What Is the Purpose of an Accounting Service Company?
Small businesses originate through the dream of the entrepreneur. The entrepreneur considers the needs of the business and creates a business plan. The entrepreneur knows how to serve his customers. The entrepreneur may consider outsourcing any function not necessary to serve the customers. Outsourcing to an accounting service company allows the entrepreneur to focus on the business while the accounting service company manages the accounting work. An accounting service company serves several purposes for the entrepreneur.
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Financial Reporting
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One purpose of an accounting service company involves creating the financial reports for the owner of the business. The owner provides information relating to financial transactions that occurred throughout the month. The business owner may enter this into an accounting software program and provide a download of the transactions, or he may simply provide the data to the accounting service company. The accounting service company uses this information to record the transactions and create financial reports.
Account Reconciliations
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Another purpose of hiring an accounting service company is to obtain a second look at each account. The accounting service company can perform account reconciliations and verity each transaction recorded. Cash represents a primary asset of the business and should be reconciled monthly as an internal control procedure. Accounting service companies reconcile cash by preparing bank reconciliations using the company's checkbook records and the company's bank statement. The accounting service company may reconcile other accounts, such as the payroll checking account or the credit card receipts.
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Tax Preparation
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Business owners often struggle preparing taxes at the end of the fiscal year. Accounting service companies fill the purpose of preparing and filing tax returns for the business owner. Accounting service companies stay updated on tax law changes and complete tax returns more efficiently.
Payroll Administration
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Accounting service companies also fill the purpose of administering payroll for small businesses. Payroll tax obligations require the business to calculate withholdings for each employee. The accounting service company maintains current tax rates for Social Security tax, Medicare tax, federal and state income taxes, and unemployment taxes. The accounting service company can also manage additional payroll deductions, such as garnishments, insurance premiums or retirement contributions. This frees the business owner's time from being spent calculating the deductions and employer payroll taxes and allows her to focus on the business.
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