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Outsourcing Accounting Services: Increase Your Bottom Line

Outsourcing Accounting Services: Increase Your Bottom Line

Outsourcing accounting services is a great way to save time, money, and your sanity. It can be difficult for many business owners to find the time or expertise necessary to keep up with all the paperwork that comes from running a successful company. We will examine how outsourcing accounting services can help you improve your efficiency and your bottom line.

 

You will have access to a team of experts

Accounting is one of the most difficult professions to master. Most accountants have many years of education, training, and experience. Many accountants work toward one or multiple certifications—Chartered Accountant, Certified Public Accountant, Certified Managerial Accountant, Enrolled Agent, or others.

Each certification is useful depending on whether the accountant wants to focus on financial accounting, taxes, auditing, or general business. Each certification has rigorous requirements that require many hours of study, experience, and testing.

In most cases, the requirements for certification are overkill for what is used in daily business life. So, if your accountant is not certified, it will likely not have an impact on their ability to have a drastic effect on the long-term success of your company. What it reveals is how serious the accounting industry is about producing talented accountants.

Also, accountants work with many businesses daily. By outsourcing your accounting, you gain the benefit of avoiding the mistakes that other businesses have made that your accountant has already solved. Accounting can be frustrating, so your accountant has had many wins in their career.  This shows that your accountant has the moxie and resolve to ensure the continued success of your business.

 

You can avoid the headache of hiring and training employees

For most small and medium-sized businesses, hiring and training a quality accounting team can be an expensive and resource-intensive process. Even retaining the best talent can be a headache. Because the needs of a business can change throughout the year, it is easy to adjust an accounting team through the outsourcing company.

By outsourcing your accounting, you are passing on headaches that would otherwise be yours and instead hand them off to an expert who specializes in accounting. This frees your time up to focus on core business functions that add value to your company. You are free to do what you are best at… while they do what they are best at—adding to your bottom line.

 

You will save money and time

They say that a penny saved is a penny earned. First, you will save on the large amount of money that goes into office facilities, software, office machines, and supplies. As briefly mentioned, not only will you bypass the headache of maintaining a staff, but you will also save on the salaries and payroll taxes of in-house accountants. By outsourcing, you will have access to the latest technologies and innovations without additional costs.

They will find money you did not even know you had. Did you know that when the coronavirus hit, congress passed several laws aimed at helping businesses survive the anticipated economic impact? If you did not know, your accountant did and already had several strategies on how to help you benefit.

Additionally, the tax laws change every year. By outsourcing your accounting, you will partner with accountants who are on top of these changes and help you get access to help and tax deductions that will enable you to thrive—especially during difficult times.

 

You will be up to date on your financial position

For simplicity, many small- and medium-sized businesses choose the cash basis of accounting. In essence, revenues are recognized when cash is received; expenses are recognized when cash is paid out. Although it saves time, you lose out on what your true financial position is. For example, if you prepaid some expenses—such as rent or insurance—you may have more cash available than you think you do.

An outsourced accounting team is likely to prefer to use accrual accounting because it gives insights into the financial health of a company. Accrual accounting recognizes and records transactions when they occur. For example, you buy a $20,000 distribution truck to be used for the next 10 years. Under the cash basis you expense $20,000 when purchased. This makes one year look bad and all the other years look good. Under the accrual basis, you would depreciate it as it is being used—over the next 120 months. As you are using the asset, you are likely generating a profit from using the asset.

An outsourced accounting team can create accurate and timely financial reports so you can predict future revenues and costs. This will help you make well-informed decisions for the long-term success of your business. With the accrual method all sorts of metrics are now available to tell you exactly how you are doing. Where performance is measured, performance improves.

 

Outsourcing your accounting services to a team of experts is a wise investment for your business. The right partner can help you increase your bottom line and avoid the headache of hiring employees. They will give you guidance on how to best manage risk in each area of business so that nothing falls through the cracks. You will be able to save time by not having to worry about staying up to date with technology and billing cycles.

Having an expert staff who has years of experience in the industry who is always looking out for ways to improve efficiency and reduce cost is one of the best ways to give your business a competitive edge. Having access to a team of professionals dedicated solely to handling all matters related to finance and taxes on behalf of your organization means you are better positioned not only from a risk management standpoint but also having funds available for other pressing needs within your company.

