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What you the Entrepreneur should expect from your Accountant

Yes, you need an accountant. However, its not like car insurance, where many people buy it just to be legal to drive hoping they never have to make a claim. No, the services of an accountant will effect your business in many real ways. So one should be selective when hiring and obtaining the services of a certified public accountant. An accountant can help you structure your business, and prepare you for self employment taxes and estimated taxes so that at the end of the year, you aren't suddenly in denial when Uncle Sam comes a calling. But a CPA can do more than just prepare your estimated taxes. Here are a few services that a quality CPA can provide. And yes, it is important to hire a quality CPA. I would discourage the entrepreneur from hiring a friend to do your accounting, when they boast of taking accounting classes at the local community college. Or trying to do the work yourself, hoping to save a little money. The mistakes you make can cost far more than what you pay a CPA. So, here are some key issues that a quality CPA can provide.

For starters, a good CPA can help you write a business plan. They can also help you produce data that along with your business plan, you can go to the bank and obtain loan. A CPA can help you set up your business structure, and tell you if and when you need to incorporate. A CPA can help you find the right software for your business, which will help you with record keeping and billing statements. You need software that is inline with your business's needs. Also, a good CPA will help you set up said software and get you started using the program in a consistant way. Sometimes you should pay with cash, and sometimes you should borrow money for a purchase. A CPA you have a good relationship with can help you know when each is appropriate. A good CPA will help you set up a tax deferred retirement plan for you, your family, and your employees if you so desire. If you want to transfer your business to your spouse or your children, a CPA can help you with that. They can advise you when you may need an attorney, or a financial consultant, and often make suggestions for you based on your specific needs. And finally, a quality CPA that you have a professional but close relationship with can help you see which aspects of your business are doing better than others, and thereby help you focus on areas that will increase your business's growth, and trim back or eliminate those areas of your business that are dragging and non cost effective.

So how do you find the right CPA? Well if you are a small business, try looking for a small accounting firm. Bigger is not always better. So if your business has 10 or less employees, try finding an accounting firm that has 10 or less employees. Look for a CPA that has knowledge in your specific business field. Make sure your CPA is proficient with technology. Computers play such a huge role in todays economy... so your father's accountant may not be your best bet in today's market. (your accountant should be able to text you atleast). You should not only meet with your CPA regularly (quarterly) at their office, but have them come to your place of business too. There may be simple suggestions they can make just by seeing how you operate.

Hiring the right accountant could be one of the most important decisions during your entrepreneurial experience. Many people may make the mistake of thinking "well, an accountant doesn't make me money... So I will spend more money on a new fangled espresso machine, and less on a quality accountant". This is a mistake. Money management is more important than total cash income, because even if you have a small budget, if you manage your money wisely, you will 'feel richer' than if you have a large cash income, but make bad decisions, and you will feel like you are always in debt. A quality CPA can help you trim here, and spend there, make wise purchases, and avoid bad ones, and ultimately increase the amount of black ink in your check book, and cash in your pocket.

Change Is Good, Unless Its Your Entrepreneurial Financial Accounting Practices

With technology morphing faster than a tadpole in warm spring puddle, its critical that a business change with the times and what the market dictates. Whether it is the automobile industry trying to stay out in front with leading technological and saftey improvements, and the competitors racing to keep up, or the fast food wars and which franchise can deliver the biggest meal for the cheapest price from a drive thru window, change is necessary to stay ahead of the competition. However, there is one aspect of small business that change can cause adverse effects for an entrepreneur trying to move ahead in today's economy; Financial Accounting.

In the early 2000s, several large corporations fell due to accounting scandals. To blame was deviation from the norm, and trying to be 'creative' in accounting practices. Since then the US government has put in place regulations that hold coroporations to a closer standard, but ultimately, its the business owner who must adhere to this rule of standard and unchanging accounting.

It goes without saying how important it is for a small business owner to utilize the services of a qualified accounting. By doing so, the entrepreneur can reduce the risk of waste, excessive taxes, and fraud among other things. For the sake of this blog post, lets take it for granted that all business owners use the services of a financial accountant.

Accounting rules often change over time to reflect changing business models and transactions. But, financial accounting as a business tool should remain stable. Accounting should evolve only after explicit consideration is given to why business transactions should be recorded and reported differently.

Rather than an attempt to school the reader in the details of financial accounting (something we say when we ourselves aren't knowledgable in a certain field of expertise), I will touch on a few of the most basic functions of accounting. It should be clear why these are better static, than in flux.

