Recording financial transactions is the top priority for all businesses. While every financial document has its own importance, a Balance sheet is one that defines the financial health of a business entity at a given point of time. Balance sheet of a business contains enough financial data of an organisation to determine the growth of the company as well as predict its future expansion plans.
However, accounting mistakes can lead to discrepancies in the balance sheet that can prove to be costly for businesses. Here we will be discussing some common balance sheet mistakes that even professional Accountants and Bookkeepers can make and to avoid them.
Avoiding Balance Sheet mistakes:
Before we hop on to the discussion straight away, here’s a basic understanding of the formula that a Balance sheet operates upon and how each entity contributes:
- Assets – Anything that the business owns and has monetary value
- Liabilities – It includes the debts a company owes to others
- Shareholder’s Capital or Equity- This includes the total amount invested by the Shareholders
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It is a common balance sheet mistake to miss out on recording transactions like personal expenses, inventory, or any other financial transaction. Even professionals can face this situation where a transaction just slips out of their mind.
Recording transactions incorrectly
Mistakes are inevitable and a core part of human nature. Many times, business owners and accountants can be in a spot where they unknowingly record a transaction wrong. Don’t worry you aren’t suffering with Dyslexia if you record 71 as 17. It is a common transposition error and can be rectified easily if you double check the balance sheet. This is why many business owners prefer cross-checking the entries of their bookkeepers.
Missing out on recording inventory changes
Have you forgotten to record inventory changes?
Take it easy, it’s a common balance sheet mistake. At times even the easiest tasks are prone to mistakes. Make sure that you are doing your books on a regular basis since too much work can make Jack a dull boy and he can make such mistakes.
Classifying data incorrectly
As discussed earlier, Balance sheet works on 3 primary entities(assets, liabilities and equity). Inaccurately classifying your transactions can disrupt the balance sheet formula that it works on and can result in major errors. However, this is one mistake that professionals won;t make generally but in any case, proper classification of business transactions is imperative to avoid such errors.
Business owners who do their books on their own should re-verify the classification of their transactions with an accountant.
How to avoid balance sheet mistakes
Above discussed mistakes are pretty common and can create data irregularities within the balance sheet. Here’s how you can avoid them:
- Conduct a trial balance before creating your balance sheet
- Review and update balance sheet transactions regularly and double check them for common errors discussed above
- Keep your financial documents well-organized to avoid any hassle
- It is always advisable to seek professional help
From obtaining a business loan to better understand your business performance and liquidity position, balance sheet is a crucial business asset and its importance shouldn’t be overlooked.
Hire a Professional Bookkeeper of Ledger Bench and let the professionals do their job while you do the job you’re best at!!
“Ethics is knowing the difference between what you have a right to do and what is right to do.”- Potter Stewart
Ethics are an integral part of an individual that defines his/her professional ethics. And accounting is one such profession that affects the lives of millions of people each day which makes ethical accounting practices even more important. An accountant’s one mistake (be it intentional or unintentional) can wreak havoc in people’s life.
Enron scandal of 2001 is one such example that is cited as the biggest audit failure and left the Accounting profession questionable.
Therefore, ethical accounting practises are very important as businesses are counting on them to be fair and also it influences the lives of ordinary people to a great extent. Here’s what Ethical Accounting incorporates:
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Ethical Accounting and How to Practice it:
We are living in a globalized marketplace where Accounting services can be carried out from all around the world. Fair and transparent accounting practices define the honesty and integrity of an Accountant and make sure that they are positively affecting the lives of others. Here are a few reasons to practice Accounting:
- Accounting deals with sensitive financial information
- Accounting mistakes can affect many and can prove to be very costly
- Ethical Accounting ensures healthy and long-term business relationships with your clients
- It allows you to build a reputation and grow your professional network
- Practising Ethical Accounting will help you avoid any legal repercussions
Here the 5 common Ethical Accounting codes
There have been examples in the past where the Accounting profession can be driven by illicit gains, however, integrity towards the profession is a must to keep the profession ethical. Accounting firms and accountants should feel morally obliged to keep their reporting accurate and transparent.
Practising confidentiality restricts Accounting firms to share sensitive information with third-parties including unauthorized personnel of the organization. Sharing information either intentionally or unintentionally is against the ethical accounting code. However, if any information that goes against the public interest should be shared after seeking a professional lawyer’s help.
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Independence and objectivity
Objectivity is an ethical code that concerns an individual accountant’s whereas Independence is an Accounting attribute. Objectivity is an accountant’s mental state to be unbiased in his/her judgement and shouldn’t be driven by personal gains or someone else’s influence. Independence is what defines the objectivity of the Accounting profession as whole.
