As an engineer, you use math and science to tackle technical problems. Accounting and bookkeeping for your electrical engineering firm require the same diligence to solve financial planning and tax planning problems.
What Exactly Is Bookkeeping For Electrical Engineering Firms?
Bookkeeping for your electrical engineering firm encompasses many things, but the primary tasks are organizing and recording your company's financial transactions. Bookkeeping lets you monitor figures to determine if your business is profitable.
Monitoring numbers gives you the backbone to determine what moves to make, like if you should take on a new client or project or if the way they handle a project needs to be changed before it becomes a full-fledged crisis. Another thing to consider is bringing in a certified public accountant (CPA). Having a CPA for electrical engineering firms to help you with your bookkeeping will allow you to identify areas for financial expansion that you may not have noticed without having clear financial reports that you can easily understand.
Bookkeeping basics for your electrical engineering firm can include:
- Sending invoices
- Making payments
- Managing accounts
- Preparing financial statements
There are two methods a CPA can use to do your bookkeeping. The first is single-entry bookkeeping. This is where each transaction is input one time. If a customer pays you, you enter that sum in your asset column. This method works well for small electrical engineering firms that don't have cash transactions, don't store equipment, and don't hold inventory. Medium-sized electrical engineering firms may benefit more from using the double-entry accounting system. Many refer to this as Newton's third law of motion for finances. With a double-entry bookkeeping system, there are two entries for each transaction, a debit, and a credit. The debit is recorded on the left and the credit on the right.
Understanding Financial Reports For Electrical Engineering Firms
Looking at the flow of money in and out of your electrical engineering firm gives you a clearer picture of your company's financial health. Here are some areas your CPA with highlight to gauge your firms health and profitability:
- A balance sheet lays out the liabilities, equity, and assets your firm has in a single period.
- A profit-and-loss statement lays out business revenue, expenses, and costs over a set period.
- A cash flow statement is like your profit-and-loss statement, but it does not have non-cash items, such as depreciation. Cash flow statements help you see where your business is earning and spending money.
Keeping Up With New Tax Laws That Impact Tax Planning For Electrical Engineering Firms
The Tax Cuts and Jobs Act was signed into law in December 2017. This law has several provisions that will impact tax planning for electrical engineering firms. For example, this law places limits on the deduction of business interest. Many of these provisions impact the amount of and types of deductions your electrical engineering firm may make. Fortunately, our team of experienced accountants here at Fusion CPA are knowledgeable of all the tax laws that can impact your firm. We also offer industry-tailored services including CFO advisory for electrical engineering firms and tax planning for electrical engineering firms, bookkeeping, accounting and more. Our goal is to help you discover areas where you can improve and create a healthy financial future. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
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