Accounting Software for Non-Accountants

Accounting Software for Non-Accountants

As a small business owner, you are the marketer, the human resource manager, the IT officer and even the secretary of your establishment. All these may be important for your business to grow but they do not compare to what keeps your business breathing, accounting. You are probably thinking about the headache accounting gives you right now especially if you are not good with numbers. You can solve all your accounting issues without a need for a professional accountant. With online accounting software, financial management becomes the most straightforward task to do.

Accounting is an integral part of your business. It not only allows you to understand the financial health of your business, but it also allows you to plan your business strategy and make smarter business decisions. However, essential accounting concepts like balance sheet, assets, liabilities, and income statement are strange gibberish to most entrepreneurs. As a result, many would prefer to have someone do the tedious accounting work and give them the overview of their business finance.

However, with cloud accounting software, you save the money of hiring a professional. The online accounting software allows you access to your account and check your income statement within seconds, compare your yearly profits and know what your working capital is for the period. You also get a free regular update while managing your cash flow.

Keeping proper records allows you to track the profit you earn (income), the money you spend (expenses), account payables and the account receivables. This, however, can be difficult if you have to stack many papers in a cabinet. There is a possibility of theft, burning or even misplacement of essential data. Online software not only provides you with the right security for your financial record, but it also gives you easy access to your financial data at any time. You can access your business’ financial standing anytime with either your phone, tablet or PC.

Precision and accuracy can make or mar your business. Cloud accounting software gives you real-time information about your finance. It serves as a payment reminder and generates an accurate financial report. The automation feature of myBooks accounting software gives you an updated statement of your balance sheet, your profit and loss account and your sales tax returns. Inaccurate data may lead to significant loss, constant information update with online accounting software keeps your business afloat.

The ease at which you carry out activities on online accounting software makes it all the more suitable for small business owners to use without any prior training in accounting. The software is tailored to be used by non-accountants and as a result, does all your accounting works for you without breaking a sweat. It is also important not to overlook its affordability, myBooks online accounting software allows you to choose flexible payment option while completely eradicating the cost of a software update.

The growth and survival of your business are in your hands especially if you are a small business owner. To reach the goals you set for your business, you would need to make some on-the-spot decisions, and you can only make that with information that is up-to-date. As long as there is an internet connection, accounting is the simplest of tasks.

myBooks Easy Online Accounting Software |Best Cloud Based Small Business Bookkeeping Software


Depreciation Demystified For Small Business Owners.

Depreciation Demystified For Small Business Owners.

As a small business owner, there will be a need to invest in the purchase of equipment, machinery, operational vehicle and other forms of assets in the course of doing business. Of course, it will appear on your balance sheet as an asset, but there’s more to it than just a single line of accounting. Let’s get something straight first, while you record a disposable printer paper and ink as an expense, a printer or photocopier will be marked as an asset. An asset is meant to have a longer life than expenses.

Every business regardless of size is faced with depreciation and a decline in the value of assets. Through a cloud accounting software, the amount of depreciation can be calculated easily. Depreciation has an impact on your overall business performance and profitability. In explaining depreciation, it is pertinent to understand the different form of depreciation that can affect your fixed assets;

  • Physical Depreciation:

Simply known as wear and tear. You cannot expect a 2009 Ford Focus used for delivery to function at the same pace in 2018.

  • Technological Depreciation

A better, faster, and cheaper means of performing the same task becomes available. This happened to typewriters with the proliferation of computers.

  • Functional Depreciation

The usefulness of an asset may become obsolete. A company might not see the need for using the equipment.

  • Monetary Depreciation

This often occur in an inflation-prone economy. There may be a need to push up the depreciation value due to inflation. For instance when an asset experience over 50% inflation in value.

In reality, depreciation has a decreasing effect on the stockholder’s equity, net income, and the total asset value. To determine the depreciation cost of an asset, three factors are considered;

  1. The cost of acquisition
  2. Salvage value
  3. Predicted useful life

As expressed earlier, depreciation has an impact on the overall business performance and profitability. It is essential to assess effect of depreciation on the income statement, cash flow, and the balance sheet. Depreciation is technically an expense and therefore will adversely affect profits. In arriving at the final profit on an income statement, every one of the expenses would have been deducted. The larger the depreciation expenses, the lower the net profit of a business.

On the cash flow report, the effect of depreciation is not as evident as the income statement, what affect cash flow is the purchasing of an asset. Subsequently, depreciation will not affect cash flow as it is a non-cash expense. Simply put, there’s no cash outflow due to depreciation. For the balance sheet, depreciation appears under assets on the balance sheet. It is an intended substitute for the reduction in asset value as it loses value over time.

