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Accounting & Taxation

6 Ways Cloud Accounting Services Can Help Your Business Grow

Last Updated on May 22, 2022 By Ifama Leave a Comment

Running a business is not an easy task. Aside from ensuring that your products or services are of good quality, you also need to make sure that your finances are in order. Without proper financial management, your business will not be able to grow and prosper.

That’s why more and more businesses are now using cloud accounting services. With cloud accounting, you can manage your finances more efficiently and effectively.

In this article, we’ll discuss six ways how cloud accounting services can help your business grow.

So, let’s get started!

Table of Contents

  • 1. Improved Cash Flow Management
  • 2. Reduced Accounting Costs
  • 3. Improved Financial Visibility
  • 4. Better Decision-Making
  • 5. Increased Security
  • 6. Increased Efficiency
    • Manage Your Finances More Effectively and Help Your Business Grow

1. Improved Cash Flow Management

One of the most essential aspects of financial management is cash flow. With cloud accounting, you can manage your cash flow more effectively by tracking your income and expenses in real-time.

This way, you’ll know exactly how much money is coming in and going out of your business. As a result, you’ll be in a better position to make informed decisions about your finances.

2. Reduced Accounting Costs

When it comes to accounting, businesses often have to spend a lot of money on hiring accounting staff or outsourcing accounting services.

However, with cloud accounting, you can save on these costs as you can do your own accounting. All you need is a computer and a reliable internet connection.

3. Improved Financial Visibility

Cloud accounting also gives you improved financial visibility. With cloud accounting, you can access your financial data anytime, anywhere.

This way, you may always keep track of your business finances and make sure that everything is in order.

4. Better Decision-Making

Another benefit of using cloud accounting services is that they can help you make better decisions about your finances. With cloud accounting, you can track your financial performance in real-time.

This way, you can identify areas where your business is doing well and areas where it needs improvement. As a result, you can make better-informed decisions about where to allocate your resources.

5. Increased Security

When it comes to financing, security is always a major concern. However, with cloud accounting, you can be assured that your financial data is safe and secure.

Cloud accounting providers use state-of-the-art security technologies to protect your data. This way, you may be sure that your financial information is safe from hackers and other cyber threats.

6. Increased Efficiency

Last but not least, cloud accounting can help you increase the efficiency of your accounting processes.

With cloud accounting, you can automate repetitive tasks such as invoicing and billing. This way, you can save time and resources that can be better used elsewhere.

Manage Your Finances More Effectively and Help Your Business Grow

If you are looking for ways to take your business to the next level, cloud accounting may be a good option for you.

Cloud accounting services offer a number of benefits that can help businesses grow and manage their finances more effectively.

By using cloud accounting, you can save time and money while getting access to the latest features and tools. If you’re not already using a cloud accounting service, now is the right time to start!

Ifama

Hi! This is Ifama. I am a student and giving my services in SEO. I have a lot of experience in digital marketing. Travelling is my hobby and I love visiting different hilly areas and doing adventures.

Filed Under: Accounting & Taxation

Accounting vs. Bookkeeping: What’s the Difference?

Last Updated on April 12, 2022 By Ayesha Saeed Leave a Comment

Accounting and bookkeeping are two related functions that involve the finances of an individual or a business. While these two can help you achieve the common goal of keeping your finances on track, it’s important to understand the difference between these two areas of finance to be able to decide whether you need to hire an accountant or a bookkeeper.

In this article, we will highlight the distinction between these two aspects of finance and explain the differences between the roles of an accountant and a bookkeeper.

Table of Contents

  • What is Bookkeeping?
    • What is Accounting?
    • What is the difference between an Accountant and a Bookkeeper?
    • Final Thoughts

What is Bookkeeping?

Bookkeeping refers to the process of diligent recording of day-to-day financial transactions. It is a crucial aspect of running a business and must be performed consistently to ensure updated and accurate financial data is always available to aid in decision-making.

Bookkeeping may involve the following tasks:

  • Daily recording of financial transactions.
  • Posting debits and credits.
  • Bank reconciliation.
  • Preparing and sending out invoices.
  • Chasing overdue invoices.
  • Preparation of financial statements such as the balance sheet, income statement, and cash flow statement.
  • Efficient maintenance of general ledgers and historical accounts.
  • End-to-end payroll processing.

Among these tasks, one of the primary functions associated with bookkeeping is the maintenance of the general ledger. This is a basic document where the bookkeeper records or posts sales and expenses. So the more sales you have, the more often the ledger is posted.

Traditionally, ledgers are maintained using sheets of paper or spreadsheets. Nowadays, innovative accounting systems can help maintain ledgers more efficiently and conveniently.

Although the bookkeeping function seems to involve basic administrative tasks, the complexity increases depending on the size of your business and the number of transactions completed. This is because all sales and purchases must be recorded, and the IRS requires supporting documents on some items or business transactions.

What is Accounting?

Accounting is a high-level function that involves using bookkeeping data to generate financial models. Compared to bookkeeping which is mainly transactional, accounting is somewhat more subjective.

The accounting function involves the following tasks:

  • Preparing to adjust entries.
  • Financial statement review.
  • Analysis of operational costs.
  • Accomplishing income tax returns.
  • Helping business owners understand the impacts and implications of their decisions.

