When you sell an inventory item, the asset is reduced and the Cost of Goods Sold account is increased, moving the item from an asset to an expense. It’s no longer an asset once it’s sold, and the cost of the item sold reduces your profit and is expensed into the Cost of Goods Sold account.
Some accountants will abbreviate the Cost of Goods Sold account to COGS, and you might hear them call it that. In the case of wholesale and retail businesses, the cost of goods sold is the amount that was paid for the inventory items to be sold.
Service businesses will typically not have a balance in the Cost of Goods Sold account. If they do have direct costs, the costs are often coded to a Supplies account under expenses. At any point in time, the cost of items you purchase are in two different accounts:
It’s important that the Cost of Goods Sold balance is accurate, because there are many good things you can learn from it when you compare it with inventory. You can learn how fast your inventory is selling, and you can determine your gross profit margin. If your inventory purchases have not been coded correctly, you can take inventory and arrive at the correct cost of unsold items. If your physical inventory does not match your books, your accountant can make a correcting entry between Cost of Goods Sold and the Inventory account so that both are accurate. If you have further questions about the Cost of Goods Sold account, feel free to reach out any time. And if you are still manually handling inventory tracking, please schedule an appointment to discuss options to more efficiently account for your inventory and COGS.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.
Why pay more for software and services than necessary? Check out our Resources page for information on discounts available to our clients.
Next, get your Income Statement for June 2019 Year-to-Date and check the revenue figure. Are you on track with your budget, or are you halfway there revenue-wise, accounting for seasonality? If so, pat yourself on the back! If not, what promotions will you put in place to boost your growth for the rest of 2019?
On Track for Profit Looking at the same Income Statement, check your net income figure. Are you on track with what you planned? If so, great! If not, the reason is simple: it will be either lower sales than expected or higher expenses than expected. If your expenses are too high, you’ll need to drill down into each of your expense accounts, including cost of goods sold, to see which ones are higher than expected. Were there some unanticipated costs? Does your pricing need adjusting? Do you need more volume to cover your costs? This is where we can help you with an analysis of where your opportunities are to increase profit. On Track for Cash One more place to look is your cash balance. It can be uncomfortable when you are running short of cash for your business. If your balance is lower than you’d like it to be, it could be because of some of the factors mentioned above. It could also be because you just purchased an asset like a truck. If you need help with improving your cash flow, that’s another thing we can help you with. Mid-Year Review This mid-year review can help you head off any small problems before they grow into big ones throughout the rest of the year. And it can keep you on track so you can meet your 2019 business goals.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.
Why pay more for software and services than necessary? Check out our Resources page for information on discounts available to our clients.
The benefits are simple. You save time, certainly. But the bigger benefit is you no longer have a monthly deadline to get your documents to your accountant – at least for all the documents that can be automated in this way. This reduces stress and eliminates minutiae from your day.
Accountants benefit too. No accountant likes to spend their time asking clients for documents over and over again. We know you have better things to do with your time, and we know you probably hate doing the paperwork. Receipt fetching is an easy way to get the job done. To take advantage of receipt fetching, the first step is to select a receipt-fetching app. Some of these apps do receipt fetching only, and others have many more functions. There are a multitude of apps available so please let us know if you’d like some recommendations - some can even be found on our Resources page. The second step is to determine which vendor accounts are supported, and to connect with them. Generally speaking, the connection is based on your account credentials, so if those change, the connection will need to be updated. When many of your documents can be pulled into one place, you don’t have to spend time logging into each vendor portal to pull receipts. If you’re curious about how to benefit from receipt fetching in your business, please feel free to contact us.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.
Cost accounting. This type of accounting looks at the cost of items for sale. It’s especially useful in manufacturing, construction, or even restaurants where dozens or even hundreds of components are purchased and assembled to make the items that are for sale. Cost accountants account for and evaluate these costs to determine when they are too high or low and need to be repriced or purchased in a different way.
