Accounting 101- Issue 21
Top Questions to Ask When Choosing a Business Accountant-
Many small business owners attempt to tackle their business finances alone through free resources online. This can be a costly mistake and lead to many errors and missed opportunities to improve the business finances. There are important questions to ask when considering to hire and work with a business accountant. Below are some questions a business owner should ask when considering working with a business accountant.
Top Questions to Ask When Choosing a
Business Accountant
Many small business owners attempt to tackle their business finances alone through free resources online. This can be a costly mistake and lead to many errors and missed opportunities to improve the business finances. There are important questions to ask when considering to hire and work with a business accountant. Below are some questions a business owner should ask when considering working with a business accountant.
1. What’s the best way to contact you and how often should we be in touch?
-It is important to be clear on how you can contact your business accountant and clearly define a schedule as to when that communication will take place. It is your business and you don’t want to work with someone that you can never get a hold of or never hear from.
2. How can you help me grow my business?
-Your business accountant should be able to tell you where the business is doing well and what areas are struggling. They also should be able to provide you with ideas to improve upon in the areas that are struggling. This requires ample communication from both sides.
3. How can you help me understand/manage my cash flow?
-Your business accountant should be able to help you understand the state of the business cash flows and present ideas for improving cash flows.
4. Can you help me review/negotiate contracts?
-A business accountant is more than likely not certified to practice law; this subject is probably better left to attorneys.
5. What experience do you have in your expertise?
-Understanding the amount of experience the business accountant has is critical in understanding the knowledge they bring to your small business.
6. What are the services and prices?
-Get clear on what services your business accountant provides and what the fees are. Do not make the mistake of assuming your business accountant provides services that you haven’t received clear confirmation that those services are provided.
7. How is your business performing?
-Your business accountant should be able to not only produce reports but also analyze the data to provide you with an analysis of how your small business is performing. This type of information will assist you greatly with meeting business goals, setting up budgets and planning for business growth.
Accounting 101- Issue 20
What Are My Business Expenses?-
When you start a small business that began as a hobby or a side hustle, it is very easy to confuse what constitutes a business expense and what doesn’t. For example, you may have a mobile phone that was originally your personal phone but with your small business it has become your only method of communication with your clients. It is all too common to mix your personal expenses and business expenses together when you are in the early stages of your business.
What Are My Business Expenses?
When you start a small business that began as a hobby or a side hustle, it is very easy to confuse what constitutes a business expense and what doesn’t. For example, you may have a mobile phone that was originally your personal phone but with your small business it has become your only method of communication with your clients. It is all too common to mix your personal expenses and business expenses together when you are in the early stages of your business.
There are some tips you can use as guides to make sure that you are treating your business expenses correctly. This process will lead to better business books and better management of your small business.
Business expenses are those expenses that are specifically for the business. They can be incurred to run the business itself or be a part of the product/service that is provided.
Business expenses should be paid for by the business with a bank account specifically for the business only.
Business expenses should be entered into the business financial system such as Quickbooks for proper bookkeeping.
Accurate tracking of business expenses ensure that income/loss for the business is calculated correctly.
Tracking your business expenses will allow you to understand what your mark-up should be on your product/service.
Evaluating business expenses and the tracking process should be done regularly to assure the following:
Proper bookkeeping
Need to decrease expenses
Need to increase prices on products/services.
Accounting 101- Issue 19
What type of accounting professional does my business need?-
There is much confusion over what type of services are offered by which type of accounting professional. The more common types of professionals that are used interchangeably are bookkeeper, accountant and tax accountant. While the services they each offer do build upon each other, they each offer their own type of services. Below is a list of services that each type of professional may offer. This will assist in deciding which type of professional you need based upon the needs of your business.
What type of accounting professional does my business need?
There is much confusion over what type of services are offered by which type of accounting professional. The more common types of professionals that are used interchangeably are bookkeeper, accountant and tax accountant. While the services they each offer do build upon each other, they each offer their own type of services. Below is a list of services that each type of professional may offer. This will assist in deciding which type of professional you need based upon the needs of your business.
Bookkeeper- A bookkeeper will record financial transactions for the business books. This person normally keeps the day to day and makes sure the transactions are kept in order. They may summarize data on financial reports. They lay the groundwork for accountants.