How to understand your balance sheet: A beginner’s guide

How to understand your balance sheet: A beginner’s guide

A balance sheet is a financial statement that provides an overview of the company’s assets, liabilities, and equity at a specific point in time. It is important to know what each one means in order to understand how well you’re doing. It can be difficult to understand all the information on this document, but there are ways to break it down into more manageable pieces.

 

What is a balance sheet?

The balance sheet is a financial statement that provides information about the assets, liabilities, and equity of a company.

The first section of the balance sheet lists the assets on hand. Assets are anything that can be turned into cash. Assets include cash, accounts receivable (money owed to you), inventory (goods waiting to be sold), and prepaid expenses (e.g., insurance that is paid annually in advance). Assets are usually broken up into short-term (less than one year) and long-term (one year and longer)

The second part lists liabilities, which are things you owe money for. Liabilities include loans payable or due for goods purchased on credit. Like assets, liabilities are usually broken up into short-term and long-term.

Finally, equity is calculated by subtracting what you owe from what you own. This is also referred to as net worth or the net value of the business.

 

The importance of the balance sheet

Balance sheets are a snapshot of what a company’s assets, liabilities, and equity look like at any given point in time. A balance sheet is a tool that can be used to find out if a company has enough money to cover its obligations and stay afloat or enough assets to cover its long term obligations.

The balance sheet can also be used to determine how a company is financing its operations. A company that is generating enough net income will have higher retained earnings from one year to the next. A company that is financed through debt will have an increase in long-term liabilities year-over-year.

 

How to read a balance sheet

Below is an example of a balance sheet.

balance sheet

We already explained assets, liabilities, and stockholder’s equity. The balance sheet must always “balance” because assets equal liabilities plus equity (known as the accounting equation). Understanding this equation helps you understand a company’s position. If the company has more liabilities than assets, then it will have negative equity, which is a potential major red flag especially with mature businesses.

Investors and creditors like to determine a company’s financial health using something called ratio analysis. To determine how liquid a company is, divide current assets by current liabilities. In the example above, 67,500 / 34,200 = 1.92. Whether that is good or bad depends on the industry. In general, anything near or over 2.00 is acceptable.

Other performance indicators include solvency ratios (also called financial leverage ratios), profitability ratios, efficiency ratios, and coverage ratios. Corporations also have market prospect ratios which are used to predict performance, which is imperative when valuing a company’s stock price.

 

How to use information from the balance sheet to improve your finances

Did you know the information found on a balance sheet can also be used to measure your company’s vulnerability to risk? A complete balance sheet includes key pieces of information like cash on hand, accounts receivable and inventory. By analyzing these numbers, you will be able to see where your business is strong or weak in relation to other companies in similar industries. If there are any areas for improvement (i.e., too much debt), it will allow you time to prepare so that when the unexpected happens.

If you want to take control of your finances and improve them, the balance sheet is a good place to start. Understanding what it includes and how to read one will provide insight into where you can make changes in order to get more money for yourself or avoid unnecessary expenses that are taking too much from your paycheck.

The best way to use this information is by comparing two different months side-by-side on paper so that you have everything at hand. Once you have done this, focus on adjusting only those areas which seem most important – like lowering debt payments or reducing inventory on hand – and see if there is an impact in your bottom line!

The balance sheet is a powerful financial tool that can be used to improve your finances. It’s important for you to understand how the information on the balance sheet works and what it means in order to make informed decisions about improving your money management skills. Let us know if we can help! Contact our team of experts today and let them show you how they have helped others grow their wealth with remarkably simple math.

Financial Forecasting 101

Financial Forecasting 101

If you’re a business owner or been thinking about opening up a new venture, the thought of improving its performance must have crossed your mind. And that’s where financial forecasting comes into play. 

It’s simply the process of looking into the future of your business based on historical data and trends. In this post, you’re going to learn the basics of financial forecasting and how it can help you.  

What is Financial Forecasting?

The definition is literally in the name. Financial forecasting is forecasting a business’s financial status. 

More specifically, this is the processing, predicting, and estimating the future performance of a business based on current data at hand. Company revenue is used as the benchmark in most basic cases. 

The sales figure can say a lot more than how much profit your business made. Those data sheets are effectively a portal to your business’s future. But it takes a different set of capable eyes to capture the essence. 

