Archive for Small Business Accounting
November 19, 2008 at 7:06 am · Filed under Small Business Accounting
Career opportunities in accounting and finance are endless. This is because when you have either a CA or CPA license with you, it is possible for you to work for a large firm that has offices both here and abroad. Given that every company needs ones, it will not be that hard to find a job.
Some of things that you can get into include actuaries, auditing, banking, chartered accounting, corporate finance, corporate recovery, stock broking and taxation management.
One report shows that employments prospects for these professionals is quite high over the past 5 years and this is expected to continue until after 2010. You will also be handsomely rewarded with a good salary but long hours come with the territory especially when companies and individuals have to file their income taxes and towards the end of the financial year.
Just to give you an idea, newly grades who work in banks earn from $35,000 to $50,000 annually while financial managers earn almost double that amount. Professionals who soon become partners for the bigger firms earn more than $100,000.
But in order for you to get a higher position, you will also need to go back to school. Most financial experts pursue an MBA after a few years in the corporate world. While some return to their employers, others apply elsewhere.
Before you can see yourself up there, you have to work from the bottom going up. While some decide to make it big in Wall Street, you too can also succeed wherever you decide to apply.
The first thing to do is conduct some research. This will make you understand how things work and how news in business affects the industry, the country and the world as a whole.
If you want to get the job, aside from being knowledgeable, you need to have connections that are already there so you are given the position instead of someone else. This means building your network from school and then using it to your advantage.
Associating yourself with those who have done well may give you pointers so you too can be just as successful as them.
But you shouldn’t wait until graduate before you start looking at the various career opportunities in accounting and finance. The best way to get your foot in the door is to apply for a summer position or an internship because most companies hire those who have worked with them for a short period of time compared to those that sent in their resumes. Believe me; you already have an edge right there as you already have an idea about the internal workings of the company.
Just in case the company you worked for does not have an opening right now, you should prepare your resume and yourself for interviews with other companies that do similar activities with what you used to do during your internship.
The average professional who works in either accounting or finance leaves after 2 years. They may apply for reassignment to another department or find employment doing something else. When this happens, there are job openings around for fresh graduates as well as those who already have experience in this industry.
Indeed, there are career opportunities in accounting and finance. You just have to build your network and get it.
http://thesmallbizconsultant.com/?p=239
November 17, 2008 at 7:39 am · Filed under Small Business Accounting
I have read, over my business career, well over 10,000 different articles and lists about how anyone can be successful with a small business be it an independent business or a franchise. Many well intentioned and intelligent consultants I have come across professionally believe that a great idea with a great marketing scheme and superior desire can make anyone successful. Do yourself a favor and tell the next person spewing this nonsense that they are absolutely wrong!
The success or failure of the vast majority of all small businesses has little to do with the desire, marketing scheme or the great idea that created the business. While these three items must be present in every successful business, solid fundamental management principles will allow a small business to prosper and succeed. Every successful company, be it a small, medium or large business, uses the same set of management principals. The size of the business determines the individuals principals used and the sophistication of the principle. As an example, a small business normally has informal and perhaps even unwritten employee hiring guidelines. A medium sized company has a legally approved, comprehensive employee manual with employee hiring guidelines as a separate section. A large global business has an entire department writing several employee manuals in several languages with employee hiring guidelines based upon legal and social issues in each country. However, the common sense management principal that all companies should have a fair, consistent and applicable employment program must be used by every company.
As I have spent the vast majority of my career with small and medium sized businesses, here is a simple and select set of management principles that every small and medium business should follow to ensure success and profitability:
A good accounting department with timely monthly financial statements provides the basis for all management decisions. Any business owner or officer who believes purely in his or her “gut” feel, is running what will be a failed business. Regardless of the business size, every owner and senior executive must have valid data to confirm the decisions their “gut” tells them to make. Your financial statements are a factual record of your business history and we must all clearly understand our history so we do not repeat the mistakes of the past. How can you determine whether your recent marketing campaign is a success unless you see and evaluate the financial results? We have all heard stories about the marketing campaign that brought many new customers to the company but killed the company because the advertising expense was greater than the profit margin on the new sales. A business owner does not need an accounting degree but should know enough to understand and participate in the financial information review.
