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How to Manage Your Overdue Invoices

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Do you analyze your business accounts and your accounts receivable from time to time? If yes, then sometimes, you might have come across overdue or pending invoices. You might surely have some clients who don’t pay on time creating potential cash shortfalls and stress.  Getting your payments from some customers on time can be a little tricky if they follow the same pattern every time you issue invoices to them.  The challenge of getting your clients to pay in a timely manner can be managed easily. Here are some helpful tips suggested by accountants in Edmonton that will help you deal with your overdue accounts receivable.

Explain Your Terms and Expectations

It is important to explain your company’s invoicing and billing policies and expectations to your new debtors to avoid any confusion or disputes later. Be clear as to your company’s payment policy. For instance, most businesses offer a 30-day payment policy. Also, mention to your clients that if they fail to pay within your payment duration, you will charge interest on the payable amount. Furthermore, mention all other crucial invoicing terms that you have for your clients.

Follow Up and Send Reminders

Follow up with your clients after the service has been provided, the products have been delivered, or the project has been completed. Remind them on a regular basis during your payment grace period. You can either send gentle reminder messages, emails or official reminder letters. Don’t overdo or become too pushy while following up and sending reminders. Repeated follow-ups might irritate your clients. And most important, do not get angry or irritated, or don’t threaten them while following up. Doing so will only spoil your corporate relationships.

Appoint a Staff Member

You might have several things to do as a manager or business owner. Therefore, assign one of your employees or hire an accountant specifically to follow up with your clients, send reminders, and collect payments from them. This will save you a lot of time and energy that you can invest in other important tasks. You will always have one point-of-contact in charge of your accounts receivable.

Offer Discounts and Levy Penalties

For timely clearance of invoices, you can set-up an upfront or an advance payment policy.  Offer discounts to clients who make payments within a short span and levy penalties or interests on late payments. Ensure your clients are aware of these policies as this will be an incentive for your clients to make early payments and save money.

You will always have different experiences with various clients.  Some clients will generally clear their invoices reasonably quickly while others may continue to take their own time to clear the invoices. In any scenario, accountants in Edmonton suggest business owners to stay calm and try to manage their overdue invoices by following the tips mentioned above.



Why is Bookkeeping Important for Your Business?

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A business operates on capital and to keep a check on the income and expenses made in the business, regular and correct bookkeeping is crucial. Bookkeeping is the method of maintaining records of financial transactions taking place within a business. There are various ways in which bookkeeping can contribute towards a better functioning of your business. Here are some of the reasons why regular and timely bookkeeping is important for your business.

Easy Cash Flow Management

When running a business, keeping a check on your cash flow is essential. Issuing proper invoices to your customers and maintaining records on a daily basis is crucial. If the same is not followed, it leads to delays in receivables and payables, which could affect your cash flow adversely. Having a bookkeeping system ensures that proper entries are maintained thereby making it easy to know and manage your cash flow.

Helps in Tax Breaks

When your books of account are not maintained, you may miss out on transaction entries. Doing so will affect your tax planning. You may not realize this, but there are various expenses which are allowed as deductions according to the Income Tax Act and expenditures which are not fully deductible for income tax purposes.Accurate recording of transactions will ensure that expenditures are recorded in order to be able to give them the proper tax treatment at your company’s fiscal year-end.

Aids Future Planning

Often business owners assume they are making a profit without proper bookkeeping and just by taking the incoming money to be profit. This is a mistake and can be avoided by correct bookkeeping. When you have a detailed record of your expenses and incomes, it becomes easier to make informed decisions about your business’s future. The main bookkeeping statements you need to check are the balance sheet and the profit and loss statements to get a complete insight into your current standing and financial health.

Easy Presentation to Investors

The first thing that an investor may ask for before investing money in your business is to have a look at not only your company’s prior Year End Financial Statements and Corporate Income Tax Returns,  but also your bookkeeping for the current year. Having a disheveled bookkeeping will give an impression to the investor that you are not a focused business owner. When your bookkeeping is accurate and well kept, it becomes easier to provide reports of financial growth and profitability to the investor.

