Monday, July 29, 2013

Going paperless

We are trying to do our part to keep the planet green by going paperless, but it is difficult for accountants to give up our beloved documents!  Here are a few suggestions on how to reduce your paper footprint:

First, find a good scanner which means one that scans multiple pages and gives you options on what you want to do  with it.  Ours handles regular documents as well as business cards which is nice.

Next figure out what you will do for centralized data storage.  This can be done with a file server or by using cloud based storage such as Dropbox, Google Drive, SkyDrive or SugarSync.  Most of these offer initial space free.  We just had to pay for our Dropbox upgrade as we are converting our old paper files into cloud based.

You will want to make sure your files are searchable.  Windows 7 and 8 offer Fast Find and there are other tools/apps which provide the same service such as Voidtools Everything, dtSearch Desktop and Copernic Desktop Search.

Having a paperless Fax will reduce the amount of paper you need.  RingCentral, PATLive, MyFax and RapidFax are all options for this service.

You can also reduce your paper footprint by using an online calendar and CRM system for contracts and To Do lists.  Microsoft Outlook provides this service as does Google.

Paperless bill management is another way to reduce your waste.  Manilla, Mint, CalendarBudget and MyCheckFree are options and many financial institutions offer this service as well.  We email all our invoices so we don't use paper or envelopes or stamps.  Our clients have the option of printing the invoices if they wish or just keeping the electronic record. 

Expense reporting can also be done paperless  with Expensify or Concur.  Many bill and expense management options work well with mobile devices which makes it easier than ever to gather the information for recordkeepers.

Finally, you can prepare and review financial statements in a paperless manner by viewing them on your computer screen.  The availability of large screens for meetings means you can project the financials so everyone can see them without the need for printing them. 

Going paperless is not only good for the planet, it also is good for your bottom line.  Less paper means less expense!

Monday, July 22, 2013

The importance of education

My youngest brother is an Associate Professor of Music at DePauw University School of Music.  He emailed me last week asking for my opinion (as well as two other family members with accounting and financial backgrounds) on the accounting courses required by DePauw for their Music Business degree.  The school currently requires both Managerial Accounting and Financial Accounting courses.  Some feel this redundant thus Scott's request for our opinions.  The managerial course focuses on the creation and use of information for internal management decision making including job costing, budgeting, pricing and outsourcing decision making.  The financial course deals with traditional accounting as it relates to the preparation and use of financial statements.

The unanimous opinion of those asked was that both courses are necessary for the candidates to be successful in their careers.  A good manager needs to be able to understand all the underlying factors at play in any business and those are most readily apparent in the numbers.  Obviously accountants such as myself are useful allies in any business, but the more a manager or an owner knows, the better.

The most successful clients we have are those who want to understand their business and are willing to take the time to learn from us what their financial statements are saying.  It is not necessary for a small business owner to have an accounting degree or even to have taken accounting classes.  What is necessary is that they respect the need for good financial information and to have the desire to understand it.  Successful business owners are willing to spend the money to insure that they have current and accurate financial information via good bookkeeping and accounting processes.


Tuesday, July 2, 2013

What kind of loan do you need?

When we are helping a client write a business plan, one of the major considerations is cash flow and the working capital that will be needed during the start-up phase of the business.  New business owners are often unaware of the different types of loans available to them.  This article will detail the types of loans and their proper usage.

The easiest way to differentiate between loans is the manner in which they are disbursed and repaid.  A line of credit is very similar to a home equity loan: the business can request a disbursement when it needs the money and pay it back when they don't.  There is no set repayment schedule and interest is charged based on the average balance each month.  This type of loan is often used to smooth out differences between when a business receives money from its customers (accounts receivable terms) and when it pays money to its vendors (accounts payable terms).  Some businesses have to buy their inventory in bulk at certain times of year and then sell it at a later date.  Using a line of credit provides the business with the cash to pay for the inventory and still leaves operating funds while the inventory is sitting on the shelves.  The key to successfully using a line of credit, is to pay it off when the inventory is sold and the money is collected for the sale.  It is important to try and "rest" the line or pay it off in full periodically.  Remember, the line is supposed to be for temporary, seasonal or short term cash needs.

Term loans are generally disbursed all at once and have a set repayment schedule involving interest and principal payments.  This type of loan is used for longer term cash needs such as the purchase of equipment or real estate.  The length of the loan or the repayment schedule should match the expected life of the asset being purchased.  If you are buying equipment expected to last for five years, you would like to have it financed with a five year loan.  This matching principal is common in the accounting world and really does help a business cash flow properly. 

There may be times that the lender writes a loan with a shorter term than the repayment schedule which results in the need for either a balloon payment at the end of the loan's life (a large final payment) or a refinance of the remaining portion of the loan when the loan comes due.  This does create some risk for the business as it must insure that it either has the money available to make the balloon payment or the ability to refinance the loan when the original loan comes due.  Many businesses were caught short in 2009-2011 by loan structures such as this. 

Having an understanding of the different types of loan structures is helpful to a small business owner so they know what type of loan to ask for and terms to negotiate for.