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5 accounting tricks to check your accounting management Cofinia has been supporting SMEs in business management and accounting management since 2016. Many clients have approached us to help them update their business accounting, knowing that there was a problem. However, in several other cases, we had to notify the client of shortcomings and problems that we observed when they entrusted us with a bookkeeping or system migration mandate. Here are 5 accounting tips to check if your accounting is in order: 1. Are your bank and credit card reconciliations done? Bookkeeping may seem routine to some people, but it comes with its own set of challenges. Too often, we find that the bank reconciliation is not carried out. Especially since with accounting software like Zoho Books and Quickbooks that synchronize with your bank accounts and regardless of the transactions, it is easy to consider these reconciliations as a proper reconciliation. 2. Are your taxes properly configured and the tax reports properly executed? It is not enough to have rates of 5% for the GST and 9.975% for the QST, you also have to know when to use them. For example, do you apply a 50% reduction on these taxes for entertainment costs? What is the frequency of your tax reports? Are the revenues declared for the period identical to the revenues invoiced? Have you taken into account any transactions or corrections recorded on a date prior to your last report? 3. Do balance sheet items include amounts that have not changed for more than one fiscal year? This might be normal for share capital, but this is not the case for prepaid or accrued expenses. Too often, amounts are posted to these accounts but not processed correctly afterwards. Prepaid fees should normally reduce periodically. For example, when paying an annual insurance premium, we will put 11/12 of the amount in prepaid expenses in the period and this will reduce the amount periodically each month. For accrued expenses, it often happens to record, for example, a bonus provision or an expense for an invoice that will be received in a later period. Often, when the time comes to process the invoice or the disbursement of the bonus, the expense account is applied a second time instead of reducing the accrued charge. It may be a simple oversight, but one that will skew the company’s results. 4. Do your financial results fluctuate a lot each month? I really like looking at a comparative income statement . I compare it month by month since the beginning of the year or I compare the current month to the same month of the previous year if the company has cyclical operations. I analyze the variations for each line of income or expense. Often, the expense amounts are higher in certain months, indicating to me that the accounting treatment is not appropriate. We often see this case in equipment costs. We sometimes forget to recognize a fixed asset when buying a computer.  One of the accounting principles is to pass an expense in connection with the life of an asset. This is how depreciation should be calculated. This way of analyzing the results will also make it possible to detect errors of double entry. 5. Have year-end entries been accounted for? At the end of the year, you send your information to your accountant to file your tax returns and sometimes a notice to reader or a review engagement. The accountant will certainly have to make adjustments, for example, reclassifications, non-current transactions such as disposals of assets, but also the calculation of depreciation and taxes. These entries are generally sent by your accountant at the same time as the financial statements. These entries must be recorded in your accounting system so that your beginning of year balances on the balance sheet are accurate. Here’s a 6th bonus tip! 6. Do you have unapplied credit notes on your customer and supplier invoices?  In many cases, suppliers issue you credits that are “forgotten” in your accounts payable. This money is due to you. Regularly check the dates of the credits to ensure that you are reimbursed if no purchase is planned in the near future. If you have any questions, our team of experts is available to guide you through the accounting of your business. It will be our pleasure to advise you on the accounting management software adapted to your needs and to help you with the implementation. If you want to save time and money, do not hesitate to contact us ! Stay tuned and don’t miss any of our new publications   Access our Tools We provide you with completely free tools to help you familiarize yourself with the management tools Make an appointment! Make a telephone appointment with us to learn more about what we offer as a service and how we can help you. Follow us Follow us on our social networks to learn more about our company, our values ​​and our services.

The business case for a service business With cloud applications, it is increasingly easy to have (almost) real-time access to the financial performance of our company. Of course, as an accountant, I am quite well equipped to analyze the numbers. On the other hand, as an entrepreneur, I must say that it takes on another meaning. For what? Because it’s not just numbers and it’s not enough to make decisions based on the analysis we make of these indicators. In the past, as CFO, I gave my opinion, I issued recommendations, but ultimately, it was the CEO and the management team who made the decisions. Since I founded Cofinia, I have asked myself the same kind of questions as the entrepreneurs I meet. My advantage, I know how to structure information to analyze results and make decisions. I must say that I don’t always make the right decisions, but as I’ve been told before, it’s better to make decisions and make mistakes than not to make any decisions. At least we learn. And I must say that I learn every day! Gross margin If your charter of accounts is well structured, you should be able to calculate the cost of the services you offer and, by extension, the gross margin. Why is this important? Because it is the first milestone in the analysis of profitability. Turnover is important, but what’s really important is making a profit. Many companies record salaries and expenses in a single accounting account heading. I always suggest separating the accounts into at least 3 distinct sections. Direct costs (related to services rendered) Sales and marketing costs Administrative costs In this way, it is possible to identify the gross margin (revenues less direct costs). A company generally owes a minimum of 50% gross profit. The effective rate I really like this indicator, because I find it very revealing about the performance to be achieved. It is calculated by dividing the income for the period by the number of hours worked. Note that if you have a lot of rebillable expenses, you must reduce the income by these amounts to give a more accurate picture. Thus, if you charge a rate of $100/hour, you will have an idea of ​​the real rate realized on your mandates by calculating the effective rate. There are often times that we are not able to charge our customers (learning about files, travel, resumption of work, etc.). It is therefore relevant to ensure that we are able to cover overhead costs and this will not be possible if our effective rate is lower than what is required and anticipated. Profitability by project or client Profitability is the key. It sounds simple, but when you start a business, you always want to give the customer more to establish our credibility, provide good service and ensure that our customers come back and refer us. Calculating the profitability by project or by client implies that timesheets must be made. For many, this is not a pleasant part, but it is essential. By assigning average rates to our resources, it is quite easy to determine if our projects/clients are profitable or if action needs to be taken. Sales recovery time Getting paid is the sinews of war. I often hear people say “I am making a profit, why is my bank account always empty?” “. The first thing I validate is if the company is indeed making money. When the entrepreneur pays himself in dividends, we sometimes realize that the profits are not enough. If we added the contractor’s salary, we would see that the income would not be sufficient. Then I look at the recovery period. No, I don’t look at the age of the accounts. It is useful, but it does not take into account the work carried out, but not invoiced. Indeed, it sometimes happens that we cannot systematically invoice all the work at the end of the month. According to accounting principles, it would be appropriate to recognize work in progress, but in general, small companies do not do this. Result, we do not realize, but we find ourselves recovering the costs between 60 to 90 days later. To calculate the DSO, here is how I proceed: Monthly income / Accounts receivable * 30 days Monthly income / (Accounts receivable + work in progress) *30 days This gives us the number of days to recover our costs. The burn rate or our monthly costs The costs of a service company are mainly made up of salaries. Next come administrative expenses such as rent, software costs, insurance costs and professional fees. It is quite simple to make a monthly average of these costs. Once this amount has been established, simply add an amount to cover interest costs, debt repayments, taxes and the shareholder’s dividend if applicable to establish the income to be generated. to meet the company’s obligations. I have, of course, simplified the explanation by not taking into account investments to be made and significant variable costs, but it can give you a good idea. Why is it useful? To find out how many sales you need to generate each month to generate enough profit. Stay tuned and don’t miss any of our new publications   Access our Tools We provide you with completely free tools to help you familiarize yourself with the management tools Make an appointment! Make a telephone appointment with us to learn more about what we offer as a service and how we can help you. Follow us Follow us on our social networks to learn more about our company, our values ​​and our services. facebooktwitteryoutube