Saturday, December 22, 2007

Accounting as Simple as it Gets

Many people look at accounting and say, "Accounting doesn't make a lot of sense." Well I hate to be bold but there is no better way to say, "Hey I'm a moron, I shouldn't be running a business." Accounting is the story of your business and you should know not only how to read that story but how to tell the story. There are a lot of complex accounting issues, that can be a nightmare. The chances are that you will never deal with them. Don't worry about the complex stuff, focus on the basic principles of accounting. You should be able to understand ninety-nine percent of all accounting issues with just a basic understanding of the principles and constraints.

Accounting is an ongoing story, the financial statements are a snapshot in time of the continuous action taking place.  The fundamentals of accounting are based on Relevancy, Reliability, Comparability, and Consistency. To test the relevancy principle just make sure that the information can be used by outside users to analyze your business. Reliable information is unbiased and not a crock of b.s. you cooked up. If you can't fight temptation get a third party accountant/auditor who is unbiased to your business to actually make or confirm entries to the accounting system. If you report in a comparable manner you report in a way that is typical of other businesses in your industry. This is to ensure nobody is comparing your apple company to someone else's orange company. I always get confused when I compare apples to oranges. Consistency involves simply staying in line with the current accounting practices and using the same principles from year to year. You can't just simply switch accounting methods mid-stream (without fixing historical information) to make numbers look better. Your financial statements should follow the same logic/method over time.

When developing accounting information there are two important constraints to keep in mind conservatism and materiality. Conservatism is simply saying hey I can represent a loss here buy reporting this way or a gain if I report another way; I am gong to choose to take a loss. This can change with tax reporting. When it comes to taxes the conservative approach would be to report a gain. The government likes that money and they don't get to tax you on losses. That is what AMT (Alternative Minimum Tax) is all about.

By now you may be asking yourself what this accrual garbage about. Well if you just bought inventory, prepaid rent or you owe your employees a bonus at the end of the year how do you want to represent that. You want a way of keeping track of your inventory, how long you have the rights to a building and what those costs are over time, and you should want to know what you are going to owe your employees so you can anticipate what you'll need to pay. Well this is where accruals come in handy.  More importantly they tie expenses to revenue by accruing those expenses when the revenue occurs from incurring those expenses.

With cash accounting you recognize inventory expenses upon the purchase of goods. With accrual accounting you say I've got a benefit/asset here I want to represent this benefit to outside users. You do this by reporting it as an asset and expense the cost of inventory when the product is sold (Cost of Goods Sold). This helps you tell the story of a business by telling all the parts not just bits and pieces at a time when cash transactions are made. The same thing goes on with prepaid rent and other assets paid in advance of when delivery is made.

Now, for accruing liabilities. Well you tell your employees that you are going to pay them a bonus based on performance at the end of the year. Hopefully, you plan on paying this bonus, because you don't want to face the dreaded everybody quits on you all at once type of turnover.  STRIKE!!!! Well if you are keeping track of your companies performance you can keep track of what you owe them each month and record the liability and expense.  Basically, you promised employees 1% of net income at the end of the year. Simply, multiply 1% times your profit(loss) and make the appropriate entry. Tie your expense and liability to the month in which the profit was realized. Doing this will give you a better idea of the cash outlay you'll need to make at the end of year. Accounting is full of good ideas and methods to keep track of what is occurring in your business.  Now if there comes a point when you realize you will not owe employees a bonus you would have to true the account to zero because you employees won't be paying you for the losses of the business.

At the end of the day tell the full story of what is going on in your company, through accrual accounting. Don't embellish the story, keep a conservative outlook. Don't change your logic without letting everybody know through restatement of prior year financials. Put out information that doesn't waste the time of internal or external users. Last but not least don't be an accounting moron by excepting that you just don't understand accounting.

Friday, December 21, 2007

Can Oranges Get You Play

I lead a vegetarian lifestyle with the exception of the holidays. Just so nobody can call me a liar I do have fish twice a week, I need to get that cholesterol somehow my HDL was below 40, and that is not good. Other, than that I stick to salad, fruit, soy and what not. I a going to use these facts to qualify myself as an expert orange consumer, I eat them all the time. I eat oranges like the world eats rice, it's crazy.  It is a bit disgusting but when I fart there is no need to roll down the windows. Unless, you mind a citrus odor.

I eat fruit every morning for breakfast not including about four or five fruit snacks before lunch. I'll typically start with melon and about forty minutes later I move on to other fruits. I typically eat one type of fruit at a time and I have noticed a strange phenomenon when I bring out the oranges. Woman literally flock by my corner office and I usually get comments on how good they smell.

Don't try to take too much from this article, I only have a hypothesis related to oranges and sexual attraction, "When a man eats oranges women want to get randy with the orange eating stud." From my experience women tend to gravitate toward me when I am in the act of eating oranges. Even when I have not eaten an orange women are still drawn to me and will often mention that they sense a citrus smell.  All this is based off of my personal experience and while I admit I have no scientific support the orange issue comes up way too much to be coincidence.

I will say it may not be the ingestion of oranges that give the appeal. I really think that it is the act of pealing an orange that causes the attraction to occur. When pealing an orange you get the scent on your fingers and then a mist comes up from the peal. Once you are covered by the mist it stays with you, kind of like nature's little bottle of perfume. Orange peels are actually used to make many perfumes and even house held cleaners due to their pleasant smell. Orange peals are also used to absorb odor and at the same time the citrus odor permeates the area. At the end of the day why can't oranges be used as a sort of aphrodisiac.  What do you think, can oranges get you play?

