It’s tax season, and instead of confidently submitting your financial records, you’re scrambling to locate receipts, fix errors, and reconcile accounts. Sound familiar?

This scenario affects many business owners. Neglected books cause stress and can lead to tax filing errors, missed opportunities, and even non-compliance issues.

Regular bookkeeping and accurate financial reporting are essential for smart business decision-making and tax audits. Without them, you risk losing sight of cash flow, overspending, or missing critical deductions. Signs your business might need a bookkeeping cleanup include unreconciled bank and credit card statements, missing data, and unpaid invoices.

But there’s hope: a practical bookkeeping cleanup checklist can help you regain control of your financial records, ensuring compliance, clarity, and peace of mind.

Preparing for bookkeeping cleanup

Preparing for the bookkeeping cleanup process doesn’t have to be complicated. Here are some tips for making it more manageable.

Gather all financial documents

Before anything else, gather your financial documents. These records are the backbone of your bookkeeping cleanup process and ensure you’re not overlooking important details.

Collect essential items like:

• Bank statements

• Credit card statements

• Receipts

• Invoices

• Payroll records

Having all your financial data in one place sets the stage for smooth and accurate bookkeeping.

Review current accounting methods

It’s worth reviewing your financial management to identify areas for improvement. If you use accounting software, double-check that your categories and tax codes are properly configured for accuracy.

Still not using accounting software? If you’re reading this article, chances are you might benefit from it.

Set clear financial goals

Setting clear goals is essential for boosting your financial health and staying on track during the bookkeeping cleanup process. Think about what you really want to achieve.

Maybe it’s simplifying expense categories, staying ahead for tax season, or getting a better grip on cash flow. Start small—like tackling one financial area each week—and be specific.

For example, aim to review all expense categories or finalize reconciliations by a set date. Measurable goals and knowing the benefits of bookkeeping make progress easier to see and keep you motivated.

Bookkeeping cleanup checklist

​​With all your financial documents accounted for, your accounting methods reviewed, and those financial goals set, let’s move on to the bookkeeping cleanup. Here’s a step-by-step checklist to guide you through the process and relieve stress from managing your books.

1. Reconcile bank and credit card statements

The first step in reviewing your finances is ensuring your books match your financial activity. The reconciliation process is about catching mistakes—like duplicate charges, missing transactions, or miscategorized entries—so your financial data is always reliable. Beyond accuracy, reconciling accounts can help you spot overlooked trends, avoid overdrafts, and ultimately make better decisions.

First, align your bank and credit card statements with your bookkeeping records or accounting software. Look for inconsistencies and confirm that every transaction is categorized correctly. This step ensures everything adds up, catches potential errors, and gives you confidence that your financial records are accurate and complete.

2. Review accounts receivable and payable

Once you’ve sorted out your accounts, it’s time to deal with your clients and vendors:

• Start by identifying unpaid invoices and following up with clients. Make sure your client information is current to streamline this process

• Then, review outstanding vendor bills and schedule payments to avoid late fees

• As part of your transaction review, double-check records for accuracy and ensure the vendor reconciliation aligns with your books

Staying proactive helps avoid surprises and keeps your finances running smoothly.

3. Organize financial records

A little organization goes a long way when managing your financial records. Start by digitizing paper documents, which makes them easier to find and reduces clutter. Even the IRS has started expanding its digital scanning efforts.

Next, ensure all transactions are categorized consistently and accurately to avoid confusion later on. If you don’t already have a system, create one using simple tools like spreadsheets or user-friendly software.

Here are some tips to get started:

• Use cloud storage for secure and easy access to your digital records

• Create clear naming conventions for files (e.g., “2025_January_Expenses”)

• Color-code files or add tags to highlight critical documents

• Schedule regular check-ins to review and update your filing system

• Backup your digital files regularly to prevent data loss

4. Verify financial statements

After organizing those financial records, you can verify your financial statements. They clarify your business’s performance, providing the foundation for sound decisions.

To start this process:

• Review income statements to confirm that your revenue and expenses are recorded correctly. Check your balance sheet to ensure assets and liabilities are listed accurately and align with your financial position.

• Next, examine cash flow reports to track how money moves in and out of your business. Look for discrepancies, such as missing transactions or errors in categorization, and correct them immediately.

Regularly verifying your financial statements helps maintain transparency and preserve your business’s financial health.

5. Analyze payroll records

Payroll mistakes can be costly, so it’s worth taking the time to double-check everything:

• Ensure employee records are current, including details like tax withholdings, deductions, and benefits.

• Go over payroll entries carefully to confirm they’re categorized correctly and match what’s actually been paid.

• Watch for errors like overpayments or missing deductions and correct them as soon as you spot them

Regular payroll audits help you avoid costly mistakes and keep you compliant with tax laws. Staying on top of this process saves you stress and keeps things running smoothly.

6. Check asset and liability accounts

Understanding where your business stands financially means diving into some key areas. Your depreciation schedules are a great place to start—ensure they’re accurate and reflect the current value of your assets. You should also evaluate your loans and liabilities to confirm they’re correctly recorded and up to date.

Check your asset accounts to ensure everything aligns with your business’s current position and financial goals. Keeping depreciation, loans, and liabilities accurate ensures your books are clean and ready for smart decisions, whether you’re planning for growth or preparing for an audit.

7. Audit expense accounts

Take a closer look at your expenses and look for ways to save money:

• Start by eliminating duplicate charges or outdated subscriptions that are no longer necessary. These minor cuts can add up to significant savings over time.

• Then, make sure all your expenses are categorized correctly. Accurate categorization gives you better insights into where your money is going and helps streamline your financial reporting.

By organizing and cleaning up your expenses, you’ll have a clearer picture of your spending and can make more informed financial decisions in the future.

8. Update the chart of accounts

Streamlining your bookkeeping structure is all about making things simple and functional. Review your chart of accounts and remove any outdated or redundant categories that no longer serve your business.

Also, ensure your account names accurately reflect your current business needs, making it easier to track finances and understand transactions at a glance. Simplifying and standardizing your chart of accounts creates a more organized system that saves you time and minimizes confusion moving forward.

Best practices for maintaining clean books

Now that your books are tidy, keep them that way with these tips.

Set up regular bookkeeping schedules

Consistency is key to keeping your books in great shape.

To stay on track, make sure to:

• Set aside specific dates each month or quarter for bookkeeping tasks

• Use calendar reminders or task management tools to stay consistent

• Dedicate time to reconcile accounts, update records, and review transactions

• Work with a bookkeeper to ensure everything is done correctly and on time

• Stick to a routine

Use accounting software

Accounting software can be a game-changer for small businesses. It not only saves time but also improves accuracy by automating repetitive tasks.

Tools like QuickBooks and Xero are especially popular for simplifying bookkeeping. Features like automated transaction categorization and report generation mean you spend less time on manual data entry and more time focusing on growth. Plus, they’re designed to meet small business needs, offering integrations and customizable options to suit your workflow.

Outsource your bookkeeping to professionals

Sometimes, bringing in a professional is the best move you can make. A skilled bookkeeper can help ensure compliance, spot errors you might overlook, and keep your books in shape.

Outsourcing bookkeeping lets you focus on running your business while experts handle the details. It’s beneficial if you’re experiencing rapid growth, dealing with complex finances, or simply feeling overwhelmed by bookkeeping tasks.

Need help with bookkeeping for your small business?

With Archer Lewis’s expertise, you can confidently manage your books without stress. Whether you’re following a bookkeeping cleanup checklist or looking to hire a bookkeeper, we’ve got you covered.

Learn more about Archer Lewis’s small business bookkeeping services and discover how we can help your business thrive.

For many small business owners, financial management can be overwhelming. That’s why it makes sense to keep organized with sound bookkeeping.

