Essential Accounting Tools for Streamlined Financial Management

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by Truc Nguyen

Effective accounting is the backbone of any successful business. While QuickBooks by Intuit is a popular choice for many small businesses due to its comprehensive functions such as invoicing, expense tracking, and payroll management, there are numerous other tools that can make your accounting process more efficient and compliant. Here’s a look at some other top accounting tools available today.

Bill.com: Automating AP and AR Processes

Bill.com is a cloud-based platform designed to streamline and automate accounts payable (AP) and accounts receivable (AR) processes. Here are its standout features:

1. Accounts Payable Automation

  • Invoice Management: Bill.com starts processing as soon as invoices are forwarded to its inbox, reading and extracting data for review. The platform can perform invoice matching and purchase order matching, flagging potential duplication to reduce the risk of overpayment.
  • Approval Workflows: Confirm billing codes and amounts, then let Bill.com route invoices for proper authorization. You can automate workflows with as many specific rules and controls as you need.
  • Payment Processing: Use various payment options like ACH, virtual card, international wire, or paper check with just a few clicks.
  • Vendor Management: Vendors can set up profiles and control their banking information within the Bill.com network.

2. Accounts Receivable Automation

  • Invoice Creation and Sending: Create and send electronic invoices effortlessly.
  • Payment Collection: Facilitate electronic payments, making it easy for customers to pay.
  • Auto Reminders: Automatically send payment reminders to customers.

3. Integration

  • Seamless Syncing: Integrates with major accounting software like QuickBooks, Xero, Sage Intacct, and NetSuite. Bill.com automatically syncs data to your general ledger.

Expensify: Simplifying Expense Reporting

Expense reporting can be a tedious task, especially for businesses with many traveling employees. Although some accounting software already includes expense tracking features, a dedicated and specialized expense tracking tool is still a must. Expensify is a specialized tool designed to streamline this process with the following features:

1. Creating Expense Reports

  • Automatic Receipt Scanning: Snap a photo of a receipt, and SmartScan inputs the details for you—no manual entry needed.
  • Credit Card Integration: Link your credit card to import expenses automatically. Expensify even matches these expenses to scanned receipts.

2. Submitting Expense Reports

  • Custom Reports: Employees can group expenses by theme, such as business trips, and submit to admins for review.
  • Automated System: Admins can create and submit reports for employees based on the company’s workflow.

3. Approving Expense Reports

  • Approval Workflows: Set up custom approval rules to review and approve reports quickly.
  • Efficient Review: Approve and export reports with a few clicks, eliminating manual data entry.

4. Reimbursing Expense Reports

  • Quick Reimbursements: Approved reports can be reimbursed in seconds, with ACH reimbursements processed in 4-5 business days. Expensify also offers Next Day Reimbursement for even faster payout to your employees.

5. Integration with Accounting Software

  • Syncing and Reporting: Integrates with QuickBooks, Xero, NetSuite, and SAP. Expensify imports general ledger codes to tag expenses, saving hours of manual reconciliation.

Gusto: Comprehensive Payroll and HR Management

Gusto combines payroll, benefits, and HR management in one easy-to-use platform. Here’s how it can empower the accounting professionals:

1. Full Payroll Service

  • Unlimited Payroll Runs: Run payroll as often as needed without extra costs or set it on AutoPilot for consistent periods.
  • Compliance: Stay compliant with labor laws and regulations with Gusto automatically processing and filing payroll taxes at local, state, and federal levels.

2. Hiring and Onboarding

  • Job Posts and Tracking: Improve your hiring process with job posts, applicant tracking, and offer letter templates.
  • Onboarding: Streamline onboarding with digital document signing, customized checklists, and welcome emails.

3. Time Tracking

  • Automated Hours: Calculate and integrate employee hours, PTO, and holidays. Gusto also helps manage time-off requests, approvals, and project tracking.

4. Employee Benefits

  • Health and Retirement Plans: Enroll in health plans (medical, dental, vision), and manage retirement plans like 401K and 529.
  • Additional Benefits: Offer HSA, FSA, and workers’ comp plans.

5. Reporting and Syncing

  • Custom Reports: Build custom report templates for crucial data analysis.
  • Accounting Integration: Easily sync payroll with accounting software like QuickBooks, Xero, Sage, FreshBooks, and more.

Everlance: Modern Mileage and Expense Management

Everlance simplifies mileage and expense management with features designed to reduce manual tracking, streamline mileage reimbursements, and ensure compliance with tax regulations.

1. Automatic Mileage Tracker

  • GPS Tracking: Automatically track trips with GPS for accurate mileage capture.
  • Reliability: Provides precise location tracking, eliminating manual calculations.

