Welcome To The Bookkeeping-Payroll FAQ’S!

While they seem similar at first glance, bookkeeping and accounting are two very different mediums. Bookkeeping serves as more of a preliminary function through the straightforward recording and organizing of financial information.

Accounting takes that information and expands on it through analyzing and interpreting the data.

While any competent employee can handle bookkeeping, accounting is typically handled by a licensed professional. It also includes more advanced tasks such as the preparation of yearly statements, required quarterly reporting and tax materials.

Most accounting is typically done by CPA’s or Accountants/EA’s. However, may of them do not take on the advisor role while analyzing your data and then putting together strategies that help you reduce your tax liability. We offer both bookkeeping and tax advisory services so you get the best of both worlds.

Payroll is the process a company uses to pay its employees. The process includes tracking time, accounting for bonus pay, and making on-time distributions. Another big part of payroll is calculating taxes. A businesses payroll department or payroll provide is required to report the following:

• State/federal tax witholding
• Health Insurance
• Contributions To Retirement (401ks ect) from both employee and employer
• Union Dues (if applicable)
• Medicare Taxes
• Social Security Taxes
• Sick Days
• Holiday Pay
• Vaction Time
• Court Ordered withholdings (e.g., you have an employee who owes child support)
• Overtime
• Commissions and Bonuses

The payroll department handles the reporting and payment of those taxes. Reporting and paying them accurately depends on employee data (through form W-4) and how much they make (what tax bracket they fall into).

For example, you’ll take more out of a single earner of $100k  per year than a family of four who earn $50k.. You also tax overtime pay differently. So payroll includes many financial variables. 

One of the significant variables might be the state you operate in. So take some time to do some research regarding your state’s laws for scheduled tax payments.  

Bookkeeping tasks provide the records necessary to understand a business’s finances as well as recognize any monetary issues that may need to be addressed.

Proper planning and scheduling is key since staying on top of records on a weekly or monthly basis will provide a clear overview of an organization’s financial health.

For every type of business, bookkeeping includes several components and steps, which may very on the business and how they are structured. Those include the following but not limited to:

• Documenting every financial transaction (payments and expenses)
• Recording all debits and credits
• Sending invoices and processing payments (this is typically done internally by staff members and not entirely the bookkeeper)
• Preparing financial statements (balance sheet, income and cash flow)
• Maintaining and balancing a general ledger
• Conducting daily banking activities
• Completing payroll functions

• Deductions: Wages withheld from an employee’s earnings for the purpose of paying taxes, benefits and other mandatory items (e.g., garnishments) or voluntary contributions (e.g., charitable donations)
• Gross pay: Total pay before taxes and deductions
• Net pay: Take-home pay after taxes and deductions are subtracted from earnings
• Compensation: All monetary and non-monetary payments, including the value of benefits, received by an employee
• Pay stub: A summary document that demonstrates the factors – number of hours worked, the rates paid for those hours, deductions for taxes and benefits, etc. – that were used to calculate an employee’s pay for a designated period of time

The official title for people who handle payroll is payroll clerks . Payroll clerks are a specific type of bookkeeper, as managing payroll is an early stage of the accounting process. However, the entire payroll department of a large corporation might consist of people from Human Resources (HR) and accounting.

Because of the crucial human element of payroll, accountants from within HR might handle it. After all, receiving payment is a pretty big deal to people who work.

Employees with payment discrepancies need delicate handling, which is a big part of the HR skillset. Accounting professionals might not have this same ability unless they’ve worked the necessary positions. On the other hand, HR professionals might not have the required skills to handle payroll accounting. So its best to have HR as one department and accounting as the other or at last have different folks operating them.

State laws and collective bargaining agreements with unions may dictate how often a business must run payroll. If such requirements don’t apply to them, employers may choose a payroll calendar that works best for them and their employees. The most common are weekly, bi-weekly and semi-monthly. We set it up to match how you want your employees paid.

This varies based on your gross revenues and total net profit and tax liability along with how your taxed as a business entity.

The rule of thumb is if your business does over $100k in net income, to pay yourself no more than 20% of your net income in a salary.  There is a reasonable salary matrix we utilize to make sure you are paid in accordance to that matrix so we minimize your income tax liability to both you personally and to the business.

