Ep 20 – 6 Steps for an Easier Tax Time Next Year


Episode 020 – 6 Steps for an Easier Tax Time Next Year


Recorded: April 20, 2022

Released: April 20, 2022

Intro by Clive Castle

Sounds by ZapSplat


Few people like tax season. It saps your energy trying to locate your documents and research and fix discrepancies. In this episode, we explain 6 steps to help make tax time easier for you the next time around. Find the transcript of this episode below.




Hello and welcome back to The Better Bookkeeper Podcast. I am your host, Patrick Donovan, President of Cape May Counting House. Did tax time get you stressed this year? Have you now breathed a sigh of relief that it’s over? I know what you mean! This time of year can be very, excuse the pun, taxing. But in this episode I will provide some tips on what you can do going forward so that next year won’t be so bad. For a transcript of this episode, please visit thebetterbookkeeper.com/020. I’ll see you on the other side.


Tax time makes most people cringe. You would be hard-pressed to find many tasks that people absolutely loathe, but preparing for taxes is pretty high on that list. So what can you do to make this whole process less stressful for you next year. For you small business owners, you have your plate full of tasks to generate revenue, there’s little time to sit down for hours to organize, prepare, and complete your filing. What can you do?

Well, there are quite a few things that you can do.

#1: Follow any recommendations that your accountant has provided to you this year. Why wouldn’t you? Your tax professional has just gone through your financial statements trying to prepare your tax return. The suggestions they offer are coming from the person who just prepared your taxes. They may have seen some categories with amounts that don’t make sense which could be a result of transactions being entered incorrectly. They may instruct you to reclassify certain transactions so that your records match what is on the tax return they just prepared. There may have been instances where they needed a receipt and you had to search high and low to find it, taking you away from generating that revenue. Make it easier on them which means less stress and headaches for you.

#2: Review your tax payment frequency. Depending upon the amount of your tax liability, you may either have to pay monthly or quarterly. Your accountant would be able to help you with this. If your liability has changed, you may need to pay taxes at a different frequency. Review this and prepare to make any necessary changes so that you don’t get hit with penalties and interest.

#3: Keep your business expenses separate from your personal expenses. This cannot be stressed enough. You have got to keep your business expenses separate. If your books are a jumbled mess of business and personal transactions this is a nightmare for your tax preparer. You might think that you’re the business owner so in the end it’s a wash. NO! The business is separate from you, it is a distinct operation. If something is a legitimate business expense it needs to be on the company’s books as a business expense. If you go to the store because you need some personal items and the only card you have on you is the business card that is not a business expense. You still need to show it in the books but this transaction should be recorded as an owner’s draw because you are taking money out of the business to pay for a personal expense. It’s not a business expense. If you purchase something for the business on your personal card then make a journal entry and record the purchase as an owner’s contribution. It is best to never use a business card to pay for personal expenses and never use a personal card to pay for business expenses. Sometimes it happens but this should be the exception and not the rule.

#4: Get yourself organized. Look at your accounting software for features that allow you to attach documents and receipts. QuickBooks Online, for example, allows you to take a picture of a receipt with their app and upload it into QuickBooks. Just review it in QuickBooks Online and the receipt gets attached to the transaction. If you or your accountant has a question about that transaction later, the receipt is already attached. No more scrambling around trying to find a receipt from a year ago. The same goes for bills. At the bottom of your transaction screen, on the left side, you will see an area where you can attached a document. It’s there so use it and save yourself time and headaches later!

#5: Have procedures and workflows in place to make sure that transactions get entered into your accounting software properly and consistently across all applicable team members. Establish workflows so that everyone on your team knows how tasks are to be completed, who needs to approve what and when, and who to go to in the case of an issue. You don’t want to find out the day before you supposed to send your documents to the tax preparer that there is a major issue. Work to ensure that everything is done properly throughout the year.

