Search Results

In today’s fast-paced digital world, managing your finances efficiently is more important than ever. Whether you are a small business owner, freelancer, or individual looking to streamline your accounting tasks, connecting with a professional accountant online can be a game-changer. Online accountant support offers convenience, expertise, and cost-effectiveness that traditional accounting services may not always provide. This blog post explores the benefits of online accounting services, how to find the right support, and practical tips to make the most of your collaboration with an online accountant. Why Choose Online Accountant Support? Connect with Professional Bookkeepers and Accountants Online Online accountant support has revolutionized the way people handle their financial matters. Instead of scheduling in-person meetings and dealing with piles of paperwork, you can now access expert advice and services from the comfort of your home or office. Here are some key reasons why online accountant support is becoming the preferred choice: Accessibility : You can connect with your accountant anytime, anywhere, using digital tools and platforms. Efficiency : Online systems allow for faster processing of financial data, tax filings, and reports. Cost Savings : Reduced overhead costs for accountants often translate into more affordable services for clients. Real-Time Updates : Cloud-based accounting software enables real-time tracking of your financial status. Personalized Service : Many online accountants offer tailored packages to suit your specific needs. For example, a freelance graphic designer can upload invoices and receipts directly to an online portal, where the accountant reviews and categorizes expenses promptly. This eliminates the need for physical document transfers and speeds up tax preparation. Connect with Professional Bookkeepers and Accountants Online Online accountant working with financial data on a laptop How to Find Reliable Online Accountant Support Finding the right online accountant support requires careful consideration. Here are some practical steps to help you choose a professional who fits your needs: Check Credentials : Ensure the accountant is certified and has relevant experience in your industry. Read Reviews and Testimonials : Look for feedback from other clients to gauge reliability and quality. Evaluate Communication : Choose someone who is responsive and explains financial concepts clearly. Assess Technology Use : Confirm that the accountant uses secure, up-to-date accounting software. Discuss Pricing and Services : Understand what services are included and how fees are structured. You can start by visiting websites that specialize in connecting clients with accountants. For instance, if you want to speak directly with an accountant online , you can reach out through their contact page to inquire about services and availability. Client interacting with online accountant through digital tools How much does an online accountant cost? Understanding the cost of online accountant support is crucial for budgeting and decision-making. Pricing can vary widely depending on the complexity of your financial situation, the services you require, and the accountant’s experience. Here are some common pricing models: Hourly Rates : Some accountants charge by the hour, typically ranging from $50 to $200 per hour. Fixed Monthly Fees : Many online accountants offer subscription plans that cover bookkeeping, tax filing, and advisory services for a set monthly price. Project-Based Fees : For specific tasks like tax preparation or financial audits, a one-time fee may be charged. Package Deals : Bundled services can provide cost savings if you need multiple accounting functions. When comparing costs, consider the value of time saved and the accuracy of financial management that professional online accountant support provides. Investing in expert help can prevent costly errors and optimize your tax benefits. Calculating costs and budgeting for online accountant services Benefits of Using an Online Accountant for Your Business Online accountant support offers numerous advantages that can help your business grow and stay compliant with financial regulations. Here are some benefits to keep in mind: Time Savings : Automating bookkeeping and tax processes frees up your time to focus on core business activities. Improved Accuracy : Professional accountants reduce the risk of errors in financial records and tax returns. Better Financial Insights : Access to detailed reports and analysis helps you make informed business decisions. Scalability : Online services can easily adapt as your business grows or changes. Secure Data Handling : Reputable online accountants use encrypted platforms to protect your sensitive information. For instance, a startup can benefit from monthly financial reports generated by an online accountant, helping the founders track cash flow and plan budgets effectively. Tips for Maximizing Your Online Accountant Support Experience To get the most out of your relationship with an online accountant, consider these actionable recommendations: Organize Your Documents : Keep digital copies of receipts, invoices, and bank statements ready for upload. Communicate Regularly : Schedule periodic check-ins to review financial status and address questions. Use Recommended Software : Adopt the accounting tools suggested by your accountant for seamless integration. Stay Informed : Learn basic accounting principles to better understand reports and advice. Set Clear Expectations : Define the scope of services and deadlines upfront to avoid misunderstandings. By following these tips, you can build a productive partnership that supports your financial goals and reduces stress. Connecting with a professional accountant online is a smart move for anyone looking to simplify their financial management. With the right online accountant support, you gain access to expert advice, efficient processes, and peace of mind. Whether you need help with bookkeeping, tax preparation, or financial planning, online accounting services offer flexible solutions tailored to your needs. Don’t hesitate to explore options and reach out to an bookkeeping business online today to start improving your finances.

(part 1) of 2 (part 2) Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management Revenue Deferral: A Step-by-Step Guide for Project Managers *The following instructions are proprietary information, created by bookkeepingbusinessonline.com , and are subject to copyright laws. QuickBooks Online provides the software. I provide expert guidance and support. Contact me   or Schedule a 30 minute free consultation Revenue Deferral (Revenue Recognition) is a crucial accounting practice that enables businesses to accurately reflect their financial performance over time, especially in industries where services are rendered, or products are delivered over extended periods. In this blog post, we’ll explore the step-by-step process of deferring revenue, highlighting essential tasks such as creating estimates, issuing sales and change order invoices (earned revenue), and managing deposit-retainers (unearned or deferred revenue). I recommend using QuickBooks Online Advanced with Excel Spreadsheet Sync for large projects. My simple process of automation for numerous months of revenue deferral: Begin with an Estimate of Product or Service(s) + Markup The Basics are: 1) Invoice for the deferred revenue (unearned revenue) from the Estimate of services to be provided, match payment in bank feed. 2) Select "Make Recurring" from the Invoice for each deferred revenue (unearned revenue) invoice date thereafter to project or job end. 3) Invoice for consecutive months (-) deferred revenue (unearned revenue) (+) service provided (earned revenue) 4) Select "Make Recurring" from the Invoice for each month of service and be sure to add an end date of the (earned revenue) just before the next deferred revenue (unearned revenue) invoice date. thereafter to project end. **bills can be attached to invoices for accurate job costing, for the particular customer, and will be GAAP compliant. (If your billable expense (COGS) is greater than any individual month deferral for a particular customer, you can defer the COGS using prepaid expenses current asset, using the same automation technique *see managing billable expense below. This information is an important metric used in Job Costing, planning and analysis. The Process of Revenue Deferral: Step 1: Create an Estimate (Non-Posting) Start with a detailed estimate outlining the project scope, costs, and timeline (e.g., by job phase) Duplicate the estimate. The two estimates are: an Approved copy  is for invoicing (contractual and unchangeable). a Pending copy  is for purchasing. Step 2: Create a Deposit-Deferred Revenue Invoice (Unearned revenue) After approval, create an invoice for the deposit amount, tied to deferred (unearned) revenue. This invoice links the approved estimate to the deposit received. Match payments (to undeposited funds) bank feed and reconcile the bank deposit accurately. Step 3: Create Sales Invoice(s) (Earned Revenue) Generate sales invoices based on the approved estimate job phases : Date them to the project completion, deferral end, or service date. Deduct previously recorded deferred revenue deposits. Run a "Balance Forward" statement to show when deferred revenue became earned. This process moves deferred revenue (unearned revenue) from the Balance Sheet to the Income Statement and adjusts COGS accordingly. Repeat Steps 2 & 3  for each job phase or service period to track future earned revenue (Income Statement) and deferred revenue (unearned revenue) balances (Balance Sheet). This method adheres to GAAP, supports subscription-based services, and aids financial planning and analysis. Key Tip:  Use linked transactions (estimates, POs, bills, and invoices) instead of journal entries to maintain, an audit trail, accuracy and clarity in financial documents. Progress Invoicing vs Revenue Deferral: You can enable project progress invoicing in Accounts and Settings to bill against the approved estimate based on the AIA % of