Common Bookkeeping Mistakes

Before getting into a discussion of common bookkeeping mistakes, it is worthwhile to address the importance of sound bookkeeping in general.

The importance of sound bookkeeping is frequently lost and ignored by management. It is apparent that the main reason management tends to ignore the bookkeeping function is because it is focused on the “big picture.” What management fails to recognize is that there is no “big picture” to look at without bookkeeping first doing its thing in the details.

Bookkeeping

Bookkeeping can help keep your business organized and able to yield a profit. Many small businesses fail due to poor financial management. By applying sound financial principles, you may be able to prevent this fate from befalling your business.

The following are some of the benefits that are generated by an accurate bookkeeping environment, as noted by QB Express:

1.   Improved financial analysis and management

Cash flow management is something that your business should start focusing on right away. Once your invoices are delayed, there will be zero follow-ups on customer payments. With accurate bookkeeping, you can systematize your follow-ups and be invoicing, while making on-time payments to suppliers.

2.   Fulfil your tax obligations on time 

Bookkeeping can help you keep a track on all the information required to accomplish your tax obligations. When the time for tax comes, you will no longer need to rush everywhere to hunt for your bills or try to remember your expenses. An organized Balance Sheet, Profit & Loss, and Cash Flow also make filing your Tax Returns a lot easier. Your tax advisor can also finally give you some sound tax advice instead correcting incorrect entries in your financial statements.

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3.   Enjoy easy reporting to your investors

With regular and accurate bookkeeping, you will no longer need to worry about reporting to your investors and sharing the financial status of your company. From graphs to charts and the lists of data, you can easily present everything to your investor right from your accounting books.

4.   Make informed business plans

With the Balance Sheet and Profit & Loss statements, you can check if your company is on the right track financially. Based on your financial status, you can make informed and effective business plans.

5.   Keep a proper record, as required by the Law 

With bookkeeping, you can keep a record of all your financial dealings and keep everything organized right from your big to small invoices.

Common Bookkeeping Mistakes

The foregoing section above focused on a discussion of the benefits that can flow out of a sound bookkeeping system. Such a system shouldn’t be taken for granted, however. Frequently, bookkeeping mistakes can creep in and weaken the bookkeeping infrastructure as well as the systems in the organization that relies on the bookkeeping system.

The following is a list of common bookkeeping mistakes that bookkeepers and others should always be on the lookout for.

1.   Skipping an Accounting System

As Business2Community notes, your business may be so small that you decide to save money by not using software that is specifically designed for accounting.

However, even if you use spreadsheets and a well-organized file system to keep track of where your money goes, you are missing out. As Doug Boswell, an accounting expert, points out: “…before having your taxes done, the tax preparer needs to cobble together some sort of makeshift system that will allow your tax return to be prepared, but it almost surely won’t capture all your deductions.”

2.   Not Double Checking Everything

Not Double Checking Everything

Another good point from Business2Community: adopt the habit of double-checking everything and be consistent about it. As their report notes, a mistyped number, a lost receipt, and other human errors can result in inconsistent figures. Prevent such problems from piling up by reconciling your records with your bank account statements every month. Keeping track of your businesses money will be easier if you try to use cash as little as possible. Credit and debit transactions will show up on your statements so you know where every penny goes.

3.   Jumbled Invoices

Some small businesses miss out on money because they have an inefficient system for filing invoices. Number your invoices and keep them in order so it is easier for you to find out which invoices have been paid and which still have outstanding balances.For Accounting services and Financila plan read here  Accounting Services Arizona

4.   Not reconciling your accounts

As this analysis of sound bookkeeping observes, after the end of each month your bank, credit cards and even merchants like PayPal will release statements showing your beginning and ending balances as well as all of the transactions that occurred in that month. Take those statements and reconcile your accounts in your bookkeeping software. Not reconciling your accounts each month can lead to errors that copy over month after month.

5.   Not tracking Mileage

Business2Community

Remember: you can be reimbursed for the miles that you drive for your business. The IRS sets a mileage rate for businesses each year that covers your gas, maintenance to your car and general wear. Use an app like MileIQ that will track all of your drives and then you can categorize them as the business or personal. At the end of every month, they’ll send you a report showing how many business miles you drove and what that amounts to. You can take that amount and reimburse yourself from your business account while categorizing it as a business expense. Not doing this prohibits you from claiming this eligible deduction on your taxes.

In addition to the previously noted mistakes, the following links point to additional common bookkeeping mistakes.

