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Accounting Services for All Your Personal & Professional Needs in Chicago, IL
Accountants provide valuable accounting services for individuals and business owners alike. Whether you're a server worried about accounting for tips or the owner of a high turnover limited liability company, hiring an accountant makes managing your financial affairs easier.
According to U.S. census data, there are 291,007 firms in Chicago and over 1 million small businesses across Illinois as a whole. Access to capital and managing cash flow are major issues for businesses in the city. Accountants offer impartial guidance and practical advice to improve the financial stability of the companies they work with.
What Can an Accountant Do for You?
Whether you're self-employed or an employee, an accountant can help you manage your taxes more efficiently. Accountants are not financial advisors, but they can offer useful tips about how to keep track of your income and outgoings as well as how to save money on taxes.
Accountants provide tax advice on a variety of topics:
- Tax credits for those working in certain industries
- Homeowners' exemptions
- Tax deductions for medical expenses
- Preparing tax returns
- Tax exemptions for dependents
- Calculating state income tax
- Dealing with IRS disputes and issues
Many people fail to claim all of the tax exemptions and deductions they're entitled to. This means they're missing out on an opportunity to save for the future. They could even be missing out on health care or other essentials because they feel they can't afford them.
Accountants help people manage or improve their personal finances by providing advice about financial planning, such as how much to save for retirement or where to put savings if they're planning to buy a home in the next few years. Choosing the right investments ensures savings receive maximum interest or rates of return and minimizes tax liabilities.
An accountant may also be useful for those who are struggling financially. If someone is faced with significant debts or a sudden reduction in their income, an accountant can offer advice on the best way to pay off those debts or organize their finances to avoid potentially serious financial consequences, such as defaults or repossessions.
What Can an Accountant Do for Your Business?
It's imperative that businesses maintain clear, comprehensive, and accurate records of all financial transactions and accounts. Not only is the organization of these required for tax purposes, but business owners can also learn about the well-being of their business by analyzing their finances.
The reporting requirements for individuals and corporate entities vary, and the rules around assets and liabilities can be confusing for someone who has no formal training in accounting. A skilled accountant makes dealing with the financial complexities of running a business much simpler, which in turn can help a business owner understand and run their company better.
Most accountants offer the following for businesses:
Help with Tax Returns
Many people associate accountants with tax returns. Just as hiring an accountant can save individuals money on their tax returns, it can also benefit businesses in the same way. In many cases, the amount of money an accountant saves a business exceeds their fee, so they truly do pay for themselves.
Accountants have a solid understanding of tax-deductible expenses, so they can offer advice on legitimate business expenses that you may otherwise overlook as tax-deductible. Even small expenses, if they're incurred weekly, can become significant over a fiscal year. Making full use of your allowable itemized deductions as a business is an effective way of cutting your tax bill.
Having an accountant file your tax return for you means you can feel confident the return was accurate and detailed. This reduces your risk of being faced with an audit. In addition, if an audit does occur, it should only be a minor inconvenience rather than a lead-up to significant fines.
It's hard for a business owner who has little to no training in financial matters to file their accounts in a timely and correct fashion. Why waste hours on a tax return when a professional can complete them more quickly?
Bookkeeping Services
Bookkeeping and accounting are separate but closely linked fields. A bookkeeper is responsible for the day-to-day recording of transactions. An accountant, in contrast, summarizes and interprets the transactions recorded by a bookkeeper, turning them into financial statements for use by the business and producing accounts for tax purposes.
Bookkeepers have a keen ability to pay attention to detail, but they don't undergo the same level of financial training as accountants.
Some accountants can provide both services. Many small businesses fall into the trap of ignoring their record-keeping obligations for a whole quarter, or even an entire financial year, then rushing to compile their records at the last moment or asking their accountant to turn a file full of receipts and invoices into a set of accounts.
Many accountants offer a basic bookkeeping service to help prevent the above scenario, or they might provide clients with one-off audits of their current bookkeeping methods. Some remote accountants offer a consultation service to advise new clients on how to maintain their books so that when tax time approaches, the accountant can file the taxes quickly and accurately.
If you struggle to keep your books up to date, consider asking your accountant which record-keeping techniques they recommend for an organization of your size and in your industry. They can advise you on software or systems to streamline recording financial transactions.
