Does a Start-Up Need a Business Accountant?

Before you take your dream from the beginning stages of notes and drawings to actually running and operating your business, you need to make sure you have someone to help you with your financial organization of the business. Starting your company takes a great deal of time and passion that you probably don't have for the accounting aspects of running your business.

Starting the right way with an accountant can set you up for better success from day one. Although it is an added expense you thought you should hold off on till funds start rolling in, you may be missing out on what a business accountant can do for you in the start-up phase that can be saving you time and money.

Finding an accountant that you can trust and work with can be a time-consuming task. To make it easier, you can always ask for references from friends, family, or your attorney. This is an important decision, so make sure your references are suitable for your needs. There are also search firms like Ageras that will provide you with certified accounting professionals in your area. These services are generally free of charge to you and will give you a handful of professionals that are experienced to handle your business and industry accounting needs. You can consult with each one and make a decision on who will be the best for you and your business.

Reasons for Startups To Have an Accountant

If you are still wondering why it is so important to have that accountant right at the start-up of your business, here are four reasons to consider:

1. They can help you determine the best software to use for your accounting system.

2. They can help you determine if an LLC, sole proprietorship, corporation, or partnership is the best business structure for you.

3. They can assist with your initial banking and set up of accounts and bank cards.

4. They can file your financial statements and taxes to ensure you are in compliance.

Imagine the time saved in just these decisions alone by having a professional guide you through these initial steps. You can take this extra time now and work on getting your business off the ground, finding your clients or partners to work with, and establishing yourself in your industry.

How Accountants Grow Your Business

You can also work with your accountant throughout the year, not only at start-up and tax time. This will enable you to have a financial advisor who is willing to guide you to success. If you have big business decisions like expansion and hiring an employee, the purchase of large equipment, or adding more inventory, your accountant will be able to assess when a good time is for your business for doing these ventures.

A good financial plan and budget are the backbone of growing your business. Accountants are your resource and guide for doing just this. You can meet with your professional quarterly to set the stage and plan for your next quarter.

As your company and cash flow expand, managing your income and expenses becomes just as important as managing your start-up funds. Here is how your accountant can now help you:

1. Invoicing. They can set up a system to help you collect account receivables more efficiently.

2. Cash Flow. They can help you organize your cash flow when you have unexpected expenses.

3. Payroll. If you do have employees, they can assist you in managing payroll and staying compliant with payroll taxes.

Spend Your Time in Your Business

You have spent a great deal of time dreaming about your new business, planning its execution, making a presence in social media and in your industry, and building your client base. Keep your focus on your business and not on the stresses of compliance and accounting procedures.

Not having an accountant during start-up could have cost you not knowing what deductions you could have been taking and planning future deductions. Take the guesswork out of big business decisions and future budgeting. Turn to your professional financial advisor and work together to grow and succeed. Your accountant may not be the least expensive budget item you have, but they will save you more time, energy, and money than you could have on your own.

Differences Between GAAP And IFRS Financial Statements

In the accounting world, there are a few different financial reporting standards that must be met. These standards can differ by country or region, but here in the United States, the two most common standards are that of International Financial Reporting Standards (IFRS) and General Accepted Accounting Principles (GAAP).

Let's get into these two different standards and how they work with auditing services and accounting firms. 

GAAP

GAAP must be used for any company that distributes financial statements outside of the company. This would apply to companies that are publicly traded or that release their financials to the public in any way shape or form. If the company is also publicly traded, these financial statements would also need to comply with the standards set by the U.S. Securities and Exchange Commission.

GAAP standards are made up of things such as a balance sheet, item classification, revenue recognition, and share measurements that are outstanding. With how adopted GAAP is nationwide, as an investor, if you see financial statements that don't follow GAAP guidelines, you should definitely be suspicious of the validity of the company you are receiving them from. 

GAAP also states that when financial data is released that does not follow GAAP guidelines, such as in press releases, that it should be disclosed as such.

IFRS

IFRS standards are meant to provide stability and transparency to financial records. IFRS standards help auditors and tax advisors to better see what has been happening with a company in order to allow those in charge to make better financial decisions.

IFRS standards are practiced in Europe, Asia, and South America. Over 144 countries around the world have adopted and instituted the use of IFRS standards. This makes IFRS the ultimate financial language to be used worldwide. Interestingly enough, these standards are not practiced in the United States due to the SEC not having made the switch yet. The SEC is continuing to review proposals to switch from GAAP to IFRS standards as the world is pressuring the USA to get on board with IFRS. The companies that benefit the most from IFRS standards are those that deal with a lot of international business and investing. 

