You work hard to make sure that all of your small business dreams come true. However, it is likely that accounting wasn’t a part of that dream. Unfortunately, a small business’s success relies on solid financial planning and bookkeeping. If that’s not your specialty, no need to worry. We put together this helpful guide with all the small business accounting tips you need to ensure success!

Get Organized

Organization isn’t everyone’s default setting. If you’re one of those that aren’t normally organized, then there are some easy steps you can take to help you get there.

The first step? Make sure you have separate bank accounts for personal and business expenses. There are a lot of benefits to this. Aside from saving you time and money, it also makes your taxes easier and protects your personal assets from legal liabilities. 

Create Systems that Work for You

What works for someone else may not work for you and your small business—especially when it comes to accounting. That’s why you need to create a record system that works for you, not against you.

Maybe you prefer doing it all yourself? Or maybe you want to outsource? Once you decide, you can start compiling accurate financial documents and decide on a schedule for reporting. Creating systems will help you to keep everything straight and avoid issues down the line. When you have an accurate understanding of expenses and income, you’ll be able to better prepare your small business for success.

Nail Down the Essentials

There are a few must-knows when it comes to small business accounting.

Profit/Loss Statement

You might have guessed it from the name, but this financial statement helps you understand how profitable your business is (or isn’t). You can use this information to make informed decisions that can improve your business.

Balance Sheet

A balance sheet helps small business owners understand how much value their business possesses. Start out by counting up everything that your business owns and comparing that against what your business owes. 

Cash Flow Statement

Again, the name probably gives this one away. Cash flow statements help you to understand how you’re spending money and how you’re earning it. Because cash flow is essential for a successful business, this statement is possibly the most important of those you’ll deal with. 

Don’t Wait Until Tax Season to Prepare

We can’t stress this one enough. Don’t wait until tax season to start worrying about tax season! Trust us. You’ll thank yourself come tax time if you’ve spent time preparing all year long. 

What does that preparation look like? Putting all the other tips together! Make sure that you’re organized. Employ those systems you put in place. Keep track of those essential financial documents. Follow these tips, and you could save big next tax season!

Make Sure You Have the Right Help

Whether you decide to go with the DIY approach or get the help of a small business accounting professional, make sure that you set your business up for success. The experts at Banks, Finley, White & Co. are prepared to help you grow a successful small business.

Maintaining good habits is essential to success for any business, but it’s especially important in the world of small business accounting. Keep reading for tips and tricks from the experts that’ll save you time and money in the future.

Start With A Detailed Budget 

Before you can begin making informed business decisions, you need to know where you are with your finances. Creating a detailed record of your expenses is a necessary first step. You will have a thorough idea of how much you spend on necessities—like overhead—and how much profit you need to cover those expenses. Also, a complete picture will allow you to see where you can save costs across your business.

Keep Business And Personal Expenses Separate

Once you have your accurate budget, maintaining it should be your next focus. Opening a business bank account and keeping your personal expenses separate is a vital part of small business accounting. Not only will this help you keep your finances in order, but it will save you a lot of time and pain when it is time for your tax preparations next year.

A business credit card may also be a good idea to keep expenses separate. It allows you to track your spending easily, and you’ll also have the ability to build a healthy credit rating and cash in on perks, like cashback offers.

Create Time Now To Save Time Later

Leave procrastination in the past. Staying on top of your finances is another step toward maintaining your records. Break down your accounting workload into smaller, more manageable tasks and save yourself the headache of having to tackle a mountain of work at the last minute. By tackling smaller tasks more often, you’re less likely to make a mistake in a rush to finish.

Reevaluate Your System and Implement Changes

Now that you have your budget and a system to maintain it, you’ll need to regularly reevaluate to make sure it’s still working for you. Schedule a recurring time to sit down and reassess your bookkeeping system. You may find that you need to make some adjustments and adapt to the inevitable changes in the small business accounting world.

In the beginning, this process will probably be rocky at best. But rest assured, once your small business gets established, you’ll get the hang of a system that works best for you.

Hire the Right Small Business Accounting Firm.

