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Accounting and bookkeeping are the key jobs in any business. Accounting is the systemic and complete recording of financial operations in a business. Business bookkeeping is the recording of financial dealings as a part of the accounting process.

Small business accounting errors range from minor errors to big accounting and bookkeeping errors which cause grave danger to the business. Accounting problems start with irregular bookkeeping and accounting. This will not give a true picture of the business and no good decisions can be made. Entrepreneurs/owners often do not realize that common small business accounting errors are a major threat to the growth of their business in the long run.

Here are some common accounting errors that actually damage the businesses.

NOT USING AN ACCOUNTING SOFTWARE

Manual work is always the toughest and is at risk for errors. A small accounting error can lead to big damage in businesses. Small and medium-sized businesses should use an appropriate accounting software according to the type of business they run. Cloud accounting is an emerging technique in accounting software and has its benefits in small to medium-sized businesses. 

Manual accounting is time-consuming and the chances of errors are much higher. While using an accounting software not only diminishes the chances of errors, the software also take much less time for accounting operations.

Choosing an appropriate software is an important and challenging step in business according to your needs. You should consider its cost, usability, and extra features when choosing a suitable software for your small business.

Features of an accounting software must include

  1. Inventory management
  2. Sales tracking
  3. Contacts management and contact history following
  4. Account to accept credit card payments
  5. Producing invoices
  6. Financial statements, cash flow statements, and balance sheet,
  7. Budget planning
  8. Payroll
  9. Taxation matters

INFREQUENT BOOKKEEPING

Bookkeeping and accounting statements must always be kept up to date in any business. Running behind in bookkeeping and submission of entries of the expenses or sales will not produce an up to date picture of the business and allow you to make timely decisions. It can lead to a negative balance if expenses are made but an income statement is not updated. Invoices that have not yet been paid by the company may go unnoticed and it can lead to a bad reputation for a company. It can end terms with your suppliers. Business growth is ceased or significantly reduced. Not producing financial statements monthly is common in small business accounting problems.

MIXING PERSONAL FINANCES WITH THE BUSINESS ACCOUNTS

  • Business owners combine their personal cash with business expenses. It is of utmost importance to keep the personal finances and the business finances separate. If these two finances are not isolated then it cannot be known what was planned for business and what was consumed personally. The amount of profit that was produced out of the invested capital cannot be assessed properly.
  • A business credit card is operated for personal expenditures during a holiday trip or other payments. Later on, this sum will be funded from the company’s income which is a bad idea.
  • During purchase orders for inventory of the company, procurements are also made for private use.

COVERING SMALL EXPENSES IN A BUSINESS OUT OF POCKET

Business owners take it upon themselves to pay small expenses for the business out of pocket as it saves their time. However, these expenses are not listed in the business bookkeeping. The business looks stronger in income when this accounting error is done. While in reality, the business is not that strong.

INTERESTS ON DEBTS FOR MANAGING PAYROLL

Small to medium-sized businesses get loans at the time of monthly payroll. The income of the business ends up paying back the loans with interests. Sometimes, the debts increase as well as the interest on those debts. Businesses, instead, can get the services of payroll companies to avoid heavy long term loans.

CONCLUSION

Small business accounting errors range from minor errors to big accounting and bookkeeping errors which cause grave danger to the business.Accounting problems start with irregular bookkeeping and not using accounting software.

Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

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Small business owners are often searching for cost-effective solutions to manage their business needs in an efficient manner. This is the sole reason why more and more businesses are now shifting towards QuickBooks Online to manage their accounting and bookkeeping needs effectively.

QuickBooks is an accounting software that is easy to setup and has a simple user interface. It keeps all of your data in one place and ensures smooth processing. You can create customized reports and export them onto other applications using the useful features of this bookkeeping software.

Though there are several training courses available online, most do not teach you how to create inventory assemblies – which is an important part of the QuickBooks online application that will help you ensure efficient management of your data. Though the concept is quite simple and the application helps you out in the process, it can still prove to be a complex task at times.

