Learn More About Merchant Account

Credit cards don’t process themselves. This is where merchant accounts come in. A merchant account is essentially the middleman that lets businesses accept credit and debit cards in person and online.

Usually provided by banks and other financial institutions, a merchant account processes electronic payments by transferring funds between customers’ and merchants’ banks. During a sale, the merchant account works behind the scenes to withdraw funds from the customer’s bank and deposit them directly into the merchant’s checking account. The process works the opposite way during a refund.

Here is a simple explanation of how a merchant account works, what to look for in a merchant account and how small businesses can get one. For a more in-depth look at merchant accounts, check out our Credit Card Processing Buyer’s Guide, which will also help you figure out whether your business needs a merchant account and how to find the right one for your business.

How a merchant account works
When a credit card transaction is processed, information must be sent to a payment gateway to see if the cardholder has sufficient funds. For traditional transactions, this is generally part of the point of sale (POS) machine, which reads the cardholder’s data and checks with the credit card company to ensure the transaction can go through. This is known as a “swiped” or “card present” type of merchant account, which can include retail, restaurant or lodging merchants.

But in a “keyed” or “not present” transaction, this is done online by a payment gateway, which connects to the credit card company. These kinds of merchants can include mail order companies, telephone order companies or e-commerce/Internet merchants. When merchant accounts are set up, the same company, called the payment processor, can often set up the payment gateway in the same process.

Within the e-commerce category, there are a number of different kinds of merchant accounts:

Direct — applied for directly at a merchant bank.
Local — an account in one’s home country.
Offshore — an account outside of the country of the merchant, known as an international merchant account.
High-risk — for online businesses with a high percentage of chargebacks and returns.
Third party — connected via an additional secure payment gateway to a direct credit card payment processor, contributing to the work of the processor and sharing its expenses. Ideal for beginner e-commerce companies.
Generally, merchant transactions are not posted to the account at the time of purchase/refund. These transactions are usually posted in a batch during the merchant’s settlement process. Depending on the business, the settlement process can either be automated to occur at a specific time of day, or manually initiated. This is dependent upon the specific payment gateway.

How to get a merchant account
To get a merchant account, a business must apply and be approved. Credit card companies guarantee that a cardholder is entitled to receive a promised good or service; if such good or service is not delivered, then the cardholder is entitled to their money back. As one of the most basic consumer-protection principles, this also mitigates the risk that the credit card processor faces. The payment processor has the potential to lose money every time it processes a credit card transaction for your business. Thus, all businesses who want a merchant account must apply, and sometimes there is a fee associated with this.

It’s important for businesses to stay grounded in reality when applying for these merchant accounts. When applying, the prospective processor should be able to provide clear answers on the type of documentation required and how long the approval process might take. If the processor makes unrealistic blanket promises or statements, it would be a good idea to be skeptical and take a closer look at the company.

When applying for a merchant account, it’s important to have financial documents in order to leverage the best terms of approval possible. Having a strong processing history is another valuable tool that you could use to leverage your application. An old-fashioned cover letter will help explain exactly what your business does and why it deserves a merchant account.

Find a merchant account
From credit card processors to POS system providers, small businesses have many merchant account options to choose from. To help small businesses find the right merchant account, Business News Daily has done extensive research and analysis to find the best credit card processors and the best POS systems, where you’ll also find a roundup of reputable credit card processors and POS system vendors.

How To Choosing a Secure POS System

Choosing the right point-of-sale (POS) system is key to a business’s success. While factors like type of POS system, features, cost and limitations are all important considerations, it’s easy to overlook one of the most critical aspects of using POS systems: security.

Understanding POS security isn’t for the faint of heart. Not only are regulations complex, but keeping up with changes is a whole other beast. As a small business owner, however, dealing with POS security is a necessary evil if you want the convenience and benefits of accepting credit cards.

To help you make sense of POS security and better protect your business and customers, we asked experts to share their tips on what to look for in a secure POS system.

1. Is the POS system PCI compliant?

The first thing to look for is whether your new POS system meets the required regulations for accepting credit cards.

