The types of accounting

There are several types of accounting that range from auditing to the preparation of tax returns. Accountants tend to specialize in one of these fields, which leads to the different career tracks noted below:

Financial accounting. This field is concerned with the aggregation of financial information into external reports. Financial accounting requires detailed knowledge of the accounting framework used by the reader of a company’s financial statements, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Or, if a company is publicly-held, it requires a knowledge of the standards issued by the government entity responsible for public company reporting in a specific country (such as the Securities and Exchange Commission in the United States). There are several career tracks involved in financial accounting. There is a specialty in external reporting, which usually involves a detailed knowledge of accounting standards. There is also the controller track, which requires a combined knowledge of financial and management accounting.

Public accounting. This field investigates the financial statements and supporting accounting systems of client companies, to provide assurance that the financial statements assembled by clients fairly present their financial results and financial position. This field requires excellent knowledge of the relevant accounting framework, as well as an inquiring personality that can delve into client systems as needed. The career track here is to progress through various audit staff positions to become an audit partner.

Government accounting. This field uses a unique accounting framework to create and manage funds, from which cash is disbursed to pay for a number of expenditures related to the provision of services by a government entity. Government accounting requires such a different skill set that accountants tend to specialize within this area for their entire careers.

Audit

Every year, companies have to produce an annual report which includes a statement of their accounts. Auditors are external accountants who check that the report is accurate and the company’s financial practices are up to standard.

• Auditors go into a company as part of a team and perform checks on all different aspects of its finances.
• They get their hands into everything – they might ask for access to warehouses, physical receipts, accounting spreadsheets, and seek expert valuations of the company’s machinery, buildings, products and other assets.
• They check that everything they inspect matches up with the information in the financial report.
• Then they write their own report giving their findings.

Auditors get a fascinating inside look at all the different businesses they audit. They spend a lot of time on-site with their clients, sometimes working in a different office every week.

It’s a role that takes a lot of tact and people skills – the company’s employees will find their daily lives disrupted by the auditors’ questions and requests, so auditors have to be polite and personable.

You’ll enjoy it if you’re fascinated by business, you’re a people person and you like to travel.

Management accounting

In some ways, management accounting is similar to financial accounting – it’s about tracking the company’s financial position and making reports. However, where financial accountants provide reports to be used externally, management accountants create reports to be used internally.

• Management accountants provide the financial information that managers need to make business decisions – for example, reports on which business areas have been profitable.
• They often use charts and statistical techniques to present the data in a way that supports decision-making.
• At the higher levels, management accountants can make business recommendations or even be part of a company’s senior management team.

Management accounting is more than just stating the figures – it’s about interpreting trends, making predictions and considering the non-financial, qualitative aspects of business too.

You’ll enjoy it if you’re strategic, ambitious and want to get into the higher levels of management.

Tax accounting

Tax accounting deals with an organisation’s tax liabilities – what tax they must pay and why. It involves interpreting complex and continually changing tax legislation, as well as jumping through all the necessary hoops for Her Majesty’s Revenue and Customs (HMRC).

• Tax accountants track all the transactions that affect how much tax a company pays and calculate how much tax is due.
• They try to find ways to reduce the tax paid, if possible within the legal tax framework.
• They complete all the necessary forms for HMRC and ensure that the correct amount of tax is paid.

Tax accountants can also work on behalf of individuals – especially wealthy individuals who want to reduce their tax bills.

Forensic accountant

Forensic accountants are the detectives of the accounting world. These professionals analyze financial records to ensure they’re compliant with standards and laws. Conversely, forensic accountants are brought in to uncover errors, omissions or outright fraud.

A forensic accountant must possess a unique skillset, combining the mind of a “numbers person” with the curiosity of an investigator. They typically work in either investigation or litigation support. In some cases, forensic accountants can serve as expert witnesses in court proceedings.

In order to land this position, you’ll need to earn a bachelor’s degree in accounting. Upon graduating, you’ll also likely be required to acquire some certification. Most forensic accountants earn a CPA credential. You may even consider becoming a certified fraud examiner (CFE).

CPA: Certified Public Accountant

Certified Public Accountants (CPA) are upper-level accountants who are recognized as experts in an organization’s accounting records, taxes and financial standing. While some of their work does involve taxes, their involvement tends to be more in-depth than just working with taxes.

A CPA’s role is that of a trusted advisor, helping their clients plan and meet their financial goals, while also assisting in other fiscal matters. This could include audits and reviews, forensic accounting, consulting and/or litigation services.

Understanding Accounting Methods

Officially, there are two types of accounting methods, which dictate how the company’s transactions are recorded in the company’s financial books: cash-basis accounting and accrual accounting. The key difference between the two types is how the company records cash coming into and going out of the business. Within that simple difference lies a lot of room for error — or manipulation. In fact, many of the major corporations involved in financial scandals have gotten in trouble because they played games with the nuts and bolts of their accounting method.

