July 23, 2008
Auditing
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To qualify for being able to file shortened accounts a small company should satisfy at least two of three conditions. The three exemption conditions prior to April 2008 were that annual turnover is less than 5.6 million pounds, balance sheet total is less than 2.8 million pounds and the average number of employees is less than 50.
Where the financial year started after April 2008 the parameters increased to, annual turnover less than 6.5 million pounds, balance sheet total less than 3.26 million pounds and average number of employees less than 50.
Medium sized companies may also submit abbreviated accounts and the parameters to be classified as a medium sized company are significantly higher than those for a small company. For example for financial years starting from April 2008 two of the three qualifying conditions for a medium sized company to be satisfied were increased to sales turnover of under 25.9 million pounds, balance sheet total under 12.9 million pounds and average number of employees less than 250.
When a small company satisfies the audit exemption parameters it can maintain that audit exemption for a full financial year afterwards even if the parameters were exceed in that following financial year.
There are benefits in submitting abbreviated accounts as simpler and easier accounting records can be maintained reducing time spent on accountancy work. In addition although potential suppliers and financial institutions may require details of the year end financial accounts it is acceptable not to publish full details.
The main differences that can be produced under the banner of abbreviated accounts basically mean that a small company does not have to include a full balance sheet, profit and loss account or directors report which would normally be required by Companies House.
The small company is still required to submit a shortened balance sheet together with notes that explain the year end balances shown in the balance sheet. Under the audit exemption rules the year end accounts for a small company do not have to include an auditors report. When an auditor has prepared the accounts and submits a special audit report that report should state that in the auditors opinion the abbreviated accounts are being submitted in accordance with the appropriate section of the Companies Act.
Small companies must include a statement in the balance sheet that the year end accounts have been prepared in accordance with the special provisions contained in Part V11 of the Companies Act 1985. For financial periods starting after 5 April 2008 the accounts must be prepared in accordance with the Companies Act 2006 and include a statement that the special provisions applicable to small companies have been adopted
The statements to accompany the balance sheet of a small company submitting abbreviated audit exempt accounts are that:
The company was entitled to audit exemption for the financial year under the relevant section of the Companies Act 2006.
The shareholders have not required the company to obtain an audit.
The company directors acknowledge their responsibility for preparing accounts that comply with section 221 of the Companies Act 2006.
The company directors acknowledge their responsibility for preparing accounts which give a true and fair view of the state of affairs of the company and the profit and loss for the year.
The accounts have been prepared in accordance with the special provisions of the Companies Act relating to small companies
The rules on audit exemption apply not only to the year end accounts supplied to companies house but also those supplied to HMRC. This enables the small company to submit the short version of the corporation tax return, CT600, with the abbreviated accounts for tax purposes.
Terry Cartwright is a qualified accountant in the UK and producing Accounting and Audit Exemption packages for small limited companies in accordance with Companies House submission requirements.
July 23, 2008
Budgeting
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It seems to me that, for large swathes of the public, the two “fiscal rules” that govern economic expenditure are, if not totally incomprehensible, at least too shatteringly dull to care about. One states that borrowing should not exceed the bracket of 40% of GDP whilst the other, the ‘golden rule’, refers to the balancing of the budget over the economic cycle.
It’s not exactly Bad Boys II is it? For the past 11 years these Brownite commandments have largely gone undisturbed. However, with financial storm clouds gathering overhead, it looks like they might not be as perennial as people thought.
The problem with this, naturally, is that if someone starts moving the goalposts, it somewhat throws the match into disrepute. The Conservatives, as one might expect, are practically queuing up to attack the Treasury over the issue. “The last nail in the coffin for Brown’s reputation for prudence” they’re calling it. The shadow chancellor George Osbourne, for example, rather sniffly referred to Brown “giving the prisoner the keys to their own cell”
A couple of rather adroit analogies aren’t they? Well, yes, until you read what Cameron said about these ‘fiscal rules’ at his party’s economic summit only two days previously:
“I don’t believe it’s impossible to try to get some political consensus [with the government]…about tight rules on fiscal policy”
That’s how he decided to phrase his intentions for steadying up the economy. Elsewhere he claimed that he wanted to “Reform the fiscal architecture” Which sounds remarkably like the way Kevin McCloud might describe Labour’s policy of ‘relaxing the fiscal rules’
Of course, as the old saying goes, the duty of the opposition is to oppose, but to describe Brown (and invariably it is Brown and not the Treasury or Alistair Darling… I wonder why?) as some prodigal cad and then hint at proposing the exact same measures is pretty rich isn’t it?
Many financial commentators have described Brown’s cabinet as standing at a crossroads with this issue. Either, they tighten their belts, raise taxes and feel the brunt of public unrest, or they slacken their belts, throw caution to the wind and indulge in a little more borrowed cash. The choice, clearly, is a tricky one:
ROCK: Oi! Brownie! How can you justify sticking to a set of outdated rules that will unnecessarily burden the public?
HARD PLACE: Oi! Gordon! where do you get off talking about borrowing more money when the financial situation is in such trouble?
Still, I suppose either of the two main positions are better than what Nick Clegg’s thrown into the mix. His ‘fair tax’ party has done somewhat of a u-turn of late and are now saying that they can solve the sticky economic climate by… lowering taxes.
Mmmm…? Well, we’d all like to see how that plans out wouldn’t we Nick? Sure you’ve thought this one through? Because I find it very hard to believe that every other economic advisor has dropped the proverbial clanger and forgot to add up these huge sums of money that are secreted around the different nooks and crannies of public spending. Brown doesn’t keep a penny jar does he?
So what have we learnt? That the government is in trouble; that the opposition will belligerently scratch and claw at everything the cabinet say, and that Nick Clegg could feel the benefit of a nice sit down. Well what’s new? Of course, detractors will rally around to call this the ‘end of the Brown era of economics’ but that only matters if you believed in such short-sighted spin in the first place.
Samantha is a London theatre fanatic and regular West End theatregoer. She writes and researches some of the biggest London shows you can view examples of her work here Oliver and Show and Stay.
March 28, 2008
Accounting
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Like any other product, you can pay for it or you can take it for free. The great majority of the free accounting software products is not very complicated and is easy to use. Although they are not suitable for large companies, they can easily be used by small businesses, because they focus on simple accounting. Many people say that with free accounting software they can perform the same tasks as with a paid version.
