Author Archives: Archer Lewis

The Ultimate Guide To Restaurant Accounting

What restaurant accounting really means

Restaurant accounting is the structured process of recording, analyzing, and interpreting financial data within your restaurant business. It goes beyond restaurant bookkeeping—you manage revenue streams, track labor and food costs, handle financial transactions, and monitor operating expenses in real time.

Consider this: restaurant owners today don’t just deal with standard customer ebbs and flows. They’re struggling to survive due to labor costs and inflation, slim margins, rising expenses, complex inventory, and a high volume of financial transactions.

These challenges make restaurant accounting more than a back-office task—a strategic function that directly influences daily operations and long-term success.

Unlike other businesses, restaurants use specific accounting methods to address daily sales fluctuations, tip reporting, and vendor credits. Many also operate on weekly accounting periods to better match costs and income.

Whether you use the accrual accounting method or the cash-basis accounting method, your accounting system needs to support the business’s financial status in a way that encourages informed financial decisions.

Core components of an effective restaurant accounting system

Every restaurant should establish a system that covers the full spectrum of accounting processes to maintain financial performance.

Here are the key elements to build around:

Chart of accounts: Your accounting system should start with a well-defined chart of accounts that separates business costs into specific categories such as food costs, labor costs, and inventory expenses.
Restaurant accounting software: Leverage tools that connect with your restaurant’s point of sale system, allowing for automatic data syncing and simplified reporting.
Payroll processing: Managing payroll taxes, employee wages, and tip distribution is central to staying compliant.
Cash flow statements: Use real-time reporting tools to track gross revenue and manage your cash flow effectively.
Detailed financial reports: These include your profit and loss statement, balance sheet, and other key financial reports that provide a full picture of your financial health.
Inventory management: Control the cost of goods sold (COGS) and food inventory closely to avoid waste and protect profit margins.
Bank accounts and reconciliation: Regularly reconcile accounts to catch errors and maintain clean records.

Together, these tools and practices form the basis of proper accounting practices that empower restaurant owners to make smart financial choices.

Where restaurants get stuck (and how to fix it)

Even with accounting systems in place, restaurants often hit snags that affect profitability. The most common accounting method for small restaurants—the cash method—can work for some, but others benefit more from accrual accounting. Even the best food and service can’t overcome financial inefficiencies without the right setup.

Common pitfalls include:

Combining finances between business and personal accounts.
Delaying financial reporting or bookkeeping updates.
Improper tip classification or underreporting.
Cash management issues that create gaps in liquidity.

Using general accounting software or relying on a bookkeeper unfamiliar with restaurant accounting methods can lead to inaccurate reports and missed opportunities.

Partnering with restaurant accounting professionals

There are many benefits of hiring an accountant who understands the specific demands of the restaurant business. From navigating compliance requirements to helping with forecasting and growth planning, a specialized partner can be a game changer. If you’ve worked with generalists or explored small business accounting companies that didn’t quite fit, it might be time to look at industry-specific expertise instead.

Many restaurants choose to work with accounting professionals or accounting firms specializing in the restaurant industry. These experts bring experience, systems, and restaurant management software that streamline financial management and align with proper accounting standards.

Working with restaurant accounting experts offers more than just outsourced number crunching. You gain access to accounting solutions tailored to the unique challenges of the restaurant industry. That includes tools that simplify complex financial tasks and provide consistent, clear accounting reports to support smarter cash flow management.

These professionals also manage the finer details—like vendor payments, prepaid accounts, and tip tracking—so nothing slips through the cracks. Perhaps most importantly, they offer strategic tax planning and help you monitor essential financial metrics like your net profit margin and prime cost, allowing you to make informed decisions that keep your restaurant on a path to growth.

Instead of just tracking data, accounting services help you interpret financial data and apply it to day-to-day decisions.

When to bring in an expert

If your current system isn’t helping you improve cash flow, produce timely financial statements, or reduce restaurant expenses, it may be time to bring in outside help.

Look for signs like:

Inconsistent or late financial reports.
Confusion over payroll taxes or classification.
Uncertainty about your net profit.
Lack of clarity on operating costs or the business’s financial status.

Working with an expert helps you create a system that delivers clear, timely, and reliable information to support better business decisions.