The first thing to look for is whether your new POS system meets the required policies for accepting credit cards. For instance, new credit card regulations require merchants to have EMV chip-enabled POS systems by Oct. 15. [Learn more about EMV].

There is also a huge change happening soon. Starting June 30, businesses are required to comply with version 3.1 of the Payment Card Industry Data Security Standards (PCI DSS). These new PCI 3.1 standards are mandatory, and any business that fails to comply could face steep penalties. Although vendors have taken the necessary measures, it’s your responsibility to make sure your business is truly compliant. [Learn more about PCI 3.1.]

“Any business that accepts credit card payments for goods or services must be PCI compliant,” said Tony Ciccerone, a Detroit-based territory manager for Heartland Payment Systems. This means that in addition to following the Payment Card Industry Data Security Standard (PCI DSS) rules for credit card processing, your POS itself must meet PCI standards for merchants.

This is important because if your customers’ information is leaked, you could be on the hook for financial damages, even if your company uses PayPal or some other third-party service provider to process your credit card transactions, said Vikas Bhatia, founder and CEO of cybersecurity firm Kalki Consulting. “Make sure to ask your service provider for proof that they passed their PCI DSS evaluations,” he said.

2. Update and maintain purchased technology

Technology is changing rapidly, and credit card payment processing systems are, too. When you choose your new POS system, ask the service provider about the maintenance schedule. An outdated system may put your business and customer credit card info at risk for a security breach.

That includes your firewall. “Consumer-class routers that are commonly used in SMBs generally include a firewall; however, it needs to be configured correctly in order to protect your network,” Bhatia said. It’s critical that you change the default login and password on every network device you purchase, including your new POS system, he added.

“The most advanced firewall is worthless if it has the default login and password in place,” Bhatia said.

In addition to ensuring your POS software is up-to-date, it’s important to check the changing PCI compliance rules regularly, to make sure your POS systems meet them, Ciccerone said.

“Visa and MasterCard, for example, change PCI rules and regulations about once a year,” he said.

3. Isolate your POS systems

When choosing a POS system, it’s also important to consider whether you can keep the system completely separate from the rest of your business technology.

“POS systems are often the weak link in the chain and vulnerable,” said Mark Bower, vice president of product management and solutions architecture for retail security tech provider Voltage Security.

Bower said POS systems often run a standard operating system and, therefore, are easy targets for attacks if they’re exposed to a malware delivery channel such as a browser, a compromised POS management system, patch system or — worse — from an insider.

“In use, POS systems should be isolated from other networks to restrict access to payment data flows, but often are connected to many systems,” Bower said.

4. Encryption services and fees

With security being such an important issue in electronic payment acceptance, it’s important to understand the encryption options available for a POS system.

Encryption is the process of changing information into a form that’s unreadable except to holders of a specific cryptographic key, according to the PCI website glossary. Using encryption protects your customers’ payment information from unauthorized access until it’s decrypted with the key.

Ask the POS salesperson if the system in question requires separate encryption services. Keep in mind that encryption could require an extra monthly fee. Also ask if they offer a system with end-to-end encryption, which can simplify the process, thus saving you time and money.

“Point-to-point encryption (P2PE) from the instant the card data is read, also called end-to-end encryption, addresses this risk by encrypting all the payment card data before it even gets to the POS,” Bower said. “If the POS is breached, the data will be useless to the attacker.”

Should You Know About Accounts Payable

Accounts payable are the bills and other debts that the business needs to pay. As a matter of fact, the only thing that a business pays that is not considered accounts payable is payroll. Everything else falls under the category, making it a critical aspect of your business.

“The accuracy and completeness of a company’s financial statements are dependent on the accounts payable process,” said Harold Averkamp, founder and author of accounting advice website Accounting Coach. “The efficiency and effectiveness of the accounts payable process will also affect the company’s cash position, credit rating and relationship with its suppliers.”

Implementing a dependable accounts payable system will produce accurate financial information you need to plan for both the short and long term. Here’s what you need to know about keeping up with your business debts.

Tracking accounts payable
Accounts payable, sometimes abbreviated as A/P, are tracked monthly for many small businesses, but as the business grows, it is better to make it a weekly task to take advantage of early payment discounts and resolve any credits due to inventory returns. It is handy to keep a record of accounts payable in case there are any payment disputes, to remind the business of current or outstanding invoices, or as proof of spending at tax time. These records can be kept manually or with accounting software.