project completion model. In this method: Only retainage (typically 5%-10%, deferred revenue) and paid invoices (earned revenue) are reflected on financial statements. The remaining estimate stays off the balance sheet and is invoiced as the project progresses. Work-in-progress reports help track progress. Caution: Progress invoicing complicates financial reporting, tax compliance, inventory and project management. If your contract follows a % completion model but uses revenue deferral accounting, specialized reports will show job completion percentages. The customization of the revenue recognition process is based on the business's operating standards and procedures. It requires careful planning to accurately identify the products and services items delivered, mapping the items to corresponding income, COGS, and expenses on the chart of accounts, and management of the timing of revenue deferral, as well as the handling of prepaid and billable expenses. Preparation Steps: Sales Channels & Mapping: Map sales channels, job phases, or service segments to their respective class. Align these to product/service income and COGS categories in your chart of accounts. Use report filtering to analyze by class, location, or customer without complicating the Income Statement with excessive line items. Document Organization: Sort sales documents by class in Account Settings, choosing either per document or per line (recommended per document for large projects). Add custom fields (Gear Icon > Custom Fields) for details like Project Manager or Sales Rep. Sales Tax: Location is utilized for NEXUS ship from (origin) information (business or job address, seller office, warehouse, inventory location, employee location, fair or tradeshow, drop shipper, et...) The location field specifies where and how you will submit sales taxes. Set up sales tax based on product or service and location, verifying compliance with state and local laws and the Department of Revenue. Refunds, Discounts, Shipping, Fees and Sales Tax require special consideration depending on how the sales is processed, and if the item is taxable. You will need to set up sales tax for each of your products and services items. Default tax to location (origin-Ship from) or search for the specific item you are selling, and you will get the message, "this item might have special tax considerations. Select Edit sales tax to view our recommendation and we'll make sure it's taxed  correctly. We'll apply sales tax based on the product or service and location. "  ** Because sales tax liabilities are always the seller's legal obligation, I recommend confirming your licensing and other obligations by checking with the Department of Revenue and State and Local Statutes ** Review: Integrating your ecommerce app with QuickBooks Online Chart of Accounts Setup: Ensure accounts match your business type, with income and COGS properly mapped to products and services. Special Sales Considerations: Account for refunds, discounts, shipping, fees, and sales tax depending on item taxability. For taxable items, set default tax to the origin or specific item recommendations in your software. Pricing Rules: Add price rules for specific customers and products and services items Vendors & Customers: Add vendors and customers with email addresses. Mark all vendors as 1099 eligible for profile completion or upload confirmation documents. Upload exemption certificates for tax-exempt customers and vendors. Class Setup Sort the sales documents by class setup from Accounts Settings, per document or each line of a transaction. For large projects it is wise to choose the per document selection. Custom Fields can be added to your forms from Gear Icon > Custom Fields to further specify meaningful information on the document such as Project Manager, Sales Rep, et... GAAP Transaction Matching Income = COGS or Billable Expense Matching-Reimbursements plus Markup (Gross Profit) *A sales price and purchase price are required to be entered for your products and services items to produce COGS calculations on your income statement if a bill is not available when an invoice is issued. Follow Consistent Accounting Procedures: Accounting in QuickBooks follows a specific and structured process. As an accrual-based system that complies with GAAP standards, following consistent accounting procedures is imperative. Proper setup of products and services, including standard sales and purchase prices, is essential for calculating COGS when no bill is linked to an invoice. The primary goal of GAAP accounting is to align expenses and bills with the revenue generated from invoices, creating a clear audit trail to connect all transactions seamlessly and produce accurate financial statements. The accounting process is: Estimate (optional) to PO (optional) to Bill Item or Expense Item ( marked billable , attach receipt) to bank feed (spend transaction) matched to a bill or expense, will populate the Unbilled Charges report, adding Inventory (quantity) and COGS (amount) to your financial statements when invoiced (add billable items to the invoice from the suggested transaction pop out drawer). This process Bill + Invoice is critical for correct accounting of Sales, COGS and Inventory, is GAAP Compliant and produces accurate financial statements. My accounting preference is to GAAP accounting (matching costs with revenue to calculate accurate Gross Profit) following correct workflows Upload all receipts and vendor bills to transactions > receipts and create bill from there. These bills will remain on A/P until paid, from a bank feed spend transaction or otherwise. *Always enter a vendor email to give that vendor access to the 1099 platform. Pre-entered bills will dictate whether the expense/purchase is for: Item dropdown lines  for products and services purchased for resale, typically billable items sold and matched to an invoice. OR Category dropdown lines  for indirect overhead expenses, asset purchases, liability payments, and are typically non-billable . You can enter a bill or expense for COGS directly to the Income Statement, using the category field, for cash accounting transactions only < not recommended where inventory valuations are concerned Always add, customer or job, class and location to each document The rule of COGS calculations: An invoice (income) + bill attachment (Item: COGS) with markup = gross profit An invoice (income) + bill attachment (Item: COGS) and no markup is a reimbursement = zero gross profit   An invoice with no bill or expense attachment will not calculate COGS (if not stated in your products and services), increasing your stated gross profit-income, and your tax liability An Invoice with only a receipt attachment may not calculate the true COGS, or COGS at all, to your income statement (from the receipt) if the price and cost are pulling from the products and services and no billable expense item is attached. Increasing gross profit income and your tax liability. Sales, Inventory and COGS should be reconciled EOM. Create a (BOM) monthly and save to My Accountant > Shared Documents, maintaining a historical record of Inventory, COGS and Sales. QBO engineers have been altering transaction, including estimates, you may need to modify the process of reporting to show invoiced, remaining and closed and watch your Estimates Report for correctness. When the invoices, created from the estimates are paid, the attached bill + invoice will distribute cost of goods + income to the Income Statement, clearing unbilled charges. (12/30/2024 Please send feedback to QBO Gear Icon > Feedback to QBO engineers to correct their work) Item Mapping: Products and Service Item Setup-Mapped to the Chart of Accounts: If the items on the estimate are for: COS Purchases (Non-Inventory) , These items would be mapped to (Income = Sales Income for Invoices and the Expense/Purchases account = COS billable expense/or specific expenses) or ( Category fields on an invoice from Chart of Accounts setup are for general indirect overhead Expenses, non-billable only ) If the items on the estimate are: Inventory Items (Inventory) (Income = sale of product income for Invoices, and the Expense/Purchases = COGS for Bills/Expenses) If the items on the estimate are: COS (Service) Item (Income = Billable Service Income for Invoices, and the Expense/Purchases account = COS Billable Service Expense for Bills/Expenses If the items on the estimate are: Service Vendor Items (Service) (Income = Billable Labor Income, and the Expense/ Purchases = Billable Labor expense COS Labor) (use for 1099 subcontractors ) If the items on the estimate are: Time Item Setup (Service) (Income = Billable Time Income, and the Expense/Purchases = Billable Time COS Labor) *turn on in Accounts and Settings > Time ( use for employees ) employees can easily track time against customers, jobs, service items, and whether a job is billable, for improved accuracy in invoicing and job costing with QuickBooks Time Elite. Read More quickbooks.intuit.com/app/apps/home If the items on the estimate are: Revenue Deferral Item (deposit/retainer) (Income = deferred revenue, and the Expense/Purchases = deferred revenue) For the contractor and final fees *plan according to your preferences If the items on the estimate are: Bundle Item (Multi-Inventory) (Income = Sales for Invoices, and the Expense/Purchases = COGS for Bills/Expenses. (Build of multi-inventory items) *Estimated sales prices should match bundle prices for a client specific estimate to subsequent invoice transactions. If not you may need to issue a change order. Bundles can be used for estimating common projects (e.g. kitchens, bathrooms, et...) when creating inventory bundles always use finished price. (see details: (part 2) ( manufacturing and construction profitability ) and optional production line accounting Managing Prepaid Expenses: Prepaid Expenses (any billable product or service):     If the business is prepaying expenses on behalf of a customer several days or months in advance, set up the Prepaid Other Current Asset account on the Chart of Accounts. This process will follow GAAP matching principles. (1 Create a Bill to the vendor being paid, categorized to the Prepaid Expense Current Asset (increase Prepaid) and pay the Bill when due (match in bank feed). Enter the Customer name in the specified field and make a note of the expense item in the description line, but do NOT mark as billable (2 Immediately after payment is made, create a copy for an opposing Bill dated to the revenue deferral earned income date, with the actual Item, previously prepaid, marked as billable LESS  (-) Prepaid Expense Current Asset (decrease Prepaid NOT marked billable .) 