This essential practice ensures every financial transaction is tracked, every record is accurate, and all financial information is neatly organized. In short, bookkeeping best practices lay the foundation for sound financial health.

Accurate bookkeeping isn’t just a good idea—it’s vital to your financial success. It clarifies your financial picture, helps you avoid costly mistakes, and ensures you’re ready to seize growth opportunities. And when the complexities grow too big to handle, reaching out to professionals for small business bookkeeping services can make all the difference.

Let’s dive into the top nine benefits of bookkeeping that can transform your business.

1. Clearer picture of financial health

Keeping your books up-to-date gives you a clear view of your business’s financial health without the guesswork. With everything recorded and organized, you’ll always know where you stand:

• Track profitability: When your books are current, you can easily see how your revenue compares to your expenses, giving you a real-time view of your profitability

• Spot cash flow trends: Up-to-date financial records make it easier to spot patterns in your income and expenses, helping you prepare for financial transitions and avoid cash flow surprises

• Support strategic decisions: Accurate financial data gives you the confidence to make big moves, whether expanding your operations or navigating unexpected challenges

When your financial information is organized and current, you’re not just managing numbers—you’re making smarter, more strategic choices for your business’s future.

2. Enhanced cash flow management

Managing cash flow is a big deal for small business owners. It’s what keeps the lights on.

That’s why solid bookkeeping is so crucial. When you actually track cash flow, you can stay on top of your finances instead of just hoping for the best.

• Monitor income and expenses: By closely monitoring accounts payable and receivable, you’ll always know exactly when money is coming in and going out—no more nasty surprises.

• Avoid cash flow crunches: Regularly updating and checking your balance sheet helps you catch potential issues early. Whether it’s a slow season or unexpected expenses, you’ll be ready to handle it.

• Plan for growth: With accurate cash flow tracking, you’re not just staying afloat but setting yourself up for expansion. Knowing where your finances stand gives you the confidence to reinvest and grow.

Good bookkeeping will alleviate your cash flow worries and give you a clear path ahead.

3. Streamlined budgeting and forecasting

Accurate bookkeeping is your ticket to creating budgets and forecasts that actually work. When you know where every dollar is going, you can confidently plan your next steps, such as:

• Laying a foundation for budgets: A bookkeeper ensures all your financial data is accurate, giving you the groundwork for realistic short- and long-term budgets

• Setting financial goals: Proper financial planning helps you define and achieve your business goals, whether they involve increasing revenue, cutting costs, or expanding operations

• Allocating resources wisely: Expert bookkeepers handle payroll processing and help you pinpoint areas where you can save or invest for maximum impact

When your books are in order, budgeting and forecasting no longer feel like guesswork, and your numbers become a reliable guide to making good decisions.

4. More accurate financial records

Keeping everything organized and accurate, especially with proper general ledger management, helps prevent costly mistakes and ensures your data is rock solid.

Here are some key benefits of keeping accurate financial records:

• Keep records error-free: A reliable bookkeeper ensures transactions are logged correctly, so you’re not left sorting through errors down the line.

• Stress-free audits and reviews: With tidy, up-to-date records, audits and compliance checks become a breeze instead of a nightmare.

• Easier tax prep: Tax season is smooth sailing when your financial records are in great shape. No last-minute scrambles or missed deductions—just clean, organized data ready to go.

With solid bookkeeping practices in place, your financial records aren’t just neat and tidy—they’re tools you can rely on to make wise choices and stay ahead of the game.

5. Improved financial decision-making

Effective decision-making relies on high-quality data, and accurate bookkeeping is essential for providing that data. By keeping your financial data organized and accessible, you can:

• Spot trends and patterns: Identify shifts in your financial landscape before they become problems. For example, track which products or services are selling well and which might need adjustments.

• Evaluate performance: Understand what’s driving success and where you might need to course correct. Data-backed insights can help you boost marketing efforts or trim unnecessary expenses.

• Support big decisions: Solid financial data gives you the confidence to tackle major moves, like deciding on new investments, managing debts strategically, or scaling your operations.

Bookkeeping isn’t just about numbers—it’s about empowering strategic planning. With clear, actionable insights, you’ll feel ready to make bold choices and set your business up for long-term success.

6. Simplified tax preparation

Tax season doesn’t have to be a headache when you have bookkeeping and tax preparation services to back you up. It’s the backbone of a stress-free tax season, keeping everything organized and easy to manage.

Here are three key benefits of maintaining accurate bookkeeping for your financial records:

• Stay compliant: Bookkeeping ensures your financial records meet all tax compliance requirements, so you don’t have to worry about falling behind

• Organized tax records: Filing taxes becomes simple with all your documents in order. You won’t have to scramble for missing receipts or outdated reports

• Avoid penalties: Accurate records reduce the risk of errors and missed deadlines, saving you from costly fines

By staying current with your bookkeeping, you’ll make tax time much less painful.

7. Reduced risk and better compliance

Every small business owner wants to avoid financial risks, and bookkeeping plays a significant role in protecting you. By following tax planning strategies and implementing solid internal bookkeeping controls, you can:

• Adhere to regulations: Stay compliant with financial reporting standards and tax laws to make regulatory hurdles a breeze

• Detect discrepancies early: Regularly reviewing your records helps you catch errors or signs of fraud before they escalate into big problems

• Minimize penalties: With accurate and timely financial reporting, you can avoid late filings, fines, or compliance-related issues

By staying on top of your books, you’re building a safety net for your business, ensuring you’re ready to handle whatever challenges come your way.

8. Increased productivity and efficiency

Time is every small business owner’s most precious resource, and bookkeeping helps you use it wisely. By automating routine tasks with bookkeeping software and outsourcing bookkeeping to professionals, you can:

• Streamline operations: Automation features in bookkeeping software can handle repetitive tasks like data entry, freeing up your time for more important things.

• Focus on growth: With outsourced bookkeeping or software, you don’t have to spend hours buried in spreadsheets. Instead, you can use your time to grow your business.

• Achieve work-life balance: Delegating your bookkeeping services to experts means you can spend more time doing what you love—both at work and at home.

By outsourcing bookkeeping, you’re not just saving time—you’re ensuring your money is in capable hands, giving you the peace of mind to focus on your business.

9. More business growth opportunities

Good bookkeeping is your ticket to securing financing and attracting investment, which are essential for growth:

• Secure loans and investments: Lenders and investors rely on accurate financial statements to gauge your business’s stability and reliability. Clean, well-maintained books give them confidence in your potential.

• Showcase stability: Strong financial records showcase your business’s financial health, making building trust with potential partners easier.

• Unlock growth opportunities: With clear insights from your books, you’ll know when and where to seek funding for expansion, new products, or other strategic initiatives.

Bookkeeping goes beyond tracking numbers—it sets your business up for growth and opportunity. Whether you’re applying for a loan or pitching to investors, your financial records can make all the difference in driving your business forward.

Need help with bookkeeping for your small business?

Bookkeeping doesn’t have to feel like a never-ending challenge. At Archer Lewis, we understand how critical it is for small businesses to stay on top of their finances. That’s why we offer expert services to help you thrive.

From accurate financial records to improved cash flow and stress-free tax preparation, the benefits of bookkeeping can transform your business. It ensures financial clarity, streamlines operations, and provides a solid foundation for strategic decision-making. With Archer Lewis, you get tailored solutions designed to fit your unique needs, whether tackling taxes, handling payroll, or planning for growth.

When you hire a bookkeeper from Archer Lewis, you’re investing in more than just numbers. You’re gaining peace of mind and more time to focus on what you do best—running and growing your business. Learn more about Archer Lewis’s small business bookkeeping services.

As you review your dental practice’s monthly numbers, the phone rings with a patient who needs an emergency appointment. Does this sound familiar?

Many dental business owners struggle to balance patient care with effective financial management. Unique accounting challenges in dentistry, such as cash flow delays and navigating complex insurance claims, make this task even harder.