Working with accounts payable requires a great attention to detail. Each invoice needs to be verified for accuracy, billing date and payment date, and then entered correctly in the general ledger or accounting software. Based on our research, here are some general tips to set up your accounts payable and help the process run smoothly:

Work from the original invoice whenever possible. Some invoices are sent electronically — print once and then file the email away to minimize confusion.

Use the same entering system every time. Each vendor has their own system of invoicing but assigning the invoice number in your system should be consistent. Determine the method, such as using leading zeros, and stick to it.

Enter every invoice individually. This includes multiple monthly invoices from the same supplier. In the event of a dispute, you will want to be able to track it down in your system easily.

Get invoice approval from the appropriate person before entering it. The person approving the invoice should be different than the one entering it. If you are a sole proprietor and do your own bookwork, this may not be possible, but still have a clear process for approval and entry. Keep solid records to support each one.

Look for early payment discounts to save money. It can add up by the end of the year. Some vendors offer a small percentage off the invoice if you pay it within a specified time frame from the invoice date, such as within ten days. If you typically only work with accounts payable once a month, consider a system in which you identify early payment discount opportunities when the invoice is received and pay those separately from the monthly pile.

Cash flow is important to a small business. A solid system of monitoring and paying accounts payable gives you a clear picture of your expenditures against your revenue, enabling better business decisions.

Know More About Accounts Receivable

Accounts receivable are the lifeblood of a business’s cash flow. Sometimes referred to as A/R, “accounts receivable” is the accounting term used to refer to the money that the business should receive from its customers for the goods or services it provided.

Your business’s accounts receivable are an important part of calculating your profitability, and provide the clearest indicator of the business’s income. They are considered an asset, as they represent money coming into the company. To determine profitability, add up all of your assets, including accounts receivable, and subtract your total accounts payable, or liabilities, which are what you owe to suppliers and vendors. If the number is positive, the company is profitable. If it’s negative, then decisions must be made regarding how to increase the assets or reduce the liabilities.

Why track accounts receivable?
If you do not keep track of accounts receivable, you may forget to bill certain customers or will not know if you’ve been paid. You may end up providing your product for free and negatively impact your ability to be profitable. The longer it takes to send the invoice, the less likely it will be that your payment will be sent. Keeping track of accounts receivable is also a great way to have documentation supporting proof of income at tax time.

Accounts receivable are best managed on a consistent and routine basis. In retail, each transaction is paid for immediately. With other industries, customers apply for a credit line, and orders are placed against the credit line. The customer is provided an invoice and payment terms with the shipped product, payable at a later date. Regardless of your system, ensuring payment is crucial. Here are five tips to make sure your business stays on top of its accounts receivables:

Communicate. In a 2013 Transworld Business article, Jason Stine, business development manager for collection services company CRF Solutions, advised regular and prompt communication with clients. Stay on top of transactions; more nonpayment errors develop in the first 60 days after delivery because of insufficient or incomplete customer contact, Stine said.

Create a solid internal process. Determine the process for performing accounts receivable, and stick to it. Pick a day of the week to create, print and mail invoices. Choose another day to print an aged accounts receivable report and contact customers who are beyond their payment term window. As your small business grows, you may need to split these tasks among different people to stay on top of all the accounts.

Confirm receipt of invoices. Many companies have had success in contacting the client a week after the invoice was sent, in order to confirm receipt. Things do get lost in the mail or accidentally deleted in an email inbox. A quick inquiry about receipt of the bill also provides the chance to ask for feedback on the product provided, demonstrating your excellent customer service skills as well.

Extend credit with moderate terms. With today’s technological advances, companies can receive payment before shipping an order or starting a service. With service-based companies and high-cost goods, however, that may not always be possible. In those cases, have the client apply for a credit line. You will be able to evaluate their payment ability and set a credit limit you’re comfortable with. It also provides an opportunity to be sure both parties are clear on the terms of payment and what happens if the account goes delinquent.