Why Archer Lewis is the right fit for restaurant accounting

At Archer Lewis, we specialize in efficient restaurant accounting that supports growth, compliance, and clarity. We build accounting systems that simplify everything from bank account reconciliation to cash flow management.

We don’t just handle the numbers—we help restaurant owners understand them. Our accounting services cover everything from setting up your chart of accounts to interpreting financial data and producing high-quality financial reports.

If you’re ready to stop stressing over spreadsheets and start making more informed financial decisions, it might be time to explore how Archer Lewis can support your restaurant’s financial success.

Let’s talk about your restaurant’s financial future

You’ve got the food, the team, and the vision. Now you need a financial system that keeps up. If your current setup is leaving you guessing—or worse, missing key numbers—it might be time for a change.

Talk to our team today. We’ll help you turn your financial data into insights, clean up what’s not working, and give you the support to focus on what matters most: running your restaurant.

Monthly Accounting Overview & Key Tasks

What exactly is monthly accounting?

Monthly accounting simply refers to reviewing, organizing, and updating your financial records each month. It means taking time to track what money is coming in, what’s going out, and where it’s going, so you always have a clear picture of your financial health and stay on top of your overall business finances.

Think of it as giving your business a regular financial checkup. It gives you a pulse on your finances, helping you make smart spending decisions, plan for growth, and spot financial issues early on.

Immediate and long-term benefits of monthly accounting

Taking a little bit of time each month to stay on top of your accounting can pay off quickly, both now and down the road. Even if you’re overwhelmed, monthly accounting offers quick wins leading to peace of mind and smarter financial planning.

Here’s what regular monthly accounting can do for your small business:

Avoid tax-time panic: No more scrambling to find receipts or make sense of backlog transactions come tax season. With proper accounting, you can avoid costly tax mistakes (the IRS collects billions of dollars in employment tax penalties yearly) and stay ahead of your potential tax liability.
Keep cash flow steady: Spot cash slowdown or gaps in income early, so you can adjust before a crisis hits and track cash flow trends over time to anticipate challenges.
Make smarter decisions: Up-to-date financial information allows you to confidently plan spending, set prices, and make more informed future business decisions.
Catch errors before they snowball: Fixing a small mistake from the previous month is much easier than finding it later.
Build investor and lender confidence: Clean, consistent accounting makes applying for loans easier and appeases investors because investors and lenders rely on accurate financial statements.

Core tasks involved in monthly accounting

Not sure what monthly accounting should really look like for your business? Here are the main tasks.

Review financial transactions and reconcile accounts

One of the most important steps in monthly accounting is reviewing your financial activity in detail. This means going through transactions from your bank accounts, credit cards, and loan activity, and don’t forget to reconcile cash accounts for a complete picture.

You should categorize all income and expenses, adjust entries in your accounting, match transactions to receipts and invoices, including gathering and organizing all expense receipts, and reconcile accounts to bank/ credit card statements.

Reviewing transactions in this manner allows you to spot errors, catch potential fraud, understand the state of your finances, and maintain the integrity of your financial data.

Update and analyze financial statements

The next step is updating and analyzing your monthly financial statements and generating timely financial reports. Regular financial analysis of your statements helps you spot opportunities, reduce risks, and stay ahead of economic challenges.

These should include the following core reports:

Profit and loss statement (P&L): This shows your income and expenses over a set period of time. It helps you answer the question: Are you making more than you spend?
Balance sheet: The accounting balance sheet shows what your business owns (assets) versus what it owes (liabilities). Make sure to review your balance sheet accounts regularly to maintain accuracy.
Cash flow statement: This tracks how cash moves into and out of your business. Can you cover upcoming expenses?

With these statements, go beyond numbers alone, and look for trends. Are expenses creeping up? Is income spiking during certain seasons? Which clients are slow to pay?

Preparing financial statements regularly keeps you compliant and gives you sharper insights into your performance, helping you confidently shape future business decisions.

Record and track receivables and payables

Managing the money coming in (accounts receivable) and going out (accounts payable) keeps your operation moving smoothly and avoids cash flow crunches. If you lose track of either, you might be unable to pay employees or invest in growth, even if you’re paying bills on time.

Responsibilities include following up on unpaid invoices, recording incoming payments promptly, and regularly review accounts receivable to ensure you’re not missing out on collections.

Pro tip: Set calendar reminders or use accounting software to automate certain tasks to stay organized and ahead.

