If you would prefer to have a system that does not impose limitations on you then you may want to consider going with Peachtree or Sage Accounting Systems. Peachtree is a competitor to Quickbooks and has been around nearly as long, but has not taken off quite as well as Quickbooks. Some of the reasons why it has been less widely accepted is that early versions were a lot less user friendly and you had to be fairly familiar with accounting principles to understand how it worked. Peachtree has worked out those issues though and its latest versions are quite good. One of the biggest benefits that Peachtree has over Quickbooks is that it does not limit the number of inventory items, customers, vendors, or anything for that matter. The problem though that users will find from Peachtree is that as your data grows larger the performance of the software will reduce and processes will take longer and longer. This concern can be alleviated by increasing memory on your system.
Saturday, September 1, 2012
Which Accounting Software Should You Choose?
If you have a new small business or an existing business you may be considering which accounting software to use to keep track of your income and expenses. There are several options to consider depending on the size of your business and your accounting experience and background. The most common selection for small and some medium businesses is Quickbooks. Quickbooks is a versatile software system that allows you to keep track of your banking, accounts payable, accounts receivables, and inventory. There are a couple options depending on the size of the organizations either pro, premier, or enterprise. Pro allows any business to set up in minutes and begin recording transactions. There are a few limitations to the Pro and Premier systems such as a limitation on the number of inventory items that you can add. Using both Pro or Premier you have the option of adding up to 14,500 items and up to 10,000 vendors or customers. I've had some businesses that ran out of space quickly, but for most these numbers are may never be reached. If on the other hand you do come to that crossroads then you can switch to Enterprise that opens up the option of having 100,000 items and assembly builds with up to 500 items. Enterprise still has limitations on the number of vendors and customers similar to Pro and Premier, but other than that Enterprise is a great system for the larger expanding business.
September 2012 Today's Post Contest Begins - Today's Post
August was a great month for our Today's Post contest we hope that everyone who participated enjoyed it. We would like to continue our free posting contest into September. That means that we have added 1 point to each persons' points account, so now there is no reason why anyone can't post.
Here are the details of the contest. Post run from September 1, 2012 to September 30, 2012 11:59pm. There will be four categories: sad stories, love stories, funny stories, and venting/complaining keep in mind that only original works will be included in the contest. Also there will be no re-posting of past posts. You must create a new post each time. In order to qualify each post must receive a minimum of 20 votes, not including your own, and each person posting must refer at least 10 new members to the site. There must be a minimum of 10 posts before the contest becomes active, that means that you will want to have as many people on the site actively participating in the contest. You will want to let your friends know to post, we won't be adjusting the terms of this months contest, if there are not 10 posts then there will not be a winner. The prizes for this months contest are as follows:
$10 for the highest voted post in the category of Love Stories
$10 for the highest voted post in the category of Funny Stories
$10 for the highest voted post in the category of Sad Stories
$10 for the highest voted post in the category of Venting/Complaining
There will also be an overall prize for the highest voted post without regard to category.
The post with the most votes will win $40 on top of the $10 prize for the category win, so the winning post could win $50.
We may throw in some additional prizes as we move through the month of September so check back often and make sure that you've posted, these additional prizes may be more random than the above mentioned prize.
We hope that there will be great participation in the September's contest and we look forward to seeing all your posts and also watching everyone enjoying themselves while competing for the prizes.
For details or to join go to http://www.todaychats.com
For details or to join go to http://www.todaychats.com
September 2012 Today's Post Contest Begins - Today's Post
Thursday, May 10, 2012
Tuesday, November 8, 2011
Tuesday, August 9, 2011
The Right Business Plan
I remember many years ago I decided to open a business, while I was in my first year of college. At the time I was in the middle of a small business class and we were talking about organizing a business and specifically about business plans. I really thought I had a handle on this writing thing and would be able to crank out a plan that was investor ready in no time. After three months I realized that I really didn't know the first thing about preparing a business plan and honestly to this day that first plan is still not completed. Since then I have written hundreds of plans for all different businesses and industries.
