Biggest Technology Trends in Accounting and Finance
Technology has had a profound impact on accounting and finance for small to medium size businesses and not for profit organizations. Over the years, new technologies have revolutionized the way businesses operate and manage their finances. In this blog post, we will discuss some of the biggest technology trends in accounting and finance that businesses and non-profits should know about. We will also explore how these technologies are helping businesses achieve greater efficiency and productivity. Keep reading to learn more!
Cloud-Based Accounting Software
Over the past few years, cloud-based accounting software has become increasingly popular among accounting and finance professionals. There are several reasons for this trend. First, cloud-based software is more convenient and easier to use than traditional desktop software. It can be accessed from any device with an internet connection, which means users can work from anywhere. Second, cloud-based software is typically more affordable than desktop software, since it does not require a large up-front investment. Finally, cloud-based software is more flexible and scalable than desktop software, making it ideal for businesses of all sizes.
As the demand for cloud-based accounting software continues to grow, we can expect to see more businesses making the switch in the coming years.
Cybersecurity
One of the most pressing issues and one the biggest technology trends in accounting and finance is cybersecurity. The finance sector is a prime target for cybercriminals, as sensitive information such as credit card numbers and bank account details are often stored electronically. As a result, it is essential for businesses in the industry to invest in robust security systems. This can include anything from firewalls and anti-virus software to employee training on best practices. By taking these measures, businesses can help to protect themselves from the growing threat of fraud and cybercrime.
Blockchain Technology
Blockchain technology is one of the most talked-about trends in the accounting and finance industry. A blockchain is a digital, distributed ledger that records transactions in a secure, tamper-proof way. This technology has the potential to revolutionize the way businesses handle accounting and financial transactions. For example, blockchain-based systems can streamline the process of tracking and verifying transactions, and they can help reduce fraud and errors. Additionally, blockchain technology can be used to create “smart contracts” that automatically enforce themselves. Ultimately, blockchain technology has the potential to make accounting and finance processes more efficient, secure, and transparent.
Artificial Intelligence and Machine Learning
Accounting and finance have always been data-driven industries. In recent years, however, the advent of artificial intelligence (AI) and machine learning has taken this to a whole new level. Today, AI and machine learning are being used to streamline financial processes, identify trends and outliers, and make predictions about future market movements. In short, they are helping to make the financial world more efficient and effective.
For businesses, this means that they can save time and money on accounting and financial tasks. For consumers, it means that they can get cheaper and faster access to financial services. In the coming years, AI and machine learning will only become more commonplace in accounting and finance. Businesses that embrace these technologies can expect to gain a competitive advantage.
Mobile Payments and Digital Transactions
The growth of mobile payments and other digital transactions is one of the biggest technology trends in accounting and finance. Mobile payments refer to the use of mobile devices, such as smartphones and tablets, to make financial transactions. These transactions can be made via apps, text messages, or mobile browsers. Digital transactions are similar to mobile payments, but they can also include the use of electronic data, such as invoices and receipts.
The growth of mobile payments and digital transactions is driven by the increasing use of mobile devices and the demand for convenient, fast, and secure payment methods. In addition, mobile payments and digital transactions offer advantages over traditional payment methods, such as cash and checks. For example, mobile payments can be made without carrying cash or waiting in line.
Businesses of all sizes are starting to invest in mobile payment systems. It is expected that this trend will continue to grow in the coming years because businesses have been able to streamline their operations and improve efficiency.
Associations Are Not Getting the Most Out of Their Accounting and Bookkeeping
It is no secret that many associations are not getting the most out their accounting and bookkeeping. In fact, a recent study revealed that nearly 60% of associations are making do with outdated or manual processes. What is even more alarming is that less than half of associations said they were confident in their ability to produce accurate financial statements. Another recent study by the American Institute of CPAs found that less than half of all associations keep accurate financial records. This is a problem because it means that associations are missing out on important opportunities to save money and improve operations.
So, what can be done to turn things around? For starters, it is important to understand the root causes of why associations are not getting the most out their accounting and bookkeeping. Once you have a handle on that, you can start taking steps to get the most out of your accounting and bookkeeping practices. With the right people, processes, and technology in place, you can free up time and resources to focus on other areas of your association. Sound impossible? It’s not!
People
One reason why associations are not getting the most out of their accounting and bookkeeping is because they do not have a dedicated staff member who is responsible for overseeing these functions. The finances are often handled by someone who has other responsibilities as well. This can lead to a number of problems including inefficient record-keeping, lack of timely information about the association’s financial status, and poor decision-making due to lack of accurate data.
Another reason is that many associations do not have the necessary knowledge or expertise to manage their finances properly. This can lead to mistakes and financial mismanagement, which can have serious consequences for the organization. Hiring the right people is essential to getting the most out of bookkeeping and accounting. Without well-skilled and focused employees, businesses will not be able get their work done efficiently or effectively which could lead them down an expensive path financially as well demotivating other workers.
