5 Ways Bookkeepers Support Business Decisions

As your business grows, you need to surround yourself with a team of people that have the skills and drive to help you take your vision to the next level. And when it comes to bookkeepers, you want a financial quarterback on your side, not a data-entry monkey.

Unfortunately, both can be called bookkeepers, but the quarterback is the bookkeeper that asks how they can make your business better. They’ll pair their knowledge with a clear assessment of your business data to help you make the business decisions that are in the best interests of your company.

For example, a bookkeeper can improve how you approach decisions about:

Managing Cash Flow

Have difficulty keeping track of your cash? Great bookkeepers can give you a cash flow report that shows where your cash has been spent. They can also develop cash flow projections that will help you to manage your current and future cash needs.

Selecting Projects

If you take on a lot of project work, a bookkeeper can assist you with project costing and give you a breakdown of which jobs made you money and which jobs didn’t. This can help inform the decisions you make about what jobs are worth taking on in the future.

Improving Gross Margins

Are you looking to improve your company’s gross margin? A talented bookkeeper can help you analyze direct and indirect costs and determine where your greatest opportunities for improvement lie, enabling you to make informed decisions about production, materials, and pricing.

Offering Employee Incentives

To get the most out of your employees, you have to encourage their efforts. Whether you’re looking to launch an incentives program or expand an existing one, your bookkeeper can help you analyze, plan, and execute a bonus scheme that will enhance employee performance.

Buying or Leasing

Small- and medium-sized business owners need to consider their investments carefully, particularly when it comes to big ticket items like office space and equipment. Should you lease, or buy? Your bookkeeper can give you the data you need to make a wise decision.

Your bookkeeper can also help you make decisions about expense management, tax filings, and a host of other issues. These insights can impact the growth and efficiency of your business and also ensure that your business stays in line with relevant business regulations and CRA requirements.

Learn more about how Legacy Advantage can help you make the right business decisions. Contact us today.

 

7 Apps To Streamline Your Business Cloud Accounting

It goes without saying that your business should have an online presence. But should you take your business online? And what does that even mean? Simply put, the future of business management is in the cloud. No, not “up in the clouds,” actually ON THE CLOUD — using business cloud accounting software or apps.

If you’re not yet familiar with the cloud, then in the simplest terms according to PC Magazine, “cloud computing means storing and accessing data and programs over the Internet instead of your computer’s hard drive.” From file storage, back-ups, and software updates to group collaboration and client management, business cloud solutions offer companies enormous benefits. And while every aspect of cloud computing may not be a fit for your business, business cloud accounting will be.

Cloud applications effectively streamline business accounting functions, so let’s take a look at some apps that may benefit your company in the following areas:

Integrated Cloud Accounting Platform

The first step in establishing a business cloud accounting system is to select a cloud-based platform from which all of your other applications will be managed. Our preferred choice is QuickBooks Online (QBO). It’s easy to learn, and it integrates with thousands of other applications.

Point of Sales (POS) System

If you need a POS, then Square is a great choice. It has a very simple cost structure, and a beautiful interface suitable for most retail operations. If you don’t need a POS, you can email invoices directly from QBO, which handily offers your customers the option to pay by credit card.

Cloud applications effectively streamline business accounting functions Click To Tweet

Receipt Tracking

Never lose a receipt again! HubDoc and Receipt Bank are mobile applications that allow you to take photos of receipts and store that information digitally. As soon you as you digitize your receipts, you can throw away the original rather than store it in a shoe box under your desk.

Data Analysis and Reporting

QBO has great native reports, from simple profit and loss statements and balance sheets to more complex reports that can break down your profits and losses by month, by customer, by class, or against your budget. Unfortunately, QBO’s dashboard and visuals aren’t as impressive as its data. If looks matter, another option is Fathom, which allows you to generate both insightful and beautiful reports.

Transfer and Storage of Data

Your financial team can’t accurately process the information they don’t have or can’t read. Receipts, invoices, statements and other paper documents are easily lost or garbled, but there are tools that can digitize and upload these to your cloud accounting system. On the go, you can use the mobile app CamScanner to upload items you’ve just received. If you’ve got a backlog of paperwork in the office, you can digitize it with the Scansnap scanner and never look back.

 

Looking for more tips on how to set up a business cloud accounting system? Legacy Advantage would love to help.

 

Three Ways to Achieve More Simplicity in Business

In so many ways, workplace productivity and efficiency boil down to finding greater simplicity in business, and most of us can agree that simplicity and administration are infrequent bedfellows.

Recently, I was listening to a Harvard Business Review podcast interview with Basecamp CEO Jason Fried in which he was advocating that businesses reduce administrative burdens so that employees can focus more on their work.

I couldn’t have agreed more.

Simplicity has always been at the core of our philosophy at Legacy Advantage. Now that’s easier to say than it is to achieve, so we’ve embraced the Results-Only Work Environment approach known as the ROWE system developed by Cali Ressler and Jody Thompson. The basic logic is this: when, where and how you do your work is less important than what results from that work. Simple, right?

