Business

Business

Ensuring Financial Success for Your Business

Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?

Not quite. You can’t let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way – decisions about pricing, hiring, investments, and so on.

So, how do you handle the array of questions facing you?

One way is through cost accounting.

Cost Accounting Helps You Make Informed Decisions

Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions – raw materials, labor, inventory, and overhead, among others.

Note: Cost accounting differs from financial accounting because it’s only used internally, for decision making. Because financial accounting is employed to produce financial statements for external stakeholders, such as stockholders and the media, it must comply with generally accepted accounting principles (GAAP). Cost accounting does not.

Cost accounting allows you to understand the following:

  1. Cost behavior. For example, will the costs increase or stay the same if production of your product goes up?
  2. Appropriate prices for your goods or services. Once you understand cost behavior, you can tweak your pricing based on the current market.
  3. Budgeting. You can’t create an effective budget if you don’t know the real costs of the line items.

Is It Hard?

To monitor your company’s costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.

Fixed costs don’t fluctuate with changes in production or sales. They include:

  • rent
  • insurance
  • dues and subscriptions
  • equipment leases
  • payments on loans
  • management salaries
  • advertising

Variable costs DO change with variations in production and sales. Variable costs include:

  • raw materials
  • hourly wages and commissions
  • utilities
  • inventory
  • office supplies
  • packaging, mailing, and shipping costs

Tip: Cost accounting is easier for smaller, less complicated businesses. The more complex your business model, the harder it becomes to assign proper values to all the facets of your company’s functioning.

We Can Help

If you’d like to better understand the ins and outs of your business and create sound guidance for internal decision making, you might consider cost accounting.

And we can help. Allow us to evaluate your business from top to bottom and determine the real cost of each component. With that as a foundation, we can help you draft budgets, adjust pricing, keep an appropriate level of inventory, and much more. Give us a call today.

Business Quickbooks

Receiving Payment from Customers in QuickBooks

Undoubtedly, there are some QuickBooks tasks that are more enjoyable than others. It’s no fun paying bills, for example, and making collection calls on unpaid invoices can be downright unpleasant.

But you probably don’t mind recording payments after all of your hard work creating products or providing services, sending invoices or statements, and generating reports to make sure you’re on top of it all.

QuickBooks offers more than one way to document customer remittances, and it’s important that you use the right one for the right situation.

Defining the destination


Figure 1: Uncheck the box on the farthest right if you think you may want to direct payments to other accounts sometimes.

Before you begin receiving payments, you need to make sure they will end up in the correct account. The default is an account called Undeposited Funds. To make sure that this setting is correct, open the Edit menu and select Preferences, and click the Company Preferences tab. Use Undeposited Funds as a default deposit to account should have a check mark in the box next to it.

If you think you’ll sometimes want to deposit to a different account, leave the box unchecked. Then every time you record a payment, there will be a Deposit to field on the form. Talk to us if you’re planning to use any account other than Undeposited Funds, as you can run into serious problems down the road if payments are earmarked for the wrong account.

The right tool for the job

Probably the most common type of payment that you’ll process will come in to pay all or part of an invoice or statement that you sent previously.


Figure 2: You’ll record payments on invoices you’ve sent in this window. 

To do this, open the Customers menu and select Receive Payments. In the window that opens, click on the arrow in the field next to RECEIVED FROM to display the drop-down list, and choose the correct customer. You’ll see the outstanding balance. Enter the amount of the payment you received in the AMOUNT field and change the date if necessary. Click the arrow in the field next to PMT. METHOD, and then select the type of payment.

If you established a credit card as the default payment method in the customer record, the card number and expiration date will be filled in. If not, or if a check was submitted, enter the information requested.

Any outstanding invoices will appear in a table. Make sure that there’s a check mark in front of the correct one(s). If the customer only made a partial payment, you’ll have to indicate how you want to handle the underpayment. Here are your options:


Figure 3: You can select how to handle partially-paid invoices here. 

When you’re done, save the payment.

Instant income

There may be times when you receive payment immediately, at the time your products or services change hands. In these cases, you’ll want to use a sales receipt. Open theCustomers menu again and click Enter Sales Receipts.

Select a customer from the drop-down list or add a new one, then fill out the rest of the form like you would an invoice, selecting the items and quantities sold, and indicating the type of payment made (cash, check, credit).


Figure 4: Fill out a sales receipt when payment is received simultaneously with the sale. 

Other scenarios

These are the most common methods of receiving payments from customers, and you may never have to do anything other than simple payment-recording and sales receipts.

But occasionally, unusual situations arise that may leave you stumped. For example, a customer may want to make a partial, advance payment before you’ve created an invoice or at the same time you’re entering it. In a case like this, you’ll have to create a payment item so that the money you’ve just received is reflected on the invoice. Or you may get a down payment on a product or service, or even an overpayment.

Let us help you when such situations occur. It’s much easier–and more economical for you–to spend some time with us before you record a puzzling payment than to have us track it down later on. We’ll help ensure that your money makes it to the right destination.

Business

How to Get Paid on Time

Due to current economic conditions, it’s likely that collecting on your accounts receivables is becoming more and more of a challenge. Strengthening your collection procedures may allow you to improve collection rates and shorten the aging days of your accounts receivables.

The following suggestions will help your business improve its cash flow and tighten up its credit and collections policies. Some of the tips discussed here may not be suitable for every business, but can serve as general guidelines to give your company more financial stability.

Define Your Policy. Define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.

Tip: You should have a system of controls for checking out a potential customer’s credit, and it should be used before an order is shipped. Further, there should be clear communication between the accounting department and the sales department as to current customers who become delinquent.

Clearly Explain Your Payment Policy. Invoices should contain clear written information about how much time customers have to pay, and what will happen if they exceed those limits.

Tip: Make sure invoices include a telephone number and website address so customers can contact you with billing questions. Also include a pre-addressed envelope.

Tip: The faster invoices are sent, the faster you receive payment. For most businesses, it’s best to send an invoice with a shipment, rather than afterward in a separate mailing.

Follow Through on Your Stated Terms. If your policy stipulates that late payers will go into collection after 60 days, then you must stick to that policy. A member of your staff (but not a salesperson) should call all late payers and politely request payment. Accounts of those who exceed your payment deadlines should be penalized and/or sent into collection, if that is your stated policy.

Train Staff Appropriately. The person you designate to make calls to delinquent customers must be apprised of the seriousness and professionalism required for the task. Here is a suggested routine for calls to delinquent payers:

  • Become familiar with the account’s history and any past and present invoices.
  • Call the customer and ask to speak with whoever has the authority to make the payment.
  • Demand payment in plain, non-apologetic terms.
  • If the customer offers payment, ask for specific dates and terms. If no payment is offered, tell the customer what the consequences will be.
  • Take notes on the conversation.
  • Make a follow-up call if no payment is received and refer to the notes taken as to any promised payments.
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