Understanding AR and AP

Effective management of operational cash is integral for the success of any company. Every business owner should know how cash flows into and out of his organisation, unfortunately many business owners find themselves bogged down by day to day business operations and often leave the money bit to their finance department or receivables management services. While your finance department may definitely understand managing finances better than you, you are the owner of the business. It doesn’t do you or your business any good if you don’t have a basic understanding of your finances. The first step to understanding your company’s finances is to understand Accounts Payable, Accounts Receivable and related elements.

Accounts Payable

Accounts Payable is the money that a business or organisation, in this case, you, owe another individual or company for purchased goods or services rendered on credit. It could be rent to be paid for office space or rented office equipment, or money owed to your IT service provider. Also known as AP, Accounts Payable is a liability.

Receivables Management Services

Accounts Receivable

Accounts Receivable is money that is owed to you by individuals or companies for goods purchased or services rendered. Understandably, unlike Accounts Payable, Accounts Receivable, or AR, is an asset.

Working Capital

For a business to run successfully, it is important that a balance be maintained between AR and AP. This is simply because at any point of time, it is crucial that a business has sufficient cash in hand to keep the business running. This is also referred to as positive net working capital, where working capital is essentially the difference between assets and liabilities at a given point of time. A positive working capital can only be achieved if your business collects payment timely and settles pay outs effectively.

Accounts Payable

Day Sales Outstanding (DSO) and Day Payable Outstanding (DPO)

DSO refers to the average number of days AR payments are collected. Receivables management services state that a DSO of less than 45 days is needed to manage working capital effectively. DPO refers to the average number of days it takes your business to clear an AP payment.

Increasing Working Capital

Since we have established why it is important to maintain a positive working capital, the next question is how do you effectively do this. The answer is quite simple- reduce DSO and increase DPO or collects AR payments faster and delay AP payments. Unfortunately, implementing this is not as easy, simply because no one likes a business that delays payments and no one likes businesses that rush collecting payments. Now you don’t want to become the business that no one likes; which is where receivables management services can help you.

Business owners have found that outsourcing AP and AR management to receivables management services takes off the stress of managing finances and they are free to focus on core business operations. They have also reported a marked increase in working capital, a direct consequence of effective AR and AP management.

 

Your Profit and Loss Statement

As a business owner you have probably seen your share of Profit and Loss Statements especially if you are accounts payable outsourcing, or maybe you haven’t. Maybe you don’t even know what a Profit and Loss statement is, not good news. A Profit and Loss statement is an important part of any business; it is a vital financial document. If you haven’t been paying attention to your P&L statement, it’s about time you did. Let us understand what this document is and why it is important.

Understanding Profit and Loss Statement

Sales- Costs= Profits, a basic equation.

Sales refer to the income you generate from selling your product or providing services to customers. Costs, on the other hand, refer to the expenses incurred by your business. So, your profit is technically what you have left over from your sales after all your expenses have been taken care of.

Accounts Payable Outsourcing

As all accounts payable outsourcing companies state, the P&L statement is an analysis of your financial situation. It provides detailed information about your company’s income, costs, overhead and net profit. So why is this analysis important?

Importance of P&L Statement

  • Revenue Projections– All businesses make revenue projections annually. A P&L statement against your revenue projection can help you understand how your business is performing. It can show you how you are generating your income and managing your costs. This is useful when you are planning to expand your company, whether you are a accounts payable outsourcing company or website development company.

P&L Statement

  • Planning Future Expenses– Your P&L statement is useful when planning the future of your business. When forecasting future expenses, knowing where and how you spend your money will allow you to predict and prepare accordingly.
  • For Investors– There is nothing that potential investors love more than a good Profit and Loss Statement. If investors see that you can make profits, they will find your business a good investment opportunity. This is also useful when you need to take out a loan or get credit. Your credit worthiness can be determined and substantiated by your P&L statement.

So how about a change? Your P&L statement is a useful piece of financial information. Don’t let it go to waste; make the best of it.

Outsourcing Information Technology Services

IT or Information Technology- no modern day business or organisation can do without information technology services. From recruitment and hiring to inventory management and payroll management, nearly all aspects of business depend on apps, tools or software of some sort. Of course, you could do without these, but it would be at the cost of efficiency, cost savings and productivity. Besides you will find yourself miles behind your competitors in business.

So we have established that IT is good and necessary, but unfortunately, the costs involved in setting up your own IT department and infrastructure can be quite high, especially if you are a small or mid size business. And that is precisely why numerous small business owners prefer to outsource their IT services, which they have also discovered is affordable like bookkeeping services rates. Let us take a look at the commonly outsourced IT services.

