Opening a business can be an exciting, surprising, complicated and expensive endeavor. It seems simple; you just make sure you are selling goods for more than you make them, right? Wrong. Without proper record keeping your prospering company can take a sudden and sharp dive toward bankruptcy.
Accounting is one of the most important tools for success in any business. It plays a role in every financial decision you make. From purchasing vehicles, equipment and supplies, to increasing production, selecting inventory quantity, and determining salary amounts, accounting is a critical component of any successful business. But if you lack any extensive background in accounting, where do you begin?
Choose an accounting method.
The first decision you must make is the type of accounting method you wish to use. Accounting methods determine how and when you record your expenses. The two main types of accounting methods are cash accounting and accrual accounting. Cash accounting is recommended for small businesses. It requires that you record the transactions when you have actually made or received the payments. Accrual accounting is usually the choice for large corporations. With this accounting method, you log in each transaction as it occurs, whether or not you have actually made or received the payments. You may choose to use a hybrid of the two accounting methods. For example, you may use accrual accounting to record revenue and cash accounting when recording bill payments. You must choose one of these accounting types the first time you file a tax return.
Learn the meanings of basic accounting terms.
These terms include transactions, credits, debits, assets, liabilities, equity, revenue, cost of sales, expenses, cash flow, depreciation, accounts payable, accounts receivable, net profit/loss, overhead, and redeemable assets. If you are unsure as to the meaning of these terms, you can refer to Definitions of Accounting Terms included on the website.
Learn to use accounting tools.
You must know how to use a general ledger; this is where all accounts are maintained. Learning to use journals is also necessary. These are account ledgers where you initially record each of your account entries. The balance sheet is a record of your assets, liabilities and equity. The profit/loss statement records your revenue, cost of goods and expenses. These statements allow you to track cash flow to avoid losing money faster than you are making it. Negative cash flow is one of the main reasons for small business failure. Understanding how to use each of these tools will aid you in maintaining and organizing your accounts and will give you an immediate picture of your company's success.
Know basic accounting principles.
There are a few basic accounting principles that must be remembered when maintaining, updating and balancing your accounts. A credit in one account always equals a debit in another. Also, remember that you must subtract the liabilities of your company from the asset value to determine the equity of you company. Revenue alone will not give you a clear picture of the worth of your company.
To ensure proper accounting in each part of your business, you should follow a simple procedure - keep or make a receipt of each transaction in your company. Have the accounting department analyze each transaction to determine the type of transaction, accounts involved and the resulting debit or credit to individual accounts. Record these transactions in the general journal so you can access the information in the future. Transfer, or post, the information to the appropriate accounts in the general ledger and then balance the amounts by adding or subtracting from each specific category and summing to make sure that the credits are equal to the debits. You should make any adjustments needed at the end of the period and close the account by taking the balance to zero and preparing a financial statement (balance sheet, income statements).
If you are new to accounting, the terms and principles can be very overwhelming; however, help is always available. Take some accounting courses to learn the proper methods of accounting - courses are available at most local community colleges. Purchase accounting software. It can guide your accounting procedures and ease the confusion of assigning credits and debits. Most software does this by prompting you to enter the amount and the payee and then automatically recording the entry in the two appropriate accounts. Some software even includes a "primer" that teaches you basic accounting principles.
So, if you're a small or startup business owner and a beginner accountant, remember to record each transaction as it occurs, make sure your entries are accurate and let accounting-based information guide each of your financial decisions - ensuring the financial security of your company.
The first decision you must make is the type of accounting method you wish to use. Accounting methods determine how and when you record your expenses. The two main types of accounting methods are cash accounting and accrual accounting. Cash accounting is recommended for small businesses. It requires that you record the transactions when you have actually made or received the payments. Accrual accounting is usually the choice for large corporations. With this accounting method, you log in each transaction as it occurs, whether or not you have actually made or received the payments. You may choose to use a hybrid of the two accounting methods. For example, you may use accrual accounting to record revenue and cash accounting when recording bill payments. You must choose one of these accounting types the first time you file a tax return.
So, if you're a small or startup business owner and a beginner accountant, remember to record each transaction as it occurs, make sure your entries are accurate and let accounting-based information guide each of your financial decisions - ensuring the financial security of your company.
