SMART BUSINESS

No two businesses are alike, except too many are the same when it comes to how they handle their outgoing cash flow. The reason? On a strategic level, many companies view their Accounts Payable process as nothing more than a cost center that adds no business value. And they’re right, to an extent. AP is a recurring cost-center, one that grows proportionally over the life of a business. So, to realize value, businesses need to find ways cut associated costs and make AP more efficient. The answer is automation and integration, and all it takes is the right advice to get you there.

Throw away the manual

From start to finish, the AP process is an inefficient one: sorting, data entry, approvals, exceptions, reporting, and mailing, often followed by more data entry. And that’s not calculating the costs to retrieve documents manually and to store them onsite and off. So, trimming AP costs by as much as 50%-95% is as simple as eliminating manual and redundant steps wherever possible, and getting rid of the paper that goes along with them.

By using a high-speed data capture solution to collect, index and deliver incoming invoice information, a company can reduce processing by days, while making things like lost invoices, duplicate payments, and late payment fees a thing of the past. All of which translates to real savings that can quickly offset any initial investment.

The benefits of AP automation go beyond cost savings to something just as precious to a business: time. In the time it takes a clerk to input one invoice, a high-speed capture solution can process 120, or more. In the time it takes a clerk to get up from their desk to manually retrieve a document, a few keystrokes can recall any invoice in their system, along with purchase orders and any other identifying information. That’s because in an automated environment, invoices are scanned in batches by software that actually learns to differentiate different form types over time. Each invoice is indexed with multiple data points for easy recall. Priority invoices are moved to the head of the line. Invoices with irregularities are pulled for review prior to payment, and errors from manual data entry simply don’t exist.

So, the only question that remains is: why would any company continue running their AP process manually?

Implement Some Integration

As each level of AP automation is added, efficiencies are gained that free additional resources. But to get to that level requires tying the AP process to the databases, Accounting and ERP systems that are at the heart of a company’s operations.

For companies with limited IT resources, or who are not skilled with document management technology, partnering with an experienced systems integrator, particularly one who’s familiar with their existing software environment, can be the key to unlocking the full value of their IT assets. A skilled systems integrator can enable real-time collaboration between systems, further eliminating manual steps, as AP data flows freely into back-office systems. Integration is the final ingredient in making accounts payable more painless.

About Datamation

Datamation automates business processes by image-enabling your information systems. We analyze, design and implement comprehensive imaging capture, management and workflow systems so you to get more from your current infrastructure. Our digitization and outsourcing services further eliminate processing inefficiency and expense. We also provide all imaging hardware, software and data center equipment service.

All I need to know, is that a qualified accountant will be preparing my accounts or tax return. Beyond that I don’t really care, I will assume that he or she knows what they are doing and that the process will be straight forward. All I need to know is what will it cost me and how long will it take to get the work done!

That’s where the internet comes in. These days you can place an advert on a specialist website giving details of what you need done and hey presto, replies arrive in your inbox as if by magic. What’s more, you won’t be flooded with desperadoes vying for business either. Most sites allow a fixed number of responses and that’s it, you are left to make your choice and take your chances. One thing though, you will get replies from right across the country which is the only downside as far as I can see. After all, do you really want to do business with your accountant via email and courier services. To be honest, I can’t see the problem, in fact I’d rather do it by email than have some guy in a suit reciting the equivalent of Shakespeare for 30 minutes.

However, that’s not the end of the matter. The next stage is to ask yourself “Do I really need to ask for quotations?”. I say this because the internet is already saturated with online firms offering long distance services at low prices fixed in advance. Their websites show their prices and all you have to do is literally choose what you want and press “proceed”, nothing could be more simple. The only draw back is that most such service providers have terms and conditions stating that their low price only stands if you do your books to a decent standard. This however is the case with all accountants. If you agree a fixed low price and upset the accountant, you’ll find your fees going up next year, so in the longterm, nothing is really that different online.

