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Author: Admin

  • Are You Managing Your Business Bottom Line?




    If you don’t keep track of how much money you’re making, you have no idea whether your business is successful or not. You can’t tell how well your marketing is working. And I don’t just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is. If you don’t, there’s no way you can know how to increase it.

    If you want your business to be successful, you need to make a financial plan and check it against the facts on a monthly basis, then take immediate action to correct any problems. Here are the steps you should take:

    • Create a financial plan for your business. Estimate how much revenue you expect to bring in each month, and project what your expenses will be.
    • Remember that lost profits can’t be recovered. When entrepreneurs compare their projections to reality and find earnings too low or expenses too high, they often conclude, “I’ll make it up later.” The problem is that you really can’t make it up later: every month profits are too low is a month that is gone forever.
    • Make adjustments right away. If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates. If overhead costs are too high, find ways to cut back. There are other businesses like yours around. What is their secret for operating profitably?
    • Think before you spend. When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you proceed to make a purchase.
    • Evaluate the success of your business based on profit, not revenue. It doesn’t matter how many thousands of dollars you are bringing in each month if your expenses are almost as high, or higher. Many high-revenue businesses have gone under for this very reason — don’t be one of them.

  • A Look at Basic Accounting Principles




    Accounting has been defined by Professor of Accounting at the University of Michigan William A Paton as having one basic function: “facilitating the administration of economic activity. This function has two closely related phases.” The first, according to professor Patton, is: Measuring and arraying economic data; and the second is: Communicating the results of this process to interested parties.”

    As an example, a company’s accountants periodically measure the profit and loss for a month, a quarter or a fiscal year and publish these results in a statement of profit and loss that is called an income statement. These statements include elements such as accounts receivable, (what is owed to the company) and accounts payable (what the company owes).

    It can also get more detailed and complicated with subjects like retained earnings and accelerated depreciation. This is at the higher levels of accounting as well as in the organization. Much of accounting though, is also concerned with basic bookkeeping. This is the process that records every transaction, including every bill paid, every dime owed, every dollar and cent spent and all accumulated factors.

    But the owners of the company – which can be individual owners or millions of shareholders – are most concerned with the summaries of these transactions that are contained in the financial statement. The financial statement summarizes a company’s assets. A value of an asset is what it cost when it was first acquired. The financial statement also records what the sources of the assets were.

    Some assets are in the form of loans that have to be paid back. Profits are also an asset of the business. In what is called double-entry bookkeeping, the liabilities are also summarized. Obviously, a company wants to show a higher amount of assets to offset the liabilities and show a profit. The management of these two elements is the essence of accounting.

    There is a system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!

  • The Accounting Capacity of Quasar Software


    Accounting has become more and more complex as have the businesses that use accounting functions. Fortunately, there are several excellent software packages that can help you manage this important function. Quasar is one such package. All versions of Quasar offer comprehensive inventory controls. In its most basic use, the inventory module allows a business owner to track the locations and quantities of all inventory items.

    Additionally, the inventory capabilities go beyond simple record-keeping. Manufacturers and wholesalers can assemble kits using component items; whenever a kit is assembled, the inventory representing its component items are adjusted accordingly. Items can be grouped into various categories and the groups can be nested many levels deep. Vendor purchase orders can be generated for items with quantities below a preset level.

    Costs and selling prices for items can be set and discounted in a myriad of different ways. Finally, these items can be reported upon to show such things as profits, margins, and sales per item. Sales and purchases are another strength of Quasar. Customer quotes can be easily converted to invoices to be paid. Promotions can be created and discounts can be given based on date, customer, or store location.

    Also with the capacity of Quasar software, margins can be reported upon for traits such as individual items, individual customers, or an individual salesperson. Likewise, a purchase order can be created and converted to a vendor invoice, which can be paid in a number of different ways, including printing a check. Quasar can keep track of miscellaneous fees such as container deposits, freight charges, and franchise fees.

    The intelligent design of Quasar’s user interface allows for quick and easy data entry. Some programs you may encounter are not optimized for keyboard use. These programs require you to move your hand to the mouse to select frequently needed options. While some of Quasar’s menu options are only mouse-accessible, the bulk of Quasar’s user interface is designed in such a way that you can keep your hands on the keyboard by using special shortcuts. This allows for faster data entry, which can save time (and therefore money) in the long run.

