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Accounting A La Carte, Santa Barbara, CA : Accounting Matters Blog

Accounting Matters Blog

Do-it-Yourself Bookkeeping??

Do-It-Yourself Bookkeeping?

How to Start Doing Your Own Bookkeeping

1. Avoid using computer software that is not suited to your size of business or your skill level. This is one of the biggest mistakes DIY bookkeepers make.
2. Critical key to success is setting up the correct chart of accounts that is right for your company and industry.

3. Don’t fall behind on billing your customers … and follow-up quickly when payments are overdue. Send out monthly statements and be sure to call them if payments are overdue to determine when they will be paying.
4. File all your tax compliance reports on time, even if you can’t pay them. If you just don’t have the time to get to them that is an indication you need to hire basic bookkeeping help.

5. Too many DIY bookkeepers pay too much tax because their records are not accurate enough to claim valid tax deductions. You might want to bring yourself up-to-date on valid tax deductions for your state and the federal government (United States).

5. My last tip for you is to always do your bank reconciliation and credit card reconciliation EVERY (yup I said every!) month. You are running a business now making this step imperative.

Consider it part of your month end process. What!! You don’t have a month-end process. GASP!!!!! Then checklist might look something like this:
• customer invoices and sales receipts issued including outstanding customer invoices
• on line banking activity including bank statements
• expense receipts including internet receipts - sorted by source of payment: bank, credit card, business cash, and personal funds
• documents pertaining to the purchase, major repair, and sale of capital assets
• investment statements, bank statements including deposit slips and returned cheques, credit card statements including card payment slips, vendor statements
• a check register would be helpful
• a listing of all pre-authorized direct deposits and withdrawals on your bank and credit card statements
• vendor / supplier invoices both paid and unpaid
• listing of accounts payable would be helpful - even if it is just your best guess
• an accounts receivable listing would be helpful - even your best guess helps marking any doubtful accounts
• Documents pertaining to lease agreements, financial loans, insurance or any contracts you have entered into.
• list of all customer deposits and / or prepayments received
• inventory listing
• all government correspondence and tax forms including
• payroll information and reports including new employee information, payroll report and returns

Remember, if you decide not to do your own books because it’s more work than you thought, (or you need to focus on your “unique qualities” that make you a great business person) - please contact me immediately so that I can assist you in setting up your books, or check the books you have set up on your own!

Tips for Year-End

Let’s talk about getting your books and business ready for your tax preparer, while cleaning up your books and close the current year on a good note, which will start the next year on the right foot.
Small Business Guide - Year End - 7 Item Checklist

1. Get your financial records and books in order.
If you are a mom and pop shop, a sole proprietorship who has a full file of receipts that haven’t even been recorded in your books or even if you have a part-time bookkeeper, you need to be sure all your key financial transactions are recorded before you can do anything else in a New Year. To make it simple, here are few key areas to consider:
 All sales and purchases invoices/ receipts are recorded in the book
 Expenses are accounted or accrued for product or services consumed but not yet paid
 Review that outstanding customers’ records are updated and current. Write off bad debt expenses where necessary.
 Review all outstanding supplier payment list and make sure good received but not yet invoice are all recorded.
 If you sell products, conduct an inventory assessment and compare the results to your last inventory report.
 Make Depreciation Entries
 Reconcile all bank statements for any charges and to show true bank balance position.
You might have a list of vendor invoices that are still unpaid. Or a list of customers, who owe you money, be sure to keep an eye on both of these as this helps with cash flow forecast and give you a clean start for the New Year.

2. Prepare the financial statements for the year.

A very important step at year end is to prepare your financial statements - as these will be given to your tax preparer so that s/he has the correct information to prepare your return. Financial statements will assess your performance and position at year ended. A completed financial statements for a small business usually composed of three key components:
Balance Sheet - a snap-shot of the business financial situation at a particular point (year-end). It shows all your business assets, liabilities and the owner’s equity position. Balance sheet shows the liquidity of your firm as well as the key sources of your funding. Income Statement shows profitability of the business during the financial year. It compares the business revenues to expenses and the results are either a profit or loss.