Keeping your practice financially healthy is key to keeping your patients happy. The good news is that smart accounting practices simplify this process, giving you the confidence to make better decisions and focus on what really matters: your patients.

Dental practice accounting makes running your operations smoother and your decision-making sharper. When you work with experts who genuinely understand dentistry’s challenges—like managing fluctuating cash flow or handling insurance claims—you’ll have the peace of mind to focus on your patients while knowing your finances are solid.

What is dental practice accounting?

Dental accounting is the specialized management of a dental practice’s financial health. It involves:

• Tracking financial transactions, which includes:

  • Revenues from patient services

  • Expenses like salaries, supplies, and utilities

  • Complexities of insurance claims and reimbursements

• Ensuring compliance with industry-specific tax regulations to avoid costly mistakes

• Providing financial insights to guide budgeting, investing, and growth planning

This isn’t just about crunching numbers—it’s about creating a financial framework that supports your practice’s success. Patients depend on your financial stability for seamless care.

By embracing dental accounting, business owners can:

• Run their practices more efficiently

• Reduce stress during tax season

• Identify opportunities for improving dental practice cash flow

With the proper financial foundation, dental practices can focus on delivering exceptional care while building long-term success.

Why is accounting important for dental practices?

Specialized accounting isn’t just about crunching numbers; it’s about giving your practice the tools to grow sustainably while providing the best care possible for your patients.

Dental practices can gain significant advantages by embracing specialized accounting solutions:

• Accurate financial insights: Tailor-made accounting gives you a clear picture of your financial health, which means making smarter decisions for the long haul

• Reduced stress during tax season: Staying organized year-round means tax time doesn’t have to be a headache

• Improved profitability through cost optimization: Spotting inefficiencies, like excess inventory or unused equipment, can save money and boost dental office profit margins

Challenges with dental practice accounting

Dental practices face several unique challenges in accounting, so they need tailored solutions to stay on top of their finances and run smoothly.

Fluctuating cash flows

Insurance companies often take their time reimbursing claims, making it tricky for practices to maintain steady cash flow. Late payments disrupt operations and add stress to the daily grind. On top of that, claim denials mean more time spent fighting for payments, which can delay revenue by months. When you add unpredictable patient payments, managing cash flow becomes even more complicated.

Inventory and equipment depreciation

Between dental chairs, X-ray machines, and countless supplies, it’s easy for things to get overlooked. Monitoring all this equipment is key to accurate financial reporting. Inventory mismanagement can result in overordering supplies or letting them sit unused, wasting money. Proper depreciation is also necessary to stay compliant and save money during tax and dental practice audits. However, it’s important to distinguish these from clinical audits focusing on patient care rather than financial compliance.

Tax regulations

Tax planning for dental practices can feel like navigating a maze. For example, you might qualify for equipment-related deductions, but knowing how to claim them takes expertise. Healthcare businesses like dental offices also have complex obligations, from employment taxes to benefit deductions. Failure to comply can result in costly penalties. Partnering with a dental CPA who understands tax planning for dental practices ensures you don’t miss a thing and helps maximize deductions.

Basic accounting principles for dental practices to understand

Getting a handle on accounting basics is essential for keeping your practice financially healthy and setting it up for long-term success.

Revenue and expenses

Understanding where your money comes from and goes is key to running your dental practice smoothly.

• Revenue: Income from services like cleanings and exams builds your financial foundation.

• Expenses: Costs, like salaries and supplies, keep your practice operating efficiently. Expense tracking for dentists ensures you’re not overspending.

By understanding your revenue and expenses, you can uncover opportunities to boost profitability, spot financial trends, and make smarter decisions that keep your cash flow in check.

Accrual vs. cash basis accounting

Accounting methods determine how and when your practice tracks income and expenses. Let’s take a closer look at these two methods and how they might fit your dental practice’s needs.

• Accrual accounting: Records income and expenses when earned or incurred, not when cash changes hands. This provides a more complete picture of financial statements.

• Cash basis accounting: This method records income and expenses only when cash is received or paid. While it’s simpler to use, it doesn’t offer the same depth of insight.

The key difference is timing: accrual accounting tracks transactions as they happen, while cash basis focuses on actual cash flow.

Chart of accounts

A chart of accounts is a tool that organizes your practice’s financial transactions into key categories, such as:

• Assets: What your practice owns, like equipment or cash

• Liabilities: What your practice owes, like loans or bills

• Revenues: Income earned from dental services

• Expenses: Costs incurred, such as salaries or supplies

A clear chart of accounts ensures the accuracy of your balance sheet, simplifies financial reporting, and helps you pinpoint areas for improvement.

What do dental accountants and bookkeepers do?

Managing dental practice finances can feel overwhelming, but that’s where a dental accountant or bookkeeper steps in. They handle all the critical financial tasks that keep your practice running like clockwork. Here’s how they help.

Manage financial records

Accountants keep your finances organized by recording transactions daily and reconciling accounts weekly. Their monthly financial reports highlight trends, pinpoint issues, and provide insights to help you make confident business decisions.

Budgeting and forecasting

Dental accountants help you stay on top of your financial planning by handling key tasks like:

• Budget creation: Crafting a dental practice budgeting plan that ensures income and expenses are in balance

• Variance analysis: Comparing your actual financial performance against your budget to spot unexpected deviations

• Cash flow forecasting: Using past trends and current operations to project cash flow and identify growth opportunities, keeping your practice financially stable

Tax planning and compliance

Accountants reduce tax planning burdens for dental firms by clarifying obligations, finding tax deductions for dental practices, and managing tax deductions and tax credits to ensure filings are accurate and stress-free.

Analyze financial performance

Getting a clear picture of your financial performance can make all the difference for your practice. Here’s how dental accountants help:

• Profit and loss analysis: They look at your revenues and expenses to find trends and opportunities to boost profitability

• Benchmarking: By comparing your performance to dental industry standards, benchmarking helps you identify what’s working well and where improvement is needed

Manage payroll and employee benefits

Dental accountants simplify payroll management for dental offices by setting up systems that ensure employees are paid accurately and on time. They handle benefits like health insurance and retirement plans while keeping your practice compliant with regulations, so your team stays supported, and everything runs smoothly.

Manage accounts receivable and payable

Dental accountants handle bookkeeping tasks by managing billing, collections, insurance reimbursements, and vendor payments to keep your practice’s finances organized and efficient.

Choosing accounting software for your dental practice

Although it cannot replace an accredited accountant, specific software simplifies financial management by automating various accounting services.

It tracks expenses, creates reports, and manages cash flow effortlessly. The revenue cycle in dentistry refers to managing patient billing and payments, ensuring the practice efficiently collects revenue while controlling operational costs.

Some top software picks for dental practices include:

• QuickBooks Online

• Xero

• Dentrix Ascend

When you’re looking for software, be sure to:

• Look for software that integrates easily with patient management systems

• Prioritize dental-focused features like revenue tracking and detailed reports

• Train your team to get the most out of your new system

Integrating your patient management systems

Integrating accounting software with patient management tools makes everything more efficient. Centralizing data ensures smoother workflows and accurate financial records.

Here are some best practices for integration:

• Choose software that works seamlessly with your current systems

• Set up clear processes and schedule team training

• Test integrations thoroughly to ensure everything runs without a hitch

Outsourcing your accounting services

If managing finances in-house feels overwhelming, outsourcing offers a practical solution for dental practices. One key benefit of hiring an accountant is their ability to handle complex financial tasks.

Other key benefits include:

• Expertise: Work with professionals who understand the unique challenges of dental accounting, from tax planning to compliance

• Time savings: Free time to focus on patient care while leaving financial management to specialists

• Accuracy: Reduce errors, get tailored tax tips for dentists, and ensure compliance with industry regulations

What to look for in a dental practice accounting partner

When choosing an accountant for your practice, prioritize:

• Relevant experience: A proven history of working with dental practices

• Proactive support: Clear communication and ongoing financial insights

• Strategic expertise: Guidance in optimizing profitability and managing growth effectively

Need help with your dental practice accounting?