One of the crucial aspects of the accounting process involves the analysis of financial reports to help you make informed decisions. The end result is that you will achieve a more in-depth understanding of your business’ actual profitability and be better equipped to manage your cash flow efficiently.

You will be able to turn the financial information recorded on the general ledger into valuable insights on your business performance and monitor how you’re tracking towards reaching your goals. Business owners usually tap into the expertise of accountants to assist them in analyzing their financial position, budgeting, forecasting, and efficient tax planning.

What is the difference between an Accountant and a Bookkeeper?

Many people are not aware of the difference in the role of accountants and bookkeepers. Contrary to the common belief that they do the same work, these two professions actually require different skill sets.

Generally, the role of the bookkeeper is to keep an accurate and updated record of transactions and ensure that your books and reports are kept organized. On the other hand, accountants can assist you in financial analysis, provide tailored advice, and help you navigate complex tax matters.

Bookkeepers aren’t required to undergo formal education, and accountants typically oversee their work. In order to be an effective bookkeeper, it is crucial to have a keen attention to detail and diligence.

Meanwhile, accountants need to graduate with a bachelor’s degree in accounting and hold additional certifications. In order to obtain the title of Certified Public Accountant, the accountant must first pass the Uniform Certified Public Accountant exam and have sufficient experience.

Final Thoughts

To sum it up, the bookkeeping function is more transactional and administrative, while accounting uses bookkeeping information to provide you with insights into your business’s financial performance.

With the help of a good accountant and bookkeeper, you will be able to achieve organized books and financial records, develop a sound financial strategy, and build a tax-efficient business that thrives.

While some small business owners do the accounting and bookkeeping by themselves, this is not an efficient use of your time. As a business leader, your focus should be directed to managing the core aspects of your business and driving growth.

So if you’re looking for a reliable accounting firm that can do both and even provide personalized business advice, you might want to consider a princeton CPA. Our team of accountants can also assist you with hassle-free audits and efficient tax planning that can help you enjoy cost savings.

Contact us today to learn more about how we can help you run your business better and give you more time to focus on doing what you do best.

ayesha saeed
Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.

Filed Under: Accounting & Taxation

Year-End Accounting: 7 Things To Know

Last Updated on March 18, 2022 By Jason Obrien Leave a Comment

The end of the year is a time when most organizations close their books. Despite being critical to every business, preparing a year-end account can be an intimidating process.

However, this article will show you 7 essential pieces of information that’ll help you take control of your year-end accounting process and prepare you for the new year.

Table of Contents

  • Hiring Tax Accountant Services Is Critical
  • Your Financial Statements Are Crucial
  • Past Due Invoices Are Still Relevant
  • Your Business Receipts Should Be Well Organized
  • Budget And Outcome Comparison Is Essential
  • An Inventory Of Your Assets Will Be Needed
  • Accounts Reconciliation Help You Maintain Balance
  • Conclusion

Hiring Tax Accountant Services Is Critical

While your in-house accounting department can do your year-end accounting, you can be assured of a more effective outcome when engaging with tax accountant services. Hiring accounting professionals will free up your time, allowing you to perform other relevant tasks.

The valuable insights these professionals offer can also help guide your business plans and enable you to make more strategic financial decisions. Additionally, having a fresh eye to audit your taxes can help you gain an objective view of your performance. Therefore, you can proactively streamline your systems to maximize profits.

End of the year certificate

Your Financial Statements Are Crucial

Financial records play a significant role during the compilation and analysis of year-end statements. Your financial statements can be regarded as your business’ lifeline. They give you a synopsis of your financial state by revealing your past and current finances.

Through your statements, you can also forecast a financial future for your business. Critical financial statements include your income statement, cash flow statement, and balance sheet. To have proper year-end accounting, you should ensure these statements are well prepared and readily available for each of your financial activities across the year.

Past Due Invoices Are Still Relevant

When preparing your year-end account, you should try to retrieve outstanding debts that your customers owe your business. Doing this might be challenging when past invoices are not available. However, having them handy lets you discover debtors after a brief cursory search.

With a simple invoice reminder, you can get some customers to settle their bills. However, others may require more effort to yield to your demands. The goal here is to ensure you don’t leave your money in the pockets of customers who have received your services. Getting your money back will help your accounting process be more comprehensive and further increase your financial strength for the new fiscal year. 

Your Business Receipts Should Be Well Organized

If you’ve not given much attention to your business receipts, you may need to think twice regarding this, because receipts are essential business documents and must be tidied up for the new year. Having disorganized receipts puts you at risk of inaccurate records.

Moreover, bad records increase the chances of making errors on necessary documentation, such as business tax returns. Organizing your receipts saves you from making costly accounting mistakes. You may pay for things twice when you have no payment record or exclude such expenses from your account.

A way to organize your receipts is by sorting them according to the expenses they represent. You can also have your receipts in folders or stored on digital devices.

Budget And Outcome Comparison Is Essential

Business budgets help keep financial expenses in order. Aside from assisting you in allocating resources, a budget aligns your investments to expected outcomes. Comparing your budget with your outcome is essential while preparing a year-end account. When you compare your budget at the end of the previous year to the results you’ve achieved at the end of this year, you can tell how well you’ve fared.

