Showing posts with label Accounting. Show all posts
Showing posts with label Accounting. Show all posts

The Value Of Proactivity

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If you are a small business owner, your business can be one of the most important components of your life. It is your livelihood, the way that you earn your living and provide for your family. It can be a means of connecting with your local community and can also help provide for the lives of your employees. With all of these things in play, you are no doubt concerned about your business performance and how to maximize your results.

How to have a healthy business Your business operations depend upon many factors and each of them relate to the other. Ensuring that all functions can be performed optimally is a vital way to reduce the amount of time or money needed to produce results and can directly impact your bottom line. Benchmarking is one of the best ways to achieve such results. By leveraging technology, benchmarking is able to efficiently hone in on problem areas in your financial and operational systems.

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It then can identify and help you implement simple changes that can produce positive outcomes to your sales and profits. It can allow you to perform tasks in dramatically less time than before, freeing up resources for other jobs. It can save money by eliminating waste and it can allow your company to serve more customers in the same amount of time. All of these things together are how your business will not simply survive but will actually thrive.
Do not wait for a problem If you wait until you really feel a problem, the solution could end up taking more time and investment. If, however, you engage benchmarking on a regular basis even when you do not suspect a problem, you can catch small things early, allowing the fix to be implemented much quicker and with less impact to your business. Adopting a philosophy of productivity will pay dividends for your business. Just like a preventative checkup at the doctor or dentist can find small things before they are out of control, benchmarking for your business when things all seem to be fine is the smart business owner's way to success. Business Benchmarking is the process of finding then fixing internal issues by comparing your Revenue and Expenses against the most efficient and profitable companies. This helps you identify the differences that may be keeping you from having the same success as your peers or competitors.

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With your year-end Profit and Loss report or tax return you transfer each line item from your profit and loss, both revenue and expense, on to a Benchmark Financial Statement. You then extensively research to find similar companies with revenue similar to yours BUT with much higher NET PROFIT. Next you place your line items beside the benchmark company. At this point you easily find your deficiency(s) called LOST PROFIT!

Best Accounting Services

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Going out to the vast, endlessly changing and challenging world of accounting means that you are like an ant to the world of giants. Sure, you got your degree but every clear minded individual knows that it is the real world where you grow and develop your skills, knowledge and expertise. The same logic applies to accounting when it comes to managing your books, writing off pay cheques, balancing spreadsheets and recording multiple transactions. If you have no backhand or preliminary knowledge or something, you may not even last a day in the professional field. That is why for your accounting convenience, we have prepared a list of the best accounting services tips that will you get started on the right track:
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Basics of bookkeeping
Not so confident about taking up the task for bookkeeping, then you could always ask a business friend or an actual bookkeeper. However, in case of an emergency or sickness, it is imperative that you brush up on your best accounting services basics for it may save your life when you least expect it.
Making a petty cash fund
Small expenses or even unexpected ones are avoidable with this best accounting service tip. They are small because they do not necessarily require the need to write off any cheques or the use of credit cards. That includes buying pens, staples or cleaning supplies. You should document every purchase that is made with fund and replenish when required. Keep in mind to do some extra counting in order to ensure that the amounts are balanced out on both ends.
Make it simple
This best accounting service tip shows that you must keep your record keeping methods simple and to the point. As your work with your industry you will be able to learn, adapt and develop experience that will help construct exceptional best accounting services. Taking on the situation head on without a base or a plan is simply betting all your chips in one go and failing.

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Traditional and contemporary bookkeeping methods
Managing your books using a pencil may be years out of style but it still works. Electronic bookkeeping is fast but at times without the human element of revision, can draw out some nasty results such as inaccurate balance sheets and more. Using a paper assures more credibility about the accuracy of your results. If you are going to use a computer, be sure to have as many copies of your files and documents as you can. Don't go any further cause if you do, you'll know that you have greatly missed out on the best accounting services that our prestigious company has to offer.

Different Sections of Accounting

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Accounting is the backbone of any organization. But it is unfortunately one of the most ignored aspects of the company. We all know there are accountants working in our organization but we are never quite sure what they do. Yes, we do know that if we are not getting our salary right, they are the people to hound! But other than that, what is their function in the organization? Well, they are the ones that are keeping track of all the inflow and outflow of money, what is being done with the money and how it is being spent. Basically the economic condition of the organization lies in their hands. Their understated position in the company often undermines their importance. Its effects can hinder the long term economical prospects of the company. For the regular people, accounting seems like a big ball of numbers and nothing else. Accounting actually has many segments that look after different areas.