Do not hesitate to take professional help to maintain accuracy. Reach out to one of the finest chartered accounting firms for comprehensive consultation on your bookkeeping.

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Chartered Professional Accountant: How to Manage Your Business Cash Flow

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Cash flow refers to the movement of cash in and out of a business. It is the capital required to run your business on a daily basis. For a smooth functioning of the daily operations, it is essential to manage your cash flow. Consider the following tips to manage your business cash flow suggested by chartered professional accountants.

Record and Analyze Regularly

The very first step in proper cash flow management is the recording of every transaction being made in the business on a regular basis as this will avoid the chances of missing out on any transaction. Up to date records will allow you to analyze your cash position and determine your future cash requirements. You will therefore be well-prepared with sufficient cash as and when payments for expenses are due.

Manage Receivables and Payables

The two major factors which affect your cash flow significantly are your receivables and payables. When you are paid for a product or service immediately, your cash flow is maintained. However, if the payment is to be received later, it creates a discrepancy in your cash flow. To make sure your cash flow is not affected ensure that you get timely payments, issue prompt invoices and keep a thorough check of pending receivables. Similarly, when managing your payables, make complete use of the credit period. For instance, don’t make a payment in 15 days if it due after 30 days unless you are offered any discount for early payment.

Reserve for Cash Shortfalls

You can never be fully prepared for any unexpected expenses. For situations like these, having a reserve of cash set aside for such shortfalls is a must. Having a reserve of cash acts as a safety net to manage your cash crisis and avoid attracting any penalty for late payments in the form of interest.

Hire a Chartered Professional  Accountant

As an entrepreneur, there are various aspects of business you need to look into. With too many business responsibilities, you may end up not maintaining records of your transactions on a daily basis. This leads to discrepancies in the future. Therefore, it’s recommended that you take professional help. Having an accountant to look after your daily transactions will not only allow you to manage your cash flow but also have an updated accounts statement. This can be very beneficial once you start with your corporate tax planning.

Use Technology

Another easy and error-free method to manage your cash flow is to make use of technology. You can make use of online accounting software such as QuickBooks to maintain your records and also look after invoices and payments. There are various types of software available for this accounting purpose. Choose a software as per your need.

There are many more methods to manage cash flow in a better way which chartered professional accountants can help you with. Offering discounts to debtors, raising invoices on time, informing debtors before the due date, etc. are some ways to ensure your payments are on time and you do not face the problem of cash shortage. To get more information about how to manage your business cash flows, get in touch with the best chartered professional accountants and experts.

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Basic Accounting Concepts Every Business Owner Should be Aware Of

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When you run a business, your focus should be on operations and not on spending extensive time managing your business accounts. However, there are still some basic concepts of corporate accounting that you should be aware of. Knowing the following corporate accounting terms can help you better understand your business expenses, incomes, and financial position at any given point.

Accrual Based Accounting and Cash-Based Accounting

Accrual and cash are the two methods of accounting and only differ by the time when the expenses and incomes are recorded or recognized. In the accrual-based accounting, the income and expenses are recorded when the transaction takes place. Even if the payments aren’t received, or expenses are not paid, they are recorded in the books of account.
On the other hand, in the cash method, the incomes and expenses are recorded when the actual movement of cash takes place.

Cash Flow

Cash flow is a term that explains the flow or movement of cash and cash equivalents, basically real and virtual money, to and from your organization. The movement of funds includes various incomes from customers and clients or direct sales and expenses such as operating costs, production costs, and daily cash payments. There are two situations of cash flow that every organization faces. Positive cash flow is when there is an increase in liquid assets that enable you to make investments, settle debts, pay loans, and clear tax liabilities. Negative cash flow occurs when there is a decrease in liquid assets, which prevents you from clearing your liabilities.

Balance Sheets

A balance sheet is a type of financial statement that summarizes the assets and liabilities along with the shareholder’s equity in your business at a specific point in time. Balance sheets with these three sections help you understand the business assets and liabilities owed at specific points in time, generally at the end of every month, quarter, or year. Balance sheets are also described as the “snapshots of an organization’s financial condition.”

