Clearing Up Confusion about Common Jargon in the Bookkeeping and Accounting Industry

Hiring bookkeeping and accounting services might be one of the best decisions you will make for the financial success of your company. It is essential that you have an experienced team to guide your financial tracking and decisions that will affect the well-being of your business. But, do you feel like you are in over your head trying to understand the jargon in the financial industry?

It can be confusing for a new business owner to decipher terms that are standard in the bookkeeping and accounting world. Instead of bringing in a translator to explain these things in layman terms, you can use this guide to break down some of the common topics of conversation that come up with your bookkeeper or accountant.

At Easier Accounting, our name says it all: we are striving to make accounting as easy and as simple as possible. We are proud of the quality services and simplicity offered to our clients. Our expert team can help with the financial tasks that need to be handled. At the same time, we want you to understand what is going on with your business accounts so that you are clear about the benefits your business is receiving from these services.

Common Terms and Jargon in the Bookkeeping and Accounting Industry

These are some of the common terms that you might hear as you are working to gain a greater understanding of your business finances and reports:

  • Accounting Method: Your accountant might talk to you about the accounting method that is used. This process is the strategy that is implemented in reporting expenses and income. Two methods can be used for proper reporting to the IRS: either accrual accounting or cash accounting.
  • Accounts Payable: These numbers can be accessed in a report that shows the total amount of money the business needs to pay in bills. When your vendors submit invoices or payment requests, then they are categorized as Accounts Payable. These amounts are liabilities since you need to have the cash to pay for the products or services.
  • Accounts Receivable: On the other hand, the money that is collected from your customers or clients falls into the Accounts Receivable category. If a customer owes money but hasn’t paid yet, then it is an asset that will hopefully be collected in the future.
  • Accrual Accounting: This form of accounting maintains reports based on when expenses are incurred, and income is earned. Businesses have a bit of flexibility in determining when the expenses and income are recognized, as long as the management of these numbers matches IRS regulations.
  • Assets: Does your company own anything that has value? A variety of things can fall in your assets category, such as inventory, real estate owned by the business, vehicles, equipment, and more. Even your outstanding Accounts Receivable falls into the category of business assets.
  • Balance Sheet: One important financial report is called your business balance sheet. This statement shows the changes in your liabilities and assets in a given accounting period. Understanding the difference between these two numbers is critical to determining the current success and trajectory of your business.
  • Cash Basis Accounting: An alternative to Accrual Accounting, this method records the expenses and revenues when the payments are sent or received. It is a straightforward method of accounting that is often used for small businesses or new startups, especially when the company is running on a cash basis or doesn’t have an inventory to manage.
  • Cash Flow: The order in which money flows in and out is critical so that you can manage your expenses and profits. Revenue and expenses should be coming in regularly, but it doesn’t always mean that there is money in the bank to meet your Accounts Payable needs. Even if your business is profitable in a given accounting period, you will face cash flow issues if the expenses need to be paid before receipt of the revenues. For example, some companies need to pay suppliers upfront before the customers send payment for products or services.
  • Depreciation: Some assets are purchased, and they lose their value over time. For example, equipment or vehicles can wear out due to regular use. Your accountant might recommend that depreciation is used to reduce the listed value of the asset each year on the balance statement. This strategy spreads out the loss over multiple years, which helps to manage taxable income in some cases.
  • Double Entry Bookkeeping: It is common for businesses to use a double entry system for bookkeeping. This process requires each transaction to be listed twice in the accounts since two effects are happening. If you buy $10,000 in inventory, then an entry needs to show a reduction of cash reserves. At the same time, a second entry shows that assets are increased by $10,000.
  • Expenses: Your business will require a variety of costs to keep the company running. Any time these costs are accrued, they fall into the expense category. Expenses that result from revenue-generating activities might include business development, marketing campaigns, inventory purchasing, payroll, and more.
  • Financial Statements: This broad term can cover a variety of reports that might be run through your bookkeeping system. These documents show the activities of your business in a given period. Common reports that fall in the Financial Statements category include Profit and Loss Reports, Balance Sheets, General Ledger, Equity Statements, and Income Statements.
  • Financial Year: Depending on the way your business is structured; your financial year might not run according to the calendar year. There are times when reports are run from January to December, but there are many instances where the 12-month period for a company doesn’t align with the calendar year. These dates need to be recorded and tracked for reporting and tax purposes.
  • General Ledger: The master sheet that shows every transaction is known as your General Ledger. Data for all other reports are pulled from this ledger.
  • Income Statement: Commonly known as a “Profit and Loss Report,” an income statement shows the profits for your business in a specific timeframe. Both revenue and expenses need to be calculated to determine the profitability of your company.
  • Liabilities: Money that your business owes to another company or vendor falls in the liability category. These balances need to be tracked so that you have the cash flow necessary to pay the expenses.
  • Revenue: A revenue report shows the amount of money your business receives for products or services sold in a given time frame. This total might include the exchange of assets, net sales, interest received, and any other transaction that brings money or value into the business. Revenue is usually calculated before expenses are factored in to determine profitability.