Document everything. Documentation of accounts receivable helps your bookkeeper with weekly or monthly inputs for financial statements and your accountant at tax time. From first contact, keep notes on the order, conversations and agreed-upon terms. In a worst-case scenario, that documentation will also be important should you have to pursue payment through a collection agency or court.

The funds collected through your accounts-receivable process is the food that fuels the actions of your company. Inconsistent and spotty attention to the task can starve a company’s growth, while a steady and smooth process results in a well-fed machine capable of achieving all of its goals.

Right SBA Loan for Your Small Business

Small businesses are the backbone of the U.S. economy: According to data from the 2010 U.S. Census, there are 27.9 million small businesses registered in the United States, employing 120 million people — almost half of the nation’s workforce.

Part of what the Small Business Administration (SBA) does is help America’s small businesses secure the funding they need to operate and grow. As a federal government agency, the SBA does not lend small businesses money directly. Instead, it sets guidelines for loans that are made by its partners, which include banks, credit unions, community development organizations and microlending institutions. The SBA guarantees a portion of these loans granted by these institutions will be repaid, eliminating some of the risk for lenders.

Kale Gaston, head of the SBA Lending Group for TD Bank in Greenville, S.C., said SBA loans “do a great job of helping lenders say ‘yes’ to borrowers.” He also noted that SBA programs provide better access to capital and credit enhancement for small business owners. For example, since the SBA guaranty lowers the risk in case of a loan default, lenders are able to provide funding when the down payment available is too low or the business’s cash flow is not high enough for traditional options.

SBA lenders can provide longer terms as well. Instead of five or 10 years for a real estate purchase with a balloon payment at the end, the lender can give terms for 25 years, eliminating the balloon (i.e., final payment) or need to refinance every few years, Gaston said. For shorter-term assets, like equipment, terms could go to 10 years instead of the usual three to five years.

SBA loan programs
The SBA’s loan programs are designed specifically for small business owners who don’t have access to other reasonably termed financing. There are four main types of loan programs:

7(a) loan program: This is the SBA’s primary program to help startups and existing small businesses obtain financing. 7(a) loans are the most basic and most commonly used type of loan, as well as the most flexible. The money can be used for a variety of general business purposes, including working capital, machinery and equipment, furniture and fixtures, purchasing or renovating land and buildings, leasehold improvements and debt refinancing. Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets. Borrowers can apply through a participating lender institution.

CDC/504 loan program: This program provides businesses with long-term, fixed-rate financing for major assets, such as land and buildings. The loans are typically structured with the SBA providing 40 percent of the total project costs, a participating lender covering up to 50 percent and the borrower putting up the remaining 10 percent. Funds from a 504 loan can be used to purchase existing buildings, land or machinery, and to construct or renovate facilities. These loans cannot be used for working capital or inventory. Under the 504 program, a business qualifies if it has a tangible net worth of less than $15 million and an average net income of $5 million or less after federal income taxes for the two years before application. The maximum amount of a 504 loan is $5 million.

Microloan program: This program offers very small loans to startups, or newly established or growing small businesses. The loans can be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery or equipment. The SBA makes funds available to specially designated intermediary lenders, which are nonprofit organizations with experience in lending and technical assistance. Those intermediaries then make loans of up to $50,000, with the average loan being about $13,000. The loan cannot be used to pay existing debts or to purchase real estate.

Disaster loans: The SBA offers this option to businesses that have been affected by a declared disaster. These low-interest loans can be used to repair or replace damaged real estate, personal property, machinery, equipment, inventory and business assets.

Further details on each type of loan program can be found on the SBA’s website.

What you’ll need to apply
When applying for an SBA loan, you’ll need to fill out forms and documents for the specific loan you’re trying to get. The SBA also encourages borrowers to gather some basic information that all lenders will ask for, regardless of the loan type. The following items are usually required:

Personal background and financial statements
Business financial statements
Profit-and-loss statement (three years)
Current within the last six months
List of debts
Projected financial statements
Business certificate/license
Income tax returns
Résumés for key team members
Business overview and history
Business lease
The SBA also advises small businesses applying for a loan to be prepared to answer several questions:

Why are you applying for this loan?
How will the loan proceeds be used?
What assets need to be purchased, and who are your suppliers?
What other business debt do you have, and who are your creditors?
Who are the members of your management team?
Why your business plan matters
Whether you’re a new startup or an established company, the key to a successful application is a well-written business plan.