A better solution is to hire a professional accountant or bookkeeper who can devote themselves full-time to ensuring that the association’s finances are in order. This will allow associations to make more informed decisions and get the most out of their accounting and bookkeeping. Outsourcing bookkeeping and accounting services to a reputable, experienced third-party company is a budget friendly way to ensure that the tasks are carried out efficiently and effectively.
Processes
Associations may not be getting the most out of their accounting and bookkeeping because they are not customizing it to fit their needs. Every organization is different, and therefore each organization’s accounting and bookkeeping system should be tailored to meet specific needs. If associations are not taking the time to customize their system, they may not be getting all the benefits that they could be.
One of the best ways to learn about how to customize your accounting and bookkeeping system is to talk to other associations. Ask them what processes they have in place, what has worked well for them, and what has not worked so well. This will give you a good starting point for figuring out what works best for your own organization.
If you are unsure about how to customize your accounting and bookkeeping system, ask for help. Professional accounting and bookkeeping services can help you get set up and running in no time. Taking advantage of their expertise can save you a lot of time and hassle in the long run.
Technology
Another reason why associations are not getting the most out of their accounting and bookkeeping is technology. One reason may be that they are not taking full advantage of the features and benefits offered by their software. For example, many software programs offer users the ability to track spending and budgeting, as well as generate reports that provide an overview of the organization’s financial status. If associations are not utilizing these features, they may be missing out on important insights into their finances.
Another reason associations may not be getting the most out of their accounting and bookkeeping is because they are not properly training their staff members on how to use the software. In order to make the most of their accounting and bookkeeping system, staff members need to be familiar with how it works and what features are available. If associations are not providing their staff with adequate training, they may not be getting the most out of their software.
Get the Most Out of Your Accounting and Bookkeeping with Consultance
Associations working with Consultance Accounting Services, get the most out of their accounting and bookkeeping. We have years of experience working with a wide range of associations, and we can help you find the right software and processes for your needs. Consultance Accounting Services has helped many associations manage their accounting and finances more accurately, effectively, and efficiently.
Over the years, we have performed accounting, bookkeeping and CFO services for a wide range of associations. Whether it is how to invoice and collect membership dues, allocating functional expenses across programs or managing solicitation registrations, we will draw upon our industry knowledge to ensure your organization runs more efficiently and ensure that it is aligned with best practices and industry standards.
Throughout the year, we provide you with timely and accurate financial data and analyses to identify opportunities for growth and cost reductions. Consultance will help you improve the operations, efficiency, and profitability of your association. With Consultance handling the accounting, you can focus on what is most important… membership.
Learn More about getting the most out of your accounting and bookkeeping!
The last couple of years have sparked dramatic changes in our personal and professional lives. Now, the question that is on everyone’s mind is: what is next? Law firms have found new capabilities adapting and reshaping legal services by integrating law firm management software and cloud-based computing into their practices.
The 2021 Legal Trends Report published by Clio discovered,
“The majority of law firms adopted technology to a level never before seen in legal during the pandemic:
85% were using some form of software to manage their firms
83% were meeting clients virtually
79% were storing firm data in the cloud
73% accepted online payments
62% supported electronic documents and e-signatures
Research data also showed the vast majority—95% or higher in most cases— plan to continue to use these technologies beyond the pandemic…”
What is Law Firm Management Software?
Law firm management software is a complete system that supports efficient daily operation management for legal practices. There are many options and customizations available depending on the firm’s needs/ objective, size, and area of expertise. Cloud based options are available along with seamless integrations with existing programs and software.
Key Features of the Software
There are many different law firm software programs that exist, and each offers unique key features. Below are a variety of key feature options available.
Law firm management software provides many benefits for legal practitioners. It helps practices with organization, efficiency, time management, and reduces administrative errors.
A major benefit is consolidating and organizing information and resources in one place. This information can be accessed, managed, and maintained via app or on a home or office computer. Online payment options help firms to get paid faster. Increased productivity and time management is a huge benefit of firm management software. All cases, calendars, contacts, documents, and bills are organized in one location which creates efficiency and consistency.
Consultance Accounting is a technology-based accounting firm with the vision and expertise to deliver simplified, user-friendly, and cost-effective services while providing the most technologically advanced law firm management software and cloud-based technology solutions available. Contact Consultance Accounting to learn more.
What to Expect in the First Year of Running a Business
Starting a business is exciting! It is a year full of many firsts: first sale, first tax filing, first time to hire employees, first experience with rent or utility bills in your name. There are many tasks that you have never done before that you will have to master in order to be successful with your new venture. According to the Bureau of Labor Statistics, 20% of small businesses do not survive the first year, and nearly half of businesses close by their fifth year. In other words, starting a successful business is no easy task and it is very important to know what to expect in the first year of running a business. The startup and first few years can present some hurdles that often get overlooked. Consultance Accounting Services hopes to help prepare you for what to expect in the first year of running a business.