If you encounter any other terms that you don’t understand, then your bookkeeper or accountant can help with a definition of the jargon. It is helpful to ensure that you understand these concepts so that you know what your financial team is talking about in conversations about the financial reports and tracking for your company.

Enlisting the Services of an Experienced Accounting Pro

Business owners have a lot of stress and responsibility in keeping the company running. Are you feeling overwhelmed trying to keep up with everything that needs to be addressed? Not only do you need to oversee product development, employee management, marketing campaigns, overhead expenses, and more… but you also need to consider the financial health of your company.

The most important thing that you can remember is that you don’t have to do it all by yourself. If you don’t have training or experience with bookkeeping and accounting, then it makes sense that you should hire an experienced team to assist with these tasks. Ongoing services can go a long way to improving the financial health of your company and ensuring success in the future.

Choosing a Bookkeeping and Accounting Service

Understanding the jargon is just the first step in determining the right financial plan for your company. It is also essential that you hire an accounting and bookkeeping team that you can trust. A little bit of research in the beginning can go a long way to ensuring the financial success that you desire.

It is smart to hire an outsourced accounting service instead of attempting a DIY approach. The best solution is to choose a team that specializes in small business services. You need to work with an accounting pro that will understand unique challenges and situations that might apply to your business.

Also, consider the reputation of the company. As you look online, you can find information about the accounting service to determine whether the company is reliable and reputable. Make sure that the team holds the right accounting certifications.

Take time to learn about the services that are offered to ensure that these services are a good fit for your business needs. If you need guidance or assistance in choosing the right accounting services, then Easier Accounting is here to help. We’re here to assist with everything from explaining industry jargon to providing the ongoing financial support required for your business efforts: (888) 620-0770.

9 Tips to Create a Modern Bookkeeping and Accounting System

Is your company keeping up with the trends in the bookkeeping and accounting industry? Or, are you stuck in the past with outdated financial systems? If you haven’t stepped into the current business trends with online accounting and financial software systems, then right now is the best time to talk to an experienced team for personalized advice.

Yes, the transition to a new bookkeeping and accounting system can be painful in the beginning. Anytime you are making major changes to your business systems; you will experience growing pains and other adjustments that need to be addressed. But, these changes are worth the effort because of the long-term benefits that are available for your company.

Benefits of Modern Bookkeeping Systems

Why does it matter if you update your financial systems? Here are a few benefits that you can expect when you implement some of the latest advances in the industry:

  • Easy financial tracking
  • Reducing busy work
  • Automated reports
  • Digital access from any location
  • User-friendly solutions
  • Security for financial records
  • Simplified payroll processing

These are just a few benefits of implementing a modern bookkeeping and accounting system. As you adjust to the new processes, you will find that there are countless benefits that can support your business goals.

Strategies to Improve Your Bookkeeping and Accounting Processes

So, what are the changes that need to be made to improve your bookkeeping and accounting system? Here are a few things that should be considered for your small business:

