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Archives for Accounting

Making Midseason Corrections

After the first two weeks of the NFL season it seems some fans are already looking ahead to next year.  Their teams have gone oh-and-two and the prospects for winning this year and making the playoffs are somewhere in the range slim to none.

“Better luck next time,” as the saying goes.

Whoa, hold on, isn’t it a 17-game season? Are they giving up too early?

Well, the truth is, as it is with business, an NFL team is really a week-to-week, real-time enterprise.  The defense and offense can make subtle or wholesale changes to get on track.  Two loses don’t make a season.

Same goes for your business.  It’s not that we don’t want to look ahead to next year, but we can manage this team from week to week (or financial quarter to financial quarter) quite successfully.

Remember when we talked about goals? By setting (and keeping on track with) goals you give your company direction, momentum and, really, lift.

Let’s say that at mid-year, your sales are slow or behind projections.  That’s when you gather your team together to reexamine your goals and discuss your options to getting back on track.  If sales are down, talk over how each part of the enterprise can help sales meet their goals. If production is behind, what can the team come up with to help meet customer demand if the supply chain is challenged?

You get the idea. This is about stepping up and taking action as a team that results in success for the greater good.

If you need help with the financial part of that equation, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

**photos courtesy of Unsplash (Manasvita S and Behnam Norouzi, photographers)

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“Going out of my head…”

Little Anthony and the Imperials sang it and most of us live it at one point of our lives:

“Going out of my head…”

Sure, life has its distractions, both good and not so good.  But the reality is that focus is a good thing.  Now that focus can be on that thing you are leaving your senses for.  Or it can be for the entrepreneurial business you are trying to keep straight.

Now, don’t get me wrong.  Sometimes distractions are a way to get creative and ensure a positive and free-thinking direction for your enterprise.  However, if you leave your head too often and don’t focus on the things you should, then things could get sticky with your partners, employees, local government and the tax man.

So, if you are the creative thought leader of your company and don’t have a head for the business side of the business, perhaps you should consider taking on employees or stakeholders who can help keep the things in your head that need to be kept in your head? Maybe you could use help with:

  • Operations.
  • Human resources.
  • Marketing.
  • Sales.
  • Supply chain management.
  • Finance.

Now imagine this team of phenomenal head-keepers all around your conference table with you leading them.  Smart people hire smart(er) people so they can take their enterprises to the next level.

Oh, and that last one on the list? We can help you with that.

For more on how to choose and implement a comprehensive approach to managing your company, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

**photos courtesy of Unsplash (Fakurian Design and Riccardo Annandale, photographers)

 

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It’s an Accrual World…or is it?

Cash or accrual? Accrual or cash? Which approach should I take?

Huh?

Yeah, we’re talking about accounting approaches…again.  But that’s ok.  It’s our business.  And it should be yours, too.

Sure, you’re the business owner, founder, inventor, chief creator or whatever. But if you don’t know how your expenses are handled then you might not be in business all that along.

So, please, pay attention, here.  You do have a choice in accounting approaches. And it has to do with timing.

If you use cash basis accounting, revenue is recorded when cash is received from customers and expenses are recorded when cash is paid out (payroll and bills).

  • Usually smaller businesses (less than $5 million in annual revenue)us this system as it is simpler.
  • It is not about how you are paid (cash) rather it means that invoices aren’t income until they are settled.
  • Same with bills—they aren’t expenses until they are paid.

Accrual basis accounting records revenue when it is earned and expenses are recorded when consumed.  That is:

  • Income is recognized as soon as an invoice is generated—not paid (payment received).
  • And bills—expenses—are recognized as soon as they show up, not when they are paid.
  • This system works better for larger companies, usually with $5 million or more in annual revenue.

Then there are hybrid systems, too. But be sure and understand your business and seek out the counsel of an accounting professional before you choose an accounting method for your company.

For more on how to choose and implement an accounting approach, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

**photos courtesy of Unsplash (Steve Johnson and Scott Graham, photographers)

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Graduation Day

There are milestones in every life and relationship—first meeting, marriage, births, graduation day.  And with each milestone comes a change.  Sometimes they are difficult partings, others joyful.

