Essential Business Accounting Terms You Need to Know

Business Accounting Terms

Do you own a business, but are still a little foggy on some of the financial terms? Having a firm grip on these definitions will better help you understand what your accountant is talking about, or help you manage your own accounts. Read up on these essential business accounting terms to get a good handle on the basics.

Accounts Payable

Accounts payable is the amount that a business owes in the short term. These are purchases that have been made but not yet paid for, such as office supplies or catering costs. This figure is considered a liability. When a debt is accrued, it is credited to accounts payable, and then when the debt is paid, it is debited from accounts payable. This figure tells you what you owe in the short term.

Accounts Receivable

Accounts receivable is all money owed to you for services or items you have given to customers but have not yet been paid for. This figure is considered an asset. When an item/service is given, the debt is credited to accounts receivable, and when the item/service is paid off, it is debited. This figure tells you what money you can expect to come in in the short term.

Assets

Assets are anything of value that a business has. These can be both tangible and intangible things, like real estate, a patent, or accounts receivable. There is also a factor of if an asset is “liquid” or not, which is a question of if that asset can be turned into cash if need be. Keep an eye on assets to know your company’s worth.

Cash Flow

Cash flow is the amount of money moving in and out of a business over a given time period. It’s important to know your cash flow to get a handle on what kind of expenses and debts you can handle. It is different from profit, cash flow is instead what sort of liquid cash you handle each month.

Balance Sheet

A balance sheet is a snapshot of a company’s health and net worth. It should include all assets, liabilities, and equity. Balance sheets should be generated periodically throughout the year to evaluate the state of your business.

Equity

Equity is the amount that has been invested by the owner/s of the company. This can either be the equity a small handful of owners have, in the form of stock options, or collective ownership by shareholders.

Expenses

Expenses come in a few different categories: fixed, variable, accrued, and operational. Having a handle on all of these expenses is essential to running a business efficiently. Fixed expenses are the same every month, like salaries and rent. Variable expenses are tied to the company’s sales and change constantly. Accrued expenses are expenses that need to be recorded but have not yet been paid off. Lastly, operational expenses are necessary expenditures to conduct business – like equipment, marketing, and administrative fees.

Fiscal Year

A fiscal year is the period of time you designate as a year for financial and accounting purposes. It can coincide with the calendar, or be altered to work around other important financial dates for your company. Each fiscal year, all statements and taxes must be closed out to begin a new year.

Profit and Loss Statement

A profit and loss statement, often called a “P&L,” is a report of earnings, expenses, and profits over a time period. Generating these reports regularly is essential to keeping a finger on the pulse of your company’s health and growth.

Revenue

Revenue is total amount of all income without any expenses yet deducted. It is very different from profit or net. Revenue is important to understanding what you are bringing in before expenses, and what you could be profiting with lower expenses.

Become a better business owner by being up-to-date on these business accounting terms you need to know. The world of accounting is a big one, but by starting here, you should be able to get a good start on better handling your finances.

What Does Managed IT Services Mean?

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What Does Managed IT Services Mean

A managed service provider, often called an “MSP,” is a third-party contractor that manages services from an offsite location. IT service providers essentially take on everything that an in-house IT department would normally be responsible for. They provide server space for companies to use, run system updates, and even manage data and cyber security. For business owners, it is usually an “out of sight, out of mind” type of all-inclusive IT partner.

How Does Managed IT Services Work?

Managed IT services often work like this: the contractor (or MSP) owns the IT equipment that businesses use and manages all upkeep. This would mean that the provider would own the servers that the company uses, is responsible for running updates, network maintenance, cyber security, and so on. In today’s landscape, this often includes cloud computing services as well, but not always. Services are usually customizable to a company’s needs.

Payment is often in the form of a flat monthly fee and corresponds with what services the business uses and what sort of memory space their data takes up. This system means that the MSP is just as motivated as you are to keep things running smoothly and efficiently; they don’t profit from problems. It is usually more cost effective that hiring IT staff for companies that are smaller or are just not technology savvy.

