Growth Articles Accounting Small Business USA

Financial Accounting - Don't Reinvent the Wheel When Accounting For Your Business' Future
By Gene Siciliano

It has been said that the only thing that's constant is change, and if you've been in business for any length of time, you know how true this is. If there's one thing that sets companies that have been successful over the long haul-think IBM, General Electric, Wal-Mart or Microsoft, for example-apart from all the others, it's their positive reaction to change.

Adapting to change impacts a company's ability to capture and hold onto its market, grow its business and profitably sell its products and services. However, every small business owner or manager must learn to differentiate between those business processes that must evolve and those that should remain stable.

When Change Is Destructive

While evolving in order to meet changing consumer demands and an ever-shifting technological environment is essential, there are some business processes where change and evolution are counter-productive, even destructive. Financial accounting is one of these.

The accounting scandals that brought down several large corporations in the early 2000s illustrated the destructive potential of getting too "creative" when it comes to financial accounting. While the government passed legislation that attempted to tamp down such accounting irregularities, it's still primarily the responsibility of business owners and their accounting professionals to create and provide financial information that is what I call ARTistic: Accurate, Relevant and Timely.

Accounting rules can and do change over time to reflect changing business models and new types of business transactions. However, financial accounting as a business process should remain stable, evolving only after careful thought is given to the potential implications of reporting transactions differently.

A complete overview of the basics of financial accounting is way beyond the scope of this article. However, by sharing a few standard accounting concepts with you, I hope I'll motivate you to perhaps take a little bit closer look at the financial statements your CPA slides across your desk next month.

The Chart of Accounts

Let's start at the beginning: with the financial data recording system that's known as the chart of accounts. This is a systematic listing of all ledger account names and associated numbers used by your company, arranged in the order in which they will appear in your financial statements (more on them in a minute): usually Assets, Liabilities, Owner's or Stockholder's Equity, Revenue and Expenses.

A chart of accounts allows the orderly reporting and summary of all of your company's financial transactions. For example, you can go back and look at all vendor invoices paid during a specific time frame to determine exactly what work was done, why it was done and what organization benefited from the expenditures.

Think of the chart of accounts as a collection of buckets, each with a particular kind of data inside. There might be a bucket for each asset your company owns, each debt you owe, each product or service you sell, and each type of expense you incur to sell products and services.

The chart of accounts is an organized, comprehensive list of all these buckets. The buckets, in turn, are labeled with the appropriate account number and arranged by the kind of data they hold. They can be rearranged during the accounting process as their contents are counted and checked (usually monthly) so reports can be produced that summarize the data they contain.

The General Ledger

No, this isn't the person who secretly runs the accounting department and issues all those reports nobody can read! The general ledger is the place where all accounting transactions ultimately come to rest, and the data source for your financial statements.

Think of the general ledger as a large, old-fashioned scale that is always kept in balance by adding and subtracting an equal and offsetting amount of weight to each side. All of the buckets that appear in the chart of accounts are arranged in one or the other of the trays. As transactions occur, you add to each bucket the appropriate data that represents the financial effect of that transaction.

When something is added to a bucket on the Asset side, for example, something else of equal value either must be taken away from the Asset side (such as the cash paid to acquire the asset) or added to the Liability side (such as a loan taken out to pay for it). This way, the scale always remains in balance and your company has a self-checking system to ensure that the entire transaction has been recorded properly.

The Financial Statements

These are the real "meat and potatoes" of small business accounting. There are three primary financial statement formats that appear in annual reports and most business' internal monthly financial reports:

• Balance Sheet: This shows the financial condition of the company as of a particular date, usually the end of a month, quarter or year. It lists all of your company's assets on one side and all of your liabilities on the other. The difference between the carrying value of the assets and liabilities is equal to the equity interest accruing to the owners.

• Income Statement: Also commonly referred to as the Profit and Loss Statement, or the P&L, this recaps all of the company activities that were intended to produce a profit. It lists the amount of sales, all the costs incurred in making those sales (or the cost of goods sold), and the overhead costs incurred in running your company's operations (e.g., salaries, rent, utilities, etc.).

• Statement of Cash Flow: This shows the effect of all the transactions that involved or influenced cash but didn't appear on the income statement. For example, if you borrow money and deposit it in your checking account for use later, no income or expenses have been created, so this activity can't be reflected on the income statement. Instead, it would go on the statement of cash flow. Every transaction that occurs in your company between any two balance sheet dates will be reflected in either the income statement or the statement of cash flow, and from those two reports the summarized results appear in your balance sheet in the form of net changes to balances.

Make Better Business Decisions

The key to sound decision-making will be your ability to understand and use these critically important business reports. They are the condensed result of every financial transaction your company has undertaken, and the result needs to be accurate, relevant, timely and understood.

This is a role that cannot be delegated. Don't shy away from asking your accounting department or CPA to explain any aspect of these reports until you really understand them. The success of your business depends on it.

