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Standardizing Your Chart of Accounts

A chart of accounts is a list of categories used to classify your assets, liabilities, equity, income and expenses.  An account, when used in this context, is not like a bank account, but is a category that is used to organize your business’s finances in order to gain a deeper understanding of what is occurring within your company.  For example, depending on your business (we’ll pretend that it is a construction company in this article), you will have a chart of accounts that will contain an office equipment account, along with a building materials account.  Under the building materials account, you may further organize your chart to include lumber and roofing material.  When you are recording your A standardized chart of accounts contributes to your business's growth.expenses, you will record that you spend $2,275.50 on office equipment and $8,550.00 for lumber and $4,035.00 for roofing material.

It should be clear that without a good chart of accounts, you will not be able to properly analyze the performance of your business. If you begin to see your profits slumping, it will be difficult to understand the reason why.  Are your lumber costs rising?  Is it perhaps that roofing materials are more expensive.  If you are not tracking your lumber or roofing material expenses individually, but have lumped them together in your building materials account, you will not be able to tell.  By creating a detailed chart of accounts, it becomes simple to find where your money is being best spent, and which products or services are most profitable.

Many industries  have a chart of accounts that is standard among the industry group.  As your business grows and seeks financing as well as investors or buyers, the need for a standardized chart of accounts will increase. Once a standard chart of accounts is adopted, your firm will be able to analyze your business in comparison with benchmarks across the entire industry.  Using these benchmarks, you will be able to compare your costs for overhead and materials with industry averages.  This is attractive to you as business owner because you will be better able to understand where you can bring your costs under control, or where to focus production efforts.  This is attractive to lenders and investors because it lets them compare your business with everyone else in your industry and to evaluate your business’s performance relative to the industry as a whole.

At Integrated Accounting Services, LLC, we understand the importance of setting up a standard chart of accounts.  Our experience spans industries, from construction and hospitality to manufacturing.  Our experienced CPAs can organize your standard chart of accounts in a manner that will give your business a competitive advantage, whether you are starting your first business or growing your existing business.  Call us at (602)944-0423 to get started!

 

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Integrating Your Business

Integrating your businessThe more efficiently people work together in a business, the lower the cost of operations will be, which will lead to higher profits.  Organizing employees to work more efficiently can be analyzed best by approaching the data interfaces between working positions as a problem of integration of each person’s responsibilities and duties assigned with those of others including business clients, lenders, and investors. As business consultants, Integrated Accounting Services, LLC offers insights into accounting for the requirements of the interfaces and improving the definition and accuracy of the transferring of data and follow up duties.  This type of analysis ensures that information is flowing properly within a business, and that information is getting to the proper person in a usable format.  We can eliminate redundancy and create new synergies through an analysis of these information interfaces within your organization.

This can be accomplished by the an evaluation of the data being transmitted within a business to determine its degree of importance and completeness as compared to the needs of the recipients. In addition Integration Accounting Services’ CPA.CITP is authorized to audit the Information Technology controls according to Service Organization Control (SOC) standards and guide lines to determine their adequacy in providing security and privacy of private and nonpublic data being processed.  This assures that your internal system is secure and that your liability relating to loss of customer data is limited.  With the ability to certify your information technology system and analyze your internal flow of information, IAS can open up new opportunities to your business.

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Starting a business?

 Organizing a new business based on established standards and guide lines used  in your industry is unequivocally necessary to insure a high probability of achieving success.  As with any endeavor, starting strong will increase the probability of success.  Here are a few crucial ideas that can make a difference in the strength of you new business.

1. CHART OF ACCOUNT: The first step is to adopt the standard chart of accounts that is used in your industry. This is critical because the initial operating budget can be prepared based on what  each category of income and expense is as a percentage of the Gross Income for comparable businesses. The utilizing the ratios of income and cost being experience by other operating business in your industry as a basis of your budgeting is referred to as “benchmarking”.  Your budget becomes a reliable guide for planning and decisions making. The high rate of failure of new business is primarily due the improper disbursements of the start up expenses in relation to the actual income being achieved.