What Should I Expect in the First Year of Running a Business?
The first few years in business are crucial for building your company’s foundation and reputation. The lack of history with customers may make it more difficult to get them to buy from you over large companies they already do business with. Customers may be wary about buying from someone who is not well known because there is no proof that the product or service is good; therefore, the first thing you need to do is to make a good first impression.
You will not be a millionaire overnight. The first step is often the hardest but gaining customers and building your reputation takes time and money. During this time, it is very likely that you will run low on funds because many start-ups take more than six months before they see profits. It is important to remember that while these first few years may be difficult, if you perform well during this time, you will eventually gain stability and success.
Work-life balance is difficult. As an entrepreneur there is no one telling you what to do every day. However, without having employees or bosses around you constantly checking on your progress, it can be difficult to stay on top of tasks and meet deadlines. This first year will reveal how disciplined you are as a worker and where you might need improvement.
Say goodbye to sleep. One thing that first-time entrepreneurs do not anticipate is the amount of work they will end up doing late into the night or first thing in the morning before anyone else arrives at their office. You will end up working more hours than ever before, but this first year is crucial for showing customers and potential investors what you’re capable of so try not to lose too much sleep over it.
You might think taxes are only one thing when running a business, but they will not always be the same form or due date each month. You will often need to file every quarter instead of once annually like most people do for their personal taxes. This means if you have not already created an LLC (which most people don’t decide until after several months in business), start researching now what forms and paperwork you will need to first create the LLC and then file taxes as an LLC. You also will want to research any other forms your state may require on top of federal ones, such as paying sales tax every month (if applicable in your area). Hire an accounting services company to relieve some of this burden.
You will first learn to manage your own personal and business checking accounts, that means everything from paying bills to buying supplies or making deposits. And because you are a small business you definitely do not want any bank fees for anything because it can add up quickly if not monitored closely. It’s also a good idea to get an accounting software program since this is another expense you will need to take care of along with filing quarterly taxes. You will then become familiar with how these programs work which should include an inventory-tracking feature so that you do not buy more than what you really need and perhaps can sell later when needed.
Tips for Overcoming First Year Challenges
Prioritize
You need to make sure you prioritize tasks. Look at what needs to be done first and stick to that list until everything has been completed. It is easy to get distracted by all the other things begging for your attention, but if you focus on one task first, it will allow you your time and space when needed.
Find a Mentor
Do not try to do this alone! There are plenty of people who have had more experience than yourself and can offer advice and guidance during rough times. Having someone knowledgeable in the industry around while starting the business can help with troubleshooting problems and making better decisions in general.
Create a Schedule
When first starting out, it is difficult to know how many hours you will end up working, so it is important that you create your schedule around that. You want to be sure that you have built in some time for yourself first. Remember the first year is all about proving yourself to clients and investors alike so make sure you have a solid work ethic first.
Be Patient
The first year is not going to go how you planned or resemble any other first year of a business before. It will take more time than you expect and require more effort on your part, but if you have a good plan at least there will be something for potential customers and investors to see from the beginning. Anyone can start a company, but it takes skill and experience to run one successfully during its first few years.
Contact the Professionals
First-time entrepreneurs should expect to work hard in their first year of owning a business. The first year is all about gaining customers, establishing your reputation, and proving yourself capable of running the company. It takes time to build up these things so first-time entrepreneurs should come into the first year with patience, realistic expectations, and an understanding that this first year will be unlike anything they have done before.
If you want your business to make it in the long run, you must build a strong foundation because the first few years of business determine long term success.
Consultance Accounting provides a broad offering of accounting services that can be customized to meet your specific needs. What makes us different is how we deliver our services. Through our people, processes, and technologies, we’ve proven our unyielding commitment to exceptional client service. Our goal is not only to provide you with top-notch, reliable accounting services, but also be your trusted business advisor. Contact Consultance Accounting Services today for any of your business needs.
Artificial intelligence is reshaping many professional fields, including accounting and bookkeeping. As small business owners, we are always looking for ways to stay ahead of the curve and keep up with the latest trends. With the advancement of artificial intelligence (AI), it is important that we understand how this new technology will affect our businesses. In the past, bookkeepers would have to manually calculate and input data into their computers, but now they can rely on AI technology to do it for them. This means that businesses will save time and money, as well as avoid errors from human error that happen during data entry. Let’s explore how AI is revolutionizing small business, bookkeeping, and the accounting industry!
Benefits of Artificial Intelligence in Accounting & Bookkeeping
There is no doubt that AI is changing the landscape of business, with some experts predicting that up to 40% of jobs will be replaced by robots and AI in the next decade. While this may seem like a negative thing, it could actually lead to increased efficiency and productivity in the workplace. Fortunately, AI is not going to be replacing humans at least not any time in the near future. AI has the potential to be integrated into the day-to-day tasks of forward-thinking accountants, streamlining tedious processes, and reducing the chance of error.