A Guide to Building Assemblies in QuickBooks Online

We have compiled a handy guide that will teach you how to build assemblies in QuickBooks Online. Before you start, make sure that you have formed detailed records of items that will be added to the assemblies. If there are any new items, you can add those later. However, it is best to add all items beforehand in order to ensure smooth processing.

We have listed all of the steps that will help you create a simple assembly. Several issues can arise when creating and selling builds. Therefore, if you plan on doing these frequently, you should consider taking a QuickBooks class to understand it more completely.

1. Click on the ‘Vendors’ menu and open the ‘Inventory Activities > Build Assemblies’. A dialogue box will pop up in front of you.

2. Click on the arrow next to the category labeled ‘Assembly Item’ and click on the option ‘<Add New>’. A ‘New Item’ box will appear displaying ‘Inventory Assembly’ as highlighted. Select ‘New Item’ and enter the ‘Item Name or Number’ in the field.

3. You will not yet be entering anything in the field of ‘Cost’, however, you can enter a description in the ‘Description’ category. Also, you need to make sure that you have chosen the right Cost of Goods account under the ‘COGS Account’ category.

4. Go down to the box below ‘Bill of Materials – BOM’. Click on the space underneath ‘Item’ and access the list of items present in your inventory by clicking the down arrow. Choose the first option in the assembly and fill up the ‘QTY – Quantity’ field. Go down to the next option and continue doing this process until you’ve entered all of the required information.

5. QuickBooks Online continues tallying the costs of the items present in your assembly, which is not the sales price and puts the total beneath the ‘Bills of Materials (BOM)’ box.

6. The ‘Asset Account’ must display the accurate information. You need to enter the number of new builds that need to be ordered in the ‘Build Point’ field. If you know the amount of builds you have in your hand, type that number in on the ‘On hand’ box. QuickBooks then calculates the total value of your current builds and presents the figure in the ‘Total Value’ box.

7. Once you are done with the above steps, you can scroll back up and issue a ‘Sales price’, which will be based on the cost along with the markup. When you are done, click on ‘Ok’. The screen that comes up after that will ask you the number of assemblies you want to build. Type in the number of assemblies you want to build and save the record.


Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.



 

 

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There is no denying the fact that cutting business expenses and controlling costs has become extremely challenging in today’s business environment. Modern trends indicate that companies need to reduce their expenses to effectively achieve their business goals and objectives. However, establishing control over your business and finances requires a large amount of motivation, knowledge, skills, and expertise. Why? Because only a clear-cut strategy and well laid-out plan can make cutting down your monthly expenses hassle-free.

Cutting business expenses? Not a problem!

Moreover, reduction in business expenses and an increase in revenue can have a big impact on a company’s profitability and are two ways by which companies can maximize their profitability index. According to industry experts, increasing sales and revenue is hard because it requires a lot of planning and strategy. It takes time and effort to come up with a brilliant execution plan. On the contrary, cutting business expenses is something that can be done easily, without much stress. All that it takes is a little bit of your time. Moreover, it is important to review your bookkeeping and accounting records to establish a clear picture of your company’s standing prior to making any solid decisions regarding controlling your costs.

Reduce Supply Expenses

If you expect to reduce supply expenses, you need to look outside of your pool of traditional vendors. Look for the vendors, manufacturers, or suppliers who can offer you the best price as large discounts help you cut business expenses and costs. Bulk purchasing is ideal in each and every sense. Always seek multiple bids to get ideal rates and never make a long-term contract for supplies with a single party or vendor as saving can have a big impact on your bottom line.

Lower Financial Expenses

Hiring an in-house accounting or auditing professional can be a costly decision. That’s why most businesses rely on external accounting agencies or individuals who offer competitive rates for their services. Cutting back on your business expenses means saving money on insurance and additional bills. To meet financial emergencies and consider a business expansion, you need to regularly contribute to your savings account. Lastly, don’t take on unnecessary debt to make ends meet because you may eventually find it hard to pay back the money you borrowed from the bank with interest. Prior to making such decisions, you must do a thorough cost-benefit analysis and future forecasting.

