Tag: A/R

What Drives SMBs’ Accounting Software Purchases?


Software Advice™, a trusted resource for software buyers across industries, recently published a trend report on accounting software purchases by small and midsize businesses (SMBs). SMB Accounting Trends Buyer Report – 2016 was based on hundreds of consultations the firm conducted with SMBs over the past year. The report provides excellent insights into what business owners should look for when considering buying an accounting software system to replace outdated software or manual entries (e.g., pen and paper or Excel spreadsheets).

prospective buyers current accounting methods
Prospective Buyers Current Accounting Methods

Software Advice analyzed a random sample of consultations and found that nearly 60% of SMBs are looking to replace their existing accounting software with a more advanced system, while roughly 30% are first-time buyers.

35% of buyers seeking upgrades are now using some version of QuickBooks. This comes as no surprise. In my experience working with SMBs, I’ve seen that software packages such as QuickBooks and Sage 50 (formerly Peachtree) are very popular because they are advertised as relatively inexpensive and easy-to-use. Though these solutions provide the basic financial information owners need to prepare their tax returns, they do have limitations on the following:

  • The number of user licenses and the ability to set user permissions
  • Inventory items and SKUs that can be tracked in the system
  • Capabilities for tracking edited/deleted transactions (audit trail)
  • Integration with operational, industry-specific software

SMBs Requirements for Advanced Functionality

According to the trend report, the majority of buyers desire greater system capabilities. Buyers want the new software solution to be able to:

  • Handle multiple entities
  • Consolidate data and accounts
  • Run payroll in-house

At KRS CPAs, we’ve noted that handling multiple entities is often a tipping point for businesses progressing from basis to advanced accounting solutions. When businesses try to perform the function with a solution that isn’t designed to support multiple entities, the process is time consuming and error-prone.

For example, inter-company transactions processed by larger software applications are handled in one entry. If the application doesn’t offer multi-entity access, then the entry must be recorded in each entity separately, which is time consuming and can result in mistakes.

Software Advice also reported that the 21% of buyers wanting to automate processes correlates with the same percentage currently managing their accounting with manual methods, such as Excel spreadsheets. These buyers are looking to improve efficiency by reducing time spent on manual data entry.

Financial Reporting Capabilities Are Crucial for SMBs

82% of buyers wanted financial reporting in their new software solution in order to measure key financial and performance metrics. I typically advise clients to ensure their new system has basic reports, including the balance sheet, profit and loss statement (P&L), and cash flow report. The P&L acts as the starting point for tax planning, while the balance sheet reports cash levels, debt and retained capital in addition to assets and liabilities.

Accurately tracking and reviewing this financial data on a regular basis gives business owners insight into financial history, department efficiency and the profitability of different ventures. This allows them to make more informed decisions regarding cash flows, budgets and projections.

Cloud Solutions Grow in Popularity

Another accounting trend SMBs should be aware of is the growing popularity of cloud-based solutions. Software Advice identified these benefits of moving accounting to the cloud:

  • Greater ease of access
  • Better security
  • Improved ease of use

I’ve also seen that cloud-based systems provide more integration and add-on options, which allows users to extend the reach of their existing systems to serve many industry-specific needs.

Ready to Get New Accounting Software?

If you’re ready to start evaluating accounting software, Software Advice offers an online accounting software questionnaire that can help you match your business needs with several products for you to assess.

Once you have your new software installed, KRS CPAs can help you set up your bookkeeping, accounting and financial reporting processes so that they deliver the insights you need to manage your business more effectively.

Ten Tips for Choosing a Reliable Payment Processor

Choosing a credit card processor can be confusing. Here’s what you need to know to get it right.

Since businesses usually cannot withdraw funds directly from a customer’s bank or credit card account they rely on payment processors as the middleman. These payment processors connect you to merchant accounts such as Visa or American Express.

Tips for choosing a credit card processorThere are many ways to obtain payment processors. For example, they can be found through banks, online providers and companies such as PayPal. They all have different rates. Some may require contracts or mandatory leasing of their equipment (credit card machine), so it is very important that you choose one that will work best for your company’s needs.

Finding the right credit card processor is important and there are many points you should consider. For example, mobile businesses must consider the ability to accept credit card payments from anywhere. For these businesses, a mobile credit card processor would be best. Also consider integration with your accounting system and CRM software to ensure efficient processing and recording.