Cash-basis accounting

In cash-basis accounting, companies record expenses in financial accounts when the cash is actually laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account. For example, if a painter completed a project on December 30, 2003, but doesn’t get paid for it until the owner inspects it on January 10, 2004, the painter reports those cash earnings on her 2004 tax report. In cash-basis accounting, cash earnings include checks, credit-card receipts, or any other form of revenue from customers.

Smaller companies that haven’t formally incorporated and most sole proprietors use cash-basis accounting because the system is easier for them to use on their own, meaning they don’t have to hire a large accounting staff.

Accrual accounting

If a company uses accrual accounting, it records revenue when the actual transaction is completed (such as the completion of work specified in a contract agreement between the company and its customer), not when it receives the cash. That is, the company records revenue when it earns it, even if the customer hasn’t paid yet. For example, a carpentry contractor who uses accrual accounting records the revenue earned when he completes the job, even if the customer hasn’t paid the final bill yet.

Expenses are handled in the same way. The company records any expenses when they’re incurred, even if it hasn’t paid for the supplies yet. For example, when a carpenter buys lumber for a job, he may very likely do so on account and not actually lay out the cash for the lumber until a month or so later when he gets the bill.

Which Accounting Method Should I Use?

Which accounting method you should choose depends on the size of your business.

Like a single entry system of accounting, a cash accounting method is preferred by small businesses because it is simple to implement and saves time. Because the transaction is recorded when cash exchanges hands, the business owner has a better idea of the company’s cash flow at any given time.

Accrual accounting is preferred by larger businesses (and in some cases, legally required) because it gives an organization a clearer picture of the company’s income and expenses. For instance, if combined sales for a company total 1.2 million in December, then an accrual system would show that amount in the company’s statements even if the payments from the clients didn’t come in until early the following year. Had senior management been going with a cash accounting method instead, they would be unaware of the 1.2 million and might make decisions or policy based on incomplete information.

What Is Payroll Outsourcing?

In order to save time, money and effort, business entities hire an external firm so that they can look into the payroll functions of the hiring entity. Outsourced payroll solutions turn out to be more accurate as compared to the in-house results as it gets analyzed, evaluated and prepared by professionals. The key factor here is that payroll speaks about how a business entity rewards and retains its employees. To get a clearer idea, let’s have a look at the payroll outsourcing service in the UAE, followed by its benefits.

Benefits of Payroll Outsourcing

The benefits of payroll outsourcing are briefed below:

1. Saves Time

Professionals who are involved in delivering payroll services would consume less time as compared to untrained employees trying to maintain the payroll records.

2. The Overhead Costs Get Reduced

Training the in-house employees to maintain the payroll books and then proceeding ahead involves heavy cost. So, the best option turns out to outsource the payroll books.

3. Improved Data Security

The amount of risk that exists in-house is way more as compared to the payroll professional firms.

4. Guaranteed Government Compliance

Professionals do take completely the books as per the legal rules and always have updated knowledge.

5. Access to Multiple Services

Professional payroll service providers do have multiple additional services as they are specialized in the respective domain.

Manage Your Risk Better

Payroll processing for small businesses is not a very easy job if you venture into the harsh compliance requirements, as well as the legal hurdles that are expected from duly registered business enterprises.  In fact, even a tiny misclassification or inadvertent error can result in a massive fine. Taking it further, mistakes in payroll processing can lead to serious class action lawsuits, fines, penalties, and in extreme cases, even jail time. This is precisely why even large companies sometimes outsource their payroll and accounting processing so that they can minimize their risk.

When you have highly experienced and dedicated experts who are suitably well-versed in all the latest payroll service companies for small businesses, then you can rest assured that you will make fewer mistakes, and your propensity for erroneous payroll processing will also go down substantially. In the long run, the smooth and consistent disbursement of payroll will keep your employees happy (which in itself is a significant advantage of outsourcing your payroll process). Furthermore, it will also get the government as well as the legal system off your back so that you can concentrate on the crucial task of expanding your brand new business.

Make Payroll Services Work for Your Business

Payroll is an important consideration for every business that has employees. Outsourcing payroll services can sometimes make it easier for businesses to focus on other important organizational matters and enjoy peace of mind, as payroll needs are taken care of. Payroll errors and compliance issues can cost money and damage employee perceptions of the company.

When selecting payroll services, however, it is not enough to simply consider paychecks and choose the lowest priced service. Other important factors, such as visibility, payment options, and reliability of the company should also be considered. By considering the following points, you can make payroll services work for your company.

