Search Results

Retirment savings are a great way for individuals to ensure they are setup for the future, but to also save on taxes, depending on the account you use With the recent reopening of the federal government, the IRS had recently released it's updated limits for retirement contributions for 2026. Retirement contributions to plans such as a 401(k) are a great way for individuals to not only save for retirement, but to also lower their income tax bill by being able to decrease their taxable income by their contributions. Being aware of these changes will help those who save for retirement ensure that they are not stuck with the surprise of having to withdraw their additional contributions over the limits or getting hit with a tax bill for the additional contributions. In order to make changes to your contributions as an employee, most employers make it easy to do either through an online portal, likely the same portal used to see your paystubs, or through the online portal of where your retirement account is held. 401(k), 457, 403(b) Retirement Plans Most employees have one of the above retirement plans, as they have become the main vehicle for Americans to save for retirement. In 2025 the maximum contribution you could make for the entire year was $23,500 per year. In 2026, the contribution limits for these 401(k), 457 and 403(b) plans has increased by $1,000 to $24,500 for the year. For employees age 50 or older, the contribution catchup that allows you to contribute more over the limit has been increased from $7,500 in 2025 to $8,000 in 2026, allowing these employees to contribute $32,500 for 2026 to their 401(k), 403(b), or 457 plans. If you have maxed out your contributions for 2025 and are or are looking to max your contributions in 2026, you will have to review your elections come the new year and make adjustments to ensure you max out your contributions. Individual Retirement Accounts If individuals are not able to take advantage of the above plans, they most likely will have either a traditional or roth Individual retirement account (IRA). The Roth IRA allows you to make contributions after income tax is paid, allowing the retirement withdrawals to be tax free when it comes time for those distributions. Traditional IRA contributions can be deducted from the individuals income tax in the year they were contributed, but the distributions in retirement are taxable. These accounts had a total contribution limit in 2025 of $7,000 in total between the accounts for the year with a age 50 or older catchup provision of $1,000. In 2026 the contribution limit has been increased to $7,500 with a catchup increase of $1,100, allowing those 50 or older to contribute $8,600 throughout the year. Making changes to these accounts is normally done through whatever financial institution where your account is held, either through a banks' wealth arm, a brokerage, or an online servicer. Conclusion With the price of everything and the cost of living going up, the IRS every year makes adjustments to the maximum retirement contributions to ensure that individuals with these accounts do not get left behind when it comes time for retirement. Ensure that you at a minimum review your retirement and are aware of any changes at least once a year to make sure you're in compliance and maximizing your future retirement earnings and tax savings.

1040 season is right around the corner. Make sure you're not left behind and have your records organized ahead of time. As the new year approaches, it's the perfect time to make sure you're on track for a smooth tax season. Whether you're filing on your own or working with a professional, early preparation can help you avoid stress, reduce the risk of errors, and even uncover potential savings. Here are some of the most common tax preparation issues individuals face, and how to stay ahead of them for 2025. 1. Disorganized Financial Records One of the biggest obstacles to accurate and timely filing is disorganized documentation. Missing receipts, misplaced W-2s or 1099s, and incomplete bank statements can delay your return or lead to inaccurate filings. Start now by setting up a digital or physical folder labeled "2025 Taxes" and drop in documents as they arrive. Many tax documents start arriving in January, but organizing your income, deductions, and major expenses from 2024 now will save headaches later. 2. Overlooking Income Sources and Tax Forms More people are working side gigs, freelancing, or earning income from investments. These non-traditional income streams often go unreported, either due to oversight or misunderstanding. It's essential to track all forms of income and ensure you receive the correct tax forms: W-2 Forms : Employers are required to provide W-2s by January 31, 2025 . These forms report your wages and the taxes withheld. If you haven’t received your W-2 by early February, check your company’s payroll portal or contact your HR department. 1099 Forms : There are multiple types of 1099s. Common ones include: 1099-NEC  for contract or freelance work (due by January 31, 2025). 1099-MISC  for miscellaneous income. 1099-INT , 1099-DIV , or 1099-B  for interest, dividends, and investment sales (usually sent by February 15 ). 