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The level of diversification usually depends on the size of the company. In the smaller companies, a single accountant might be looking after everything while in the bigger ones there might be different teams for every section. The different segments of accounting might seem too fine for us to make out the difference. One big divide however is often quite marked - the difference between financial accounting and management accounting. Now, a single team might still be responsible for dealing with both aspects but they each have distinct features that are easy to differentiate. Financial accounting deals basically with the here and now of the company - the earnings, the expenditure, and the profit and loss of the current times. There is always a specific period that is taken into account when accounting, usually the financial year. The term of financial year is different for different countries. In Australia for example, the fiscal year starts from 1st July and ends in 30th June. Now during this period, every monetary transaction is recorded, including investments made by the company. The taxes the company is liable for and whether there will be some rebate. In fact, the office accountants usually deal with every employee's individual taxes as well. Very few of us have an in-depth idea about our tax break down. Now imagine how many employees there are in the office. Each one has a different tax profile, with different tax saving policies adopted. Calculating all those taxes is really a taxing job! Management accounting is very different from financial one. In the financial accounting segment, most of the information needs to be sent outside the company like to the shareholders and tax office. While the financial accounting deals with hard facts and figures, the management kind deals with speculation.

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That is not to say that these are all guesswork. The speculation is based on the past as well as present trends in the market. Now this does involve a little bit more of instinct. Whenever, you are about to predict what is going to happen, uncertainties creep in. When you are opting for accounting outsourcing know that, some people have a natural instinct as well as a solid ground of experience to predict accurately and making business decisions based on that. Others are not so talented. Keep that in mind when you are outsource accounting.

Effectively Track Your Business Finances

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As the owner of a business, it is very important for you to have a system that you follow to track your revenue and expenses. A routine system that through which every transaction flows. I like to call this the Financial Flow System™. This system should be followed consistently and done weekly or monthly to record and manage your business finances. Your Financial Flow System™ is your step by step operating procedures for your bookkeeper or accountant. This system allows your bookkeeper or accountant to follow step-by-step and will essentially let them know how you run your business. Writing down and documenting these procedures will highlight for them areas that need improvement and tweaking and areas that are bringing you maximum operating efficiency.

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Managing your books regularly does not need to be a complicated task. If you have a simple Financial Flow System™ in place it functions as a step-by-step instruction guide to track your income and expenses. Your system does not have to have a lot of accounting jargon and it can be a simple list that can followed easily every time.
Systems are the key to a successful business!
Systems are in every facet of your business, not just in your product or service line. Having a Financial Flow System™ in place in your accounting department will help you see where your business is thriving and where a breakdown might be occurring, so you can take the necessary actions to prevent financial stress or failure. Let's take McDonald's for an example. Each franchise owner follows McDonald's corporate Financial Flow System to run their specific store location. These operating procedures allow franchise owners to have instructions and procedures to effectively and efficiently run their store. They do not have to reinvent the wheel for every process, but they can follow the steps and easily tweak where needed for their individual location.
Create a System
Documentation. Write down your entire current process from start to finish. Don't change the process, just get it all down as is, on paper. Then give the list to your bookkeeper or accountant to review. They will be able to assist you with finding ways to increase optimization in your process. Cash is king. Balance and reconcile your cash accounts. If your cash account is not reconciled regularly, you have no way of knowing what's going on in your business. Who owes you and who do you owe? Make sure your balance due to you from customers and the balance due to vendors are up to date and accurate at the end of every month. This is needed in order for you to make accurate cash flow forecasts that will keep your account in the black. 

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Adjustments. Make any necessary adjustments needed to ensure all of your balance sheet accounts are accurate. This is important because this statement tells the financial status of your business at any given point in time. Look at your reports. Review and analyze your monthly reports to determine if they accurately reflect how your business is operating. If not you may have to make some changes, but at least you will know in advance and not when it's too late.

Face Your Financials

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July 1 starts the new fiscal year at many organizations and that's a good time to think about financial management and fiscal health. There may be both an accountant and a bookkeeper on the payroll but you, the business owner, nevertheless bear the ultimate responsibility for maintaining the financial integrity of the enterprise. Every owner must be able to make sense of basic financial data. Each financial statement has a story to tell and the business benefits greatly when the owner is able to analyze and apply the information that the numbers convey. Three financial documents are typically generated monthly (and also compiled quarterly and annually): the Balance Sheet, the Cash Flow Statement and the Profit & Loss (or Income) Statement. The Balance Sheet resembles your checking account monthly statement. This document details business assets and liabilities, showing the monetary value of all the business owns and what it owes: net worth.

