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Agenda

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Modern technologies allow large and small businesses to work with clients and employees remotely. Working remotely reduces the cost of both providing services to clients and managing employees — thereby increasing profits. Today, a modern accounting firm can have many accountants that serve business owners without ever meeting them in person. At the same time, the team can collaborate effectively on a remote basis, serving clients all over the country.

Research shows that modern entrepreneurs are increasingly taking advantage of online bookkeeping services. For small businesses, this is a logical decision because it allows you to save time and money. Bookkeeping services handle monthly accounting, prepare financial statements, take care of payroll, help prepare businesses for tax season, and perform other financial tasks. However, it’s important to go through reviews of bookkeeping services, just as you would look at the resumes of job applicants, to ensure that you do not stumble across cheaters and expose their financial information to a company that is inclined to scam and deception. 

Reviews from real customers will give the employer a realistic overview of the service quality a particular company will provide. For example, reviews like the one below are always a good sign. This review was given for BooksTime, a popular remote bookkeeping service:

Our experience working with BooksTime has been fantastic. The level of technical knowledge, the follow through and attention to detail, and the upbeat, service-oriented attitude of our accountant, Jennifer Page, are absolutely top notch.

Liz Sullivan 
25 of April

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Reviews like this are a good sign that the company is legitimate and provides good services — and not just a scammer, who just wants to get access to your bank information, etc.

Given the emphasis on software, the success of remote accounting practices largely depends not only on their employees’ accounting qualifications but also their software competency.

Quality of work, efficiency and pricing.

Alex Dytko 
29 of May 

As a rule, the majority of modern managers are tech-savvy entrepreneurs who embrace the use of new software and online collaboration tools. They are used to receive information quickly and respond quickly, so they prefer to communicate via instant messengers. It is clear that every year, the importance of remote cooperation and online communication with all involved in the business grows.

In order to work with the modern client, an accounting firm must meet the requirements set by this new generation of tech-savvy entrepreneurs. They want fully remote services, quick problem solving, communication through modern chat apps, and the use of the latest tools and software. Given the emphasis on software, the success of remote accounting practices largely depends not only on their employees’ accounting qualifications but also their software competency. 

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We continue to be quite pleased with the service we receive from BooksTime and your staff. All professional and courteous, I appreciate their willingness to work with where we are at… Both Mila and George are enjoyable to work with, and very approachable… Both are very efficient, and we are spending less on our bookkeeping than if we had to pay for an employee.

Gretchen Horton 
Administrative Director of King’s Chapel

As you can see from these reviews, the modern business owner wants a remote accountant or bookkeeper who not only keeps a good record of all the finances but also quickly responds to clients’ questions and requests.

Finding the Right Accountant or Bookkeeper

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What do employers pay attention to when searching for a suitable accountant or bookkeeper? Education, work experience in a similar position, recommendations from previous jobs or reviews from other customers in case of online services, skills in desired accounting programs, an ability to quickly and efficiently master new programs and applications, teamwork and leadership. 

The main qualities of the best accountant are also honesty, attentiveness to details, accuracy in actions, perseverance, competent planning of working hours and an inclination to routine work as well as an understanding of the principles of modern business culture. 

An accountant plays one of the most important roles in the company, especially when it comes to financial matters. The chief accountant is responsible for communicating with regulatory authorities and for the timely payment of taxes. He or she must be a reliable backbone of the company in any situation. His or her responsibilities usually include:

  • accounting, tax and management accounting at all sites – working with primary documentation, electronic databases, generating reports, maintaining financial statements according to national or international standards, payroll and other operations
  • drawing up accounting policies of the company – the development of effective methods of accounting, which should be applied by the head office and branches
  • interaction with regulatory bodies – timely submission of documents to relevant organizations, control checks, protection from violations.

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A bookkeeper might not be able to do all of these tasks or have sufficient experience with this. If you are a small business that is just starting, then you should know that whether you hire an accountant or a bookkeeper, these tasks will need to be done by someone and it is likely that you would want this burden to be off of your shoulders. Thus, you will need to find an individual or company that can meet all of your needs. 