Does Your Internal Payroll Burn Resources?

If your organization does not have an efficient internal payroll solution, it can waste countless labor hours. If there are no employees that specialize in accounting or have a broad range of knowledge regarding different accounting issues, it can spell disaster. If outsourcing payroll services will relieve your company of a largely time consuming burden, it may be time to consider doing so.

Do You Know All That You Need to Know About Compliance?

Federal, state, and local laws regarding payroll and labor can be difficult to keep up with. Trying to manage a business and keep up with compliance changes and needs can be taxing. Doing so may also increase the likelihood of errors. While some payroll software will help keep track of regulatory changes, a payroll service will take responsibility for making sure that your company stays compliant with laws.

Are There Different Payment Options?

Paper checks are not environmentally friendly, can waste employee time, and sometimes even hamper productivity. To make payroll services work well, you should make sure that the payroll option selected offers different ways for employees to get paid. Many payroll services offer these options and many in-house options do as well; it is important to take this into consideration when reviewing companies that offer either service.

What About Employee Self-Service?

Employee self-service is beginning to be viewed as a necessity, rather than an added bonus. More and more, employees expect that they are able to readily access their paycheck information remotely on their own time. If employee self-service is not available as an option with a payroll service, or is difficult to integrate with other HRIS employee self-service options, it may be worth considering a different company or different payroll solution.

What a Payroll Company Does

As a payroll services provider, your company is responsible for handling records on employee wages, deductions, hours worked and pretty much everything else related to compensation for your clients. It’s your job to translate all that information into paychecks or direct deposits for each employee.

You can choose to specialize in a particular area of payroll services, which might help your business cater to niche markets, but it is likely that your processors will need to be able to handle a large number of payroll-related services, including:

• Pay adjustments
• Processing federal and state income tax
• Computing time and wages
• Issuing manual checks
• Voiding checks
• Direct deposits
• Benefits administration
• Bookkeeping
• Compilations services
• Wage garnishments

Processing Payroll

Too many companies use an Excel spreadsheet or other manual method to process payroll.

By using an outside company, the business representative simply logs on to the outsourcing payroll services’ portal and approves salary or hourly timesheets every few weeks.

The solution provider processes the appropriate deductions and either sends the direct deposits to employees or issues the checks automatically. While the business enters the employee hours or pay rates, the solution provider keeps track of the changing tax rules or other deductions.

By using financial partners to outsource your payroll, this information can automatically be downloaded to your accounting system for easy integration into your financial statements.

Easy Access for Employees

It should be no surprise that employees have a lot of questions around payroll. By using payroll outsourcing services, they can access a portal to get all their answers without taking up company resources. (For example, when they want to know why their final check was a certain amount and question the accuracy of their deductions.)

Trusted financial partners can also keep track of employee sick and vacation time allocations and redemptions so there are less misunderstandings. They will also provide employee W2s by January 31 of each year for employee tax filings.

How to Choose the Right Bookkeeping Services

Hiring Internally

While hiring an employee to take over bookkeeping may seem like a good way to keep control of your finances and the people managing them, this method often falls short in execution. For businesses without an expertise in managing bookkeeping procedures, accounting software or financial analysis, managing bookkeeping internally can be a recipe for disaster.

Hiring Freelancer or Part-Time Bookkeepers for Bookkeeping Tasks

What kind of education and experience does a freelancer have? The answer varies greatly from one worker to the next. You want to ensure your bookkeeper has professional education in the field, along with relevant experience and a good track record. Certification, licensing and insurance should all be investigated. If a freelancer makes a mistake while working for your business and doesn’t have liability protection, you’ll likely be left holding the bag. In addition, if your freelancer is working off-site, say from a home office, you’ll have to find a way to provide adequate oversight in order to prevent account mismanagement and serious mistakes.

Hiring CPAs

Hiring a CPA to do a bookkeeper’s job is usually a serious waste of resources. Not only that, but accountants rarely enjoy the work. Instead, consider hiring a CPA to advise you on financial matters requiring more expertise, like filing taxes or managing investment funds. CPAs regularly work with bookkeeping services, and may be able to recommend professionals who can fill a daily accounting role for your business at a much lower price.

Hiring Professional Bookkeeping Services

Finally, there are bookkeeping service companies that manage daily accounts for multiple businesses. They often employ CPAs for management roles to provide adequate oversight and counsel for a bookkeeper who runs into a problem. Because they work with a variety of clients, these services often have access to a wider range of tools, and because they employ so many people, they have a better chance of having the experience needed by your business. Additionally, leveraging connections to industry experts and accounting technology companies can provide extra benefits to businesses.