Accountant- An accountant will review, analyze and interpret the financial reports of the company. They can make sure the reports are following financial standards and requirements. They can act as advisors to business owners to assist in making informed business decisions. They can provide management, budgeting and forecasting services. They can provide both bookkeeping and accountant services. They work in conjunction with tax accountants.
Tax Accountants/CPA- A tax accountant/CPA (certified public accountant) will provide services to review financial reports and prepare taxes for the business. They can make sure that the business is compliant in regards to tax policies and requirements. A firm will be the business liaison for tax related matters with the tax government authorities such as the Internal Revenue Service. They will work with the business bookkeeper and/or accountant.
Keep in mind that an accounting firm may provide all three professional services above. A business may also choose to have a bookkeeper in house and outsource their accountant and only have a tax accountant once a year, at tax time. It is important that a business have an accountant and a tax accountant, as a business owner you want to know how your business is doing not just at tax time but throughout the year.
Accounting 101- Issue 18
Understanding Payment Terms-
When you have your own business, aside from providing your service to your clients, understanding when you will be paid is of utmost importance. In the early years of your business, cash flow can be difficult to manage and even more difficult to keep in the positive direction. If you can understand payment terms, you can better position yourself in the terms you offer your clients.
Understanding Payment Terms
When you have your own business, aside from providing your service to your clients, understanding when you will be paid is of utmost importance. In the early years of your business, cash flow can be difficult to manage and even more difficult to keep in the positive direction. If you can understand payment terms, you can better position yourself in the terms you offer your clients.
Payment terms are the conditions under which the seller will complete the sale. The terms specify the period the buyer is allowed to pay the amount due. The following is a list of payment terms and how they are used in business:
These terms enable a quick turnaround of cash back to your business. The terms you should use when you are at the beginning of your business and are trying to build positive cash flow.
N7- Net seven days, payment is due 7 days after invoice date
N10- Net ten days, payment is due 10 days after invoice date
PIA- Payment is due in advance, prior to the service being provided
Immediate- Payment is due immediately upon presentation of invoice
These terms can be offered once the business is stable in regards to its cash flow. Your business is now able to go longer between payments.
N30- Net thirty days, payment is due 30 days after invoice date
N45- Net forty-five days, payment is due 45 days after invoice date
Accounting 101- Issue 17
Understanding Your Business Profit-
As a small business owner, one of the most important goals especially in the early years is to create a profit. We have committed work, time, sweat and tears to our business, that creating a profit signifies that we have made it, our business is successful. Profit also allows us to continue to materialize our dreams of growth and changing lives with our passions.
Understanding Your Business Profit
As a small business owner, one of the most important goals especially in the early years is to create a profit. We have committed work, time, sweat and tears to our business, that creating a profit signifies that we have made it, our business is successful. Profit also allows us to continue to materialize our dreams of growth and changing lives with our passions.
The best way as an owner to understand profits within your business is to have an accurate profit & loss statement otherwise known as a P&L. The P&L will provide all the areas from which revenue is being generated. It will also provide the costs/expenses that are being incurred. This type of statement is usually best run monthly to be able to have details on a smaller scale and to be able to make changes as needed.
Here are tips to help you understand your P&L:
If your business provides multiple streams of income then you should have those broken up to show up that way on your statement. For example, if you are speaker/writer/coach. Then you should have Speaking Revenue, Book Revenue and Coaching Revenue.
Make sure your costs are detailed enough that you can understand what costs are related to which source of revenue or related to running the business. At the beginning of your business you may not need to be as detailed but as your business grows, don’t wait to make sure the detail is there.
There are direct costs in your business that are related to the product/service that you produce. Such as paying a publisher for your books that you will sell. There are indirect costs that exist to simply run your business. Such as the costs of phone bills for your business.
The purpose of the detail in both your revenue and costs is so that when you are analyzing your monthly report you know exactly the following:
Areas that are struggling in revenue.
Revenues that may be incorrect or not showing up at all.
Costs that are too high in one area or over a certain time period.
Numbers that may be erroneous.
Usually the revenue that is on your P&L is cash that will be received in the future. This will help you plan cash flow.
An accurate P&L will show if your business has made a profit/loss over a certain period of time. The accuracy is dependent upon the information that is inputted in the business financial system. A solid financial system is a must for any business success.