Recruitment of a remote accountant is time-consuming work. It requires the participation of the head of the firm and other team members. One should not take it lightly the choice for its accounting/bookkeeping department because business finances greatly depend on it. A qualified remote specialist can keep more customers and provide better accounting, increase revenue, reduces the cost of training and adaptation of new employees.

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Being confident that your accountant/bookkeeper not only understands what is required from him/her but also does it diligently and honestly, you can also be confident that there is less chance for scam and more likelihood that your business will grow and succeed. After all, everyone knows that cheaters and scammers in a business can reduce your profits to zero. 

Another forewarning: with careful selection right from the start, you reduce the risk of losing customers. After all, if a new accountant has difficulty mastering duties, does not have time to serve customers and communicates with them without proper attention, customers accumulate negative experience and dissatisfaction, which inclines them to refuse your service.

Learn the Basics

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For the majority of managers and owners of companies, accounting is a separate world, a dark forest they hope they do not have to go into. Therefore, accountants work as best they can, and management learns about the problems in accounting too late – when they receive an office audit with millions of additional charges or when the account is blocked due to legal issues and the company’s activities become paralyzed.

If you do not know what all the financial reports and statements your accountant presents to you mean and the basics of how accounting works, then it is much easier for the scam to slip into these papers and scammer to flourish. Knowing what all the information means will also allow you to make better decisions.

Surprisingly, many entrepreneurs do not know the meanings of simple terms, which means that they miss many opportunities to optimize their activities. After all, with the help of competent accounting, you can manage the timing of cash flow, smoothing financial indicators, see cash shortages and possible financial problems of your company in advance, which will allow you to prevent them or know how to deal with them in advance.

Thus, if you want to protect your business and comply with the law, you need to also know what documents to ask from your accountant or bookkeeper and be able to review them for signs of deception and fraud to ensure that no cheaters stay long enough in your company to harm and even destroy it. 

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Besides scam, you also need to look for seemingly simple mistakes you accountant or bookkeeper can make, which shows that they are either not very careful in their work or simply do not know how to handle the responsibilities they are entrusted. These slip-ups, intentional or not, it is critical to catch them before it is too late. 

For example, in his review about BooksTime, one customer says the following: 

BooksTime has some of the most knowledgeable, detail-oriented and dependable bookkeepers in the industry. They have helped put bookkeeping in reach of the even the smallest small business. It’s a delight to work with them!

Romeo J. Ibanez IV 
26 of April

Successful business owners always know that they need to keep an eye on every part of their business and not say that they hired an accountant to keep track of their finances. To ensure that no debts, undelivered tax declarations, incorrectly calculated taxes, an absence of a primary document and other “trifles” do not become an unpleasant surprise for the manager and owner, you can regularly check your accountant. 

With relatively basic knowledge, the manager and owner are able to quickly understand how well or poorly the bookkeeping works and records are kept. If you personally do not have time or enough knowledge to make such reviews on regular basis, we suggest hiring an independent auditory, who will do it on your behalf, give you an overview of your business standing and let you know if any of your employees are cheaters.

Accounting Versus Bookkeeping

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First, let’s take a quick overview of the two terms: accounting and bookkeeping and why you would need to have one or the other or even both working for your company. Although these terms are often used interchangeably, they actually can a slightly different meaning. 

A bookkeeper records and classifies all business transactions, including sales, expenses, and revenues in the accounting system. Bookkeeping can be done either manually (pen and paper or offline programs like Excel) or automatically/online, where many transactions are automatically recorded into the ledger thanks to the integration with the bank and other payment systems and most of the calculations are also done automatically, keeping all the information updated. 

An accountant, on the other hand, analyzes, reviews, reports, and interprets this financial information from your bookkeeping. The accountant is able to tell the manager in simple words what the numbers mean, current financial situation and what to expect in the future, which enables business managers and owners to take appropriate steps. 

If you are a small business or a one-person company, then you can either do the bookkeeping yourself or hire a bookkeeper. If your business is growing, you can hire either one, however, larger businesses would want to also have an accountant on-call or working full time who can help to make sense of all the data and prepare for tax season. A chief accountant, accountants, and bookkeepers might all work for one company if it is quite large and one person is not able to keep up with all the work. 

