Balance Sheets - How to Analyze a Balance Sheet Properly

A balance sheet is considered to be the statement showing the business position of any company, firm or business organization as on a particular date. When it comes to business position, it represents the assets owned by the firm and liabilities owed by the firm to others.

A similar definition can be given for profit and loss account of any firm. Profit and loss account is a statement showing the income earned and expenditure incurred by the firm during a particular period.

Of course, the period can be monthly, quarterly, half yearly or yearly. In many countries, as per statutory rules in force, each firm has to publish the balance sheet and profit and loss account at least once a quarter.

When it comes to the financial statements namely; balance sheet and profit and loss account of any firm, the following are the interested parties who are willing to know the details: the owners of the firm called as shareholders or stakeholders; the creditors who have been providing the materials required by the firm on credit terms; the bankers who had granted limits to the firm or who are willing to provide financial assistance to the firms; the debtors who are the users of the products and services provided by the firm; the auditors and the government.

Nowadays, the balance sheets are either provided in account form or statement form. For the purpose of analysis of any balance sheet, the liabilities can be bifurcated into long term liabilities consisting of capital, reserves and long term borrowings and short term liabilities consisting of sundry creditors, overdraft availed from the bankers, advance payments received from the customers and any other provisions. The liabilities are substituted by the word namely; sources and similarly the assets are substituted by the words namely; applications or uses.

The long term uses consist of land, building, machinery, intangible assets, noncurrent assets and short term uses consist of cash balance held by the firm, balance held in the bank, sundry debtors, stock of goods and advance paid to the suppliers.

The analysis of any balance sheet is done using ratio analysis and the ratios are classified into liquidity ratios, profitability ratios and solvency ratios.

Current ratio and quick ratio or acid test ratio are classified into liquidity ratios. Debt equity ratio and debt service coverage ratio are called as solvency ratios.
Gross profit ratio, net profit ratio etc. are called as profitability ratios

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Are You Making Full Use of Your Accountant?

If you are running any kind of business large or small or even a family owned business then you should really have an accountant at hand to look at all your financial transactions. Individuals are also recommended to have their own personal accountants because although we might prefer to do all our financial statements ourselves, an expert eye is also needed to make sure we are correct. In other words to use an accountant is definitely a wise decision.

Main duties of an Accountant

The duties and responsibilities of an accountant stretch far beyond working with numbers and handling company finances, whether minor or primary every function of an accountant must be compliant with state laws, rules and regulations of the industry they are working in. In addition to this they need to be aware of and obey all the various tax and accountancy laws of the country they are in so accountancy is not just about juggling numbers. There are certain duties that are common among all accountants regardless of the industry they are working in. Differences in accounting duties do exist and to use an accountant you should choose one who is knowledgeable in the industry you are in. Preparing financial budgets and reports, managing organizational finances, make the appropriate tax payments on time, developing cash flow and profit projections and budgets of organizations, preparing monthly and annual financial reports pertaining to profits and losses loss are just but a few of the duties accountants are responsible for. So why use an accountant?

Advantages of Accountants

You will be receiving the services of someone who is a keen decision maker, has leadership skills, a strategic planner and has an unparalleled knowledge about financial and non financial matters of an organization. So if you are asking why use an accountant? These few points should motivate you to acquire the services of one since they can also be able to determine where you or your organization is financially. This is really an important factor to enable to project future goals of the company or individual correctly so use an accountant to point you in the right direction.

Exploit your Resources

One way you can use an accountant in your organization is as an accounting risk analyst. The accountant will identify all market dangers, competition and opportunities unique to your area of expertise and find any operational and strategic risks the business may be facing. The accountant will then provide a solution to what you are currently facing to enable your organization cope and survive.

If you lack the ability to analyze and track data to find missing funds and are suspecting of foul play at your organization, then you should really use an accountant. Forensic accountants not only find missing funds, they also identify fraud and trace any illegal activities that may be happening in your organization. This is important to avoid prosecution for something that may not even be you fault.

If your business stretches across many borders then it would be wise to hire an International accounting specialist to help you manage all you cross border transactions. So you may be wondering why use an accountant for this? Different laws apply to different areas especially across international borders and the International accounting specialist will ensure that you are compliant with all these laws.

