Is it Time to Upgrade?

Accounting software is a great tool for your business. It helps you keep track of invoices, let’s you see where are your money is going and even allows you to access your information basically anytime, anywhere.

But if your accounting software is out of date, it actually might be doing more harm than good for your business. Here are some signs that it might be time to look into an updated system.

  • Are you still communicating with vendors and customers through email or even *gasp* snail mail? If so, it may be time to look for a system that provides an easier way to communicate.
  • If your desk is covered in papers and you have paper invoices and timecards coming out your ears, it’s time to stop endangering the tree population and look into a system that can do this electronically.
  • It might be time to look into some new software if your system doesn’t allow you to look at your information anytime, anywhere. This includes your cell phone – many systems allow you to have all of your information at the swipe of a finger.
  • Is your chart of accounts endless? Or, maybe you need to create a whole new set of accounts each time you add another profit or cost center (grants, jobs, products lines, etc.). Either way, both are major signs that it’s time to upgrade and update.
  • Your account system should do what you need it to, without you having to perform extra steps and work arounds. If your system is doing the exact opposite of its intended purpose, it’s time for something new.
  • If your vendor has completely stopped (or won’t be for much longer) supporting your software, you’ll need to upgrade. Although this sounds pretty obvious, we see this problem quite often!
  • It’s time to upgrade to a new system if you’re still using spreadsheets to track date and compute calculations. (Hint: accounting software does this for you!)
  • Here’s a big one. Do you enter manual journal entries – maybe you’ve even compiled them in your spreadsheets? Are you operating in several systems that don’t sync together? Time to get on board with a new, updated system!
  • Consider how much time you are devoting to closing the books each month. If you’re manually creating reports and manually completing the consolidation process, you’re wasting your time. An updated system can help you save your time to dedicate to other parts of your business.

If any of these common warning signs sound like something you are experiencing, now is probably a good time to start looking for new, updated accounting software. Although the transition won’t be easy, the benefits to your business will be worth it!

Have Questions? We have Answers

In our line of work, we get a lot of questions on anything and everything related to owning and operating a business (and we’re happy to answer them, too)! While a lot of these questions are usually pretty easy to answer, sometimes we get a few that really make us think. Even then, we enjoy researching and finding the answers to help business owners be successful.

So, what questions do you have about your business? We would love to help you reach your dreams and goals.

In case you think your question might be too far out there, we promise it’s not. Check out some of these questions (and our answers) to get you started on finding the information you need to watch your business succeed.

“I have invoices coming out of my ears! What do I do with all of them?”

When you have a large amount of invoices to deal with, it’s easy to get overwhelmed and lose track of what needs to get done. When invoices aren’t being properly managed, your business can see some serious negative side effects, such as fraud. Following this list of tasks can help you make sure you’re keeping everything in check. Looking to an automated system, such as QuickBooks, is also a great way to keep your invoices at a manageable level.

“Where in the world did all of my cash go?”

This question is more common than you may think. While your business may be profitable, you can still be running out of cash, which might be a concern. Financial struggles can be hard, but our professionals are available to help. Check out this blog – and then, let’s talk!

“Why don’t I have enough time to do everything that needs to get done?”

We get it: owning and operating a business means you have a lot on your plate. From accounting and finance, to human resources to the day-to-day operations, you probably don’t have enough time to do it all yourself. The good news is you don’t have to! Consider your team of employees. What can you delegate to take some of the burden off your shoulders and free up some time? Another option is outsourcing. When you outsource some of your business activities, such as your accounting processes, you free up time to focus on why you got into business in the first place.

“What is this accrual accounting thing I hear so much about? Am I doing it?”

Knowing the specific ins and outs of accounting can be a confusing, daunting task. What it comes to what method of accounting you are using, the water may get even muddier. Maybe you’ve heard of cash based accounting and accrual accounting, but you really have no idea where to begin. We’ve written multiple blogs on how to tell the difference and how to select what fits your business and set up your books. Check them out!

“Taxes terrify me. Where do I even begin?”

Taxes are a complex issue, and questions regarding this topic are common. Whether you want to know more about R&D tax credits, employer vehicles and mileage, how to track your taxes or even all those pesky (yet necessary) forms, we’ve got you covered. Check out our tax archive for answers to all your most pressing questions. If you can’t find the answer, let us know.

Remember, although we numbers nerds really like our financial lingo, we promise to answer your questions in a way you will understand, not just a bunch of accountant talk. After all, we want to see your business succeed!

Setting up for Success: Part 2

Welcome to our “Setting up for Success: Part 2” blog post. Part one focused on selecting a basis for your accounting and determining what information you need to track in your business.

Now that you understand what you need to track, how do you track this important information?

You can start by developing your chart of accounts. We know what you’re thinking: “develop my what?!”