2-line transaction. This net zero transaction does not affect A/P since the Bill has been paid. It reduces the Prepaid Expense Current Asset on the revenue deferral date and marks the expense to be billed to the customer at a deferred date, maintaining GAAP accounting practices, invoice from unbilled expenses on the deferral date. Managing Billable Expenses: Billable Expenses (Any billable product or service): If you are using markup and have turned on markup in Accounts and Settings there are Two ways to proceed: (1 Items can be marked up directly from the Estimate , with markup calculated and included on the subsequent PO + Bill + Invoice. If Invoicing directly from the estimate, with predetermined marked up items, when the actual spend arrives in the banking center, the bill, fielded for the client should NOT be marked up again, only check marked billable (to populate the Unbilled Charges Report). When earned revenue is realized directly from the estimate and invoiced, the markup is already calculated and the difference on the Income Statement is the estimated Income less the billed item (COGS) = Gross Profit with no visible markup calculations. (2 The items are check marked billable and marked up directly on the bill (Cost Plus billing) and matched to a PO and a spend transaction in the bank feed, then invoiced. The markup amount will appear as a separate income line item on the income Statement. Billable Income and Billable Expense line items should match EOM leaving a seperate line for markup. Typical of Cost-Plus Billing, your Income will be clearly visible as the difference between Markup Income + Item Income - billed Item COGS = Gross Profit (example: Bill $100 + 20% MU = $120 Invoiced = $20 Markup Income/Gross Profit) *If no markup was added to the estimate or bill, attached to an invoice, the income and COGS expense will be equal amounts known as reimbursements and should have a separate category on the Chart of Accounts (reimbursement expense and income) to manage EOM balance. How will you know what bank feed spend transaction belongs to which customer? You should have already marked a PO as received, and entered a bill fielded to the customer, check marked billable, for that specific product or service and amount. The bank feed spend transaction will be matched to the unpaid bill on the Unbilled Charge Report. Do not duplicate billable items from the original estimate, that have already been marked up and converted to an invoice. Bills and subsequent Invoicing are reserved for Un-Invoiced Charges or Change Orders and are common practice for Cost Plus Billings. (****Caution should be taken! Failure to mark an expense or bill transaction billable or duplication of transactions can be challenging to reconcile EOM****) In either case, determine whether these bills should be marked as prepaid to a particular Job Phase and that they are attached to the Purchase Order. Receipts for goods purchased can be uploaded to the general company forwarding email (or new AI feature) transaction > receipts and should be attached to at least one of the PO-Bill-Invoice transactions since they are all connected. Conclusion: Effectively deferring revenue is a nuanced process that requires careful planning, attention to detail and adherence to accrual and GAAP accounting principles. By consistently following the outlined steps—creating estimates (with Job Phase bundles), converting to deposit-retainer invoices (unearned revenue), and finalizing with Job Phase sales Invoices (earned revenue) businesses can accurately reflect their financial performance over time. This not only ensures compliance with accounting standards but also provides a clear picture of a company's true economic standing and is beneficial to inventory and project management (and associated accounting collaboration) as well as planning and analysis. Whether you're in a service-oriented industry or managing subscription-based services, mastering the art of revenue deferral is key to financial transparency and sustainable business practices. See below, an outline of the deferrals, related to the milestone billing process. I will be adding more, bookmark this page. (part 2) Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management See also: Cost-Plus Billing vs Time and Materials Billing See also: Navigating Revenue Recognition: A Brief Guide to ASC 606 Compliance See also: Understanding ASC 606 Revenue Recognition: Five Essential Steps Milestone Billing and Deferred Revenue Milestone Billing and Deferrals QBO engineers have been altering transaction, including estimates, you may need to modify the process of reporting to show invoiced, remaining and closed  and watch your Estimates Report for correctness. When the invoices, created from the estimates are paid, the attached bill + invoice will distribute cost of goods + income to the Income Statement, clearing unbilled charges. (12/30/2024 Please send feedback to QBO Gear Icon > Feedback to QBO engineers to correct their work) Products and Services Item Setup: Revenue Deferral Item (deposit-retainer) (income = deferred revenue liability for invoices, and the expense/purchase = COGS or COS for bills and expenses, depending on whether you are using it to defer Contractor and Final Fees or Items) COS Purchases Item (Non-Inventory) (income = sales income for Invoices, and the expense/purchases = COS Purchases for bills & expenses) Inventory Item (income = sales of product for invoices, and the expense/purchases = COGS for bills and expenses) Service Vendor Items (income = billable labor income for invoices, and the expense/purchases = COS Labor for bills and expenses) (use for 1099 subcontractors) Time Item Setup (income = billable time Income for invoices, and the expense/purchases = billable time COS Labor for bills and expenses) *turn on in Accounts and Settings > Time (use for employees) Additional Preparation Steps are noted above. Spreadsheet sync can help with the management of large products and services lists. Caution should be taken not to overwrite inventory quantities if only purchase price and sales price are to be updated (and be sure that the sync does not constitute fraudulent asset manipulation) The most recent inventory purchases relevant to the approved job estimate, and subsequent bill to invoice, is the correct COGs calculation (Specific Identification) regardless of FIFO inventory build and valuation. (hence, GAAP accounting) Use Spreadsheet Sync to review and compare the bill(s) for products and services data in QBO from the bills detail report in Spreadsheet Sync (sorted by customer and class-Job Phase) Verify the data against the approved job estimated costs and invoiced items. Do not sync back to QuickBooks. The bills on the reports are connected to Purchase Orders, A/P and A/R. Deferral Process: Step 1 Job Cost Project Estimate (with Markup)  Enter the full bid details of inventory or materials quantity and amount + any other job-related billable expenses + contractor fees + estimated employee time and payroll tax + 1099 vendor/subcontractor time, et... to an Estimate, *Check with local jurisdictions regarding state and local sales tax laws, add to products and service items accordingly. Tax exemption requires a certificate, posted to vendor or customer list. Spreadsheet sync can be used to build the initial estimate and uploaded back to QBO if desired. Be as specific as you can, breaking down the components of the estimate into job phases (and bundles). When complete send the estimate to the customer for signature approval. Once an estimate is in approved status do not change line items or amounts. Make a duplicate copy of this estimate before proceeding . The accepted estimate will be used to create invoices and monitor job invoicing progress and the pending estimate will be used to create purchase orders and Customer: Bill Bundles. Once an estimate is approved Do Not Sync back to QuickBooks. Step 2 Deferred Retainer-Deposit Invoice (unearned revenue) , on the date the contract is acknowledged create an invoice from the approved estimate for the Deferred Retainer-Deposit Item. Usually 5-10% of the total estimate. Create the invoice from the approved estimate as a whole or % (tip: round to a whole numbers or specific items being deferred), remove all lines you are NOT deferring. Keep the items that you are deferring (+) make an identical subtraction (-) to those items that you are deferring and insert the line-item (+) Deferred Revenue Deposit for the total. Date this Deferred Revenue Deposit unearned revenue invoice to the Current date and email to the client for payment. This is a Good Faith deposit from the client to proceed. Types of deferrals: Products and Services Item Deferrals: Immediately following the Deferred Revenue Deposit (unearned revenue) Invoice sent to the customer (above); create a copy of the invoice, for the same items you just invoiced (+) only, (-) Deferred Revenue Deposit Item (net zero invoice). Date this earned revenue invoice to Job Phase Completion date or Project End to defer the sale and associated sales tax, or punch list items, services, or whatever you are deferring. Subsequent bills for these items can be attached to the invoice at a later date, project end date. Contractor Fee and Final Fees Deferrals: You may want to ask for the deposit from part of your estimated contractor or final fees, excluding products and service item deferrals from the good faith deposit and/or subsequent Job Phase deposits. In that case you would enter: 1.) Deferred revenue deposit unearned revenue invoice (for the contractor service fee or final fee item) to the   Current date from the approved estimate 2.) followed by a copy of