More so, such a comparison will help you spot areas you spend more money in than planned and those you spent less. You can use this information as a guide while preparing your accounts for the coming year. This way, you can apportion resources more to tasks and operations appropriately.

Balance Sheets

An Inventory Of Your Assets Will Be Needed

As you end the year, it’s necessary to count the available materials and supplies accurately. This proves helpful in several ways.

First, it enables you to have correct records of business materials and supplies. Secondly, you can note the supplies you will need to make for the next year and materials you need to get off your shelves/store.

If you run an inventory-based business, ensure you complete an inventory check as the year ends. Compare the total inventory on hand to your balance sheets. By doing so, you can make adjustments to any misalignments and have your records straight.

Accounts Reconciliation Help You Maintain Balance

Accounts reconciliation forms a significant aspect of your year-end accounting. Ensure your accounting records tally with your bank accounts. To make this reconciliation, compare your bank statements to your accounting records. Ideally, both records should match, but if you observe a discrepancy, then you need to do some inspection and inquiry. You should locate the origin of the mismatch and guarantee the records are equally balanced.

Conclusion

Having a well-prepared year-end account is a significant business outcome. However, the process doesn’t always come easy. Nevertheless, by focusing on the essentials, you can achieve desirable results. The tips recommended in this article will enhance efficiency and save you time and effort without compromising accuracy in preparing your year-end accounting.

Jason Obrien

Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.

Filed Under: Accounting & Taxation

Money Mistakes – 5 Things You Need To Know If You’ve Made A Mistake On Your Tax Return

Last Updated on March 1, 2022 By Tristan D. Porter Leave a Comment

Dealing with different taxes is no fun at the best of times. Nobody enjoys handing their hard-earned cash over to the government, and although we love receiving tax returns, organizing all the paperwork is a tedious and complex process. This can sometimes lead to mistakes, which can have rather significant consequences if you don’t get them fixed. So today, we’re going over what you should do if you’ve got something wrong on your tax return:

Table of Contents

  • You Should Probably Seek Professional Guidance
  • You’ll Need to Submit an Amendment
  • What if your Mistake is Related to a Self-Managed Retirement Fund?
  • You Could be Audited
  • You May Face Penalties

You Should Probably Seek Professional Guidance

First and foremost, it’s time to call in a professional. Filing your own taxes can save you a bit of cash upfront, but if you’ve made a mistake, you really don’t want to try to fix it alone. Run a quick Google search for a tax accountant near me, and select an agent who can fix up your figures and ensure you have the correct information to submit.

You’ll Need to Submit an Amendment

Figuring out the numbers precisely is vital at this stage as you’re going to need to submit an amendment. While you might get away with accidentally submitting the wrong information to the tax office once, if your figures are also wrong in your amendment, you might find yourself in some pretty serious trouble. The good news is that your selected tax accountant will be able to get everything fixed up properly, so you can avoid making the same mistake again.

What if your Mistake is Related to a Self-Managed Retirement Fund?

Calculator with money

It’s important to note that if you have a self-managed retirement fund, you’re going to need to get in touch with your accountant. Mistakes on your tax return may affect your account if the issue was related to it, so your personal accountant or financial advisor needs to be kept in the loop.

You Could be Audited

The tax office is within its rights to randomly audit anyone at any time. However, your chances of being audited will increase significantly if you have made a mistake on your tax return. Because of this, it is important to ensure that you have all receipts and documentation organized and ready in case this occurs.

You May Face Penalties

Finally, it is important to be aware of the fact that you may face penalties if your mistake is significant or goes uncorrected. We don’t say this to scare you but to prepare you for the possibility.

In most cases, as long as you take steps to rectify the issue, the worst that will happen is that you will receive a fine. However, if your mistake is large enough and goes uncorrected for long enough, it could be considered tax evasion. So, it is important to get things sorted as efficiently as possible.

Making a mistake on your tax return isn’t the end of the world, but it is something that you need to correct swiftly. The tips in this article will help you do this, but it is important to remember that our first point really is vital. While it can be tempting to try to fix the issue yourself, having a professional rectify things not only ensures that they’re correct but also provides you a certain level of protection moving forward. It really is your best course of action. You can also claim back any fees associated with doing your taxes in the next financial year, so it ends up paying for itself. Good luck.

d porter
Tristan D. Porter

I am Tristan who loves to ride and spend time with my jenny (horse) and my love Mark. After completing my graduation, I have been working as an accountant in a private firm in Cologne.

Filed Under: Accounting & Taxation

India is about to Launch a National Digital Currency

Last Updated on February 24, 2022 By Ayesha Saeed Leave a Comment

India has announced to represent the bill regarding cryptocurrencies several times in parliament. But government authorities have announced that they will table the digital currency bill in the august session of 2022.

Some of the leaks of cryptocurrency bill 2022 include the amount of tax financial authorities will levy on each virtual coins transactions alongside the formulation of India’s first digital currency. If you are interested in bitcoin trading, visit auto-trading robot to acquire an utter guide to crypto trading. Surprisingly, financial authorities did not mention the ban of cryptocurrencies, but the taxes they are about to levy on each transaction subjected to these virtual coins are massive. Here is a detailed overview of the glimpse of cryptocurrency bill 2022 India.

