Building a Useful Budget

With any company, a budget is the bread and butter of running a successful business. The only problem is budgets are difficult to plan and maintain in the best of times. There is always unexpected events, cash flow problems, etc. that can cause a collapse in the budget. Being able to formulate a successful budget the will take you through the years is an important tool to have in your arsenal that keeps your business successful and running smoothly.

Budgets are the most important part of your business. They set specific spending limits on your business to ensure you reach your profit goals established for the year.  It is a month-to-month road map that guides you though the year. Think of a budget as providing control over your money and looking out for your best interests. If done right is can help predict peak periods so you know when to add additional stock and how to handle sale volume.

Plan to visit your budget monthly to update and see what impact this will have on your income and profit. You can see places where you could invest money into to create a better impact on the market and see where the cash flow is throughout the business.

You budget can help you adjust to unexpected changes. If a client cuts back it will affect how your company is run. You will be able to adjust and predict how long it will take for your company to recover. It can also allow you to adjust in other areas to absorb the impact.

Once you have established a good working budget your can tie incentives to how well you can stay on budget. It is important to maintain a healthy budget and set specific parameters for making a profit and meeting payroll. A solid budget can give the business guidance and help see the trends for the future.


New AICPA framework Unveiled

The American Institute of CPAs announced, in June, a new framework the will provide a new accounting option to help small- and medium-sized businesses provide financial reports for specific entities. These new options are not currently required by the US Generally Accepted Accounting Principles (GAAP), but they will help to streamline financial information reports for privately held, owner-managed businesses.

The new framework was developed by a group of CPA professionals with vast knowledge and understanding of the needs of private companies’ financial statements. While there has been some scrutiny over the new framework, it was designed to make it easier for small- and medium-sized businesses to produce accurate, reliable financial statements. These statements show the business’s profitability, cash availability, assets to cover expenses and concise disclosures. The framework makes it easier to the businesses to create reports for lenders, insurers, and other people who require financial statements.

To help create these reports, the framework uses a blend of traditional accounting and accrual income tax methods. By using the historical cost and target disclosure requirements, the report provides options for presenting the information to various entities. It reduces book-to-tax differences while expanding options for CPAs and other companies to provide consistent, cost-beneficial statements.

After a survey of 200 CPA firms, many of them were familiar with the new framework and half of them expected their clients would use the framework. With the option of the new framework, many companies will use it to help them have less complexity in their daily business. As the framework is used more, time will tell if it will be the best for the companies that use the new framework.


AICPA Framework for Small Business

On June 10, the American Institute of CPAs announced the new framework to help small businesses with their financial reporting. The new framework is to provide a new accounting option for small- and medium-size entities. While these new accounting option are not required as US Generally Accepted Accounting Principles (GAAP) they will help to streamline relevant financial information for statements for privately held, owner-managed businesses..

The purpose of the new framework for small- and medium-size business is to help prepare financial statements clearly and concisely. The report shows the business’s profitability, cash available, assets to cover expenses and concise disclosures. The framework provides a report that makes it easy for lenders, insurers and other people that use the financial statement.

With a blend of traditional accounting and accrual income tax methods, the framework uses historical cost, target disclosure requirements, options to presenting the information, and reduces book-to-tax differences. This new framework expands options for CPAs and other companies for providing consistent, cost-beneficial financial statements.

The framework was developed by a group of CPA professionals that are experts in understanding the needs of private company financial statements. There has also been public and professional scrutiny to improve the new framework for any users.

Almost half (46%) of the 200 CPA firms surveyed are familiar with the new framework and half of them expect their client to use the new framework. There are a few critics to the new framework, but the opinion remains that the framework will help provide less complexity for the daily business.


Global Opportunities: Small Businesses Make the Leap

Crowley Halloran Conference RoomIn today’s business environment, the more ways a company can share their product, the better for the company. Markets all over the world hold potential for small business, but what does it take to get into the foreign markets? Can small business take advantage of the global opportunities? The answer is yes. The global economy has never had more opportunities for small business, and with a strong global financial strategy, small businesses are competing in foreign markets.

To succeed globally, small businesses need to create a global financial strategy. Small businesses will face common issues and a few roadblocks in the global market, but having a well-defined plan can make the difference between being successful and failing in the new market

Some questions to consider when creating your plan are:

  • What performance indicators need measured for both financial and operation purposes?
  • How will accounts receivable and payable be set up and managed?
  • Is there enough support for multiple locations and countries?
  • How will the company keep control over the global financial process?
  • How are local tax regulations and requirements managed for each foreign location?
  • How are different currencies handled in foreign locations?

Being able to answer these questions and any other unique question regarding your company is the best way to start.

Some strategies that help in making a successful transition are setting up multi-entity accounting, understanding foreign tax laws and codes, managing multiple foreign currencies, and having local human resources. Businesses with multi-entity accounting have consolidated their business processes. By consolidating business processes, the company will eliminate duplicate work, create a standard workflow, and be able to support the demands of a more complex business model. Hiring a local accounting firm to help with all the local tax codes and regulations would be extremely useful when breaking into the global market. They will be able to navigate your business through the different regulations, and be able to keep up with the different currency fluctuations. They can also be part of your management team that will take care of the day-to-day running of the business.

Ventures into a new market are exciting new opportunities for small businesses. With a proper plan and a good management team, anyone, even a small business, can take advantage of the global business opportunities.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.