AI is an exciting prospect for small businesses because it allows owners to focus on their knowledge-based duties, leaving the repetitive tasks to the technology. Rather than wasting time with monotonous tasks such as data entry, accountants can focus their efforts on all the work that requires a human touch, such as analyzing and interpreting data and using that information alongside human intuition to make educated decisions on how the company should proceed.
Additionally, AI has the potential to make accounting and bookkeeping more efficient and productive. In a traditional bookkeeping setting, accounting mistakes may go unnoticed. AI can detect errors immediately, ensuring that your books are always accurate. Machines may also be able to provide real-time financial insights, which often take accountants extra time and effort to discover.
AI Can Match Payments and Invoices
Although AI integration is naturally going to vary depending on the unique needs and preferences of accountants, clients, and companies, some accounting processes are more likely than others to be handled by AI and machine learning. One major example is clearing invoice payments.
Currently, dealing with payments from multiple invoices can be quite difficult, often requiring the accountant to dig through and match invoices or contact the client for clarification, a process that can be very time-consuming, especially when multiple clients and invoices are involved. Machine learning allows AI to analyze the data and clear out invoices or generate new ones.
AI Can Help Businesses Remain Compliant
Expense submissions should be accurate and compliant with company guidelines. AI can detect inaccuracies and flag improper submissions for removal or human approval. This real-time auditing would be quite tedious for human accountants. Using machine learning, AI can learn the company’s policies and analyze data in bulk to ensure that there are no discrepancies.
AI Can Analyze Data and Perform Fast Risk Assessments
AI can also perform large-scale tasks that would be virtually impossible for humans to complete in a timely manner. For example, AI can analyze the data from every accounting project ever completed in your company. It can then provide valuable insights on how to proceed with a potential project idea most effectively or even recommend that the company scraps it all together. While a human accountant might arrive at the same conclusion, it would take countless hours to pore through the data. AI allows for fast risk assessment, helping businesses to move forward on a more efficient timeline.
Consultance & Artificial Intelligence in Accounting
Artificial intelligence is becoming a major force in the bookkeeping and accounting world. For more information about small business accounting and how your business may benefit from AI, contact Consultance Accounting services. Consultance accounting provides the very best technology-based and operationally integrated accounting solutions for the small and medium-sized business market. From forecasting revenue projections to streamlining categorization and organization, Consultance using the latest technology gives you the competitive edge, and it is only a matter of time before AI becomes adopted widely.
Business Process Management and People Process Technology
In 1964, business management expert, Harold Leavitt wrote a paper called “Applied Organization Change in Industry” in which he conceived a model for creating change in an organization. The model is the People Process Technology (PPT) Framework, also referred to as theGolden Triangle, and it is a Business Process Management(BPM) Strategy. The Association of Business Process Management ProfessionalsdefinesBPM as, “A disciplined approach to identify, design, execute, document, measure, monitor, and control both automated and non-automated business processes to achieve consistent, targeted results aligned with an organization’s strategic goals.” Simply, BPM analyzes a business’ current status and recognizes areas of improvement to establish a more efficient and effective organization.
People Process Technology supports BPM as a basis for implementing organizational changes, improvements, and reengineering. As separate components, people, process, and technology are essential for organizational growth, transformation, and management. To achieve organizational efficiency, all three elements must balance and sustain good relationships and interactions among themselves.
People
People are the most crucial part of the triangle. ‘People‘ refers to the employees within the organization. The people are the ones who complete the tasks in the process, sometimes by means of technology. One of the main issues regarding the people aspect of this method is people are occupied or busy. Thus, the managers will have to wait for these right people to become available. Focus on the availability of the most productive employees. Hiring the right people is essential. Businesses need to identify their key employees with the right skills, experience, attitude, and values that align with the company’s culture. People also require clearly defined roles, so everybody knows their responsibilities. Thus, ensuring that the team consists of the right people with the right communication is also critical.
Process
Process refers to the steps or actions to produce a particular goal. The process in the PPT framework mostly answers the “how” aspect. How will we reach our goal? How do we utilize the people and technology to reach this goal? Without processes in place, people don’t have a clear idea of what to do. Without people in place, processes don’t get done. Implementing processes in the workplace is not as easy as assigning a task or suggesting an activity. A lot of planning and coordinating goes on behind the scenes.
Here are some tips when introducing new processes in the workplace:
Make sure that your employees understand what their role is in the workplace
Identify all of the steps that you and your team members need to complete to reach the goals that you’ve set
Provide clear instructions to all of the individuals who are a part of the change
Implement a review system that will help your employees understand what you’re expecting of them with each new change
Determine what metrics and other measurements you’ll use to determine the success and completion of a task
Technology
The technology provides the tools that the people can use to implement the process. It also helps automate some parts of the process. Innovators and experts are coming up with new, helpful technologies and tools every single day. However, technology alone cannot solve all of your problems. Given the People, Process, Technology Framework, technology needs people and processes to work correctly. Too often companies make huge investments into technology to gain strategic advantages. The people and processes are a second thought. Then they try to fit the people and process into this new technology. But this won’t bring out the best outcome. Technology is nothing without the right people following the right process to support it. Thus, technology should always be the final consideration.