  1. App and Software Development– All business owners who have attempted to build in- house app or software development teams know why this one tops the list. App and software development requires the highest level of expertise and dedication to be successful. Finding the wrong people for this is easier than finding the right people. Besides as a business owner, you will have trouble keeping tabs on the team due to your lack of IT knowledge. Outsourcing IT services like app or software development ensures that you get what you are looking for from professionals and cost effective, like bookkeeping services rates, than doing it your way.

Bookkeeping Services Rates

  1. Data Security– In the digital world, data security is of the utmost importance. All information is just a click away, so if you want to run a successful business with an upstanding reputation, you need to ensure that you have the best data security and recovery services at your disposal. Outsourcing this part of your operations gives you stronger security and better recovery strategies.

Bookkeeping Services Rates

  1. Data Management– Many business owners feel data management is the backbone of their business. Data management and entry requires attention to detail, focus and dedication, which is why this is also a task best undertaken by professionals.

Information technology is here to stay. It makes life a lot easier for everyone involved; increased productivity, efficiency, lower costs, quick implementation and instant access to information are all perks of using IT. So go ahead and make the best of it.

Volunteer or Outsource Non- Profit Bookkeeping?

Running a non- profit is not easy. Aside from arranging for funds needed to keep the organisation running, there are numerous other issues that are troublesome and time consuming; one such task is bookkeeping and accounting for non- profits. Non- profits have certain tax benefits, but to avail of these benefits, you need to maintain clean and accurate books. Lack of funds often means that non- profits depend on volunteers to take care of the bookkeeping, so no bookkeeping services fees; definitely not a good thing. Here is why this doesn’t often work out for non- profits.

  1. Proper Handling of Tax Related Documentation– Regulatory reporting and filing is required to maintain the 401(c) status in non- profit bookkeeping. Non-profits are also required to keep thorough records and detailed reports, annual and otherwise, to satisfy their donors and patrons. These conditions are difficult to meet if you are working with volunteer bookkeepers as they may not have the time, and sometimes, expertise to handle the responsibilities.

 Bookkeeping Services Fees

  1. Save Money– Time is money. Save time, save money. An experienced bookkeeper, irrespective of the bookkeeping services fees, can take care of your bookkeeping in a fraction of the time that your volunteer can. You can also relax in the knowledge that your books are being handled with care by professionals. Another reason is that non- profit bookkeeping and accounting when done efficiently can save your organisation money by finding and rectifying financial leaks in your system. You will also get weekly, monthly and annual reports that can help you manage your non- profit’s finances better.

Non-Profit Bookkeeping

  1. Minimize Bookkeeping Fraud– Fraud and embezzlement are among the biggest problems faced in non- profit bookkeeping; such activities in a non-profit can cost the organization its reputation and goodwill. Outsourcing to professional bookkeeping and accounting services is a good way to prevent this issue. The multiple layers of security measures and safety nets in place in professional bookkeeping firms ensure that your data is safe and your funds are not misappropriated.

While bookkeeping services fees are a matter of concern for most non- profits, the benefits of using professional services largely outweigh the cons; and the bookkeeping services fees are really not as much as you fear.

Importance of Simple Bookkeeping Reports

Business owners are always busy; 24 hours seems like too little time for many. So how do they make the most of the 24 hours that they have? They focus on the tasks that they absolutely cannot overlook and ignore the ones that they can, which they generally outsource; tasks pertaining to simple bookkeeping, accounting, payroll, recruitment and the like.

Now, you may think that just because you have outsourced the task, you don’t have to worry about it. True, you don’t have to; but the thing is that the reports generated by your bookkeeping and accounting team are priceless. They provide a lot of information about your business. Let us take a look at some of the reports generated by your simple bookkeeping team and what it can tell you.

  • P&L Statement– P&L statement provides a comprehensive financial report for a fixed period of time. The report provides information about revenues, costs and expenses. A thorough analysis of this report can give business owners a lot of data helpful in making informed business decisions.

Simple bookkeeping

  • Profitability Ratios– Profitability ratios are a way of measuring a company’s performance, by assessing its capacity to make profit. There are different types of profitability ratios, what they all ideally try to do is measure by how much your revenue exceeds your expenses. It is a valuable source of information for any business- you can gauge how well your business is doing, compare yearly performances and watch for trends and seasonal patterns. This can affect the way you do business.

Simple bookkeeping

Never make the mistake of ignoring your simple bookkeeping and accounting. These non- core business functions have a major role in the growth and development of your company. You can learn a lot from the reports your bookkeepers send you regularly. If you find you cannot understand the reports, you can always ask your bookkeeper or accountant to help you out. Soon you will be able to analyse and review all financial reports yourself.

