Business Accounting Services that Can Make Your Company More Profitable

In order to manage your business profitably it is necessary to have access to the appropriate financial data, advice and services. For small business in a very competitive market you are faced with the challenge of constantly improving profitability, the need to decrease taxes, eliminate tax surprises and free up time for other competing interests. Using business accounting services will make your company more profitable by reducing staffing cost and attaining cost savings based on expert advice.

Business Accounting Defined

Business accounting is the process in a business that tracks and communicates financial information. This consists of three basic activities: identifying, recording and communicating the economic events, such as transactions and investments of a company. Bookkeeping techniques are utilized to record these economic events. A key business practice for profitable small businesses is outsourcing business accounting.

Interpreting Business Accounting Reports: Internal Users

Data collected from bookkeeping is used by accountants to generate financial statements that are then presented to the internal and external users. Accountants can also analyse and interpret these financial statements and explain the meaning of reported data. Internal users, such as marketers and supervisors, of small businesses would need the expertise of a managerial accountant to interpret these financial statements. If such staffing is not a part of your small business it is then pertinent to gain the services of business accounting professionals with the requisite qualifications and experience who will assist small businesses in understanding the economic status of their company, and, by extension, run the company profitably. Without the expertise of accounting professionals your business could run the risk of failing to meet legal and regulatory standards, this mistake could potential eat away at your profits.

Interpreting Business Accounting Reports: External Users

The external users vary. Investors who are seeking to expand his/her investment portfolio would need financial information on an organisation as well as creditors and government agencies. Government agencies typically seek out tax accountancy information of an organisation. Small business that seek profession tax accounting services ensure that they are advised on using the most tax effective strategies so that they pay the correct amount of taxes, and are compliant according to government standards. Financial accountancy services are required to manage and produce the reports needed by the various external users. Accurate data drives profitable business decisions, and that's why small businesses must ensure their books are in the hands of experts.

Financial Reports Produced

Business accounts are usually kept in the form of financial statements that show all of the financial resources within the organisation and how these resources are being allocated. Accounting records typically filed are balance sheets that give a snapshot of a business's financial information from the period of the snapshot through the end of a specified accounting period. Additionally, profit and loss statements, and cash flow statement are produced along with an analysis of the business's performance by applying ratios, benchmarks in their reports so as to enable their performance to be improved.

Reasons For Selling A Business

A business sale is not a "one size fits" all situation. The details that apply in a specific situation will not all be the same. Before proceeding further, it's important to step back a bit and look at the big picture for business sales in a variety of circumstances. Not all business sales are for the same reasons, and the circumstances of the sale can have a big impact on how a sale should proceed.

What KIND of Buyer is it?

Before considering the various sale situations, it helps to consider the KIND of buyer. In almost all cases the buyer will be either another company or an individual.

If the buyer is another company then it is likely the buyer will be able to run the business successfully. The buyer's ability to pay may be fairly secure. Training the buyer may not be critical, but assistance with customer retention after the sale may be critical. The buyer may be more sophisticated, or at least have more sophisticated advisors. Consideration for the sale may include some form of performance based incentives (i.e., an "earn-out").

If the buyer is an individual, training the buyer may be even more important than assisting with customer retention. Since the buyer's ability to run the business successfully may not be as certain as it would be if the buyer were another company with a proven track record, the cash and/or collateral the buyer brings to the table may be a major factor in the sale.

The Most Common Sales Situations

These are the most common sales situations. Whether you are a buyer or a seller, one of these situations most likely fits you. Additional details applicable to each are covered later in subsequent articles.

Very Small Business - This is the most common business sale situation

Sometimes referred to as "Mom & Pops", "Main Street Businesses", etc.
Most of these businesses do not actually sell.
This is usually a sale to an outside individual (an "External Sale").
Sometimes (although rarely) the sale will be to an insider (an "Internal Sale").
It is rare to have an employee with both the interest and the ability.
The person needed can sometimes be recruited.
Can often be creatively structured as a win/win, even if the buyer has little money.