2. Manage Mileage Reimbursement

  • Custom Schedules: Set custom mileage reimbursement schedules and automate direct deposits to your employees.
  • Easy Submission: Mileage reports can be submitted on the go and be approved with a click.

By integrating these tools into your accounting processes, you can save time, reduce human errors, and ensure compliance with financial regulations. This not only enhances efficiency and accuracy but also provides valuable insights and automation, ultimately leading to more effective and streamlined financial management.

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United Contractors Chili Cookoff; Wheeler Takes 3rd

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On August 1st, a crew of fearless Wheeler chefs set out to make the best pot of chili for the United Contractors Annual Chili Cookoff. Thanks to Michael Gurr, Kim Cabanayan, Jennifer Hauck, Ryan Niederer, Anthony Luna, and Joseling Torrez for representing us as team Chili Chili Bang Bang.

team photo at a chili cookoff hosted by United Contractors

Big shout out to Jamie Megrath as well, who donated the recipe (with a kick!), Angela Wamsley for arranging all the equipment and swag (aren’t those aprons spiffy?) and Michael for opening his kitchen for the concoction process.

I am proud to say, the hard work over a hot stove paid off and earned us a 3rd place trophy!

United Contractors chili cookoff team members hold up a third place trophy.

5 Strategies for Improving Collections

Businesses that operate in the retail or restaurant spheres have it relatively easy when it comes to collections. They generally take payments right at a point-of-sale terminal and customers go on their merry way. For other types of companies, it’s not so easy. Collections can be particularly difficult for business-to-business operations, which often find themselves in complex relationships with key customers. In these businesses, it’s often not as simple as “pay up or hit the road.”

If your company is dealing with slow-paying customers, which isn’t uncommon in today’s economic environment where everyone is trying to preserve cash flow, it helps to review the basics. Here are five tried-and-true strategies for increasing your chances of getting paid:

1. Request payment up front:

For new customers or those with a documented history of collection issues, consider asking for a deposit on each order. This would generally be a small but noticeable percentage of the contract or order price. You could also explore the concept of asking for a service retainer fee, similar to how law firms typically operate.

2. Charge fees:

Most customers are likely familiar with the concept of late-payment fees from dealing with their credit card companies. Consider implementing fees or finance charges on past due accounts. Place extremely delinquent accounts on credit hold or adjust their payment terms to cash on delivery.

3. Reward timely payments:

An effective collection strategy isn’t only about “penalizing” slow-paying customers. It’s also about incentivizing those who pay on time or who represent a potentially lucrative long-term relationship. Crunch the numbers to determine the feasibility of giving discounts to customers with strong payment histories or to those who have improved the timeliness of payments over a given period.

4. Communicate proactively:

Set up regular e-mail reminders and place live phone calls to customers who haven’t settled their accounts. If the employees who work directly with the delinquent customers can’t resolve payment issues, elevate the matter to a manager or even to you, the business owner. If necessary, consider executing a promissory note to prevent the customer from disputing the charges in the future.

5. Get external help:

If, after repeated tries, your collection efforts appear unsuccessful, it might be time to get outside help. This typically means engaging either an attorney who specializes in debt collection or a collections agency. View this as a last resort, however, because third-party fees may consume much of the collected amount and you’re unlikely to continue doing business with the customer.

One last important point about collections: If an outstanding debt is uncollectible, you may be able to write it off on your tax return. Be sure to document each customer’s promises to pay, details of your collection efforts and why you believe the debt is worthless.

Contact the office if you have questions about tax deductions and other collection activity. Or call for help improving your overall accounts receivable processes.

408-252-1800

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HSAs Can Be Powerful Retirement Saving Tools

Health Savings Accounts (HSAs) are tax-advantaged savings vehicles for funding health care expenses not covered by insurance. And for those in relatively good health, they also may serve as attractive retirement savings vehicles.

To be eligible to contribute, an individual must be covered by a high-deductible health plan (HDHP). In 2024, an HDHP must have a deductible of at least $1,600 for individual coverage or $3,200 for family coverage. For 2024, you can contribute up to $4,150 to an HSA, $8,300 if you have family coverage (plus an additional $1,000 if you’ll be 55 or older this year). Contributions are tax-deductible and withdrawals used to pay for qualified unreimbursed medical expenses are tax-free.

Any funds you don’t need for medical expenses will continue to grow on a tax-deferred basis, providing a valuable supplement to your other retirement accounts. In general, once you reach age 65, you can use your HSA funds to pay for anything. Amounts spent that aren’t for qualified medical expenses will be subject to state and federal taxes, but not subject to a penalty. Contact the office with questions about adding an HSA to your plans for retirement.

