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Why Budgeting and Forecasting Are Vital for Your Business

February 2, 2017 / by Jim Rice posted in Rochester, Orlando

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Jim-Rice-for-web.jpgRecently, a client in the financial services industry decided to open up several new locations over a 12-month span. I asked if they had a budget in place and a definitive timeline for opening up each location. Nothing concrete, they told me.

This isn't unusual. Many companies make up their budgets and forecasts as they go along. But this is like setting out on a long drive with no map, no GPS, no credit cards and no idea how much gas you have in the tank. Where you'll wind up is anyone's guess.

Plan Ahead by Looking Back
The next company that correctly forecasts its annual budget right down to the penny will be the first. Still, just because you don't know your exact operating expenses is no excuse not to come up with a reasonable estimate.

The best way to determine how much money you'll need in the next year is to carefully track how much you spent in past years. It's important not only to calculate the total amount you spent, but also to analyze seasonal highs and lows. Doing so will allow you to anticipate lean months and set aside additional funds as needed. Also, the more closely you scrutinize your spending, the more likely you are to find ways to cut costs and eliminate unnecessary expenses.

Typically, companies forecast budgets over a 12-month period. Depending on the nature of your business, however, you might want to forecast for six months, or even 30 days at a time. This will provide your employees with a detailed roadmap of exactly where you're headed and the resources you have to get there.

Does Budget Forecasting Work in the Real World?
So how did my client's planned expansion turn out? Very well, I'm happy to say. Together we looked at their sales trends over the two previous years. Then we analyzed the current market and economic conditions and came up with a reasonable sales forecast.

Next, we drilled down and looked at the costs of goods sold (COGS). We also calculated their business expenses over the past few years, noting increases in rent, insurances, advertising, employee expenses, accounting costs and legal fees. That provided the basis for a cash flow analysis, giving us an idea of the money coming in and money going out, including projected income and expenses. And that, in turn, gave us a reliable indicator of when extra cash was going to be available and when revenue would be light.

Based on this solid data, the client was able to proceed with their plan to open up additional locations.

Now, as the client moves forward, we carefully compare their actual cash flow against their forecast. By monitoring their finances on a regular basis, we've been able to identify potential problems at an early stage and formulate a strategy to correct them before they become major issues.

In other words, the client has been able to get where they want to go by carefully studying where they've been.

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Five Signs That You Should Outsource Your Nonprofit's Accounting Functions

October 27, 2016 / by Jim Rice posted in Rochester, Orlando

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Jim-Rice-for-web.jpgMany nonprofits try to do more with a smaller budget. This is a challenge when it comes to accounting and bookkeeping, as there are specific regulations and tracking and filing requirements for nonprofits.

For these nonprofits, the simplest, most cost-effective solution may well be to outsource their accounting functions. Does your organization fit this description? Here are five signs to look for.

  1. You Suffer from "I've Got It/You Take It"
    Businesses with limited budgets may decide to add accounting and bookkeeping tasks to people who were hired to do other jobs. This may be expedient in the short-term, but it can be problematic to have people who aren't trained in or knowledgeable about accounting and bookkeeping for nonprofits serving in this role.

  2.  You Have No Backup Plan
    Maybe you do have a single competent staff member in charge of all financials. But what if he or she gets seriously ill? Or quits without notice? Or leaves on a two-week cruise just when you get hit with an audit notification?

  3.  You've Become Too Big to Act Small
    Growth is good — up to a point. And that point arrives much sooner for a nonprofit. "The compliance and administrative burden for a small nonprofit organization is far greater than for a similar sized for-profit company," authors Murray Dropkin and James Halpin write in Bookkeeping for Nonprofits (Jossey-Bass, 2005). According to the authors, "In some states, a nonprofit organization with $250,000 or less per year in support and revenue is required to file an audit with the state attorney general and pay a filing fee based on income or net assets."

  4. You Can't Afford to Hire a Professional
    Budgets are unforgiving. If you've priced out the cost of a full-time accountant or bookkeeper and can't afford the salary and benefits, your options are limited. You'll just have to keep spreading out those financial responsibilities among existing staff. What other choice do you have?