Take something off your to-do list and trust that it is being taken care of correctly. Let our extensive business experience at Banks, Finley, White & Co. assist you in all your small business accounting needs. 

Any questions? Contact us today, and one of our experienced accounting professionals will be happy to reach out.

Mergers and acquisitions don’t fall out of the sky fully assembled. Instead, they require countless hours of meticulous effort throughout their different phases, placing demands on team members across an entire organization. At Banks Finley White & Co., we believe that accounting plays an important role in any merger or acquisition that wants to be successful. 

Sound Accounting is the Key to Success

Before closing out marathon sessions with bankers with hopeful smiles and firm handshakes, an accurate and reliable foundation must first be established. Ownership will have an idea of what goals they want to achieve. Accounting must provide a secure foundation for ownership to reach their goals. 

Sound accounting is key for successful negotiations—that should be established and ready to sell in the first place. Make sure your ledgers are clean, old balances are taken care of, and everything is in full compliance with US GAAP. The classification of assets and liabilities as current and noncurrent will be particularly important as components of networking capital. This could have a substantial impact on cash––something that buyers and sellers alike are tuned into.

As a whole, all of the accounting should be straightforward, precise, and compliant. Since both mergers and acquisitions create an abundant amount of work for everybody else, these accounting efforts need to be done in a timely manner, preferably as soon as possible to prevent delays and time crunches. 

Buyers need assurance that the target business is not one of those struggling subsidiaries that will want standalone financials. Granted, generating those standalones can be a time-consuming and highly-involved process––especially during audits. 

Whether the entire company is on the sales block, or just a component of it, bankers and advisors will assemble all of the financial information. Accounting will be expected to answer questions throughout the process and provide certain key documents including:

• Confidential Information Memorandum

• Data Room

• Sale Agreement

• Deal Model

Navigating Sales

Once your Deal Model is in place, and marketing is in full swing, bankers will offer the CIM to interested parties. In general, a merger and acquisition is complex, and will typically require multiple rounds of due diligence that include accounting.

No deals are exactly alike, but this outline can give you insight into the process.

First-Round Bids

The due diligence around initial bids revolve around the information within the CIM. This information is enough to provide a first-round bid––a nonbinding bid or multiple bids potential acquirers are willing to pay for the company.

Second and Third-Round Bids

These are the bidding rounds where non-disclosure agreements are executed and the data room is opened up to interested parties. This is where due diligence becomes more exhaustive and detailed, resulting in follow-up questions that require more in-depth financial information.

Also, second and third-round bidding will involve a series of due diligence calls that include all involved parties. This phase of the process will last about four weeks. Prospective buyers will provide a marked-up scale agreement along with their second or third-round bid. Once the bid is received, the CFO and legal counsel will sit with potential buyers to weed out the details of the sale agreement, with the end result being a signed deal.

In order to close the deal many conditions will have to be met, including:

The buyer must have sufficient financing.

The agreement is subject to regulatory review and approval from the FTC.

The seller must meet certain restrictions between signing and closing, usually requiring the business to maintain consistency with normal operations.

Once the deal is finalized, the new owners are able to take over.

Post-Closing: Sealing the Deal

There might have been a few hiccups along the way but, as is usually the case, the attention to detail has paid off. Now comes a whole set of post-close challenges with different requirements.

For example, the purchase price might include a mechanism for a cash settlement of the difference between a networking capital peg, and the final net working capital between the buyer and seller. In this situation, the seller provides a final net working capital calculation––which will determine how much cash the buyer provides the seller in an NWC shortfall. Then, cash moves from seller to buyer if the final NWC was greater than the peg number.

This type of calculation is typically assembled by the seller’s accounting team and requires a thorough review by the buyer’s own accounting department.

In another situation, post-closing responsibilities might include specific shared services functions. For example, if the seller’s larger corporate entity executed payroll, the buyer would have to sign a Transition Services Agreement (TSA) that requires the seller to provide those payroll services for a certain amount of time. The transaction will carry out other accounting implications for both the buyer and seller as well.

For more information about our accounting services, contact Banks Finley White & Co. today.

