Managing Your Accounts Receivables Is Critical

Tight Management of Collections Is Crucial

If your business sells products or services to other businesses then you may be in the position of having to extend credit to your customers. If you do extend credit then your business, like many others, may be having a hard time getting paid. And although no one really likes having to be the bad guy someone has to make sure that your customers are paying their bills. If they don’t then you may find yourself in the unenviable position of not being able to pay your own bills.

Are Your Customers Being Tight Fisted?

With the economy the way it is right now most businesses are trying to hold onto their cash as long as they possibly can. Most likely you are doing the same thing too. But once the job that you were hired to do or the product you supplied is delivered then that money they are holding really belongs to you. And as long as they have it then it cannot be made to work for you.

So Who Gets to Be the Bad Guy?

So who gets to be the bad guy? Well that depends on you. There are two basic options. Either you do it in house which, depending on the size of your company, might actually require you to do it or you can hire an outside firm. Each system has its advantages and disadvantages. In the case of an outside firm you get professionals in the collections business. The problem that can sometimes surface comes from the tactics they use to get your money. Often they will try to pressure a customer into paying their bill. This of course can be counter productive to your relationship with that customer. So if you are looking at using an outside firm then you need to question them first about the collection methods they use.

Doing Your Own Collections

If you are planning on doing it yourself or designating someone within your company to handle your collections then you need a system to govern your methods. To start you are going to need information. What is primarily needed is contact information. Phone numbers, addresses, and the person that it would be best for you to deal with. Once you have that information then you need to decide how aggressive you want to be in collecting your money. Most businesses allow 30 days for a customer to pay. If that is your policy then you need to try and stick to it. Because if you allow your customers more time then they may try to take advantage of you.

Preserve Your Customer Relationships

The most important thing to remember when dealing with money you are owed is that you need to preserve your relationship with the customer. If you don’t do that then all the effort you put into building that relationship will have been wasted. It even matters how well you treat their bookkeeper. Treating them well will help you in the future when the time comes again that you have to ask them to pay a bill. All you need to do is ask yourself what kind of a response you would give to someone that is rude or pushy when they are trying to get you to pay a bill. Keep that in mind when you want someone to pay your bill. Remember collections is a dirty job but someone has to do it.

By Justin Miller

Straight-Line and MACRS Method

Financial Reports and the IRS -- Accounting for Depreciation

A company may choose to use the straight-line method for depreciating assets on their financial statements, but this method is not correct for income tax purposes. The straight line method of depreciation for financial reporting purposes is an acceptable method according to generally accepted accounting principles (GAAP), but the Internal Revenue Service requires that companies use the Modified Accelerated Cost Recovery System (MACRS) to compute depreciation for income tax purposes.

Straight-Line Method

The benefits of using the straight-line method for book purposes are that it is simple and easy to use, and is a fairly reasonable transfer of costs for financial reporting purposes. A simple spreadsheet is all that is required to use this method. An accountant simply calculates the depreciable cost of the asset, and divides this amount by the estimated useful life. The entry can be recorded monthly on the books for financial reporting purposes by debiting depreciation expense and crediting accumulated depreciation.

As an example, if a company purchased a light-duty truck to use in their business at a cost of $20,000, with an estimated residual value of $5,000 at the end of five years, the depreciable cost would be $15,000 ($20,000-$5,000). Divide this by the five year useful life and the monthly entry for this would be a debit to depreciation expense-company vehicles for $250 ($15,000/5=$3000/12), and a credit to accumulated depreciation-company vehicles. At the end of the year, the financial statement would reflect a total expense of $3,000 for depreciation expense-company vehicles. Therefore, the net income on the financial statement of the company would be reduced by $3,000 each year for five years using the straight-line method.

MACRS Method

For tax purposes, the MACRS method should be used. According to the IRS, the two most common asset classes besides real estate are the five-year and the seven-year asset class. Asset classes are similar types of assets grouped together. The five-year asset class includes automobiles and light-duty trucks, while the seven-year class includes most machinery and equipment, which means that all automobiles and light-duty trucks should be depreciated for five years, and most machinery and equipment should be depreciated for seven years. When using the MACRS method, the residual value is ignored. All fixed assets are assumed to be put in and taken out of service in the middle of the year. Therefore, for the five-year class assets, depreciation is spread over six years. The depreciation rates for the five-year class are as follows:

• Year 1---20.0%
• Year 2---32.0
• Year 3---19.2
• Year 4---11.5
• Year 5---11.5
• Year 6---5.8

These total 100%, and at the end of year 6, the asset will be fully depreciated. Using the MACRS method with the example above, the depreciation computed for tax purposes in year 1 is $4,000 ($20,000x20%). The straight line method for year 1 is $3,000; therefore the MACRS method reduces taxable income by an additional $1,000 in year 1. It isn't until Year 4 that the MACRS method produces a lower depreciation deduction than the straight line method.