Managing your dental practice’s finances doesn’t have to be overwhelming. Partnering with a small business accounting firm lets you focus on patient care while leaving the financial complexities to experts.

At Archer Lewis, we provide personalized accounting services, tax tips for dentists, and strategic guidance to help you grow. Our experienced team understands the unique challenges dental practices face and is ready to support you every step of the way.

Let us handle the numbers so you can focus on your patients. Learn more about our small business accounting services.

For small business owners, bank account reconciliation might sound like just another task on your endless to-do list. But this crucial practice can save you from headaches down the road and help you make better business decisions.

What is bank account reconciliation?

Bank reconciliation is like balancing your checkbook but for your entire business. It’s the process of comparing your internal financial records against your bank statements to ensure everything matches up. Reconciling your business accounts helps catch any discrepancies between what you’ve recorded and what’s actually happening with your money.

Why is bank account reconciliation important?

Reconciling your accounts probably isn’t the most exciting part of running a business. But it’s one of the most important things you can do to maintain your financial health. Here’s why:

• Catching errors early helps you avoid overdraft fees and bounced checks that can harm your business relationships and bottom line.

• Regular reconciliation makes it easier to spot unauthorized charges or fraudulent activity before they become major problems.

• Having accurate books gives you a clear picture of your cash flow, helping you make informed decisions about spending and growth.

• Come tax time, you’ll thank yourself for maintaining clean records that make filing easier and help maximize your deductions.

How to reconcile your bank account

While the process might seem daunting at first, breaking reconciliation down into manageable steps makes it much more approachable:

1. Gather your documents: you’ll need your bank statement and internal financial records for the period you’re reconciling.

2. Compare the opening balances to ensure you’re starting from the right point.

3. Mark off all matching transactions between your records and bank statements.

4. Note any bank fees or interest earned that might not be in your books yet.

5. Identify any outstanding checks or deposits that haven’t cleared.

6. Adjust your books for any errors or missing transactions you find.

7. Calculate the final reconciled balance — it should match your bank statement when you account for any outstanding items.

Common reconciliation challenges and how to solve them

Even seasoned business owners run into roadblocks during reconciliation. Here are some common challenges we see:

• Missing receipts or documentation can make it hard to verify transactions. We recommend scanning receipts immediately and storing them digitally to avoid this issue.

• That check you wrote on Friday might not clear until Tuesday, while the Square payment you received instantly shows up in your account. These timing differences are normal, but they can make reconciliation tricky. We recommend keeping a running list of pending items to easily track what hasn’t cleared yet.

• Multiple transaction types, from ACH payments to Venmo to credit card transactions, can complicate the reconciliation process. Using accounting software that can automatically categorize these different payment types helps keep reconciliation manageable and ensures nothing falls through the cracks.

• Manual data entry errors can throw off your entire reconciliation. Double-check your entries and consider using accounting software to reduce mistakes.

When to get professional help

While many small business owners start by handling their own reconciliation, there are times when bringing in a professional makes sense. Consider getting help if:

• You’re spending hours each month on reconciliation and could better use that time growing your business.

• You consistently find unexplained discrepancies between your records and bank statements.

• Your transaction volume has increased significantly as your business has grown.

• You’re not confident in your accounting skills and worry about making mistakes.

Keep your books balanced and your business growing

Regular bank account reconciliation is more than just good bookkeeping. It’s a fundamental practice that helps protect and grow your business. While it takes time and attention to detail, the benefits far outweigh the effort involved.

Need help with your accounting? Explore our accounting services for small businesses.

As small business accountants, we regularly meet business owners who’ve never looked at a balance sheet. So, exactly, what is a balance sheet in accounting? While keeping track of your daily income and expenses is crucial, your balance sheet tells an even more important story; it reveals your business’s overall financial health at a specific moment in time.

What is a balance sheet?

Basically, it’s an overview of your business’s financial position. While your profit and loss statement shows how your business performed over time, your balance sheet shows what you own, what you owe, and what’s left over right now. This information helps you make informed decisions about expanding your business, taking on debt, or investing in new equipment.

Why is a balance sheet important?

Your balance sheet isn’t just another financial document. It’s a powerful tool that helps you understand and improve your business’s financial health. Banks, investors, and potential buyers all look at your balance sheet to evaluate your business’ stability and growth potential.

Key components of a balance sheet

Understanding these components helps you read and interpret your balance sheet effectively:

1. Assets

Everything your business owns that has value. This includes cash, accounts receivable, inventory, equipment, buildings, and even intangible items like patents or trademarks. Your assets show what resources you have to generate future income and grow your business.

2. Liabilities

Everything your business owes to others. This includes accounts payable, loans, credit card balances, and future obligations like employee benefits or lease payments. Understanding your liabilities helps you manage debt and plan for future payments effectively.

3. Owner’s equity

What’s left after subtracting liabilities from assets. This represents the owner’s stake in the business, including initial and subsequent investments, plus retained earnings. A growing equity section usually indicates a healthy business.

4. Current vs. long-term classifications

Assets and liabilities are split into current (less than one year) and long-term categories. This distinction helps you understand your immediate financial position versus long-term obligations and helps with cash flow planning.

5. Notes and disclosures

Additional information that explains important details about your financial position, such as accounting methods used, significant upcoming changes, or contingent liabilities that might affect your business.

Essential financial ratios from your balance sheet

The real power of your balance sheet comes from the financial ratios it helps you calculate. Here are some key ratios that can guide your business decisions:

• Current ratio (current assets ÷ current liabilities): This tells you if you can pay your bills over the next year. A ratio above 1 means you’re in good shape.

• Quick ratio (current assets – inventory) ÷ current liabilities): Similar to the current ratio but more conservative since it excludes inventory, which can be hard to convert to cash quickly.

• Debt-to-equity ratio (total liabilities ÷ owner’s equity): This shows how much you’re relying on debt versus owner investment. A lower ratio usually indicates less financial risk.

• Working capital (current assets – current liabilities): This shows how much money you have available for day-to-day operations.

How to create a balance sheet

Creating a balance sheet follows a simple formula: Assets = Liabilities + Owner’s Equity. Here’s how to get started:

• List all your assets and their current values

• Categorize assets as current or long-term

• List all your liabilities and their current values

• Categorize liabilities as current or long-term

• Calculate owner’s equity by subtracting total liabilities from total assets

• Keep detailed records and update monthly

Common balance sheet mistakes to avoid

We often see small business owners make these mistakes when managing their balance sheets:

• Failing to reconcile accounts regularly

• Miscategorizing assets or liabilities

• Forgetting to record all liabilities

• Using incorrect asset valuations

• Not maintaining supporting documentation

How an accountant can strengthen your financial position

While you can create and maintain a balance sheet yourself, working with an accountant offers several important advantages. They can:

• Ensure all items are categorized correctly and nothing is overlooked

• Help you interpret what the numbers mean for your business

• Identify potential issues before they become problems

• Advise on how different business decisions might impact your balance sheet

• Implement proper accounting procedures and controls

• Help you use your balance sheet to make better business decisions

Making your balance sheet work for you

Remember, a balance sheet is a tool that can help you make better business decisions. The better you understand it, the better equipped you’ll be to grow your business successfully. Use it to:

• Monitor your business’s financial health

• Make informed decisions about investments and expansion

• Secure financing when needed

• Plan for future growth

• Identify and address potential financial issues early

Need accounting support? Learn more about our accounting services for small businesses.