  5.  You Can't Afford Not to Hire a Professional
    Actually, you do have a choice. You can take away your worry by outsourcing your nonprofit's accounting and bookkeeping needs. If you work with a vendor that provides multiple services, you'll be able to set up a solution that fits your particular needs. That will allow your staff to get back to doing what you hired them to do. They'll be able to refocus on the goals that attracted them to nonprofit work in the first place, without enduring the time-consuming and stressful process of navigating nonprofit financial regulations.
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Why Auto Dealers Should Outsource Bank Reconciliations

September 15, 2016 / by Jim Rice posted in Small Business Advice, Orlando

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Jim-Rice-for-web-2.jpgIt was an expensive lesson for California auto dealer Danny McKenna. He found that two of his most trusted employees had systematically drained $600,000 from his five dealerships.

The guilty parties "had been there a long time and had earned this immense trust," McKenna told Automotive News. "Now I don't dog-pile all this trust on one person all the time anymore."

McKenna's losses could have been even more catastrophic. One of the co-conspirators, who worked in McKenna's accounting department, had taken a medical leave. It was only then that a temporary employee uncovered the fraud, which had gone undetected for years.

Auto dealers everywhere should heed the lessons that McKenna learned the hard way. As a small-business owner, you want to build an atmosphere of mutual trust with your employees. But while it might seem counterintuitive, the best way to accomplish this is to outsource your bank reconciliations — if not all of your accounting and bookkeeping services.

Detection and Deterrence

Regular bank reconciliations performed by an outside firm can not only detect fraud that has already occurred, but also deter future fraud.

With their high annual turnover rate — a recent study pegs it at 39.4% industry-wide — auto dealerships are particularly susceptible to fraud and outright theft. One survey found that 88% of dealership fraud was committed by first-time perpetrators. Moreover, up to 40% of employees could be tempted to commit fraud if they thought they could get away with it, according to the same survey. An employee who knows a third-party reconciliation is coming, however, will be less likely to try to cook the books.

Beyond the obvious benefit of saving you money, keeping your employees honest helps maintain morale. McKenna says that the fraud he experienced "affected everyone's life" at the dealership and "was awful." He now uses certified third-party auditors.

Another benefit of third-party reconciliations is that they can uncover irregularities resulting from honest mistakes or faulty practices. That can keep you from casting a suspicious eye on an innocent employee and promote a healthier working relationship. It can also help you streamline procedures and eliminate inefficiencies.

Spreading out the Responsibilities

With multiple streams of debits and credits, auto dealerships can be an accounting nightmare. New cars, used cars, leased cars and loaners all require separate bookkeeping. Most dealerships also have a parts-and-service department, with fluctuating inventory and multiple vendors. A dishonest employee who knows the system can easily play a shell game with your money.

Industry experts recommend dividing accounting responsibilities and building in crosschecks and redundancies to avoid concentrating too much responsibility — and too much information — in one person's hands. It's a simple safeguard against fraud. In addition, a distribution of responsibilities keeps a dealer from being left high and dry if a key accounting employee leaves or has an extended absence.

Cash flow is the lifeblood of any business. For some auto dealerships, the best way to monitor that lifeblood is to use a third-party accounting service. At the very least, a conscientious auto dealer should perform monthly bank reconciliations, according to the Houston Chronicle. "When bank statements are not monitored and reconciled, the potential for undetected loss is high," the Chronicle reports. "Keeping an eye on bank statements can help you keep your finger on the pulse of your company."

 

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3 Ways Technology has Revolutionized the Accounting Services Industry

September 15, 2015 / by Jim Rice

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Let’s face it, accounting services hasn't historically been seen as the most glamorous and exciting profession out there. However, in recent years, new accounting-centric technology solutions have brought a lot of new energy to the accounting industry. Here are three ways in which technology has revolutionized how outsourced accounting services providers add values to the businesses' they serve:

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1) Automation Reduces Human Error and Frees Up Human Resources

When it comes to accounting, automation is a great thing. It allows your computers to do what they’re best at (processing data quickly and accurately), while your accounting team focuses on what they do best (being creative and critical thinkers). Not only does it drastically reduce human error in data entry, it also frees up valuable human resources, i.e. your actual accounting team. Automated data entry will allow your accounting services provider to be more than just a number cruncher, but a financial analyst and champion for your business, working with you to make decisions, and to help you with financial planning so you can better manage your business. In fact, before accounting automation tools were available, companies overwhelmed with a high volume of manual transactional work simply carried the fixed expense of in-house employees whose sole function was to manually process accounting data. Now, companies can effectively outsource their accounting  function.  The accounting services provider, with new technology at their disposal, can replace the heavy lifting formerly done by employees, greatly reducing the company's accounting costs.