Bitcoin

Table of Contents

  • Key Takeaways
  • Skyrocketing Digital Economy
  • Taxation on Cryptocurrencies
  • Increasing Trends of Cryptocurrencies
  • Are National Currencies Undermining Decentralization?
  • The Future of Mining In India

Key Takeaways

  • India’s top digital currency is not under construction yet. However, the development of this coin will start in the April of 2022 and will be launched somewhere between 2022- 2023.
  • Meanwhile, India has announced taxation on every cryptocurrency transaction, whether a gain or loss.
  • Conferring China and India, African countries have also dictated their plans of creating a cryptocurrency powered by the national bank.

Skyrocketing Digital Economy

While announcing the cryptocurrency bill, the finance minister of this country addressed the surge in the economy after the arrival of national bank-powered digital currencies. India’s digital currency is potential enough to lead towards a more proficient system. However, public domains are currently devoid of detailed knowledge regarding India’s national bank-powered digital currency.

The Finance minister of India revealed a glimpse of cryptocurrency bills amid crackdown rumors. As in an earlier parliament session, the national bank clarified that a few cryptocurrencies would be banned. For example, privacy-focused cryptocurrencies will no longer operate in India, as per the bill of 2022. Before the parliament session, people were also speculating on a hardcore ban on cryptocurrencies.

Taxation on Cryptocurrencies

India will follow a brilliant strategy to regulate cryptocurrencies as for each exchange subjected to such digital coin exchange, and the country will intensify taxation. However, financial authorities will not implicate any straight ban on cryptocurrencies.

Increasing Trends of Cryptocurrencies

India is now amongst the countries that have revealed their plans regarding developing national bank-powered cryptocurrencies. Immediately after announcing national bank-powered cryptocurrency in India, Jamaica also revealed its plan. South American and Caribbean countries have also amplified the use of cryptocurrencies.

So far, China is the mere country to execute the plans of significant cryptocurrencies with utter grace, and their national currency is named as Yuan. On the other hand, Japan and the United States have been conferring similar plans for a very long time, and their national digital currency is on the way.

Are National Currencies Undermining Decentralization?

National currencies cause a massive concern amongst cryptocurrencies bug as usual digital currencies contemplate an open-source ledger. Besides an open-source ledger, peer to peer also accounts for the decentralization part of digital coins.

Decentralization not only means noninvolvement of government but any other party trying to regulate it. However, national bank-powered cryptocurrencies are not decentralized at all. Financial authorities have the power to govern these centric cryptocurrencies. Undeniably centric cryptocurrencies comprise less volatile characters, but the government will record each transaction alongside the public identity.

The Future of Mining In India

Mining has proven its profitability in developing countries over the last few years. But the viability of this process usually depends on resources like electricity and hardware. In India, multiple mining plants are making a hell of a lot of money, and most of them are either early movers or multinational companies. However, the concern arises when people consider the expenses of mining for a solo miner.

Setting up a mining plant that provides a handsome income stream is expensive. Usually, each mining calculator depicts that a miner can make 12% of their entire investment in good market conditions. So, according to Indian currency, if you purchase a GPU worth 1 Lakh INR, you can quickly generate 8000 to 12000 INR each month. You might wonder about the durability of a GPU and how much time a GPU can provide its maximum performance. The process is long-lasting for five years. If you buy a GPU today to start mining, you can efficiently operate with this GPU for mining purposes till 2026.

ayesha saeed
Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.

Filed Under: Accounting & Taxation

5 Reasons to Hire a Tax Attorney

Last Updated on February 8, 2022 By Ayesha Saeed Leave a Comment

The government collects taxes through a variety of methods. There are individual income taxes for professionals, corporate income taxes for businesses, and more. Considering that the government uses tax payments as its primary source of funding, it is understandable that they pay close attention to people’s activities related to it. Unfortunately, dealing with taxes can be overwhelming for some. Certain policies and regulations about tax payments, debts, and management are difficult to understand, especially for a layperson.

People are expected to pay their due taxes promptly. Otherwise, concerned government agencies such as the Internal Revenue Service (IRS) will take action against you. According to  www.flclaw.net, hiring a tax attorney can help you understand more about tax payments and how to deal with specific tax issues you might be facing.

Here are top things your tax attorney can help you with:

Qote board on top of cash bills

Table of Contents

  • They can help during a tax audit
  • They can assist with missed tax returns
  • They can represent you in case of tax fraud
  • They can help communicate with the IRS
  • They provide professional legal advice
  • Bottomline

They can help during a tax audit

Tax audits are the IRS’s way to ensure that your tax records are on track. They want to see if you adhere to the tax laws and policies. The IRS checks, reviews, inspects and verifies whether financial records and transactions are all accounted for. This process is often stressful and overwhelming to handle on your own.

A tax attorney can help you during an audit by briefing you about the purpose of the audit and guiding you throughout the whole process. The tax attorney will also walk you through all the paperwork and records to be prepared and submitted to the IRS for review. They will also ensure that your rights are protected during the audit. Lastly, they will be there to act as the mediator between you and the IRS.

