Five Things You Need to Know about Outsourced Accounting Services

Accounting isn’t what it used to be.  The rules are the same – we still debit and credit like we did in yesteryear, but accountants aren’t paper pushers anymore, we’ve become digital.  Businesses used to hire an in-house accountant or accounting team to service their financial needs.  Today, the trend is to become lean, efficient, and automated.  Those are not words that usually find themselves in the same sentence as “accounting”.  We understand that.  Accounting is laborious, time consuming, and anything but efficient – or at least it used to be.  Today, accountants, software developers, and other industry leaders are thinking outside the box and the unthinkable is happening…accounting is becoming, dare we say, efficient.  Outsourcing your books will put your business on the right track if you follow the rules outlined below.  It’s cost effective, simple, and comforting to know that your books are being attended to.  However, there are a lot of outsourced bookkeeping solutions out there and if you are not careful, some of them could do more harm than good.  Here some things to look for when you outsource:

  1. Are they an overseas provider or a local provider? If your outsourced accounting team is overseas, you are going to get a very affordable bookkeeping solution because of cheap labor markets, but there is a greater price to be paid.  Just because your bookkeeping is outsourced, that doesn’t mean that your accountant should be thousands of miles away.  There is something to be said for having your accountant by your side.  We suggest that you hire an accounting team that visits your location in person versus communicating strictly via the internet.
  2. Know the experience level of your accounting team: Does the accounting team have experience in your industry?  Ask them what type of clients they currently serve, request resumes, and look at credentials.  You should treat the hiring of your outsourced bookkeeping service as a job interview.  After all, they’ll be managing your finances.
  3. Know the end result: Not all accounting services are created equal.  Some accountants only report to you quarterly, others annually – some report to you monthly or even weekly like we do at Dashboard Accountants.  Also, they reports you receive are going to be different from one bookkeeper to another.  If you are only getting the standard accounting reports (i.e. Balance Sheet and Profit and Loss Statement), you are missing out on managerial reports that will help you drive the future financial position of your company.
  4. Do they have the staff to support your needs: Make sure that the accounting and bookkeeping company has the actual staff needed to dedicate the time required for your accounting system.  The truth is that accountants are expensive and so bookkeeping companies often under hire and load their accountants up with too much work.
  5. Do they think like business owners? This is important.  We have found that our clients don’t like it when we think like accountants only.  Instead, they like it when we think like small business owners and use our accounting tools to help develop the business.

Remember, if you want to save time and money, outsourcing your books is a great way to go.  Just take your time to find the right provider.  At Dashboard Accountants, we believe in providing the highest quality of accounting service possible.  To do that, we ensure that your accounting team is local, experienced and educated, reports to you weekly, is staffed properly, and thinks like a small business owner.  To learn more about our accounting services, you can call 801-336-5311 or visit our website.

Great tool for professionals to network and build referrals with

Occasionally we will run into some really great services on the internet.  We ran into one today called referralkey that is really great.  The idea is that the site allows you to manage your professional network in a way that tracks referrals that you pass to  and from each other.  Since we provide accounting services, we find a lot of our clients through networking with other professionals such as financial advisors, tax accountants, and lawyers.

This is a great service and we suggest you look into it if you own a business and are looking to grow your referral base.

When a company runs out of blood

When does your company kick the bucket?   Is it when you stop selling, lose your employees, or is it when you run out of accounts receivable to call on?  Actually, its when your company runs out of blood;  that blood of course is cash.  You’ve heard that cash is king.  We don’t think that phrase is strong enough.  Envisioning cash as the blood that runs through the veins of your company is a little better.  All business owners, especially small business owners should weigh their decisions on the following question:

“How will this effect my cash?”