Accounting firms and accountants should be well-aware with the latest technology trends while they adopt best industry practices by continuously ups killing. Accounting professionals should be trained well to keep up with the industry norms and carry out their responsibilities while following the ethical code of competence.
No profession is ever complete without the commitment to practice professional behaviour while respecting the profession and complying up with the laws and regulations of their profession. Accounting Services need to ensure that they don’t negatively impact the profession.
Accounting profession is a sophisticated profession where mistakes can be costly. Also, professionals might get distracted to move up the ladder quickly by practicing illegal means, however, following ethical accounting is always the right way to be successful in the long-run while you don’t put your reputation at stake.
Business and tax are two inseparable entities that can’t stay away from one another for long enough. Every year the tax season arrives and with it comes the tax filing complexities. Even though the tax season arrives yearly it is advisable to work on it all throughout the year else you’ll end up creating a mess with excessive workload to handle. In this post, we will take a deeper look into How to do tax preparation for small business for tax season efficiently.
Small Business preparation for Tax Season
Keep organized and updated throughout the year
Preparing for tax season isn’t a task that needs to be done only when the filing season is near. It is a process that should be well organized throughout the year. Keeping your financial position up-to date will not only make it easy for you to be well-prepared in advance but also ensure that you have your financial state at your disposal at all times so that you can make business decisions accordingly.
A professional bookkeeper can help small business owners in keeping the financial work organized all throughout the year, making it easy when the tax season arrives.
According to the financeonline.com, “21% of SMB owners feel that they are not knowledgeable enough about accounting and finance”. However, many small business owners avoid seeking professional help when preparing and filing taxes. While small businesses can save a handsome a few bucks if they don’t hire a professional, it can also backfire in many ways. As said above, preparing for tax season is a continuous process that requires tracking and recording of financial transactions throughout the year, SMB owners who prefer taking care of their Accounting and Bookkeeping by themselves can end up making mistakes as well as spend their valuable time doing something that they shouldn’t be doing.
Also, if you hire a professional Accountant who is more qualified to advise you on tax matters, you can save more money than you can lose if you do it by yourself.
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Separate business from personal expenses
While many business owners do spend from their own pockets, they should keep the expenses separate as it not only simplifies the process of managing finances but also helps in claiming tax relief when the tax season arrives.
Know which business tax return you need to file
Small Businesses can fall under many different categories like Limited Liability Partnership, Limited Liability Company, Single Member LLC or Sole Proprietor. And each category has it’s different set of rules and tax rates. Therefore, business owners need to classify their business before they go for filing their tax return. Businesses can lose a significant amount of capital as they could end up overpaying taxes, failing to classify their business.
Technology has made our lives easier and the Accounting profession isn’t new to it. Using Accounting software like QuickBooks can help small business owners automate their day to day tasks and keep the financial records organized while they are safe and secure under multi-layer data encryption that accounting software uses.
Tax preparation for Small Business – Preparing for tax season isn’t as difficult as it sounds. All that needs to be done is keep the financial processes well-organized all throughout the year. While business owners have other core responsibilities to handle, they can hire a professional bookkeeper to maintain their books.
We are living in a smart age where technology drives us to become better at our work each day. Technology has completely transformed how we used to work.Tasks that required hours of manual and mental work a decade ago, can now be completed with just a click. Each and every industry is benefiting from this technological advancement and Accounting & Bookkeeping industry is one of them that is of concern to us.
Accounting and Bookkeeping is an ever evolving landscape that has adapted pretty well to the technological boom. From the manual paperwork to using Excel to using Accounting software, the Accounting industry has come a long way.
Accounting software is an application software that can perform various accounting and bookkeeping tasks like record: financial data of a business, payroll, accounts payable, accounts receivable and many more. It can also reduce bookkeeping discrepancies that can prove to be costly. Accounting software varies widely with the functionalities they offer and are designed in accordance with the business requirements(small business and large business requirements can vary widely).
However, when it comes to best Accounting software for small businesses, the one name that pops up instantly is ‘QuickBooks. According to acecloudhosting, QuickBooks has around 800M global small businesses and self-employed customers, and 56M prospects visiting QuickBooks every year. But what makes QuickBooks best for small Business. Here are a few key features that make QuickBooks the stand-out Accounting Software for small businesses:
Features of QuickBooks for Small Business:
Mainly QuickBooks offers two products that are:
QuickBooks Desktop which is a one time purchase software that is installed on your computer and offers robust inventory management, job costing, and industry-specific features and reporting.
QuickBooks Online offers quite similar features to the Desktop version with the major difference being that it is a cloud-hosted platform.