Anyway, either paid or free, you need to choose your accounting software correctly, a thing which, as it was mentioned earlier, can be a quite difficult thing. Here are a few pointers that should cheer you up a little bit and help you find the best solution available for you:
1. Think about and write down your needs. What’s the main objective of your company? Do you plan on making it a big one?
2. Don’t get carried away by product reviews, recommendations from friends, although you should consider them. First and foremost though, you need to concentrate on what’s suitable for YOU;
3. Don’t consider only the first few highly rated products;
4. Write down a list with all the available pieces of software. Carefully thinking about your needs, your available budget and their specifications, rule out the first few which clearly don’t fall into your preferences from the start;
5. By now, you should have narrowed down your list to about 2 or 3 products that meet your demands. Make your final decision by re-checking all of their features and making sure you check out all the other available products for that specific price. Usually, it’s best if you decide on a product made by a known company, rather than a more obscure one. Although it’s sometimes wrong to judge by that, sometimes it’s plainly safer.
Also, you may hear about a growing number of companies which are developing and providing free accounting software for marketing campaigns. Don’t discard such an option and pay attention to everything, as you may find a pleasant surprise among those products. After all, what do you have to lose if it’s free?
Still, a recommendation would be that it is always best to simply test the trail version, if you ever consider downloading free accounting software. It is the best way to see whether it suits you or not. This is because you don’t have to commit yourself to anything, and if you decide to try another one, you can simply search for it until you find the right demo for you.
So which one is going to be your option? Whatever you should finally decide upon, remember to patiently look for the right option for you. Take into consideration the nature of your business, your plans with it, its domain of activity and all the other variables. If you do all that, you will be able to find the accounting software that best suits your needs.
Best accounting software choices
Accounting software.
http://www.accountingsoftwarefaq.com
Interested in an accounting careeer?
Accounting degree and employment.
http://www.accountingdegreejob.com
March 28, 2008
Auditing
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Recently hailed as the number one career for the year 2007, Internal Auditors are very well sought after and compensated accordingly. Because of stricter laws and enforcements due to corporate accounting scandals, like that of Enron, companies are offering top dollar compensation to accounting and finance professionals to provide internal audits. As an internal audit can be expensive, it is wise to allocate and ensure the availability of funds prior to hiring an internal auditor.
As most companies typically conduct annual or bi-annual reviews of processes and procedures, in order to remain compliant, and hire internal auditors to do so, there are times when a government agency will come to audit things themselves. These are stressful times and choosing the right Internal Auditor can save thousands in fine and penalties.
There are several factors that should be determined before choosing an Internal Auditor. First, you must know the role of an Internal Auditor to be able to match your compliance strategy with the proper education, experience and know-how to effectively get the job done. Acting as a go-between for government compliance offices and providing a service to your company, the internal auditor must be aware of the latest in compliance governance. Therefore, when you choose an internal auditor, it is your job, that is, you’re responsible for the auditor you choose, to make sure the credentials are relentlessly checked. Including the human resource department, the chief financial officer(s) as well as others who make high-level decisions for the company are good ideas, too.
In order to enhance internal controls and to remain compliant with government standards, experience has to be the number one criteria when choosing someone who will have access to all intellectual and physical property records as well as delicate financial information. When choosing an Internal Auditor, you should check references, licensing information, and review previous audit information available. The Institute of Internal Auditors is a professional organization aimed at providing guidance, certification and educational research to it’s over 130,000 members. This organization serves as a clearinghouse for checking licensing and references.
Secondly, keeping in mind your companies business needs, the internal auditor should specialize in the type of auditing you require. For example, if it is quality management auditing, then the internal auditor should have the capability to grasp and understand fully your company’s business, quality controls and standard operating procedures. This should be proven by a consistent track record of QMS audits. If it is risk management or financial analysis that is required, then, along with being bonded individually as well as within his/her own auditing company, the internal auditor must be completely impartial and objective. This ensures that, while no personal interest is involved, the end result will be to make recommendations, share downfalls and places where compliance must be tightened to ensure your organization will pass any type of auditing test.
As reported by NASDAQ, only half of all companies listed on the exchange actually have in place internal auditor functions. This is a dangerous lack of practice and could cost so much in fines and penalties, that an internal audit can look like the cost for a weekend drive to your mother’s house. Sarbanes-Oxley requires the Internal Audit function exists in companies that have $250,000 in assets or more. It would be a horrible thing if a Cynthia Cooper wanna-be blew your company apart simply because you didn’t hire an Internal Auditor.
Kevin Dark’s new website will tell you more about internal audit and SOX compliance.
March 28, 2008
Bookkeeping
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If you plan on starting a business, a basic knowledge of the accounting code guide is necessary in order to keep track of your transactions. Even if you are not a bookkeeper and you decide to hire a professional, the basic accounting knowledge is always a plus in the success of your business.
Accounting information is organized within the financial system of your company through the Chart of Accounts (COA). A list of all account names and numbers (cost elements) that appear in the company’s General Ledger is included in this document.
The COA is used to classify transactions as income, expenditure, assets, liabilities and equity. All financial transactions must be coded against an internal order (indicating ownership) and cost element (what the transaction represents), which provide the basis for budgeting, monitoring and reporting. The elements of the COA are:
FUND
This is a 6 character code which basically describes to source of funding in a transaction. Generally, the first 5 digits represent the office of the president fund number, while the final digit is used to establish sub-funds for further breakdown.
ORGANIZATION
It is also a 6 digit code, which represents the department of a company.
ACCOUNT
It is a six character code which represents the basic accounts classification. There are 7 different account types, and these are: assets, liability, system control, fund balance, revenue, expenditure and transfer.
PROGRAM
Yet another six character code, it represents the functions of the respective company.
ACTIVITY
This is designed for future use.
LOCATION
It is a six character code, and it is used for identifying assets from transactions.
INDEX
This one is a seven character code and it represents FOPAL (fund, organization, program, activity and location). The first three characters of the index are letters and they represent the name of the organization. The last four identify the FOPAL combinations.
This is a simple and basic walkthrough in the world of the accounting code guide. A professional bookkeeper is much more than that though, and if you consider an accounting career, you should know that it’s a work that requires a lot of patience, but it can pay off in the end.
You should also consider purchasing accounting software (although you can also get it for free) if you are serious about your company. The choice is yours, and it really depends on the size of your organization also. Most of the business owners leave the accounting stuff to specialized people, who are able to process all the information correctly, people who have a good knowledge of the accounting code guide.
Essential accounting code guide
Accounting code guide.
http://www.accountingcodeguide.com
Great accounting software resource
Accounting software.
http://www.accountingsoftwarefaq.com
March 27, 2008
Accounting
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The credit application form for business to business is a great tool for small business owners, sales and marketing managers and entrepreneurs as well as anybody else who is connected with business in any way to apply and obtain credit. Used by most companies, it provides a lot of functionality for managing the sales and marketing activities of the company and has been designed specifically for making the credit business successful. The credit application, along with credit history keeps tabs on the customer’s past performance history in conjunction with an analysis program, helps calculate revenues, and costs.