Somewhat Larger Small Business - External Sale

More likely to sell than a Mom & Pop, but many never do.
Internal Sale
Easier to structure than for a Mom & Pop, but still difficult to find the right successor.
Family Sale
The IRS has insanely complex rules designed to make sure they get all the tax revenue they think they are entitled to. Which is A LOT.
Will most likely need an appraisal to support the price.

Divorce

Often VERY contentious, with expensive appraisal and attorney fees, and the eventual price and terms set by a judge.
Can sometimes be greatly simplified with advance legal planning (such as Shareholders Agreements).

Partner Buyout

Can also be contentious.
Can sometimes be greatly simplified with advance legal planning (such as Shareholders Agreements).

Sale for Health Reasons

If the seller is in ill health but not clearly dying
Time is not as critical as for a dead or dying seller.
Potential buyers may try to take advantage of the situation.
The seller's help with the post-sale transition may be affected.
If the seller is still alive but clearly dying
A sale planned to occur upon death can sometimes be arranged.
This has the potential to save a LOT of tax.

Seller (business owners) has passed away

The company may be in turmoil.
Can be VERY difficult to find a buyer.
Tax issues can be VERY complex.

Financially Distressed Sale

If the business is in trouble, the buyer will need to see a way to fix the problem, or a sale will not happen.
Often involves simply liquidating the assets and walking away.
May be forced by the company's lenders.

Sale to a Large Buyer

Likely to be fairly sophisticated buyers.
Likely to include an "earn-out" as part of the "price".
Publicly traded buyers
May involve tax-advantaged strategies involving the buyer's stock.
Large, closely held buyers
May be easier to attract than a publicly held buyer.

Start-ups

Often done with personal funds.
If funding is from family and friends, then their ownership must be decided.
If Venture Capital is involved, then complexity goes way up.
Usually only available if the upside potential is very high.
Initial Public Offerings ("IPO's")
Basically, this is selling part of the company to the public in the form of company stock.
Often involves venture capital at an earlier stage.
VERY complex.

Employee Stock Option Plan (ESOP)

Very complex and expensive.
Can have significant tax advantages.
Might have motivational effect on employees.
Not as popular as initially expected when these were created.

Very Small Businesses

These businesses are sometimes referred to as "Mom & Pops", "Main Street Businesses", etc. Although each company is small with only a few employees, they represent a huge part of the goods and services available in our economy, and are the embodiment of the American Dream for many people.

Attempted sale of these businesses is the most common business sale situation. Unfortunately, most of the time they never actually sell. Some estimates are that only one in seven of these businesses will actually sell once they are listed for sale. Many more simply shut down once the owner decides to move on to something else.

Unrealistic expectations on the part of the seller, particularly the value of the company, are one of the reasons blocking sale of many of these companies.

The value of these companies is NOT the value of the company to the seller, which may be quite high. Instead, the maximum value is limited by the cost a potential buyer would incur to start a similar business instead. That means the value may be determined by the value of the equipment, plus something extra for the "running start" available to the buyer from buying the existing business instead of starting a similar operation from scratch.

How A Business Loan Helps Business People

Becoming a self-employed businessman is a great reputation in the society but the problems faced by the entrepreneurs from the day one of their business is enormous. It is a great challenge for a person to overcome all obstacles to become a successful businessman. The numerous problem faced by all is finance. Even great entrepreneurs of various industries have struggled a lot of financial crisis for setting up their business and to run their daily business operations. Thus finance plays a major role in the life of business people. Great ideas require the necessary financial support to bloom into a successful business.

Introduction:

There are various sources for business people to raise capital for their business. The most trusted source is from banks. There are various reasons why people choose banks as the best source for raising capital for their business. Banks provide a lower cost of funds in the form of Business Loans. There are various types of business loans at differential interest rates to facilitate business people to solve their financial crises.

Types of Business Loans:

Businesses are of different types and need finance at different stages of their business operations. The need also being different, banks help them in providing different types of business loans helping various small and medium enterprises to raise capital.