Accounting 101- Issue 16
Top Ways to Get Paid Faster-
In small businesses, there are many activities that need to work smoothly in order for the business to be successful. We need to make sure we create the product or service for our clients, ensure our vendors/suppliers are paid on time and collect the receivables from our clients for what was provided. Each of these areas entail a set of ways to come together in order for the activity itself to run smoothly.
Top Ways to Get Paid Faster
In small businesses, there are many activities that need to work smoothly in order for the business to be successful. We need to make sure we create the product or service for our clients, ensure our vendors/suppliers are paid on time and collect the receivables from our clients for what was provided. Each of these areas entail a set of ways to come together in order for the activity itself to run smoothly.
In the collection of receivables, there are ways that enables your business to receive the payments faster. Some of the ways to get paid faster in your business are as follows:
Ensure each invoice is accurate and contains the correct information.
Send invoices as soon as the product/service is provided.
Email invoices to your clients to ensure secure and quick delivery of the invoice.
Enable your clients to pay you via electronic bank transfer to ensure secure delivery and avoid the lag in snail mail.
Follow up with your clients once the invoice becomes past due.
Offer discounts in order for your clients to pay early.
By following the ways listed above, you are giving your business the best possible chance of not only receiving the payments faster but also keeping your business in a cash flow positive position.
Accounting 101- Issue 15
Automation In Accounting-
When you open a business, as an entrepreneur, we wear many hats in the beginning. As you start to piece your business together, you will find that two processes that will help help immensely in your business. Those processes are automation and delegation. Automation is when you set up processes in your business to run by themselves. Delegation is handing off tasks to others in the business.
Automation In Accounting
When you open a business, as an entrepreneur, we wear many hats in the beginning. As you start to piece your business together, you will find that there are two processes that will help immensely in your business. Those processes are automation and delegation. Automation is when you set up processes in your business to run by themselves. Delegation is handing off tasks to others in the business.
Delegation is harder to achieve especially at the beginning of the business when it’s only you in your business. However, automation is important to achieve so that you can concentrate on the more important tasks of your business. There are ways that an entrepreneur can use automation in accounting for their business. Below are ways that automation can be used when it comes to running the accounting for your business. These processes can be used within a business that has a financial system in place such as Quickbooks.
Sending an invoice automatically via email to your clients. Once a sale is made, an email address should be collected for all your clients so that you are able to automatically email the invoice to your client. This creates automation, saves time and assures the collection process begins quickly and smoothly.
Transactions that are processed in your books should be taking care of quickly and efficiently on a frequency that does not allow the transactions to build-up with out being tended to. This allows for the bank reconciliation to be automated with little work each month since all the leg work has already been completed throughout the month.
Vendors can be set-up to automatically be expensed to the same account each time a bill is processed so that there is little time spent on entering these invoices. This creates automation in processing these invoices.
Statements should be automated to email to your clients each month when there are past due balances so that collection efforts will be consistent.
Reports should be set up to automatically run and sent via email to you every month. This will automatically enable you to take a look at the company books on a frequent basis and keep you aware of any issues as they arise.
Accounting 101- Issue 14
Statement of Cash Flows-
One of the reports that are necessary to have and review in any business is a statement of cash flows (cash flow statement). Cash flow is very important in any business but even more so in small businesses. Small businesses tend to suffer from limited budgets and cash flow issues. Cash flows issues are more detrimental in small businesses and can mean the demise of the business. A cash flow statement is broken up into three sections: operating, investing and financing activities.
Statement of Cash Flows
One of the reports that are necessary to have and review in any business is a statement of cash flows (cash flow statement). Cash flow is very important in any business but even more so in small businesses. Small businesses tend to suffer from limited budgets and cash flow issues. Cash flows issues are more detrimental in small businesses and can mean the demise of the business. A cash flow statement is broken up into three sections: operating, investing and financing activities.
Operating activities- The inflow in this category include the revenues from selling product/services and any other cash receipts. The outflows in this category include payroll costs, payments to supplies/vendors, overhead costs, taxes of the business and any other operation-related payments.
Investing activities- The inflow in this category include sales of business assets, payments received from loans and any other sales not in the normal course of the business. The outflows in this category include loans made and purchases of capital equipments.
