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The transactions with a customer who owes a company money is the basic description of accounts receivable. Most account receivables are generated from a business who has exchanged their services or goods for an open credit line. Most billing cycles are 30 days long, however, some are 10 to 15 day cycles. That means the account should be paid within that prearranged billing cycle. After that, the account may be charged a late charge.

Accounts receivable are assets but do not become income until the account is paid. At that time, the payment is a debit to receivables and credit to a revenue account. Each customer with a balance should have an accounts receivable ledger. Postings made to the customer's ledger on a daily basis can be used as the statement at month end. The accounts receivable ledger should equal the individual invoices from that month. A new ledger sheet with the balance forward from the previous month should be started each month.

Many types of computer software can generate the reports necessary to maintain an aging report. These accounts should be reviewed on a regular basis. It is not a good practice to allow a customer to go over 30 days, but there can be exceptions. When an account reaches the 60 to 90 day period, they should contacted by phone or letter as a friendly reminder. When the account reaches the 90 to 120 day period, they should be contacted with a request to bring the account current. This reminder can also reinforce that the account could be placed on a cash only basis and if the account is not brought current, the company attorney will be notified.

In accounting terms, accounts payable are the people that you owe money to. Properly managing your accounts payable is an important function of any successful business. Accounts payable can include your vendors, state and federal taxes, employees salaries, and regular overhead on your building such as electric bills. If you do not pay your vendors on time, they could refuse to deliver vital goods to your business. If you do not pay your employees when they expect it, you could soon be without anyone to work your business. In addition, if you do not pay your bills when they are due, you will be wasting valuable cash on late charges.

On the other hand, paying your accounts payable too early ties up cash that could be used for other things in your business. Managing your accounts payable properly means that you pay your bills when they are due - not before they are due and not late. This means that your business must have a good handle on their cash flow to ensure that the cash is available to pay bills as they come due.

Managing your accounts payable properly will ensure that your business pays their bills on time. This will maintain your good reputation and credit standing in the community, but does not tie up cash that could be used to keep your business growing. There are many different ways to manage your accounts payable, depending on the size of your business. Some smaller businesses outsource their accounts payable to avoid hiring an employee to handle it. Some businesses can handle their own accounts payable through computer software. Whatever system works best for your business, managing your accounts is vital to the health of your business.

Imagine you are a business owner who is fulfilling your lifelong dream of producing widgets, benefiting the lives of millions and securing your income at the same time. You have grown from working in your garage, to an industrial plant and from zero employees to one hundred. As you started your business you were completely excited about marketing the best possible widget. You lulled yourself to sleep at night dreaming of what colors you would produce your widgets and how every American household would have them.

Fast forward five years and suddenly those welcoming dreams has become a conglomeration of nightmares. Your nightly visions of electric blue or soft champagne hues have been replaced by a mental pounding of regulation and compliance issues. Restless worry about disgruntled employees screaming about incorrect deductions consistently invades your precious little sleep. Your alarm ringing has you awakening in cold sweats with certainty that it is the IRS calling about delinquent payroll taxes. Is outsourcing payroll an answer?

Doing a thorough cost analysis can give you the answer. In filing payroll taxes yourself you need to know how much you are spending on the labor involved with gathering and inputting payroll data. Information such wage and hours worked, state and federal (sometimes city and county) taxes, software and training expenses, as well as requirements for incorporating other services like insurances, retirement programs and direct deposit programs are important. Would you like to trade those headaches for a life without audits, quarterly reports, tax deposits, W-2s, down payments for workman compensation and even assistance with 401k plans and human resources. Look into a professional employer organization (PEO), formerly known as employee leasing, as well as payroll service companies. You may again lull yourself to sleep with visions of pastel widgets soon.

It has been said by some very learned people that tax laws are among the hardest things to understand because they are not easily interpreted and are very complex. Additionally, the laws change periodically and it may be difficult to keep abreast of the changes. Some of these recent changes are enumerated below.

The IRS taxation law has increased the contribution limit that can be taken on IRAs to $5,000 in 2008; the former limit was $4,000. Additionally, individuals age 50 in 2008, can contribute an additional $1,000 to their IRA. This change covers traditional or Roth IRAs.

The personal exemption has increased to $3,500 for 2008. The “standard deduction” rate has increased for 2008 for married filers who file a joint return; they may now take a deduction of $10,950.

For those persons who do not itemize deductions, but do pay real estate taxes, there is an additional standard deduction for real estate. For single individuals, an additional deduction can be taken up to $500 of the real estate taxes they paid. Those individuals filing joint tax returns may take an additional deduction up to $1,000 of the real estate taxes they paid.

There is also a tax credit that can be taken advantage of by First-Time Homebuyers, but it only applies to purchases of a primary home between the dates of April 9, 2008 and June 30, 2009. Only ten percent of the price of the home is allowed as a credit, with a maximum credit of $7,500.

When it comes to owning a business, it is of great importance to be organized. Most businesses actually depend upon this fact of organization. A business could never be truly successful if the owner did not keep track of the income, expenses, clients, workers, bills and payments, along with many other pieces of information. While many do not think that being organized can do much to help a business, they are quite surprised as to how much more smoothly it can run when everything has its place.

It is a good idea to have separate books and ledgers, to keep track of one's expenses and income. This is very nice to have as one can keep track of daily happenings and will always know what their balance is. This is extremely important, because if an owner did not keep track of their income and expenses, they could be losing money without even knowing it. The owner could imagine they are doing fine, but further down the road, they find out that they were indeed losing money all along, resulting in the closure of their business. No business owner wants this to happen, so having some way of keeping track of the money coming in and going out is one of the most important things for a business.

There are many different kinds of software available that can do many functions, such as keep track of income and expenses on spreadsheets, keep track of clients and contacts, and so much more. Having everything in one place with easy access allows the owner to know exactly where everything is and keeps their business running with ease.

TaxBookAdvisor.com

Accounts Receivable

Accounts Payable

Managing Payroll Needs

Recent Changes in Tax Laws

How to Organize One's Business