1099-K  for payment card and third-party network transactions, especially from platforms like PayPal or Venmo, if your income exceeds the IRS threshold. You can typically access these forms via your bank, brokerage account, or payment app dashboard. Review these portals in early February to make sure you haven’t missed anything. Make a list now of all income sources from 2024, including self-employment, rental income, or stock sales, so nothing slips through the cracks. 3. Ignoring Changes in Tax Law Tax law evolves, and missing key updates can cost you. For tax year 2025, watch for any changes to standard deductions, credit eligibility, or reporting requirements. For example, the no tax on tips and overtime has thrown a wrnech into documentation because the W-2 form has not been updated to reflect these numbers, meaning employees not only have their W-2, but the final paystub of the year which would report the years tips and ovetime numbers. Staying informed through a trusted CPA or IRS resources can help you plan smarter. 4. Missing Out on Deductions and Credits Many individuals leave money on the table simply because they don't know what they're eligible to claim. Commonly missed items include student loan interest, educator expenses, charitable contributions, and medical costs. If you experienced a major life event in 2024, such as marriage, a new child, home purchase, or job change, you may qualify for new credits or deductions. Talk to a tax advisor now to understand what documentation you should be gathering. 5. Waiting Too Long to File Procrastination is a common tax trap. Waiting until the last minute limits your options and increases the chances of mistakes. It also leaves little time to resolve surprises, like a missing form or an unexpected tax bill. The earlier you prepare, the more control you have. Especially as the IRS becomes even more woefully understaffed and fragmented, running into an unexpected issue in mid April could be a frustrating experience for taxpayers. Consider setting a goal to finalize your documents by mid-February and schedule a filing appointment or online submission soon after. Final Thoughts Tax season doesn’t have to be stressful. A little preparation now goes a long way toward a smoother filing process. At Pathfinder, we help individuals navigate the complexities of the tax code and maximize their returns with confidence. If you're unsure about your situation or want expert guidance, reach out to our team today. Let’s make 2025 the year you file early, accurately, and stress-free.

If you run a service-based business, be it HVAC, plumbing, roofing, or an agency, you have felt like you underquoted a job before. You won the job, did everything right, but when you ran the numbers at the end, there was nothing left from the job. It’s frustrating, but there is a way to make sure you’re pricing yourself correctly, as well as remaining profitable on the job. That’s where infrastructure to do project costing and matching to estimates comes into play. Done right, it’s one of the most valuable tools you can use to grow a more profitable and sustainable business. Running the numbers before, during, and after the project are important for a profitable service based business. Getting Real with Your Numbers Project costing is the process of accurately keeping records for the costs that you have put into a job, from materials, labor, subcontractors, and the overhead costs for your admin team. By tracking these costs against your original estimate, you’re able to create a feedback loop to not only ensure your job is profitable, but that when you go to market for any new jobs, you’re able to provide better quotes that get you profitable jobs. Estimating is only as good as the data it’s based on, so if you’re winging it with guesses, you’re gambling with your business. Why It Matters When you consistently compare your actual costs to your estimates, you can: ·       Improve Future Quotes : You can see where you went wrong in previous jobs with your quotes, allowing you to get better, and making your future quotes more accurate. ·       Identify Your Most Profitable Work : Every job isn’t equal. Project cost tracking shows you which types of projects deliver the best return, allowing you to focus your marketing to win more of these higher margin jobs. ·       Spot Scope Creep Early : When your actuals start to drift away from your estimates, you can flag it quickly. It gives you a chance to reset expectations with the client or make changes before the profitability takes a hit. Start Simple, But Start You don’t need a fancy accounting system to get started. A spreadsheet can do the trick for smaller operators, but accounting software like Xero or QuickBooks Online supports estimates, and project costing, allowing you to do it in one software. The key is to become consistent with your operations. You get to capture every cost, match it to the job, and review it once the project wraps. What We See at Pathfinder At Pathfinder Accounting & Tax, we work with a lot of service-based businesses, from trades to agencies. The ones who nail project costing are the ones who tend to grow steadily, price with confidence, and build more resilient businesses. If you want help setting up a better system for tracking job costs and refining your estimates, get in touch. It’s one of the smartest moves you can make for your bottom line.