2. MARKET ANALYSIS: The second critical step is the development of a realistic appraisal of the size of the market, how the current volume is being shared and what would be a realistic expectation of  sales you hope to capture on an annual basis. This requires a study of each company to determine not only what their market share is but also to evaluate why their share is high or low. The degree of market penetration is limited by the amount that has been budgeted for marketing and advertising.  This knowledge provides guidance for your planning and positioning of your product or services. For manufacturers the analysis is the essential information needed for scheduling the rate of production.

3. POLICIES AND PROCEDURES: The third organizational requirement is the establishment of policies and procedures to be used in the training and education of the employees as they come together for the first time. To accomplish this it is important to assign responsibilities and to define standards for how the day to day decisions are to be made in a manner that establishes a uniform method for performing the day to day tasks.

4. NET OPERATING INCOME: Preparing a ten year projection of the Net Operating Income (NOI) is the fourth step in establishing a business. The NOI projection is calculated according to the Chart of Accounts and is based on projected sales volume outlined in the Market Analysis. Interest, taxes and depreciation are shown below the NOI, producing the Net Cash Flow.

5. BUSINESS PLAN: The Business Plan includes all of the planning developed in first four steps and a description of  how the plan is going to be implemented including the organization and assigning responsibilities.  Business plans also include a statement of goal and schedule milestones for their accomplishment.

Integrated Accounting Services provides continuing consulting and education programs  for new and established businesses whereby management and employees can continue develop as the business thrives and expands.

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How a CPA.CITP can help your business grow.

In today’s fast-moving business environment, efficient use of technology can give a business a competitive edge against their competition.  A CPA.CITP is a Certified Public Accountant who is also a Certified Information Technology Professional.  With a background in accounting and a deep understanding of information technology, a CPA.CITP is able to offer businesses unique insights that either a CPA or information technology professional alone would not be able to.

A CPA.CITP is qualified to perform SOC1, SOC 2 and SOC 3 audits and to help businesses create controls to ensure that confidential data is kept safe.  Additionally, a CPA.CITP is able to help smaller businesses develop information technology infrastructure that is scalable so that growing businesses are able to expand their IT network while being certified as meeting SOC requirements.

In order to qualify as a CITP, the CPA must develop an understanding of information technology principles and practices encompassing a wide body of knowledge across both disciplines. As a CPA.CITP, Michael Warren is recognized for his understanding of IT technology and its relationship with business accounting. This unique body of knowledge and experience establishes Mr. Warren as one of only a few CPAs who is certified to perform audits of the degree of the suitability of a service organization’s controls for storing, transmitting and protecting electronic data.

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What can IAS do for your business?

The major challenge in the management of any business is the need to continually find ways to improve the product and services while reducing costs. An in depth knowledge of all aspects of a business  as well as the market demands and subcontractor and/vendor capability and pricing is necessary as part of the decision making process. Professional auditors and business consultants bring to the table an up to date perspective as to competitiveness and viability of your business based on their experience with other related businesses.

When the knowledge gained from a careful review of the accounting and cost control systems is integrated  with an understanding of the day to day operations gained from the management interviews new ideas and suggestions emerge for consideration.

Integrated Accounting Services’,  team of financial auditors and business annalists strive to understand your business goals and offer new solutions and suggestions that  will improve your competitive position.  The introduction of different perspective in this manner by fully informed professionals enables the thinking process of all concerned to open up and be receptive to valid operation changes that can result in a more profits.

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How IAS Can Help Your Business

Here at Integrated Accounting Services, LLC, we are constantly striving to ensure that we are delivering extraordinary value to you, our client.  With that in mind, we offer a whole host of services designed to help you grow your business.  We provide financial analysis and other services that will help you evaluate company performance and properly plan for future sales opportunities and growth needs. Some of these services include:

  • Estimating income tax liabilities, both business and personal
  • Creating budget and forecasting revenue and expenses
  • Managing cash flow
  • Searching for bank financing options
  • Access to financial planning strategies

Additionally, we integrate your business and personal financial needs so you can focus on what you do best.  As a business owner, your revenues don’t come from the time you spend with your accounting.  The time you spend on your accounting is time you are not making money.  You need to be finding new customers and delivering your product.  As a CPA firm, your accounting is our passion, so you can have confidence that your financial matters are watched over by consummate professionals.  We can also help you maximize your profits through timely reporting to avoid penalties and fines.  Reduced bank fees and loan interest rates can also help increase your profits.

Integrated Accounting Services is your partner for growing your business.

 

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