When small business owners ask us about bookkeeping vs accounting, we explain that while these roles work hand in hand to support your business’s financial health, they serve different purposes. Bookkeeping entails maintaining your business’s daily financial records, while accounting takes those records and uses them to see the bigger picture of your company’s financial health and future.

What is bookkeeping?

Bookkeeping is the foundation of your business’s financial record keeping. It involves tracking and organizing your daily transactions to ensure your financial records are accurate and up-to-date. A skilled bookkeeper helps maintain the financial data that you will use to make important business decisions.

Common bookkeeping duties include:

• Recording all financial transactions, including purchases, sales, receipts, and payments in your accounting software or books

• Reconciling bank statements to ensure all transactions are accurately recorded and there are no discrepancies

• Processing and recording payroll, making sure employees are paid correctly and on time

• Managing accounts receivable and accounts payable to keep track of who owes you money and which bills you need to pay

• Maintaining organized financial records and receipts for tax purposes and future reference

What is accounting?

Accounting takes the financial data that bookkeepers collect and analyzes it to give you insights into your business’s financial health and help you make strategic decisions. An accountant will work with you to interpret the numbers and plan for your business’s future.

Key accounting responsibilities include:

• Analyzing financial data to identify trends and opportunities for business growth or cost savings

• Preparing financial statements like balance sheets, income statements, and cash flow statements to give you a clear picture of your business’s financial position

• Providing strategic tax planning advice and preparing tax returns to ensure compliance while maximizing deductions

• Creating budgets and financial forecasts to help you plan for the future and make informed business decisions

• Offering business advisory services to help you understand your financial position and make strategic choices about your company’s direction

Bookkeeping vs accounting: What sets them apart

The training and expertise required for bookkeeping and accounting differ significantly. Bookkeepers typically need a solid understanding of financial record-keeping and accounting software, along with attention to detail and organizational skills. Many bookkeepers have associate degrees or certificates in bookkeeping or accounting.

Accountants, particularly CPAs (Certified Public Accountants), undergo more extensive education and training. They complete at least a bachelor’s degree in accounting, pass the rigorous CPA exam, and maintain ongoing professional education to stay current with tax laws and accounting standards. This advanced training allows accountants to provide more complex financial analysis and strategic guidance for your business.

Which service does your small business need?

Most small businesses benefit from both bookkeeping and accounting services, but your specific needs depend on your business’s size and complexity. You might need a bookkeeper if:

• You’re spending too much time managing daily financial records instead of running your business

• Your financial records are disorganized or falling behind

• You need help with regular tasks like invoicing, bill payment, and payroll

You likely need an accountant when:

• You want to understand what your numbers mean and how to use them to grow your business

• You need help with tax planning and preparation

• You’re making major business decisions and need financial guidance

• Your business is growing, and you need more sophisticated financial planning and analysis

Need bookkeeping or accounting support?

Many of our clients start with basic bookkeeping services and add accounting support as their businesses grow. We’re here to help you figure out exactly what level of service will best support your business goals.

Learn more about our bookkeeping services for small businesses.

We know collecting payments from customers isn’t always straightforward. Sometimes, despite your best efforts, invoices go unpaid — and that’s where bad debt expense comes into play. In this article, you’ll learn how to calculate bad debt expense for your small business.

What is bad debt expense?

Bad debt starts with an unpaid invoice. Maybe you provided services to a customer who later went bankrupt, or perhaps you’ve been trying to collect payment for months with no success. When you realize you won’t be able to collect that money, it becomes a bad debt.

Bad debt expense is how we record these unpaid amounts in your books. Let’s say you run a small consulting firm and completed a $5,000 project for a client. You sent the invoice, but the client’s business closed unexpectedly. That $5,000 you’ll never collect? That’s your bad debt expense.

How to calculate bad debt expense:

There are two main ways to handle bad debt in your books — the direct write-off method and the allowance method. Let’s look at both.

The direct write-off method

This is the simpler approach — you record the bad debt expense when you’re certain you won’t collect the payment. Going back to our consulting example, you’d write off that $5,000 as bad debt expense when you learn the client’s business has closed.

While this method is straightforward, it has a significant drawback — it doesn’t comply with Generally Accepted Accounting Principles (GAAP). Why? Because it records the expense in a different period from when you earned the revenue, which violates the matching principle.

The allowance method

This is the GAAP-compliant way to handle bad debts. Instead of waiting until you know for sure that you won’t collect, you estimate your bad debts in advance. There are two ways to calculate this estimate.

Percentage of sales approach

With this method, we estimate bad debt based on your past experience with uncollectible amounts. Let’s say your historical data shows that about 2% of your credit sales typically go unpaid. If you have $200,000 in credit sales this year, you’d estimate your bad debt expense at $4,000 (2% of $200,000).

The percentage of sales approach works best when your sales volume is relatively stable and you have a consistent history of bad debts. It’s particularly useful for businesses with a large number of small accounts, like retail stores or subscription services, where individual customer default rates are fairly predictable.

Percentage of accounts receivable approach

This method looks at your current accounts receivable balance and estimates what percentage might go unpaid. For example, if you have $100,000 in accounts receivable and expect 3% to be uncollectible based on past experience, you’d record an estimated bad debt expense of $3,000.

The accounts receivable approach is often more accurate for businesses with fewer, larger accounts or those with varying payment terms. It’s especially useful if you’re in an industry where economic conditions significantly impact collection rates, like construction or business consulting. This method also helps when your sales fluctuate seasonally, as it’s based on your actual outstanding balances rather than sales volume.

What to do if you’re worried about bad debt expenses

If bad debt is becoming a concern for your business, we’ve got good news — there are several ways to get ahead of the problem. Modern accounting software can help you track payment patterns and flag potential issues early. These tools can show you which customers consistently pay late or have unpaid balances, helping you make informed decisions about extending credit.

But software is just the start. Working with a financial professional can make a huge difference. A good accountant can help you set up proper credit policies, implement effective collection procedures, and maintain accurate records of your accounts receivable. Plus, they’ll make sure you’re using the right method to calculate and record bad debt expenses for your business size and industry.

Ready to get started?

Managing bad debt is just one piece of the small business accounting puzzle. From setting up your books to tax planning strategies, we’re here to help you build a stronger financial foundation for your business.

Explore our bookkeeping services for small businesses to keep your finances healthy and your cash flow strong.

Adjusting entries are journal entries made at the end of an accounting period to update various accounts before creating financial statements. Think of them as your accounting time machine — they help match up your income and expenses to when they actually happened, not just when money changed hands. Let’s break down what adjusting entries in accounting are, why they matter, and how to handle them in your business.

What is an adjusting entry in accounting?

Adjusting entries are the bridge between when business activities occur and when money changes hands. For example, if you pay your office rent on January 1st for the entire year, you’ll need adjusting entries each month to show that you’re using up that prepaid rent over time.

These entries are a key part of accrual accounting, where we record transactions when they happen rather than when money moves. If you’re using cash accounting — recording income and expenses only when cash actually changes hands — you won’t need adjusting entries. However, most growing businesses eventually switch to accrual accounting since it gives a more accurate picture of their financial health.

Why make adjusting entries?

Adjusting entries serve several crucial purposes in maintaining accurate financial records:

• They ensure your financial statements reflect reality. When you use adjusting journal entries, your income statements will show all revenue earned and expenses incurred in the right time periods, while your balance sheet will accurately represent what you own and owe.

• They help you track depreciation of major assets. Without adjusting entries, you’d show the full cost of equipment or vehicles in the month you bought them, rather than spreading that cost over the asset’s useful life.

• They prevent tax complications. Incorrect timing of income and expense recognition can lead to filing incorrect tax returns. This might mean underpaying taxes (which can lead to penalties) or overpaying (which ties up cash you could use in your business).

Types of adjusting entries

Accrued revenue

What it is: Accrued revenue represents income you’ve earned but haven’t received payment for yet. This commonly happens when you perform services or deliver goods in one month but don’t get paid until the following month.