New Project Loan - Banks are interested in funding for new businesses and also for new projects of existing business. There are various criteria for getting new project loan and differs from bank to bank. Project loans are approved against the collateral of the person like residential property, commercial property or empty land.

Top-up on Existing Loans - These loans are issued for expansion, replacement, diversification of an existing business. These loans are approved for short term or long term basis to buy goods, machinery or any fixed assets for the company.

Working Capital Loans -These loans are provided for the business to solve sudden financial crises and repaid within short durations. Banks are more interested in providing working capital loans against their inventories, stocks or receivable bills of the company.

Secured Business Loan - Business loans in which companies raise their capital against any security for the bank. It may include plot, residential or commercial places, gold, shares, bills, insurance as collateral to get funds for their business. The interest rate is preferably less.

Unsecured Business Loan - Every businessman cannot afford to pledge a security in getting the business loan, so bankers help them with loans without any security based on bank transactions and income tax returns. These loans are charged with more interest rates when compared to secured business loans.

Requirements of the Banks:

There are various steps and procedures followed by banks to provide funds. The procedure and documents to be submitted to the banks as follows

Identity and address proof of the company - Address proof and identity proof of partnership or proprietor business.

Statutory legal registration of the company - Whether the company is legally registered under government norms and have followed all procedures legally in setting business.

Financial statement of the company - Every bank is interested in seeing the recent 1-year business transaction of the company.

Income tax returns - ITR helps the bankers to check the business performance, efficiency level, assets and liabilities of the company and also tax that company pays from their current earnings. This also plays a major role in deciding the loan amount for the business people.

Financial Security - It includes the fixed and movable assets of the company which helps the banker to consider providing business loans based on the asset value along with the business transactions. This also safeguards banks from the failure of businessmen that fail to repay the loan amount.

5 Secrets That Will Thrust Your Small Business Into the Big League

There are 28 million small businesses in the US. The sad reality is that most of them fail within the first few years of operation. The small percentage that survive stay small forever. A select few manage to grow into huge businesses. But why them and not the others? What are the factors that enable unknowns to become household brands? One thing for sure that it takes much more than hard work, luck, and timing. Read on to see if your small business has what it takes to make the leap into the big league?

Systems

Many small business owners' lives are chaotic due to lack of systems. Systems are hard, but they enable small businesses to scale. Systems are not glorious like sales, marketing, or research and development. Some say that systems are boring, after all, it is a back office function. Systems separate struggling small businesses from those that grow by leaps and bounds. Creating systems can be a daunting task, and for many, the prospect of taking on yet another project is out of the question. For some, it is a catch-22 situation. You may say "How do I carve out extra time from my already hectic schedule." The correct way to think of systems is that creating them is an investment in your business.

One of the greatest challenges that small business owners face is that the they are perpetual decision makers. The owner is involved in everything from sales, customer service, research and development, bookkeeping, so an and so forth. Creating systems is the first step toward a business where not every decision is dependent on the entrepreneur. Systems allow people to plug in and go. Systems include operating procedures and manuals that can bring a new team member up to speed in no time. It is what takes small out of small business.

Franchise businesses are often more successful than independently operated ones simply because they are built on systems. The franchisee may be paying a premium in upstart costs compared to an independent business, but it makes sense for many because they don't have to worry about developing systems. Someone already went ahead and created the necessary systems for success. When you buy a franchise you are taking a system that has been proved to work. Does it mean that you have to buy a franchise to succeed? Absolutely not, but you have to think of your own independent business as a franchise. Create procedures for everything. Don't leave anything to guesswork.

Most small businesses do without systems, but it doesn't mean that it's a good idea. While you might get away with it in the beginning the lack of systems will create huge bottle necks down the road. The lack of systems will reduce your profits. Why? Because you and your employees will have to reinvent the wheel day in and day out. systems minimize the element of surprise. With systems in place your team is able to deliver consistent service. Businesses with consistently good service will outperform those with fluctuating quality service.

In addition to making your life easier, systems also increase the value of your business. Buyers want to buy businesses that are built on systems. The presence of systems tell buyers that the business doesn't entirely rely on you. Creating systems help you create a turnkey operation, appealing to buyers. Business systems are assets that enable your company to run without you.