Main Differences

The key difference between these two standards is that IFRS is principles-based and GAAP is rules-based. Due to this, IFRS financial statements typically are not as detailed as GAAP reports. Because of this, IFRS reports may leave some figures up for interpretation, which can require more financial disclosure and explanation than figures done in GAAP format. With that being said, IFRS reporting is often more logically sound and may better represent the economic situation and factors of the transactions that businesses make. 

Another huge difference is that of how inventory is treated. With IFRS standards, the use of last-in, first-out accounting methods are banned and are not used. GAAP allows for this to be used. GAAP also does not allow for inventory reversals, whereas IFRS does allow them under certain parameters and conditions. 

Constantly Changing

Due to the complexity of international business and investments, the IFRS standards and guidelines constantly change. This is where using an auditing service that is familiar with, and has experience using IFRS is extremely important in order to help your business navigate the rules and principles that go along with this type of reporting. If you are a U.S.-based company, having a firm that can help you transition from GAAP over to IFRS is extremely important to ensure that your company can operate in an international environment when it comes to your financial records and investments. 

A good firm can help convert your existing financial records over to the IFRS standard. They can also help you to shore up any areas of your reporting that need more transparency or that need to be analyzed in a different way. They can also help train your existing financial employees and accountants in a consultant role to help them understand how IFRS reporting works and to be able to stay within the guidelines when making and sending out financial statements. 

Conclusion

As you can see, IFRS standards are the future way of recording financial statements and will most likely be adopted in the USA in the future. If more countries continue to adopt and use IFRS, it will provide one universal financial reporting language that all countries can understand and interpret, thus making it easier for companies to do business internationally as opposed to just operating domestically. With the inevitable move over from GAAP to IFRS, it's in your company's best interest to start making the transition now so that you are already prepared for when the switch to GAAP to IFRS inevitably happens. Choosing a firm that can help you to convert your existing statements, as well as provide training to your current employees can help to make this transition process even easier. 

Should You Use A Software Program or A Tax Preparer?

There is one thing we all agree on: Nobody wants to make a mistake on their tax return. Filing taxes can be a stressful time, especially if you don't know whether to use tax software or hire a professional tax preparer.  Albert Einstein understood this problem perfectly, he said: "The hardest thing in the world to understand is income tax."  So don't worry if you haven't figured out the best way to file your taxes yet. This post will help you decide if you should buy tax software or hire a tax preparer that offers tax services Calgary. You can compare the differences between the two and decide what is best for you.

What is tax software?

If you like to do things yourself, tax software is for you. It is a computer program designed to help you prepare and file income, corporate, and other returns.  As you enter your financial data on the platform, the tax software automatically updates the forms and offers you advice. In addition, it will notify you of deductions for which you may qualify and calculate your tax liability if any. The task of preparing taxes is one of the most complex and to which you would spend the most time. Therefore, you should first prepare the necessary documentation that you will need to input into the software or give to your tax preparer.

How to choose a tax preparer

If you think a tax preparer is the best option, here are some tips to help you find the best one:

1, Find out how often they are available

If tax preparers only offer their services during tax season, you won't be able to contact them if you have a tax problem during the year.

2. Check their credentials

Check an individual's qualifications on the IRS federal tax return preparer’s site. You can browse the directory by zip code to find people who work near you. In addition, it is a good idea to get recommendations from other business owners or coworkers who are satisfied with their tax preparers.

3. Request information on prices

A candidate should be able to give you a detailed list of what they charge for each service offered. Once you gather the cost from at least three different tax preparers, you would then make an informed determination.

Review the preparer's history

If there have been complaints, most people file them with the Better Business Bureau. You can check the status of the preparer's license and whether disciplinary action has been taken.

Sharing confidential information

You should decide if you are comfortable sharing confidential information with a stranger. Because tax preparers review confidential financial information, you should choose someone you can trust.

Conclusion

Armed with this information, it is now time to determine which option you would rather choose. It will depend on your familiarity and confidence in preparing taxes on your own. However, remember that you may not be aware of the changing tax laws, but a tax preparer does.

What You Should Know about Cash Discount Credit Card Processing

There are many companies that are offering cash discount credit card processing in order to help eliminate credit card processing fees. When this is done correctly, it’s legal and permitted in your merchant agreement. However, there can be some confusion between surcharges and cash discounts. The confusion has led to categorizing a surcharge program as a cash discount program. 

Surcharge Vs. Cash Discount

A cash discount is when credit card prices are posted and a business offers a discount on the price for a customer who pays with cash. A surcharge is when you post the cash prices but charge an extra fee on top of that for any customers who pay with a card. In the first case, customers pay less than your listed price. In the second, the customers are paying more. If you are charging more than your listed price then it is a surcharge, no matter what it is being called. Even if your processor tells you, you are adding a service fee, and it is still considered a surcharge. These differences seem minor, but it’s important in terms of compliance and legality. If you get it wrong, it means your merchant account could be shut down, or your risk fines. 

