How To Use Accounting Software Properly

Accounting software can fulfil many important office functions and save a lot of time on business routines. Modern office systems have the ability to do job costing, invoicing, accounting, manufacture reports, handle a customer database, and do targeted marketing. Because not all businesses have the same needs, be sure that the business software has the functions you specifically need before making a large investment.

Job Costing

When a customer requests a bid on a job, they require a quick turnaround, and the best cost. For a contractor, there are two significant concerns: the cost of performing the job and the profit margin. If a quote given to a potential customer is too high, the business will not get the bid, but if the quote is too low, there will be little profit to the business. A good estimating program eliminate this margin for error and makes manufacturing more profitable by maximizing customers and profit margins.

Invoicing

A good intergrated database keeps track of customers and the payment status of accounts.

When it comes to hard disk recovery, the best method is to insure that you will never need it. Besides making frequent backups, the following measures will keep your system running smoothly.

Antivirus Protection

New viruses are invented everyday, and system security is a concern for every business. Malicious software can damage your system to the point where it will not even boot up. The latest versions of Windows are the favorite targets of malicious programs such as spyware and viruses, and it is helpful to use 2 or more antivirus/anti-spyware programs to prevent destruction or theft of your data.

Spyware Scanner

The clues that spyware is on a computer include a barrage of pop-up ads, a hijacked browser,a sudden or even repeated change for your computer’s Internet home page, the appearance of a new toolbar or new screen icons, malfunctioning key, random error messages, and most of all, sluggish computer performance. Any sytem with access to the internet is prone to this proble, but there is software to block spyware installation. In addition, make sure all employees using the office network do not download from unknown sites, and set your internet browser security at "Medium" or higher. Install individual firewalls to prevent uninvited users from accessing your network. A firewall blocks unauthorized access to your computer and will alert you if spyware already on your computer is sending information out. Purchase an anti-spyware program from a vendor you know and trust. Set it to read on a regular basis - at least when 1 week - and each time you run your computer, if possible, and delete any programs programs the anti-spyware program detects on your computer.

Computer Maintenance
The best way to avoid having to use file recovery software is to be sure that no corrupt data is stored on your computer. Companies like Norton sell disk optimization programs keep your network running at top speed, correct problem files and maximize the available space on your hard disk. Run disk optimization and anti-virus programs at least once a week.

Hard Disk Recovery

There are disk recovery applications specifically developed to recovering files of a certain format, like graphics files as opposed to word document files, and there are programs to hunt fo any type of misplaced file regardless of the format. There is no program on the market that can guarantee recovery of every lost file, but you are able to increase your chances for recovery by selecting the appropriate program for the file you are trying to save.

Do-it-yourself programs are a lot less expensive than hiring a data retrieval company that specializes in information recovery and you should at least attempt to utilize of this type of program if money before calling a professional.

In addition to recovering deleted files, there exists information recovery programs that can restore files after you've formatted the drive, after a power failure, natural disaster, or even files damaged by a computer virus.

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Business Inventories: Checklist to Success

In business management, inventories are lists of the goods and material a company has available in stock. If a business does not have an inventory, it cannot be truly considered as a business.

Inventories provide a business with a comprehensive view of the properties it owns. In the broadest sense, inventories deal with the stock level of items it has for sale. But inventories also deal with the properties a business has that are not for sale.

These properties include office equipment, office supplies, warehouses, land properties, and other items related to the business, whether or not they are used in the day-to-day operations of such.

Manufacturing organizations have three categories for sellable items on their inventories: a) the raw materials/parts which are to be used in making products
b) the materials/parts which are already in the process of being transformed into finished products, and c) finished goods - the goods that are ready for sale, trade or stock.

For example, in a canning factory, items such as raw tin cans, the raw food stuffs to be processe are considered to be under category A of the above mentioned categories.

When these raw materials are processed, but are not yet finished - as in the case of food stuffs that are already canned yet lack the proper labels and price tags - they are listed under category B. When the product is ready to be sold, they are then listed under category C.

Financial accounting

An organization's inventory has its advantages and disadvantages. The disadvantage of such is that inventories are counted as assets on the organization's balance sheet. However, it also makes funds immovable when they might have been appropriated elsewhere.

Moreover, it costs the organization to have these assets protected. Inventories also induce increased tax expenses.

On the other hand, since inventories show up as assets in an organization’s balance sheet, they can be turned into cash through selling. Some organizations intentionally hold large inventories to bloat their apparent value on the market.

Businesses that stock too little inventory cannot take advantage of large orders from customers if they cannot deliver. The business therefore stands to gain from a proper inventory system.

Since the inventory shows a business’ capability to deliver goods ordered of it, the business may be able to adjust their inventory, increasing or decreasing it, according to market demand.

Why inventory?

Without a proper inventory a business cannot know what assets it has at its disposal. It also is blind to the quantity and status of the goods it may, or even, may not have.

For example, a business that does not have a proper inventory is asked to deliver 100 crates of its goods. Without an inventory, the business does not know if it even has that number of crates.

In the case of non-sale inventories, businesses are now able to keep track of equipment purchased and their status.

Too often, businesses with sloppy inventory systems do not keep track of their existing equipment. Without this, no one is accountable for equipment that gets stolen or damaged. The business ends up spending more to replace these equipments, when in fact, someone might be stealing from or sabotaging them.

Proper inventory keeping may be a painstaking, time-consuming process that leads many businesses to forego such altogether. However, without one, a business cannot operate efficiently, and properly.

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But Which Accounting Software Do I Need?

There's an abundance of Accounting Software packages in the marketplace, but even so, deciding which one would be best suited to your individual needs, doesn’t necessarily have to be a difficult decision. You just have to break the process down to a few matching a few simple criteria.

Firstly, you need to ascertain what you want the product to do. Secondly, forget the sales hype that merely showcases all the "must have features" in each product, and thirdly, analyze each according to its functionality and suitability for your requirements.

Features:

There really isn’t that much difference between the free software packages and the 'pricey' alternatives other than reporting capabilities, inventory management and the number of users allowed. Most of the other basic functions are quite similar from one product to another, and in some cases the free products out perform some of the more expensive options. One thing to always keep in mind though, are your future needs, but don’t pay for features that you’re never likely to need.

Ease of Use:

Always try the software before you buy it if you can. The product might have a steep learning curve that takes a lot of training before it becomes easy to use. A program that is relatively cheap might not be the best solution if it takes you 3 months to "get the hang of it!" You also need to consider how easy it is to integrate with any other specialty software you currently use?

Free v Purchased / Major Brands:

Are you prepared to risk using a free software product that may or may not be upgraded and supported, as opposed to a name brand product where these things are virtually assured? When you finally select the product that looks best suited to your business you may as well get the best value. Shopping around might just prove that the local computer shop can supply what you want for less than the big online merchants.

Scalability:

Whilst we think we know where our businesses will be in 2 years or 5 years times, things don’t always go as planned, so be sure to buy a product that has the ability to cope with your future business directions. It may well be better to opt for a product initially that has more flexibility to be adapted or added to at a later date.

Product Support:

Which support program would suit your needs best? Will you survive with just email support, or do you need to have access to phone support. Maybe you’d sooner be able to call the supplier and have them come to your office for onsite support when necessary. The level of support you are likely to need will largely depending on the level of skills you have "in house". Down time is costly, so assess your likely support needs closely.

Make a list of everything you need in each of the above areas, and be sure you get all the features you need, or are likely to need, but don’t waste money on unnecessary "bells and whistles" that you are highly unlikely to ever need.

If you do decide to minimize your costs initially, make sure there is a smooth process to expand the program later if necessary.

Making your decision with these basic factors in mind will go a long way towards getting you the accounting software program that will meet your needs.

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Why Use Accounting Software?

Accounting is the measuring, and disclosure or provision of assurance about information that helps managers and other decision makers make resource allocation decisions.
How to become an Accountant.

Accountants in the US are called Certified Public Accountants and in the UK and Canada are called Chartered Accountants. Chartered Accountants in Canada are expected to know all US CPA knowledge as well as a Canadian Accounting body of knowledge.

In order to become an Accountant an undergraduate degree is required and then a period of articling is required which can take as long as 5 years with gruelling exams and an exhausting series of finals.

In her notes compiled in 1979, Professor Linda Plunkett of the College of Charleston S.C., calls accounting the "oldest profession"; in fact, since prehistoric times families had to account for food and clothing to face the cold seasons. Later, as man began to trade, we established the concept of value and developed a monetary system.

Evidence of accounting records can be found in the Babylonian Empire (4500 B.C.), in pharaohs' Egypt and in the Code of Hammurabi (2250 B.C.). Eventually, with the advent of taxation, record keeping became a necessity for governments to sustain social orders.

Perhaps the most significant benefits to contemporary accounting has been the introduction of computer programs to assist in the accounting function. Computer programs were introduced in business and government organizations in the 1950s, and the most important applications of computers have been in the areas of record keeping, balancing , and transaction recording.

Accounting uses various bases of measurement, mainly the cash basis, the accrual basis (or historical cost) and variations of these; all of these functions are greatly assisted by the use of various accounting software programs.