The General Ledger: This is the main accounting record of a business which uses double entry book keeping. Usually, a general ledger is divided into two sections. The left is for debit transactions, and the right is for credit transactions. Think of the center as the axis of a scale. entries should in a sense, balance. Some of the entries are for current assets, fixed assets, libilities, revenues, gains, etc. The ledger should be kept in balance, ideally. And a good accountant need not be creative to list entries, however, they can offer advice on how to keep the ledger more balanced.

Financial Statements: Sometimes called a financial report, this is a formal record of the financial activities of a business. There are three basic elements of a financial statement. 1) Balance sheet - usually posted at the end of a month, quarter, and/or yearly, this shows the financial condition of a company. A financial statement lists all the companies assets on one side, and libilities on the other. 2) Income Statements, sometimes referred to as a profit and loss statement, or P&L, highlights all activities within a company to make a profit (sales, cost of goods, and overhead, including salaries, rent, utilities, etc.) 3) A Statement of Cashflow shows all cash that flows in and out of your bank account. Not limited to cash associated with buying goods, and selling goods, cash flow statements can include borrowed money to repay loans. This activity isn't part of an income statement, but instead is listed on a cash flow statement.

Improving Business Decisions: We all learn from our mistakes. Thats a part of biological evolution, and financial evolution. A good accountant can point out areas that need adjustment, or improvement, but ultimately its up to the business owner to make decisions that will enhance the business, and stimulate growth of their business. Ask for your accountants advice, but don't be afraid to make tough and savvy decisions.

High Tech makes International Business a Snap

Week 8
(question 21)

Never in history has international business been more lucrative. In the past 10 years, so may aspects have come together to make it international business possible on a everyday or 'normal' basis. I can order French wine and have it shipped to house in a few days. I can order a handmade blanket from the Chilie and have it at my door in less than a week. A person in Dubai can order a case of fresh Alaskan King Crab and have them at their resort in a few days. Basically anything anybody wants from anywhere in the world is possible. But how?

A few things are in place that allow for such a easy and lucrative international business atmosphere: The Internet, Extensive Airlines/Airports, Efficient Ground Shipping Businesses, and GPS.

And though I'm sure you can imagine how it all comes together, let me paint a picture, to make it easier.

John is in love with Jane. They have been on a few dates, but he knows he loves her. He wants to invite her over to his house for a special night, and he really wants to impress her. So John sits at his computer, and connects to the Internet. He has his list beside him, and he starts searching. He researches and finds a select bordeaux from France, and adds it to his cart, and buys with with his credit card, and has it expressed shipped to his house. It will arrive in 3 business days. He searches for Kobe Steaks from Japan, and after a few minutes, finds a place that will deliver to the US. Click, Bam, Boom, his done, and they are on their way, due to arrive in 5 days. he can almost taste the sweet marbled filets. After watching an episode of Deadlist Catch, his mouth is watering for King Crab Legs. He finds a place in Alaska that delivers overnight. He arranges 10 pounds to be delivered on X day. Next John finds a place in Eureka, California that makes hand made bees wax candles. Those are Janes favorite, he orders those. The Egyptian Cotton hand woven throw blanket will be perfect on his sofa, click, its on its way. He finds his favorite local bakery online, and places an order for some special chocolate tort to be delivered. A few items later, his list is all checked off, everything ordered and will arrive to his door on very specified days. His credit card charged. He will receive shipping notifications in his email for each item, stating when each will arrive. Tracking info is great! Some of the products are leaving the place of origin, in the belly of an international jet. Upon landing, a courrior picks them up from the respective airports, and now the ground shipping is under way. A few stops later, they are in Johns local UPS or FED EX branch wating for final delivery. They driver checks his GPS and sees a map and exact location of John's house address. When he arrives with the packages, John is waiting anxiously. They arrive within three days of each other. The crab legs last, ofcourse. The smallest package, an engagement ring from Tiffany's is what John is most excited about when signing a electronic signature tablet that is zapped directly to UPS headquarters confirming John's receipt of the package. So much high technology has made this possible. Computers, the Internet, Air Travel, Ground Shipping, Online Banking, and GPS.

Too bad Jane contracted the flu that week :-/

Can A Manufacturing Business Be Successful In USA?