As I look back on that experience I realize that I really didn't have the right mindset to complete that plan. I have a fear of failure, which was causing me to stall each time I would sit down to write. I find that many new business owners feel the same way or just realize that they don't have the competencies to complete their own plan and wind up not moving forward with the project or moving forward without having planned out the process. It is very important that businesses prepare or have prepared a plan that can be easily implemented by management. Unfortunately, 70% of businesses begin operation without a business plan and consequently nearly 50% of businesses discontinue operations by the fifth year. Although, there are many factors in a businesses closure there is a simple correlation that can be drawn between planning and business success.
If you are one of the many new businesses getting ready to start a new business project make sure that you consider using a business plan. And if you are like me and find yourself unable to prepare the plan yourself then make sure that you go to http://www.solutionbusinessplans.com for information on getting your plan prepared.
Thursday, January 21, 2010
Setting up Your Accounting Software
So you're considering using a computerized accounting program. Before you can start printing checks, tracking bills, and printing invoices, you will first want to create a company file which should have a list of vendor, customers and accounts receivable balances. Additionally you will need a list of products and services sold, and all the necessary financial account balances. Are your eyes crossing yet? At this point most people will enlist the services of a professional to make sure that the accounting system is done right. Although it may take some time, energy, and effort to set up your accounting system you will find it to be an invaluable tool. Some of the benefits that you will enjoy from your new accounting software are: improved data accuracy, compliance, productivity, and revenues.
I often suggest to new clients that they use QuickBooks for their entrance into the world of accounting, but the principles are the same for most accounting software package. Before you get started with your new accounting system, you will need to gather some information about your company. This article explains the basic information you need and how to best assemble it.
The six step process:
1. Collect your company’s important information
2. Decide on a start date.
3. Gather your business records.
4. Set up your financial accounts.
5. Input transactions.
6. Verify balances on your accounts.
1. Company Information
Most accounting programs have an interview that walks you through the basic steps of setting up your accounting system. Some information that would be helpful to have for this part of your company set up includes: the name of the company, the tax ID (EIN), state sales tax ID, state employee income tax withholding ID, unemployment insurance number, the street address, phone, fax, email, and website information.
If you haven’t already received your tax ID go to http://www.irs.gov/businesses/small/article/0%2C%2Cid%3D102767%2C00.html follow the instructions on the site and at the end you will be issued a Federal Employer Identification Number. Keep in mind that if you are a sole proprietor you will use your social security number for your tax ID. The EIN will normally be issued for partnerships, limited partnerships, limited liability companies, and corporations.
In many states you will be able to register with your state online for sales tax ID numbers, employee income tax withholding ID numbers, and unemployment insurance number. In some cases where you will not be selling products within your state lines the sales tax ID will not be required. If you will not be hiring employees you will not need to secure a state employee income tax withholding ID or an unemployment insurance number.
2. Decide on a start date
The start date is a date that you choose in order to begin entering transactions. The start date should be a date where you can easily obtain or calculate your account balances. These balances should be entered in your accounting program as of the starting date or beginning point. Keep in mind that you do not enter any transactions prior to your chosen start date. Entering information prior to your start date will throw off your account balances so as to not allow you to reconcile correctly. Once your starting balances have been entered, you will then need to enter all transactions between that start date and your current date. Once you have entered the start date and all subsequent transactions the accumulated totals should equal the current balance for each of your accounts. The accounts that typically will carry balances are the: accounts receivable from your customers, accounts payable owed to vendors, bank accounts, credit card liabilities, income accounts, and expense accounts.
Entering beginning balances as of the start date
When calculating beginning balances of accounts, you should:
Calculate balances as of a chosen date also known as your start date.
Ignore payments received from customers after the close of business on that date.
Include amounts due to vendors as of the close of business on that date.
