kathy-beck – Page 23 – Beck & Company

7 Questions to Ask Your Accountant After Year-End

By now your accountant should have logged your last Business Activity Statement and sent you your business’ year-end financial statements. Generally, you will receive two statements – the profit and loss (P&L) statement and the balance sheet. Take the time to thoroughly peruse these two documents; don’t just look at the bottom line of the P&L to see how much money you made. These statements can tell you a lot about your company – from its performance last year to the adjustments you will need to make this year.

Many companies have questions after examining their P&L and balance sheets. If you know what to look for and have the right questions to ask your accountant, you may be able to increase your profit and surpass last year. Take a look at the 7 questions to ask your accountant after year-end financial statements are distributed:

1. How did my business compare with competitors (or others in the industry)?

Don’t be afraid to ask your accountant to show you business benchmarks relevant to your industry. These are quick and easy ways to compare the performance of your business with the industry average. Is your company’s profit better than the industry average? Are you spending too much on wages or marketing? Business benchmarks will help you identify both the areas in which your business may need some work or in which it currently excels.

2. What is my business’ gross profit (gross margin) percentage?

Gross profit is the difference between the value of your sales and the actual cost of your sales. As a business owner or manager, it is crucial to understand this figure and what it means for your business. Consider the following formula used to calculate gross profit:

Gross Profit Percentage = Gross Profit ÷ Sales x 100%

To increase your gross profit margin, you must increase your selling price or reduce your cost of sales. After calculating your company’s percentage, ask yourself (and your accountant) what you can do to increase your gross profit margin in the next year.

3. How can I reduce my expenses without compromising quality or service?

This is actually a quite common question and in order to answer it, you have to know where your money is going. If you don’t know where exactly it is going, you will never know where to start controlling expenses. Take a close look at each expense and determine its importance. If the expense does not affect the way your business runs right now, then it can be reduced or eliminated completely.

4. What is my “breakeven” point?

Your “breakeven” point is the point at which your business makes neither a profit nor a loss. Knowing this point is critical to the success of your business, as it lets you know at what point you will begin making a profit. The breakeven point can be calculated for any period of time, be it yearly, quarterly, monthly, weekly or daily.

5. Which of my products and services are making me the most profit?

Take a look at the profit margin of each product and service your company provides. Keep the products and services that are giving you the highest return for the least effort and discontinue the products and services that have a low profit margin and take more effort to provide.

6. How can I improve my cashflow?

A surefire way of improving your cashflow is to examine how long it takes your customers to pay you for your products and services. Make it a mission to collect your money on time; after all, it is rightfully yours! Make sure that your customers are aware of your company’s payment terms and designate a short amount of time each week to personally contact clients whose accounts are due.

7. In its current financial position, will my business be able to survive an economic decline?

As you know, the economy affects your business directly. Is your company in a strong enough position to weather a tough economic storm? Ask your accountant about your debt to equity ratio (the proportion of the capital invested by the business owner to the funds provided by external lenders). This ratio gives a comparison of how much of the business was financed by the owner’s equity and how much was financed through debt. An acceptable debt to equity ratio is generally within the range of 1:1 to 4:1 (i.e. a maximum of $4 debt for $1 of equity); however, it will ultimately depend on the individual business and industry circumstances.

Too much debt could put your business at risk, and too little debt could mean that you are not taking advantage of crucial opportunities and allowing your business to reach its potential growth.

Social Media: Is it a Necessity for Accountants?

While many small businesses and nonprofit organizations have jumped on the social media bandwagon, accountants and accounting firms seem to be reluctant to embrace the new trend of communicating with their clients and prospects through social media avenues. According to a recent Resources Global Professionals survey of 261 accountants in and around the Toronto area, today’s accountants are hesitant to adopt social media strategies. The survey revealed the following:

62% do not trust the information posted on social networking sites
58% consider face-to-face to be the best use of time
39% currently have a social media strategy
66% are concerned about the security of their personal information on social networking sites
22% followed key industry leaders on social media sites
LinkedIn, out of every other social media site, is the most popular tool for professional accountants

The survey indicates that there is huge potential where accounting firms and social media are concerned. Social media can be extremely beneficial to accounting firms, if used correctly. As we discussed in a previous post, social media can establish trust with your clients, give you better control over your “brand” perception, lower your marketing costs, drive traffic to your website and improve your website’s search engine rankings. So, with all of those benefits, why are accountants still hesitant to embrace social media?

