Monday, October 27, 2008

Bookkeeper’s Cost vs. Bookkeeping Quality

It’s kind of preposterous how people get stuck on the factor of price when availing a service. It applies more to the subject of bookkeeping; service buyers ritually overlook the quality of work, which they compromise in return of a lower price. The result is an erroneous bookkeeping service that costs double or triple than the fixed budget.

However, the reverse also holds true; there are a handful, to whom, quality of a service comes first. Many bookkeeping service providers take advantage of this perfectionist’s attitude; while they submit a flawless job, the wallet of the service buyer runs dry. So where to strike a fine balance that shall provide a quality service for a reasonable price, measure for measure?

Factors to judge a bookkeeper

To answer the above question, we need to understand first the definition of the word quality and how it applies to an outsourced bookkeeping assignment. Quality here can be defined as a work that’s done in a concise manner, is complete and delivered on or before the scheduled time. All these factors define a good Bookkeeper.

Now, with all these factors taken together, there must be a minimum definite price for which, it can be bought. Bookkeeping cost thus really depends on a bookkeeper; if it’s an organization, then the management should set the cost. Since bookkeeping is a service-related business; therefore, time equals to money. A quality job thus demands more money since it takes more time to get the records spic-n-span.

But the good news is, bookkeeping cost is negotiable. The rates change according to the market; if the rates fit your budget and the quality your mindset, your service provider may well receive a continuous business from you in the future. This is a strong point you may use while negotiating.

How to choose the right bookkeeper

So analyze the bookkeeper before you choose him. You may have a different need (a different concept as well) for your business; therefore, try at least three to five different bookkeepers. The one, who gives the least rate, has a satisfactory track record and is a patient listener who also asks when in doubt should be the bookkeeper for you!

Tuesday, October 21, 2008

Payroll Accounting – Hazard of doing it yourself

There are more number of small entrepreneurs than the larger ones who continue staying small because of misconceptions and their inability to understand certain business fundamentals. One such is payroll accounting; while entrepreneurs remain skeptical on the confidentiality of data leaking out, they subject themselves to a gargantuan task – often accompanied by irreversible errors – that eats the better portion of their time, barring a business’ further growth.

• DIY - Payroll accounting hazard

To any person running a business and employing a fairly large number of people, payroll accounting turns out to be true headache. Even if we overlook the intricacies of the rules, rates and regulations, putting everything in the correct format is enough to boggle even the smartest business brains; an inevitable result for such mistakes even in a small business payroll can cost a fortune.

Let’s take a look at the common errors you may confront while doing the payroll accounting yourself.

Payroll tax deposits: This relates to withholding taxes from an employees' gross pay. An employer matches some of these while paying some, which an employee doesn't. These taxes require to be paid at very specific intervals and within strict deadlines to either or both federal and state agencies. A wrong calculation or missing the deadlines may invite some real stiff measures.

Payroll tax returns: Every quarter, certain reports conciliate the earning of employees with the payroll tax deposits. It’s also important filing annual reports that reflect the authenticity of the quarterly reports. The role of the W-2 form cannot be overlooked as well for the employees to file personal individual tax returns. All these require a sharp eye and mechanical accuracy to keep fines at bay.

• Why outsource payroll accounting

Firstly, because outsourcing payroll accounting is a smart option that can save a lot of hard work in exchange of a negligible amount. To compare, tally an outsourcing firm’s charges against the amounts that may show up as fines. Besides, the time you shall be spending to keep those records shall bear more fruits if invested on the business development strategies. And it’s easier to call in the hours and checking the bank account for an amount that shall cover the payroll.

Now, all these points hold true for both the starter and the established; while the starters may avoid unexpected expenditures (fines or the salary of a full time accountant) and make that money flow to support some profit-yielding strategy, the established ones may save more money and concentrate on newer measures to take their business to newer horizons. But mostly, it’s an age of specialists and payroll accounting requires specialized services.

• Benefits of outsourcing for small business

So outsource payroll management to benefit in multiple ways. Firstly, you save a lot of time; small business payroll handling, though embraces lesser number (10-30) of employees, is still a tough task when the details stay associated. Instead, you may outsource payroll accounting and focus on stuff that can make your company grow. Marketing and business development are colossal tasks as well; there is no need to shoulder more burden than is necessary. Besides, outsource payroll to save a great deal of money. If you do not want to handle the accounts yourself, the second best option is to employ a group of accounting professionals full time. It means you have to pay them a fixed amount every month along with insurances, benefits, sick leaves, vacations and other related expenses. Usually, this is much higher than outsourcing the job to independent professionals. The price shall include everything from calculating taxes and deductions, filling out forms, printing them out and delivering the cheques. But most of all, the payroll experts are specially trained and offer you a specialized service free from errors. And when thinking of the bigger picture, you cannot possibly do without specialization!

