Choosing the right small business accountant

the right accountant is vital for business successIt is important to choose the right small business accountant because accounting is the language of business.

It refers to the recording, reporting and analysis of financial data for economic entities such as businesses but also including economic entities such as states and countries. Accounting practitioners are generally referred to as accountants but the discipline of accounting has a number of specialized fields.

A small size business is probably most interested in a tax accountant considering that the major factor of concern is in relation to the payment of taxes and meeting other government compliance requirements.

Having said that, an accountant with management accounting expertise is also of benefit to small businesses that often get into difficulties because they do not understand the numbers. Management accounting essentially deals with the analysis of the financial data for use by internal business management.

Financial accounting deals with the record keeping processes and reporting of a company’s financial information. This is an area where small business owners can make savings if they have the right knowledge and tools to enable them to undertake the bulk of the bookkeeping processes.

The other area of accounting is called auditing. In this role, the accountant, or auditor as they are commonly known, review the recording of data as well as the financial processes to ensure, to the best of their ability, that the financial statements are likely to be accurate. This is more likely to be done for larger businesses.
Here is a video on 5 tips to choose an accountant

 

So whether you are involved with a small or large business, what are the factors you should consider when hiring the services of an accountant? Here are some things to consider:

Professional Association Accreditation

It is important to hire an accountant who is fully qualified and a member of a professional organization. The professional accounting organizations ensure that their members keep up to date with professional development and, to the extent that they can, abide by their rules and ethics. While this does not guarantee that your accountant will be competent, it is much more likely than hiring somebody who is not a member of such an organization.

Relevant Small Business Accounting Experience

It is no point hiring an auditor if you need a tax accountant. Even then you want a tax accountant who has experience that is relevant to you. A small business needs an accountant who has experience in all the disciplines – tax, management, financial and even auditing. So ensure that the accountant you hire has considerable experience not only in accounting, but experience with your type of entity.

Seek References from Existing Clients

A good accountant will have clients that will give them a reference. Ask for references and call them to determine what they think about the person or firm. Do a Google search and see what other references there might be on the internet as well.

Accounting is a critical element of a business and it is important to have an accountant who is experienced and with whom you have a good rapport. As you grow they will become an important partner in your business.

Accounting Software Reviews

accounting-program-reviewsA small business is a business like any other, so proper records should be kept to increase accountability of how the funds generated are spent. This means that the act of accounting is required. Accounting is a systematic process of recording, analyzing, summarizing and presenting the information to interested parties. These parties may include the managers, employees, government, tax authorities and others.

There are both formal and informal accounting methods. Most small business adopt informal accounting principles. They are more likely to keep the incomplete records. The accounts in a small business can be done using a manual system or computerized systems. To this day, many small businesses have opted using a manual system as they tend to be cheaper as compared to the computerized ones and require less expertise.

QuickBooks is a program often used by small business operators to keep track of the costs and all financial business operations. Quickbooks is a program from Intuit, which has been providing accounting software for many years. This program helps in the management of accounts payable and receivable as well as tracking expenses.

Another package is the Gnucash package that is a free package used by people using the Linux operating system as well as Windows. This program is most accurate and effective when it comes to applying double entry accounting principles and also when tracking bank accounts, incomes generated and expenses declared. It gives relevant and required information and ensures accurate financial reports are generated. (See http://en.wikipedia.org/wiki/GnuCash)

Another option is the Turbocash package. It is diverse and even medium sized businesses can use it. It creates a general ledger and helps in posting transactions into different accounts and producing financial reports. It assists in managing creditors, debtors, invoices and also the bank reconciliations. This system is unique in a kind that it can be set up in a way it uses different currencies.

Cashflow Manager is another package aimed specifically at small business. Developed in Australia, the US version is called Simplazz 1-2-3. It’s a rule of thumb that in order to be successful in preparing the financial reports you must possess accounting knowledge. The Cashflow Manager or Simplazz 1-2-3 package enables those who do not possess any accounting knowledge to prepare financial reports. This system is advantageous in that it is easy to understand, saves time and money.

If you want to keep excellent books and not need to use a computer, the Accounts Manager Manual System can be used in the UK. It is also helpful in that it acts as a learning tool for the bookkeeping process. It has instructions that act as guidelines, gives examples, has sections for recording receipts, recording payments, wages computations, creating a cash flow budget and also helps in VAT computation and reporting.

Xero software seems to be the flavor of the month because it is spending huge amounts on marketing even though it has never made a profit. It seems to be banking on building a large client base at any cost. Maybe the plan is to then sell it off which is an interesting strategy. It has a lot of add-on modules such as payroll tools, invoicing, inventory accounting, payments and budgeting and while it is a good program, it is quite costly to own when you do a 5 year cost comparison with other alternatives.

