% of your home’s square footage. So you could deduct 10% of your home expenses from your taxable business income.

Which method should I use?

You’ll likely need to do the calculations with both methods to determine which is the larger deduction. As a rule of thumb, if you’re paying rent or are paying a mortgage with high interest, the regular method will probably be better for you.

How do I claim the deduction?

To claim the home office deduction, you must complete IRS Form 8829, Expenses for Business Use of Your Home when you do your taxes. Taking the home office deduction can draw more attention from the IRS and increase the possibility of a tax audit. So, be sure to follow all the rules and maintain accurate records to support your claim.

Note: Before you take a home office deduction for mortgage interest or depreciation, consider the long-term possibilities. If and when you sell your home, if you claimed the home office deduction, the deduction may affect your capital gains taxes. Keep in mind the depreciation you claimed for your home office may affect the capital gains tax exclusion allowed from the sale of your primary residence. We recommend you consult with a tax professional or review the IRS guidelines carefully.

Tip: Big E-Z makes it easy and affordable to track your business expenses, giving you easy-to-read financial documents that ensure your books are accurate.

Conclusion

The home office deduction can help you save money on your taxes if you work from home. Evaluate your eligibility, choose a deduction method, and make sure you have accurate records of your home office expenses throughout the year.

Writing financial statements can be daunting, especially if you’re a small business owner. Maybe working with numbers and spreadsheets isn’t your area of expertise, or maybe you’re just new to all of this and need some help getting started. “What goes into a balance sheet?” “What do I count as an asset?” “How should I categorize these expenses?” This short post will take you through all the basics, with examples, so can conquer the paperwork and get back to doing what you love. Financial reports and statements are important tools that help business owners understand the financial health of their companies. They provide information on a company’s revenues, expenses, assets, liabilities, and cash flow, and can be used to calculate key financial metrics like the net profit and the net value of the company. By preparing these documents, small business owners can stay on top of their finances and make informed decisions about their companies.

Types of Financial Documents

One of the tricky aspects of financial documents is that there are several kinds, and they often contain some of the same information. This seems redundant at first, but different documents have different purposes. Each one presents its information in a way that’s easy to read and understand for the given purpose. This post will cover the three most-used financial documents: balance sheets, income statements, and cash flow statements. See other less common but very useful financial statement samples. Note: Big E-Z Accounting handles the redundancy for you. Enter your information once at the beginning of the year. Then, enter new figures as needed, and Big E-Z will generate multiple documents using the same source of information, saving you time and ensuring accuracy. See other common financial statements that small businesses and nonprofits use.

The Balance Sheet

The most common type of financial statement is the balance sheet. This document reports the financial health of a company on a particular date. It’s conventional to prepare one at the end of each year, but businesses often write them at various points within the year as well, as a way to verify that everything is accounted for. The balance sheet shows a company’s assets, liabilities, and shareholder equity at a specific point in time.

• Assets are anything of value that the company owns: that includes things like savings accounts, investments, as well as equipment and real estate.
• Liabilities are a company’s financial obligations (debts). They include things like taxes owed, mortgage, and other loans.
• Shareholder equity is the amount of money held by all shareholders. In other words, it’s the total value of the company. This number should be the same as the assets minus the liabilities. So, when Shareholder equity = Assets – Liabilities, then your books are balanced

It can be hard to remember all the categories of assets and liabilities. Big E-Z provides pre-formatted sheets that are customized to your business type, so you won’t leave anything out.

Income Statement

The next type of financial statement is the income statement, also called the income & expense statement or profit & loss statement. This document shows a company’s revenues and expenses over a specific period of time, typically a quarter or a year. It includes information on sales, cost of goods sold, operating expenses, and net income. It’s used to determine how much money a company is making and how much it’s spending. Ultimately, it gives you the company’s profit margin – the percentage of revenue left over after all the expenses have been paid.

Cash Flow Statement

The third type of financial statement is the cash flow statement. This document shows the overall cash movement into and out of a business, usually over a monthly period. It gives a detailed breakdown of cash transactions so you can assess the profitability of different business activities and identify potential cash flow problems. The cash flow statement is broken down into three sections: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

• Operating activities, the most common, are the ordinary day-to-day transactions of the company. They include inflows from sales, as well as outflows from wages, overhead expenses, and taxes.
• Investing activities are the buying and selling of investments such a real estate, equipment, or shares of other companies. This section, combined with operating activities, shows how much of a company’s income is due to investing in appreciating assets, versus buying assets that generate income.
• Financing activities mark the cash flows due to your company selling shares or debt to others, or buying back shares / repaying debt / issuing dividends. This section shows how the company is financed, from external sources like debt versus internal sources like retained earnings. It also shows how the company’s dividend or stock buyback policies would affect its cash position.

Big E-Z’s Direct Cash Flow document comes with more features than the standard cash flow statement. It compares the summarized cash flow to the starting and ending balances of the year, in order to verify that the books are balanced. It also breaks cash flow down by month so you get a more granular look at your data.