Take Advantage of Social Media Marketing

Traditional marketing can cost you a fortune. This indicates that you need to look at some cheaper alternatives like social media marketing such as Facebook, Twitter, and other similar dynamic platforms. You can build your customer base there, as studies have revealed that social media marketing is more effective than traditional marketing on the mainstream media, ultimately reducing your business expenses.

Try To Achieve Economies of Scale

By maximizing your productivity in manufacturing, you can expect to take your expenses to a minimum level. Improved R&D and market knowledge will help you achieve economies of scale, which is ideal for maximizing your profitability.

Review Your Finances and Business Books Quarterly

To get a clear picture of your finances and business condition, you need to review, maintain. and manage your business books, if not on monthly basis, then quarterly. Moreover, to cut business expenses, you need to audit your monthly subscription billing. Switch to the software applications or talent that are worth your investment and money.

Look For Affordable And Suitable Office Alternatives

You can always consider relocating your office to a more affordable area to cut business costs. Often times, in the age of digitalization, companies don’t need to have their office located in prime, expensive locations. You can move your office to a convenient location that offers affordable rates to reduce commercial rents.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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Creditor days is used for the purpose of calculating the days a company is required to pay all of their creditors, whereas debtor days measure the average amount of days it will take for a business to obtain all payments for the products or services they have sold. It can also be termed as accounts receivable days. Bookkeeping will provide all of the necessary and relevant information from which all of your accounts are formulated. 

Creditor Days

Creditor days is a way for a company to show its creditworthiness to its creditors and suppliers. These days are a way for the company to know how long their creditors and suppliers will wait for their payments to be made.

Within reason, a higher number of days will be better for the company. This is because all companies wish to conserve their cash. Still then, a business that is found to be especially slow in paying all of their bills (for example, taking 100 days or more), could be a company that has trouble generating cash. Maybe the company is having trouble financing its operations with their supplier’s funds. In the end, a business whose creditor days are in excess will eventually have trouble in obtaining their supplies.

Debtor Days

Debtor days is a way of indicating a business’s efficiency in collecting all of their money owed. In such cases, it will be beneficial for the company if their debtor days are lower. When the number of debtor days is high, it reflects on the company’s inefficiency. It may also point towards the company’s bad debts or doubtful sales figures.  

Different Ways to Reduce Creditor and Debtor Days

 

  1. Negotiate and Discuss Payment Terms and Conditions with Suppliers

You pick your suppliers based on your specific needs and requirements, whether it’s about price, quality of the product, or simply speed of delivery. In most cases, the payment terms and conditions are the last thing considered when selecting suppliers.

If you have built a good relationship and rapport with your suppliers, negotiating better payment terms should not be a problem for you.

 

  1. Offer Discounts and Concessions For Prompt or Early Repayment

If you use invoice finance in your business, you end up paying 3% for the first 40 days of the invoice, with 4.5% for 80 days. You could offer this discount to your clients in cases of payment upfront vs. delivery.

  1. Change Payment Conditions And Terms

Although the majority of businesses in their early lifecycle are found to be flexible in terms of their payment conditions, over time this leads to problems with working capital. Just as your client/supplier payment terms start to stretch, you might face difficulty running your business. New businesses start to apply short, new payment terms to all of their new clienteles they have on board. When they are confident that there is no such issue, they revisit their clients and change their terms and conditions. 

  1. Set Up Chasers, Automate Credit Control

With the introduction of cloud accounting, like Geniac and Xero, there are now several solutions available that help a business with automating timely reminders.  

  1. Credit Control Externally

Although automated credit chasers can be extremely helpful, credit control cannot be beaten. If you happen to have a bookkeeper who works part-time, you are likely to find out that you have lengthy debtor days. With the help of external credit control, you will not only have confidential, but quick results.