J D Scott provides accounting services to individuals and businesses right across the UK.
Contractor Accountants

• Dealing with Accountability and Reliability

Even though you may not be the largest company that is out there, it is still extremely important to track your books and your financial details. Detailed financial records are the key to running a good business and staying on top of your business details. When you are looking at outsourcing bookkeeping services, with a reputable company, you are going to get books that are done correctly and that are reliable. Knowing all of this is done correctly will give you faith in your business and your bookkeeper.

• Making Your Bookkeeping Cost Effective

Cost effectiveness is a huge part of running a business, when it comes to bookkeeping there is one way to do that: outsourcing bookkeeping services. The best part about hiring and outsourcing your bookkeeping is that it is extremely cost effective. You will find that no matter what you do with a bookkeeper that is in your office, you are going to save so much money when you outsource your bookkeeper. When you outsource a bookkeeper, they are going to help you in the sense that they will only bill you for the hours that they work, which saves all kinds of money.

• Other Types of Savings

Aside from just a salary, there are other ways that you save money when you are outsourcing bookkeeping services. One of the biggest ways that you can save money is that you can get a software program that you don’t have to update. Generally, accounting software has to be updated frequently and the more updates, the more money that it costs you. So, by outsourcing, you aren’t going to have to pay those costs to get the most recent version.

• Managing Your Bottom Line

Today, whether you run a giant company or a small Mom and Pop business, your bottom line is what you need to focus on. The bottom line of your business refers to the money that you are bringing in over your expenses. So, when you are looking to cut costs, you need to look at all parts of it, including your outsourcing bookkeeping services, which will keep money in your pocket. Check out the different options for Outsourcing bookkeeping services and make sure that you are keeping your bottom line alive so that you have profits.

The coming to age of cloud computing has brought about a large number of commercial opportunities and efficiencies available to the business community, particularly small and medium enterprises (SMEs). One of the opportunities and efficiencies is virtual accounting or, as some protagonists like to put it – cloud accounting is one of the strong emerging service offerings. What started as a theoretical computing possibility is indeed a reality today.

Accounting controls have progressed from the days when it was considered a specialised and an awkwardly difficult task, fraught with illogical principles that undermines business freedom. Accounting packages such as peachtree, Sage, MYOB and so one have made very useful contributions in reducing the difficulty of day-to-day accounting, but these programmes appeared to add to the learning curve and accessibility is limited to the computer system that they are installed on.

Some rather slick and simpler solutions are emerging in the market based on cloud computing principles. The ability to access your books of accounts and useful performance reports at anytime and from anyplace with internet connectivity and the simplicity of use that virtual or cloud accounting solutions bring has accelerated the uptake. Users are instantly amazed at how easily they have been able to manage their books by themselves or through a part time accountant working remotely. This brings additional opportunities of efficiency and reduced.

Clearly, the economic benefits of virtual accounting significantly outstrip its costs by several multiples. Like most shared services, the installation, support and maintenance costs are spread across the number of users bringing the unit costs down over time. The commoditisation of accounting computing power as an anytime and anyplace services has been helped in no small measure by advances in telecommunications. Significant improvement in wired and wireless communication bandwidth, the ubiquitous WIFI access in major cities in Europe and the smart phone revolution, have made virtual accounting the best solution for SMEs.

Whilst technology and the growth of personal wealth have delivered a range of possibilities, it is not an excuse for carelessness. Accounting is no less a serious matter than it was 50 years ago. Diligence is still required to ensure that accounts reflect a true and fair view. The level of regulatory scrutiny and the keenness of tax authorities to grow national revenue in the challenging economic circumstances of today cannot be over emphasized. Users of virtual accounting services must ensure that their records are accurate and complete.

Simple steps to harnessing such strengths include:

1. Using reminders to plan their accounting and administrative tasks including invoicing, bank reconciliation and updating the books account.

