Cash Flow essentially determines the health and solvency of your business. Poor management of cash flow is to blame for the downfall of over 80% of all businesses, according to one study. Cash flow is how money comes in and goes out of your business, and it is imperative to monitor.
Cash flow analysis takes a closer look at this movement:
Cash Flow Analysis
Cash flow analysis takes a closer examination of different things that could be impacting your cash flow; some of the things involved may be inventory, accounts receivable, accounts payable, and lines of credit. By looking at each of these components, you will find ways to curb costs as well as improve cash flow, ideally.
Simple Equation
For a simple equation to conduct a cash flow analysis, compare unpaid purchases at the end of your month with your total sales for that same month. This will reveal if you will need to spend more money in the coming month than you have, which points to a possible cash flow issue. If your total unpaid purchases are more than the sales that you have due, you could face a money problem.
Identify Lags
Another benefit of conducting a cash flow analysis of your account receivables is that you will be able to pinpoint lags in prompt payment. In other words, the assessment should identify any customers that are slow to pay their bills with you.
Small Business
Small businesses should be particularly concerned with conducting regular cash flow analysis. This is key for companies that could grow quickly or that pay more for labor due to a smaller workforce. It is also key when you need to invest in equipment, inventory, or supplies to get off the ground.
This is very prudent for seasonal companies and businesses, also, like landscapers or holiday-themed stores and establishments. It is important to track expenses, revenues, and cash flow for these companies that depend on small spurts of patronage to thrive year-round.
Falling Behind?
It is not uncommon for cash flow issues to be the result of poor bookkeeping. Many business owners or entrepreneurs are simply too busy to keep their books, invoices, and accounts in order. Accounting software and services offer a solution to cash flow systems and analysis. Consider hiring a bookkeeper or service that will take care of cash flow statements on your behalf.
Want to learn more about cash flow statements and systems? Talk to the professionals at BMH Accounting; they will take care of bookkeeping to ensure small businesses, self-employed contractors, and entrepreneurs keep their books up to date and don’t fall behind in areas like accounts payable, invoicing, and collections- all that impact the overall health and success of any company.
If you own a small business, you know the importance of tracking your finances and expenditures. This provides a clear view of your cash flow, while also increasing your ability to make efficient and cost-effective business decisions. One way to do this is with QuickBooks; QuickBooks is the most common accounting software program among small businesses for several reasons:
Time
QuickBooks is a program that connects and syncs with your bank and business accounts to help track the flow of money in – and out – of your company. It eliminates the rigorous job of entering data and updating ledgers that can take time away from other important tasks, like managing your business. QuickBooks provides the ability to itemize and categorize, making it easy to use and implement.
Intuition
It is fascinating how intuitive QuickBooks is; the program gleans which categories are most used and automatically categorizes your popular entries. Pay your bills, compile mileage, manage any contractors from the comfort of your keyboard with the QuickBooks accounting program. You may also be able to garner ways to save money by assessing where your revenues are going, which can put more money back in your company.
Reports
What good is the information gained when tracking if you can’t read or understand it? Don’t worry; QuickBooks offers various reports for businesses to gain a new insight and garner control over their finances. You will be able to review profit and loss statements, customer history and invoices, outstanding bills or accounts, stock and inventory reports. This puts you back in control of your company’s money, which can prove invaluable as you prepare and plan your operating budget and project your business revenues. Even better, you have the option of readable, summarized reports with as much detail, graphics, and information as you choose, which may help when comprehending the information that you see.
Taxes
Stressed about trying to complete your company’s taxes? QuickBooks can make this necessary process a whole lot simpler and more streamlined. Since you are tracking daily sales, invoices, and expenses, it is easy to transfer this information to tax forms and vital documentation. QuickBooks offers options and products that serve to solve tax time dilemmas for consumers, from small businesses that are struggling to gain traction to established brands with a loyal consumer audience and following.
The most important data in a new company is likely the flow of finances; make sure that you are tracking these expenditures accurately, using a program that is user-friendly. Regardless of what you do, your revenues and profits are paramount in daily operations as well as in long-term growth and success.
Ready to start tracking your company’s finances? Start with QuickBooks and reach out to BMH Accounting if you find yourself in need of any of our extensive QuickBooks services!
What will happen to your company when you retire? Business Succession is something that many business owners don’t consider until it is too late, making selling the company the only viable option. If you want to preserve the legacy of your company or if you have other invested parties to consider, a business succession plan is not just smart but imperative. In essence, a sound business succession plan will include how you intend to oversee, sell, or transfer the company if you retire or in the event of your death.
Consider the following key factors to develop your sound business succession plan:
Why?
Don’t ignore it; retirement and death happen. Have a solid business succession plan in place to prevent prevailing issues and problems from rearing their head after you’re gone- which could cause the unfortunate demise of a company that you worked to protect. If you are an investor or partner in a company, make sure that you are well aware of the succession plan.
Who?
You will need to elect a successor for your company; in many instances, this involves passing the reigns to a family member or associate, but there could be many individuals that are vying for ownership of your business. Consider the pros, cons, strengths, and weaknesses of all candidates and prepare for opposition or hostility from those that were not chosen to replace you. Choose the best person for the job; you can’t please everyone all the time. Those invested in your company who do not care for the choice may opt to sell their stakes in the company to other partners or associates if they wish. This is not an uncommon repercussion at a time of succession or transition.
What?
It will behoove you and whoever takes over your role to determine the actual value of our business. Usually, this requires an appraisal from a CPA (certified public accountant) or from arbitration among all partners and owners. If your company is publicly traded, the value will be determined based on the current stock market value.