Apart from the current sales figures, historical data is also used in financial forecasting. It helps analyze the performance with regards to the past, present, and hopefully a better future. This method is widely used by successful CEOs and entrepreneurs around the world for its accuracy. 

Why is Financial Forecasting Important?

Any business with long-term objectives can definitely benefit from this process. It also helps to set new standards for the business as well as guide the decision-making process. 

Another very important reason why entrepreneurs use this process is to convince investors. 

Suppose, you own a winery and you wish to expand across different states. You know it will be a successful venture. But how do you attract more investors? 

That’s where financial forecasting comes to play. You can accurately determine the future of your winery by considering all the variables in your current model and projecting them into a future scenario. 

CEOs love this model because it can bring important insights such as how to spend business resources, what the industry holds for the future, how long the debts will hover over the business, how to pay the shareholders, etc. to light. 

And when you have at least an idea of what you’re diving into, making the right decisions at the right time becomes a lot less burdening to your shoulders. 

Types of Financial Forecasting

When venturing into the dynamic world of forecasting, you should know about the types as well. There are two major branches of forecasts. One is Qualitative while the other one is Quantitative. 

Qualitative Forecasts 

Qualitative financial forecasting does not rely on computers to analyze large data sets. It’s quite an unorthodox way of finding out the connection between events. Rather than following the sales figures, Qualitative Forecasts focus on decisions taken from experience and intuition. 

It starts with gathering opinions from major positions in each department. Analyzing their insights might be crucial for forecasting.

The next step might be taking a similar scenario from a different environment and projecting it onto the subject scenario. 

The Delphi Method is another important aspect of financial forecasting. It indicates that company professionals fill out a questionnaire. Based on it, another questionnaire is created and filled. Now, these are combined and presented to the participants to re-evaluate their answers. 

Scenario forecasting is another great method. The person tasked with the forecasting will project different results based on the consequence of scenarios. Your management team has the freedom to select any result you want. 

Quantitative Forecasts 

Unlike qualitative forecasts, quantitative financial forecasts solely depend on large historical data sets. These are used to find patterns and trends in the business space. These forecasts are more accurate in sectors where numbers speak louder than legacy. 

Pro-Forma Financial Statements is a great method used in this forecast where the sales data from the previous years are used to make the prediction. 

Another method is Time Series Analysis. For short-term goals and objectives, this the perfect method to use. It involves collecting data for a certain period and analyze it to find trends. 

Lastly, the Cause-Effect method dictates that every effect on the business is related to the cause. The consumer’s income, their confidence in the business, unemployment rate, etc. directly influences the sales figures. The goal of this method is to find the connection.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

The Basics of Financial Statements

The Basics of Financial Statements

A key aspect and skill in managing a company is the ability to understand financial statements. Because we operate in a competitive business environment, it is important to be able to identify a company’s financial position/health, business trends and risks at an early stage. The ability to analyze your company’s financial statements forms a key part in cultivating overall growth.

 

Let us dig into the basics of financial statements:

 

The Balance Sheet

The foundation of the balance sheet reflects the “book value” of a company at a specific date, also known as the reporting date. The balance sheet provides a clear overview of the company and can be divided into three components namely, assets, liabilities, and owners’ equity.

Assets: Anything that the company owns or is owed, and represents an accurate quantifiable value can be attributed to this asset.

Liabilities: Any legal obligations owed by the company to third parties. In a simplistic term, liability can be seen as the opposite of an asset.

Owners’ Equity: this refers to amounts invested by or owed to shareholders. If you had to subtract all the liabilities from all the assets you should effectively arrive at the owners’ equity value. The amount reflects the net worth of the company that belongs to the shareholders.

The term “balance sheet” is indicative of one important accounting principle which is that it should always balance according to the well-known formula: Assets = Liabilities + Owners’ Equity.

 

The Income Statement

The income statement (also referred to as the profit & loss statement) is an accurate record summary of revenue, expenses and other transactions over a given period. This is a particularly important document that allows you to analyze the progress and performance of your company. You can easily determine if your company is making a profit or loss, analyze expenditure/costing, identify business trends, etc.

The Income statement typically includes the following basic information:

Revenue: The amount that the company earned from sales.

Costs of goods sold (COGS): This figure is the cost of what it took to produce your goods. A simple way to put it, for each product that you sold, how much did it cost to make and get it into the hands of the customer.