2. Using the invoicing and chaser facilities (e.g. email reminders) on virtual accounting solutions to manage their business operations and working capital.

3. Accessing their account reports regularly either directly or through part time accountants to ensure that the books reflect what they expect.

4. Regularly using the various reports and aids e.g. working capital ratios, sales and profit graphs, that virtual accounting solutions instantly generate to make business decisions

5. Utilising the account closure and financial statement generating facilities and tax filing plug-ins to generate their accounts for regulatory and tax filing purposes.

6. Keep your password strong, safe and secure

The simple steps help ensure that business are well controlled and that regulatory and tax obligations are met in a timely manner.

Recently, the UK tax authorities and the International Accounting Standards Board requirements for companies to file accounts using the eXtendable Business Reporting Language (XBRL) came into play. Traditional accounting packages have had to find add-ons to further process the accounts generated in order to comply. This is an added cost, but virtual accounting solutions are designed to be compliant.

Overall, the virtual accounting promise appears to have been delivered.

The cash method and the accrual method of accounting are the two main methods of keeping track of a business’s expenses and income. The method a company chooses is often dependent upon which is simpler and serves all the different purposes of that business. Basically, the main difference in the two methods is timing of when transactions are debited or credited onto the business’s books.

Small businesses tend to favor the cash method. The cash method means the business does not count any income on a product sold or a service rendered until payment is received, and expenses are not counted until the business makes payment on any goods purchased or any services done for them.

An example:
A company purchases a new computer for $2000 on credit in August and pays for it in November, 90 days later. Under the cash method of accounting, the business would record the $2000 cash payment for the month of November which is the month the money is actually paid. In the accrual method, the $2000 payment would get recorded in August when the purchase took place.

Transactions are recorded when the order is made, item delivered or services have been rendered, regardless of when payment takes place under the accrual method. Under the accrual method, it is not always easy to find out when a purchase or sale has taken place. For those businesses using the accrual method of accounting, the important date is the date the job was completed or sale or purchase made.

An example:

A department store sells 5 easy chairs, all purchased on credit for a total purchase price of $1500. The department store will record these transactions the same day the purchases were made, regardless of the fact that each of the people purchasing the chairs will undoubtedly send their payment at different times in the future.

There are advantages and disadvantages of using either method of accounting. One of the main advantages of the accrual method is its ability to show the ebb and flow of a business’s income and their debts more accurately, which helps their lenders to quickly see how a company is doing. Although, it does tend to leave the company in the dark about what is available in their cash reserves, which in turn could mean a serious cash flow problem. It is important to understand that if a company using the accrual method is looked at in the vacuum of a one month period that on paper makes them look really good due to a high volume of sales, they may in actuality be cash poor because the company’s customers haven’t paid for those purchases.

There is another disadvantage when using the accrual method for tax purposes. It is obviously more difficult to minimize taxes by shifting items of expense and income from one year to another when the accrual method is used. A business could try to control expenses and income by deferring some income to the next tax year by shipping and invoicing as little as possible during the closing days of the year; however, that might not be worth the cash-flow problem it could cause.

There are also advantages and disadvantages when using the cash method. Although, the cash method of accounting gives a much more accurate picture of just how much cash a business has on hand at any given time, it could give a misleading picture of the longer term profitability of said business. Again, if someone were to look at a company’s books for just one month and that month showed a very high profitability rate, their assumption that the company was healthy could be incorrect. It might only mean that a lot of previous sales made on credit were paid during that month, and, in fact, the company may have had few actual sales during that month.

Some companies don’t have the luxury of choosing between these two methods. Small businesses that have sales of less than $5 million dollars per year are allowed under the law to choose either method.

The accrual method of accounting is required under the following circumstances:

• A business has sales in excess of $5 million dollars per year, or
• A business stocks an inventory of items that they will sell to the public and the gross receipts exceed $1 million dollars per year (Inventory includes any merchandise sold, along with any supplies that will be used to make or become part of an item intended to be sold)

Regardless of the accounting method chosen by a company, it is important to understand that neither one gives a full picture of the financial status of the business.