Accounts Receivable & Payable
Accounts receivable is an account for current assets. It lists the amounts that a company can collect from customers who have received goods or services on credit. In contrast, accounts payable is an account for current liabilities. This account records the funds an organization owes to suppliers for goods or services that were received on credit.
There are two sides to every business transaction. When a company reports a sale, it creates an asset. The other side of the transaction reports a purchase and a liability. When the buyer makes a payment, several things happen:
- The seller's accounts reflect an increase in their cash account and a decrease in their accounts receivable.
- The buyer's accounts show a decrease in cash and a matching decrease in accounts payable.
It's important for the transactions to balance. An accountant helps individuals or businesses record their transactions in the correct accounts.
Accountants also help clients understand what their books are saying about their business. They analyze accounts receivable and accounts payable. Then, they use that information to identify cash flow issues, financial trends, and transaction patterns in the business. This, in turn, can help a company run more smoothly and save more money.
Financial Statements
Financial statements are used by investors to determine the health of a company. In addition to preparing tax returns, accountants prepare financial statements. Organizing and developing financial statements is one of the most important accounting services that a accountant offers to a business looking to grow an investment or attract more profit.
There are several types of financial statements, including:
- The balance sheet
- Income statement
- Cash flow statement
Once prepared, these statements are useful for business owners to become familiar with and study because they reflect the current status of the company. They also help investors make predictions about the prospects of the business. For companies that trade on the stock market, using an accountant helps them prepare annual reports that present the company in a good light while fully complying with the SEC's financial reporting requirements.
Balance sheets
The balance sheet provides an at-a-glance overview of a company's assets and liabilities. It also shows shareholder equity when applicable. The balance sheet is a snapshot in time from the date it was written. Some businesses strategically buy or sell assets just before compiling their balance sheets in order to manipulate their accounts to look a certain way.
The balance sheet helps people identify how assets are funded. This could be using liabilities, such as stockholder equity or debts, or it could be through paid-in capital or retained equity. Assets are listed on a balance sheet in order of their liquidity.
Liabilities are shown on the balance sheet in the order payment is due. A liability is classified as short-term if it's due to be paid in the next year. On the other hand, it's classified as long-term if the due date is more than one year away.
Income statements
The income statement is a document that covers a specified period. Typically, this period is either one quarter or one year. The income statement lays out the revenues, expenses, net income, and earnings per share for a company.
Income statements often provide two or three years' worth of data from matching time periods to help the reader compare the most recent period to previous performance.
Calculating net income is achieved by subtracting revenue from expenses. The income statement is sometimes called the profit and loss statement. It focuses purely on revenues and expenses.
Revenue includes operating revenue, non-operating revenue, and other income. Operating revenue includes the income generated through the company's core business. Examples of non-operating revenue include interest paid on investments, rental income from a property, or income from strategic partnerships, such as sponsorships or advertising arrangements. Other income is revenue that comes from miscellaneous activities, such as the sale of major assets.
Any time a company spends money, this is classified as an expense. This includes wages, rent, utility bills, sales commission, and the cost of goods sold. Expenses can also include the interest paid on a loan. If the sale of an asset results in a loss, this may also be recorded as an expense.
Income statements are useful for determining whether revenue is increasing and how well the managers of a company are controlling their expenses to increase profits. This makes the document useful for business planning and for investors. An accountant prepares income statements that help stakeholders make informed decisions.
Cash flow statements
The cash flow statement measures how well a company is able to generate the income required to fund its activities. Where the balance sheet is a snapshot in time and the income statement is an overview of a longer time period, the cash flow statement shows where a company earns money and how it's being spent.
Cash flow statements are important because 82% of small businesses fail due to poor cash flow. If a business has liabilities due in the coming quarter and cannot pay those liabilities, it doesn't matter if they have a significant amount of money due in accounts receivable for later in the financial year.
A healthy business has sufficient reserves to cover short-term expenses and manages its cash flow in a way that maintains a steady income stream.
An accountant helps businesses produce a clear cash flow statement and understand what that statement says. A business owner can then identify issues with inventory management, develop a minimum viable budget, and work out what level of cash reserves the company requires to remain sustainable.
These reports can help companies make important business decisions. For example, if you have an office space in West Loop or Fulton Market District, you could be paying higher than average rents. If you rarely meet clients at the office, moving to a more affordable district could improve your cash flow.