The Financial Statement for your business is probably the single most referred to report that your company will produce. It comprises several other documents including the Balance Sheet and the Profit and Loss statement and provides all of those looking for a complete financial picture of your business with a detailed account.

So, who actually uses the information in a financial statement? Which groups of people find such things essential and why?

Owners & Managers
First and foremost you will need the information yourself as the owner of the business without the information in a financial statement it would be very difficult to make any important business decision. Anyone that you may have put in charge of your company will also need to access the financial statement not only in order to run things on a day to day basis but to allow them to provide more detailed reports to shareholders.

Shareholders
If someone has a vested interest in the success or failure of your business they will often require seeing regular and up-to-date financial statements to check on their investment; if they need to withdraw funds the financial statement lets them know what if anything is available.

Lenders
Anybody who is considering extending finance to your business has to have access to your business’ financial statement; whether a high street bank or an independent investor, they will be looking to ensure that you are a safe bet to pay the money back with interest.

Investors
Before any potential investor makes a decision to put money into your venture, they will want to view your business’ financial health, the way that they will do this is by looking at your financial report; investors, like lenders, will want to judge your company sound, so that they can guarantee a return on their investment.

Staff
Employees may need to see the firm’s financial statement at one time or another, to work out anything from compensation, to their prospects for promotion.

Suppliers
Anyone selling anything to your business that may be looking to extend credit terms will want to assure themselves that you can pay and that you are not going to end up on their bad debtor list.

HMRC
The Government will need to see your business’ financial statement regularly, as assessing your tax requirements and checking that you are paying your dues is probably one of the most important reasons for the statement’s existence.

Media
Believe it or not there are many reasons why the media and/or the public at large may be interested in the financial statement your business produces, especially if you are a firm in the public eye or with whom they feel a special connection; also large employers in certain areas will be of interest as their success or failure is often tied in with that of the community as a whole.

Never has one business report meant so much to so many; it really is the ‘go to’ report for anyone who needs to make a decision based on the financial health of your company and as such is probably one of the most important things your business will ever have to say.

How much time and energy do you spend doing your own bookkeeping? What if there was a way to shift your focus from the computer to a more constructive area, such as managing your company or building better customer relationships? What if this method saved your company thousands of dollars, and allowed your staff to focus on the most pressing needs of the organization?

What we are presenting is not some get rich quick scheme, but rather a more common sense approach of allowing well qualified professionals to focus on what they do best. Certified Quickbooks Pro-Advisors outsource bookkeeping specialists manage your bookkeeping department, providing accurate financial data so that you can make better decisions to grow your own company.

Certainly every other department in your company is staffed by a qualified professional, so why have a spouse, friend or relative who is unskilled in accounting make critical classification decisions in a vacuum, with ramifications that could possibly bring down the firm in an audit. Are you really saving money in the long run? Disorganized financial records make it extremely difficult to obtain a loan or make any other type of decision regarding your business. Outsourced bookkeeping is a skill which is available at very affordable rates from certified Quickbooks Pro-Advisors.In some case it is cheaper to obtain bookkeeping services than it is to hire a cleaning service.

Certified Quickbooks Pro-Advisors can perform all of the data entry. They reconcile all of the accounts. In addition to mundane entries, financial statements are prepared allowing accounting firms to have access to vital information needed to prepare tax returns. The information you need will be right at your fingertips!

Some businesses may avoid using outsource bookkeepers fearing that they may be operating from another country and not be as familiar with U.S. financial regulations. While there are international outsource bookkeeping firms, many very talented Quickbooks Pro-Advisor outsource bookkeeping professionals may be found within the United States. These specialists are able to perform all accounting functions by using remote access or accounting software that generates an accurate picture of the companies solvency for very little money or investment.

Time, money, energy and effort are all saved by having an expert provide accounting services. At the end of the year, 1099s are prepared, and money is saved on compliance issues, wages, benefits, payroll taxes and vacation pay. Whatever reasons may have been holding you back from using an outsource bookkeeper, think again! During these challenging financial times, your company needs every edge possible to stay on top! Quickbooks Pro-Advisor outsource bookkeeping can save your business, offering you the advantage you need to not only stay in the game, but prosper in the long-term.