Financing activities- The inflow in this category include money that’s borrowed. The outflow in this category are payments for debt services and dividend payments.
When using an accounting system such as Quickbooks, the statement of cash flow will be automatically generated for your business. The first step is to understand what comprises the different sections of this type of statement. The second step is to analyze the information. The first key is to make sure that the business is having more cash inflows than outflows. The second key is to make sure that the cash from operating activities is more than the business net income. If it is less, then that is a red flag as to why the net income is not turning into cash.
Cash is king in small businesses. A small business owner needs to analyze the cash inflows and outflows frequently to make sure that cash flows does not become an issue. The statement of cash flows being run on a consistent basis will help assure that the company continues to remain cash positive.
Accounting 101- Issue 13
Chart of Accounts-
When a small business owner chooses an accounting system for their business, the next step is to select their chart of accounts. A chart of accounts is defined as a listing of your accounts that make up your general ledger for your business. These accounts are used to create your financial statements such as your balance sheet and your profit & loss statement.
Chart of Accounts
When a small business owner chooses an accounting system for their business, the next step is to select their chart of accounts. A chart of accounts is defined as a listing of your accounts that make up your general ledger for your business. These accounts are used to create your financial statements such as your balance sheet and your profit & loss statement.
Chart of accounts are usually pre-defined to a set of accounts in the accounting software chosen based on the business industry chosen. It’s important to understand that the accounts are a good foundation to start your books but by no means should that be the way your chart of accounts remain. Below are some helpful tips to keep in mind when creating and maintaining your chart of accounts.
Consistency is key to be able to compare reports from year to year, so when creating your chart of accounts, begin with the pre-defined set and add those you think apply to your business.
It is important to understand what kind of information you need from your reports. If you want to be able to tell what your profit margin is on your products or services specifically, then be sure to create your chart of accounts to be able to give you this information.
There are costs of producing your products or services and there are expenses of the business, to have this granular detail it is important to structure your chart of accounts accordingly.
It is also helpful to review your chart of accounts annually and see if any accounts are not being used or a particular account needs to be broken down in greater detail. For example, many books have a miscellaneous or other account, these accounts are not specific enough to be useful if they have large balances.
Accounting 101- Issue 12
Small Business Budgets-
A budget is an important aid that small business owners use to plan for a specified period of time and reveals what the business needs to make their business goals come to fruition. The advantages of having a budget provides a framework for the future, assists in cash flow management and assists in growing the small business. Below are some tips to help you understand having a small business budget.
Small Business Budgets
A budget is an important aid that small business owners use to plan for a specified period of time and reveals what the business needs to make their business goals come to fruition. The advantages of having a budget provides a framework for the future, assists in cash flow management and assists in growing the small business. Below are some tips to help you understand having a small business budget.
A budget is normally done on an annual basis but can also be done in smaller increments of time such as monthly or quarterly.
Research is key when planning your first business budget. Previous business results are helpful in planning budgets. As well as research on trends and the current market your business is in.
A budget is best kept simple especially when just beginning to put the first one together.
Focus on revenue and expenses at high level and become granular as budgets become more of a norm for the business.
A budget only serves a great purpose if it is compared to actual results on a timely basis such as monthly.
Investigate discrepancies when comparing actuals to budgeted projections.
A budget is a tool and should be used as such to help in achieving your business goals. If after comparing results, you need to change your budget, do so. The purpose of a budget is not to create a stopping point but rather a guide towards business success.
Accounting 101- Issue 11
Bank Reconciliations-
Each month a business needs to go through the process of performing a bank reconciliation. A bank reconciliation is a process to ensure that all of the transactions that were applied to a company’s cash account are correct and that all the transactions that are on the monthly bank statement are correct. A reconciliation needs to take place between the two, the cash account on the business books and the bank statement itself. Below are some tips to help you understand bank reconciliations.
Bank Reconciliations
Each month a business needs to go through the process of performing a bank reconciliation. A bank reconciliation is a process to ensure that all of the transactions that were applied to a company’s cash account are correct and that all the transactions that are on the monthly bank statement are correct. A reconciliation needs to take place between the two, the cash account on the business books and the bank statement itself. Below are some tips to help you understand bank reconciliations.
The deposits and payments should automatically clear and be correct as they should have been processed during the month.
