Six crucial accounting terms for small business

Appointing an accountant is widely considered best practice for small business owners. But entrusting financial analysis and reporting does not mean detailed checking out the process each month or quarter. On the contrary, it is recommended that business owners work closely with their accountants throughout the year to understand their financial situation better and make intelligent plans for future progress.

Do you want to expand your accounting understanding so you can have more informed with intelligence discussions on your account every quarter?

Mentioned below is the list of six crucial accounting terms for small business owners.

Do you have extra cash flowing into your business each month than you pay out to cover all costs and expenses? If so, your accountant will accept that your cash flow is positive. "However, if the opposite is true, your cash flow statement will disclose that you're "cash flow is negative."

Having excess cash on hand means you are better prepared to keep up with your debt, cover unexpected expenses, and capitalizeon development opportunities. Therefore, your accountant will produce a quarterly cash flow statement to check the key performance indicator.

2 Profit and Loss Statement

The profit and loss statement, also known as the income statement, is one of the best significant documents used by accountants to establish profitability.

The Profit and Loss statement lists revenues and gains and expenses and losses over a specific time period, typically every three months for small businesses. Then, it calculates your all-important "bottom line" so you know if you are operating at a loss or turning a profit.

3 Gross vs. Net Profit

Gross profit variance is when the cost of goods (COGS) is subtracted from the total sales. Net profit, on the other hand, shows in great depth. It exposes your exact dollar per profit of sales after deducting all operational expenses, including COGS, taxes, interest paid on debt, etc.

Gross and Net Profit are required ratios. As a consequence, they are essential for gauging business performance against an industry benchmark and your competitors.

4 Balance Sheet

The balance sheet offers an indication of your overall financial position at a given moment in time. That lists the assets, such as cash, inventory, accounts receivable, equipment, liabilities, accounts payable, income tax, employee salaries, and shareholder capital. In a nutshell, the balance sheet shows what is owed to the business and what the business owes others.

5 Accounts Receivable & Accounts Payable

Accounts Receivable is money customers owe your business for goods or services sold to. Therefore, it is reflected as an asset on the balance sheet. On the other hand, Accounts Payable is money you owe suppliers and any bills you have yet to pay., so this is listed as a liability on the balance sheet.

6 Bad Debt Expenses

Bad debt occurs when you cannot collect payment from your customers. For example, outstanding long-term Accounts Receivable could be listed on the balance sheet as "bad debts," If these amounts are never collected, they may have to be written off as a loss.

Here you have the Six crucial accounting terms to help you build your accounting vocabulary, join in the conversation, and empower yourself with more intelligent decision-making.

While working with us, you can be assured of the day-to-day upkeep of all your accounting transactions. Timely managed reporting. Our main objective at Business Pillars Limited is that customers receive satisfaction. Therefore, we provide outstanding customers the accounting services.

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Being experienced with an accounting background, we can offer a wide range of reliable and accurate bookkeeping services. A common question often asked is, "What exactly does a bookkeeper do? "The answer to this question is shown below for our services as specialist bookkeepers. We can,of course, modify our services to suit the needs of your business whether you need a few of these services or all.

·      Accounts Receivable*-Invoice preparation and follow-up with the client

·      Accounts Payable* - Suppliers' invoices are processed and paid when due.

·    Bank Reconciliations -Reconciling Bank and Credit Card accounts with daily bank feeds

·     GST Filing                        - Timely filing of Bi-Monthly or Six-Monthly returns

·     System Training               - Training is required whenever you choose new software. We provide free training.

·    Accounting Software conversions – With our expertise, we can switch your accounting information to XERO/MYOB

·        Payroll

·        Unlimited Email Support

*Note:- Accounts Receivable and Accounts Payable are closely monitored to ensure that your business has no issues with cashflow

Payroll Management

Business Pillars offers all-inclusive payroll services that help your business run efficiently. We are committed to being legally compliant. Our services are built to simplify payroll processes for small to medium-sized businesses throughout New Zealand.

PAYROLL processing made easy

We provide the most updated payroll solutions tailored-made that is affordable to your requirement. We are committed to taking care of all the work demanded, allowing you to focus your time and energy on more essential things you love to do.

Our payroll services are:

·        Employees pay, On-time payments including benefits, reimbursements, deductions, Weekly/Fortnightly/Monthly

·        Employee PAYE

·        Payday Filing   – Timely filing returns to IRD

·        Leave entitlements– Accruals for each type of leave

·        Leave Payment - As per Holiday Act 2003

·        KiwiSaver contributions

·        Maintaining payroll records – payments and documentation

GST Filing

Timely Processing

We ensure that we file all GST Tax returns two weeks before the due date. We keep our clients informed before we proceed. This ensures that the client is at ease.

·        GST Filing        - Timely filing of Bi-Monthly or Six-Monthly returns

Monthly / Quarterly Advisory

The clients are in a position to process their reports from the software chosen. Based on the service requested, additional reports are also given that are not available in their chosen software. These reports enable the client to make corrective business decisions. Business Pillars reaches out to clients who require more assistance.

Monthly Management Meetings

The primary purpose of a monthly management meeting is to get the business to grow. This is either done through a phone call, zoom, or meeting in person.

Cash flow Management

Managing cashflow is a significant responsibility faced by most small businesses. We reach out to businesses making it stress-free to ride on the highs and lows of the cash flow throughout the year.

We assist in producing a cashflow statement which is a financial statement that summarizes the amount of cash entering and leaving the business. The cashflow statement measures how well the business can manage its cash position, meaning how well the business can generate cash to pay its debt commitments and fund the day-to-day operating expenses.

Budget Forecasting

Small business budgeting and forecasting

We need to get some relevant numbers to know what the future will look like regarding a business. Budgeting and forecasting will help to support this vision. Business Pillars can work alongside you to understand these basics so you can build a financially sustainable business.

What is a budget?

The budget estimates how much money will come in and go out from your business over time (usually a year). Budgeting and forecasting normally benefit all businesses and first-time startups to see if they can afford to run the business and compensate for all their hard work with a good return for their initiative.

What are the main principles of having a budget

Budgets forecast the money-making possibility of a business. It will also highlight things like:

  • How much will it cost to startup?
  • How much money is needed to borrow?
  • When will be the breakeven point?
  • How much should the customers be charged?
  • How many staff are needed?

Monthly / Quarterly Advisory

The clients are in a position to process their reports from the software chosen. Based on the service requested, additional reports are also given that are not available in their chosen software. These reports enable the client to make corrective business decisions. Business Pillars reaches out to clients who require more assistance.

Job Management

Job Management is software that supports project managers and teams to complete client requests and projects efficiently. Most professionals depend upon this job tracking software which assists them in supervising multiple sections of a business. Business Pillars are here to assist in setting up this service to track income and expenses related to service jobs.

XERO and MYOB both have the capability for Job Tracking

These are the advantages:-

·        Create quotes immediately

·        Easily track jobs from quote to invoice

·        Schedule the jobs on the go

·        Get paid quicker