Running a small business based on the cash balance in the business checking account also violates this management principle and will severely inhibit the growth and success of the business. Unless you want to remain a “mom and pop” business forever, good accounting information is a requirement.
Standardize and automate all routine functions. Have you ever noticed that most successful business people have a routine for most of their daily functions? They have staff meetings at the same time, they want all reports in a specific format, they want all PC’s and software to be the same in the office and they want the external phone calls to be answered with a specific greeting. By standardizing all routine functions, successful business people do not have to think about or manage these functions. They can concentrate their time and efforts on managing non routine situations.
This same principle also applies to your business. I personally know a company that, 10 years ago, had a credit department with 15 employees and 3 managers who made many decisions daily. Today, that company has doubled its sales and now has a credit department consisting of 5 employees, one manager and a set of software programs that manages electronic payments and even sends out reminder letters and emails to customers.
Review and analyze the Balance Sheet before the Profit and Loss Statement. Your monthly P & L tells you whether you were successful last month from your operations but your Balance Sheet tells you what shape your business is in and what you can do in the future. I have seen a company that doubled sales one year and closed their doors less than six months later. I have also seen a business that went bankrupt even though their P & L’s showed reasonable success. The company Balance Sheet shows how the company uses its daily operations to fund the long term success of the business. Analyzing Fixed Assets, Accounts Receivable, Long Term Debt and Retained Earnings will give us the long term view for our company. It is not as exciting as analyzing our new customers and product offerings but is necessary for the long term.
Business Planning and Budgeting will allow you to slow down the daily business fires and take advantage of opportunities. There are an unusual number of small and medium businesses that do not work hard at either annual or strategic planning and budgeting. Most are too busy fighting fires and struggling to keep up with daily business activity. There is no time for planning and budgeting in their 80 hours work weeks. We have all been in this position. The unfortunate issue here is that the fire fighting and long weeks will never slow down or cease until some planning and budgeting is put in place. The need for planning and budgeting becomes more intense as a business grows due to your inability to “manage by walking around.” The planning and budgeting can start simple and will grow naturally as the business expands. This management principle will allow all employees to see the vision and the focus of the business which will start to reduce the daily fires that pop up.
The greatest advantage of planning and budgeting is that it allows every business owner to evaluate quickly and easily how an unexpected opportunity might be of benefit to the business. I have talked to many business owners who stumbled across a sudden and potentially great opportunity such as a competitor for sale, a good supplier needing a partner, a potential new customer that would immediately double sales or a potential new product that would require an entirely new set of tools and equipment. These opportunities happen to all business owners regularly but many also go away quickly. Those companies that have a good plan and budget in place can evaluate these opportunities quickly and easily to determine if the new opportunity fits into the company’s long term plans. These companies also have the ability to quickly approach a bank with solid financial proformas if additional capital is needed.
It isn’t a sale unless you collect. Most small and medium businesses spend way too much time in the sales process and far too little time with the collection process. Most companies are willing to pay a six figure salary to a salesman who can generate tremendous sales for the company and, at the same time, put an entry level accounting clerk in charge of collection with little or no oversight and procedures. The company borrows more and more money to increase sales while an accounting clerk with no customer service experience struggles to collect. The sales department in every business must have a part in the collection process and the company must have a strong, fair and customer oriented collection process to ensure that a sale really means money in the bank.
This process must always start before the sale is made. Collecting information up front to determine whether the potential customer is able to pay and ensuring the potential customer clearly understands the credit terms and payment requirement will benefit all parties. All good potential customers will appreciate this process because we all enjoy dealing with quality companies. I have never found any company that was unwilling to pay for quality products and services when everyone understood the terms and requirements.
The credit department must also have a good set of processes and procedures to ensure that the payment process flows smoothly and efficiently. Supplier employee turnover, cash flow issues and other unexpected issues stop or slow down the payment process. The credit department must, in a customer oriented fashion, work to keep our cash flowing.
Run the business as if it your grandchildren will take it over. Every business is a living and vibrant organization that has many similarities to our children. Your business starts out as an infant and learns to crawl and eventually walk. We would never make a decision for our child that does not take into account the child’s future and we should not do this with our business either.