Gross profit: This is the total revenue less the cost of goods sold.

Operating expenses: These are costs incurred to keep your company operating but aren’t direct materials or labor related to producing your goods or services. Examples of operating expenses include property insurance and taxes, building repairs and maintenance, utilities, administrative staff wages, etc.

Operating income: This is the income amount that reflects the gross profit less the operating expenses (other than COGS).

Net income: This is the company’s profit after all expenses and taxes.

The income statement provides you with a good indication of how well your company is performing. You will also be able to analyze financial trends on profitability, excess expenditure, cost-saving and if there is any excess cash to invest back into your company.

 

The Cashflow Statement

This cash flow statement provides a detailed overall view of what has happened to the company’s cash and the movement of cash over a given period. It is vital that a company has enough cash on hand to meet its obligations. A cash flow statement is typically broken into three sections namely, operating activities, investing activities, and financing activities. This allows for the reader to determine the following:

  • Operating activities indicate whether a company can generate cash from their normal operating activities (selling their goods or services).
  • Investing activities indicate the cash earned or spent from investments. This can include buying/selling physical property, vehicles, fixed deposits, patent rights, etc.
  • Financing activities indicate the cash raised/spent to settle debt and/or equity financing.

 

A positive cash flow figure reflects more money coming in than going out. A negative cash flow figure reflects more money flowing out (being spent) than flowing in. A negative cash flow figure is not necessarily a bad indication and this can relate to various strategic cash flow expenditure by management. The cash flow statement is vital when it comes to decision-making pertaining to the company’s cash position. It portrays the ability of a company to operate in the long term and short term based on the in and outflow of cash. Knowing this not only allows you to plan and budget in the long term, but also allows for better short-term strategical decision making.

 

Bringing it all together can provide meaningful information

 

Whilst accountants work with financial statements on a daily basis and for them it is second nature, the same cannot be said for all business professionals and it sometimes becomes difficult to understand the financial jargon. You can however learn the basics of understanding financial statements and the benefits it can yield when it comes to analyzing the statements. Financial analysis of the balance sheet, income, and cash flow statements can provide useful information such as:

 

  • The financial health of the company
  • Assist with financial forecasting, budgeting, and cash flow planning
  • Maximizing gains or minimizing losses
  • Identifying trends and new opportunities to grow the company
  • Identifying and avoiding undue risk
  • Improving and visualizing strategic business decisions
  • Allows investors to analyze the profitability and market value of the company and decide whether they would like to invest

 

The possibilities of financial analysis and the usefulness of metrics are endless. It is important to have accurate financial statements prepared by experts that will provide you with invaluable data to analyze. The data itself won’t save your businesses – only you can.

 

Protea Financial is Your Outsourced Bookkeeping and Management Accounting Services:

 

The good news is that you can learn how to interpret financial statements even if you do not have a financial background. At Protea Financial we match our solutions to the needs of the customer. Protea Financial can support you with everything from bookkeeping services, preparing financial statements, order processing, inventory tracking, handling management accounts, and tax schedules in order to support your tax accountant. Protea’s goal is to provide timely, accurate, and high-quality financial information on which a business can act. We can work with you to provide an evaluation and find the best solution for your business.

 

 

 

 

 

Protea Conversations: Destiny Burns

Protea Conversations: Destiny Burns

Protea Financial was founded in 2014 to provide high quality out-sourced accounting at an affordable price.  Given Protea’s flexible work environment, the Company especially appealed to accountants who wanted to re-enter the work force after taking time off to start a family. This allowed Protea to attract extremely talented individuals who were overlooked.  Over 80% of both Protea’s leadership and accounting teams are women.

We selected the name Protea because is the national flower of South Africa and is a symbol of our connection. The Protea flower has become an ornamental flower because of this striking beauty and is included in arrangements and bouquets as a symbol of courage or daring to be better or a sign of positive transformation.

Protea Conversations focuses on a successful woman in business and their achievements.  The hope is that these conversations will create a forum to discuss the experiences, opportunities, and challenges women face, and how we can build a more diverse, inclusive, and successful environment for everyone.