that invoice to a (net zero invoice), with a credit (-) for the deferred deposit contractor service fee or final fee item you invoiced dated to the Job Phase Completion date or Project End date. Note: Contractor Fees and Final Fees are profit over and above cost of materials and labor. An example of Products and Services Item Deferrals: Example of Date specific Deferred Invoice transactions (ASC 606 Revenue Recognition) Retainer-Deposit-current date-payment required Deferral-date revenue will be earned on the Income Statement Proceed only after payment has been received (to undeposited funds) and matched to the customer invoice for the deferred retainer-deposit in the banking center. Interim Activities: Collect new vendor contact information, W9, or (TIN) SS#, I9, Tax Exempt Certificates, General Liability Certificate of Insurance and full contact information, including email address , ACH information, direct deposit. **Workforce (self-service) HR communications/Payroll setup **Workforce (self-service) Building Permits Pre-Inspections Insurance Sales Tax Permits Construction Bonds Step 3 Create a PO Sales Invoice(s) from the pending estimate with the item and amount for each line, for each Job Phase (Bundle) expected beginning date (typically each Job Phase (Bundle) will reduce the balance of the construction loan, as an equal portion of the estimate) This will increase accounts receivable and break out the needed inventory items by job phase begin date. Use for Purchase Order Management . The estimate, PO's and PO sales invoices will be connected to A/R bills and to A/R invoices in QBO Do Not Sync back to QuickBooks. ** Note: invoices will not calculate cost of goods sold correctly on the Income Statement without a bill for the product or service item (paid or unpaid) for product and services items. Each product or service item should have at least a standard sales and purchase price. Cost of Goods sold is calculated from the products and services list when no bill has been received against an invoice. Consistent with GAAP accounting, the bill associated with an invoice is the correct COGS calculation (use identical bill and invoice numbering to connect, if possible). Attention to date, customer, and job detail is required for accurate accounting. Step 4 Enter Purchase Orders from the pending estimate . Run an Inventory Valuation Detail Report (showing FIFO inventory build) and/or the Open Purchase Order report to determine the status of inventory requirements, by date, customer and class-Job Phase (Bundles). The Sales Invoices entered in step 3 will show up on the Inventory Valuation report as negative quantities and negative values (if products and service items are not already in stock), until items are on a PO, and attached to a Bill for receipt. The PO to bill process will add to inventory and effectively balance the sale of the negative inventory already invoiced in step 3. Email POs to Material Vendor(s) line by line for each relevant vendor, and relevant Job Phase, with terms of required delivery date, consistent with the relevant Job Phase beginning date (or a few days in advance) for Purchase Order Management and Reporting. Give each vendor permission to the company forwarding email in QBO, where they will send their bills and other documentation, and also collect their ACH payment information for bill payments. Mark all vendors as 1099 eligible and enter their email address Then, email the vendor to complete their profile, view their payments and download their 1099 forms, from the menu: Payroll > Contractor center. Do this even if they are not 1099 eligible (document this fact). A PO sent to a Service Vendor (1099 subcontractor) will notify them of contract acceptance. Insert a description of expected job phase service dates, for scheduling purposes and send a PO to HR to begin an employee hiring/scheduling process. (Give each Service vendor (1099 subcontractor) and Employee permission to the company forwarding email in QBO, where they will send their bills and other documentation, and also collect their ACH payment information for bill payments. Mark the vendors as 1099 eligible and enter their email address . Then email the vendor/ contractor to complete their profile, view their payments and download their 1099 forms from the menu: Payroll > Contractor center. Do this even if they are not 1099 eligible (document this fact). Then wait for Vendor(s)  ...…. Enter a Bill against a PO only after Delivery of Inventory has been confirmed (Bill/Inventory Approval) or for Service Vendors, date their Bill to intended work performed schedule (Bill/Service Approval) (Optional Inventory Tracking) Once the inventory is received (raw materials) to your warehouse for an entire Job Phase, you will be able to follow the job phase progress and inventory movement by using a Customer: Bundle Bill: through each stage of construction/production 1) Raw Materials 2) Job Order, 3.) Installation, 4.) Job Phase Completion (customized to your project specifications) optional Steps are outlined here: (see details:   manufacturing and construction production ) Interim Activities: Pay Vendor(s) if in inventory has been received, or service is performed, follow up on backorders Pay Sales Tax Collected Payroll and Payroll Taxes Inspections PO Reviews, Inventory Status Reviews, WIP Reviews, Payroll and Subcontractor Reviews and Estimate vs Actuals Reviews (Change Orders) As the jobs progresses monitor job progress for change orders. Any cost over and above the original estimate is a Change Order , as determined by the Estimate vs Actuals Reports. Change Orders should have the client's signature and are entered as separate invoices from a Billable Expense + markup. Check in with the status of Estimate vs Actuals Reports often to avoid major overages. Also cap time spending for employees and 1099 subcontract vendors, determined by the original approved estimate. Any overtime would also be considered a Change Order and invoiced accordingly. * Before proceeding to step 5: Consult with a CPA or other Advisor to determine if the PO Sales Invoices for each Job Phase should remain A/R (other asset) and Job phase dated or be Deferred Revenue (liability) and Job Phase Dated. See notes below. Step 5 Alerts: Workflow Automation (Project Management): Deferring the A/R Job Phase PO Sales Invoices you entered, over and above the 1st deferred deposit retainer, requires workflow adaptations. (Repeat Step 2: of the Deferral Invoice Process using the PO Sales Invoices you entered for each Job Phase from start to finish. See the above Example: Date specific Deferred Invoice transactions Use workflow automation alerts to be notified of expected Job Phase start (request for new deposit) and end date (earned revenue) for each Job Phase. To fully Defer a project. (1) Change the existing A/R (purchase order management) PO Sales Invoices you entered to Deferral-Deposit Invoice(s) with ITEMS (+) and (-), for each consecutive Job Phase start date and add the (+) Deferral-Deposit line item send each job phase deposit to the customer for payment (your customer will be informed of the expected timeline for deposits and expected items required for each Job Phase), followed by (2) a copy of that invoice to earned revenue sales invoice (-) Deferral-Deposit line item (+) Items (net zero invoice) recognizing the revenue to the income statement for each consecutive (-) Job Phase completion date . Proceeding to each Job Phase would be stalled if the preceding Job Phase work is incomplete, the next Job Phase deferred deposit invoice is not paid, or the building departments inspection approval is outstanding for the preceding job phase. Include inspection requests in your workflows in advance of each job phase deferral deposit date and preceding job phase end date, if applicable. You may need to change dates of future job phase deferral deposit (start dates) and earned revenue sales invoices (completion date) (along with workflow automations) accordingly. Notes to Project Managers, Accountants, CPA's or other Advisors': Job Phase PO Sale Invoice(s) entered for PO Management from the pending estimate are posted to A/R but are really neither A/R nor Deferred Revenue. From the beginning (contract acknowledgement), goods and services were not yet delivered, and the contract for the revenue, is unearned and not collected. Deferring the successive A/R PO Sales Invoices is beneficial to cash flow projections (future dated P&L and Balance Sheet) along with inventory and project management (and associated accounting collaboration), planning and analysis, and is closely associated with ASC 606 While these instructions are detailed and lengthy, making revenue deferral appear to be complicated, it is not. An entire project can be organized and deferred from beginning to end, by Job Phase, following the process described above. Any accounting or date adjustments can be made, as needed, before and after each Job Phase. Understanding the difference between A/R and Deferred Revenue Accounts receivable (A/R) refers to the money that a company is entitled to receive from its customers for goods or services that have been delivered but not yet paid. Category: It is an asset on the company's balance sheet, representing the amount of money that is expected to be received within a short period (usually 30 to 90 days) from the date of the sale or service. Residential construction typically takes at least 6 months. Deferred revenue , also known as (revenue recognition, unearned revenue or deferred income), represents money (or a contractual obligation) that a company has received in advance for goods or services that it has not yet delivered. Category: It is a liability on the company's balance sheet until the goods or services are provided. Once the products or services are delivered, and each deferred revenue invoice paid, the revenue is recognized to the income statement, and the liability is reduced. See also: Cost-Plus Billing vs Time and Materials Billing See also: Navigating Revenue Recognition: A Brief Guide to ASC 606 Compliance See also: Understanding ASC 606 Revenue Recognition: Five Essential Steps Continue to: (part 2)   Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management Demystifying Revenue Deferral: A Step-by-Step Guide