The Two Main Methods of Bookkeeping

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Any business owner needs to decide which bookkeeping method to use to keep account of business transactions. Here is a short overview of both methods and when each one is a better choice. 

Cash Method – When using this method, you will record your income (revenue) only when you actually receive the money and recognize expenses only when you actually make a payment. It is a simpler method and often used by small businesses, operated by one person from home or office. 

This means that expenses on credit and customer payments on credit are recorded only when the payment is made in full. An invoice received in July will be recorded in August when the payment is made, and the transaction takes place. The payment and expenses do not necessarily need to be made with physical cash, so electronic funds transfers also count. 

This method allows to easily check for accuracy by cross-checking the bookkeeping records and bank statements and maybe even catch cheaters in your company. However, this can be misleading because of late payment, for example, can create confusion when summing up monthly expenses. Neither you have a chance to record inventory that you bought but never used, which can lead to inaccurate decisions. 

Accrual Method – This method is usually used by larger corporations. Many businesses switch to this method as they grow. Most businesses and professionals and public companies are required by law in the United States and Canada to use this method for keeping a record of their financial activities. 

When using this bookkeeping method, you will record any expenses and income (revenue) immediately, even when the funds will be transferred later. Thus, an expense is recorded right when you will receive the invoice and not when you actually pay it. Also, no matter when you will receive a payment for the service you provided or the goods you sold, you will record the transaction on the date you made the sale. 

Credit requests from suppliers and credits to customers require that you use this bookkeeping method. The accrual method, however, does not allow to easily compare banks statements and the bookkeeping records to check for accuracy. 

Financial Reports

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Financial reports not only allow the managers to evaluate the state of the business at the moment and make decisions for the future, but they also allow to catch scammers and cheaters if something looks suspicious. These can be unusually high revenues and low expenses that are not associated with seasonal changes, declining operating cash flow along with positive earnings, revenue growth that does not align with average growth in this industry, capitalized operating expenses, incorrect asset valuation, etc. This what one business owner shares in his review:

We entrusted BooksTime with a critical initiative to reorganize our financial data. BooksTime maintained a rigorous quality assurance process to ensure that no data was lost or misclassified. Whether helping with projects big or small, the team at BooksTime delivers reliable, high-quality service every time.

Jack Foster
Founder of CRG

The following detailed financial reporting elements capture the main details of day to day business activities. They allow one to see how much the business is spending and making. It will also show exactly where the money is coming from and where it is going. 

These financial reports are done on a monthly, quarterly and yearly basis and allow to effectively plan the budget and make adjustments as necessary. These detailed reports should be created at least once a year for tax purposes. If you are planning to attract investors, they will also want to review these financial documents before deciding whether they want to invest in your company. 

Balance sheet

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The balance sheet presents an overview of the company’s assets (cash and property), liabilities (debts), and capital (stocks and money invested into the company), where assets should be equal to liabilities plus capital. This is a snapshot of business standing at a given time that also allows to calculated business net worth. The company’s net worth can be calculated by subtracting total liabilities from total assets.

If the balance sheet is not balanced, then one should look for errors (everything should be recorded correctly and in the right place) and possibility of scam, although, in most cases, cheaters use special tactics by overstating (forecasting) income or understating liabilities among many other fraudulent actions to visually balance the two sides of this report. 

Income statement

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The income statement is a record of your profits and losses, usually for a period of one month or one year. It focuses on revenue, expenses, and costs, where revenue is what business received from selling goods or services, costs (COGS) is the money business spent to make or purchase these goods and services, and all the other operating expenses that do not directly relate to the cost of goods and services, such as salaries and rental fees, are written under expenses. Foreign exchange or business-related investments are also included in the income. 

In this financial document, you will see your gross profit and your spendings, in other words, how good your company’s performance is. Their difference between the two will be your net income (profit or loss statement), which can in some cases be negative is the business is not able to cover its expenses and money spent on providing services or making goods. Just like the balance sheet, it is created for a specific time period. Your income statement should be complete and detailed, with an entry for every single dollar and penny you spent or earned. 

Many business owners begin to panic and suspect scam when they see that the profit on the income statement differs (lower or higher) from the cash on their bank account. However, scammers have nothing to do with it because debt payments and other cash flow activities are not present in this report. It should also be noted that the amount of taxes you pay will be calculated based on this net income number and not the amount of money in your bank account. 

