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In a business, you are involved in numerous activities that flow the money through your business. Fundamentally, you have money coming into small businesses and money going out of them. These money flows are referred to as transactions and they can be both positive as well as negative. To manage this money, every business needs an accountant/bookkeeper who can formulate an accounting primer specific to the needs of that business. It must be designed so that all the basics are laid out and everyone is on the same page about how to proceed with the objectives.

Small businesses usually rely on a person who is considerably good in a particular skill. If there are more than one partners, the person most skillful in the field may end up with managing that specific department. However, it has been observed that there is not a lot of accounting strength among entrepreneurs. Though, with persistence and an unblemished accounting primer, business owners can develop a financial understanding which can help them to manage current operations as well as future growth prospects. Here are some of the basics that are part of the primer for start-up businesses.

GAAP and Tax Basis for Small Businesses

After a lot of struggle and time, the accounting standard board has established generally accepted accounting standards (GAAP), which are responsible for the reliable reflection of business performance. It is different from the tax basis on grounds that the latter is more influenced by the government taxation laws. A newly developed business would not generally have specialties beyond filing a tax return. If that company needs a bank financing or enters into a deal with other businesses, it is probable that they would require your audited financial records. The records must conform to the GAAP in order to be approved by the involved parties.

Cash and Accrual Accounting Primer

When filing tax returns, small businesses must follow one of two methods in recording their revenues and expenses. Following the cash system of recording, any business would recognize a revenue when the check or money is received and similarly would record an expense when it goes out. The entry is made when the actual transaction takes place and not when the revenues are earned which is the case in the accrual system. Just like a construction firm would record the income at the time of work completion, even though they have not yet received the promised amount. Accrual method in the accounting primer is a preferable method as it portrays the accurate picture of business operations at any specific moment in time.

Small businesses usually opt for the cash method as it is manageable for them and also because it has a significant impact on the taxable income. However, if your business deals with a lot of inventory, it is better to opt for the accrual system of recording income and expense.

Direct and Indirect Costs

Direct costs are the expenses that are directly related to the manufacturing or procurement of a product or service while indirect costs are incurred anyhow, regardless of how you acquire the product and cannot be directly tied to it. The cost of buying all the components for a car plus direct labor costs can be termed as direct costs while rent, utility bills, and other similar costs are an indirect cost in the given scenario. This is an important concept to grasp for small businesses as they must be able to calculate the cost of making one additional unit. At the time of pricing your products, you would need to know all the costs associated with it and, therefore, an accounting primer must include all the information related to it.

Inventory Management

Keeping track of your resources and how you use them is an important element for businesses who desire to mark their presence in the market. There are two basic methods to keep track of your inventory which are called FIFO and LIFO. First in first out (FIFO) means that anything that’s stored first in the inventory should leave first and last in first out (LIFO) is just the opposite of that. Both methods have their own advantages and flaws, however, you may choose the one best suited to the needs of your business. The inventory price of some businesses fluctuate dramatically and using the right recording method becomes extremely critical. The accounting primer for small businesses advocates the need for consulting professional assistance in such volatile markets.

Depreciation

Depreciation accounts for all of the expenses occurred on fixed assets of a company. With time, machinery and other fixed assets of a business depreciate in value which needs to be recognized on the books in the form of a depreciation expense. Under law, it is compulsory for all businesses that meet certain standards to record the depreciation expense, however, small businesses are allowed to incur it immediately which can offer them tax relief.

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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Accounting and managing finances is probably the last thing a small business owner wants to think about.  If not done correctly, it can be time consuming and daunting.  The good news is that there are accounting tools on the market that now allow small business owners to manage their finances with ease and concentrate on different aspects of their business. Accounting software helps you manage cash flow, generates invoices, have an audit-ready business, and make preparation for tax time. These tools make handling your small business customers and expenses a breeze. Following are the top-rated accounting tools for small business which have proven helpful in managing your finances and bookkeeping functions in small businesses.

1. PDFConverter

PDFConverter will convert Microsoft Office, Open Office, Lotus and other documents to a PDF. The interface is intuitive and it only takes a few steps to convert a file. Not only can you turn your documents into a PDF, PDFConverter Elite can turn PDF documents into editable MS Office or Open Office file formats.  It is a reliable, inexpensive, and hassle-free way to manage the documents in your business.  Click here to see a detailed course specifically for accountants on how to manage your PDF Files.  