Monday, October 20, 2008

Struggling US economy causes stocks to nosedive

The fall experienced by the stock market on Tuesday has put the proposed $700 billion plan at stake; internal disputes of the congress may delay further the efforts to rescue the financial sector, thus pushing the U.S. economy into a greater darkness. However, it’s also true that index futures went up following an extended trading of $5 billion that went as an investment. It was Warren Buffett's Berkshire Hathaway keeping Goldman Sachs Group in its good books.

Following the investment was a straight 8.4% rise in the stock prices for Goldman Sachs; the side effects were futures that opened sharply higher on Wednesday, which also dragged the shares of other banks up. The highest was Morgan Stanley, with a 9.5 percent increase in electronic trading.

Probable factors for the disaster

Among many others, the statements from Richard Sichel (Chief Investment Officer, Philadelphia Trust Co.) reinforced some faith back into the financial sector. "It's clearly a positive when Warren Buffett sees value in a company. Buffett is so highly regarded as an intelligent value investor, if he's putting a lot of money into a company that's been beaten down, it sends a message to the market that maybe not every financial company should be ignored at this point." Considering the downgrades, the statement was enough to revive hope among many a hurt ones, including the shares of Bank of America (2.5%) as well as energy sectors that weakened with a rising oil price. As of now, to quote Edward Craig (Head, Cash Equities Trading, Jeffery’s Group, New York) - “everybody's waiting for this plan to be detailed, and the longer it's delayed, the more people speculate that maybe it won't happen. The one thing the market hates is uncertainty.” But while colossal organizations like General Electric (down by 4.6%), Apple Inc. (down by 3.2%) and Microsoft (down by 0.2%), there are more numbers of declining stocks that can outnumber the forward-moving shares by 2.6 on the NYSE.

Wednesday, October 15, 2008

Potential corporate fraud – FBI investigates

• FBI probes Fannie, Lehman & AIG Case studies

Guess who’re the current names in the FBI list? Fannie Mae is one; the rest are Freddie Mac, the Lehman Brothers Holdings Inc. and AIG Insurance. However, it’s the senior executives for AIG that are the prime targets of FBI. The reason? A potential fraudulence suspected on mortgage deals. Despite the lack of specifics by FBI, it is now an open secret that their inquiries are just a part of a broader investigation.

• What’s being investigated?

FBI suspects these financial institutions – to be precise, their senior executives - are responsible for misinforming the public that has contributed to the U.S. mortgage industry collapse. As reported by one of the federal law enforcement official, it is one of the 26 potential corporate fraud cases that are currently being investigated by FBI.

• From the horse’s mouth

The U.S. Congress has been reported of 24 such cases of potential corporate fraud. Robert Mueller (Director, FBI) disclosed the details of the same and also the fact of the count, which were 21 during July. As a testimony, the FBI chief also confirmed the House of Representatives Judiciary Committee regarding pursuing the corporate executives of the mortgage industry if the situation demands, from every level to frame the federal charges on the ground of misstatements of assets.

Monday, September 29, 2008

International Accounting Standards

A positive approach by the securities and Exchange board

• US move towards International Accounting Rules

There are a lot of people who has come across the name Securities and Exchange Commission; what a large chunk is still clueless about is their decision regarding allowing certain big-scale American companies to use international accounting standards from 2009. The figure is expected to reach 100% by the end of 2016 and if everything goes right, the world shall move towards using one fixed set of standards to facilitate the comparison of different companies by investors. Differing regions are not going to be an issue in this endeavor; moreover, raising capitals for an attractive market shall become easier for firms interested in that particular sector.

To fit the criteria as presented by the proposal, a company needs to be one among the 20 largest companies in that industry sector worldwide. The commission shall also require the large American companies to comply to the new set of international standards to prepare their financial statements for the year 2014, with the smaller ones following the path in 2015. The smallest companies; however, may delay adopting to the new standards until 2016, since the final decisions on these shall be pending till 2011 and shall be in the hands of S.E.C.

The only problem that experts are speculating is regarding learning new accounting rules by the auditors and other accounting professionals, but considering the advantages, it shall be a small burden to bear. And facilitated by a new monitoring body comprising regulators from many countries and soon to be established by international authorities, the chances of political influences can simply be overruled. That leaves us only with the question of uniform application of the rules, which, though being tried to be converged by the international and the American board, are still showing signs of differences with the international rules.

• Advantages & Disadvantages of a common accounting system

In a common accounting system, accountants stay responsible for recording the revenues and every form of expenditure along with acquisition of assets and disposal according to an actual amount of money (or money equivalent) that is received/paid to complete a transaction. However, the common accounting methods only consider an acquisition cost of assets without recognizing their values in a current market. That’s cost allocation and not determining an asset’s value; despite the methods being informative regarding acquisition costs of assets as well as their deprecations, they ignore every possibility of determining the current market value of the same asset, which may be either higher or lower than is suggested.