Review payroll and employee-related costs

Whether you’re a solo business owner or you have a team, payroll plays a key role in compliance and financial stability.

Every month, you need to:

Run payroll accurately and on time.
Review payroll tax withholdings.
Update any changes to benefits or contractor payments.

Review business budget vs. actuals

How much is your business spending, and is it within budget? That’s a question you need to answer every month.

By comparing the budget to actuals each month, you set the stage for more accurate cash flow projections and smarter long-term planning.

Plus, these monthly check-ins help you create more accurate, realistic financial forecasts over time.

Document notes or changes for your accountant

The more information your accountant has, the more you can save time and money and prevent confusion down the road.

Keeping a simple log of information can help with everything from tax prep to long-term planning, including more effective tax planning and minimizing your tax liability.

Here’s what to jot down each month:

Major purchases or investments.
Loans taken out or paid off.
Any unusual income or expenses.

By consistently documenting these notes and changes, you make tax prep smoother and support accurate general ledger reconciliation, ensuring that all your accounts align properly.

This proactive habit strengthens the accuracy of your overall financial records and empowers your accountant to deliver even better insights and guidance for your business.

DIY vs. partnering with an accounting professional

Not sure if you should tackle your monthly accounting the DIY way or partner with an accounting professional? As it turns out, 70% of small businesses don’t have an accountant.

In some situations, it might be better to handle your accounting in-house—let’s say, if you’re a new business or your finances are simple.

However, as your business grows, so does the complexity of your accounting needs. Eventually, doing it all yourself can lead to missed opportunities, costly mistakes, and unnecessary stress.

So, how do you know when to bring in a professional? If you’re struggling to keep up with these tasks every month, second-guess your reporting, or find that accounting tasks are eating into time you should spend on your business, it’s time to call in support.

How Archer Lewis can lighten the load

If you’re looking for your next trusted accounting partner, Archer Lewis is here to help. We’re more than just another firm: we’re dedicated to your long-term growth, instead of just tax-season help.

Our bespoke accounting services are designed for businesses just like yours and include monthly bookkeeping, financial reporting, payroll processing, and strategic planning through fractional CFO support.

What makes Archer Lewis different? We use a people-first, relationship-driven approach combined with the capabilities of a national network to meet your needs. Our team is available and responsive, and we’re here to help you simplify your financial world.

Your monthly accounting doesn’t have to be a drag

Monthly accounting might not be your favorite activity, but it’s key to a stable, stress-free business prepared for whatever the future holds. If you feel like you’re in over your head or have fallen behind on your accounting, it’s not too late to get back on track, especially with some help.

That’s where Archer Lewis comes in.

Let’s connect and discuss how we can support your monthly accounting process, so you can focus on what you do best.

The Ultimate Guide To Medical Practice Accounting

Why medical practices have unique accounting needs

Your medical practice isn’t like other typical small businesses, and your accounting needs reflect that. Medical practice accounting requires specialized knowledge and precision, from how you earn revenue to how you handle payroll and taxes.

Some specific medical accounting challenges include:

Manage multiple revenue streams (insurance, patient payments, Medicare/Medicaid) and ensure smooth revenue cycle management to maintain healthy cash flow.
Handling high-volume invoicing, delayed reimbursements, and accrual accounting (including adjusting entries in accounting).
Navigating complex tax regulations and payroll structures (especially for contractors vs. employees).

These aren’t your run-of-the-mill accounting challenges. Some practices may also use cash-basis accounting, depending on the right accounting method for their needs.

Because of that, they need to be handled by those with industry-specific accounting experience to avoid compliance risks and lost revenue.

That’s where proper financial management and accounting practices come into play.

Key components of effective medical practice accounting

Proper medical practice accounting involves more than just basic number-crunching. Here are the key components of healthcare accounting every business should have in place.

Bookkeeping

Accurate, daily medical practice bookkeeping is essential for tracking financial transactions, categorizing income and expenses, and maintaining accurate financial records.

Consistent bookkeeping ensures your financial data is up-to-date, which helps you monitor cash flow, prepare for tax season, and make informed business decisions throughout the year. Accounting and bookkeeping services usually go hand-in-hand.