In today’s difficult economy, proper cash flow management is more important than ever for almost any organization. One of the most common causes of cash flow problems is poorly managed accounts receivable.

Poorly managed receivables may necessitate drawing down your reserves, or increasing the amount of financing you require. As delinquent accounts get older, the probability of collecting those accounts diminishes, and account write-offs increase. In addition, the more cash you have tied up in receivables, the less cash that is available for running your organization.

For charities and not-for-profits, slow collection of donation pledges and annual membership dues can put a strain on cash flow. While donations and membership dues are not technically accounts receivable, many of the same best practices can be applied to accelerate cash inflows from these funding sources. Awareness of good accounts receivable practice is also becoming imperative for many not-for-profit organizations now engaging in the sale of products and services to generate income.

Described below are a number of suggestions for improving your receivables processes, which in turn should improve your cash flow and strengthen your bottom line:

1. Email invoices. This will ensure your customers receive your invoices immediately, avoiding mail delays. Ensure that you confirm with your customers which email address they wish you to send invoices to.
2. Shorten payment terms. In the days of paper invoices and cheques, it was fairly common for businesses to extend credit to customers to allow for mail and payment delays, by granting credit terms, for example “Net 30″. However with the widespread adoption of email communication and electronic payment methods, businesses are now more commonly specifying “Payment due upon receipt”.
3. Permit EFT as a payment option. An increasing number of businesses are now paying their suppliers using EFT (Electronic Funds Transfer). By specifying on your invoice that payment may be made by EFT, you will enable your supplier to deposit payment directly to your bank account. Simply include on your invoice your EFT banking information (bank, branch and account number).
4. Monitor the age of your receivables, and systematically follow-up on any accounts that are past due more than a predetermined number of days. A good practice is to run an aged receivables report from your accounting system on a weekly basis, paying special attention to any receivables that are over, for example, 30 days old.
5. Follow-up with telephone and/or email. Follow-up unpaid accounts with a phone call or email if payment has not been received within a reasonable time after invoice has been sent. Written collection letters are usually less effective as they do not engage the customer in conversation in the same way that an email or telephone call does.
6. Maintain a collections record. For each over-due account, keep a log of when follow-up calls or emails were sent, along with a record of customer’s responses to follow-up calls. Knowing what your customer said to you (for example promises to make a payment by a certain date) will be invaluable if additional follow-up calls are required.

If you would like assistance in improving your cash flow and strengthening your organization, please contact me at 613-727-1230 ext 212 or rmacneill@otusgroup.com

Setting up a chart of accounts is very easy, especially when you have an easy to use accounting software program.

To complete this task all you need to do is

1. Ensure each account type is distinguished in some way

This means that assets, liabilities, owners equity, revenue and expense are distinguished in some way. A great way to do this is to start each type of account with a different number. For example assets could be 1000 numbers, liabilities be 2000 numbers, owners equity be 3000 numbers, revenue be 4000 numbers and expenses be 5000 numbers. So for example accounts receivable might be account number 1015 and accounts payable be 2020. This is just one example of how to distinguish the account types but any method to distinguish them will work.

2. Ensure accounts are numbered leaving room for new accounts

You will want to number the accounts with space to insert new accounts. This means not numbering your accounts sequentially. For example you might have two types of investments you want to separate in your system. One being stock investments, numbered 1020 and one being bond investments, numbered 1030. By numbering them in this manner it allows you space for 10 accounts between 1020 and 1030 in case you need to add an additional investment of some nature to track in your books. How much space you leave between each number really depends on your business and how likely you will be to have to add new accounts.

3. Use a logical numbering system

Use a numbering system that makes sense to you. There is no right or wrong way so choose one that you are comfortable with and that helps you organize your accounts. With an easy to use chart of accounts you can save your self a lot of time trying to find the right account number when entering your journal entries.

