Archive for the ‘Business Accounting Practices’ Category
Financial Reports: How to Make Them User Friendly
It goes almost without saying that the financial reporting of a business is of key importance to those who use such reports in the process of their decision making. Most business people understand just how much rests on the assessing of such reports, anything from whether or not they get a bank loan, or bag a large investor, to how much tax they pay at the end of the year, so, taking their importance as a given, are there ways to make the financial reports your business produces work better for you? How can these vital reports be improved to make them more user-friendly and therefore pleasing to the end user?
Cautious.
There will almost certainly be parts of the information you give that you have had to estimate; obviously you cannot ever be one hundred percent accurate with financial predictions, but the information still needs to be provided, in these situations it serves everyone well to provide conservative estimates; guard well against over-optimism in figures that are yet to be seen.
Tailored.
Although there will without doubt be someone for whom you are producing a particular financial report, who they are can differ widely; it is important when putting your information together to remember who will eventually read it, because there may be a chasm of difference between how, for instance, an accountant views financial information and how a potential investor might. It is worth bearing in mind that not all of your readers will have the same skill-sets or experience.
Dependable.
It matters not at all who is going to be using the information you provide when it comes to being honest about the facts; whoever reads your report needs to be able to trust that everything they see is completely candid and not fudged or polished or padded in any way; apart from the obvious problems reporting in this way could bring, you cannot rely on the right decision being made if the decision is based on erroneous info.
Pertinent.
Keeping what a report says on track and applicable to the reason for producing it is pretty vital; there are of course many types of financial report and not all concern the same area of your business’ finances. Try to focus on exactly what the report is aiming to say and steer away from extraneous or irrelevant stuff that could get in the way of the heart of the matter.
Comparable.
Your reports will not exist alone in a vacuum. Each time that your business produces a financial report it joins all of those that have been produced before and will be produced in the future, not just by your company, but by every other business in existence. Professionals whose job it is to utilise financial reports will sometimes need to compare the current reports with your business’ historical reports and perhaps also with those of other firms. To do this, there needs to be a certain uniformity about how the information is presented and a consistency to what is included. There are of course official guidelines laid down by the accountancy profession to help with this, and it is important to follow these with care.
Bookkeeping Courses – Choosing the Right One
When you decide to take a bookkeeping course you should consider some aspects of the course such as the faculty, the accreditation, the course material, as well as the certification. As you may already know bookkeeping is the recording of the financial transactions for a business. The role of a bookkeeper is vital no matter how small or large a business is.
By taking a bookkeeping course you will get the opportunity to learn about basic accounting information and how to process financial transactions. Many courses will reward you with a certificate and qualification. In order to be a successful bookkeeper you should be focused, detail-oriented and of course you need to enjoy working with numbers.
The first thing to consider when looking for a bookkeeping course is to check its accreditation. People specialised in this field have reviewed the accredited courses offered by the various colleges and other institutes. The administrative and the academic policies of the course need to meet certain standards. Moreover, the colleges and other institutes can sometimes offer you access to some of the government aid programs available.
When you choose your bookkeeping course you need to check the qualifications of the teacher or instructor. You should make sure he or she is a professional in their field; for instance, is the teacher or instructor a qualified accountant or bookkeeper? You should take your time when investigating the teacher and their credentials prior to selecting a bookkeeping course.
There are bookkeeping courses available from numerous career and community colleges or institutes. You should read the description of the course carefully and make sure the material is relevant and up to date. The bookkeeping course should use the most recent software versions and it will need to be based on the current legislation.
The majority of the bookkeeping courses available usually lead to a bookkeeping certification after they have been completed. This is a great way of getting your skills recognised. You can also take other courses in the future, such as inventory or payroll, in order to broaden your knowledge and general bookkeeping experience.
As a bookkeeper, you will be responsible for the entry- level accounting and support; maintaining the financial records and creating accounting reports at the year end. The owners of the business are likely to depend on all this information you provide when they are making any financial decisions. In essence the bookkeeping course you finally choose to opt for should be relevant to the role you are looking to fill in a business and should also result in a qualification that is professionally recognised.
Business Accounting – Brief Overview of How to Read a Balance Sheet
Accountants in Manchester – Business Accounting Basics
A company’s financial standing is reflected in its balance sheet, which reveals the exact status of the company in the current market conditions. This important document is also referred to as a ‘statement of financial position’ and it summarises many of the important details concerning a company.
If you are planning to invest in a small business or become a shareholder, then it is very important you understand the basics of how to read a balance sheet, because it is this report which contains the vital statistics and the precise details of the financial position of a company. A balance sheet generally details the assets, liabilities and the net worth of the company at the end of a particular period. Acquiring knowledge only about a company’s profit is not enough to identify how well it is doing. You need to analyse the balance sheet along with the profit and loss account and the cash flow statement in order to get a better understanding of how well a company is performing.
A balance sheet is structured in such a manner wherein the company’s assets should be equal to the liabilities’ and the shareholder’s equity. This is the equation on which the balance sheet is created. One portion of the balance sheet is entirely dedicated to the company’s assets, which includes current assets and fixed assets, whereas the other portions contain the liabilities and the shareholder’s equity.