Payroll and benefits

Timely payroll processing and employee benefits compliance are crucial for keeping your staff happy and your practice running smoothly. Your medical practice might have a mix of salaried employees, hourly workers, and independent contractors, further complicating payroll and benefits management. Keep in mind that the IRS collects billions of dollars per year in penalties associated with employment taxes alone.

Tax preparation and planning

Quarterly and annual tax filings are vital, as are proactive strategies to reduce liabilities. With the right financial planning in place, you can minimize surprises, lower your tax burden, and align your tax approach with your long-term business goals.

Financial reporting

Accurate financial reports—such as clear income statements and financial statements, cash flow reports, and balance sheets—offer a clear snapshot into your practice’s financial performance.

These reports are essential for tracking profitability, identifying trends, and guiding strategic decisions (such as whether you can afford to invest in that new equipment you’ve been eyeing).

Account reconciliation

Regularly reconciling bank accounts, medical billing software, credit cards, and vendor balances ensures your records are accurate and complete. This helps catch and prevent situations like billing errors or fraud, and maintains trust in your financial data.

Common mistakes that hurt medical practices financially

Even the best medical practices can run into financial trouble—not because of poor patient care or a lack of medical expertise, but because of avoidable accounting missteps.

Studies show that almost half of small businesses don’t use an accountant or bookkeeper and that one quarter of small businesses still record their finances on paper (instead of using a computer).

Mistake #1: Relying on generalist accountants

Medical billing is complex and specific, and not every accountant can handle it. Generalist accountants might miss critical details, from coding errors to unclaimed reimbursements.

Instead, when you choose an accountant with medical expertise, they know the nuances of your accounting needs and ensure you’re both legally compliant and financially sound.

Mistake #2: Not separating personal and business finances

Medical professionals can sometimes (accidentally) mix their personal and business finances, such as through shared bank accounts and credit cards.

This makes it harder to track deductions, prepare taxes, and measure your practice’s financial health. When you blur these financial lines, you increase your audit risk and make it difficult to make informed business decisions.

Mistake #3: Failing to reconcile accounts or track reimbursements accurately

Without regular reconciliation, billing errors, missed payments, and fraud can go unnoticed, and accounts receivable balances can become outdated or incorrect.

Plus, medical practices often deal with delayed insurance payments; if they’re not tracked properly, revenue can quietly leak out. These lapses could leave some serious money uncollected, impacting cash flow and long-term viability.

Mistake #4: Waiting until tax time to look at finances

Many medical practices only look closely at their books when filing taxes. But that can lead to a last-minute scramble, where it’s too late to make strategic adjustments and mistakes slip through the cracks. Instead, ongoing proactive financial oversight allows for better planning, smarter decisions, and fewer surprises come tax season.

How medical practice accounting supports growth and compliance

Airtight medical practice accounting is a powerful tool for growing your practice and staying compliant, even in an increasingly complex healthcare environment.

Wondering how?

Solid accounting helps with:

Hiring and expansion planning: Are you thinking about hiring a new provider, adding staffing, or opening a new location? Reliable cash flow tracking and financial forecasting help you understand whether your practice can afford it and avoid putting unnecessary financial strain on your operation.
Avoiding IRS audits and financial penalties: Medical practices can face heightened scrutiny from tax authorities due to their mix of income sources and complex payroll structures. But accurate records and timely tax filings help you stay compliant and minimize the risk of audits or penalties.
Planning for new equipment purchases or service lines: We don’t have to tell you how pricey medical equipment can be. Whether you’re investing in new diagnostic equipment or launching a new specialty service, proper accounting helps you evaluate your budget and ROI, and time your purchases wisely.
Managing debt and credit effectively: Medical practices often take on loans for equipment, renovations, or expansions. A clear picture of your debt obligations, interest rates, and repayment schedules helps you manage those commitments (without overextending).

Example: Why Sector-Specific Accounting Matters

For example, a small dermatology clinic expanding to offer cosmetic services might need to evaluate the cost of new equipment, hire additional staff, and navigate changing payer contracts — all while managing existing patient care. Without specialized accounting support, it’s easy to miss tax-saving opportunities, overextend cash flow, or delay growth plans.

Ultimately, the formula is simple: financial clarity = less stress and smarter business decisions.

How Archer Lewis helps medical practices thrive

At Archer Lewis, we understand the unique challenges of medical practice management accounting because it’s one of our core specialties. We provide tailored financial solutions designed specifically for busy medical professionals, with a deep understanding of medical billing complexity, payer systems, and practice operations.