This means that all transactions outstanding checks, payments received, invoices outstanding, etc. prior to and including the close-of-business on your start date are reflected in the balances entered for your start date.
To calculate the balance of an account as of the start date, you should start with bank statements, vendor statements, and/or credit card company statements. These statements will provide you with a simple starting point, from there you still need to add transactions that occurred prior to the start date but that are not reflected on the statement, also subtract any payments made which have not posted as of the start date. For accounts receivable, summarize all charges and payments for each customer, prior to and including the start date in order to determine the balance outstanding as of the start date.
Beginning balances should be calculated for all account in the chart of accounts: bank accounts, accounts receivable, inventory, fixed assets, accounts payable, credit card liabilities, notes payable, and equity accounts. When the start date falls on a new fiscal year, income and expense accounts will be zero, but if the start date is in the middle of a fiscal year, income and expense account balances should be calculated as well.
3. Gather your business records
Calculating and entering the bank balances, accounts receivable, and accounts payable constitute the majority of the work for most businesses. Setting up these accounts depends upon your situation. Does your business already exist or are you starting something new? Have you been keeping up accounting records or have things gotten a behind?
Setting up a new business
Setting up an accounting system for a new business is much simpler than for an existing business. New businesses have zero balances for all financial accounts, as the company enters transactions the company then can accurately track account balances. For a new business, the start date is the date of the first transaction, which is usually when the company opens a new bank account and performs its first deposit. Transactions such as deposits or checks created are recorded as they happen. Accounts may be created as the need for them is recognized.
Converting from an existing system
If you have an existing business, and are converting from a manual system, your existing accounting system is a good source for beginning balances. With an existing business, you need to decide what start date to use, enter the beginning balances as of that date and then record transactions from that date to present.
Your choice of date should be influenced by how either simplicity or analytic need. To be simple your business should consider a date that falls at the end of an accounting period, for instance a month-end, in some cases your business will have a specific need that requires you to select a start date that may be several months or possibly a year or more in the past. This need may be because of some analysis that you must have in order to properly understand your financial situation. Once you have determined your start date then you should begin entering transactions from your old system into your new system as of the start date and proceeding forward until you have reach today’s date. By choosing a recent date, you may reduce the number of transactions to be entered between start and current dates. From the start date forward, all transactions must be entered in your new system. In most accounting programs, no transaction details or financial reports will be available prior to the start date; however this information may be found in your previous accounting records or program.
Generating beginning balances from last year's tax records
If your current system is non-existent or not fully organized you may be able to use your previous year's tax records as a source for locating your beginning balances, if your accountant prepared what is known as a "trial balance." In order for your accountant to prepare the trial balance he or she will have had to examine the accounts in order to insure that the trial balance is accurate. The trial balance will also have been adjusted for items such as depreciation and amortization.
The use of these balances can be helpful as a start for determining your beginning balances, but it can also require much more work if you are late in the year since the previous year’s tax records will be accurate as of the last day of your fiscal year. Most small businesses use a calendar year as the fiscal year for tax reporting purposes, and all transactions between the start date and the current date must be entered before the accounting system can be useful. Choosing a start date that is closer to the current date equates to fewer transactions to enter in the new system, but the data still needs to be accumulated and summarized to produce accurate starting balances.
No system: Calculating balances from scratch
If you have no accounting system, or have been struggling with a check register and hand-written invoices, you will still need to determine a start date and calculate balances as of that date from whatever records you have. A good place to start is with a reconciled checking account balance as of the start date. Begin with the balance per the bank, add deposits in transit (those not shown on the bank statement) and subtract outstanding checks (uncleared checks). The accounting system setup interview will prompt you to enter a beginning balance when creating your bank account.
Next, review amounts due from customers as of the start date. Include customer balances that were due on the start date but have since been paid. You will need these balances to record the subsequent payment receipts and deposits. As you create each customer record in the accounting system setup, you will be able to enter the customer’s beginning balance as of the start date. Follow the same steps with bills due to vendors as of the start date, even if they have been paid. You will enter these bills when you create vendor records. Checks written after the start date that pay bills outstanding on the start date will be applied to the vendor's balance instead of applying to an expense account.
