Author: Rich

So, I have been working as an Accountant for 30 years now!  Hard to believe, really. The one issue I hear about and have experienced myself is the value of the administrative functions.  This includes Human Resources, Accounting, Admin Support Staff.

The Administrative functions are known as overhead. The cost of having administrative staff does not generate revenue, build the product, package, or ship the product being sold. Because of this, the administrative function is sometimes thought of as just an expense and can be looked over or cut to save money.

Granted, excessive costs in any area of the business are not wise, but there is more to evaluating a business function other than revenue. Without a strong, effective administrative function, most businesses would not ever know if they were profitable or not, if they could add a new product line or not, or if they could downsize or expand. Avoid thinking of administration as a necessary evil; it is an important part of the business team.

Just a quick note about year-ends. A calendar year runs from Jan 1 to Dec 31. A fiscal year is any 12-month period. For example, one can have a fiscal year end of July 1 to Jun 30^th. If you are a sole proprietor or in a partnership, you will have a calendar year-end, and your profit or loss will be recorded on your personal T-1 tax return.

A corporation can have any fiscal year-end, usually tied to when the corporation was formed. If the corporation was formed Nov 5, 2019, the fiscal year-end would be Oct 31, 2020. Corporations file T-2 tax returns based on their own unique fiscal year-end.

In Accounting, everything must balance. Each entry posted to a manual ledger or a complicated accounting system must balance. Debits always equal Credits. This means that like yin/yang, up/down, in/out, there must be two components to an entry. Let me try to explain with an example: I buy office supplies for cash, so the entry will be an increase in office supplies (debit) and a decrease in cash (credit).

No matter how complicated the entry is, it must always balance! 

I have been asked by clients many times, how should I record my transactions. There are many accounting software programs available with their own unique characteristics. The answer I usually give is whatever you, the client, are most comfortable working with. If you love Excel, then let’s work with that. If you want to use accounting software, we can examine which would best suit your needs.

The long and short of this is, they are your books. It is your company, and the financial statements are representing how your business is operating. As your consultant, bookkeeper and/or accountant, I am here to assist you. I can guide you through the process and help ensure that whichever method we adopt, you are getting reliable, accurate information to make well-informed decisions about your business.

Money is simply an indicator/tool. Let’s look at a business scenario. Is the business operating effectively and efficiently with well-trained, happy staff” Are the clients loyal, and is productivity strong for a reliable product/service? If so, the money will flow.

If the flow changes, don’t put the focus on the loss of flow. Determine instead what element has changed and therefore needs attention to get the flow of money back to where it could be. Cash flow could indicate a change in market demand, in staff attitudes or in product quality.

If too much time is spent focusing on the money change and not focusing on the root issue, the flow will continue to decrease, and the problem will only get worse.