Posts Tagged ‘Accounting’

How Much Do Accounting Services Cost?

Without fail, we get asked “How much do accounting services cost?” by about ten percent of our initial inquiries. The question comes in various forms, from “What is your hourly rate for a bookkeeper?” to “Can I get a ballpark of what it would cost for a daily bookkeeping service?” but the questions all boil down to one main concern: Cost.

Of course, we understand that cost is and will always be a factor in decision-making. After all, budgets must allow for the cost and an appropriate return on the expense must be present. But we worry sometimes that this question, when taken out of context, fails to address the greater issues at hand. As such, we do not have a pricing matrix per se but rather we create custom fixed fee monthly quotes for each prospective business based on the scope and complexity of the work required. However, we can address cost considerations in different ways to help answer your pricing concerns.

What About An Hourly Rate for Bookkeeping Services?

This may come as a surprise (unless you’re a big fan of accounting yourself) but virtually any business can boil down their expenses and costs to some form of an hourly rate. After all, the number of employee hours spent on a given project and the employees’ salaries can easily provide a rough hourly estimate through basic arithmetic. As a responsible business, we have to know what the cost of our services is to appropriately budget and set pricing. However, actually billing at an hourly rate doesn’t make sense for us due to a variety of reasons.

Scope and Complexity of Work Isn’t Always A Straight Equation

This may go without saying but not all bookkeeping tasks are as simple or as complex as others. Some of our clients require incredibly complex reporting and financial management, which requires oversight by highly trained professionals. These same highly trained professionals may also be the ones monitoring and managing more common bookkeeping tasks—but charging clients a single “rate” for services would potentially put them at risk for paying hourly rates that are not always in line with the level of knowledge required to deliver a service. Instead, evaluating an approximate amount of time required to perform each account task in a period and establishing monthly, fixed fee rates for the complexity of work required is more likely to create a fair price.

Price Fluctuations In Monthly Fixed Fees For Accounting Services

At the same time, we recognize that our clients like to have options when it comes to their accounting services. From adjustments in frequency that increase or reduce the number of times work is performed to service add-ons that increase or reduce the complexity of reporting and analysis, we provide up to three “service tiers” for accounting services quotes. Some examples of typical variations include the frequency of review with a controller, managed employee expense reporting, payroll management and sales tax reporting. Sometimes simple adjustments in frequency, such as from monthly to quarterly, can have notable effects on pricing.

Interested in finding out how much accounting services would cost for your business? Contact us for a free consultation.

 

Why Our Clients Are Relying On An Outsourced CFO

Throughout the course of our work we find ourselves engaging with and working in accordance with many different types of professionals to assist our clients. One of the most common professionals we work with is the company CFO—and for good reason. Of course CFOs rely on accurate financial statements and thorough accounting, which is the bulk of our daily work for clients. As we’ve honed this working relationship and find ourselves engaging on more comprehensive levels with our clients’ CFOs, we’ve started to notice a bit of a trend: Many of our clients are increasingly reliant upon outsourced CFOs.

What Is An Outsourced CFO?

So what is an outsourced CFO you might ask? And how does it differ from a conventional CFO? Well, in actuality the specifics of the job functions don’t differ so much between outsourced and conventional as they may between different company types and sizes. However, where they differ substantially is in the flexibility and adaptability in the particular application of their skills.

For many of our clients, an outsourced CFO is proving the ideal channel because it provides the high level CFO services they require without the burden of hiring and keeping on staff a seasoned CFO. For growing and established businesses with revenues up to $30 million (our typical client type), an outsourced CFO provides all of the expertise and accountability without needing to be kept on staff and on payroll at their pay scale. Instead, they can utilize the CFO services they require at the frequency they require, whether that is once a week, once a month or on a project basis.

What Are CFO Services?

Of course, CFO services vary just as greatly. CFO services run the gamut, from overseeing the totality of accounting and finance functions, securing funding or financing, engaging with other key professionals, ensuring regulatory compliance, reviewing and negotiating contracts and insurance or managing restructuring, buy outs and company turnarounds. From our startup clients seeking funding to our established businesses looking to explore new growth opportunities, the CFO role is an integral part of their development and decision process.

For more information on Outsourced CFO Services, please check out our recent blog post on About.com’s new Accounting Channel.

