In Pursuit of Profit
Read our expert article below or sign up to get articles sent to your inbox.
After your business has closed, you are probably ready to get rid of whatever you do not need and move on to your next endeavor. Unfortunately, not keeping key documents can get you in trouble with the IRS or state treasury department long after the business has closed. However, companies generate a tremendous amount of paperwork every year between tax filings, employment records, benefits information, licensure, property certificates, financial reports, and insurance documents. While it is less common, the Social Security Administration, Equal Employment Opportunity Commission, and Immigration and Naturalization may also ask for business records after your business has ceased operations as well.
So, what should you keep, and for how long?
Small businesses with less than $25M in annual revenue can choose whether they prefer to use cash or accrual accounting. However, you must declare which you are using when filing business tax documents during formation and plan to stick with your choice for the foreseeable future. New businesses are often tripped up by which they should use because they do not truly understand the implications of each type of accounting.
What are the differences?
Are there advantages to using one over the other?
Do bookkeepers and accountants work with both?
The decision about which type of accounting system to use depends on size, payment terms, business goals, available resources, and third-party financial requirements. Management should consider all these factors before deciding and consult with a professional accountant as needed during the process.
Both cash and accrual accounting methods result in the same bottom line when all your accounts receivables are collected. The differences are when that revenue is recognized and what kind of tax obligation is incurred as a result.
The possibility of business fraud is the dirty little secret that business owners tend to ignore. Unfortunately, there will always be unscrupulous individuals that try to take what is not theirs, even during hard times. Recent reports of bookkeeper fraud serve as a reminder to business owners that fraud never stops, even when businesses are down on their luck. In fact, a global fraud study found that, on average, companies lose 5% of their yearly revenue to fraudulent activities.
While it is easy to imagine fraud occurring by faceless cybercriminals or strangers sneaking in to rob your company of cash and valuable assets, most perpetrators have deep ties to the business, and many are first-time offenders. Many times, the people you least expect are the ones responsible for fraudulent activity – long-time employees, close friends, and even family. These bonds can make it difficult to spot the warning signs, causing fraud to go undetected far longer than it should.
July numbers reported an increase in small business loan approval rates at big banks (i.e. banks holding more than $10B in assets). Approval rates of 13.5% in June rose to 13.8% in July, marking the first increase since January of 2020 when big bank loan approval rates soared at 28.3%.
This increase was mirrored in loan approval rates at small banks as well, which rose from 18.4% in June to 18.6% in July. This was a continued bump from 16.9% in May, but still remains well below the 50.3% mark that small business loan approval rates at small banks hit back in February of this year.
It is important to note that these loans were separate from the widely distributed government PPP loans that many businesses successfully applied for and received earlier in the year.
The widespread increase in bank loan approvals throughout July was accompanied by a continued decrease in the unemployment rate, bringing it to 10.2%. Unemployment had peaked in April at 14.7% and has continued to fall month-over-month since. July alone added 1.8 million nonfarm jobs as economic activity that had been restricted due to COVID resumed, especially in the areas of leisure, hospitality, retail, professional services, and health care.
These indicators may be a sign of an economic rebound on the horizon.