However, our concern is QuickBooks Online which currently serves 4.5 million global customers with a net add of 1.1 million new customers in FY’19.
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Key Features of QuickBooks:
One of the features that makes QuickBooks Online the best Accounting software is that it automates daily tasks like handling recurring invoices, bill payments, payment reminders, sync bank and credit card transactions data; bank reconciliation and many more such tasks, thereby saving time as well as avoiding human error.
QuickBooks further offers excellent reporting with predefined templates available like general ledger, trial balance, 1009 transaction reports, P/L templates, etc. Moreover, it offers graph features that can be used to analyze data easily and make business decisions based on the same. It also allows you to schedule business emails and ease off the manual workload.
QuickBooks Online offers email invoicing features along with other features like accepting online transactions, e-signatures and saves time. You can optimize emails for mobile devices as well as syncs easily with Gmail accounts making it easy to send invoices via your Gmail account.
QuickBooks Online can be integrated with many third-party apps and software that you may be already using. Some of the popular integration include CRMs, email, e-commerce platforms, payment processing, time tracking, payroll services and many more
QuickBooks Online also comes with a mobile application which makes it easy to be accessed from anywhere in the world, using your mobile device. You can do the following using the QuickBooks Online mobile app:
- Create, customize, send and track invoices
- Click photos of receipts and attach them to your expenses
- Reconcile transactions
- View customer information, add new customers and message customers directly from the app
- View data such as your account balance, accounts payable, accounts receivable, profit and loss report, and open current and past due invoices
- Accept online payments
QuickBooks Online Pricing:
- Simple Start Plan that costs $25/month and supports one user.
- Essentials Plan costs $40/month.
- Plus Plan costs $70/month.
- QuickBooks Advanced costs $150/month.
While there are many Accounting software out there, QuickBooks for Small Business has always stayed a step ahead from its competitors, mainly due to easy accessibility and affordable pricing. So if you still don’t use an Accounting software and figuring out which will be the best, just go for QuickBooks Online, it has it all!
The ‘Bottom Line’, ‘Numbers’, ‘Sales’ are some entities that are self-explanatory in any business. Especially when it comes to real estate, the number of properties sold successfully and an impressive sales record are enough to reflect the business. But, all of this is true if their is uncompromising accuracy, vigilance and standardisation in the numbers presented and their credibility. Which is where experienced accounting comes in the picture. Showing a promising real estate practice on the basis of inaccurate books can be a bane for your business and can tarnish your image in the industry as well as with your clients.
In this blog, we will talk about the common real estate accounting mistakes that your business needs to avoid in order to get through the tax season seamlessly. If you are cautious to dodge these commonly encountered errors, then not only will your books be accurate, they will also be dependable and actionable.
Mistake No 1: Realigning Funds Before the Transaction is Complete
This is a very common business error, if we may say with property and real estate accounting. The entrepreneurs are seen to be disbursing the funds before the deal is closed. This not only is a malpractice, but at the time of doing the books, is an additional wastage of time for your bookkeeper, as they need to go back and check the completion and the authentication of each transaction that you have made. In accounting terms, a transaction is considered revenue and can thus be acted upon only when the chain is complete, in real estate terms, it is when the keys are finally exchanged.
It is important for real estate entrepreneurs to keep this in mind at all times while confirming a transaction to be a revenue or before its disbursement. So that, your Accounts Payable are accurately aligned with your Accounts Receivable.
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Mistake No. 2: Tracking Commissions Additionally From an Accounting Software
When your brokerage is tracking commission additionally and alternatively from the main accounting software that you are using, then you are backing up on age-old data entry to pay those commissions. Honestly speaking, this redundant data entry puts you at a greater risk, with your books being rampaged with human error and threats.
Ideally, using accounting software or any accounting technology is a matter to make things simpler and more convenient. Therefore, you need to have a commission management system in place that can seamlessly integrate with your accounting system and help make things more convenient for you.
Mistake No. 3: Insufficient Training of the Accounting Software
If you have an in-house or a local accountant, who you are presuming will be on track with the technological developments and has a proficiency in the accounting software of your choice, then you might be going far-fetched. The idea is that you need to have someone who is an expert and a thorough professional when it comes with dealing with your accounting tools so that bookkeeping is an easier and more convenient feat. If you take it into consideration, having someone who is not-well versed and trained in these tools, will not be able to optimize the efficiency of the same and might make errors. Therefore, it is essential to have someone who is trained and has a smooth knowledge of state-of-the-art accounting tools and technology, especially the ones preferred for use by your business.
