Articles Tagged ‘accounting’

Move the Needle-Know your numbers

Tuesday, April 10th, 2012

Raise your hand if you are interested in starting a small business because you love accounting.

I’ll assume that unless you are starting up a small CPA practice, most of you kept your hands down. Let’s be honest, accounting is no fun. For nearly all small businesses, it generates absolutely zero revenue, doesn’t help find a new prospect and isn’t going to improve your marketing.

However, you can’t run a small business without a crystal clear understanding of your numbers. In fact, I often tell entrepreneurs that if you aren’t committed to getting your arms around the financial fundamentals, you should shut your business down. That’s right – close the doors.
Here’s why.

Unless you know your numbers you can’t effectively monitor your progress and you won’t have any idea how to grow profitably. For those of you who are thinking, “I didn’t get into business to make money, I just want to do what love/help people/be in control/etc.” that is OK – but please understand that you don’t have a business, you have a hobby and there’s a huge difference.
The good news is that getting your arms around the financial essentials isn’t rocket science. Like most of the concepts we discuss it can be boiled down into a handful of simple fundamentals.
First, you have to carefully calculate your gross margin on sales. Gross margin is the profit that is left over after you have subtracted all of the variable costs (cost of goods sold) associated with each sale.

For example, if you are a general contractor and remodeling a kitchen your variable costs would be all materials, subcontractor and labor costs associated with this particular job. Subtract all of these from the price your charged the customer and you have your gross margin.
Next, develop a budget. Most business owners ignore this simple piece of advice because they don’t know how or believe that it’s a waste of time because they are just guessing with the numbers. These are terrible excuses.

All you need to do to build a budget in whatever accounting software you are using is to go to the Help section and type in “create a budget”. Minutes later you will have your fist budget in place. And, it’s OK if your numbers are completely wrong in the first year of having a budget – guessing in year one is encouraged!

The most important number you need to understand in this first year is your break even which is calculated by taking your fixed costs and dividing them by your gross margin percentage. This number represents the bare minimum you need to sell each month to stay in the black.

Finally, you need to find a good accountant. Your accountant should be much more that the individual who prepares your tax return. They should help you with these financial fundamentals throughout the year and serve as a trusted advisor through many of your toughest business challenges.

C.J. McClanahan
Reachmore Strategies
317-576-8492
cjm@goreachmore.com

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9 Reasons You Should Change Your Accountant

Tuesday, May 3rd, 2011

Good financial information is critical to a success of any business, particularly a small business. The financial statement is the business owners’ report card on how the business is doing. This report card is used regularly by bankers, shareholders, investors, taxing authorities and by anybody looking to purchase or value the company.

The outside CPA firm is the source small business people look to for guidance in tax preparation, preparation of accurate data for their lenders, shareholders and numerous other entities. They are the go-to people that provide creditability, accurate and objective information relative to the subject company. How does one know when it is time to change accountants? Here are red flags that will give you clues:

1. It’s your money. Knowing the daily, weekly and monthly financial condition of your company is critical (business owners have 70% to 90% of their personal net worth tied up in their business). Many business owners have tried to delegate this responsibility to their outside accountant, controller or even the bookkeeper with devastating consequences. Financial management is not something that most business owners want to do; but it is your money; you need to understand everything you can about improving it. If your accountant is not helping you toward that end, then you have the wrong person. This is your report card; it tells the outside world how you are doing in business. You need to be very knowledgeable and conversant with your income statement, balance sheet and statement of cash flows.

2. Tax surprises. You have finished out the year and feel pretty good about what you accomplished. Your accountant is busy and doesn’t tell you the consequences of your performance until April 10 and then explains that you have a large tax payment to make prior to April 15. You don’t have the cash then you spend the next week trying to solve the problem. Your accountant needs to be engaged with your business in the last quarter of the year, asking questions about your projected profit for the year (if you don’t do this, call me for guidance) and helping you define your future tax liability. If your accountant doesn’t do this for you, ask him to get involved or find someone that will.

3. Large adjustments at year-end made by your accountant that are not clear as to why there were made. This can be an issue with deprecation, inventory and/or work-in-progress adjustments. This just happened 60 days ago, a business owner was pretty confident that their profit for the year was $150,000 and he was happy to explain to his banker about the improvement in the company’s performance; but when the year end adjustments were made, he now showed a loss. The accountant explained year end adjustments, prior year adjustments, all of which were unclear. Not a good deal.

4. Two sets of books. This happens too many times. You have an accounting system in your company with a set of books and your accountant has another one in his office. Yours is designed to do everything an accounting system can do; but you are only writing checks, balancing the check book and keeping track of accounts receivable and payable. At the end of every month you send your accountant a bunch of information (including data from your accounting system) for him to enter it into his system. A few weeks later he creates your monthly financial statements from his set of books which he returns to you. This is a duplication of effort, time and money and slows down information you need to run your company. It is a great set up for your accountant, not a good one for you.

5. Too busy. Your accountant is not easily reached and doesn’t return phone calls in a timely manner, especially in tax season. Most decent accountants are very busy in the first quarter of the year; but realize that businesses run 12 months out of the year and are available to answer your questions. Find another accountant if yours doesn’t return calls within a 24 hour period.

6. Over billing.
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Importance of Bookkeeping for Small Businesses

Monday, October 18th, 2010


Bookkeeping is any process of keeping the records of financial transactions of the business. Fundamentally, it’s keeping track of all items dealing with finances – cash transactions, sales, purchases, among others – on a day to day basis. The one who ensures that all entries are recorded chronologically is the bookkeeper.

It is typical for small and medium business entrepreneurs to take care of the bookkeeping by themselves. It is also common that business managers have a tendency to ignore this part of their business for factors like:

a) complexities of the job;
b) they are more interested in generating sales and income;
c) they are not equipped with know-how and expertise; or
d) they simply do not have the liberty of time.

This is where most of the businesses go wrong and crash head on to closing.

Bookkeeping isn’t going to make you sales or earnings on the other hand this is one part that is important for the business’ future. Here are some of the reasons why bookkeeping needs to be given top priority in business operation:
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Press Release: Brook Avey — Breathe Easy Quickbooks Training

Wednesday, September 15th, 2010

*Breathe Easy Quickbooks Training *

Brookside Accounting is providing seminars on the basic functionalities of
Quickbooks, October 13 and 27 from 1 – 5 pm at the Broad Ripple Park in
Indianapolis, IN.

The seminar will focus on:

– Avoiding Top Bookkeeping Mistakes
– Saving time with Key Quickbooks Functionalities such as:
– *Set up and Design:* What things to consider in setting up the
Chart of Accounts, Lists, and overall company file.
– *Accounts Receivable:* How to set up customers, enter
estimates/invoices, apply payments, and handle all your receivable
needs.
– *Accounts Payable:* How to set up vendors, enter bills, make
payments, charge expenses back to customers, and track payables
– *Cash Management:* How to track transactions back to cash and
reconciling bank statements
– *Credit Card:* How to enter credit card transactions and perform
credit card reconciliations.
– *Reports:* How to generate and customize reports as needed.

Register at www.brooksideaccounting.com/training

The seminar will be presented by Brook Avey, a CPA with over 10 years of
experience.

Brook M. Avey, CPA
President

www.brooksideaccounting.com

888-317-4835

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