If you need someone to handle all the market research in you organization and identify supplier bet practice and capabilities, take care of contracts and come up with evaluation plans then you should hire the services of a strategic procurement manager in the form of an accountant since they have the ability to negotiate well and a strategic mind for planning.

Accountants can also act as Chief Financial Officers (CFO's) of organizations. By analyzing data, creating road maps for success and ensuring you are ahead of the competition, the organization remains financially healthy and able to meet all its obligations.

As you can see accountants are not just book keepers but they can fit into a variety of roles in any industry. They are a necessary part of business practice and may just be the saving grace your business needs so use an accountant to his/her full potential and enjoy the benefits and expertise they bring to the table.

Culture And Accountancy

In 1980, a commentator named Hofstede defined culture as the collective programming of the mind that distinguishes the members of one human group from another. He likened the cultures of the world to the operating systems that let us use our computers. Computer operating systems contain sets of rules that act as a point of reference. In this way, culture includes a set of societal values that drive institutional form and practice. If this is true, then culture has an impact on how countries form their legal systems, political systems, capital markets, and other substructures. If, such as we apply this to Accounting then you can bet that accountants from Ireland hold different accounting practices and norms than their accountant counterparts in England, or America. Sometimes, culture in one country is so diverse that differences in how accountants practice their profession vary from one region to another. As accounting is a profession which allows for professional judgment, we can assume that accountants in Cork behave differently from accountants in, say, Dublin.

Hofstede then studied over one hundred thousand employees from IBM in 30 countries, which led him to define, for him, four basic dimensions of culture. The first dimension is individualism vs. collectivism which addresses the degree of interdependence that a particular society maintains among its people. The second is large vs. small power distance. Power distance refers to the extent to which members of a society accept that power in institutions and organizations distributed unequally. This dimension of culture according to Hofstede addresses how society handles inequalities when it occurs among its people. The third dimension is strong vs. weak uncertainty avoidance which is the degree to which the members of society feel uncomfortable with uncertainty: how a society reacts to the fact the future is unknown, and whether it tries to control the future or lets it happen. The last dimension is masculinity vs. femininity which measures a society's preference for achievement, heroism, material success (which are masculine traits) and for relationships, modesty, caring and quality of life (which are feminine traits).
Researchers have then used these cultural differences to explain international differences in the behavior of accountants and to some extent, the nature of the accounting system in their country. For example, researchers suggest that a country with high uncertainty avoidance and low individualism will be more likely to show conservative measurement of income, and may prefer to limit disclosure only to those closely involved in the business. Researchers have then come up with other dimensions with which to measure accounting values, such as professionalism vs. statutory control, uniformity vs. flexibility, conservatism vs. optimism, and secrecy vs. transparency.

What does this all mean? For accounting firms and accountants, it means that they can look to accounting practices of other areas if they want to improve and develop other ways of doing things. For customers, it means that they can adjust their expectations depending on who they hire and where they are from. This leads to more options for both ends, which, in the end, can only be a good thing.

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Do I Need to Accept Credit Cards for My Small Business?

If you run a small business, you know what a headache it can be to know that you have a sale on the line but your customer doesn't have the cash with them for the purchase. What can you do? Take plastic!

In today's competitive market, it has become a real necessity to offer a variety of payment options, but that is no reason to have credit card processing services take a huge chunk of the first slice of the pie leaving you with the left overs.

Where can you begin? Compare!

The best services will not charge application or setup fees. They will not set monthly minimums and will not charge you an annual fee. They will also offer you a number of options for purchasing, leasing or renting a credit card machine.

It's a buyer's market. There is a lot of competition for your account, so shop around for good rates on the percentage the company charges on your sale. In the end, you are your own best advocate, so ask a lot of questions of as many companies as you can.

Often, services are so streamlined that you can begin the very day you contract with your credit card service. Others may require a bit more set up time. After all, credit card processors know they are bidding against the competition for your business. If you negotiate with them, they can often hurry your application and get you started within a day or two of finalizing your agreement.

Be sure to ask about customer service hours. If they are not doing business when you do business, they are not a good fit. If customer service isn't available when you need it, you've not only lost potential sales, you risk offending friends. The larger companies all offer 24/7 customer service hours that will guarantee you a speedy resolution to problems that arise.