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The Cash Flow Statement is the business budget and shows what sales revenues will flow into the business and what expenses will flow out. This document shows how much money is available to cover expenses, like payroll and rent. Accounts payable (the bills) and accounts receivable (sales revenues) are listed on this statement. If you've ever managed a household budget, then you can master the Cash Flow Statement. The Profit & Loss (Income) Statement is similar to the Cash Flow Statement. It contains many items that are also found on the IRS tax form Schedule C, Profit or Loss From a Business. Sales revenues and expenses are listed on this statement, including labor, taxes, inventory and the wholesale costs of products sold. Net Profit is shown on the last line of this statement (the bottom line). One does not need a degree in accounting or an MBA in finance to identify which numbers on financial statements are most critical to your business. Monitoring a handful of key values, including values called ratios, will do wonders for your comfort level with financial analysis and in the process, guide your business decisions in many ways. Gross Profit in the P & L indicates how much money remains after product acquisition or production costs (the wholesale cost of goods sold) have been tallied and the wholesale value of product inventory is subtracted. Providers of intangible services calculate this figure as time. How many hours were spent to develop a new service that you will offer (e.g., a workshop or webinar)? Make a reasonable estimate of the wholesale cost of your labor. Can you produce and deliver services more efficiently, or acquire products less expensively? Lower production costs increase gross profit. Net Profit at the bottom line of the P & L tells the ultimate story. Every line item that precedes it, impacts it. If you want to increase that number (and don't we all?), examine expenses and production costs to see what can be trimmed. Consider also how to increase the top line, gross sales, by generating new business. Gross sales revenues in the P & L may be tracked in two ways, looking back over what occurred in previous months or years (historical comparison) and going forward (projections, or forecasting), to predict what you can reasonably expect to sell in a given period, guided by current demand. Are you achieving, exceeding, or failing your sales goals? Finally, see your Balance Sheet and calculate these ratios, to continue the financial analysis. After your review, consider what might be done differently to either capitalize on upward trends or minimize negative impact. Quick Ratio = Accounts Receivable + Cash - Inventory divided by Accounts Payable This figure indicates how much money is available to pay bills. A 2:1 ratio represents a business in good shape. However, a big receivables number can mask clients who take longer than 30 days to pay, thus signaling the owner to step up collection efforts.

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Current Ratio = Assets divided by Liabilities This figure measures resources available to pay debts over the next 12 months. A value > 1.0 shows a business in good shape, > 2.0 is a business in excellent shape. Working Capital = Current Assets - Current Liabilities Think of this number as the amount of money available to not only pay bills, but also to invest in business upgrades and expansion. Debt to Equity Ratio = Total Assets divided by Total Liabilities This figure indicates how much debt the business carries relative to its assets. A value <0 data-blogger-escaped-.5="" data-blogger-escaped-and="" data-blogger-escaped-excellent="" data-blogger-escaped-is="" data-blogger-escaped-values=""> 0.5 mean the business is carrying rather heavy debt and is considered highly leveraged.

Small VS. Big Accounting Firms - The Pros And Cons

Choosing an accountant isn't always easy. With so many to options to explore - big firms; small firms; one-man bands - it can be hard to decide which is best for you and your business. That is, unless you know what you're looking for. As you begin your search for the right accounting firm, it helps to be armed with the pros and cons of every option. Using the facts, you can choose an accountant that will be of most benefit to you - whether that's a big, household name or a smaller independent firm.

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Big accounting firms: the best bits
Whether it's one of the 'big four' or a larger local firm, the biggest accountants do come with their advantages. As established, trusted names in accounting, they come with years of experience and an impressive portfolio of clients to boot. And with a huge number of employees on their payroll at locations across the UK and abroad, they'll be able to provide an expert for most if not all potential challenges.
A word of caution: big firms come with their fair share of cons
But of course, it's not all good news. Big accounting firms are not for everyone; especially if you're after a personalised service from your accountant. With a huge hierarchy, staff members have very specific roles - meaning there is a reduced sense of ownership for your account. In fact, you'll be one in a sea of many clients all with the same 'out-of-the-box' package.
Don't disregard small firms
No matter what type of business you run, don't disregard how a small accounting firm could be of benefit. With fewer staff, they can be more agile in their approach - resulting in a personalised service tailored exactly to your needs.

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The owners are typically more 'hands on', meaning that everyone from the receptionist to the senior staff will know who you are. With one or two points of contact, your accountant will get to know you and your business inside and out - so they can be proactive with advice. They don't just do a job, they could make a tangible difference to your bottom line.