Typically, the credit application form is an uncomplicated form that requires the following information:
- The name of the company applying for credit
- Years in business that the company has been in
- Complete address and phone numbers
- Nature of the company e.g. sole proprietorship, partnership or corporation
- Names, title, address, phone number of partners, principals or corporate officers
- Names, title, address and phone numbers of financial contacts
- Names, account numbers, contact names and titles, phone numbers of bankers
- Names, contact names and titles, phone numbers of trade references
- Signature and date certifying that the information provided is true and accurate
Once the information has been entered into the credit application form, the company can use it as a determining factor in extending terms. Also used in this determination are the monthly cash flow statements, monthly sales projections as well as reporting milestones and accomplishments for each potential customer. All this information generates better service from the company and is used to report and assess the customer’s past credit performance.
According to the terms and conditions of the credit application for businesses, the customer must ensure and warrant that the purchases he makes are intended mainly for use in the business and not for personal and family usage. In addition, the customer agrees to pay interest at an agreed-to rate of interest. In case the customer’s check is returned from his bank, he shall agree to pay a fixed charge on these returned checks. The customer also assures the company extending terms shall be paid within reasonable time and in case of litigation and disputes, the customer shall bear the expenses for attorney’s fees as well as other legal fees.
The credit application form is a complete document that requires detailed information that should be duly filled out; such pre-formatted forms are readily available in the market and it makes good sense to buy these inexpensive documents rather than try to reinvent the wheel and get caught in the tricky business of making one from scratch. These low cost, exhaustive and detailed forms have already had experts and lawyers draft them to meet any eventuality and so afford a reasonable cost-effective solution to finding an appropriate form that does not take time to fill, and fits individual needs adequately.
Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view a
Credit Application
March 27, 2008
Accounting
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A cash flow statement is a financial reporting document displaying the cash outflows and inflows of a company on a monthly or quarterly basis. This report reflects the effects of changes to the balance sheet and income accounts on the cash position as well as analyzing the operating, investing and other financial aspects of the company. When analyzed, the cash flow statement helps assess the short term capability and practicality of the company as to whether it will be able to fulfill its obligations to pay its bills or not.
Those who may be interested in studying the cash flow statement include:
- The accounting department
- Creditors and other lenders who need to assess the repayment capability of the company
- Investors who will judge whether the company is economically sound and viable
- Contractors and would-be employees who need to know whether the company will be able to fulfill its financial obligations
Companies that have limited fluid assets and which are just beginning operations are most in need of cash flow statements because they may be vulnerable and may experience cash shortfalls in spite of having healthy Accounts Receivables balances.
It is important to design a good cash flow statement that will translate the accrual basis of preparing an income statement as well as the balance sheet back into cash basis. The importance of this method is underscored when considering the fact that cash basis statements help in analyzing the actual amounts of cash flowing in and out of the business. Though the accrual basis may accurately reflect the company revenue and expenses the cash flow statement will additionally map out what happens when changes to the balance sheet are made. There are four different kinds of cash flow statements:
- Net cash flow statements that reflect operating activities. The generation of cash inflows and outflows that reflect the daily operating behavior of the business and includes cash received from customers, cash paid to suppliers and employees, and operating expenses, interests as well as taxes, and cash income received from dividend payouts.
- Net cash flow statements pertaining to investing activities. Mainly reflects the sale or purchase of equipment.
- Net cash flow from financing actions. Inclusive of common stock, short or long term loans changes as well as paid out dividends.
- Net changes in cash as well as marketable securities. To check whether the calculated amounts of increases or decreases in cash and marketable securities as arrived at from the above three points are in tune with those reflected in the balance sheet to help ascertain if the calculations were correctly made.
Though there are a number of different people interested in viewing the cash flow statement, each wanting their own perspective of the business, this financial statement is most important to management, lenders, tax officials and investors. The importance of this report is that it reveals the entire picture about the business and this is very helpful as it will reveal whether the business has enough cash or not to meet its obligations.
With cheap cash flow statement documents being available for as low as US$10 it is indeed a bargain to purchase one and use it for one’s business instead of going through the hassles of preparing one from scratch. These prepared documents usually take into account the various needs of different businesses and can also be tailor-made to suit individual needs.
Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view a
Cash Flow Statement
March 27, 2008
Accounting
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One of the hottest trends in the outsourcing field is online payroll processing. As long as you have access to the Internet, you can have a payroll processing company available to you at all times. You can even print your paychecks from your desktop computer once you have given all of the information to the payroll outsourcing company to prepare the checks.
These advantages, convenience and professional support, have made online payroll processing a very attractive alternative for businesses. These companies will set up all of the information for proper processing of you payroll.
A company manager can input employee information at any time and the information is stored. Only when the information is transmitted to the payroll outsourcing company will the payroll be processed. This means that changes such as new employee, address changes, etc. can be entered when they are received instead of all information having to be keyed in at the busy time when payroll is being prepared. It is recommended that a separate computer system is used for this purpose to avoid security risks.
It is easy to understand why web based payroll processing by outsourcing has become so popular. A company has the choice of going directly to the providers website and inputting all the necessary data, and the payroll processing company then does all of the calculations. Since the security of this sensitive data is so important, secure socket layer encryption is used to prevent anyone else from accessing or changing the data. These secure data centers have multiple firewalls for safety. Alternately, the company can store all of the information on its own computer and then transmit that information to the payroll processing company when the payroll date approaches.
Another distinct advantage of online payroll outsourcing is that it virtually guarantees that payroll taxes will be paid on time. Companies can also more readily supply credit information for an employee because this can be done directly with the bank. A company considering online payroll outsourcing should research the available options and make sure they choose the outsourcing company that will give them quick, accurate results while providing top notch customer support.
A really big benefit, however, is the ability to rely on accurate accounting reports and not have to be concerned with audit problems or sarbanes oxley. Outsourcing will take the risk off of your company and put it on the outsourcing company (check your contract). When it comes to audit and sarbanes oxley (if your company happens to be public), you do not want to fool around at all.
MJ Batta writes job outsourcing related topics and hosts a job outsourcing research site at Outsourcing Research and a special outsourcing report at Outsourcing Jobs
March 27, 2008
Accounting
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Outsourcing of payroll processes simply means that you transfer this traditionally in house function to another company. All of the tedious duties involved with payroll processing are shifted from the company itself, allowing more constructive use of staff time.