Remember that you are the customer when choosing a credit card processing service. Be sure to let the company you want to use know that you have other options. You can sometimes negotiate a better rate and lower fees simply by reminding them that they are business should know the value of keeping the client happy.

When it comes to signing on with a credit card process service, do your homework before you sign on the dotted line. It will keep your customers happy and spare you some awful headaches!

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Tracking Business Revenue

Now that tax time is over, business owners find themselves pulling their heads out of 2011 and turning their focus to more important matters like how they are doing in 2012. The very first and most basic way to see how a business is doing is by tracking revenue. Unfortunately most business owners stop there. Organizing and tracking revenue is critical to the success of your business. Regardless of how a business generates revenue, identify and track it in an organized and meaningful way. Here are a few basic points to make sure revenue is being tracked correctly.

1. Divide revenue into major, relevant categories. This way both the specific source and respective amounts of each revenue stream can be identified. Track revenue by product, service, customer, profit unit, region or any other relevant method. For example, say you own a bicycle shop that does repairs, new and used sales, and rentals. There would be at least four revenue categories separating each kind of income received: repairs, new sales, used sales, and rentals. This will allow you to see the customers, products or services that generate the greatest amount of revenue. It also allows for a comparison of profitability and the amount of contribution to the bottom line from each individual revenue stream.

2. Each week pick a day that will be a "cut-off" day such as Friday or Saturday and on this day summarize the following data:

1. Current week's revenue

2. Previous week's revenue

3. Current month-to-date revenue

4. Revenue for the same period last month

5. Weekly and month-to-date revenue for the same period of last year

6. Year-to-date revenue for the current year

7. Year-to-date revenue for the same period of last year

8. At the end of each month summarize the following data:

* Revenue for the current month just ended

* Revenue for the previous month

* Revenue for the same month last year

* Year-to-date revenue for the current year

* Year-to-date revenue for the same period last year

Remember to separate all revenue comparisons into major relevant categories (products, service, customer, new and used sales, etc.) as well as the totals. This level of revenue detail can be integrated into future strategic planning and marketing to help grow the business and improve its profitability. Tracking business revenue in an organized and systematic way can help target and capture a greater market share of those more lucrative revenue streams.

Why Small Businesses Should Consider QuickBooks

Companies often find maintaining their financial records as a challenge and are confused as to which system is best for their requirements. While there are a number of bookkeeping and accounting software in the market, QuickBooks has been one of the most widely used accounting systems in the United States. QuickBooks is also one of the most recommended systems for small enterprises as well as for home based businesses. There are many reasons why so many companies opt for QuickBooks and some of the benefits are as follows:

One of the main advantages of using QuickBooks is the reporting aspect of the system. Companies can generate customized reports and learn about their performance and other financial aspects. You can print graphs and charts to compare cash inflow towards the business and revenue you are generating. You can use the customized reports to compare data over years such as comparing data from the past year with current year performance. This gives a clear picture to the business owner as to which direction their company is heading towards.

Another benefit of using QuickBooks accounting system is that it will help you manage all your expenses. It keeps track of all the checks you are signing and also your credit card payments to keep you informed about where your money is going. There is an extremely simple way to enter the transactions in the system which makes sure that you do not forget to record even a single expense that you made.

Not only does QuickBooks helps you keep track of your expenses and generate user friendly reports, but it also helps you in creating estimates and take care of your entire billing requirement. With the help of this system, businesses can draw up an estimate in no time and use the same system to generate invoices for particular jobs.

QuickBooks can also help companies in tax planning and calculating their taxation liabilities for the financial year. Depending upon the data entered into the system like your expenditures and your incomes, the system would be able to calculate your final tax amount that needs to be paid at the end of the financial year.

Many entrepreneurs or small business owners find that systems like QuickBooks allow them to effectively manage their financial records and more importantly allow them to spend more time on other core business activities instead of worrying about their accounting requirements.

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How to Complete a UK Self Assessment Tax Return

If you are one of the 7 million or so UK Tax payers that are required to complete a self assessment tax return each year then this page may give you some assistance in completing this not so interesting task.

