Choosing An Internal Auditor

nternal Auditors are very well sought after and compensated accordingly. Because of stricter laws and enforcements due to corporate accounting scandals, like that of Enron, companies are offering top dollar compensation to accounting and finance professionals to provide internal audits. As an internal audit can be expensive, it is wise to allocate and ensure the availability of funds prior to hiring an internal auditor.

As most companies typically conduct annual or bi-annual reviews of processes and procedures, in order to remain compliant, and hire internal auditors to do so, there are times when a government agency will come to audit things themselves. These are stressful times and choosing the right Internal Auditor can save thousands in fine and penalties.

There are several factors that should be determined before choosing an Internal Auditor. First, you must know the role of an Internal Auditor to be able to match your compliance strategy with the proper education, experience and know-how to effectively get the job done. Acting as a go-between for government compliance offices and providing a service to your company, the internal auditor must be aware of the latest in compliance governance. Therefore, when you choose an internal auditor, it is your job, that is, you're responsible for the auditor you choose, to make sure the credentials are relentlessly checked. Including the human resource department, the chief financial officer(s) as well as others who make high-level decisions for the company are good ideas, too.

In order to enhance internal controls and to remain compliant with government standards, experience has to be the number one criteria when choosing someone who will have access to all intellectual and physical property records as well as delicate financial information. When choosing an Internal Auditor, you should check references, licensing information, and review previous audit information available. The Institute of Internal Auditors is a professional organization aimed at providing guidance, certification and educational research to it's over 130,000 members. This organization serves as a clearinghouse for checking licensing and references.

Secondly, keeping in mind your companies business needs, the internal auditor should specialize in the type of auditing you require. For example, if it is quality management auditing, then the internal auditor should have the capability to grasp and understand fully your company's business, quality controls and standard operating procedures. This should be proven by a consistent track record of QMS audits. If it is risk management or financial analysis that is required, then, along with being bonded individually as well as within his/her own auditing company, the internal auditor must be completely impartial and objective. This ensures that, while no personal interest is involved, the end result will be to make recommendations, share downfalls and places where compliance must be tightened to ensure your organization will pass any type of auditing test.

As reported by NASDAQ, only half of all companies listed on the exchange actually have in place internal auditor functions. This is a dangerous lack of practice and could cost so much in fines and penalties, that an internal audit can look like the cost for a weekend drive to your mother's house. Sarbanes-Oxley requires the Internal Audit function exists in companies that have $250,000 in assets or more. It would be a horrible thing if a Cynthia Cooper wanna-be blew your company apart simply because you didn't hire an Internal Auditor.

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Final Statements

Accounting does not end with recording transactions. The owner or the management needs useful information about whether the business made a profit or loss or how the financial position at the end of the accounting year compares with that at the start.

From the trial balance all the income and expense items are transferred to the income statement. Further, certain other items are also adjusted before transferring the balances. Consider rent. Now, rent becomes payable at the end of a month. Therefore, following the accrual principle the accountant posts the rent as payable outstanding and adds this amount to the rent expense. The rent payable appears as current liability in the balance sheet and squared off when the actual payment is made.

Similarly, insurance payments are made annually. But, they would not match the accounting year. On the date of the preparation of final statement, there could be some months of insurance remaining prepaid. This amount is deducted from the expense and shown as current asset in the balance sheet. It becomes expense for the next accounting period.

The excess of income over expenses represents profit while the reverse scenario would mean loss. Profit adds to the equity or owners' capital while loss erodes the same. In effect, profit means the assets have increased while liabilities have decreased. Loss means assets have decreased and liabilities have mounted.

To find out the exact position of assets and liabilities, the accountant prepares the balance sheet. Although one would know whether the business made profit or loss or the value of assets and liabilities have increased or decreased, there is a need for a statement that gives complete information about how the financial position was achieved. The Cash Flow statement serves this purpose.

The basic rationale behind the cash flow statement is that all operations of the business are connected with receiving and paying cash. This is also called the cash-to-cash cycle. The firm buys inventories, sells them, incurs expenses and pays off the dues. So, there is always a parallel run between the firm's debtors and creditors. There are also transactions like fresh infusion of capital, paying off loans and making investments.
Therefore, to get the correct picture about how the firm's operations and other non-operative items contributed to the changes in financial position, the cash flow statement is useful.

The starting point for the cash flow statement is the balance of cash at the start of the year. There are three segments in the cash flow statement: Operating, Investing and Financing. For the first segment, we knock off non-cash charges like depreciation and loss on sale of assets to derive the operative profit in cash terms. We also adjust the net increase or decrease in all current assets and liabilities except cash. In the second segment, we include the investments in fixed assets or financial instruments. In the third segment, we show the dividend or withdrawal of capital. The net effect of all the three segments is adjusted with the opening cash balance to get the closing cash balance.