To be clear, there are many accountants and accounting firms on social media sites; however, a good majority of those accountants only use social media for professional networking rather than for business communications. Because they deal with sensitive information on a consistent basis, accountants want to maintain a trustworthy image with their clients at all times. Although they acknowledge that social media can bridge communications between clients and boost marketing strategies, accountants still have some concerns about the privacy and professionalism of using these sites.

Consider the following uses for social media and discover how to incorporate social media safely into your marketing strategy using the tips below:

What Social Media Sites Should I Use?

The social media discussions should begin with the types of social media networks you or your accounting firm plan on using. Many accounting firms ease their way into social media with LinkedIn, because the site helps accountants develop professional relationships that often result in more business and referrals. Facebook and Twitter are usually used to engage with current clients and prospects. Accounting firms can use each site (particularly Facebook and Twitter) to market to their followers. Many companies offer tax tips, answer questions, address concerns, and promote their specialty services on these sites. Many accounting firms find Twitter especially useful, enabling them to connect directly with industry thought leaders and obtain industry-specific education and information.

Prior to making your decision, give each social media site a try. Observe how other companies or accounting firms are using these sites and evaluate their results. Do you think their social media efforts are paying off? Once you gain a better understanding for how social media is used (or can be used), you can make the best-informed decision for your accounting firm.

Create Measurable Social Media Goals

As an accountant, it is your job to enter every engagement with a defined set of measurable objectives and goals, and social media should be no exception. Accountants who use social media wisely define measurable goals regarding their social media strategies. Sit down and figure out a strategy to effectively incorporate social media into your marketing program. Once your social media strategy has been created, establish measurable goals. For best results, accountants should establish and measure goals quarterly to gain a better idea of their social media impact.

Develop a Social Media Policy

After you have set and defined your measurable social media goals, your accounting firm needs to write a policy to govern social media efforts. These policies help employees understand how to use social media, how long to spend on social media sites during the workday, and the sensitivity associated with posting personal information. This policy is usually included in the employee manual so employees know the rules and regulations regarding social media on the job.

How Can I Best Prepare My Organization for a Nonprofit Audit?

CPAs and accountants receive hundreds upon thousands of questions a year pertaining to both for-profit businesses and nonprofit organizations. Among some of the many questions asked of CPA’s, the most common is “How can I prepare my organization for an upcoming nonprofit audit?”. While we have written several blogs that address nonprofit audits, we’d like to go into a little more detail to help you fully prepare for an upcoming audit.

The best way to prepare for a nonprofit audit is to be proactive and plan ahead. No one likes being caught off guard, especially by an auditor. While it may be uncomfortable to have someone examine everything your organization has done over the past year, being prepared will make the whole experience easier and less frustrating. Consider the following steps developed to improve your nonprofit financial reporting process and, in turn, improve the nonprofit auditing process as well:

Document Your Internal Controls
You are most likely familiar with the term “risk based auditing standards”. If you are not familiar with this term, you should know that these standards came into effect in December 2006 and completely changed the way nonprofit audits are performed. Auditors are now required to focus on identifying areas of risk. In order to fully identify these areas of risks, auditors must spend a considerable amount of time gaining a complete and total understanding of an organization’s internal control structure and the effectiveness of these controls. The organizations that have taken the time to understand what controls they have in place will be much better prepared to face an auditor’s questions.
Improve Identified Inadequacies
Once you have a comprehensive understanding of the internal controls your organization has in place, you should make every effort to improve the areas where inadequacies have been identified. This is important not only for the upcoming nonprofit audit, but for the organization in general. Identifying inadequacies and implementing strategies to overcome them will only help your organization run more efficiently.
Utilize Your Organization’s Strengths
As you know, it can be difficult to staff a nonprofit organization even in good economic times. When the economy is less than desirable, it becomes even more challenging to find enough qualified individuals to improve upon every identifiable control weakness in the organization. If you find this is true for your organization, consider asking specific board members for help. While it is true the main role of the Board is to govern the organization, members of the Board could prove to be a valuable resource. Take advantage of the financial knowledge and expertise of your Board members. Allow their guidance to help you implement beneficial controls, review auditing schedules and draft financial statements prior to your audit.
Educate Yourself on the Nonprofit Accounting Principles
Nonprofit organizations have more specific accounting concepts than the traditional business. Take the time to learn about the accounting principles specific to your type of organization. If the accounting concepts your review seem foreign to you or your organization does not have the appropriate in-house resources to properly record such items, consider seeking outside help from your accountant or CPA. However, keep in mind that new accounting laws are requiring separation between accounting/bookkeeping services and audit services so the assistance you receive from your auditor may be limited.
Keep in Touch with Your Accounting Firm Throughout the Auditing Process
Begin the auditing process with a meeting with your auditors. Request an audit timeline, as well as a client task list (a detailed list of what they will need from you and when they will need it). Make sure that you communicate with your auditor about who to contact in your organization regarding each specific item on the list. Do not hesitate to contact your auditor for advice or to keep them informed of what is occurring within your organization throughout the year. Trust us, they will appreciate the opportunity to address any issues with you prior to beginning the audit.

