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Dear Penny: Can I Kick My Sister Out of the House We Inherited?

Dear Penny,
My mother died in 2006, leaving my father who could not very well take care of himself. My sister had been living in Hawaii, but costs of living there had grown and income opportunities had shrunk, so she moved in with my father in Oregon in 2008 to help him until he died in 2010. 

The house was left to the both of us in a trust. She has been living there rent-free for 11 years, covering the property taxes and repairs.

We are both living on our Social Security, which is tight for me, but impossible for her to live on, as steady employment was not her forte, and moving around a lot was. The house is worth somewhere between $400,000 and $500,000. Proceeds from the sale would split this between us. 

She keeps finding reasons that the house is not suitable for selling. This delay has moved us into rising real estate costs, meaning that she cannot afford anything with her half.

I have put down roots since buying my first home at the age of 23, so I now live in a paid-off home. She does not recognize my needs for the proceeds of selling the house. 

I love my sister, but I do not feel responsible for the fact that she has never acquired equity in anything in 70 years. She says, “This house is all I’ve got.”

I feel that I’ve been very patient for 11 years, but I’m feeling the financial squeeze of old age. I do not want my sister to be homeless and I don’t want to alienate her, but I am at a loss for what to do next.


Dear Sibling,

I don’t think your only two options here are to make your sister homeless or let her live rent-free forever. She would have $200,000 or $250,000 from her half of the home sale. Real estate prices may be out of control right now, but not so much that she couldn’t afford a modest one-bedroom apartment.

In a perfect world, you could do what’s called a cash-out refinancing. You’d receive your half of the equity as cash, while your sister would take on a mortgage for 50% of the home’s value.

“Most lenders would typically approve such financing to even borrowers with low credit scores and limited income or assets because 50% loan-to-value provides very low risk to the lender,”  said David Reischer, attorney and CEO of LegalAdvice.com who specializes in real estate and mortgage law.

The big problem, of course, is that your sister lives off what sounds like a meager Social Security income. She may not be able to afford even a small mortgage payment.

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The extreme approach is to her sister to court. “When a co-owner of a house wants to sell and the other person does not, most state laws allow the co-owner who wants to sell to force the sale of the house by petitioning the court for a sale,” Reischer said. “The court supervises the sale of the property, ending in division of the sale proceeds.”

This process can typically take anywhere from six to 12 months. Of course, the damage to your relationship could last forever.

Your sister has been living rent-free for 11 years. She has every reason to keep making excuses. She won’t give up this arrangement voluntarily.

I think you should let her know that you’re at least considering taking the matter to court if she won’t work with you. Tell her you really don’t want that to happen. But tell her that after 11 years, you’re afraid that may be your only option.

Try not to focus on your sister’s poor choices when you have this discussion. Focus instead on what you need, which is your half of the equity in the home your father left you both. Hold firm when she says the house is all she’s got. Perhaps that’s true. But she can also walk away with half the proceeds from selling a home in a red-hot real estate market. If she insists she’ll have nowhere to go, point her to some Zillow listings that would be within her budget.

Perhaps with some pressure, your sister will be more motivated to either sell or find a way to make a small mortgage payment. Could she rent out a room in the home for income? Or could she take a part-time job?

If your sister still refuses to budge, you’ll have to decide whether to actually take her to court. Ultimately, you’ll have to choose whether to sacrifice your relationship with your sister to get your stake in this home. I hope that’s a decision you won’t have to make.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Age at Home: How to Save Money on Senior Care


Many elderly people who require highly skilled nursing and watchful eyes around the clock have no choice but to live in a nursing facility. Others choose to move to one because of the socialization and ease of living with all meals and other services provided.

But most seniors would prefer to age in place, according to a 2018 AARP survey. It found 77% of Americans age 50 and older say they would like to remain in their current residence instead of moving somewhere else.

It’s not always possible, and certainly not easy to make this happen. Yet the benefits of a better adjusted, happier senior — along with saving thousands of dollars — make aging at home worth the effort.

How to Save Money Keeping Seniors at Home

Genworth, a Virginia-based provider of long-term care insurance, conducts an annual survey on the cost of care for retirees. The median price for one month in a private room in a nursing home in 2020 was $8,821. A semi-private room cost $7,756 a month. The average cost of a home health aide in the retiree’s home was $24 an hour.

