Archive for category Accounting
Making Sure You Choose The Right Accountant For Your Business
Posted by admin in Accounting on February 2, 2011
By Ade Lewis
As a sole trader or small limited company, when you first start out you generally do everything yourself. This generally involves everything from answering the telephone, invoicing, to cleaning the office not to mention actually doing the work that your clients pay you for.
As your business grows you get to the point where you can’t do everything yourself and if you want to continuing growing you are going to have to employ the services of other people. An accountant should be the first professional that you consider hiring but choosing the right accountant for your business isn’t as straight forwards as you might think. Here are some tips to help your decision making process.
Make sure that you hire a qualified accountant for your business. There are many people who will offer to do your accounts for you and on the surface they may appear to carry out a good job but you don’t really know how good a job they are doing until the Inland Revenue ask to look in to your accounts in detail. If this happens then you really need the assurance that your books have been professionally prepared by a qualified person who is up-to-date with current tax laws and allowances.
Choose an accountant that you feel that you can have a genuine professional relationship with. Once you start looking around for an accountant there is generally a divide between the big accounting firms and the smaller local accounting firms. Read the rest of this entry »
Factoring in All of This Factoring
Posted by admin in Accounting on February 2, 2011
By Robert A Hicks
Factoring is a business transaction that converts a companies accounts receivable (AR) or other assets into cash. When a debtor owes a company for goods and services and the debtor gets terms to pay over time, 90 days until payment is due, the small business may run into a cash crisis if it is a big dollar AR. To eliminate the immediate crisis the company could sell the AR asset to a 3rd party thus converting it to liquid cash. However, the factor (the buyer of the AR) will want to buy the paper at a discount and it will be substantial. If the AR is used as collateral for a short term loan this is a different type of transaction.
Cash flow is the life force for a business. Without cash flow the business will stall and may ultimately fail. So in desperate times when a company must improve their liquidity position asset sales may be the only answer. If a company is owed $100m for goods and services and they need cash now, but it will be 90 days until payment is received because of the negotiated terms, the AR asset can be sold. If it is sold to a factor they will never pay 100% of the amount owed because of the associated risk. There is risk associated with the purchase of another companies assets, especially if it is a future event of a promise to pay a debt. What if the debtor does not pay their bill? What if they only pay a portion of the AP bill to the new owner of the asset (the factor) and need more time to pay the balance? These are the questions a factor (the 3rd party buying the AR asset) will have to factor into their offer for the asset. Read the rest of this entry »