Being a complicated process, small businesses would have needed the service of an accountant. However, calculating depreciation and accounting for it can be done using accounting software for small businesses. The cloud accounting software will know the most appropriate depreciation method to adopt in calculating depreciation on every of your business assets.


Operating Profit Margin, What is it and Why it is Important

Operating Profit Margin, What is it and Why it is Important

In evaluating a business, investors and analysts rely on the operating profit margin. Being a key profitability ratio, it serves as an indicator of the efficiency of a company in managing its expenses. The operating margin shows to an investor, analyst and even business owners of the relationship that exists between revenue and final profit of the business. Often, the profit margin is confused with operating margin. Also though they share similarity as they both compare earnings against cost. In arriving at the operating profit margin, two components are essential; the revenue and the operating profit.

Revenue of the business is often from the primary source, usually the sales of goods and services as displayed on a cloud accounting software. On the other hand, the operating profit is derived from the gross profits after offsetting administrative, overhead and operational expenses. Both of these figures can be gotten from the balance sheet report of the business. Below is how operating profit margin is calculated;

Operating Profit / Revenue  X 100

The determination of the operational efficiency of a business is through the assessment of changes in the operating profit margin of a business over a period. When a company is experiencing an increase in operating margin with a corresponding increase in profit and cost. As far as operating profit is concerned, it’s weighed against the industry average. A company that operates at a margin above the industry average or the entire market is considered to be financially efficient and stable. On the other hand, a company floating below the industry average can easily be affected by economic conditions by suffering financial distress.

Just as market indices vary across industries, operating profit margin can never be related or constant among industries. It is important to state that the scale and size of the business has a role to play in operating profit margins. In small businesses like sole proprietorship and partnership, the operating profit margin is expected to be higher. These forms of businesses need to cover the high cost and make a reasonable profit. For large corporations, the high volume of sales makes it bearable when operating at a low operating profit margin.

Through MyBooks online accounting software or any other cloud accounting software, the operating profit margin of a business can be calculated. You don’t have to possess accounting or bookkeeping education to calculate the operating profit margin. It can be handled excellently using any online accounting software for small businesses.

If you are still in doubt as to the importance of knowing the operating profit margin of your business, read on. Through this metric, companies can spot room for growth and expansion. Operating profit margin also highlight areas where there are unnecessary expenses, which have to be cut out in the business. It will also unravel other cost-cutting avenues that can help the business maximize profits. Lastly and most importantly, a company uses the operating profit margin to compare its performance with others in the industry.


Accrual Vs Cash Reporting

Accrual Vs Cash Reporting

Although accounting is important for a business, choosing a suitable accounting system is more important. That is why it is essential to know the pros and cons of the two commonly known accounting methods, accrual and the cash basis reporting accounting methods. The major difference between accrual and cash reporting method has to do with, when the revenue and expenses are recorded. The Cash reporting method focuses more on when the cash is actually paid or received while accrual accounting considers account payables and account receivables.

Accrual Accounting

Companies, especially publicly traded companies, commonly use this accounting method. Accrual accounting method is a way of recording transactions that occur as they occur. Expenses and revenues are matched together. This implies that all expenses incurred on credit are recorded. All items sold made are recorded irrespective of whether the cash has being received or not. Sales made on credit (account receivables) and bills received but are yet to be paid for (account payables) are considered while using this method.

The benefit of accrual accounting method is that it gives an overview of the performance of the business over a given period. That is, it tracks credit and helps to plan and make important business decisions because transactions are recorded when it actually happens.

The flip side to this though is that the accrual accounting system is complex and more difficult to carry out than the cash reporting. Also, it does not track the cash flow of a business. Therefore, it does not provide adequate report on the profitability of a business.

Cash Reporting

This accounting system is suitable for individuals and small businesses. It is a method of recording a transaction only when cash has changed hands. Unlike accrual accounting, cash reporting system does not track receivables and payables.

The Cash reporting accounting system is not only simple and fast to compute, it also makes tracking the cash flow of a business very easy because it deals with cash. Furthermore, transactions done on credit are not taxed because they are not recorded.

On the downside, because it does not consider invoice, it is short term. The effect of this is that the future of the business cannot be predicted using this method. More so, it is difficult for businesses with inventories to use this method because it does not allow the matching of transactions with a specific item of inventory.

The Winner

Though most businesses use the accrual accounting method, if you have a small business that deals mainly in cash and does not have inventory then you can adopt the cash reporting method. Also, it is important to consider the goals of your business before choosing an accounting system. Accrual accounting system allows you to know what your profitability is likely to be in the future while the cash reporting accounting method shows the precise cash you have currently. In addition, the size of your business determines your accounting system. That is the business’ operations and specifics mostly dictate which accounting method is suitable.