  1. Boost Stock Control

In order to reduce the necessity of working capital, a business must become effectual and efficient in their sales/purchasing cycle.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

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An extraordinary accountant is not only responsible for compliance and issues related to your taxes but steers you towards success by carefully analyzing data and offering you strategic insights into your key business decisions. Evolution in the technology front has given rise to big data, cloud computing, and many other tools that are transforming the accountancy services to full-time consultancy for many businesses. You may be thinking that this might not be the case for your small business, however, the progressions in the field allow you to benefit from their specialized services at a significantly low cost.

An Accountant – More than just Preparing your Taxes

Tech-savvy business owners today expect a lot more from their accounting professionals than just fixing their tax issues and keeping the books. They are constantly in touch with key personnel of their business through smartphones and other gadgets. They demand quick responses and solutions to existing problems and situations faced by the business. With the availability of advanced accounting software, accountants do not have to manually enter data, therefore, can emphasize on formulating business strategies and contribute to driving profitability. Here are some of the ways that an accountant can help grow your business.

Breaking it down

Apart from handling your taxes, accountants can help you identify those high-end customers who are not contributing significantly to your profit margins and, instead, are using a lot of your valuable resources. For example, you are a contractor and are able to win large contracts, however, you undervalue the project, leading to underbidding and cutting your margins. With the right person guiding you, you will be able to accurately estimate the cost of the project and bid so that your profitability is not compromised.

A similar approach can be applied to your products and services. An accountant would be able to identify the products and services that are putting a burden on the business and the ones that are outshining. Based on the numbers, you can make important decisions regarding continuing or making changes to certain products and services. Therefore, your taxes are not the only reason you should hire professional accounting services.

A reliable partner, driven by technology

When you are making key business decisions and sharing critical information about your business with someone, you are trusting that person to keep the information private and also help you along the way. With advancements in cloud computing, an accountant is able to monitor the given information at a minuscule level and manage it from anywhere and anytime at ease. Moreover, the data can be updated, along with a recommendation, from anywhere without the actual need to be physically present.

Any trends or inconsistencies in the data are easily traceable and the accounting professional would be able to tell you if it is just a bad patch because of poor market conditions or if there is something wrong internally. With all of that in mind, it is really up to you how you choose to use your accounting professional, as just someone who looks after your taxes or a trusted partner who can help your business be successful.

Leveraging your strengths for financial plans

Getting the most out of an accountant really depends on who you choose to be your partner and how the chemistry is between you two. Initially, you are solely responsible for all issues related to bookkeeping and other financial matters of your business.

As your business grows, you require the help of a trained professional who can collaborate with you to devise a consistent policy for recognizing revenue and leveraging it to come up with financial plans. This is an important step for the growth of your business because you need to show a constant revenue stream to attract potential investors and business partners. Accountants must be able to identify your strengths as well as weaknesses based on numbers and should be able to help you plan for the future.

Connecting operations with finance

Just like other professions, an accountant often limits themselves to finance and managing your taxes. However, a well-reputed accounting service will view all of your business operations in a circle, tied to each other. Marketing, sales, HR, and finance all work hand in hand. The hired accounting service must be able to provide thoughtful insights into all operations. This comes from experience and not everyone will be able to help your business in all departments.

Once an accounting firm falls prey to the assumption that their job is to only look after your taxes, it is really hard to shift the focus somewhere else. Therefore, before choosing your accountant, you must guarantee that they will be able to align with the goals of your business and offer a non-conventional approach to managing your business finances.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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Hiring a good accountant or bookkeeper is your secret weapon for faster growth and they can truly add real value to your business. Besides helping you to manage your accounts, they will help you grow your company with better financial decision making, employ legal tricks to minimize your tax bills, reduce accounting errors and save you a lot of time on admin.