#6: Make sure that your files are backed up. You should perform a backup of your files and save that backup on a different computer than the one you currently use. That could be on a server, a different server, or even in the cloud. Backups should be done on a frequency that makes sense to your business. If you don’t have many transactions then maybe a monthly backup will work fine for you. If you have a ton of transactions daily you should consider backing up daily. The reason being, if your computer crashes, you will need to restore the most recent backup which will contain all of the transactions that were entered up to the date of the backup. So if you haven’t backed up your data in months, you will have to reenter all of those transactions that occurred since your last backup. Some online account software automatically backup your data. Check with your software publisher to see how backups are handled and if there is anything that you need to do yourself.

Following these steps can make tax time less of a drain on your sanity and put you on a solid footing throughout the year.


Just as a reminder, please check out our online courses at https://courses.thebetterbookkeeper.com and get 50% off with coupon code HALFOFF. Thank you for listening!

Ep 19 – Fixed Assets and Depreciation


Episode 019 – Fixed Assets and Depreciation


Recorded: April 13, 2022

Released: April 13, 2022

Intro by Clive Castle

Sounds by ZapSplat


Fixed Assets and Depreciation go hand in hand. Fixed assets are the durable, long-living assets such as equipment, vehicles, building, and land that a business has at its disposal to help generate revenue. Depreciation is how we account for wear and tear over time and calculate the book value of a fixed asset. Find the transcript of this episode below.




Hello and welcome back to The Better Bookkeeper Podcast. I am your host, Patrick Donovan, President of Cape May Counting House. Thank you for joining me today as I talk about fixed assets and depreciation. If you would like to see the transcript of today’s episode please visit thebetterbookkeeper.com/019. You can also follow our Facebook page to leave a comment or question at www.facebook.com/thebetterbookkeeper.

One other thing, you may have heard our big announcement. If not, let me fill you in. The Better Bookkeeper has now expanded into offering online bookkeeping courses. Our first one is called Bookkeeping Fundamentals and you can learn more at courses.thebetterbookkeeper.com. If you are interested in taking the course, please use coupon code HALFOFF to get this course for 50% off.

Now, let’s get back to the podcast. As I mentioned, the topic of this episode is Fixed Assets which are basically durable, long-living assets such as office equipment, office furniture, company-owned vehicles, buildings, and land. These are sometimes classified under the heading of Property, Plant, and Equipment or PPE on the Balance Sheet. These are all considered tangible assets because they are physical assets. There are also other types of long-term assets that are considered intangible assets because there is no physicality to them such as patents, copyrights, trademarks, and goodwill. It’s important to know what they are and how to properly account for them in the bookkeeping records. So, let’s get into it.


Welcome back!

One of the items that a business has at its disposal to help generate revenue is fixed assets. This could be office equipment such as computers and printers, it could be the display cases or shelving in your retail store. Fixed assets could also be the machinery in your factory. Company-owned vehicles, buildings, and land also get included. Needless to say, these are not small-dollar items that you would normally just expense off when they are purchased. Fixed assets are usually high-dollar items that make up a sizable amount of your assets. Fixed assets get capitalized in the books, meaning that they get recorded at their original price and that price gets expensed at a predetermined frequency over time, called depreciation.

Entering fixed assets into the books is not difficult. Whatever costs are associated in acquiring those assets, having them delivered, installing them, and preparing them for use are included in the cost that you enter into the books. This is known as the historical cost. That figure will appear on your balance sheet because fixed assets appear on the balance sheet. Typically, fixed assets are added through a journal entry where you would debit Fixed Assets or if you have a more specific subcategory in your chart of accounts. The credit would be to cash or a bank account if you purchased them in full or to accounts payable if you will pay for them over time.

Now, as time goes on, these fixed assets begin to experience wear and tear. They are getting older and they may not work as efficiently as when they were new. Because their value decreases over time, that must be reflected in the books. That is where depreciation comes in.

IRS Publication 946 explains how to depreciate property so for more information please review that document. Depending upon the type of fixed asset in question, there are different time frames over which you can depreciate property. There are also different methods allowed for depreciating property and you should speak with your tax professional to decide which way is best for your specific situation. The Better Bookkeeper Podcast does not provide accounting, legal, or tax advice.