(part 2) of 2 (part 1) Revenue Deferral: A Step-by-Step Guide for Project Managers *The following instructions are proprietary information, created by bookkeepingbusinessonline.com , and are subject to copyright laws. QuickBooks Online provides the software. I provide expert guidance and support. Contact me  or Schedule a 30-minute fee consultation The recording of raw materials in accounting is crucial for accurate financial reporting, cost analysis, and inventory and project management. Profitability in Manufacturing and Construction Contracting Key Benefits of Proper Raw Material Inventory Recording: Accurate Financial Reporting: Reflects the true cost of production and profitability. Enhanced Planning and Analysis Management: Supports project managers in tracking project-specific costs. Regulatory Compliance: Ensures adherence to GAAP accounting standards using either inventory valuation methods (FIFO, LIFO, or Weighted Average). Improved Decision-Making: Facilitates data-driven decisions through clear visibility into material usage and costs. Follow Consistent Accounting Procedures: Accounting in QuickBooks follows a specific and structured process. As an accrual-based system that complies with GAAP standards, following consistent accounting procedures is imperative. Proper setup of products and services, including standard sales and purchase prices, is essential for calculating COGS when no bill is linked to an invoice. The primary goal of GAAP accounting is to align expenses and bills with the revenue generated from the invoices, creating a clear audit trail to connect all transactions seamlessly and produce accurate financial statements. The accounting process is: Estimate (optional) to PO (optional) to Bill Item or Expense Item (marked billable, attach receipt from your QBO to your custom email) to bank feed (transaction) matched to bill or expense, adding Inventory (quantity) and COGS (amount) to your financial statements. When invoiced (add billable items to the invoice from the suggested transaction pop out drawer). This process Bill + Invoice is critical for correct accounting of Sales, COGS and Inventory, is GAAP Compliant and produces accurate financial statements. My accounting preference is to GAAP accounting (matching purchase with revenue to calculate accurate Gross Profit) following correct workflows . Send bills from vendors or store receipts to custom QBO email, then wait for match in the bank feed (bank transactions). Follow the prompts from the Receipts menu . These bills will remain on A/P until paid, from a bank feed transaction or otherwise. Pre-entered bills will dictate whether the expense/purchase is for: Item dropdown lines  for products and services purchased for resale, typically billable items sold and matched to an invoice. OR Category dropdown lines  for indirect overhead expenses, asset purchases, liability payments, and are typically non-billable. You can enter a bill or expense for COGS directly to the Income Statement, using the category field, for cash accounting transactions only    Shared Documents, maintaining a historical record of Inventory, COGS and Sales. Here are some basic tips: Profitability in Manufacturing and Construction Contracting Enable Markup in Accounts and Settings. Set up products and services Inventory with purchase cost and sales price for raw materials. Inventory and COGS requires cost and purchase price info if no bill is received at invoicing to calculate Gross Profit correctly. ( Average Costing ) Match most recent bill + invoice (specific identification) for current cost and sales price (GAAP accounting) on the Income Statement, regardless of FIFO Inventory Build. Select sales tax for items from products and services. Use Manufacturing or Construction Sales for Chart of Accounts Income and COGS. Be cautious with Excel spreadsheet sync. Avoid overwriting quantities on hand and maintain a BOM production report regularly. Test the project workflow before starting. QuickBooks Online Advanced with Excel Spreadsheet Sync is recommended for large projects. Here is an example of Basic Production Workflow for material inventories recorded in progress: 1. Purchase of Raw Materials Inventory (typically tax exempt requires certificate) Job Purchase Order: When raw materials are purchased, an accounting entry is made using a Purchase Order (from the Pending Estimate). When materials are received, a Bill or Customer: Bill Bundle is created. Bill #1: Date of movement (+) QTY and AMT Raw Materials Received from the Purchase Order to (A/P). Debits:  Raw Materials Inventory. Credits:  Accounts Payable or Cash/Check Bill Payment. 2. Issuance of Raw Materials Inventory for Production (Job Production Order) As raw materials are issued for production, an accounting entry is made. Bill #2: Date of movement (-) QTY and AMT Raw Materials (+) QTY and AMT WIP Issuance Inventory (from copy Bill #1 , change fields (-) and (+) line items, date). Debits:  Work-in-Process Inventory Issuance. Credits:  Raw Materials Inventory. 3. Conversion of Raw Materials Inventory into WIP Conversion (Installation) As work begins, the cost of raw materials is transferred to the Work-in-Process Inventory. Bill #3: Date of movement (-) QTY and AMT WIP Issuance Inventory (+) QTY and AMT WIP Conversion Inventory (from copy Bill #2 , change fields (-) and (+) line items, date). Debits:  Work-in-Process Inventory Conversion. Credits:  WIP Inventory Issuance. 4. Completion of Production and Transfer to Finished Goods (Job Phase Completion) When production is completed, the cost of raw materials and WIP inventories are transferred to finished goods. Bill #4: Date of movement (-) QTY and AMT WIP Conversion Inventory (+) QTY and AMT Finished Goods (from copy Bill #3, change fields (-) and (+) line items, date). Debits:  Finished Goods Inventory. Credits:  WIP Inventory Conversion. 5. Sale of Finished Goods (Ready to Invoice) When finished goods are sold, the cost associated with production is transferred from Inventory to the Cost of Goods Sold (COGM), and revenue is recognized on the Income Statement. Invoice + Bill + sales tax (dated): Debits:  Cost of Goods Sold Manufacturing or COGS Construction. Credits:  Finished Goods Inventory. These accounting entries ensure that the materials are accurately accounted for at various stages of the process. The goal is to match the cost of producing goods with the revenue generated from their sale, providing a clear picture of the profitability of the business operations at each interval or job phase, ensuring GAAP compliant accounting. Effective Inventory and Project Management is the key to accurate reporting. Tracking Inventory Assembly or Job Phase Production: To check the stage of the inventory in production, run a Balance Sheet, double click the inventory asset account (with any subcategories) to view the Bills or customer: Bill Bundles and the date of job progression, along with inventory quantity and/or value. This enables you to determine when the finished goods are ready to be sold on invoice (earned revenue). **One broken in progress (Create an inventory quantity adjustment, from the products and services list for that item) Details of the inventory in stock and movement are also available on other reports such as the Product and Services List Report. The example transaction report below demonstrates the quantity and value movement of inventory as of the report date. (Customize by vendor, customer, product, and more) Note *Customer: Bill Bundles track inventory quantity and date only. Inventory Movement Detail Reporting Manufacturing The Invoice formula for calculating COGS in manufacturing and assemblies: COGM = Direct Materials Used + Direct Labor + Manufacturing Overhead *Don't forget to add sales tax on the Finished Goods Sale (setup by product and service item). The final invoice will contain the costs (bills) linked to the revenue (invoices), aligning with the GAAP matching principle and is consistent with the ASC 606. guidelines Inventory Movement in the Manufacturing Cycle Construction The Invoice, formula for calculating COGS in construction is similar: COGS = Materials Inventory + Billable Labor + Billable Subcontractor Costs + Billable Equipment Costs + Billable Overhead Costs (*Costs that are not directly associated with a specific project should be excluded) The sales invoice(s) will contain the costs (PO + Bill) linked to the revenue, aligning with the GAAP matching principle and is consistent with ASC 606 guidelines . Progress tracking of construction inventory is a necessary activity and can be accomplished using bundles and the zero balance Customer: Bundle Bill process described below. From inventory stock order to job order and job completion, through each job phase of construction ( Preparing the Homesite, Laying the Foundation, Framing the Home, Installing HVAC, Plumbing, and Electrical, adding the Insulation, affixing the drywall, Inserting the Interior and Exterior Finishes to Completing the Final Inspection and Walkthrough) Inventory progress tracking serves as a valuable tool for measuring compliance with AIA, ASC 606, and IFRS 15 Revenue Recognition Standards : For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognized as the performance obligation is satisfied. Construction inventory tracking also provides a good control measure to identify and reduce inventory shrinkage and assist in identifying overspending, ultimately a measure to job cost containment and is compatible with inventory and project management (and associated accounting collaboration), planning and analysis. Conduct a physical inventory count before construction starts and after final walkthrough, or as necessary. Make any adjustments (inventory quantity adjustments to an item) accounting for inventory shrinkage, if required, or to identify inventory that can be returned for vendor credit/refund. You can also utilized standard project progress invoicing against an estimate based on the AIA model of % of project complete. In this case, only the amounts actually retained (deferred revenue