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Getting a Real Merchant Account or Using 3rd Party Processors Like PayPal(R) - Which is Better?

A lot of folks see PayPal, ClickBank and other third-party agents as the optimal method of doing business excluding a Merchant Account. This view is substantiated because there is usually no application process, and a few companies, PayPal for example, do not have any fees up-front. This feature boosts their appeal to "shoestring" start-ups and companies that deal in online (digital) products. A bargain is not always the 'cheapest' product.

Why don't we discuss the real differences between going with a third-party company (such as PayPal) and setting up a merchant account of your own...

1. A regular merchant account will charge between $100 - $250 initially to set up, a minimum monthly fee (minimum charges incurred) of $25 and $5+ to send out statements. These companies will bill you somewhere around 1% to 4% or even more per transaction (discount rate) - this varies with your business type - and a majority also use some kind of flat-fee for transactions. These fees range from $0.05 to $0.25

In contrast, PayPal does not charge a set up fee. They do have a 2.9% discount rate and charge 30 cents for each transaction. CC Now lacks fees except a 9% per transaction charge. ClickBank's set-up fee is $49.95. They charge no monthly fee, but a transaction fee of $1 in addition to 7%. DigiBuy has a set-up fee of $29.95 and no monthly fee. They do charge 13.9% or $3 per transaction (you pay the larger fee).

To better explain the fees involved, essentially, as soon as you build up a noteworthy sales volume ($1000/month or more), the costs involved with utilizing companies such as ClickBank, CCNow and DigiBuy far exceed what you would pay for a true merchant account that really works with your business. The advertised discount rate is normally where most of the money is used anyway, and this is how third-parties usually take in all their money.

PayPal, however, has a quite affordable discount rate, and the sole extra charge incurred for a regular account is the 30 cents transaction fee. In fact, if the average charges of a traditional merchant account are compared with PayPal's strictly from a "numbers" standpoint, the only time it is less expensive to use a merchant account is if your transactions are upwards of $50,000 monthly.

This perspective is only taking considering the actual numbers involved - and not any other variables that crop up when conducting business online, or offline...

2. Initially, it seems like PayPal is by far the better choice. Their low discount rate and transaction fees are without equal, and there is almost no entry impediment. You can start a PayPal account at no cost in a few minutes, and you are able to begin taking payments the moment your details are verified. For some small-time sellers and internet entrepreneurs, PayPal is just the ticket.

However, there are huge shortcomings that are not disclosed in the black and white contrast table that deals with cash - the value of the service could be different after you understand the following:

a. Many times these alternatives don't deal with support requests quickly; there have been times that delays persisted for several weeks.

b. Paypal does not give you access to your customer's credit card number, neither do any of the other third party service bureaus

c. A great majority of the alternatives cannot calculate shipping charges and taxes in their shopping carts

d. Some other companies are only serviceable for large profit-margin sales because of the expensive charges per sale (eg. DigiBuy charges 14% per sale which is huge)

e. Many alternatives to the merchant account lack a shopping cart altogether (eg. ClickBank), while like Paypal's is crude to say the least

f. PayPal has been known to shut down accounts and freeze funds - without warning - based solely on the hunches of employees that feel that vendors have violated their terms of service.

g. If you're especially accomplished at marketing, and if you render an ample amount of sales during a launch - you should not be startled if your account ends up being "red-flagged", frozen and audited. And this will take place, once again, without warning.

In comparison, this is what you can anticipate from a merchant account:

1. If you are processing sales online, you will have the ability to enter your merchant details into an easy to use, uncomplicated menu-driven (shopping-cart) interface/gateway - and there are several that are readily obtainable, even free ones such as OSCommerce. These are is simple to use by potential clients, and all-inclusive in terms of assembling crucial data

2. You can allow you to modify the shopping cart to fit your precise purpose including the shipping costs and taxes

3. It will show you your clients' credit card numbers to make tracking, refunds, etc. easier.

4. It will assist you in fully automating your business's payment processing

In other words, when you are starting out and your sales volume is low, a more cost-effective approach could be to use services like PayPal. However, when your sales increase - or if you desire more control over your ordering process, at the same time saving cash on higher sales volumes, a merchant account is a better choice.

In conclusion, if you're sincere about making your small business succeed, you will sooner or later need to obtain a merchant account. It's more cost effective, and you have much greater control over the money being processed.