Once a firm entrusts its payroll processing to a reliable outsourcing company, they can be assured that not only will all the payroll be taken care of, but expert advice will also be available. The costs of setting up your own payroll systems, which include software purchasing, maintenance and upgrades is avoided. Using payroll processing outsourcing avoids many issues such as penalties, salary calculation errors and claims.
There are many payroll processing outsourcing firms to choose from. Make sure the company you decide to work with has the right experience in your locale and that their references are impeccable. A company can make a comparison of the methods of various vendors.
In addition to payroll processing, payroll outsourcing companies will provide the necessary accounting reports. Accounting data can be very tedious for companies to put together. In addition, there is a certain amount of risk around accounting reports since audit usually uses such reports. The last thing you want to take a chance with is messing up your audit data and getting yourself in trouble in that arena. Outsourcing payroll services added that extra benefit and piece of mind that your accounting data and reports is accurate. Outsourcing payroll services provides this extra piece of mind. All data time capture and entry must be documented, and the company should provide round the clock help for employee assistance.
The lure of an economic solution for a tedious and time consuming chore should not be over shadowed by carelessness. It is imperative that the provider of these services can provide the maximum security to its clients through the use of encryption technology and password protection.
There are so many attractive benefits besides costs savings of payroll processing outsourcing. Increased productivity, employee satisfaction with online assistance, avoidance of late taxes and penalties are just a few additional benefits that add to the attractiveness of payroll processing outsourcing. Best of all, a company may avoid going out of business by incurring a cheaper, more efficient system of operations through outsourcing. What better benefit could there be? If a companys competitors are outsourcing do to cost reasons, most likely they should outsource alos to ensure they can stay in business and compete.
MJ Batta writes job outsourcing related topics and hosts a job outsourcing research site at Outsourcing Research and a special outsourcing report at Outsourcing Jobs
March 27, 2008
Accounting
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Accounting concerns a system providing qualitative information about finances. It may relate to maintaining of a chronological list of related debits and credits of a business, the statement of transactions and the resulting balance. Accounting methodology or accounting system is a part of a ledger of accounts. The methodology of accounting involves measurement, disclosure or provision of assurance about financial information. This comes of help for managers, investors, tax authorities and such others who take the crucial decisions for resource allocation.
Financial accounting is a branch of accounting and is often considered to be synonymous with accounting. It involves processes by which financial information related to any business is accounted (i.e. recorded, classified and summarized), interpreted and communicated. This relates to the preparation of financial statements for decision makers - stockholders, suppliers, banks, government agencies, owners etc.
In financial accounting the main concerns taken up are the accounting equation (i.e. assets equal sum of liabilities and owners’ equity) and the financial statements. The financial statements are prepared based on the trial balance. This trial balance is again prepared using the double entry accounting system. The figures appearing in the trial balance are rearranged and a profit and loss statement and a balance sheet are prepared.
The format of all these accounts is to be determined in conformance with certain standards. The financial statements obtained will show the income and expenditure for the company and present a summary of the assets, liabilities and shareholders’ or owners’ equity in the company on the date of preparation of the accounts.
Financial accounting is primarily needed to reduce the problems which arise under conditions of incomplete and asymmetric information (wherein one party is better informed than the other) when a principal hires an agent.
The measurements of financial transactions form the essence of accounting. These are the transfers of legal property rights as made under contractual relationships. Non-financial transactions are specifically excluded from the ambit of accounting.
The day to day record keeping involved in accounting is called bookkeeping. The double-entry bookkeeping system lies at the core of modern financial accounting. As per this system at least two entries for every transaction needs to be made- a debit in one account and a corresponding credit in another. The sum of debits should always equal the sum of credits as a rule. This makes it easy to check out for errors.
The object of accountancy is to prepare and provide accurate financial reports which managers, regulators, shareholders, creditors or owners find worthwhile.
Jason Uvios writes about on Accounting and financial accounting to visit :- business management, business management ethics and business management process
March 26, 2008
Accounting
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The Capitalization Table provides investors with a bird’s eye view of the sum total of all the different securities issued by a company. It includes the amount of investment that the company has procured from investors and the distribution of securities which might include common/preferred shares, options, warranties etc. and the individual capitalization ratios.
The driving force behind an investment in a company is its expected return on investment, which should be profitable as well as lucrative. For investors, the tool used to state expected return is called a capitalization table, which is used in tandem with pro forma financials. Thus, the usage and preparation of capitalization tables is of great interest to prospective investors.
Basically, a capitalization table addresses the present and future funding requirements of the company as well as returns in terms of value that will be obtained over a period of time. It implies that the investor is greatly concerned about whether the returns on investment are good enough to justify the risk involved or not. The capitalization table encapsulates all the details about the amount of equity capital used in funding the company, the time of capital contribution and the ownership of the company. This information helps investors better understand their returns on investment.
Terms most commonly used in capitalization tables are “pre-money valuation” and “post-money valuation”. The former refers to the company’s value prior to any investments made by an investor. When the pre-money valuation is divided by fully diluted shares outstanding, a price per share is obtained. The latter refers to pre-money valuation plus whatever amount is invested. Obtaining the exact picture regarding calculation of pre-money valuation is not so much a scientific endeavor as it is an art form. There is great scope for personal judgment. All said and done, pre-money valuation is, by its very nature, negotiable.
However, getting future valuation for the exit can be achieved more scientifically.
There are a number of formulas that help determine the value of the company but, often, just one solitary equation without need for other and more complex formulae will help solve the issue. For a company wishing to achieve higher valuations at exit, it must have first achieved a sustainable competitive edge, and normally this may only occur after six years or more for those companies having planned for a five year plan of action. That makes it imperative for companies to outperform “also ran” companies and prove to the competition that trying to imitate more successful companies will surely not be of much use.
Some important and noteworthy aspects that a capitalization table should address are:
March 26, 2008
Accounting
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An accounting audit report gives the complete financial perspective of a company, and is prepared at the end of the financial year. This document is of use to all who want an exact picture of the functioning of the company. The aim of this document is to provide insights into the functioning as well as profitability and viability of the company as a commercial enterprise. The benefit to those who study this report is that they get the real picture from studying all the information that it holds, which is certified to be true and materially accurate.
The reporting period is referred to as a financial year and this pertains to the start of the accounting year i.e. the day following the end of the previous financial year. In case of a new company, this is the day of formation of the new company.