Ok, for those small business owners out there who think you do not need an accountant because you have the latest version of Quicken or financial software, think again. For those few select business owners that actually are proficient in accounting and book keeping and are happy with your business the way it is… you can stop reading now. But for the rest of business owners who hire accountants to do their books and prepare quarterly statements and tax returns, there is so much more your accountant can do. The question is, to what degree should you involve your accountant in your business?

Most book keeping is done with computers now, and most business owners use computers to keep track of there purchases, expenditures, and cash flow. An accountant is the person that makes sure all this data is filed correctly and will submit that later for tax purposes. Doing your own taxes is simple for an individual, but for a former business owner, I tried one year to do that, and it was a nightmare. So I hired a CPA to help me with that. It was expensive, and I thought twice about it next year. (But I still made use of their services). This one on for a few years, until I got out of the business. The problem was, I never developed a good relationship with my CPA, and now I know how much more she had to offer.

So, besides basic bookkeeping tasks, a CPA can offer the following services, and can really help increase productivity of your business if used to their fullest potential. Here are some agendas you could involve your CPA with your business:

Involve your CPA on the ground level with taxes in mind. By not just submitting your books to them for tax purposes. Instead, meet with them early in the year, perhaps they can advise you of ways to say legally on your taxes. A CPA can provide you with solid business advice too, as probably many of their clients are in the same business as you, they have seem common mistakes and common successes. Its important for you to listen to their advice. Work with them on book keeping software. Ask their opinion of what kind to install, and let them train you with that. It will help proficiency. Accountants can help you prepare a loan application, should you need cash to purchase equipment, or expand your business. Bankers like in depth loan applications and data… and a CPA can help you produce this. If you are in a restaurant business, an accountant can help you file for all necessary licenses and permits, etc. Also, a CPA can help you predict cash flow, eliminate waste, and tighten your budget thereby producing most cash in pocket. Something we all hope to have as business owners.

So remember this, “Ask not what your accountant can do for you…ask what you can do for…well no, actually you should ask what your accountant can do for you!

This information is for those of you who have decided to purchase a bookkeeping program, like Quickbooks, and to go ahead and do your own bookkeeping. Congratulations! You are on your way to becoming more organized with your business finances.

Taking a break from the excitement you are feeling, let’s consider that doing your own bookkeeping can be an intimidating project especially if you have never done it before. But there are some great resources out there to make sure you are doing things correctly.

One thing you can do is learn how to use Quickbooks through an instructor led class or training workshop. These are usually not very expensive, about $389.95 and up, and can get you started on the right foot. You can also take classes online or order training programs. These can start as low as $39.95. Oftentimes you can find smaller accounting firms that teach these trainings for a lower hourly fee. Quickbooks Intuit offers some great resources for finding both online, program based, and instructor led courses.

In addition to taking an official course, we suggest the following tips to help you as you begin keeping your own books:

1. Know What Constitutes a Receipt. A receipt is a cleared check, bank statement, credit card statement or actual receipt.
2. Stay on Top of It. Do your bookkeeping at least once a month.
3. Make Sure Your System Makes Sense to You. If you don’t understand it, your tax accountant won’t either.
4. Be Thorough. When recording income, make sure to include the record type, check number, date, and a copy of the payment. This will help clear up any client payment disputes.
5. Just Do It. The hardest part of bookkeeping is sitting down and doing it.

Now that you have an idea of what you need to do to get started on your bookkeeping, make sure you utilize some or all of these resources to make sure you are doing your books correctly.

Most small business owners understand about entering information into their accounting systems to help regulate and reconcile their business earnings and expenses. This also helps to make things easier at tax time.

However there are sometimes some things that aren’t entered into your accounting system that really should be.

The core entries are usually the same for most businesses. These include accounts receivable and accounts payable, billing, stock or inventory and sales orders. Your business may also record things like purchase orders or keep a cash book, where your business records collection and payment.

Some businesses may also require entries for expenses, electronic payment processing, payroll tracking for employee salaries, taxes and superannuation payments, and purchase requisitions.

But many businesses don’t consider entering in many of the very small expenses they see each month that could really add up to a substantial amount by the end of the year. These can include bank fees and charges and other similar charges you may not have entered.