You’ve heard the term managing for cash, right?    Once that bank account hits zero, its time to find a day job.  Managing for cash is not hard.  There are no magical rituals or rites of passage you must pass through to better understand how to do it.  As with most things in life, there are three steps to making it happen:

1.  Know how much cash you have right now. That sounds easy and it is if you reconcile your bank statements EVERY MONTH.  Most start-up companies  keep their books in Excel.  Do yourself a favor and buy QuickBooks.  If the software intimidates you, give us a call and we’ll help you navigate your way through it.  As you reconcile, the following things happen.  You realize that you spend more money than you think you do.  You often go to the gas station or the fast food restaurant, buy something on the company card, and forget to keep the receipt.  This spending will show up on your bank statement as you reconcile forcing you  to record the transaction in your accounting records.  Another wonderful thing that happens is that you can see how many checks you’ve cut and mailed out that have not yet been cashed.  Many small business owners get online to look at their cash balance.  Don’t do this.  The bank does not know about those checks that are about to be cashed.  If you are recording every transaction into QuickBooks and reconciling, you’ll always know what your true cash balance is.

2.  Use our cash flow forecasting tool. We’ve built a tool for all of our clients that allows them to forecast their cash.  The tool tells them how much cash they will have at the end of every week over the next three months.  Its amazing h0w almost everything effects your cash balance.  If you don’t have a tool for forecasting cash, you won’t be able to see how today’s purchases may send you into a negative cash flow three weeks down the road.  For example, we have a client that has plenty of cash.  He asked us if it would be wise to purchase a large piece of equipment.  We put the purchase into the tool and although his cash balance at the end of the day was healthy, he wouldn’t have been able to make payroll the following month.  He would have run out of blood.

3.  Weigh every decision you make against your cash flow projection. This is where the term managing for cash comes in.   You need to know how your decision effects cash now and in the future.

Remember, when you run out of cash, you’re done.  If you’re managing your books yourself, please be very studious about your cash flow.  If you have hired a bookkeeping company, make sure that they understand how important cash flow really is.

Good luck and happy cashflowing!

Calculating break-even

If you own a business and you don’t know your break-even point, you won’t be in business for very long.  If you aren’t sure how to calculate it or where to start, have no fear – it’s really not that hard.  You can do it in three easy steps:

1.  Classify the costs.

So you spend money on a daily basis to run your business.  You pay for rent, peoples salaries, meals, marketing, and all sorts of other things – right?  Step 1 consists of looking at all of your costs and essentially putting them into one of two buckets:  Fixed costs and variable costs.  The way to tell which type of cost you are dealing with is to ask the following question “Does the amount of the cost depend on how much of my product or service I produce?”  If so, you have a variable cost.  If the cost remains around the same from month to month, its a fixed cost.

Lets pretend we are a shoe maker.  The leather that goes on the shoes would be a variable cost because the more shoes we make, the more leather we need to buy and use.  The heating bill for the shoe shop is roughly the same each month regardless of how many shoes we make, so the heating bill is a fixed cost.  You get the idea.

2.  Figure out your contribution margin.

This is a percentage and it tells you how much of each dollar that you make will be available for paying those fixed costs after the variable costs are paid for.  So lets say that for every dollar we make on selling shoes, we spend 20% on shoe leather, 10% on rubber, and 15% on really fancy laces.  That means that we have to spend .45 cents to generate $1 of revenue.  Our contribution margin is what is left after we pay the .45 cents, in this case .55 cents or 55%.  This is an important percentage to know because we can now say if we make $100,000 selling shoes this month, its going to cost me $45,000 just to make the shoes.  I get to keep the other $55,000 to pay for fixed costs and if there is anything left, I get to keep that.