“The business plan not only is the road map that will guide the business from planning to startup to (hopefully) success, but also will show any potential lender that the potential business owner does have a clear view and understanding of the business, how to run it and, most importantly, how the loan will be repaid,” David Hall, a public affairs specialist with the SBA in Washington, D.C., said in an email interview with Business News Daily.

Gaston agreed, noting that lenders want to know how knowledgeable you are about your business and the competitive market.

“The concept may be great, but what the lender is looking for is that the individual is driven, capable and determined,” Gaston said. “You really need to understand what you are doing every step of the way and be able to convey that to the lender during the application process.”

Hall also recommended that business owners take full advantage of the business planning resources offered by the SBA and its partners, such as SCORE, SBDCs (Small Business Development Centers) and WBCs (Women Business Centers).

Finding a lender
While Gaston acknowledged that applying for an SBA loan is a process, she said working with a lender that has experience can make that process a lot easier. To find experienced SBA lenders in your area, he suggested talking to folks locally in the market and looking for a lender that is part of the SBA’s Preferred Lender program. This program gives thousands of lenders per year delegated authority to approve loans based on certain criteria, shortening the time period between application and approval.

You can find SBA lenders by going online at sba.gov, contacting local accountants and attorneys, and looking for lenders with a large local presence. SBDCs also provide document support and lender referrals.

“The SBA program drives a tremendous amount of value in the economy, lending approximately $30 billion to small businesses annually,” Gaston said. “It takes businesses to the next level, is appropriately structured and enables them to be successful.”

Let’s Learn About Smart Budgeting Tips

If you run a small business, it’s likely that you’re operating on a relatively limited budget. Whether you bootstrapped your business or are trying to pay back loans you took out to cover your startup costs, it’s in your best interest to conserve money wherever you can.

Without a thorough budget plan, however, it can be difficult to track and manage your finances. This is especially true for any unexpected business expenses that may come up, as they often do. A 2015 survey by small business credit provider Headway Capital found that although 57 percent of small business owners anticipated growth this year, nearly 19 percent were concerned about how unexpected expenses would impact their business.

If you want to keep your business operating in the black, you’ll need to account for both fixed and unplanned costs, and then create — and stick to — a solid budget. Experts offered their advice for small business owners looking to keep their finances in order.

Define and understand your risks
Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Paul Cho, managing director of Headway Capital, said that small business owners need to consider their long- and short-term risks to accurately plan for their financial future.

“How will changes in minimum wage or health care requirements impact your workforce?” Cho said. “Do you operate in a geography at high risk of a natural disaster? Do you rely heavily on seasonal workers? Understanding the potential risks facing you on a short- and long-term basis is important for all small businesses. Once you’ve mapped out the threats to productivity, a clearer picture can be built around emergency planning, insurance needs, etc.”

Overestimate your expenses
If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can’t predict when something is going to go over budget.

“Every project seems to have a one-time cost that was never anticipated,” said James Ontra, CEO of presentation management company Shufflrr. “It usually is that one unique extra item [that is] necessary to the job, but [was] not anticipated when bidding the job.”

For this reason, Ontra advised budgeting slightly above your anticipated line-item costs, no matter what, so that if you do go over, you won’t be fully unprepared.

“I go by the cost-moon-stars theory,” he said. “If you think it will cost the moon, expect to pay the stars.”

Pay attention to your sales cycle
Many businesses go through busy and slow periods over the course of the year. If your company has an “off-season,” you’ll need to account for your expenses during that time. Cho also suggested using your slower periods to think of ways to plan ahead for your next sales boom.

“There is much to be learned from your sales cycles,” he said. “Use your downtime to ramp up your marketing efforts while preventing profit generation from screeching to a halt. In order to keep your company thriving and the revenue coming in, you will have to identify how to market to your customers in new and creative ways.”