Simplicity in business starts by reframing the question and asking yourself not what you’re trying to track but what you’re trying to achieve. Our aim has been to eliminate as much administrative work as possible so that we can instead spend that time adding value for our bookkeeping clients.

Ask yourself not what you’re trying to track but what you’re trying to achieve. Click To Tweet

Here are three easy ways you can achieve simplicity in business:

1. Have as few meetings as possible

When you think about it, meetings are expensive. If five of your employees participate in a one-hour meeting, that’s five productive hours gone. Truth be told, meetings (especially status update meetings) are usually a huge waste of time considering, as Fried points out, these updates could simply be summarized and sent out.

If you’re running meetings daily, weekly, or even monthly, take a step back and ask yourself this: What is the result I’m trying to achieve, and what is the result I’m actually achieving?

If the aim is to keep everyone in the loop, why is that important? Does person A working in Department X really need to know what person B in Department Y is doing? If yes, then do persons C and D need to be there? More importantly, can A update B in a more efficient way and still keep management in the loop? Bottom line, hold meetings sparingly and run them efficiently

2. Stop tracking time and attendance

Companies spend a lot of resources tracking holidays, paid leave, unpaid leave, sick days, etc., but keeping track of whether or not someone is at their desk eight hours a day only proves that they were there. It doesn’t tell you how productive they were.

What if they could be more productive by working outside the normal 9-5 business hours? My senior manager comes to work at 11am. Crazy, right? Not really. He’s a night owl, so he works late because that’s when he’s most productive. Give your employees some flexibility and they may pleasantly surprise you.

The same goes for holidays. Tracking holidays is tedious, especially as your team grows. What if you let your employees decide when and how long they need for vacation? How much do the details matter if your employees are refreshed, at their best, and delivering quality results on time. If your fear is that employees will abuse this sort of policy, then you either have a corporate culture issue or they’re not the right employees.

3. Maximize your profits and efforts

Did you know: the majority of your profits come from a small number of customers and only a small percentage of your marketing efforts acquire the bulk of your new customers.

Now, when you have a great idea or a great product, you tend to want to tell everyone about it. You need spread the word wide and far by as many means as possible, right? Wrong.

What you need to do is maximize your productivity by identifying your best margins. Who are your top customers? What are your most effective marketing channels? You need to find your niche.

All of these ideas about maximizing efforts and profits feeds into the 80/20 principle which I’ve written about at length in a previous blog.

Once you’ve figured it out, trim the fat by eliminating underperforming and unnecessary products and services. By doing this, you can redirect your time, energy, and resources towards your top marketing activities and big ticket clients.

Finding greater simplicity in business ultimately maximizes both profits and productivity, makes your employees happier and frees up your valuable time.

 

Your Stress-Free Guide to Year End Bookkeeping

“Year end” – what a vague phrase! To non-accountants, it doesn’t mean much beyond planning your new year’s eve party, but for us, it’s a critical concept and activity.

Year end is the time of year where you “wrap up” your financial year, including inventory, revenue, taxes – the whole financial works! Once your year end documentation is complete, accountants will then take these numbers to conduct an audit, review, or simply file your tax return.

How To Ensure Your Year End is Done Correctly

At Legacy Advantage, we have our own way of ensuring an accurate and complete year end. I’m going to share some proprietary information with you, so shhh… keep it a secret. I hope the following checklist takes a bit of stress off your plate and makes your year end process a little easier.

Tax Agency Compliance Review

Every company needs to comply with federal and provincial regulatory bodies. The Canada Revenue Agency (CRA) is a federal tax agency to whom you pay your corporate taxes and your government sales tax (GST) / harmonized sales tax (HST). The Ministry of BC is the BC Provincial tax agency to whom you pay your provincial sales tax (PST).

What to do:

  • Check with the CRA and Ministry of BC to ensure that all GST, PST, payroll remittances have been filed and paid.
  • If you have outstanding amounts, pay them immediately.

Bank Reconciliation Review

The purpose of Bank Reconciliation is to verify if all of your bank transactions have been captured. This is the most fundamental step in ensuring your bookkeeping is accurate.

What to do: 

  • Pull up your bank reconciliation for the last month of your fiscal year.
  • Check if you have any uncleared deposits or payments. If so, are they stale? Are there errors?
  • Any uncleared amounts should be addressed individually. Should they be cleared out or should they remain as uncleared?

Balance Sheet Review

Your Balance Sheet shows you at your company’s Assets & Liabilities are at any point in time. It’s important that this picture is correct before you file your taxes.

What to do:

Many balance sheet accounts need to be reviewed for year end. The following are among the most important:

  • Prepaid Expenses – Are these amounts still prepaid? Or should they be recognized?
  • If you have a sales clearing account (because you have a point of sales system), does it actually clear?
  • Accounts Payable (AP) – Are all AP amounts real? Have these bills already been paid but just not marked off? Cleaning up AP can be quite cumbersome. Reach out to us if you need help.
  • Accounts Receivable (AR) – Are all AR amounts real? Have they already been collected, but just not marked off? Or are they bad debt? Below is a video on how to write off bad debt in Quickbooks Online (QBO).