Not only is the MACRS method required for tax purposes by the IRS, it can be more beneficial to the company because it reduces taxable income which in turn reduces the tax liability of the company. It is acceptable for a company to use the MACRS method for both financial statement and tax purposes, but only if it does not result in significantly different amounts than would have been reported using other GAAP methods such as the straight-line method, or the double declining balance method.

However, using the MACRS method for financial reporting purposes may not be the best choice. Showing a profit on financial reports to shareholders and stakeholders is an important goal for any business, and the MACRS method reduces net income more significantly than other methods in the first few years of an assets life. This is one of the reasons that many businesses choose to use other methods for depreciation on the financial reports, and then adjust the depreciation expense on the income tax return to reflect the MACRS method required by the IRS.

Even though GAAP provides for uniformity in financial reporting, different rules may exist for tax purposes. Therefore, it is possible for the financial reports of a company to differ from the tax returns prepared for the IRS because of the use of different accounting methods. In order to comply with both the requirements of GAAP and the IRS, it may be necessary to consult with a competent tax accountant or CPA.

By Justin Millier

The Proper Way to Use a Revolving Credit Line

How to Properly Use Your Business Line of Credit

One of the most valuable tools a growing business can have is a revolving line of credit issued by your bank. But it is a tool that must be used wisely or you could lose it. So what exactly is a revolving line of credit? First off it is not a credit card. You are not issued a piece of plastic that can be whipped out whenever you need something. Instead it is a line of credit issued by a bank which is intended to cover the short term cash requirements of a business. It is normally used to cover the gap that occasionally occurs between receiving payment from a customer and making payment to a vendor. It is usually good for a period of one year but can be renewed at the end of each year.

How Does Your Bank Make Money?

So how does your bank make money off you? Well besides the fees they charge for establishing the credit line they make money on the interest. But just like a credit card they only charge interest on the money currently being borrowed. Not on the amount available to you.

Why You Need to Manage Your Line Carefully

Now just as you have to manage other aspects of your business a credit line must also be managed. The better you manage your credit line the more likely it will be that your bank will renew it. Along with your bank renewing your line of credit the possibility exists that they may increase the amount of the line if you ask and can prove to the bank the benefits of doing so.

What Is Your Bank Looking for?

So what exactly does your bank want to see? They want to see you use it properly of course. To them this means borrowing and repaying it regularly. A bank credit line is not a long term loan. You want to borrow what you need from it to pay particular bills and when your customer has made their payment to you then what you borrowed needs to be repaid. The more times this occurs the better the bank will like what you are doing.

Use Your Credit Line During Good Times as Well as Bad

Even if times are good and you don’t need to borrow money from it you should. By keeping the account active you show your bank that you value the line of credit you have and would like to keep it. If times become somewhat tight and you need to borrow regularly from it remember one rule above all concerning a credit line. Show the bank you can pay it off even if you have to borrow again the next day. Your banker will sleep better at night knowing the line of credit they issued is in good hands.

By Cash Justin Miller

Current Accounts- Meeting the Needs of Businessmen

Current Account is primarily meant for businessmen, firms, companies, public enterprises etc. who have to perform numerous daily banking transactions. In this account, the customer can deposit any amount of money any number of times. He can also withdraw any amount as many times as he wants, as long as he has funds in his credit. They are meant neither for the purpose of earning interest nor for the purpose of savings. These accounts are only for convenience of the business.

A proper introduction by an existing customer or a respectable person known to the bank is essential for opening the current account. The account holder can access his account from any branch of the concerned across the country. The cheques of the customer can be payable at par at all branches of the Bank across India. For this purpose you need for a demand draft. The customer can also give standing instructions to carry out his regular payments like Insurance premium, rent, taxes etc., with the current account provided sufficient balance is maintained in the account. The account holder also avails the facility of transfer of funds by means of Mail Transfer/ Telegraph Transfer/ Demand Drafts.

The current account can be opened with a minimum deposit, as stipulated by the Banks from time to time. The prospective account holder/customer needs to give a declaration that he/they are not enjoying credit facilities with any other bank or branch of the same bank at the time of opening the account. The Prospective account holder(s) should fill in the Account Opening Form, sign it and furnish the operational instructions to avail the current account facility.