Why Businesses Use Managed IT Services

Companies of every size use managed IT services. Many small businesses are stuck in an in-between space where they need the security and reliability of IT staff, but are not quite large enough or need enough services to warrant hiring IT staff in-house. Using a managed IT service provider is more cost effective for small businesses and offers professional cyber security and system maintenance, which many small businesses lack. The consistent monthly payment makes IT expenses predictable.

Managed IT services aren’t just for small businesses though. Many medium and even large businesses prefer to use an IT service provider for a few different reasons. One instance where an MSP makes more sense is for businesses that have many locations and/or many remote employees. If your staff is not all in one place, there is not really an advantage to having an on-location IT department. Another example is companies in industries that are just not in the business of technology. A number of companies in older industries, like construction and manufacturing just to name a few, might realize they need to step up their IT game but just aren’t familiar with it or don’t want to learn. Hiring an MSP becomes simply a more convenient option for today’s necessary data security and mobile computing.

Advantages of Managed IT Services vs. Traditional Model

With a managed IT service provider, you are locked into a predictable monthly cost. Your MSP is truly a partner, rather than a service provider that makes more money when you have technical problems or when systems break down. The MSP has the same goal as your company: to keep things running as smoothly and efficiently as possible. That is why the model of managed services is becoming increasingly popular in the IT world.

Managed IT Services

The demand for managed IT services grows as business technology needs continue to change. With each passing year there is a new trend in tech that businesses need to keep up with to stay competitive. Hiring an MSP contractor to manage your equipment, updates, back-ups, and the whole nine yards is an attractive option. It is often more cost effective, too!

Why are Small Businesses Targeted by Hackers?

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Why are Small Businesses Targeted by Hackers

Although it’s cyber attacks on giants like Target and Chase Bank that make the news, small businesses are actually more often the victims of hacks. You would think that there would be less valuable information to steal, not really making them worth going after. So why are small businesses targeted by hackers? In reality, small businesses make much better targets because they often have outdated cyber security, don’t have the resources to pursue the thieves, and the information to steal is still very much worth the effort.

Easier to Hack

Thieves often go for the easiest target, and hackers are no exception. Small businesses usually have outdated technology and weak cyber security. By going after an easy target, hackers are more likely to be successful in their attack and gain access to valuable the information that small businesses have. Client social security numbers, financial information, and even client lists can be easily sold on the black market.

Less Resources to Fight Back

Attacking a large, wealthy company means a higher risk of being caught and prosecuted. Small businesses are often so devastated by the hack that they hardly have the time or resources to track down the perpetrators and seek restitution.

Large companies not only have the money and legal teams to go after hackers, but law enforcement devotes more resources to large hacks on powerful victims as well. Small businesses are not nearly as capable of fighting back as the big guys.

The Less Media Attention, the Better

How many criminals have you heard of that want to attract attention to themselves? A good thief is one you never know was there. The more attention a hack attracts, the more risk of the thief getting discovered. The hack of a small business with a small amount of data stolen is not likely to attract a ton of media and law enforcement attention. The small business may not even know it was stolen! The smaller the target, the less unwanted attention on the hacker.

Protect your Small Business from a Devastating Hack

The hard truth about hacks on small businesses is that they can be devastating to business owners and easy for hackers to perpetrate. Many company simply cannot recover from huge data losses and wind up closing their doors because of it.

Preemptive cyber security measures and having a cloud backup solution can save small businesses from ruin. Don’t be an easy target and stop the attack before it happens. Read more on cyber security for small businesses and cloud backup solutions to keep your business safe.

3 Things Your Business Shouldn’t Skimp On

Things Your Business Shouldn’t Skimp On

As a business owner, one of your ongoing challenges is the balancing act of keeping costs low while not limiting your growth and success. There are a few areas where it is okay to be tight fisted, but for some expenses, cutting corners will only hurt you. 3 of the main things your business shouldn’t skimp on are technology, marketing, and accounting.