Destiny Burns is a native Clevelander (born and raised in Euclid), and she recently moved back home after more than 30 years to be near family and to live my dream of opening an urban winery here in her beloved hometown. Destiny is a retired U.S. Navy officer (served for 20 years on active duty (thank you!), and then spent more than 13 years as a business development executive in the defense industry in the Washington DC area. Destiny is also a former volunteer firefighter/EMT and has a great love and respect for first responders and for all those who serve our country and communities in uniform.

Wine has always been a great passion of hers having lived and traveled all around the world throughout her adult life, studying and enjoying wine and food. Destiny has advanced degrees in Business and professional experience in all aspects of business development, marketing and management, and also pursued formal and informal training and professional development opportunities in the wine industry. All of her experience and education, combined with a passion for wine and for her wonderful hometown, has culminated in her decision to open and run her own winery in the metropolitan Cleveland area and provide the “wine companion” to all the great craft beer and spirits made here! As they say, let’s have fun, celebrate, connect, support charitable causes and drink some great wine together at CLE Urban Winery! 

How did you get into the wine industry and how did you come up with the concept of CLE URBAN WINERY?

I always wanted a food- or wine-related business of my own as a “someday” dream. When I turned 50, newly divorced after a long marriage with an adult child fully launched, I decided to get serious about achieving this dream. I left my high-pressure career in the Washington DC area and returned to my hometown of Cleveland, Ohio to open my own business.

After performing a market analysis, I decided that opening a restaurant was too risky (too much competition), but I discovered that I absolutely loved the craft brewery culture of Cleveland. I decided to build my business based on my love of wine and my hometown, so I created a craft brewery-style urban winery and Tasting Room in a 100 year old former auto repair garage in my suburban Cleveland neighborhood. I call it Good Wine Made Fun that Celebrates Cleveland and Creates Community, and I will celebrate my 5 year anniversary this July!

 

What has been the biggest challenge you have experienced in reaching your current success (personally and professionally)?

I would say the biggest challenge that I have faced as an entrepreneur (aside from COVID-19, which has presented a number of significant challenges for all of us) is really understanding the costs, key performance indicators and other financial measures of my business. The unique business model I created is a bit of a hybrid, and I struggled with generating the financial reporting I needed to truly understand how to profitably manage and grow the business. I finally found my financial bookkeeping partner in Protea Financial – I can’t say enough good things about how they have helped me truly understand the unique financial aspects of my urban winery business model and to effectively manage my books. The resulting financial confidence has been a godsend as I have worked to successfully navigate my business through the COVID-19 crisis.

 

What are your short term goals of your career/business and yourself?

I think I have the same short-term goal as many other small business owners… to survive the pandemic, both personally and professionally. Both aspects are challenging in this stressful and unpredictable environment, and that is doubly so as an entrepreneur. I have had to continually hustle and pivot throughout this crisis – no staying home and making a sourdough starter for me!
The other short term goal that I have been working on in 2021 is to launch the Urban Wine School™ – a comprehensive wine appreciation and education learning community that is affordable, accessible and fun! I plan to bring the first courses online this spring.

 

What is the best piece of advice you have ever received that has helped you in your success?

The best piece of advice I ever received was from a former boss who once told me that “Hope is not a strategy.” The only way you will be successful is through hard work and by developing a strategy and executing a plan to get you where you want to go… just hoping everything will work out is not going to get you very far.

  

What is the piece of advice that you wished you had gotten when you were starting out?

I knew this when I started out as a small business owner, but I didn’t fully understand how important this advice was until I was neck-deep in it… CASH IS KING.

  

What advice you give to others to help them be better leaders?

Don’t be afraid – and the best way to mitigate that fear is through knowledge. Do your homework, leverage resources, work hard and stay focused. Don’t take no for an answer. Set clear expectations and goals, and then hold yourself and your team accountable for achieving them. Surround yourself with great people and do everything you can to make them successful and productive, both personally and professionally – they, in turn, will then take care of you and your customers.

 

As a thank you to our interview and Protea’s commitment to more diverse and inclusive leaders, Protea will make a donation to Vital Voices. Vital Voices Global Partnership is a global movement that invests in women leaders who are solving the world’s greatest challenges. They are “venture catalysts,” identifying those with a daring vision for change and partnering with them to make that vision a reality. They scale and accelerate impact through long term investments to expand skills, connections, capacity, and visibility. Over the last 22 years, we have built a network of 18,000 change-makers across 182 countries who are collectively daring to reimagine a more equitable world for all.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.