2. QuickBooks Online

QuickBooks is the bookkeeping and small business accounting tool used to handle accounting operations. QuickBooks is developed and marketed by Intuit. QuickBooks is used to:

  • Generate invoices with the logo of your company and with all details required by customers
  • Processing payrolls according to HR policies
  • Managing all business transactions, including bills from suppliers and vendors
  • Inventory management
  • Tracking expenses

QuickBooks can be accessed anytime, anywhere. QuickBooks is widely used by small business owners to simplify accounting operations and manage bookkeeping quickly. It is an affordable and easy to use software that can be easily learned and used by small business owners with no financial background. 


3. Freshbooks

Freshbooks is a well-known software used by small business owners, freelancers, and entrepreneurial agencies to handle accounting and bookkeeping processes. It is a user-friendly tool and is preferable for a service provider.

Following are the features of Freshbooks:

  • Generating invoices
  • Managing expenses
  • Accepting payments from customers
  • Generating automatic reminders for payments
  • Managing clients of each project with pricing
  • Stellar customer services


4. Xero

Xero is a great software with a wide range of features for small businesses. It is a good choice for online product sales. Xero has the following features:

  • Bookkeeping
  • Paperless management of expenses
  • Payment in 160 or more currencies with ability to convert and update exchange rates automatically
  • Generating invoices and quotations
  • Tracking and managing inventory
  • Generating purchase orders
  • Automatic reconciliation of accounts
  • A dashboard with bank balances, expenses, and invoices
  • Customized reports required by the small business
  • Tracking cash flow in real time
  • Graphical presentation of data
  • Data can be shared and accessible to accountant and others
  • Generating customized reports and reminders to customers
  • Scheduling of payments and returns

5. Zoho Books

Zoho Books is a good choice for both product sellers and service providers because of having CRM and time-tracking features. Bookkeeping is also available in Zoho Books.  They offer a free 14-day trial. Zoho offers a Client Portal where you can share recent transactions, expedite estimate approvals, accept bulk payments, and capture customer feedback.


6. Xporter Data Export Tool

Xporter isn’t specifically an accounting tool. It is used to export stored data to Excel file. Any kind of required reports can be generated and automatically emailed to desired contacts.  With Xporter, a user can export customers, orders, transactions, refunds, checkouts, countries, articles, blogs, draft orders, products and more from your shop.  They offer a 7-day free trial.


7. SimplyCost

SimplyCost is a simple and economical Shopify app used to create profit reports. It tells you the actual profit you are gaining from the sale of a product. It also keeps track of worth of inventory. SimplyCost saves you time by calculating profit of your sales. It takes into consideration discounts, refunds, shipping and taxes. You can add other cost in addition to your product cost to track your profit accurately. SimplyCost is $4.99/month with a 14-day free trial.  


8. Profiteer

Profiteer is another Shopify app. This is an app to track the cost of goods sold and variants. It is able to export a CSV report of the total value of inventory and profits as it does not integrate with accounting software directly. Currency fluctuations are also catered by this app and an accurate report of profit is generated for a specific period.  The price can range from $15-$30/month.


9. GoDaddy

GoDaddy makes bookkeeping simple. Everything is organized and in one place, without hours of data entry or tracking down receipts. Mobile access and time tracking are present. But, the payroll option is missing. It estimates quarterly taxes. Live support is also present in this small business accounting tool for it’s users.  There are several plan options available starting at $3.99/month and up.


10. Kashoo

Kashoo is an easy to use and manage software. Mobile access and time tracking are present. The payroll option is present in this small business accounting tool for small business owners.  This software company offers new users a free 14-day trial. With Kashoo, a user can send invoices, get paid in minutes, track expenses, and see their cash flow.  It is $29.95/month
for their Monthly Plan or $16.65/month for their Annual Plan.


11. OneUp

OneUp offers seamless invoicing, stress-free accounting, up-to-date inventory tracking, and simplified CRM reports. This software syncs with your bank, retrieves your transactions, and automates 95% of your accounting. Mobile access and inventory tracking are present. Live support is also available in this small business accounting tool.


12. AccountEdge

AccountEdge is for both online and desktop use. Mobile access, time tracking, and payroll options are present. It does not estimate quarterly taxes. Live support is available for it’s users. Command centers help you run and report on all aspects of your business: sales and invoicing, purchases, payroll, inventory, time billing, and more.  AccountEdge offers a 30-day free trial for new users.


13. Sage 50c Premium Accounting

Sage 50c is a well-rounded small business accounting tool. Mobile access, time tracking, and payroll options are present. It does not estimate quarterly taxes. Live support is available.  Office365 is now integrated with this software, providing access to essential apps and accurate financials any time and anywhere.  This software advertises itself as reliable, accessible, and flexible.  There are several plan options available.  