Profit and Loss Review

Profit and loss statement shows you how much profit… or loss… you have made in the year.

What to do:

  • Let’s assess whether any expenses should be capitalized. Look through your Office Expense and Repair and Maintenance ledger to see if you made any purchases over $500. If so, check if they should be capitalized instead of expensed. For example, if you bought a new Mac for ~$1200, then it should be recorded to “Computer Equipment,” instead of expensed through Office Expenses.
  • Are there any items that look strange? For example, negative sales or positive expenses.
  • Are there any transactions in “uncategorized transactions” or “suspense” or “Ask My Accountant”? Those need to be allocated and cleared up.
  • Lastly, we do a trend analysis. We pull up the profit & loss by month and look for any anomalies. For example, we can check if rent/utilities/payroll amounts have any significant variances from month to month. If so, it might be an indication of error.

Transaction Review

Your bookkeeping is simply an amalgamation of all the transactions you have recorded in the year. It’s important to selectively review these individual transactions to ensure that they are correct.

What to do:

  • For example, at Legacy Advantage, we take a risk-based approach to in-depth review. More specifically, we take a look at all the large transactions to ensure that they are recorded properly.
  • Another area of high risk is journal entries. We review all large journal entries to ensure accuracy.

Client Specific Review

Each client has their own bookkeeping nuances. For example, they want the numbers to be presented a special way, or they want their payroll cost split over a number of different projects. These special requests need to be reviewed.

What to do:

  • Each client has its own nuances. We perform a review according to these nuances. For example, non-profits have deferred revenues and/or funds.

Account Overview

Here’s where we can get a little creative. After all the accounts are accurate, we can look for ways to add value to our clients.

Here are some examples:

  • Do our clients have a hard time tracking Cost of Goods Sold? Then we can recommend POS systems and make introductions to vendors to improve this process.
  • Do our clients have high transaction costs? If so, we can make introductions to Payment Processors to see if they can get a better deal.
  • Do our clients have sales in more than one provinces? Then we need to assess whether there are any sales tax exposures.

At the end of all of this, we can then send these files to your tax accountant for them to file your taxes.

Need assistance correctly reviewing your year end?

You still have time to contact us before your year end documents are due.

 

How Does the 80 20 Principle Work in Bookkeeping?

The 80 20 principle is likely a phrase you’ve heard before. But have you ever heard it be applied to bookkeeping practices? Maybe not. For those of you that aren’t familiar with the 80 20 principle, also referred to as the Pareto principle, here’s what Wikipedia has to say about it:

“The 80 20 principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of income in Italy was received by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes.”

Joseph M. Juran made some apt conclusions about Italy’s income, but what does that have to do with bookkeeping? Turns out, everything!

The 80 20 principle and bookkeeping

Chances are, 20% of your products/jobs/service lines/activities generate 80% of your profits. I want to emphasize that we are talking about profits, and not revenues. Just by looking at the top line, you are missing a wealth of data that will help you make better business decisions. One way to think about this is: Revenue is vanity; profit is sanity; cash is king.

For example, a large revenue job may require extensive resources, thus leading to lower profits than a combination of your small jobs. Similarly, you might have 2000 SKU’s in your inventory. It’s likely that only 20% of those products are generating the majority of your profits.

Unless you track your profits and costs, how would you be able to apply the 80 20 principle to your company?

20% of your activities generate 80% of your profits. Click To Tweet

How bookkeeping figures out the 80 20 principle

Let’s imagine you’re running a project or job based company, like a design firm, painting company, electrical company, where your income and expenses can be directly traced to a job.

All income and expenses will be tracked by project, and at the end of the quarter, we can analyze all the jobs all at once. We’ll sort each job by profitability. Then we look at the top 20% of the most profitable jobs. What do they all have in common? Can we replicate these results? Then, we review the bottom 20% of the least profitable jobs. What do they all have in common? How can we prevent these things from happening again?

Investing in your business’ bookkeeping allows you to get into the details of your company. Do more of the activities that increase margins, and reduce the activities that decrease margins. Quarter over quarter, year of year, the disciplined process of analyzing your project profits will allow you become much more profitable.

How would you like to generate the same amount of business next year, but be way more profitable? Why work harder when you can work smarter!

In Summary:

  • Similar to “Working smarter, not harder,” the 80 20 principle is the idea that 20% of your efforts contribute to 80% of your profits.
  • Understanding your profits vs. costs can help you determine which activities are significantly adding to your profitability.
  • Once you’ve understood how this principle works for your business, then you must rigorously apply those learnings. You need to put this information to work.
  • Detailed bookkeeping services can help unveil this information.

The 80 20 principle is a powerful way to reach your business objectives. Our bookkeeping team will identify the 20% and provide insight into what to do next. Let us help you grow your business, contact us today!