To be sure that you are allocating depreciation expense against your fixed assets, it should be recorded for each accounting period. You don’t want to allocate depreciation expense all at year end because that will show an entire year’s worth of depreciation all at the end of your fiscal year. However, that fixed asset depreciated over the course of the year so depreciation expense should be allocated in each period to give a more accurate rendering of this expense.

Each time that you allocate depreciation expense, it builds up in the Accumulated Depreciation account which is a contra account to Fixed Assets. This is important to remember because once you enter the fixed asset into the books, the value doesn’t change. Your fixed assets will show the historical cost. If depreciation is never charged then 10 years from now, the value of your fixed assets will remain the same. It is the contra account Accumulated Depreciation that will offset the value in Fixed Assets and allow the calculation for Fixed Assets, net of depreciation. This will show the book value of Fixed Assets (Historical Cost – Accumulated Depreciation). So you really need to stay on top of your depreciation to make sure that your Fixed Assets are not overstated. If you don’t allocate depreciation, key metrics that investors and lenders look at will be skewed and that could cause a liability for you or even get you turned down for a loan.

One more thing. We have been talking about depreciation for tangible fixed assets. In the introduction to this episode we also mentioned intangible fixed assets such as patents and copyrights. These basically get handled the same way but we don’t depreciate these assets per se, intangible fixed assets are amortized. For this too, review IRS Publication 946.

And that, is that. I hope that you found this episode about fixed assets helpful. I also hope that you will make use of it in your business or that of your clients to provide additional value. In the end, that’s what it’s all about, the value you bring to the table.

Just as a reminder, if you are interested, please check out our online courses at courses.thebetterbookkeeper.com and get 50% off with coupon code HALFOFF. Thank you for listening!

Ep 17 – Accounts Receivable


Episode 017 – Accounts Payable


Recorded: March 14, 2022

Released: March 14, 2022

Intro by Clive Castle

Sounds by ZapSplat


Accounts payable are the bills that you owe to creditors, suppliers, vendors, etc. and will pay at a later date. Scrutinizing each bill for accuracy shows that you are a good steward of your business’s financial resources. Find the transcript of this episode below.




Hello and welcome back to The Better Bookkeeper Podcast. I am your host, Patrick Donovan, President of Cape May Counting House. Thank you for joining me today as I talk about accounts payable. If you would like to see the transcript of today’s episode please visit thebetterbookkeeper.com/017. You can also follow our Facebook page to leave a comment or question at www.facebook.com/thebetterbookkeeper.

As I mentioned, the topic of this episode is Accounts Payable which are the bills that you owe to vendors, suppliers, and contractors. It can also include money that you owe on bank loans or liabilities that you owe but haven’t paid yet like utilities or sales tax or payroll taxes. Just like with accounts receivable from our previous episode, properly managing your accounts payable can also help improve your cash flow. So, let’s get into it.

I’ll see you on the other side.


Welcome back! In the intro I explained that accounts payable is money that you owe to suppliers, vendors, bank loans, tax liabilities, utilities, among other things. When you get a bill but will pay it at a later date, you will record it in your accounting software as accounts payable so that you will be able to keep track of what you need to pay out. If you are using the cash basis for your accounting you would not use accounts payable. Hopefully, you are using the accrual basis which means you will be entering these bills into your software.

The first step in managing your accounts payable is to actually have a system in place for managing your accounts payable. If you have multiple team members in your business there should be a process for receiving and entering a bill, verifying its accuracy, storing all source documents, and a process for approving the bill for payment. Within this process is what is called a three-way match where you match the purchase order to the receiving report to the vendor invoice. Any discrepancies should be addressed and resolved immediately.

Verifying that what you need to pay is exactly what you owe is done by communicating with any individuals who were involved with these transactions. You also want to verify that the vendor is correct, the unit costs, quantities, and terms, among other things, are correct. Look to make sure that the bill hasn’t already been entered into your system. If you had a contractor provide services, speak with those team members who oversaw the contractor’s work. Was it satisfactory? Did they complete all their tasks on time, completely and correctly? If the bill is for inventory, check with your receiving department to see if they did in fact receive all of the product you’re being billed for. Was the inventory in satisfactory condition? If not, you should be requesting a credit or returning product for a refund to lower the amount you owe. If you received inventory that you can’t sell because it is of inferior quality but don’t return it, then you will be taking the loss instead of the supplier where the real responsibility lies. When it comes time for a business to be paying money out, you should be scrutinizing every bill for accuracy. Communication between departments is very important to determine if credits need to be requested from vendors.