After you have factored in the pros and cons of the two methods, then you can set up your accounting system with MyBooks cloud accounting software.


Key Financial Metric to Check the Financial Health of your Business

Key Financial Metric to Check the Financial Health of your Business

Knowing the financial standing of your business is essential to keep it from crumbling down. The ability to pay your staffs’ monthly salary is not the only indicator you need to know the financial health of your business. Net income growth, current ratio, quick ratio, and return on asset are some of the key financial indicators to know where your business stands financially. An accurate financial statement helps you to plan your business strategy and predicts future performance.

  1. Profitability metric

The profit and loss statement, also known as the income statement, contains the net profit, the gross profit and the operating profit. The income statement measures the profitability of the business at a given period but it is usually for the period of three years. As a small business owner, you can use online accounting software to determine the profitability of your enterprise. It allows you to compare the profit made in one fiscal year with another. You must note that increase in sales does not necessarily result in increase in profit especially if there is corresponding increase in expenses.

  1. Liquidity metric

This is an important metric to determine how your business is fairing. The liquidity metric allows you to measure the working capital and the current ratio of your business. In other words, it deals with how much money the business has to be able to deal with current needs. In essence, liquidity metric has to do with the current asset and current liability of the business. An important current asset is the account receivable while the account payable is a current liability. The current asset must be more than the current liability for a business to be liquid.

  1. Leverage metric

The amount of debt a business owes determines how long the business would last. The Leverage metric gives you an insight into the financial health of your business by considering the amount used by the owner against that of the creditor to finance the business. The debt to equity ratio and the debt to asset ratio are the two most important ratios use in getting the solvency of a business. You must note that the lower the ratio, the better for the survival of your business.

  1. Activity metric

Activity metric is all about the management of the business. How you use the resources at your disposal would say a lot about the growth of your business. Some activity metrics include inventory turnover, fixed asset turnover, account receivable turnover, average turnover period. Although it is important to stock the inventory, too much inventory tie down capital needed for growth. Therefore, carrying out activity metric reduce the chance of excess inventory.

  1. Growth metric

It is essential to measure whether your business is actually growing or not. The growth of a business is determined by factors such as, increase is in profits, sales revenues, working capital, employees and customers. However, increase in all these is bound to result in increase in the running cost of the business, which is normal as long as the expenses do not exceed income.

To sum up, these metrics do not only show where your business stands but where it is likely to be in a couple of years. Therefore, it is essential to do a regular evaluation of your organization using these metrics to promote its survival. What better way to do it than to use myBooks online accounting software.


Small Business Financial Budgeting & Planning

Small Business Financial Budgeting & Planning

Businesses need a budget. The size of the business is irrelevant as to the determination of the need for a budget. It is expected that as a small business owner, your cash flow keeps you awake in the middle of the night, that’s what happens to every other small business owner. What many fail to understand is that budgeting using online accounting software can ease their burden. It’s not just about small business owners; many businesses don’t have a budget in place. Don’t look at your size or the age of your business, just put a plan in place using free bookkeeping software.

At myBooks, we’ve highlighted essential accounts for small businesses to put up a financial plan and budget using online accounting software for small business;

  • A Profit and Loss Report

This is where you should start your budgeting as a small business. To know whether you are making money or running at a loss, you need to put together a Profit and Loss report.

Through you Profit and Loss report, you can ascertain your recurring and expected income. Look into the recurring and sundry cost of your business also. Other areas include; depreciation, payroll, debt repayment and overhead expenses.

For instance, if you make a profit, you can decide to offset your debts, expand the business or keep cash in reserve. Putting a budget in place will make you know the right things to do when it’s either profits or losses.

  • A Balance Sheet

Your budgeting plans must also involve a balance sheet through a cloud accounting software. You need to know how much your business is worth, what you own and what needs to be paid. You don’t need an accountant to compute the balance sheet, myBooks online accounting software will help you compute a balance sheet. Every one of your assets and the cash you have at the bank will be captured. This will help you plan ahead with the knowledge of your business position.

  • A Trial Balance

Often overlooked, the trial balance is a vital accounting book. In one single document, you’ll have your assets, liabilities, credits, and debits. Just think of it as a single document of your business account.

With this documents in place, you are ready to budget and plan your business finances.

With a budget, you’ll be able to see the dark areas of your business as a budget serves as a light. A budget helps you to navigate yourself away from obstacles that are meant to come your way. There’s a lot a budget can do for your business;

  1. A financial budget will help you forecast how your cash flow will look like.
  2. With a budget in place, you won’t run out of money, let alone having issues paying creditors or your staff.
  3. With a budget, you’ll be in the know as to where you can make savings or cut costs.

Essentially, every business must put in place a budget; it’s a requirement for success in the business as it ensures business continuity.