3 basic steps to bookkeeping success

Introduction

Big business owners are because of foolproof bookkeeping policies; for owners of small businesses, proper bookkeeping and accounting are the keywords to a brighter future. Indeed, bookkeeping brings in together the intricacies related to government regulations, marketing rules and their applications, various aspects of business operation and many of an assistance programs; all these form the very base of business record management and without proper bookkeeping or accounting measures, business success may just stay a dream.

Steps for success in bookkeeping

Things start from the point where a business starts. That is to say, the licenses, registrations, GST (Goods and Service Tax), RST (Retail Sales Tax), excise taxes and setting up the payroll accounts besides opening a business account for carrying out all the monetary transactions associated with the business. As the first step for a successful bookkeeping, keeping track of all of these is paramount. This is because financial records keep account of all income and expenses and this information is necessary for filing tax returns. Therefore, to get started, you need to keep intact your:

• Bills, receipts and payment vouchers: These are the small records that keep information regarding every transaction in a rudimentary form. That said, they are the biggest proofs for the business transactions your company was (and is) involved in. You won’t require to rack your brains for the transaction amounts, dates and other related details on specific sales/purchases id these are kept in a proper order.

• Income and expenditure summaries: Summarizing revenue generations and expenditures according to the category and date in a ledger (preferably, in digital format with a good accounting software) on a weekly or monthly basis shall keep your bookkeeping enthusiasm regular and complete.

• Financial Reports - Financial reports are themselves a summary of all the financial information of your business. The reports make for a regular cash flow analysis and forecasts regarding profits and losses forecast; therefore, maintaining a balance sheet is also paramount for an efficient bookkeeping.

Following the above steps shall make sure one thing; you won’t require to hunt the wilderness at the end of every financial year. Besides, it shall also save you from the labors of convincing the banking sector regarding your credibility in case you opt for a business loan. And above all, any document proving adequate cash flow is what the banks always target; with a planned budget, you can make a lot of your dreams come true without having to go through the unnecessary hassles.

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Bookkeeping – How to manage your books

If entering the debits and credits to proper columns can cheat someone out of several nights’ sleep, imagine what bookkeeping can do as a whole. The thought seriously can numb if your bookkeeping needs appoint in-house staff not trained enough for the job; the only way to get this very crucial job done for running your venture successfully is to teach them the basics and to send the financial records to a qualified bookkeeping professional for the final evaluation. And if they still prove incompetent, then the only option that stays on how to manage your books is outsourcing. Let’s see how.

How to manage your books

There are a plethora of accounting firms who outsource regularly their bookkeepers for getting done the accounts of their clients. The financial records being a pile of complex calculations need regular updates in the accounts books and the one doing it needs to be thoroughly accurate while dealing with the numbers. That makes outsourcing the easiest way to manage your books efficiently; if you are skeptical about the costs, there are ample numbers of good accounting service providers who provide the best services in return for a nominal fee. And even if their fees exceed your one-time budget, they are way down than what you have paid otherwise to a full-time accountant working as one of your employees.

When to seek help from expert bookkeepers

Investing in an expert bookkeeping service ensures the returns in the form of highly accurate data that help you to save the extra dollars. This further ensures the right way for a business being conducted and helps a business head to take significantly important decisions for business growth. Therefore, if you find your business is stagnant or falling due to:

• Wastage of time and efforts.

• Business related expenditures eating into your profits.

• The salary (and bonuses) of an accountant appointed in your firm is attracting a large chunk from your revenues.

• The large business growths are not reflecting in the balance sheets.

…It’s high time that you seek professional services from the expert bookkeepers. Seeking the advices and services shall make you capable of an optimum use of your available resources and make you realize how to change aspirations from just theories to practicality.

Impact of ROA on company’s efficiency

A little extra doesn’t hurt. Definitely, but what if it’s much greater than a little? In that case, a company’s ROA (Return On Assets) can face an adverse impact. Let’s see how.

• Return on Assets

The financial measure accepted widely by the entire business community as a firm’s capability to manage its assets and thereby, a measure of the company’s efficiency, return on assets is also a measure of a company’s economic profitability. The calculations by which ROA is determined is:

ROA= Net Income/Assets.

This signifies ROA or returns on assets to be inversely proportional to the amount of assets, making most companies target maximum net income by minimizing the assets level. Asset management, in other words - return on assets is an answer to the question of generation of profit by a firm by using its assets.

ROA also helps evaluating managerial skills and therefore, determines a large part of the compensation paid to them by the employer. For companies trading publicly, return on assets is one of the factors that investors monitor closely. That makes return on assets a vital part of stock management and it has a direct impact on a company’s stock price.

Now, ROA has a few points attached to it, which one must know before carrying out the discussion any further.

 Return on assets is independent from the measures a firm undertakes for financing its assets.

 ROA is usually defined on a pre-tax basis. It is done for making international comparisons possible.

 ROA compares profitability among several firms practicing financing strategies that are different from each other.

• Improving Efficiency

Assets of a company comprise both equity and debt, which fund the company’s operations. The figure exhibited by return on assets provides investors an estimate on a company regarding how efficiently can it convert the investment to a net income. A higher ROA number depicts a company to be earning more by investing less. Therefore, company A with a net income of $1 and total assets of $5 (ROA = 20%) is converting its investments more than company B earning $1 with $10 of assets. All in all, it’s about making a large profit with a minimum of investments. For credit unions as well, ROA is an important phenomenon in particular. It is because the retained earnings of a credit union make source for additional capitals that are needed by the regulators for making a credit union grow and benefit from the economic scale. ROA, therefore, to regulators are also a tool for stock management that helps in issuing the stocks and bonds to investors outside the company.