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Understanding Accounting Vocabulary

When you learn something new like accounting concepts and terms, it helps to create links between what you know and what you are trying to learn. In some ways, it is like learning a second language and decoding the new word is part of the learning process. For example, trying to translate the Spanish word necesario you might brainstorm with necessary - and you would be right. How about blanco? Blanco is like blank which is like white. So, blanco is Spanish for the color white.

Try to make some logical connections about the accounting vocabulary. Take the word - accounting - and think about it. Really, the accounting system is a basic counting of what goes on in your business.

Let's move on to transactions. Transactions are the business activities, or actions, that build day by day and become your expenses and income. Try to think about the term - transactions. Actions are business activities, and trans means across or thru. These are the basic building blocks of an accounting system. Transactions are to accounting like what raw materials are to a factory, or gasoline is to your engine - the transactions are real and how your accounting system handles them impacts your business.

You must keep a record of your transactions to know how much money your business earned and how much money your business spent. Sounds obvious, right? Ask your bookkeeper or accountant how obvious some transactions are. It can get tricky quickly if you are not clear about what happened in the transaction and how you want it recorded.

For example, if you were a carpenter you might pay cash for a bucket of nails to assemble hand made wooden deck chairs. The nail purchase is a transaction and will have to be counted as a business expense. In your workshop, you then assemble the chair using a pneumatic nail gun, sand paper, stain and varnish. The next day you deliver the chair to a customer in a neighboring town. You hand the customer a sales slip and they then write you a check. That, too, is a transaction. It is easy to see the transactions when money is spent or received. Did you, however, see the other transactions?

The stain and varnish, nail gun use and chair parts were also part of the transaction. What about the gasoline and truck used to deliver the chair? Did you have any left over nails or did you use them all? Maybe there is a little life left in the sand paper but it is not new anymore, is it? If we do not account for those costs we are missing a piece of the picture-an important piece-that could affect how much money you have at the end of the year.

In all your business activities, try to think in terms of transactions because once you can identify what transactions occur in your business, you will be able to organize them into a meaningful manner. Right now, take a minute to list what transactions occur in your business each day, week and year. Always thinking in terms of transactions might seem miserly, but it is important to be cost-conscious and honest with yourself about all your transactions. Your success in business depends upon it.

Some transactions are initiated by customers and suppliers. Other transactions can take place inside your business or back office. The bookkeeping department creates transactions when they adjust your books for year-end considerations like machinery depreciation or inventory shrinkage.

What is depreciation? Let's say you bought a brand new car, a 2006 Professor Now Coupe, and you spend $27,500 on this new car. Next year the car has some dings on the doors, wear on the tires, stains on the seats and 20,000 miles on the engine. You know your car is not worth $27,500 anymore. This means your car has lost value or depreciated.

When it comes to business owned equipment, you can deduct this lost value as a business expense. Sure, you did not spend cash on the lost value but with depreciation, this is a transaction your bookkeeper or accountant will force through at the end of the year. On your taxes, it helps you by increasing your expenses like all other cash transactions. Of course, the other side of depreciation means your equipment is not worth as much anymore.

In order for you to get a really clear picture of how your business is operating, you need to be diligent and thoughtful about what your real expenses are. Depreciation is a real expense even though it is not a cash transaction.

Learning to see transactions for what they are takes practice and contemplation. Transactions affect so many areas of your business that you must analyze the daily details so you can piece together the big picture.

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Discount Merchant Account Availability

Find out if discount merchant account services are available for your company by browsing Websites of potential lenders. By checking application guidelines, you will soon see whether you quality, and if so, how to apply and enhance your chances of being approved for this account. Getting a merchant account makes you eligible to accept credit card payments. Think of how greatly your sales volume could increase when you allow customers to pay with credit instead of insisting on cash or checks. They will love you for providing this option, and your sales volume could quickly skyrocket when happy customers come to visit with plastic in hand.

A discount merchant account lets you provide credit payment options at one low price. For example, after paying a possible application and setup fee of perhaps $100, you may be charged just $19.95 per month for the options of accepting credit card and debit payments as well as e-check processing and related services.

You have to be careful when shopping for a merchant account, as there may be all kinds of hidden fees that are not listed on the home page. Instead, these may be buried in fine print or posted on a distant link from the home page. You need to find out in advance what the costs will be and how you will be expected to pay them. For example, ask about an online application fee, a membership fee, and a setup fee, among others, if you dont see these posted.

Some services will tell you that what you see is what you get. In other words, if you dont see a certain fee in the price list, it doesnt exist and cannot be added later. Even if you accept a merchant account under certain conditions the first year, during the second year your fees could change, so ask about the long view as well.