Accounting is tied to the invention and dissemination of the double entry bookkeeping process.Different Accounting Software Solutions available today:
ACCPAC web-based accounting, launched the ACCPAC Online web site in 1999 which allows end users to run ACCPAC from a simple browser for a small monthly rental fee.

Intuit's QuickBooks for the Web represents a new product from scratch. Microsoft Small Business Manager is a new player on the block which is a scaled down version of Great Plains Accounting Software. Netledger centralized net computing renamed Oracle Small Business Manager Peachtree.

This product was the older Peachtree Office Accounting product and is also a web-based solution. In 2000, Peachtree added a web-based module to its' flagship Peachtree Complete Accounting product called Peachtree Web Accounting.

SAP mySAP - web-based accounting featuring a limited number of SAP modules.
So it appears that there are 2 different types of Accounting Software:
Web Based Accounting: which is one application on a Web Server running everybody's application.

There are of course advantages and disadvantages to this type of application, immediately coming to mind is confidentiality and the security of the Servers being used as well as possible breakdowns.

Advantages are of course in being able to use unlimited Server Resources. And then there is PC Based accounting which everybody has tried and is Bill Gates favorite.
Advantages;
In-house control of everything but subject to limited resources.

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You Can Bank On It.

Most U.S. citizens walk into, get online to, or drive up to their bank several times each week and hand over their hard earned dollars. Why do they do it? How many other strangers would they trust to hold their savings, and return the money and additional funds back to them at any point in time? What makes banks safe, and how do we know they are?

Well, the first indication that you're money's in a safe place is the placard that greets you at the door - FDIC. This federal U.S. agency, the Federal Deposit Insurance Corporation, typically protects up to $100,000 of your deposited funds from loss. Established in the 1930's, the FDIC became a way to curtail the runs on banks that occurred directly after the Depression. By 1934, with the initiation and support of the FDIC legislation bank runs had been reduced by nearly 4000.

In addition to FDIC protection, banks also pay for supplemental banking insurance from private carriers. This insurance is set up to protect investors' funds from vandalism and bank robberies.

Banks offer a variety of options to their customers, many of them an evolution of the traditional checking and savings account operation. While a checking account is still the most familiar and most common banking feature, there are now a variety of checking account choices - some, known as negotiable order of withdrawal (NOW) accounts, actually pay interest on the balance. Besides the traditional savings account, banks also now offer loans, certificates of deposit, and money market accounts. Some offer IRAs and education savings accounts.

With a traditional savings account, you are able to deposit and withdraw virtually at will, with no minimum deposit or balance required. For this you earn a small interest - currently at an all time low range of .6 - 2 percent.

A money market account offers the immediacy and convenience of a traditional checking account along with the interest bearing advantage of a savings account. There are some limitations, however. Generally you can write just a few checks per month - at some banks as few as three. You are also limited to just a few more withdrawals as well. You'll also be held to a minimum running balance, although a money market account almost always pays more interest than a traditional savings account.

A certificate of deposit is a banking account purchased in a specific amount for a specified period of time. Banks traditionally offer a variety of time periods for certificate maturities - anywhere from 30 days to 15 months. The longer the time to maturation the higher the rate of interest paid. For the length of the certificate, however, you are not able to withdraw any of the funds.

Individual retirement accounts (IRAs) and education savings accounts are designed to accrue a substantial amount over a lengthy time period for a specific purpose, IRA's for retirement, education savings account for college education. They generally offer the highest rate of interest but also deliver hefty financial penalties for early withdrawal except for emergency hardship situations.

With as many options as are offered by today's banks, and the protections established by the FDIC, you can indeed bank on your local bank.

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April 15th… Time To Splurge

Seriously, throw caution to the win, splurge, and have a grand ‘ole time, in moderation OF COURSE. I’m not suggesting clandestine trips to Vegas, down payments on a Lamborghini, or shady high risk investments. My ideas are a wee bit more conservative; simply put, reward yourself, your ‘significant other’ or your family with a night on the town, weekend getaway, trip to the theme park. Something that says… “Nicely done!”

Okay, now that you’ve spent your $10.00… :o)... what should you do with the rest?

I don’t know the size of your refund, and I feel certain you wish it were more, use it wisely… before ‘blink’… it’s gone.

* FACT: The IRS reports average refund $2,436 as of early March ‘06

PAY OFF your credit cards… Years ago I got into serious money trouble with credit cards, since the memory is painful; I’ve no desire for a return performance. Debit cards are my plastic of choice. Sure, there are times a credit card would come in handy, but I ‘bit the bullet’, and decided to live free from debt, at least credit card debt. That’s not a lecture, your life and choices are your own, but please, pay more than the minimum, or compounding will sink its teeth, draining financial blood for years to come.

* FACT: Credit card debit averages OVER $11,000 per household.

PREPARE for your golden years. As each day passes, we’re one day older; over simplification, but true nonetheless. Contribute to, or start a retirement fund. I like to call it, feathering my ‘nest egg’. Fun, free and frolicking, that’s my plan for retirement, not desperation and worry. Our golden years should be fun, full of exploration and remembrance, use some of your refund to accomplish this.

FUND your emergency account. The other day as I walked my dog, I noticed he was limping. On examination I found a growth on his foot. I love my mutt and I want him taken care of. That said, I wasn’t expecting a near $500 vet’s bill, thank the lord (and talks with my Grandmother) for my emergency fund. You never know when the Grinch will sneak up, ill intent on his mind.

BE SMART. Or at least make certain your kids are. If you haven’t already done so, start a college fund. If you begin when your kids are young, you’ll have no problem providing a higher education, wait till they’re in their teens and you’ll wage an uphill battle.

* FACT: For the last ten years, college costs rose faster than inflation.

KEEP YOUR MIND ACTIVE. Life can be VERY competitive, speaking for myself; I never rest on my laurels (hey remember that great article I wrote last week?). Continue your education; take a weekend seminar, push your boundaries.

PAY OFF your house note. Okay... that won’t be possible, but making an extra payment or two, might. And while you’re at it, consider a 15 year mortgage instead of the more typical 30 year term. Don’t let the larger payment scare you; it’s not that radical, and the savings in interest... amazing.

Note: interest rates for example only.

30 year loan at 8%

Loan $100,000
Monthly payment $734
Interest $164,165

15 year loan at 7.5% (15 year loans are typically lower)
Loan $100,000
Monthly payment $927
Interest $66,862

Difference $97,293.

Difficult to believe? Believe it, that’s how the rich get richer.

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How to Put the 'R.E.L.A.X.' Back in Tax Time.

"...A new year will begin and what's the biggest thing on my mind - Tax Time. If you're like me, you started out well in the early part of this year but, then by the end of the summer you had a small pile of receipts building up and you may or may not have updated your budget file since then. But now I'm forced to get my paperwork together and, while it's not the worst project in the world, it's no day at the beach either. So, what can be done throughout the next year, to make tax season a sunnier walk through the park?..."

Oh! The end of the year is coming, a new year will begin and what's the biggest thing on my mind (besides my 2005 marketing plan) - Tax Time. If you're like me, you started out well in the early part of this year keeping all of your receipts together, organizing your budget and keeping track of your business operations but, then by the end of the summer you had a small pile of receipts building up and you may or may not have updated your budget file since then. But now I'm forced to get my paperwork together and, while it's not the worst project in the world, it's no day at the beach either. So, what can be done throughout the next year, to make tax season 2005 a sunnier walk through the park? Here's some tools that I use and also some new ideas to fit easily into your business lifestyle.

Whether you have a professional accountant or take care of your own financial reports and tax filings, you still have to build a system for tracking and storing your business transactions and records. Start-ups and individual entrepreneurs should also get into the habit of keeping receipts for business transactions, recording what your income is and what expenses the business has. This is basic information that you will need in order to file your taxes. The structure of your business as either a Sole Proprietorship, Corpation, S-Corp or LLC will determine which forms you are required to complete. Visit those websites below to find out more information. What's important to realize is that if you build a foundation of record keeping from the beginning, you will make things much easier for your business in the long run. And if you have a history of lousy record keeping you can still make a change.

Quicken is great for your personal budgeting needs. You can track all household transactions and even those related to your business and create reports to make income and expense reporting easier. Account downloading features are real helpful and relieve the time taken to enter individual transactions. Quickbooks is great for capturing your business transactions and creating the three most important statements needed for your business tax filings - Profit/Loss, Income/Expense Report and Balance Statement. These softwares can be the crutch of your computer filing system, but if you don't have a computer, your paper filing system should not be overlooked.

Your paper filing system allows you to separate your business bank account and any business credit accounts you have. Placing all of your files in one box or in a pile on your desk will only lead to lost information, incorrect accounting and, if you really

miss something, monetary penalties. You must assign a folder for each account separately or for very closely related subjects. And for your receipts it's a good idea to purchase an accordian size folder and as you acquire your receipts, you place them in a crease for that month. If you have a larger business, you can devote an entire folder to one month or a section of a file cabinet. What matters most is that you collate the information so once it's time to go through your information for tax time, it's readily accessible.