Consultance knows that the accounting function of every organization is part of a complex operational backbone that integrates with all other critical functions of an organization. Our professional staff works closely with our clients to re-engineer their accounting processes by employing the latest technologies to eliminate inefficiencies and wasted effort.ConsultanceAccounting leverages exceptional talent, proven processes, and top technologyplatforms to deliver timely and accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.
Everything starts with a conversation. We’d love to talk with you, so we can better understand your specific needs and learn more about your organization. We can walk you through our service offerings and provide you with a demo on areas of interest. Give us a call or fill out our contact form online!1-877-232-6788We look forward to talking to you!
The first commercial cryptocurrency transaction was in May 2010… for a pizza. Seven years later, a crypto millionaire purchased a $200,000 Lamborghini Huracan by cashing in 45 bitcoins. The largest real estate sale occurred the following year when a Miami mansion was sold for 455 BTC. Most recently, Russell Okung, a former offensive lineman for the Seattle Seahawks, requested half of his $13 million contract be in Bitcoin. Some major corporations that accept crypto currency are Starbucks, Home Depot, Overstock, Tesla, Microsoft, Amazon, Visa, PayPal, Coca Cola, Whole Foods, and Expedia. It appears that crypto is everywhere and everyone is jumping on the bandwagon. However, there is still confusion surrounding this new currency. Consultance Accounting has created this informative blog with resources in hopes to put your mind at ease and answer some questions about cryptocurrency basics, cryptocurrency accounting, crypto accounting software, and more.
Cryptocurrency Basics
What is Cryptocurrency?
Investopedia explains, “A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”
Cryptocurrency is not tangible. It is a digital representation of value and exists in the form of data. It is a form of payment exchanged for good and services.
*Think about going to an arcade as a child. In order to play you needed to have certain coins or tokens to put into the arcade games. Handing the cashier money and in exchange receiving a specific amount of game tokens used to play the games, is essentially the concept of cryptocurrencies.
Why is Crypto Popular?
Crypto allows individuals to take complete control over their assets because it is not issued or controlled by a central authority or by the government. It is a decentralized market meaning that technology allows investors to deal directly with each other instead of operating in a centralized exchange. Virtual markets that use decentralized currencies (cryptocurrency) are an example of a decentralized market. A decentralized market uses various digital devices to transmit, and show ask prices or bids in real-time. This allows buyers, sellers, and dealers to be located in different places and still able to conduct transactions.
“As decentralized platforms, blockchain-based cryptocurrencies allow individuals to engage in peer-to-peer financial transactions or enter into contracts. In either case, there is no need for some trusted third-party intermediary such as a bank, monetary authority, court, or judge. This has the potential to disrupt the existing financial order and democratize finance. The size of the cryptocurrency space has grown exponentially in the past decade, with new innovations and a collective market cap of nearly $2 trillion”
Types of Cryptocurrency
There are over 12,170 different cryptocurrencies as of September 2021. The most popular are Bitcoin Cash (BCH), Cardano (ADA), Ethereum (ETH), Binance Coin (BNB), and Tether (USDT). Other valuable cryptocurrencies are Polkadot (DOT), Stellar (XLM), Litecoin (LTC), Chainlink (LINK), Dodgecoin (DOGE), and Monero (XMR).
Crypto News
Cryptocurrency Accounting
There is a lot of confusion regarding accounting for cryptocurrency especially for businesses. Generally Accepted Accounting Principles do not currently address cryptocurrency and it is not considered cash or inventory but for federal tax purposes it is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. Crypto can be indefinite-lived intangible assets, accounted for under ASC 350. Crypto is noted on the balance sheet at cost (whatever you paid for them). It is not amortized but are tested for impairment annually (or more if suggested the asset has become impaired). The impairment is the difference between the carrying value on the balance sheet and the fair value. More confusion arises because a business can write crypto for losses, but not for gains.
Crypto Accounting Software
Gilded, a B2B blockchain payments and accounting software provider, has released Compass, a solution that enables advanced mapping capabilities between blockchain wallets and a business’s general ledger.
Compass integrates with Intuit’s QuickBooks Online. Gilded aims to unify the worlds of traditional finance and digital assets. With Gilded, QuickBooks Online users can reconcile cryptocurrency transactions alongside fiat transactions in QBO.
ICO
The market for Initial Coin Offerings (ICOs) and digital assets are growing in popularity. Businesses and individuals are using ICOs to raise capital and investors are looking for new investment opportunities. With any investment there are risks. Before investing make sure you do your research. Investigate the individuals and firms offering the investment and check out their backgrounds on Investor.gov and by contacting your state securities regulator.