Cost accounting can be applied to small businesses to help them with pricing, determining break even points, controlling costs, and budgeting. Government accounting. Government accounting is simply accounting that’s done for government entities. Government accountants are concerned with maintaining government regulations as well as learning a different way of keeping books. Nonprofit accounting. Nonprofit accounting is unique to nonprofit organizations in that they often need to track and mark specific donations, manage grants and meet reporting requirements, fulfill public disclosures and reporting, and maintain a fund accounting process. Financial accounting. Financial accounting is the preparation of financial reports for external use and includes providing financial statements. Attest. Attest accounting is where a CPA goes through a process of verifying financial reports of a business to interested third-parties, such as banks and the public. The three main services in this area include compilations, reviews, and audits. Only a CPA can perform these services. Fraud or forensic accounting. A specialty role in accounting, forensic accountants can help a company that has been the victim of fraud. There are also services available to help reduce the possibility of fraud. Tax accounting. Tax accounting can be many things: the preparation of federal and state income tax returns for businesses, individuals, and other entities like estates and trusts; state and local tax assistance with collection, filing, remittance, and compliance; franchise tax support; and payroll tax collection, filing, and payment. There are more, but these are the big ones. Budgeting. Making a revenue and spending plan is an important accounting function. Internal auditing. Large companies have internal audit departments that maintain checks and balances for the company. In small companies, having someone in charge of monitoring internal controls would be the equivalent function. Accounting systems. Some accountants are technology-savvy, and this type of accountant can help solve technology issues, integrate accounting system modules, and streamline workflow. Fiduciary accounting. A fiduciary is someone legally responsible for financial responsibilities in an organization. Fiduciary accounting typically refers to accounting for trusts, but can have a much broader meaning. Public accounting. Public accounting is practiced by employees in a public accounting firm, which is one that serves many businesses with varying accounting needs. This is opposed to private or industry accounting where an accountant goes to work for one company in their accounting department. Public vs. industry accounting is really referring to an accountant’s career experience. Managerial accounting. This type of accounting focuses on internal numbers and how the organization can reach its goals. It’s broader than cost accounting, but there is an overlap. Accountants who serve in an advisory capacity to businesses will focus on this area. As you can see, there are many ways accounting can support your business success. Give us a call to discuss options for increasing the value you receive from your accounting services.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.
If you have employees, you have the distinct honor once per year of being part of a worker’s compensation audit.
You likely receive a form in the mail, an email request, or a phone call that will ask you about your payroll numbers and employees for the prior year. Worker’s compensation is an insurance program that covers employees in the case they get hurt on the job. Each employee receives a classification code that describes the type of work they do, and a rate is figured based on the classification and its risk factors.
Your numbers need to tie back to the numbers reported on your quarterly payroll reports for both state and federal. The provider may also want copies of your 941s and your state payroll reports.
Once you’ve submitted your numbers, the insurance provider will calculate whether they owe you or you owe them additional fees. The worker’s compensation audit happens every year (even if you pay worker’s comp premiums each pay period, some companies still request an annual audit). It’s not difficult, but it is time-consuming. If you would like our help completing your audit, please feel free to contact us.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax advisor for additional details.
Tracking data is then entered into a system where data is kept about the item. A simple system may be a spreadsheet.
There are also software apps more sophisticated than spreadsheets that track all of the fixed assets for a company, including original cost, depreciation method and history, and tax treatment. You never know how many of an item you might have until you record and count them. How many computers (and computer parts) do you have lying around your office? Extra desks and chairs? Maybe you even have extra office space or extra land. Part of being a great entrepreneur is fully utilizing all the resources you have at your disposal. Where can you put to better use the extra assets you have? Could you sell the surplus items? Or donate them for a write-off? Do you have extra room to rent out to a tenant, earning rent? Sometimes we’re so focused on operating the core of our business that we don’t see what else is a money maker right in front of us. In addition to focusing on income and expenses from operations, consider the resources you have in your fixed assets. For assistance with developing or reviewing your a fixed assets schedule, please give us a call. And if you do sell some of your fixed assets, be sure to contact us so we can help you book the transactions properly.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax advisor for additional details.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax advisor for additional details.
Internal control is a very special phrase in the accounting profession. Tactically, it’s the set of processes that help a company produce accurate data throughout the organization, follow reporting requirements and laws, and maintain consistency and accuracy in its operations. Strategically, it’s an entirely new way of thinking and doing business.
Internal control helps to reduce organizational risk. A blunt way of putting it is internal control is what you put in place to avoid mistakes, intentional or accidental, and to control accuracy and quality. It impacts every aspect of an organization.
There are literally hundreds of internal control procedures that should be implemented in small businesses as they grow into larger businesses. Internal control is typically a big part of an audit or an attest function in accounting; it determines how many additional procedures an auditor needs to do in order to provide assurances about the reliability of the financial reports. But it’s also just good plain common business sense to implement as many internal control processes as are cost-effective for your business to protect it at the level of risk you’re comfortable with. If you’d like to discuss the idea of internal control further, please feel free to contact us at any time.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax advisor for additional details.
One main goal of marketing is to acquire leads that will hopefully turn into buying customers and even repeat customers. To start measuring your marketing efforts, we need to find out where those leads are coming from and measure which ones became your customers. That means we need to develop a system that tracks a customer from lead source to sale.
