Independence is a key concept in accounting, especially in the assurance or auditing area of accounting. Assurance services are services where a licensed CPA reviews an organization’s financial statements and accounting records and provides an opinion about them. This opinion takes the form of a report that can be shared with third parties such as banks and shareholders. Auditing services are one of many forms of assurance services.

Only a licensed CPA can provide assurance services; this is regulated by the states. A CPA who provides certain assurance services must be independent from the business that it is writing an opinion for. Essentially, independence means that the auditor must be able to do their work objectively and with integrity. And it goes farther. The auditor must not be perceived as having any kind of bias or connection with the business it is auditing. There must be no perception of any impropriety.

To this end, the auditor must not have a relationship with the company’s executives. A CPA cannot, for example, audit her brother’s company.  A CPA cannot be an investor in the company and also be the auditor because of the financial relationship. The audit opinion must not be influenced in any way by a relationship between the auditor and anyone in the company. The CPA must be able to provide an honest, professional, and unbiased opinion when auditing financial statements.

Being independent also means the CPA must have a healthy dose of skepticism.  A common phrase in the accounting profession is “Trust, but verify.”

Numerous rules abound to protect auditor independence. For example, an auditor cannot be paid on a contingent or commission basis. All practicing CPAs must complete ethics courses every few years, and these almost always include independence scenarios and case studies.

If you have any questions about independence, assurance, or auditing, please feel free to reach out any time.

To maximize profits in your business, all of your business functions need to run smoothly, including your accounting department. Your accounting system is at the core of your accounting function. If it is old or lacks the features you need, your business may suffer.  Here are five warning signs you can look for to determine if it’s time to upgrade or replace your current accounting system with something more cost-effective.

1. Not enough users

If your current system limits the number of users you can have in the system at any one time, this could be a major enough reason in itself to switch to a larger option. Luckily, most accounting software companies include an accountant user for free, so at least this type of user doesn’t have to count toward your total requirements.

If you’re not sure how many users you currently have a license for, we can help you check on that. It might be as easy as buying more licenses if you’re not at the maximum capacity.  But if you are at maximum, it may be time to look for a better accounting system with room for you and your business to grow.

2. Outdated

If your accounting system runs on desktop-based software that’s upgraded every year and you have not paid for or installed the upgrades, then your system is outdated.  If it’s been sunsetted, that means the software vendor no longer supports the software. You are at major risk for the software crashing, getting buggy, getting hacked, or worse, permanently breaking.

The cost of getting the system current may be better spent looking for a new alternative, or moving to a cloud-based system where updates occur automatically.

3. Lack of functionality or scale

It is commonly the case that your business has grown so much that it’s outgrown your original accounting solution. That’s good news!  It’s time to find a solution that will scale better for your business.

You might be missing important features that are costing you more time and money than if you were on a system that offered those features. Common time-wasting activities in accounting include too much time spent on data entry and/or Excel spreadsheets to make up for what the accounting system can’t do.

4. Lack of reporting and analytics

If you’re unable to receive the reports and analytics you want to run your business better from your current accounting system, it may be time to switch. With better data comes better decision-making and if lack of data is costing you money, then it’s time to find a more robust system.

5. Lack of integrations

Thousands of apps exist to expand accounting systems’ core functionality. If your current accounting system lacks integration capabilities or does not have apps that are built to integrate with it, you may be missing out on additional functionality.  This include mobile apps; it’s quite common now to do much of your accounting work from your mobile phone.

Does your current accounting system have any of these red flags?  If so, please reach out. We can help you find a best fit for your accounting needs.

That’s right: The future is here! Now that it’s officially 2020, it may be time to jump on that accounting app bandwagon if you haven’t already done so. The exciting news is you can actually do a lot of your accounting tasks from your phone instead of your computer.

Here are just a few examples of accounting things you can do on your phone.

Banking

Are you still trudging to the bank to make your deposits?  If so, there is a better way! Simply download your bank’s mobile app, login, and look for the Make Deposit function. Get the check you want to deposit, write “For Electronic Deposit Only” on the back and endorse it. On your phone, enter the amount, then take a picture of the check. Presto! Hit Deposit and the money will be in your account in no time.