With those daunting figures, family caregivers often think it makes sense to quit their jobs so they can devote themselves to caring for their seniors, and not pay for someone else to do the job.

Don’t do it, said financial journalist Jean Chatzky, who serves as an ambassador to AARP. She and others recently shared advice about caring for seniors during a webinar.

“The amount they would spend on care may be equal to the amount they would earn. But when you factor in all the other things, (such as) retirement contributions, Social Security credits, career trajectory, it makes sense to stay working,” Chatzky said.

Here are various options for keeping seniors in their homes and decreasing the costs of doing so.

Explore Adult Group Care Programs

Finding a great place for a senior to spend his or her days while a family member who’s also a caregiver works can enable the elder to stay in their home and the caregiver to stay employed.

Programs that provide group care for adults during the day can be the key to allowing a caregiver to continue working.

There is a range of options at various prices and levels of care where seniors can spend up to 10 hours a day with peers playing cognitive games, doing physical exercises, making crafts, having one or two meals and connecting with others.

To understand the benefits of a group day program for seniors versus a paid caregiver at home, consider the pros and cons of having a child in preschool versus at home with a nanny. The cost is less and there is more structure and socialization with a group.

There are several options for adult care programs outside the home:

A group of people play games at a non-profit senior daycare center at a church.

Not-For-Profit Group Adult Care

Some churches and other non-profit organizations offer adult care programs five days a week for the whole day. While churches have offered pre-school programs for children for more than a century, Edenton Street United Methodist Church in Raleigh, N.C., was one of the first to develop an adult care program for seniors in 1991. The Ruth Sheets Center now cares for 25 seniors a day and is licensed for up to 32 when COVID-19 limits are lifted.

Ten hours of care costs $71, or about $7 an hour.

The program, which operates in the church’s fellowship hall, accepts seniors with varying degrees of physical and cognitive abilities. It’s okay if they have Alzheimer’s disease, are in a wheelchair or need assistance going to the bathroom.

“We do cognitive activities throughout the day. It might be as simple as naming the states, which can lead to a variety of different conversations. They might get to one state where somebody used to live or they often visited so this turns into an off-shoot conversation,” said Matt Frazier, Sheets Center executive director. “The whole key is to try to get everyone involved, to spark the mind.”

A typical day at the Sheets Center includes exercising, cognitive games, crafts, morning and afternoon snack, hot lunch and rest time. A Licensed Practical Nurse is on duty to help with clients who are insulin dependent (this costs a little extra) as well as any emergency health issues for all clients. Everyone on staff knows CPR and is certified as a Clinical Nursing Assistant or Patient Care Assistant.

They all understand the importance of keeping clients engaged, not just putting them in front of a movie, Frazier said.

When seniors make Valentines to send to family and friends, a caregiver gets people talking about past relationships or special people in their lives. During a horse racing game, seniors name each of their handheld miniature horses and explain why they chose that name.

“If someone has experience riding horses, or we have a staff member who has a fear of horses they can tell their stores,” Frazier said. “We make sure socialization goes along with the competition.”

For-Profit Adult Day Programs

There are numerous for-profit adult day programs. One is SarahCare, which has a wide range of activities based on clients’ abilities, according to Marcia Jarrel, executive director of the Lake Boone Trail program in Raleigh.

“Care plans are developed with the family and staff to help create meaningful and appropriate activities,” she said.

SarahCare has day programs for seniors in California, Connecticut, Florida, Georgia, Idaho, Indiana, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania and Texas. Prices vary but generally range from $60 for a 4-hour half day to $85 for an 11-hour full day, which includes breakfast, lunch and a snack.

SarahCare offers a wide variety of group and individualized activities. Each client plans their own custom day, which can include technology tutoring, letter writing, painting, bowling and close to 100 other things to do.

It also gets the community involved. High school students come to play Chess or other activities and the seniors themselves may go out to children’s daycare programs to rock babies or roll a ball with toddlers.

If family caregivers at home can’t shower seniors, that’s an option at SarahCare for $21. Transportation costs $14 one way and $28 round trip.

Visit the National Association of Area Agencies on Aging to find local agencies that can direct you to adult care programs in your area and financial programs that might help pay for them.