3.  Calculate break-even

The final step is to add up all of your fixed costs that you must pay for each month.  Lets say our shoe shop has $60,000 in fixed costs each month.  This is a very lavish shoe shop.  To figure out the break even point, we divide this total by our contribution margin as follows:  $60,000 / 55% = $109,091.  This means that in order for our quaint little shoe shop to break-even, we must sell $109,091 in shoes each month!  Thats a lot of shoes just to  break-even.  To lower the break-even point, you need to sit down with your trusty accountant (Thats Dashboard Accountants) and do some cost analysis.  Figure out how to lower fixed costs and variable costs without sacrificing quality.  In this example, it might be a good idea to consider other business opportunities.  If one par of shoes cost $30, we would need to sell 3,636 pairs of shoes each month just to stay in business.  Yikes!

We hope this helps.  If you have a business and you are having trouble calculating your break-even point, call us.  We would be glad to help out.  We can be reached at 400-8968 or 678-3476.  Good luck and happy number crunching.

Am I supposed to charge sales tax?

http://www.dashboardaccountants.com  and http://www.dashboardaccountants.net

So you own a business and you’re wondering if you are supposed to charge sales tax for what you sell or for a service that you provide. You may be thinking, “I have a service based business and my neighbor doesn’t charge sales taxes, so I don’t have to.” If that is what you are thinking, you may be very wrong. For example, if your business is to repair bicycles, which is a service based business, you should be charging sales tax, at least in Utah. Read on to find out why. Not only that, but you may also be wondering about what rate you’re supposed to charge, what you’re supposed to do with the cash when your customers give it to you, and how you report it. Have any of these questions popped up in your head? If so, this post is for you. Today I have the urge to talk taxes. Let’s get started.

What are sales and use taxes anyway?

They are transactional taxes. When certain transactions take place, the purchaser (your customer) has to pay a tax agency a required tax. The business owner (you) is charged with collecting that tax from the customer, holding it in reserve, and filing it at the right time to the right tax authority. It’s almost as fun as watching a slinky fall down the stairs. If you don’t charge a sales tax when you are supposed to, then the purchaser is required to remit that tax on their own, and that is called a use tax.

We are looking at Utah here:

Sales taxes are different for every state so it can really be a headache to manage; especially if you’re business has several locations. Since Dashboard Accountants is based out of Utah, we will be referring to Utah’s sales and use tax laws. If you are doing business outside of Utah, please refer to your state tax entity for specific information.

So when do you have to charge sales tax?

There are a lot of different transactions that require you to charge a sales tax. To see if the type of transactions your business generates is taxable, check out the guide from the Utah State Tax Commission at http://tax.utah.gov/forms/pubs/pub-25.pdf

In general, some of the transactions that Utah requires sales tax on are:

· Retail sales or purchases of tangible personal property within Utah.
o i.e. selling a stereo
· Rentals and leases of tangible personal property
o i.e. the lease of a car
· Labor to repair or maintain tangible personal property which includes maintenance agreements.
o i.e. maintaining bicyces.
· Labor to attach tangible personal property to other tangible personal property.
o i.e. paying a company to attached your stereo to the hood of your car. Don’t ask me why you would ever do this.

Some items that are not taxable are:

· The sale of real property (land, homes, etc.)
o If you are a contractor and you are building a home, then Utah considers you as the user of the materials and you will pay taxes on the materials to build the home. However, the sale of the home to a homebuyer is not taxed.
o Installation charges for permanently installing tangible personal property to real property.
§ i.e. when you hire someone to install an A/C on your home, the purchase price of the A/C and the fee to install it are both no taxable. The State of Utah sees this as though you originally bought the A/C with the home and therefore it is part of the real property.
· Services that are not related to tangible personal property.
o i.e. accountants. Dashboard Accountants maintains the accounting records for small businesses. Those books are not tangible, so you don’t pay sales tax.

Remember, there are a lot of rules here. We have only covered a few today. The next post is going to be on figuring out what rate you are supposed to apply to your sales. We will be talking about a lot of things. For example, does your business operate out of one location? Multiple locations? Does your business not have a specific location? If so, what tax do you charge? These questions will be answered in good time.

Good luck and if you have any questions, let us hear from you. Happy taxing.

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