The act of preparation of financial statements, reports, tax documents required by businesses and individuals in their dealings with the IRS, SEC and local and state authorities. Some statements included might be profit and loss, interim statement and balance sheets. Most accounting is done in accordance with GAAP (generally acceptable accounting principles)
Bookkeeping is an interesting subject in more ways than one because of the intricacies involved as well as the extent to which it is utilized in our personal and business lives. So what goes on in the accounting and bookkeeping departments at big and small businesses alike? And what do these people we know as bookkeepers do on a daily basis? Well, one thing they do that is terribly important to everyone working in those businesses is payroll.
All the salaries and bonuses earned, and taxes paid by every employee every pay period have to be recorded. The payroll department has to ensure that the appropriate federal, state and local taxes are being deducted; and the pay stub attached to each employee paycheck is an ongoing record of these taxes and any number of other deducted items.
Such items usually include income taxes, social security taxes and other employment-related taxes that have to be paid to federal and state governments. Other deductions include personal items, such as retirement savings accounts like 401(k), IRA, RRB (Railroad Retirement Board Benefits, as well as vacation, sick pay and/or medical benefits. It’s a critical function, and for that reason, some companies have their own payroll departments while others outsource it to bookkeeping specialists.
The accounting department receives and records any payments or cash received from customers or clients of the business or service. The accounting department has to make sure that the money is sourced accurately and deposited in the appropriate accounts. They also manage where the money goes; how much of it is kept on-hand for purposes such as payroll, or how much of it goes out to pay what the company owes on its loans, to its vendors and other such obligations. Some may also be invested, depending on the particular business policies.
The other side of a receivables business is the payables area, or cash disbursements. A company writes many checks during the course of a year in order to pay for purchases, supplies, salaries, taxes, loans and services. The accounting department prepares all these checks and records whom they were disbursed to, how much and for what.
Accounting departments also keep track of purchase orders placed for inventory, such as products that will be sold to customers or clients. In addition to all these responsibilities, they also keep track of assets such as a business’ property and equipment, which often includes the office building, furniture, computers, and even the smallest items such as pencils, pens, notepads and other similar paraphernalia.
Present-day American families have the same dreams shared by families a few decades ago; buy a home, provide for the health and welfare of their children, and send those children to college. But the price tag for fulfilling these dreams climbs higher and higher every day, making it much more difficult to achieve the same standard of living that families enjoyed in past decades.
It used to be that a husband went off to work in the morning and the wife stayed home doing household chores and taking care of the kids; but the days of one-income households are long gone and both parents must now go out to work – when they can find it.
However, as the old familiar adage suggests, “necessity is the mother of invention” and accordingly, many enterprising single moms & dads, and even husband & wife teams are finding ways to stay home, and still earn a living via opportunities that are springing up all over the country as a result of the tremendous growth of an industry that makes work at home possible.
The Home-Based Business (HBB) industry has made it possible for anyone with some basic skills, a computer and Internet access to start a business at home. For example, an individual with a background in word processing can create his/her own in-home word processing business.
Before you begin your Home-Based Business however, it is important to do your research. Find out what kind of software program will be most suitable for the type of business you intend on doing. You will also want your computer system to be compatible with your clients and customers.
Next, look at the make-up of your industrial area. An arts community, or a thriving business area? By checking out the demographics of your area, you can make a decision regarding the type of advertising you want to use.
In the beginning, you will want to try all sorts of advertising. Neighborhood newspapers are an inexpensive way to advertise, but they usually only published on a weekly basis and that may not be enough to keep the clients rolling in. You can put your name on the bulletin board at your local supermarket and pass out flyers door-to-door in large office buildings or other business complexes.
Although it may be more expensive than neighborhood newspapers, you may want to run an ad in your local daily newspaper (in the business services section). Church bulletins and university newspapers that sell advertising may also be a relatively inexpensive way to go. You should also get your business cards printed up right away; and don’t let a client walk out the door without one or two business cards. Repeat business and word-of-mouth may well be your best advertising tool.
Whatever methods you choose to employ in your advertising, do yourself a favor and track the responses. Put a check list next to your telephone and whenever a call comes in (whether you get hired or not) ask the prospective client where s/he found out about you. It won’t take long for you to discover where your most cost-effective advertising comes from and when you know that, you can punch it up and drop the ones that aren’t doing anything for you.
Do your homework!
One telephone call will be the only opportunity you have to sell your service. If you hesitate when asked a price for a particular project, you will probably lose the job so do your homework. Call the competition and ask what they are charging. If the competition is out of your immediate geographic area (and you are therefore not a threat to their livelihood), you may want to be straight with them and tell them you are starting a home-based business in their field and ask for their input. You may be surprised to find them willing to help out with important information.
Keep in mind that there are myriad of tasks that need to be undertaken in order to establish the fundamental operations of your new home-based business. Whether you expect to get clients from the Internet or not, it is necessary to set up your business in a manner that will accommodate local clients/customers. So business letter heads, envelopes, forms, business cards, invoices and other paraphernalia will be necessary.
It will also become necessary to establish your pricing policies and have them available upon inquiry. Depending on your business, you could set a basic rate which can be a flat rate or a percentage.
…Using the business of word processing for a pricing example, a prospective client may call asking what you charge for 4 single-spaced pages. Your answer might be $45.00 per page straight text and then when the client comes, you discover that what s/he has is 4 pages of extremely complicated tables – definitely NOT STRAIGHT TEXT.