Receipts

Shoeboxes of receipts are a thing of the past. (Thank goodness, we say, as we wipe our forehead!) Send your receipts to your accountant simply by taking a picture of them and sending them via email or through a document entry system like Receipt Bank or AutoEntry.  You’ll need to set this up to connect with your accounting system, but once it’s set up, it’s a real time-saver.

Accounting

Wondering how much income you made last month? Download your accounting app on your phone and login to get many of the features that you have on your computer onto your phone. You’ll need to be on a cloud system like QuickBooks Online or Xero, or possibly have a hosted desktop solution in order to have this functionality.

Payroll

There’s no need to be tied to your desk on payroll day if you can submit or approve payroll from your phone.  Many payroll systems have apps you can download so you can be free of your computer.

Add-ons

There’s a mobile app for almost any add-on you might need, such as TSheets for time tracking or Square for taking payments.

Artificial Intelligence

There are even some apps where you can talk in plain English and get a plain English answer back. These apps are using artificial intelligence which is exploding in the accounting space.  You can ask questions about your cash flow or check a metric that you like to follow.

Feel free to reach out to us if you’d like to find out more or get help moving some of your accounting functions to your mobile phone.

If you find yourself on the go more often than not, having constant access to your business accounts and these features will be beneficial.

You might wonder why there are so many extra tasks at year-end. While the government requires much of the work, there is clean-up work and adjustments that need to be done to make the books accurate. It’s not always cost-effective to perform all of these updates monthly, so you’re actually saving money by doing some of them at year-end.

Here are just some of the items that are performed at year-end.

Tax-related:

  • If you have payroll, employees need to be sent their W-2s, and the federal and state government need a copy of the W-2s with a W-3 transmittal.
  • For employees, you must also have an up-to-date W-4 signed by them.
  • For employers, your federal unemployment 940 return is due.
  • If you have contractors, they need to be sent their 1099s, and the IRS needs the 1099s and the 1096 transmittal.
  • For contractors, you must also have an up-to-date W-9 form from them. You may also need to request an insurance certificate, or you may get a surprise at your workers compensation audit.
  • For vendors that claim exemption from sales tax, you’ll need to be sure you have an exemption certificate in your files from them.
  • If you pay sales tax annually, your return and payment are due.
  • Your personal federal, state, and local income tax and returns are due in the spring, and they can be extended until later in the year.
  • Depending on the type of entity your business is organized as, you may have franchise, federal and state tax returns to file. This deadline comes up sooner than the individual tax return due date.

Books-related:

  • Just about every asset on your balance sheet needs to be verified in some way or other:
    • Petty cash accounts need to be reconciled and reimbursed as of year-end
    • Bank accounts need to be reconciled with the bank statements. This includes PayPal.
    • Accounts receivable balances and all other receivables need to be tied to each customer and any amounts determined to be uncollectible need to be written off.
    • A physical inventory count needs to be taken and the inventory account should be adjusted accordingly.
    • Fixed assets need to be reconciled to their fixed assets ledger and depreciation should be properly recorded.
    • Goodwill accounts need to be checked and amortization adjusted.
    • Accruals, deposits, deferred accounts and all other asset accounts need to be adjusted if necessary.
  • Liabilities and equity need to be adjusted too:
    • Accounts payable balances and all other payables need to be tied to each vendor.
    • Liabilities that haven’t been recorded need to be added to the books.
    • Loans need to tie to lender statements, and interest paid on loans needs to be properly expensed.
    • The Equity accounts need to be checked and tied out to prior year balances.
  • Corrections and adjustments need to be made:
    • Any misclassifications and corrections need to be made on the books with adjusting journal entries or other classification tools.
    • If the client is a cash-basis taxpayer, a reversing journal entry needs to be made to get the correct tax numbers.
  • A clean set of reports can now be run and used.

Documents-related:

  • This is a good time to file and store your receipts in case you are ever asked for them. For long-term storage, thermal receipts should be copied or scanned in before the ink fades.

If you’re wondering why we’re so busy this time of year, it’s all of the extra work we have to do over and above the normal monthly load. If you have questions about any of this, just ask anytime!

Did you know that you can add apps to help increase the functionality of your core accounting system? The process will save you time and frustration. It is because every business is different that you may—and likely will—need these add-on features that aren’t already included in the accounting system you currently use. That’s where the apps come in: They provide a deeper functionality in the areas you need them. Take a look below at some examples we’ve put together.

