Want to learn about cloud accounting for your small business? Browse our guides on mobile accounting, what to consider when you’re choosing a cloud provider and more.
Chapter 1: Does your business need a mobile accounting app?
As a small business owner, you probably spend a lot of time out of the office. So it makes sense to be able to keep your accounts in order while you’re on the move. Here’s how to do it – and save yourself time and money. Plus keep your evenings free for things like life.
Managing your mobile business
Small business owners work hard and are often on the move. You may be out meeting clients, working on-site or ing between jobs. If you have an office – at home or anywhere else – you probably don’t spend a lot of time in it.
Mobile phones, tablets and laptops have made working on the go much easier. You can check emails, manage appointments and edit documents. But did you know you can also manage your accounts on the go?
Mobile accounting apps (sometimes also called mobile bookkeeping apps) let you manage expenses, send invoices and track your cash flow from anywhere. There’s no need to wait until you get back to the office at the end of the day.
Mobile bookkeeping app or mobile accounting app?
Bookkeeping and accounting have different meanings, but these words are often used interchangeably when it comes to apps. So when you’re shopping around, look for both.
Seven apps in one
A good mobile accounting app comes with a lot of capabilities, including:
1. Expenses app
Instead of stuffing receipts into your pocket or work bag, you can photograph them with your phone. The image is stored with your accounts, so you don’t have to worry about losing track of what’s been spent. You (or your staff) can also raise a personal expense claim using the app.
2. Data capture app (optional)
Data capture tools like Hubdoc or Receipt Bank will make it easier to stay on top of business spending. Once you’ve taken a picture of a receipt, these apps will read the image and enter the data – like supplier, date and amount – into your accounting software for you. Data capture apps also allow you to easily get your supplier bills into your accounting software to keep track of spending.
3. Mobile billing app
Send invoices directly from your mobile device, straight after you finish a piece of work. You won’t have to spend your evenings on billing, and you’ll be far less likely to forget about sending an invoice. Mobile billing helps you get invoices out faster, which can do wonders for cash flow.
4. Mobile invoice tracker
Because mobile accounting apps receive fresh bank data every day, you can easily see if and when payments have landed. The software spots payments and matches them to invoices for you – so you don’t have to sift through a bunch of transactions to figure out what’s been paid and what hasn’t.
5. Automated bookkeeping
These sorts of apps connect to your business bank account over the internet and copy across transactions into your business accounts. That’s a massive time saver and explains why these are also called mobile bookkeeping apps. This bank connection means that you get a very recent and accurate picture of money coming in and going out of your business. You will still need to reconcile and categorise this information but a lot of the raw data entry is taken care of.
6. Bank reconciliation app
One of the least-loved jobs of any business owner is bank reconciliation. That’s where you make sure the data on your bank statements matches the data in your accounting records. Most people sit down at a desk once a month and work through hundreds of transactions at a time. But a mobile accounting app will show you fresh bank transactions every day and allow you to reconcile them right there on your phone. You can do your bank reconciliation anywhere, for a few minutes at a time, which prevents ugly backlogs of work from forming.
7. Live cash flow dashboard
Keeping tabs on money coming in and going out is vital. Mobile accounting apps help you check cash flow whenever you like, with simple dashboards that show you things like revenue, expenditure, overdue invoices and payments that are due. The report refreshes every day, so you always have a current picture of cash flow.
An accounting app for Android, iOS and iPad
Mobile accounting apps and mobile bookkeeping apps are online services. The software isn’t on your device. It’s online, and you simply use your phone to access it.
This means there are no compatibility issues. Online apps run the same way on any operating system. So it makes no difference if you change from Android to iPhone – or if you switch between phones, tablets and desktops throughout the day.
Towards easy accounting software
Mobile bookkeeping and accounting apps allow you to take care of important financial admin while you’re on the road. You can capture expenses, send invoices, see what you’re owed, chase payments, reconcile accounts, and see what bills are coming due. And because these apps keep pulling fresh data from your business bank accounts, you know you’re working with accurate numbers.
It’s accounting for business people that don’t sit at desks. Mobile accounting apps allow you to get the basics done, no matter where you are.
Are mobile accounting apps for you?
Mobile accounting apps – or mobile bookkeeping apps – are useful for almost any business. But they are great for sole traders and businesses that don’t have dedicated office staff.
In other words, if you do most of the bookkeeping yourself, an app can really save you time. You can do things on the fly that might otherwise ruin your weekends.
When you’re ready to start looking for an app like this, choose wisely. Get a system that offers a full list of features, make sure it syncs with your bank account every day, and check that it integrates with other apps (such as receipt scanning apps).
Chapter 2: Sole trader accounting software
Sole traders are independent business people with drive and ambition. If you’re one of them, you’ll need sole trader accounting software that fits in with the way you do business. Here’s how to find it.
Software that helps you work smarter
More people are going out on their own, with sole traders representing up to a third of the workforce in some countries. Most sole traders are upbeat about the future – with three quarters saying their best work years are ahead of them.
Technology drives a lot of this optimism and growth. Online tools allow people to work from anywhere, automate processes, and manage their business without being tied to an office. Accounting software, for example, makes it easier to stay on top of tax, revenue, expenses and cash flow, and automate some of these tasks, without ever needing to sit at a desk.
Find out what accounting software can do and use this guide to help find the right package for your business.
The pros and cons of being a sole trader
There are two sides to being a sole trader. On the plus side:
- You have no one to answer to but yourself.
- You have the freedom to work from anywhere at any time.
- You have the potential to earn more than you would have if you’d remained an employee.
But there are disadvantages too:
- You may have to work at inconvenient times. For some professions, deadlines can be tight.
- If you don’t work, you don’t get paid.
- There’s no sick pay or holiday pay.
- You have to wear many hats. Your jobs include CEO, marketing, sales, PR, development, customer support – and office cleaner.
- The success of your business depends on you alone.
- It can be a lonely way of working.