Gross Profit v/s Net Profit

The gross and net profits are ratios for you to assess your company’s financial stability and overall health.

  • Gross profit is calculated using the following equation:
    Gross Profit = Sales – Cost of Good Sold
    Here, the sales is the total revenue generated by selling the goods
  • Net profit is calculated using the following equation:
    Net Profit = Total Income – Total Expenses
    Here, the income is the total revenue generated, and expenses include the total costs or expenses associated with selling the goods (operating expenses, transport and other expenses, interest, taxes, etc.)

    Tax Liabilities

    Tax liability is the amount of taxation or money that your company has to pay in compliance with the current Canadian taxation laws. Taxes are imposed on various incomes, direct or indirect. The direct incomes include revenues generated from the sale of goods and payments from customers and clients. The indirect income includes revenues that you earn from a secondary source such as dividends and bank interests. If you do not report and pay the taxes owing in accordance with current Canadian taxation laws, you may become subject to additional interest and penalties.

    Every business owner should be aware of the basic business and corporate accounting concepts. However, you don’t have to be an expert. To handle these as well as other, complex accounting and financial management tasks, you can hire expert chartered accountants. Our professionals focus on providing accurate business numbers with the help of best corporate accounting software and methods.

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Small Business Accounting Tips

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As a small business owner, you may decide to conduct your own business accounting. But, there are certain things you must know about accounting to minimize potential risks. Some important small business accounting tips offered by a professional chartered accountant in Edmonton are listed below:

Record Every Transaction

Recording every business transaction is crucial. All business transactions, whether a small payment made using petty cash, salaries paid to your employees, or a lump sum payment received, must be recorded. Without an accurate record, you cannot evaluate your profitability and cash flow needs.

Preserve Every Receipt and Invoice

This may seem like a big task to perform on a regular basis, but it will save time and prevent accounting confusions in the future. Preserving every receipt and invoice will give proof of every business transaction. You can take a look at the receipts in the future and get information about the transactions. If you should be audited by CRA,  they will require your receipts and invoices. An auditor will request complete information about your business expenses as they relate to the period under audit. Therefore, maintaining receipts and invoices in a file that you can refer to is crucial as any unsubstantiated expenses will be denied by the auditor.

Develop a System

To keep track of all the revenues and related expenses, you must select the best-suited system of accounting for your business. A manual record keeping system is outdated and time-consuming. You can either digitize the process with the help of Excel spreadsheets or use DIY accounting software such as Quickbooks. Or, you can hire an accountant in Edmonton who will help create a customized accounting system.

Keep your Finances Separate

If you mix up business and personal finances, things can get complicated. Accounting and maintaining records of mixed transactions can be very confusing. Hence, it is best to keep personal and business finances separate and use them for their respective purposes only. Set-up a separate bank account for your business transactions so that they can reflect in one place. Although, it isn’t legally necessary for a sole proprietor or a small business to have a business bank account, having a separate bank account keeps records distinct and will make life easier during the tax season.

Another helpful small business accounting tip is to hire an accountant in Edmonton so that you can concentrate on your business and leave the stress of accounting to a professional. Hiring an accountant in Edmonton helps you save time that you can invest in your business operations, expanding your business, and earning bigger profits.

Where Did The Money Go?  The Worst Scandals in the World of Corporate Accounting.

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Where Did The Money Go?

When you look ahead to what you envision for your company, the media attention that you may aspire to achieve is distinction in the business pages as a business success story that you hope will serve as an inspiration to others.  Certainly, nobody wants ever to find themselves the subject of front page news as occurred in these incidents, rated among the ten worst corporate accounting scandals of all time.  Some of these names and companies have been forever tarnished as a result of their misdeeds.

  1. Tyco (2002)

Tyco experienced a company decline and the loss of investor confidence when it was discovered that its CEO Dennis Kozlowski had been involved in a series of unethical business transactions using company money that were not included in the company’s financial reports.  It is alleged that Kozlowski as well as other key administrators within the organization stole $150 million from the firm and mis-represented the company’s income by an estimated $500 million.  Kozlowski and others involved in the scandal did receive time behind bars as a result of their actions.