Smaal retailers are dealing with the slowdown in consumer spending and belt tightening that is starting to appear in early 2025. The first half of 2025 brought both opportunities and challenges for small retailers. Consumer spending remains positive, but growth is slowing compared to prior years. Inflation has cooled from pandemic highs, yet costs for essentials like food, housing, and shipping continue to squeeze both shoppers and store owners. Key insights from the white paper: Consumer Demand  – Retail sales are still rising, up about 3–4% year-over-year, but shoppers are cautious and saving more. Value and loyalty will matter more than ever. Inflation & Prices  – Costs are up around 2.5% annually. Many small businesses (60%) have already raised prices, but careful pricing strategies and efficiency are critical to staying competitive. Labor Market  – Unemployment is near historic lows, making hiring tough. Small businesses may need creative staffing approaches or added perks to retain workers. Tariffs & Supply Chains  – New tariffs have pushed costs higher and created supply chain challenges, with nearly half of small businesses adjusting suppliers this year. Financing  – Loan rates remain elevated (6.6–11.5%). Locking in fixed rates or exploring SBA programs can help manage borrowing costs. Local Opportunities  – In southern Illinois, nearly $900M in tourism spending in 2023 has boosted local shops. Retailers who tap into visitor traffic can find growth opportunities despite national headwinds. Bottom line:  Small retailers in 2025 face modest growth, tighter margins, and labor challenges. Staying adaptable by managing costs, diversifying suppliers, and connecting with local demand will be key to weathering uncertainty and finding opportunity.

Small business financials & bookkeeping can become a mess if you don't have the time or experience. As a small business owner, you're used to wearing many hats. Sales, customer service, marketing, and especially bookkeeping. But as your business grows, juggling your books alongside everything else can quickly become overwhelming and risky. So how do you know when it’s time to hire a professional bookkeeper? We’ll walk through the key signs that it’s time to bring in expert help, the benefits of hiring a bookkeeper, and how to get started. 1. You’re Spending Too Much Time on Bookkeeping If you’re spending more time updating spreadsheets than serving customers or growing your business, it’s time to reassess. Bookkeeping is essential, but it shouldn't be the task that eats into your evenings and weekends. Hiring a bookkeeper can free up hours each week so you can focus on what you do best, serving your customers. 2. You’re Behind on Financial Records Are your books always a few weeks, or months behind? Late invoicing, missed expense entries, and scattered receipts can lead to cash flow issues and tax-time chaos. A bookkeeper will keep your records accurate and up to date so you can make smarter business decisions year-round. 3. Tax Season Is Stressful (and Risky) Do you dread tax season? Scrambling to pull together reports and receipts can lead to errors, missed deductions, or worse an audit. A bookkeeper ensures everything is in order, so when tax time rolls around, your CPA has everything they need and you can breathe easier. 4. You’re Not Sure How Your Business Is Doing Financially Can you confidently answer these questions: What’s your monthly profit or loss? How much do clients owe you? Are you overspending in any category? If not, your books aren’t giving you the insight you need. A bookkeeper provides accurate reports that help you make informed, data-driven decisions. 5. Your Business Is Growing Growth is great, but it also means more transactions, more expenses, and more complexity. As your team, customer base, or revenue grows, DIY bookkeeping can become a liability. A professional bookkeeper helps you scale confidently and stay financially organized. Ready to Take Bookkeeping Off Your Plate? If you’re seeing these signs in your business, now might be the perfect time to hand your books over to a professional. Whether you need monthly reconciliation, invoicing support, or full-service bookkeeping, we’re here to help. You'll get your time back, lower your stress, are able to see how your business is actually doing, and lower your future tax preparation costs. Contact us today  to schedule a free consultation and see how we can help your business thrive.