So there are sacrifices to be made. But most people feel they are worth making. Many people become a sole trader and never look back.
Lightening the load by moving online
One reason why sole traders are optimistic is because technology has made it easier than ever to do business. Online or cloud-based software has streamlined processes and sped up the exchange of information. For example, you may already be using:
- online office tools like Microsoft Office 365 or Google Apps
- email services like Gmail
- cloud-based file storage
- social media to market your services and keep in touch with customers
- video conferencing to talk to clients and friends
- websites to reach new clients.
What’s left? Your accounting software. If you’ve moved everything else online, it makes sense to do the same with your accounts. There’s no point being tied to a single computer when cloud accounting gives you freedom.
Choose the right tool for the job
It might be tempting to use a spreadsheet for your accounting data. But spreadsheet programs like Microsoft Excel weren’t designed to be a substitute for accounting software. You can quickly run into difficulties if that’s the way you’re using Excel. Here’s why:
- It’s hard to see an up-to-date picture
Spreadsheets don’t automatically update – they show you the static numbers and not the meaning behind them. Accounting software helps you see your cash flow in real-time. Reports and graphs give you clear information and a sense of the big picture.
- Spreadsheets can be riddled with mistakes
It might be easy to start with a simple spreadsheet doing manual data entry and simple sums. But if you want your business to run efficiently, manual copy and paste techniques are no way to thrive and grow.
- Spreadsheets aren’t scalable
Sole trader accounting software is designed to grow as you do. It will help you with tasks like payroll, direct payments and automating your bookkeeping. And you’ll be able to share data with your accountant and bookkeeper remotely. No spreadsheet can do all of that.
- There’s no audit trail. Accounting software keeps track of every entry and who made it. This is called an audit trail, and it’s a vital part of accounting. But anyone can change a spreadsheet, leaving no record of what was done or who did it. This leaves your business open to fraud.
You’ll know from running your own business that it makes sense to use the right tool for the job. So get this right the first time – and avoid problems later.
The benefits of online accounting software
If you use online accounting software for your business, there are many advantages. Here are some of the main ones:
- Access from any device
Log in to your accounting software from your laptop, smartphone or tablet. You’re not stuck using a single computer in an office.
- Simple, easy-to-use features
As a sole trader, you don’t need bloated software with unnecessary features. You need a package that does what it’s supposed to do – quickly.
- Data entry automation
Smart accounting software automates data entry and even follows up with customers regarding payments on your behalf. Instead of organising and manually typing data into your accounts, the numbers can flow in automatically from your bank and with the help of data capture tools. And you can set up automatic invoice reminders. Automation solves the major problems with accounting data entry by saving time, reducing costs and eliminating human error.
- Log in from anywhere
If you’re out and about a lot, sometimes it can feel like you have no fixed workplace. So you need to be able to work from wherever you are. Online sole trader accounting software lets you do that. Wherever there’s an internet connection, you can get to your accounts and issue or pay invoices.
- You don’t need to worry about technology
If you’re not technical, updating computer software can be a worry. With the best online software, that stress is taken away. The software company carries out updates while you sleep – and your data is backed up automatically.
- Airtight security
Your accounts are confidential. With online accounting software nobody will have access to them unless you hand over your password. Cloud security is much safer than leaving data on your hard drive or a USB stick.
- Ability to share data
You may not have employees, but you’ll need to share data with your accountant or bookkeeper. Some software will allow you to give people a remote login – and you can control the level of access.
- Pay as you go
Choose software that’s based on a subscription model. This will mean you have a small cost every month, instead of a lump sum upfront. For businesses just starting out, this is a real cost saving.
Find the right software for you: Three steps
Now you have an idea of the type of sole trader accounting software you need, it’s time to choose the best package for you. Here are three simple steps to help you.
- Ask for recommendations
You need software that’s been proven to work well for your type of business. So talk to other people in your situation. Network with other sole traders, online and in the real world. Find out what accounting software they use, and if they’d recommend it. Ask your bookkeeper or accountant for suggestions too.
- Plan ahead
If your business grows, you may need to hire employees. So try to find software that will grow with your business. For example, you may not need full payroll features today. But next year, who knows?
- Try before you buy
Companies that believe in their products are often willing to offer a free trial. See if you can sign up to online accounting software for free. Test it, get used to it and see if it will work for you.
Make it part of your business
Sole trader accounting software isn’t just a key part of your business. Think of it as a way to fine-tune the way you work. It can help you become more efficient – and pretty soon, you’ll wonder how you managed without it.
Chapter 3: Non-profit accounting: The basics
Running a non-profit organisation is different from managing a conventional business – and the accounts are handled differently too. So what do you need to know about non-profit accounting?
Non-profits are businesses too
Non-profit businesses are sometimes called not-for-profit entities, especially by accountants. Unlike a conventional business, a non-profit company’s main aim isn’t to make lots of money.
Instead these entities are often charities or small clubs. They handle money, such as donations and membership fees, but in a different way to a for-profit business.
In other respects, a non-profit company works just like a regular business. Money comes in, money goes out, employees are paid, and day-to-day operations are carried out.
All of this has to be accounted for, by law. There are legal processes that not-for-profit entities have to go through – when they are formed and on a regular basis from then on. Non-profit accounting is a big part of this work.
In this guide, we’ll look at what you need to do to set up your non-profit company and keep it running smoothly – and legally.
Is your business really non-profit?
Not all types of business are suitable to be run as non-profit organisations. Here are some questions to ask yourself:
- What’s your motive?
What is the purpose of your business? If it’s to provide charitable services, or to handle the accounts of a social or sports club, there’s a good chance it qualifies as a non-profit.
- Where will revenue come from?
Non-profits tend to get most of their income from donations, membership fees, fundraising events, grants from the public or private sector and perhaps investment income.
- Are there other non-profits like yours?
Whether or not your business will be granted non-profit status depends on a number of factors. It will help if there are other not-for-profit companies with a similar structure.