Furthermore, the person who is entering the bill should not be the same person who is approving and remitting payment because this opens up the opportunity for fraud. Separation of duties is an internal control function that helps to eliminate bogus bills from being paid or bogus invoices to customers from being reported in an attempt to inflate revenues.

Next, you should review your accounts payable aging report. Similar to your accounts receivable aging report, accounts are broken into different buckets such as 1-30 days past due, 31-60 days past due, and so on. Identify the oldest accounts as those are the ones that should be prioritized to prevent unfavorable outcomes. If needed, create a spreadsheet to do some analysis or play out some different scenarios.

You could also review your Accounts Payable Turnover Ratio which is calculated by dividing your net credit purchases from vendors and suppliers by the average accounts payable for the same period. This tells you how many times during that period you paid your average accounts payable.

To find out how many days it takes you, on average, to pay your bills you would divide 365 by your accounts payable turnover ratio that you just calculated. Once you have calculated this, compare it to the terms you have with your vendors and suppliers. It gives you insight into how well you are meeting your terms and if improvements need to be made. Creditors may be willing to offer better terms to borrowers who pay on time which could save you money down the road.

Now that you have gone through your bills and verified that the amounts are correct and identified accounts that need immediate attention, it’s time to determine your ability to pay them. You should start asking some basic questions about your current financial situation like what is the balance in your bank account? What are your projected cash inflows over the next 30-45 days? You should also factor in how quickly people typically pay you and take into consideration slow payers, late payers, and no payers. (Expecting every invoice to result in a payment on time is unrealistic.) Ask yourself what are your projected cash outflows over the next 30-45 days to become current on your bills?

Are you experiencing a cash crunch and need to hold off paying some bills? Do you currently have past-due bills to pay? Are you being charged interest or late fees for them? Are you at risk of being sent to collections? How many seriously delinquent bills do you have that need to be paid immediately? Are suppliers or vendors threatening adverse actions such as halting shipments, pausing services, or even switching to cash on delivery? Making notes in your vendor accounts can help provide important details regarding who may be willing to wait a little longer and those who will absolutely not.

Are you in a good cash position? Perhaps you could afford to pay some bills early to take advantage of an early payment discount. However, you should also look to see if there are other opportunities that could provide a better return for your cash than the typically 2% discount you may receive for paying a bill early.

Once you have selected your accounts to pay, prepare them for approval according to your accounts payable management process. Do you have to submit an approval request, attach source documents, and provide a summary? Providing all of the necessary information to the person responsible for approving bills for payment makes the process more efficient. By this phase, any discrepancies should have already been identified and resolved. If you are printing out physical checks, review each one for accuracy. Make sure that the checks are legible, aligned correctly, and the fields are filled out with the appropriate information. Make sure that the checks get signed by the appropriate authorized signers. As a final step, you may want to send out emails to your vendors to update them that the checks are going out. This would be wise if you are sending out payments for very old accounts where vendors have already threatened adverse actions. This would cause them to hold off on proceeding or at least delay that action for a few days to make sure they actually receive the payment before proceeding.

If you did, in fact, reach out to any vendors, make sure to add a note into the account in the event you need to refer to it later on.

So, to be clear, there is more to managing accounts payable than just writing out a check and mailing it. You should be verifying that the bill is legitimate and accurate before even recording it into your system by performing a three-way match, then resolving discrepancies. Separate duties between team members to hopefully eliminate the opportunity for fraud. Review your current financial situation, including funds you are realistically expecting to flow into and out of the business over the short term. Identify accounts to be paid, prepare them for approval, and finally verify that checks are complete and accurate before sending out.

And that, is that. I hope that you found this episode about accounts payable helpful. I also hope that you will make use of it in your business or that of your clients to provide additional value. In the end, that’s what it’s all about, the value you add to your boss or your client.