Gene Siciliano, CMC, CPA, is an author, speaker and financial consultant who works with CEOs and managers to achieve greater financial success in a dramatically changing economy. As "Your CFO For Rent" and president of Western Management Associates, Gene has spent more than 20 years helping his clients build financial strength and shareholder value through applied knowledge and process improvement. Gene also helps non-financial CEOs and senior executives understand finance and apply it to their companies and careers. Gene's first book, "Finance for Non-Financial Managers," (McGraw-Hill, 2003) is available in bookstores and online and his new book, "Financial Mastery for the Career Teacher," is scheduled for publication in Spring 2010. More information and free articles are available at http://www.GeneSiciliano.com.

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Web Based Accounting - Takes Your Company To The Zenith
By Michelle Barkley

To maintain the accounts of any company is a very hectic job. An individual should be very much cautious in entering data. A minute mistake may prove fatal. While hiring any accountant, the company studies the capability of the person. Today, many big and small companies prefer offshore accounting because it gives an error free work. Another method of maintaining all the money related affairs of the company is web based accounting. All companies are finding the method very useful. The owner of the company is finding the system beneficent because despite sitting anywhere he can get the entire picture of his company. He gets to know all the dealings of his company. Profit and loss of his company is now before his eye.

Web based accounting is a system that resides on a web server. Anybody from any part of the world can access that accounting system with a simple browser, which is required to set up. It helps in running the company. The company need not have to pay a large sum of money for the hardware and software. The user only needs to pay a small monthly rental fee. The concept is very much interesting and many companies are implementing it. The advantages of web based accounting are-(1) The administration cost is low, (2) You just need a browser, (3) Cost is low, (4) One can work from home, (5) No back up worries and (6) Applications are up-to-date. The system is a blessing for all the big and small companies. A company can prosper only when the finance of the company is properly maintained.

This performs cash-flow management, customer relation management, inventory control and marketing. It can be operated from any parts of the world. The monthly charge is also very low. It is very easy to implement this system. Firstly, you need to set up a system network. Secondly, you have to select and subscribe to the software. Thirdly, you have to customize the accounting system and lastly, you need to prepare system documentation. This system is a blessing for the small companies because it cut the cost of keeping an accountant. Now, the owner need not have to worry for the accounts of his company because sitting anywhere, he can see how the account of his company is maintained. There is less possibility of any sorts of mistakes.

With the advent of the web based accounting in 1998, the complete process of maintaining account has undergone a massive change. Before implementing it, the companies have to study its pros and cons. Before adopting the system, one should check whether this process would be helpful for his company or not. If it is not useful then he should not adopt the system. Maintaining balance sheet and keeping a record of the profit and loss of the company is a very tough job. If a wrong number is inserted on the balance sheet then the company has to suffer the consequence. Maintain accounting through web is a very easy process and involves less chance of mistake. The user should be very little careful in inserting numbers.

Michelle Barkley is a CPA who advises people on tax preparation and tax calculation.She specializes in bookkeeping outsourcing,Tax return preparation,back office outsourcing and Outsourced Accounting.To know more about Accounting outsourcing services, Web based accounting and to use the services visit www.ifrworld.com.

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Let Your Firm Grow With Bookkeeping Help
By Alvis Brazma

Accounting has always been quite important. The involvement of numbers in running a business is very important and crucial; therefore, it is understood that the accounting or the bookkeeping department of any firm will be given a lot of importance for the successful running of any organization. The accurate placing and calculation of numbers in the various accounting books is quite important. Taking the help of the right professionals is therefore very important. Bookkeeping has always been known to be a hectic task and involves tremendous mind work. One needs to be highly calculative and thoroughly accurate while dealing with the various kinds of accounts books of an organization. Therefore, the best thing to do to get accurate accountancy results is to take the perfect bookkeeping help from organizations and professionals who are thorough with their work and who have a good hold on their work.

Getting the right and apt accounts in-house professionals might be a problem. Many times, when one feels that they have the right professionals to take of the bookkeeping department of the firm, business owners realize that the work is still not being done properly and the business is not being able to grow. In such circumstances, the best thing to do is to take bookkeeping help from experienced and well-established firms that outsource their services to all kinds of businesses. Outsourcing the accounts work from a firm that has expertise in this field costs less and moreover, the work is done with tremendous accuracy. Therefore, taking bookkeeping help would definitely prove to be one of the best moves by any business owner.

These days, the rise in competition has made things worse. Everyone wants to excel in their field of business and wants to be the inevitable leader. Expansion is very much required too and the one thing that they do not understand is the fact the all these need proper funding. Therefore, it is important to increase the incomes and to decrease the expenses. This can only be possible if the resources are properly used and the outflow of cash is properly regulated. When one says that the accounts department of any firm has the capability to make it a profitable firm or a loss making firm, it is indeed true. Therefore, the hiring of bookkeeping help would definitely prove to be a beneficial move, if only the resources are used in the right manner.