These steps will prove to be beneficial to your organization during the auditing process. You may also want to look at any letters received at the conclusion of your last audit to ensure that the items are properly addressed prior to the start of your next audit.

Improve Efficiency by Creating an Effective Budget

Improving your small business’ efficiency involves more than simply changing a few processes and procedures; it involves knowing the ins and outs of your company and being able to account for every dollar that passes through your business. While budgeting may not be the first thing that comes to mind when you think about ways to improve your company’s efficiency, an effective budget can save you a substantial amount time and money, allowing you to focus on the areas of your business that need further improvement.

Most small businesses already have budgets in place; however, many companies are failing to take full advantage of the budgeting process. An effective budget is a life-saver for the small business, especially in uncertain financial times. An effective budget will gauge the health of your business, help you plan for future expenses and needs (such as the hiring of a new employee, new hardware or a new office space), and provide you with the necessary tools to help your company grow.

Consider the following basic budgeting tips below to learn how to transform your budget and improve the overall efficiency of your business:

1. Keep Your Accounting Records Updated

Think of your accounting system as the answer to all of your problems? Want to find out how your company faired last year? Pull a report. Need to know the amount of money you are spending on that new project? Pull a report. Do you need access to this year’s projections in order to plan out the year effectively? Pull a report.

Your accounting system contains a wealth of information designed to help you run your business smoothly and efficiently. Start by running historical reports that will show you the breakdown of your monthly and yearly costs. Use these reports to compare this year to last and get an idea of where your business is spending its money.

Make sure that you pull a break down report every month and any other necessary accounting data you may need for forecasting. This will help you gain a better idea of where your business is financially, not only month-to-month, but year-to-year.

2. Set Business Goals and Develop Realistic Strategies for Reaching These Goals

The purpose of a budget is two-fold: to gauge the financial health of a business and to help that business accomplish its goals (financial and otherwise). What are your future business goals? Prior to creating your budget, sit down with key members of your staff and discuss your company’s future. Ask yourself these questions to get a start on developing your goals: What are your sales goals for the year? What costs can be eliminated and what costs are crucial to meeting those goals? What will our marketing strategies look like each month? What is our profitability goal for the upcoming year? How can we realistically meet that goal?

In order to reach the goals your company set forth, you will need to develop realistic and quantifiable strategies. These are realistic goals that can be measured. Instead of saying “I want to increase sales this year”, set a more realistic goal, such as increasing sales by 5% in the first quarter of the year. This will help you not only create more realistic – therefore, attainable – goals, but it will also help you plan more effectively.

3. Incorporate Your Goals into Your Forecasts

Now that you have defined your goals, incorporate them into your new monthly forecast. These forecasts are based on past accounting data and future goals. Remember to adjust your initial forecast based on any irregularities of the past year. For example, if you had a slow June last year, consider revising your baseline to account for June’s irregularity.

4. Compare Your Actual Results to Your Projections Each Month

Once you have created a new forecast for each month of the year, develop a template that allows you to track the actual numbers as compared to those forecasted. Calculate the difference and percentage of variance between what you forecasted and the actual numbers for that month. This will give you a better understanding of your company’s performance, and will help you create more realistic forecasts for the months to come.

Make sure that you review your actual totals vs. your future forecasted totals each month in order to stay on track to meet your initial goals. This will allow you to make immediate and necessary adjustments in order to reach your goals.