A group of senior citizens play games.

Check Out Local Community Centers

Many cities and counties have one or several senior centers offering classes, events, meals, camaraderie and other services at little or even no charge. Family caregivers can drop off their senior for several hours to give the elder an interesting outing and the caregiver a little time away.

This can be a valuable supplement to care at home several times a week for limited periods, but most senior centers do not offer continuous care throughout the day. Some, however, do have day-long programs. Clients need to be in good physical health and able to to follow programs on their own.

Important: Don’t Call It Daycare

No matter what you find for your senior to enjoy during the day, it can be insulting to a senior to refer to it as “daycare,” a term associated with little children. Frazier said his clients’ families say things such as, “You are going to your program today,” “going to see friends,” “going to church” or simply: “It’s time for the Sheets Center.”

DIY At-Home Senior Care

When their mother fell and broke her shoulder at age 89 three years ago, sisters Lynn Ellen and Donna Warren started a tag-team in-home care program that has only increased as their parents in Raleigh have gotten older. Two years ago, their father suffered a liver abscess that went undiagnosed and caused damage to his heart, kidneys and liver.

When he came home from the hospital, the two sisters learned to administer his IV and care for his abscess.

Both parents are better now but at ages 92 and 95, their health is deteriorating. Still, their daughters make it possible for them to remain in their own home without paying for any outside aid.

Ellen is local, so she spends about every other day with her mother and dad. Warren lives two hours away in Virginia and comes for five-day stints every three weeks, bringing lots of meals each time.

“Fortunately, we are both retired, and our children are grown. We decided we wanted to do this for them as long as we can,” Ellen said. “We are saving a ton of money and it’s what our parents prefer (over) moving into a place. They would go through so much money there very quickly.”

They’ve brought in limited outside help that’s covered by Medicare while learning several techniques for making home care easier and more affordable.

  • Free IV class

“The hardest medical stuff we had to figure out was when Daddy got discharged from Duke University Hospital. We had to keep him on the IV for the antibiotics,” Ellen said. The hospital gave them a free class and they didn’t leave until they really knew what they were doing.

  • Free therapy

Ellen’s mom has wet macular degeneration and her sight is very limited. Medicare completely covers an occupational therapist to help her continue daily functions. The therapist put bright dots on the switches of the toaster oven, microwave and washing machine so that they can be more easily operated.

“Medicare also provides other visual aids such as special lighting and an eye patch. The occupational therapist comes once a week for two hours to help Mom learn to do these things on her own for when we aren’t there,” Ellen said.

Meanwhile, her father’s primary doctor thought physical therapy could help his patient regain strength and improve his mobility. A physical therapist evaluated the situation and came for several weeks to teach a routine of leg lifts and arm exercises. The evaluation and actual therapy were completely covered by Medicare.

  • Free remote for visually impaired

Through the occupational therapist, Ellen learned their local cable company would give them an oversized remote with large buttons so her mom can now turn the TV on and off and change the channels and volume. Even if she can’t see it well, she can listen and get it going for her husband, who has limited mobility.

  • Lift chair

Another thing that helped was adding a “lift chair” to the home. These chairs include various reclining positions and a remote control that lifts up the chair and tilts it forward to help people with mobility issues go from sitting to standing. Prices start around $300.

  • Bathroom remodel

When Ellen and Warren decided to keep their parents at home as long as possible, they realized they needed to remodel their bathroom to make the door big enough for a wheelchair and get rid of the 6-inch ledge at the base of the shower door. There was extensive work required such as moving a wall and reworking plumbing.

“We made it all one level, added grab-bars and a fold-down seat in the shower,” Ellen said. The job was more than they expected, around $14,000.

“That is a lot of money, but that’s what a retirement home might charge for two people for just one or two months,” she said. “We did this three years ago and it has made it so much easier for all of us.”


Look into Benefits for Veterans

The VA has a program called Veterans Aid and Attendance that provides a variety of services and money for veterans 65 and older who were honorably discharged.

Veterans with a net worth of no more than $129,094 may qualify for $2,170 or more per month toward the cost of several types of senior care, including nursing homes, memory care and adult day services.