Preparation and filing of accounts
The procedure of filing audit reports applies to all public companies, even if they are filing for exemptions based on the contents of the report. Every company, be it public or private, has to keep accounts of its existence and performance. The accounts prepared must include:
1. Profit and Loss account
2. Balance Sheet
3. Auditors report
4. Directors report duly signed by either a director or a secretary of the company
5. Group accounts, in case of a group of companies
The auditor is an individual or a firm appointed to scrutinize and prepare the complete financial position of the company via its performance for the financial year. There are both public and private companies that carry out audits and prepare the accounting audit reports. The accounting report deals with all the operating and financial aspects of the company.
In the United Kingdom, all companies, limited and public limited, must submit their accounts to the Registrar of Companies. In the United States, the report is to be submitted to the Securities Exchange Commission though private companies do not need to do this. Incorporating a company varies from state to state.
The duties of the auditor involved in preparing accounting audit reports are as follows:
1. Financial statements and Reporting process
Must review and discuss with external auditors and management of the Company the interim financial statements
2. Risk management and Internal controls
Must review and monitor the integrity of the Company’s internal control system. Discuss Company guidelines and policies pertaining to risk management, risk assessment and internal control.
3. Auditor qualifications and their independence and effectiveness
To consider and recommend to the Board appointing, reappointing, removing and remunerating external auditors of the Company.
Associations such as AICPA have, through the Auditing Standards Board, issued a number of statements relating to the assessment of risk in auditing financial statements. These statements are the foundation for setting standards and give some much needed guidance with regard to auditor’s assessing risks of material untruths (either fraudulent or erroneous) in financial statement audits. It also needs to design and perform audit procedures which are responsive to the assessed risks.
Those interested in evaluating the performance of a company will need the accounting audit report to form a considered opinion. Using this report can make them invest in the shares of the company or for the bigger business heads, decide whether to potentially purchase a company or not.
Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view an
Audit Report
March 26, 2008
Accounting
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A Balance Sheet is a financial document prepared by a business, organization or individual at the end of a fiscal year or other period, which depicts the assets, liabilities and shareholder equity of the company. Based on the double entry bookkeeping system, the balance sheet helps assess the net worth of the company at a given point of time e.g. end of fiscal year or some other arbitrary time. The net worth is arrived at by finding the difference between all the assets owned and liabilities incurred.
A balance sheet is a formal statement depicting the book value of the concerned entity at a particular time. It is prepared internally or by one or more Certified Public Accountants and truly reflects the state of affairs of the entity. It is quite different from an income statement which is a statement about the income and expenses incurred during a particular period of time.
A truly photographic account of the current state of the entity is how a balance sheet may best be described. It is the most used financial statement and, in fact, is the only one that reflects the state of the entity at a given point of time rather than over a span of time. The two basic features of a Balance Sheet are assets and liabilities.
Since the business may own a number of assets in the form of built-up inventories of unsold stock, plant and machinery, buildings and equipment, these are not always readily convertible into cash and so form the core of the asset valuation. On the flip side, there are creditors who need to be paid as well as tax authorities that have tax payments outstanding and these form the liability base. In addition there is the original capital and a share of profits not withdrawn by the proprietors.
Any modern balance sheet will have three main components; assets, liabilities and shareholder equity. It is usual to set out all assets at the top of the balance sheet before presenting the liabilities. The difference between assets and liabilities constitutes the net worth or net assets of the company. This net worth or net assets of the company is equal to the shareholders equity.
Valuing equity suffers from some discrepancies because sometimes the value to a purchaser of a business via the net worth may not be what is revealed by the balance sheet figures, due to unrecorded material facts. This may happen when property has not yet been revalued.
Also, assets may have been valued keeping in mind that the concern will return a profit. Under such circumstances the break-up value of assets may be more than if the business is running into losses. So whenever someone wants to know how a company is doing, a well documented and accurate answer is very desirable. And the best way to showcase the entity’s success is through its balance sheet.
A lot of people as well as different organizations will surely be interested in the performance of various companies and so they turn to the company’s balance sheet for more information. In addition, the owners of entities are also constantly keeping track of how their enterprises are doing. Creditors, before extending credit, would like to assure themselves that the enterprise will repay the credit. Everyone with any interest in financial dealings with an entity will, of necessity, turn to the balance sheet for guidance.
Balance sheet is the common title of this financial document but Statement of Financial Position is also one other term used to describe it.
Wade Anderson is a CPA and operates DigitalWorkTools.com Legal Forms and Business Documents. Click to view a Balance Sheet
March 26, 2008
Accounting
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A purchase order is a document, commercial in nature, issued by a purchaser to a seller, informing the latter about what type, quantities and price of products and/or services that are agreed for purchase by the buyer from the seller. When the buyer sends a purchase order to the seller, it makes for a legal offer for purchasing goods or services. When the supplier accepts the form, a contract between the buyer and seller comes into existence. A Purchase Order has the following contents:
1. Purchase Order Number
2. Shipping date
3. Billing address
4. Shipping address
5. Requested terms
6. List of products including quantities and prices
There are usually several reasons for a buyer to issue a purchase order to a supplier. In the first instance, the document sets out the a written communication to the seller about the buyer’s intention to purchase and it strengthens the hands of the seller who can find protection in this written communication in the event the buyer defaults on the purchase. To protect themselves against malfeasance on the part of the buyer, sellers ask for a written form. A purchase order is the document representing the buyer’s intention to purchase specified quantities of goods at specified prices. In case the buyer defaults on paying the seller, the P.O. is a legal document in a court of law that demonstrates the intentions of the buyer in purchasing goods or services with the intention of facilitating collection of dues. Since a P.O. reduces the risk of defaulting buyers, most companies that do business with other companies for major purchases require such a form to be filled out by the buyer.
There are several different types of purchase orders. Some of the more common Types are:
1. Electronic P.O.s, especially using B2B standards such as ANSI, EDIFACT and RosettaNet
2. Single use forms as used in retail stores to keep track of purchases through use of a single form
3. Blanket Purchase Orders used by some companies to track purchase made for a certain class of products such as IT purchases
Each time a buyer orders some goods or services from a vendor it gives rise to a contract to buy as well as a contract to sell. A Purchase Order helps keep an accurate track of such important transactions. Each document should state the shipping method, date on which the goods or services are required as well as the name and designation of the person with whom the order has been placed. The form should also confirm the quantity and price per unit of the items being bought.
Some companies have very sophisticated purchase ordering systems where automatic generation of forms occurs once the on-hand quantity of an item falls below a certain level. This enables the processing of partial receipts, updating of inventories as and when goods are received as well as being able to track variations in price of goods received against price of goods invoiced.
By integrating the purchase order with accounts payable, inventory management and an effective sales order module it gives rise to an all-inclusive purchasing system. A good system will help the company in making better informed purchasing decisions with all information related to this activity being easily available at all times.