5. Identify and Re-evaluate Cost Areas in Your Budget

After you have evaluated your company’s current financial standings and projections, you need to sit down and review the cost areas as compared to the total costs being spent. Are there areas that could use improvement? Are there cost areas that could be eliminated? Ask yourself these questions as you evaluate every area of your budget. Eliminate any unnecessary costs and adjust spending according to your budgeting goals.

As you review your various costs, re-evaluate your suppliers and service providers to ensure that you are getting the best deal possible. Ask around, and get an idea of the average price for that service. If you feel that you are being taken advantage of, look elsewhere.

For more information about creating an initial budget, read our article, “5 Tips for Effective Budgeting”.

Effective Budgeting Practices for Nonprofit Organizations

In order to create an effective budget, nonprofit organizations must establish an effective budget process. An effective process engages those responsible for adhering to and implementing the objectives created in the budget, including the financial committee and senior staff. Organizations must establish a budget timeline, leaving plenty of time for the research, review, feedback and revision of the budget. The yearly budgeting process should be thoroughly documented and clearly state the tasks, responsibility assignments and deadlines needed to create the budget. An effective process also incorporates strategic planning initiatives and requires that income be budgeted before expenses.

Once the budget has been reviewed and revised by the necessary people, it will be presented to the organization’s board. Prior to submitting it to the board, organizations need to take the following into consideration when creating a budget:

Budget Income First. Make sure that you base your income targets on realistic expectations and only include income in the budget if it is reliable. Never include an income projection to fill the gaps of expenses. This is not realistic and sets your organization up for a budget deficit before the year even begins.
Keep Expenses Lower than Income. This may seem obvious, but it is crucial when creating an effective budget. Make sure that your expenses are always lower than the total dependable income.
Analyze and Understand Your Revenue. Does your organization depend on a single source of revenue? In some cases, the lack of diversity in revenue sources can threaten the financial stability of an organization should the sole revenue source become unavailable. There is no “right” list of revenue sources, so in order to find the right sources, you will need to analyze your organization’s circumstances, mission and industry and find a good match for your organization.
Make Sure Your Budget Supports Your Mission. Before you even begin to develop your budget, you need to sit down and go over your organization’s mission and strategic plan. Make sure that all strategies that have an effect on the budget are included in the budget you create. Your budget is designed to communicate and support your organization’s mission through numbers, so make sure that your allocation of funds coincides with the mission of your nonprofit.
Budget for Capital. The budget should take an organization’s annual operating income and expenses into account, as well as ensure resources for long-lived or non-operational needs (the capital budget). The capital budget could cover several years and should include target amounts and fundraising strategies to achieve the organization’s financial and strategic goals.
Make Notes to Explain Budget Assumptions. Board and committee members will appreciate any explanations you offer to help them understanding the underlying thoughts behind the numbers in the budget. While it is best to present budgets in spreadsheet format (which does not allow for much note-taking room), you can provide the board with narrative notes in a separate document. Whether or not the notes are in a separate document, make sure that you add a key that associates each note to the related line on the spreadsheet.

As you can see, developing an effective budget takes a lot of hard work and determination. While it may not be an easy process, your organization will benefit greatly from the work you put into your budget. By maintaining an inclusive budget and well-documented policies, an organization can carry out its mission thoroughly and effectively. If you have any questions about creating your budget, please contact us today.

For more tips on creating effective budgets, read our article “Five Tips for Effective Budgeting”.

Effective Financial Reporting Solutions Improve Nonprofit Transparency

Is your organization doing all it can to keep your donors’ and supporters’ trust? Are you using a financial reporting solution to produce transparent and accurate reports? If you plan to continue carrying out your mission for years to come, you need to do all you can to keep the trust of your supporters and an effective financial reporting solution can help you do just that.

Nonprofit organizations are facing increasing government regulations each passing year. Restrictions around the use of government grants are continuing to increase and private funders are now asking for specific measurable outcomes resulting from grant awards. With the recent proposed rule changes to A-133 and Form 990, nonprofits will be required provided extensive reports on all federal and private funding.

Being accountable in all aspects of your organization’s financial and program management has always been important; however, with the recent regulations, it is more crucial than ever to develop effective financial reports.