Selecting Your Payment Processor

With the help of Christopher Mammaro, CEO/President of Integrity Card Systems, we have listed 10 tips to consider when selecting your payment processor:

  1. Don’t be sold/fooled – Make sure you are not being set up with equipment you do not need. Quite often representatives will indicate that you need new equipment that is proprietary in nature and only works with their processing system. If you do need such equipment, are you paying for it? Often merchants will offer a “FREE” terminal when in fact you are actually paying for it through unexpected monthly or annual fees, or costly termination fees.
  2. Bigger does not always mean better – Just because a bank is larger does not mean that it will provide better service. Inquire if your bank uses a third-party provider and be sure to get comfortable with them. As a third party, they may not know anything about your business.
  3. Availability – Make sure the processor you choose can be reached in a timely manner. Inquire about their customer service and response times. Common complaints are in the area of support as many do not have local representation and you will not have a dedicated service representative.
  4. Trust –Referrals from people you trust or respect are more likely to place you in front of a good payment processor.
  5. Rates – Understand your current pricing structure and what type of pricing structure the processor suggests for you. Here are some examples: flat rate, tiered, interchange plus, and surcharge.
  6. Education – The processor should listen to the needs of your business and, afterwards, present a few solutions. Make sure their processing solutions are PCI (payment card industry data security standard) compliant and utilize current technology.
  7. Beware the contract – Avoid a long-term contract. If there is a contract, find out the term and if there is the penalty for leaving before the end. You are looking for a client relationship, not a hostage situation.
  8. Reputation – Do your homework. Make sure the company is reputable. Look for ratings and referrals.
  9. Sales rep vs sales partner – A sales rep may have a quota to fulfill and will be very accommodating during the sales process only to never be seen or heard from again. Make sure the person you deal with has a vested interest in your satisfaction.
  10. Bait and switch – Have a frank discussion about fees. Inquire as to any extra fees there are and how often they are charged. Request this information in writing. You do not want to be sold on a monthly savings only to be charged another “non-disclosed” fee.

Accepting credit/debit cards can increase sales, help you better compete with your competitors, have quicker access to funds, and avoid the cost and time of collections. Choosing a payment processor is perhaps the most difficult task in any businesses decision to accept credit cards. Mammaro’s advice is to take your time, comparison shop and search for the one that best suits your needs and business operations. Credit card processing companies are competitively priced, yet each may have a unique set of fees and contracts; it’s important to understand those nuances so you find the processor that’s a good match for your business needs.

At KRS CPAs, we work with businesses to provide the bridge from operations to financial reporting. Our accountants and bookkeepers understand the sales and collection process and assist our clients in evaluating merchant services and integrating these services with their accounting systems. If you need help, contact me at 201.655.7411 or [email protected].

Valuation Considerations in Selling a Business

 

The most important tool in helping evaluate cash flow and risk is good accounting records. If the business has five or more years of good accounting records, the buyer’s perception of risk is reduced, because the records will tell the story of the company’s cash flow, and make it easier to project future cash flow.

Price and Value balance conceptIt is unlikely that any single action will result in a significant increase in cash flow, but the here are some areas where improvement may be achieved:

Expense Reductions – Review your financial statements line by line. Can the company operate with less payroll?  Fewer vehicles?  Can you reduce your space and related rent expense?

Have employee contributions to health insurance costs kept up with rising premiums?  I once assisted with a business sale in which the owner’s mantra was “find an expense reduction or become one.”  Every dollar that is added to the bottom line may increase the value of the business.

Revenue Increases – Can the customer base be expanded?   How will the company’s market share be affected by a price increase?  What about a price decrease?  Can the company take on new product lines?

Accounts Receivable – Can customer payments be accelerated? Money that is not in accounts receivable will be in your bank account, available for the business to use.  For example, a business that has $10 million of annual sales will gain approximately $385,000 of cash by reducing its average collection period by 14 days.

Inventory – Are you carrying obsolete or slow moving inventory? If so, it should be sold at a discount to reduce inventory and raise cash.  This step is also necessary so that prospective buyers of the business will have an accurate picture of normal inventory levels.

Common risk factors

Although different businesses may have different risks factors, some risks are common to all businesses. In evaluation of risk, we identify factors that may cause cash flow to not be received in the amounts expected and when expected. Following are some risks common to many businesses:

Customer Concentration – Is the business dependent on sales to one or a few customers? What would happen if one or more of those customers were lost?

Supplier Concentration – Are business operations dependent upon one supplier? If that supplier ceased to exist, could it be replaced?

Key Employees – Do the key employees have employment agreements and/or non-compete agreements? If not, and they went to work for a competitor, would the business suffer?

Obsolescence – Are your products or the processes used to produce your products approaching obsolescence, or are you updating your products and processes to stay competitive?

To understand the value of the business and how to increase it, a business owner considering selling should have the business valued. This will help him understand the factors that drive the value of the business.  If this is done long before the contemplated sale, this will give the owner and management team more time to make the changes necessary to increase the value of the business.

For more about business valuation, read the posts, “Why You Need a Business Valuation,” and “Goodwill and Your Business.” Also visit the KRS Business Valuation and Litigation Support page.

Cross-Reference Your Cash Receipts for Easier – and More Accurate – Bookkeeping

bookkeeping tipsReconciling your company bank statements does not have to be an onerous chore. Of course, it’s much easier to track customer payments by credit card or check. But what about reconciling your bank statements when it comes to cash receipts? Continue reading “Cross-Reference Your Cash Receipts for Easier – and More Accurate – Bookkeeping”