Why Does the Distinction Matter?

There are two reasons why this distinction matters. There are states where surcharges aren’t allowed and there is also a prohibition on surcharges on debit cards. 

Cash discounts in the true form are allowed in all 50 states, but there are some states that have laws against surcharge programs. These states are Oklahoma, Massachusetts, Maine, Kansas, Florida, Connecticut, and Colorado. These laws have come under scrutiny recently and there are states that have gone to court over the laws. While laws may change in the future, you have to check with the state Attorney General for the latest information on surcharges. 

Surcharges aren’t permitted on debit cards. This is true even if you are running one as credit, and it’s not permitted even in states where a surcharge is legal. If you are adding it to a debit card transaction, even if you are calling it something different, you could risk negatively affecting your merchant account. 

How to Tell if a Processor Is Offering a Surcharge Program

Many processors seem to be offering cash discount credit card processing, but it’s really a surcharge program. If you see a reference to a service fee or non-cash adjustment then it’s a surcharge program. Processors that offer a surcharge program may say that your business lists cash prices and then adds fees for customers. If you aren’t posting the credit card prices and offering the cash discount then it’s surcharging. 

Should You Implement a Cash Discount?

For many businesses, there isn’t any harm in offering a cash discount if you have set prices to account for cards. This just means you are passing the processing fee savings to the customer. Some customers may think that a business that prefers cash is not properly paying taxes, and that can impact your perception, but for the most part, it’s not a problem as long as it’s done correctly. 

Top 10 Sources of Finance for Small Businesses

One of the challenging issues that emergent businesses face is the lack of adequate capital to fund their operations. According to Pret Commercial small businesses can still find a wide range of financial arrangements to kickstart and finance day to day activities. Here are sources of capital they may consider.

1. Business Line of Credit

The form of business finance allows you to access the capital as many times as you want-it's a revolving fund. To qualify for this loan, you need to have a $50 000 annual turnover and a higher credit score, ideally 560 and above. Also, you'll need to provide personal collateral security to guarantee the loan when you default. Two advantages of this financing are that it's available quickly, in a week or two, and you can borrow between $1000-$500,000.

2. SBA Loan

The Small Business Administration is a federal agency that helps small businesses to get funding and resources. The agency isn't the lender but a guarantor to financial institutions to lend you money. With this loan type, you can access any amount between $50,000 and $500,000, which is payable from 10 to 25 years. Although the paperwork takes longer, SBA offers a wide range of loans to micro-businesses. 

3. Short-term Loan

If you're hard-pressed for time and want a loan at the speed of lighting, you can apply for the SBA Express Loan. It can take less than 24 hours for you to have the money, and you can borrow up to $50,000. However, you must repay it quickly between 1-3 years.

4. Business Term Loan

It's suitable as working capital for acquiring equipment, expanding your business operations, recruiting more staff, etc. You can get $5000 up to $2 000,000 in a couple of weeks. The repayment period ranges from one to five years, and the interest rate is quite low.

5. Merchant Cash Advance

Merchant Cash Advance is a flexible form of business finance because it allows you to borrow against your future income. You'll need to authorize the lender to deduct a certain amount of your daily credit bank deposits. The minimum you can access is $5000, going up to $200,000 as the maximum capital. Since you can get the funds in under 24 hours, the interest is pretty high. 

6. Business Credit Card

As the most-user friendly loan, you can use a business credit card to borrow amounts up to $ 500,000 with little paperwork. It's possible to get the money within two weeks, and if your credit score is 680, you're a good candidate.

7. Equipment Financing

Equipment financing provides capital up to $5,000,000, and you can use it to purchase any useful resource for your business. The loan's approval and processing are less than 24 hours, provided your business has been generating a $50,000 annual turnover, and you've got a 650-credit score. If your credit score is low, you can still apply for the loan as long as you have a water-tight financial statement of your three to six months earnings.

8. Commercial Mortgage

With this type of loan, you can expand your retail space, acquire a warehouse, or venture into another business. It also allows you to buy a piece of land and build your property. Although you can access between $250,000 to $500,000 as loan capital, the amount you'll get depends on the property value you'll provide as collateral security and your credit score.

9. Accounts Receivable Financing

Also called factoring, it provides you with capital based on your unpaid invoices by your clients. With this arrangement, you need to sell your receivables or purchase orders to the financing company. It's also possible to receive more than 80 % of your purchase orders within three days of your application.