  1. Payroll

Payroll apps help to simplify how you pay your employees. These payroll apps were created to help you implement an easy and automated method of managing payroll and all things HR-related.

Popular payroll options include Intuit’s many options, Gusto, ADP, OnPay, and Patriot.  Explore the different features of each app and find which one works best for you and your needs.

  1. Time Tracking

The best and most accurate way to keep track of an employee’s time is with an app. A wide range of apps can make not only tracking but scheduling your employees’ time simple, too. These apps include:

  • ClockShark
  • BigTime
  • Time Tracker
  • TSheets
  • And more!

Again, each app will offer different features. For example, most have timers, but only one might offer geofencing, so find the one that’s best for your business. Regardless of which one you choose to use, though, you will quickly discover how much time and energy you save without having to do time tracking manually.

  1. Inventory

Need more functionality to better manage your inventory? If you run an ecommerce, retail, or wholesale operation, you may need an inventory app to give you more features. Back order functions, drop ship handling, and recall functionality may be required depending on what you sell.  Here are some popular apps for inventory:

  • SOS Inventory
  • BigCommerce
  • Unleashed

There are also many ecommerce apps in this space: WooCommerce and Shopify, to name a few.

  1. Cash Flow

Dozens of apps exist to help you manage your cash flow as well as get funded:

  • CashFlowTool
  • Cash Flow Frog
  • PayPie
  • Chata.ai
  • FUndbox
  • Blue Vine
  • Fundera
  • And too many to list

Managing your cash and debt are important areas and ones that are easy to find to help you get quicker answers to your questions.

Now that it’s 2020, try working smarter, not harder. Add-on features can help! Remember, the examples listed above are just a few apps currently available. Determine what you need for your company to make better decisions, and then look around for the perfect app.

And, if we can help you implement your ideas faster, feel free to reach out to us anytime.

If your eyes glaze over when you’re presented with financial statements for your business, you’re not alone. Many entrepreneurs benefit greatly when they can see their financial results in graphical and chart formats. Fathom is the perfect tool to help your numbers come alive so they can become meaningful for you.

Fathom is a company based in Brisbane, Queensland, Australia and founded in 2011. The product is also named Fathom and is a cloud-based software application that crunches accounting data and provides multiple views that make analysis easy. In accounting terms, we call this type of software by many names: Financial Dashboard; KPI software, where KPI stands for key performance indicators which are metrics that help you measure your business results; and Business Intelligence (BI) software.

Fathom can present your accounting data in multiple insightful views:

  • KPIs – Popular KPIs are pre-loaded, plus you can create and calculate your own. Fathom handles financial KPIs like the current ratio or debt-to-equity ratio, and you can also enter non-financial data such as number of employees and customer satisfaction scores.
  • KPI explorer – This display takes on a wheel shape where green is good and red indicates room for improvement.
  • Profitability – This line graph shows your business’s breakeven point.
  • Cash flow – This bar graph shows in red and green your cash balance fluctuations.
  • Trend – This line graph allows you to see at a glance the direction account balances are moving over time.
  • Goalseek – This chart allows you to perform what-if analysis, set goals and measure your progress.

You can also generate predefined or custom reports in Fathom. The reports can be scheduled as well as exported to Excel.

Fathom does require a setup process. It integrates with QuickBooks Online, QuickBooks Desktop, Xero, and MYOB (which is popular in Australia). It’s included in the Advanced version of QuickBooks Online. The steps to set up Fathom include:

  1. Updating the data, which is mostly done through integration setup
  2. Adding your company profile
  3. Mapping Fathom to your Chart of Accounts, which is a very common setup step
  4. Selecting your KPIs, which requires some strategy work on your part
  5. Setting targets
  6. Enabling alerts if desired

There’s a lot to like about Fathom. If you feel like you’d like to start digging deeper into your business’s financial results to find opportunities for more growth and profit, then please contact us anytime.

A great way to make a wonderful start to 2020 is to wrap up 2019 feeling organized and on top of the world. Here’s a checklist of items that you can start on now to make your year-end close go smoother than ever before. And don’t worry if you don’t know how to do some of these tasks – that’s what we’re here for.