Connector Apps

Connector apps are used to connect and integrate accounting software. By integration apps, data can be transferred automatically from one application to another and to other partners. This is a time saving and easy to use application used to export all kinds of data related to tax matters, customers, and expenses on a single click.

These connector applications are for:

Conclusion

When getting ready to purchase accounting software, do your homework. Invest wisely in the purchase of a small business accounting tool according to the nature and volume of your business. The more specific requirements for a business also require an efficient and effective accounting software to manage finances and bookkeeping.

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.

Woman confused about her accounting information
Accounting information is the collected and stored particulars of the financial and accounting data of a business. It is used and processed by the internal users. An accounting system is generally computer based data. Accounting data usually comprises of much more that the financial statements, balance sheets and cash flow charts. It contains data of revenue, expenses, bookkeeping, customer information, data related to tax paid and due, and employee information. It also includes sales orders, purchase receipts, requisitions, invoices, ledgers and such financial statements of this type. 

Inventory is up to date in an accounting information system. Check registers that were previously made on old fashioned registers of paper are now maintained in computerized systems by installing special accounting data using specific software. Using this software makes data interpretation much easier to access and report.

As this accounting data is for company use only and it consists of customer and employee information and other sensitive data, they are highly secured. Security checks are maintained in the accounting information system and hackers and other external sources are prevented from accessing the data.

The data that an accounting information comprises is very important and it must be interpreted correctly. In the case of wrong interpretation, the company can go into loss. Because of this, entrepreneurs must know the basics of accounting data and its elements. They must fully understand their financial statements. While, of course, they can segregate the job to accountants and other personnel, the entrepreneurs must still understand the accounting information on their own. They should be able to access, interpret, and account for the information in both internal meetings and with the outside sources.

Financial mistakes pose an adverse risk to the growth of business and it can damage the reputation with the customers and suppliers.

Common Mistakes made in Interpretation of Accounting Information and How to Avoid Them 

1.  Business owners often mix their personal finances with business expenses. Keeping these two finances separate is of utmost importance. If these two finances (personal and business) are not segregated, it is impossible to know what was intended for business and what was used personally. The amount of profit that was generated out of invested capital cannot be estimated correctly if the two are intertwined.

2.  Entries are not done in time. Getting behind in bookkeeping and the submission of entries of expenses or sales will not yield an up to date picture of the business and will not allow you to make timely decisions. It can lead to a negative balance if the expenses are entered but the income statement is not updated. Invoices to be paid by the company may go unnoticed and it can lead to a bad reputation of the company. It can even end terms with suppliers. Business growth is halted or significantly reduced when you do not enter data in a proper amount of time.

3.  Not setting up a proper software that is needed by the company leads to faulty decision making. Further more, installing the wrong (more complicated than required or lacking crucial functions) software can lead to inappropriate data entry. Sound decisions are hard to make when your company lacks the proper accounting software that it needs.

4.  Failure to double check the reports and statements and, instead, just relying on checking the amount of net profit may lead to many errors or malfunctions in business. Accounting information software is just a tool to use. Decisions must be made after completely checking the reports and interpreting the data. Data interpretation is made by comparing financial statements with the cash flow statements and the balance sheets.

5. Keeping all receipts until all taxes are paid and an audit is conducted is must. Even after that time period, receipts are very important for matching data entries in registers or in software.

6. After a long day of work, there is more of a chance of mathematical or data entry mistakes. Stay focused. One mistake can lead to big errors.

7. Entrepreneurs and business owners must focus on the long term consequences of the decisions they make after getting a full picture of their accounting information. Short term decisions after interpretation of accounts data do not set the business up for long term benefits.  Always focus on the future and the bigger picture.

Conclusion

Correct interpretation of accounting information is the backbone any business. Specifically, focus on accurate bookkeeping practices and be sure to pay attention to every little detail so that you can take that information and make wise decisions for your company.

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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As a corporate proprietor, it is imperative to be involved in all aspects of your operation. Although, that doesn’t mean that you must be an expert at everything. Business holders may wear those strategic and customer-relations hats well, but many have a more difficult time with the accounting side of the business. Even worse, financial mistakes can truly exploit growth or adversely impact your bottom line. It can clog cash flow, attract undue attention from the IRS, or hurt reputations with suppliers, customers, and staff.

To avoid those situations, listed below are 10 accounting mistakes business owners are prone to making and the reasons why these errors can be so harmful.

1.    Falling Behind in Entries and Reconciliation

Time is definitely not on the side of the small business proprietor, especially when there may be daily fires to put out. Rapidly, months can pass without making any entries in the books or reconciling any business checking statements, credit card statements, sales tax accounts or other types of financial accounts. This means financial statements and reports are not current. Without up-to-date information, it is challenging to make sound business decisions.