Expensify is especially an expense software. It uses a smart scan that inputs collects information, accepts receipts and matches it with relevant expense. It can also capture reimbursable expenses such as mileage.

Indinero is another system that is generally meant for entrepreneurs rather than accountants or tax professionals. It makes the information easier to understand for entrepreneurs and tracks the trading profits and loss accounts, the statements of financial position and the cash flow.

If you are looking at payroll, the Zen Payroll system focuses only on payroll. The user enters the data about the employees such as hours, bonuses, overtime pay and then the system automatically computes and pays the state payroll taxes.

Zenefit is a program that makes it easy to come up with benefits for a group on issues like stock options and medical. It also has a payroll feature and also helps entrepreneurs in the selection of insurance plan.

Small business software products are very important for any business that wants to make and maximize profits. Obviously, small business operators do not need to use all the systems but choosing the software that best meets their accounting needs is very important to be successful.

All businesses should choose an appropriate system and ensure they always do regular checks to make sure it is working for them.

Accounting Software for Small Business

Using accounting software
Image courtesy of Stuart Miles / FreeDigitalPhotos.net

I’m sure you put a lot of thought into starting your business. Buying the right accounting software demands a similar level of attention, because keeping good financial records is vital to your business success.

Choosing accounting software that suits your need is very important. Before buying software you need to consider your needs and whether the software can meet your business demands. On the other hand you do not want to get software that does everything a business might need but is so complicated that you will not be able to use it. So another important question is: “Who will use the software and is it easy to learn?”

In some cases you might also need to schedule a training session to make sure that people who are going to handle the software understand how to use it. If it’s a small business and you are going to be alone when you use the software, you should also consider the support that is accessible to you.

Because buying accounting software is a big decision, it is recommended to consult others who use accounting software and have experience in buying it. There are also many software review sites that can be useful.

Features Of Accounting Software

Small businesses can use a mix of management or financial accounting solutions depending on their business operations. Financial accounting mainly concentrates on allocation of business costs to goods or services, employing budgets for business functions and also helping to make the important financial decisions for the business. Management solutions can involve aspects like customer relationship management (CRM) and support functions as well as other functions to help you manage your systems.

Cloud v Desktop

Many businesses are now storing their essential data and content via a global network of computer servers known as the cloud. When asked, many new business owners have doubts about how safe is it to put essential and sensitive data on a server that is owned, maintained and secured by someone else. But just to clear the air, it is getting increasingly safer to use cloud features. Yes, cloud servers can be hacked, but you can also get viruses that destroy your information on your local systems.

Putting important information on a cloud server can be beneficial as you can assess your accounting details anytime and anywhere. All you will need is a web enabled device. It can also reduce the risk of the important data being lost as many small business owners do not backup their computers or particularly their accounting data properly.

Usage of cloud services can be time saving and cost efficient. An increasing number of accounting software programs provide this service. They directly back up all the data on a cloud network, so in case of any mishap such as if the data on the local computer gets erased, one can easily access all the accounting data using cloud.

On the other hand, the speed of a cloud system is dependent upon your internet speed. And even though technology is advancing at a rapid rate, some functionality on the cloud can be slower. For example, when you do something in the cloud it needs to communicate back to the server and this can be slower than your desktop where everything is together and instantaneous. Plus there is some functionality that can be done on a desktop that just simply can’t be done in a web browser as yet. So we are not convinced that the cloud is the panacea for everyone yet.

Things To Consider Before You Buy

As we said earlier, the first thing to consider before buying software is your business needs and whether the software can meet your business requirements.

Another thing to consider is how easy the software is to use. Many small business owners have never been taught accounting and can struggle with many of the options available. For most self employed small business owners we recommend an easy program that makes it easy to track the money coming in and going out of your business, create invoices, manage receivables and payables as well as inventory bought and sold without knowing anything about accounting.

The easiest program we have seen is called Simplazz 1-2-3 in the US, Simplazz 1-2-3 in Canada, Cashflow Manager in the UK and Cashflow Manager in Australia.

Of course, another thing that you should consider before buying accounting software is your budget. Accounting software is available in various different ranges when it comes to money. Some are highly advanced while some are very basic. You should be able to learn the software quickly to achieve the benefits you are looking for.