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Friday, September 26, 2008

US Federal Reserve loan resuscitates Insurance giant AIG…crisis looms large on Morgan and Goldman.

The chaos spread after the Lehman Brothers filing for bankruptcy protection has caused enough ripples and with the breakdown of AIG it could have spelt doom for the US financial market and its ripples could have affected the World Economy.
With fears unabated on the ability of Investment banks access to liquidity, the Goldman Sachs and Morgan Stanley shares dropped by 10 and 18 percent and were giant losers.
The other financial Institutions hit by this fallout are Wachovia, Citigroup one of the biggest US bank. Also the stock of Washington Mutual fell sharply. These falls comes after AIG was taken over US Federal.
The Federal Authorities pumped in $85 billion in the AIG lifeline for the period of two years with a committed stake of 79.9 percent equity.
The decision came two days after the US authorities let Investment bankers Lehman Brothers into bankruptcy court. Unlike Lehman brothers AIG was considered to be more important as its collapse can trigger a fall in the global economy.
In the course AIG would have to pay a steep rate of Interest that is 8.5 percent and above, equaling the current rate of 11.4 percent.
The AIG being the premier sponsor of Manchester United, it means the US taxpayers money going to the English premier league.

US recession looms large

• Just a song before we start…

What goes up must come down; the only two things that don’t follow this set rule are age and experience. US have followed the same path till now; the post-WWII America has gifted its people an enjoyable life, have given them the freehand of wasting for pleasure (so cheap were food, gas and similar other things), but of recent, Asia and the neighboring developing countries have been noticed climbing up the success ladder. The world doesn’t catch a cold now when America sneezes like the previous years and The American Dream is now turning to a nightmare. And joining the league of American Presidents is currently being considered as the stickiest job of all.

• What is recession?

The world seems to have gone paranoid talking about a recession, chances of which are now looming over the United States and being reflected to the max in the form of a worldwide economic slowdown. So how come the weakening of the American economy is affecting the rest of the world? To know that, we must have a clear concept of what a recession is.

Recession is defined as a decline in a country's GDP (gross domestic product) growth over consecutive quarters of a fiscal year. If these quarters are noticed to be slowing down, a recession might be imminent.

There can be several factors triggering a recession; it could be due to an economy slowing down after a period of steady growth. This could occur following the trend a normal economic cycle follows, which is a six month to twenty-four months recession occurring after a 6 to 10 years of steady growth. It may also happen if the consumer sections start losing confidence in the way the economy is growing and become tight fist, thereby hampering the demand for goods and services. This eventually leads to a decreased production rate, loss of job and an increased unemployment rate. As a result, investment sectors also head for a toss since people fear to put their money in fear of reduced stock values and the stock markets also start gathering negative sentiments.

• Current crisis in US

Despite the Bureau of Economic Analysis’ denial from declaring a recession, the world fears an overall slowdown of the global economy. Is Asia one of the continents to suffer the same way? To know the results of how the US slowdown shall impact the Asian market, it’s paramount that we get an idea of the crisis US is facing currently. That is to say, the prime causes and the effect they are bringing in.

The sub-prime mortgage market in the US exhibits more number of defaulters now than before. The home-loan defaults are now a major crisis; this also proves that there re more number of people with poor credit-worthiness/unstable incomes than the well to do. The nose-diving sub-prime market has thus led major banks into trouble; what was thought before would take the housing market to new heights, backfired the schemes of making home-loans easily available. The boom was a flash-in-the-pan; it failed to sustain the momentum. Inevitably, the colossal loan defaults made the sector collapse. Foreclosures became the most common thing that joined forces with the rising oil prices ($100/barrel).

• How will US slowdown hit the Asian market?

The stock markets follow the economy that is currently traveling downhill. That’s affecting the economic buoyancy and In India, the stock markets crashed due to this slowdown. The Sensex went down almost 13% in January but a bounce-back occurred as soon as the US Fed reduced the interest rates. That’s better than before but Indian investors don’t seem too happy with the current stock prices waning.

Fears are also looming over the outsourcing sectors, of which, Asia holds the lion’s share. If US has less money to spend, the outsourcing industry that has grown substantially all these years is going to decline; the Indian economy alone is likely to go down as much as by 2% in the 2009-2010 fiscal year. Profit margins shall shrink drastically.

• Impact of recession

As for the other exporters, the strengthening of the rupee against the dollar is heralding long-term, stable prospects; it shall make foreign money enter more to Indian markets and reduce the oil prices. That’s definitely bringing down inflation. Overall, either entire Asia would be falling victim to a recession triggered by the US economy, unless it becomes totally independent from the rest of the world.

• How to fight recession

Proposals are on for a lowered tax structure as the first step; it amounts to a $150-billion bailout package. Moreover, the US government has taken initiatives for creating more vacancies in the job sectors (new jobs as well) to boost both manufacturing and services sectors with special attention been given to the private sectors to avoid the ill-effects of the current crisis.