The regulations vary depending on where you set up your business, so check local laws for guidance.
Six steps to get started as a non-profit
There are some hoops to jump through before you can start running your not-for-profit business:
- Incorporate your company
File the necessary paperwork with the appropriate government agency. It’s easy to forget to do this, but you may be liable for extra taxes if you don’t do it on time.
- Apply for tax exemptions
A big advantage of not-for-profit entities is tax exemption. Again, do this early on to get the most benefit from it. Note that although your business is tax-exempt, your employees will still have to pay taxes.
- Create a business plan
Good quality non-profit accounting software can help you here, allowing you to run through different forecasts and scenarios. Play with the numbers and see which plan works best for you.
- Plan your fundraising
You’ll probably have no products or services to sell, at least at the beginning. So how will you raise money? A well-thought-out fundraising plan will help keep cash flowing in.
- Look into financing
Non-profits can apply for various grants and other forms of finance, from the public and private sectors. An online search can be helpful here. Check your government’s business website for details.
- Structure your outgoings
How much can you afford to spend? Your business was set up to provide a useful service, but you’ll need to budget carefully to make sure expenditure doesn’t exceed income. Again, accounting software can help here.
You might need some assistance with all of this, so consider hiring an accountant to help you.
Record all revenues
Non-profit companies can have many different sources of revenue. Each of these must be accounted for:
A pledge is a promise to give money. Some pledges might be conditional on a future event (such as the same amount being matched by another donor), so record these carefully.
These might come as a result of street collections, postal campaigns, cold-calling, web advertising or email marketing. All donations must be recorded, whether cash, cheque, money transfer or internet payment.
- Volunteer time
Time is money, and must be accounted for as such. That’s especially true if it adds value to your organisation, or if the person concerned has a special skill such as bookkeeping.
- Membership dues
These are collected by social clubs and societies in return for access to facilities or services.
- Special events
If you collect entrance fees for a fundraiser or other event, this is revenue to be recorded.
Larger non-profit organisations might buy investments such as stocks or land. There are rules about this, so check your tax office for details.
- Grants and other lump sums
Remember, there are grants available for non-profit companies, central and local governments, and the private sector. All the money you receive in this way must be recorded in your accounts.
Think like a regular business
Just because you’re running a not-for-profit company doesn’t mean you can’t strive to make your business successful. The more efficiently you run your organisation, the better the service you’ll be able to provide to the people who need it. Here are some ideas:
- Hire the right employees
A non-profit organisation doesn’t technically have an owner. But it does still have people in positions of responsibility, such as the secretary or treasurer. It’s important that these people fulfil their roles to the best of their abilities. So make sure you hire well.
- Strive to earn more than you spend
You’re not technically trying to make a profit. But if you collect more in revenues than you spend, that extra money can be either reinvested or spent on extra services or facilities.
- Look for business opportunities
Network with business owners, talk to advisors and your peers. Learn about opportunities to raise money for your non-profit company or improve the services you offer.
- Talk to your ‘customers’
The people receiving your company’s services can be considered as customers. Whether it’s the members of the club you run or the recipients of your charitable services, talk to them. Find out what they really need from you, then tailor your organisation to match.
Choose good accounting software to keep an eye on the numbers
Just like any other business, a non-profit company is best run with one eye on the accounts. If you have the right accounting package you’ll be able to do this easily. Look for these accounting features:
- Ability to handle non-profit organisations
That might seem obvious, but some accounting software was written only with conventional businesses in mind. Try to find a package that was designed with at least some input and feedback from not-for-profit entities. It’s likely to work better for you.
- Full reporting
You might want to track things like accounts receivable ratios, liquidity graphs, monthly timelines of income and expenditure and other useful statistics. High quality accounting software will let you do this, with a ‘dashboard’ of useful numbers that you can access quickly and easily.
- Collaborate from anywhere, at any time
Many non-profit organisations are tight on money with no fixed office space, so they need to have employees working remotely. Cloud-based software make perfect sense here, allowing your accountant or bookkeeper to update the accounts wherever they happen to be.
- Tools for growth
Your business might stay small, or it might grow as you reinvest revenue to help people. Choose non-profit accounting software that can be scaled up for extra users, and extended with add-on apps to handle new features that you might need.
- Automate those manual time-consuming tasks
If you’re running a non-profit business in your spare time, you’ll want software that can handle all the important tasks for you – in one place. That way, you’ll get more done in less time.
Make the most of your non-profit status
There are advantages to running a not-for-profit organisation. Obviously the big one is not having to pay tax on net income (subject to local laws).
The paperwork tends to be lighter, too, as governments try to keep non-profit red tape to a minimum. For example, you may be exempt from providing regular balance sheets and statements of income.
All of this will hopefully leave your business with more money in its accounts. Use it wisely. Your organisation was set up either to serve its members or improve the welfare of a group of vulnerable people – or society in general.
By following best practices and carefully monitoring all the money received and spent, you’ll be able to serve those people well – and make a real difference in their lives.
Chapter 4: Why cloud accounting is good for business
If you want your business to work smarter and faster, cloud accounting software is a wise investment. Working in the cloud will give you a better overview of your finances and speed up your business.
What is this thing called the cloud?
Think about when you use internet banking. Every time you access your bank data, you’re using the cloud. The cloud makes data and software accessible online anytime, anywhere, from any device. The hard drive on your computer or laptop is no longer the central hub.
What is cloud accounting?
In the case of cloud accounting, you keep your business books online. That includes records of income and expenses, and assets and liabilities. The information is encrypted, much like a bank’s, so only people with the login can view the data. Businesses started using cloud accounting software – also known as online accounting software – in the early 2000s. Most systems come with tools for quoting, invoicing, managing bills and more.How cloud accounting works
Users subscribe to an online accounting software solution and move their books to the cloud. They can access their accounts from any web browser or from an app on their phone from then on. Most users connect the software to their business bank account, so that banking transactions flow automatically from the bank to the books. This saves them from a lot of data entry.
