Accounting Pitfalls to Avoid

Accuracy is critical in accounting. From basic bookkeeping to financial reporting, accurate and timely entries are essential practices for any business. Adherence to disciplined accounting practices enables businesses to accurately monitor the financial health of their company.

In addition to accounting accuracy, businesses also need to ensure that they have an understanding of key functions such as cash flow planning and management.

Following are some accounting pitfalls to avoid, particularly for small businesses, where resources and budgets are often rationed.

Missing entries and untracked expenses

It is easy to forget about recording an expense once the transaction is complete. Once an entry is missed, it may go unnoticed until tax time. Not only does this result in inaccurate accounting and finances, it can also erode profits, as expenses which are smaller than those stipulated by the IRS guidelines remain unrecorded by business owners. However, these small expenses accumulate and could be beneficial to track for tax purposes. Even small expenses can add up to help you qualify for effective tax deductions.

Mismanaging cash flow

Cash flow management helps you monitor income and expenses. Poor cash flow management can lead to the illusion that there is enough cash, whereas in reality, the income no longer matches the expense. You may feel that there is enough cash reserve, while in reality the expense has already exceeded income. This can happen with your petty cash reserves, as well as with the company's overall finances. With small cash reserves, this problem may be compounded, since it is easy to lose track of money withdrawn.

Not managing the cash flow can result in cash crunches when you least expect or need them, eating into investment opportunities or derailing plans for expansion which may need some initial expenses.

Delaying account reconciliation

Account reconciliation is a critical step in the bookkeeping process. For business owners performing this function themselves, it is often relegated as a task to complete later. However, this opens the door for small errors to snowball into larger accounting mistakes. Further, like poor cash flow management, this can also give you a false sense of liquidity.

Using manual accounting

Manual accounting is not a pitfall in itself, but it can lead significant errors, especially if your company is growing. Accounting software can assist in regulating your bookkeeping, ensuring more accurate books, and eventually, dependable financial reports. Using software to automate accounting can help your business in several ways:

• Automated systems track and update records of funds withdrawn; they also balance the remaining reserves, thus providing the correct measure of liquidity.
• Automation reduces dependency on human beings, therefore reducing opportunities for human error or fraud.
• Automation helps create updated reports and, more importantly, accounts that are tracked and contain recorded data. In contrast to manual bookkeeping, automation can generate reliable audit trails and ensure accurate financial data.

These are just some of the accounting pitfalls that companies should attempt to avoid in an effort to maintain accurate financial records.

Analytix Solutions
The Company that CPAs Recommend
Analytix Solutions is a professional full-service business support solutions provider. The company offers comprehensive and scalable bookkeeping and accounting services while leveraging its expertise, experience, and state-of-the-art infrastructure. It offers multiple services in diverse packages for companies that are seeking a trustworthy and professional partner to give their business a head start.

Five Business Functions to Automate

Although small to mid-sized businesses may operate under constricted budgets, this does not imply a decrease in quality of work, regardless of limited infrastructure or manpower. Optimizing existing resources can help you remain within budget parameters, while ensuring that client deliverables and client expectations are met.

Automation can assist small businesses in optimizing existing resources. With automation, companies need not invest in expensive new machinery or hire highly skilled human resources. Identifying key areas to automate can produce significant productivity results. Often times, vendors or partner companies can assist with automating certain functions. An experienced vendor who is familiar with your business may also help you identify areas which could benefit most from automation. As a starting point, following are five suggested business functions worth investigating for automation.

Financial processes: Due their significance within the daily operations of a small to mid-sized business, financial processes can benefit immensely from automation. Timely access to data and data accuracy are equally important in recording financial transactions. Automation improves the quality of both.

Accounting: Accounting functions are the backbone of every business, including start-ups or solo practitioners. Accounting is also an area which requires maximum attention to detail. A minor error that occurs when recording revenues can result in major revenue losses, or worse significant tax implications.

However, for many small business owners, minimizing accounting errors while meeting client requirements often are at odds with each other. Business owners can only perform a finite number of functions and do them well. They can either work diligently to ensure client deliverables are met, thereby often neglecting accounting tasks, or they can pull key resources from business deliverables to focus on the companies financials. However, automating accounting functions can assist in ensuring both objectives are met. In addition, automation reduces dependency on human resources therefore freeing up an employee's time to focus on more client focused work.

Bookkeeping: Bookkeeping is the foundation for accounting. When companies automate bookkeeping functions, business owners can feel confident that record keeping is completed in a timely and accurate manner. Automated bookkeeping assists in creating timely records. For example, regular, periodic transactions can be recorded instantaneously. This eliminates the possibility of omitting particular entries, as well.

IT processes: As a small business, dependence on IT can determine the speed and efficiency with which you service clients. Automating your IT processes can help radically reduce actual time incurred to execute. Besides execution, IT automation can assist in ensuring better record-keeping and adherence to deadlines through a system of automated triggers, email-reminders, etc.