When you partner with Archer Lewis, you gain more than just accounting services — you gain a human-first team of dedicated advisors who communicate clearly, respond promptly, and help you stay financially healthy year-round.

Our specialized services for medical practices include:

Fractional CFO support for larger practices
Tax resolution and planning for high-income practitioners
Bookkeeping cleanup for practices behind on records

Wondering whether to handle your accounting in-house or partner with a fractional expert? This guide to in-house vs. fractional accounting can help you weigh the right approach for your practice.

We’ve got your medical practice accounting covered

Accounting might not feel like the most urgent task in your day-to-day operations, but for healthcare practices, it’s a key part of running a healthy business. When done right, it empowers you to focus on patient care instead of paperwork, with fewer financial surprises and more peace of mind.

If your accounting needs feel overwhelming, you’re not alone — and you don’t have to figure it out by yourself.

Think of us as your trusted, caring fractional accounting partner, here to deliver tailored financial support for healthcare practices like yours.

Let’s connect about how Archer Lewis can support your practice’s financial future and give you the peace of mind you deserve.

The average cost of tax preparation by a CPA for a small business

Tax preparation is a critical responsibility for small business owners, often ranking high among the most challenging tasks. Particularly with tax laws frequently changing, partnering with a Certified Public Accountant (CPA) can provide much-needed clarity and peace of mind.

A CPA’s expertise goes beyond basic tax filing. They ensure compliance with ever-changing regulations, optimize deductions to lower your small business tax return fees, and offer strategic advice that supports long-term financial health.

The average cost of tax preparation by a CPA for a small business varies according to the complexity of your tax situation, location, and the services you require. But understanding these fees is essential for effective budgeting and decision-making.

For small businesses, choosing the right CPA isn’t just about today’s tax season—it’s about building a foundation for sustainable growth. Let’s explore the costs and benefits in detail to guide your decision-making.

Average CPA tax preparation costs

The average cost of tax preparation can vary widely depending on several factors, so let’s dive into a tax preparation cost breakdown to help you understand what to expect:

National average costs: According to the National Society of Accountants, preparing a Form 1040 with Schedule C (the form businesses use to report profits and losses to the IRS) costs an average of $457. Simple Form 1040 filings cost approximately $220 without itemization, while itemized versions average $323.
Regional differences: The cost of filing a state tax return can vary regionally:
- Midwest region: Known for its affordability, the Midwest often has lower tax preparation costs, with fees for small business filings averaging around $300–$400.
- South Atlantic region: Moderate pricing around $350 for standard small business filings.
- Pacific region: Higher fees, often exceeding $500 for comprehensive returns.
Simple vs. complex filings:
- Simple filings: If your business has minimal deductions and straightforward income, expect lower fees, often around $200-$300.
- Complex filings: Businesses with multiple income streams, significant deductions, or intricate asset management may see costs rise to $1,000 or more.
Additional charges:
- Consulting services: Average rates hover around $150/hour for tax consultations.
- Amendments to returns: Depending on the complexity of the changes required, fees typically range from $50 to $300.
- Disorganized records: Clients with incomplete or poorly organized files often face an additional fee averaging $165.

Understanding these factors can help you estimate your annual tax preparation costs and plan effectively for your business’s financial health. By knowing the average cost of CPA services and identifying your specific needs, you can make informed choices that align with your budget and goals.

CPA vs. tax preparation software costs

Tax preparation software, such as TurboTax or H&R Block, provides a budget-friendly alternative to working with a CPA.

These tools typically cost between $60 and $130 for small business editions, making them attractive for those exploring tax filing options for small businesses with straightforward needs.

However, software has its limitations. It doesn’t offer personalized advice or adapt well to complex financial scenarios. For small businesses facing complicated tax situations, tax preparation services costs associated with hiring a CPA can ultimately save money by optimizing deductions and ensuring compliance with tax laws.

CPA vs. enrolled agent costs

Enrolled agents, or federally authorized tax practitioners, offer another option for tax preparation. While they often charge less than CPAs, their scope of expertise may not extend beyond taxes.

Conversely, CPAs offer a broader skill set, including strategic financial planning and business advisory services. When evaluating CPA vs. tax preparer costs, businesses often find a CPA worthwhile for their expertise and lasting financial value.