  1. Catch up on your books, especially if you do them only once a year. By doing it now, you’ll be able to get into your accountant faster this time of year and they will appreciate getting the work done ahead of their crunch time.
  2. Catch up on bank reconciliations in case they are not up to date. Don’t forget your savings accounts, PayPal, and any other cash equivalents. Void any old uncleared checks if needed.
  3. Review unpaid invoices in accounts receivable and get aggressive about collecting them, especially if you are a cash basis tax payer. Clean up any items that are incorrect so that the account reconciles.
  4. Write off any invoices that are no longer collectible.
  5. Ask employees and vendors to update their addresses in your payroll system so that W-2s and 1099s will reflect the correct addresses.
  6. Collect any W-9s that you don’t already have on file for contractors that will receive a 1099 form from you.
  7. Collect workers compensation proof of insurance certificates from contractors so you won’t have to pay workers comp on payments you have made to them.
  8. Collect sales tax exemption certificates from any vendor who has not paid sales tax.
  9. Decide if you’ll pay employee bonuses prior to year-end.
  10. Review employee PTO and vacation time and reset or rollover the days in your payroll system.
  11. After the final payroll runs, contact your payroll software company to make any W-2 adjustments necessary for things like health insurance.
  12. Set the date to take inventory, and once you have, make adjustments to your books as necessary.
  13. Write off any inventory that is unsalable. If possible, sell scrap inventory or other waste components.
  14. Prepare a fixed assets register, calculate depreciation, and make book adjustments as needed.
  15. Record all bills due through year-end, and reconcile your accounts payable balance to these open bills.
  16. Make loan adjustments to reflect interest and principal allocations.
  17. Perform account analysis on all other balance sheet accounts to make sure all balances are correct and current.
  18. Make any additional accrual entries needed, or if you’re a cash basis taxpayer, make those adjustments as needed.
  19. Get an idea of what your profit number will be. Choose whether you want to maximize deductions to save on taxes or whether to want to reflect more income. Decide what you can defer into 2020 or what you want to have as part of your 2019 results.
  20. Match all transactions with their corresponding documents – receipts, bills, packing slips, etc. – to make sure you have the paper trail you need.
  21. Download your bank statements and store them in a safe place.
  22. Download any payroll reports and store them in a safe place.
  23. Scan in paper documents so that they’re stored electronically.
  24. File any important papers such as new leases, asset purchases, employee hiring contracts and other business contracts.
  25. Prepare a budget for 2020 and enter it into your accounting system.
  26. Take a look at the 2020 calendar to determine which holidays you’ll close and give employees a copy.
  27. Review your product and service prices if this is the time of year you do that and make any changes you decide on.
  28. Update your payroll system for any new unemployment insurance percentages received in a letter each year.
  29. Update the mileage deduction rate if that rate has changed at the beginning of the year.
  30. Set a time with your accountant to go over 2019 results and get ideas on how to meet your financial goals in 2020.
  31. Review the metrics you’ve been using in 2019 and decide on the list of metrics and corresponding values that will take you through 2020.
  32. Celebrate the new year; it’s a wonderful time to gain perspective and be hopeful about the upcoming year.

Start 2020 with a bang and this year-end checklist, and feel free to reach out if we can help with anything.

Custom fields in your accounting software are data fields that you can define yourself. They are typically associated with customers, vendors, employees, and items, and they can help you store and categorize additional information about these stakeholders and your products and services in your business.

An example custom field that can be associated with customers is their anniversary date with you. You could also decide to store their birthday, their spouse’s name, their favorite color, or their shoe size.

Custom fields add functionality to your accounting system. Here are a few examples of practical uses for custom fields:

  • Staff contact for customer – if customers are assigned a particular staff member, you can add their name in a custom field
  • Frequency of service – daily, weekly, monthly
  • Warehouse location
  • Type of customer; for example, hospitals, pharmacies, retirement homes
  • Referring physician
  • Preferred method of contact: email, phone, fax, text, chat
  • License number

Some software allows you to choose the type of custom field you want to add. In some cases, this allows for cleaner data as the data can be limited to a certain type or certain values upon entry. Here are the most common types:

  • Free form text – this is the default type; it can come as a single line or paragraph
  • Check box – choose one or more values from a limited number of choices
  • Radio button – choose only one value from a limited number of choices
  • Drop down – choose a value from a dropdown list
  • File upload – add an attachment
  • Image upload – upload an image that will be displayed
  • Date/time – enter a date or time
  • Number – enter a number; it can be currency, integer, or another mathematical type of number

Custom fields allow you to meet your company’s unique needs over and above what the software provides by default.  It’s a great way to make your data more meaningful. If you have some ideas for custom fields in your accounting software and want help setting them up, feel free to give us a call anytime.