Monday, December 17, 2007

Business the Communication Breakdown

By Sean Anderson

My girlfriend's work recently hosted a Christmas party. During the festivities everyone was asked to stand up and introduce themselves and explain what they do for the company. It turned out that most people could not adequately describe what they do or even give a job title. I was struck by the fact that the only people who had a clear idea of what to do everyday were the warehouse men.

The only other two people that could give an adequate description were the accounts payable and accounts receivable clerks and even they said, " I take care of Accounts Payable and some other stuff." I was amazed, then I realized that the same type of communication breakdown occurred at my job only within each department. Communication can be a considerable problem in any company despite the size.

There are tons of tools to address communication barriers. You can implement instant messaging, e-mail and voice note systems, holding daily weekly & monthly meetings, develop a mail room, and so on. The key question is how do you know which tool best suits a communication problem? To answer this managers first need to recognize the communication problem, and then address the issues the problem is causing.

The recognition of a communication problem isn't rocket science. Typically, almost every employee knows about the communication problem. The difficulty is admitting that a problem exists and then taking committed action to get the problem fixed. The best way to discover a problem is to simply discuss job functions. Then put a questionnaire together with question like, is this person overstretched, are managers effectively communicating tasks to subordinates, do employees have a defined purpose and goal when they come to work. Review the questionnaires and have a meeting to discuss the results and possible solutions. Then make a commitment to corrective actions, and implement the solutions immediately. Managers must then follow up on the changes and take ownership to open constructive lines of communication.

Address the issue that communication gaps are causing. I will cover four major inefficiencies caused by communication breakdowns. They are gaps between responsibilities, redundancy of tasks, loss of information and infighting.

Gaps between responsibilities often originate from turnover. Unfortunately, turnover results for more responsibilities for current workers, which can in turn result in more turnover. This can become a vicious cycle. If turnover is resulting rapidly take steps to reward employees and more importantly assure them of their importance. Do not lose sight of your team and fail to communicate with them. To eliminate the problem of communication gaps cross train employees. That way at least one other employee knows the job of another, and the value of information they can receive from their peers. Also, implement a training trainer system. Where an employee becomes trained and then trains another employee even if it is a supervisor. This solidifies job duties and creates awareness across positions.

Another problem created by poor communication is redundancy of tasks. This is basically when two employees are creating the same output but are often distributing it to different parties. The suggestions for closing gaps apply here as well, but a better control is to sustain an information flow chart. Then analyze the flowchart using bins to see where information is flowing, where it is going, and classify information based on use using specific criteria. The main idea is to keep everything organized. This is kind of similar to a computer defragmenting the hard drive. Condensing a moving information flow in a way that best optimizes the system.

Loss of information is another problem. This is through loose controls and the solution amounts almost solely to organization. This simply amounts to a lecture about being organized, so we can move on. The other reason is turnover, which we have already discussed.

I saved the humor for last. For some reason people really grow attached to their information. Today the inf oration people create is their job. They have often developed the process and method for communicating the information, and they don't want anybody to drop their data I mean baby. I often see trainers over emphasize a process in order to ensure this integrity. This often bogs down the information and delays the communication process. The best way to handle this is to develop checkpoints to verify communication is accurate and expedient. Focus should be placed on verifying checkpoints, and that way unnecessary precautions will be avoided. It will also keep everybody on good terms. No arguments will be created by the transfer of communication.

Well communication is a vital part of every company. Monitoring it can result in lower costs, better cooperation and greater efficiency. Communication is the information flow that is the life-line of business.

Sunday, December 16, 2007

An E-Commerce Opportunity

By Sean Anderson

Very seldom do you find great opportunities to make money on the web. Someone is always asking for your credit card number at a minimum. At the Nascent Commerce Website you can find this opporunity. No credit card required, just a simple e-mail and you have immediate access to your on-line store.

The great thing about Nascent Commerce is that you have access to more than just an online shopping cart. This is a full on-line store. You have the ability to provide your merchant account infromation, you'll have features that easily support dropshippers, and the ability to make changes to your store look immediately. You put in a product refresh you page and bam your done. The product as well as any other change you've made to improve your store are there without any interference to current shoppers. You can follow this path to see the complete list of Nascent Commerce features.

I have taken advantage of the Nascent Commerce's free one month trial offer. It took me about that time to get my store to where I wanted it to be and by using the features offered by Nascent Commerce in conjunction with I managed to make a few sales. I would be lying if I said I didn't work diligently for a month, but then again I am somewhat of a perfectionist. If you would like take a look at my PoochLove to view my store supported by Nascent Commerce. I am looking currently building a second store to support some drop shipping products, my suppliers for PoochLove are proving to be unreliable.

There are several strategies to employ when buidling your store to take full advantage of the one month trial offer. First find decide on a business formation. I setup a C corporation, but you may have different ideas for you future. Next find a merchant account provider and then sign up for a drop shipper. A lot of dropshippers offer free trials as well. Make the most out of this by setting up and cancelling your first account before recurring charges begin. Scower the site for products and a niche you would like to promote, and then setup a new account shortly after you have started your store with Nascent Commerce. Then simply work quickly. You should also have your AdWords campaign ready to implement in conjunction with the full launch of your store.

Yahoo! Search Marketing

I have been able to make the most out of this great opporunity. Send me an e-mail at and sign up for my newletter at my Truly Free E-Books site. I had to get some plugs in somehow I am not a member of any affiliate program Nascent Commerce has in place. It is just a great product that has really helped me. There really isn't anyway to realize it's power until you are fully involved. When your one month trial offer ends be sure to mention this article when you subscribe.