Outsourced CPA vs. in-house accountant costs

Hiring an in-house accountant—who may also be a CPA—means committing to salary, benefits, and training expenses, which can strain small business budgets. Outsourcing your tax preparation to a CPA, on the other hand, offers a more cost-effective alternative.

With options like flat-fee pricing, an outsourced CPA provides expert tax guidance without the ongoing overhead of a full-time employee, helping you manage resources more efficiently.

Factors influencing CPA tax preparation costs

Several key factors influence tax preparation costs, including the complexity of your finances, your business location, the CPA’s experience, and the specific services you require.

Before choosing a tax preparation partner, be sure to consider:

Tax return complexity: A business’s financial complexity significantly impacts its tax return efforts and costs. Simple returns with few deductions typically cost less, while intricate finances—like multiple income streams or extensive deductions—require more time and expertise, increasing fees. The more complex your return, the higher the accurate and compliant preparation cost.
Business location: Geographic location plays a significant role in tax preparation costs. Urban areas often have higher rates due to increased demand and operational expenses, while rural locations may offer more competitive pricing. These regional differences highlight the importance of considering where your business operates when planning for tax preparation costs.
CPA experience: A CPA’s experience significantly influences tax preparation costs. With their extensive knowledge and proven track records, seasoned CPAs often charge higher fees. However, this investment adds value: better ensuring compliance, optimizing deductions, and providing strategic insights.
Hourly rates vs. flat fees: CPA pricing for small businesses can vary significantly between hourly rates and flat fees. Hourly rates can escalate for complex tasks, while flat fees are generally less expensive for predictable services. Knowing your needs upfront helps determine the best option, ensuring transparency and effective budgeting.
Frequency and types of services: The frequency and types significantly influence tax preparation costs. More frequent services result in higher expenses, while additional services like year-end tax planning or audit support typically cost more. However, bundling services can help small businesses reduce fees and streamline financial management.

How to reduce CPA costs for tax preparation

Reducing the cost of small business tax preparation starts with proactive management, including staying organized, understanding obligations, and bundling services. The following tips can help you proactively manage your tax preparation process and control costs.

Organize your financial records

Keep receipts, invoices, and bank statements well-organized throughout the year. Organized financial records reduce your CPA’s workload and lower preparation costs. Use tools to track expenses, create digital backups of important documents, and establish a monthly routine for reconciliation to maintain accuracy and efficiency year-round.

Understand tax obligations

Understanding your tax obligations is essential for avoiding penalties and maximizing savings. Start by familiarizing yourself with filing deadlines and requirements. Tools like the IRS Small Business Tax Guide provide clear guidance. Consider consulting a CPA for advice tailored to your unique circumstances, ensuring compliance and optimal financial planning year-round.

Bundle services

Many CPAs offer discounts when combining tax preparation with other services like bookkeeping or payroll. Bundling services can significantly reduce the accountant cost for small business taxes while streamlining financial management. Additionally, exploring bundling options can help small businesses lower CPA fees for tax filing, providing both convenience and cost savings.

Benefits of using a CPA for tax preparation

Partnering with a CPA offers significant advantages, including ensuring regulatory compliance, optimizing deductions, and providing expert financial insights that support immediate and long-term business growth.

Accuracy and compliance

CPAs ensure your taxes are prepared accurately and comply with all regulations. This level of assurance provides peace of mind during tax season, eliminating fears of making costly mistakes or facing an audit. With a CPA, you can confidently focus on running your business, knowing your tax obligations are expertly managed.

Strategic financial advice

CPAs provide insights beyond tax preparation, helping you optimize taxes through tailored strategies and expert advice. Their expertise in tax planning ensures businesses maximize deductions and minimize liabilities. This proactive approach delivers long-term financial benefits, setting a solid foundation for sustained growth and financial health.

Time savings

As tax professionals, CPAs take the burden of handling complex tax tasks off your plate, preparing tax returns much faster than those inexperienced. Accuracy and compliance remain the top reasons businesses seek professional help, but maximizing deductions and credits are just as important.

A tax professional ensures you take advantage of every opportunity to reduce your tax burden, keeping more money in your pocket while staying compliant with regulations.

Still, the additional impact can’t be understated: expert tax management also reclaims business owners’ valuable time, enabling them to focus on growing their businesses and ensuring they can prioritize strategic initiatives.