Working with a supplier who has inferior quality but the cheapest price might be a great short term cash solution for our company but will eventually run off our customers and destroy our business. How many times has a business lost all its records because it decided it couldn’t afford computer backups or a fire alarm system on its warehouse? Have you hired an employee before you had them take a drug test? I even once jumped at the chance to hire a salesman from a competitor because I thought he would be able to bring over many customers. Unfortunately, he cost too much and didn’t bring over any good paying customers at all. There is no such thing as a good short cut for efficient management principals and the long term success of your organization.
Hire the smartest and best people. How many of us have hired our friends, the salesman we thought was a bargain, the bookkeeper who spoke the best during the interview or the manager we thought was most like us? Many small and medium sized businesses are littered with employees who were hired for these reasons because small businesses can’t afford high wages and all the fringe benefit packages that large companies can afford. We tend to hire the best we think we can get.
We need to set our expectations higher and use our planning process to find perfect employees. The first issue is that your company must have a good annual plan as well as a logical 5 year plan on where the company will be. Your company can then lay out what employees will be needed during this 5 year period. Now that we have defined what employees and what responsibilities are required, we need to find the individuals who meet these requirements and not just who we can afford today.
I have always tried to hire people who are smarter and have more experience than I have at the specific position. Any owner who believes he is the smartest individual in every area will never be able to hire the right people. A company will never be greater than its weakest employee so we must always hire the best.
The last company I worked with laid out a plan showing they were going to need their first CPA in 5 years. After 3 years, they told me they hired this CPA and were very surprised because this individual had other job opportunities with large national firms who were offering huge benefits. However, this small firm could offer professional growth and responsibility not available at the larger company. The vast majority of good employees prefer to have a more responsible position with a smaller company with a grand future than a less responsible position with a large company.
You can grow yourself out of business. Cash is king in business and those who recognize this fact will succeed and prosper. I have seen far more businesses that grow too fast with no good business plan and are forced to close their doors or find a quick buyer. Companies that are struggling watch their cash daily and doing what they need to keep the doors open. However, those companies doubling their sales see huge profits on their monthly financial statements and get caught up in the emotion and success. They watch their Accounts Receivable double, their Inventory double because they must buy much more product, their employees double because they must take care of these sales and suddenly they do not have the ability to make this week’s payroll because they have no cash in their checking account. Their company literally grew itself out of business which many small and medium business owners have trouble understanding until they have lived through it.
The culture of every business is as important as its mission. As mentioned earlier, a business is a living and breathing organization. The culture of every business is as important to the overall success of the company as the products and services offered. The owner of the business cannot delegate this function and must be involved. There is no right or wrong here as the business culture is a reflection of the quality, morals and ethics of its owner. A successful company’s culture is not a constantly changing but evolves based upon the growth and expansion of the organization. Constantly changing a company’s culture is a sure way to close a business.
A company with a strict dress code, time clocks that are strictly enforced, and many processes and procedures is no better than another company with no dress code, few processes, and telecommuting for employees. The only difference is the type of employees they retain and the way they do business.
Your quality competitors are essential to your long term success. You can stop laughing now because this is really a fact that every successful company understands. This is an unusual concept but one that great businessmen and women all embrace. Competition is a wonderful concept in every free market economy and quality competition makes us all better. Quality competitors push us to come up with quality improvements, quality products and services and ensure that we have a quality customer oriented operation. We have all seen businesses spring up offering a 50% price reduction for a cheap knock off of our products. Our sales drop and we spend time and effort away from our core business chasing this situation. They stay in business for a short period of time and accomplish nothing more than causing our customers to question our industry. Quality competitors push us all toward greatness and there is plenty of room in every industry for multiple organizations.
Outsourcing reduces costs and improves your weaknesses. Many individuals hear the jokes about the language issues at large company call centers in India or the Philippines and tell themselves they will never make that mistake. However, that might be one situation that is not really a mistake. A good IT programmer in the U.S. can cost upwards of $100,000 annually with payroll taxes, fringe benefits, etc. That employee in India with the exact same intelligence, skills and experience can cost as little as $30,000 annually.
The management principle here is that we should all concentrate on our strengths and outsource everything else where feasible. No business person thinks twice about using an outside tax accountant to do our Federal and State taxes. This is a highly technical area that changes constantly. Most of us also have an outside legal firm. Why do we primarily limit our use of outsourcing to those two areas?? Today, there are professional payroll firms, employee leasing firms, credit and collection firms, IT and Web programming firms and marketing firms. These companies work with many business organizations, stay on top of industry best practices and can better stay on top of the technical changes in their area of expertise.