10. Start-up Loan

As a new business owner, you might find it an uphill task to secure a loan because of non-existent revenue and a solid balance sheet. A start-up loan can be your savior as you can borrow from a minimum of $ 500 to $750,000 as the maximum amount. One good thing about this loan is that you can get the money in a couple of weeks.

The Smartest Ways To Protect Your Company’s Finances

Running a company would be oh so much more straightforward if the money situation just took care of itself. If you knew that your finances were under control and healthy, then you’d be able to engage in the more fun aspects of owning a business, such as putting your ideas into practice. Alas, you can’t have everything your own way -- if you want to run your own company, then you’ll need to work on the finance part of things.

You’ll have a lot more peace of mind regarding your business finances if you know that they’re well protected. In this blog, we’re going to look at some of the best ways to do just that. 

Active Management

If there’s one piece of advice that all company owners should follow, it’s to spend some time actively managing their financial situation. These things won’t take care of themselves! And while there’ll be some aspects that you can outsource, you should have a solid grip on the fundamentals. Spending a little bit of time going over your incomings and outgoings will give you a solid overview of where, if anywhere, you need to improve. By doing this, you’ll also be able to identify any potential problems as soon as possible. 

Legal Safeguards and Professional Advice

Furthermore, as you actively manage your business's financial situation, having a legal professional by your side ensures that you're not only compliant with existing laws but also proactive in anticipating and addressing any legal issues that may arise. They can assist in creating a solid legal framework that aligns with your business goals and mitigates risks.

While we've discussed the importance of managing costs, maintaining cash-flow, and addressing late payments, it's equally crucial to invest in professional advice to secure the legal foundation of your business. By incorporating the services of an estate lawyer into your overall business strategy, you're taking a proactive step towards ensuring the long-term success and legal resilience of your company.

Cut the Costs

It sounds obvious to say that you can protect your company’s finances by cutting your costs, but it’s true -- you can. A lot of businesses end up spending wayyyy more money than they should, for various reasons. The biggest reason is that the costs keep on adding up and up, yet rarely get purged. So have a look at where you’re spending your money. Are all of those expenses necessary? It could be that you can cut some of them without having any negative impact on your business.

Don’t Write Things Off

There’ll be times when it seems like you’re not going to get the money that you were owed. At that point, you’ll have the option to write it off and move on. While you may eventually have to do this, don’t make it your first option. Take action first. You can use skip tracing software to track down a non-paying customer. If it’s a business that isn’t paying, then you may have legal options available to you.

Maintain Cash-Flow

The reason why so many companies fail isn’t that the ideas behind them were bad. It’s that they didn’t have a solid grip on their cash-flow. If you’re going to survive in the business world, then you need to have access to money. There’s no getting around it! Cash-flow problems can stem from investing too much in your business and by late-paying customers. Rather than buying hardware, you can rent. Instead of waiting for customers to pay, you can offer incentives to pay early (such as a 5 percent reduction).These tips will help you to keep a solid grasp of your financial situation and prevent things from getting too out of hand. They’ll be beneficial to both your business and your peace of mind.

How To Improve Your Company’s Cash Flow

Maintaining a healthy cash flow can be important for your company’s reputation and credit approval. This involves making sure that money is coming in at a faster rate than it is coming out. If money isn’t coming in and you owe payments, you’ll likely end up missing payments or having to take out loans to cover expenses.  

Sometimes a poor cash flow can be the result of running an unprofitable business. However, most of the time, this isn’t the case - your company could be profitable, but your customers may not be paying you on time or you could be failing to budget effectively. Below are just a few ways in which you may be able to improve your cash flow.

Chase up late payments

Late paying customers can be a real inconvenience. In many cases, a vicious cycle can form - you could end up paying your own creditors late.

Some customers will hold off paying you for as long as possible until you chase them up. As a result, if customers haven’t paid you, you should never wait it out. Send them an email or a text as soon as they miss a payment to remind them that money is due - and keep chasing them up until the money is paid. 

If customers bill you on a monthly basis on a specific date, you may be able to set up automatic emails or texts to alert customers whenever money is not paid on time. This could be easier than having to chase up payments manually. If customers proceed to still not pay up, ring them, and try to get to the bottom of the problem. 

If you’re strict with chasing up payments, you could find that a lot of customers get into the right habit of paying you on time. There may be some customers that continue to repeatedly miss payments or never pay. You may have to eventually cut off the former if it becomes a problem, while you may have to seek legal action for the latter. It’s important that you never get angry with customers and that you don’t harass customers with payment reminders - threatening or harassing behavior could be used against you if it turns into a legal battle (for most companies, this hopefully shouldn’t happen very often). You can read this guide to chasing up late payments for more tips. 