As a nonprofit leader, your mission to create a positive impact on your community or cause is the driving force behind your work. However, ensuring your organization remains in good standing with donors, funders, and the IRS is just as crucial. Failure to stay compliant with nonprofit accounting standards can lead to serious consequences, including the loss of tax-exempt status or ineligibility for future grants. This guide covers essential IRS regulations, grant accounting standards, and practical tips to ensure your nonprofit remains compliant. Understanding IRS Regulations for Nonprofit Organizations Nonprofit organizations are subject to a unique set of rules established by the IRS, particularly under Section 501(c)(3) of the Internal Revenue Code . While tax-exempt status is a significant benefit, it comes with specific accounting obligations. Here are key areas where nonprofits must remain compliant: Accurate Recordkeeping for Nonprofits The IRS mandates that nonprofits maintain detailed financial records, including income, expenses, and donations. Good recordkeeping ensures tax compliance and fosters transparency with stakeholders. Key records to track include: Donor Contributions Grants and Funding Sources Salaries, Benefits, and Expenses Assets and Liabilities Filing Annual IRS Forms (Form 990) Nonprofits must file an annual return with the IRS, commonly known as Form 990 . This form provides a comprehensive overview of your nonprofit’s financial activities. The specific form you file depends on your organization’s annual revenue and amount of assets: Form Type Gross Receipts Total Assets Form 990 Over $200K Over $500K Form 990-EZ Under $200K Under $500K Form 990-N (e-postcard) Under $50K N/A Proper Classification of Employees and Contractors Ensure that your nonprofit correctly classifies individuals as employees or independent contractors. Misclassification can lead to tax issues, including incorrect payroll tax withholding. Proper classification is essential for compliance. Unrelated Business Income Tax (UBIT) If your nonprofit generates income from activities unrelated to its exempt purpose, it may be subject to Unrelated Business Income Tax (UBIT). The IRS requires nonprofits to pay taxes on non-charitable income, such as revenue from a gift shop or paid events. Donor Restrictions Compliance If your nonprofit receives restricted donations, you must track and use the funds as directed by the donor. Failing to comply with donor restrictions can jeopardize your nonprofit's status. Adhering to Grant Accounting Standards Compliance with grant accounting standards is critical to ensuring responsible fund management and accountability to funders. Whether your nonprofit receives government grants, foundation grants, or corporate sponsorships, it’s essential to follow the guidelines for proper fund allocation and reporting. Nonprofit leaders need to ensure their organization follows more complex accounting standards, especially when grants are involved. Grant Budgets and Reporting Each grant comes with a specified budget detailing how funds should be spent. Ensuring strict adherence to this budget and providing regular reports—such as progress updates and financial statements—is necessary for continued funding. Cost Allocation for Grants Proper cost allocation is vital for maintaining grant compliance. Direct costs (e.g., staff salaries) and indirect costs (e.g., office rent) must be tracked separately and in accordance with grant terms. Funders may impose restrictions on administrative costs or require documentation for indirect expenses. Audit Trails and Grant Audits Many grantors require an audit or independent review. To prepare for audits, maintain a clear and organized audit trail, including records of all financial transactions, invoices, receipts, and supporting documents. Tracking Funds Received vs. Funds Expended Grantors want assurance that funds are being used as intended. Nonprofits must track the funds they receive and compare them to actual expenditures to ensure compliance with the grant’s terms. Address any discrepancies promptly. Best Practices for Nonprofit Accounting Compliance To avoid mistakes and maintain compliance with IRS regulations and grant accounting standards, follow these best practices: Implement a Robust Accounting System : Set up an accounting system that allows you to track donations, grants, expenses, and assets in real-time. This can be done with a nonprofit specific accounting system, or setting up and using your accounting system correctly. Train Your Team : Ensure your finance and program staff are trained on nonprofit accounting requirements, both for IRS reporting and grant compliance. Segregate Restricted Funds : Create separate accounts for donations with restrictions to ensure funds are used according to donor intentions. Consult Professionals : If you’re unsure about specific tax or accounting requirements, consult a nonprofit accountant or financial advisor for guidance. Conclusion: Ensuring IRS and Grant Compliance for Nonprofits Staying compliant with IRS regulations and grant accounting standards is crucial for maintaining your nonprofit's tax-exempt status and eligibility for funding. By keeping accurate records, adhering to grant terms, and staying updated on regulatory changes, your organization can continue to focus on fulfilling its mission while maintaining transparency and accountability. By following these guidelines and maintaining strong financial practices, your nonprofit can ensure long-term success and continue making a meaningful impact. Struggling with nonprofit compliance? Contact Pathfinder Accounting & Tax today for expert accounting services tailored to your mission-driven organization.