Consultance Accounting has knowledgeable technologically advanced cryptocurrency accounting experts. Our professional accountants work with crypto clients and help them succeed at every business level. Consultance guides clients every step of the way. The Consultance team is made up of highly experienced specialists, with expertise that includes accounting and bookkeeping, state-of-the-art accounting technology, compliance and ethics, financial analysis, process and systems re-engineering, risk management, and accounting system optimization.
Consultance Accounting provides a broad offering of accounting services and tools to improve efficiencies and decision-making in a customizable format to meet each client’s specific needs. We are experts in our fields and are fully certified in the technology platforms we offer our clients. What makes Consultance different is how we deliver our services. Through our people, processes, and technologies, we have proven our unyielding commitment to exceptional client service and knowledge from industry experts. Contact us today for more information about any of our services including cryptocurrency accounting.
Accounting Methods, Glossary, Financial Statements, & Fundamental Accounting Principles
Business owners take on many different responsibilities and every industry and business is unique. Owners may take care of the marketing, sales, management, staffing, customer service, daily operations, planning, and financial aspects of the business. Each industry and aspect of business has its own lingo that is necessary to effectively communicate. Sometimes accounting terms can be overwhelming but knowing the basics are essential for overall business success.
To assist business owners with financial operations, we have created a financial and accounting glossary which includes accounting methods, financial statements, important accounting terms, and fundamental accounting principles.
Accounting Methods
Accrual Basis Accounting
Public companies and many businesses and professional services in the United States are required by law to use accrual basis accounting. The main concept of accrual accounting is not when the money changes hands, but when the money is earned. Basically revenues are to be recorded when the customer is invoiced and expenses are to be recorded when they are incurred, rather than when the actual payments are made. Accrual basis accounting gives a more accurate picture of the long-term health of the business.
Cash Basis Accounting
Cash basis accounting is a simple method of keeping track of revenue and expenses. Many people use cash accounting in their daily lives when balancing a checkbook. The main concept of cash accounting is the actual flow of money. Revenue is recorded when the customer makes payment and expenses are recorded when paid out. This method is often used by sole proprietorships and small businesses that do not keep inventory. If the customer has credit terms, the revenue is not recorded until full payment is received, regardless of the invoice date. Similarly, if the business incurs an expense on credit, the expense is not recorded until the invoice is fully paid.
Financial Statements
Balance Sheet
A balance sheet is a snapshot of a company’s financial position (assets, liabilities, and equity) at a particular point in time. This is the master record of a business’ finances and shows what your business owns and owes. It is organized into two main columns, with assets in one column and liabilities and equity in the other. The two sides always equal each other.
Assets = Liabilities + Equity
Cash Flow Statement
The cash flow statement measures whether your cash balance grew or shrank over the past period. It shows the movements of cash and cash equivalents in and out of the business. The cash flow statement is an important tool for evaluating business health, as it is possible to show a profit on the income statement while draining cash from the business.
Income Statement
The income statement (also known as a Profit and Loss Statement) shows your revenues, expenses, and profit for a particular period. It is a snapshot of your business that shows whether your business is profitable at that point in time (month, quarter, year, whichever time you pick).
The basic equation of the income statement: revenue minus expenses equals profit or loss.
Statement of Owner’s Equity
The statement of owner’s equity (also known as Statement of Retained Earnings or Equity Statement) explains the changes in retained earnings. Retained earnings are on the balance sheet and are most influenced by dividends and income
Accounting Terms
Accounting period
An accounting period is a specific period of time covered by financial statements. An accounting period can be one month, one quarter, or one year, depending on the business.
Accounts payable AP
This account is used to describe all unpaid expenses. AP represents the money that your business owes for goods and services. A/P can be anything from your utility bill to the rent on your office. You typically receive a bill from the vendor for these goods and services
Accounts receivable AR
This is the opposite of accounts payable. AR is money owed to your business for good and services that have been provided but that have not yet been paid. It can be considered an asset.
Accrual accounting
Accrual accounting records transactions when they occur rather than when payment is made or received. Most regular businesses use the accrual accounting method.
Allocation
This is the practice of spreading the cost of an expense across multiple accounting periods on your balance sheet. A common example is depreciation. Suppose you purchase manufacturing equipment for your business. You can spread the cost of that equipment over several years.
Asset
The things a company owns in order to run the business and it has a monetary value. This can include buildings, cash, land, equipment, tools, vehicles, furniture, and inventory. Assets can have varying degrees of liquidity, how easy it is to spend, like cash. Other assets are harder to spend, like property, which first must be sold or liquidated.
Bank Reconciliation
This is the process by which you ensure that your general ledger (GL) accounts are in balance with your ending bank balance for a specific month.
Capital
Capital is the money that your company can use for operations and investment. It is calculated by subtracting liabilities from assets. It can include cash, but it can include non-cash assets that can be leveraged or liquidated for spending. Capital is not the measure of how much the company is spending, but rather the amount the company could spend.
