Basic Accounting

>As a consultant; I hear business owners asking about the viability of their company. Just looking at the monthly Financial Statements is not sufficient any more. When economic times are good, profitably seemed certain, and the Financial Statements were enough. But now the profitability of the business is very thin. Owners and managers struggle to understand why profit is so low and how to stop the falling trend. There is more relevance for the expression, “the devil is in the details.” Business owners cannot wait for monthly and quarterly financial reports to let them know how they are doing. Managing the business has to happen on a weekly or even daily basis and a Job by Job basis too.

Your Business needs to implement Cost Accounting. Let’s face the facts, no one likes Cost Accounting. It is time-consuming, prone to error, too detailed, and worst of all confusing. The good news is that if you keep it simple; Cost Accounting can be quick, rewarding, and it can give you the information you need to make great business decisions. Make your cost tracking efforts provide usable information.

Examples: Is my projected cost at completion close to my original estimate? Is my cost of materials running too high? Do I have the Resources available to complete the job on time? Which customer produces the best profit margins? The key to a solid solution is real-time data. You can’t make a good decision on out-of-date information.

There are three primary sources of costs: Labor, Materials, and Subcontractors. Your reporting is dependent on accurate tabulation of this data. Let’s review each of these three cost components in more detail.

First, most jobs are very Labor intensive. This means many man hours or crew hours need to be accounted for. As you enter the hours you can apply a shop rate to come up with the cost of labor. I do not recommend you use personal pay rates within job costing, it is too emotional.

Second, most jobs have some material component too. This might be lumber, steel, boxes, welding coils, gas, or any of a thousand material items. The material might be pulled from stock inventory or purchased uniquely to your job. In fact the estimated material often becomes the demand for the procurement process (BOM into MRP engine).

Third is subcontracting. This might be a local vendor or a remote vendor who will perform some service or process that you don’t or can’t perform in-house. Example: Metal Plating might be more efficient to send out than to create a department to do the work in-house. It is often much less expensive to ‘sub it out’ than to do the work in-house. Or you can use the subcontractor as an additional resource when your in-house staff is over loaded.

These three cost sources usually make up 80% of the cost of a Job. Other costs such as transportation, equipment, overhead, or supervision might make up the remainder. The accounting side comes from the need to enter employee time cards, vendor invoices, material usage tickets, and travel expenses. Your cost accounting software needs to become a tool to do the tabulation of the mounds of raw data. When you have 150 active jobs, 70 shop employees, 30 field employees, and 15 subcontractors all working simultaneously you must have a software solution to sort, group, sub-total, and filter the thousands of daily job cost entries.

By the way, if you really want timely and accurate Job Cost Reporting, this Video Presentation on The Job Manager Software for Microsoft Dynamics NAV will lay it out for you.

Keeping Financial Logs is Always Good Tax Advice

If you want good tax advice, this is something you shouldn’t ignore. It pays to always keep records of your tax returns, tax credits and claim benefits.

If you don’t know how to go about recording your tax histories and other financial activities, HM Revenue & Customs (HMRC) offer these tips.

Tax Advice: Why Financial Records are Important

When you have an effective system for logging your financial activities, you can monitor your expenses better. No longer will you have to wonder where your money went. Here are other advantages of keeping records.

1. Quickly see if anyone owes you money or if you owe anyone

2. Cut down on accountancy expenses

3. Save time counting your finances

4. You can make sure you receive the right amount of credits and benefits

5. Pay the right tax amount

6. Avoid penalties and you don’t have to pay extra tax

Another thing, when you give HMRC a tax return, you may be asked to present your records to see what your used to complete your data. It’s imperative that you enter the right figures in your tax returns.

Are There Penalties?

You may face penalties of your records aren’t adequate or if you don’t keep records at all.

More importantly, what’s the point of keeping records if your tax return you send is inaccurate? You can still face a penalty if your returns aren’t correct. With reliable records at hand, you can avoid this penalty.

On the other hand, it’s natural to make mistakes. Even HMRC isn’t safe from human error. If you made an error, but can prove to HMRC that you’ve been responsible about making sure the return turns out right, you won’t pay any penalty.

Here are areas you should not neglect to take care of:

• Keeping complete records and make sure they’re updated. Save them securely.