The UK tax year runs from 6th April to 5th April each year and anyone who is required to complete a self assessment return must disclose all of their taxable income for this period.

The majority of UK tax payers have their tax collected at source through the Pay as You Earn Scheme, whereby employers run a payroll scheme that deducts the correct amount of tax and national insurance each month. The employer is then legally obliged to pay this amount over to HMRC every month or every three months depending upon their size.

This is the easiest and most efficient way of collecting tax; however it only works when the tax payers has full time employment and recovers the tax that is due through this employment. PAYE schemes do not and cannot recover tax that is due on income from other sources. This is where the Self Assessment Tax Return is required, it has a main tax return and up to 11 subsections to cover every eventuality of income that could be obtained and tax payable upon., below are the most common reasons why a tax payer would be required to complete a self assessment tax return

• · They have Income above £2,500 from Land or Property
• · They are a Company Director or If you are self employed
• · They have Income from a pension and a salary
• · They are a 40% income tax payer and have savings income
• · They receive income from investments that are not taxed at source
• · They receive Income from foreign sources
• · They have income subject to capital gains tax

There are also various reliefs that can be claimed and again these are included in the tax return.

It is possible to collect all the data that is required and submit your own tax return online through the HMRC website, although this is not the easiest way of doing things it does have the advantage of being free.

The other way of getting this annual chore out of the way is to outsource it to a specialist who deals with self assessment tax returns, these specialists are often fully qualified accountants who choose to deal with personal tax affairs rather than general accountancy, they can provide excellent value for money compared to the traditional high street accountants who charge up to 4 times the amount of an online specialist.

The tax return accountant will probably provide you with an end of year checklist to ensure that you do not miss anything of importance and will also ensure that you claim all the allowances that you are entitled to, this can be very helpful if you are a landlord and have property income as it is a specialist area and nor everyone who has buy to let income has the knowledge, nor wishes to acquire the knowledge of what is and is not allowable against rental income.

Once all the income has been disclosed on the return, the tax return account will calculate the amount of tax that is due, discuss the return with you the client and submit the return online on your behalf. The online returns must be submitted by 31 January following the end of the tax year to which they relate.

Online tax return accountants provide value for money and take away the strain of the annual tax return. Enter the search term on your favourite search engine and see what a difference a little bit of professional help can make.

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What Can Media Accountants Do for You?

For people who work in a niche industry, the kind of standard business advice that is suitable for most people often doesn't quite cut it. Take the example of media professionals; they'll often find that their work is irregular and impacted upon by the greater economy, and they may be subject to different regulations when it comes to their financial situation. Everyone from producers down to runners should have the help of specialists to count on but exactly what can you expect from media accountants?

Media accountants: professionalism and discretion guaranteed

Depending on what your job is, you'll invariably get a different experience when you meet but you'll know that their attention is focused solely on you. Perhaps you're a freelance contractor and need some assistance with your taxes, or maybe the production company you're setting up requires guidance through some contracts and legislation. No matter what your position, there are accountancy companies out there that understand your needs and will be able to help.

Let's take a look at the example of an independent camera operator. You're looking for work and manage to get picked up for a new series that involves travelling internationally but means that you could be out of the country for some time. By consulting with specialist media accountants, you'll be secure in the knowledge that they will manage your annual taxes on your behalf, dealing with any bookkeeping that may need doing. They'll even help you out on your contract negotiations if you ask, fighting to get you the very best rate.

Take your business advice from the people who know best

Business owners in the world of media will also find that having media accountants at their disposal is a great benefit. While you're busy running the day to day operations of your company, your chosen partners can get on with the minutiae of the numbers, keeping all records up to date and ensuring that should HMRC come calling, you'll have any information they require at your fingertips. The peace of mind that comes with knowing your finances are being taken care of by a professional, talented team is priceless.

Many media accountants also offer services such as accounts preparation and business development, making your life easier. Whether you're self employed or part of a company, it's good to know that there's someone there to fight your corner when it comes to financial matters. From solo freelancers seeking business advice to big businesses needing assistance in producing series with multi-million pound budgets, advice from highly trained specialists is always to be heeded.