Technology

At the core every business is their digital infrastructure and network of computers. Without functioning technology, your business will have a tough time reaching customers, keeping track of leads, and facilitating a smooth sales experience. Invest in a trusted and experienced IT partner. It’s not worth trying to manage it yourself or going with cheap, used equipment.

Cloud computing has also become increasingly popular. With cloud computing, your service provider does all the heavy lifting by setting up your network, running updates, and backing up all data. This sort of technology will be around for years to come and is worth the monthly cost to switch over to. Your business will benefit from more mobility and far less technical difficulties.

Marketing

When done well, marketing should serve to steadily increase your brand awareness and attract new leads more and more as time goes on. Some businesses are able to skate by on referral traffic for a while, but there always comes a time when the referral tap runs dry.

Investing in marketing is investing in the future of your business. It is not something that can be stopped and started and still expected to produce consistent results. For steady growth each year, you must invest in marketing on a regular basis. This doesn’t necessarily mean a multi-million dollar budget, but just keeping your website updated and brand awareness campaigns consistently running to help you out when your referrals become scarce. And even referrals can be easily scared away by a poorly maintained website or outdated branding.

Accounting

Unless you are an accounting wiz, experienced with payroll, and have a few spare hours a week, hire a high-quality accountant to handle your books. Not only is accounting time consuming, but doing it incorrectly can have dire consequences. These consequences could be accidentally over or under paying vendors and employees, or even worse, under paying the IRS. Your employees and vendors might be forgiving, but Uncle Sam isn’t. Hire a business accountant with a proven track record to assure everything is done correctly.

Don’t Limit Your Success by Skimping on Important Costs

Know when to skimp, and when to invest. When it comes to business services, there are a number of crucial areas where you will get what you pay for. Pinching pennies at the wrong time will only end up hurting your business in the long run. Invest in your future with quality technology, consistent marketing, and reliable accounting.

Benefits of Letting Employees Work from Home

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Benefits of Letting Employees Work from Home

Have you considered letting your employees work from home, but aren’t sure what’s in it for you? The reason working from home has become such a huge trend is because it is great for both employee and employer. Some of the benefits of letting employees work from home are that they will be more productive, happier, and take less leave, all while you will enjoy lower overhead costs.

Increase Productivity

According to Entrepreneur.com, 54% of employees prefer working on important projects from home, not in the office.* Most people report that they can focus better and be more productive in a home setting, free from the social and environmental distractions of the office. Who could say no to increased worker productivity?

Work-life Balance

Another benefit of letting employees work from home is the increased work-life balance. Not only will boasting a work-life balance attract better potential candidates, but it will truly make your employees happier and more likely to stay long term. By working from home, workers spend less time in the car and less time preparing for work. This means more free time and less chance that they will burn out.

Lower Overhead Costs

Even if your employees don’t work from home exclusively you will still save on overhead costs by letting employees work from home. You will need less (if any) office space, less office supplies, and less money spent on amenities like coffee and snacks. You will see a drastic effect on your bottom line if you switch to more work from home time for your workers.

Get a Much Wider Pool of Candidates

By touting the ability to work from home, your pool of candidates just got much wider. You now have the ability to hire anyone in any location. In addition, you can consider employees who are limited to working from home due to health reasons or being the caretaker of a family member.

Employees Will Take Fewer Sick Days and Vacation

When you work from home, the need to take a sick day or just get out of the office and take a vacation dwindles. Most minor symptoms that might keep you away from the office are much more manageable at home. With a better work life balance, your employees will also feel less of a desperate need to take a break. Working from home means less paid leave.

Technology Today Makes Working from Home Easy

Technology has finally caught up to make working from home easy. Today, you do not even need to bring a computer back and forth with cloud computing and remote desktop technology. You can access your desktop along with all of your files and programs on any device, anywhere.

With cloud computing, you do not have to worry about cyber security by letting employees work from home either. Cloud computing and remote desktops are actually more secure than traditional networks.

Benefits of Letting Employees Work from Home

The ability to work from home is both sought after by job candidates and beneficial for employers. Enjoy having a wider pool of candidates and employees that will stick around. Offering work from home is great for both productivity and the bottom line.