Most MNCs (Multinational Corporations) have in-house accounting teams usually working around the clock all year to ensure that taxes and other corporate debt(s) are paid on time, salaries and bonuses are being disbursed, profit potential is evaluated, financial reports are created and balanced-out, and the growth is managed successfully. It is the job of a good accountant/bookkeeper to get things moving in the right direction, resolve all financial discrepancies, and make sensible monetary projections year-round.

On the contrary, small-scale businesses, are also now looking to hire the services of professional accountants because they know they can only grab a significant market share and survive in the competitive market if their financial equation is favorable. It doesn’t matter whether you’re in the initial phases of business creation or have an established business, the need for hiring a pro-level accountant never dies. Your accountant and/or bookkeeper is the backbone of your business and, undoubtedly, your secret weapon for faster growth. Any small-scale business with a sound game plan and business execution strategy can expect to reach the top in no time if the business has a good accountant to look after its financial operations.

Planning and Forecasting Your Cash Flow

Planning and forecasting prior to decision-making makes sense but, once you start to take a ride on the sinking boat, it isn’t helpful at all. Businesses—small or large, almost always strive to achieve a perfect balance in cash flow, especially when they structure the operations of business on a DIY accounting model. The influx and outflow of cash have to be maintained properly or else the lack of effective financial management can be fatal to the future of your business. On the other hand, a good accountant and bookkeeper can make your business move in the right direction and help you achieve faster growth. A professional accountant with superior bookkeeping services will help you in better financial decision-making which will allow you to succeed in a very short span of time.

Reduction in Taxes and Financial Discrepancies

Professional accountants and bookeepers have superior accounting knowledge, skills, and experience which helps them to stay on the top of cash flow, taxation rules and regulations. They know the tricks to handle tax-related issues and help you reduce them, up to a great extent. Hiring a good accountant is more of a need than a desire because, without them, you cannot expect to achieve faster growth or strategic goals. The theory of tax reduction is quite simple, the more relief you can claim, the more you save, the faster you grow.

Sharpen Your Focus

Obviously, hiring a professional bookkeeper allows you to focus on the core business operations, which ultimately sharpens your focus. Small-scale businesses usually do everything on their own—from conceptualization of ideas to business establishment to managing their finances. However, little do they know, they can help their business to achieve faster growth if they define a way to manage their finances well. For that, a good accountant or a professional bookkeeper seems like a fair choice as they help you with better decision-making, reduce accounting errors, and find financial discrepancies.

Compare Your Numbers with Industry Benchmarks

It is the duty of a good accountant to let their clients know about their current financial standing and what financial decisions they have to make if they expect to achieve faster growth and success. KPIs (Key Performance Indicators) are a good starting point to know whether you are performing better or worse and what possible measures you can take in order to keep the financial equation favorable. Comparing your numbers with industry-specific benchmarks helps accountants sketch a clear picture of your financial standing for suitable measures.

Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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A simple understanding of a profit and loss statement is the first thing an entrepreneur should be aware of. Many entrepreneurs do not actually take this into consideration for their start-up needs. No doubt, they are enthusiastic and passionate about what they are doing but understanding the need for accounts management and knowing where to begin is highly crucial. Having the relevant knowledge about this vital aspect of any business is a blessing and huge help. It makes the execution of business operations easier than one can imagine. A simple guide to a profit and loss statement is important and helps in understanding how to balance the accounts.

Importance of Financial Management

A business’s finance aspects are the reasons that it is able to cope with it’s activities. There are literally hundreds of entrepreneurs who overlook the importance of statements, indicating that their financial situation must be, in some ways, overseen. These matters can be addressed without the need of being a qualified certified professional accountant. These basics can really help in understanding how to better manage and effectively implement methods into a system. This simple guide about profit and loss statements contains some important key points to remember.