The same goes for business relationships. As a fractional CFO and controller, I have seen many companies of various sizes and values grow right in front of me.  Some start out with little financial strategy or processes and grow into companies of substance, size and scale.  In the case of the Big Dot of Happiness, the owners decided to sell the business.  Through the acquisition, I worked with their team, assisting with purchase price allocation accounting, processes and implemented accrual accounting practices.

When I first met Big Dot, a year ago, my assignment with them was to help establish financial processes and to act as their fractional controller.  Recently, the time came to “graduate” them to the next level.  They had grown significantly, production was higher, and they needed additional resources to help them grow.

My work here was done.

While it was sad to not be continuing as their day-to-day financial expert, it was gratifying to know that I had an impact on their growth and future.

Some of the things we put in place to make the financial aspect of their business come into focus:

  • Established uniform accounting practices; that is, put an accounting system in place.
  • Created and implemented a system for following accrual accounting.
  • Established a financial reporting package.
  • Assisted with creating a better way to look at inventory system and cost-of-goods sold infrastructure.
  • Attended to daily cash flow management and monthly close procedures.
  • Built balance sheet reconciliations and more.

It was a fun ride and I thoroughly enjoyed working with them.  I got to implement some needed financial strategies and along the way met and worked with some talented, smart and gracious people. This was living proof that sometimes the best thing you can do is help someone to the next phase of their business.  As the Tim McGraw song says, “when you get where you’re going, turn around and help the next one in line…”

Glad I could do my part and help in the transition to their new full-time controller at their Wisconsin headquarters.

Tina

For more on how to transition your business to the next level, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

*photos courtesy of Unsplash (Good Free Photos) and Tina O’Banion

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Could I Get an Interpreter Here?

Do you ever feel like you’ve been to a foreign country when you leave your CPA’s office? I mean, really, they seem to speak in an altogether different language.

It’s like you need an English-to-CPA dictionary. Or at least a phrase book. Now there’s a thought.

Instead of immersing yourself in a whole ‘nother culture and language of numbers, how about you learn a few key terms and notions that will help you navigate the financial landscape between you.  That is, the balance sheets, income statements and tax returns that describe your company in financial terms.  After all, you know your company best—they just know the numbers better.  It is, really, up to you to put two and two together…oh, sorry, I couldn’t resist.

Here are a few key words, phrases and concepts to keep top of mind when next you visit with the green-eyeshade monster:

  • Accounting period
  • Cash flow
  • Cost of sales
  • General ledger
  • Gross profit
  • Income statement
  • Liabilities
  • Liquidity
  • Return on investment (ROI)
  • Working capital

While this doesn’t cover everything, it will, in the continuation of the travel metaphor, at least keep you from missing your (financial) train. You don’t need to know all of these concepts in great detail, but you should at least have a passing definition and some examples in your mind for each one.  Over time and as your relationship builds with your financial team, you will become more literate in the language.  And they, in turn, will become more knowledgeable about your business and industry.

For more on how to speak the language of finance, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

**photos courtesy of Unsplash (Ivan Shilov and Waldemar Brandt, photographers)

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What’s Mine is Mine and What’s Yours is Mine

OPM. Other people’s money.

In the world of investments that’s usually how an enterprise gets funded.  The days of banks being the leading (or only) source for loans and funds for investing have been waning for quite some time.

Have you taken advantage of using funds from private investors to fund and grow your company? If you have, you know that it can be an adventure, but it can also be a positive way to grow and expand.  But if you take this road, what should be considered in handling other people’s money?

Here’s a list of considerations:

  • Involve a third party, like an attorney or money manager, to accept, handle and return money.
  • Set up separate accounts just for the private lending cash; also consider not co-mingling the cash from multiple investors.
  • Consider assigning each loan a specific role—i.e., operational improvements or warehouse expansion.
  • Be sure and follow your state’s regulations on reporting and filing any reports.
  • Repay your investors promptly and to the plan agreed to. Continue to pay interest until their portion of the investment is paid off.

Whatever you do, start with a clear plan and then stick to it.  As the saying goes, “those who fail to plan, plan to fail.”

For more on how to work with investment groups and individuals and handling investor’s money, call or write to us.  TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.

**photos courtesy of Unsplash (Allef Vinicius and Sharon MCutcheon, photographers)

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