By not making firm pricing commitments over the phone, you will have the flexibility to charge a more accurate price when a client brings you something other than what you were expecting.
Elaborating further on the word processing example, to some clients a resume may be a single spaced page, but it takes a lot longer to type than a business letter and you will want to charge more for resumes. You will want to establish an hourly rate for tables, transcription and other more time-consuming jobs.
Always keep in mind that your pricing will change as you become more familiar with what your clients demand, and you may find yourself doing a lot of list maintenance and merge letters, or you may be doing work primarily for doctors, or attorneys; so you need to have a good basis for your pricing… but be flexible.
There are several home-based business models you can choose from, each one giving you the same flexibility to create your own USP (Unique Selling Proposition), as well as your own operational balance sheet. After all, the income & expense aspect of any business is usually an excellent indicator of that business’ prospects for success or failure; and truth be told, no business – new or old – start out with failure as an aspirational milestone. Therefore, it is success to which they aspire and choosing the type of home-based business to launch could make all the difference.
Choice of business types
The two business types that came to mind – based on my own – experiences are: Promotion and Distribution. You can choose to be a promoter or a distributor in addition to all the other choices that are available; but I have provided a glimpse of each vocation with the help of two other publishers whose knowledge of the topics is unquestioned.
According to a What is Promotion? article published to the Slide Player website, “Promotion is any form of communication a business or organization uses to inform, persuade, or remind people about its products and improve its public image. Product Promotion: 1) Explains the major features and benefits of its products (especially in relation to competitors), 2) tells where the products are sold, 3) advertises sales on those products, 4) answers customer questions, and 5) introduces new products…”
…And Distribution is described in the following manner: After a product is fully developed and offered at a competitive price, it must be delivered to an identified target audience. The place element of the marketing mix is where product production and distribution channels are decided and planned. The decisions made in this step directly affect the types of communication that are used to tell the target audience about a product.” This description is provided in the article, What Is the Difference Between Place & Promotion in the Marketing Mix? Written by Tim Burris for the Chron website. And there are so many more!
In the movie “You’ve Got Mail”, if you put the love angle aside for a moment you’ll remember a sub-plot in which heroine Annie Reed (played by Meg Ryan) was forced out of business when big-time bookstore owner Sam Baldwin (played by Tom Hanks) moved into town.
You may recall that Annie owned a quaint little bookstore which she inherited from her mother, and although the prices of her books were a little steep, she makes up for it with excellent service which included packing the books in a specialized bag and knowing all her customers by name.
Sam, on the other hand, moved into town to build a branch for a big chain-bookstore which offered discounted prices out of a huge building which housed the company’s operations, which made Annie’s little bookshop on one corner of the town’s street seem inconsequential.
As the movie went, Annie was forced out of business because her customers went to Sam’s monstrous bookshop, and although they did not get the kind of customized service offered by the small “mom and pop” store she operated they paid less and presumably benefitted from having a larger selection of books.
The movie aside, however, this situation no longer holds true in the modern-day business environment, as more and more small businesses are blazing the trail and giving big businesses a dose of their own medicine.
Thinking back to the movie for a minute, we’re told that Annie was forced out of business because she can no longer realize a profit due to her prices being too steep as compared to her competitor’s big business discounted rates; and therefore her only edge is to provide personal service and employ a very small staff (about 2 or 3 employees).
As a small organization you may consider incorporating these tools, resources and features in your daily operations as your edge in competing against the big business sharks. That having been said, here are a few tips on how you can hold your own against a big business:
1. Small businesses have big competition. This means that you need to know how to survive out there. No matter what nature of business you own or manage, it is better to learn about the competition so that you will be able to survive.
2. Keep your business alive. When it seems as if your cash flow is on a downward spiral, keep a tight rein on your budget. Do not spend on unnecessary business purchases, and always balance your books. If you are one who is prone to buying on impulse, or if you are the type who listens to those that sweet-talk you into purchasing “necessary” items, control yourself. Get a second and third opinion if possible, as these impulsive buys may lead to the end of your small organization.
3. Do not be afraid to seek professional help. The fall of most small businesses start with decisions on problems which are not carefully analyzed. Although you may think that you already have a contingency plan, make sure you have foreseen the results of a particular business decision; but in the long run, it is better to seek professional help than to embark on a plan that could lead to the downfall of your business.
4. Keep your books straight. The better option is for you to hire an outside accountant who is a professional to figure the returns of your investment and handle other financial aspects of your business.
5. Take advantage of every free business counseling whenever available. This not only helps to broaden your knowledge, but it will also give you an idea of how other businesses are managed by small-scale owners.
6. Know exactly where your business is headed. In your day-to-day operation, make sure you know where you want your company to be five or ten years down the road, and be always aware of the trends in your industry. Practice good money management and learn how to recognize potential problems before they arise.
7. Learn how to market your small organization. Marketing is not about trying to sell your products and services to everyone, but rather, it is about knowing who to market your products to. In marketing, it is good to remember these fast facts:
Know about your customers.
Communicate with your customers.
Build a good and personalized relationship with your customers.
This will be a great edge for you to have against the bigger companies. They might offer discounted prices but it is harder for them to keep track of customers on as personal a level as you can.
Never Stop the Marketing Process!
As a small organization, you need to routinely review the markets that you need to pursue so that you can better reach out to your customers. Remember, small organizations are big businesses these days so do not be afraid to work hard for the company that you have – no matter it’s size; because ultimately, if you work hard, make wise business decisions, learn how to market your small business and personalize your customer interaction, your small-scale business is sure to rise to the top.