As we approach the last few weeks of 2020, it’s more important than ever to take a moment to assess what all has happened in your business and your personal life throughout 2020. 

Often business owners tend to make judgements about business performance through the lens of quarters or even months. Expanding your time frame can help you find patterns, strengths, or even areas of weakness that you can possibly improve next year. It’s best that you do this assessment alongside a trusted accounting partner to set yourself up for success moving into a new year. 

Here are five questions you should ask your accountant for the upcoming year.

#1: What Has Changed?

The main reason individuals outsource accounting services is to better manage any personal or professional tax code changes that occur. Especially in light of the onset of COVID-19 and the resulting global pandemic, it’s imperative that your accountant communicates any changes to filing taxes or how monies should be recorded. 

The government stimulus and the PPP (Paycheck Protection Program) loans are just two examples of unusual funds that need to be accounted for properly. There may be new credits or deductions your business qualifies for this year that it has not qualified for in the past. 

This year especially, it’s important to know what has changed.

#2: How Have We Performed?

Again, this year has been especially tough for individuals and business owners alike as government restrictions have forced many to close their doors and/or file for unemployment for some period of time. 

It’s fairly safe to assume that most business projections for 2020 weren’t realized—and that can be a painful reality. However, it can still be exceedingly helpful to look back on the year’s performance to see what lessons can be learned, and to form a realistic outlook for 2021.

#3: Do We Need to Update Our Payroll System? 

If you’re still writing paper checks, switching to an electronic payroll system could streamline your process and save you money in the process. Be sure to review all your workers and make sure they are properly classified. Are they employees, independent contractors, or consultants? This simple review every year can protect you from government penalties and save you valuable resources. 

#4: How Do We Handle Unpaid Customer Invoices?

Making sure you’re collecting the money you’ve earned is essential to having a positive cash flow and a viable business. Assess whether this is a common problem or not in your business. If it is, decide with your accountant if there’s a better system you could implement to collect unpaid invoices in a timely fashion.

#5: Are We Prepared?

If there is any upside to the unprecedented challenges this year, it may be that businesses are acutely aware of the importance of having an emergency reserve. Now more than ever, there’s a need to make sure you can handle unforeseen challenges to cash flow, payroll, or demand.

Creating a strategy with your accountant to make sure you can access extra capital during times of emergency or unforeseen strain can be the best way to set yourself up for success moving forward. 

Need A Trusted Partner?

If you’re trying to handle all of these accounting systems in-house while you run a business, chances are you’re missing opportunities that costs you time and money. 

If you are looking for a trusted resource to help you answer these questions or tackle some of the accounting tasks for your business, contact us today. We are happy to help you through this process and prepare for success in the new year.

If running a small business wasn’t already demanding enough, keeping up with bookkeeping can lead to late nights worrying if you don’t feel confident in handling business finances. Fortunately, it doesn’t have to be that hard when following basic bookkeeping guidelines to keep your business on track.

Bookkeeping is the process of recording all of a business’s financial transactions. This may sound similar to the job of an accountant, but it’s not. An accountant’s job is to interpret and analyze the data recorded by the bookkeeper. Both roles are important, but they are very different. 

Get to Know These Bookkeeping Basics

Assets

When it comes to your business, this is one of your best friends. Assets are anything of value in your business including the cash in you bank accounts, inventory, office technologies, furnishings, and your accounts receivable balance—money owed to you by customers.

Liabilities

These are the debts owed by your business. Liabilities include loans and accounts payable—what you owe to vendors.

Expenses

It’s impossible to run a business without expenses. Things like electricity, cell phones, employee salaries, and new client lunches keep the business rolling. But, like most things, they do come with a price.

Revenue/Income

Another hot commodity for your business is your income. Simply put, this is the money earned by your business either through products sold or services provided.

Equity

When you subtract your business liabilities from your assets, you find your equity. This reflects the financial interest of your business.

Debits and Credits

To record any financial transaction to your ledger, you use debits and credits. Debits are recorded on the left column of your ledger and can increase the balance of other accounts (i.e. assets). Credits are noted in the right column of the ledger and can increase the balance of other accounts (i.e. revenue). If using double-entry accounting, a corresponding credit entry is made for every debit made, and vice versa.