Your chart of accounts is a listing of accounts that are needed to prepare financial statements and reports. A typical structure looks like this:

1000-1999 Assets

            2000-2999 Liabilities 

            3000-3999 Equity

            4000-4999 Sales

            5000-5999 Cost of Goods Sold (COGS)

            6000-6999 Operating Expenses (General and Administrative)

            7000-7999 Other Income and Expense

            8000-8999 Income Tax Expense

Account numbered 1000-3999 are used in preparing the balance sheet, while numbers 4000-8999 are used in preparing the income statement, which focuses on profit and loss. Of course, the number of individual accounts within each category will depend on the specific needs of your business.

A good rule to keep practice is to try to use the least number of accounts to attain the financial information you need, and structure it for growth.

What do we mean by growth? Let’s take a closer look at the assets section:

1000 Petty Cash

            1005 Checking

            1010 Savings

            1100 Accounts Receivable

            1200 Inventory

            1300 Prepaid Expenses

            1400 Fixed Assets

            1450 Accumulated Depreciation

You probably noticed the account numbers aren’t in sequential order. This allows for room for growth in your business.

You can also use the chart of accounts to track different jobs, departments, segments, etc. For example, maybe your business has locations across the Midwest in Fargo, Minneapolis and Sioux Falls. You want to be able to see how profitable you are at each location. You can track each location by assigning a division number, such as 01-Fargo, 02-Minneapolis, 03-Sioux Falls, and then attaching each division number to each of the accounts, like this:

            4000-01 Sales

            4000-02 Sales

            4000-03 Sales

            5000-01 COGS

            5000-02 COGS

            5000-03 COGS

Now that you know what information you need and how to track it, you can select an accounting system to help you track and keep information in order.

There are two options for tracking your information: manually or electronically (think desktop or cloud based). While there is no right or wrong way, computerized accounting is usually more efficient, which is leading to manual accounting becoming a dinosaur in today’s accounting world. Cloud based accounting also gives you the freedom to access your information anytime, anywhere. Who doesn’t love simplicity and accessibility?

It’s important, as always, to remember that each business is different, so accounting systems usually aren’t one size fits all. Doing your research and truly understanding your business’ needs can help you select a system that gives you the best possible results.

If all of this seems overwhelming, fear not. We have the resources and talent to help you design an accounting system that can set your business up for success.

Setting up for Success: Part 1

You’ve decided to start a new business – how exciting! There are many important things to consider when getting everything set up, such as your human resources policies (your employees matter!) and software and solutions (you want everything organized and running smoothly). Another important component you need to consider is your accounting – after all, these numbers lay the foundation for your business and essentially tell your story.

Accounting is an important part of your business, and getting it right the first time is crucial. So where do you even begin?

First, it’s important to understand your business and industry. This understanding can help you answer some important questions for designing your accounting system. Some of the questions that may come up include:

  • “What basis of accounting should I be using?”
  • “What information should I be tracking in order to make informed decisions?”
  • “I know what I want to track, but how do I track it?”

Let’s start with the first question: selecting your basis of accounting. Your basis of accounting is essentially a framework used to record your transactions. There are a few different types to choose from, with the following being the most common.

  • U.S. GAAP (United States Generally Accepted Accounting Principles) – Try saying that one ten times fast. This is an accrual based framework in which revenues and expenses are recorded when they are earned and incurred, respectively. This is the most commonly recommended type.
  • Cash Basis – In this framework, revenues and expenses are recorded when cash is received or paid, respectively. Cash basis presents two different methods of accounting: pure and modified. The difference comes in that under modified cash bases, some transactions follow U.S. GAAP. Check out this blog to learn more about cash versus accrual methods.
  • Income Tax Basis – This is a framework in which revenue and expense recording depends on tax regulations. This helps eliminate the need for converting from one basis of accounting to another for tax return purposes.
  • Regulatory – In this framework, a regulatory agency prescribes the best method.

Now that we’ve looked at the different basis types available, it’s time to determine what information you should be tracking. The key here is to capture all of your business transactions in the simplest, and most efficient, way possible. This includes both cash and noncash transactions.

Depending on your specific business or industry, you might need to consider tracking your transactions in greater detail. Here are some areas to consider tracking:

  • Should you be tracking direct and indirect costs related to construction or manufacturing contracts so you can see the profitability?
  • What sales tax jurisdictions do you need to track for sales tax reporting?
  • Do you need to track certain items for tax return purposes?
  • If you do business in multiple states, should you be tracking transactions by state for tax purposes?
  • Do you have different departments or divisions that you need to track in order to view profitability?

Once you decide what information you should be tracking, you can select an accounting solution, and start designing your accounting system.

Stay tuned for the second part of this blog, where we go in depth about how you track your information. Although we’ve shared similar posts about these topics in the past, we think a refresh and reminder is important. If you need help in the meantime, just ask!