  1. Health South (2003)

The largest healthcare provider in the United States for outpatient surgery and diagnostic and rehabilitative care found itself with a diagnosis of guilty after an extensive investigation by the Securities and Exchange Commission in 2003.  At the direction of company CEO and chairman Richard Scrushy, earnings were allegedly overstated on a quarterly basis from 1999 to 2002, inflated by $1.4 billion to meet the expectation of the company’s stockholders.  Scrushy was charged with accounting fraud and later indicted.

  1. Satyam (2009)

Collusion among the leadership at Satyam Computer Services resulted in the conviction of eleven people, including the company’s chairman Ramalinga Raju.  Upon his resignation from the company in 2009, Raju admitted to manipulating accounts in the value of $1.47 billion dollars.  In the wake of the scandal, just months after the fraudulent activity was made public, the company was acquired in whole by a competitor, while the court action played out over the next six years to convict the disgraced directors.

  1. Waste Management (1998)

Dean Buntrock, the CEO and founder for Waste Management as well as his auditing firm were found to have falsely lengthened the depreciation time of their assets which was discovered when a new administration team assumed control and conducted their own audit of the books.  The fraud, which amounted to $1.7 billion in fictitious earnings landed before the courts in a class action lawsuit which settled for $457 million and the auditing firm was levied a hefty ten figure fine.  To prevent further incidents of the same nature, the company’s new CEO has established an anonymous reporting channel for employees to come forward with any improper or dishonest behavior at any level of the organization.

  1. American International Group (2005)

Three years before the American International Group (AIG) was bailed out by the American federal government to the tune of $180 million in 2008, they found themselves embroiled in another significant financial crisis when they were alleged to have been responsible for a large-scale accounting fraud amounting to $3.9 billion.  An investigation by the New York Attorney General resulted in criminal charges for some of the executives and a fine levied in the amount of $1.6 billion.

  1. Freddie Mac (2003)

Slapped with a $50 million fine, one of the United State’s largest home mortgage financing companies was found guilty of mis-stating an estimated $5 billion in earnings.  Four senior directors with the firm were also found guilty for their individual involvement and issues civil fines for restitution amounting to more than $275,000.

  1. Lehman Brothers (2008)

Lehman Brothers was a global investment company with a 158 year legacy in the industry at the time it declared bankruptcy in 2008.  The company’s involvement in the sub-prime mortgage crisis, as depicted in the recent Hollywood blockbuster “The Big Short” included hiding more than $50 billion in loan transactions disguised as ad sales.  Their bankruptcy filing is regarded as the largest of its kind in American history and is believed to have contributed to the further downward spiral of the markets that followed their demise.

  1. Bernie Madoff (2008)

Bernie Madoff was a respected stock broker and financier with his own firm for 48 years until his career came to a sudden halt when it was discovered that he had manipulated investors out of a total of $64.8 billion.  His criminal activity resulted in the largest Ponzi scheme in history – an elaborate con where investors are paid out from the investments of new contributors instead of from the legitimate performance of their fund or operation.  While most of the scandals appearing on this list were perpetrated by individuals, their scandal is worn by a parent company.  Not in this case, the name Bernie Madoff has become infamous in investment circles and has even been lampooned in mainstream pop culture.  Madoff was sentenced to 150 years in prison in 2009.

  1. Enron (2001)

Through slick financial reporting, under the direction of Jeffrey Skilling, elaborate loopholes were created to hide billions of dollars in debt from poor management and development projects.  As a result, shareholders lost an estimated $74 billion and thousands of e16mployees and investors lost their retirement savings.  When the company was forced into bankruptcy after being discovered, the company set the bar for the largest company to do so up to that point in history.  They would later be eclipsed by Lehman Brothers in 2008.

  1. World Com (2002)

The media reported a stock market “jolt” in 2002 when World Com, an American telecommunications company announced that it had fired its Chief Financial Officer and Vice President after discovering evidence of improper accounting.  In the following weeks, it was identified that the mismanagement had resulted in $180 billion in losses for its investors through inflated reporting of assets as high as $11 billion.  In the ensuing controversy, 30,000 jobs were lost.