Wednesday, July 22, 2009
Top 10 Reasons to Start a Business in a Recession
Do you have one good reason to start your business right now?
How about 10?
Regardless of what people around you (including the media) may say, right now is the best time to get into business. Just go back and look at the economic slowdowns throughout history. Most recessions in the post-World War II era last an average of 10 months, followed by growth cycles that last an average of 50 months.
What this means for the startup is there's no better time than right now to get going and start pursuing your business dreams--in anticipation of the next period of growth.
So with a nod to David Letterman, here are my top 10 reasons you should start your business now--despite the current downturn:
1. Everything is cheaper.
Let's face it: There is great value right now in this and in world markets. This is the right time for fantastic deals in virtually every category, from land and equipment to commercial office space, personnel and labor. As asset prices have been knocked down, there is no better time to get into the real estate or financial markets, or even heavy equipment and construction. Some people have waited years to find value in these markets--and now that time has come.
2. You can hire more and better-qualified people.
In an era when even Microsoft is laying off, you can find great resources at affordable rates. Thinking about getting your high-tech startup off the ground? There are plenty of engineers waiting to be hired. Thinking about forming a professional services firm? There are many accountants and attorneys looking for their next opportunity.
3. People are looking to change suppliers.
From a cost perspective, everything is on the table for most companies. Even if your prices are higher, if you can come in with greater value, you have a good chance at winning new business. You also have the advantage of being the new kid on the block when it comes to pitching your products and services. Many companies are desperate to find new partnerships with new companies that have a different, better or more innovative way of delivering those products and services.
4. Ownership equals tax incentives.
Business ownership offers a variety of tax benefits that aren't available to employees. While taxes should never be the sole reason to go into business for yourself, it should be one reason to add to you "benefits of business ownership" list.
5. Family and friends don't want to (or can't) invest more money into the stock or real estate markets.
That means they may be willing to finance a portion of your new venture, or the expansion of an enterprise that has proven itself over time. The main benefit is that they know you and have a relationship with you--and if you have a solid business plan that delivers real numbers, your chances of raising the capital you need increase exponentially.
6. Suppliers are giving better credit.
Because the credit markets have virtually shut down, the B2B credit flows are keeping money circulating out of sheer necessity. That means a bullish outlook for companies looking for good terms on stock and/or inventories. The main advantage is that all parties have more incentive than ever for finding true win-win situations that allow for cash and stock flow. When everyone is looking to survive, great deals can be had.
7. You can get good PR by showing you are going against the trend.
The media loves aberrations, and if you are optimistic by expanding or getting into business now, you would be in that category. That means you can generate some great PR by demonstrating your "alternative" view of the market.
8. You can buy everything you need at auction.
In addition to everything being less expensive, you can find great deals at auctions, especially in terms of any large equipment and office furnishings. Auctions are also a great place to find hardly used or "gently" used restaurant and bar supplies at great prices. These days, you may even be able to get deals on fleets of vehicles and trucks for a delivery service or hauling or construction company.
9. You can find great "low money" or "no money" down deals.
This is simply being aware of good opportunities others have buggered up, and finding deals where you could get an entire business simply by taking over a lease (along with all the equipment). Many business owners want out at any cost, meaning you can negotiate great win-win deals that allow the current owners an escape while giving you an opportunity to turn around what could be, if run right, a very viable business.
10. And finally . . .
You've lost your job, and you have to do something.
Sometimes, the best business decision is the one you are forced into, and the incentive (as well as need) for income is often enough to push those previously "on the fence" to strike out on their own. There's nothing wrong with being in this position; it simply means there is greater urgency to do something that will start to generate income as quickly as possible.
There you have it: my top 10 reasons to start your business in a recession.
After all, the odds are on your side that the expansion will be many times more robust than the present slowdown.
There's no better time to start than the present, especially if people around you are more comfortable with their own list of reasons why they shouldn't start pursuing their own business dreams right now. It only means you'll be facing a lot less competition.
visit our website coming soon. www.startupbusinesskenya.com
How about 10?
Regardless of what people around you (including the media) may say, right now is the best time to get into business. Just go back and look at the economic slowdowns throughout history. Most recessions in the post-World War II era last an average of 10 months, followed by growth cycles that last an average of 50 months.