Mistake No. 4: Not Taking Backups
This is a mistake that cannot be stressed-on enough. If you are an entrepreneur, then you need to know gone are the days, when people had stacks of paperwork in physical form, that they could go back to and tally whenever needed. This was not only time consuming, but took a lot of space and was adept with errors on all levels. With the coming in of the right accounting technology, you need to save time, effort and error. Taking backups of your data is ever-important so that you have securely kept all your essential financials readily available whenever needed. Real estate businesses are generally seen to lack in this imperative feat.
Real Estate is an exhaustive and a challenging field. You need to constantly be at your alert-best and on your toes. But the accounting part of it, need not be that dreadful if done the right way. Being on the right road of accuracy, having a dependable team that backs your efforts and avoiding these common accounting mistakes can help you keep up with your books and also get through the year-end stress-free. We hope this blog will help you highlight some common errors, and avoid them in your future accounting journey.
Not everyone knows the nitty-gritties of Accounting for a Restaurant, and neither is that proficiency expected. Especially not with Restaurant managers. You already have your plate full literally with a lot! The pain of keeping your books updated and accounting should not be one of them. However, knowing the blueprint of the main things to keep in mind while taking care of your accounting or its basics, can really help you manage your money better and understand your operations more efficiently.
And, because it is so important, we have put together this list of accounting principles 101, which will help you get ahead with your restaurant’s books and financials. No matter the type of restaurant you are running, a takeaway, stand-alone or a chain, there is something in this for everyone. Whether you do it yourself or hire an outsourced bookkeeping service, keeping these points in mind will benefit you greatly!
This is where we get the Chart of Accounts into the picture. Your primary goal should be to get this order. These are the buckets that are used to describe the funds that are flowing in and out of the business. This includes everything- assets, liabilities, expenses, revenue, etc. Now, you need to complete the chart by outlining the sub-categories in it as well. From marketing, to inventory, etc. All these items should accurately be recorded in your Chart of Accounts.
This is important as this is what is used for drafting any business financial statements and reports. These blueprints help you get the insights necessary for understanding where your restaurant is currently standing and where it is headed to.
Cost of Goods Sold
Cost of Goods Sold (COGS) refers to the total cost that goes into making the product or services that someone is selling. In your restaurant, it would basically mean the cost of all the ingredients that go into making your restaurant’s menu. The efficient way to calculate your total COGS is when you take your weekly restaurant inventory in terms of your beginning inventory and subtract your ending inventory, you get the cost of goods sold for your restaurant. But it is important to make certain that your cost of goods sold does not include any utilities and labour costs added to it. It should only have the cost of the actual ingredients that go into making your menu. The essence of doing this all, is to keep a tab on the cost of each plate of food that is sold at your restaurant, so that you can make a healthy profit and excel better.
Keeping a tab of the Labor Cost, Occupancy Expenses And Operating Expenses
The Cost of Goods we spoke about earlier, does not include the labour costs or added utility expenses. But in order to know the accurate financials for your business, it is important to know each detail of your restaurant’s expenses correctly to be able to take the right steps and make beneficial decisions. Your operational costs like- labour costs, occupancy expenses, etc. all need to be divided into different categories. It is important to know that every restaurant differs in its operational costs. Therefore, keeping a close check on them will help you to work towards more rewarding profits in the business. It is necessary to also add the payroll taxes and employment benefits to this category.
Another part to add are the occupancy expenses like rent and property insurance also need to be accounted for. Knowing the difference between operating costs and occupancy costs are important.
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Get Acknowledged with the Prime Costs
Your prime costs are what you get by adding your Costs of Goods Sold with the labour costs. This primarily includes Accounting for Restaurant primary expenses. Therefore you need to pay extra attention so as to avoid any mistakes or inaccuracies that may creep in these records.
Also, it is difficult to cut back on costs other than the prime costs, if you work effectively on these, you can also save on funds.
The fact is that to know the exact status of your finances, it is important to take it into account with other factors. No financial indicator, no matter how crucial it is can help you completely understand the financial space your business is standing in and where it is headed to. Out of common sense, you can imagine that if you are looking at a large restaurant, it will have more prime costs in comparison to a small restaurant that has a lower prime cost. But then this can’t help you come to a final consensus, up until you compare it with the sales in each.
Therefore to understand where your business is currently and where it is headed to, it is important to take into account the cost-to-sales ratio.
This is important as it allows you to compare your business with other businesses’ keeping in mind complete accuracy.
You No More Have To Worry About Restaurant Accounting
Restaurant Accounting does not have to become gibberish and a deterrent in running your restaurant effectively. If you have your accounts in place, are managing your costs effectively. In addition to that, if you have your accounts outsourced to a bookkeeper, then you can save on time, added costs and can focus on the core operations of your business.So that you get reliable data, actionable financials and all that you need to run your business with better insights.