2.   Struggling to Be Accounting Software Shrewd

In a rush to get the business set up, some business holders may not have spent the time to correctly learn the accounting software they have chosen. Not knowing what the bookkeeping software is capable of doing means you could certainly make a mistake or miss out on some powerful functionality. Not setting up a software system properly could also lead to unused reporting capability and incomplete information that results in bad business choices.

3.    Not Seeing the Reports for the Tools

Accounting is not just an instrument for entering financial data in order to achieve state and federal tax protocols or tell you how much money is in the bank. Instead, bookkeeping is a powerful mechanism that provides answers to questions connected to how a business owner’s tactical decisions are functioning or not functioning.

4.    Mixing Business and Personal Finances

One of the most common accounting mistakes business proprietors make is to mix their business and personal finances. Keep these separate and distinct to provide a more precise track record of what was really used for business and what was specifically related to personal use only.

5.    Throwing Away Receipts

Paper trails still count, but even those can become digitized. However receipts are kept, the point is that they need to be recollected. Receipts provide solutions to any mistakes or gaps in bookkeeping records and many offer supplementary deduction opportunities come tax time.

6.    Making Math Mistakes

In the haste to get the accounts done after a long day, math mistakes can happen quite effortlessly, even when you are using automated accounting solutions. Math mistakes can also result from posting entries to the wrong account or even just making typos.

7.    Concentrating Only on the Short Term

With the day-to-day matters of running a business, it is easy to preoccupy in the short term and completely forget about the future. Bookkeeping, though, is not just keeping track of today’s statistics. It’s also about estimating future growth and recognizing any financial risk from current financial decisions or results.

8.    Hiring the Wrong Person

The wrong person can create financial problems that go beyond just making uninformed resolutions. In reality, trying to save money or help a loved one out can truly lead to audits or penalties. Employing the wrong person can create issues that haunt your business for many years to come.

9.    Thinking Technology Is Always the Answer

Tossing money at technology does not guarantee accounting mistakes will be evaded. After all, you still need to make the technology work properly. Also, not all technology was generated equally or is relevant to a specific business.

10.   Not Letting Go

As a business proprietor, there are circumstances where not getting professional help is a major blunder. It is okay to confess that accounting may not be your area of expertise. You likely started a company with a great idea or solution that had nothing to do with accounting and that is where you should focus.

Conclusion

The financial side of running an industry can make or break your business. Learning when to use tools or professionals to help in areas you struggle with can be one of the biggest make or break decisions for a company.

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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BQE Core’s Usage of Overhead Multiplier

Company’s may calculate and change their overhead multiplier quarterly or yearly and they may also handle billing and time entry differently. Generally, the calculation of Bill Rate is done using the following formula.

Bill Rate = (Profit + Overhead Multiplier) x Direct Personnel Expense

While Overhead Multiplier is calculated using:

Overhead Multiplier = (Expenses in Total + Allowance for Doubtful Accounts) / (Direct Labor + Direct Expenses)

Certain government departments limit profit by not allowing the creation of any allowance for doubtful accounts. In light of your contracts and/or practice, Direct Labor costs are either incurred through salaries or direct personnel expense.

These calculations can also be done through the General Ledger, special accounts for Direct and Indirect Labor, and other data from bookkeeping. This uses a simple formula:

Overhead Multiplier = Sum of Indirect Expenses/Sum of Direct Labor

Things BQE Core and QuickBooks Users Should Know

If you are using QuickBooks as your business’s accounting software, while integrating with BQE Core, you need to ensure that you send the cost (in terms of time) to the correct accounts. Your activity codes should be mapped in order that direct and indirect time is easily distinguishable. Also, ensure that you separate Direct Expenses from Overheads. Again, Proper Mapping is highly recommended.

Activity Codes for overhead activities can be very different from the ones for direct project expenses. Furthermore, different Activity Codes are also needed for Indirect and Direct time.

In some cases, your firm may have employees who don’t enter their work times in BQE Core. These people have categories of activity, which are known as outside project. These categories are later summed up and included in the Indirect Labor account in the General Ledger. If you want to see information for each individual category, you can check it in the project reports you get.

The activity codes you set are key as the mapping that connects QuickBooks and BQE Core is highly dependent upon them. After the codes have been set up properly, the staff simply needs to enter their details in the activity that relates the most to their tasks. There is no need for them to have in-depth knowledge regarding mapping or accounting. Firms with smaller projects usually find the tasks related to activity codes pretty tedious.