You don't have to do much to keep your paperwork in order. If you R.E.L.A.X., tax time can be a good opportunity to go over your financial information for the year and make future predictions for the year to come, and for some us a chance to get back some of our hard earned money. Set up your paperwork with these thoughts in mind and you'll be on your way to tax filing heaven and command a heartfelt thank-you from your accountant.

R - Reevaluate your opinions about paperwork. Some people, especially those with accountants, believe that the accountant will sift and sort through their paperwork, so they don't have to keep things orderly, they just don't have the time to do it. While this may be true, what you should realize is that if your accountant is spending time, getting your paperwork in order, that's less time they can spend filing your forms to receive the best refund within Generally Accepted Accounting Principles.

E - Expect that you will sometimes get so busy that it is not easy for you to update your information every month. This is especially true for start-ups and entrepreneurs who often are working by themselves. You don't have to forsake your whole system just because you weren't able to update this month, when the next month comes around make it a priority to catch yourself up. Catching up for one month is alot easier than catching up for the last six months.

L - Learn from your previous mistakes. If you realize that every year, you stress yourself out and spend hours getting your reports together because you have to go through a complete year of receipts, bank deposits, etc, it's time for a change. If you never had software to keep track of your transactions, invest in it and if you don't know how to organize a paper filing system, so you can designate file space for your records, hire someone to do it for you. Don't keep making the same mistake year after year, your time is valuable.

A - Always be consistent. This may seem simple but if you name your April folder, Apr Receipts on your computer, use that term on anything else that will group all of your April receipts. This consistency in headings, titles and group names will be a great help for you and those that must go over your information. If they see Apr Receipts, 04 Receipts and April Receipts, they may second guess as to whether these are related.

X - 1X1=2. You may be thinking, huh? That's because if you claim you have $50 in meals and entertainment expense but you only have receipts for $35 you can leave yourself vulnerable to penalties for incorrect accounting. Although, the example given is not likely to flag an audit, (fewer than one in 100 tax returns are audited) you want to build a foundation based on satisfactory evidence of your income and expenses. Penalties for under-reporting income and over-inflating expenses can be a greater pain in the neck than making sure you keep your receipt from your business lunch or logging your marketing campaign expenses.

For important dates, new tax information and forms, and accounting tools, visit these sites:

http://www.irs.gov
http://www.tax.state.ny.us
http://www.taxsites.com/state.html
http://www.turbotax.com
http://www.intuit.com

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Against All Odds -Tips on How to Protect Your Assets

With so many bad things happening in our society today, it is important to obtain safety measure needed to protect our lives, our business, or simply the things we own. That is why a lot of people are finding asset protection as vital in one’s economic growth and stability.

- Asset protection shields your assets
- Protect your possessions against credit claims
- Easily dismiss complaints
- Crucial in company security

1. A Good Investment

For example, when an individual opt to buy some insurance for his or her car or house that is already one good illustration of asset protection. In this case, finding some means to protect your property because you value most the things that you own and the money, time, effort, and hardships that you have employed just to acquire the items is decent and practical. Hence, people who insist that getting asset protection is an immoral thing does not know anything about asset protection in one way or another. Nevertheless, for people who deem it more necessary than just buying some properties without insurance, there are some tips that you may find useful when getting asset protection.

2. Consider the different types of asset protection

Basically, there are three categories of asset protection: wealth-segregation asset protection, insurance-type, and the liability-limitation asset protection. Each category has its own function and description.

3. When using wealth-segregation asset protection

Today, there are many ways and laws made to segregate one’s wealth through asset protection method. In this method, you get to protect your assets that your creditors are aiming to get or your complainants who wish to obtain your assets. Good examples of asset protection are those that are stated in bankruptcy law. By filing bankruptcy, you get to protect your assets from imminent claims of your creditors. With bankruptcy proceedings, the court will usually issue a written order curbing your creditors from any claims against you or from continuous harassments. It is, however, still important to carefully consider such options before jumping into conclusions. Asset protection methods such as bankruptcy cases may have adverse effects on your credit history and may do more harm than good. So, when trying to utilize wealth-segregation type of asset protection, it is best to choose those that can safely shield your properties from any imminent danger without having to employ additional risk.

4. Insurance protection

This is one of the most common and well-known type of asset protection. Here, you pay certain amount of money in exchange of insurance policy that you will use in case something gets out of hand like accidents. The insurance company will be the one who will cover the cost of expenses incurred therein. In this way, you get to protect your asset against any claims of your complainants in lieu of the incident that had happened. When choosing insurance-type of asset protection, it is best to always shop around before deciding to get one. Keep in mind that not all asset protections are made equal and may vary from one company to another. That is why, it really pays to shop around and compare prices first so that you will get to choose the best asset protection for your property.

5. If you want the liability-limitation asset protection…

This type of asset protection entails the coverage for the assets incurred or invested by the company. This means that when things get out of hand, the company is bound to lose only the things that were invested by the company. It will not include the owner’s personal properties and other assets outside the company’s jurisdiction. Whereas, if a company does not have any asset protection, chances are, the owner will lose not only the things he or she had invested but all the other things outside the company as well, including cars and everything. Whatever protection it can give you, it is best to consider the rates and charges that it will cost you. There are instances that this type of asset protection usually charges big especially when the people behind the company who provides these asset protections know that they are dealing with a big business.

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Computerized Bookkeeping Is Fast, Simple, and Flexible

Every business needs to keep good records to ensure bills are paid, obligations are met and checkbook balances match up. Whether it's a home-based business, a Fortune 500 company or even the business of running a household, well-kept books can really help guide a "business" in the right direction when it comes to keeping finances in order. More and more people are turning to computerized programs for keeping money in check. The reasons for this are many.

Computerized financial programs are becoming the way most business gets done for a number of reasons. Not the least of which, of course, are ease of use, simplicity in seeing the bottom line and ability to track actions as they happen. Combining online banking services with online bookkeeping has made managing the books even easier.

For home use, computerized bookkeeping is fantastic, especially when combined with online banking and bill payment options. Programs abound that help regular people keep their books as neat and clean as any big corporation's and they're used for a number of reasons, including:

* Ability to instantly update and have the program track bottom line and types of purchases. Some programs will even help separate out all charity donations and other tax deductible items for future use on tax forms.

* Quick way to see the bottom line. Computerized checkbook registers, for example, can instantly show a user how much they have, what they need to meet regular obligations and more. This is great for those who combine their use with online banking and bill paying methods.

* Better ability to see where the money goes. Clean and clear registers help users track their purchases and bottom lines easier. This is great for those who are living within a budget to help guide decisions about future buys and where costs should be cut.

Computerized bookkeeping systems are especially loved by businesses for the way they can simplify even a complicated business' books. Computerized programs offer the following (and more) advantages for businesses:

* Ability to track expenses and income for different divisions while melding it all together into an overall budgetary plan.

* Quick and easy to see how money is being spent and even why.

* Ability to track trends in spending and income.

* Fast reports for a variety of things including expense categories such as capital outlays, salaries, benefits and so on.

* Easier earnings reporting. These systems tend to do all the calculations for a business, so running reports, getting projections and so on is simple and easy. All that really needs to be done is to purchase the correct program to meet a business' needs and input the proper data.

* Simplicity in cutting checks. Many financial programs come with check cutting tools that enable companies to run their payroll, pay bills and so on with ease while the program constantly updates the bottom line.

Making it quick and easy for individuals and businesses to track their bottom lines, computerized bookkeeping programs are becoming hard to replace. By offering ease of use and a lot of options, these programs can help virtually anyone institute a solid accounting system.

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Save Your Way to Millions

When I say that you can get rich (or rich enough) without lifting a finger, it probably sounds too good to be true.

But then again, you can opt for other ways that would sound more realistic that it may seem. You can boost your bottom line automatically, and control your finances too!

Here is an easy money-management system that actually works. There is a miracle at its center that will amaze you. In fact, it has already amazed many people when they have tried it themselves. Once you start down this road, you will wind up spending less and you will also wipe out your consumer debt and other financial burdens. In the end, you will be able to work on it in order to solve your way to millions.

The key to this system: Save more money.

However, there are people who may contend that it is such an impossible scheme. Some even insist that they are already living paycheck to paycheck.

The fact is you can indeed save more than what you are doing right now.

How? Have money automatically taken out of your paycheck or your bank account. Most of us spend whatever we have available in our checkbooks ñ and maybe a bit more. If you limit that amount, your spending will magically shrink to fit.

As a test run, try taking $10 out of what you have in your wallet each day. At the end of the month, your life would not change much, but you will now have a tidy $300 tucked away.

Try to repeat this technique over a year and you will have added about $7, 200 to your savings without ever noticing what you gave up. If $10 seems like too much, start with $5.

Your bank can set up automatic payments to a savings or investment account; or you can do it yourself through an online bank account.

Here is how to build wealth through automatic savings:

1. Eliminate your consumer debt

Credit card interest payments do not seem very large from month to month. But paying 15% on an $8,000 balance adds up to $1, 200 a year.

However, if you pay off the debt and add $1,200 to investments that earn an average of 8% a year, you will have $59,000 after 20 years and $149,000 after 30 years! That is a lot of money, indeed!