Begin the Bookkeeping Process

Once you have the basics down, you’re ready to start handling the steps of bookkeeping.

Set up your chart of accounts

As a pillar of your business, your chart of accounts is a crucial part of properly recording transactions. Some people use a ledger book, although an accounting software program, such as Wave, is recommended since it’s easier to set up to suit your business needs.

Start recording all of your financial transactions

Using your ledger book or accounting software, you can begin recording all of your transactions, from paying a bill to creating an invoice. Using software seems to be the better choice, as it simplifies the invoicing process.

Reconcile your bank accounts

This step ensures you have an accurate cash balance, which is especially important when your cash flow is limited. Once again, software simplifies the process, linking your bank accounts to your software if you choose.

Close out the month and run financial statements

If using a ledger book, close each individual account and combine into account types, which will take some time. Or, use software instead, which handles the process automatically.

Learn More About Bookkeeping

To learn more or access a professional expert for assistance, contact us.

Nonprofits are an important part of everyday business in the cities where we live, work, and play. Many provide crucial services to support our communities, which are supported by key fundraising efforts, grants, professional memberships, and other strategic channels. And while these funds are at the heart of keeping nonprofits healthy and productive, having poor accounting measures in place could shatter even the best of intentions.

Keeping the following nonprofit accounting tips in mind can help nonprofits achieve their mission in all areas of operations for ongoing success.

#1: Know Your Nonprofit Tax and Accounting Regulations

When it comes to nonprofit accounting, the rules of the game are totally different compared to standard for-profit accounting. 

When filing and claiming your nonprofit’s tax-exempt status, you need to follow specific nonprofit IRS requirements as well as Generally Accepted Accounting Principles (GAAP). These can change from year to year, so be sure to always check for updates. Choosing the right professional team of accountants can help you move in the right direction. 

#2: Encourage a Multi-year Plan that Supports Strategic Initiatives

Creating growth for your nonprofit is key to maintaining an edge in the market with committed employees and an active, enthusiastic board of directors. Having a multi-year plan of three to five years allows you to plan ahead with your organization’s goals, marketing strategies, and financial needs in mind. This may include hiring additional staff or implementing new accounting software to support your nonprofit’s growth.

#3: Create a Realistic Annual Budget

Every financial segment of your nonprofit is important, from operating costs and new programs to fundraising efforts and donor participation. Knowing how to balance your nonprofit’s annual budget helps ensure that realistic goals are put into place. Maintaining a structured budget keeps expectations in line and goals on track. 

#4: Distribute Financial Tasks Throughout the Staff

You know the old adage—never put all of your eggs in one basket. The same applies when assigning financial tasks. This helps protect the integrity of your accounting stream for improved troubleshooting should a discrepancy occur. 

#5: Improve Fraud Protection

Nonprofit fraud is nothing new. To steer clear of any unlawful accounting practices, share your internal policies and controls with organizational leaders, staff, and board members. You can also have your nonprofit create a Code of Ethics, sharing it with everyone to use as a personal moral compass. Discussing your practices with a nonprofit accounting specialist can also help ensure it stays in the clear for productive days ahead. 

#6: Streamline Budgeting with the Right Software

Your nonprofit is special. So, your accounting software should be unique, too. Nonprofit accounting software is designed for the specific challenges it may face, building a stronger business across all departments in the process. Your nonprofit accounting software can even help you protect financial data for a more secure working platform.

#7: Build Relationships Within the Company

As part of a healthy nonprofit accounting practice, building relationships with other departments keeps everyone working toward the same goals and outcomes. This can be done through accounting training sessions, record reconciliation team sessions, and regular meetings for policy updates. Get creative and choose a nonprofit accounting specialist to guide you for best results.

#8: Support Independent Board Members

 Having board members who are independent in their own field makes way for more diverse ideas and problem-solving for your nonprofit. Avoiding any conflicts of interest helps develop trust within the board and the organization, where decisions are only made in the best interest of the nonprofit.

Check in to Nonprofit Accounting 

To learn more about nonprofit accounting best practices, contact us today.