Benefits of cloud accounting software
Running your business accounts online has many advantages.
- Data about your sales or income and purchases can flow straight from your bank to your books, so you don’t spend hours transcribing them.
- You can see your current financial position at any time.
- Multi-user access makes it easy to collaborate online with your team and advisors.
- It’s online software, so there’s nothing to install or update, and all your data is backed up automatically.
- You can set up a dashboard showing important financial information like who owes you money, what bills are due, and how your cash flow is looking.
Accounting software shouldn’t be a chore to use
Small business accounting software that’s not available via the cloud can be tedious. It requires a lot of manual data entry and can suck up far too much of your time and effort. This doesn’t add value and takes the fun out of being in business. Cloud software can save your company time and money.
Problems with traditional accounting software
- The data in the system isn’t always up to date.
- It only works on one computer, and data gets moved from place to place, for example, on a USB drive. This is not secure or reliable.
- Only one person has user access. Key people can’t access financial and customer details.
- It’s costly and complicated to keep backups (if they’re done at all).
- It’s expensive, difficult and time consuming to upgrade compared to cloud accounting software, which updates automatically.
Why the cloud and accounting software are the perfect match
You can use cloud-based software from any device with an internet connection. Online accounting software keeps small business owners connected to their data and their accountants. The software can integrate with a whole ecosystem of third-party business apps. It’s scalable, cost-effective and easy to use.
In the cloud, there’s no need to install and run applications over a desktop computer. Instead, you pay for the software by monthly subscription.
Cloud security is world-class.
As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, if your laptop is stolen, using cloud software no one can access your data unless they have a login to the online account. With cloud software, your data lives online on secure servers instead of on your hard drive.
In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.
In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.
Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting.
Work smarter with accessible data in the cloud
The beauty of online accounting software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.
Software updates can be developed and delivered faster and more easily in the cloud. This means you don’t need to worry about installing the latest version, and you’ll get access to new features instantly. With cloud accounting software, you have the option to run your business remotely, from anywhere in the world. And when data is fluid and accessible, the possibilities are endless.
Chapter 5: Farm accounting: 10 points to consider
Whether you run a small farm with a few sheep or a herd of a thousand cows, farming is a different type of business to any other. So the way you manage your accounts will be different too. Find out the top ten factors to consider for farm accounting.
Accounting for the way you run your farm
Farming is unique. Few other types of business rely on living produce, whether it’s crops or livestock. That makes farm accounting more complex than other businesses when it comes to assets, liabilities, costs and revenue.
Depending on the country you’re in, farming can be quite a regulated and subsidised industry. Then there’s the weather, of course, which can have a dramatic effect on profit and loss.
Accounting for all these factors is far from straightforward. But with a little thought and planning it’s possible to get into a routine of managing the finances for every aspect of your farm’s operation. Here are ten essential points to bear in mind about farm accounting.
1. Your land is an asset
Properly managed agricultural land shouldn’t depreciate – it might even go up in value. But mismanaged land can take many years of careful nurturing to return to productivity, especially if it’s become highly acidic or drained of nutrients due to over-farming in the past.
The cost of maintaining your land should always be accounted for
This is an unavoidable expense if you want to keep your fields productive.
Nothing grows without water, and irrigation is a major cost in dry countries.
Soil that doesn’t drain well will rot crops and harm livestock. Improving drainage is a costly process.
- Soil pH management
Different plants require different pH levels. Acidity often means more weeds, though some crops may require more acidic soils. Careful analysis is required in order to add the correct nutrients to maintain soil pH at the appropriate level.
- Weed removal
Whether it’s manual extraction or spraying, weed removal is an ongoing expense.
- Pest control
If you’re growing crops, you’ll need to manage pests. This is a continuous fight with natural selection as pests develop resistance.
If looked after well, good quality land should remain productive year after year. So whatever it costs to keep your land in good condition, it is likely to be money well spent. Make sure you account for all these expenses.
2. Stay up to date with government subsidy schemes
Farming is a critical industry. If a country doesn’t have the resources to feed itself, it will have to rely on imports to keep its population alive. For that reason, most governments provide subsidies to farmers to help them out during the lean years, make particular types of farming more appealing, and ensure that the country never runs out of food.
These subsidies are different in each country, and they often change. One year you might find there’s a big subsidy on cheese production, another year it might be beef that’s subsidised. Quite often, governments get it wrong, leading to surpluses that drive down prices too far. The so-called ‘butter mountains’ and ‘wine lakes’ in Europe towards the end of last century were partly a result of poorly-managed subsidies.
Today subsidies are managed more efficiently, but that can mean they change more often too. So make sure you keep track of subsidies an,d account for them, especially if they’re made as direct payments. The more knowledge you have about subsidies, the more you can plan your farming strategy to make the most of them.
3. Adjust your farm accounting calendar to suit the government’s
When is a lamb not a lamb? When the government decides it’s a hogget. Farmers know that nature doesn’t follow strict timetables. For example, if lambs are born early, late or out of season, they might not fit into the government’s rigid definition of age. This can cause long-term headaches if you’re trying to keep a tally of the animals on your farm.
Resolving this can be a problem, particularly when farming breeds of animal that reproduce all year round or outside the usual seasons. Usually, the simplest solution is to go with the government’s definition of significant dates and livestock ages when doing your accounts. It may not be always be factually correct, but it’ll save you going through more complex calculations in the future.
4. Record changes in land use
As economies change, so does the type of farming that’s carried out on the land. For example:
- Pasture to crop production
A shift towards a more vegetarian society can lead to pasture being given over to cereal, fruit or vegetable production.
- Arable to native bush and plants
Some governments may pay farmers to return farmed land to its ‘native’ state by planting indigenous species and letting them grow wild.
- Carbon capture schemes
These pay farmers to change land use to forestry, as a way of ‘locking up’ carbon in new tree growth.
- Forest to livestock
In some parts of the world forests are cleared to make way for meat production, mainly beef for sale to burger chains.