The hard part is that some of this needs to be done outside the accounting system. The good news is that there are many tools and analytics available to help in this process. One of the first things to do if you don’t already have it set up is to record the lead when they enter your sales process. Enter basic information about them in your CRM (customer relationship management system) and be sure to ask them how they found out about you. This will help you track the lead back to the campaign or channel that they came in on. Once they’ve made a purchase, you can connect the lead to the customer record and track revenue by marketing source. If your leads come in digitally, there are many automated tags you can set up to track where they originated, whether it was from the web site, a particular web page, a social media account or a link from an email you sent out. An important statistic for businesses is cost per lead, how much it costs to generate one lead for your business. The cost will vary by channel or marketing source. For example, someone coming from your website will cost less than someone coming from social media in most cases. Once you know how many leads to generate to make a sale, you can start calculating what your marketing budget should look like. More importantly, you’ll be able to forecast your revenue more accurately, too. While numbers are probably the last thing you think about when you’re doing your marketing, they can be very effective for your bottom line. There are many metrics beyond cost per lead that would be valuable to measure as well. Here are just a few of them:
You might not think of accountants when you are doing your marketing, but we encourage you to think about the “numbers” part of marketing, the financial side. And as always, if you want help developing these processes and metrics, please reach out.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.
The start of a new year also means that it’s the perfect time to revisit old business strategies from last year so that you can maximize your revenue for 2019. If your financial numbers were fantastic last year, that’s great! Keep the strategies that worked for you and cut the ones that didn’t.
If your financial numbers weren’t amazing last year, or maybe you’re just interested to see how you can increase your revenue, we have you covered. Here are 10 ways you can boost your revenue this year: 1. Revisit your current prices and make adjustments as necessary. Many people will tell you that increasing your prices will increase your profits, but that’s not necessarily true. Increasing your prices by a small amount might increase your profits without turning away existing customers, but make sure you research your competitors’ prices and adjust based on what makes sense in your market. 2. Bundle your services or products together. Make your products or services more attractive by bundling them together and pricing them at a better deal than purchasing the services or products separately. Customers that only want one particular product or service should still be able to purchase the product or service à la carte, but offering different packages of increasing value makes it much easier to upsell to clients and increase your business revenue. 3. Offer free gift with purchase. Tacking on a complimentary or free service to your products or services could be the small push needed to close sales. Even better, you could add a complimentary or free service to your highest-quality bundle. As an example, the cosmetics industry has been doing this for decades. 4. Start a new product or service line. If you’re limited to just a few products or services, it’s time to expand. If you mow lawns, offer a leaf collection or snow removal service. If you sell shoes, add socks. If you manage a restaurant, consider offering alcohol. Expanding the scope of what you’re selling will provide you with additional revenue. 5. Expand your geographic reach. If you’re still only offering services and products locally, consider expanding your reach, especially because the internet is so readily available nowadays. Think about which services you can offer virtually; some may require you to invest in cloud-based delivery systems. If you only sell products at a physical location, ecommerce is a huge industry and you could definitely increase revenue by having a storefront online. 6. Learn to say “no” to bad clients. This may seem counter intuitive, but learning to turn away bad clients is really important. When clients are ungrateful, unreasonable and just take up too many of your resources, you have to realize that they are unprofitable. By turning them away, you can devote more of your attention to building relationships with your best customers and creating new, profitable opportunities. 7. Make your online presence known. Everyone uses search engines and social media to find the right business to serve their needs, so make sure you can be found online. Create a website for your business and make sure your have business pages on social media platforms like Facebook, LinkedIn and Twitter. You’ll have to develop some marketing strategies and optimize your site to rank high, but, when done right, these channels can drastically impact the amount of revenue you get. 8. Manage your online reputation. When you have many good reviews, your credibility goes up and your business is more appealing to potential clients and customers. If your clients leave you an amazing testimonial, it’s a good idea to ask them to post it online as well—especially on Yelp, your Facebook Business Page, and Google Reviews. On the other hand, negative reviews will look bad to potential clients and can negatively impact your revenue, so make sure you respond appropriately to the review and show potential clients that you care about getting things right. 9. Encourage customers and clients to sign up for a continuity program. Do you have loyal customers? Reward them by offering a membership or continuity program with VIP benefits. Retail, restaurants, and service businesses can set up privileges like faster service, discounted prices, and frequent purchase rewards that many consumers will pay a small monthly fee for. 10. Encourage customer referrals by building and nurturing customer relationships. Connect with clients and build strong relationships through effective communication, providing exceptional service, getting feedback, addressing concerns, and showing appreciation. Doing so can increase repeat customers, customer referrals and your business revenue. If you’re looking to boost your business revenue this year, definitely give these strategies a try.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.
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