Cash accounting
Cash accounting records payments when they are received and expenses when they are paid, not when they’re incurred. Most sole proprietors and very small businesses use cash accounting, but if you have employees, you must use the accrual accounting method.
Cash flow
This is the amount of cash the company is expected to receive over a select time frame. Monthly cash flow is how much cash you anticipate receiving in a month.
CPA
A certified public accountant is a designation conferred by The American Institute of Certified Public Accountants. CPAs pass a uniform certified accountant exam and are licensed in their home state. The designation denotes a certain level of mastery in accounting to verify that an individual is properly qualified to work in this field.
Cost of goods sold COGS
Cost of goods sold is the direct cost of producing or purchasing the items you have for sale. This can include anything from materials and labor to the cost of a product you purchase for resale. It is important to keep track of your COGS to properly calculate your gross and net profit.
Credit
Credit is an accounting entry that is made on the right side of any accounting transaction. A credit increases a company’s liabilities or equity account and decrease its assets.
Debit
A debit is the inverse of a credit. A debit paid to a business increases its assets. A debit paid by the business decreases its liabilities. The double-entry accounting method pairs every debit and credit in the ledger.
Depreciation
Depreciation measures how much value an asset loses over time. A classic example is the depreciation of a company vehicle. Each year, the vehicle decreases in value. The process of lowering an asset value is depreciation.
Diversification
Diversification is the process of spreading investments into varied assets. The goal is to minimize risk by reducing the percentage of assets that can lose value resulting from a single event or transaction.
Expenses
Expenses are what your company pays. Generally, they are categorized as fixed, variable, accrued, or operation.
Fixed expenses (FE) are payments that are the same each period, like rent or mortgage.
Variable expenses (VE) change regularly. Labor or inventory replenishment are common examples.
Accrued expenses (AE) are expenses that have yet to be paid.
Operation expenses (OE) are indirect costs, such as advertising or taxes.
Equity
On a balance sheet, equity is determined by subtracting liabilities from assets. Owner’s equity is a different concept that describes how much of something is owned by a person or business. Property equity demonstrates how much of a mortgage is paid, while stock equity describes the percentage of a company that is owned via stock.
General ledger
This is the complete record of a company’s financial transaction over the lifetime of the organization, including assets, liabilities, revenue, expenses, and equity.
Gross profit margin
Calculated by dividing a company’s gross profit by its net sales during the same period.
Gross profit
This is the company’s profit excluding overhead expenses. It is often used as part of the calculation to evaluate a company’s value.
Insolvency
Insolvency is what occurs when a company or individual cannot pay its debts. Insolvency is often projected by comparing all expenses to revenue. If revenue is insufficient to cover expenses, insolvency becomes inevitable.
Inventory
Inventory is the list of sellable goods owned by a company. Inventory is usually classified as finished goods (which are ready for sale), work-in progress goods (that require assembly) and raw materials (that will become other goods in time).
Liabilities
liabilities are debts or money the business owes. Accounts payable, bonds, loans, taxes, unpaid bills, and accrued expenses are different types of liabilities
LLC
A limited liability company (LLC) is a business structure in which the owners are not personally accountable for company debts or liabilities.
Net profit and loss
Net profit is how much money the business has made after subtracting every single expense. Net loss is how much money the company lost after this same calculation if profit is negative.
Overhead
This is the general cost of doing business, but it does not include the cost of goods that are sold. Utility payments, printing costs and property taxes are examples of overhead.
Payroll
Payroll is the total compensation a firm pays its employees for a given time. It includes keeping track of hours worked, distributing payments, and dividing money for Social Security and Medicare taxes are all part of the payroll process.
Retained earnings
Also called an earnings surplus, retained earnings are a company’s net income left over for the company to spend after paying dividends to shareholders. The management of a business usually determines whether to keep the profits or distribute them to shareholders.
ROI
Return on investment is a calculation that demonstrates how much money is made from an investment relative to its cost. An ROI can be calculated for money spent on advertising and marketing. To determine ROI, the benefit of the investment is divided by the cost of the investment.
Revenue
Revenue is the total amount of money earned by the business. It is used to calculate gross and net profit.
This type of bookkeeping system tracks a company’s financial activities by recording cash, taxable income and tax-deductible costs coming in and out of the firm as one entry per transaction. Single-entry bookkeeping can be performed through accounting software or simple tables. It is far less complicated than double-entry bookkeeping, which necessitates two entries for each transaction.
Variable cost
Variable costs are defined as a company’s costs pertaining to the number of goods or services it produces. Variable costs increase as output goes up and decrease as output declines. In contrast to variable cost, fixed cost refers to a company’s costs that remain constant regardless of production, such as rent and insurance.
Fundamental Accounting Principles
Economic entity assumption
A business is an entity unto itself and should be treated as such.
Monetary unit assumption
All financial transactions should be recorded in the same currency.
Specific time period assumption
Financial reports should show results over a distinct period of time.
Cost principle
The cost of an item doesn’t change in financial reporting.