Trivial, yet Deadly Bookkeeping Mistakes

Business owners, especially small business owners, often have a lot on their plate. They have to make sure that their company meets demand, customers are happy, products meet quality- oh, so much to do and worry about. So it is really not surprising that they often don’t pay much attention to the bookkeeping and accounting aspects. As a result, small business owners often end up making teeny- weeny mistakes, which end being costly and more often than not, quite troubling. Let us take a look at some silly, yet deadly, mistakes that quite a number of business owners are guilty off.

  1. Throwing Away Receipts– Yes, this one tops the list of silly, yet deadly accounting mistakes and all small business bookkeeping services agree on this one. Keeping all your receipts and invoices safe is challenging and annoying at best. Never underestimate the power of this slip of paper; they are the IRS’ best friend. When the Internal Revenue Service comes knocking, have proof of business expenditures ready and produce them on demand. So make it a habit to scan and upload your receipts as soon as you get them. File them away safely and be prepared for the IRS at all times.

small business bookkeeping services

  1. Mixing Business and Personal Accounts– Never mix business with pleasure- now where have we heard that one? Maintain separate business and personal bank accounts and credit cards. Be judicious in how you use them, so you don’t make a mistake of mixing the two and getting yourself into a fix that is difficult to come out of. Small business bookkeeping services also claim that sorting and accounting for such transactions takes more time and has the potential to draw attention from the IRS.

accounting mistakes

  1. Ignoring Accounting and Bookkeeping Reports– Whether your reports from your small business bookkeeping services provider or in- house bookkeepers are weekly, monthly or yearly, they are a treasure trove of business related information and data pertaining to your business. Data on business trends, areas that are doing well or need attention, cash flow pattern and more can be gleaned from these reports. So do not ignore them; make time to read, analyse the reports and make sense of them. Take help from your accountant if you have trouble understanding the reports; you will be surprised at how much you can learn from these reports.

Renewing Business Goals

At some point of time, every entrepreneur and business owner has to review and renew their business goals. While the ideal time is the start of a new year, if you feel things aren’t going right, you should step back and analyse your business goals and progress to date. The best way to approach this problem is to break this into two steps- first, analyse the past year and how your previous goals have fared and secondly, review all this information in the light of the new year ahead.

Analysing the Past Year

This can be a raw moment for many as it requires reviewing the company’s performance in the past year with honesty and often brutality.

  • Review Past Business Goals– What were your goals for the last year? Did you achieve them? If not, where do you stand in relation with these goals? Were your goals unrealistic? Were they underachieving? Conduct an unbiased review with your team.

Virtual Bookkeeper

  • Review Actions and Activities– Identify the specific activities and actions that lead you to where you are, positive and negative. Analyse each activity and understand how you can improve on them, whether you should avoid all together etc. Did hiring a virtual bookkeeper make things better for you? Was renting out more space and equipment a bad move?

Planning New Business Goals

Learn from the mistakes of the past year and be wise when planning your business goals; this will set the tone for the year ahead.

  • Identify Priorities– List your priorities- is it growth, revenue etc. Once you know what your priorities are, it will be easier for you to formulate achievable realistic business goals.

Virtual Bookkeeper

  • List Steps to Achieve Goals– Identify how you will achieve the set business goals. Discuss this with the personnel involved so that everyone is committed to achieving the goals.

Business goals are important for the growth and development of any business. They are vital to determine where your business is headed and to determine if you are moving in the right direction. Involve your in- house or virtual bookkeeper and accountant in relevant discussions, as chances are they might have something useful to contribute. Discussions involving careful planning and thorough analysis are needed if you want to reach well defined and realistic goals that will help you build and maintain a thriving business.

Inspiring Business Quotes for Dark Days

Everyone wants to be inspired. From the New York Times Bestselling author writing her 10th book, to the fashion designer seeking fresh new designs and patterns, or an entrepreneur or the owner of an outsourced bookkeeping business trying to keep her dream company going, all of us need and even seek inspiration- that one image, or that one quote that will make sense of everything, that will let you soar into the skies. All entrepreneurs and business owners will see dark, gloomy days that seem to never end, when you feel like giving up, when you feel all your efforts are naught and in vain. When you reach that point, remember that there is always a light at the end of the tunnel. Albert Einstein, Thomas Edison, Steve Jobs- all great men who didn’t have it easy.

Outsourced Bookkeeping

If you are at a low point in life, wondering what you are doing or where your business is headed, here are some quotes that just might give you the drive to get up and carry on.

  • “I have not failed. I’ve just found 10,000 ways that won’t work.”

Thomas A. Edison 

  • “But you have to do what you dream of doing even while you’re afraid.”

Arianna Huffington 

  • “The cost of being wrong is less than the cost of doing nothing.”