Sometimes, companies need to distinguish between billable/non-billable and chargeable/non-chargeable expense and time. For example, an expense might be non-billable, however it can be still charged as an expense to a project since it would be in the cost of doing that project. The client might not be billed for it, but the identification of expense is necessary.

In BQE Core, you can select an option to assign a project to a particular ‘Overhead’ Contract Type. This option is utilized for some internal work, for example: office renovation or marketing.  The expense is treated like a regular project. Similarly, several small projects can use the same activity codes. You can exclude and delete the codes that aren’t relevant.

This is all done simply to allow you to breakdown the project into smaller, more manageable tasks, making it easier to put together and track your budget. It can be made even easier if everyone in your firm who collects a salary can enter time in BQE Core. This will give you a more accurate look at the hours and the corresponding costs that are required in running your project. It might be unusual for non-project employees to enter their hours in BQE Core, as it is project-centric software. You can also ask them to mark their off days on the next workday in order to process their payroll and track Paid Time Off. After all of that is done, to calculate Overhead Multiplier, simply do the following:

  1. Run Profit/Loss Report for the previous year (12 months) – Take the values of Total Expenses and Total Payroll Expenses
  2. Apply The Formula

Overhead Multiplier = Total Expenses / Payroll Expenses

This will give you a value which will denote the total expenses incurred per every dollar you pay in wages. BQE Core then calculates the default Cost Rate by multiplying Pay Rate for each employee by the Overhead Multiplier. The Cost Rate is used to derive the Cost Amount by being applied to the work hours. When you update the Overhead Multiplier (either quarterly or yearly), new time entries are subject to a recalculated cost rate.

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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Have you just entered the entrepreneurship world? If you’re scared of accounting operations (which who isn’t?!), dig right in and learn the most important aspects below. Remember, it’s the accounting operations that continue to cause the revolution of information, which turns the economy of the world up and down. As an entrepreneur, your aim is to have a higher return figure than the figure of the investment/capital used. The reasons that an entrepreneur needs to learn about accounting and finance is explained in the following three points:

1.  Making future predictions for the business

2.  Making effective time, cash, and energy commitments for customer attraction and delivery of efficient goods and services

3.  Measuring and reassessing the progress for a more profitable behavior, reporting positive progress for investors, and changing direction with critical evaluations.


Entrepreneurs that aspire to make a big mark in their field need to grasp the latest tools needed for their accounting operations and finances.  These vital accounting tools allow you to have:

  • A clear demonstration of the results of the company’s activity to time
  • Confidence in the future for bankruptcy prevention
  • Timely submissions of reports to municipal authorities
  • Monitoring all available possessions: material, labor and financial
  • Proper planning for company’s activity

Easy 8 steps to Accounting Basics for Entrepreneurs

1. BEST ACCOUNTING METHOD FOR SMALL BUSINESS

The first thing you need to figure out is your business accounting method for efficient bookkeeping.

There are two methods: cash and accrual. The primary difference lies in the recognition of economic events by a company.

In the accrual accounting method, it matters when money is earned and you record transactions regardless of the fact that your customer hasn’t paid yet. The business must use this method in the case when:

  1. There are sales of more than $5 million a year
  2. There are gross receipts of an inventory of items of $1 million a year
  3. The business is a publicly held corporation

In the cash method, you record transactions as they occur, when the cash changes hands. It is the best and the simplest method for starting with a small business.

2. KNOW WHAT KIND OF RECORDS TO KEEP

You should be well aware of the type of records that you need to keep.

Legal documentation. Trade licenses, permits, sale tax licenses, DBA certificate, or any other documents which are legally significant for company activity. These documents should be stored somewhere safe and be kept accurate and up to date. The location of both online and offline documentation should be known.

Supporting financial documentation:  Source documents are of great worth for a company because all bookkeeping operations are based on them. Supporting financial documents include contracts with counterparts, receipts, payrolls, cash registers cash, and several other documents associated with the business area.

3. PROPER RECORD KEEPING

Transactions, sales, and profits should be maintained properly. Records of outgoing and incoming payment, funds movement, paychecks of employees, liabilities, taxes, overhead expenses, and operating costs should be maintained. Documentation of cash that comes in in the shape of costs for the digit of material, products, and services you sell and when should all be properly kept.

4.   DOCUMENTS MANAGEMENT

All documentation of an entrepreneur should be well organized to reduce mistakes. Bookkeeping should be updated and arranged.  Common rule of thumb is that you can never document “too much”.

5. SEPARATE BUSINESS ACCOUNT

Personal and business accounts must be separate to have a better awareness of business expenses and taxes.  When the two are mixed, it is very hard to discern between what are personal income/expenses and what are business income/expenses.

