Archive for

Lose Track of Your Finances and Your Breakfast May Cost Much More Than You Think

The first step if you want to solve your debt problems is to know your income and expenses. You must know how and where your money is spent. Knowing your spending is as important as knowing how much money is coming in.

You may someday be the next person who buys the world’s most expensive cup of coffee and bagel if you don’t know where your cash flow stands!

If you said five dollars for a cup of coffee at Starbucks or Dunkin’ Donuts is rather expensive, none would argue with you. Yeah no one but Jake Drehar might.

Jake looked forward to each day was a hot cup of coffee in the morning, the one thing he can’t miss in even in summer heat. Jake started it off with his coffee everyday and it would not be a good day otherwise. Jake walked to the counter at his favorite coffee shop on one Monday near the end of the month. He had known about writing a few checks that month and the balance in his checking account may be running low. He paid with his debit card as he expected his paycheck would be directly deposited into his checking account that day and he had some cash in his wallet. He’d pay cash if the debit card were declined.

When the cost of his coffee was put on his debit card, he was pleasantly surprised, thinking his paycheck had cleared. Then he ordered a bagel and paid for that with his debit card. He received overdraft notices from bank two or three days later. He was assessed a fine not only for each overdraft but he was charged a fee for the bank covering his transactions. Jake’s coffee and bagel cost over $120 because of the two fines and two bank fees!

The experience of Jake is an extreme one but it is common. Endless ways are there to lose track of our finances. We put ourselves in peril of being hit with fees and fines that cause bigger and bigger problems when we do lose track.

We all tend to overestimate how much money we have and underestimate how much we are spending. This is the reason we lose track. Our spending sneaks up on us hence we do this. Moreover, it is amazing how little, everyday expenses add up over the year.

On your way to work each day spending on one medium Dunkin’ Donuts or Starbucks coffee and plain bagel adds up to more than $687 over the course of one year.

Daily purchases have a greater impact on your total expenses than you’d think. Keeping track of what is coming in and what is going out is most important.

Do you want to keep better track of income and expenses? Read *The Road Out of Debt* which offers you simple and ideal solutions for taking control and resolving your financial problems.

Keep Control of Your Business Finance Using Accounting Software

In the past, people hated keeping accounts. It was time consuming, and boring. People would write something in a book, but most of the time it did not mean anything.

Bank accounts were not balanced, because it was not something a lot of people understood. What do you do when you spend money out of the business account and it was for your own use? It was too confusing, that is why you pay your accountant.

That is true, but it also meant that a business person had no idea what the true financial affairs were for their company. Even, if they did have some idea, often it did not make sense to them. They would check their bank balance, and too often the balance showing either told them how much they could spend or how much they owed the bank.

But that has changed now. No longer is accounting a hidden secret, not when you purchase and use accounting software. You see a product that will enhance your business but can you afford to buy it or not? Now you can know exactly what money is available to spend on that product.

You no longer have pieces of paper around your house and office with notes, pay this supplier by a certain date, or chase up that customer if they do not pay by a certain date.

You now have it all automated, as you check your debtors and creditors on a daily basis. Nothing is left to chance. Having accounting software makes you wonder how you ever managed without it before.

Cash Flow Statements and Accounting Applications

Cash flow statements are one of the four financial statements prepared by the management at the end of the financial year in accordance with the accounting standards. It is concerned with the inflow and outflow of cash in a given time period from operating activities, investing activities and financing activities (not necessarily in the mentioned order). That means it is based on a cash basis of accounting as opposed to accrual basis used in the balance sheet and profit and loss statement. It shows a picture of the ability of the company to pay expenses including payroll and interests. A strong statement is required by investors if they are to make a decision when it comes to investing in business. In addition, for the business to invest for expansion, it has to study the statement.

Of course, the management needs to know the result of operating the business and whether the current projects are feasible or not. In addition, being in profit may not lead to sustainability of the business if its incomings are not able to cover immediate expenses or meet immediate current liabilities. It is of no use if the business has not enough cash to pay its employees but its accrued income – and thereby its profit is high.

As per Generally Accepted Principles of Accounting (GAAP), cash flow statements can be prepared in two ways: direct and indirect. The latter mode is deemed appropriate because it shows the relation between net income and cash from operations. Moreover, it starts with accrual method’s net profit (or loss) and proceeds further. The former mode, on the other hand, presents a summary the cash flows from various activities only.

Despite the name, non-cash items including leasing to purchase an asset, conversion of debt to equity, exchange of non-cash asset, liabilities for similar non-cash assets, or liabilities, and issuance of share in exchange for assets should also be recorded. This can be done as a note or within the statement itself, as the management deems suitable. Also disclosed in the notes are any significant noncash transactions like depreciation, amortization or impairment loss.

Accounting applications help in making accurate information to be presented in cash flow statements. Direct method or indirect method, applications are capable of preparing precisely – after all, it comes from the journal entry that is made in the initial stages of accounting, and the app makes sure of it – what the management wants. The management can see the flow of cash at any period of time in the fiscal year. In addition, because its data is linked with the “cash” part in the balance sheet, having accurate figure helps a lot. Moreover, there is also the feature of security, an authenticity that comes with the apps.