Veterans who meet the above requirements are also eligible for financial help in modifying a bathroom so they can live at home with a disability or as they age. The lifetime benefit is $6,800 for eligible veterans with a service-connected disability, or $2,000 for veterans with non-service-connected disabilities.

Katherine Snow Smith is staff writer for The Penny Hoarder and author of Rules for the Southern Rulebreaker: Missteps & Lessons Learned.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Alliant to Modify Rewards on 2.5% Cashback Card


Beginning in July 2021, Alliant is changing its rewards structure on the Alliant Cashback Visa® Signature Credit Card. Alliant will offer cardholders a tiered rewards program that will impose new requirements in order to snag that solid 2.5% cash-back rate on purchases.

Here’s a look at what’s changing.

New rewards requirements

The new tiered rewards program will eliminate the card’s current $99 annual fee. After the July 2021 changes, the card will have a $0 annual fee.

Cardholders will be able to earn two different cash-back rates:

  • 2.5% cash back: You’ll earn this rate on up to $10,000 of eligible purchases per billing cycle if you maintain an average daily balance of $1,000 or more in an Alliant High-Rate Checking account for at least at two months of the third and fourth quarters in 2021 and for every quarter in 2022. Terms apply.

  • 1.5% cash back: This rate applies to all other purchases that don’t qualify for the elevated cash-back rate.

Previously, you weren’t required to have a checking account to earn 2.5% cash back. Cardholders can open the checking account online. The High-Rate Checking Account is free, it doesn’t charge any monthly maintenance fees. Plus, it earns a decent rate.

In addition to having the checking account, you’ll have to opt in for electronic statements and have at least one monthly deposit made into the account. Eligible deposits include direct deposits, payroll deposits, ATM deposits, mobile check deposits or transfers from other financial institutions.

Is it still a good deal?

The latest changes may offer a better deal for those who can afford to maintain $1,000 in Alliant’s High-Rate Checking account. You may have to complete a few extra steps to earn the 2.5% back, but you’re not required to pay an annual fee.

Cardholders also won’t be out of luck when they meet the card’s billing cycle spending limit. Before, if you met the cap, you stopped earning rewards. Now, you will earn a decent 1.5% cash-back rate ― that’s the gold standard among credit cards.

In addition to meeting the requirements mentioned above, membership will also be required to qualify for the Alliant Cashback Visa® Signature Credit Card. It’s easy to join if you can’t qualify through your place of employment or an eligible family member. You can become a member of Foster Care to Success,  and Alliant pays a $5 membership fee to this organization on your behalf.

What happens if I already have the Alliant Cashback Visa® Signature Credit Card card?

Current card holders will be automatically placed into the 2.5% rewards tier for the July, August and September 2021 billing cycles. You’ll still earn 2.5% cash back rewards on eligible purchases up to $10,000 per billing cycle.

In order to earn 2.5% rewards for the fourth quarter billing cycles of 2021, you’ll need to meet the new requirements of opening and maintaining an average daily balance of $1,000 or more in an Alliant High-Rate Checking account, in addition to making one eligible deposit per month.

Can You Get a No-Doc Business Loan?


Some lenders (typically online or alternative lenders) offer no-doc business loans. Tempting as it might be to get funding without all the paperwork, these loans often come with high interest rates and fast repayment terms.

Picking out the best small-business loan means more than just going with whichever option is most convenient. But if you’re short on time, have bad credit or are interested in a no-doc or low-doc business loan, make sure you understand all its costs — and the impact on your business’s cash flow — before borrowing.

Here are some types of financing that may require minimal paperwork, as well as more information about no-doc business loans.

Business loans with low documentation requirements

The unavoidable reality is that every business loan from a lender (rather than family, friends or individuals) requires some paperwork. What differs is how much of it and what kind of information you need to provide.

Here are some types of business loans that may be less paperwork-heavy. These aren’t necessarily true no-doc business loans, but they’re pretty close.

Unsecured short-term business loans

Unsecured short-term business loans don’t need collateral such as equipment or property. These loans tend to have less paperwork than secured loans and pay out faster. For example, online lender OnDeck requires basic business and owner information and three months of bank statements to apply for its short-term unsecured loans. Funds can be available the same day.