So, eliminate your debt as fast as you can using funds deducted from your checking or saving account.

To figure the highest monthly payment you can afford, use the financial calculator that is being provided by many sites available in the Internet today. And with timely, automatic payments on your credit cards, you will also avoid costly late fees.

2. Set up an emergency account

Move money automatically each month from your checking account into an account earmarked for unexpected expenses. Aim for a sum that will cover three monthsí worth of basics like mortgage, food, utilities, car payments, etc.

Once you have built this nest egg, you would not have to withdraw from long-term savings if crisis hits like you suddenly need something to compensate your hospital expenses. You can also use automatic savings for planned expenses such as holiday gifts or a vacation.

3. Check your companyís retirement plan

In the United States, there is an employer plan such as a 401(k) or 403(b), wherein your company will deduct a percentage of your income from each paycheck and invest the sum in your choice of instruments, which are mainly mutual funds.

In other countries, some big companies match employee investments to encourage savings, so if you invest more, you may receive more from your company.

4. Check out other options

If you are self-employed, you can set up a plan with a mutual fund company and make automatic contributions from your bank account. Or you can get a pension plan.

5. Pick the right investments

Saving money is just a start. You have to choose investments that will earn money over the long haul.

Look for a lifestyle mutual fund, which puts a portion of your money in diversified stocks and the other portion in bonds, and maintains a solid balance between the two.

Another good choice is a ìtarget retirementî fund. Its portfolio becomes more conservative as you approach retirement age.

With all these things in mind, there is no secret to building wealth. You need to live on less than you make and invest the surplus well. When you save and invest automatically, it is that much easier to reach your goals.

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Understanding Account Reconciliation

When you confirm that the balance in your checkbook is in sync with your corresponding bank statement, it is known as account reconciliation.

Any record that you keep regarding your financial transactions with banks, credit card companies, or retail stores is known as an account. It is an arrangement between buyers and sellers in which payments are to be made in the future. The different forms of payment are checks, bills of exchange, and promissory notes. These are transferable, signed documents, which guarantee to pay the bearer a sum of money at a later date.

Purposes of Account Reconciliation
Account reconciliation makes available a suitable method for reconciling the accounts to the monthly financial reports produced by the Financial Records System (FRS). Account reconciliation helps you evaluate departmental account records in regards to the reports, which have been generated by the FRS. This helps you to better verify the accuracy of each account statement. The person in charge of each account should verify the account every month. Account reconciliation helps ensure accurate reports on the account. It helps to identify errors and inconsistencies in your accounting.

In order to perform the reconciliation most efficiently, you should be certain that the person in charge of an account maintains full and accurate records. It is your choice to maintain the records in a manual filing system or on a computer program. You can develop your own filing and record keeping system. It should be capable of providing an effective means of reconciling your accounts on a monthly basis. You can make use of the following files to make the reconciliation process easier.

Open Transaction Files: These files hold all source documents that you may have started for the account, but have not yet processed. Some common types of source documents are Distribution of Deposit forms (for cash receipts), Check Requests, Purchase Orders, Prepaid Purchase Orders, Interdepartmental Billing Forms, Merchandise Orders, and Travel Authorizations.

Pending Files: These files hold source documents that had some activities posted on the FRS report, but await further activities before they can be completed. These include Purchase Orders, Inter-departmental Billing Forms, Travel Authorizations and Travel Expense Reports.

Closed Transaction Files: These files hold the source documents that are fully processed in the FRS. You can always refer to the Records Retention Policy to establish how long documents must be maintained on file.

Monthly Reports: You receive these after the end of each month. The accounts must be reconciled to the monthly reports. The FBM090, Account Statement, and the FBM091 and Report of Transactions can be handed over to the person handling each account. You then compare the open transaction and pending files to the FBM091 and the Report of Transactions, which has a detailed list of transactions posted in a particular month. Make a comparison of the source documents with the report to find out if the encumbrance was properly established, adjusted, or canceled in the correct account and the correct object code.

Additional Help
Software is available to help you in reconciling your accounts in an automated fashion. Apart from providing you with all the help, they are reasonably priced as well.

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Understanding Bank Reconciliation

Bookkeeping is fundamental in running your business in an informed way. It is important that you have an organized, transparent and updated bookkeeping system in place. One of the ways to keep track of your company’s books is bank reconciliation.

What is bank reconciliation?
The procedure of comparing the account balance given by the bank with that of the company’s book of accounts and explaining any discrepancy is bank reconciliation. The discrepancy in the balances may be due to the different timing of registering the data in the bank’s books and in your company’s books. This discrepancy is normal and is rectified automatically within small time. However, sometimes the discrepancy is due to an error, which has to be rectified manually and to catch this error you need bank reconciliation. Companies generally do bank reconciliation at the end of each month.

Reasons for maintaining bank reconciliation
Regular monthly bank reconciliation keeps your company’s financial records clear and updated. You never build up an erroneous backlog. Also, you can understand your accounting status all the time. It is important that you have a prompt and reliable communication system with the bank so that you keep your records accurate.

Bank Reconciliation Statement
It is better to prepare a bank reconciliation statement by yourself so that you are able to figure out the causes of discrepancy.

Structure: The statement is divided into two sections. The right section reflects your bookkeeping for bank transactions and the left side reflects the bank’s records for your account with them.

Heading: The heading of the statement will have the bank’s complete name with the date of reconciliation.

Items: The first item of the statement is your opening balance just before the reconciliation. Check each item of the statement further for the following. If the transaction is missing from you our company’s account and it is on the bank’s record then you need to enter it in your books. If the bank section has missed it then enter it under their section. If the missing transaction belongs to the bank such as any fees deductions or interest credits, then it is an error at the bank’s end and it will rectify the error.

Adjustments: Once the reasons for the discrepancy have been figured out then you should include the missing information in journal entries.

Items of Bank’s Statement
Credit: Banks may credit some interest periodically into your account as applicable on the account balance.

Debit: These will be any of the bank charges on your account as applicable.

Erroneous credit: Any incorrectly placed credit in your account is booked under this head. Sometimes, the bank makes a deposit in the wrong account.

Items on Your Account Books
Unpresented check: Your Company’s books should record any checks issue immediately at the time of issue. The bank will, however, record it when the check is presented to it.

Software for bank reconciliation
There is a lot of bank reconciliation software readily available in the market. This software is compatible with all the latest accounting packages. The data is automatically imported, checked and reported through the software making your job easier.

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Are You Properly Tracking Your Company’s Stock?

The Capitalization Table provides investors with a bird’s eye view of the sum total of all the different securities issued by a company. It includes the amount of investment that the company has procured from investors and the distribution of securities which might include common/preferred shares, options, warranties etc. and the individual capitalization ratios.

The driving force behind an investment in a company is its expected return on investment, which should be profitable as well as lucrative. For investors, the tool used to state expected return is called a capitalization table, which is used in tandem with pro forma financials. Thus, the usage and preparation of capitalization tables is of great interest to prospective investors.

Basically, a capitalization table addresses the present and future funding requirements of the company as well as returns in terms of value that will be obtained over a period of time. It implies that the investor is greatly concerned about whether the returns on investment are good enough to justify the risk involved or not. The capitalization table encapsulates all the details about the amount of equity capital used in funding the company, the time of capital contribution and the ownership of the company. This information helps investors better understand their returns on investment.

Terms most commonly used in capitalization tables are “pre-money valuation” and “post-money valuation”. The former refers to the company’s value prior to any investments made by an investor. When the pre-money valuation is divided by fully diluted shares outstanding, a price per share is obtained. The latter refers to pre-money valuation plus whatever amount is invested. Obtaining the exact picture regarding calculation of pre-money valuation is not so much a scientific endeavor as it is an art form. There is great scope for personal judgment. All said and done, pre-money valuation is, by its very nature, negotiable.
However, getting future valuation for the exit can be achieved more scientifically.

There are a number of formulas that help determine the value of the company but, often, just one solitary equation without need for other and more complex formulae will help solve the issue. For a company wishing to achieve higher valuations at exit, it must have first achieved a sustainable competitive edge, and normally this may only occur after six years or more for those companies having planned for a five year plan of action. That makes it imperative for companies to outperform “also ran” companies and prove to the competition that trying to imitate more successful companies will surely not be of much use.
Some important and noteworthy aspects that a capitalization table should address are:

• Dilution
• Consistency
• Notes and other forms of corporate ownership

Building a capitalization table is of vital importance and knowing how to build one is essential for any entrepreneur wishing to deal with shares of stock. In addition, there is a need to understand the different circumstances under which it operates. Every interested entrepreneur should learn the arithmetic behind each deal to prosper in his or her business dealings. Also, asking questions of investors to understand their needs is important to an entrepreneur dealing with investment options.

A capitalization table may be segmented to show the differentiation between preferred and common shareholders. In addition, it describes the different funding rounds in the company. Thus, it follows that the capitalization table is an instrument that needs careful analysis before arriving at an informed decision about valuing a company.

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How To Avoid Hidden Loan Charges

Taking out a loan is extremely simple nowadays, with so many companies offering loans to more people and at excellent rates. However, some of the deals that seem to good to be true often have hidden charges that can make the loan costs much higher than you might have known. If you know about the dangers of these hidden charges, then you can easily avoid them and get a loan that is cheap and fair.