How to choose the right CPA for your small business

Here are a few things to consider when selecting a CPA:

Seek industry-specific expertise: A CPA familiar with your industry can provide tailored advice that aligns with your needs and challenges. Industry knowledge ensures they understand the nuances of your financial situation and tax obligations.
Ask key questions: When considering tax preparation services, ask about their experience with small businesses, response times, familiarity with industry-specific regulations, and pricing structure. Also, inquire about their range of services, such as tax planning or audit support, to determine if they align with your needs.
Compare options: Evaluate CPA services against other tax preparers, considering expertise and cost. CPAs often provide added value through strategic financial planning, while other preparers may suit businesses with simpler needs. Comparing options ensures you find the right fit for your budget and goals.

Need tax prep help?

We hope this has given you a clearer understanding of the average cost of what small businesses can expect to pay for CPA tax preparation. Now, you can plan to ensure a smooth and stress-free tax season. Taking the time to organize and prepare now will save you stress and money later.

Archer Lewis specializes in making tax preparation straightforward and effective for small businesses. Our experienced CPAs provide personalized service, ensuring accurate filings and peace of mind while helping you focus on what matters most—growing your business.

Don’t wait until tax season becomes overwhelming. Let Archer Lewis handle the complexities of your taxes so you don’t have to. Ready to make tax season easier? Learn more about our tax preparation services for small businesses.

R&D Tax Credit: How Small Businesses Can Turn Innovation Into Tax Savings

This article was originally written in November 2024 and has since been updated with new discoveries and research in 2025.

If your business is solving problems or improving products, you might be qualified for a hefty tax break: the R&D tax credit. This tax credit (also called the Research and Experimentation credit) is not only for tech giants or scientists—it’s also accessible to small businesses across many industries.

However, innovation in small businesses often goes unrecognized and underutilized when it comes to tax savings.

But it’s true: if your business is designing, developing, or improving something, you could take up to 20% of your qualified research expenditures right off your tax bill with the R&D tax credit, reducing your tax liability and freeing up capital for growth.

This article covers everything you need to know about the R&D tax credit, including who qualifies, how it works, and why it matters.

What is the R&D tax credit?

The research and development tax credit is a federal research incentive designed to reward businesses investing in innovation. Known formally as Internal Revenue Code section 41, this credit encourages companies to develop new products, improve existing ones, and enhance technologies. It’s not only reserved for tech or science firms but is available based on activity, not business sector.

Unlike deductions, which just reduce your taxable income, this credit is a dollar-for-dollar reduction. It can either help reduce your income tax or your payroll tax, depending on your company’s tax status.

Keep in mind that this is a permanent tax credit, not a one-time benefit.

Who qualifies?

Not sure if you qualify for the R&D tax credit? You’re not alone—data reveals that less than 30% of businesses that qualify for this credit actually claim it.

Small businesses are usually the ones that leave money on the table.

First, know that companies do not need a formal R&D department to qualify, and you don’t need to be a tech startup. This tax credit is flexible, and various activities can go towards it. This includes both basic research and applied research activities.

If you’re not sure if your business qualifies, ask yourself these questions:

Are you improving a product or service?
Are you experimenting with new materials or processes?
Are you developing custom software or workflows?

If the answer is “yes,” you might indeed qualify. While businesses in a broad range of industries can be eligible, common sectors include construction, food and beverage, manufacturing, and SaaS.

What expenses can be claimed?

The R&D tax credit covers all kinds of research-related costs.

Common small business expenses that are eligible might include:

Wages: Employees working directly on qualified research expenses and activities, such as innovative projects or directly supervising qualified research efforts.
Supplies: These are used for prototyping or testing, such as materials used for research.
Contractors: Up to 65% of costs for third-party research contributors.
Cloud computing: If used to develop or test new products or processes.
Equipment rental: Computer equipment rented for R&D work.

Get this: even partial involvement in innovation could make these expenses count, especially when looking at qualified research expenditures incurred throughout your projects.

The four-part test

How does the IRS determine if your business qualifies?