Make use of invoice factoring

Ideally, you shouldn’t have to take out loans to cover late payments. However, if you owe money and there’s no other option but to borrow money, invoice factoring may be the best solution. 

An invoice factoring company immediately pays you any money that you are owed by customers so that you can finally get paid. The company then chases up your customers on your behalf and takes the money for themselves. The catch is that you will generally only get paid 90% of what you are owed. However, if you’re in need of quick cash to cover payments and you’re tired of chasing up a customer, this small loss could be worthwhile. 

Run credit checks on new customers

When it comes to charging in installments or billing customers on a monthly basis, you can often avoid taking on chronic later payers by running a credit check first. This can help to evaluate a customer’s credit score and determine how likely they are to pay on time. A customer that consistently misses payments is more likely to have a poor credit score - hence, you may want to avoid taking on customers with poor credit scores for this reason.

You can check customers’ credit scores by signing up with a credit reporting agency. This is free for small businesses - larger businesses that require more frequent credit checks may have to pay a fee. 

Consider these other methods of reducing late payments

There are a few other ways in which you can discourage late payments. These methods include:

Charging late payment fees: Many customers will pay up if threatened with the prospect of late payment fees. When a customer fails to pay on time, provide a warning telling them that a fee will be charged if they do not pay by a certain date. It’s important that these late payment fee guidelines are followed.

Offer early payment discounts: You may be able to encourage customers to not only pay on time but to pay early by offering early payment discounts. This could be a useful incentive for customers paying in installments. 

Allowing payments via credit card: A customer may not have to pay you installments if they can pay by credit card. This allows you to receive the full amount upfront, while also allowing them the convenience of paying installments to their credit card provider. Consider looking into accepting credit cards if you don’t already.

Sending payment reminders before payments are due: Sending customers a payment reminder a couple of days before a payment is due could encourage your customers to check that they have enough money in their account so that the payment isn’t missed. 

Start setting aside savings

Late payments aren’t always the cause of cash flow problems. Unforeseen emergency costs such as machinery repairs may cause you to have to spend money you hadn’t budgeted for. This could then leave you unable to pay creditors. Alternatively, you may run a business that has seasonal lows, in which case you may have to struggle through certain months with little income. 

In either case, it can be useful to have savings set aside that you can dip into. This could allow you to continue paying creditors when you haven’t got enough money coming in.

The best way to set aside your savings is to put them in a business savings account. This allows you to set aside funds for dealing with cash flow problems. You’ll also generate some interest on your savings, potentially giving you some extra income. Which leads to the next useful cash flow tip...

Find ways to develop a passive/continuous income

If your income is unpredictable or you receive more work during certain seasons, it could be worth finding a way to bring some regularity to your income so that you can more easily budget from month to month. For instance, if your company sells ski equipment, you could struggle to make money during the summer months, leading to cashflow problems.

Seasonal lows may be able to be addressed by broadening your products or services. For instance, you could consider selling mountain biking or hiking equipment alongside ski equipment. 

Alternatively, you could try investing in savings and making a return off of them. This could include making interest off savings, making interest off of peer-to-peer lending, or even making a return off of stocks or property. By using this APY calculator, you may be able to forecast exactly how much money you’ll make over a certain period of time. Higher returns may involve making riskier investments. 

It’s also possible that you may be able to earn money by renting out office space or equipment while not in use. For instance, some companies sublet out spare rooms to other small companies or rent out printing services to other companies. 

You may also be able to make a passive income off of ad revenue or sponsorships by pouring energy into a business blog or vlog. If your blog or vlog is successful and you get a lot of readers/views, you’ll get paid money for advertisements and will likely attract the attention of sponsors. 

If you tend to live off of only a few large payments per year, you could consider promoting installment plans as a way of spreading out payments - this could allow you to budget more effectively than getting paid a large amount every few months. Alternatively, you may be able to promote subscription or continuous services over one-off services (if you own a cleaning company you could try to promote more regular office and house cleans as opposed to living off of one-off deep cleans). 

Organize payments to go out on the same day

Cash flow problems can also occur if your outgoing costs are difficult to keep track of. If you have different payments coming out at different points of the month, consider organizing all of these payments to go out on the same day so that you can more easily budget. You may be able to move payment dates simply by talking to creditors - while some creditors may want to stick with a certain date, most creditors will be willing to move the payment date if it prevents late payments. 

Avoid setting a large payment date a couple of days before you get paid. If you regularly get paid on a certain day, it may make sense to set your outgoing payments for a couple of days after this date.