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But if your accounting software is out of date, it actually might be doing more harm than good for your business.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!

An Exit Interview with Jim Ramstad

Jim Ramstad is no stranger when it comes to business. From starting businesses to selling businesses and every step in between, Jim has done it all. After all his time and experience, Jim has decided it’s time for a new path in life – retirement!

Jim has been an important part of our work here at Eide Bailly, and we know his advice and knowledge will be missed. We sat down with Jim to ask him to share some of his thoughts and advice with you, fellow business owners and entrepreneurs.

How long have you worked in the business world?

Altogether, I’ve spent 49 years in the business world, involved in various aspects of business.

How/what made you want to get involved in business?

Growing up and in high school, I never even thought of getting involved in business. In fact, I wanted to be a teacher and a coach. As I grew up, I watched as my dad’s family did very well for themselves in business. As I watched their successes and trials, I became more and more intrigued, and decided it was the right path for me.

If you weren’t in business, what would you be doing?

As mentioned before, I thought about being a teacher and a coach when I was younger. Now looking at it, I think it would be fun to be in politics. Twenty some years ago, I took a personality test that determined the top two areas that would make sense for me career wise. My top two were politician and ambassador, and accountant wasn’t even on the list. I feel like ambassador made sense, and I’ve gotten to do some of that in being an ambassador for other businesses.

How long have you been at Eide Bailly?

I’ve been working at Eide Bailly for 12 years, and I was a client here before I started working here. I’ve always had a connection with the Firm, which has led me to some of the career positions I’ve been in.

What positions have you held prior to being at Eide Bailly and at Eide Bailly?

Prior to being at Eide Bailly, I held many different positions. I’ve been an accountant, controller, CFO, COO and CEO. I’ve also done business development and government relations for a company in which I got to propose a piece of legislation that actually got approved into law in the energy bill.

Here at Eide Bailly, I’ve always worked in business advisory. In 2005, I started working with entrepreneurs to help get their businesses to take off. Throughout this role, I’ve been blessed and fortunate to take my personal experiences in business and apply it to other clients and help them learn from it.

What was your favorite position and why?

I don’t think I could really pick a favorite – I’ve enjoyed them all! I’ve really enjoyed the last twelve years here at Eide Bailly. I’ve enjoyed getting to apply my past experiences while also learning new things from our clients. Although there have been challenges, I’ve found it very rewarding.

What changes did you see take place in the business/accounting world during your tenure?

The biggest and most obvious change I’ve seen is in technology. From everything being completely manual to now being nearly all online and in the cloud, it’s been a total change. When I was 26, I worked with for a trucking company that completed everything manually. I gradually helped introduce them to technology, which was a process. Now, they use technology for everything.

What advice would you offer small to mid – sized businesses just getting started?

Get an advisor. It’s important to find people who are truly and genuinely interested in you and your success, not just in selling you something or getting a fee for the job. Find these people and rely on them – don’t try to do it all on your own.

What will you miss most about Eide Bailly?

The people, hands down. I am also sad that I won’t be around to watch the Possibilities Center grow into a bigger, Firm-wide practice, but I will be paying attention and willing to help if the need arises.

What are your plans after retiring?

I’m going to stay busy. I’m going to use my facilitation skills to start some groups in the FM area, such as mastermind groups and a bible study type group. I always want to continue to be a mentor and resource for Eide Bailly professionals who may need my help. The rest of my time will be spent with family, being a grandpa and a great grandpa.

While Jim isn’t leaving us for a few more weeks, please join us in wishing him well and thanking him for all his hard work and dedication.

Three Components You Can’t Ignore

Like you, your business is alive. But is it thriving? Are you giving it the fuel it needs to grow?

Many components of business require the time of owners, founders and management. And three critical components stand out—accounting, culture and systems. Sure, it’s possible to make money without these, but it can be extremely difficult to grow or reach goals. Surprisingly, these three components are typically ignored or left to chance. Don’t leave your success to chance.

Accounting, culture and systems are equally important, although one might take priority over the other two, depending on your business and its current development stage. But no matter where you’re at, it’s important to be aware of how these three components contribute to your progress.

Accounting

Accounting is usually most ignored by small and beginning businesses. However, we’ve seen many well established, profitable companies that don’t have or can’t produce reliable financials on demand. Without that, management loses all ability to gain valuable information that’s provided in financial statements.

So, why is accounting often ignored? While each business likely has its own, unique reasons, there are some common themes we see. Often times, small businesses just can’t afford to have in house accounting people, so these functions get pushed to the back burner. Another common theme we see stems from lack of understanding. Accounting can be tricky, and when businesses don’t understand their numbers, they often times just ignore them and hope for the best. This can lead to some serious financial issues that, if ignored, can take a business downhill fast.