Cash Flow Statement shows the inflows and outflows of cash in your business. Cash flow statement is generally prepared under 3 sub-headings:
 Cash flow from operating activities - The core activities of the business such as normal revenues and expenses during the year
 Cash flow from investing activities - It shows the fixed assets and investments purchased and sold during the year
 Cash flow from financial activities - Movement in sources of finance such as new loans borrowed and loan repayments during the year. It also include any new owner cash injection
Cash flow statement is a very important report for investors and lenders. . It shows the real flow of cash by eliminating all (non cash) items and accounting estimates including depreciation and accrual. It also reconciles the opening cash to closing cash position by showing the net increase or decrease in your business’s cash flow over the period.
3. Analyze the financial statement
Once you’ve prepared your balance sheet, income statement and cash flow statement, step back and take a look at the overall performance - use basic ratio analysis to understand the results deeper. Basic ratios like current ratio, total debt ratio, efficiency ratio and profit margin tells lot about the business performance and situation. Customer receivable analysis can show the customer’s bills and the number of days the bill have been outstanding. Are your current assets enough to cover your current liabilities?
4. Evaluate your results against the last year goals.
Now that you understand your results, it’s time to see if you have performed well; at least compared to the plan. You can perform the following comparisons:
 Compare the actual results to the annual budget of year under review. Of course, this assumed that you have prepared a business budget for the year. If you don’t, then start it this year, because budget is a good control tool for any business.
 Compare the actual results to the actual results of prior year. This reveals the decline or growth in the key numbers like sales, profit, cost etc.
 Compare the actual results to the industry average or a competitor.
By comparing the prior year, you should be able to answer some questions such as how you met or didn’t meet the budget? How did you do over the prior year? What areas might show improvement of expenses, or expenses that need further analysis due to overspending? Make some notes about any areas that might need a closer look when preparing your next year’s budget . If you need help in understanding your financials ask you tax person to help
If you have a number of employees, it is also important to request for their general feedback. Their candid feedback and opinion could help you to know the areas that need some improvement. For example customer service, employee motivations, new product development, public awareness, business social responsibilities etc.
5. Prepare your New Year budget (Plan).
Use the information on your last year’s financial performance and feedbacks, you can begin to prepare your New Year goals and turn them to a budget. A great tip in goal setting would be to use SMART meaning Specific, Measurable, Attainable, Result focused and Time-bound.
For example your business goal could be:
 an increase of 2018 sales by 15 percent compared to last year
 20% increase in number of active customers etc.
 post $100,000 profit by December 2018 etc.
For every major goal, it is important to prepare an action plan. Action plan is the summary of key steps that must be taken to achieve a specific goal. For example if you goal is to increase sales by 20%, the related action plan could be new product offering, new outlets, online shop or new strategic alliances.
Depending on the size of your business, employee engagement in business goal setting can positively impact their commitments to achieve these goals.
Start implementing your action plans in the new year .
All the planning in the world will not help you achieve your goals. You must take action. This will set the wheels in motion and create the necessary momentum you needed. Do not forget to learn from your last year mistakes and successes.
6. Assess your employees and consider giving bonuses
It does not matter if you have 5 or fewer employees, assessing employee performance can be a very important feedback for yourself and the company. The end of the year is the perfect time show your appreciation and gratitude by thanking them with a bonus (if profitable) or some small token if losses have been incurred. Keep them motivated and loyal during the tough times, This gesture will give everyone a sense of accomplishment and boost them to be excited about the new year ahead.
7. Print and Mail Out Tax Forms
Even if your fiscal year does NOT coincide with the calendar year, you must print and mail certain forms by a certain time.
• 1099s: These forms should be mailed no later than January 31 to any independent contractors you hired. Don’t delay in case there are errors.

• 1096: This form must be mailed to the IRS no later than January 31.

• Payroll Forms (e.g. W-2, W-3, 940, 941): Print and mail these forms as soon as you can, especially if you’re handling it yourself and not asking an accountant or firm to do it. Remember that your employees cannot file their taxes until they receive a W-2, and many people like to file as soon as possible. These forms should be mailed no later than January 31.

The end of the fiscal year is a crazy time for any business, but smaller businesses feel the pinch even more due to limited staffing and skill-set availability. Prepare yourself and make sure to cross off all of the steps necessary for a successful and responsible end of your

Year End Accounting Check List

It’s That Time AgainAccounting A La Carte

It’s that time of year again when most businesses are closing their books. The business owners are either celebrating or licking their wounds. In any event, we as accountants usually have some clean-up and decision making to do.

Year-End Financial Statements

The year-end financial statements are the most critical reports we issue. These reports (profit and loss statement and the balance sheet) will be used for tax preparation, for 2010 budgeting and for decision making more than any other monthly reports we prepare. Because it’s important that these year-end financial statements reflect accurate information, we need to make sure they are correct.

