When the going gets tough entrepreneurs get going, they become more efficient and they find a way. Right now things are getting a bit tough. Consider if you will the credit markets making it tough to expand a business, the increased costs of fuel and all the regulations that businesses must deal with, and you can see why things are tough these days.

Even more problematic is the fact that the US Economy currently is flat at no growth. The consumers have little confidence and they are not buying. Layoffs have already hit many large corporations and they are trying to save money by paying their bills slower, which is hurting all their small business vendors. These are difficult problems and challenging times, and it is for that reason that this is no time to cut your accounts to save money in your business.

You see, it is essential that you know where you are in the game. Proper accounting gives you a snap shot of where you are in the middle of all the chaos. With delinquent receivables, cutting staff, real depreciation of your assets and little borrowing opportunities, you will need to sharpen your pencil. You need a strong accounting team to get you the information you need to survive in these turbulent times.

Many businesses will cut the very most important things during a recession, but you must not cut your accounting. If you do you could get into trouble with taxes, regulations and put your company behind the eight ball. If you are to get through this challenge and outlast your competition, you will need to be strict in your spending. If you have to cut your accounting staff, be careful, as it is the last cut you should make. Please think on this, do not become another statistic in a downward business cycle.

In several industries companies and individuals can buy equipment such as machinery, boats or even aircraft and then lease them back to rental agencies, marinas or fixed base operators (aviation). This is a great accounting strategy allowing someone or company to own an asset and have it pay for itself through the rental fees. The owner of the asset has the ability to tax full advantage of the tax write off of this asset and depreciate it as a business in itself, a rental business, even if the individual owns the item.

Once the equipment, boat, or aircraft is fully depreciated, paid for the owner of the asset still owns it at its then current book value. Many years back, I had sold aircraft leasebacks for flying schools and aircraft charter companies, and as well as such an accounting strategy looks on paper, it is not always as clean, crisp and consistent as the proforma may have you believe. The accounting of leasebacks is serious business, not to be taken lightly.

For instance, if someone buys a new Cessna and leases it back to the flight school that aircraft will have some hard flying hours on its airframe, this could increase maintenance costs and wear and tear on the aircraft lessening its value prematurely even faster than the allowable tax depreciation schedule. Additionally, after a couple of years and before the aircraft is paid for it might need a new motor when the aircraft hits its TBO.

Further, the flight school may have newer aircraft on the line that are owned by the FBO (fixed base operator) which they will attempt to rent first or the students and instructors may prefer. Thus, there could be a deficit in the monthly maintenance costs, tie-down, insurance, and payment of the aircraft. So, before you use a leaseback accounting strategy for equipment of any type you need to treat it as a business and consider the reality of the inevitable. After all, anyone can make anything look good on paper.

He finally had to close his doors, not because of the economy, but rather due to the accounting and management issues. Specifically, he had over a long period of time built up his business from scratch. He made furniture as works of art, beautiful stuff and had developed quite a reputation for himself. In fact, he did not even have a showroom, he simply set up on the main road outside of town and folks stopped by to purchase his hand made furniture and told their friends.

Eventually, the city expanded and then disallowed road-side sales, so he went and got a retail space in the old revitalized section of town. Unfortunately, he was selling so much furniture that he could not be in the showroom all the time, rather, he had to be in the workshop, something that only he could do, due to the artistic talent needed.

The center in "old town" was very nice, but expensive and he had to sell more and more to pay for the triple-net lease, and things were moving well, but that meant he was forced to produce more and more inventory, but this meant he could never be one with his customer as before. He hired a sales staff to work the stores mandatory hours; 10AM to 7PM, as per his lease agreement.

He had trouble finding the right people and they often sold the furniture too cheap or failed to give customers cash receipts. He eventually had to close the store, even though it was making money, even though he had so much demand he could hardly keep up. All due to cash flow, management and mostly due to accounting problems, unable to see where he was; he had no snap-shot of his financial situation. Thus, he could not get a loan, move his business to the next step or capitalize on all the goodwill, he had created over the years. Think on this.

If you ask a business person, entrepreneur or executive what the most important thing in business is they are likely to tell you; people, sales, capital or a product and service that people desire. Sure, those are important, but they often miss accounting.

A company with a sharp pencil, which knows where it is at, at all times, is more likely to make money, have a better cash flow and grow the business over a long period of time. A company that is weak in its accounting has a greater chance of business failure in the first 5-years and no company; small, medium or large is exempt.

If you are a small business person and you feel as if there is more to know, then why not register and take some accounting classes at the local community college level? If you are an entrepreneur, then you need to understand how to create realistic proformas, how to attain money and how to insure your cash flow is strong so you can start, grow and succeed in your entrepreneurial endeavors.

Flying by the seat of your pants in your own business and juggling all the finances is fun and exhilarating, but as the business grows larger and larger it's time to either hire an accountant or learn how to do that part of it also. Not only will good accounting help you make better business decisions, but it will also keep you from going to jail for making a mistake on your taxes, withholding or misstating your income. I sincerely hope you will consider all this as you seek to increase your knowledge of business accounting.

Accounting Double Entry

Accounting involves the classification, analysis and dissemination of financial information to those parties who require such information in order to make informed judgments and decisions based on the material.

It is the measurement and control of financial transactions which are, in essence, the transfer of legal property rights, between one party and another, made under binding arrangements. However, transactions that are not financial in nature are specifically excluded since they are regarded as not material.

The double-entry bookkeeping system used in accountancy is the linchpin used by businesses and organisations to record all of their financial transactions. The concept was first introduced in 1494 by the Italian mathematician Luca Pacioli.