They can assist with missed tax returns

It is possible to miss filing your tax reports. In times like this, having a tax attorney by your side can help you deal with unfiled tax returns. A tax attorney can help communicate a deal with the IRS and provide you with an arrangement that is beneficial to both parties. This is particularly helpful if you are facing years-worth of unpaid taxes.

They can represent you in case of tax fraud

A criminal charge from the IRS because of tax fraud or evasion should be taken seriously. Cases like these put all of your assets, properties, livelihood, and freedom in jeopardy. Thus, it is crucial that you hire a trusted and reliable tax attorney right away.

A tax attorney is the only person qualified to stand and represent you in court. Throughout this process, they will provide you with sound legal advice and defend your case by providing all necessary reports, paperwork, and evidence to prove your innocence.

They can help communicate with the IRS

Facing the IRS can be intimidating. If you have little to no knowledge about tax policies and regulations, it is best to hire a tax attorney to do the talking for you. In the eyes of the IRS, ignorance is not an excuse to commit a crime or miss tax payments. A tax attorney can help guide and educate you about the fast-changing tax laws, so you don’t break them.

They provide professional legal advice

Tax attorneys are not only there when you are in a dire situation or pitted against the IRS. Tax attorneys can also help you by providing legal advice and education about certain tax policies and regulations that a layperson may not know. This is particularly important if you are thinking about establishing a business or conducting a noticeable financial transaction that can catch the attention of the IRS.

Bottomline

Given the gravity of tax-related problems one can face, people should take their time in choosing the right tax attorney to represent them. It is crucial to consider the attorney’s reputation, qualifications, and experience in specific tax cases to see if they can provide you with the right services.

Hiring a tax attorney to guide you during an audit or a missed tax return can significantly ease the stress and pressure during these challenging situations. You can rely on their knowledge and expertise to help you deal with the IRS with little to no risk to your assets and livelihood. Aside from that, tax attorneys can also provide professional advice and education about tax laws and policies that will stop you from committing a crime or an infraction.

ayesha saeed
Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.

Filed Under: Accounting & Taxation

7 Qualities That Make a Business Accountant Worthwhile

Last Updated on January 26, 2022 By Ayesha Saeed 1 Comment

A business accountant can seem like a luxury, but they are essential to any company’s success. A good accountant will help your company make the most of its opportunities and avoid costly mistakes. They can also play a vital role in helping you through the tax season among other important accounting roles. It’s important that you pick one with the right qualities to propel your business to the next level. Here are seven qualities that make a business accountant worthwhile.

calculator-pencil

Table of Contents

  • Accountability
  • Experience
  • Financial Knowledge
  • Creativity and Innovation
  • Knowledge of Technology
  • High Ethical Standards
  • Client-Oriented Approach

Accountability

Accountants should always provide accurate, timely information and be available when needed. You need your accountants to easily trace financial problems to their root cause and tell you how to fix them.

Experience

Accounting is a rapidly changing profession, with laws and regulations constantly being updated by the government or other authoritative bodies. Accountants should always be staying up to date on changes in their field to advise clients accordingly. The more experience your accountants have, the better they will handle your finances.

Financial Knowledge

Business owners may know how to make money, but that doesn’t mean they understand the accounting profession. This is where a great business accountant from Pherrus.com.au can step in and provide expertise on finance-related issues. A good financial analyst will help you find new ways to grow your revenue and manage it in the long run.

Creativity and Innovation

A great accountant will also bring ideas for new ways to make money and help you develop methods that can reduce your expenses over time. Some of the most crucial ideas a worthwhile accountant will bring to your business include:

  • How to select a base currency for your business
  • Methods to reduce the time it takes to complete books and records at year-end
  • How outsourcing jobs can save you money in the long run

With such an accountant in your team, you can rest assured that your financial systems will always run seamlessly.

Knowledge of Technology

Great accountants understand the impact that social media and cloud software have on businesses today, and how to incorporate these platforms without compromising your security or performance.

High Ethical Standards

Business owners often make financial choices that negatively impact the bottom line, and it’s up to an accounting team to point out where any missteps may have occurred. Well-trained accountants will always maintain a strong sense of integrity and are inclined towards honesty for the benefit of your business.

Client-Oriented Approach

A great accountant will be dedicated to giving insightful advice when necessary about how business decisions may affect your tax liabilities and financial standing. A good accountant will never try to push you into a direction that may not be best for the company. They are always looking at all angles of any decision made, so there is no room for miscommunication or mistakes.

Business accountants are an invaluable asset to any business. They will help you stay on top of your business finances, reduce tax liabilities through proper filing, ensure that all necessary federal and state filings are completed accurately every year, and motivate the company to grow into a better version of itself each day.

ayesha saeed
Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.

Filed Under: Accounting & Taxation

A Small Business Guide To Indirect Tax Governance

Last Updated on January 21, 2022 By Tristan D. Porter Leave a Comment

Now that you’re gradually venturing into the world of business, you’re most probably concerned about the indirect taxes you have to pay and impose on your products. You’re not the only one bothered by them. Even large businesses are affected by it, and of course, the consumers who will purchase the products.