You should also consider entering such things as debt collection, bad debts and any overdue bills. In some businesses, these can be written off prior to tax time as bad debts. In other cases, you may also incur fees related to your debt collection efforts.

It’s important you also ensure your personal expenditure is kept separate from your business records. Even if you’re a sole trader and your personal income is intermingled with your business earnings, you should still make an effort to keep your records separated, entering your business information into your accounting systems and keeping a separate track of your own personal drawings.

If you keep up with entering your business information into your accounting systems on a regular basis, you’ll find it much easier to keep up throughout the year. You’ll also find that you’re much less likely to miss important information when you keep up with it regularly.

If ever you’re unsure about what you’re supposed to enter into your accounting systems, it’s important you speak to your accountant about your options. This can make it much easier for you to always know what you should be entering and what you should be keeping track of.

As a business owner, you’re constantly jugging a host of decisions. Is it time to move your business to a new location? Do you need to expand your staff? Is it time to increase your advertising budget? Is it time to add a new product or service to your business’ offerings? These are not easy decisions. Fortunately, business owners can rely on financial and managerial accounting to help make them.

These two accounting methods are quite different. When you hire an accountant to perform managerial accounting tasks, that accountant will report directly to you and the other managers in your business. The goal here, is for accountants to study your business’ financial health and prepare a report that summarizes the findings in language that is easy to understand. You can then study this report to help decide if moving to a new location will boost your company’s bottom line or place undue financial stress on it.

Financial accounting is a different entity, but one that is just as important. This time, you’ll hire a certified public accountant to again study your business’ finances. This time, though, the accountant will make sure that you are correctly filing your taxes, are properly balancing your books and have a cash-flow projection that is accurate and realistic.

In short, managerial accounting helps you make the big decisions for your business. Financial accounting helps you make sure that your small business is operating in a fiscally sound way on a day-to-day basis.

The difference may sound minor, but it’s actually not. Financial and managerial accountants have vastly different jobs to perform. The end result of their reports, too, is extremely different.

If you’re debating whether it’s time to expand your business, you might consider hiring an accountant to perform some managerial accounting for you. If you’re just hoping that your books are balanced and that your expenses are totaled correctly, you’ll be fine hiring an accountant to concentrate on financial accounting instead.

Not all accountants are the same. There are many different reasons why you should choose an accountant that is right for your needs and will suit your specific requirements. These could include whether you’re a sole trader, a company or partnership or just an individual wanting to maximise your tax return for the year.

You could also find that some accountants specialise in certain areas. A good example of this might be specific investment types or foreign income as part of your regular turnover.

Here are some things to look for before you choose an accountant:

Qualifications and Accreditations

Always check the qualifications of the accountant you’re considering. A tax agent isn’t always going to be the same as a fully qualified CPA. In fact, there are several official accounting bodies within Australia. Be sure the accountant you’re considering is a member of either CPA Australia or ICAA.

This can be an important step, as accountants who are members of these professional bodies are required to meet minimum standards of education. They are also required to keep their knowledge up to date and must also hold professional indemnity insurance.

However, only agents registered with the Tax Agent’s Board are allowed to charge a fee for preparing a tax return for you. Be sure you understand what accreditations with which officially recognised bodies the agent holds.

Reputation

Where possible, try to ask other people in similar financial situations to your own to recommend an accountant they use. Asking for referrals is a good way to locate accountants who may have experience dealing with your specific needs. A sole trader working on sub-contract for one or more companies is going to have very different accountancy needs to that of a larger exporting company.

Specialisation

Some accountants specialise in certain areas. If your own income is a little different to a normal income from an employer, you might want to consider finding a specialist accountant who understands your particular needs.

Additional Services

Will you need additional services on top of just tax preparation? Some accountants are able to offer extra services for such things like incorporating your business, financial planning advice, expanding your current business operations, retirement advice, estate planning, risk management, wealth creation or investing advice.