More than just APR

When you are shopping for a loan, you need to remember that the costs involved in repayment are more than just the advertised APR or Annual Percentage Rates. There are many other charges that you need to take into consideration, many of which the lender will not clearly point out. It pays to know about these extra charges, so that you can get a loan that suits your needs and doesn’t put you under financial pressure.

Redemption fees

Most lenders do not talk about redemption fees when you make your application, but they are something that you should know about if you want to pay back your loan early, which many people do. When paying back your loan early, many lenders will charge you up to two month’s interest for doing so. These penalties are usually the same whether you pay back your loan straight away or a month before it finishes. However, more and more lenders are starting to reduce or scrap these penalties, as borrowers become more aware of their implications. Before taking out a loan, find out whether or not the lender charges redemption fees, especially if you are taking out a loan that you will repay early.

Rule of 78

Redemption fees are not the only thing you should look out for if you are going to repay your loan early. There is also a charge called the rule of 78. This rule is quite complex, but lenders rarely mention it. Basically, if you repay your loan early, then you have to pay extra interest. This interest is calculated on a sliding scale, and is so called because it originally came from adding together the interest from the first 12 numbers of a 12-month loan. So, the earlier you pay back your loan then the more interest you will pay. Although this charged has now been scrapped for all new loans, if you already have a loan then you should check to see if this rule applies to you.

Loan insurance

Perhaps the biggest trick that lenders play on unknowing borrowers is to simply include the cost of loan protection within your payment. Many lenders will simply give you a quote that includes the loan protection cover, which can often cost you a lot of money. Also, the lender might include the full cost of the cover at the beginning, meaning any interest or penalties are paid on a higher amount than just the loan amount. You should always ask a lender whether the quote they have given you includes protection or not. If it does, then think about how much you could save without the protection.

Of course, protection can be useful if you think you will need it, but there are cheaper options. Your current employer may cover you for some of the protection clauses, or you can get similar loan protection from other companies at much lower rates than the primary lender. Making sure you have the right loan insurance for your needs can save you literally hundreds of pounds in charges. Just remember that once you know about these hidden charges, it is easy to avoid them and find a great loan deal.

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Get Tax Benefits, Protect Your Assets With An Irrevocable Trust

An Irrevocable Trust is a trust which, once set up, cannot be changed or canceled without first getting the permission of the beneficiary. The grantor may not withdraw contributions from the trust. There are certain tax advantages accruing when the trust is irrevocable. Using this type of trust a person is allowed to give away his or her assets or money even before death, which is not possible in the case of a revocable trust. Thus, an irrevocable trust is a trust that becomes permanent after being established and may not have changes made to it or be revoked once formed.

There arrangement must be set up per the grantor’s wishes. In establishing the arrangement for estate planning purposes, the goal of the trust would be to minimize federal estate tax savings. If passing on real estate or other property, the grantor will be giving away the property to the beneficiary permanently. This would mean that the grantor no longer owns the property and so it does not qualify as part of the total estate and no federal estate taxes need to be paid.

In the event the grantor takes out a life insurance to pay for the federal estate taxes, this may then be the only asset of the trust and it would be possible for the policy to be separate from the grantor’s estate and not subject to taxation. The most ideal situation is one where the trust is formed prior to taking out a life insurance policy. The trust is named as the owner and beneficiary of the life insurance policy. The trust purchases the Policy instead of the estate owner. This makes it separate from the estate of the grantor and therefore not subject to federal estate taxes.

A typical Irrevocable Trust Agreement will have the following components:

• Date, Name & Address of the Grantor and Name & Address of the Trustee
• Agree to Transfer of Trust
• Disposal of Principal and Income
• Any additions to the Trust
• Compensation paid to Trustee
• Successor Trustees
• Laws that Govern Trust
• Witness
• Signatures of Grantor, Successor Trustees, Trustees
• Notarization

For the purpose of taxation, an irrevocable trust is a taxable entity quite unique and different from the grantor. If a Grantor places his or her assets into an irrevocable trust before his death, the assets no longer form a part of the estate of the grantor and so do not qualify for consideration as part of the grantor’s estate.

In case an estate or irrevocable trust does not have a FEIN (federal employer identification number), then there is no need to enter the decedent’s or trustees social security number in the identification number entry on Form 593-B.

A well created and carefully drafted agreement is necessary because once drawn up, it cannot be changed without the approval of the beneficiaries. An irrevocable trust is very frequently used for charity, especially by organizations or by millionaires (high net worth people) for managing inheritances. A trust may also be the central cog for institutions founded by individuals or groups, existing for the sole purpose of ensuring long-term financial feasibility of the beneficiary.

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Your Home Business Tax Deductions

If you operate your own home business, then you are probably aware that there a few drawbacks to being self-employed, just as there are a few drawbacks to any major decision you do in your life.

Being an entrepreneur and self employed often means that you lose some workplace benefits, such as group insurance, sick leave, paid vacations, etc. However, the government does provide solace balance to those who have an entrepreneurial spirit, and this solace comes in the form of tax breaks, because you the home worker small business owner, are the largest source of employment in America.

There are many possible tax deductions for home businesses; you simply have to be well-informed about them to make use of them.

There are good reasons for you to go through the trouble? Because you’ll earn more money that way. By knowing all the possible tax deductions, and more, that you can take, you’ll come away with more of the benefits that your business generates, instead of getting cleaned out by the government. When it comes to taxes, make no mistake about it – knowledge is power. The government needs you to have this power to keep it working also so they will help you when they can.

If you run a home business, some of the possible tax deductions for you are:

Home office costs, such as those that involve office repairs and maintenance. Expenses racked up through janitorial services, for example, when shown to be needed by the business, are deductible, as are waste management and garbage disposal services. Business furniture and equipment may also qualify for deductions in their year of purchase, as long as the amount does not exceed a certain limit.

Utility costs, such as electricity and water. The deduction applies to those areas that are used regularly and exclusively for business.

Telephone costs. This only applies if you have a separate line for use in business. A single line that is used for both business and personal calls does not qualify. However, if you make long distance calls and/or incur fax transmission fees, those expenses are deductible no matter which type of phone you use. You need to make honest percentage estimates of how much is used and keep good records based on your bills.

Rent or lease payments. A percentage of your rent, lease, or mortgage interest payments can be deductible provided that you are using the property regularly for business purposes.

Employee wages and employee benefits. If you are an employer of labor, you can deduct a portion of your salary and benefit expenses. Employee education and training costs are also deductible.

Education costs necessary in your line of work. This applies especially to professionals. Those who need continuing education to maintain their expertise may deduct the cost of this education from their tax returns.

Real estate taxes on business property. A portion of real estate taxes are considered deductible by the IRS.

Personal expenses. Some personal expenses, when conducted in conjunction with business affairs, are deductible. A portion of your automobile expenses, meal allocations, and travel and entertainment cots may qualify for deduction, as log as they are related to your business.

A final reminder: Try to maintain as accurate records as is possible. Document your deposits, income, expenses and deductions. This way, you will have proof validating your tax deductions. Because tax laws are complex and often changed, it is often advisable to consult a professional. This will allow you to claim as many possible tax deductions for home businesses as you can. Keep a stenographers notebook with separate pages for every deduction you feel you might have coming. Even if you don't know if it is a deduction, for now, record it.

The above is very powerful. If you think something might be a deduction, write it in your notebook.

Have a CPA do your taxes for you. They cost more but you will get more back and have less trouble with the irs.They will find deductions you did not know you have coming from your possible list of deductions and they will also take off deductions you do not have coming. Some things they will be able to carry over for years in the future.

Your CPA will give you tips that will save you time and money and make your business better. They have software that will make your tax work far more efficient. If you get called in for an audit your CPA will do all the talking and you say nothing. I let the IRS call my CPA, regarding my taxes, if they have any questions.

You are less likely to get audited directly by the IRS because your CPA has a reputation to keep up and will keep your taxes straight. You will even save the IRS some money because they know your CPA will do better tax work than you.

Overseas tax services cannot go to an audit with you. This is a very important benefit of a CPA for you. Even though their charges are less they cannot know your business as well as your CPA to help you with many problems and questions. Buy Americans when it comes to taxes.

If you are going to be an entrepreneur the CPA will serve you better than an automatic tax software program and yes the software programs will result in mistakes. By the way, I am not a CPA or trying to sell you any tax services.

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The Ins and Outs Of A Financial Statement Audit Report

An accounting audit report gives the complete financial perspective of a company, and is prepared at the end of the financial year. This document is of use to all who want an exact picture of the functioning of the company. The aim of this document is to provide insights into the functioning as well as profitability and viability of the company as a commercial enterprise. The benefit to those who study this report is that they get the real picture from studying all the information that it holds, which is certified to be true and materially accurate.
The reporting period is referred to as a financial year and this pertains to the start of the accounting year i.e. the day following the end of the previous financial year. In case of a new company, this is the day of formation of the new company.

