Learn to love accounting

My goal in life is to get everyone to love accounting. I don’t think I’m going to succeed but I’ll keep trying. What do I love most about accounting? It’s all about balance. Balanced equations, balanced transactions, balanced books. In these turbulent times, couldn’t we all use a little balance in our lives?  So how can accounting bring some balance to your business life?

Try focusing on managerial accounting. Large businesses have cost accountants, Fortune 500 corporations have whole departments devoted to the discipline. Successful small business owners need to assume this role as well. It is not as scary as it sounds. We are fortunate in this time period to be able to make use of a variety of accounting software programs. Beth and I are QuickBooks Pro-Advisors, but there are many other good programs out there that make accounting and bookkeeping easier for the small business owner.  We have noticed that too many small businesses have only a tax accounting focus to their accounting. We suspect that is because most small businesses use a tax preparer to finalize their books and a tax preparer is naturally focused on what the business needs to file their taxes. It is very important to keep the tax authorities happy! It is also important to recognize that tax accounting is only a small component of the accounting picture.

Managerial accounting is using the information your accounting program or accountant is providing to help you guide your business. This means you must have financial statements prepared and available to you on a monthly basis. This is where the focus shifts from tax accounting which relies only on a year-end statement to managerial accounting which requires monthly statements. Ideally, as the small business owner, you have prepared a budget for your business and you are comparing your actual results to your budget regularly. You should also be comparing this developing and this task will bring these problems to your attention before they reach a crisis point. If your gross profit is less than you expected you need to understand why. Is your main supplier charging more than you anticipated? Are your shipping costs running higher? Do you have an employee theft problem? If your supplier is charging more, do you need to raise your own prices or can you get your sales staff to increase volume and earn you a volume discount. If shipping costs are rising, do you need to add a surcharge to your customers? If you suspect theft, do you need to install security cameras in your warehouse?

In today’s tough economy, no business can afford to be blindly operating at a loss. If you are losing money and you don’t know why, putting on your managerial accountant hat can help you answer the questions and formulate a plan to solve the problems. So do you love accounting a little more? Maybe not, but hopefully you can see how it can help bring some balance to your business life.

Are You Concerned About the Integrity of Your Financial Information?

Every once in awhile a situation arises which reminds me of the reasons why Susan and I were compelled to start E&S Entrepreneur Advisors, LLC. This week I encountered one of those situations: a situation that happens over and over through no fault of the service provider, but which greatly impacts the small business owner.

If you bring your information to your tax accountant in a reasonable time frame (not March 31!) and your tax accountant immediately suggests filing an extension, then that might be a flag to you that your books are not in good order. If your tax accountant is asking you a lot of questions and indicates that they will have to make quite a few adjustments, then that is another flag that your books are not in good order.

Tax accountants are extremely busy from the beginning of the year until tax time, especially the smaller CPA firms and Single-Person Tax Providers. They do not have the time to be straightening out your books. They file extensions and then put your information aside until they do have time later. And, depending on the tax accountant's demeanor, they may never tell you that you are accounting for things incorrectly. Remember, the tax preparer's main focus is on taxes.

In the meantime, many small business owners are frustrated and overwhelmed. They end up incurring late penalties on their other year-end government reports and operating 6 months into the following year, at a minimum, with poor financial information. They are not comfortable with the integrity of their financial data.

If you are in this situation, give us a call now to set up a Free Consultation. We will straighten out your accounting situation and put procedures in place for you so that you have the vital information at your fingertips each month in order to effectively manage your business and make timely business decisions.

What can good accounting do for your small business?

What is accounting really? Techniques or a language that allows you to keep track of the money coming in and going out of a business. Many people are uncomfortable with accounting because they are unfamiliar with the terminology. I can’t tell you how many times I tried to explain to friends struggling with an accounting class in college how assets could be debits, liabilities-credits while income was a credit and expenses were debits. They always thought assets and income should act the same way. I tried to get into the theory behind double entry accounting and how the balance sheet and income statement flow through each other, but some people just got bogged down with the terms.

The nice thing about the invention of accounting software programs is that the terminology has really become a non-issue. With QuickBooks or other programs, the user is filling out forms or writing checks and the program “writes” the entries for you so you don’t need to know whether you are debiting cash or crediting sales. Once you let your discomfort over the terminology go, you can focus on learning how to use the program. Modern software has nice features built in that require you to enter data such as customer names and addresses only once and then each time you invoice that customer, all that information is automatically entered into the form. Even better, once you’ve learned how to use your accounting software, you can really reap the benefits of good accounting by learning how to use the many reports the programs can generate.

The whole point to establishing a good accounting system is to provide you, the owner, with the information you need to run your business. The less time you spend on the bookkeeping portion of the accounting process, the more time you will have for the analysis portion. It is the analysis that will point out the questions your business is asking you. While modern accounting programs can’t answer the questions, but they can point you in the right direction and give you the information you need to find the answers.

A successful small business owner learns how to make the most from her accounting process by selecting the right program, learning how to use the software, learning how to read the financial statements and using all the great information to make the decisions needed to keep her business moving forward.

My goal in life is to get everyone to love accounting. I don’t think I’m going to succeed but I’ll keep trying. What do I love most about accounting? It’s all about balance. Balanced equations, balanced transactions, balanced books. In these turbulent times, couldn’t we all use a little balance in our lives? Accounting can help give you some. See-something to love already and a reason to love accountants. Yes, I’ve heard all the jokes; my husband loves to accumulate them. So how can accounting bring some balance to your business life? Try focusing on managerial accounting. Large businesses have cost accountants, Fortune 500 corporations have whole departments devoted to the discipline. Successful small business owners need to assume this role as well. It is not as scary as it sounds. We are fortunate in this time period to be able to make use of a variety of accounting software programs. Beth and I are QuickBooks Pro-Advisors, but there are many other good programs out there that make accounting and bookkeeping easier for the small business owner. Managerial accounting is using the output from your accounting program to manage your business. We have noticed that too many small businesses have only a tax accounting focus to their accounting. We suspect that is because most small businesses use a tax preparer to finalize their books and a tax preparer is naturally focused on what the business needs to file their taxes. It is very important to keep the tax authorities happy! It is also important to recognize that tax accounting is only a small component of the accounting picture.

Managerial accounting is using the information your accounting program or accountant is providing to help you guide your business. This means you must have financial statements prepared and available to you on a monthly basis. This is where the focus shifts from tax accounting which relies only on a year-end statement to managerial accounting which requires monthly statements. Ideally, as the small business owner, you have prepared a budget for your business and you are comparing your actual results to your budget regularly. You should also be comparing this year’s results to prior year’s financial information. Red flags should pop up if financial problems are arising and this task will bring these problems to your attention before they reach a crisis point. If your gross profit is less than you expected you need to understand why. Is your main supplier charging more than you anticipated? Are your shipping costs running higher? Do you have an employee theft problem? If your supplier is charging more, do you need to raise your own prices or can you get your sales staff to increase volume and earn you a volume discount. If shipping costs are rising, do you need to add a surcharge to your customers? If you suspect theft, do you need to install security cameras in your warehouse?

In today’s tough economy, no business can afford to be blindly operating at a loss. If you are losing money and you don’t know why, putting on your managerial accountant hat can help you answer the questions and formulate a plan to solve the problems. So do you love accounting a little more? Maybe not, but hopefully you can see how it can help bring some balance to your business life.