Finding the right accountant can help you add considerable value to your business and can also help you manage your own financial future much better. It’s worth taking the time to be sure you find the right one to suit your particular needs

The thrust of my articles, attempt to explain the difference between profit and cash. The cash building strategy outlined below, will reflect differently in the books of account of a business. In fact, these reserves will nor reflect on the Profit and Loss/ Income Statement accounts, and yet, it is the most crucial aspect of the finances!

People are tempted to always spend more money than they make. We see the constant pursuit of higher earnings from working and business people alike. But after earning that increase in income, people remain deeper in debt than before. Expenses chase income, and wins the race most of the time. We remain trapped in the illusion, that more money, is the only way out of the mess.

Look at families taking extra jobs, employees who receive the promotions with the salary increases, businesses who secure additional contract, but they remain short of cash, or more in debt. When people earn more, they spend more. Simple as that. The strategy is to save cash before it is spent. The excuse that there is not money to save, is not valid. The sooner its implemented, the better.Discipline and dedication is required. It can work.

Bank Savings Accounts:

Open three different accounts, at three different banks, in three different areas. Reason? it limits the temptation to withdraw cash from these accounts. The account type does not matter(preferably interest bearing), but designate as described in previous article.

1. A building/ expansion fund

2.Tax fund

3.Emergency Fund

Commit to savings by signing a monthly transfer of say;

1.Building fund@ 2% of Average Monthly cash deposits

2.Tax fund@1% of Average Monthly deposits

3. Emergency fund@ 1% of Average Monthly deposits

Let it run, for three months, and gradually start to up the percentage by 0,5% a month.
See savings as an additional expense, and factor the savings into your monthly budget.Credit Card/s:

Credit cards are controversial and problematic, but you can make this device work, for YOU and YOUR business, instead of the other way around.

Don’t destroy your card, but put it out of reach. If repayments on a card is say $500.00, commit yourself to pay an additional $250.00, on the card.Dont make any arrangements with the bank, just pay the card direct.No bank fees on cash deposits made in a credit card.
What happens, is that the bank draws their arranged amount, and it is augmented by an additional payment, resulting a a rapid reduction of debt on the card over a six month period.
After twelve months, the credit card could swing into a positive balance.The interest on cards with a positive balance vary, but is higher than some savings accounts.

If you committed to the savings program outlined above, the percentages and transfer arrangements for your savings accounts and credit card, you will detect a notable increase in cash, and reduction of expenses. You not compelled to save more, and can spend available cash as you please, if all your bills are paid.

If the cash in reserves grow, you can utilise it as follows,( preferably after twelves months)

1. Tax Fund, to pay any unexpected taxes

2. Emergency Fund, any expenses not covered by normal insurance, staff incentives. Vacation.

3. Building fund, should be accessed after two years, but can be used to purchase capital equipment.

Use the credit card for purchasing additional equipment, when the need is there.And start replenishing the card balance at your soonest.Be careful, don’t go on a spending spree. Put the card away, as soon as it is utilised for emergency funding, don’t leave it in your wallet.

Create a separate spreadsheet, for your accounting for Cash In, Reserves, Cash out. Don’t use conventional accounting software(will just confuse the process). Maintain stats on a monthly basis, and start forecasting your cash flow.

Don’t wait until sales improve, start saving now, even if it is just 1% of cash. Look at savings after a year. Maybe you can indeed go on that dream vacation after three years!

The accounting definition of profit is sales(including credit sales), less expenses. The oversight of the important aspects of “profitability”, leads to numerous problems for business owners.The problem with accounting is that assets purchased cash, will reside on the balance sheet, and inflate the profits, artificially,by the very same amount, that the asset was purchased for.

Invoiced credit sales are recorded in sales journals, and a corresponding debit(debtor), is raised for those credit sales. Value Added Tax or general sales tax is charged on that invoice as it is processed.

One major shortcoming in small business, is the lack of credit control. Many business owners lack the skills to collect outstanding debts. Where VAT or GST has been charged, it become payable, regardless of whether the debtors invoice was paid or not. Businesses also pay tax on profits.

Business owners(on the advice of their accountants) are profit driven, and not cashflow driven. This leads to certain interpretations of their finances. If assets exceed liabilities(solvency),current assets, exceed current liabilities(liquidity), they happy. Business owners consider the available amount on their overdraft or business credit card facility as CASH AVAILABLE! Its not available cash, but debt!