An organization’s accountability does not fall solely on the CFO or Executive Director; it is also the responsibility of all staff and board members who are involved in the financial management, fundraising and program planning aspects of the organization. Keep the following tips will help you maintain accountability among your supporters and funders:

Make sure that you are using raised funds only for the purposes you outlined in your solicitations. Keep your donors updated on how you are using their donated funds and send out communication on a regular basis. This can be as simple as sharing a success story in your organization’s newsletter or making your annual report available on your organization’s website, or as complex as reporting on fulfilling grant restrictions, program outcomes and the impact donated funds have had on your organization. However, at the end of the day, funders need tangible proof, such as clear tracking of donor restrictions and funds spent, in order to keep their trust in your organization.
Keep the lines of communication open. Ensuring accountability means allowing your supporters to communicate with you through the good times and the bad. Grant-makers and donors desire open communication, especially when things do not go as planned. Funders are not looking for justification to take the grant away; they just want to know what the roadblocks are and how they can help organizations overcome them.
Don’t let your actions come back to haunt you. Remember that donors and members of the grant-making community network and talk. While your actions and communications can reinforce their decisions to fund you and gather support from other funders, they can also be a deterrent. When your organization becomes tainted in the mind of your donors, you can expect to never receive funding from that donor again. So let your actions speak for the good you do.
Maintain an effective financial reporting solution to meet your financial needs. Part of being accountable means having the right infrastructure in place to assist with the necessary reporting, tracking and communications. Audits come yearly, and your organization must be prepared to provide key stakeholders, grantors and auditors with a clear trail to verify the financial accuracy of your reports. Make sure that your financial reporting solution not only tracks and reports outcome measures on financial statements, but that it can also be used to budget outcome measurements for more accurate forecasting. Information on outcome measures can be factored into the financial data and presented to the necessary constituents. An effective financial reporting solution will give your donors and grantors a clear picture of your organization, outline your intentions and ensure that your supporters see the accountability of your financial data.

A financial reporting solution can also helps organizations manage donor information. An effective system helps nonprofits acknowledge donations in a timely manner, keep record of all communication histories, maintain profiles on all donors, create follow-up reminders and personalize communications with your organization’s programs and projects.

While effective financial reporting software can help keep your organization accountable and transparent, at the end of the day, it is the people in your organization that use these tools to demonstrate transparency, accountability and financial accuracy. Contact us for more information about maintaining financial transparency.

How to Prevent the Most Common Issues in Nonprofit Audits

Nonprofit organizations are as unique as their for-profit counterparts and while they have key organizational differences, auditors have noticed three common issues when performing nonprofit audits: insufficient staffing, weak internal communications and insufficient application of internal controls. These issues not only affect the reliability of the financial information provided by the organization, but they also create an environment for potential fraudulent activity. Consider the following issues that arise out of nonprofit audits and how nonprofits can prevent these issues:

Insufficient Staffing
An accounting department that is insufficiently staffed could mean that the financial information reported by the nonprofit is unreliable. As nonprofits continue to cut costs, individual employees are taking on too many roles, resulting in more reporting and data-entry errors. Because employees may not have the necessary time needed to complete a task carefully, errors may be over-looked or require many time-consuming corrections.

Insufficient staffing can also put an organization at risk for internal fraud. The limited number of accounting staff requires individuals to take on multiple roles within the organization, leading to an improper segregation of duties. The proper segregation of duties is a key in fraud prevention. The authorization of transactions, custody of assets and record-keeping functions must be separated in order to ensure that fraudulent activity does not occur.

Nonprofit organizations need to analyze their individual situations regarding the lack of staffing in their accounting departments. If the accounting staff is burdened by their responsibilities, it may be necessary to hire an additional employee (or two) to take on some of the responsibility. If an organization is short on funds, part-time help may also be considered to alleviate the burden on the accounting staff.

Weak Internal Communications
Weak or insufficient internal communications can damage an organization’s reliability, especially when the accounting department fails to receive updates on individual transactions. Communication breakdowns within an organization can increase the potential for unaccounted for transactions and non-compliance with government regulations.

Communication breakdowns can also affect an organization’s standing with granters. If the accounting staff is not aware of specific grant restrictions and requirements, the nonprofit may jeopardize its ability to obtain grants. If the organization is closely scrutinized by regulatory agencies and its financial records are found to be deficient, future grants may be at risk. Ensure that your organization remains in good standing with your granters by implementing strong internal communications within your organization.

Nonprofits with weak internal communications have an increased potential for fraudulent activity. If the accounting department is not informed of an organization’s various activities, questionable transactions may not be identified.