How to choose the right bookkeeper for your business

Good industry knowledge

The responsibilities of a good bookkeeper include managing the critical financial aspects of a business. Although the bookkeeper skills needed for a business—which includes familiarity with business trends and updates and how it relates to the current financial situation of the business—are not essential in bookkeeping, it pays to find a bookkeeper with a wide berth of knowledge of the industry in which the business operates.

Willing to regularly update industry knowledge

Good knowledge and experience is important, but so too is having knowledge that is consistently up-to-date. Of course, while bookkeepers are required to be always updated regarding financial regulations, however a good bookkeeper must be willing to update their current industry knowledge and be able to keep the business at the forefront of its industry as well.

Reliable

Reliability is possibly one of the most important bookkeeper qualities that a business owner should look for. While it is certainly a good thing if a potential bookkeeper has all the right credentials and experience, it doesn’t necessarily mean that they would be reliable from the get-go.

Qualities to Look for When Choosing Your Small Business Bookkeeper

Prioritizes You

At the end of the day, you need a seasoned bookkeeper who’s willing to work for you. Making your business a priority means being respectful of your time, maintaining a proactive approach to communication, and demonstrating the capacity to understand your professional objectives. Taking some time to investigate their customer service habits and client relations will ensure you choose the small business bookkeeper most likely to help you meet your financial goals.

Sees the Big Picture

Beyond suggesting valuable, money-saving strategies to maximize tax deductions, and minimize penalties and late fees, a bookkeeping service that demonstrates big picture thinking can dramatically improve your long-term profitability. Remember, your success hinges on knowing the true costs of running your business.

Understands Your Industry

Beyond the day-to-day management of your company’s accounting activities, your outsourced bookkeeper should have a solid understanding of the industry you’re in, and how it relates to your specific financial situation. The more familiar they are with industry trends and operations, the more likely a bookkeeping company is to spot oversights and patterns in your data. And that can prevent reporting errors, and help you to capitalize on potential tax savings.

Good Communicator

Some bookkeepers are much better with numbers than they are with people, but the right bookkeeping service for your business must be adept at dealing with both. Make sure your bookkeeper listens well, and explains things in a way that makes sense to you. Your business is as individual as you are, and a bookkeeper who adopts a one-size-fits-all approach to communication will be unlikely to meet your needs or expectations.

Choose the Right Bookkeeper

Trust & Security

Bookkeepers have access to much of the most critical personal/private information regarding a company. Considering bookkeepers maintain all of the essential financial records of a company, they’re frequently a pivotal individual for making sure there are no issues with invoicing, payroll, and taxes.

Certification

You should always hire a fully licensed and certified bookkeeper. In an attempt to save money, some businesses feel tempted to hire unlicensed individuals to maintain their books. Hiring uncertified bookkeepers can be a shortsighted mistake because even though unlicensed bookkeepers might save you money in the short-term, they are more likely to make errors and cost you money in the long-run.

Excellent Communicator

A bookkeeper is a person you rely on to keep track of your numbers; therefore, this is an individual that you’re going to be in communication with regularly. Some bookkeepers might be excellent at keeping track of the numbers, but if they fail to communicate with you, they can still be a detriment to the overall well-being of your company. Part of being an excellent communicator is being a fantastic listener, so your bookkeeper should be attentive and interested when you’re discussing the details of your company. Ultimately, you and your bookkeeper should have a harmonious relationship that allows for information to routinely and accurately flow between the two of you.

Organized

A bookkeeper is a financial record keeper, and they need to maintain a filing system that reflects the importance of their job. There should be an immediate answer to most financial questions that you might have for your bookkeeper. If a bookkeeper organizes well, there should never be an issue with answering basic questions regarding company finances and expenditures. A bookkeeper that appears disorganized, or is inconsistent in how they file important company paperwork, should not be trusted to maintain the financial records of an entire business.

HOW TO CHOOSE THE RIGHT BOOKKEEPER FOR YOU

Honesty and Trust:

When looking for the right bookkeeper, these two are most important things to consider when doing your search. A bookkeeper has the role of managing your finances with little input from you the business owner. Since this will be a total stranger handling your finances, it is important to hire an honest person, someone you can trust with your finances. To do this you need to thoroughly vet them before settling for one.

Integration:

Most business owners are moving from the traditional ways of doing business to digital methods and systems. Therefore, when looking for a good bookkeeper, ensure that he or she has a wide knowledge of various bookkeeping software and keeps a keen eye on the different market trends.

Personality:

Your bookkeeper is your closest business ally. He or she can help your business grow by offering financial advice whenever need arises. Therefore, you need to look for an individual with excellent personality. This means he or she needs to be a good conversationalist, someone you can talk with freely, understanding and friendly. The bookkeeper should also be free with you, can ask you hard questions and tell you issues whenever they happen.