Home services have been seeing an increase in demand in 2025, either from tariff fears of from consumers staying in their houses, but the demands may be eaten up by the increase in material and labor costs. The first half of 2025 has been a mixed bag for small businesses, especially those in home services like roofing, HVAC, and landscaping. While challenges remain with labor and material costs, steady consumer demand and new tax incentives are creating real opportunities for growth. Key Takeaways from the Report: Strong Consumer Demand:  Homeowners are investing in upgrades and maintenance, driven by rising home equity and low mortgage rates that keep them in place rather than moving. Rising Costs:  Tariffs on steel, aluminum, and copper are pushing up material prices. Labor shortages continue, forcing many firms to raise wages or pay overtime. Southern Illinois Growth:  Our region has added jobs and seen rising incomes, which means more homeowners have money to spend on home improvements. Tax Law Changes:  The new “One Big Beautiful Bill” (H.R.1) locks in the 20% Qualified Business Income deduction and extends 100% bonus depreciation on equipment—big wins for small businesses. Energy Incentives:  Federal credits of up to $3,200 are available for homeowners making energy-efficient upgrades, a potential boost for contractors in HVAC and related services. Bottom Line:  Demand is steady, but costs are higher. Home service businesses that price smartly, take advantage of tax incentives, and focus on retaining skilled workers are positioned to thrive in the second half of 2025. Download the full report here:

The first half of 2025 has been a balancing act for small restaurant owners. Sales are steady, but higher costs, staffing shortages, and new Illinois policies are squeezing margins. Our 2025 Restaurant White Paper breaks down the details. Here’s a quick look: Sales: Holding, But Traffic Soft Restaurant sales sit around $98–99 billion a month, up 5.6% from last year. But customer traffic is weaker, with more operators seeing fewer diners than in 2024. Diners are cautious, so value and customer experience are key to keeping tables full. Costs: Food & Labor Pressure Wholesale food prices remain 30–40% higher than pre-pandemic, with beef, eggs, and coffee driving spikes. Menu prices are up too—4.4% year-over-year for full-service, but raising prices further risks driving customers away. Illinois’ new $15 minimum wage and paid leave law also add payroll pressure, with labor already accounting for about one-third of sales. Staffing: Persistent Shortages Nationwide, restaurant employment has mostly recovered, but full-service jobs are still down 228,000 since pre-pandemic. Illinois trails even further, with turnover and hiring challenges remaining a top concern for small operators. Illinois-Specific Headwinds Beyond wages, Illinois carries one of the nation’s highest corporate tax rates, plus steep local taxes and fees. Many owners report nearly 25% of revenue goes to taxes across all levels, tightening already thin profit margins. Outlook for Small Restaurants To adapt, restaurants should: Emphasize value and loyalty over discounts. Trim waste and improve operational efficiency. Build flexibility into supply chains and staffing. Download the Full Report For charts, deeper data, and state-level insights, download the free PDF here:

As a business owner, understanding your accounting method is important to ensure you accurately portray your business' finances as well as plan for any potential future plans or expansion. When you’re running a small business, choosing the right bookkeeping method isn't just a compliance issue, it's a strategic decision. One of the most important early decisions you’ll make is whether to use cash or accrual accounting. Each method tells a different story about your business’s financial health, and choosing the wrong one can distort your view of profitability, cash flow, and tax obligations. What Is Cash Accounting? Cash accounting records income when it’s received and expenses when they’re paid. It’s simple, intuitive, and easy to manage, which makes it a popular choice for freelancers, solopreneurs, and small