In addition, automated IT processes also help track initiation and the progress of various assignments and projects, as well as promote business continuity.

Training and Communication: Automation can enhance communication needs as well, including training. In the case of small businesses where employees may work remotely or in various geographic locations, business owners can create frameworks which serve as information and training portals, thus cutting reducing time and expenses involved in live training and knowledge transfers.

In summary, for many companies, these five areas are worth investigating as areas which could benefit from automation.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

Cash vs. Accrual Method: Which is Best for Your Business?

The cash accounting method is a type of accounting that takes into consideration both income and expenses, when payments are made in cash. This payment could consist of either cash received or cash given/paid. In contrast, the accrual accounting method records income as revenue earned while expenses are noted as liabilities. These transactions are noted in the accounting books, without the necessity of cash being paid out or received.

So, which method is best for your business? It depends.

A closer look at the cash method

The cash basis of accounting records the income or expense at the time the cash is exchanged. The cash method is considered an uncomplicated and simpler process. It is also easy to understand and is most often applied to individual or personal finances. Under the cash method, income received is taxable at the time of receipt, while deductions are made at the time of the expense.

This means that a transaction is not recognized until the payments are cleared. If the payment becomes delayed, the process of recording the transaction is also delayed. Thus, the cash method can prove to be an inaccurate measure of the company's accounts.

Although it seems easy to maintain, the cash method could also depict a company's income as being highly inconsistent. For example, if Company A follows the cash method, and it receives a high-value project, the company cannot record any revenue earned until they are paid for the project. This means that if it is a long-term project, the company's income records will not show any revenue as earned until the actual payment is made. This can result in certain periods showing limited income, while others show as high-revenue periods.

Unfortunately, this can lead to an inaccurate depiction of a company's financial status. These discrepancies could have repercussions when preparing tax returns or seeking loans and financing.

A closer look at the accrual method

The accrual method is the opposite of the cash method. Regardless of when the cash exchange occurs, a transaction is recorded in the accounting books. This method accounts for expected revenue, as well as credit payments. As a result, it is a more accurate record of a company's current status.

The accrual method is based on the principle that if a sale or economic transaction has occurred, then cash will exchange hands at some point. Records in the account books thus reflect the point at which the transaction took place. Typically, accrual method entries for income are noted in a column termed as accounts receivable. Regardless of actual cash changing hands, the entry in the account books indicates income received.

The accrual method, in contrast to the cash method, recognizes that long-term financial transactions can reflect upon a company's current financial status. Because of the accuracy required of this method in outlining the financial status of a company, it is more prevalent among larger businesses.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

Accounting Services: A Means For Focusing More On Your Small Business

Using accounting services has become a common practice with small and mid-sized businesses, which have fewer resources to manage their business with. A professional accounting service provider has the potential of saving small businesses up to 40% in costs, which can be used to develop the business further. However, using an accounting firm to maintain books of accounts is not just a way to reduce costs; it has many other benefits also.

Focus on your main business activity

The most important reason you should use accounting services from a professional is that you can then focus on your main business activity. Maintaining your books of accounts is not your specialty, and you should hence not spend time doing that. If you have an accounting firm taking care of all your accounting and bookkeeping, you can stop worrying about it and spend more time on core activities which can increase business for you. Handing over all your accounting tasks to an experienced accounting service provider will free valuable time for you which can be a crucial factor for making your small business successful.

Reduce employee-related issues

Many businesses face a lot of issues related to hiring, training and retaining in-house employees. Sometimes, in case of bigger problems, businesses face employee-related lawsuits, which are time consuming. When you use accounting services from a service provider, you don’t have to worry about any issue related to employees, as you are using services and not employing people directly. An accounting firm hence ensures that you save on time and resources of hiring in-house employees.

Experts at your service

Using accounting services from a professional ensures that your books of accounts are being taken care of by experts in the field of accounting and bookkeeping. Accounting firms hire experts who are efficient and experienced at what they do and will work better than an in-house accountant. With such experts working on your accounting, there will also be less likelihood of mistakes in the work that is completed. You hence not only save cost of hiring an accountant, but also get a much more experienced staff to complete your accounting.

Save on office space and resources

The space that your in-house accountant would utilize for maintaining your books of accounts can be saved if you use outsourced accounting services. Accounting firms generally provide online accounting, which eliminates the requirement of any office space. You hence save on rent of an office or the space occupied by your accountant, which you can utilize elsewhere in your business.

No last minute problems

An accounting service provider updates transactions in your books of accounts on daily basis. You can hence stop worrying about pending tasks or last minute glitches at the time of tax filing and annual audits. Your books will be up to date at any given point of time, which eliminates the hassles of last-minute problems which are typically faced at the time of filing of tax.