If your use of land changes, even if it’s just a few fields, be sure to record it in your accounts. Ensure the land value (the asset) is adjusted if necessary and that your account for the sale of any stock on the land before. Or, if moving to a livestock farming model, be sure to record the cost of buying stock.
If you record these changes as they happen, it will make it much easier to keep your business accounts up to date.
5. Know your stock
Most farmers will know how many animals they have, of what type, breed and age, to within a small margin.
But animals breed and die, so the number will not remain static. And the old saying – where there is livestock, there is also deadstock – still applies, especially during cold winters and lambing or calving season.
So your stock numbers will change over time, and it’s essential to record these changes in your accounting software. Every head has a value, and that value should be recorded.
6. Understand depreciation
In most countries, the cost of new equipment can be offset against tax. And its value will depreciate over time as it becomes older, wears out or is made obsolete by newer technology. Ensure you understand the rules for depreciation in your country because your equipment’s value will affect your tax bill.
- Tractors, trucks, harvesting equipment and other farm machinery
Built to last but undergo heavy use and wear and tear in all weathers. Good quality equipment may hold its value but new technology is moving fast in this area, making older machinery less valuable.
- Computer equipment
Increasingly essential for managing a farm efficiently, computers depreciate faster than almost any other type of equipment.
- Hand tools, machine tools and repair equipment
Often long-lasting with a long depreciation tail, though low-quality items can fail sooner and be a poor investment.
Keep track of what you buy and account for its depreciation each year.
7. Account for loss
Farming is dependent on the weather, and sometimes the weather wreaks havoc. A hot, dry summer might be great for wine growers but it can be catastrophic for dairy farmers. Unseasonal storms can destroy an entire wheat crop, and unexpected rain can leave hay rotting in the fields.
It’s important to record any losses in your accounts, because that will reduce your overall tax bill. You won’t want to be taxed on something that’s been destroyed, or on a profit that you haven’t made.
8. Keep track of your profitability
Farm profitability can be difficult to measure. There have been various attempts to do so, including:
- Economic Farm Surplus or similar schemes
Favoured by accountants use various farm accounting metrics to give an overall performance rating.
- Month-to-month profit
A useful quick guide to how your farm’s performing right now, but no help in predicting future cash flow or profits.
- Working costs to milk solids
A popular one for dairy farm calculations, though be sure to keep your figures up to date and based on current milk solid prices.
- Revenue or profit per unit area
A measure of how much revenue or profit is generated for each unit area of farmland, for example, dollars per hectare. While this gives a good idea of current farm performance, it doesn’t always take underlying costs into account. Almost any farm can appear temporarily profitable if it’s had enough recent investment.
The only way to truly understand farm profitability over time is to use good quality farm accounting software. The additional benefit of doing this is that you can use it to make forecasts and predictions based on past trends.
9. Use the internet and the cloud
Most farmers have some form of internet connection these days. It’s not always fast – rural life has its downsides – but it’s usually enough for the basics. Some uses for the internet in general and the cloud in particular include:
- Checking stock prices and trends
Keeping up to date with these numbers can help farmers decide how best to utilise their land.
- Accessing kill sheets, tracking solid milk prices, etc.
Usually faster and easier than getting this information by mail or word-of-mouth.
- Long-range and short-range weather forecasting
Vital required knowledge for just about every type of farm.
- Using cloud apps
These new tools offer much faster access to information, accounting tools, resources and bank accounts.
With the internet, and especially cloud computing, farmers can take advantage of the latest farming software. Good farm accounting software will have direct feeds in place for banks and farm suppliers. This means you can manage all your resources, suppliers and partners from one place.
10. Consider hiring an accountant
It is possible to manage the accounts of a small or even medium-sized farm on your own, but the time and complexity involved mean it will be hard work. If you’re running a family farm, the farm’s day-to-day running one member of the family handles the accounts while another looks after the farm’s day-to-day running, However, there will still be a steep learning curve.
A good accountant can take most of the fiddly detail work off your hands, leaving you free to run your business the way you want to.
Although the expense might seem high, good accountants will be able to save you money in the long run. With their understanding of tax legislation they may be able to reduce your tax bill, perhaps enough to cancel out the cost of your accountant’s bill.
Account for every aspect of your farm
As we’ve seen, farm accounting is a big topic. Every farm is different, and we’,ve only scratched the surface in this guide.
Luckily, for farmers who want to go it alone there’s now a range of good quality software, most of it cloud-based, to help simplify the accounting process.
Even if you do hire an accountant, you’ll still need to keep some important financial information at your fingertips. When you and your accountant work together in the cloud so you can both access the figures, it’ll help your farming business run much more efficiently.
Chapter 6: Simplify real estate accounting
Whether you run a real estate agency or manage properties for clients, real estate accounting can be complex. But it doesn’t have to be that way. Re-Leased, a cloud-based property management software company shares some tips for making it easier.
Well-managed real estate accounting is vital
Working in real estate means dealing with large sums of money on a regular basis. That’s true whether you:
- run a real estate agency employing commissioned salespeople
- manage commercial or residential real estate for clients
- handle the accounts of a housing association
- run a building construction firm
- manage an investment trust
- provide residential sales and lettings services.
In all of these roles, well-managed real estate accounting can make all the difference. Mistakes could cost you (or your clients) a lot of money.
Re-Leased talks to us about how property management software can save time and ensure data is up-to-date.
Understanding the issues
The real estate industry forms a major part of the national and global economy. Accounting regulations are designed to:
- make the most of real estate’s contribution to GDP
- encourage wealth creation and distribution through investment
- try to prevent a repeat of the mistakes leading up to the global financial crisis of 2007.
The regulations in force don’t always achieve these goals – but they are the rules that you must follow. In particular, some countries now have stricter rules about:
- ownership transfer and identification
- money laundering
- valuing commercial and residential real estate
- offsetting expenses
- land, property and inheritance taxes
- managing and accounting for clients funds.