If you need a fast business loan, an unsecured loan may make sense. But be careful and confident in your ability to pay it back — short-term loans tend to have high interest rates and quick repayment terms. OnDeck’s maximum term is 36 months, for instance. You’ll likely need to provide a personal guarantee on an unsecured business loan as well, which creates additional personal liability.

Invoice factoring

Invoice factoring isn’t explicitly a loan, but it does provide businesses with money quickly and with minimal paperwork. With invoice factoring, you free up cash by selling unpaid customer invoices to a third-party company at a discount. Typically, you’ll get around 85%-90% of your money upfront, with the rest coming, minus fees, after the invoice is paid.

Invoice factoring can let B2B businesses access capital quickly and without the same kind of requirements as other types of small-business funding. For example, it can take minimal information and fewer than 10 minutes to apply with BlueVine. Once approved, the only documentation you need is the invoices you wish to factor, or you can sync with your accounting software to simplify things.

Equipment financing

Equipment financing is an option for businesses that need cash to finance a piece of equipment and may come with less paperwork than a term loan. Crest Capital, for example, doesn’t require documentation like tax returns or financial statements for borrowers financing equipment of $250,000 or less. The lender says its approval timeline can be as quick as the same day you apply.

Applicants for equipment financing provide lenders with the price of the equipment they’re borrowing money to buy. The lender then provides a lump-sum payment to the borrower upon approval and sets an interest rate and time frame by which the financing has to be paid off. There’s usually no need for a personal guarantee or collateral for equipment financing — what you’ve purchased serves this role.

Business credit card

Getting a small-business credit card does require documentation, but often much less than a business loan does. Well-qualified candidates — those with good-to-excellent personal credit (a FICO score of at least 690) and upstanding business credit — may get a near-instant approval, which makes this a potential option if you’re looking at no-doc business loans as a quick way to access capital.

Using a business credit card in lieu of a business loan can come with its own drawbacks, however. Cards are likely to come with lower spending limits and higher interest rates than traditional business financing. Expect to pay a variable APR of anywhere from 12% to 22%, depending on your creditworthiness, if you don’t choose a 0% intro APR business credit card.

Merchant cash advances

Merchant cash advances provide upfront funding that you repay with a portion of your credit or debit card sales. These advances require minimal paperwork, as you may be able to qualify with just a few months of your business’s credit card statements.

However, the APRs on these advances can hit triple digits, and repayment may be required daily. Consider all other forms of small-business financing before using a merchant cash advance.

What is a no-doc business loan?

Most business loan applications ask for a significant amount of personal and business data. A no-doc business loan reduces that requirement, which can lead to faster funding. Types of no-doc loans can include:

  • Actual no-doc loans. These loans don’t require documentation beyond basic information about you and your business to determine creditworthiness. No bank statements, tax returns or other financial records are needed to be approved.

  • Low-doc loans. These loans still don’t require in-depth financial statements like balance sheets and profit and loss statements, but you’ll need to provide a bit more information — like bank statements or daily credit card receipts.

  • Stated-income business loans. These loans are a variation of no-doc loans in which you include the income you derive from your business, but you don’t need to verify that number with supporting documentation.

Where to get a no-doc business loan

Some lenders require less information than others when deciding to loan your business money. To get a no-doc business loan, you’ll likely be limited to working with alternative online lenders.

To determine if an applicant makes for a good loan candidate, alternative lenders typically use technology to emphasize or analyze underwriting criteria differently than lenders like banks or credit unions. This can sometimes result in applicants being able to qualify with bad credit or needing to provide less documentation around things like their income.

Conventional lenders often set high requirements, both in terms of documentation and credit and financial history. For example, SBA loans can require a significant amount of information about the applicant’s personal and business finances — including three years of balance sheets, income tax returns and your loan application history.

The trade-off for that effort is a business loan that will likely offer a lower interest rate and more flexible repayment terms than no- or low-doc options.

What Is Bookkeeping? A Small-Business Owner’s Guide


One of the first challenges new business owners face is managing their business’s bookkeeping. Not only is solid bookkeeping required to file your tax returns each year, but it is also necessary to have the financial information you need to make sound business decisions.

Even with this inherent knowledge about the importance of bookkeeping, many business owners are still confused. What, exactly, is bookkeeping? What is the difference between bookkeeping and accounting? What goes into bookkeeping, and what should you expect from your bookkeeper?