Profit And Loss Statement Basics

A profit and loss statement is a summary of the expense incurred and the revenue generated by a business. Usually, it is a financial tool that helps relevant professionals sum up the overall health and performance of a company. The keywords that are used here are revenue and expenses. The International Accounting Standards Board is responsible for all guidelines issued to the public. Global organizations, like FASB in the US, help it with setting policies and regulations. Due to the nature of different types of accounts for various types of organizations, jurisdictions, and practices, statements can differ. Usually, in the profit and loss statement, the summary is always included to sum the following information.

Revenue

The revenue contains all of the important information regarding inflow of cash, assets, etc. During a specific period of time, all recorded elements such as services, producing goods, or any other activities that have generated revenue are calculated. The gross revenue of any business, that sells a product or its services, is recorded in the statement.  It is an elemental part of the statement.

Expenses

The expenses are the records of any flow of cash going away from the business. As a fundamental part of a profit and loss statement, this can be all of the expenses endured to carry out its activities successfully and are represented in more ways than one, as mentioned below:

  • COGS (cost of goods sold): All costs that are related to its production. All goods sold, incurring any amount, are recorded here for accounting and bookkeeping purposes. This can include labor, material costs, overheads, etc.
  • SGA Costs (Selling, General, and Administrative): These are indirect costs incurred. In a simple guide for the non-technical, these are the costs borne by a business through proactively running it. These are all expenses undertaken, shown in the profit and loss statement, to sell goods, run showrooms or factories, or conduct manufacturing. Also, these costs are related to salaries, offices, utilities, insurance, equipment, suppliers, vendors, etc.

Depreciation

Depreciation is not the market value decrements, but it is the charge in regards to fixed assets which are capitalized on the balance sheet for specific accounting purposes.

Conclusion

It is note-worthy to point out that any business that has more expenses than revenue is headed towards trouble. A business that has more revenue than expenses heads towards success. From the above, entrepreneurs without an accounting background can easily get an idea about a profit and loss statement and its importance in the business. Trying to weigh a situation regarding a business’ financial position can be easily comprehended from understanding this vital tool of a business. Without understanding or reading statements, a business cannot even begin to take a direction nor can the entrepreneur, who invests much of their time and money into creating a sustainable business, be successful. If you are someone who has never viewed this financial tool, you are not alone. This is one of the most commonly occurring mistakes that one can do. It is important to understand the profit and loss statement like any other documentation in a business.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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It is essential for a fix and flip investor to implement maintainable and accessible systems that help in expanding their business and improve the number of revenues they are earning. Successful fixing and flipping businesses are made up of complicated processes. An important aspect of these complicated processes is related to accounting and bookkeeping.

Accounting for all of the expenses that take place is necessary to achieve success in this field of business. Reducing the overall tax on the business by providing accurate values and accounting shows the investors and other lenders that the business is running professionally.

Developing efficient accounting systems is not hard, especially with the technological advancements in the millennial age. Efficient accounting methods can be made easy by utilizing software and applications that are specifically made for accounting and bookkeeping purposes.

However, ensure that the accounting procedures are not complicated. Keep it as simple as possible while educating your employees who are responsible for accounting. They should know the handling of new technology that you introduce in your business or organization. Below are some ways to stay organized and things that you need to show to your accountant or bookkeeper at the end of the day.

1. Introducing and Developing an Effective Accounting System

The shoebox method is a process in which all the receipts and financial records are collected, stored and handed over to the accountant at the end of the year. This is a cost-effective method and is not very common in the millennial age. Some experts do not recommend this at all.

A more profitable and time-saving method would be to use software programs and applications that cater to accounting services. An example of an application is Expensify which allows the user to scan a receipt, enter the specific amount, categorize it accordingly and then save it into the cloud. It works somewhat similarly to the shoebox method, but it is much easier to maintain and simpler to use.

Regardless of whatever method you use for developing an effective accounting system, make sure that you include the following categories of transactions:

1- Acquisition costs

2- Rehab costs (The improvements made in the household)

3- Repairing costs of the household

4- The holding costs of a property

5- The selling price of the property

6- The selling costs

2. Types of Records that should be kept as a Backup

The laws of a state do not require the records of a fix and flip business, unless there are certain specifications. Any method of recording transactions can be opted for that clearly defines your income and expenses or any other expenses that might take place.

