These days, when you consider nearly any aspect of living, there’s usually a trusty app you can turn to. But travel agencies — whether sole proprietorships, large business or small teams — have complicated bookkeeping issues. As tempting as less expensive online bookkeeping and tax software can be, you’re almost always better positioned with a personal, enduring relationship with professionals who can guide you and save you time, energy and money down the road.
So how can you get started? We’re breaking down how to find the best financial team based on your needs heading into the 2022 tax season.
Pro tip: You may need to hire a team
“You know the obvious; you hire a professional because they’re professional,” says Kayce Gerlach, CPA, CGMA and CEPA, who specializes in travel and hospitality at Rapid City, South Dakota-based Casey Peterson CPAs & Financial Advisors. “If I’m traveling, I hire a travel professional because it saves me time searching reviews and saves me money, because they keep up on the twists of the industry. Well, that’s the same for tax or accounting purposes. We keep up on what’s changing in the tax laws to help travel agents or agencies get all the deductions they can, while helping them to know what is a deduction and what’s not.”
In the opinion of Peter Giersch, managing director of Milwaukee-based Giersch Group, a bookkeeping and management advisory firm with numerous travel and hospitality clients, having a bookkeeper is also key.
“It’s tricky,” he says. “There are two things you need. One is a bookkeeper and one is a CPA. The bookkeeper turns your financial transactions into financial statements. A CPA will file your taxes. Sometimes a CPA can also do your bookkeeping, but it’s a rare find.”
Getting ready to file taxes isn’t something that should suddenly occur to you the first week in April. It’s a year-round activity, and a good bookkeeper and CPA can shepherd you so that tax season doesn’t become an exercise in biting nails the week before the deadline.
Get a clear picture of your business
Financial statements are handy for more than just taxes. “Everybody knows you need to get your taxes done and that you need to understand revenue versus expenses and equity versus debt,” explains Giersch. But, he adds, there’s another key reason for understanding your financial statements: they tell you, not just the IRS, where your business is going.
“We say there are three audiences,” he explains.
- The first audience is the IRS because more than anything else, you need to pay your taxes.
- The second audience is someone who may want to invest in your business. Looking to get a bank loan, take on a partner, or find an investor? As a key decision making factor, they will want to know whether you’re making money, and if so, how much.
- The third audience is going to be you, and that, according to Giersch, is the most important. “As a business owner, you need to know if you’re making money, if you’re losing money, if you’re pricing right, if your margin is right. Should you hire staff? Can you afford to invest? You need your financial information to answer all of those important questions.”
Find the right experts
Giersch warns that bookkeeping is something that’s best left to the professionals. “Bookkeeping can seem straightforward, and many have someone on their team take responsibility for this,” he notes. “Unfortunately, I’ve seen this end badly—many times, it even ends up costing them more to fix the issue.”
Word of mouth and personal recommendations are a great way to find someone to work with. But if you have no one to ask, then at least narrow the search field. You want someone who either specializes in working with travel agents or has enough experience with small business issues to provide the expertise you need, he advises.
When it comes to accounting, many people may be tempted to rely on their bookkeeper, but that may not be the best bet for business owners. A CPA can represent you in the case of an audit. There are limitations on other tax preparers, but not on CPAs (Certified Public Accountants), tax attorneys, or EAs (Enrolled Agents).
When researching potential providers, watch out for these red flags:
- A tax preparer who brags about hidden deductions they’ll use to save you money.
- A tax preparer who doesn’t E-File (the IRS requires all tax preparers filing more than 10 tax returns to E-File, so you’d be dealing with someone with very few clients).
- Make sure the accountant is clear about the fees. If they calculate their fees via a percentage of your return, there is likely a better option.
If you’ve found a CPA you like and want to investigate further, you can also search the IRS directory for approved tax preparers and check with your State Board of Accountancy. Of course, you should also check that any preparer’s license number (EIN) is legitimate and current. You can also check for issues with the Better Business Bureau, and search tax professionals’ organizations, like the NATP or the AICPA.
Avoid common tax and accounting mistakes
Gerlach says that the most common mistake he sees when business owners do their taxes is deducting items they shouldn’t, especially personal items. “We keep up on the changes in tax law every day. We’re reading and following what’s going on in Congress, and can make sure to clearly share what counts as a deduction and what does not, ” he says.
Here are a few common rules about deductions that are helpful to have on hand: If you’re working from home in a different state than your place of business, you may be liable for taxes in both states. As an employee working from home, you cannot deduct office space. Your employer, on the other hand, might be able to deduct supplies or equipment given to you.
“CPAs save people valuable time,” Gerlach says. “The tax code is really complicated. We see that when people prepare their own tax returns, they may spend a whole day pulling data together and then trying to get it into TurboTax. If you work with an accountant, it relieves you of that burden. It saves time, saves money, we can answer questions, and we can help do planning before the end of the year. We can give clients peace of mind. When they hire someone professional to do the work, they know it’s right.”
Recap: smart moves for travel business pros
- Keep your personal and business expenses separate.
- Consider setting up a separate account for client down payments. It’s not critical, but with one, you’re not robbing Peter to pay Paul, so-to-speak.
- Keep every single business-related receipt.
- If you use your car for both personal and business trips, carefully log the mileage for each.
Originally appeared in the winter 2021 issue of The Compass Magazine.
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