Usually the assets are mentioned in the descending order starting with the most liquid one and then the list narrows to the least liquid assets. Basically there are two types of assets, namely current and fixed assets. Current assets have the capability of being converted into cash quickly, within a year or less. Accounts receivables, inventory, cash and cash equivalents are included in the current asset category. Cash equivalents are considered the most safe and easily convertible assets. There are assets which take a longer time, more than a year, to be converted into cash and these ones are referred to as fixed assets. They consist mainly of tangible assets such as buildings, machinery, etc…, and non-tangible assets such as patents, goodwill and copyright.
What a company owes to its creditors and outside parties constitute the liabilities of the business. These liabilities can be further broken down into current liabilities (to be paid in less than 1 year) and long-term liabilities (repayable more than 1 year). Current liabilities include items like trade creditors, whereas long- term liabilities include items like long-term bank loan balances. Lastly, the shareholders equity is the total of all the profit and reserves of a company plus the share capital issued.
A balance sheet basically represents a ‘snap- shot’ of a company’s assets, liabilities and shareholders funds at a point in time. If a balance sheet is positive at end of a period this is generally a good sign and can indicate that a company is financially sound. As stated above, the balance sheet can tell us a lot about a company’s make-up but it should always be read and interpreted along with other financial statements before any important decisions are made.
Bank Reconciliation- A Few Common Mistakes
Preparing a bank reconciliation is a very important element of bookkeeping. Whether you are keeping your own books and records or you have employed the services of a bookkeeper, preparing a monthly bank reconciliation should be a ‘must do’ on your bookkeeping checklist.
A bank reconciliation basically allows you to reconcile your cashbook records (receipts and payments) to the business bank account statements. It is fundamentally a check to confirm you have not missed any business financial transactions in your cashbook during the period.
Outlined below are a few of the common mistakes which some people make when preparing a bank reconciliation:
- One common mistake, if you use a manual cashbook or spreadsheet, is that it does not add up properly. Indeed, it is very easy to make a mistake when adding up a column of payments or receipts with a calculator. Similarly, even if you use a spreadsheet make sure you check the addition formulas, because if one of them is wrong, the total column will be incorrect as well.
- Omissions of payments are another type of mistake, which some people make when completing a bank reconciliation. For example you may have written out a cheque but forgotten to enter it in the cashbook. Not entering all the direct debits or standing orders in the cashbook is also another common type of omission problem. To avoid these types of errors it is a good idea to tick the bank statement entries to the cashbook payment entries and also make sure at the same time you have entered all the direct debits and standing orders.
- Related to the above point, forgetting to enter certain receipts in the cashbook, for instance bank giros, is another common type of error that can occur. Again it is crucial you follow a strict monthly routine whereby you tick up the bank statements to your cashbook receipts and make any necessary adjustments.
Lastly, some entries on a bank reconciliation involve listing the amounts of any cheques which were written before the end of a particular month, but do not appear in the bank statement until after the end of the month. These are known as outstanding or o/s cheques. It is important to make sure the outstanding cheques on the bank reconciliation for the previous month all cleared. Indeed, it is perfectly possible that a cheque for the prior month, which you expected to clear, is still outstanding. If it is still outstanding it should be carried forward and entered again on your current reconciliation. Failure to carry forward these un-cleared cheques is a common mistake that many people make when completing a bank reconciliation.
The Importance of Having a Business Bank Account for Your New Business
Accountants in Manchester – Accounting Advice
Many small business owners avoid or do not pay too much attention when considering whether to open up a bank account in their business name. They make the mistake of using their personal account to carry out their business transactions, just so they can save a small amount of money required to open a new business bank account.
Having an account in your business name has many advantages. For example it gives your business a more professional look when dealing with your customers or clients. Using your personal account for business purposes gives the impression you are not really serious regarding your business and it is more like a hobby.
Having a separate business account proves to be beneficial when you need to complete the accounts for the business and any related tax returns. Indeed, you can quickly check the income and expenses for the year, rather than having the hassle of separating your personal and business transactions if you only have a personal account.
Another good reason to have a business bank account is to show the tax authorities that your business is transparent in terms of the financial transactions it carries out. All the income and expenses should be accounted for through the business account. Thus, if HM Customs & Revenue want to look at your records, this will demonstrate that you are declaring all your income and only claiming expenses related to business.
Opening a company account with a bank also has other additional perks. For example, you can usually obtain free banking for at least a year as a new business. Also some banks even offer new clients special deals on accounting software to use in their businesses. Lastly, as regards this point, it may be easier for you to obtain a business overdraft or loan if you have a company bank account.
Some entrepreneurs are put off from opening a business bank account because they think it will be complicated in terms of the formalities and legalities. This is a misconception as it is very easy to open a bank account most of the time.
A few points that one needs to keep in mind while opening a business accounts are:
- The account maintenance fee
- Different transaction modes available e.g. online banking, debit card etc.
- Overseas transaction charges
- Interest rate charges
- Minimal balance that you need to maintain
A company bank account may initially seem to be an extra overhead on your business, but the amount paid will be worth in terms of the time and money you will save by not having to separate out your business transactions from your personal transactions. Having a business bank account also sends a clear message to other businesses you deal with and the tax authorities that you are a proper business with nothing to hide.