Preparation and filing of accounts
The procedure of filing audit reports applies to all public companies, even if they are filing for exemptions based on the contents of the report. Every company, be it public or private, has to keep accounts of its existence and performance. The accounts prepared must include:

1. Profit and Loss account
2. Balance Sheet
3. Auditors report
4. Directors report duly signed by either a director or a secretary of the company
5. Group accounts, in case of a group of companies

The auditor is an individual or a firm appointed to scrutinize and prepare the complete financial position of the company via its performance for the financial year. There are both public and private companies that carry out audits and prepare the accounting audit reports. The accounting report deals with all the operating and financial aspects of the company.

In the United Kingdom, all companies, limited and public limited, must submit their accounts to the Registrar of Companies. In the United States, the report is to be submitted to the Securities Exchange Commission though private companies do not need to do this. Incorporating a company varies from state to state.

The duties of the auditor involved in preparing accounting audit reports are as follows:

1. Financial statements and Reporting process
Must review and discuss with external auditors and management of the Company the interim financial statements

2. Risk management and Internal controls
Must review and monitor the integrity of the Company's internal control system. Discuss Company guidelines and policies pertaining to risk management, risk assessment and internal control.

3. Auditor qualifications and their independence and effectiveness
To consider and recommend to the Board appointing, reappointing, removing and remunerating external auditors of the Company.

Associations such as AICPA have, through the Auditing Standards Board, issued a number of statements relating to the assessment of risk in auditing financial statements. These statements are the foundation for setting standards and give some much needed guidance with regard to auditor's assessing risks of material untruths (either fraudulent or erroneous) in financial statement audits. It also needs to design and perform audit procedures which are responsive to the assessed risks.

Those interested in evaluating the performance of a company will need the accounting audit report to form a considered opinion. Using this report can make them invest in the shares of the company or for the bigger business heads, decide whether to potentially purchase a company or not.

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Is Your Business In Balance? All About The Balance Sheet

A Balance Sheet is a financial document prepared by a business, organization or individual at the end of a fiscal year or other period, which depicts the assets, liabilities and shareholder equity of the company. Based on the double entry bookkeeping system, the balance sheet helps assess the net worth of the company at a given point of time e.g. end of fiscal year or some other arbitrary time. The net worth is arrived at by finding the difference between all the assets owned and liabilities incurred.

A balance sheet is a formal statement depicting the book value of the concerned entity at a particular time. It is prepared internally or by one or more Certified Public Accountants and truly reflects the state of affairs of the entity. It is quite different from an income statement which is a statement about the income and expenses incurred during a particular period of time.

A truly photographic account of the current state of the entity is how a balance sheet may best be described. It is the most used financial statement and, in fact, is the only one that reflects the state of the entity at a given point of time rather than over a span of time. The two basic features of a Balance Sheet are assets and liabilities.

Since the business may own a number of assets in the form of built-up inventories of unsold stock, plant and machinery, buildings and equipment, these are not always readily convertible into cash and so form the core of the asset valuation. On the flip side, there are creditors who need to be paid as well as tax authorities that have tax payments outstanding and these form the liability base. In addition there is the original capital and a share of profits not withdrawn by the proprietors.

Any modern balance sheet will have three main components; assets, liabilities and shareholder equity. It is usual to set out all assets at the top of the balance sheet before presenting the liabilities. The difference between assets and liabilities constitutes the net worth or net assets of the company. This net worth or net assets of the company is equal to the shareholders equity.

Valuing equity suffers from some discrepancies because sometimes the value to a purchaser of a business via the net worth may not be what is revealed by the balance sheet figures, due to unrecorded material facts. This may happen when property has not yet been revalued.

Also, assets may have been valued keeping in mind that the concern will return a profit. Under such circumstances the break-up value of assets may be more than if the business is running into losses. So whenever someone wants to know how a company is doing, a well documented and accurate answer is very desirable. And the best way to showcase the entity's success is through its balance sheet.

A lot of people as well as different organizations will surely be interested in the performance of various companies and so they turn to the company's balance sheet for more information. In addition, the owners of entities are also constantly keeping track of how their enterprises are doing. Creditors, before extending credit, would like to assure themselves that the enterprise will repay the credit. Everyone with any interest in financial dealings with an entity will, of necessity, turn to the balance sheet for guidance.

Balance sheet is the common title of this financial document but Statement of Financial Position is also one other term used to describe it.

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Why Can Outsourced Accounting Save You Money and Improve Efficiencies for Your Company?

Small and midsize companies are now starting to ask whether outsourcing some or all of the routine transactional accounting and bookkeeping tasks such as accounts payables, accounts receivables, payroll, tax filings and financial statement preparation is practical for them. The primary concerns when transitioning these functions are:

1. A change in their financial accounting process
2. Loss of control
3. Cost implication
4. Managing an employee verses managing a vendor

1. A Change in the Financial Accounting Process
A primary concern to any business and the employees of a business is change, especially changes related to the management and reporting of finances and income. Although changes present challenges to any business it is a given that all businesses will undergo transition and change. The changes can be planned for and managed or be forced upon management by external situations.

Implementing an outsourced accounting solution is a change that can be managed and implemented proactively. Outsourcing the accounting process provides a business owner with an opportunity to upgrade and improve on the current financial accounting system. The end result is improved internal efficiencies, the company positioned for long term growth and secure in the knowledge that it has implemented a comprehensive scalable accounting solution that will grow with the company.

2. Loss of Control
Outsourcing the routine back office operation such as accounts payables, accounts receivables and other bookkeeping functions places more control into the hands of the owner. The owner is no longer burdened with doing routine data entry or managing bookkeepers but rather can focus on critical tasks such as sales, marketing, customer service, operations. These are all core functions central to the success of the organization.

Freeing up the owner's valuable time coupled with having access to accurate financial information in a timely manner are critical factors in helping an owner understand and manage their business intelligently and efficiently resulting in them having more control of their business.

3. Cost Implication
The cost analysis for hiring and retaining a bookkeeper should go beyond just crunching the numbers of the hourly rate. The total cost of the bookkeeper should include all of the associated benefits, taxes, overhead, the cost of your time to manage that person and the cost to correct errors by the bookkeeper. Listed below are some of the typical costs associated with hiring, retaining and managing a bookkeeper. What you think is costing $25,000 to $32,000 for a bookkeeper may actually be costing $50,000 to $65,000.

Typical costs for a bookkeeper:
- $2,600/month of salary based on an hourly rate of $15/hour and a 40 hour work week
- $350/month for health insurance
- $100/month for the 2 weeks of paid vacation per year, that is taken by the bookkeeper
- $260/month for payroll taxes and workers compensation
- $520/month of overhead costs based on office space usage, computers, supplies, etc.
- $52/month for retirement benefits such as a 401K plan

Additional items not included above that drive up the cost of retaining the services of a bookkeeper is the amount of time an owner has to spend monitoring and managing a bookkeeper as well as hiring a CPA to correct errors and prevent fraud and embezzlement by the bookkeeper. If an owner's time is valued at $100 per hour and they have to spend three hours per week with the bookkeeper, then on a weekly basis the additional cost to the owner is $300 per week or $1,300 per month. In addition, if a CPA is hired at $200 per month to correct and verify the bookkeepers work then the total additional cost, including the value of the owner's time, is $1,500 per month or $18,000 per year.

Once each of the costs detailed above are factored in, the true cost of hiring and maintaining a bookkeeper on staff is $64,584 per year, more than double the annual salary of $31,200 per year.

By implementing an outsourced accounting solution a business can typically save twenty-percent to fifty-percent in accounting costs.

4. Managing an employee verses managing a vendor
In addition to the costs outlined above, managing employees can present additional challenges. These can include spending additional time hiring and training replacement personnel due to employee turnover, managing internal conflicts and running the risk of employee fraud and embezzlement.

Critical to the success of outsourcing your back end accounting functions is finding a suitable vendor that you can work with. The vendor should have a good reputation, be capable of processing your work on time, and have a system in place for processing the work and a means for communicating the status of the work being processed. Once a qualified vendor is identified and a system is in place, the process will appear seamless to your vendors, clients and employees.

Conclusions
Outsourcing the back office operations of accounts payables, accounts receivables, payroll and bookkeeping will continue to evolve and eventually become routine for small and mid-size companies. The benefits to outsourcing the accounting functions include improved efficiencies, more control, reduced cost, elimination of gaps in work flow due to employee turnover, improved financial reporting and minimized risk of fraud and embezzlement. All of these benefits will position your company for long term future growth.

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How To Generate Pro Forma Financial Statements For A Company

Pro forma financial statements are a process of formally displaying financial projections for a given period of time and in a consistent layout. The word pro forma is derived from the Latin term which means "as a matter of form". Most businesses make use of pro forma financial statements in the executive process for planning and control as well as for reportage to owners, investors, and creditors. A pro forma financial statement is utilized as the foundation stone while comparing and analyzing information in order to give a feel to the management, investment analysts, and credit officers about the nature of the business' fiscal organization under different conditions. The American Institute of Certified Public Accountants (AICPA) and the Securities and Exchange Commission (SEC) both ask that standard formats be used when presenting or forming these types of statements.