When you pay a bill in your business, are you 100 percent comfortable that the bill payment is correct and justified? Is there ever a chance that that bill is fake or fraudulent? What about duplicates? With so many fake bills being mailed to businesses these days, it makes sense to think about controls you can put into place to reduce the risk that you might write a check out of your hard-earned profits that should never be written.

Accounts Payable Controls

In the accounting profession, the term “internal controls” refers to processes, procedures, and automations you can put into place to reduce errors. In accounts payable, there is a specific subset of rules and controls you can put into place to reduce risk in this area. Here are just a few ideas.

1. Approvals

All bills should be approved by the appropriate level of staff in your business. Sometimes a bill gets approved that is fake or shouldn’t be approved, especially in areas where the approver doesn’t have technical knowledge of what they are buying. Be sure to read the fine print on the bill and make sure you know what you are paying for.

2. Segregation of duties

The person who pays the bill should be different from the person who submitted the bill. These people should be different from the one who signs the check. This reduces employee fraud.

3. Receipt confirmation

A packing slip or other confirmation of receipt of the goods or services should be matched to the invoice, line item by line item.

4. Math check

A prudent step is to check an invoice’s math, at least for reasonableness.

5. Duplicate payments

If a vendor emails their bill as well as mails a hard copy, controls should be put in place (usually automated) to avoid duplicate payments on the same bill.

6. Reconciliation

If there are a significant number of transactions between you and a vendor, an accounts payable reconciliation should be performed each month via a statement.

7. Missing check numbers

Most systems provide a missing check numbers report that you can use to make sure all checks are accounted for.

8. Bank reconciliation

A bank reconciliation is a sure way to see exactly what checks cleared your bank account.

9. Coding

Coding each transaction to the correct expense account, inventory, asset, or cost of goods sold account is an essential part of the process.

10. Income statement review

Each month, a review of the balances in your expense accounts as well as a disbursements ledger review for reasonableness can provide added peace of mind.

11. Purchase order

Requiring purchase orders is another control you can add to your process. Purchase orders should be matched to packing slips and invoices before payment or approvals are made.

12. In-depth knowledge of your business’s numbers

The more you get to know the numbers in your business, the greater chance you’ll have of accurate accounts payable handling.

And if you’d like to discuss your accounts payable function with us and how it can be improved, we’re happy for you to reach out any time.

Each month, your accounting system yields actionable information for you to run your business better. Here are some key reports that all business owners should review every month.

Balance Sheet

A quick review of the balance sheet can tell you the balances of your current assets and current liabilities. Current assets should always be larger than current liabilities; if it’s not, you may have liquidity issues.

You can also take a look at these accounts: cash, accounts receivable, and accounts payable. They should look reasonable to you based on your business history.

Accounts Receivable Aging

Your gaining report can alert you to who has not paid their invoice, so that you can take action to collect that money. Any balances over 30 days should trigger a collection process since the older the receivable gets, the less likely it is to collect.

Accounts Payable Aging

Hopefully, this report is clean and you are able to pay all of your bills on time. If you have an unusually large amount in this account, you’ll want to make sure you have the future cash to pay the bills.

Income Statement

The first number most entrepreneurs look at on the income statement is profit. It’s a good idea to review every account balance on this report to see if it is what you expected. Some questions to ask yourself include:

  1. Did I generate the amount of revenue that I expected? If not, should I ramp up marketing for the next few months?
  2. Do all of my expenses look reasonable? Are there any numbers that look too high?
  3. Are my payroll expenses in line with what I was expecting?
  4. Which accounts caused me to generate more or less profit?
  5. What I can I do next month to improve performance and increase profit?

Sales Reports

There are many excellent sales reports to dive deeper into your revenue so you can see what sold and what didn’t. Sales by Item and Sales by Customer are two good options for you to get more detail about your revenue balances. By analyzing your revenue, you can see what promotions worked and how you might take action to increase sales.

These five reports are very basic, but they are also very key to your business. To profit from these reports, it’s up to you to take action in your business to improve your success.