What this means for the startup is there's no better time than right now to get going and start pursuing your business dreams--in anticipation of the next period of growth.
So with a nod to David Letterman, here are my top 10 reasons you should start your business now--despite the current downturn:
1. Everything is cheaper.
Let's face it: There is great value right now in this and in world markets. This is the right time for fantastic deals in virtually every category, from land and equipment to commercial office space, personnel and labor. As asset prices have been knocked down, there is no better time to get into the real estate or financial markets, or even heavy equipment and construction. Some people have waited years to find value in these markets--and now that time has come.
2. You can hire more and better-qualified people.
In an era when even Microsoft is laying off, you can find great resources at affordable rates. Thinking about getting your high-tech startup off the ground? There are plenty of engineers waiting to be hired. Thinking about forming a professional services firm? There are many accountants and attorneys looking for their next opportunity.
3. People are looking to change suppliers.
From a cost perspective, everything is on the table for most companies. Even if your prices are higher, if you can come in with greater value, you have a good chance at winning new business. You also have the advantage of being the new kid on the block when it comes to pitching your products and services. Many companies are desperate to find new partnerships with new companies that have a different, better or more innovative way of delivering those products and services.
4. Ownership equals tax incentives.
Business ownership offers a variety of tax benefits that aren't available to employees. While taxes should never be the sole reason to go into business for yourself, it should be one reason to add to you "benefits of business ownership" list.
5. Family and friends don't want to (or can't) invest more money into the stock or real estate markets.
That means they may be willing to finance a portion of your new venture, or the expansion of an enterprise that has proven itself over time. The main benefit is that they know you and have a relationship with you--and if you have a solid business plan that delivers real numbers, your chances of raising the capital you need increase exponentially.
6. Suppliers are giving better credit.
Because the credit markets have virtually shut down, the B2B credit flows are keeping money circulating out of sheer necessity. That means a bullish outlook for companies looking for good terms on stock and/or inventories. The main advantage is that all parties have more incentive than ever for finding true win-win situations that allow for cash and stock flow. When everyone is looking to survive, great deals can be had.
7. You can get good PR by showing you are going against the trend.
The media loves aberrations, and if you are optimistic by expanding or getting into business now, you would be in that category. That means you can generate some great PR by demonstrating your "alternative" view of the market.
8. You can buy everything you need at auction.
In addition to everything being less expensive, you can find great deals at auctions, especially in terms of any large equipment and office furnishings. Auctions are also a great place to find hardly used or "gently" used restaurant and bar supplies at great prices. These days, you may even be able to get deals on fleets of vehicles and trucks for a delivery service or hauling or construction company.
9. You can find great "low money" or "no money" down deals.
This is simply being aware of good opportunities others have buggered up, and finding deals where you could get an entire business simply by taking over a lease (along with all the equipment). Many business owners want out at any cost, meaning you can negotiate great win-win deals that allow the current owners an escape while giving you an opportunity to turn around what could be, if run right, a very viable business.
10. And finally . . .
You've lost your job, and you have to do something.
Sometimes, the best business decision is the one you are forced into, and the incentive (as well as need) for income is often enough to push those previously "on the fence" to strike out on their own. There's nothing wrong with being in this position; it simply means there is greater urgency to do something that will start to generate income as quickly as possible.
There you have it: my top 10 reasons to start your business in a recession.
After all, the odds are on your side that the expansion will be many times more robust than the present slowdown.
There's no better time to start than the present, especially if people around you are more comfortable with their own list of reasons why they shouldn't start pursuing their own business dreams right now. It only means you'll be facing a lot less competition.
visit our website coming soon. www.startupbusinesskenya.com
Monday, July 6, 2009
start up a business from your work station
Across the world over 65% of the employed youth rely on the salary from their employment and 70% of these jobs are not secured. In the event of being laid off, there comes frustrations.
In this blog, i welcome creative ideas where people will join interests and start up small businesses to generate additional revenue as well as realize their dreams.
i will also be giving free ideas and suggestions to bloggers
welcome
In this blog, i welcome creative ideas where people will join interests and start up small businesses to generate additional revenue as well as realize their dreams.
i will also be giving free ideas and suggestions to bloggers
welcome
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