2) Accounting Apps Make Accounting Accessible

Cutting edge accounting apps that have come on the market have been a boon to accounting services providers and their clients. The newly redesigned QuickBooks Online Accountant allows outsourced accountants to manage a portal where they can work with all of their clients and also affords them wholesale pricing to offer to their clients as well. For about $15/month, each client can share their books to up to 5 users, and give their accountant access to boot. QuickBooks Online has integrations with 100's of ancillary accounting apps, such as Bill.com for payables management, and TSHEETS for employee time tracking. All of these applications allow a business to operate its accounting function completely online in a fully integrated environment, that not only speeds the pace of their accounting workflow, but gives all of the players real-time access to the accounting data from anywhere. Many outsourced accountants will set-up the right cloud technology platform to meet the business' as part of their new client onboarding process.

3) The Cloud Saves Space, Time, and Stress

The Cloud has completely revolutionized how we think about data storage. When your accounting team puts your information in the cloud, this is more than just a storage solution. This becomes a back-up for your most vital financial information, as well as your disaster data recovery plan to ensure that after a catastrophe, your data can be recovered without you and your clients losing any sleep. We once had a client that had a fire in their office building, and lost access to most of their business data for about a week, as they could not access their on-site file servers. They, however, had no downtime in accessing their QuickBooks file and other accounting records, as these were all managed in the cloud as part of our services package. Just make sure to understand your cloud storage provider has solid security and data recovery procedures in place as part of your vendor selection process. Also, as part of your internal process, ensure all employees save 100% of their documents in the cloud, and don't save anything locally.

To learn more, Download our Cloud Accounting Tools eBook

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Five Reasons to Outsource Your Bookkeeping Services

September 7, 2015 / by Jim Rice posted in Orlando, Bookkeeping Services

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If you’re like many other small business owners across the States, you’ve probably considered outsourcing your bookkeeping processes to an outside firm. As a provider of outsourced bookkeeping services, I’ve advised many potential clients on this issue before. Here are the top five reasons to make the switch.

1. A Bookkeeper Will Save You Time & Money

Outsourcing your bookkeeping will allow you to pay only for the time you actually need. Rather than paying an in-house full-timer, an outsourced bookkeeping services firm will bill you a fraction of the cost of a full-time employee. In addition to this, if you’ve been trying to do your books on your own, you’ll probably find that those in the bookkeeping business will do the same work faster and more effectively than you can do yourself. 

2. Bookkeepers Do More Than Just the Books

Your bookkeeper will be doing more than just logging transactions for you and giving you a bottom line at the end of the quarter. Your bookkeeper is there to provide you with valuable financial metrics on your business allowing you to see how you’re progressing financially.

3. Bookkeepers Have The Latest Knowledge

Your bookkeeping services provider is the first to know about the latest regulatory changes and how to handle them. This will ensure that all your financial operations are in compliance with the most up-to-date regulatory changes affecting payroll, hiring, and other vital processes. Without this expertise, you could end up having to do the same work twice to make sure you’re in line with the latest compliance standards.

4. Bookkeepers Provide Up-To-Date Records

Your outsourced bookkeeper should be providing you with up-to-date financial records on a monthly basis at the very least. This will be extremely helpful when it gets to be every CPA's favorite time of the year: tax season. Having up-to-date records will make it very easy for your accountant to file your tax return, and this way you can avoid staying up till 4:00 AM the night before with two filing cabinets and a shoebox of receipts.

5. A Bookkeeper Can Help You Understand Your Business

Most importantly of all, a bookkeeper is an outside eye on your business. Your provider of bookkeeping services is especially valuable for this because, while they’re on your team, they’re also on the outside, which gives an invaluable outsider perspective. Your provider will be well versed in the most vital financial processes of your business, and will be able to help you examine your profits and losses when making your financial plans and business strategies. Remember, your bookkeeper isn’t just there to crunch the numbers. They’re there to help your business thrive.

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