Applying for a discount merchant account must be undertaken with caution. Something that sounds too good to be true probably is just that. Look for a lenders name you can trust along with a reputation built on values like integrity and respect. Avoid companies that you are unfamiliar with, as there are many fly-by-night entities looking to make a fast buck. Get the contract in writing, and make sure you read it all before signing up. Ask for clarification of any terms or conditions you do not understand. All too often, an unwary entrepreneur may end up in dire straits when a seemingly lucrative merchant account becomes a sinkhole.

Dont rush out and buy all types of credit processing equipment when your merchant account is approved. First, make a business budget that includes a category for growth and marketing. Then look for the right kind of equipment that will best serve your customers needs. For example, you dont have to buy every type of credit processing system available when a simple plug-in terminal will do. Keep your expenditures low while you get used to this new way of collecting payments. If all works out well, you can add more options later with your discount merchant account.

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Apply For A Credit Card Merchant Account Online

Who should ? Why, you should, of course, if you want to grow your business and maximize sales volume! In this day and age, more and more business functions are moving into cyberspace, which means that business owners must be ready to travel to this relatively unknown domain if they want to maintain strong customer ties and stay a step or two ahead of the competition. Don't worry if you're not Web savvy; most online processes that are geared to the general consumer are not hard to perform. In fact, most are downright easy.

First, find a lender that you respect that is willing to extend you a credit card merchant account online. This may be the bank where your business interests and accounts currently reside. Or you may choose to shop for another lender with better rates or services. Don't rush into this decision, however. Plan some time in your schedule to carefully browse the many services offered through a host of financial institutions today.

You can browse the Internet by typing in search phrases like merchant account or merchant services and seeing what Google or your favorite search engine can bring up. Then it becomes a matter of checking out each lender to find the one that will best fit with your business budget or growth objectives. Some companies may seem a little too shady, while others may not have been in business long enough to enjoy a solid reputation. Others may charge a frightful amount for the services you want. Ask around your local business community to see which merchant account providers others are using, and then compare those costs and services with those you find online. You can probably reduce your list to a few of the better underwriters in short order. Then you will need to make the final selection by comparing monthly and annual fees.

Applying for a credit card merchant account online is fast and easy. Just click on the lenders home page link to 'application' (or some variation thereof) and follow the links to the application page. Then type the requested information in each blank. Contact the customer service representative if you do not understand a question or if you are unsure how to answer it. Remember to print a copy of the application if you are able to do so, or keep a copy of the confirmation number if one is provided. Often a company will email a verification of your application's receipt and tell you when to expect a reply. At least print this page, if nothing else, for your records.

After applying for a credit card merchant account online, sit back and wait to hear about the decision. Often this arrives within a few days or even hours by email, although some are mailed out by post. When you receive approval and open your merchant account, you can begin to accept credit card payments right away. You will be delighted to see how quickly your profits increase as customers begin taking advantage of this valuable service. Don't wait consider applying today for your credit card merchant account online.

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Smart Businesses use Off Shore Merchant Accounts

Among the many smart business accounting practices that can help your business is that of using an off shore merchant account for your credit card processing needs. These offshore accounts are completely legal and can help your business save money. They also provide service levels comparable or often even better than their on shore counterparts.

In the present day context credit card processing ability is almost a necessity for big and small businesses alike. Most people prefer to pay with credit or debit cards. The practice of paying by check or cash is fast disappearing. In this scenario, it is important to have the ability to process credit and debit cards. It allows you to serve a wider range of customers.

In order to ensure that the money paid by credit or debit cards is properly transferred from the customers' accounts into your account you will need to open a merchant account. Merchant accounts are similar to any other bank account, but should be kept separate as business accounts for accounting purposes.

Many companies will help you open a merchant account in the United States, but it is worth considering the option of opening off shore merchant accounts available from countries in the Caribbean, Central America, and Europe. This will help you save money in many ways in the process of money transfers through credit and debit cards.

If your account is located off shore, often it counts as foreign income. Foreign income, thought taxed, is taxed at a different rate than domestic income. Consult with your accountant or a tax attorney to settle the accounting necessities attending this option. At any rate, if you choose to open an off shore merchant account, you can send less of your money to Uncle Sam.

Another way that this accounting trick saves you money is by making it possible for you to save money in upfront costs and security fees. Many on shore accounts require quite a bit of money for an opening account and for security reasons, and then keep back a certain amount of money, on top of the original security amount, each month in order to cover charge backs. Initial deposits and holdbacks for charge backs are usually lower with off shore accounts.

Some of the transaction fees associated with off shore accounts are a little bit higher, but that cost is usually more than off set by the savings enjoyed in taxes and in other fees. Additionally, the service is often very good, as these companies are actively trying to gain and maintain clientele.

Checking out the feasibility of an off shore merchant account can be one of the smartest accounting moves you can make for your business.

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