Solvency or liquidity should be measured by the amount available cash(bank and cash on hand), exceeding liabilities. All other assets should be be excluded. The reason is that assets ,could be sold far below their market value, if the business had to be liquidated. Cash is the only asset that can be used, without incurring a cost or loss, on conversion.

What about the cash flow statement? The cash flow statement is not compulsory for small businesses, but is viewed is an important tool, for analyzing the business’s cash flow. Many tax authorities accept only the income and expenses account. But even the cash flow statement has its flaws. Loans advanced will reflect as “cash from financing activities”, thus creating the illusion that the “healthy Bank Balance”, means the business is healthy. In an environment of high interest rates, the loan can be risky, and that aspect has to be factored into the reporting. A note on the financial statements, is not sufficient.

Many accountants might not agree, with the above. But its my firm belief that thorough cash management is lacking in most small businesses. Accounting financial statements should only be used for tax or statutory purposes.

A cash flow driven business would operate as follows:* Collect outstanding debtors as soon as possible(The most difficult and problematic, I agree)

* Take substantial cash deposits from customers, before commencing a project

* Bank cash promptly, since cash gets lost or spent very quickly

* Stall creditors, as long as possible

* Start investing 5 to 10% of cash received in a particular month, in different bank savings accounts

* These banking accounts also known as reserves, can be called:

a) A Building Fund(For future expansion)

b) A Tax fund and lastly an Emergency fund (Any emergencies that may occur).The reserves can also be augmented by additional sales, the value of credit card payments, that have been paid up. (Would not hurt, since you used to those monthly credit card payments)

* Before spending cash on any expense, apart from salaries, funds should be set aside for the “reserve accounts”

* The benefits of the reserve accounts are two fold, 1) It creates a buffer, between income and expenses(will exert pressure on overheads/spend less), and 2) The business will gradually build capital in reserves, that the business would have had to source somewhere else, if the need arose.The reserves would grow rapidly, if it remain untouched, for say ,twelve months. This exercise requires discipline, for it to work.

Focus on the cash balance and savings, will ensure a rapid (almost magical) growth of cash! The business will also become less reliant on loans, credit and capital from outsiders.

Many successful partnerships have been going for years, especially in legal, accounting and medical firms. And businesses benefit greatly from the diversity of skills, as well as the injection of capital.

Unfortunately it is not all smooth sailing. For smaller firms, a substantial amount of partnerships have turned out to be nothing, but disasters. No binding partnership agreement, nor any other amount of counselling or consulting will save a partnership if it starts to unravel.

Business Partnership divorces can be even more traumatic and stressful than a marital divorce. Prolonged, subsequent court battles also takes its toll on the affected individuals.

Unlike bigger firms, partnerships in smaller businesses come about,almost always, as a result of friendship and family relations. Its with this “taking on”, of friends and family, where most of the problems lie.

SCENARIO 1

An established sole proprietorship business, decide to appoint a partner. This partner has never worked in the business since its inception. He is nevertheless, elated to part own a business.
Of course, the new partner is entitled to a salary and demand all the other perks that comes with running a company. When the partner learns that he must forgo his total or part of salary in tough times, the tension starts to mount, inevitably leading to a collapse of the partnership.

SCENARIO 2

A business owner is approached by an “influential deal maker with all the corporate or government contacts”. Out of desperation for business, the current owner gives the deal maker a share of his business. But as months go by, no new business transpires. But our new partner demands a salary and perks. Conflict erupts and that spells the end of the partnership.

The two scenarios, above are not exhaustive, but just two examples of typical, causes of partnership break ups.

In most, but not all, partnerships are people who want the benefits, without the responsibility that goes with running a business. Since we are social beings, we want to extend that friendship into our business lives. Beware, nothing destroys a friendship, like a business relationship, gone sour!Running a business is stressful and demanding, dont add to the pressure by taking on a partner,who cannot handle these challenges. Develop a management team, and delegate, but retain your equity in the company.

It is a fallacy, to think that you need a partner in your business to make it a success. Yes you need help, but does it really warrant taking on a partner?

Take on a partner as your very last resort, when you close to retirement for instance.