6. BALANCE SHEET

To determine the financial health of a business, a balance sheet is a must. It provides information of assets, liabilities, and equity.

 

7. SELECT ACCOUNTING SOFTWARE

Every entrepreneur should have accounting operations software to manage more effectively and efficiently. Software for small business are available online and are truly catered to each and every business out there.

8. ACQUIRE PROFESSIONAL ACCOUNTING ADVICE

Take support from a professional accountant and bookkeeper for the best bookkeeping practices. They will guide your business to control transactions and recommend changes for better growth. They are also responsible for setting company establishment. For building a better understanding of transactions, a well-oiled bookkeeping system is a must.

CONCLUSION

It is vital for entrepreneurs to have, at least, a basic understanding of the accounting and financial practices of their business.  Whether your bookkeeping is outsourced or done in-house, it is crucial that effective financial management is practiced to ensure the success of your 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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Accounting and bookkeeping are the key functions in any business. Small businesses face challenges in accounting and bookkeeping procedures. Accounting is the systemic and comprehensive recording of financial operations in a business. Business bookkeeping is the recording of financial transactions as a part of the accounting process.

Entrepreneurs and business owners often do not see that common small business accounting mistakes are a major threat to the growth of their business in the long run.

Biggest Bookkeeping Challenges For Small Businesses

Not Using the Best Accounting Software

Choosing the correct software is among the biggest accounting challenges that small businesses can face. An important and challenging step in business is to choose the proper software per your business needs. Consider it’s cost, usability, and extra features when choosing a suitable bookkeeping software for your small business.

Features of an accounting software must include:

  • Inventory management
  • Sales tracking
  • Contacts management and contact history tracking
  • Account to accept credit card payments
  • Generating invoices
  • Financial statements, cash flow statements and balance sheet
  • Budget planning
  • Payrolls
  • Taxation matters

The cost of an accounting software is an important issue to consider. First, plan out your business needs and finances. Purchasing a costly software with highly-advanced features will not help your small business if you do not need these expensive features. A small business owner can plan to purchase an accounting software by providing a full payment at once or they have the option to make payments in installments or monthly payments. Plan to purchase the software that suits your business finances the best.

Financials are Incorrect

Incorrect financials is a threatening accounting problem in your business. If your financials are incorrect, it may sink your funding round in your business.

Any error in your financial statements leads to big loss. Business bookkeeping and other business operations will go into a mess if you do not keep your financial data up to date. Your accounting statements must be clear and transparent. Income and expense statements must be precise and related to the cash flow and balance sheet. Delayed data entry is a big risk of frauds and thefts.

Financials are not Produced Monthly

In a small business, it is often thought that it is okay to produce financials on a quarterly or bi-annual basis. However, monthly financials show investors that you are closely monitoring your business.

It can lead to negative balance if expenses are made but no income statement is updated. Invoices to be paid by the company may go unnoticed and it can put a bad reputation on a company. It can end terms with the suppliers. Business growth is halted or significantly reduced.

Business Owners mix Personal Finances with their Business Account

If you mix your personal and business finances, you cannot correctly estimate how much profit was generated out of your invested capital.  For example, if a business credit card is utilized for personal expenses during a trip or dinner, later on, this amount could be paid from the company’s income.


Covering Small Expenses out of Pocket without Recording

Paying  for business expenses out of your own pocket will eventually make your company look stronger in income than it actually is. It is extremely important to record everything so that you have a true picture of where your company stands financially.

Starting New Projects and Ideas without a Clear Budget

If you start a new project in your business without planning for it, you can easily run short of your budget for other business operations. You may have to quit the project in the middle if you don’t get the loan or find other investors. It’s important to always plan ahead before making big moves.  

Not Using Accounting Software or Cloud Technology

Failure to set up the correct software needed by your company leads to poor decision making. Installing the wrong (more complicated than required or lacking crucial functions) software can lead to more complexity in accounting. Accounting software prevents accounting and bookkeeping errors. Many software come with guided help boxes to make an accounting process easier to interpret. Inventory control tools are provided in software. Tax matters are made easier using accounting software.

Poor Interpretation of Accounting Information

Accounting information software is only a tool to use. Decisions must be made after completely checking the reports and interpreting the data. Data interpretation is made by comparing financial statements with the cash flow statements and balance sheets. This interpretation can be complex and hard to understand, therefore hiring a bookkeeping service may be ideal.

Entrepreneurs and business owners must focus on the long-term consequences of decisions they make after getting the full picture of accounting information. Making short term decisions after interpretation of accounts data does not provide the business with any long term benefits.