Cash flow statement

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Any expected revenues or expenses that arise from sales, sale, and purchase of assets, loan proceeds, operating proceeds, manufacturing, investments, etc. are represented in the cash flow statement. In other words, the inflow of money and their outflow, be it do to investing and financing activities or operating, for a specified period are included in this financial document. 

The cash flow statement is very similar to the income statement. However, elements such as interest accruals from investments and other non-cash items are not included in this document. Only cash (not necessarily actual money, but also electronic funds) transactions, i.e. your sales and expenses, will be shown on the cash flow sheet. The income statement analyses three categories: operating activities, investing activities, and financing activities of a company. 

Accounting Terminology

Accounts Payable – this is the company’s liabilities and debt to other businesses. In most cases, they appear when the company purchases supplies, parts, and other goods or services on credit from its vendors or other organizations. Any unpaid bills that a business owes to creditors, suppliers, etc. will be included under accounts payable. If you will want to negotiate with your creditor, you will be talking to their accounts receivable department because one man’s payable is another man’s receivable. Accounts payable appear as liabilities on the company’s balance sheet. 

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Accounts Receivable – in simple words, this represents the amount that customers and clients, be it individual people or other companies, owing to the business for the goods they purchased or services they received. This money will be received sometime in the future because the services or goods were delivered on credit. When you will want to talk to a company that owes you money, you will be redirected to their accounts payable department. Total accounts receivables are recorded under assets on the balance sheet since you have already “earned” that money. 

Assets (Fixed and Current) – equities or stocks, fixed income or bonds, and cash equivalents are considered assets. Assets that will be converted to cash within a year are called current assets, which include cash, accounts receivable or inventory. Fixed assets include real estate, land or major equipment that will last for several years and are listed after current assets on the balance sheet. These are usually larger, more expensive items that a company owns. A company can also have intangible assets such as customer goodwill. 

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Break-even Point –in any business, it is important to calculate at what point the enterprise will completely cover the losses (expenses) and start generating real income. The investor must decide whether to invest in the project or not and the calculation of the break-even point, where the revenues are equal to expenses, in this case, plays an important role. This indicator helps to determine how many products need to be sold (or services provided) to get zero losses. Thus, at the break-even point, revenues cover expenses. If the break-even point is exceeded, the company makes a profit; if the break-even point is not reached, the company incurs losses.

Business Plan – a document that gives a detailed justification of the project and the ability to comprehensively evaluate the effectiveness of decisions made, planned activities, including an estimate of expected expenses and revenues, and allows to answer the question of whether to invest funds in this project or not. A business plan is developed to justify a new project/new business to attract investors, justify the feasibility and profitability of investing in the development of specific business, to restore solvency and promote financial recovery of the company; for planning future activities, etc.

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Cost of Goods Sold (COGS) – sometimes called cost of sales (COS), means all costs that are associated with the production and sale of products or services combined together. These costs are presented in monetary terms. In practice, there are cases when not all products that were produced during the reporting period, were sold during the given period of time. In this case, the cost of goods sold is calculated as a set of costs relative to the products that were sold in this reporting period. Product or service price determined based on this method should ensure the receipt of the desired profit and cover all costs that are not taken into account when calculating gross profit. COGS is included in the income statement. 

Debit and Credit – these are accounting entries that are usually used with the double-entry accounting method. As a rule, this is a table divided into two columns. In the first column, we see a debit, that is, on the left, and in the second column, respectively, the credit is reflected, that is, it is on the right. A debit entry to one account is accompanied by a credit entry to other accounts, so the two balance each other. When a debit is entered under assets or expenses, they increase and a debit entry under a liability or equity decreases them. A credit entry to each account does the opposite.

Double Entry Bookkeeping – one of the main elements in the formation of reliable information on the economic operations of an enterprise. Double entry is a method of maintaining bookkeeping records with the simultaneous reflection of any transaction in equal amounts for two different accounts at the same time: credit one and debit on the other. At the same time, depending on the type of account, an increase or decrease in one or another account may be reflected. The double record of business transactions allows you to maintain a balance and identify errors. If there is no equality in debit/credit entries, then a mistake is made. Additionally, the double-entry system allows you to track changes both for the assets of a company and its sources (liabilities and equity). 