Example: Imagine you run a landscaping business. In March, you completed a major spring cleanup project for a client, billing them $3,500. Your payment terms give them 30 days to pay, so you won’t receive the money until April. Even though no cash has changed hands yet, you’ve earned that income in March, so you need an adjusting entry to record the revenue in the correct month.

Deferred revenue

What it is: Also called unearned revenue, this happens when customers pay you before you deliver goods or services. You can’t recognize the revenue until you’ve actually provided what was promised.

Example: You own a gym that sells yearly memberships. In January, a customer pays $600 for a full year upfront. You can’t count all $600 as January revenue because you haven’t provided the full year of service yet. Instead, you’ll need to make adjusting entries each month to recognize $50 of that revenue as you provide access to your gym facilities.

Accrued expenses

What it is: These are expenses you’ve incurred but haven’t paid for yet. Common examples include utilities used but not billed, employee wages earned but not paid, and interest accumulated but not yet due.

Example: You own a retail shop and pay your utility bill a month after service. By December 31, you’ve used electricity all month, but won’t get or pay the bill until January. If you typically pay $400 for utilities, you’ll need an adjusting entry in December to show this expense, even though you haven’t received the bill yet.

Deferred expenses

What it is: Also called prepaid expenses, these are costs you’ve paid in advance that need to be allocated over future periods. Common examples include insurance premiums, rent, and software subscriptions paid annually.

Example: You run a small marketing agency and in October, you prepay $1,800 for an annual subscription to a specialized design software. While you paid the full amount upfront, you’ll use this software over 12 months. You’ll need to make adjusting entries each month to show that you’re using $150 worth of that prepaid expense.

Depreciation expenses

What it is: Depreciation represents the gradual “using up” of long-term assets like equipment or vehicles. Instead of expensing the entire cost when purchased, you spread it over the asset’s expected useful life.

Example: Your coffee shop bought a new commercial espresso machine for $15,000. You expect it to last five years. Instead of showing a $15,000 expense when you bought it, you’ll make monthly adjusting entries to record $250 in depreciation expense. This better reflects how you’re using up the value of the machine over time.

When to get help with adjusting entries

While some adjusting entries are straightforward, others can get complex quickly. It might be time to bring in professional help if:

• You’re spending hours each month trying to figure out the right adjustments. Your time is better spent running your business.

• Your business is growing and transactions are getting more complicated. Maybe you’re dealing with multiple subscriptions, prepaid expenses, or complex depreciation schedules.

• You’re worried about compliance. Incorrect adjusting entries can lead to inaccurate financial statements and tax returns.

• You’re planning to seek funding or sell your business. Potential investors or buyers will want to see impeccable books.

Good adjusting entries foundational for accurate financial statements. Whether you handle these entries yourself or work with a professional, understanding their purpose and importance will help you make better business decisions and keep your finances on track. Regular, accurate adjusting entries now can save hours of cleanup and corrections later, giving you more confidence in your numbers when you need them most.

Need help with your accounting? Learn more about our accounting services for small businesses.

Managing a company’s accounting needs can get the best of even the most attentive small business owners. Tasks like bookkeeping, financial reporting, and payroll taxes often become overwhelming, leading to stress and inefficiency.

Outsourcing is an ideal solution for many of these tasks. It boosts efficiency by letting experts handle your financial management while you focus on core business decisions.

Let’s demystify the benefits of outsourcing accounting for small businesses, the challenges involved, and the best practices to help your business thrive while you achieve financial clarity.

What is outsourced accounting, and how does it work?

Outsourced accounting involves hiring an external firm to manage your financial records and tasks. Instead of maintaining an in-house accountant, you collaborate with a professional team specializing in accounting functions like bookkeeping and tax preparation.

Here’s how it works:

• Data sharing: You provide your financial data securely to the firm.

• Remote management: The firm handles payroll taxes and financial reporting, often using cloud-based tools.

• Tailored support: Services are customized to meet your accounting needs, ensuring flexibility and scalability.

Unlike in-house accounting, outsourcing reduces overhead while providing access to expert guidance and improved redundancy. In-house teams can leave business owners vulnerable when a key employee leaves the office or departs the company.

With an outsourced team, you leverage a group of experts, ensuring continuity, maintaining accurate financial statements, and streamlining business processes—all while freeing up time to focus on growth.

Common accounting services small businesses outsource

Many small businesses choose to outsource specific accounting functions. Here are the most common services and their benefits.

Bookkeeping

Bookkeeping is a fundamental component of effective financial management:

• What it covers: Bookkeeping involves recording daily transactions, categorizing expenses, and reconciling accounts to ensure accurate and up-to-date financial records.

• Why outsource: Outsourcing bookkeeping guarantees accuracy and saves time.

Payroll processing

Payroll tasks ensure that employees are paid in a timely manner, maintaining their satisfaction and your legal compliance:

• What it covers: Payroll processing includes calculating wages, deducting taxes, and ensuring compliance with labor laws.

• Why outsource: You avoid costly mistakes and ensure employees are paid accurately and on time.

Tax preparation and filing

Tax compliance is critical for avoiding penalties and optimizing deductions:

• What it covers: This includes preparing and filing business taxes, identifying deductions, and ensuring compliance with federal, state, and local regulations.

• Why outsource: Professional accounting firms simplify tax preparation, ensure accuracy, and help your business stay compliant while determining how to achieve the most significant cost savings.

Financial reporting

Gain clarity on your business’s financial health with professional reporting:

• What it covers: Financial reporting encompasses creating balance sheets, income statements, and cash flow reports to assess your business’s financial health.

• Why outsource: Outsourcing delivers clear, comprehensive reports tailored to your needs.

Auditing

Audits ensure your business adheres to laws and regulations, with the documentation to prove it:

• What it covers: Auditing involves examining financial records to ensure accuracy and compliance with regulations.

• Why outsource: A professional audit builds trust with investors and stakeholders.

Accounts receivable and payable

Smooth cash flow is critical for any business’s success—and it requires proper management of accounts receivable (AR) and accounts payable (AP):

• What it covers: This service includes managing invoices, tracking payments, and ensuring timely collections.

• Why outsource: Effective AR and AP management better ensures smooth cash flow, reduces errors, and provides a more accurate understanding of your precise financial situation.

Budget planning and forecasting

Plan for growth and navigate uncertainties with confidence:

• What it covers: Budget planning involves developing comprehensive budgets and creating financial forecasts to predict future trends.

• Why outsource: Outsourcing budget planning ensures expert guidance in financial forecasting.

Benefits of outsourcing accounting for small businesses

Outsourcing your accounting offers several key benefits that can transform how you manage your business’s finances. You can save time and money by leveraging these outsourced accounting benefits while still accessing and scaling expertise to meet your needs.

Cost savings

Outsourcing accounting helps reduce overhead costs, making it an effective solution for small businesses looking to:

• Reduce expenses: Save on hiring, training, and retaining in-house staff.

• Boost income: Some small businesses leveraging external financial advice have reported a double-digit percentage revenue increase.

• Efficient resource allocation: Redirect savings to core business activities and growth opportunities.

Time savings

Outsourcing frees up valuable time, allowing business owners to focus on strategic priorities. A tax preparation partner provides:

• Administrative relief: Spend less time on repetitive tasks like bookkeeping and payroll.

• Streamlined operations: Rely on experts to handle time-consuming accounting functions efficiently.

• Growth focus: Concentrate on driving growth and improving business processes.

Access to expertise

Gain the insights and support of seasoned accounting professionals, including:

• Industry knowledge: Work with experts who understand your sector’s unique needs.

• Advanced tools: Leverage the latest technology without additional investment.

• Tailored solutions: Benefit from customized advice and services that align with your business goals.