Meet the Team: Stephanie Berggren

StephWhat is my role? My role is to help business owners by sharing and teaching what I love – accounting. Owners can focus on the fun stuff, like making their business grow, while my team and I can provide the accounting skills and knowledge to help them make smart growth decisions. My team and I can help them interpret the story the numbers are telling so they can have a better understanding of where their business is and where it’s going.

Why are numbers important for business?  Numbers are the story of your business. They tell the owner important statistics that, when understood and applied correctly, can help the business owner make informed decisions. Numbers tell the business owner what works and what doesn’t.

Why do I want you to succeed? When you succeed, we all succeed. I love the feeling of seeing businesses I worked with become successful. It develops a sense of pride in what I’ve accomplished, but also makes me excited to see where your business will go next!

#ILoveSmallBiz – Small businesses truly make the world go round. From job opportunities to innovative ideas, small businesses provide success and growth opportunities for our communities, which is a win-win for everyone.

Happy Small Business Week!

Happy Friday! We hope you’ve had a great week – after all, it was National Small Business Week!

What’s Small Business Week you ask? Dating back to 1963, the President has announced National Small Business Week every year. The purpose of this event is to recognize and celebrate the important, inspiring and amazing contributions of entrepreneurs and small business owners (personally, we think small businesses should be celebrated all the time.)

In honor of National Small Business Week, we want to share some of our favorite fun facts about small businesses – after all, we think they’re pretty neat!

  • According to the Small Business Administration, more than half of Americans work for or own a small business, and they create roughly two out of every three jobs in the US.
  • There are somewhere around 30 million small businesses in the US and of those, roughly 22 million consist of one lone employee!
  • One of the fastest growing industries for small businesses is the service industry – think auto repair and hair salons (but likely not in the same place.)
  • In 2015 alone, venture capitalists invested nearly $60 billion in small businesses. People know and understand the importance of these businesses – they show that by supporting ones they believe in.
  • Good news on profits! 2016 was the fourth consecutive year of improved net profits seen in businesses with less than $5 million in revenue.
  • Three of the top five challenges said to be facing small businesses in 2017 are increasing profit, growing revenue, and cash flow – finances really do matter!
  • Some of the biggest names in the business world (think Apple, Starbucks, Coors) all started out as small businesses, thanks to some generous funding.
  • Over half of small businesses have a CFO or controller (either in house or outsourced) managing their finances.

To top it all off, check out this video that shows even more statistics of just how important small businesses are:

http://mediahub.financialpicture.com/view/7823/481

We truly enjoy working with small businesses, and we’re happy to celebrate National Small Business week with you!

Successful Solution Selection

It can be overwhelming picking out a new, or even your first, business solution system. After all, this software can help you maintain your financials, customers and even your own internal resources. Picking out this solution is no easy task – and certainly not one to take lightly.

So where do you even begin?

It all begins when you realize your current system isn’t working (if you already have one), or when you realize some form of business software might help you better run your business (think better data, more efficiencies, etc) if you don’t already have one in place.

You then need to be a psychic and look to the future to see where your business will go and what software will get you there. Okay, not really, but you do need to think about your business needs looking forward. You will want to think about what growth you hope to see for your company, and what you will need from your software to get you there.

Once you understand what exactly you want from your solution, you can start evaluating different options. Of course, there are many options available, but have no fear – a consultant can help you find the right fit for your business (let us know if you need help).

To help you get started (because we’re nice like that), here are five tips for successful solution selection.

  1. Be sure to involve leaders from each division of your company in the process. These people are often the most impacted by the outcomes of your decision, so you want to make sure they have a say. By involving them, you can likely discover specific needs and desires that may have otherwise gone unnoticed. By including a broad range of leaders from your business, you can help ensure you’re choosing a solution that everyone can benefit from.
  2. Identify all the wants and needs for your new business tool, and then take the time to determine which are the most important to the success of your business. In a perfect world, there would be one solution that would cover absolutely everything on your list. However, reality disagrees. By creating a list, you know where you can compromise on some aspects and still get the best solution for your business.
  3. Ask around to find out what other business colleagues are using in their businesses. This can help you get valuable reviews on which products seem to be doing better than others, and can help you determine which ones will be a better fit in your industry. Learning from others can help you implement a trustworthy solution.
  4. After you’ve shopped around based on your wants and needs, consider contacting companies to set up product demonstrations. Seeing the tool in action gives you a real-time view of how this product would work within your business. When requesting demos, don’t be afraid to let the company know some specifics of what you want to see. After all, this is the success of your business we’re talking about, and you want the best solution possible.
  5. During these demos, make note of how the system performs on components that are important to your business’s success. After experiencing all the demos, you can go over your notes and see which systems performed well on these parameters, and which systems flopped.

Choosing a solution for your business can be a daunting task, especially with all the options available on the market. By following these five tips and reaching out to a consultant, you can comfortably make a decision on the best solution to fit your business.

A version of this blog first appeared on Eide Bailly’s technology consulting blog.