How?
After you know what your company is worth, partners and owners in the business should take out life insurance policies that benefit the others in the event of a death. The benefit is then used to buy out the investor who has died, and their share is distributed among the surviving owners or partners.
How this occurs is typically one of two ways:
An entity-purchase arrangement is fairly simple and provides for a single policy on each owner or partner of a business, and upon death, the business uses the benefit to purchase the deceased person’s share.
A cross-purchase arrangement is a bit more complicated. In these instances, each owner or partner buys an insurance policy on each of the other owners of the business. When one partner dies, the benefits of each surviving investor are pooled to purchase the share of the business previously owned by the deceased.
Got your business succession plan prepared? For the smoothest transition and equitable arrangement for your company, seek out the expertise of a qualified and competent financial advisor for support. Talk to the experts at BMH Accounting to ensure you are covered and your company is protected in a wide range of scenarios; call to learn more today.
Business owners and managers spend hours filling out payroll tax paperwork for the federal government, but if it is not done properly, they can be held personally responsible. The IRS has policies for filing tax cases against owners and managers when income taxes are not withheld and are promptly sent to the IRS. An innocent oversight has the potential to cause tremendous frustration, be very costly – and can even be considered a crime!
Know Your Responsibilities
The IRS identifies small businesses as the largest source of uncollected taxes, so it focuses attention on the accuracy of payroll taxes. A failure to file, a failure to deposit, or a failure to pay can incur significant penalties – some lofty and which only increase over time as interest is added.
Your unpaid payroll taxes can be considered a crime. Additionally, any business owner who borrows against their payroll taxes is violating federal law, as the money collected from an employee’s paycheck doesn’t technically belong to the company.
Problematic payroll tax filings can result in the business owner being personally liable. In some instances, a past due amount owed can result in the IRS putting you out of business – permanently, or until the debt is settled. When you enlist the help of qualified tax and accounting professionals such as BMH Accounting, we can help you and your team reach an amicable solution that satisfies your obligation to the IRS, allowing you to hold onto your company’s finances, as well as your own.
IRS Compliance is Key
Insufficient documentation can trigger an investigation, but each business is judged individually and held to different standards. If a business does not demonstrate a “willfulness” to comply, the IRS may assume that they are intentionally evading tax payments. If the IRS feels it is being misled, it may seek to enforce greater penalties.
Individuals who are technically in authority over tax payments, but do not have that as part of the duties in their job description, still will be held responsible by the IRS. Business owners, officers, and managers can be penalized for mistakes made by bookkeepers, whether or not they were intentional.
Preparing Your Small Business for A Payroll Audit
If the IRS has requested to audit your payroll taxes, a business owner who has kept organized records will be able to provide the necessary documents to resolve any discrepancies with ease. IRS workers inspect the following documents to determine liability when penalties are being charged:
Articles of Incorporation.
Copies of Cancelled Checks to Creditors.
Interviews with each person using form 4180. You may be asked about your responsibilities and the money allocated for payroll taxes.
It’s important to understand how your payroll works when the IRS wants to audit your records. Many companies run into trouble in how they designate independent contractors versus salaried employees. Independent contractors help with the budget since they aren’t receiving paid time off, health benefits, or other perks that some ventures offer when signing on as an employee. Company owners who incorrectly account for this can be subject to penalties for the incorrect designation. A qualified accounting team can assist you with these determinations, and help determine how to amend any misclassifications.
Stop Worrying About Your Payroll Taxes – Call BMH Accounting Today!
Having a qualified accounting team to help your business manage its payroll taxes may prevent an audit which can financially cripple a business. Give the capable and qualified accountants at BMH Accounting a call for professional help to keep the IRS at a safe distance.
Wise investors know that they should conduct an independent analysis of the value of their business. Estimates must not be clouded by emotions, instead, financial professionals should perform objective analyses of relevant data, so you receive an accurate and fair valuation. Relying on buyer opinions or marketplace estimates cut short your profits when growing a business or planning to sell it.
Relevant Date for Accurate Valuation Service
With relevant data that impacts the actual worth of an enterprise, accounting professionals assure a maximum return on your investments. Sometimes hidden and overlooked assets which impact your company’s value can be discovered during the process.
There are several factors that are inspected to determine the value of your company:
Inventory of Assets – This can be used to generate revenue for small businesses. Larger businesses may use inventories to further their investments.
Comparisons – Knowing the selling price of similar companies can provide valuable insight.
Liquidation Value – This can be helpful for those looking for a quick sell.
Income Capitalization – This can give a good prediction of potential future profits based on historical data.
Income Multiple – This process uses the seller’s net income or owner benefit amount to calculate an income multiple, which can be used to negotiate the price.
Valuations are Useful for Other Assets
Valuations can also be conducted on other assets. For example, Estate Tax Discount Appraisals ensure that major tax cuts are not deducted, so both the beneficiary and the estate owner benefit. Divorce Financial Service valuations provide clear accounts of assets and income, so the right amount of spousal support is allotted.
Increase Your Knowledge for Wise Business Decisions
Thoroughly and accurately collecting valuation data helps businesses know their options for future growth and what deals are worthy of acceptance. It can also alert them to risky investments that have a growing debt or an ineffective management style that may need to be overhauled.
Excellent Financial Assistance Near Your Area in South Florida
If you think the time might be right for a valuation of your Florida business, please contact today, our dedicated team of accounting professionals at BMH Accounting to discover our wide range of business valuation and financial services. We provide trusted financial services to business owners in Boca Raton, Boynton Beach, Lake Worth, and throughout South Florida.