Plan for large purchases carefully and early
Some large business expenses occur when you least expect them — a piece of equipment breaks and needs to be replaced or your delivery van needs a costly repair, for instance. However, planned expenses like store renovations or a new software system should be carefully timed and budgeted to avoid a huge financial burden on your business.

“Substantial business changes need to be timed carefully, balancing the risk with the reward and done with a full understanding of the financial landscape you’re operating within,” Cho told Business News Daily. “An up-to-date budget and data-driven financial projections are important components that help guide when to make large investments in your business.”

Remember that time is money, too
One of the biggest mistakes small businesses make is forgetting to incorporate their time into a budget plan. Ontra reminded business owners that time is money, especially when working with people who are paid for their time.

“Timing underestimation directly increases costs,” Ontra said. “For us, the biggest underestimation is allotting time for client feedback. It is a Herculean effort sometimes to meet a deadline with lots of people focused on a single task. Then, the client needs to give feedback for us to proceed. If the client is distracted with other issues, feedback planned for a three-day turnaround, can become a week or longer. Not only do you start to lose time to the delivery schedule, your team also loses momentum as their collective thought shifts focus to another project.”

Ontra recommended treating your time like your money, and set external deadlines later than when you think the project will actually be done.

“If you believe the project will finish on Friday, promise delivery on Monday,” he said. “So, if you finish on Friday, deliver the work early and become a star. If for some reason time runs over, deliver on Monday and you are still a success.”

Constantly revisit your budget
Your budget will never be static or consistent — it will change and evolve along with your business, and you’ll need to keep adjusting it based on your growth and profit patterns. Cho suggested revising your monthly and annual budgets regularly to get a clearer, updated picture of your business finances.

“Regularly revisiting your budget will help you better control financial decisions because you will know exactly what you can afford to spend versus how much you are projecting to make,” Cho said. “Take into account market trends from the previous year to help you determine what this year may look like. Once you have a clear understanding of your business’s budgetary needs, you can accurately forecast what can be set aside for an emergency fund or unexpected costs.”

All About Accounting

Accounting is vital to a strong company, keeping track of the business’s finances and its continued profitability. Without accounting, a business owner would not know what money was coming in or going out, or how to plan for the future. The actions taken by accounting professionals — from bookkeepers to certified public accountants (CPAs) — make it possible to monitor the company’s financial status and provide reports and projections that affect the organization’s decisions.

What do accountants do?
The American Accounting Association defines accounting as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.” This is often done by logging a business’s accounts payable, accounts receivable and other financial transactions, typically using accounting software.

While bookkeepers tend to focus on the details, recording transactions in an efficient and organized manner, they may or may not see the overall picture like accountants do, said CPA Stan Snyder.

“Accountants use the work done by bookkeepers to produce and analyze financial reports,” Snyder said. “Although accounting follows the same principles and rules as bookkeeping, an accountant can design a system that will capture all of the details necessary to satisfy the needs of the business — managerial, financial reporting, projection, analysis and tax reporting.”

One part of accounting focuses on presenting the company’s financial information in the required ways to those outside of the company. In order to present this information in a format everyone can understand, accountants follow a set of guidelines. In the United States, most accountants abide by the Generally Accepted Accounting Principles. There are different sets of accounting standards for companies that operate overseas, as well as for local and state government entities.

CPA Harold Averkamp said accounts also provide a company’s internal management team with the information it needs to keep the business financially healthy. Some of the information will originate from the recorded transactions, while some will consist of estimates and projections based on various assumptions, he said.

To come up with a company’s status and projections, accountants rely on various formulas. Accounting ratios help uncover conditions and trends that are difficult to find by inspecting individual components that make up the ratio. Accounting ratios are divided into five main categories:

Liquidity ratios measure the liquid assets of the company versus its liabilities.

Profitability ratios measure the organization’s ability to turn a profit after paying expenses.
Leverage ratios measure total debt versus total assets, and gauge equity.

Turnover ratios measure efficiency by comparing the cost of goods sold over a period of time against the amount of inventory that was on hand during that same time.
Market-value ratios measure the company’s economic status compared with others in the industry.