The only area of any company that I advise against outsourcing is the area that is crucial to the success of your company. Never allow the core of your success to get outside your control. As an example, if your company has a proprietary marketing scheme or a customer database or an engineering method or a production process that is key to your success, do not let it out of your control.
http://wowmynews.com/small-business/essential-management-principles-for-every-small-business/
November 8, 2008 at 2:54 am · Filed under Small Business Accounting
The election is finally over, and as the dust settles, it’s time for some accounting. How will small businesses fare under an Obama administration? Smart Answers columnist Karen E. Klein asked three experts—Bill Rys, tax counsel for advocacy group National Federation of Independent Business; Jay Sumner, labor law attorney with the law firm of Littler Mendelson; and John Arensmeyer, executive director of advocacy group Small Business Majority—to comment about issues important to entrepreneurs, including taxes, labor policy, and health care. Edited excerpts of their conversations follow.
Toward the end of the campaign, Obama put forward a small business emergency rescue plan. While it’s not set in stone, the principles indicate some of President Obama’s small business policy priorities. What are some of the highlights?
Bill Rys: His tax plan keeps the 2001 tax rates in place and extends them [rather than extending the Bush Administration's tax cuts of 2003]. It also extends business tax incentives based on tax code section 179—that are scheduled to expire in 2008—through 2009.
In his stump speech, Obama talked a lot about cutting taxes on individuals earning less than $250,000 a year. How does that threshold impact small business owners?
Rys: Well, 75% of small business owners have organized their companies as pass-through entities, meaning that they pay taxes at the individual level. So we did a survey at the end of 2007 that asked small business owners how much they earn from their businesses, and about 10% reported that they make more than $250,000. When we broke that down by how many employees they had, about 30% of those with 20 to 250 employees said they make more than $250,000 in taxable income. What the survey concluded is that regardless of the tax rate, small business owners draw a considerable amount of income from their businesses, and if a higher tax is placed on that income, they will have to make tough decisions about where to cut business investments.
Will it be helpful to extend the Section 179 tax incentives, which allow businesses to take an immediate deduction for the full value of qualified purchases on things like trucks, copiers, and manufacturing equipment, as Obama’s plan advocates?
Rys: Let’s get some background: The current limit on those deductions is $125,000, but last year, as part of the economic stimulus bill, they increased it to $250,000 for purchases made in 2008. That is supposed to expire at the end of 2008, but Obama’s proposing to extend it through 2009. In 2003, when the limit was $25,000 and it was increased to $100,000, IRS data showed that the amount of depreciation deductions taken in that year represented the largest increase ever. So a lot of businesses did make investments in equipment during that year, based on IRS stats, and anytime you increase those limits, it’s certainly helpful for small businesses in particular.
My concern now is whether small businesses really have the money to make those kinds of investments with their sales decreasing and many entrepreneurs reluctant to make expansions. I’d recommend locking in the higher dollar amount past 2010, and then, as we start to see the economy recover, it would send a nice signal to small business owners that as things pick up for them, they’ll have a tax incentive they can rely on to do some investment at that time.
What other tax changes do you hope the new administration will put in place that will help small companies?
Rys: In general, when it comes to small business owners and taxes, we try to stress the importance of simplicity. The cost of tax compliance on small business owners can be especially onerous, because they don’t have in-house tax departments like big businesses do.
http://www.businessweek.com/smallbiz/content/nov2008/sb2008117_087748.htm?chan=smallbiz_smallbiz
November 5, 2008 at 6:00 am · Filed under Small Business Accounting
If you are a new business and looking for a credit card, chances are you want a small business credit card. Because you are a new business, resources may be limited as well as manpower. When you’re looking for that new card, you should consider the credit card services for a business that the issuer provides.
Credit card services for a business when looking for a credit card?
Sure. A small business credit card can provide you with more than extending credit. After all you are new and small. You may need all the help you can get.
Financial institutions understand the additional control and constraints a business needs over their credit. Business card offers vary just like personal credit cards, although some of the incentives are the same. However, various issuers go even further with their business credit card offers and add credit card services for a business.
When looking for a new small business credit card, you want to keep in mind th