Believing you have to do your bookkeeping yourself

Leaving bookkeeping to the last minute

Not using bookkeeping software properly

Using the wrong accounting method

Not separating business and personal bank accounts and transactions

Inadequate filing systems (for bank statements, invoices, receipts)

Lack of documentation or systems regarding cash

In conclusion, it’s fair to say that the fewer bookkeeping mistakes there are in your organization the smoother your organization will operate. It is human nature to seek short cuts and avoid pain points, but this is a crucial area where you can’t afford that approach: you must take a long way and endure the strain of the process, otherwise much bigger pain points could arise down the road.

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Do You Have An Effective Disaster Recovery Plan?

One of the most significant, if not the most significant function within any secure business is that of risk management. Risk Management equates to having a set of policies and procedures in place that are designed to mitigate losses caused by a myriad of circumstances including natural disasters (floods, tornados, hurricanes, etc.).

It is incumbent on business owners and management to be prepared for the threats from the fore-mentioned types of disasters. Risk management and Disaster planning, in general, is concerned with minimizing the impact on the company’s operations and IT functionality caused by disaster.

As Search Disaster Recovery notes, a disaster can be anything that puts an organization's operations at risk, from a cyberattack to equipment failures to natural disasters. The goal of Disaster Recovery is for a business to continue operating as close to normal as possible. The disaster recovery process includes planning and testing, and may involve a separate physical site for restoring operations. For Accounting services and Financila plan read here  Accounting Services Arizona

In addition, a disaster recovery plan provides a structured approach for responding to unplanned incidents that threaten a company's IT infrastructure, including hardware and software, networks, procedures and people. The plan provides step-by-step disaster recovery strategies for recovering disrupted systems and networks to minimize negative impacts to company operations. A risk assessment identifies potential threats to the IT infrastructure; the DR plan outlines how to recover the elements that are most important to the company.

As this disaster recovery report observes, an IT Disaster Recovery Plan (DRP) is created to ensure a business and more specifically their technology department can recover quickly and efficiently should they lose their data centre or have a major IT software or hardware failure. Prior to developing an IT DR plan it is critical that a Risk Assessment and Business Impact Analysis is carried out. These two prior phases will clearly highlight where a potential disastrous event may occur and also establish important factors such as the time frame and recovery order in which the business needs to re-establish their systems.

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According to Yatsish Mishra: “Ninety four percent of businesses that suffer a large data loss go out of business within 2 years”

As this disaster recovery report further observes:

Preparing for a disaster requires a comprehensive approach that encompasses hardware and software, networking equipment, power, connectivity and testing that ensures DR is achievable within targets. While implementing a thorough DR plan isn't a small task, the potential benefits are significant.

Not the following elements to an effective disaster recovery plan published by CIO:

1. Let employees know where to go in case of emergency – and have a backup worksite. “Many firms think that the DR plan is just for their technology systems, but they fail to realize that people (i.e., their employees) also need to have a plan in place,” says Ahsun Saleem, president, Simplegrid Technology. “Have an alternate site in mind if your primary office is not available. Ensure that your staff knows where to go, where to sit and how to access the systems from that site. Provide a map to the alternate site and make sure you have seating assignments there.”

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2. Make sure your service-level agreements (SLAs) include disasters/emergencies. “If you have outsourced your technology to an outsourced IT firm, or store your systems in a data center/co-location facility, make sure you have a binding agreement with them that defines their level of service in the event of a disaster,” says Saleem. “This [will help] ensure that they start working on resolving your problem within [a specified time]. Some agreements can even discuss the timeframe in getting systems back up.”

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Asset-Based Financing – Basics

For companies experiencing temporary cash shortages, asset-based financing may be an alternative that makes sense as a viable way of meeting its cash shortfalls. With this method of financing, a cash-strapped business can use the assets that they have to overcome its cash flow shortages.

As noted by FinWeb, there are two primary means of asset-based financing, as follows:

1) asset-based loans

2) factoring.

As FinWeb explains, to obtain an asset-based loan, a business must apply for a secure loan from a lending institution, collateralized by pledging one or more assets. Asset-based loans are used generally by companies with somewhat spotty credit. As such, the fees and interest rates for these loans will typically be higher than market prices. Accounts receivable and business inventory are the most common assets used as collateral, but any asset might be accepted by the lender.

 Secondly, there is a method of asset-based funding known as factoring. It is often used by rapidly-growing companies in need of immediate cash. Using this process, the business will actually sell its accounts receivable to a factoring company for cash (as opposed to pledging them as collateral for an asset-based loan). For newer invoices, the company could receive up to eighty percent of their value up front. The factoring company assumes all credit risk for the outstanding accounts.