Unfortunately, indirect tax grows in importance, leading to a complex and frequently changing taxation system. But why is it becoming essential in society? It is because the revenue collected by the government from indirect tax is increasing.

Indirect tax can be found on every product you purchase. Depending on your country, indirect tax is often referred to as value-added tax (VAT) or goods and services tax (GST). However, these two are just a part of it. If you want to learn more about these taxes, you need to continue reading this guide.

Moreover, if you want to compute the tax on any product, you may visit apps or websites that offer their calculator for tax computation for free.

Table of Contents

  • What Is Indirect Tax? 
  • How Is Indirect Tax Different From Direct Tax? 
  • What Are The Different Types Of Indirect Taxes? 
    • Value-Added Tax (VAT)
    • Sales Tax
    • Excise Tax
    • Customs Tax
  • What Are The Advantages Of Indirect Tax? 
  • Final Words 

What Is Indirect Tax? 

Indirect tax is a type of tax collected by a business entity from the supply chain. It is imposed on a manufacturer but is passed on to consumers as part of the price of goods and services purchased. So basically, the consumer is paying the taxes by buying the product, not the business that produces it.

Tax value

How Is Indirect Tax Different From Direct Tax? 

As mentioned above, indirect taxes are paid from the purchases made by the consumer. It will be collected by the businesses that sell the products. Then, they will be forwarded to the government as a tax payment. That’s how indirect taxes work. 

On the other hand, direct taxes, as the name suggests, are paid by consumers directly to the government. It could be in corporate tax, income tax, wealth tax, and more.

With this said, the main difference between the two is how the taxes are paid.

What Are The Different Types Of Indirect Taxes? 

Indirect taxes come in many forms, depending on what products you want to purchase. For example, the tax imposed on alcoholic beverages is different from what is on basic consumption necessities. Here are the types of indirect taxes you might need to know:

Value-Added Tax (VAT)

Value-added tax is placed at every step of production, starting from purchasing raw materials to their final purchase. It means that the government receives revenue from every manufacturing process that adds value to the product. To further elaborate the confusing taxation process, here is how VAT implementation works, assuming that the VAT rate is 10%: 

  • A small business manufacturer purchases a raw material costing USD$1. It will become USD$1.1 with added VAT. 
  • Then, the product produced with the raw material is sold to a retailer for USD$3. It will become USD$3.3 with added VAT. Only two cents will be forwarded to the government minus the previous one cent incurred during the product’s initial production. Note that the two cents are only 10% of the gross margin of USD$2.
  • Lastly, the retailer will sell the product to consumers, following the above principle. 

However, VAT may vary, depending on where you live. Different state or country means different VAT rate. For example, Louisiana has a different tax rate from Maine, Massachusetts, and others.

Because of its nature, VAT is full of controversy. According to experts, it only increases government revenue by placing additional costs on consumer goods instead of charging wealthy taxpayers who can afford it more.

Sales Tax

Sales tax is imposed on all goods and services you can see in the market and is only levied at the point of sale compared to VAT. So, when you plan to buy your favorite products in the department store or visit one of the best spas in town, remember that you are about to pay indirect tax in the form of sales tax. 

Also, do not worry if your product will be double-taxed because it will not. As the name suggests, sales tax will only function after the sale of the product. On the other hand, VAT is added not on the sale of the product but every step of its production. Therefore, rest assured that your product won’t be double-taxed because of their difference in application. 

Excise Tax

Excise tax is a special tax required on specific products, including tobacco, alcohol, and fuel. If you’re a manufacturer of these products, you are already paying this tax to purchase the necessary raw materials. Unfortunately, the excise tax will only make the product more expensive and burden consumers.

For example, the manufacturer buys a living substrate to produce alcoholic beverages. Because they need to pay indirect taxes as soon as they purchase the raw materials, they need to raise the product price, transferring the burden to their consumers. 

Customs Tax

Have you noticed that the products you purchased abroad are slightly cheaper than buying the same in your country? It is because of an indirect tax called customs tax.

Customs tax is also known as tariffs. It is the tax imposed on all imported goods and is also the reason why your favorite brands abroad are way too expensive once they reach your country. Tariffs may differ, depending on which country you live in. Some countries offer higher tax rates, especially if the government sees a fast movement in the line of imported goods. 

If you’re planning to sell your products overseas someday, you will need to determine the tax rate on imported goods imposed on your products.

What Are The Advantages Of Indirect Tax? 

Even with many negative implications to consumers, indirect taxes can still benefit society. Here are some advantages you might want to know: 

  • The low-income household can still participate by purchasing even low-cost products in the market. 
  • Indirect taxes are not noticeable, so consumers won’t feel that the government has taxed them. However, they can still see the tax breakdown on their receipt for transparency. 
  • Indirect taxes are easier to collect than direct taxes. 
  • These taxes discourage everyone from purchasing harmful products, such as alcoholic beverages and tobacco. 

Final Words 

Starting a small business is not easy, even more so when governments impose indirect taxes on your products, making them more expensive than their actual value. Also, as an owner, you must apply these taxes properly on your goods and services. To do this, you will need to know the type of taxes applicable to your business, such as sales tax, VAT, or excise tax.