Conclusion

Small businesses face the biggest accounting challenges. Either they are running short on resources to keep an up to date accounting and bookkeeping picture or they are not using the correct software for their accounting. From choosing a proper accounting software to managing accounting tasks correctly as well as keeping them up to date are among the biggest accounting challenges that small businesses face.

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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The financial systems of the yesteryear are gone. With financial technology becoming easily available and the technological revolution, there are plenty out there. Fintech is making pathways for professionals like accountants and bookkeepers who have massive amounts of paperwork to deal with. With the web evolved and technology galore, traditional financial systems are biting the dust. Not just due to the advancement of systems and technologies but from obsolete physical systems that pose a danger to security and reliability as opposed to digital systems. These systems are heavily undermined as they cannot take advantage of innovations in the digital world. An accounting department filing cabinet is one of those systems.

An accountant is a professional that deals with taxation which makes it legislatively important, for starters. They also help with portraying the financial health of a business and evaluate credit worthiness. Measuring, processing, and coordinating financial information of economic entities is called accounting. It is the summation of an organization’s activities related to economics and uses information related for users such as creditors, investors, management and regulating authorities. The scope of this field is vast and, due to its broad usage, tax accounting and auditing are also a part of it. An accounting department filing cabinet is part of it’s processing and practices.

The Evolution of Accounting

Accounting is centuries old so it is not hard to understand the need for standards and regulations in this vast field. The 21st century practices differ from the last century due to the formation of bodies and other authorities that govern the laws of accounting such as GAAP or IFRS. Having been around for so long, the accounting profession is desperately in need of an upgrade to better fit into the digital era. For classification needs, an accountant needs to record all particular asset details and information.

Like the accounting department filing cabinet, all records are known to the accountant and where they are stored. Like skeuomorphism, where models are made to depict real-time objects that are imitated, using century-old methods like cabinet systems pulls down the potential of an organization, thus making a profound impact that generally allows competitors to move ahead. The physical attributes are such as the cabinet versus digital filing.

Depending on the requirements of an organization, the cabinet holds information that is vital for the progress of the business which leads to growth and development. In a physical system, such as an accounting department filing cabinet, it is crucial to know where the information lies, which folder has it, which section it underlies, etc. Anyone who is assigned that task will be grateful and appreciative of how the data is stored, retrieved, managed and organized. There are many fields where data can be stored under categorization like copying papers and placing them in various places for ready reference but this practice is wild as workloads grow and paper management becomes a curse.

To allow more freedom and ease in life, accountants use a prescribed system of account classification such as billing, costs, expenditures, and physical goods that help them acquire information readily unlike the accounting department filing cabinet.

The digital era of our modern world has various concerns. Let’s take hashtags, for instance. Anyone on social media is aware of it while hash tagging pics of friends or a tweet. The nature of this is that hashtags are unstructured data in the domain of big data. It’s not compatible with accounting as structured data is used for financial reporting or training. Without reinventing itself, it cannot use hashtags as information organization but, upon realization of this problem, accountancy has to think up new ways to develop and grow to accommodate a modern world’s needs.

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 accounting professional is the secret weapon for faster growth of any company. Sketching a clear picture of finances and cash flow is an intimidating task for most business owners as it requires vast accounting knowledge, skills, perseverance, and wisdom to manage your finances seamlessly. Moreover, a qualified individual will help you nurture your start-up with better decision making, minimizing your tax bills, and saving you a ton of time on administrative work. A professional accountant or bookkeeper has the capacity to change the entire dynamic of a business with better financial rulings and projections for the future.

Why Hire an Accountant or Bookkeeper for a Start-Up?

Hiring the right person for the job is always a challenging task for most organizations. In the beginning, entrepreneurs may feel reluctant in hiring professional accounting services as they consider them costly. However, hiring a top-notch accountant or bookkeeper can change the entire fate of a company in a very positive way. Time and time again, it always pays off in the course of a business’ journey. Since most entrepreneurs lack in depth financial knowledge and skills, it is ideal to hire professional services so that they can focus more on running their business and less on the accounting side of it.

Accounting Professional—The Need of the Hour!

According to studies, most start-ups fail to make their mark in their first year of business. When you examine the core of failure, you find accounting and financial inefficiencies along with poor financial management, planning, and forecasting cash flow and resources. Certain inabilities restrict organizations in managing their internal and external managerial affairs which further confines them in making an impact in the market. This indicates that cash, borrowing, and resource management have their own unique significance and must be managed professionally.