4. Setting up your financial accounts
You need to decide which accounts you want to have as part of your accounting system. All businesses have general ledger accounts (accounts that are used to summarize and categorize financial transactions). These general ledger accounts are commonly referred to as "accounts" or "financial accounts," and are listed in your chart of accounts. Most accounting software programs will provide recommendations for your standard chart of accounts, from there you may then add to the chart of accounts to accommodate specific needs for your business, such as separate revenue and cost of sales accounts for labor and materials.
Most accounting programs walk you through the process of creating financial accounts and entering beginning balances.
When you select a business type in the Company Setup Wizard, the program will recommend a standard chart of accounts based on your business type, which is an excellent starting point. You can add or delete accounts from the list to suit your business requirements. After you choose which accounts will be part of your system, you'll enter opening balances for each of them. Remember, account balances for an existing business need to be calculated as of a specific point in time, usually the close-of-business on the last day of a fiscal period. You then create and enter balances for general ledger accounts, set up customer and vendor records, and enter inventory items, quantities, and costs.
After you select your accounts, review the following list to see if any of these accounts apply to your business:
- Inventory of goods held for sale to customers.
- Fixed assets: furniture, fixtures, equipment, and vehicles owned by the business
- Other assets: patents, trademarks, copyrights, or start-up costs.
- Business credit card accounts. (As with accounts payable, calculate the balance due as of the start date, not the current date. Begin with the most recent credit card statement prior to the start date; add any charges before the start date that are not reflected on the statement, and subtract any payments made but not posted on the statement to get the balance due as of the start date.)
- Balance due on a business line of credit.
- Sales taxes payable.
- Payroll taxes payable.
- Notes payable to banks or other creditors.
When placing a value on inventory, fixed assets or other assets, the actual cost should be used. If the asset has depreciated, the lesser of cost or current market value should be used, but appreciation on assets is not recognized until the asset is sold. Liabilities are valued at the amount owed as of the start date.
Entering accurate asset account balances will increase your equity, and entering accurate liability accounts will decrease your equity. Your accounting program uses the equity account Open Balance Equity to track changes in equity as the asset and liability accounts are created. You can be confident that if your asset and liability accounts are accurate, your equity balance will be correct. Your accountant may want to reclassify the opening balance equity into accounts like Paid in Capital or Retained Earnings, but total equity will be left unchanged.
5. Input transactions from start date and current date
The next step is entering transactions. Since you've calculated your beginning balances, this process should be simple. The process of entering transactions is centered on the bank account, since virtually all transactions eventually affect the bank account.
- Enter transactions month-by-month, take time to reconcile your accounts at the end of each month.
- Create invoices and record payments received against those invoices or beginning customer balances, then make the deposits to the bank account.
- Enter bills, payments made on accounts payable and record checks written out of the bank account.
- Use your vendor statements to enter finance charges and verify that your balances agree with your vendors' balances.
As you complete each month, reconcile your bank statement, credit card, and vendor account balances to verify that all amounts have been recorded accurately.
6. Verify account balances
After entering all transactions through the current date, verify that all of the account balances reflect real-world amounts by comparing them to external sources. Reconcile the bank account to your bank statement (this should be done every month); verify the credit card liability to your credit card statement. Notes payable may be verified by comparing to a loan history or loan statement from your bank. Accounts payable may be verified to vendor statements, and sending accounts receivable statements to customers will help to verify receivable balances.
On an ongoing basis, the verification steps mentioned above — reconciling all of the balance sheet accounts to external sources — will insure that your data remains accurate and help you to find and eliminate errors. Reconciling the balance sheet accounts — assets, liabilities and equity — on a monthly basis will make year-end reconciliations "just another month," and will make assembling information for your tax accountant quick and easy.