Also, remember that tax rates vary from state to state or country to country. So, make sure to do your little homework to avoid having errors in imposing taxes.

d porter
Tristan D. Porter

I am Tristan who loves to ride and spend time with my jenny (horse) and my love Mark. After completing my graduation, I have been working as an accountant in a private firm in Cologne.

Filed Under: Accounting & Taxation, Business

How To Manage Your Cap Table After A Fundraising

Last Updated on January 21, 2022 By Tristan D. Porter Leave a Comment

A cap table is a dataset often started in a spreadsheet containing detailed information about the different people who own a company. The cap table includes a detailed breakdown of a company’s ownership or capitalization structure. It usually contains a list of the persons who own shares of stock in a company. It also indicates how many stocks are owned by each person or shareholder on the list.

The cap table contains other data aside from the list of shareholders and their capital stock. It includes data about any grants the company may have received, such as liquidation rights and classifying shares into preferred, common, convertible, and warrants. The cap table also includes entries about debts incurred by the company. Here are some suggestions on managing your cap table after a round of fundraising.

Table of Contents

  • How To Manage Your Cap Table
    • Update Your Cap Table
    • Compare Post-Money Results With Your Fundraising Action Plan
    • Check For Rounding Up Errors
    • Check Transactions Involving Existing Shareholders
  • Avoid Over Dilution After A Fundraising
    • Consider Using Cap Table Software
    • Review Alignment Of Legal Documents With Cap Table
  • Conclusion

How To Manage Your Cap Table

Adobestoke

Update Your Cap Table

One of the first few things you have to do after fundraising is to put all the relevant information about those who put up the money. It would be best to put in the new or updated information on your shares of stock as soon as possible, so you don’t forget or lose the data.

Since you’ve recently conducted a round of fundraising, there might have been changes or transactions which would affect your existing shareholders. If they’re all new investors, you’ll have to input the investments they brought in during the fundraising.

Compare Post-Money Results With Your Fundraising Action Plan

It would be best to have a fundraising action plan before executing any fundraising round. This will enable you to manage the fundraising to meet your immediate funding requirements yet stay aligned with your strategic business goals. After the fundraising, it’s best to compare the results of your company’s post-money situation with the goals and forecasted scenarios in your fundraising action plan.

Among the things in your checklist should be the overall ownership and capitalization structure. The post-money structure should be well within the range envisioned before the fundraising. Venture Capital (VC) specialists suggest that the founders maintain majority ownership during the seed and early financing rounds.

Some VC professionals suggest founder shares should be somewhere between two-thirds (67%) up to ideally 80% of the total capitalization. This would ensure the founders would have enough stake and motivation to make the startup fly. This also leaves them enough shares to unload for future rounds of financing. The suggested share of early angel investors should be not more than a fifth (20%) to give room for subsequent investors. Some startups also allocate around 10-12% for Employee Stock Option Programs (ESOP).

Check For Rounding Up Errors

Rounding up decimal numbers is one of the most common errors after a company goes through a financing round. This is expected in all mathematical computations involving decimal numbers. It also happens in preparing accounting reports and statements and engineering computations.

It’s specifically relevant in managing cap tables because the Price Per Share (PPS) can be in real numbers (numbers in fractions or with decimal points). In contrast, the shares will always be integers (whole numbers without decimal numbers, i.e., 300, 367, 521 shares, etc.).

The typical error that occurs when the PPS of an investor is rounded is that it will affect the total number of shares owned by that shareholder. For example, a PPS of USD$7.33033129 won’t be equivalent to the same number of shares if the PPS was rounded to USD$7.33. The difference could run up to more than a hundred additional shares of stock. This will impact the overall capitalization structure and the ownership percentage of other shareholders across the board.

Check Transactions Involving Existing Shareholders

It’s also possible that some of the transactions involved a transfer of shares between some of your shareholders and other external incoming shareholders. There could have been a transfer of shares among your existing shareholders. These types of changes will most likely require adjustments in the data entries of those shareholders who were parties to the transactions.

Some of these things can be easily adjusted using popular spreadsheet software applications. But there are changes that you have to keep track of almost every day. This is why some businesses prefer to use special software applications to create their cap tables rather than do it using popular spreadsheet applications.

Avoid Over Dilution After A Fundraising

You should review your capitalization structure after high-resolution fundraising. This happens when the business puts out a variety of offers for Simple Agreement for Future Equity (SAFEs) and convertible notes containing different terms. Startups usually do this to entice specific investors to buy in. They’re hoping these investors would greatly help the venture, especially in the early stages.

High-resolution fundraising gives the startup founders a lot of room for flexibility, especially during the early rounds of pre-seed and seed. The problems come up when the business loses track of what they offer. The variety of discounts and valuation caps, combined with pre-and post-money valuations, can result in so many messed-up values that would be difficult to track manually with your usual spreadsheet.

Consider Using Cap Table Software

This can happen when you’re not using advanced software for managing cap tables. After sorting the cap tables, you might find out that you’ve given away an ownership portion of your company way beyond what you had in mind. It might also dilute the stock shares of other investors who wouldn’t know any better if they don’t have real-time access to updates to your cap table.