Keeping in mind the possible advantages for a business entity that accrue from having a good purchasing system, it may be for the betterment of the company to have a complete purchase order form on hand. With well formed template documents available in the market, the company would be well advised to consider using them for their purchasing needs.
Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view a Purchase Order
March 26, 2008
Accounting
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Pro forma financial statements are a process of formally displaying financial projections for a given period of time and in a consistent layout. The word pro forma is derived from the Latin term which means “as a matter of form”. Most businesses make use of pro forma financial statements in the executive process for planning and control as well as for reportage to owners, investors, and creditors. A pro forma financial statement is utilized as the foundation stone while comparing and analyzing information in order to give a feel to the management, investment analysts, and credit officers about the nature of the business’ fiscal organization under different conditions. The American Institute of Certified Public Accountants (AICPA) and the Securities and Exchange Commission (SEC) both ask that standard formats be used when presenting or forming these types of statements.
For those who are interested in getting started in a business, the preparation of pro forma statements, both for income and for cash flow, is essential before investing any money, time and energy into the venture. Being an essential part of the planning process, these financial statements help reduce to the barest minimum, any risks associated with the start-up and operation of a business. It may be the basis of convincing lenders and investors to provide capital for a new business venture.
Pro forma financial statements must be reliable and accurate and should help those studying it to draw a true and accurate picture of the start-up firm. It should be based upon purposeful and dependable information that will go a long way in creating a true and concise projection of the expected profits of the business as well as its financial requirements in the first year of operation and after. Once the business has taken flight and the initial statements have been prepared, these should be regularly updated, both monthly as well as annually.
Most companies use pro forma statements for business planning and control. These pro forma financial statements are obtainable in homogeneous and columnar lay-outs and are used by management to evaluate and distinguish between other alternative business strategies. By judiciously presenting information concerning financial and operating statements adjacent to one another, the management is thus able to analyze the projected results of the various contending strategies and arrive at the best path and the most suitable plan of action.
While forming pro forma financial statements, companies should realize that these statements should be unique and each proposed plan or project has its own distinct features that should be accurately captured therein. The prime usage of these statements is for management to:
1. Recognize the assumptions that cause the financial and operating characteristics to produce different company scenarios
2. Build on the different sales and budget (income and expenses) projections
3. Bring together the results in the form of profit and loss projections
4. Transform such data into cash-flow projections
5. Evaluate the resultant balance sheets
6. Execute ratio analysis and compare projections against one another as well as against those of comparable companies
7. Examine proposed decisions regarding marketing, production, research and development and make an assessment about their impact on profit as well as on the liquidity of the company
through simulation of competing plans, useful gains are obtained with regard to the evaluation of financial effects of each alternative plan.
With different sets of assumptions providing different scenarios regarding sales, production costs, effectiveness and practicality, projected financial statements for each such scenario holds enough information to indicate the future prospects, inclusive of sales and earnings forecasts, cash flows, balance sheets, projected capitalization, and income statements.
Company management also uses the these financials to choose from different budget alternatives. The planner will provide sales revenue, production expenses, balance sheet and cash flow statements for different contending plans and will explain the essential assumptions of each. Having analyzed this data, the management will then select the annual budget. Having chosen the action plan, all that remains to be done is to explore and find deviations in the plan and rectify them.
Wade Anderson is a CPA and operates DigitalWorkTools.com
Legal Forms and Business Documents. Click to view
Pro Forma Financial Statements
March 26, 2008
Bookkeeping
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When you live in Never Never Land, aren’t things supposed to be fun? According to Michael Jackson’s latest financial woes the answer is no. Earning large amounts of money since he was five, how can Michael Jackson have a fiscal fiasco?
It boils down to spending versus watching the bottom line. Although Jackson’s bottom line included 50% ownership in The Beatles Catalogue, a stake in the Elvis Presley and Bob Dylan Catalogues estimated to be worth
March 26, 2008
Bookkeeping
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When you confirm that the balance in your checkbook is in sync with your corresponding bank statement, it is known as account reconciliation.
Any record that you keep regarding your financial transactions with banks, credit card companies, or retail stores is known as an account. It is an arrangement between buyers and sellers in which payments are to be made in the future. The different forms of payment are checks, bills of exchange, and promissory notes. These are transferable, signed documents, which guarantee to pay the bearer a sum of money at a later date.
Purposes of Account Reconciliation
Account reconciliation makes available a suitable method for reconciling the accounts to the monthly financial reports produced by the Financial Records System (FRS). Account reconciliation helps you evaluate departmental account records in regards to the reports, which have been generated by the FRS. This helps you to better verify the accuracy of each account statement. The person in charge of each account should verify the account every month. Account reconciliation helps ensure accurate reports on the account. It helps to identify errors and inconsistencies in your accounting.
In order to perform the reconciliation most efficiently, you should be certain that the person in charge of an account maintains full and accurate records. It is your choice to maintain the records in a manual filing system or on a computer program. You can develop your own filing and record keeping system. It should be capable of providing an effective means of reconciling your accounts on a monthly basis. You can make use of the following files to make the reconciliation process easier.
Open Transaction Files: These files hold all source documents that you may have started for the account, but have not yet processed. Some common types of source documents are Distribution of Deposit forms (for cash receipts), Check Requests, Purchase Orders, Prepaid Purchase Orders, Interdepartmental Billing Forms, Merchandise Orders, and Travel Authorizations.
Pending Files: These files hold source documents that had some activities posted on the FRS report, but await further activities before they can be completed. These include Purchase Orders, Inter-departmental Billing Forms, Travel Authorizations and Travel Expense Reports.
Closed Transaction Files: These files hold the source documents that are fully processed in the FRS. You can always refer to the Records Retention Policy to establish how long documents must be maintained on file.
Monthly Reports: You receive these after the end of each month. The accounts must be reconciled to the monthly reports. The FBM090, Account Statement, and the FBM091 and Report of Transactions can be handed over to the person handling each account. You then compare the open transaction and pending files to the FBM091 and the Report of Transactions, which has a detailed list of transactions posted in a particular month. Make a comparison of the source documents with the report to find out if the encumbrance was properly established, adjusted, or canceled in the correct account and the correct object code.
Additional Help
Software is available to help you in reconciling your accounts in an automated fashion. Apart from providing you with all the help, they are reasonably priced as well.
David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
March 26, 2008
Bookkeeping
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If you operate your own home business, then you are probably aware that there a few drawbacks to being self-employed, just as there are a few drawbacks to any major decision you do in your life.
Being an entrepreneur and self employed often means that you lose some workplace benefits, such as group insurance, sick leave, paid vacations, etc. However, the government does provide solace balance to those who have an entrepreneurial spirit, and this solace comes in the form of tax breaks, because you the home worker small business owner, are the largest source of employment in America.