Culture

Culture is your company’s personality. It’s how your staff interacts with each other and customers. If you don’t identify and define your culture, you can stunt your business’s efforts to grow. For example, one business owner almost completely replaced her staff. Her former staff wanted to keep the “mom and pop” feel. In her long-range planning, which her former staff was part of, they identified strategies for growing the business, complete with revenue targets. It wasn’t until the owner began taking the necessary action to achieve the growth did she realize her staff wasn’t actually on board. Her views of change and growth for the company differed from her staff, which created a cultural nightmare.

It is imperative for everyone to believe and share the company culture. Maybe this means creating policies and procedures that directly align with your company culture, or hosting meetings and events to help your staff understand and adapt to the company culture. However you implement it, culture is too important to ignore – after all, your people are at the heart of your business.

Systems

Proper systems are more than writing down the process. The systems should be both quantifiable and qualified. Quantifiable means it should be set up to measure if things are being done the same way every time, and if the desired results are being achieved. A qualified system is one that’s performed the same way and the way it was written, even if you or management is not present. It should be pointed out that it’s not necessary to systematize your entire business. Focus on areas that create consistent and reoccurring frustrations, are important to the operation and growth of the business and where consistent results are needed.

To sum it all up, all components of your business are important. Your accounting needs, culture and systems and processes are three components that stand out because unfortunately, they are often ignored. By devoting more time, effort and resources into these, you can help your business stay on track for growth and continued success.

*Shameless plug: These three components may seem confusing, scary and downright challenging, but it doesn’t have to be that way. We have talented professionals who dedicate their time and skills to helping your business succeed. If you need help, let us know!

When it Comes to Accounting, Communication is Key

By: Kristie Rants, Eide Bailly LLP

We get it: the thought of sitting down and talking with your accountant might be a little scary. After all, all they do all day is sit and stare at numbers and do math, and their jargon and lingo is hard, if not impossible, to understand, right?

Not exactly.

While the thought of having conversations with your accountant might be intimidating, it really shouldn’t be. More often than not, your friendly number cruncher wants to talk to you, too (and we promise to use words that make sense)!

To help the conversation go smoothly, we came up with some tips to help you have successful conversations with your accountant.

Communication is key

  • First and foremost: figure out the best method for communicating with your accountant. Whether it’s in person, email or even Skype, agree on what works best for both of you.
  • Decide on frequency for communicating. Some businesses may need to have meetings weekly, while others may be on a monthly schedule. This is usually driven by business needs.
  • Make sure you’re both on the same page. It’s important that your accountant understands your business, just as you should be able to understand what they’re talking about. If you are unsure about the topic being discussed, don’t nod your head – ask more questions!
  • Establish a relationship. Create an environment where both you and your accountant are comfortable with each other. When you have a solid relationship with your accountant, it’s often easier to ask whatever is on your mind, no matter how basic it may seem.

 

Be prepared

  • Come prepared to each meeting. Make sure you have organized and complete information to share. If you’re not sure what exactly to bring, ask your accountant. He or she can give you a list of documents and information that might be needed.
  • Be prepared to share any changes occurring in your business. This keeps your accountant in the know and decreases the likelihood of any unwanted surprises in the future.
  • Ask questions throughout the year and as they arise rather than holding them all in. It’s easier to remember and examine information right away, rather than waiting six months down the road.
  • If your accountant sends out newsletters, articles, etc., read them! These often contain current and important information that can impact your business. If your accountant thinks it’s important, you should give it a read as well.

Accountants wear many hats

  • Your accountant likely has access to many resources to help you with any phase of your business. Your accountant can do all sorts of tax planning, whether you’re interested in putting away additional money in a retirement plan or wondering what your options are for depreciating equipment. Maybe a cost segregation study to accelerate depreciation or a 179d study makes sense for you!
  • Accountants can even help train you or your staff. Ask them if they offer an on-site service. Sometimes a few hours of training makes all of the difference. (Shameless plug: our accounting coach services do just that)!
  • Consider what stage your business is in. If you’re thinking about selling (or buying) or even retiring, your accountant can likely help you or introduce you to someone who can get you on the right track for a successful transition. They have the expertise to help you succeed.

The moral of the story…

Communicating with accountants can seem intimidating and confusing. Using these tips can help you have successful conversations. If you’re still intimidated, reach out. We promise to help you understand the accounting side of your business so you can get back to doing what you love.