Loans and credit cards charge you interest on the basis of an Annual Percentage Rate (APR) on the amount you borrow, whereas current accounts pay you an Annual Equivalent Rate (AER) on your credit from that account. This rate indicates what the amount would be if interest is paid on annual basis. The higher is the AER, the more is the interest the account holder earns. It works in the same way for any overdraft withdrawal, but money is deducted rather than credited from the savings amount. Current account interest rates are subject to change; both the provider and the Reserve bank of India can change them. However, the concerned banks notify of any interest rate changes before they take effect. To make a balanced decision regarding current account interest rates, you should look at the interest rate for both when in credit and if you are overdrawn. A high interest rate on your credit and a low interest rate on your overdraft is all about opening best bank current account

The account holders should watch out for interest rates on disarranged borrowing . When the account holder goes into the red or over the agreed overdraft limit, he is not only charged,but also can face a high rate of interest on this unauthorised borrowing. Some banks offer current accounts with tiered interest rates. Therese accounts work on the basis that different interest rates are applied to your money according to the balance available on your account. The tiered interest rates can mean the interest paid on your credit will drop once you pass a certain financial threshold. Similarly the interest on your overdraft amount can rise if you borrow over a certain limit.

Comparing before Opening best bank current account makes a significant difference. Comparison can help you reduce the cost of having an overdraft by helping you find an account with a lower rate of interest charged on your borrowing or overdraft. It can also help you find the best available rate of interest on your balance so you can earn more while your money is lying idle in your account. You need to compare the interest rates.
Current accounts- meeting the needs of businessmen

Summary: Current Accounts come with the answer of all kinds of business requirements.These accounts have been customised to ensure efficient fund management, quick transfers and instant availability of your funds across the network of the bank.

Current Account is primarily meant for businessmen, firms, companies, public enterprises etc. who have to perform numerous daily banking transactions. In this account, the customer can deposit any amount of money any number of times. He can also withdraw any amount as many times as he wants, as long as he has funds in his credit. They are meant neither for the purpose of earning interest nor for the purpose of savings. These accounts are only for convenience of the business.

A proper introduction by an existing customer or a respectable person known to the bank is essential for opening the current account. The account holder can access his account from any branch of the concerned across the country. The cheques of the customer can be payable at par at all branches of the Bank across India. For this purpose you need for a demand draft. The customer can also give standing instructions to carry out his regular payments like Insurance premium, rent, taxes etc., with the current account provided sufficient balance is maintained in the account. The account holder also avails the facility of transfer of funds by means of Mail Transfer/ Telegraph Transfer/ Demand Drafts.

The current account can be opened with a minimum deposit, as stipulated by the Banks from time to time. The prospective account holder/customer needs to give a declaration that he/they are not enjoying credit facilities with any other bank or branch of the same bank at the time of opening the account. The Prospective account holder(s) should fill in the Account Opening Form, sign it and furnish the operational instructions to avail the current account facility.

Loans and credit cards charge you interest on the basis of an Annual Percentage Rate (APR) on the amount you borrow, whereas current accounts pay you an Annual Equivalent Rate (AER) on your credit from that account. This rate indicates what the amount would be if interest is paid on annual basis. The higher is the AER, the more is the interest the account holder earns. It works in the same way for any overdraft withdrawal, but money is deducted rather than credited from the savings amount. Current account interest rates are subject to change; both the provider and the Reserve bank of India can change them. However, the concerned banks notify of any interest rate changes before they take effect. To make a balanced decision regarding current account interest rates, you should look at the interest rate for both when in credit and if you are overdrawn. A high interest rate on your credit and a low interest rate on your overdraft is all about opening best bank current account

The account holders should watch out for interest rates on disarranged borrowing . When the account holder goes into the red or over the agreed overdraft limit, he is not only charged,but also can face a high rate of interest on this unauthorised borrowing. Some banks offer current accounts with tiered interest rates. Therese accounts work on the basis that different interest rates are applied to your money according to the balance available on your account. The tiered interest rates can mean the interest paid on your credit will drop once you pass a certain financial threshold. Similarly the interest on your overdraft amount can rise if you borrow over a certain limit.

Comparing before Opening best bank current account makes a significant difference. Comparison can help you reduce the cost of having an overdraft by helping you find an account with a lower rate of interest charged on your borrowing or overdraft. It can also help you find the best available rate of interest on your balance so you can earn more while your money is lying idle in your account. You need to compare the interest rates.