Scalability

Outsourced accounting adapts to your business’s evolving needs via:

• Flexible services: Adjust support levels based on seasonal or growth demands. Shift up during busy periods or settle back down during slower times.

• Future-proofing: Ensure your accounting infrastructure grows with your business, reducing stress and inefficiencies.

Challenges with outsourcing accounting

While outsourcing offers many advantages, it’s important to recognize the accounting challenges for small businesses. By understanding these challenges and preparing for potential obstacles, you’ll empower your business to thrive:

• Loss of control: Outsourcing can raise concerns about maintaining oversight of financial processes and ensuring everything aligns with your expectations. You may worry about losing control over critical financial data and decision-making. Preventing this challenge requires establishing transparent workflows, communicating expectations upfront, and requesting regular updates to stay informed.

• Communication barriers: If communication is ineffective, collaboration with external providers may lead to misunderstandings or delays, disrupting workflows or resulting in missed deadlines. Ensure your tax preparation partner prioritizes you and replies promptly, especially during the busy tax season. Use collaborative tools and schedule regular meetings to maintain open and clear communication channels.

• Security and privacy concerns: Sharing sensitive financial records with third parties can feel risky, particularly in regulated industries where financial data breaches or compliance issues could arise and result in severe consequences. Partner with providers that use robust security protocols, earn compliance certifications, and follow Generally Accepted Accounting Principles (GAAP) and other applicable standards.

• Building trust: Establishing confidence in a new external partner takes time and effort, and trusting someone outside your organization to manage critical tasks can be challenging. Review their track record and request testimonials or references to gain more confidence in their expertise and reliability. You might also consider starting with a trial period.

Best practices for successfully outsourcing your accounting

Outsourcing accounting can revolutionize the way your business handles financial management. To ensure success, focus on strategies that promote clear communication, define goals, and foster trust with your provider.

Here are some of the best outsourced accounting tips.

Establish clear objectives and expectations

Defining goals and expectations is vital to a successful partnership. Clarity ensures mutual understanding and sets the foundation for trust and collaboration.

Be sure to:

• Define goals: Specify the tasks and accounting functions you want to outsource, from bookkeeping to financial reporting.

• Communicate clearly: Provide your provider with a detailed scope of work, including deadlines and performance metrics.

Communicate regularly

Maintaining open communication channels fosters collaboration and prevents misunderstandings. Strong communication builds a customer-centric, relationship-driven partnership.

To achieve it:

• Schedule check-ins: Hold regular meetings to review progress, address concerns, and refine workflows.

• Use collaborative tools: Leverage technology to share updates, track tasks, and keep communication seamless.

Monitor performance and provide feedback

Consistent monitoring ensures quality and allows for continuous improvement. Feedback is a key driver of success in any outsourcing partnership, particularly when partners:

• Track progress: Use agreed-upon performance metrics to assess your provider’s effectiveness.

• Offer constructive feedback: Share insights to help refine processes and improve outcomes.

Maintain compliance with regulatory requirements

Ensuring compliance protects your business and instills confidence in your financial management practices. Partnering with a trusted provider minimizes risks and best ensures you:

• Adhere to standards: Confirm that your provider complies with industry regulations, such as ASC 606 or IFRS 15, as appropriate.

• Stay updated: Keep informed about tax laws and financial policy changes to maintain compliance.

How to choose the right outsourced accounting partner

Picking the right accountant can be a game-changer for your business’s financial health. To maximize the benefits of professional guidance when choosing an accountant, follow these steps.

1. Determine your accounting needs

Start by identifying the tasks you want to outsource and ensuring they align with your business goals. Then, evaluate your budget to determine the level of expertise you can afford while still receiving high-quality support.

2. Research potential providers

Look for firms with proven industry experience to meet your specific accounting needs. Read reviews and ask for recommendations from peers to ensure you’re partnering with a reliable provider.

3. Evaluate providers’ experience and credentials

Examine the provider’s certifications and track record to confirm their credibility. Assess their familiarity with your business’s unique needs to ensure they can deliver customized and effective solutions.

4. Consider technology and software compatibility

Ensure the provider uses tools that integrate seamlessly with your current systems, minimizing disruptions. Ask about their approach to technology upgrades and ongoing training to ensure they’re staying ahead in the industry.

5. Review security measures

Confirm that the provider follows strict data protection protocols to safeguard your sensitive information. Verify their compliance with regulations and industry standards to protect your business.

6. Assess cost structure

Understand the provider’s pricing model, including any additional fees. Compare these costs against your budget and evaluate the potential ROI to ensure the partnership is financially beneficial.

Ready to outsource your accounting?

Outsourcing accounting for small business needs can transform operations by reducing costs and saving time. A trusted partner will deliver all the benefits of hiring an accountant and ensure critical financial tasks are handled expertly.

Archer Lewis offers small business accounting services tailored to your unique needs. Let us handle the numbers while you focus on what you do best. Explore how Archer Lewis can help with your small business accounting.

Has tax season ever been anything but stressful for business owners? Managing complex tax laws, ensuring compliance, and meeting deadlines requires expertise, time, and precision.

Enter outsourced CPA services: a solution designed to simplify your workload while maintaining accuracy, ensuring data security, and saving on costs.

In this guide, we’ll explain everything you need about tax preparation outsourcing—its benefits, challenges, and the best tax outsourcing companies to consider in 2025. Whether you’re a small business looking for back-office tax solutions or a firm exploring bookkeeping and tax outsourcing, we’ve got you covered.

What is tax preparation outsourcing?

Outsourcing CPA tasks involves entrusting your tax-related tasks to external professionals specializing in tax preparation. This strategic move allows businesses to focus on their core operations while ensuring that their tax obligations are handled with precision and up-to-date knowledge.

Common services offered include:

• Tax filing support services: Comprehensive preparation and submission of tax documents, ensuring they meet all regulatory standards

• Tax audit preparation services: Assistance in tax document management to navigate audits with confidence

• Tax compliance services: Ensuring adherence to the latest tax laws to minimize risks and maintain legal standing

• Strategic tax planning: Developing forward-thinking strategies to optimize financial outcomes and reduce liabilities

• Tax return preparation: Detailed preparation of accurate tax returns to ensure timely filing and compliance

Remote tax preparation has become the norm in today’s dynamic accounting landscape. It offers businesses access to specialized expertise, enhances efficiency, and ensures compliance with ever-evolving tax laws.

Benefits of tax preparation outsourcing

Why should you consider outsourcing your tax preparation? Let’s explore the top benefits of tax outsourcing.

Cost savings

Outsourcing your tax preparation offers substantial financial benefits. Here’s how:

• Lower operational costs: Maintaining a full-time, in-house tax team can be costly. Full-time bookkeepers in the U.S. usually make around $45,000 per year. Outsourcing eliminates the need for additional salaries, training, and infrastructure, reducing overhead significantly.

• Avoid costly errors: Filing mistakes can result in steep IRS penalties and interest. Professional outsourcing ensures accurate tax returns, helping you avoid financial pitfalls and maintain compliance.

• Time savings: With tax experts managing the process, your team can focus on growing your business rather than navigating tax complexities, translating to long-term financial gains.

Access to expert knowledge

Tax professionals bring specialized expertise to the table, offering invaluable guidance for businesses of all sizes.

They are adept at:

• Navigating intricate tax laws and ensuring compliance with ever-changing regulations

• Identifying eligible rebates and deductions to help you maximize savings

• Developing tailored strategies for minimizing liabilities and optimizing your financial outcomes

Expert tax preparers also provide proactive advice to anticipate and mitigate future challenges, allowing companies to focus on growth and success.

Increased efficiency

Time is of the essence during tax season. Tax season outsourcing ensures your business stays ahead of deadlines and avoids costly penalties.