Entrepreneurs may lack the financial wisdom to tackle complicated issues such as debt and tax requirements, debt repayment, filing income tax returns, managing financial books, credit accounts, etc. However, that doesn’t mean that they cannot understand and comprehend the financial standing of their company with help from a professional.

Here are few of the reasons why all entrepreneurs and business adventurists should work with an accounting professional.

They Help You Find Work-Life Balance

Whether it’s a new business start-up or an established business, the need for finding the perfect work-life balance never dies. It is the job of a professional accountant to provide you with peace by taking on certain finance-related tasks that you are less than passionate about handling. Delegating some of the responsibilities to experienced and qualified accountants is ideal for ensuring faster growth and success.

They Help You Focus on Achieving Your Strategic Goals

Hiring a seasoned accounting professional is absolutely necessary for managing your business’s finances effectively. Entrepreneurs usually have a certain state of mind that keeps them passionate about their business, which means they will be more than excited to see their business grow at a significant rate at any cost. Businesses can only expect to grow at a massive speed if they share some of the responsibilities with specialized third-party service providers.

A Professional Reputation

Start-ups can only expect to grow if they keep all of their stakeholders, clients, employees, accountants, promoters, distributors, financiers,etc. happy. This indicates that building and retaining a strong relationship with your stakeholders can help you achieve success within no time. By maintaining integrity and upholding standards, an accounting professional will not only earn a name and positive rapport for themselves, but also represent your company in the best possible way.

They Understand Accounting Matters More

From developing a new financial perspective to providing you a safe method for saving more time and money, an accounting expert has become the need of the hour for handling core financial matter. Plus, they know the legal tricks to minimize your tax bills, which is huge in each and every sense. They help you make better financial decisions for your business which is vital to business success. An accounting professional is an ultimate game changer as they can put a business on the right track to succeed and grow.

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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In the present times, the increasing urge to abandon manual systems in order to automate business processes has led to businesses opting for software to ease their accounting and bookkeeping processes. One of these prevalent software have been POS (Point of Sale) systems. The conventional days of using a cash register and solid-binding registers are long gone. These traditional practices have been replaced by advanced technological inventions such as the POS software. Below mentioned are a few ways that a POS system is helping businesses with their accounting processes for increased efficiency.

Real-Time Reporting

With the help of a POS system, businesses can now get real-time detailed sales reports, cutting down the manual tasking that was once required to generate each report. These reports are an essential part of the accounting process since sources and segregation of revenues must be identified to calculate profit or loss for a particular accounting period. In addition to this, these sales reports can help with identification of possible lags, which may then be amended. Improved strategies may be put in place to help boost sales and for increased efficiency as the latest sales reports can be accessed in real-time.

Inventory Management

POS systems can also help with efficient management of business inventory requirements. This inventory management comprises of aspects such as reordering level, when to reorder, and whether a certain product in the inventory is running low or not. Keeping track of inventory has become crucial for all businesses especially in retail, owing to the impact a stock-out can have on one’s business reputation. Moreover, the selling pattern of products may be drafted out using the POS system and inventory refurbishments may be done accordingly. Products with higher demands will have a higher Economic Order Quantity (EOQ) relative to those with low demand and sales. This results in increased efficiency as the accounting process will become less complicated and there will be no paperwork involved. Moreover, time savings is yet another benefit that may potentially be actualized from POS implementation for business accounting.

Better Customer Service

POS systems have helped business accounting such that customer satisfaction has gone up following its implementation within the business. With lower sales-related discrepancies and accurate pricing details sent over to customers through the system, the accounting procedures have become agile and hassle-free. This has led to happy and satisfied customers that are a source of good word-of-mouth. In addition to this, customers are now provided with a range of payment options such as debit/credit cards, gift cards, cash, etc. This has enabled increased efficiency in processes which are now automated and streamlined for enhanced performance.

Information Tracking

In addition to the benefits above, POS systems have also allowed for a seamless tracking of all personal information, be it regarding customers or vendors. This personal information consists of payroll information, customer billing, shipping details and statuses, vendor listings, quotations, receipts and invoicing, and basic profiling. This is a source of information that is required for business accounting processes, allowing for increased efficiency as well as improved management of resources.

User-Friendly

POS systems help with business accounting, provided that it is easy to learn and use within the organization. The software implementation is usually resisted by most of the existing employees within an organization as innovation such as this takes them out of their comfort zones. However, POS systems are both easy to install and maintain, alongside its user-friendly interface. You may train staff on the use of POS without facing much resistance. Integration may as well be achieved with various other applications being used within the business. This feature of the POS allows for increased efficiency, not through its use, but its acceptance within the organization.

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.