For those who are interested in getting started in a business, the preparation of pro forma statements, both for income and for cash flow, is essential before investing any money, time and energy into the venture. Being an essential part of the planning process, these financial statements help reduce to the barest minimum, any risks associated with the start-up and operation of a business. It may be the basis of convincing lenders and investors to provide capital for a new business venture.

Pro forma financial statements must be reliable and accurate and should help those studying it to draw a true and accurate picture of the start-up firm. It should be based upon purposeful and dependable information that will go a long way in creating a true and concise projection of the expected profits of the business as well as its financial requirements in the first year of operation and after. Once the business has taken flight and the initial statements have been prepared, these should be regularly updated, both monthly as well as annually.

Most companies use pro forma statements for business planning and control. These pro forma financial statements are obtainable in homogeneous and columnar lay-outs and are used by management to evaluate and distinguish between other alternative business strategies. By judiciously presenting information concerning financial and operating statements adjacent to one another, the management is thus able to analyze the projected results of the various contending strategies and arrive at the best path and the most suitable plan of action.

While forming pro forma financial statements, companies should realize that these statements should be unique and each proposed plan or project has its own distinct features that should be accurately captured therein. The prime usage of these statements is for management to:

1. Recognize the assumptions that cause the financial and operating characteristics to produce different company scenarios
2. Build on the different sales and budget (income and expenses) projections
3. Bring together the results in the form of profit and loss projections
4. Transform such data into cash-flow projections
5. Evaluate the resultant balance sheets
6. Execute ratio analysis and compare projections against one another as well as against those of comparable companies
7. Examine proposed decisions regarding marketing, production, research and development and make an assessment about their impact on profit as well as on the liquidity of the company
through simulation of competing plans, useful gains are obtained with regard to the evaluation of financial effects of each alternative plan.

With different sets of assumptions providing different scenarios regarding sales, production costs, effectiveness and practicality, projected financial statements for each such scenario holds enough information to indicate the future prospects, inclusive of sales and earnings forecasts, cash flows, balance sheets, projected capitalization, and income statements.

Company management also uses the these financials to choose from different budget alternatives. The planner will provide sales revenue, production expenses, balance sheet and cash flow statements for different contending plans and will explain the essential assumptions of each. Having analyzed this data, the management will then select the annual budget. Having chosen the action plan, all that remains to be done is to explore and find deviations in the plan and rectify them.

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How To Use Purchase Orders To Track Purchases

A purchase order is a document, commercial in nature, issued by a purchaser to a seller, informing the latter about what type, quantities and price of products and/or services that are agreed for purchase by the buyer from the seller. When the buyer sends a purchase order to the seller, it makes for a legal offer for purchasing goods or services. When the supplier accepts the form, a contract between the buyer and seller comes into existence. A Purchase Order has the following contents:

1. Purchase Order Number
2. Shipping date
3. Billing address
4. Shipping address
5. Requested terms
6. List of products including quantities and prices

There are usually several reasons for a buyer to issue a purchase order to a supplier. In the first instance, the document sets out the a written communication to the seller about the buyer's intention to purchase and it strengthens the hands of the seller who can find protection in this written communication in the event the buyer defaults on the purchase. To protect themselves against malfeasance on the part of the buyer, sellers ask for a written form. A purchase order is the document representing the buyer's intention to purchase specified quantities of goods at specified prices. In case the buyer defaults on paying the seller, the P.O. is a legal document in a court of law that demonstrates the intentions of the buyer in purchasing goods or services with the intention of facilitating collection of dues. Since a P.O. reduces the risk of defaulting buyers, most companies that do business with other companies for major purchases require such a form to be filled out by the buyer.

There are several different types of purchase orders. Some of the more common Types are:

1. Electronic P.O.s, especially using B2B standards such as ANSI, EDIFACT and RosettaNet
2. Single use forms as used in retail stores to keep track of purchases through use of a single form
3. Blanket Purchase Orders used by some companies to track purchase made for a certain class of products such as IT purchases

Each time a buyer orders some goods or services from a vendor it gives rise to a contract to buy as well as a contract to sell. A Purchase Order helps keep an accurate track of such important transactions. Each document should state the shipping method, date on which the goods or services are required as well as the name and designation of the person with whom the order has been placed. The form should also confirm the quantity and price per unit of the items being bought.

Some companies have very sophisticated purchase ordering systems where automatic generation of forms occurs once the on-hand quantity of an item falls below a certain level. This enables the processing of partial receipts, updating of inventories as and when goods are received as well as being able to track variations in price of goods received against price of goods invoiced.

By integrating the purchase order with accounts payable, inventory management and an effective sales order module it gives rise to an all-inclusive purchasing system. A good system will help the company in making better informed purchasing decisions with all information related to this activity being easily available at all times.

Keeping in mind the possible advantages for a business entity that accrue from having a good purchasing system, it may be for the betterment of the company to have a complete purchase order form on hand. With well formed template documents available in the market, the company would be well advised to consider using them for their purchasing needs.

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Can Restaurant Owners Increase Profitability by Monitoring and Understanding the Financial Numbers?

The other week I stopped at a restaurant to have a bite to eat only to find that it was about to close its doors. I was somewhat surprised since the restaurant had a terrific menu, good quality food and excellent service. In speaking with the owner I discovered that the restaurant did not have any systems or processes in place for monitoring its financials. The owner never knew where he stood financially on a daily basis, weekly basis or monthly basis.

When we speak with owners of restaurants that failed, we often find this is the case. The restaurant has failed to implement an effective system for monitoring the financials. As with other cases, this owner assumed he was making money because the restaurant was always full.

Critical to the success of any business is the ability of a company to generate cash and make a profit. A restaurant must implement a great sales and marketing plan that fosters customers' loyalty and generates new business. It must also have a system in place to manage the flip side of the profit equation - the expenses. To effectively manage and control expenses a restaurant owner or manager must be able to breakdown and identify expenses in a timely manner so that adjustments can be made rapidly.

The key component to understanding the relationship between sales, expenses and profitability is an effective Management Information System. In this case the system refers to procedures or a process put into place to gather financial data from the registers, journals, ledgers and subsidiary ledgers and compile it into useable reports. Reports can then be used by the manager for monitoring and controlling the facility. A management information system need not be extremely complex or sophisticated; however it does have to be accurate. The reasons for having an effective management information system include:

1. Low margins
Income before taxes for a restaurant is typically between 4 percent and 8 percent. Any minor changes to costs can have a major impact on profitability. For example if the food cost in a full serve restaurant increases by 1 percent of sales, income before taxes is decreased by 25 percent (4 percent to 3 percent). If undetected for any length of time the net result is a significant loss for the restaurant owner.

2. Volume of sales transactions
An effective system is required to summarize the volume of transactions processed by restaurant into a meaningful report.

3. Susceptibility to theft
Because of the significant number of cash transactions that take place on any given day in a restaurant and the inventory that is on-hand at a restaurant, theft can become common place. An effective system allows the owner or manager to monitor high risk areas and quickly identify problems.

When implementing a system the primary objective is to gather and convert the accounting data into useful information for the manager. The following are common key characteristics of an effective system:
- Accuracy
- Timeliness
- Simplicity
- Usefulness

By converting accounting data into meaningful daily reports, weekly reports and monthly financial statements a manager can analyze operations and make adjustments accordingly. Critical to proactively managing a restaurant is to have daily and weekly reports.

Daily Reports
Daily reports need not be complicated but do have to provide the manager with some basic information such as a daily cash report so that the days cash receipts can be reconciled with sales. This allows the manager to monitor any cash shortages or overages by balancing the day's sales to cash deposits. Because most restaurants now have some sort of POS system they can run numerous reports; Breakdown of sales for specific items, sales by server, restaurant sales per hour, etc.

Weekly Reports
Weekly reports provide the manager with some insight into the trend of a restaurant's performance so that adjustments can be made. If negative daily or weekly trends are not identified until monthly reports are available a trend, that can be corrected easily, may result in a major problem due to the large number of daily transactions.

Monthly Financial Reports
Traditional financial statements, at minimum, should include the balance sheet and income statement. They may also include other financial reports such as general ledgers, bank reconciliation statements and earning reports. These reports compiled by a CPA are critical to:
- Monitoring the restaurant's profitability.
- Meet reporting requirements of banks and outside investors.
- Validate the in-house weekly/profit and loss reports.
- Quickly identify possible theft/bookkeeping irregularities.

Implementing these financial processes and reports allows a restaurant to more effectively manage its expenses and make corrections quickly resulting in higher margins for the restaurant.

A little more profitability might even pay for an extra meal out each week.

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How to Monitor Your Cash Flows With A Cash Flow Statement

A cash flow statement is a financial reporting document displaying the cash outflows and inflows of a company on a monthly or quarterly basis. This report reflects the effects of changes to the balance sheet and income accounts on the cash position as well as analyzing the operating, investing and other financial aspects of the company. When analyzed, the cash flow statement helps assess the short term capability and practicality of the company as to whether it will be able to fulfill its obligations to pay its bills or not.