Bookkeeping definition

Bookkeeping is broadly defined as the recording of financial transactions for a business. It is part of a business’s overall accounting process. Bookkeeping can be done as frequently as daily or as infrequently as once per year.

Modern bookkeeping was formally established in the late 15th century when Italian mathematician and Franciscan monk Luca Pacioli described double-entry bookkeeping in his book, Review of Arithmetic, Geometry, Ratio and Proportion.

That’s right: “Modern” bookkeeping is over 500 years old. And while the basics of accounting haven’t changed in over 500 years, the practice of bookkeeping has. Bookkeeping was once done manually using actual books called journals and ledgers. Because bookkeeping is based on double-entry accounting, transactions had to be recorded in two separate places (the journal and the ledger). The books then had to be balanced each month — known as a trial balance — before financial statements could be prepared.

In other words, bookkeeping for a business was a full-time job.

The advent of computerized accounting software significantly lessened the tediousness of bookkeeping. Technologies like optical character recognition (OCR) and bank feeds have come just short of fully automating the traditional bookkeeping process. Data entry can now happen as soon as you snap a photo of a receipt with your smartphone. And reconciliations happen almost in real-time through daily bank feed maintenance, making the end-of-month closing process a snap. Now one bookkeeper can manage the bookkeeping for several businesses in fewer than eight hours a day.

Accounting vs. bookkeeping

Many people use the terms bookkeeping and accounting interchangeably. Even though many bookkeepers today do fulfill some traditional accounting roles — like consulting clients on their finances — there is a difference between bookkeeping and accounting.

Bookkeeping is largely concerned with recordkeeping and data management. Bookkeepers make sure the information in the books is accurate and that the books are reconciled each month. In essence, they complete the first step in the accounting process.

Accountants, on the other hand, use the information provided by bookkeepers to summarize a business’s financial position and render financial advice to the business owner. Many accountants also prepare tax returns, independent audits and certified financial statements for lenders, potential buyers and investors.

Accountants typically have at least a bachelor’s degree in accounting, and many go on to become Certified Public Accountants (CPAs) or Certified Management Accountants (CMAs.) Bookkeepers might also have degrees in accounting, but most have either technical certifications or on-the-job experience.

Bookkeeping terms

Bookkeeping has its own language, and bookkeepers and accountants sometimes forget business owners might not be fluent in it. The following are some common accounting terms you will encounter when doing bookkeeping or working with a bookkeeper or accountant. This is by no means a comprehensive glossary, but a quick primer:

  • The accounting equation: The accounting equation is the key formula that keeps your books in balance. That equation is Assets = Liabilities + Equity. You can see the accounting equation in action in your business’s balance sheet.

  • Assets: What your business owns. Assets include cash, buildings, vehicles, patents and open invoices due from customers (accounts receivable), just to name a few.

  • Liabilities: What your business owes. Liabilities include credit card balances, amounts due to vendors (accounts payable), loan balances and tax liabilities that have not yet been paid.

  • Equity: What is owed to the owner or shareholders of the business. Equity includes money paid in by the owner (contributions), money the owner has earned but not taken from the business (retained earnings) and other types of contributions like stock issued.

  • General ledger: The general ledger is made up of assets, liabilities, equity, income and expenses. These five types of accounts comprise the books for your business.

  • Chart of accounts: The listing of categories you use to classify your business’s transactions. Think of the chart of accounts as a sort of filing system for your business’s transactions.

  • Debits and credits: Each bookkeeping transaction has two sides (remember, it’s called double-entry accounting). One side of the transaction is the debit side, and the other side is the credit side. Assets and expenses are increased by debits and reduced by credits. Income, equity and liabilities are increased by credits and reduced by debits.

  • Accrual basis and cash basisAccrual basis accounting recognizes income and expenses when they are incurred. Cash basis accounting recognizes income when payment is received and expenses when payment is made. Our accrual vs. cash basis accounting guide can provide more detail.

  • Reconciliation: The process of verifying the balance of certain accounts (checking, credit cards, loans, etc.) against statements from an outside source, usually a bank.

  • Income: Money your business earns through sales.

  • Expenses: Money your business spends on operations and overhead.

  • Cost of goods: Money your business spends to produce income.