     

  • About Business Investing and Financing


    An important portion of the statement of cash flow reports the investments your company made during the reporting year. New investments are signs of growing or upgrading the production and distribution facilities and capacity of the business. Disposing of long-term assets or divesting itself of a major part of its business can be good or bad news, depending on what’s driving those activities.

    A business generally disposes of some of its fixed assets every year because they reached the end of their useful lives and will not be used any longer. These fixed assets are disposed of, sold or traded in on new fixed assets. The value of a fixed asset at the end of its useful life is called its salvage value. The proceeds from selling fixed assets are reported as a source of cash in the investing activities section of the statement of cash flows.

    Usually these are very small amounts, but like individuals, companies at times have to finance its acquisitions when its internal cash flow isn’t enough to finance business growth. financing refers to a business raising capital from debt and equity sources, by borrowing money from banks and other sources willing to loan money to the business and by its owners putting additional money in the business.

    The term also includes the other side, making payments on debt and returning capital to owners. It includes cash distributions by the business from profit to its owners. Most businesses borrow money for both short terms and long terms. Most cash flow statements report only the net increase or decrease in short-term debt, not the total amounts borrowed and total payments on the debt.

    When reporting long-term debt, however, both the total amounts and the repayments on long-term debt during a year are generally reported in the statement of cash flows. These are reported as gross figures, rather than net; but, putting aside the fact that every business needs to make investments and secure financing in order to maintain a healthy economic life, one thing that must be understood is the cash flow of a business should be fluid.

     

  • Depreciation Accounting and Reporting Methods


    In an accountant’s reporting systems, depreciation of a business’ fixed assets such as its buildings, equipment, computers, etc. is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, s/he counts depreciation as an expense. Buildings, machinery, tools, vehicles and furniture all have a limited useful life.

    All fixed assets, except for actual land, have a limited lifetime of usefulness to a business. Depreciation is the method of accounting that allocates the total cost of fixed assets to each year of their use in helping the business generate revenue. Part of the total sales revenue of a business includes recovering of cost invested in its fixed assets.

    In a real sense a business sells some of its fixed assets in the sales prices that it charges it customers. For example, when you go to a grocery store, a small portion of the price you pay for eggs…

    …or bread goes toward the cost of the buildings, the machinery, bread ovens, etc. Each reporting period, a business recoups part of the cost invested in its fixed assets.

    It’s not enough for the accountant to add back depreciation for the year to bottom-line profit. The changes in other assets, as well as the changes in liabilities, also affect cash flow from profit. The competent accountant will factor in all the changes that determine cash flow from profit. Depreciation is only one of many adjustments to the net income of a business to determine cash flow from operating activities.

    Amortization of intangible assets is another expense that is recorded against a business’ assets for the fiscal year of that business. This is different in that it does not require a cash outlay in the year being charged with the expense. That occurred when the business invested in those tangible assets in prior years. Depreciation is not necessarily limited to a business, but can be used on personally owned investment real estate.

  • Depreciation as an Expense


    Depreciation is a term we hear about frequently, but don’t really understand. It’s an essential component of accounting however. Depreciation is an expense that is recorded at the same time and in the same period as other accounts. Long-term operating assets that are not held for sale in the course of business are called fixed assets.

    Fixed assets include buildings, machinery, office equipment, vehicles, computers and other equipment. They can also include items such as shelves and cabinets. Depreciation refers to spreading out the cost of a fixed asset over the years of its useful life to a business, instead of charging the entire cost to expense in the year the asset was purchased.

    According to this method of dealing with Depreciation, each year that the equipment or asset is used bears a share of the total cost. As an example, cars and trucks are typically depreciated over five years. The idea is to charge a fraction of the total cost to depreciation expense during each of the five years, rather than just the first year.

    Depreciation applies only to fixed assets that you actually buy, not those you rent or lease. Depreciation is a real expense, but not necessarily a cash outlay expense in the year it’s recorded. The cash outlay does actually occur when the fixed asset is acquired, but is recorded over a period of time.

    Depreciation is different from other expenses. It is deducted from sales revenue to determine profit, but the depreciation expense recorded in a reporting period doesn’t require any true cash outlay during that period. Depreciation expense is that portion of the total cost of a business’s fixed assets that is allocated to the period to record the cost of using the assets during period. The higher the total cost of a business’s fixed assets, then the higher its depreciation expense.