Scalability

Investors love highly scalable companies because they have the potential to multiply revenue with minimal incremental cost. You simply can't substantially grow a business without cracking the scaling code. Some business are built to scale while others are forever destined for small business status. Unfortunately, many professional service providers are not scalable because they rely on personal output. So, if your goal is to build a big company avoid consulting types of businesses. A software company, on the other hand, is a highly scalable business model. Once the software product has been completed it can be sold millions of times with minimal costs. In other words, their increased revenues cost less to deliver than current revenues. What this means is that a scalable business will be able to increase the operating margin as revenue grows.

A highly scalable business requires small variable costs that the company can control. Variable cost changes with the volume of business. Fixed costs do not vary with sales. For example, for a software company fixed costs include the cost of the office location, computers, and furniture. These cannot be quickly added or liquidated. Salaries on the other hand are a variable cost since workers can be hired and fired relatively fast.

Most consulting businesses like marketing agencies are not scalable because they are unable to substantially increase their revenue without greatly increasing their variable costs. Such businesses are considered poor investments.

To build a scalable business you should start with a scalable idea. Scalable businesses have high margins. They require low support and staff expenses. Scalable businesses allow you to work on your business as opposed to working in your business. If you find yourself constantly working in your business your business is either not scalable or not yet ready to scale.

Truly scalable businesses are highly automated. Automation helps you reduce variable costs such as labor. It is at this point when scaling and systems begin to work together. If you truly want to become a market leader or dominate your industry, scalability is the only way to do it without a miracle.

Board of advisors

If your goal is rapid growth, you must have a board that you can rely on for your big audacious goals. The life of an entrepreneur can be a lonely one. Often you feel like you are all alone with all the decisions you have to make. Your board will share some of the burdens of making key decisions and it will tell the outside world that you are systematic about your business, and that you understand that you need to surround yourself with people that are smarter than you. Your board will help you with large strategic goals. It can help with your overall business plan, policy issues, financial questions, strategic partnerships, and more.

Your board shouldn't be utilized to deal with routine tactical challenges. Don't waste the boards time on daily employee issues or what color the chose for your new office. Rather, let your board help you with strategic advice, or by helping you with making introductions to strategic partners and recruiting talent.

Fellow entrepreneurs and business leaders make excellent board members. Before you build your board you should have a clear understanding of what areas you need help with. Ask yourself what skills do you currently lack that you need to take your business to the next level? Is it marketing, intellectual property, or finance? Whatever it is you need help with should influence the ultimate makeup of your board. You could hire a recruiter, but they are expensive. It is best if you perform the search yourself.

Your board is not a group of your closest friends. It is a group of professionals, each with a respective specialty. One might be an IP attorney while another a retired CEO. You are not looking for a group of yes men. If you build a great board, each member will have more experience than you and each will know much more than you. If you feel like the dumbest person in the room, you are on the right track.

Your board of advisors will not join you for the money, but there are costs involved. It is a good idea to compensate your advisors. At least, you should cover their expenses. Do they need to travel to your board meetings? Are there hotel and other expenses? It is also advisable to pay a per meeting fee that might be a few hundreds or a few thousand dollars. In addition to monetary compensation, you could chose to offer stock as payment.

IP (Intellectual Property)

Most small business owners care most about time and money. Some understand that IP is as good as money in the bank. It is considered one of the most important assets of some of the most valuable companies in the world. Even though IP is an intangible asset, it's almost impossible to build a hugely successful business without it. If you are going to dominate your industry or at least be one of its key players, IP is a must. You can often read about huge business acquisition deals structured around IP. Often, IP is the reason companies are bought and sold for huge multiples.

Simply put, IP makes your company more competitive. Without IP you end up competing on price and efficiency, a tough way to build your business. When you compete through IP you often set your own price, a luxury most businesses never experience. Since innovation is the main driver in business, developing IP should be a key objective for all companies that want to enter the big league.