There are many possible tax deductions for home businesses; you simply have to be well-informed about them to make use of them.
There are good reasons for you to go through the trouble? Because you
March 26, 2008
Bookkeeping
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Bookkeeping is fundamental in running your business in an informed way. It is important that you have an organized, transparent and updated bookkeeping system in place. One of the ways to keep track of your company’s books is bank reconciliation.
What is bank reconciliation?
The procedure of comparing the account balance given by the bank with that of the company’s book of accounts and explaining any discrepancy is bank reconciliation. The discrepancy in the balances may be due to the different timing of registering the data in the bank’s books and in your company’s books. This discrepancy is normal and is rectified automatically within small time. However, sometimes the discrepancy is due to an error, which has to be rectified manually and to catch this error you need bank reconciliation. Companies generally do bank reconciliation at the end of each month.
Reasons for maintaining bank reconciliation
Regular monthly bank reconciliation keeps your company’s financial records clear and updated. You never build up an erroneous backlog. Also, you can understand your accounting status all the time. It is important that you have a prompt and reliable communication system with the bank so that you keep your records accurate.
Bank Reconciliation Statement
It is better to prepare a bank reconciliation statement by yourself so that you are able to figure out the causes of discrepancy.
Structure: The statement is divided into two sections. The right section reflects your bookkeeping for bank transactions and the left side reflects the bank’s records for your account with them.
Heading: The heading of the statement will have the bank’s complete name with the date of reconciliation.
Items: The first item of the statement is your opening balance just before the reconciliation. Check each item of the statement further for the following. If the transaction is missing from you our company’s account and it is on the bank’s record then you need to enter it in your books. If the bank section has missed it then enter it under their section. If the missing transaction belongs to the bank such as any fees deductions or interest credits, then it is an error at the bank’s end and it will rectify the error.
Adjustments: Once the reasons for the discrepancy have been figured out then you should include the missing information in journal entries.
Items of Bank’s Statement
Credit: Banks may credit some interest periodically into your account as applicable on the account balance.
Debit: These will be any of the bank charges on your account as applicable.
Erroneous credit: Any incorrectly placed credit in your account is booked under this head. Sometimes, the bank makes a deposit in the wrong account.
Items on Your Account Books
Unpresented check: Your Company’s books should record any checks issue immediately at the time of issue. The bank will, however, record it when the check is presented to it.
Software for bank reconciliation
There is a lot of bank reconciliation software readily available in the market. This software is compatible with all the latest accounting packages. The data is automatically imported, checked and reported through the software making your job easier.
David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
March 26, 2008
Budgeting
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Most people would love to get a raise; but did you know that by lowering your bills, you’re giving yourself a raise? For every $100.00 a month that you can lower your bills, you’re getting a raise of about 60 cents an hour based on $1200.00 a year divided by 52 weeks and 40 hours a week. It doesn’t sound like much until you figure that most companies are giving 3% annual raises and you would have to make $20.00 per hour to get a 60 cent raise. Not only that, but $1200 would pay for a decent big screen T.V.
In this article, I plan on showing you a few easy ways to save money and with any luck, at least one that you didn’t think of.
The first thing you should do after reading this article is grab a notebook, PDA or some other way to keep track and start recording your spending. Write down every purchase you make, even a soda or snack from a vending machine. Keep it up for at least a month and then look at where your money goes. You may start to see a trend that you want to stop before the month is over and by all means, change it. You may also want to do this more than once. It’s a great way to keep from falling back into or developing new bad spending habits.
Improve your credit card balances and rates. This is a given and dozens of books and articles have been written so I won’t waste too much of your time repeating the same old information. Just know that the lower your rate and the faster you pay it off, the more money you save. Start with your highest rate card and pay as much extra as you can until it’s paid off, and then go to the next and include what you were paying on the first card. You could easily drop $100 per month just from this.
Take your lunch and snacks to work. If you spend $5.00 a day on fast food lunch and drink 3 sodas a day, you can easily save about $15.00 - $20.00 a week and that would be about $60.00 to $80.00 a month just by packing a lunch, not including gas and wear and tear on your car. Not to mention how much healthier it would be. You may only want to cut back on the lunches but it would still be a savings. Just a thought, you could use the extra time to read a book or just relax.
Buy Regular Unleaded gas unless your car requires higher octane gas. Check your owner’s manual to be sure. Most places charge 20 cents a gallon extra for Supreme over Regular Unleaded and unless you’re driving a sports car you won’t be able to tell the difference. Depending on your gas mileage this could add up quickly.
Use a shopping list and stick to it. Avoid impulse buys unless they’re something you’d normally use and on sale. Clip coupons. If you think it isn’t worth it, try it for a month and keep track of your savings. If it’s more hassle than it’s worth you can stop. But I’m betting you’ll be surprised at how fast it adds up. Pay attention to prices at different stores. Most stores offer some products under wholesale just to bring you in because they know most people will buy other things and they’ll make money on the higher priced items.
Do you still smoke? I bet you’re expecting me to say quit. Well, that would save you money but I’m not going to. If you want to quit then I wish you luck because I know it’s hard.
Try out the cheaper cigarette brands. Buy a single pack and see how they taste. If you find a brand you like and it’s a $1.00 a pack cheaper then look at how much you’ll save. If you smoke a pack a day then you’ll save about $30.00 a month, $365.00 a year. If you’re scared of what people will think, buy a nice case. They’ll never know you’re smoking cheap cigarettes.
Take a look at your cable/satellite package. Look at what stations you watch and which package they’re included in. If you don’t watch anything in the higher end packages, drop the extra or find out if you can get just the channels you watch. If you have cable, take a look at satellite providers such as Dish Network and see if you can save money if that’s an option where you live. Some apartments don’t have access to the correct direction to use satellite but if you do, then it could be a better deal and you may receive a channel you’ve always wanted.
Check your phone bill. This is one of the easiest bills to be over charged for and one of the easiest to change. Most people think they don’t spend enough to bother with it, but many companies hide fees or make up their own. Some will even tell you a fee is mandatory when it’s really just an administrative fee.
What you may not realize is that depending on your calling habits or the area you live in you may want a different long distance company or you may want to go with VOIP (Voice Over Internet Protocol) if you have a broadband internet connection. We offer a calculator that compares 11 companies and shows the rates for your area. There’s even the advanced calculator that takes your calling habits and finds the best rate for you based on if you call more instate or out of state.