Seth Godin 

  • “If you can dream it, you can do it.”

Walt Disney 

  • “Success is not final; failure is not fatal. It is the courage to continue that counts.”

Winston Churchill 

  • “Would you like me to give you a formula for success? It’s quite simple, really: Double your rate of failure. You are thinking of failure as the enemy of success. But it isn’t at all. You can be discouraged by failure or you can learn from it, so go ahead and make mistakes. Make all you can. Because remember that’s where you will find success.”

 Thomas J. Watson 

  • “If you really look closely, most overnight successes took a long time.”

Steve Jobs

 “The real test is not whether you avoid this failure, because you won’t. It’s whether you let it harden or shame you into inaction, or whether you learn from it; whether you choose to persevere.”

Barack Obama 

  • “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”

Colin Powell

  • “Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don’t quit.”

Conrad Hilton 

  • “Many of life’s failures are people who did not realize how close they were to success when they gave up.”

Thomas A. Edison

These quotes are not just business quotes; they are life quotes as well. Whether in life or in business, these quotes can inspire you. So open your hearts and your minds. You are unique and you can achieve success; all you have to do is tide over the tough times. Let go off all the non-core business functions that are draining you; invest in outsourced bookkeeping services, payroll management companies, HR services and others. Once that is taken care of, you can focus on key business aspects. You have the power to decide which direction your business goes- up or down.

Present Day Bookkeeping

Bookkeeping has been around for probably as long as businesses have; business owners have been tallying their books and managing their accounts for countless years. Now, centuries later, businesses and bookkeeping are still around, however, the nature of both businesses and bookkeeping has changed. Who would have thought a couple of decades ago that we would be buying and selling things online? Yes, things are changing, faster than anyone ever thought possible; some changes are good, while others not so much so.

QuickBooks Bookkeeper

But good or bad, the changing times demand that businesses and bookkeeping also evolve and catch up with the pace of the world. Online bookkeeping, QuickBooks bookkeeper, cloud bookkeeping services are growing in popularity with each passing day; all this begs the question- are bookkeepers growing obsolete? Never, however a bookkeeper can no longer hope to function the old way. Bookkeeping today is efficient, quick, cost effective and provides real time updates. Bookkeepers are required to know not only bookkeeping and accounting, but also how to use bookkeeping and accounting software like QuickBooks. They also need to know other apps and programs that can work with the accounting software to make their work more efficient and quick. Breaking down financial jargon and explaining it to clients is also of great importance in today’s world.

QuickBooks Bookkeeper

It is not only what is expected of bookkeepers that has changed, things expected of business owners have also changed. If you want your bookkeeper to give you the best, you need to take at least 5 minutes every day to upload your receipts. With just that your bookkeeper can make sure your books are up-to-date and accurate and that you are at par with your competitors. In fact with the numerous tools at their disposal, your QuickBooks bookkeeper will be able to make sure that you get detailed financial reports, weekly and monthly, which will allow you to make well informed business decisions.

Bookkeeping is here to stay. Whether you are a business owner or a bookkeeper, remember, for your business or practise to flourish, you need to stay with the times and make the best of the tools that modern day technology offers you.

Business Functions You Can Outsource

The benefits of outsourcing, especially for small businesses, are well established; which is why numerous business owners prefer outsourcing a number of non- core business functions like outsource bookkeeping, payroll and accounting. So which business functions are best managed outsourced; let us take a look.

  1. Human Resources– Recruitment, hiring, payroll, training are just some of the tasks on the ever growing list of HR responsibilities. Hence it goes without saying that it is time consuming and requires a lot of resources, which is why Human resources is a hot outsourcing favourite.

Outsource bookkeeping

  1. Bookkeeping and Accounting– This is definitely one of the most outsourced business functions. To outsource bookkeeping, accounting and other financial tasks means that you don’t need a finance team and maintaining books and accounts are no longer your headache. The financial part of running a business is what most business owners find most difficult.
  1. IT– This one obviously has no arguments. The world of technology sees development every day and so you need an expert to stay on top of things. What better way to get an expert than to outsource this area of your business? This not only saves you money, you are also relieved of the trouble of recruiting and hiring an IT expert.

Outsourcing Business Functions

  1. Sales and Marketing– Sales and marketing involves a lot of things in today’s world- running print and online ads, online marketing. Hiring and training sales and marketing personnel can be annoying here as well, which is why, it is wise to outsource this part of your business. Leave it to the experts so that you can focus on your core business tasks.

All said and done, you know your business and its needs best; you know whether you need to outsource bookkeeping or build in- house an IT and networking team. So take a minute, sit down and analyse what your business and its needs; now you can decide.