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But remember; there are limitations
While small firms can provide a first-rate service, you will need to check up-front that they have the expertise you need. If you work in a niche industry, then you will require an accountant with the knowledge to match. This is where small accounting firms can be more limited - but with a little research, you may be able to find the best of both worlds.

The Impacts of Globalization on Taxation

Over the past thirty plus years, the business environment throughout the world has changed dramatically through the course of globalization. Globalization is defined as the process in which individual economies become integrated with each other and eventually operate together as one.

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Due to vast improvements in technology, such as transportation and communication, along with an increase in international trade, international business has grown at a rapid pace. This growth has led to the formation of Multinational Corporations, or MNC's. Some well-known MNC's include Toyota and Samsung. While operating in a global economy, there are bound to be dissimilarities and incompatibilities between the laws or regulations between the individual economies. One in particular is taxation. Two important issues surrounding taxation in a global economy are tax havens and double taxation treaties, or DDTs.
Globalization allows a corporation to operate in a country other than their own, known as a host country. By doing this, it allows the MNC to produce its' goods or services for a lower price, and more often than not, at a significantly lower tax rate. When searching for a country to outsource its' operations to, MNCs will look to see which country offers the most attractive tax haven. A tax haven is a state, country, or territory where certain taxes are levied at a low rate or, in some cases, not at all. Tax havens are appealing for MNCs and help the decision of which country to operate within. Tax havens also work to create competition globally and help keep tax rates low.

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(1)Tax havens typically work in favor of the MNC and can have negative effects on the host country. For example, the Netherlands offer a tax haven in the form of "mailbox companies". A mailbox company, or a shell corporation, is a business that is set up to engage in transactions without having an actual physical presence, meaning significant assets or operations, in the host country. According "The Global Problem of Tax Havens: The Case of the Netherlands," the Netherlands is host to more than twenty thousand mailbox companies.
(2) The MNCs move their money through the mailbox companies in the Netherlands, with the intent of having the money end up in a "pure" tax haven. A pure tax haven means that there are no taxes levied at all. While tax havens are attractive to the MNC and its' home country, they can end up having a detrimental impact on the economies of the host countries. As MNCs are operating in a tax haven paying a low tax rate, the host country is losing out on revenues which could lead to an increase in poverty levels.
Double taxation is another important issue surrounding taxation and globalization. Double taxation occurs when an MNC is operating in a host country. The MNC is responsible for paying the taxes levied by both their home and host countries. Many countries will avoid the issue of double taxation by signing double taxation treaties, or DDTs. (4)For example, in 1946 at the International Tax Convention, the United States and the United Kingdom signed an agreement in which exemptions from taxes, credits for taxes paid, and a reduction of overall tax rates were implemented to reduce or eliminate double taxation. By signing DDTS, countries are promoting the growth of international business and the development of more MNCs. DDTs are advantageous because they lower corporate tax rates and allow MNCs to operate globally, but they can also prove to have a negative impact on taxation, as well as being quite costly. Setting up DDTs can carry high administrative costs, such as negotiations and the translation of languages. Most importantly though is the loss of tax revenue. As opposed to tax havens where the host country usually loses out on tax revenue, DDTs favor which ever country has a lower tax rate.
(3)For example, Hong Kong is a tax haven and also does not tax foreign sourced income. A double taxation treaty would have no effect on Hong Kong's tax system because they don't tax income earned in another country. A country that does tax foreign sourced income, such as the United States, would end up giving up substantial tax revenues if they were to enter into a DDT with Hong Kong.
Globalization is continuously evolving, leading to more and more opportunities for large corporations to grow and flourish throughout the world. As this continues to be the case, the countries that choose to participate within the global economy will eventually have to agree on the proper way to deal with the differences between their individual tax systems. Until then, the issues of tax havens and double taxation treaties will continue to interfere with global business.

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References
The Global Problem of Tax Havens: The Case of the Netherlands SOMO Paper | May 2008 By Michiel van Dijk & Francis Weyzig
Rainsford K. Tax Treaties with Tax Havens: The Hidden Tax Break. Auckland University Law Review [serial online]. January 2011;17:60-87. Available from: Academic Search Complete, Ipswich, MA. Accessed October 9, 2013. Edwards C. Tax Competition Spurs GLOBALIZATION. USA Today Magazine [serial online]. March 2003;131(2694):26. Available from: Academic Search Complete, Ipswich, MA. Accessed October 9, 2013. Taylor, J. C. (2010). TWILIGHT OF THE NEANDERTHALS, OR ARE BILATERAL DOUBLE TAXATION TREATY NETWORKS SUSTAINABLE?. Melbourne University Law Review, 34(1), 268-311.