Talk to an accountant..
With all these regulations, it’s sensible to seek assistance if you’re new to real estate accounting. Before you even start your new business, talk to an accountant.
If possible, try to find an accounting firm that specialises in real estate accounting. There are many rules to bear in mind, and an accountant will help you follow them. They will also be able to:
- structure your business in the most tax-efficient way
- give you guidance on how to avoid unnecessary expenses
- use online accounting software to share updates, reports and forecasts with you.
In short, the right accountant will save you more money than they cost you. So hire an accountant before you start trading.
Estimate the value of your real estate
In other types of business, stock has a clear and specific value. But in real estate, transactions are less frequent. One house or office block might remain in the same hands for years or even decades, so it can be hard to figure out what its value is today.
Most real estate valuations are based on estimates. Until a transaction takes place, the real value is unknown. So estimates of value are part of selling or managing real estate for clients. They are usually based on recent sales of similar real estate in the same area.
Accurate asset evaluation is essential for accounting purposes. Taxes and other charges are often based on value.
If you inaccurately value the real estate you manage or sell, you could be liable to prosecution. So follow valuation regulations carefully, and keep accurate records in your accounting software.
Paying your staff
Real estate businesses often hire staff based on commission, or a percentage of the rental income they manage. Some use a combination of a fixed salary plus commission.
For agencies in particular, it makes sense to offer salespeople commission for completed sales. This is a big incentive for them to work hard. However, commissions can make payroll more difficult since your staff payments will fluctuate.
You can make this simpler by using accounting software that has payroll features built-in. Completed transactions can be assigned to particular staff members, with commission calculated automatically.
Remember, commissions are subject to income tax. It’s important to keep track of the figures, so you withhold the right amount of tax.
Work from anywhere with cloud-based software
If your staff work remotely or complete tasks while they’re out and about on a job, look at using online property management software for your real estate business. It will mean that your employees can work from anywhere, at any time, on any device – which is a real advantage in the property industry.
Make sure your business uses software applications that integrate with your property management software. When your software is streamlined and in sync, you’ll be more efficient and be able to offer superior service to your clients.
Keep your data safe and accessible in case of an audit
Property businesses are sometimes targeted for audit by government tax inspectors. This can be a stressful time for your business – and an expensive one. Government officials will go through your accounts in fine detail. They will be looking for anomalies and asking questions.
The tax office could audit you at any time, so it’s vital you keep your records safe and accessible. Good accounting software will help you do this, with an audit trail of every transaction. This simplifies the audit process, and you can immediately call up any record for inspection.
It also makes sense to talk to your accountant about audit insurance. This may cost a little extra, but it means you won’t have to pay a much larger sum to your accountant if you are audited.
Counting the costs
Financial reporting is a big part of real estate accounting. If you manage client holdings or housing association properties, there’s a lot to take into account. The same is true if you run a building construction firm.
It’s vital to be thorough when accounting for operational expenses. If you fail to account for every cost, you or your clients could lose money. Different countries have different rules about permitted expenses. Make sure you understand those rules.
Hiring a good bookkeeper makes sense here. A bookkeeper will deal with your accounts on a daily basis to keep all the figures up-to-date. That helps ensure that every transaction is accounted for and every cost recorded.
Let the software do the hard work.
Given the complex nature of real estate accounting, you need to use the right tool for the job. This isn’t something that can be managed using a spreadsheet. That’s not what spreadsheets were designed to do.
You need software that’s easy to use yet capable of handling all your transactions. Choose smart online cloud accounting software, because then you can:
- update your accounts securely from anywhere, even when on-site with clients
- quickly and easily share real-time financial data with your accountant or bookkeeper
- track your portfolio’s performance from anywhere, anytime – on any device
- automate much of the work, with scheduled payroll and direct bank feeds
- reduce your IT overheads – no servers required
- powerful reporting.
Like many aspects of business, your level of preparation influences your chances of success. Choosing the right accounting software will save you time, hassle and money as your business grows. Ensure you weigh up your options before you decide – it will make all the difference to your portfolio performance.
Be a real estate professional
If you want to run a successful real estate business, you have to take accounting seriously. That means using every possible resource to help you get ahead.
Hiring a good accountant and bookkeeper will give you an immediate advantage. Using online accounting software is also important. It will allow you to work closely with your accountant and bookkeeper.
Combining this with integrated property management software will streamline your accounting work and provide you with more time to grow your business.
Fortunes are made and lost every year in real estate. The people who succeed are the ones who plan well, and take accounting seriously. With careful control of the figures, you can build a solid business that stands the test of time.
Chapter 7: Why use accounting software for your retail business?
There’s a lot to think about when running a retail business. Good accounting software can make life easier, helping you manage jobs like inventory, staff payroll and taxes. Here’s how it could work for you.
Retail is about record keeping
As any retailer knows, success involves more than just exchanging goods for money. You need to understand product merchandising, advertising and marketing, stock control, customer service, market research, supplier negotiation and more.
And then there’s the accounts. Cash flow, payroll, taxes, ledgers and so on all have to be tracked carefully. With money coming in and going out all the time, you won’t want to let anything slip through the cracks.
All of this means that you can’t run a successful retail business without keeping detailed records. And that’s where good quality accounting software can help.
How retail accounting software can help
Accounting software isn’t just for accounts. Today’s accounting software can be connected to lots of other apps. That gives you potentially hundreds of joined-up tools to help you manage your retail business.
When deciding which accounting software to buy, here are a few points to consider:
- Was it designed with retail in mind?
Does the software work well for retailers? Read the online forums and specifications carefully.
- Does it have multiple access levels?
It’s best to have different levels of permissions for owners, managers and others with special authorisation. You won’t want everyone on the shop floor having full access to your accounts.
- Can it record transactions and manage payroll?
Nearly all accounting software handles transactions, but payroll might only be available as an upgrade. Check before you buy.
- Can it track inventory?