Stock dilution happens when the company authorizes the issue of new stocks and offers them to investors. The influx of the new shares brings down the value of the existing stock because it reduces their share in the overall ownership of the company.

Review Alignment Of Legal Documents With Cap Table

Keep in mind that stock certificates are also legal documents. They’re proof that the investor owns the number of shares in the company specified in the certificate. Aside from that, it entitles the shareholder to a bundle of other rights. It means they can access the financial documents. They can sell or assign their rights to other shareholders or even use them as collateral to get bank loans. Additionally, they can team up with other shareholders to form a new majority.

This makes it essential for the founders to ensure that all these legal documents and agreements align with your cap table data. You should include a review of all the discounts and convertible securities. You should hire someone who understands cap table mathematics. It would help if you also asked for help from a corporate lawyer who has experience in equities and securities transactions.

Conclusion

There will be numerous and sometimes sweeping changes in your capital structure after a round of fundraising. The issue of new stocks will dilute the ownership share of the existing stockholders. Some shareholders may transfer or exchange their stocks to another existing shareholder. They may also sell to the incoming investors. All these changes have to be managed so that your cap table will accurately reflect the ownership structure of your company.

d porter
Tristan D. Porter

I am Tristan who loves to ride and spend time with my jenny (horse) and my love Mark. After completing my graduation, I have been working as an accountant in a private firm in Cologne.

Filed Under: Accounting & Taxation, Investment & Money

How to Calculate Internal Growth Rate

Last Updated on January 11, 2022 By Methew Harbor Leave a Comment

Internal growth rate (IGR) is indeed the greatest amount of growth that a corporation may achieve without the need for external finance.

An essential statistic for start-up and small firms is the capacity of the company to generate sales and profit without increasing the amount of stock (equity) or debt that is being issued.

working on laptop

Table of Contents

  • Important Things to Keep in Mind to Calculate Internal Growth Rate
  • How to calculate internal growth rate
  • Is there a way to boost IGR?
  • What Can You Learn from the Internal Growth Rate?
  • The expansion of a business is an example of IGR

Important Things to Keep in Mind to Calculate Internal Growth Rate

  1. If a company doesn’t have outside finance, it can only expand at an internal growth rate (IGR).
  2. A corporation’s average maximum growth rate is the degree of business activities that can keep funding and develop the company without the need to issue further shares or debt.
  3. Adding new products or extending current ones might lead to internal growth.

How to calculate internal growth rate

Internal growth rate (IGR) calculation methods

First, the return on assets formula is used to compute an internal growth rate for a publicly traded corporation (net income divided by average total assets). It is then divided by net income to arrive at a retention ratio (or dividing net income fewer dividends distributed by net income). The internal growth rate may be estimated by subtracting return on assets from the retention ratio.

Is there a way to boost IGR?

IGR measures how well a firm makes use of its available resources. There must be no wasted resources to be considered efficient. If an organization has a positive internal rate of return (IGR), it is not making the most of its current resources to its full potential. The corporation may increase its IGR by putting its resources to good use in this situation.

To accomplish so, the organization needs to conduct frequent assessments of its current operations to identify areas for development. If a corporation uses Just-in-Time inventory management techniques, it can improve production efficiency. Alternatively, the firm can improve its inventory turnover to lower the cash attached to its inventory.

An organization can take the following actions if it cannot grow its IGR with its current resources: Add new business lines that complement its current products to increase its IGR. In addition, expanding the product’s market or promoting its sales might raise the IGR.

What Can You Learn from the Internal Growth Rate?

Internal growth is achieved by improving the efficiency with which a company uses the resources it already has. XYZ Sporting Goods, for example, is a manufacturer of baseball gloves, bats, and other equipment, and leadership is conducting an assessment of existing operations. XYZ assesses its manufacturing process and implements improvements to enhance the utilization of machinery and minimize the amount of time it is idle.

As a result, the company’s management has implemented modifications to limit the amount of inventory kept in the warehouse. These modifications improve operational efficiency and minimize the amount of cash held in the company’s inventory.

When the baseball season is done, XYZ may launch a football gear product line to create sales for the company’s current product offers. Using XYZ’s baseball client base, XYZ can sell its football line of products to those players who play both sports.

The expansion of a business is an example of IGR

Increasing market share for items that the company currently offers is a frequent internal growth strategy, and there are several ways to do so. For XYZ to increase sales without raising costs, the company must enhance its marketing results. Many companies establish brand awareness to achieve better marketing outcomes.

The sports goods company can also develop new items for existing consumers. Consumers already have a contract with the firm and may consider new product options. For example, if XYZ’s line of baseball gloves for infielders is well-liked, the company may release a new catcher’s mitt model and sell it to baseball glove buyers. An internal cash flow growth rate (IGR) can advise XYZ when it’s time to start looking for outside financing to develop its firm.

To have a clear picture of a company’s potential, IGR is essential. This ratio works because it relies on two critical measurements. The asset turnover ratio and the retention ratio are the first two metrics. These variables are significant indicators of a company’s overall financial health.

matt harbour
Methew Harbor

Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.

Filed Under: Accounting & Taxation, Management

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