  • Profit: What your business has earned after cost of goods and expenses are subtracted from income. Profit is not the same as cash on hand.

Common bookkeeping tasks

Bookkeeping means different things to different people. Some bookkeepers focus solely on “write up” work, which basically consists of compiling the books quickly, usually for tax preparation purposes. Other bookkeepers provide “full charge” services and can even serve as a financial controller for your company.

Full charge bookkeeping tasks can be broken down into four broad categories.

1. Data entry

Data entry involves entering your business’s transactions into your bookkeeping system. As mentioned above, a lot of the data entry now happens automatically, either through OCR or bank feeds.

There is more to data entry than just putting the numbers into your software, though. Proper data entry includes:

  • Source document verification: This is the step that usually gets skipped when doing your bookkeeping solely from bank feeds. Ideally, you want to make sure your data entry comes not from the bank feed, but from source documents like receipts or bills. This ensures that only valid business transactions are being entered into your books. Today’s bookkeeping software allows you to snap a photo of or scan in your source documents, and then OCR technology will extract the pertinent information and do much of the data entry for you. This means you can maintain source document verification while still taking advantage of the time-saving technology of your accounting software.

  • Accurate classification of transactions: Each entry into your bookkeeping system impacts at least two accounts in your business’s chart of accounts. Proper data entry — or data management if you rely on automation for your data entry — ensures that transactions are being posted to the correct accounts. Accurate classification of transactions enables you to produce financial management reports which can be used to make strategic business decisions.

  • Accurate identification of transactions: One of the downfalls of some bookkeeping software is that the artificial intelligence behind the software can make mistakes a human wouldn’t make while entering the data. The most common of these mistakes is assigning the wrong payee name to a transaction. You must make sure your transactions are being identified correctly. This is especially important for payments you make to vendors who will need a 1099 Form at the end of the tax year.

2. Office management

Often, office management tasks like customer billing, paying vendors and payroll are considered to be bookkeeping tasks. Although accounts receivable, accounts payable and payroll do impact your books, some of these tasks can be managed by a person in your company other than your bookkeeper.  Others — like payroll — can be outsourced to independent companies that specialize in the task.

If your bookkeeper bills your customers or pays your vendors and employees, make sure you have proper checks and balances in place to mitigate the possibility of fraud.

3. End of period closing

Your books should be closed at the end of each accounting period. End of period closing includes:

  • Reconciling all bank, credit card and loan accounts.

  • Reconciling accounts payable and accounts receivable.

  • Making any adjusting journal entries for prepaid revenue or expenses, depreciation or other unusual transactions.

  • Reviewing the financial statements for accuracy and completeness.

  • Locking the books so the books cannot be changed after the end of period closing has been completed (optional, but highly recommended).

4. Internal management reports

Only an accountant licensed to do so can prepare certified financial statements for lenders, buyers and investors. However, your bookkeeper can prepare internal management reports for your business.

There are three common internal management reports your bookkeeper can prepare for your business:

  1. Your balance sheet is a snapshot of what your assets, liabilities and equity as of a certain date. It is the accounting equation Assets = Liabilities + Equity in action for your business.

  2. Your income statement (also known as a profit and loss statement or P&L) details your business’s income and expenses for a period of time (a month, quarter, year, etc.). It shows whether your business has earned a profit or experienced a loss.

  3. Your cash flow statement reconciles the income statement to the balance sheet and answers the question, “Where did the cash go?” for accrual basis businesses.

The balance sheet and income statement can be prepared on either a cash basis or an accrual basis (the cash flow statement is always an accrual basis report). Although accrual basis statements are more accurate, many business owners find cash basis reports easier to understand.

Your bookkeeper might also prepare other auxiliary reports for your business, like accounts receivable and accounts payable aging reports. You can use these unaudited financial statements and auxiliary reports to make business decisions based on the information in your bookkeeping system, but they should not be presented as audited, certified or official financial statements.

It’s important to note that not all lenders and investors require certified or audited financial statements. However, it’s still a good idea to ask an accountant to review your bookkeeper’s financial statements for accuracy and completeness prior to submitting them to a third party for consideration. And even if you’re not looking for funding, consider asking an accountant to review your financial statements at least once a year.

A version of this article was first published on Fundera, a subsidiary of NerdWallet.


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