Keep a record of all of the tax assessment cards and maintain the HUD statements alongside all receipts that are inclusive of any transactions that may have taken place. Insurance documents should also be stored along with these in your bookkeeping records.

All external expenses that take place should also be recorded with the supporting documentation. The supporting documentation should show the amount that has been paid and the amount of money that was invested for a business expense.

The expenses documents include:

1- The checks that have been canceled

2- The tapes of the cash register

3- The statements of the accounts

4- The sales slips of all credit cards that have been used in the business

5- Invoices

6- The petty cash slips that are used for small cash payments

3. Decide Whether you are using Cash or Accrual Methods of Accounting

Decide whether you will opt for cash or accrual methods of accounting. The cash method defines the income recognized after the paycheck is received and expenses are recognized after they are paid. Many taxpayers use this method to get their returns.

The accrual method of accounting identifies the income and expenses when they incurred or earned instead of recognizing them after the check or payment is received. How does this imply to fix and flip investors?

When someone deals in a property, the IRS classifies him or her as dealers. This means that, for accounting, the house that the investor is dealing with is his/her inventory. The IRS will, therefore, require the use of the accrual method.

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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

 

 

 

 

 

 

 

CPA Certified Public Accountant written in notebook on white table
Accounting is most often controlled by a chief accountant; additionally, there is usually an assistant chief accountant and other ordinary accountants. Depending on the size of an organization and its workflow, these posts can be supplemented by others, such as an accountant-auditor and accountant-cashier.

Certified public accounting has generated an interesting, creative and well-paid profession. In most medium-sized organizations, the accounting system is the most important and is mainly divided into bookkeepers and accountants who are responsible for maintaining detailed operational registers. A certified public accountant of the highest qualification is able to decide how the courses should be reported, composed, and how to interpret it. A CPA is responsible for preparing a special assessment, developing and managing traffic information systems, and ensuring its accuracy. The accounting records of many organizations are evaluated by independent accountants and auditors. Bookkeeping is used by CPAs to keep detailed accounting records.

What You Should Pay Attention to in the Accounting Profession

A certified public accountant must be able to independently make decisions, have management experience, and maintain an accounting record in accordance with the criteria of the national legislature and corporate requirements. They should also be able to work with tax consultants and external audit counselors, interact with the business’s management to effectively solve the set of tasks, and much more.

What Does a CPA do?

After becoming a Certified Public Accountant, an accountant is given a higher privilege in the eyes of expert peers, regulators, business contacts, and potential clients. It is because of the fact that a CPA has met the requirements of education and has passed a very tough exam. The designation of a CPA comes under one of the most versatile and highly sought after qualifications of accounting and finance.

What Can a CPA do?

Public accounting consists of an extensive range of auditing, tax, and accounting. In addition to this, it also involves consulting tasks for small businesses, government organizations, and individuals. A proficient public accountant is capable of doing all of these tasks. Moreover, a CPA can perform two tasks that an ordinary accountant without a CPA license cannot:

  • A professional CPA is capable of preparing reviewed or audited economic statements and can file a report with the commission of securities and exchange. Every public organization has to file a reviewed and audited economic statement with the SEC.
  • An expert CPA is able to represent their clients in front of the Internal Revenue Service. However, an ordinary accountant that is a lawyer, an enrolled agent, or a registered agent for a retirement plan is also capable of representing clients.

CPA Firms

A certified public accountant (CPA) at a CPA firm works in one of the following three areas:

Tax Services

Tax services are comprised of filling and preparing state, federal, and local tax revenues as well as working with individuals and companies during the year to minimize tax obligations. A CPA organization can represent their customers in the case of an IRS audit or investigation by country or local tax authorities.