Week 8
Question 18

I am the kind of person that reads lables. I may not be as well read as some folks in history, or american literature, but I am pretty sure I read lables of food and clothing more than most of you. It is tough to find a garmet of clothing nowadays that is manufatured in the USA. Most of our t-shirts, jeans, pants, socks, unders, jackets, and shoes come from places all over the work; China, Bangladesh, Mexico, Guatamala, Hungary, Phillipines, India, Pakistan.... I could continue, but you get the idea. Having the worlds leading economy is a blessing, and a curse. Because the US is the largest consumer of any country, we buy a lot of clothing. However, American owned textile companies have picked up shop, and moved over seas (or south of the border) to increase their bottom line. You can't blame them, they are in business to make a profit. There are two main reasons manufacturing is more profitable in other, "lessor developed" countries. First, and most obvious, people in Bangladesh will work for .35 cents and hour, 10 hours a day doing the same job that an American working would demand $7.50 an hour and only work an 8 hour day (Please realize these figures are just an example, and not based on real figures, but as they say 75% of statistics are made up on the spot). The actual accuracy of the figures is not the point, the point is people in some countries will work for far less wage, because they don't have as much variety and choice of dependable jobs. Another reason it is so profitable for US companies to ship manufacturing jobs to say... China, is clear. The chinese government manipulates their currency to keep the exhange rate with the US very low. So they can sell their stuff cheap.

But I digress.... and want to touch on why I think it is possible for a US small business to turn a profit and be a success in manufactoring. It can be summed up in a word: Niche. Here is how... You want to produce bags. Shopping bags, Hiking Bags, Travel Bags, Clutch Bags.... Design your bags to be stylish, and ergonomic. Create a buzz and clever marketing scheme. Target your clients. use better than high quality materials so your product will last. Base your operation in a "hippie" or "green" type community like Durango, Colorado.... Seattle, WA, or Asheville, NC. Part of your apeal will be that each bag is hand made, hand stiched. Have a small manufactoring facility where your products are produced, by cool, earthy, crunchy people that fit the mold and target crowd you hope to sell too. Build your product around this image: Organic, Hand Stitched, Unique, Quality, Products produced and assembeled in U.S.A.

Thats how you can have a successful manufacturing business in the US.

The 4 Cs of Credit

Week 7
(question 17)

Most businesses need credit at some point, either as start up funds, or expansion funds. A business's creditworthiness is largely dependent on what has come to be known as the 4 C's of credit.

The Four Cs of Credit are:

-Character: size, location, years in business, structure of business, number of employees, principals, media coverage, past or pending lawsuits, stock performance.

-Capacity: this deals with cash flow, and the ability of a company to pay its bills. Also includes debt of a company, whether that debt is secured or unsecured. Also, if the business has any unused lines of credit.

-Capital: assesses whether or not a company has the resources to pay its creditors. Capital is scrutinized most closely during credit analysis (along with cash flow).

-Conditions: things external to a business can effect the business. market flucuation, industry growth, currency rates, and even politics. (i'd like to think the media is an external factor that can help set the conditions of how well your product or service sells).


Probalby the most important of the four is Capitial... as it includes cash flow, sometimes lumped with capacity. If you don't have the capital, chances are your business is not credit worthy.

What the Fraud??

Week 7
(question 12)

Anybody that pays the slightest amount of attention to the news knows that fraud can really impact a business. Many large companies on Wall Street have gone belly up due to fraud in the past decade. But fraud is far more common than one may think in the business world. And fraud can do paticular damage to a small business, in most cases far more than to a larger company. The reason is simple. Fraud is an ugly word, its an ugly action, and when fraud happens in a small business, if the business is lucky enough to survive, its image will be tarnished. Many small business are family owned and operated, and there is sense of trust there. But with trust comes betrayel, and most fraudelant activity comes from within the business itself. Ordering an extra case of wine for the restaurant, only to take it home upon delivery doesn't seem like much, but its stealing. Writing false billing statements to earn a little extra money on the side may seem harmless enough to your cousin who manages your automotive garage, but if a customer finds out, and goes public, your reputation is ruined. Really, one lost law suit could bankrupt a small business if they didn't have adequate insurance. There are plenty of examples of how fraud can hurt a business, and even cause the failure of a business. And most business minded people probably realize that fraud is usually more damaging to a small business than to a larger company.
So how to prevent fraud? Be sure and have a rigid hiring system in place. Do adequate interviews. Background checks are not a bad idea. If able, obtain a copy of the potential employees credit score. This will let you know if that person stays on top of their budget, a good sign. And don't settle for first person that comes along, be patient and find a good solid person. Be sure and do inventory often, and have staff meetings often. Having closed circuit tv monitors will deter would be frauders. Do internal audits once a year, and perhaps hire an outside firm to perform an audit once a year. If you deal with checks, requiring two signatures for endorsement is a way of limiting fraud. Having a good accountant helps to detect signs of fraud, and could perhaps nip it in the bud.

Don't be naive, fraud happens!