 

Smart Tools to Improve Cash Flow and Collections

No business can operate over the long term without generating sufficient cash inflows. Even a profitable firm will struggle if it can’t collect enough cash to fund operations. If cash collections are too slow, there are some great tools that can help you improve the process. When your business faces this challenge, an outside expert can help you address this critical issue.

Understanding Working Capital

Working capital, broadly defined as current assets less current liabilities, is needed to address cash flow and liquidity. In this case, “current” refers to 12 months or fewer. Current assets include cash and anything you expect to convert to cash within 12 months. Inventory and accounts receivable are two current assets that can be sources of cash. You collect on accounts receivable to generate cash and sell inventory to collect cash.

How Much Cash Do You Need?

If you need a system to collect receivables faster, how much cash is enough? How much cash do you need each week or month to operate your business? The answer to that question will be your collection goal for a given time period.

Technology can help you find out your cash needs quickly. As this article explains, Expensify is a mobile app that helps a business process and pay expenses remotely. The app will store your expense payment history. If you need a quick estimate of your firm’s expenses, you can check your Expensify activity.

If you find estimating your cash requirements difficult, an outsourced controller service can help by forecasting your required cash flow. The firm can also help you determine your cash needs and create a plan to collect cash faster.

Implementing Your Collection Plan

Assume that Bob’s commercial plumbing business requires $30,000 a week to operate. Bob’s outsourced controller helps him with this calculation. He realizes that the next step is to implement a cash collection program.

Quickbooks online accounting software offers a variety of reports to track your progress on cash collections. An aged accounts receivable report, for example, will group your receivables together, based on the date of each invoice. This report provides a quick snapshot of how fast you’re collecting receivables.

A lack of manpower can prevent a business from generating more cash flow and profit, as explained in this article. In this case, an outsourced controller sets up a system to generate and review accounts receivable aging reports each week. The controller sits down with company management and documents a formal collection policy. The plumbing firm follows up with delinquent customers using the new policy. Outsourcing this work helps the business collect cash faster.

 

Accounting and Bookkeeping Software for Independent Contractors

As an independent contractor, it is important to make sure your books are in order. One of the main reasons for this is to make your tax reporting a lot easier and get you back to work as quickly as possible. As an independent contractor, you are responsible for paying quarterly income taxes–which can be an arduous process if you don’t know what you’re doing. Knowing how much you are paying out and bringing in will assist in getting your taxes paid in a timely and accurate manner and reduce the amount of time spent with your bookkeeper or accountant. Having an accounting system in place will increase productivity and help your business run efficiently. By keeping track of bills, receipts, your net profit and gross profit, and by maintaining a clean balance sheet, you can keep an eye on your money without taking too much time from your day job.

To help get your accounting system up and running, check out a few accounting industry software providers we like to use with our clients:

Quickbooks Online

QuickBooks is now available in the cloud for on-the-go accounting and allows you to import your monthly bank statements directly into the program for ease of use. There are a variety of functions you can use based on your niche for well-documented recording and its easy-to-use interface can help you get up and going whether you manage your books entirely on your own or use an outsourced bookkeeping service. Plus, if you take payments through different online shopping sites, it includes the ability to keep track of your expenses and income from PayPal, Amazon, Etsy and eBay.

Tallie

Keeping all your receipts together can be a hassle. This program lets you take a picture with your smartphone, catalog it directly with the phone app, and organize based on project, client or another categorization method as you determine. If your business is especially expense-heavy, including lots of on-the-go receipts, you likely run the risk of losing receipts or failing to keep adequate track of your expenses. And the last thing you want to do is find yourself sifting through a box of unorganized receipts every quarter. Tallie can help you manage your receipts as you create them–and syncs directly with QuickBooks Online for seamless data management.

ScanWriter

ScanWriter assists with automated data entry directly into QuickBooks, including 100s of transactions from bank and credit card statements, bills, sales orders and invoices. A lot of independent contractors find themselves spending countless hours hand-keying data–which takes up way more time than it is worth. Instead of catching up on data entry on your day off, using an automated system will help you get data entered quickly and correctly (less user error!).

Bill.com

Start encouraging your accounts payable to take electronic payments–and then move your accounts payables and accounts receivables into the 21st century with Bill.com. You’d be surprised how many of your payments can be switched to ACH payments–we help our clients switch to electronic payments for as many vendors as possible to help streamline the bill review, payment and approval process. Whether you’re the only person reviewing bills or you’re working with a partner or small team, Bill.com can help automate the entire review process for you.