deposit) + invoice paid (earned revenue) along with any cost plus or change order invoices, would be recognized on your financial statements. The balance of the estimate remains (non-posting-off the balance sheet and is invoiced in progression) Due to sales tax obligations, job progress reporting purposes, A/R and A/P planning and analysis, I do not recommend the (off balance sheet) % completion method of progress invoicing. With the revenue recognition method , reports are available to demonstrate % completion and can be invoiced accordingly. Some notes about bundles: Bundle Item (Multi-Inventory Items) (Income = Sales for Invoices, and the Purchase/Expense = COGS for Bills/Expenses) Bundles can have up to 50 items (last I checked with QBO and requested an increase). ( The National Association of Home Builders estimates that over 3,000 components are used in constructing a house, in 6-10 Phases. Therefore, a Job Phase may include as many as 6-10 bundles.) There is no additional markup or change in price for bundles. (Bundles aren’t assemblies) Rather the price of a bundle = The total price of all its finished goods  inventory items. (Inventory Lot for instance, a complete kitchen) Bundles can be used for estimating projects and job phases (e.g.: kitchens, bathrooms, et...) by using Job Phase Bundles when estimating. This process is GAAP compliant and conducive to efficient and accurate Inventory and Project Management (and associated accounting collaboration) as well as planning and analysis. (* Optional  Production Workflow for Bundling Multi-Products  Estimates and Customer: Bill Bundles First complete the steps to Revenue Deferral (Review Details of (Part 1): Revenue Deferral ) Begin Inventories in production: Once all inventory items are verified as received and the deferral revenue deposit invoice paid, a Bill is created for inventory tracking. This is the zero balance Customer: Bundle Bill  includes all  product items that were bundled on the estimate (by Job Phase, consistent with the received items from the unbilled charges report. the Customer: Bill Bundles  are NOT connected to the Job PO's). For the zero balance Customer: Bundle Bill  leave the line item amounts as a zero balance  but leave item quantity and check mark as billable. This net zero bill does not increase A/P but will create an open transaction on the Unbilled Charges Report and is used for job progress workflow tracking of inventory quantities, for the particular Job Phase. You can use Spreadsheet Sync to create the C ustomer: Bundle Bill , in comparison to the bill(s) for the job phase on the Bill(s) detail report. Use this zero balance Customer: Bundle Bill  to begin the workflow production process from Raw Materials through to Job Phase Completion. This will allow you to monitor the bundle inventory movement from start to finish. Track the job progress workflow according to the Project Managers report of progress (along with any inventory debits/credits (Inventory Adjustments) reported during production. When all Customer: Bill bundles  of a job phase have reached completion, and the finished goods items are ready to be invoiced, the original PO sales invoice (earned revenue)  can be voided and replaced with a new sales invoice (earned revenue) , for the same or actual(s) by job phase end date. Select > Create Invoice from the approved estimate , adding the actual inventory items received and open on the unbilled charges report to the new invoice. (if the job is a cost-plus billing, the mark-up line amount(s) will be separate line items on the Income Statement. This is assuming the quantities and amounts of the approved estimated materials are identical to the billed amounts and are consistent with the deferred items revenue deposit invoice. If not, a change order would be necessary or otherwise expect that the profit margin at the end of the project will be reduced by higher actual costs than were estimated and invoiced. The new sales invoice (earned income)  will clear the unbilled charges report, track amounts and quantities invoiced against the approved estimate and any remaining unbilled amounts (evidenced from the Estimates & Progress Invoicing Summary by Customer or Project report or Estimates vs Actuals Report) It will also reduce inventory quantities on hand, while not affecting A/P (plan payments to A/P after the deferral revenue deposit is received, to avoid late fees and take advantage of vendor discounts). Your Income Statement will now reflect the earned revenue and COGS, at the appropriate time. Job Phase-GAAP compliant accounting complete! The zero balance Customer: Bundle Bills  can be DELETED at the end of production for each Job Phase.  Before job sign off of each Job Phase, use the zero balance Customer: Bundle Bill(s) and a transaction detail by account report, filtered to the customer, or sales of inventory report, or in spreadsheet sync the bill details report 1.)  to make comparisons of PO's, bill(s), and invoice(s) comparing Inventory from the approved estimate by Job Phase, and 2.)  to reconcile job inventory received, and invoiced with quantity on hand or, negative quantities on hand from the products and services list (BOM). This process will maintain inventory asset integrity on your balance sheet and substantiate PO + Bill + Invoice amounts (verifying your Income Statement). Any final billings to adjust for inventory discrepancies can be presented as a Change Orders and issued prior to Sign off. The same comparisons apply to Project Substantial Completion, if appropriate. The Sales Price quoted on an Estimate should be consistent with the products and services of the invoiced job phase bundle(s) and include markup. (best to try and maintain bundle pricing for all customers or create customer specific bundles as is described by the above process) Change orders would be used for any deviations as a result of an increase in material costs, or unbilled costs, et... Run a bill of materials (BOM) production report, generated from the products and services list reports. Produce these reports periodically throughout the job and file to My Accountant > Shared Documents. This will maintain a complete historical record of the project through each job phase. Approved Estimates used for invoicing purposes will have a line or field representing the item and amounts invoiced, remaining to be invoiced, or marked fully converted. The Estimates & Progress Invoicing Summary by Customer will track the open balance (filtered by class, location and customer job) Use this information to determine if there are unbilled items. When the project is concluded there should be no balance left on the approved estimate. (part 1) Demystifying Revenue Deferral: A Step-by-Step Guide for Project Managers See Also: Navigating Sales Tax in the Manufacturing Industry: Challenges and Strategies See Also: Pricing Strategies for your Markup and Margins    See Also: APPS Integrate with QuickBooks Online See Also: FIFO vs. LIFO vs. Average Costing Inventory Management See Also: Cost Plus Billing vs Time and Materials Milestone Billing See Also: https://www.irs.gov/pub/irs-utl/constructionindustry_atg.pdf Construction, Manufacturing and Assemblies Raw Materials COGM and COGS

As an advocate for innovation and efficiency in accounting practices, I've come to question the over reliance on journal entry accounting for recording sales and expense transactions. While journal entries have long been a staple of financial reporting, I believe that they may not always be the most effective or practical approach, especially in today's rapidly evolving business landscape. Here are some reasons why I'm opposed to journal entry accounting for sales and expense transactions: Lack of Real-Time Visibility Journal entry accounting often involves manual data entry and reconciliation processes, which can be time-consuming and prone to errors. As a result, financial information may not always be up-to-date or readily available for decision-making purposes and historical documentation. In today's fast-paced business environment, real-time visibility into sales and expenses is essential for agile decision-making and strategic planning and legal liability protections. In particular, sales, payroll, A/R and A/P require documentation should a need arise to document sales taxes, income taxes, employee wage, payroll taxes and purchase or sales costs. In particular, it is not possible to add the billable expense feature to a journal entry and customer and vendor naming conventions are distorted. Complexity and Inefficiency Journal entry accounting can be complex, especially for businesses with multiple revenue streams, expense categories, and accounting standards to comply with. Maintaining accurate records and ensuring proper classification of transactions requires meticulous attention to detail and extensive training. This complexity can lead to inefficiencies and administrative burdens, diverting resources away from value-added activities. Risk of Errors and Fraud Manual data entry and manipulation of journal entries increase the risk of errors and fraudulent activities. Without proper controls and oversight, unauthorized or inaccurate journal entries can go undetected, compromising the integrity of financial reporting and exposing the business to regulatory scrutiny and reputational damage. Automating sales and expense transactions can help mitigate these risks by reducing human intervention and enhancing data accuracy and integrity. Limited Analytical Insights Journal entry accounting focuses primarily on recording transactions rather than analyzing and interpreting financial data. While journal entries provide a historical record of sales and expenses, they may not offer meaningful insights into trends, patterns, or performance indicator details. Businesses need robust reporting and analytics capabilities to extract actionable insights from their financial data and drive informed decision-making. Here are some common scenarios where journal entries are appropriately used in accounting: Adjusting Entries : At the end of an accounting period, adjusting entries are made to ensure that revenues and expenses are recognized in the