Others

In addition to these main types of financial statements, there are other documents that may be helpful to a small business. These include:

• Budget: A budget is a financial plan for a company that outlines expected revenues and expenses for a specific period of time, usually a year. It’s used to help a business manage its cash flow and to identify potential financial problems.
• Invoice history: An invoice history document is a record of all the invoices that a company has issued to its customers. It typically includes information such as the invoice number, the date the invoice was issued, the customer’s name and contact information, the total amount due, and the due date for payment.
• Sales tax: This is a spreadsheet that a business can use to track the taxes it owes for the sales it has made. It ensures that the business won’t face any surprising fees or penalties when taxes are due.

Big E-Z helps you write all of the above documents, and more. Subscribe by email to access the full list of sample financial documents.

Conclusion

In summary, financial reports and statements are important resources for small business owners, as they measure the financial wellbeing of the business and provide important information for high-level decisions. Big E-Z Accounting takes all the guesswork, memorization, data entry, and formatting off of your hands, so you can get your own financial statements quickly and painlessly.

Most small business owners or managers invest a lot of time in setting up their accounting system so making a switch to a new program really does take a leap of faith. Here at Big E-Z we have put a lot of thought into making the switch as simple as possible. There are just a few steps to make depending on where you are switching from. In the program we have a Category Group sheet. You could use this if you are planning to make numerous changes to the initial preset Income and Expense Category List.

From QuickBooks. This can be done after install.

From your QuickBooks desktop click on Reports > Accountant and Taxes > Account Listing > Excel > Create New Worksheet > Export > Save this Excel file on your computer or in Google Drive.

With Our Free Help

If you would like assistance in transferring your Chart of Accounts, then sign up here for a 3-day custom setup or it is free to use for one year.

Do It Yourself

If you would like to transfer your Chart of Accounts yourself, be advised that our system uses a dash between Categories and Subcategories so you will need to remove any dashes from your current list before importing into the program. (See image below.) From the Excel file Account Column C, copy your income categories to our Category Group Column A. For any Subcategories move its Category name to Column C and remove it from Column A.  Now do the same for the expenses. This is only done once when setting up, and we are more than happy to help you with this process. Take advantage of our 3-day custom setup or it is free to use for one year offter.

Be sure the list is accurate before you click SUBMIT because it will completely overwrite the Income and Expenses on the preset list. After you import your changes, you need to click #5 Update Reports.

From Big E-Z Books for Windows (Desktop Users). This must be done before install.

For existing Windows Desktop clients there is a way to copy all your existing categories from Big E-Z Books over to the Google Sheets Add-on version. You will need to upload the file called SE 2015-01.xls from last year’s Big E-Z Books. Note: Before attempting this be sure to make a backup of your files from within the Workbook List (by right clicking on your name or license number) before proceeding. Go to your Google Drive and right click anywhere on the white space on the page > File Upload > navigate to your Documents > Big E-Z Books > double-click on the most recent license > double-click on the file called SE2015-01. Now, navigate to your SE2015-01 Google Sheets file and open then copy the link from the address bar. Paste this link on the bottom of the First Install – Enter Details popup screen. We are more than happy to help you with this process. Get your 3-day custom setup or it is free to use for one year”>Free 3-day Custom Setup.

From Other Accounting Programs like Freshbooks, Wave, etc.

To transfer your Chart of Accounts from other programs please contact us for assistance.

Free Help

If at any point in the transfer process you would like assistance, please take advantage of our 30-minute free setup help via screen share.

For Electronic Files and Folders

Here’s A Good Way to Set Up Your Electronic File Folders

I use a Windows PC and here is how I set up my electronic file folders. Keep in mind that I’m setting these file folders up with an objective of keeping all my accounting records in one folder for each year. To do this I have established levels. These levels are like folders within folders within folders.

Click on the folders icon on the bottom left of the computer screen (if you hover over the icon you will see that the icon is called Windows Explorer)

Click on “Documents” (or My Documents)

Near the top of the screen you will see “New Folder” – click on that

A new empty folder will pop up and here’s where you name your new folder.

Now I repeat this process until I have something that looks like this:

My Documents

My Bookkeeping Records
2023
Financial Statements
Income Statements
Balance Sheets
Trial Balance
Bank Statements
2023January
2023February
2023March
2023April
2023May
2023June
2023July
2023August
2023September
2023October
2023November
2023December
Payroll Reports
W-2s
941s
Monthly Wage Reports

For Paper File Folders

Start by Determining Which Names to put on Your Paper File Folders

I use letter size, third-cut file folders. In the picture above, you can see I used all the left cut folders to set up my miscellaneous folders and I will use the middle cut to set up the individual customer or vendor names so they are staggered in the file cabinet. I like to use them this way instead of a pattern of left, middle, right, left, middle, right because it is so much easier for me to add new folders and not have to re-alphabetize them.

I like to color coordinate my folders, so let’s say all my customer names are in purple folders this year and all my vendor folders are in orange. Next year I may have all customers in pink and vendors in green. You get the picture.

If you’re brand new in business just set up a miscellaneous folder for each letter of the alphabet as shown above. Then you can add folders during the year if you find a customer’s (or vendor’s) invoices are taking up too much room in the folder.

Repeat Each New Year

Near the beginning of the year, you can remove the old folders and store them in a banker’s box with the year of your records clearly identified on it and repeat the process.

Supplies you will need:

30-to-page blank address labels
Third-cut letter size file folders

You get the idea. You can make as many levels as needed. All you need is to put some thought into it. Hopefully I’ve given you some ideas on how best to keep your records organized.