My First Steps With Electronic Invoicing Software

I would like to share my experience on invoicing. After spending a lot of time thinking I have finally bought a program which helps to create and send invoices. Although it took several hours to install everything it was an interesting process during which I learned a lot of new things.

The first step was to provide my company data. Then I added my customers to the invoicing software database so they would be readily available when I create invoices. It took quite a lot of time, especially since I have a lot of customers. The final step was to enter all my products into the program. My company sells computers and computer accessories/peripherals.

Can you imagine how many items I had to integrate into the invoicing software? It took almost a whole day! But it was worth it - now I can create new invoices with a couple of clicks of the mouse.

After creating and sending my invoices the next step was registering payments. When I received a payment to my bank account, I immediately marked the invoice as paid. This helped me to see which invoices are paid and which are overdue. Invoice status is a really helpful feature. My invoicing software is quite smart, so it sends out reminders to the customers if the invoice is overdue. I don't even need to trace non-payers as it is happening automatically.

The program also has a possibility to add late fees and other penalties automatically. Usually I let the system send out a first reminder without late fees, but if the invoice isn't paid within three days after the reminder, late fees are added. I feel that this provides a perfect balance between customer service (by not slapping the customers with a fee immediately) and money management (by not losing revenue from late payers).

Another feature I really like is the possibility to create recurring invoices. I have a couple of clients that purchase a certain amount of accessories each month (mostly printer cartridges). The number is fixed, meaning that the invoices look the same each month. Recurring invoices allow me to make one invoices, and then the system automatically invoices the client each month. This is of course time-saving, since I do not have to do anything except make sure that the goods are delivered on time.

I can conclude that invoicing software is a really indispensable thing for any business and I truly recommend it to everyone who has a smaller or medium-sized business (I assume that this invoicing software might be too small for a huge corporation).

5 Tips for Being Your Own Bookkeeper

If you're an entrepreneur, you must be good with money, right? Not always the case. Here are some money tips for business owners, whether you're a sole proprietor or have a handful of employees.

Tracking

All business related expenses need to be tracked. Even if you work in your vehicle, you need to have a file or container to put your receipts and invoices in that is designated just for business expenses. Get into the habit of not throwing any receipts away. If you are not used keeping all of your business receipts, pick something that will work for you. Pick a pocket of your purse to put every receipt in. Automatically put all your receipts in your wallet and empty it into a file weekly - or daily. Just find a routine that works for you.

Record Deposits Correctly

Your accounting software should be checked against your bank statements so that you can make sure your deposits match exactly. Also with returns, its necessary that they're recorded to the expense account that was originally used with the item was purchased.

Taxes

Don't get caught at tax time without the funds to pay your taxes. It is a good idea to set aside money from every deposit for this kind of expense. Taxes are paid quarterly in most businesses, and if you get behind on your quarterlies, you could end up digging a pretty deep hole for yourself. The toughest money issue to get used to for new business owners is that all money that comes in does not profit make!

Accounts Receivable

Watch your accounts receivable. Don't let late pay clients bring your company to its knees. Cash flow problems can be a business killer. If you are not comfortable asking your clients to pay their bills, it is important to find another person to do that for you. Often entrepreneurs and business owners start their business because they have a passion for their product or service, not a passion for bill-collecting. Timing can also be a factor here that a second pair of eyes trained in bookkeeping can help you overcome annual cycles of sales highs and lows. Something as simple as adjusting due dates could make the difference in cash flow.

Enter Transactions

Procrastinators beware! Don't wait until the end of the year to enter your transactions into your accounting software. In the very least, enter your transactions the week your bank statements arrive. You will get to know your business better if you balance your incoming and out going transactions on a regular basis. Schedule a time on your calendar, just like any client meeting or sales appointment to do your books. If you are too busy for this, seriously consider getting a bookkeeper.

Get a Bookkeeper

Your bookkeeper is not your accountant. A trained bookkeeper is one of those expenses that bring a return on your investment. They know your accounting software better than you and what takes you hours, takes them minutes. If data entry is what you started your business for, by all means, go to town. When you think about what your time is worth, how many sales you could be making instead of searching for a lost deposit, or if you think "I'll do the books next week" each week, time to hire a bookkeeper.

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