Some do, others don’t but can be seamlessly linked to add-on apps that can. Do your research, as this is a useful feature for retailers.
- Is it cloud-based?
If so, it’ll give you access to your accounts from anywhere at any time, lower support costs, automatic backup and easy connection to other apps.
- Is it scalable and extensible?
Scalable means it will grow as your company does, letting you add new users when you need to. Extensible means you can add new features to the software just buy purchasing new add-on business apps.
Whichever retail accounting software you choose, be sure to keep all your important information safely archived. This includes sales records, loan statements, bank information and tax data. You’ll need it all for your tax returns, and also if your business is ever audited.
12 top tips for successful retail accounting
Using your retail accounting software regularly, as part of your daily business operations, will help you get the best out of it. Here are some practical tips:
- Keep a record of every transaction
Every sale, every purchase, every staff payment, every tax bill. Record them all, to build up a clear picture of your business.
- Check and reconcile
Check all transactions regularly (ideally once a day) and make sure the numbers add up. Either do this yourself or have a bookkeeper do it for you.
- Review the difference between money coming in and money going out
Because that difference is your profit or loss. Keep a close eye on this to see how your business is performing on a day-to-day basis.
- Collect all required tax information
And make backups. Check local laws for the information you’re required to hold for tax and payroll purposes. Make sure it’s stored securely.
- Ensure ledgers are properly defined
Set up the right ledgers in your accounting software – ask an accountant to help here if necessary.
- Keep ledgers updated
Move your receipts from sales and purchases into your ledger. Do this every day if possible, or at least three times a week. You won’t want to fall behind, especially if business is booming.
- Get an outside perspective
Have your financial advisor or accountant review your ledger once a week or once a month. It’s important to identify discrepancies or a shortage of cash flow as soon as possible.
- Get regular reports
Leverage your accounting software’s powerful features. The best retail accounting software can generate useful reports to help you understand how your business is running.
- Keep a paper trail
It’s important to keep paperwork such as receipts and invoices, along with payment notifications for inventory or payroll.
- Keep business separate from personal
Have separate bank accounts for business and personal finances. Consider setting up separate bank accounts for expenses and incoming revenue too. That may seem like extra hassle, but it could make it easier to notice discrepancies.
- Remember to file tax returns
Keep on top of government deadlines for tax returns, employee tax returns and all other necessary reporting. See government websites for key dates.
- Watch your cash flow
Set up processes and controls to check your cash flow on a frequent basis. Share this information with a trusted advisor, such as your accountant. Don’t let a cash shortage take you by surprise.
Use the information
Technology is enabling retailers to manage their bottom line better. With all the numbers at your fingertips, good accounting software can draw up reports and presentations that will help you see exactly how your business is performing.
So don’t get left behind. The right retail accounting software will help you keep your finger on the pulse of your business and meet your customers’ ever-changing needs.
Chapter 8: Understanding cloud computing
Cloud computing got you perplexed? You’re not alone. Most of us talk about ‘the cloud’ without even realising what it really means. We’re clearing the air on cloud computing and how it can benefit your small business.
So what is the cloud?
The cloud is where you put all your data, all your files and even your software so you can access it all from any computer or device, anywhere, at any time. See the difference the cloud can make in how you work, bank, communicate, sell and buy.
- Traditional banking vs internet banking
It used to be the case that your financial data was only available to you when you were physically at the bank. With internet banking, your financial data is available online in the cloud. You can access it anytime, anywhere and on any device.
- Traditional mail vs web mail
Traditionally, your correspondence was only available at the post office. Webmail means that your mail is available whenever you’re online. You can send an email anytime, from anywhere and on any device.
- Traditional filing vs cloud storage
Your files used to only be accessible at the office. With online or cloud storage, your files are conveniently available for you whenever you’re online at any time, from anywhere.
- Traditional shopping vs online shopping
When your physical business is only open at limited times and places, customers have a limited time frame to view and buy your products. With online shopping, customers can enjoy the convenience of being able to view products and shop anytime, anywhere and on any device.
- Traditional accounting software vs cloud accounting software
With traditional desktop software, your data lives on your computer or laptop. This means it’s only available at limited times and on limited devices – and often to a limited number of people. With cloud software, your data lives online, so it’s always accessible from anywhere at any time if you have an internet connection. Good cloud software will also let an unlimited number of people use it at the same time.
The cloud isn’t all rainbows and sunshine, we’re tackling the tough questions about cloud computing so you can be prepared before moving your small business to the cloud.
- Isn’t cloud computing just the internet?
You use the internet to connect your device to the cloud, but the internet is just the connection – the cloud is where your data lives.
- Isn’t it possible to lose your data in the cloud?
Your data is actually much safer in the cloud than on your computer. Your computer can be stolen or corrupted quite easily, but cloud companies spend millions on systems and experts to protect your data.
- Isn’t the cloud an Apple product?
Apple has a product called iCloud, which uses cloud technology, but many other companies provide products in the cloud, such as Google, Dropbox and Xero.
- Aren’t you stuck if the internet goes down?
These days, the internet is like electricity – it’s very rare for it to go down, and when it does, you just have to wait a short time for it to be available again. In the meantime, all your data is safe in the cloud.
- Isn’t cloud computing just a fad?
The cloud has been around for years and it’s only getting bigger. Internet banking started over 15 years ago. Now the technology is so fast and cheap that it’s being used for everything.
- Isn’t cloud computing expensive?
It’s much cheaper because you only pay for what you use. You’re not paying for endless upgrades, system maintenance, support fees or additional hardware like backup systems.
- Don’t I lose control of my data?
You actually have much more control of your data since you can access, share and work with your info anywhere, anytime, on any device. You also control who has access – which you can revoke in an instant.
- Isn’t the cloud only for tech people?
The cloud is much easier for everyone – you just log in and it works. Imagine: you don’t have to install files, worry about versions, or deal with patches and upgrades. Just log in.
Let the cloud set you free
As you can see, the big benefit of cloud computing is that it lets you get at your data anytime, anywhere. The cloud breaks the chain between your office computer and your business information.