• If you meet a bump in the road or find something you can’t understand, contact a tax advice expert, accountant or HMRC.

What Information and Records to Keep

There are all sorts of records that need to be kept, but the type of information you want to keep should suit the kind of tax you pay. Some of the most common financial logs to keep are:

• Benefits and expenses

• Capital Gains Tax

• Construction Industry Scheme

• Trustees

• PAYE

• Corporation Tax

• VAT

• Self assessment – directors and individuals

• Partnerships

• Self-employed

How do You Keep Financial Logs

HMRC hasn’t stated exactly how to keep records. To make sure you get everything right, make sure not to lose original paper documents, especially those that say tax has been deducted. Other documents can be stored electronically, like using a memory stick, CD, or a computer.

It’s generally accepted that these records should be kept at least six years, except if you’re an employer or contractor because they have to store records for three years at least.

The last tax advice would be to make sure not to destroy important documents and records of any sort.

A few years ago, before the internet was in existence, I would have gladly wandered down to the local high street accountant’s office to sign on the dotted line and pay what was then considered to be the market rate for accountancy and taxation services.

Today, however things have changed. Low cost accountants can be found quite easily on the internet offering prices which are quite attractive.

To understand how and why accountancy costs have reduced so dramatically over the years, firstly we have to consider the internet. The internet has made it easy for anyone to compete on equal terms with the more established high street accountants. But that’s not the full story. In the “good old days”, to produce a set of accounts it took a junior clerk to tidy up the bookkeeping, a fairly junior accountant to produce the accounts, with a senior performing the final review. A secretary would type out the accounts on a typewriter, with corrections having to be repeated again and again as the review process continued. In other words, duplication an inefficiency were rife.

Today however, we have a different breed of accountant. Clients are educated and supported via email and remote desktop connection. It could even be said that they do most of the junior clerk’s work for him. In essence, all that’s left to do is for an accountant to enter everything into his software and the job is almost done. There’s no need for a secretary, and changes or amendments can be done at the touch of a button.

So in essence, I would argue that such inefficiencies have been around for a long time, but it’s the internet that has exposed them and accountants have been forced to start to compete for business that is slowly being drained away as clients come to their senses.

Hence, internet based accountants aren’t as cheap as chips as they would first seem. In reality they are merely offering very efficient services in sector that they choose to exploit. By this I mean that some accountancy jobs consume vast resources for little reward. Others take little effort and offer considerable reward (for example IT contractors). If they optimise their website properly. both on page and off page, internet accountants can expect a high volume of clients flowing “through their doors”. If volumes are high enough, they can take advantage of economies of scale, it’s sort of like an accountancy tin can factory with products and services being churned out quickly and at very reasonable cost, but nevertheless without quality being sacrificed.

However, cowboys do exist. If you are considering using accountants from the web, I’d recommend having a good trawl through the forums first to look for negative comments, so that your can form some sort of opinion of your own before committing.

Here’s a good video I came across – Hope you like it

Author’s Description:

Welcome to Gopal Systems Private Limited Manufacturer & Exporter of Labels, Stickers, Barcode Printers, Scanners & Thermal Transfer RibbonThe company was established in the year 2007 at Heritage Foods & Mayaas are some of our esteemed cost effective pricing, on time delivery schedules & client specific solutions make us the first choice of our product list includes Softwares, Printers, Scanners, Systems, Monitors, Scales, Cards, Machines & offer POS, Retail, Restaurant, Accounting & Asset Tracking Software’s to our Thermal Receipt Printers & Hand Held Scanners are some of our best selling with that we provide All in One Touch Systems, LCD Touch Monitors & Access Control also provide Retail Scales, ID, RFID, Smart, Loyalty & Membership Cards that are fabricated from premium grade raw Web solutions, Hand Held Machines, Accessories & Caller IDs are a class further enquiry, log on

Tech

Thought you guys might like this one

Author’s Description:

Welcome to Gopal Systems Private Limited Manufacturer & Exporter of Labels, Stickers, Barcode Printers, Scanners & Thermal Transfer Ribbon The company was established in the year 2007 at Heritage Foods & Mayaas are some of our esteemed cost effective pricing, on time delivery schedules & client specific solutions make us the first choice of our product list includes Softwares, Printers, Scanners, Systems, Monitors, Scales, Cards, Machines & offer POS, Retail, Restaurant, Accounting & Asset Tracking Software’s to our Thermal Receipt Printers & Hand Held Scanners are some of our best selling with that we provide All in One Touch Systems, LCD Touch Monitors & Access Control also provide Retail Scales, ID, RFID, Smart, Loyalty & Membership Cards that are fabricated from premium grade raw Web solutions, Hand Held Machines, Accessories & Caller IDs are a class further enquiry, log on

Tech

Retraining to find work is an excellent choice for anyone who has been out of work for a long period of time. But what do you retrain as? The choice that you make when it comes to choosing a training course is quite important as the decision could affect your long term future.

Choosing a training course should really be based on what you will enjoy doing and what you are interested in. You should never make your decision purely based on money. You really need to follow your passion and the money will follow if you do something that you have a passion for then the chances are you will be very good at what you do.

Another good tip is to choose a training course in an area where there are plenty of job opportunities. There is no point in training in something that is not in demand and you should be looking for the areas where there is an abundance of jobs preferably in something that you like or will enjoy.

Retraining can encompass a lot; you can learn new practical skills and gain qualifications in many areas, like training as a plumber for example. This type of training will equip you with both practical skills and also paper qualifications that you can use when applying for a new job. The other types of qualifications that you can gain are academic qualifications which can vary from basic English and Maths to qualification’s in discipline’s like IT or secretarial skills.

Retraining can vastly improve your chances of finding a job and with the level of completion for vacant job positions at the moment it is an option that should be seriously looked at. You will stand a lot better chance in the interview against another candidate who does not have any type of paper qualifications. Qualifications prove to your prospective employer that you have the ability to learn and also have the basic knowledge in the areas that they are looking for.

There are literally hundreds of training course out there to choose from, if you perform a quick search using the internet you will see for yourself what is available. A lot of people view retraining as complete waste of time as it is not a quick fix to their unemployment problem. I can see the logic in this thinking if you have been unemployed for a long time then you most probably have a back log of debt and really need some quick cash to resolve the situation.

As for retraining being a waste of time I totally disagree, the time that you spend unemployed and doing nothing could be put to some good use like be broadening your horizons and improving your chances of finding work by adding a new qualification or skill to your CV.

I am a former IRS Agent who has worked and taught the “Offer-in-Compromise” Program in the IRS Regional Training Center. The Offer-in-Compromise is a much talked about program and advertised as “pennies on the dollar” settlement.

FACTS: Approximately 52,000 “Offer-in-Compromise” (hereafter referred to as OIC) are filed each year and that number will be rising at a record pace. 12,000 OIC are accepted each year. The program has an acceptance rate of about 22%.

OICs are worked only by an IRS Tax Specialist whose expertise is OIC. All the tax specialists are trained to scrutinize the OICs. I bite my tongue in saying this; it is my firm belief that the Agents working these cases look first to reject rather than to accept an OIC. Why, simply because it is far less work for an Agent. It is much easier to send a rejection letter than fully document the case for acceptance. Therefore the Agents look for any reason they can use to reject the OIC. An OIC rejection closes out their inventory quickly, making the Agent look very efficient in managing their case load.

The Key to having your OIC accepted is listed below:

1. Fully document the case. Get every piece of paper you can, verify every number you put on the Form 433A, the IRS financial statement.

2. Keep up with the OIC. As soon as the case is assigned, call the Agent every two weeks to ask for an update. This lets the Agent know you really want this pushed through and that you can furnish additional documents if needed. Most Agents will not even contact the Taxpayers or their representative, they will usually just send out a rejection letter. It is the easy way out.

3. Make sure the case makes sense. If you believe the Agent will have questions, send in an additional statement the clarify questions you think will arise.

4. Know that IRS will look at the history of the taxpayer and income levels for the last five years. If there have been major fluctuations in your income level, please document the fluctuations in detail.

5. Believe it or not, many offers are rejected because payments were not attached or the OIC was not signed. To avoid a rejection, you should have a tax professional review the OIC before submitting.

I have been in this business a number of years and truly believe you would be a fool not to have professional representation. Find a professional tax firm specializing in OIC, which is your very best chance of having the OIC accepted.

Former IRS Agents who have worked the Program are best suited for this job; after all, they know the tax policies.