Those that would be missing are deposits in transit and checks that have not cleared the bank account.
The types of transactions that would probably need to be entered from a bank statement are bank fees and interest income/expense.
This type of reconciliation process assures that those transactions that have cleared the bank are correctly processed in the accounting platform.
This type of reconciliation assists greatly in tracking of cash flows.
This type of reconciliation assists in the protection of the cash account against any fraudulent activities.
An accounting platform will be instrumental in processing bank reconciliations with ease and precision as it will have its own bank reconciliation function.
This reconciliation can also be done in Excel if the platform does not have a reconciliation feature.
Accounting 101- Issue 10
Cloud Based Accounting-
One of the features that has become increasingly popular in deciding which software to use for your business accounting needs is cloud based accounting. It is a feature that has become sought out with good reason. In a time where having your data easily accessible wherever is vital, cloud based accounting allows software programs to fill that need. Below are some features of cloud based accounting and how it works.
Cloud Based Accounting
One of the features that has become increasingly popular in deciding which software to use for your business accounting needs is cloud based accounting. It is a feature that has become sought out with good reason. In a time where having your data easily accessible wherever is vital, cloud based accounting allows software programs to fill that need. Below are some features of cloud based accounting and how it works.
1. Cloud based accounting is a feature that allows a business owner to access their accounting information from any device with an internet connection.
2. The accounting software is hosted on remote servers.
3. The data is sent into “the cloud” where it is processed and returned to the user of the software.
4. Allows for easier and quicker set up, usually a business can get started within minutes.
5. Having cloud based accounting allows for your accountant and tax accountant to access your books from their offices easily.
Accounting 101- Issue 9
What type of accounting professional does my business need?-
There is much confusion over what type of services are offered by which type of accounting professional. The more common types of professionals that are used interchangeably are bookkeeper, accountant and tax accountant. While the services they each offer do build upon each other, they each offer their own type of services. Below is a list of services that each type of professional may offer. This will assist in deciding which type of professional you need based upon the needs of your business.
What type of accounting professional does my business need?
There is much confusion over what type of services are offered by which type of accounting professional. The more common types of professionals that are used interchangeably are bookkeeper, accountant and tax accountant. While the services they each offer do build upon each other, they each offer their own type of services. Below is a list of services that each type of professional may offer. This will assist in deciding which type of professional you need based upon the needs of your business.
Bookkeeper- A bookkeeper will record financial transactions for the business books. This person normally keeps the day to day and makes sure the transactions are kept in order. They may summarize data on financial reports. They lay the groundwork for accountants.
Accountant- An accountant will review, analyze and interpret the financial reports of the company. They can make sure the reports are following financial standards and requirements. They can act as advisors to business owners to assist in making informed business decisions. They can provide management, budgeting and forecasting services. They can provide both bookkeeping and accountant services. They work in conjunction with tax accountants.
Tax Accountants/CPA- A tax accountant/CPA (certified public accountant) will provide services to review financial reports and prepare taxes for the business. They can make sure that the business is compliant in regards to tax policies and requirements. A firm will be the business liaison for tax related matters with the tax government authorities such as the Internal Revenue Service. They will work with the business bookkeeper and/or accountant.
Keep in mind that an accounting firm may provide all three professional services above. A business may also choose to have a bookkeeper in house and outsource their accountant and only have a tax accountant once a year, at tax time. It is important that a business have an accountant and a tax accountant, as a business owner you want to know how your business is doing not just at tax time but throughout the year.
Accounting 101-Issue 8
Accounting Year-End Preparation-
There are many steps that a business owner can take to help prepare themselves not only for year-end but the tax season that is fast-approaching. The tips provided below are to help business owners ensure that their books are in the best possible shape to end the year. It also helps your tax accountant process the business tax returns quickly and efficiently. Lastly, it saves the business owner time and money because the tax accountant will not need to spend extra time, charge more fees, on books that are unreconciled or incorrect.
Accounting Year-End Preparation
There are many steps that a business owner can take to help prepare themselves not only for year-end but the tax season that is fast-approaching. The tips provided below are to help business owners ensure that their books are in the best possible shape to end the year. It also helps your tax accountant process the business tax returns quickly and efficiently. Lastly, it saves the business owner time and money because the tax accountant will not need to spend extra time, charge more fees, on books that are unreconciled or incorrect.