Auditing Services

Auditing services are said to be independent expert services that help improve the context and quality of both non- financial and financial data, especially for decision makers. The audit is an objective assessment of economic and financial data in order to make sure it is accurate and meeting criteria. For example, GAAP (generally accepted accounting principles).

Management Services

Management services are able to provide complete guidance and assistance for managing and supervising a day to day activity of an individual or organization. Management services also provide strategic and long-term planning. These services might include budgeting, management of cash, and economic planning that includes preparation of financial statements, risk and insurance management, and guidance for investment.

Most businesses, particularly big corporations, also seek the help of CPAs for filling the positions of accounting, especially management and other higher level positions.

CPA’s are Experts in the Following Areas

  • Financial reporting and accounting
  • Management accounting
  • Internal audits
  • Tax accounting

Additionally, CPA’s can work for the government by performing financial tasks and audits of government agencies. Moreover, another job opportunity for a CPA is with law enforcement organizations, helping in the investigation of financial offenses or other crimes which leave an economic trail.

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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Stock Market Graph next to a 1 dollar bill (showing former president Washington). Red trend line indicates the stock market recession period
One of the most important reasons that a company may understate its cost of goods sold is to increase its chances of short-term success in a given market. Short-term success can be attained by getting financing or impressing outsiders to finance the company. However, understating the cost of goods sold can be dangerous for the long-term survival of a company if authorities find the fraud. Moreover, understating the cost of goods sold are in direct opposition to bookkeeping standards and rules. The different reasons why a company would understate its cost of goods sold have been discussed below.

Increase in Income

In order to determine the gross profit of a company, the cost of goods sold is subtracted from revenues. The lower the cost of goods sold, the higher the gross profit. Consequently, lower cost of goods sold makes an organization look more effective and efficient. A company stating lower cost of goods sold can create the appearance of a more sustainable business model in a competitive market. A company looking to increase the figure of cost of goods sold may under represent the cost of goods sold to impress potential investors. However, this does not provide an accurate presentation of the balance sheet of an entity and, therefore, can bring legal trouble. Sure, a firm can increase its income by attracting more investors, but the investors and other authorities can sue the company if they find out that the cost of goods sold was understated.

Get Financing

Small businesses often need outside financing to survive and grow in the market. A lower cost of goods sold (COGS) and a more appealing balance sheet may be needed to impress a bank loan officer. Businesses may be tempted to understate their COGS in order to make their business model look more attractive and their profit more sustainable, making them better candidates for loans. A lower COGS makes the financial statements more attractive – at least until it comes time to pay taxes on the earnings. This may impress potential investors and analysts who look only at the documents and do not delve any deeper into the data. The analysis based on provided data – that is, understated cost of goods sold – can provide positive remarks regarding the performance and sustainability of an organization. Therefore, an investor can be convinced to invest their money into the company. Hence, some companies falsely understate the cost of goods sold in order to present their efficiency in the management of cost and achievement of higher profits.

Considerable Risk

Knowingly filing false financial statements puts a company, the signatory to the documents, and perhaps the business owner in legal jeopardy. State and federal agencies watch for irregularities in balance sheets and are increasingly focusing on the raw data used to compile those numbers. Fraudulently lowering the COGS, or altering anything on financial documents, carries considerable risk of fines, prison terms, or both. Even still, although understating cost of goods sold is illegal and risky, there are companies who do so to attract different stakeholders.

Legally Minimizing COGS

Companies can value their inventory in a way that legally minimizes the cost of goods sold, depending on the nature of their business. Using the first-in, first out (FIFO) method determines the COGS by using the costs of your oldest inventory first. Depending on what kind of business it is, this may or may not objectively be the optimum strategy. For example, a business that sells rare coins may have won a particular item for $100 at auction and later spent $1,000 to acquire another one. If the business then sells that coin for $900 as part of a promotion, the FIFO method would result in the company showing an $800 profit, taking the coin that cost $100 to acquire out of inventory. Using the last-in, first-out inventory value method would record the same transaction as a $100 loss by removing the $1,000 coin from inventory.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.