Now that you have correct balances for all of your financial accounts, you are ready to begin using your accounting system — you have a good foundation for future transactions. Data entry will be easier — and make more sense. Accounts payable will reflect the correct amounts owed to vendors, and accounts receivable will show correct customer balances. Financial reports will show correct balances for asset, liability, equity, revenue, and expense accounts and will reflect the true results of operations. The account balances will also agree with your tax returns for the previous period.
I often suggest to new clients that they use QuickBooks for their entrance into the world of accounting, but the principles are the same for most accounting software package. Before you get started with your new accounting system, you will need to gather some information about your company. This article explains the basic information you need and how to best assemble it.
The six step process:
1. Collect your company’s important information
2. Decide on a start date.
3. Gather your business records.
4. Set up your financial accounts.
5. Input transactions.
6. Verify balances on your accounts.
1. Company Information
Most accounting programs have an interview that walks you through the basic steps of setting up your accounting system. Some information that would be helpful to have for this part of your company set up includes: the name of the company, the tax ID (EIN), state sales tax ID, state employee income tax withholding ID, unemployment insurance number, the street address, phone, fax, email, and website information.
If you haven’t already received your tax ID go to http://www.irs.gov/businesses/small/article/0%2C%2Cid%3D102767%2C00.html follow the instructions on the site and at the end you will be issued a Federal Employer Identification Number. Keep in mind that if you are a sole proprietor you will use your social security number for your tax ID. The EIN will normally be issued for partnerships, limited partnerships, limited liability companies, and corporations.
In many states you will be able to register with your state online for sales tax ID numbers, employee income tax withholding ID numbers, and unemployment insurance number. In some cases where you will not be selling products within your state lines the sales tax ID will not be required. If you will not be hiring employees you will not need to secure a state employee income tax withholding ID or an unemployment insurance number.
2. Decide on a start date
The start date is a date that you choose in order to begin entering transactions. The start date should be a date where you can easily obtain or calculate your account balances. These balances should be entered in your accounting program as of the starting date or beginning point. Keep in mind that you do not enter any transactions prior to your chosen start date. Entering information prior to your start date will throw off your account balances so as to not allow you to reconcile correctly. Once your starting balances have been entered, you will then need to enter all transactions between that start date and your current date. Once you have entered the start date and all subsequent transactions the accumulated totals should equal the current balance for each of your accounts. The accounts that typically will carry balances are the: accounts receivable from your customers, accounts payable owed to vendors, bank accounts, credit card liabilities, income accounts, and expense accounts.
Entering beginning balances as of the start date
When calculating beginning balances of accounts, you should:
Calculate balances as of a chosen date also known as your start date.
Ignore payments received from customers after the close of business on that date.
Include amounts due to vendors as of the close of business on that date.
This means that all transactions outstanding checks, payments received, invoices outstanding, etc. prior to and including the close-of-business on your start date are reflected in the balances entered for your start date.
To calculate the balance of an account as of the start date, you should start with bank statements, vendor statements, and/or credit card company statements. These statements will provide you with a simple starting point, from there you still need to add transactions that occurred prior to the start date but that are not reflected on the statement, also subtract any payments made which have not posted as of the start date. For accounts receivable, summarize all charges and payments for each customer, prior to and including the start date in order to determine the balance outstanding as of the start date.
Beginning balances should be calculated for all account in the chart of accounts: bank accounts, accounts receivable, inventory, fixed assets, accounts payable, credit card liabilities, notes payable, and equity accounts. When the start date falls on a new fiscal year, income and expense accounts will be zero, but if the start date is in the middle of a fiscal year, income and expense account balances should be calculated as well.
3. Gather your business records
Calculating and entering the bank balances, accounts receivable, and accounts payable constitute the majority of the work for most businesses. Setting up these accounts depends upon your situation. Does your business already exist or are you starting something new? Have you been keeping up accounting records or have things gotten a behind?