The principal disadvantage of asset-based financing is its expense. Using assets to bolster cash flow increases a business's cost of funds, thereby significantly affecting its bottom line: the profits.

REVOLVING LINES OF CREDIT (REVOLVERS)

As noted by the Journal of Accountancy, a revolver is a line of credit established by the lender for a maximum amount. The line of credit typically is secured by the company’s receivables and inventory. It is designed to maximize the availability of working capital from the company’s current asset base. The borrower grants a security interest in its receivables and inventory to the lender as collateral to secure the loan. In most cases, lenders require personal guarantees from the company’s owners.

The security interest creates a borrowing base for the loan. As receivables are collected, the money is used to pay down the loan balance. When the borrower needs additional financing, another advance is requested. The borrowing base consists of the assets that are available to collateralize a revolver. It generally consists of eligible receivables and eligible inventory.

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Do You Have An Interest In Exporting?

Small businesses looking to increase sales and profit, reduce dependence on the domestic market and stabilize seasonal fluctuations should consider exporting. Consider these facts: 

• Nearly 96 percent of consumers live outside the U.S.
• Two-thirds of the world’s purchasing power is in foreign countries.

Today, as noted by Export.gov, it’s easier than ever for a company like yours, regardless of size, to sell goods and services across the globe. Small and medium-sized companies in the United States are exporting more than ever before.

In 2013, for example, more than 300,000 small and medium-sized U.S. companies exported to at least one international market—nearly 28 percent more than in 2005. The value of goods and services exports was an impressive $2.28 trillion, nearly a 25 percent increase since 2010. And 2014 topped the previous year, with exports valued at $2.34 trillion.

The following list is of sales channels are available to global trading partners active in the export process,

Sales channels can include:

• Direct to end-user
• Distributors in country
• Supplier to the U.S. government in a foreign country
• Your e-commerce website
• A third-party e-commerce platform where you handle fulfillment
• A third-party e-commerce where they handle fulfillment
• Supplier to a large U.S. company with international sale
• Franchise your business. 

You are not limited to one of these channels. As it is also noted in the Export.gov study, today’s global trading system is ideal for the smaller company employing more than one marketing and sales channel to sell into multiple overseas markets. But most U.S. exporters currently sell to one country market—Canada, for example. And the smaller the company, the less likely it is to export to more than one country. For example, 60 percent of all exporters with fewer than 19 employees sold to one country market in 2005.

Tips For Potential And New Exporters

In a recent report from Shipping Solutions, these seven tips will provide helpful guidance for businesses new to exporting:

Tip #1 – Make a Commitment

Businesses new to exporting can expect to face numerous challenges such as redesigning packaging or establishing a new distribution channel. 

Tip #2 – Do Your Research

To be successful overseas, do some research on potential markets. Which countries have the lowest duties? Write an international marketing plan, which addresses a range of potential issues such as unique labeling requirements.

Tip #3 – Focus Your Efforts

For example, first-time exporters in Minnesota often target Canada as the first international market to enter. The proximity of Canada and the benefits of the reduced North American Free Trade Agreement (NAFTA) tariffs are advantageous for new Minnesota exporters ramping up on their export knowledge.

Tip #4 – Set Aside Resources

Entering new markets requires resources—primarily time and money. Companies in the best position to export already have an established track record of domestic growth and a steady revenue stream. For many companies, gearing up a business to export means having to reallocate resources from domestic business opportunities.

Tip #5 – Increase Your Company’s Export Knowledge

Look for opportunities to develop and expand the export knowledge of your staff. Work toward credentials to ensure you develop a baseline of skills. For exporting companies, encourage staff to attain the Certified Global Business Professional credential. 

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How to Create a Winning Project Plan

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If you’re contemplating executing a business project and want to be as prepared as you can be then we highly recommend you dig your teeth into the following information.

As Technopedia defines it, a project plan is a formal document that is intended to serve as a roadmap from start to finish of a contemplated project. The plan is made up of elements such as resources used, milestones, and timing to name a few.

The plan is designed to guide the control and execution of a project, and it is the key to a successful project and is the most important document that needs to be created when starting any business project.

It is used for the following purposes:

• To document and communicate stakeholder products and project expectations
• To control schedule and delivery
• To calculate and manage associated risks

The plan answers the essential questions about the project, including the following, also noted by Technopedia:

• Why? – What is the task related to the project?
• What? – What are the activities required to successfully complete the project? What are the main products or deliverables?
• Who? – Who will take part in the project and what are their responsibilities during the project? How can they be organized?
• When? – What exactly is the project schedule and when can the milestones be completed?