correct period. This includes entries to record accrued expenses, prepaid expenses, accrued revenues, and unearned revenues. Depreciation : Journal entries are used to record the depreciation expense for long-term assets such as buildings, machinery, and equipment. Depreciation entries allocate the cost of these assets over their useful lives to match their expense with the revenue they help generate. Inventory Transactions : Journal entries are used to record inventory adjustments such as inventory shrinkage due to theft or loss. Stock Transactions: When company stock is issued, or repurchased. Asset and Equity: Dividend payouts, and Reinvested Capital from Retained Earnings. Probable Contingencies : Used to record contingent liabilities. Conclusion while journal entry accounting has served as a foundational practice in financial reporting, its limitations in today's dynamic business environment call for a reevaluation of traditional approaches. By embracing innovation and leveraging technology, businesses can unlock new efficiencies, reduce risks, and gain deeper insights into their sales and expense transactions, ultimately driving sustainable growth and success. Each document (Estimate, PO, Bill, Invoice, Credits and Refund, et..) transaction in QuickBooks Online is backed by a transaction journal for T account analysis. Mitigating the use of journal entry accounting should be a top priority for your firm. Consider utilizing sale and expense documents as net zero transactions. Double entry accounting is achieved by utilizing (-) credit and (+) debit entries on these forms. QuickBooks Online provides the software. I provide expert guidance and support. Contact me  or Schedule a 30 minute free consultation See also: Entering Payroll Provider Transactions using Spreadsheet Sync Exploring Alternatives: Journal Entry Accounting

Retirement Plans for Businesses: A Smart Investment in the Future   Planning for the future is crucial for business owners, not just for themselves but for their employees as well. Offering retirement plans can be a significant benefit that attracts and retains top talent while ensuring financial security for everyone involved. Here’s a quick overview of popular retirement plan options for businesses.   Why Retirement Plans Matter for Businesses   Retirement plans aren’t just an employee perk; they’re also a strategic move for businesses. Offering a retirement plan helps you attract and retain skilled employees, boosting overall job satisfaction and loyalty. Additionally, employer contributions to retirement plans are typically tax-deductible, reducing the company’s tax burden. Popular Retirement Plan Options 1. 401(k) Defined Contribution Plans 401(k) plans are one of the most common retirement options for businesses. Employees can contribute a portion of their salary pre-tax, and employers often match contributions up to a certain percentage. An S-Corp business can contribute up to 25% of your wages but the total contribution (employer and employee) cannot exceed $69,000 ($76,500 if you are 50 or older).  These plans are highly flexible, allowing both employers and employees to contribute a significant amount toward retirement savings. Employers may deduct contributions on their income tax return when employer sponsored. A pre-tax 401(k) —also called a traditional 401(k) —is a retirement savings account where your contributions are made before  income taxes are taken out. That means you’re lowering your taxable income now and deferring taxes until retirement. Contributions come straight from your paycheck  before federal income tax is applied. Your money grows tax-deferred , meaning you don’t pay taxes on investment gains until you withdraw. When you retire and start taking distributions, those withdrawals are taxed as ordinary income . 2. Simplified Employee Pension (SEP) Plans SEP plans are ideal for small businesses or self-employed individuals. They are easy to set up and maintain, with contributions being tax-deductible. Employers contribute to each employee's SEP IRA, but employees cannot contribute themselves. The employer contributes up to 25% of your salary (but not more than $69,000).  SEPs are beneficial due to their low administrative costs and high contribution limits AND the company contributions are a tax deductible expense. 3. Savings Incentive Match Plan for Employees (SIMPLE IRA) A SIMPLE IRA is another option for small businesses with fewer than 100 employees. These plans are straightforward to administer and require mandatory employer contributions, either through matching employee contributions or a fixed contribution percentage. The employee can fund up to $16,000 for 2024 ($19,500 if 50 or older). Your business can match up to 3% of your contribution as an employee. Employers must either match employee contributions up to 3% or make a 2% non-elective contributions. Like a 401(k), employees can contribute a portion of their salary, making it a flexible option for both parties. If the organization is sponsoring the plan the company contribution is tax deductible. 4. Profit-Sharing Plans Profit-sharing plans allow employers to share a portion of the company’s profits with employees. Contributions are made solely by the employer and can vary year by year, offering flexibility depending on the company's financial performance. This type of plan is an excellent option for businesses that experience fluctuating revenues. 5. Defined Benefit Plan (Pensions) Defined benefit plans are employer-sponsored retirement plan where the benefits that an employee will receive upon retirement are predetermined and based on a specific formula. This formula typically factors in the employee's salary history, years of service, and age.  Portability can be an issue if an employee changes jobs, as these plans are often tied to long-term employment with a single company. Key Features of a Defined Benefit Plan: Guaranteed Benefits : Unlike defined contribution plans (e.g., 401(k)), where the retirement benefits depend on the investment performance, a defined benefit plan promises a specific payout at retirement, which is usually a fixed monthly amount. Employer-Managed : The employer is responsible for contributing to the plan and managing the plan’s investments. They bear the investment risk and are required to ensure that the plan has enough funds to meet future obligations. Funding and Contributions : Employers usually fund defined benefit plans, though some plans allow employee contributions. These contributions are determined by actuarial calculations, ensuring there’s enough money to pay for future benefits. Lifetime Income : Often, the benefit is paid out as a lifetime annuity, which means the employee will receive regular payments for life. Some plans offer lump-sum payouts or allow employees to choose between different payout options. Tax Advantages : Contributions to defined benefit plans (ie: an employer sponsored retirement plan that promises a specific, predetermine benefit to employees upon retirement-usually in the form of monthly payments for life) are tax-deferred, meaning taxes on the money are delayed until it’s withdrawn during retirement. Additionally, employers can deduct contributions from their taxable income. Choosing the Right Plan Selecting the right retirement plan depends on the size of your business, the level of administrative effort you’re willing to take on, and your financial goals. A 401(k) might be ideal for a growing company, while a SEP or SIMPLE IRA could be perfect for small businesses or sole proprietors. Profit-sharing plans offer flexibility but require careful financial planning. Watch for These Hidden fees  like 12b-1 marketing charges or high expense ratios in mutual funds can quietly reduce returns If you're self-employed and sponsor a Solo 401(k), you can deduct plan fees  as a business expense Fees are typically paid from pre-tax dollars  within the employees account, so they reduce the account balance but don’t trigger additional tax. May be charged as a flat fee or % of asset Employees cannot deduct 401(k) fees (unless utilizing specific services ie: loans)  on their federal tax returns during 2018–2025 due to the Tax Cuts and Jobs Act. Employers however can deduct fees as a business expense. Fee disclosures  are required annually—check your plan’s prospectus for line items like “Total Asset-Based Fees” or “Expense Ratios” Conclusion Offering a retirement plan is a powerful way to support your employees’ financial futures while enhancing your business's competitive edge. Consult with a financial advisor or retirement plan specialist to find the best solution for your company’s needs. By investing in a retirement plan, you’re not just helping employees secure their future—you’re also securing the future of your business See Also: FAQs about Retirement Plans and ERISA See Also: https://www.dol.gov/general/topic/retirement See Also: Mandatory Retirement Benefits See Also:   Savers Credit  (IRA) See Also:  ABLE See Also:  401K See Also: Retirement plans | Internal Revenue Service See Also: Retirement plan FAQs regarding contributions - Are retirement plan contributions subject to withholding for FICA, Medicare or federal income tax? See Also: Employer's Tax Guide to Fringe Benefits https://www.irs.gov/pub/irs-pdf/p15b.pdf https://www.irs.gov/pub/irs-pdf/p5137.pdf Retirement Plans for Businesses: A Smart Investment in the Future