I am a former IRS Agent and Revenue Officer. I have also taught Tax Law at the IRS Regional Training Center. I am still an IRS Insider, and I still have solid insider sources.

When a taxpayer is faced with an IRS Tax Levy, whether it’s a bank levy or a wage garnishment, immediate panic sets in, and generally the taxpayer hasten to take care of the problem as quickly as possible. If they do not have a CPA or Tax Attorney, the taxpayer starts hitting the internet to find out which company is the most credible, who they can afford, who they can afford, and most importantly who they can trust, and who can resolve their tax situation in the most expedient manner.

You can get immediate tax relief from Bank Levies or Wage Garnishments, but you have to call the right Professional Tax Firm.

Here are some very general rules to follow:

1. IRS does not want to levy! They must send out the tax levy because prior notices sent to the taxpayer went unnoticed or were not responded to. Sadly many notices were sent to the wrong addresses.

2. IRS sends out the wage garnishments and or bank levies to get your attention so they can close their case and remove you off the IRS Receivable Computer. This also takes you off the IRS enforcement computer called CADE.

3. In order for the case to be closed, all tax returns have to be filed and a completed and documented Form 433F financial statement has to be submitted to the IRS for review. The IRS will then release the levy and close your case with a payment agreement or hardship status.

4. You should hire a true professional tax firm to handle your tax situation; it will make a huge difference. You will get the results you need from a professional tax firm.

5. Beware of tax mills who promise you pennies on a dollar. The IRS only accepted approximate 12,000 settlements a year. Most companies promising you the sky, actually knows the case will never be settled.

6. Ask to speak directly to a Tax Attorney, CPA, Former IRS Agent, or an Enrolled Agent on their staff. If you cannot speak directly to this type of tax professional, seek another professional firm.

7. Beware, most of the people you speak to off the Internet are sales people selling your lead information to the highest bidder.

8. Check the firm’s BBB rating to ensure the trustworthiness of the firm you are dealing with.

By now, you could well be aware of low cost accountants offering accountancy and taxation services via the internet. These professionals could well be situated in a large office building with years of reputation behind them. However, the converse could also be true, they could be a sole trader working from a bedroom at home, or even from a garage in the back garden.

However, what exactly is all the fuss about. More and more professionals are working from home, so why should stigma be attached to an accountant who works from home. In my opinion, it makes no difference at all. Accountants have set continual professional development to perform each and every year to make sure that their skills are kept up to date, so this would suggest that as long as you find yourself an accountant who is a member of a professional body, then you should have more chance of success.

With this in mind, I am now going to suggest the type of people that should be using the online low cost accountants.

The people I suggest that should use low cost online accountants are either sole traders or sole directors of limited companies who work from home. The concept behind the tax and accountancy affairs of such individuals or businesses is, although not exactly straight forward, the type of thing that most accountants should come across on a daily basis and so should be well within their remit and should cause them very little trouble.

For example, the following services will be required:

Abbreviated Accounts for Companies House

Full Accounts for Shareholders

CT600 Corporation Tax Return

SA100 Self Assessment Income Tax Return

Annual Return

Payroll for 1 Director

Apart from some fairly rudimentary bookkeeping, all of the above can be produced fairly quickly, cheaply and effectively, i.e. at low cost. You’ll require fairly low maintenance throughout the year, just the odd bit of advice over the telephone or via email.

On the other hand, for a larger limited company in the manufacturing sector with say fifty employees, large volumes of debtors and creditors that require constant management, work in progress, raw materials, consignment stock, foreign exchange differences, then you should forget about low cost accountants found online. Your accounts will need to be produced in a controlled, orderly manner, otherwise you could experience severe difficulties. In my opinion, low cost accountants found online are not for you, well, that is unless you just use the low cost accountants to produce the final accounts. If you take care of literally everything else yourself, and just use the cheap accountants to format your figures and produce a neat and tidy set of year end accounts, then there could be savings to be made. For instance, I’ve know such businesses pay £3000 per annum for a neat and tidy set of accounts. In my opinion, the cost of this could easily be reduced by a couple of thousand pounds per annum, under the right circumstances.

However, as always, before you enter into any business relationship, do your homework first and find out as much as you can about your potential advisor. A bad decision could be costly.