Nonprofits can overcome the risks associated with poor communication by ensuring that the accounting department receives copies of every contract and agreement, is notified of all oral transactions and is informed about the circumstance of all transactions. Nonprofits can also improve communication efforts by setting up frequent meetings between key accounting personnel, management and their auditors to ensure that everyone is on the same page regarding the organization’s activities.

Insufficient Internal Controls
An organization’s internal controls represent the policies and procedures established to ensure that management directives are carried out. When those policies and procedures are overridden or ignored, internal control problems result. Inadequate policies and procedures can also result in potential financial problems that may not be identified until the audit. In order to prevent any potential financial problems, nonprofits need to conduct reviews of budgets, forecasts and prior periods on a regular basis.

Nonprofit organizations need to examine their internal control structure in order to identify weaknesses and financial overseers should verify the financial information reported to them on a regular basis. As auditors discover weaknesses in an organization’s internal controls, they should focus on expanding audit testing in order to compensate for the lack of controls and offer the organization suggestions for improvement.

As auditors and nonprofits work together, they can reduce the risk of these issues and ensure that organizations are prepared for an upcoming audit. For more information about preparing your organization for an audit, click here.

How Will the Changes to the Form 990 Impact my Organization?

The role of nonprofit organizations is ever-changing. Over the years, the Form 990 has become more complex and is subject to more intense scrutiny by the IRS, funders and donors. Take a look at some of the most significant changes to Form 990 for 2012:

The IRS has revised the definition of “grants and other assistance” to exclude certain payments by voluntary employees’ beneficiary associations in the Form 990 glossary.
The IRS has also made an amendment to Appendix K, Contributions. The amendment clarifies that a donor’s phone bill for a text message meets the Sec. 170(1) (17) requirement of a reliable written record if it shows the donor organization’s name, date and amount.
Nonprofits that have foreign investments during the tax year valued at $100,000 or more must now complete Form 990, Part 1 of Schedule F.
Nonprofits that report their distributive share of assets in any joint ventures and other entities treated as partnerships for federal tax purposes according to the ending capital account in the partnership reported on Schedule K-1 must now complete the Balance Sheet in Part X.
Nonprofits now need to report their distributive share of investment income, royalties and rental income from joint ventures on specific lines of Part VIII, “Statement of Revenue”.

Reporting Fundraising Events in the New Form 990
Many nonprofits are unaware of the requirements for reporting received donations. Since donations are key to a nonprofit’s continuation and success, organizations need to learn how to properly report their donations on the Form 990.

Organizations can begin by reporting their fundraising events on the form’s Schedule G – Supplemental Information Regarding Fundraising or Gaming Activities. This is required to be filed with Form 990 if the organization reports more than $15,000 of fundraising event gross income and contributions for the year. In order to accurately report fundraising events on Part II of Schedule G, the gross receipts and the value provided to donors must be divided as follows:

Line 1: Gross receipts from the event
Line 2: Charitable portion of event proceeds (the portion that exceeds the value of goods and services provided to the donor)
Line 3: Fair market value of event proceeds

The fundraising event should also be reported on Part VIII of Form 990 – The Statement of Revenue. Nonprofits need to make sure that the information in this section agrees with Schedule G in order to avoid any unwanted questions by the IRS.

Learn more about Form 990 by reading our article, “Demystifying IRS Form 990 for Nonprofits”.

What Should I Look for in an Accountant?

Accountants do more than help you prepare your yearly taxes. They can advise you on important financial decisions, help you create and maintain your company’s budget and help you select (and implement) the right accounting system for your business. An accountant is a crucial part of your business team and should not be selected without careful consideration.

Prior to starting the accountant selection process, determine your reasons for hiring an accountant. Are you looking for someone to help your prepare your taxes? Is your financial system going through an overhaul? Do you need someone available to answer your financial questions or concerns? Determining your needs for an accountant will ensure that you select the right accountant for your business. Consider the following tips for choosing an able accountant:

Ask Around
Ask everyone you know who they use for their accounting services. When you attend any type of meeting (or meet other business owners), ask who they’ve used and recommend. Check with your local Chamber of Commerce for the names of accountants in your area. Get as many names as possible, for you will narrow down your search to the accountants who most fit your needs.
Consider Their Current Clients
Choose an accountant who has at least 60% of their businesses coming from businesses similar to yours. They will be more familiar with the laws pertaining to your type of business than other accountants. If you are a corporation, make sure that they specialize in corporate accounting and all that it entails.
Schedule Interviews
Prepare a list of questions for the accountant prior to your meeting. Ask each accountant about the services they provide for their clients, how long they’ve been in business, and for references. Also, ask to see their license and certifications before you leave.Make sure to bring any necessary records to the interview (such as last year’s tax return). Many accountants will be able to tell you the services they can provide your company (and what it will cost) by looking at your tax return.
Rates
Ask about their rates and what those rates include. Find out what their hourly rate is and what the cost would be if you have questions throughout the year. Many accountants will be able to provide you with a rate chart that thoroughly outlines all of their rates.
Ask about Their Preferred Software Program
Ask each accountant what accounting program they prefer their clients to use (if they have a preference) and why. If you do not currently use their preferred program, ask if it will affect the services (or rates) they can offer you.
Corporation or Individual?
Are you interested in hiring an accountant backed by a corporation, or would you rather hire an accountant that works individually? If you opt to go the corporation route, find out if you’ll be dealing with one particular person, or will it be whoever answers the phone when you call. It’s best to have one person to build a relationship with!
What are Their Hours of Operation?
When do they work? Find out their hours of operation and make sure that you can call or email them at hours that are convenient for you.

Interview at least 3 accountants before choosing your final accountant. While it may seem like a lot of work up front, you will reap the benefits in the end. Choosing the wrong accountant for your company’s needs will only end up in a costly mess. The proper accountant will transform your accounting processes and give you the guidance you need to remain successful. Discover the value an accountant can bring to your business here.

Effective Budgeting for the Small Business

There are surprisingly few small businesses that develop and maintain yearly budgets. Regardless of their reasons – whether they feel it takes too much effort to learn how to develop a budget or too much time during the week to maintain it – small business owners have been cautious when it comes to creating budgets for their businesses. And their businesses are suffering as a result. In fact, recent surveys show that a good number of businesses that have failed within the last year failed because of poor financial management.

An effective budget can give companies a clear perspective and enable them to make smart decisions in regard to their finances. Without a budget to guide them, many companies do not know the state of their finances and end up making costly financial decisions. By creating an effective budget, companies can ensure that their finances are being managed properly, guaranteeing their spot in the economic future.

Creating an effective budget does not have to be hard. Consider the following tips to help you get started on creating an effective budget for your company:

Spend some time developing your budget. While it should not take an exorbitant amount of time, creating an effective budget will take some time and thought. It should not be something you throw together in an afternoon; it should be the result of coordinated input and effort by you and your team. The future of your company is valuable, so invest the time and do it right.
Practice makes perfect. While it may seem challenging to forecast your business’ future, it will get easier over time. Don’t get discouraged if you do not get it right the first time. The more you forecast and stick to your budget, the more accurate your forecasts will be.
Allow for some flex. Accounting for every penny that goes in and out of your company is not the objective. A budget is designed to give your company some direction, not an ultimatum. When developing your budget, make sure that you account for some unexpected costs (such as service repairs, unexpected fees, etc.) and allow some room for error. Remember that the budget is just a guide to help you manage your finances better and prepare for the immediate financial future.
Make an estimation on your income and expenses. An effective budget takes your income and expenses into account during a specific timeframe. Your income should include: gross sales, any interests accrued, accounts receivable, and any other income sources. Your expenses consist of any monetary resources that leave your company (such as accounts payable, payroll, material costs, utilities, and real estate costs).
Create cash flow and profit targets. Every budget needs both cash flow and profit targets. The two bottom lines are very different and require different kinds of attention to control them. Make sure you understand the difference between the two and create your budget accordingly.
Compare budgets at the end of every month.This will give your company a good understanding of your finances and where to go from there. Compare your actual results to your forecasts and ask yourself the following questions:
- How are we doing compared to the budget? Why do our results differ from our plan?
- What can we do NOW to ensure that we have a better result next month?
- What are we learning that will make next year’s budget more effective?
- Was there anything that was unaccounted for last month that we can include in next month’s budget?

Regardless of how you set it up, your budget will help your company achieve its goals and ensure success for the future. While it can be challenging to develop and maintain a budget (especially for small businesses), it is worth it. Learn more about effective budgeting strategies here.