Your research activities need to check four boxes:

New or improved business components: You need to improve your products, processes, or software—even small improvements count. Maybe you’re tweaking your manufacturing process to be more efficient or updating your software to work better.
Technological in nature: Your work should involve science, engineering, or computer principles. Don’t worry—you’re not trying to win a Nobel Prize here. Using technical knowledge to solve everyday business problems often qualifies.
Technical uncertainty: There needs to be questions about whether you can achieve your goal, what method will work best, or the right design. You might qualify if you’re scratching your head about how to make something work better.
Process of experimentation: You need to show you’re trying different approaches through testing, trial and error, or modeling. It’s about finding what works through experimentation.

By understanding and applying the four-part test, your business can confidently identify which projects and activities may qualify for valuable tax credits.

Remember, even small improvements or experimental efforts can lead to substantial tax savings, so don’t overlook the innovation in your everyday operations.

How much can you actually save?

The R&D tax credit is one of the largest tax subsidies, according to the federal government, which businesses use to save billions of dollars a year collectively. So, how much can your individual business save?

Of course, that depends on your exact business. The specific formula involves calculations of qualified research expenses over a certain period of time.

Two different methods were used: the regular research credit calculation (RRC) method and the alternative simplified credit (ASC) method. The RRC requires gross receipts and can be complex (but might result in a larger credit), while the ASC is more streamlined (which makes it accessible and a good choice if you lack enough historical data).

The money you save from this tax credit can be far more than just some pocket change, even if your team is small. For example, let’s say you’re a small food manufacturer experimenting with eco-friendly packaging.

You’ve invested in materials testing, worked with engineers to refine the design, and run trial productions. These activities could qualify you for the R&D tax credit, potentially saving your business $10K or more.

Even startups with no taxable income may still benefit from taking this business tax credit through the payroll tax election. While the maximum amount of payroll tax research credit used to be $250,000, it doubled to $500,000 for tax years beginning in 2023 and beyond.

Debunk common myths that prevent people from applying

Many small business owners mistakenly believe they don’t qualify for the R&D tax credit, so they don’t even apply. And with potential tax hikes on the horizon, maximizing available credits becomes even more essential.

Here are common myths that often hold business owners back:

Myth: “Our business is too small.”
- Truth: Nope, size doesn’t matter.
Myth: “We’re not a tech company.”
- Truth: Innovation shows up in everyday problem-solving.
Myth: “It’s too complex to apply.”
- Truth: The process can be smooth and worthwhile with the right advisor.

By clearing these common misconceptions, small business owners can better recognize the hidden opportunities within their operations.

Don’t let myths hold you back—with the right guidance, claiming the R&D tax credit can become a straightforward and rewarding step toward reducing your tax liability and fueling future innovation.

How to claim the credit

Small businesses can claim this credit using Form 6765 with their tax return. If you’re a startup or small business making less than $5 million annually, remember, you can even use this credit against your payroll taxes—up to $500,000 yearly for five years.

Be sure to clearly outline your qualified research activities, including:

Project documentation and test results.
Notes about your research activities.
Time records for employees doing the research.
Supply and contractor costs.
Project meetings and relevant emails.
Any patent paperwork.

The process then involves identifying qualified activities, tracking eligible expenses, calculating the credit, and filing the appropriate forms.

Why work with a trusted advisor like Archer Lewis?

The R&D tax credit can offer substantial savings — but only if it’s claimed correctly. It takes more than just filling out a form. You need to gather the right documentation, meet IRS requirements, and apply the right calculations to avoid leaving money on the table.

That’s why working with a knowledgeable advisor matters. At Archer Lewis, we help small businesses navigate these complexities with confidence. Our team proactively identifies eligible activities, organizes documentation, handles year-end tax planning, and ensures your claims are accurate and compliant, so you can focus on running your business while we handle the details.

Don’t Leave Tax Savings on the Table

If you’re running a small business — whether you lead a dental practice refining treatment methods, manage an HVAC company improving energy efficiency, or operate a construction firm testing sustainable materials — your everyday innovations could qualify for meaningful tax savings through the R&D tax credit.

The key is knowing what counts and making sure you claim it correctly. That’s where Archer Lewis comes in. We’re not just here for tax season. We’re your year-round partner, helping you uncover hidden opportunities, organize the right documentation, and stay fully compliant so you can focus on growing your business.

Want to explore whether your business qualifies?

Connect with a trusted Archer Lewis advisor today to discuss how we can help turn your innovations into real tax savings and strengthen your financial future.