There are many firms in the city that outsource their services to any organization. One can get information about these firms through the internet. The internet has definitely made things easier for people and today, people can look out for anything and everything on the internet and they are bound to find results. Therefore, you will also come across many firms who outsource their services but it is important for you to select the right firm, so that the resources are used in the right manner. Moreover, you should make sure that you keep a track of the work from whom you are taking bookkeeping help. Therefore, think no more and go ahead.

Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles. To know more about Accounting help, accounting outsourcing,small business accounting, bookkeeping help visit this leading internet source: http://www.impacctusa.com

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Accounts Receivable Financing - Secrets
By Gregg Elberg

The Merriam-Webster Online Dictionary defines "secret" as:

"1 a: kept from knowledge or view : hidden b: marked by the habit of discretion : closemouthed c: working with hidden aims or methods : undercover (a secret agent) d: not acknowledged : unavowed (a secret bride) e: conducted in secret (a secret trial)2: remote from human frequentation or notice : 3: revealed only to the initiated : esoteric 4: designed to elude observation or detection (a secret panel)5: containing information whose unauthorized disclosure could endanger national security".

As used in this article, secret means: revealed only to the initiated; kept from knowledge or view; and designed to elude observation or detection.

The first secret- "revealed only to the initiated" relates to the fact that most schools, even business schools, do not teach the subject of factoring or purchase order financing; most banks do not offer these financing facilities as products. Therefore, it is not surprising that many businesses are unaware of the cash potential that lays dormant in their business invoices.

Let's suppose you own a small to medium business and you depend on customers paying invoices within a 45-60 day period for your working capital. In essence, you are extending credit like a bank to your customers. For that period of time your cash is tied up in your invoices- your accounts receivable. This limits growth and may create problems regarding meeting payroll and paying your suppliers. Accounts receivable financing is the process of selling your invoices for cash as soon as they are issued which allows you to make more effective use of your assets. Purchase order financing is the process of obtaining a third party commitment to pay your suppliers as soon as products are received by your clients (in advance of payment by you or your client), based on the surety of an accounts receivable financing arrangement.

All businesses are limited in their growth and profits by the amount of capital and cash flow available to take advantage of business opportunities. The availability of virtually unlimited cash creates a powerful paradigm for potential growth. It also can expand your thinking about what business is possible and how you might go out and develop new business.

The second secret- "kept from knowledge or view" relates to the practice of non-notification factoring. Some business people are concerned that working with a factor, an accounts receivable financing company, may not be viewed favorably by their customers. In many cases it is possible to structure a transaction legally so that the accounts receivable financing is transparent to the ultimate customer.

The third secret- "designed to elude observation or detection" has to do with your business plan and how the way you think about the world can affect your success. In 2006 Prime Time Productions produced a film and a book called "The Secret". The film dramatically describes the "Law of Attraction" which asserts that people's feelings and thoughts attract real events in the world into their lives. Can your feelings and thoughts attract more business and success? Is the visualization of what you want an aid for manifesting your business goals? Is The Secret "just a new spin on the very old (and decidedly not secret" The Power of Positive Thinking (a book by Norman Vincent Peal written in 1952) wedded to 'ask and you shall receive' -as opined by Karin Klein, editorial writer for the Los Angeles Times? Did The Secret fail to discover the real roots of powerful thinking?

In the book, "The Diamond Cutter", Geshe Michael Roach examines The Budda on Managing your Business and your Life. Roach graduated from Princeton University with honors, studied the ancient wisdom of Tibet and traveled to the Tibetan Lamas at the seat of His Holiness, the Dalai Lama. In 1983 he took the vows of a Buddhist monk.

His teacher encouraged him to enter the world of business. Mr. Roach choose the diamond business. He hid the fact that he was a monk and maintained a façade of a normal American businessman on the outside. The business developed from nothing to a one hundred million dollar per year business.

The original book, "The Diamond Cutter" is the "oldest dated book in the world that was printed rather than being written out by hand. The British Museum holds a copy that is dated A.D 868." It is a written record of Buddha teachings from over 2,500 years ago. In brief, the central principles are: 1) business should be successful and make money in a clean and honest way; 2) you should enjoy the money and stay in good health; and 3) you should be able to look back ay your business and say your years of doing business had some meaning leaving some good marks in the world. I highly recommend "The Diamond Cutter" vs. "The Secret".

The bottom line: accounts receivable financing and purchase order financing may be the secrets to your business' financial success. If you read and follow the principles of "The Diamond Cutter" you can expand your opportunities for exponential growth based on the 2500 year old teachings of Buddha, as explained by Mr. Roach.

Copyright © 2007 Gregg Financial Services

Mr. Elberg is a licensed attorney and licensed real estate broker. Gregg Financial Services is a full service brokerage for commercial finance companies and banks that fund B2B businesses. Mr. Elberg arranges funding from $25,000 to $50 million per month at competitive pricing, and works to reduce your financing costs as your company grows. For more information about GFS, please visit our website: http://www.greggfinancialservices.com

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