By RahulSen

Putting Service First is Key at Danbro the Contractors Accountant

At Danbro, we understand the importance of looking after all of our clients. We recognize that customer service plays a key role in the success of a service including the Umbrella Service sector and is one of the main ways we differentiate ourselves from other umbrella service providers.

With an ethos of "it’s always the small things that make a big difference", we are constantly striving to ensure a high level of customer service. In order for DANBRO to maintain such a high level of service we are constantly carrying out training for all of our employees right across the company and pushing the importance of providing a quality service.

We regularly receive feedback from contractors expressing their positive views about our service, many of which can be found on our website www.danbro.co.uk. One client recently explained, "the customer service is excellent and I trust the people at Danbro. Any queries are dealt with quickly and you never feel you are being ‘fobbed off’." (K. Berry, 04/2008).

Evidence of this high quality service can also be found on many of the umbrella comparison websites, including Umbrella Supermarket and Bytestart. These sites compare the 100’s of different Umbrella Companies, helping contractors to choose the right umbrella company for them.

Umbrella Supermarket’s rating system does not solely rely on the site’s personal opinions but compiles the votes of thousands of contractors. They recognize that a contractor’s experience of an Umbrella Company’s online facilities is very important together with customer service and of course the contractor’s net pay. Danbro is positioned second from top on the Umbrella Company League with an overall rating of 81%. This is a very encouraging figure not only for the contractors but the whole team here at Danbro.

Danbro - Accounting Solutions for Contractors

Danbro Accountants on Track in Building Relationships

Contractor accountant specialists Danbro got off to a racing start with a “getting to know you” event for recruitment agencies.

Many of Danbro’s contractor – or freelance – clients work through recruitment agencies and the Blackpool-based company already has close links with a number of these companies.

On 2 September, Danbro took an innovative step to help it explore ways of working more closely with recruitment agencies, to further improve services to their mutual clients, by inviting agency representatives to the Donnington Park race track in Derbyshire.

The Donnington Park MSVR Blast in the Park Championships featured a packed programme of motor racing entertainment, including two rounds of the British T Car Championship for 14 to 17-year-olds.

Danbro was supporting 16-year-old Joe Hopkins, who stands equal second in the championship points table after the Donnington Park event.

Damian Broughton, from Danbro, said: “We were delighted to welcome around 35 representatives from 11 different recruitment agencies – both new and existing contacts - to Donnington Park.

“We had a very successful day, which has proved extremely useful in building bridges with recruitment agencies towards our shared aim of giving our contractor clients the best possible service. We are delighted to have achieved such a positive and productive result.”

For more information, please contact Danbro on 01253 600140 or visit our website Danbro - Accountants for Contractors

Danbro Accounting Solutions

Beginner’s Guide For Buying Accounting Software: Understand Basics Of Accounting First

By: Ashish Jain

Having decided to go for an accounting software, what you must understand is that the best accounting software is the one that performs all the conventional accounting functions promptly and accurately. All additional features are secondary to the basic functions. Never forget, it is the “rigid rules” of “accounting” that make the software so consistent throughout.

Since most of businesses deal in cash in some form or the other, the foremost accounting function is Cash Book maintenance, which ensures that all cash transactions are monitored for a certain period of time.

Next, comes the Bank Book, wherein all the records related to bank transactions are kept and can be easily sorted out for any specific time period.

Then, there is the Journal Book, which is what one needs to refer to for all such transactions that are neither related to cash, nor have anything to do with the bank.

Besides, there is Purchase Book and Sales Book. While the Purchase Book keeps track of all the purchases made and all such transactions that have anything to do with purchasing, Sales Book, as the name suggests, records the sales.

These books come in handy to prepare Trial Balance, which demonstrates the accounting accuracy of the involved transactions. The Trial Balance has a Debit and a Credit side. To find out if the transactions have been recorded properly or not one has to tally the sum total on Debit side with that on the Credit side. If they tally accurately, it indicates that the transactions have been accurately recorded. However, the tallying is effective only when the transactions are recorded using the double entry concept. The Double entry concept works on the principle that for every Debit, there has to be a Credit.

Now, if you are about to choose an accounting software, make sure that it performs these basic functions efficiently and accurately. Another thing that you must bear in mind is the user friendliness of the software because getting a technologically complicated software may make accounting complicated, which, surely, is not what you are getting the software for. So, settle for a software that is easy to operate and gives accurate accounting results.