By relying on tax prep solutions, you can:

• Speed up tax filing processes with expert precision, ensuring timely and accurate tax returns

• Prevent delays caused by inexperience or staffing shortages, ensuring your financial operations run smoothly during the most crucial time of year

• Free up internal resources, allowing your team to focus on core priorities rather than getting bogged down in compliance tasks

Outsourcing tax returns streamlines these processes, providing peace of mind throughout the busy tax season.

Risk mitigation

Data security and compliance are critical in tax preparation. Secure tax outsourcing providers offer comprehensive safeguards to protect your financial information.

These measures include:

• Advanced encryption and secure data handling: Utilizing the latest technology to prevent unauthorized access and breaches

• Adherence to regulations: Ensuring strict compliance with national and industry-specific standards; for example, if your business must comply with HIPAA, your tax preparation outsourcing partner—as a potential ‘business associate’—may need to as well

• Reduced risk of data breaches: Implementing proactive strategies to safeguard sensitive data against cyber threats

Tax outsourcing services invest heavily in these security protocols, providing businesses with confidence and peace of mind while navigating the complexities of tax preparation for small businesses.

Challenges with tax preparation outsourcing

While outsourcing offers numerous benefits, it also has challenges. Here are a few and how to address them.

Communication barriers

Accounting outsourcing during the busy tax season can present unique communication challenges. Misunderstandings could arise from different time zones, inconsistent updates, or unclear expectations. Just one of these can delay progress and disrupt operations.

More importantly, if you reach out to potential outsourcing partners after tax season has already begun, many may struggle to reply or begin working on your filings in a timely manner.

To address these barriers effectively:

• Ensure tax preparation partners reply promptly: Contact your preferred partner well in advance, but take note of their response times—and how they reply. Do they make you feel like a priority client in all dealings or just another name on their tax season to-do list?

• Establish clear communication channels: Use shared tools like project management platforms and cloud-based document sharing to ensure real-time updates and accessibility.

• Schedule regular check-ins: Organize weekly or bi-weekly meetings to clarify expectations, address concerns, and stay on track with deadlines.

• Set expectations early: Clearly define roles, timelines, and deliverables in the initial stages to avoid confusion.

• Appoint a point of contact: Assign a dedicated team member to streamline communication, ensuring a consistent flow of information and quicker issue resolution. Your tax preparation partner should do the same—assigning an experienced professional with whom you’ll interact consistently (rather than someone who hands over your account to their less-experienced associates).

By implementing these strategies, you can foster strong collaboration and achieve seamless coordination with your outsourced tax preparers.

Security and privacy concerns

Entrusting sensitive financial data to a third party can feel daunting, but with the right approach, you can confidently address these concerns.

Safeguard your information with these tips:

• Choose providers with strong privacy policies: Partner with CPA firms emphasizing clear, robust protections for sensitive data.

• Verify compliance with industry standards: Ensure providers adhere to strict regulations to maintain the highest levels of security.

• Conduct regular audits: Routine evaluations help verify that your outsourcing partner’s practices remain secure and compliant, offering ongoing peace of mind.

Partnering with a trusted accounting firm ensures you can effectively navigate complex data security challenges while maintaining operational efficiency and peace of mind.

Loss of control

Outsourcing can raise concerns about maintaining quality control and compliance standards, but these worries can easily be managed with the right steps.

Here’s how:

• Define roles, responsibilities, and quality benchmarks in your contracts so all parties are on the same page

• Check deliverables regularly to ensure they meet agreed-upon standards, creating a transparent partnership

• Maintain ongoing conversations to address any issues quickly and stay aligned with your goals

• Employ tracking tools and dashboards for real-time updates, keeping efforts on track and compliant

Implementing these strategies lets you control outcomes and compliance fully while delegating critical tasks.

How to outsource your tax preparation

Ready to outsource your tax preparation? Follow these steps for a seamless experience.

1. Assess your needs

Assess which specific tax services your business needs to ensure a smooth and effective outsourcing experience.

Consider the following factors:

• The complexity of your tax filings: Evaluate whether your business has unique filing needs or intricate tax obligations.

• Your compliance and auditing needs: Identify requirements for adhering to tax laws and managing potential audits.

• Additional services, like year-end tax planning or resolution: Explore options for proactive planning or addressing existing tax challenges so that all aspects of your tax needs are met with precision and clarity.

2. Research potential outsourcing partners

When selecting tax preparation firms that align with your needs, be sure to check for these criteria:

• Positive reviews and testimonials: Seek client feedback to gauge the provider’s reliability and customer satisfaction.

• Industry experience and certifications: Check that the company has a proven track record and credentials that reflect its expertise.

• Robust security protocols: Verify their commitment to safeguarding sensitive data with advanced protections and compliance with industry standards, offering you peace of mind.

3. Interview potential outsourcing partners

Scheduling consultations provides an opportunity to evaluate expertise and build trust.

Asking these questions is crucial:

• What’s your experience with businesses in my industry?: Assess their familiarity with your sector to gauge how well they understand your unique needs.

• What’s your Preparer Tax Identification Number (PTIN)?: The IRS tax preparation services standards require all tax professionals who prepare filings for compensation to maintain a valid PTIN.

• How do you handle data security?: Explore their strategies for protecting sensitive information and ensuring compliance with relevant industry regulations.

• What is your process for addressing errors or discrepancies?: Clarify how they resolve issues proactively, ensuring accuracy and accountability at every partnership stage.

4. Finalize contracts

A well-defined contract sets the stage for a successful partnership.

Make sure it covers these essential elements:

• Scope of work and timelines: Clearly outline the responsibilities and deliverables and incorporate tax deadline outsourcing solutions to establish mutual accountability.

• Confidentiality and data handling agreements: These agreements should include robust clauses to safeguard sensitive financial information and ensure compliance with data protection standards.

• Pricing and payment terms: Define transparent cost structures and payment schedules to prevent misunderstandings and maintain trust throughout the partnership.

5. Begin onboarding

Provide your outsourcing partner with the necessary information and tools to foster a smooth onboarding process.

During this critical phase:

• Establish communication protocols: To streamline communication and avoid misunderstandings, agree on channels, the frequency of updates, and points of contact.

• Set up secure access to your financial data: Ensure your partner has the credentials and tools needed for seamless collaboration while maintaining strict data security protocols.

• Schedule regular progress updates: Arrange consistent check-ins to review progress, address questions, and confirm alignment on goals and expectations throughout the partnership.

Top outsourced tax preparation companies in 2025

With all this information, you can feel confident about outsourcing your tax preparation to the company that best suits your needs. Here’s a look at some of the top companies in 2025 to consider.

Pilot

• Strengths: Comprehensive bookkeeping and tax preparation services

• Best for: Startups and small businesses needing tailored financial solutions

• Unique features: Expertise in compliance and strategic guidance

QuickBooks Live

• Strengths: Real-time support integrated with QuickBooks software

• Best for: Businesses already using QuickBooks for accounting

• Unique features: Personalized assistance and easy software integration

Gusto

• Strengths: Payroll-focused services with tax compliance support

• Best for: Small to medium-sized businesses seeking payroll and tax solutions

• Unique features: Comprehensive employee benefits management

Xero

• Strengths: Cloud-based accounting software with robust tax capabilities

• Best for: Companies seeking all-in-one accounting solutions

• Unique features: User-friendly dashboards and seamless collaboration tools

Archer Lewis

• Strengths: Personalized, relationship-driven tax preparation services

• Best for: Small business owners prioritizing clarity, trust, and communication

• Unique features: Tailored solutions with a focus on customer-centric service

Ready to outsource your small business’s tax preparation?

Tax preparation outsourcing offers numerous benefits, from cost savings and expert guidance to enhanced efficiency and risk reduction. By partnering with a trusted provider like Archer Lewis, you gain a reliable ally in navigating the complexities of tax season.

Learn more about Archer Lewis’s small business tax preparation services. Let us handle the numbers so you can focus on growing your business.