Staying on top of your accounting will save you a lot of time, effort and money in the long run. Finding and utilizing the programs that meet your needs will help make you a successful indepedent contractor. And if you need any help, an online bookkeeping service can help you get up and running, from managing your entire accounting department to assisting with accounting software integrations or specific bookkeeping services.

Wondering what accounting services are available for independent contractors? See whether accounting services are for you.

 

Profits vs. Profitability: Why You Need to Track Profit Margins

You don’t need an MBA to know there are two basic ways to increase your profits: increase revenues or reduce costs. The smartest businesses implement marketing strategies and cost-cutting measures that do both, but far too many obsess so much over increased sales that they forget about the importance of trimming the fat, and end up actually reducing profits.

Profits Alone Can Be Deceiving

Anyone who’s taken a basic business course knows how to calculate profits. You add up total revenues and subtract total costs, and whatever’s left is your profit. But profit as a measure of business success can be deceiving. For example, Company A spends $900,000 to sell $1 million in products and services, generating $100,000 in profits. Company B spends $400,000 to generate $500,000. The two companies generate the same profit ($100,000), but are they equally profitable?

The simple answer is no. The more a company spends to generate a designated profit, the more vulnerable it is to minor cost shifts, which could quickly put it out of business. Let’s say Company A above spends $200,000 in health insurance costs, and those costs increase by 10 percent. That increases insurance costs by $20,000, reducing profits to $80,000. Company B spends $100,000 in health insurance costs. The 10 percent increase cuts into the bottom line by just $10,000, and profits drop to $90,000. Company B is now making $10,000 more in profit than Company A.

Profit Margins Provide a More Realistic Perspective

It’s important for businesses to track not only profit, but also profit margin. While profits are measured in dollars, the profit margin is measured as a percentage, or ratio, specifically, the ratio between net income (profit) and total sales.

Continuing the example above, Company A has $100,000 in net revenue and generates $1 million in total sales, so its profit margin is 100,000/1,000,000 or 10 percent. Company B also generates $100,000 in net revenue, but its total sales are $500,000, making the profit margin 20% (100,000/500,000). The two companies have the same amount of profit, but Company B is twice as profitable as Company A.

How to Increase Profit Margin

Because profit margin more accurately reflects long-term profitability and a business’s vulnerability to sudden increases in fixed costs (such as insurance, office expenses and taxes), it’s important to track profit margin and implement strategies, which keep it as high as possible.

There are basically two ways to increase a company’s profit margin. First, you can increase the price you charge for your products and services, but this must be done only after a careful analysis of the impact of those increased prices on consumer behavior and total sales. The second and much safer approach is to control costs.

The Importance of Cutting Costs

A minor decrease in costs will improve your profit margin more than a comparable increase in total sales. Company B in the scenario above spends $900,000 to generate $1 million in sales, giving it a profit of $100,000 and a profit margin of 10 percent. If the company increases sales by $50,000 (say, by increasing either pricing or customer base) but don’t decrease costs, its profit increases to $150,000, and the profit margin increases to 150,000/950,000, or 15.8 percent.

If it instead kept sales constant, but reduced cost by the same amount ($50,000), profits once again move to $150,000, but the profit margin now increases to 150,000/900,000, or 16.7 percent. Cutting costs has made Company B more profitable, and less vulnerable, than increasing sales, and it’s generally easier and less risky to reduce costs than to increase sales.

Conclusion

No single strategy is likely to increase a company’s profitability or prospects for long-term success. The most successful companies carefully analyze consumer behavior to determine the best price to charge for products, while simultaneously researching a range of fixed cost-cutting strategies, ranging from outsourcing non-critical job functions to downsizing to carefully researching health care options for their employees. A comprehensive analysis of both price and prudent cost-cutting measures has the greatest chance of increasing a company’s profitability and persistence.

 

The 7 Deadly Sins of Bookkeeping

Accounting is a tedious and often stressful task for business owners. When working on the bookkeeping for a business, mistakes can occur if it is not completed meticulously. When a bookkeeping mistake happens, it provides inaccurate financial data about the company’s finances and may lead to poor business decisions. Accounting errors can also lead to serious budget problems. The guide below provides insight on seven common deadly sins of bookkeeping and how to avoid them.

