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.

Are The Chinese Feeding It to the Fishes Again – High Finance and China’s Municipal Vehicles

One of the most important things in securing or raising capital is investor confidence. A high level of investor confidence can come in a number of ways. Strong quarterly sales, a positive outlook, a good credit rating, and legitimate accounting are some of the best ways. It also pays to have strong financial backers behind any of the offerings. But what happens when a government, corporation, or municipality takes advantage of the investors, trying to score large sums of capital, through trickery, fakery, and behind the scenes corruption?

Well, welcome to China’s capital markets. You see, behind the 10% year-over-year growth for the last three decades, not all is as it seems. That Great Wall of China may not be on a solid financial foundation unfortunately. After the global recession, China used stimulus monies by making possible loans through municipal vehicles for huge infrastructure projects, which put people to work building giant high-rises, power plants, dams, bridges, high-speed trains, and other things. Many applauded this effort, but in hindsight it wasn’t done on the up and up.

In China Economic Review there was an interesting article published on August 16, 2011 titled; China Downplays Local Debt, Renews Push for Bonds,” which also quotes a Bloomberg BusinessWeek article about talking about how the Chinese Ministry of Finance is claiming that the local government municipal vehicles are safe from loan defaults, and won’t cause a spike in bad loans. In reality this is a huge problem, it isn’t going away, much of the collateral of so many of these loans for malls, infrastructure, high-rise apartments doesn’t exist, and never did exist, all that exists is empty paper loans and a trail awash of corruption cover ups.

This particular article in China Economic Review stated that the Chinese Ministry of Finance is putting together a plan to allow these local governments to sell “bonds” to shore up the challenges they face with their bad loans. Approximately $1.7 Trillion in loans were made in 2010, and S&P now says some 30% maybe bad according to the article. “The finance ministry has drafted a preliminary plan that would allow designated provinces and cities to sell bonds to investors on a trial basis” a person with knowledge of the matter said.”

There was another article by Tom Orlick on August 15, 2011 in the Wall Street Journal titled “China’s Official Data Muddy Its Housing Picture,” and the article was accompanied by a couple of graphs which show the difference between China’s National Bureau of Statistics and the private estimates of China Real Estate Index System. The figures were off by so much that it was obvious that someone wasn’t telling the truth. The question to me is not which one, rather it is; why the Chinese government is putting out false statistics to stave off a total financial real estate market catastrophe.

Things in China are not as they seem, and the troubles have been exacerbated by a false sense of economic prosperity which has created an incredible real estate bubble, all backed by bogus loans, and corruption behind the scenes. When all of this collapses it won’t be pretty, but it may be a while still, as China tries to shore up its problems, by selling more bonds to cover its losses. It’s too bad China did not learn from what the United States went through. Indeed I hope you will please consider all this and think on it.