service-based businesses. It’s otherwise known as “bank feed accounting”, because you only use the bank feed for your bank account to book entries. Pros of Cash Accounting: Easier to understand and implement Better real-time snapshot of your cash on hand Fewer accounting entries Often more tax-friendly for very small businesses Cons of Cash Accounting: Doesn’t show the full picture of income and expenses in the period they actually occur. An example of this is if you ship out goods in December and reduce your inventory and increase your Cost of Goods sold, but you don’t get paid until January, recognizing the income from that sale in the new year. Can be misleading for businesses with a lot of receivables or payables. Generally knowing how much you are owed or owe vendors is good practice in case you need to figure out ways to get customers to pay or pay vendors faster. Is not Generally Accepted Accounting Principles (GAAP) compliant if you’re looking for investors or funding. What Is Accrual Accounting? Accrual accounting recognizes income when it’s earned and expenses when they’re incurred, regardless of when cash changes hands. This provides a more accurate picture of your company’s performance and obligations. Pros of Accrual Accounting: Aligns income with related expenses, showing true profitability Better suited for inventory-heavy or fast-growing businesses Required for businesses with more than $25M in revenue, per an Internal Revenue Service threshold Often preferred by investors or lenders Cons of Accrual Accounting: More complex to maintain due to having to log items before they get paid. Can create a misleading sense of available cash if users of financial statements don’t fully understand. May require professional bookkeeping or accounting help When Should You Switch to Accrual Accounting? If you’re starting to scale, managing inventory, or billing customers on net terms (like Net 15 or Net 30), it might be time to move to accrual accounting. Common signs it’s time to switch: You have sales but don’t understand why cash is low You’re seeking outside financing or investment You want better insights into business performance Your CPA recommends it for tax planning purposes How This Affects Your Taxes Your chosen method affects when you report income and expenses, and that affects your tax bill. Under cash accounting, you can time income and expenses more easily to manage tax liabilities. Under accrual accounting, your financials may reflect higher taxable income even if cash hasn’t hit your account yet. Some businesses even start on a hybrid method, using accrual for internal reporting and cash for taxes, though this requires more oversight. Real-Life Examples Cash method example - You invoice a client for $5,000 in December, but they pay in January. You record the income in January. Accrual method example - You invoice the same client in December. Under accrual accounting, you record it in December and it’s a receivable, even though the cash arrives next month.   How to Choose the Right Method   Here are a few guiding questions: Do you carry inventory? Generally, you should start and get into the habit of accrual accounting. Do you invoice clients or offer credit terms? Due to having receivables, it may be best to use accrual to ensure accurate revenue reporting. Are you a solo service provider or consultant? Because you are so small in terms of the $25M in revenue, it would be fine to operate on cash basis. Are you planning to grow or get funding? To be GAAP compliant, you should use accrual to ensure most investors or lenders are understanding of your financials. Final Thoughts Choosing between cash and accrual accounting isn’t just an administrative decision, it’s a financial strategy. The method you choose can impact your decision-making, tax planning, and even how attractive your business looks to lenders or investors. If you're unsure which method is right for your business or want help making the switch, Pathfinder Accounting & Tax can help. We specialize in setting up and maintaining bookkeeping systems that grow with your business.   Book a free consultation with us today and get clarity on your financial path forward.