Types of Software Available

  • Accounting for Small Businesses: These are off the shelf systems that meet the needs of most small businesses. These software programs will have reports, accounting tools and everything that is needed to assess financial data. Some of the software that falls under this category has the ability for small businesses to add some custom needs and some have payroll functions for those with employees.
  • Business Management Software: Business Management software is specially designed for businesses that need to keep the track of point of sale and inventory control. These are more advanced than the basic categories and can provide with features like integrated billing, customer relationship management and even purchasing.
  • Free Solutions: Accounting software has to deal with many sensitive financial matters so most business owners are a bit skeptical of free versions of software. But there are a number of free software options available, often providing limited services like creating invoices, handling payroll and printing checks. As this software provides a very limited service, those who do not have a budget for paid software at the beginning mainly use it. But your accounting processes are vital to your business success and you should look at getting the best solution right from the start.

Some programs like Simplazz 1-2-3 / Cashflow Manager (mentioned above) have a free trial so it is worth taking the time to review that when you are starting out.

Keeping good records is extremely important to the success of your business and so is the right software that you can use and understand. Take the time to review the alternatives when you are getting started.

Accounting for a Small Business

 

avoiding accounting mistakesStarting a business is easy but maintaining it is all together a different thing. To run a successful business one needs to possess experience in various business functions. For example, production of products, distributing them and creating marketing strategies are just some the many tasks required to run a successful business. With all these tasks, accounting also plays a very important role. Managing financial records throughout the year is essential in keeping your business focused and also helps during tax time.
A good accounting system may be the difference between earning considerable profit in a small business and actually having financial losses. Reports suggest that about two thirds of business start-ups last for just two years and only 44 percent are able to sustain for just four years. Poor maintenance of accounts is one of the main reasons why small business fails.
Here are a few common accounting mistakes that lead small businesses to failure.
1. Not Staying On Top Of Receivables
Whenever you issue an invoice, a receivable is recorded – this means that the customer to whom you have supplied the order owes you money. Not keeping track of, and managing the receivables, causes cash flow problems that can eventually result in business failure.
2. Not Keeping Expense Receipts
Another important thing that can result in business financial difficulties is not keeping track of expenses properly. Many times what small business owners fail to consider is that apart from just buying raw materials, there are many other crucial expenses. For example, transport costs or office rent. These are essential overheads that should be considered before setting a selling price of a product and to do that you need to keep track of them.
3. Failure to record cash expenses.
It is very important that all the expenses are recorded to calculate the appropriate profit. While it’s easy to calculate the amount of payments processed by using banking facilities like credit cards or debit cards, failure to calculate cash expenses can lead to big losses depending on the nature of the business. At the very least, not recording cash expenses can cost you dearly by not claiming tax deductions to which you are entitled.
To efficiently maintain these records without any error, using computer software is highly recommended. This software can be very helpful in managing the accounts of your firm and also helps in accessing historical information.
Stay tune for our next post on ‘accounting software’ coming soon.

 

Welcome to J3 Concepts in Accounting

accountingDouble entry bookkeeping is often said to have been invented by a Franciscan monk Luca Pacioli in Milan. In 1494 he wrote the ‘Summa de Arithmetica, Geometria, Proportioni et Proportionalita’. He is also said to have been Leonardo Da Vinci’s math teacher.

However, in 1458 Benedikt Kotruljević wrote about double entry bookkeeping in: Book on the Art of Trade.

So the method used by modern accounting firms to this day was invented in the 15th century.

However, one of the biggest things that small business owners struggle with is this area of bookkeeping and accounting.

This is not surprising when they have little education in the area and it can be quite complex.

For example, double entry accounting divides transactions up into 5 types – assets, liabilities, equity, revenue and expenses. And then the ‘double entry’ is done by ‘debits’ and ‘credits’ such that for the accounts to be in balance, the debits must equal the credits.

So it can be confusing for people who are untrained in accounting to understand that an increase in assets and an increase in expenses are both debits. And likewise, an increase in liabilities and an increase in revenue are both credits.

For many years, small business owners have kept a ledger that records the cash in and the cash out, together with other ledger records of money owed to (accounts receivable) and money owed by the business (accounts payable.)

Find out more about double entry bookkeeping at http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system

The introduction of computers and software has brought the technology advances to give small business owners the opportunity to keep their own double entry accounting records. Unfortunately it has not brought with it the required skill levels because, as we said earlier, double entry accounting is confusing.

When small business owners try to do their own accounting, or when they engage bookkeepers who don’t really know what they are doing either (not all of them of course), they cause a massive problems for their accountants who often have to spend hours of time finding the errors and correcting them in order to prepare correct financial statements.

What conceptually could have been a benefit to both small business owners and their accountants can cause accountants a lot of headaches and the small business owners a lot of additional cost.

So the reason for this blog is to explore the concepts of small business accounting and bookkeeping, what is changing, what is new and what is effective for small business owners to keep great records that reduce their costs and make life easy for their accountants and tax advisers.

We trust you enjoy the content we have to share.

The J3 Team