Year-End Preparation Tips
1. Bank reconciliations should be up to date. Your balances in all your cash accounts should be valid and be substantiated. This also includes advance accounts, petty cash accounts and credit card accounts.
2. Go through both your accounts receivable and accounts payable reports. Make sure that both reports contain correct information. This is also necessary for proper planning in the new year as to when you can expect payments and when you will need to make vendor payments.
3. Update your fixed assets and process an entry for depreciation, you can discuss this entry with your tax accountant prior to making the entry.
4. Check to see if any amounts need to be reclass. Check to see if any bad debts need to be written off. Check to see if any outstanding check payments need to be voided and reissued in the following month.
5. If payroll is being processed, make sure all payroll taxes been paid that are due. Also make sure all payroll filings for the year have been completed. If 1099’s are being issued, make sure to have all the information needed to issue them in January.
6. Run a balance sheet and profit & loss statement, go through each account to make sure that these reports are validated and ready to be provided to your tax accountant.
Accounting 101-Issue 7
Small Business Accounting Software-
There are a few options to small business owners when it comes to choosing accounting software that will meet their business needs. Owners would need to assess the current state of the business and what the goals are for their business in the future. Owners would want to select software that not only meets their current needs but also allows for future growth without having to start again with a different software program in a short amount of time.
Small Business Accounting Software
There are a few options to small business owners when it comes to choosing accounting software that will meet their business needs. Owners would need to assess the current state of the business and what the goals are for their business in the future. Owners would want to select software that not only meets their current needs but also allows for future growth without having to start again with a different software program in a short amount of time.
It also isn’t unreasonable for a small business to change its software when they experience a significant growth or when new software is available that meets their business needs to a greater degree. Nevertheless, being well informed and prepared to make those software decisions will ensure that the business continues to run smoothly with minimal interruptions and expenses. Finally, utilizing a reputable, knowledgeable accounting business will ensure that your small business financials is in the best hands and the software is being used to the best of its ability.
Below is short list of the some of the top accounting software companies for those that are self-employed to those that have small businesses with inventory and payroll.
QuickBooks
Xero
Freshbooks
Sage 50c
Wave Accounting
Accounting 101-Issue 6
Top Questions to Ask When Choosing a Business Accountant-
Many small business owners attempt to tackle their business finances alone through free resources online. This can be a costly mistake and lead to many errors and missed opportunities to improve the business finances. There are important questions to ask when considering to hire and work with a business accountant.
Top Questions to Ask When Choosing a
Business Accountant
Many small business owners attempt to tackle their business finances alone through free resources online. This can be a costly mistake and lead to many errors and missed opportunities to improve the business finances. There are important questions to ask when considering to hire and work with a business accountant.
1. What’s the best way to contact you and how often should we be in touch?
-It is important to be clear on how you can contact your business accountant and clearly define a schedule as to when that communication will take place. It is your business and you don’t want to work with someone that you can never get a hold of or never hear from.
2. How can you help me grow my business?
-Your business accountant should be able to tell you where the business is doing well and what areas are struggling. They also should be able to provide you with ideas to improve upon the areas that are struggling. This requires ample communication from both sides.
3. How can you help me understand/manage my cash flow?
-Your business accountant should be able to help you understand the state of the business cash flows and present ideas for improving cash flows.
4. Can you help me review/negotiate contracts?
-A business accountant is more than likely not certified to practice law; this subject is probably better left to attorneys.
5. What experience do you have in your expertise?
-Understanding the amount of experience the business accountant has is critical in understanding the knowledge they bring to your small business.
6. What are the services and prices?
-Get clear on what services your business accountant provides and what the fees are. Do not make the mistake of assuming your business accountant provides services that you haven’t received clear confirmation that those services are provided.
7. How is your business performing?
-Your business accountant should be able to not only produce reports but also analyze the data to provide you with an analysis of how your small business is performing. This type of information will assist you greatly with meeting business goals, setting up budgets and planning for business growth.
Accounting 101-Issue 5
Managing Cash Flows for Small Business Owner-
Every business owner needs to manage their cash flows for their business. Cash flow is the total amount of money that flows in and out of your business. Cash is coming into the business when collection of accounts receivable takes place. Cash is going out of the company when payments to vendors are made or expenses are paid.