Full disclosure principle
All information that relates to the function of a business’s financial statements must be disclosed in notes accompanying the statements.
Going concern principle
A business will continue to exist and function with no defined end date.
Matching principle
Businesses should use the accrual basis of accounting and report all financial information using this method.
Revenue recognition principle
Revenue is reported when it’s earned, regardless of when payment is received.
Materiality principle
When an accountant finds a transactional error, they can use their professional judgment to determine if the error is immaterial to the business.
Conservatism principle
When there is more than one acceptable way to record a transaction, expenses and liabilities should be recorded as soon as possible, and revenues and gains should only be recorded when they occur.
A recent study about small to midsize businesses in the United States revealed:
50% of companies that track metrics in real-time met all their goals in the last 12 months compared to only 24% of companies that did not track in real-time.
92% of companies that tracked their metrics in real-time met some or all their goals in the last 12 months – compared to 64% of companies that did not track in real-time.
Only 14 percent of SMBs are monitoring their KPIs in real-time.
It is concluded that small to midsize businesses that track and monitor their metrics in real-time are twice as successful as those businesses that do not.
All KPIs are metrics, but not all metrics are KPIs. Metrics and KPIs are sometimes confused and used interchangeably, which is understandable because they are similar. However, the difference between the two is within the creation and implementation of an organization’s strategic plan.
What are KPI’s?
KPIs, Key performance indicators, are a set of quantifiable measurements used to evaluate a company’s overall long-term performance. KPIs specifically define the strategy and help determine if a company is meeting their specific strategic, financial, and operational goals.
Like KPIs, metrics also track and provide data about a company’s standard business process, but they are less critical in the comparison and measurement of performance against the strategic goal. Metrics are important in reaching an objective, but it is just a data point that does not clearly relate to the objective. Metrics track process and KPIs track reaching the target or goal.
Why KPI’s and Metrics are Important for Businesses
Measures financial performance
Increases profitability
Increases business growth
Focuses goals and strategies
Provides a way to see if your strategy is working
Focuses employee’s attention on what matters most for success
Helps analyze performance
Monitors company health
Highlight any issues that might otherwise go unnoticed, meaning that efficiency and productivity are given a boost.
Consultance Accounting is a technology-based accounting firm with the vision and expertise to deliver simplified, user-friendly, and cost-effective accounting services while providing the most technologically advanced accounting software solutions available. Our commitment to continuous innovation improvements enables us to provide you with real time access to your financial information in the most useful formats possible and to improve the financial health of your business or organization. Contact Consultance Accounting to learn more about FATHOM and other KPI dashboards that will help your business flourish.
Everything seems to be virtual these days, virtual learning, virtual meetings, virtual events, virtual tours, and even virtual accounting. However, virtual accounting has been around for a quarter of a century but has recently gained more popularity as a result of the pandemic. So, what is virtual accounting? Virtual accounting, also referred to as remote accounting, flexible accounting, or cloud accounting, allows accountants to work from any location instead of commuting to a client’s physical business or office. The business grants the accountant remote access to their server, financial documents, and software programs. Many virtual or cloud-based accounting firms offer a variety of business services. Consultance Accounting specializes in accounting system optimization which involves a customized approach to integrating the best technology available.
What are the Benefits of Virtual Accounting?
Saves Money
Typically, virtual accounting services are less expensive than an inhouse accountant. Hiring a full-time employee to do accounting for your company or hiring an outside accounting firm can get expensive. Virtual or remote accountants save a company money because they do not need to travel to a business to get documents or commute to an office to work which reduces travel expenses and overhead costs.
Saves Time
Virtual accountants save companies time because less time is spent hiring and training employees for the accounting position. Automating processes save time and reduce inconsistencies in financial management. Bookkeeping and accounting documents are automatically retrieved which reduces the time spent with document management. For example, clients can scan receipts and bills which are automatically posted to QuickBooks instead of having to enter the information. This also allows employees and business owners to spend time on what is important.
Convenience and Availability
All information is securely hosted in a cloud which is accessible anywhere anytime. If a business has a question or needs information, a virtual accountant can access that information while at their child’s soccer game or when they are out of town. Conversely, if a business owner needs a financial report, contract, employee payroll, or payment history the business owner can access the cloud software and get that information in real time from anywhere. Real-time access to key financial information helps with better timely decision making, cost control, and budget management.
Making the Switch to Cloud-Based Accounting
Consultance Accounting is a technology-based accounting firm with the vision and proficiency to deliver efficient, manageable, and cost-effective accounting services. We collaborate with best-in-class technology partners to create a customized platform that will substantially reduce the amount of time and effort you must spend on your accounting activities while receiving the highest quality accounting services. The results will be simplified document management, improved cash management, and real time metrics and analytics that provide you with greater insights into the financial health of your organization. You will be able to make better business decisions – that impact your bottom line – with greater confidence. Contact Consultance today for assistance with making the switch to flexible accounting or any other accounting and bookkeeping needs.