1. Not Keeping Track Of Receipts

Business owners are sometimes not aware of the importance of keeping their business receipts for accounting purposes. Receipts are crucial evidence that can support tax write-offs to the IRS. Without a receipt, a business may not be able to claim an expense on its tax return. Consider scanning all receipts into the computer as well as keeping the original copy locked in a file cabinet for safekeeping.

2. Inaccurately Logging Major Purchases

Business owners can miss out on several critical tax deductions due to inaccurately logging major merchandise or equipment purchases. The type of tax deduction for business overhead purchases differs depending on the lifespan of the equipment or merchandise of business purchases. For instance, printer paper and ink cartridges are typically categorized as office supplies and immediately written off during the year they are purchased. However, major equipment purchases such as copy machines and office computers can be allocated as long-term assets. The major purchases value can be depreciated over the years as long as the merchandise is still usable.

3. Mixing Business and Personal Finances

When starting a new business, it may be convenient to mix business and personal finances together. However, it is essential to keep all finances for personal and business separate. Business banking accounts should also be separate from personal accounts to avoid inadvertently intermingling finances. Keeping the accounts separate will avoid reporting of inaccurate information, which can lead to an audit by the Internal Revenue Service.

4. Lack of Implementing an Earnings Management Strategy

One common mistake business owners make is taking money from one account and using it for another without reporting and allocating the funds correctly. Bookkeeping and appropriate reporting of cash allocation for investments, expenses and savings is essential to keeping an accurate financial profile and budgeting strategy. The earnings management strategy a business develops should determine the amount of profit a business should reinvest back into the company, payments of large expenses and cash flow needed. The long-term strategy will also enable a business to determine how to allocate cash to each business account.

5. Inaccurate Financial Reports

Inaccurate recording of assets and expenses can lead to inaccuracies within the financial reports. The accountant or bookkeeper should be able to determine the correct business accounting method to use in order to correctly allocate the flow of cash. The cash accounting method is the simpler one because it is used to show the actual distribution of cash that goes into and out of the business. The accrual account method documents income and expenses immediately, rather than waiting until cash is actually exchanged.

6. Allowing Multiple Administrative Access to Accounts

Business owners should never give administrative access to their accounting files to another person. There should be separate access for each person with their own username and password. The individual employee access will provide information on who access the files at any given time and limit the type of access they have within the accounting system.

7. Lack of Multiple File Backup Methods

Many business owners are now relying on the use of cloud computing as a backup for their data and financial information. Although the “paperless” idea is considered environmentally friendly, it may not be advantageous for business information. In short, consider keeping records both online and offline in case data is lost or files have been destroyed.

In order to have a firm grasp of a business’s finances, it is essential to understand the meaning of each account. Consider working with a professional bookkeeping service to determine which procedures and methods are best.

 

The Best Classes to Take to Become an Accountant

Introduction

Accountancy can be a solid and rewarding career choice for people interested in business and finance. Anyone planning on studying for a degree in accounting can make some academic choices now that will make earning their degree easier.

Accountants are responsible for helping individuals and businesses understand their financial responsibilities, assisting people in reducing their tax burdens and helping to promote good money management.

If you’re interested in becoming an accountant, there are a number of areas that you will want to study that will give you the best chances. This article explores the general and specific classes that you could take to support a career as an accountant. There are two main areas that can assist you:

  • To expand your business knowledge, you should take some general business studies.
  • For an accounting degree, you will need to take formal accountancy classes.

General business studies

When you’re looking for general classes to take and skills to learn, you should focus on areas that will increase your knowledge of business, enhance your own skills and give you experience in related fields.

Completing a variety of studies will give you a good general grounding and understanding that will make earning your accounting degree that much easier. These areas might include:

  • Statistics, mathematics and analysis.
  • Business strategy, tactics and management.
  • Financial and risk management.
  • Business communications.
  • Macro and micro-economics.
  • IT and technology studies.

Additional classes

You may also need to take additional classes (either optional or as part of the core curriculum) to increase the number of credits that you can earn towards your degree.

Requirements vary between academic institutions and you should check the websites of any colleges or universities that you are interested in to learn their requirements.

In closing

Good accountants have an excellent understanding of business and a diverse set of skills.

Making the right choices about your academic needs now can make it much easier for you to earn a degree and let potential future employers know about your interests and talents.

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