In order to have flexibility in organizing your income and expenditures, proper classification of your earnings and expenses is essential for proper bookkeeping. Your business is unique and not necessarily every element will belong to predetermined classifications. Consequently, to achieve professional and accurate financial statements, it is important to understand the industry standards relevant to your niche. Analyzing prior tax returns, classifying asset purchases, and using simplifying accounting programs are just a few examples of smart ways to help save financial statements from turning into a mess that is likely to stress a business owner.
Startups spending more money than they earn is no new phenomenon. In fact this is quite common with many venture capital backed businesses. It is estimated that around 75 percent of venture-backed companies never actually manage to return cash to investors due to unsustainable burn rates. In case you’re wondering, burn rate is the amount of money a company is either spending or losing per month, gross and net respectively.
Before the 1980’s, bookkeeping was a very laborious process as it was all done by hand in ledger books with double entry columns. If a business did not have it’s own in-house bookkeeper, once per week, business owners would bring their papers to the bookkeeper to review the receipts for the week and enter them into the ledgers. Once per year, the bookkeeper would also prepare and sign off on the business’s taxes, prepare the yearly statements and set some budgets for the year ahead.
Then, in the early 80’s, the invention of accounting computer programs such as Visicalc set the bookkeeping world on it’s ear as it used simple spreadsheet programs to cut the need for calculators, paper ledgers and pen/pencils. The bookkeeping tasks were able to get done faster with a lower margin for error.
Proper bookkeeping is a cornerstone to every successful business. Though a lot of entrepreneurs may feel comfortable handling their own bookkeeping in-house, there’s more to gain by outsourcing the accounting and bookkeeping function to a reputable outside firm.
Are you the type of worker who put in a hard day’s work but find that there are others that just don’t seem to have that same work ethic as you... or even care? Now that you are running your own business, considering a startup, or want to improve your current workplace, it is time to set get everyone on the same page. Follow these seven steps to ensure you create a culture of accountability.
Outsourcing is often overlooked by many small-business owners and founders. However, outsourcing your accounting and bookkeeping functions can be one of the most beneficial decisions a business owner can make. Fortunately, it has never been easier and more beneficial to outsource your accounting functions than it is today.
As the year nears completion, it is important to take some time to reflect on the prior twelve months and make some resolutions for 2017. Start using that gym membership or feed that piggy bank a bit more are sure to be popular, but business owners shouldn’t forget to consider their business when setting resolutions. However, for most entrepreneurs and business owners, the end of the year is crunch time. We are busy compiling end of the year financial statements, tax documents, and making one last push to hit our annual goals.
In an effort to streamline the process, we have compiled a list of 4 resolutions that every entrepreneur and business owner can get behind.
This is part 3 of our 3 part series on financial statements.
The Statement of Cash Flows is one of three major financial statements in which is used as a tool by business owner’s to review their financial position and health of their company (The other two statements: Balance Sheet and Income statement)
The cash flow statement explains the cash inflows and outflows, and it will ultimately reveal the amount of cash a company has on hand. As we discuss the financial statements individually, it is important to note the relationship among the financial statements in entirety: by themselves, each financial statement only provides a portion of the story of a company's financial condition, where together, they provide a more complete picture.
This is part 2 of our 3 part series on financial statements.
The income statement is one of three major financial statements in which is used as a tool by business owner’s to review their financial position and health of their company (The other two statements: Balance Sheet; and Statement of Cash Flows). Financial position is assessed in the income statement by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. Also known as the profit and loss statement (P&L) or statement of operations, the income statement is a breakout of the revenues and expenses of all business operations. Unlike the balance sheet, which covers one moment in time, the income statement provides performance information over a specific period of time. The time period covered is usually for a month, quarter, or year and the statement typically provides two to three years of historical data for comparison.
This is part 1 of a 3-part series on financial statements. Please stay tuned for the remaining posts.
The balance sheet is one of three major financial statements in which is used as a tool by business owner’s to review their financial position and health of their company (The other two statements: Income statement; and Statement of Cash Flows). A balance sheet summarizes a company's assets, liabilities and owner’s equity at a specific point in time, such as year or quarter end. The balance sheet may also be referred to as a Statement of Financial Position- because it provides a snapshot of your assets and liabilities at a single point in time.