Accounting careers
Many accountants within the industry choose to become CPAs, a title they achieve by passing an exam and getting work experience. According to the Pennsylvania Institute of Certified Public Accountants, CPAs audit financial statements of public and private companies; serve as consultants in many areas, including tax, accounting and financial planning; and are well-respected strategic business advisors and decision-makers. Their roles range from accountants to controllers and from chief financial officers of Fortune 500 companies to advisors for small neighborhood businesses.

According to the University of North Carolina at Wilmington’s Career Center, there are countless other jobs that require accounting proficiency, including auditor, financial investment analyst, claims adjustor, loan administrator, tax lawyer, underwriter and stockbroker.

Best Tax Apps for Small Businesses

Although you know when tax season is coming, you may not always be prepared for it. If you’re a brand new business or have a limited budget, you may not be able to afford accountant, which means you may be stuck doing your taxes on your own.

Thankfully, with your smart phone or tablet — and the right apps — tax season doesn’t have to be a headache. Here are seven free mobile apps to help you stop stressing and start filing.

1. IRS2Go (iOS, Android)
This is the official mobile app of the IRS and is great for new business owners who want verified and expert tax advice right from the source. With IRS2Go, you can check the status of your federal income tax refund, make a payment on any taxes that you end up owing, and get free tax preparation assistance from an IRS Volunteer Income Tax Assistant in your area. You can also request tax return information and account transcripts through the app.

2. H&R Block Mobile (iOS, Android)
The H&R Block mobile app connects you directly to tax professionals to make the filing process easier. You can take a picture of your W-2 and the app will instantly import your information. You can upload any other documents and send them to a tax pro. The app can also created a personalized checklist of required documents, and lets you view tax returns from previous years. In addition, the app lets you check the status of your federal tax return, and estimate the amount of your return with a built-in calculator. If you are constantly switching between devices throughout your day, this app lets you go from your phone or tablet to your computer and back again with ease.

3. TurboTax (iOS, Android)
Intuit’s TurboTax walks you through the process of filing your taxes. You snap a photo of your tax documents and the app coaches you through every step of the filing process, double-checking to ensure that you have entered all information correctly. You can be connected with an expert live and on-screen to get answers as soon as you need them and when you input all of your information, it is saved with secure encryption and always password protected. TurboTax also checks for deductions and credits, and once your return arrives, it gets stored in the TurboTax Cloud. TurboTax is free to download, but there are costs for federal and state filing.

4. TaxCaster (iOS, Android, Windows Phone)
This income tax calculator by Intuit allows you to accurately forecast your federal income taxes before you file to see how much you may get back, or how much you may owe. Just enter the basic information about your lifestyle and business, and TaxCaster will make the estimations based on that information. Since this is an Intuit product, the app uses the same tax calculator you’ll find in the desktop version of TurboTax to provide the estimates. Based on the information you provide, it can also recommend a product to help you complete the filing process.

5. Shoeboxed (iOS, Android)
With Shoeboxed, keeping your receipts, bills, and other financial documents organized is as easy as taking a picture. Once you upload your document in the app, it automatically spots the important information, such as vendor, date, total and payment type. This then creates a fully searchable digital database of your transactions. For small business owners, Shoeboxed will pay off at tax time. The app can save you time and money by managing your paper documents for you, as opposed to needing to hire someone else to do it.

6. Evernote (iOS, Android, Windows Phone)
Evernote is more than just your run-of-the-mill note-taking tool. It also offers a way to manage the documents you’ll need to file your taxes. Because Evernote lets you easily store and organize images, you can scan in your receipts and then trash them, and since the app can read printed text, it’s easy to search for a specific receipt. To get your receipts into Evernote, there are two options: The ScanSnap scanner is the pricier option, but it is made by the Evernote developer, so it will directly scan high-quality images and automatically uploads them to your Evernote account. For a cheaper option, there is the DocScanner app for iOS and Android, which you can use to “scan” in receipts by snapping a photo with your smartphone or tablet.

7. iDonatedIt (iOS)
Charitable donations are tax-deductible expenses and can reduce your taxable income to ultimately lower your tax bill. Tracking your donations throughout the year can be a hassle, but apps like iDonatedIt are there to help. The app streamlines the process by helping you document your donations quickly and easily. Whenever you donate a non-cash item to charity, use the app to track the donation date, the charity you donated to and the fair-market value of the item. By tax day, you will have a complete and permanent record of donated items that meets IRS compliance requirements. You can also attach photos of donated items and email the detailed donation report to yourself, or an accountant.