You probably have a year-end routine you rely on, but here is a simple checklist of items that you might consider for clients when ensuring the accuracy of their year-end financials:

 Year-End Accounting Checklist

  • Does the general ledger bank balance reconcile to the bank statement?
  • Are there any worthless accounts receivables that should be written off?
  • Does the Allowance for Bad Debts have a reasonable estimate of potential write-offs?
  • Is Deposits is Transit cleared out?
  • Have all the credit card accounts been reconciled as of year-end?
  • Does the company’s inventory balance reflect actual inventory available?
  • Do you need to adjust inventory for items that cost more than their worth and should be written down to their market value?
  • Does the company still have all the fixed assets?
  • Have you recorded depreciation correctly?
  • Does the suspense account have a zero balance?
  • Any prepaid items that need to be expensed (i.e. prepaid insurance)?
  • Have all year end payables been accurately recorded?
  • Does your payroll tax liability coincide with year-end reports?
  • Does the notes payable account (loans) agree with the bank?
  • Does the interest expense for these notes agree to form 1098 from the financial institution? (you no longer need to wait for the 1098’s with the convenience of on-line banking)
  • Are there other debts that have not been included on the books?
  • Are there debts on the books that no longer exist because of forgiveness or nonpayment?
  • Are the 1099 vendor’s correct information, federal identification number, and mailing address?
  • Have I ordered or do I need to order year-end tax forms (i.e. 1099’s, w-2’s, etc).


Meet with your Client

Once you have completed this list, make sure you sit down with your client and review the financial statements to identify anything you might not be aware of.

Throughout the review ask the question, “Do these balances seem reasonable?” At the end of the meeting ask, “Are there any other assets or liabilities that I haven’t included?” Occasionally, they might surprise you with an event that you didn’t have any knowledge of before, but that will affect your books.

Finally, the last step of the year-end process is to compare your financial statements to prior years to see if any increase or decrease is reasonable. If you run across some significant changes, you may want to look at the general ledger account to ensure the entries are legitimate or if they need to be reclassified.

As you follow this year-end process you will be amazed at how much you learn. You may see trends and practices that will help you in consulting with the client and help him/her run their business more effectively.

In fact, often times the accountant will know more about the business finances than the owner. So, this year, take the time and make the effort to be precise so that you can go into 2010 with reliable balances and peace of mind.

  • Do you have questions? For no charge, call Andy at Accounting-alacarte at 805 636-1250 and she will be more than happy to support you during the year end process.


    Best Wishes for a Prosperous 2010!

Cash is King but how do you maximize it?

Cash is King but how do you maximize it?

Do you know where your cash went? Cash management is a relentless task that requires constant attention. It is important to develop efficiency in your procedures by utilizing tools such as cash flow projections and key performance indicators as a road map for the future direction of your business. Cash flow projections are the key to making smart, profitable decisions. Well managed companies utilize these tools to proactively navigate challenges through early detection and proper planning.

To be successful with cash flow management you need to be diligent and efficient in recording information timely. In addition, below are a few tips that will help you maximize your cash flow.


Establish tools to regularly monitor key business areas and drive profitability

· Utilize cash flow projections to make wise business decisions

· Develop visibility to key performance indicators to improve working capital

· Know your break-even point and your overhead rate

· Enter transactions daily to provide real-time visibility

Know your Cash situation

· Develop a 13-week and 12-month cash flow forecast to monitor cash flow

· Know your cash balance NOT your bank balance!

· Evaluate cyclicality or fluctuations in your business and establish a proper cash reserve

Collect receivables more quickly

· Email invoices upon job completion - timely billing starts the clock sooner

· Follow-up, follow-up, follow-up - Stay at the top of your customer’s payment list

· Implement tools such as credit card processing, EFT’s and remote deposit processing

· Begin collection efforts as soon as an invoice is past due

· Make good customer decisions - avoid collection problems

Slow down payments to vendors

· Negotiate with suppliers - don’t be afraid to ask for extended terms such as 60 -90 days

· Negotiate for vendor concessions such as volume and early pay discounts (your competitors are getting discounts, why aren’t you?)

· Always take advantage of all discounts and pay when due, not before

Sell your inventory more quickly

· Maintain inventory of only your top selling items (use the 80/20 rule)

· Tighten replenishment procedures (establish pre-determined re-order points)

· Constantly monitor and regularly closeout slow-moving or obsolete inventory

· Implement tight document controls and limit access to inventory to minimize theft

Safeguard your assets

· Monitor business performance against estimates and research variances

· Understand areas of risk and establish a strict tone from the top

· Know the elements that motivate individuals to commit fraud - Pressure, Opportunity & Justification

· Evaluate new hires carefully - implement background checks

· Segregate duties and establish tight internal controls to minimize risk

Understanding the key profitability drivers of your business is essential to effectively managing costs.  In addition, preparing monthly cash flow projections are crucial to making prudent business decisions.  Incorporating these tools to improve your cash management process allows you to successfully navigate challenges and minimize cash shortages.  More importantly, it allows you to focus your talents and efforts on growing your business which is what you do best.


Accounting a la Carte can help you develop the tools you need to monitor your business and make better decisions. Take the mystery out of cash management and maximize your cash flow today!


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