Setting up a new business
Setting up an accounting system for a new business is much simpler than for an existing business. New businesses have zero balances for all financial accounts, as the company enters transactions the company then can accurately track account balances. For a new business, the start date is the date of the first transaction, which is usually when the company opens a new bank account and performs its first deposit. Transactions such as deposits or checks created are recorded as they happen. Accounts may be created as the need for them is recognized.
Converting from an existing system
If you have an existing business, and are converting from a manual system, your existing accounting system is a good source for beginning balances. With an existing business, you need to decide what start date to use, enter the beginning balances as of that date and then record transactions from that date to present.
Your choice of date should be influenced by how either simplicity or analytic need. To be simple your business should consider a date that falls at the end of an accounting period, for instance a month-end, in some cases your business will have a specific need that requires you to select a start date that may be several months or possibly a year or more in the past. This need may be because of some analysis that you must have in order to properly understand your financial situation. Once you have determined your start date then you should begin entering transactions from your old system into your new system as of the start date and proceeding forward until you have reach today’s date. By choosing a recent date, you may reduce the number of transactions to be entered between start and current dates. From the start date forward, all transactions must be entered in your new system. In most accounting programs, no transaction details or financial reports will be available prior to the start date; however this information may be found in your previous accounting records or program.
Generating beginning balances from last year's tax records
If your current system is non-existent or not fully organized you may be able to use your previous year's tax records as a source for locating your beginning balances, if your accountant prepared what is known as a "trial balance." In order for your accountant to prepare the trial balance he or she will have had to examine the accounts in order to insure that the trial balance is accurate. The trial balance will also have been adjusted for items such as depreciation and amortization.
The use of these balances can be helpful as a start for determining your beginning balances, but it can also require much more work if you are late in the year since the previous year’s tax records will be accurate as of the last day of your fiscal year. Most small businesses use a calendar year as the fiscal year for tax reporting purposes, and all transactions between the start date and the current date must be entered before the accounting system can be useful. Choosing a start date that is closer to the current date equates to fewer transactions to enter in the new system, but the data still needs to be accumulated and summarized to produce accurate starting balances.
No system: Calculating balances from scratch
If you have no accounting system, or have been struggling with a check register and hand-written invoices, you will still need to determine a start date and calculate balances as of that date from whatever records you have. A good place to start is with a reconciled checking account balance as of the start date. Begin with the balance per the bank, add deposits in transit (those not shown on the bank statement) and subtract outstanding checks (uncleared checks). The accounting system setup interview will prompt you to enter a beginning balance when creating your bank account.
Next, review amounts due from customers as of the start date. Include customer balances that were due on the start date but have since been paid. You will need these balances to record the subsequent payment receipts and deposits. As you create each customer record in the accounting system setup, you will be able to enter the customer’s beginning balance as of the start date. Follow the same steps with bills due to vendors as of the start date, even if they have been paid. You will enter these bills when you create vendor records. Checks written after the start date that pay bills outstanding on the start date will be applied to the vendor's balance instead of applying to an expense account.
4. Setting up your financial accounts
You need to decide which accounts you want to have as part of your accounting system. All businesses have general ledger accounts (accounts that are used to summarize and categorize financial transactions). These general ledger accounts are commonly referred to as "accounts" or "financial accounts," and are listed in your chart of accounts. Most accounting software programs will provide recommendations for your standard chart of accounts, from there you may then add to the chart of accounts to accommodate specific needs for your business, such as separate revenue and cost of sales accounts for labor and materials.
Most accounting programs walk you through the process of creating financial accounts and entering beginning balances.
When you select a business type in the Company Setup Wizard, the program will recommend a standard chart of accounts based on your business type, which is an excellent starting point. You can add or delete accounts from the list to suit your business requirements. After you choose which accounts will be part of your system, you'll enter opening balances for each of them. Remember, account balances for an existing business need to be calculated as of a specific point in time, usually the close-of-business on the last day of a fiscal period. You then create and enter balances for general ledger accounts, set up customer and vendor records, and enter inventory items, quantities, and costs.