The initiation of a project requires detailed and vital documentation to track project requirements, functionalities, scheduling and budget. Formal project plans establish detailed project requirements, including human and financial resources, communications, projected time lines and risk management.

The following seven steps, as noted by Wrike and Computer Weekly, show how to create a successful project plan:

Step 1: Identify and Meet with Stakeholders

A stakeholder is anyone who’s affected by the results of your project. That includes your customers and end users, too. Make sure you identify all stakeholders and keep their interests in mind when you create your project plan. Meet with the project sponsors and key stakeholders to discuss their needs and expectations, and establish baselines for project scope, budget, and timeline.Professional Tax And Accounting Services Arizona

Create a Scope Statement document to finalize and record the details of the project scope. The project scope statement is arguably the most important document in the project plan. It is used to get common agreement among the stakeholders about the project definition. It is the basis for getting the buy-in and agreement from the sponsor and other stakeholders and decreases the chances of miscommunication. This document will most likely grow and change with the life of the project.

Step 2: Baselines

Components of the project plan include:

• Baselines: These are sometimes called performance measures because the performance of the entire project is measured against them. These are used to determine whether or not the project is on track during execution

Step 3: Set & Prioritize Goals

Prioritize stakeholder needs and set specific project goals. These should outline the objectives of the project — the benefits you hope to accomplish.

Step 4: Define Deliverables

Identify the deliverables you need to produce in order to meet the project’s goals. What are the specific products you’re expected to complete? Estimate due dates for each deliverable in your project plan. (You can actually finalize dates when you sit down to define your project schedule in the next step.)

Step 5: Create the Project Schedule

Look at each deliverable and define the series of tasks that need to be completed in order to accomplish each one. Next, identify any dependencies. Do certain tasks need to be completed before others can begin? Input deliverables, dependencies, and milestones into an app similar to a Gantt chart. Involve your team in some of the planning process. The people doing the work have important insights into how tasks get done, how long they’ll take, and who’s the best person to tackle specific tasks.

Step 6: Identify Issues and Complete a Risk Assessment

Are there any issues that you know of upfront that will affect your project, like a key team member’s upcoming vacation? What unforeseen circumstances could create hiccups? (Think cold & flu season, backordered parts, or technical issues.) Consider the steps you could take to either prevent certain risks from happening, or limit their negative impact. Conduct a risk assessment and develop a risk management strategy to make sure you’re prepared.

Step 7: Present the Project Plan to Stakeholders

Explain how your plan addresses stakeholders’ expectations, and present your solutions to any conflicts. Determine roles: who needs to see which reports, and how often? Which decisions will need to be approved, and by whom? Make sure stakeholders know exactly what’s expected of them, and what actions they’re responsible for. Instead of telling stakeholders that their expectation or request is unrealistic, tell them what’s required to make it happen: how much time, money, or manpower? Let them decide if it’s worth dedicating the extra resources.

In short, project planning doesn’t need to be difficult or complicated. However, project planning does need to be thorough if it’s going to be a useful tool for tapping into its potential rewards.  Business Advisory Services Arizona

Artificial Intelligence Applied to Accounting

Most professionals have only a vague understanding of what Artificial Intelligence (AI) is or means. Absent an understanding of these capabilities, it is near impossible to have a working knowledge of the opportunities for applying AI to the accounting field.

What Is Artificial Intelligence?

According to BJ Copeland of the Encyclopedia Britannica, AI refers to the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings. The term is frequently applied to the project of developing systems endowed with the intellectual processes characteristic of humans—the ability to:

• reason
• discover meaning
• generalize
• learn from past experience

Since the development of the digital computer in the 1940s, it has been demonstrated that computers can be programmed to carry out very complex tasks—as, for example, discovering proofs for mathematical theorems or playing chess—with great proficiency.

Still, despite continuing advances in computer processing speed and memory capacity, there are as yet no programs that can match human flexibility over wider domains or in tasks requiring much everyday knowledge. On the other hand, some programs have attained the performance levels of human experts and professionals in performing certain specific tasks, so that artificial intelligence in this limited sense is found in applications as diverse as medical diagnosis, computer search engines, and voice or handwriting recognition.

In addition, revolutionary, ambitious new projects, such as Elon Musk’s OpenAI project, are accelerating humanity’s course to achieving true Artificial Intelligence.

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AI Suitable to Accounting?

