New Business Direction LLC
Artificial intelligence or augmented intelligence or automated intelligence (AI) has arrived in the accounting profession in a big way. The good news is it’s streamlining accounting tasks, finding patterns in data you can take action on, and generally making things better. Here are just a few places we’re seeing AI and machine learning impact accounting.
Transaction Coding
Most systems have incorporated some form of machine learning into transaction coding. When bank feeds are imported, each transaction needs to be coded to add the account code in the chart of accounts. Class, tracking codes, and other custom data may need to be added as well. Rules can be set so that the accounting application can pre-code the transactions; in this case the accountant simply approves or corrects the entry.
Invoice Fetching
It starts with a picture of a receipt. Invoice fetching applications can turn pixels into data using sophisticated OCR (optical character recognition). The data is then turned into a business transaction that can be imported into an accounting system.
Auditing
The books of many government agencies, nonprofits, and large businesses need to be audited on a regular basis. Auditing is an expensive process. Smart programs can review a company’s data and assess where the risks and anomalies are so that the audit program can be modified to focus on the more important parts. This reduces risk and cost for everyone involved.
Accounts Payable
Automated intelligence can help to speed up the matching of purchase orders, packing slips, and invoices so that accounts payable tasks are streamlined. It can also automate approvals and look for duplicate invoices to avoid overpayments.
Accounting Tasks That Are Clerical
Robotic Process Automation (RPA) is a platform that allows users to create automation without involving the IT department. Think Excel macros or Zapier on steroids. Any workflow with a mind-numbing set of clerical steps is a candidate for RPA.
AI allows accountants to spend less time on routine tasks and more time on higher-level analysis work. As AI becomes more affordable for small businesses, everyone will benefit from this long-term trend.
Insightful Accountant has announced their “Top 100 ProAdvisors for 2019”
Money and Marriage
One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you stand.
Show me the money: Combine or keep separate or both
One of the best ways to avoid conflict is to put your money into three separate piles: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is all your own. The household spending will then come out of the joint account, and you both will make contributions to it on a regular basis.
As a couple, you’ll need to discuss who will pay for what as well as what your regular contribution will be to the joint account. This is no small discussion. The more thorough you are, the less conflict you’ll have over money.
One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, you both should have access to this account in case of emergency.
Savings and future purchase goals
Do you have goals about upcoming large purchases? These might include:
- A home purchase or improvement
- Children’s education
- Health care needs
- Saving for retirement
- A car purchase
- A second home purchase
- A vacation
- Another item such as a boat, furniture, technology gadgets, a plane, or something else
- A nest egg or cushion
If so, calculate how much you need and make a plan to set aside the money you need in the time frame you agree on.
Spending
Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems come in.
When there are conflicts in the area of spending, the best course is to focus on priorities. If you can agree on your priorities and goals, it can often shift spending habits.
Budget
You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future.
- Rent or mortgage payment
- Utilities, including electric, gas, water, garbage, phone, internet, cable
- Food and supplies, including grocery, kitchen items, liquor, and eating out
- Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.
- House maintenance including repairs, cleaning, lawn care, appliances, and decorating
- Automobile, including gas, insurance, licenses, and maintenance
- Clothing and accessories, including dry cleaning
- Health care, including pharmacy, doctor’s visit, and HSA contributions
- Personal care, such as haircuts, nail care, etc.
- Tuition and/or education expenses
- Contribution to retirement and savings accounts
- Charitable contributions
- Taxes, including federal, state, local, school, and property
- Paying down credit card or student loan debt
Retirement
What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals can change over time as retirement approaches.
You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets.
Monitoring your progress
Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.
When you reach your goals, reward yourself. Managing money is hard work, and you deserve to pat yourself on the back when a goal is achieved. If there is anything we can do to help you make your financial dreams come true, please reach out any time.
Hiring a new employee is a big accomplishment in any small business, and there are a lot of steps involved, too. Here’s a handy checklist to help you stay organized when you bring that new hire on board.
First things first, the legal and accounting items:
- Signed employment agreement, typically an offer letter. There may also be a supplemental agreement outlining employee policies.
- Payroll documents include:
- IRS form W-4
- Form I-9
- Copy of employee’s government-issued ID
- Most states require a new hire report to be filed; sometimes your payroll system vendor will automatically file this for you.
- Notify your workers comp insurance carrier.
Next, it’s time for employee benefits enrollment:
- Health insurance
- 401K
- Any other benefits you provide
- Provide the employee with the holiday schedule
- Explain their PTO and vacation if not already explained in the offer letter
Set your new employee up for success with the right equipment:
- Desk, chair, lamp, other furniture
- Uniform
- Tools
- Coffee mug, refrigerator shelf
- Phone
- Truck, keys
- Computer, monitor, mouse, keyboard, power strip, floor mat
- Office keys, card entry, gate remote, parking assignment
- Filing cabinet, keys
- Tablet
- Forms
- Office supplies
- Cooler, other supplies
Your new employee may need access to your computer software systems:
- Employee email address
- Any new user IDs and password for all the systems they will need to access
- Document access
How will your new employee learn the ropes?
- Set up training
- Assign a buddy
Hopefully, this list will give you a start toward making your employee onboarding process a little smoother.
Do you remember the days when you got a report card from school? Now that you have a business, your business has grades as well. It’s up to you to calculate them. Here are some grades or key performance indicators that you can compute for your business to give it a report card of its own.
Financial Grades
How successful is your business from a financial standpoint? These financial ratios can help you give yourself a grade.
Working Capital
This is the difference between current assets like cash, receivables and inventory and its current liabilities such as accounts payable and credit card debt. It measures the organizations ability to meet its current obligations. A 2 to 1 ratio will get you an A+.
Return on equity
This ratio measures profitability as it relates to the investment or money you have tied up in your business. The formula is net income / average equity. An ROE of 15 percent or more is an “A” for your business report card.
Return on assets
This ratio measures profitability as it relates to your business assets. The formula is net income / total assets. An ROA of five percent or more is an “A” for your business report card.
Asset turnover
This ratio measures efficient use of your business assets. The formula is sales / total assets. This number should be high for low margin businesses and low for high margin businesses.
Profitability Grades
How profitable is your business? You might know your bottom line number, but there’s more to it.
Gross profit margin
This ratio measures the financial health of a company as it relates to how much of every revenue dollar is available to cover overhead. Calculate it as follows: (revenue – cost of goods sold) / revenue. The value will be different depending on what industry you’re in, but some say a range of 25 to 35 percent is normal for small business.
Net profit margin
Net profit margin measures how profitable your business is in relation to the amount of sales you have. As an example, a business that can make $50K in profits on $500,000 in revenue is more healthy than one that can make $50K profits on $3 million in revenue. The formula is net income / total sales, and although it depends on the industry, a net profit margin over 10 percent is considered an “A.”
Report cards were important in school, and they’re even more important in business. If you’d like us to set up one for your business with specific metrics for your industry, let us know.
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