After you select your accounts, review the following list to see if any of these accounts apply to your business:
- Inventory of goods held for sale to customers.
- Fixed assets: furniture, fixtures, equipment, and vehicles owned by the business
- Other assets: patents, trademarks, copyrights, or start-up costs.
- Business credit card accounts. (As with accounts payable, calculate the balance due as of the start date, not the current date. Begin with the most recent credit card statement prior to the start date; add any charges before the start date that are not reflected on the statement, and subtract any payments made but not posted on the statement to get the balance due as of the start date.)
- Balance due on a business line of credit.
- Sales taxes payable.
- Payroll taxes payable.
- Notes payable to banks or other creditors.
When placing a value on inventory, fixed assets or other assets, the actual cost should be used. If the asset has depreciated, the lesser of cost or current market value should be used, but appreciation on assets is not recognized until the asset is sold. Liabilities are valued at the amount owed as of the start date.
Entering accurate asset account balances will increase your equity, and entering accurate liability accounts will decrease your equity. Your accounting program uses the equity account Open Balance Equity to track changes in equity as the asset and liability accounts are created. You can be confident that if your asset and liability accounts are accurate, your equity balance will be correct. Your accountant may want to reclassify the opening balance equity into accounts like Paid in Capital or Retained Earnings, but total equity will be left unchanged.
5. Input transactions from start date and current date
The next step is entering transactions. Since you've calculated your beginning balances, this process should be simple. The process of entering transactions is centered on the bank account, since virtually all transactions eventually affect the bank account.
- Enter transactions month-by-month, take time to reconcile your accounts at the end of each month.
- Create invoices and record payments received against those invoices or beginning customer balances, then make the deposits to the bank account.
- Enter bills, payments made on accounts payable and record checks written out of the bank account.
- Use your vendor statements to enter finance charges and verify that your balances agree with your vendors' balances.
As you complete each month, reconcile your bank statement, credit card, and vendor account balances to verify that all amounts have been recorded accurately.
6. Verify account balances
After entering all transactions through the current date, verify that all of the account balances reflect real-world amounts by comparing them to external sources. Reconcile the bank account to your bank statement (this should be done every month); verify the credit card liability to your credit card statement. Notes payable may be verified by comparing to a loan history or loan statement from your bank. Accounts payable may be verified to vendor statements, and sending accounts receivable statements to customers will help to verify receivable balances.
On an ongoing basis, the verification steps mentioned above — reconciling all of the balance sheet accounts to external sources — will insure that your data remains accurate and help you to find and eliminate errors. Reconciling the balance sheet accounts — assets, liabilities and equity — on a monthly basis will make year-end reconciliations "just another month," and will make assembling information for your tax accountant quick and easy.
Now that you have correct balances for all of your financial accounts, you are ready to begin using your accounting system — you have a good foundation for future transactions. Data entry will be easier — and make more sense. Accounts payable will reflect the correct amounts owed to vendors, and accounts receivable will show correct customer balances. Financial reports will show correct balances for asset, liability, equity, revenue, and expense accounts and will reflect the true results of operations. The account balances will also agree with your tax returns for the previous period.
Wednesday, June 25, 2008
What is your Motivation?
Before making the decision to work for yourself it is important first to explore your motivation. Why do you want to be in business for yourself? If your first inclination is that you want to make lots of money, then this may not be the right decision for you. There is certainly the opportunity for riches through entrepreneurial pursuits, but unfortunately, most business owners do not strike it rich. Keep in mind though that money follows good ideas. I have been involved in many good and bad ideas over the years; fortunately, it is not hard to spot the bad from the good when a little examination is done. I have consulted many would-be entrepreneurs and often times the motivation is the factor that stops the forward progress. Your motivation should be based on a desire to help others. If you are pursuing a path that assists those that are in need you will work much harder than you would if your sole motivation is to get rich.
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