Managing Cash Flows for Small Business Owners
Every business owner needs to manage their cash flows for their business. Cash flow is the total amount of money that flows in and out of your business. Cash is coming into the business when collection of accounts receivable takes place. Cash is going out of the company when payments to vendors are made or expenses are paid.
A cash flow statement is an essential report a business owner should review frequently to assure that the company has positive cash flows. Positive cash flows are when more cash is coming into the business then going out. Negative cash flows are when the opposite happens, more cash is going out of the company than coming in. A company will not survive very long when it has negative cash flows. These are some ways to manage cash flows and keep the company in a positive cash flow position.
1. Collect open receivables as quickly as possible. Resolve any issues quickly after a customer has been invoiced and ask for payment as soon as services have been provided with customers that have past payment issues.
2. Offer discounts to customers who pay early or require down payments for service work.
3. Try to set up the longest payment terms with your supplies such as net 60 days or 90 days. Do however pay on time once terms are agreed upon, since late fees can be applicable.
4. Consider discounts offered by vendors for paying early.
5. Decrease expense whenever possible during cash slow months, forgo spending on business wants and focus just on business needs.
6. Research ways that can assist the company during times of cash flow issues such as a line of credit.
Accounting 101-Issue 4
Managing Accounts Receivable
There are steps to take when managing accounts receivable for your business to ensure that your invoices are being paid in a timely manner. The goal of an owner should be to ensure the timeframe from invoicing to payment is the shortest possible. Cash flow is very important in small businesses and managing your receivables is essential.
Managing Accounts Receivable
There are steps to take when managing accounts receivable for your business to ensure that your invoices are being paid in a timely manner. The goal of an owner should be to ensure the timeframe from invoicing to payment is the shortest possible. Cash flow is very important in small businesses and managing your receivables is essential.
1. Ensure that the bill-to information is accurate with the name, address and email of your client. This ensures that the invoice will be sent either by mail or email to the correct place. Any inaccuracies in this information will potentially significantly delay payment of the invoice due to the invoice getting lost in the mail or being sent to another email address.
2. Encourage your clients to provide their email address and name of the bill-to contact to allow you to send the invoice via email. This is the quickest method to send your invoice and removes the delay of snail mail.
3. Assure that the date of the invoice and the terms on the invoice are correct and match the agreement you have with your client. This is important because it assures you and your client both have the due dates correct of when the invoice should be paid. This also helps greatly with cash flow planning for your business.
4. Provide clear details on the invoice of what services were provided and the amounts. This should also match the agreement you have with your client. This eliminates confusion for both parties and potential delay of payment.
5. Provide clear details on payment instructions on the invoice itself. Make sure your mailing address for payments is easy to see and read. If possible, provide banking information to allow payments via ACH to further assist in receiving payments earlier. This removes the delay of snail mail.
Accounting 101-Issue 3
Accounting Reports Every Small Business Owner Should Have-
Small business owners should make themselves very familiar with certain reports for their business. This allows owners to not only see how the business is doing but also allow them to make changes and improvements along the way.
Accounting Reports Every Small Business Owner Should Have
Small business owners should make themselves very familiar with certain reports for their business. This allows owners to not only see how the business is doing but also allow them to make changes and improvements along the way.
Balance Sheet- This report is a rolling picture of the business’s financial position at a moment in time, normally at month end or year end. It shows the business’s assets, liabilities and owner’s equity.
Profit & Loss- This report is the most important to a business owner. It reveals if the business is achieving its profitability goal and generating an acceptable income. The profit & loss summarizes the revenues earned and expenses incurred over a specific period of time.
Statement of Cash Flows-Cash flows reveal the inflows and outflows of cash in a business. This report would reveal the cash produced by the business as well as any investing and financing activities that have taken place during an accounting period.
Accounts Receivable Aging- This report is a detailed presentation of all the accounts receivable that is open and outstanding, owed to the business. It is beneficial for controlling and limiting receivables from becoming aged longer than the accepted terms of payment.
Accounts Payable Aging-This report is a detailed presentation of all the accounts payable that is open and owed to outside vendors. It is beneficial for keeping track of what payables are owed and when they are due.
Accounting 101-Issue 2
PROFIT & LOSS ACCOUNTING TERMS-