408-252-1800

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Independent Contractors: Classify Carefully

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Many businesses use independent contractors to help keep their costs down and provide flexibility for short-term needs. But the question of whether a worker is an employee or an independent contractor is complex. Be careful that your independent contractors are properly classified for federal tax and employment tax purposes, because if the IRS reclassifies them as employees, it can be an expensive mistake.

Differing Obligations

If a worker is an employee, your company must withhold federal income tax and the employee’s share of Social Security and Medicare taxes, pay the employer’s share of Social Security and Medicare taxes, and pay federal unemployment tax. State tax obligations may also apply. A business generally must also provide that worker with fringe benefits if it makes them available to other employees.

However, if a worker is an independent contractor, these obligations don’t apply. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if it’s $600 or more). The contractor is responsible for paying self-employment tax and, generally, making estimated tax payments for income tax purposes in relation to the amount paid.

Key Factors

Who’s an “employee?” Unfortunately, there’s no one definition of the term. The IRS and courts have generally ruled that one of the key factors that determines the difference between an employee and a contractor is the right to control and direct the person in the jobs they’re performing, even if that control isn’t exercised. The issue of control is evaluated by asking several questions, including:

  • Who sets the worker’s schedule?
  • Are the worker’s activities subject to supervision?
  • Is the work technical in nature?
  • Is the worker free to work for others?

Another important factor is whether the worker has the opportunity for profit or loss based on his or her managerial skills. That is, can the worker apply independent judgment and business acumen to affect the success or failure of the work being performed? If there’s a lack of such opportunity, that’s one indication of employee status.

Some employers that have misclassified workers as independent contractors may get some relief from employment tax liabilities under Section 530. This protection generally applies only if an employer meets certain requirements. For example, the employer must file all federal returns consistent with its treatment of a worker as a contractor and it must treat all similarly situated workers as contractors. Be aware, Section 530 doesn’t apply to certain types of workers.

Think Carefully Before Asking the IRS

You can ask the IRS (on Form SS-8) to rule on whether a worker is an independent contractor or employee. However, you should also be aware that the IRS has a history of classifying workers as employees rather than independent contractors.

So, before you file Form SS-8, contact the office for a consultation. Filing this form may alert the IRS that your business has worker classification issues, and it may unintentionally trigger an employment tax audit. It may be better to properly set up a relationship with workers to treat them as independent contractors so that your business complies with the tax rules.

Workers who want an official determination of their status can also file Form SS-8. Dissatisfied workers you’ve treated as independent contractors may do so because they feel entitled to employee benefits and want to eliminate their self-employment tax liabilities. If a worker files Form SS-8, the IRS will notify the business with a letter that identifies the worker and includes a blank Form SS-8. The business will be asked to complete and return the form to the IRS, which will render a classification decision.

Need More Help?

Worker classification is complex. In addition to what’s been discussed here, there are differing rules that apply for labor law purposes, which can impact minimum wage and overtime pay requirements. If you have questions, contact the office to assist you in ensuring that your workers are properly classified.

408-252-1800

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Valuable Tax Credit Available for Energy-Efficient Homes

Under the Inflation Reduction Act, construction contractors who build or rehab energy-efficient homes may be eligible for a federal tax credit of up to $5,000 per project. To claim the credit, builders are required to construct or substantially rehab a qualified home and own it during the construction process.

To be qualified, a home must be a U.S. single-family dwelling that’s purchased or rented for use as a residence. It also must be certified to meet energy-saving requirements before it’s sold or leased.

The credit value is based on whether the contractor acquired the home before or after 2023, and the certification and standards the home meets following construction. Contact the office for more information.

408-252-1800

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Renting to Family Members

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As rents continue to rise in many areas, you may decide to help your financially challenged family members by renting a property to them at a discount. But this can lead to the loss of significant tax deductions. Here’s a look at the tax treatment that applies when you rent to unrelated parties and how the rules change when you rent to relatives.

Business vs. Personal

If you use real estate strictly for business purposes, that is, as a rental property, you must report the income and can deduct mortgage interest, property taxes, utilities, depreciation, maintenance and other expenses. You may claim a loss (subject to limitations) if your expenses exceed your rental income.

Suppose you use a property as a personal residence (such as your primary residence or a vacation home) and rent it out for fewer than 15 days per year. In that case, you don’t need to report the rental income, but you can’t deduct related expenses. If you itemize, you can still claim personal deductions, to the extent allowable, for mortgage interest and property taxes.

Suppose instead that you rent out the residence for 15 or more days per year. In that case, it’s treated as a mixed-use property. You must report the rental income and allocate your expenses between the property’s personal and business uses. You generally can claim the personal use portion as itemized deductions. The business use portion of these and other expenses are deductible as rental expenses, but they can’t create a loss. Disallowed deductions may be carried forward to future years.