In simple terms, technology won’t just collect information, it’ll learn from what it stores. As Xero notes, accounting software is getting smarter, automatically performing analysis which previously required human intervention. Consider tasks like bank reconciliation: systems can learn how to completely automate this job, freeing up your time.

The finance sector, given its heavy reliance on mass amounts of numbers and data, is a prime candidate for the automation offered by intelligent learning systems.

Accounting Applications of AI

Note the following examples of how AI can be implemented within your environment, as explored by Accounting Today’s report on the topic:

1. Clearing Payment Invoices

Today, accounts receivable or treasury clerks struggle to clear invoice payments when customers combine invoices in one payment, pay incorrect amounts or do not include invoice numbers with their payment. To clear the invoice, the employee either has to manually add up various invoices that might match the payment amount or contact the customer to clarify some information. In the case of a short payment, the employee either has to ask for approvals to accept the short payment or request the remaining amount from the customer. An intelligent system could help by immediately suggesting invoices that might match the paid amount and, based on established thresholds, automatically clear the short payments or automatically generate a delta invoice.

2. Expense Claim Auditing (AI enhanced automation)

Finance employees must ensure that receipts are genuine, match claimed amounts and are in line with company policy. What if AI and machine learning could support this process, audit 100 percent of all claims, and send only questionable claims to a manager for approval?

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How to Succeed as a Franchisee

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So, you have an interest in owning and operating a franchise? Or maybe you know someone, such as a family member, who shares your interest? Hopefully, this information is getting to you before you’ve completed your acquisition because many of the following points should ideally be addressed and prepared for prior to making any commitments to purchasing a franchise. The following are some of the higher priority points of relevance.

Entrepreneur notes the following points that are some of the characteristics or skills you will need to increase your chances of success.

1. Risk aversion: Any business start-up involves some risk of failure, but a strong franchise with a proven track record of success will minimize this risk. Successful franchisees do their homework.

2. System orientation: Don't shy away from franchising because you assume you need a burning entrepreneurial spirit to become a franchisee. That's simply not true. Entrepreneurs want to reinvent the wheel based on their incredible confidence in their ability to figure out how things should be done. Successful franchisees, on the other hand, want proven systems. They don't want to have to figure out the best way to do something. 

3. Coachability: The motto of franchising is "In business for yourself, not by yourself." Successful franchisees look for opportunities to learn from others in their franchise system. They understand that they don't know all the answers and are willing to ask for help when they need it.

4. Hard-work affinity: No matter what franchise you're interested in, you can be sure it's going to take work to make it successful. The best franchisees know and accept that fact.Tax And Advisory Services Arizona

5. Strong people skills: Successful franchisees always have excellent interpersonal skills and can effectively interact with their employees and customers. They use these skills to create loyalty, value and trust.

The International Franchise Association provides the following perspective on what some of the keys to franchise success are.

1. Make sure you have enough money.  

• Determine how much you have to invest, how much you're willing to risk and how much you will need to live on for at least 12 months.   
• Listen to your attorney and accountant and do not be pressured by the franchise salesperson.

2. Follow the system.  

• Franchisees often get their business up and running and then begin to change, add or modify existing products, advertising, hours, services, and even the quality and consistency they are licensed to deliver.  This violates the franchise agreement and puts you in jeopardy of having your franchise terminated!  
• By following the system, you:
  • preserve the brand 
  • protect your investment and that of your fellow franchisees

3. Don't neglect your family and friends.

• Be prepared to work long hours, but also make sure to budget time for your family and friends.   
• Don't forget to acknowledge the sacrifices your family makes.   
  • Allow your family and friends to share in your new life.

4. Be an enthusiastic franchisee. 

• The success of any business is linked to the level of enthusiasm you bring to the job.   
• Enthusiasm brings a level of excitement and energy to the operation that everyone can feel-including your customers and staff. 

5. Recruit the best and treat them with respect.  

• Good help is hard to find-great help is essential.   
• To keep the good staff you've hired:  
  • Rotate routine and boring jobs.   
  • Don't show favoritism.   
  • Keep employees informed of new marketing and other promotions.   
  • Provide timely performance reviews and wage salary increases.

6. Teach your employees.  

• In franchising, training should be continuous.  Employees are your front line. 
• Training classes are a good way to show your employees that they matter to you.  
• Get all the training you can from the franchisor.   
• Alert your franchisor when you need additional training.  
  • Take advantage of every training opportunity, whether it's offered by the franchisor or by local schools, trade associations and other sources.

7. Give customers great service.  

• The most important thing you can do is to get everyone to smile! 

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