Business owners should regularly be looking at the numbers and budget their future activity. This is to offset any future surprises which could sink their business. Running a small business requires more than just passion, it takes consistent financial oversight. One of the most effective tools for staying in control of your finances is a monthly budget. When done right, budgeting allows you to plan, make informed decisions, and pivot quickly when needed. Here’s how small business owners can build a budget based on their activity and use monthly reviews to stay on track. As an example, we’ll use me as an accounting firm owner with fake numbers. 1.      Start with Your Revenue Projections Begin by estimating how much income you expect to generate for the month. This should be based on recent sales trends, seasonal fluctuations, and any expected changes (like a new marketing campaign or product launch). If your revenue varies significantly month to month, take a conservative approach. For me, if we were in the months February-April, my revenue will be a lot more as those are my tax return busy months. Let’s assume we are in the month of March, and I plan to only do business returns. Using fake numbers, lets say I will complete 50 returns at an average of $400 per return, as well as have 3 bookkeeping clients at an average of $250 per month. For your business, you’ll use some equivalent like average ticket price, average service call revenue and average number of patrons or widgets sold. See my hypothetical revenue below:   My projected revenue for the month of March using an average price per return and bookkeeping, as well as how many people I plan to serve.   2.      Identify Fixed and Variable Expenses Separate your expenses into two categories: Fixed Expenses: These are recurring monthly costs like rent, insurance, software licenses and salaries. Variable Expenses: These fluctuate with activity levels, such as inventory purchases, shipping, cost per use software, and utilities.   You can use any measure to determine your variable cost. Mine is the amount of deliverables . In this case, tax returns and bookkeeping reports. If I had employees, I would also be using the average number of employee hours for each deliverable, and multiplying that by their wage to get my payroll expense. Other service firms like landscaping, HVAC or construction can use that model and estimate the total number of hours for each service cost to estimate their payroll. See below for my hypothetical expense budget for my accounting firm:   My hypothetical budget for my firm in March, where I have my fixed costs which don't change per month, and my costs per deliverable, like credit card fees, software per return fees and office supplies to print returns.   Knowing the difference helps you understand what costs are within your control and which ones you must plan around. You don’t have to make your budget a super complex sheet that only finance heads can understand, it can basically be a simple calculation, just like mine is above. 3.      Allocate for Savings and Emergencies Build a cushion into your budget for savings or unexpected costs. Even a modest amount each month can create valuable financial resilience over time. 4.      Match Budget to Business Activity Your budget should reflect your business operations. For example, if you expect higher sales in December, plan for increased staffing, marketing, or inventory needs. A good budget aligns with your activity, not just historical numbers. 5.      Track Actuals Throughout the month, use accounting software or spreadsheets to log real-time revenue and expenses. Staying current allows for more accurate comparisons and helps you catch issues early. 6.      Conduct a Monthly Review At the end of each month, compare your actual income and expenses to your budget: Where did you exceed or fall short? Were the variances due to controllable factors or unexpected events? What can you adjust next month to improve accuracy or performance? This review process turns your budget from a static document into a dynamic management tool. 7.      Use Insights to Improve Forecasting Over time, regular budget reviews help you spot patterns and improve your forecasting. This leads to more confident planning, smarter spending, and better financial health for your business. Conclusion A monthly budget isn’t just about keeping the books balanced. It’s a vital part of running a successful business. By basing your budget on actual activity and regularly reviewing it, you gain a clearer picture of your finances and position yourself to make proactive, informed decisions every month.

Debt not only brings a lot of paperwork, it also complicates your bookkeeping. For most not versed in the complexities, it ends up bringing undue bookkeeping stress due to bookkeepers and accountants having to unravel the records. Managing your small business finances involves more than just making sales and covering expenses, it requires smart choices about funding tools like business credit cards, loans, and equipment financing. While these financial options can boost cash flow and fuel growth, they also directly impact your bookkeeping and overall financial health. Understanding how to properly record and manage these transactions ensures accurate books, easier tax preparation, and more informed financial decisions. 