Family Matters

Renting property to family members means you risk losing the ability to deduct rental expenses. That’s because use by family members is considered personal use, even if your relative pays rent, unless two requirements are met. The family member:

  1. Uses the property as a principal residence, and
  2. Pays fair market rent (not discounted).

If these requirements aren’t met, then you must report the rental income (if you rented the property for 15 days or more per year). But related expenses won’t be deductible.

If you want to avoid losing valuable tax benefits, set the rent at or above fair market value and document fair market rent with comparable local rental rates. If you give family members financial gifts to help with the rent, the IRS will likely view this as discounted rent.

Know What You're Getting Into

Helping family members with housing expenses is a nice thing to do. But be aware of the tax consequences of renting to relatives. Contact the office for assistance with these decisions.

408-252-1800

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Handle Your 401(k) Rollover With Care

Leaving a job? You may want to roll over funds in your former employer’s 401(k) plan to an IRA. But there’s a tax trap for the unwary. If you receive a 401(k) plan check that’s payable to you personally or if you have a distribution put into a personal account electronically, 20% of the taxable amount of the payout will be withheld for federal tax.

If that happens, you have 60 days to come up with the missing 20% and get it (along with the amount distributed to you) into your IRA. If by that deadline you transfer to your IRA only the amount distributed to you, you’ll owe income tax on the 20% withheld amount plus a 10% early withdrawal penalty if you’re under 59½.You can dodge this tax trap by arranging for a direct trustee-to-trustee transfer from the 401(k) plan to your IRA.

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What Expenses Can’t Be Written Off by Your Business?

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If you check the Internal Revenue Code, you may be surprised to find that most business deductions aren’t specifically listed there. For example, the tax law doesn’t explicitly state that you can deduct office supplies and certain other expenses. Some expenses are detailed in the tax code, but the general rule is contained in the first sentence of Section 162, which states you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”

Basic Definitions

In general, an expense is ordinary if it’s considered common or customary in the particular trade or business. For example, insurance premiums to protect a store would be an ordinary business expense in the retail industry.

A necessary expense is one that’s helpful or appropriate. For example, a car dealership may purchase an automatic defibrillator. It may not be necessary for the business operation, but it might be helpful if an employee or customer suffers a heart attack. It’s possible for an ordinary expense to be unnecessary. But to be deductible, an expense must be ordinary and necessary.

A deductible amount must be reasonable in relation to the benefit expected. For example, if you’re attempting to land a $3,000 deal, a $65 lunch with the potential client should be OK with the IRS. (The Tax Cuts and Jobs Act eliminated most deductions for entertainment expenses but retained a 50% deduction for business meals.)

How the Courts May View Expenses

The deductibility of some expenses is clear, while others are more complicated. Not surprisingly, the IRS and courts don’t always agree with taxpayers about what is ordinary and necessary. To illustrate, here are three recent U.S. Tax Court cases in which specific taxpayer deductions were disallowed:

  1. A married couple owned an engineering firm. For two tax years, they claimed depreciation of $76,264 on three vehicles, but didn’t provide required details, including each vehicle’s ownership, cost and useful life. They claimed $34,197 in mileage deductions and provided receipts and mileage logs, but the court found they didn’t show related business purposes. The court also found the mileage claimed included commuting costs, which can’t be written off. The court disallowed these deductions and assessed taxes and penalties. (TC Memo 2023-39)
  2. The court ruled that a married couple wasn’t entitled to business tax deductions because the husband’s consulting company failed to show that it was engaged in a trade or business. In fact, invoices produced by the consulting company predated its incorporation. And the court ruled that even if the expenses were legitimate, they weren’t properly substantiated. (TC Memo 2023-80)
  3. A physician specializing in gene therapy deducted legal expenses of $360,295 for two years on Schedule C of his joint tax returns. The court found that most of the legal fees were to defend the husband against personal conduct issues. The court denied the deduction for personal legal expenses but allowed a deduction for $13,000 for business-related legal expenses. (TC Memo 2023-42)

These cases and others should show the importance of maintaining careful, detailed records. Make sure that only business costs are claimed.

Proceed with Caution!

If an expense seems like it’s not normal in your industry or could be considered personal or extravagant, proceed with caution. Contact the office with questions about deductibility and proper documentation.

408-252-1800

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Does the Corporate Transparency Act Apply to Your Business?

On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that the CTA is unconstitutional. Does that mean that businesses no longer need to comply? Not necessarily. The federal government filed an appeal on March 11, 2024, in the U.S. Court of Appeals for the 11th Circuit. That same day, FinCEN announced that the law’s requirements are still in effect for those not involved in the court case.

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