Factoring of Receivables

If you are a seller of products or services or both, then you are no stranger to delayed payments. The business world allows pretty often a month or two to the clients for paying the invoices, which often turn out to be a challenging task for businesses looking forward to cover all business-related expenses within this period. The practice is infamous for bringing down the cash reserves, but the paradoxical truth is – There’s hope in despair.

What is factoring?

Welcome to Factoring - the selling of accounts receivable. It generates the cash, thus relieving a business from the pain of waiting for a long period for getting paid by the customers. But factoring is not a business loan; it is an advance payment on an outstanding invoice.

There are factoring companies who set the credit-worthiness of the customers of a business. Contrary to banking policies taking credit decisions based on a company's collateral(s), cash flow and an overall financial history, factoring not being a loan, relieves the company from taking the liabilities to their balance sheets. But above all, factoring is a fast process that bears fruits within a few days or hours as opposed to the length of time required by the banks.

How factoring of receivables benefits a business

Factoring of receivables or accounts receivable factoring has a number of benefits. Firstly, it speeds up the transactions (24 hours max); next, it involves fewer intricacies; provides the required capital so that a business can survive and mostly, it establishes the fact that a business has reliable customers.

In fiscal terms, factoring of receivables pay up to 85% of an invoice in the first installment and then the remaining 15% after the factoring company receives the pending payments from your customers. And all that comes for a small service fee – typically 1.5% to 6% of the total amount pending. Newer businesses benefit the most out of factoring of receivables; however, since it remains depended on a company’s sales performances, it bars a fixed line of credit.

Advantages of factoring

• Immediate receipt of cash.

• No need for showing the balance sheet; its customers' credit-worthiness that matters.

• Doesn’t bar delivering the goods and/or services that are promised.

• A company's financial history doesn’t come into the picture.

• The rates are variable and depend on specific circumstances.

• Factoring cost/fees are tax-deductible. This is because factoring stands as a business expense.

Relation between asset-based lending and accounts receivables

One cannot possibly deny the vital part asset-based lending plays in the country’s economy. But there’s where the matter ends for most of us; at the most, we nod in acceptance of the fact that asset-based lending is a dedicated act that makes the clients flourish. Those who are a little more knowledgeable on the fact shall clarify things a little further; it’s all about lending money on fixed assets. However, the fact that remains in the shadows is the phenomenon also embraces accounts receivable as well as the inventories. Those who are into it shall go several steps higher to speak about collateralized lending; their know-how-s on structuring a proper financing program for businesses are shaping today almost all types of products and services on both domestic and international grounds. However, anything more spoken on the subject right now is like asking someone with a prior experience on throwing stones to fire a .50 ACP bore handgun; let us clear our confusions first on what’s exactly meant by asset based lending.

What is asset based lending?

ABL – that’s how the business world recognizes an asset based lending. No doubt it’s another loan product, but it provides credit facilities that are fully collateralized. The borrowers, thus, are benefited by the high financial leverages while cash flows are kept at the marginal level, resulting from:

• Acquisition
• Re-capitalization
• Turnaround
• Growth Financing
• Management Buyout

The collateral (liquidation value of accounts receivable, inventory and fixed assets) limits asset-based lending, the typical scene being a three-year long revolving credit supporting the required working capital. The process may also be inclusive of a term loan that doesn’t exceed 40% of the credit facility (combined and in total) and liquidating gradually between 5 and 15 years. This, however, depends on the underlying asset’s useful life.

The point on which an asset based lending program differs from a traditional, commercial financing is its primary focus on the collateral’s liquidity; the leverage and cash flow factors are considered secondary. More liquidity and less financial paperwork being its prime forte, asset-based borrowers happily agree to go for the higher financial leverages and fringy cash flows.

Relation between assets based lending and accounts receivables.

Accounts receivables are all about the amounts customers owe in return for goods and/or services provided. This can definitely be termed as a loan given to the customer by a company and hence the company is supposed to receive it back after a certain period to merge it with the working capital. That makes accounts receivables an asset and hence, considered a vital factor to be considered for asset based lending.

This makes asset-based lending allow higher amounts to be borrowed. As a result, the accounts receivable make the lenders less concerned on leverages (debt: equity) and focus more on operating cash flows. All over, the practice represents a business with an ability to meet obligations on the interests. However, it must also be considered that accounts receivables, though backed by calculations, is an assumption the company makes on its expectations. It’s not that all accounts receivables meet fruition.

Insurance companies versus Doctors

The cold war between doctors and health Insurance companies are everlasting, when the doctor asserts the health

Insurance companies resents.
It is a known fact that the health insurance claims needs to be regulated and genuine claims should be made so as to

avoid fraudulent claims. Here again the question is raised by us, do we accept the Insurance company's diagnosis

instead of our Doctor's?

The Insurance companies are always bent upon proving the doctors wrong as it is evident from Anthem Blue cross that

they follow strict protocols in determining the appropriate care and heavily relies on medical evidence and sometime

denying medical care, this had been recently quoted by the Kaiser Health policy report. The Health advisor Jerry

Flanagan also included that the Insurers are going back to the old strategies of the 90's, which resulted in

interrupted care or denying of treatmentoffered by a doctor.

with the recession on the loom and market on rough waters the Insurers are watching their tactics same as we are. So

if you want claims to be made in your way be cautious and keep your medical log up to date.

The stake is always higher for bigger firms who have to maintain many logs for employee compensation and medical

expenses, hence it is always advisable for them to hire good accountants for their accounting services.
The best way to manage your expenses, funds and investments is by keeping a tab on it.