An experienced accounting firm can reduce your burden of everyday activities, so that you can develop your business according to the vision you have. You may benefit even more if your accounting service provider has some experience in dealing with businesses similar to yours.

Accounting Services: An Integral Part Of Your Small Business Growth

Are you an expert accountant? Most small business owners aren't, and that's why they need the help of a professional who provides accounting services. Hiring such professionals for accounting services can ensure that your books of accounts are in the right hands, so that you can focus on your business. Small business owners are generally tempted to take care of their own accounting. However, hiring a professional for small business accounting services holds some aces over do-it-yourself accounting.

Why a professional for accounting services?

Until recently, small businesses used to hire in-house staff to take care of their accounting for them. This was the only option available to small businesses, as there were few professional accounting service providers available. However, small business owners are increasingly starting to use outsourced accounting services due to the various advantages it offers. The number of service providers for small business accounting has also increased exponentially in the past few years.

Using accounting services can save precious resources, especially for small businesses. The cost of hiring and training an in-house accountant is huge, and an accounting service provider may help save as much as 40% of the cost of such recruitment. A professional company for small business accounting is an expert at what it does, so you need not worry about the quality of work being done. Such an accounting firm is also available 24x7 through phone, email, teleconferencing etc., so accessibility is also not an issue. If an accounting service provider is giving you a cheaper deal and taking care of all your accounting requirements efficiently, why should you hire in-house staff for accounting?

What to expect when you use accounting services?

A professional accounting service provider will be completely dedicated to maintaining your books of accounts. So instead of one single accountant in-house, you will have a whole company at your service. Most accounting service providers provide customized accounting services, which will be completely tailored as per your requirements. A company specializing in small business accounting will also have the latest software and experts to make sure the job is completed properly.

Most accounting service providers offer other services as well. For example, an accounting firm may also be offering bookkeeping services, tax preparation services etc. When you are checking out the company's service portfolio, see other service offerings they have over and above accounting services. If you see anything that applies to your business in addition to small business accounting, have that added in your package.

Accounting firms also provide completely scalable services, so you can change your package or requirements at any time you want. However, you need to discuss the scalability of services with the accounting service provider in question. You may also be thinking about the security of your financial information when you use accounting services from a third party. But you can rest assured that an experienced company providing accounting services will have adequate security measures to keep all your data safe. Ask your accounting service provider about the security measure it takes to keep all your data safe.

Happy Thanksgiving 2009

It’s time to be thankful for all the good things in life: Thanksgiving 2009 is upon us. Thanksgiving holiday is the time when you gather with family and friends and say thanks for all the good things you have in life. It is a day for celebration, sharing and appreciation.

Analytix Solutions wishes all its accounting and bookkeeping clients a very happy Thanksgiving 2009.

Analytix thanks all its clients for standing by it for so long and hopes this support will continue well into the coming years. To add to all those Thanksgiving deals that are being offered on this occasion, Analytix has one of its own. As a special Thanksgiving offer, Analytix Solutions announces an additional 10% off on all accounting and bookkeeping packages on Thanksgiving day. Hurry and avail of this special offer on the special occasion of Thanksgiving.

HAPPY HALLOWEEN!

31st October, the Halloween day of 2009 is here! It's that time of the year when you can carve those pumpkins, wear your best Halloween costumes and go "Trick or Treat" from door to door. You can also look for special Halloween deals to get stuff you have been waiting to buy all year.

Analytix Solutions wishes all its accounting and bookkeeping clients a very happy Halloween 2009.

If your books of accounts are tricking you or are giving you nightmares worse than Halloween, Analytix Solutions can drive them away. With Analytix into the picture, accounting and bookkeeping for your business can be a simple, effortless task for you. This Halloween, accounting and bookkeeping packages from Analytix become even better, with 10% off on all packages for the day. Take advantage of this Halloween offer right now and save your precious business resources!

Does your accounting firm adhere to these best practices? Important tips for new restaurant owners.

You may have read about the basics of restaurant accounting and bookkeeping in one of our previous posts. Owing to the large amount of queries that we receive from the new and existing restaurant owners, we thought of touching base with the other elements that are directly or indirectly connected with restaurant accounting and bookkeeping. There is a very thin line which separates the success or failure of a restaurant business; accounting and bookkeeping is a major part of the success path for a restaurant. Small discrepancies in books of accounts can force even an experienced restaurateur to close shop. We hence thought of listing down some best practices applicable to restaurants so that you can ensure that your accounting firm can follow them.

Monthly Profit and Loss Statement
A monthly P&L statement helps restaurateurs be aware of just where their restaurant stands profit-wise. If you have an accounting firm which prepares your books for you, ask it to prepare a P&L statement monthly and send it to you so that you know month-by-month progress your restaurant is making. Just looking at the statement, you will get an overall idea of the profit or loss of your restaurant, and take steps to improve accordingly.