What also plays a big roll in how you set up a chart of accounts and how easy or hard it will be is dependent on the program or software you are using. For example with Profitworks’ Easy To Use Accounting software all you need to do is type in the account name beside the appropriate type (asset, liability, owners equity, revenue or expense), selecting a number and then typing the name of the account beside the chosen number. Setting up a chart of accounts in this program can be done in only a few minutes.

Globalization is the process of integrating economies, societies and cultures through communication, transportation and trade. Large businesses and corporations now have to be mindful of not only the environment and cultures within their region but throughout the nation and ultimately across the world. Some people do not support globalization because they are afraid that it will result in sweat shops and environmental degradation amongst many other negative outcomes; however, since globalization is inevitably becoming the societal norm, it is important that future business leaders are taught with this objective in mind. While globalization is nearly impossible to prevent, with the correct education and practice, future business leaders should be able to reduce the preconceived destructive results of globalization from occurring. With that being said, Globalization has a huge impact on accounting education.

Education policies and practices is one factor that has been affected by globalization. More specifically, many concepts are being reevaluated and taught differently. These terms include but are not limited to the following; culture, in port/export, international trade, foreign market entry, ethics, market exchange rates, restrictions on trade, free trade laws, IFRS (International Financial Reporting Standards), and GAAP (Generally Accepted Accounting Principles). These words are now being taught with the ideology that students will grow to work in multinational corporations in which they are encouraged to understand how countries around the world conduct business. In the near future, if not contemporary, young scholars will also be required to be knowledgeable and able to differentiate the political, economic, and market systems of every country; however, with globalization growing so rapidly, it would not be a surprise if every country complied with one set of laws and standards in the future. In fact, according to USA Today, Sir David Tweedie (chairman of the International Accounting Standards Board) stated that “we must eventually end up with a common system of regulation, auditing and accounting.” With that being said, there may be many issues and conflicts with the many requirements in obtaining a career in the accounting field.

Since classes are constantly being added to accounting education the requirements may create a hinder on the development of pre-existing accounting professionals. In fact textbooks are revised annually and it will soon be mandatory for students to take one or more foreign language class. While accounting analyzes the history of financial decisions and documents, in order to keep current accountants up to date on the contemporary and future business aspect, companies are demanding that their employees attend seminars, workshops, and classes relating to globalization. This may create a burden on people that have been with a company for years readjusting to the ever changing business standards. It is in the best interest of accountants to submit to the wishes of their employer because those that do not comply with these requirements, may ultimately suffer with outsourcing of accounting careers to foreign countries that are familiar with international standards. While there are a few discrepancies relating to the educational requirements in obtaining a degree and maintaining a career in the accounting field, there are both positive and negative effects of a globalize education system.

Globalization creates many opportunities for both US born as well as international students. American students will be capable of traveling to large developing business corporations in countries such as Asia and Europe for work. International students whom attempt to obtain degrees in the US will be preferred (in the US and other countries) than native born citizens. With that being said many international students will establish a career in the U.S. which will ultimately create an “unbalance in the supply and demand in the US accounting job market” (Articles base, Globalization’s Impact on Accounting Career). It is unbalanced because foreign countries are not able to employ the best candidates to operate their businesses in order for them to compete in the globalize market. It is quite obvious that globalization is affecting accounting careers; however it will continue to influence the way future accountants obtain positions in the field.

In the end Globalization plays a huge role on accounting education. Not only are the effects both positive and negative, they are ultimately inevitable. It is important to educate accountants on the standards of other countries so that they are thoroughly knowledgeable in their field because many businesses operate with countries across the world. Textbooks and classes are being updated annually in order to remain consistent and up-to-date with business standards. While the requirements of obtaining a degree in accounting are complex, the journey towards achieving is well worth the time in effort.