The answer to this is it depends. We believe every business owner shouldn’t work for free and to maximize their tax deductions they should look at being setup properly with the right entity structure.

If you are doing more than $50k per year in annual gross revenues then it may be to your benefit to get setup as a S-Corp or at least have your LLC if you are an LLC elect to be taxed as a S-Corp. Then you will need to take a small salary. If you are a regular LLC, since its a pass through to you on your schedule C, you will simply be able to take draws.

There are two main ways to pay yourself as a business owner – owner’s draw and salary. Generally, the salary option is recommended for the owners of C corps and S corps.

While taking an owner’s draw is usually a better option for LLC owners, sole proprietorships, and partnerships. This is because the owners of those entities are considered self-employed for tax filing purposes, so they shouldn’t be paid through a conventional wage system.

If you wanted the option of taking an owner’s draw alongside a set salary, you’d need to incorporate as an S corp, which would come with a few additional tax obligations and liabilities that aren’t faced by LLC owners. However, S-corp has some additional tax benefits as well.

There are two main ways to pay yourself as a business owner – owner’s draw and salary. Generally, the salary option is recommended for the owners of C corps and S corps.

While taking an owner’s draw is usually a better option for LLC owners, sole proprietorships, and partnerships. This is because the owners of those entities are considered self-employed for tax filing purposes, so they shouldn’t be paid through a conventional wage system.

If you wanted the option of taking an owner’s draw alongside a set salary, you’d need to incorporate as an S corp, which would come with a few additional tax obligations and liabilities that aren’t faced by LLC owners. However, S-corp has some additional tax benefits as well.

The answer is you could, however payroll options and providers can ACH the funds directly into your personal bank account therefore checks are never needed and a set amount of payroll goes out on your employees and yourself. This keeps it much more simplified and streamlined vs. writing a check.

Lots of small to medium-sized businesses tend to outsource their bookkeeping due to professionalism and cost.

Its far lower cost to hire a professional outsourced bookkeeper that also does payroll than it is to hire, train, and manage an internal bookkeeping-payroll employee.

The average salary paid to a bookkeeper is $45,000 to $55,000. Where as if you outsource it you can save 30-50% or more depending on the size of your business.

Many business owners tend to use the money they save or would have spent on a bookeeping/payroll employee to hire these  employees for marketing and other job positions they could fill that make them more money. This enhances their cash flow, grows the company and most efficiently utilizes their new hire resources.

By outsourcing it to the right company, lets not forget the convenience it has if your tax advisor, wealth manager and bookkeeper are all working together at the same company providing you outstanding service and are there to consult with you to help you pay little to no taxes, maximize deductions and retirements while growing and protecting your wealth.

The more services you have with us the more chances you are to be qualified to get your bookeeping and payroll money back at the end of the year.

Well this typically depends on the size of your business. We work with businesses that do $1m or more in annual revenues. However on occasion we will get clients that are below that in the $500k range or even slighly lower.

The size and amount of employees, amount of transactions and accounts all varies. However lets put something into prospective for you.

You could pay a non licensed bookkeper an average of $21 hour according to Salary.com or from $35,000 to $55,000 per year.

We look to save you at least 50% or more on that number by outsourcing it to us along with us handling your payroll.

In fact you can qualify to get your bookkeeping and payroll expense credited back to you at the end of the year.

For start’s this program is for those who qualify and isn’t for every client. It’s also not free, but rather a credit towards your last few invoices of the year.

Getting those credits is going to depend on a few key things. First is we offer a 2-tier affiliate program designed to help clients get their investment money back. You have a way to earn commissions as a way to get your money back where we pay you and you earn your money back.

The other way is going to depend on how many services you do with us. It will also depend on your total gross revenues, taxable income and more.

The more services you do with us, the more of a chance you have to qualify for getting 50% to 100% of your bookkeeping-payroll back at the end of the year.

This is for being a valued client and to help be another way to put money back into your pockets.

This is something we cover with you after you have enrolled into all our services and we have evaluated your scenario to see if you qualify. We have a matrix that outlines the variables that allow for 50-100% reimbursement of funds via a credit against future invoices.