Inventory Management
Most restaurants incur losses because the owners don’t have any idea of their inventory and how it is being used. Many restaurateurs assume that the inventory is being used properly and do not manage it properly. This can be a costly mistake for the business. Most accounting firms now provide inventory management as part of their accounting services. Ask your bookkeeping firm to include inventory management in its services offering for your restaurant.

4-week Accounting Period
Accounting and bookkeeping experts recommend a 4-week accounting period for restaurants simply because it holds many advantages for it. Restaurateurs can compare performance of the business with the week or month of last year if they follow a 4-week accounting period. If your accounting firm is an expert in the restaurant industry, it will be aware of this fact and will recommend a 4-week accounting period to you.

Weekly Cost Reporting
Also ensure that your accounting firm provides weekly reports of all the costs your restaurant business incurs. Restaurants have a lot of costs that they incur weekly, like labor, food etc. Being aware of the weekly costs of labor, food etc. will help you cut down unnecessary expenditures and remain profitable.

Designate a Professional for Accounting and Bookkeeping
If all of the above sounds too complicated for you to keep track of, designate a dedicated professional for all your accounting and bookkeeping. Ideally, it should be an accounting firm which specializes in restaurant accounting, as it will know the tricks of the trade from the beginning.

Following the above-mentioned best practices for accounting and bookkeeping of your restaurant will not only help it stay afloat in this tough economy, it will also help make sure that it remains profitable. Your accounting firm can become your partner in your goal of ensuring the profitability of your restaurant.

OUTSOURCING YOUR BOOKS - The smarter way to save money

The importance of maintaining proper books and accounts is not just to file proper taxes, but essential to check the financial pulse of your business. The survival of your business depends on efficient, timely, well ordered financial reports providing timely updates and alerts on problem areas of business. Correct diagnosis and subsequent remedies depends on identifying the problem and finding right solution at the right time.

Although Bookkeeping and Accounting is not as hard as Rocket Science that would require extremely qualified professionals, it does require necessary skills, analytical ability, and complete concentration to maintain accuracy to avoid serious and expensive problems. This might translate for most of us into being tedious, boring, and time consuming frustrating task. However, this bull needs to be taken by its horns. It’s a necessary evil, which is why services of bookkeeper/accountant/CPA are sought.

But is there a smarter way to tackle your books and accounts?

It may sound noise to some ears, but Outsourcing can really work for even the small businesses too. If it means significant cost savings, you can always argue that it is a default advantage and well touted by all vendors. But there are few other not so obvious benefits too.

It is no secret that large companies have been sub-contracting or outsourcing their non-core functions to expert vendors to take advantage of economies of scale. This option was not readily available to small firms earlier. But economic slump is inducing more and more companies to look at this option. And if you have a local Outsourcing vendor who can provide an on demand one-to-one support, most of your fears regarding Outsourcing can be put to rest.

The obvious advantages of outsourcing accounting, bookkeeping and tax services are::..
· Pay only for reasonable time taken to render services. Rates are generally charged on hourly

basis
· Saves up to 40-50% of operational costs as this does not require infrastructure or related support
· Quick turnaround of work
· 24x7 online access to your books and records
· Flexible and fully scalable modules
· Move towards a paperless office
· Reduces burden of staff and who can then be channelized to other productive activities
· Last but not the least, more time to strategize and concentrate on core functions

The not so obvious benefits of outsourcing are::..
· Access to ‘on demand’ qualified talent
· Access to service and client oriented vendors, since their existence depends on satisfying you.
· Flexibility towards changes and improvements demanded by your growing business which might be difficult to implement with in-house staff who are prone to resisting changes.
· No headache of retaining staff or training newbies. Time saved equals to money saved at the end of the day
· No requirements of any additional capital investment so there is reduction in total investment risk. More opportunities to invest in income generating areas.
· Outsource additional burden during busy time without adding costs of hiring new people.
· Save on add on costs like sick leave, benefits, bonus, promotions, training, house allowances etc without compromising on quality while getting work done faster.

However before jumping the band wagon and enjoying all the fruits from outsourcing, some essential points for consideration:
· Research the vendor thoroughly. Check credentials from other clients, networking and referral sources
· Partner with vendors having ethics and integrity instead of just being cost-oriented
· Vendor must be conversant with bookkeeping and accounting standards of your country
· Check the security and confidentiality policy of the vendor
· Check the quality standards and non-performance penalty clause of vendor
· Check how and where the disputes arising will be resolved
· Check whether your liability insurance covers outsourcing

The decision ultimately depends on business owner’s choice.

Do what is more appropriate for your company and reap long term benefits. The ultimate benefit of outsourcing if done right, leads to significant improvements in efficiency, cost savings and growth in the core functions of the business.