The long-term financial development of the company you manage will of course be primarily influenced by the quality and originality of the services and products you commercialize, alongside the professionalism of your staff and the development conditions that follow rival companies present in your domain of activity. But there is also one less talked-about element that can make or break the fundamental development of emerging businesses. And that’s bookkeeping. Sure, investing in your product’s R&D and your staff’s training is flashier and for the most part, it can be an excellent choice as long as you also prioritize the rest of your firm’s departments.
But you should never think of your financial management operations as only an afterthought. Financial recordkeeping, at least in the state of Texas, can be the only way to improve your firm’s cash flow management, obtain financing from external parties, streamline the internal data management operations carried out by your employees, and avoid poor financial decisions that will have a considerable negative effect on your firm’s development projection. Without accurate financial data books, you will probably overspend, mismanage your ongoing monetary obligations, or even start having problems with the payroll and benefits of your long-term employees.
What Are the Legal and Tax Repercussions of Poor Bookkeeping Services?
The most pressing issue associated with poor financial recordkeeping practices has to do with potential IRS fines. In accordance with the Texas Tax Code 111.061 on 3/11/2015, the IRS can fine SMEs and large-scale companies alike 5% per month for late tax documentation filing, with the mention that this percentage can rise up to 25% depending on the circumstances. However, if the IRS considers that the late filing was due to fraud, then the potential penalty can be up to 75% of the underpaid sum.
Things get even more complicated if your personal finances are intertwined with your firm’s accounting data, due to poor recordkeeping practices. In such a scenario, 1) for sanctions taken against the organization you manage the courts might find you liable for the venture’s debts, and 2) you may even face criminal penalties. Proper bookkeeping service is not really a matter of stable financial administration but rather a necessity in order to comply with Texas laws.
Per the Tax Code Section 151.025, all sellers of goods and services ( SMEs included) must keep a complete record of their business documentation including gross receipts and invoices. In short, anything that can be looked for by the IRS during audits. Plus, these records, per the same section of the Tax Code, must be kept for at least four years after they are made. Failure to do this can lead to financial penalties and even to the suspension of your business license. Plus, your venture can be hit from both sides of the aisle. On one hand, there is the IRS, who can audit your organization for matters related to federal tax and on the other, there is the state comptroller, who can audit you on everything from sales to franchise tax violations.
What Makes Austin a Hotbed for Financial Recordkeeping Companies?
It’s all about the competition, really. Austin is home to some of the fastest-growing US-centric organizations active in our country, and for this reason the business climate in the city is marked by inflated competitiveness and hard-to-navigate markets in which profit margins are small and expectations are sky high. This in turn often leads to poorly managed or downright messy financial practices that can put an unwanted spotlight to the city’s already struggling firms. It’s a war out there, and the last thing domestic companies need is to also have to deal with a surprise audit from federal or state comptrollers.
Plus, the tax landscape in Texas can be a bit confusing. Are you, for example, the sole proprietor of a family-run business? Then, you will not be considered a taxable entity and you will not pay a franchise tax. Nor will you if your total revenue is under $2,470,000. However, if you surpass this value and you are an LLC or part of a limited partnership, you will need to pay. How much? It depends on the industry you are part of.
For retail and wholesale ventures, the franchise tax will be 0.375% of gross receipts. However, for other types of businesses, that sum will be 0.75%. But you can also use the EZ computation method, which will lower the gross receipts obligation to 0.331%. It’s a lot to remember, and it can get complicated at times. Therefore, the services of an Austin bookkeeping expert will probably represent the best aid you can hope for in the early development process of your SME.
The Broadness of a High-Quality Bookkeeping Service in Austin
Austin bookkeeping offerings are necessary to make order in your past books, reconcile your financial data with the ones recorded by the banks you collaborate with and streamline the management process of your invoicing and KPI’s recording. The bookkeeping expert you call will provide frequent reports that will be analyzable by your CPA, migrate your offline financial data to cloud accounting solutions like QuickBooks and handle your account payables and receivables, which should be something that will free up your staff and allow them to concentrate on the other departments of your business that require in-depth operational understanding.
The agency providing bookkeeping service in Austin will collaborate with your CPA in any way, shape, or form, provide professional QuickBooks training to your employees, monitor your ledgers from a remote location, and also ensure your financial data respects the Texas Tax code. Your financial recordkeeper could handle the preparation of your venture’s balance sheets, provide regular statements of your cash flow, handle your general ledger, and occasionally collaborate with your CPA in the filing of W-2 reconciliation reports and Forms 1099. Yes, perhaps with enough practice and training, your employees could learn to handle these tasks themselves. But it will take a while, and alas, this will have a negative effect on their workload.