Those who may be interested in studying the cash flow statement include:

- The accounting department
- Creditors and other lenders who need to assess the repayment capability of the company
- Investors who will judge whether the company is economically sound and viable
- Contractors and would-be employees who need to know whether the company will be able to fulfill its financial obligations

Companies that have limited fluid assets and which are just beginning operations are most in need of cash flow statements because they may be vulnerable and may experience cash shortfalls in spite of having healthy Accounts Receivables balances.

It is important to design a good cash flow statement that will translate the accrual basis of preparing an income statement as well as the balance sheet back into cash basis. The importance of this method is underscored when considering the fact that cash basis statements help in analyzing the actual amounts of cash flowing in and out of the business. Though the accrual basis may accurately reflect the company revenue and expenses the cash flow statement will additionally map out what happens when changes to the balance sheet are made. There are four different kinds of cash flow statements:

- Net cash flow statements that reflect operating activities. The generation of cash inflows and outflows that reflect the daily operating behavior of the business and includes cash received from customers, cash paid to suppliers and employees, and operating expenses, interests as well as taxes, and cash income received from dividend payouts.
- Net cash flow statements pertaining to investing activities. Mainly reflects the sale or purchase of equipment.
- Net cash flow from financing actions. Inclusive of common stock, short or long term loans changes as well as paid out dividends.
- Net changes in cash as well as marketable securities. To check whether the calculated amounts of increases or decreases in cash and marketable securities as arrived at from the above three points are in tune with those reflected in the balance sheet to help ascertain if the calculations were correctly made.

Though there are a number of different people interested in viewing the cash flow statement, each wanting their own perspective of the business, this financial statement is most important to management, lenders, tax officials and investors. The importance of this report is that it reveals the entire picture about the business and this is very helpful as it will reveal whether the business has enough cash or not to meet its obligations.

With cheap cash flow statement documents being available for as low as US$10 it is indeed a bargain to purchase one and use it for one's business instead of going through the hassles of preparing one from scratch. These prepared documents usually take into account the various needs of different businesses and can also be tailor-made to suit individual needs.

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Understanding a Balance Sheet

There are three main sources of financial information that a company regularly makes available to investors. These 3 items are the balance sheet, the income statement, and the cash flow analysis. Most neophyte investors have no idea how to interpret these statements. A lot of stockbrokers are not too proficient at it either. You do not need to be an expert or a financial analyst to understand and evaluate financial information, but you should know what to look for so you can determine whether you should invest in a certain company. For our purposes here, we are going to discuss how to analyze a balance sheet, which is generally considered to be the most important tool for analyzing the financial health of a company.

The first thing to examine on the balance sheet are the assets. Assets are things that the business owns or will own in the future and have a value attached to them. The next important item is liabilities, which includes everything that a company owes, such as taxes, wages, loans to be repaid, etc. The other most important item to look at is equity, which is the earnings and money contributed by shareholders. You can calculate the shareholder equity by subtracting total liabilities from the total assets.

If Shareholder Equity is a very small number or a negative number, this does not bode well for investors. If the number is on the high side, that means that the company is profitable and able to share its earnings with stockholders by paying a dividend.

A balance sheet is normally presented in two different formats, depending on where it is published. Sometimes the statement is presented horizontally. Other times, it is presented vertically. The vertical presentation is used most often because it is easier to analyze. The five basic components of a balance sheet are:

Shareholder Equity (we already covered this)

Non-current liabilities (money to be paid more than 12 months from now)

Current liabilities (money to be paid within the next 12 months)

Non-current assets (non-cash items of a permanent nature)

Current assets (cash or items that will become cash within the next 12 months)

These components are categorized differently depending upon the industry the company inhabits. A telecommunications company would have different categories of assets and liabilities than a pharmaceutical company. Also, it is important to note, balance sheets for companies in a certain industry will show different levels of profitability. Just because a software company does not have the same level of shareholder equity as a retail business does not mean that the software company is not a good investment. The software business might have to meet a lot of short-term liabilities, such as paying programmers and investing in technology, in order to meet future sales goals. Once the software is finished, those liabilities might disappear, making them profitable. You need to take into account the operations of the company when reading a balance sheet.

Also, it is important to realize that balance sheets, though they always span a 12 month period, the beginning and ending dates can differ from one company to the next. A company will typically select a 12 month period that results in the lowest level of their business cycle being the end of the 12 months. So, some statements might run from December to December, while others might run from April to April.

I hope this information will help you understand a balance sheet.. Try to set aside some time and log on to a stock quoting website. Look up the stocks of companies you are currently invested in, and then click on the link for their balance sheet. Take a few moments to review it, and then call your broker if you have any concerns.

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Forensic Accounting The Detective Breed of Accounting Careers

When you ask people to give you a list of exciting careers, accounting is never near the top. The accounting career field tends to draw the sedentary folks: steady, analytical types who value security above all else. You're basically there to keep the wheels of business turning; a plumber directing the flow of money instead of water.

However, the growing shape of the global business market and the scandals wracking the business world have highlighted the increasing need for a rare breed of accountant; the forensic accountant is either an internal or external auditor who is brought in to investigate the scene of a fraud, bankruptcy, securities scandal, or other conflicted situation and prepare a report identifying what happened. It is called a forensic function primarily because it's results can be used in a court of law.

What's the job like?

There are actually many scenarios in which a forensic accountant might be needed: disputes and litigation, insurance claims, personal injury claims, construction audits, insurance fraud, royalty audits, or Wall Street scandals are some of the specialties in this field. Most accounting firms have a cabinet of forensic accounting specialists. These people are sent in the aftermath of a fraud to assess if the numbers in the books reflect reality, and if not, then identify what's really going on.

A forensic accountant does not have the luxury of being able to disregard anything that doesn't happen on a spreadsheet. They have to take the big picture into account, dealing with the whole reality of the business situation. A forensic accounting procedure will usually include investigating and analyzing financial evidence, using computerized applications to present the financial evidence, delivering the findings in the form of reports, collecting and exhibiting documents, and perhaps testifying in court as an expert witness. In addition to knowledge of accounting, a forensic accountant must also be familiar with legal concepts and procedures.

The two sides of forensic accounting - investigation and litigation support, break down into several smaller steps:

In the investigation, you might review the situation and suggest possible courses of action, assist with the protection and recovery of assets, and work hand-in-hand with private investigators, forensic document examiners, and consultants. People may lie. The books may be cooked. Keep your eyes open!

During litigation support, you may be responsible for providing the documentation necessary to support or refute a claim, presenting the initial assessment of the case identifying areas of loss, assisting with the examination for discovery, reviewing the testimony, reviewing the opposing expert's report, and assist with the settlement discussions and negotiations. Attorneys and witnesses may contradict you. You might have to keep digging deeper into a cover-up. Most of all, you will have to convince one judge and twelve jurors that you're the right person to be testifying about the case.

By no means are forensic accountants confined to an office or a courtroom. There are a wide range of industries which retain the services of a forensic accountant. Matrimonial disputes, in which a divorce proceeding needs mediation to verify the state of disputed assets, is one area you might not expect. Other scenarios might be investigating claims of business negligence, or personal injury claims.

Business economic loss investigations might cover expropriations, product liability claims, trademark and patent infringements and losses stemming from a breach of a non-competition agreement. The growing technology industry is an example of an expanding need for services relating to product liability claims and patent infringements. It's easy to show whether or not a car's defects could lead to an accident, but how would you prove that the bugs in a computer operating system led to the loss of assets when the business which used it was hacked? It's easy to show that a competitor copied your patented design for your camera, but how exactly do you defend a patent on a cursor?

A forensic accountant combines the skills of a record-keeper, paralegal, and a detective rolled into one. To be good at it, you have to have a good dose of curiosity, persistence, creativity, and discretion. You'll need sound professional judgment and confidence that you know your job so well that your knowledge and discoveries will stand up under cross-examination. Companies will live or die and defendants may go to prison based on the work that you do, so you are challenged to be at your best. It is the most challenging of accounting careers.

Some facts about Business Fraud Detection:

Small businesses are the most vulnerable to occupational fraud and abuse. Larger businesses will have a broad number of employees preventing losses and performing internal audits, while smaller companies are more trusting of their own employees.

Surprisingly, the average fraud at a small company nets more money than the average fraud at a large company! This is due to the fact that there are fewer people watching and less control over who has access to the bookkeeping. Put yourself in the place of a start-up entrepreneur: Starting your own business already requires you to work so hard that you might as well be three people already. You won't have the time to check up on every action of everybody you hire when your business is small. You have no choice but to start out with a handful of people you trust, and hope you can go on trusting them!

Companies with fraud hotlines or other ways to report anonymous tips tend to cut their fraud losses by a flat fifty percent. And more frauds are uncovered by anonymous tips than any other source. As a fraud investigation accountant, you may have to rely on the occasional "deep throat". If you have someone tipping you off to a shady practice, you will need to be sure that the information is detailed enough to give you a good lead.

Losses due to an employed perpetrator aged 50 and above are usually much higher than the losses caused by an employee in their 20's or 30's. This is obvious considering that older employees have obtained a higher level of trust and responsibility within a company. In addition, an employee nearing retirement feels that they have less risk, since they may be out the door by the time their fraud is discovered.

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