Know More About Audited

For many businesses, the end of the calendar year means the beginning of tax season. As you prepare your receipts, invoices and other financial documents from the past 12 months, you may be concerned about the possibility of a dreaded tax audit.

As stressful and overwhelming as an audit may seem, there’s no need to panic. It does need to be taken seriously, but audits often deal with simple data or reporting errors that the IRS suspects may have occurred, said Frank Pohl, an attorney at Gunster law firm. He reminded business owners that not all tax audits end adversely for taxpayers.

If you do receive an audit notice, here’s what to do to make the process go as smoothly as possible, and to minimize any negative impact on your business. [See Related Story: 5 Tax Deductions That Could Get You Audited]

1. Review the audit letter carefully.
Open the letter promptly, and understand what information the IRS needs from you, Pohl said. If you don’t have a designated financial adviser, hire an accountant or tax attorney to help you go through the audit letter and identify the issues the IRS has flagged. Pohl also warned not to delay action or ignore the letter.

“The IRS will not go away, and not acting promptly may only make the auditor suspicious or antagonistic,” he said.

For security purposes, if you are being audited, you will receive a mailed letter, Pohl said. Scammers will often masquerade as the IRS by sending emails or leaving phone messages in an attempt to get your personal data, but the real IRS does not communicate with taxpayers in these ways, Pohl said.

2. Get your records organized.
Before you and your tax professional respond to the IRS and/or meet with an auditor, take the time to dig up and organize all of your business records from the past tax year, said Kimberly Foss, a certified financial planner (CFP) and author of “Wealthy by Design” (Greenleaf Book Group Press, 2013). This includes receipts and invoices for income and expenses, bank statements and canceled checks, accounting books and ledgers, hard copies of tax-prep data, and leases or titles for business property, she said. If the IRS has requested specific documents to review, be sure you have those readily accessible as well.

3. Answer the auditor’s questions (and that’s it).
When you sit down with the auditor, you’ll be asked numerous questions about the information reported on your tax return. Our expert sources agreed that you should not volunteer any information you are not required to give.

“Just respond with the information [that is] requested,” Pohl told Business News Daily. “Providing unneeded or unasked-for information may lead to more questions … and additional issues.”

“Be straightforward in responding to questions, but don’t manufacture excuses,” Foss added.

Similarly, an article on NOLO.com advises not to bring or discuss any documents from previous tax years unless asked: “Don’t give copies of other years’ tax returns to the auditor. In fact, don’t bring … any documents that do not pertain to the year under audit or were not specifically requested by the audit notice,” said the article.

Keeping your tax professional involved
Dealing with the IRS can be stressful, and if you’re concerned about what you might say, it’s wise to let your tax professional do the talking for you. Sandy Gohlke, a CPA, chartered global management accountant and principal at Rehmann financial services company, advised giving the IRS a signed power-of-attorney agreement that will allow the IRS to deal directly with your tax professional. That takes you out of the loop and puts them in, she said.

Pohl agreed, and said that even if your tax professional doesn’t have power of attorney, you should still have him or her present when you meet with an IRS auditor. He also advised business owners not to get defensive or hostile during the interview.

“The auditor … cannot and will not forgive and tax debt or mistakes, and any admissions you make can be used against you,” Pohl said. “Adopting an antagonistic attitude risks alienating the auditor, [which] will not be in your best interest.”

Avoiding future audits
Gohlke reminded business owners that audits are generally random, and you can’t prevent them entirely. However, some companies are selected because of certain “red flag” expenses — either amounts or types — that are out of the ordinary and would cause a second look, she said.

Foss noted that bank transfers and other financial records beyond your receipts should be tracked, and anything that can’t be explained on the standard IRS form should be explained on paper. She also advised double-checking all of your math before filing.

“Keep proper documentation, and only deduct ordinary and necessary business expenses that are allowed by the IRS,” Gohlke added. “Even if you are selected for an audit, you will know you have nothing to worry about.”