The point of these tips isn’t to make you a cheapskate, but to allow you to choose where your money goes. You can save the extra money, go out to a nice restaurant each month or spend it in any way you want, even to buy a new T.V. And wouldn’t it be much nicer to choose where you spend your money instead of wondering where it went?
Brian Baldwin is an entrepreneur who enjoys saving people money by offering some of the best products and services available today. Brian invites you to visit http://www.southerntechservices.com to compare our rates with the rates you’re paying and find out for yourself how much money you can save.
March 26, 2008
Budgeting
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In our last article we focused on a few ways to save money. This time, you’ll find a few more ways to save money and maybe a couple that you didn’t think of. As always, it’s not my intention to make you a cheapskate, but rather to give you the choice of where to spend your money instead of wondering where it went.
I mentioned this in the previous article but it’s so important that I have to repeat this again.
The first thing you should do after reading this article is grab a notebook, PDA or some other way to keep track and start recording your spending. Write down every purchase you make, even a soda or snack from a vending machine. Keep it up for at least a month and then look at where your money goes. You may start to see a trend that you want to stop before the month is over and by all means, change it. You may also want to do this more than once. It’s a great way to keep from falling back into or developing new bad spending habits.
Here’s a pet peeve of mine, ATM fees. Not only do you pay 1-3 bucks for the ATM you’re using but another 1-3 bucks to your bank. If you stop at the wrong ATM for $20 for dinner then you may be paying $26. Take a look at your bank statement and see how much you could’ve saved by planning over the last month. Personally, I saved almost $100 when I stopped using other ATMs.
Bank fees Depending on your bank, you may have free checking or pay a fee each month. If you’re paying a fee, then you really should think about how much it is and if it’s worth changing banks. You should pick a bank that has a lot of ATMs that are convenient to you and free checking. If you pick the correct bank, you can easily cut down the number of ATM fees that you incur simply by having your bank’s ATMs on the way to your destination.
Gas prices Use a search site like Gasbuddy.com Prices can vary by as much as 25 cents a gallon in the same city. It’s not worth your time to drive across town for a penny a gallon but if you can detour a few blocks for 10 cents a gallon then it’s worth it.
Prescription drugs According to a recent study, the prices can vary widely between pharmacies so unless you have drug coverage from your insurance, you should call around to different stores and check. You can also use a mail order pharmacy but be careful on those.
Pay down your mortgage Unless you have a loan that doesn’t allow this, you can over pay each month and that money goes directly to principle. Depending on your loan and the amount you over pay, you may save thousands over the life of the loan. Incidentally, some auto loans also allow this.
Pay your bills on time. A little known bit of fine print in many credit contracts allow unrelated companies to increase your rate just because you were late on a different account. Not only that but some companies will raise your rate to 29-31% interest if you’re 1 day late.
Free cycle is a group of people that choose to give away items instead of throwing them away. Not only does it save the receiver money but it keeps it out of the landfill. Do a search for your area and see if there’s a group in place.
Brian Baldwin is an entrepreneur who enjoys saving people money by offering some of the best products and services available today. Brian invites you to visit http://www.southerntechservices.com to compare our rates.
If you’d like to read the previous article, please visit stservices.powerfulintentions.com/library
March 26, 2008
Budgeting
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Why a Budget is Important. Let it be your guide from beginning to end.
Starting your own home business is a very tricky proposition. Starting your own enterprise is exciting, but it is also inherently full of risk. Enter discipline. Unless you get yourself going on the right foot, then the chances of achieving success are very small.
Conversely, as long as you have the right foundation, and keep working on that foundation, success is almost an automatic thing. It is vital that you run your home business on a strict budget, if you aspire for long term success. Strictly budget your time and your money.
As little as one hour a day, everyday, is enough to make your personal business get better everyday and grow steadily to keep your confidence up. Avoid distractions.
One of the most important parts of running your business is operating on a budget of money and time. Every ad and every supply and tool you buy must earn the value put into it. This is a golden rule that can make you successful as you are going to be at any business.
Many men and women, mostly unsuccessful ones, prefer going with the flow rather than with actually setting goals and budgets. For the most part, this attitude is a mistake. Unless you have an incredible memory and unnatural clear sightedness, planning for both the present and the future is a prerequisite to success.
No matter how you define that elusive concept. Remember, no sloppy ad, supply or equipment buys. Check everything out scrupulously before putting your hard earned funds into it. Always shop for better prices and quality with every purchase you make.
Because this article is about home businesses, we will begin by defining success as the growth and eventual profitability of your particular business. By growth we mean that the business will expand, hopefully outgrowing your home and eventually participating in the corporate arena or whichever one you feel comfortable to work in.
By profitability, we mean that the business will become a cash generating machine, so much so that you attain financial freedom, and never have to work a single day again for someone else, if you do not feel like it. You will be your own woman or man.
This article argues that in order to achieve growth and profitability, discipline is needed, and plans must be made and acted upon. I cannot harp on and emphasize this enough to you.
Crafting your budget
One of the most important plans you must conceptualize is that of your budget. Many businesses, even if they have great ideas and wonderful products, still fail for lack of proper planning and efficient allocation of resources. Do not let this happen to you. Only a home business on a strict budget can ever be truly successful.
First, make it a habit to write down, both what you earn and what you spend, on a daily, monthly, and yearly basis. A common stenographer notebook will be perfect for this. Make a different page for every expense. Every expense and every sale must be recorded so you know where you are everyday.This is the least that you can do.
Look over what you have written down and you will easily see the areas that can be improved upon, especially in the expense column. It is astonishing how many expenses we never notice until we get them down in paper. As the business grows larger, accounting knowledge might be needed. If you have neither the time nor the inclination to acquire the knowledge yourself, find someone who does.
Second, analyze the figures and determine the areas where you can control costs, and where you should add capital. Every business has areas that generate above average returns, as well as areas that under perform. As much as possible, redirect your resources to the projects and ideas that give you the most return. You will quickly start to learn this from experience.
Many years of experience have frequently given me the positive experience of having the lowest cost item or ad working for me best.
The great secret here is to, are you ready? Shop around for the best buy and do not let your emotions run wild on you when you read or hear presentations that have wild claims or will not give you the whole detail story until you pay them first. Hah! Never do it. Give me the details or forget about it. You do not need to take unnecessary risks.
Lastly, stick to your budget. Never forget this. A plan not acted upon is essentially useless, and a budget not followed is as useful as a page of doodles. Once you have written down and finalized your budget, do not make any departures from it unless absolutely necessary. Always have a solid reason for doing so.
Be disciplined. It is the only way you will get anywhere. By running your home business on a focused budget, you are securing your future at a small expense to the present and a nice profit in the future.
James M. Lowe writes original articles about home business opportunities.