  1. Eliminate the Paper: The digital world allows you to keep online records for everything in your company. Eliminating the paperwork can reduce the clutter in your office. Not only will you save time on filing, but you don’t have to stress about shredding all of the documents after you are finished. Going paperless means that you have an online, cloud-based accounting program that can be used to manage all of the transactions that move through your account. You have the freedom to access the accounting information from any location, making it simple to keep up with the day-to-day bookkeeping tasks that need to be addressed.
  2. Simple Invoicing and Tracking: How often do you delay payments received from customers because you don’t keep up with invoicing and payment tracking? It is easy to be distracted by other responsibilities in your business. But, invoicing is an important thing that shouldn’t be delayed or overlooked. Implementing a new, digital bookkeeping and accounting system is the best solution so that you always send invoices and payment requests on time.
  3. Separating Financial Accounts: One of the problems that small business owners encounter is the overlap that happens with personal and business finances. Even if you run a home-based business, you need to be careful about creating a distinction between money that is spent for business purposes and money that is used for personal transactions. A digital accounting and bookkeeping system can help you reduce the complications that occur when these expenses are comingled. This step is essential if you want to help your business grow in the future.
  4. Tax Calculations and Preparations: A poor financial tracking system can make it difficult to set funds aside to cover upcoming tax payments. There is no way to avoid tax burden, and you could be facing big issues if you aren’t prepared to make the payments when the deadlines approach. An automated system helps with these tax calculations. At the same time, you can implement a transfer into a savings account to ensure that the funds are available when the tax payments are due.
  5. Easy Bank Reconciliation: Keeping up with the daily and weekly transactions is good. But, it is essential that you are consistent to schedule monthly reconciliations as well. Not only will these reconciliation efforts help you identify potential errors in the transactions and processing. But, you can also find patterns that could indicate possible fraud or theft in the industry. Mistakes will be made at times, but these issues are easy to fix when you have a good reconciliation system in place.
  6. Improve Cash Flow: Is the money always available when it is time to pay for overhead expenses or business costs that are necessary to keep the company running? Cashflow is the lifeblood of your company. If you are struggling with cash flow, then you might be headed to a path that goes nowhere in the future. The best thing that you can do is implement the right system that helps you keep track of cash flow. Then, you can sleep easy at night knowing that the money will be there when it is needed for upcoming payments.
  7. Reduce Cash Transactions: While it might be convenient to have cash in your pocket for small expenses, the use of cash can increase the risk of errors and mistakes with the financial system. It’s hard to know how much you are spending if all of the transactions are managed with cash. Instead, implement a digital system so that you have a paper trail that shows the transactions and categories for your spending.
  8. Boost Tax Write-Offs: If transactions are overlooked during the year, then there is a risk that you might miss out on potential tax write-offs that are available for your company. A digital bookkeeping and accounting system is a good way to ensure that you don’t oversee some of the important payments that can be used as tax deductions.
  9. Integrated Systems: Not only do you need a good way to track the bookkeeping information, but you need to be sure that your new system can integrate with the other tools that are used in your business. For example, make sure that the software can sync with your point of sale system, website sales, and payroll processing. These integrations might seem small, but they can have a significant impact on the simplicity of your future business processes. Put together the right program now so that you can save the stress and headaches in the future.

The Right Services to Implement a Good Accounting System

Paying for an accounting software might seem like a success for your company. But, you won’t reap all of the benefits unless you have a good accounting team to offer recommendations and advice on how the system will be best used for your needs. The right setup and implementation are essential to ensure that you are starting on a good foot.

It is helpful to have ongoing accounting and bookkeeping services to make sure that you are staying on-track going forward. Your accounting team will keep up with the transactions that are moving through the computer program. Any time you need additional information about the financial success of your company, you will find it easy to run a report and see the overview and cash balances.

There are many opportunities available to improve your bookkeeping and accounting systems. But, it is hard to know the best solutions for your company if you don’t have a lot of experience in the industry. Instead of assuming that a specific software program is right for your needs, it is important that you talk to industry professionals for personal recommendations.

Choosing the Right Software Program and Accounting Team

In most cases, you will be making a premature decision by choosing a software program before discussing your options with a professional accounting team. Instead of navigating the financial industry by yourself, consider the advantages of talking to an experienced accounting professional who can offer personalized recommendations.

Not only can you tap into the hands-on experience of someone who has been working in the business for many years. But, you can also benefit from selecting an accounting service that specializes in businesses that are similar to yours. For example, if you are an entrepreneur or small business owner, then it is best to find an accounting team that works with other small businesses. Don’t make the mistake of hiring an accounting firm that specializes in big corporate bookkeeping.

Easier Accounting is Here to Help

We understand the challenges that you face when you are working on business financial systems. If you are ready to upgrade your bookkeeping and accounting systems, then we are here to assist with anything that you need.

Our team has many years of experience helping small business owners with some of the most challenging aspects of running a company. By creating a strong financial foundation, you can rest assured to know that your business is set up to succeed in the future. We can help with these plans so that you don’t have to worry about the transaction management and other bookkeeping details that need to be addressed on a regular basis.

For more information, it is time to talk to our team of experts at Easier Accounting. Not only do we offer general bookkeeping and accounting services, but we are here to assist with customized financial services based on the needs of your company. Contact us right away to see how we can help: (888) 620-0770