It is based on the proposition that a measure of a business's financial well being and a record of the results of its operations are best recorded by the use of accounts.

Accordingly, each account records an historical log of the changes in the monetary values relating to different aspects of the business. The method originally enunciated by Pacioli is now called double-entry bookkeeping.

The basis for this system is, quite simply, that each transaction is recorded in at least two accounts. It is established upon the supposition that for each financial transaction, there is at least one account being debited whilst, at the same time, at least one other account is being credited. The result of this process is that the total debits of the transaction are equal to the total credits so that the overall net value is zero.

Consider the following scenario. Suppose Mr A sells an article to Mr B, who then pays Mr A by means of a cheque. The bookkeeper working on behalf of Mr A would credit the account called "Sales" and debit the account called "Bank" (this would result in money flowing into the bank account). On the other hand, the bookkeeper working on behalf of Mr B would debit the account called "Purchases" and credit the account called "Bank"(this would result in money flowing out of the bank account).

It is the accepted principle that debit entries are added to the left hand side and credit entries to the right hand side of the general ledger account.

The general ledger, also known as the nominal ledger, is the main source for the recording of the accounting records of a business that makes use of the double entry process, bearing in mind that there is also a single entry process, which is a much more restrictive version.

It holds numerous accounts for such items as current assets, fixed assets, liabilities, revenue, expenses, gains and losses. The ledger accounts themselves are set up as T accounts, since they resemble the letter T when the account is empty.

It has been suggested that the double entry system dates back even further to the period of ancient Rome or Greece. Some critics of current accounting methods have suggested that the methodology has changed very little since this time, which must surely indicate that the principles set out hundreds of years ago were based on solid foundations.

Particularly pertinent in this respect is the approach engendered in social accounting which argues that business entities should pay more than lip service to the social and environmental impacts brought about by their activities.

It has been argued that accounting should not solely be concerned with the financial evaluation of economic events, but should embrace a wider audience, such as shareholders, and broaden its appeal beyond reporting simply financial profit and
loss.

Accounting has been defined by the profession as "The art of recording, classifying, and summarizing, in terms of money, transactions and events which are, essentially, financial in nature, and interpreting the results accordingly."

Accounting relates to the dissemination and measurement of financial information by accountancy professionals to establish the level of performance of an organisation. The culmination of such analysis is the preparation and production of a set of financial accounts representing company performance in the previous twelve months.

The accounting function is normally divided into three separate branches:

The Financial Accountant prepares and analyses the financial data necessary for the decision makers within a business organisation. In the case of public companies, such information, in the form of financial accounts, is made available for public scrutiny.

Management accounting, by contrast, is associated with the flow of company information, and is normally confidential in nature and available only to a select group of individuals, such as board members and accounting management.

Further, companies pay corporation tax and individual employees pay income tax and national insurance, and it is necessary to produce this type of financial information for the relevant tax authorities.

Accountants are accounting professionals, representative of these three branches of accountancy. There are a number of professional bodies who represent accountants, the most important being Chartered accountants (ACA), Certified accountants (ACCA), Management accountants (ACMA) and, in the US, Certified Public accountants (CPA).

A completely separate branch of accounting is that of Auditing. An independent auditor who examines the financial statements, in the form of financial accounts, and accounting records of the organisation with whom he is conducting the audit, is called an external auditor. The purpose of such an audit is to provide an independent record of the fairness and accuracy of the accounting statements in accordance with laid down procedures such as, in the US, the Generally Accepted Accounting Principles, also known as GAAP accounting, and elsewhere, in accordance with International Financial Reporting Standards (IFRS).

Some companies believe in auditing themselves, apart of an external audit, in order to provide ongoing financial information specifically for use by management. Such internal auditors are normally employed by the company itself.

The financial reports, especially the annual accounts, are not only used for the benefit of company management, but are also invaluable to external groups, such as shareholders, creditors and the banks. The preparation of the various accounting reports, necessary for any business, relies implicitly on the day-to-day production and dissemination of financial information generated by way of double-entry bookkeeping.

After reading my new report (you can pick it up at my site), some people emailed me with questions about "continuity". So let me break down this phenomenon further.

Do you remember the "book of the month" club? Or think of cable TV even?

These are examples of a continuity program.

Or this can relate even to those companies that auto-ship...you know that Proactiv™ infomercial, don't you?

What happens is that you purchase their products once and for a monthly fee they supply you with a set of products every month and they charge your credit card.

Continuity or a forced continuity program (the latter occurs when you AUTOMATICALLY are included in the monthly program unless you opt-out), is when you make a sale one-time and that one sale results in multiple charges over and over again.

Here are some examples I could think of quickly.

- a bookkeeping service consults with you on how to keep proper records and automatically charges you a monthly retainer to keep your books

- you get a facial and massage at a day spa and you are automatically charged $x per month every month for a selection of premium services at a discount

- a limo company picks you up and you are enrolled into their VIP programme where once a month you are driven to wherever you want to go

- a CPA performs an audit for a company, and then enrolls you for the next year into their monthly accounting service ...

You get the idea?

What's important here for YOU, the financial professional, is that your income is GUARANTEED every month!

Once you provide continuous value to the client or customer, they are assured not to cancel!

I guarantee you that continuity will change your life, your bottom line and indeed your bank balance!

Instead of making a sale once, then attempting to find new customers by advertising and marketing, set up a continuity program and make 3x as much profit or more!

Think about the products and services that you offer.

How can you use this model in your business?