Equity – in the balance sheet of the company means the number of funds contributed (invested) by the owners (shareholders) plus retained earnings (or uncovered losses), in other words, the owners share of the business. Payouts in the form of draws and distributions decrease this account. Equity can be calculated by subtracting all the liabilities from the total assets. The owner’s equity is a percentage of stock the individual (shareholder) has in a particular business. When a business does not make a profit, has large amounts of debts or the owner receives large payouts, the equity can be negative. Creditors and investors like to see equity that is positive, and it will be much easier to sell such a business.

Expenses – expenses can be fixed, variable, or include the day-to-day costs of business operation. Expenses that do not change with your sales or production level are fixed and can include insurance, rent, equipment leases, etc. Nonetheless, these expenses do change with time, e.g. increased rent cost. Variable expenses change with production and sales changes and include hourly wages, raw materials, sales commissions, etc. Some items might have variable and fixed elements, for example, fixed monthly wage plus variable sales commissions. Expenses that are not directly related to the production of goods are referred to as operational expenses (advertising costs, insurance, etc.). 

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Ledger – an accounting record made either on paper or on a computer software of a company’s assets, liabilities, gross income, expenses, profits, and losses. All the financial transactions of a business from its start are recorded in the general ledger. Modern technologies and software now allow many transactions to be automatically recorded in the company’s ledger. The ledger is then used to create various financial reports. An organization of a ledger into accounts allows to easily locate necessary information and make sense of it. It is strongly recommended to keep this information backed up because this will allow recreating the financial data based on it. 

Liability – liabilities can be current and long-term, and both are included only on the balance sheet. Liabilities are what a company owes to creditors, vendors, tax obligations for sales and payroll, etc. Debts that will be repaid within a current year are called current and can include obligations to suppliers, credit card loans and bank loans, sales, social security, and other taxes. Debts that will take several years to repay will be considered long-term liabilities, such as long-term loans, deferred revenues, and deferred income taxes. A successful business will have liabilities that are less than assets and will be able to withstand business low times as well as have more chances for getting financing. 

Net Profit – the company’s total earnings that are determined by subtracting total expenses from total revenues. In other words, it is what you get after you subtract all the expenses, such as cost of goods sold, operating expenses, interest expenses and depreciation from the amount you earned. It is also sometimes called net income and is used to calculate earning per share. However, it should not be confused with a gross profit or operating profit, as these are calculated differently for other purposes. It is relatively easy for cheaters to manipulate this number by either hiding expenses or recognizing revenue that did not occur yet. 

Return on Investment (ROI) – a rate of return on investment shown as a percentage. It demonstrates the profitability (at a value of more than 100%) or loss ratio (at a value of less than 100%) of a specific amount of funds invested in a particular project or company. ROI shows how much the investor earns as a result of financial investments in the company. Any return on investment ratio is calculated on the basis of the company’s net profit. It allows analyzing financial performance in relation to money or time invested and focus on the project that is most profitable. As for the enterprise itself, the ROI ratio can be used by its owner to search for investors. Being able to show the potential investor that he can increase his capital by 20% over a certain period, he increases the attractiveness of his company in terms of investment opportunities.

Revenue – money received by a company a sale of goods sold or services produced for a certain period of time. This is the company’s gross income from the sale of goods and services, in other words, it’s business activities before expenses are deducted. It is considered a temporary equity account that raises total equity and has only current income recorded. Operating revenue is only one type of company’s revenues. Other company revenue included investment and financial activities. Depending on the accounting method used, revenues will not necessarily reflect the actual money received because some payments might fall under accounts payable.

Conclusion

Bookkeeping and accounting make up a major part of business success. Do not take everything on trust alone when hiring a bookkeeper or choosing an accounting firm, even if you read all the good reviews about the company and personally had great experience for some time. At the same time, if you see that many customers had a positive experience with a particular firm, especially for a longer period of time, it means that the likelihood of scam is reduced to a minimum and you are looking at a company that you can entrust your finances without worrying. Knowing the basics of accounting will allow you to catch any errors and fraud in a timely manner.