1. Business Credit Cards and Your Bookkeeping What They Do: Business credit cards are ideal for covering routine expenses like office supplies, software subscriptions, and travel. They offer flexibility, cash-back, or reward points, but most small business owners don’t realize that every  swipe of the credit card affects your books, not just every time you pay off the balance. Bookkeeping Tips: Track Every Transaction: Categorize and record each purchase in your accounting software to maintain accurate expense records. Every time you swipe that card, the business owes the amount of that swipe to your credit card company, and every time you pay the card, you should be decreasing the credit card liability on your books, not recording an expense . Reconcile Monthly: Match your recorded expenses with your credit card statement to spot any errors or discrepancies. They should be treated and reconciled as you would a bank account. Record Interest & Fees: Log interest charges and late fees as business expenses to keep your financial reports accurate. 2. Business Loans: Tracking Borrowed Capital What They Do: A business loan provides a lump sum you repay over time with interest. These are commonly used for expanding operations or increasing working capital. Bookkeeping Tips: Log the Loan Properly: Record the incoming cash as an asset and the loan itself as a liability. Some time organizations end up recording the cash in as revenue. If you owe  the money in the future, it’s not revenue! Separate Principal and Interest: Each repayment includes both. The principal reduces your liability, and interest is the deductible business expense. Some owners end up recording the entire payment as an expense, instead of paying down their loan balance and recording interest expense. Don’t Forget Origination Fees: Origination or service fees should be categorized as distinct expenses. 3. Equipment Financing: Recording Fixed Assets What It Does: Financing allows you to acquire essential machinery or technology without the upfront cost, paying over time instead. Instead of recording an increase of cash as you would a business loan, you record the value of the piece of equipment which you are financing. Bookkeeping Tips: Create a Fixed Asset Entry: Record the purchased equipment as an asset on your balance sheet. Track Depreciation: Depreciate the equipment over its useful life to reflect wear and value loss. Manage Liability: The amount financed should appear as a liability, with each payment reducing the balance and accounting for interest, as you would a business loan from above. Best Bookkeeping Practices for Financed Transactions Use Accounting Software: Tools like QuickBooks, Xero, or Wave simplify expense tracking and reconciliation. Maintain Proper Records: Keep all contracts, receipts, and financing agreements organized and accessible. Consult a Small Business Accountant: A professional can ensure you’re following best practices and optimizing tax deductions. If you have an accountant or bookkeeper, ensure they are in the loop before you secure the financing or credit card to make sure systems are set up to properly record it.   Final Thoughts Business financing, whether through credit cards, loans, or equipment leasing can be a game-changer for growth. But to reap the benefits, your bookkeeping must stay on point. By accurately tracking and categorizing these financial tools, you maintain a clear picture of your business’s financial health and make smarter decisions moving forward. If you’re not confident on your bookkeeping for these financial instruments, or would like to offload bookkeeping entirely, us here at Pathfinder offer a free 30 minute consultation through this link !

Reconciling is more than a mental exercise, it's a way to ensure your accounts are good, and you're catching issues before they become major headaches. As a small business owner, staying on top of your finances is crucial, but it doesn’t have to be complicated. One simple habit that can make a big difference? Monthly bank reconciliations. It’s a smart way to keep your books accurate, avoid surprises, and protect your cash flow. What Is a Bank Reconciliation? A bank reconciliation is the process of comparing your business’s internal records with your bank statement to ensure everything matches. If there’s a difference like a bank fee you didn’t record or a check that hasn’t cleared, you’ll catch it and can fix it fast. Think of it as a monthly financial check-up that helps you stay in control. Why It Matters for Small Business Owners Reconciling your accounts each month may seem like a small task, but it delivers big benefits: Catch Costly Errors Early From duplicate entries to missed deposits, small mistakes can add up. Reconciliations help you spot and correct them before they throw off your finances. Guard Against Fraud Regular account reviews make it easier to detect unauthorized transactions or suspicious activity, and act quickly. Keep Records Accurate Accurate books are the backbone of smart business decisions, whether you're budgeting, filing taxes, or tracking profitability. Maximize Tax Deductions When all your transactions are accounted for, you won’t miss deductible expenses. That means more savings come tax time. Be Ready for Funding Opportunities Lenders and investors want up-to-date financials. With monthly reconciliations, you’ll always be prepared. How to Reconcile Your Bank Account The process is straightforward: Match your bank statement to your accounting records Check off transactions that appear in both Investigate differences (like outstanding checks or unrecorded fees) Adjust your books as needed You can do this with spreadsheets, accounting software, or with help from a bookkeeper. Make It a Monthly Habit It’s easy to push off financial tasks, but a quick monthly reconciliation can save you time, stress, and money in the long run. Plus, it gives you confidence that your numbers are spot-on. Need help getting started? Our team specializes in helping small businesses simplify their finances. Let’s get your books in shape so you can focus on growing your business.