Need access to your business bank account while you’re on the move? No problem with the cloud. Want to buy office supplies while you’re on the train? It’s easy. Need to update your accounts while you’re out of the office? Now you can.
There’s no need to keep all your files and applications on a single computer with the cloud – no need to worry about backups, theft, data loss, support and upgrades. It’s all taken care of by dedicated teams of technical people. You no longer have to worry about what’s happening behind the scenes.
The cloud takes the stress out of computing. It lets you use computers, laptops, tablets, smartphones and other devices to access all your business information – seamlessly, securely, and in real-time. Just log in and go, anytime and anywhere.
Chapter 9: Accounting for a manufacturing business
If your business makes the products it sells, you could benefit from a well-chosen accounting system. But manufacturing businesses have their own special accounting requirements – here’s what you need to know.
Your business is unique
Manufacturing isn’t like other types of business. Retailers sell stock and service companies sell their time, but only manufacturers create new products from scratch.
This can lead to accounting problems. Manufacturing businesses have to account for their raw materials and processing costs, but they also have to work out the value of the finished items they create.
There are different methods of doing this. You’ll need to choose the right one for your business and use it properly. In this guide we’ll look at the methods available to you and some potential problems and useful benefits once you’re up and running.
With this knowledge, you’ll be able to choose the right accounting system to help your manufacturing business grow.
Get the right accounting deal for your company
No manufacturing company is too small for you to properly track its accounts. Of course, you’ll need the right accounting software. There are plenty of packages available, so don’t just buy the first one you see. Manufacturing accounting software will probably stay with you for the life of your business, so choose it wisely:
- Research the available products
Read forums, ask friends and colleagues, find out what other businesses like yours are using.
- Make sure it works for you. Choose accounting software that was created with input from manufacturers, so you know it’ll handle your business needs.
- Ensure it’s scalable
You’re starting small but you may not stay that way. Be sure to go for accounting software that will grow with you.
- Aim for the cloud
Cloud-based accounting software will let you access your accounts from anywhere and should cost you less up-front, as well as reducing your IT support costs.
Choose the right accounting methods
Once you’ve chosen the right software, you’ll need to decide how you’re going to use it. That means working out which accounting methods best fit your business. The examples here will give you an overview, but you should discuss this further with your accountant or financial advisor:
- Job order costing
Generally used for batch manufacturing (as opposed to product tracking). It’s calculated by recording labour hours and raw materials units required for each batch.
- Process costing
Handy if you run a production line, continuously manufacturing the same products or parts. Costs are accounted for by department instead of by job.
- Activity-based costing
For use when fine-tuning and improving a manufacturing process. This can also be tied to activities such as customer service. Time-driven activity-based costing is a variation of this, which accounts for costs over a given period.
- Variable costing
Would be used in a similar way to overhead costs, but this varies with production output – the more product you make, the higher the costs.
- Absorption costing
Used when the product cost includes all variables and fixed manufacturing costs – raw materials, labour costs and factory overhead (FOH).
- Other costing methods
Depending on where in the world you do business, other terminology might include standard costing, actual costing, weighted average costing and resource consumption accounting. These include elements of the methods listed above, but sometimes in a different structure.
If all this sounds confusing, don’t worry! It’ll make more sense when you start applying the methods to your own business. There’s no one-size-fits-all, and you may find yourself using different methods for different parts of your organisation.
Keep track of your business data
Once your accounting system is set up with the right methods, you’re ready to start tracking valuable business information. Some of the items to track include:
Expenses and revenues within a given period. Includes purchases, sales, repayments, loans, etc. Categorise them in the right ledger, whether that’s expenses, Accounts Payable, Accounts Receivable or elsewhere.
- Assets and liabilities
Necessary for the end of a given accounting period and useful at other times.
- Cash at hand
You need to keep a close eye on how much cash is in the bank at any time.
Inventory tracking is a detailed process that’s beyond the scope of this guide, so discuss it with your accountant or financial adviser. To learn more first, read up on ‘cash method’ and ‘accrual method’ for taxes, FIFO (first in and first out), LIFO (last in and first out) and inventory flow tracking.
Ideally, you’ll want to be able to do all this tracking online. That’ll make it easy to keep tabs on your business wherever you are. Cloud-based software will let you do this and will also produce a paper trail if required.
Analyse your manufacturing process – and improve it
With these accounting processes in place, you can use them for more than just tracking your financials for the tax office. You can also use them to find out how efficiently your business is running – and make change s so it runs even better. Some of the common types of analysis include:
- Cost analysis
A basic overview. Analyse costs over whatever period you define. Great for seeing what you’re spending and how input price changes affect product costs and profits.
- Constraint analysis: See where your business is being held back by identifying bottlenecks – the manufacturing process’s slowest parts. Widen the bottlenecks and production speed should increase.
- Margin analysis or profitability analysis
Find out how much profit you’re making on each product (or each distribution channel, each customer, each product line, etc.). Useful, but being replaced by constraint analysis which is considered to be more accurate.
- Variance analysis
How much did you budget? And how much did you actually spend? Variance analysis will find the difference and help you work out why it exists.
- Budget refinement
The methods of analysis above will help you refine your budgets for the next accounting period, though you’ll need to take into account more detailed production schedule information too.
Accounting can be a benefit, not a chore
As you can see, accountancy for manufacturing is about much more than just recording numbers. With the right manufacturing accounting software, you’ll get a fresh, valuable perspective on the way your business is running. Look on it as a tool for analysing and refining the way you do business.
Remember, your expertise is probably in manufacturing, not accountancy. So don’t be afraid to ask for help. Find an experienced accountant or other financial professional. Interview them before hiring them. Make sure they understand manufacturing in general and your business in particular.
With the right accounting systems in place for your manufacturing business, you’ll be able to optimise your processes. This will help you identify your most profitable product lines and customers and improve your budgeting, helping your business grow.