Managing finances can be a daunting task for many individuals and businesses. Keeping track of expenses, income, taxes, and payroll requires time, accuracy, and expertise. Fortunately, technology has made it easier to handle these tasks efficiently. Online accounting help offers a modern solution that simplifies financial management and saves valuable time. This blog post explores how you can streamline your finances using online accounting tools and services. Virtual Accounting Services Online Why You Need Online Accounting Traditional accounting methods often involve piles of paperwork, manual calculations, and frequent visits to accountants. This approach can lead to errors, missed deadlines, and unnecessary stress. Online accounting help changes the game by providing: Real-time financial tracking : Access your financial data anytime, anywhere. Automated calculations : Reduce human error with software that handles complex computations. Cost savings : Lower expenses compared to hiring full-time accountants. Improved organization : Keep all your financial documents in one secure place. Faster decision-making : Get instant reports to guide your business strategies. For example, a small business owner can use online accounting software to generate invoices, track payments, and prepare tax documents without needing extensive accounting knowledge. This frees up time to focus on growing the business. Online accounting How Online Accounting Help Enhances Financial Management Online accounting platforms offer a variety of features designed to make financial management easier and more effective. Here are some key benefits: 1. Simplified Bookkeeping Choosing the right software for your Virtual Accounting Bookkeeping is the foundation of good financial management. Online tools automate data entry by syncing with bank accounts and credit cards. This means transactions are recorded automatically, reducing manual work and errors. Choosing the right software for your Virtual Accounting 2. Accurate Tax Preparation Tax season can be stressful, but online accounting help simplifies the process. Many platforms provide tax calculators and generate reports that comply with tax regulations. This ensures you file accurate returns and avoid penalties. 3. Expense Tracking and Budgeting Keeping track of expenses is crucial for maintaining profitability. Online accounting software categorizes expenses and helps create budgets. You can set spending limits and receive alerts when you approach them. 4. Payroll Management For businesses with employees, payroll can be complex. Online accounting platforms often include payroll features that calculate wages, withhold taxes, and generate pay stubs. This reduces administrative burden and ensures compliance with labor laws. 5. Financial Reporting and Analysis Understanding your financial health is easier with detailed reports. Online accounting tools generate profit and loss statements, balance sheets, and cash flow reports. These insights help you make informed decisions. What is the Best Online Accounting Platform? Choosing the right online accounting platform depends on your specific needs, budget, and technical comfort level. Here are some popular options to consider: QuickBooks Online QuickBooks is widely used by small to medium-sized businesses. It offers comprehensive features including invoicing, expense tracking, payroll, and tax preparation, ecommerce apps, sales tax integration, income tax and tax planning with a business performance insight dashboard and connects to over 750 apps to tailor the platform to a specific business need.. Its user-friendly interface and extensive support make it a top choice. Xero Xero is known for its clean design and strong integration capabilities. It supports multiple currencies, making it ideal for businesses with international clients. Xero also offers real-time collaboration with accountants. FreshBooks FreshBooks focuses on invoicing and time tracking, making it perfect for freelancers and service-based businesses. It provides easy-to-use tools for managing projects and client billing. Wave Wave is a free accounting software that covers basic bookkeeping, invoicing, and receipt scanning. It’s suitable for startups and small businesses with simple financial needs. Zoho Books Zoho Books offers a wide range of features including inventory management and project tracking. It integrates well with other Zoho business applications, providing a seamless workflow. Patriot Accounting and Payroll An affordable, everything you need for running payroll and managing the books. Small business friendly. Netsuite An American cloud-based enterprise resource planning (ERP) software company that provides products and services tailored for small and medium-sized businesses (SMBs) including accounting and financial management, customer relationship management (CRM), inventory management, human capital management, payroll, procurement, project management and e-commerce software. Sage A British multinational enterprise software company based in Newcastle upon Tyne, England. As of 2017. In the 2020s Sage began to integrate artificial intelligence into more of their products. In 2022 Sage launched a carbon accounting product, Sage Earth. Sage specializes in real estate and construction and the non profit sectors. Microsoft Dynamics Finance 365 Integrate data from various departments and systems into a centralized hub for full transparency. Enhance agility with financial planning, budgeting, and forecasting using Copilot within business performance management capabilities. Proactively manage liquidity with predictive analytics and cash-flow forecasting. Optimize monetization with AI-powered billing, accounts receivable (AR), collections, and more. Specialty Software: Studio Designer For interior designers. Powerful project management, procurement, client portals, calendar management with advanced reporting. (also: https://mydomastudio.com/ ) Stessa For Property Management. Track income and expenses seamlessly, draft leases, screen tenants and collect rent online, simplify tax time, and use real-time dashboards to manage smarter and faster. Includes resident log in. Single Entry cash accounting only. Yardi Complete Real Estate and Property Management software since 1984 More in depth information is available: Comparison of Accounting Software When selecting a platform, consider factors such as: Ease of use Feature set Pricing plans Customer support Integration with other tools Accounting Software How to Get Started with Virtual Accounting Services If you want to take your financial management to the next level, consider using our virtual accounting services . These services combine the power of online accounting software with professional expertise. Here’s how to get started: Step 1: Assess Your Needs Identify the financial tasks you want to outsource or automate. This could include bookkeeping, payroll, tax filing, or financial reporting, or more comprehensive service . Step 2: Choose a Service Provider Look for virtual accounting providers with good reviews, transparent pricing, and experience.. Verify their credentials and data security measures. Step 3: Set Up Your Accounts Work with the dedicated virtual accountant to connect your bank accounts, credit cards, and other financial data sources. This ensures seamless data flow. Step 4: Customize Your Services Decide on the level of support you need. We provide full-service accounting, or assistance with specific tasks. Step 5: Monitor and Communicate Regularly review financial reports and communicate with your virtual accountant. This helps you stay informed and make timely decisions. Using Bookkeeping Business Online services can save you time, reduce errors, and provide expert insights without the cost of hiring in-house staff. Financial Statements Tips for Maximizing the Benefits of Online Accounting Help To get the most out of online accounting tools and services, keep these tips in mind: Keep your data organized : Regularly update and categorize transactions. Use mobile apps : Manage finances on the go with smartphone apps. Backup your data : Ensure your financial information is securely backed up. Stay informed about updates : Software providers often release new features and security patches. Train your team : If you have employees, make sure they understand how to use the accounting tools. Review reports regularly : Use financial reports to track progress and identify issues early. Integrate with other tools : Connect your accounting software with CRM, inventory, or payroll systems for a streamlined workflow. By following these recommendations, you can enhance accuracy, save time, and improve your overall financial management. Streamlining your finances with online accounting help is a smart move in today’s fast-paced world. Whether you manage a small business or your personal finances, leveraging technology and professional services can simplify complex tasks. Explore the options available and take control of your financial future today. Get Started Today! Bookkeeping Business Online

In the ever-evolving landscape of coin and cryptocurrencies, accounting practices are facing unprecedented challenges. As the crypto space continues to innovate at a rapid pace, conventional accounting standards are being established. This guide aims to illuminate the complexities of crypto asset accounting while emphasizing the importance of a principles-based approach. Exploring the nuance d differences in accounting for coin and crypto assets under International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP), we delve into key considerations such as initial recognition, subsequent measurement, fair value assessment, tax implications, and disclosure requirements. The Evolving Coin and Crypto Asset Accounting Landscape: The dynamic nature of coin and cryptocurrencies presents a unique challenge to traditional accounting standards, prompting a careful examination of existing principles to ensure accurate and transparent financial reporting. Key Standard Setters: IASB and FASB: At the forefront of shaping accounting standards are the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). Formulating International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP) respectively, these entities play a pivotal role in determining how businesses account for coin and crypto assets. It's crucial to recognize that while both aim to enhance financial transparency, the application of accounting principles may vary slightly under IFRS and US GAAP, depending on the jurisdiction of the entity. Accounting Considerations for Coin and Crypto Assets: This guide delves into critical aspects of coin and crypto asset accounting, including: Initial Recognition and Subsequent Measurement: Distinguishing the treatment of coin and crypto assets under IFRS and US GAAP, where IFRS allows for accounting under Intangibles or Inventory, while US GAAP restricts crypto assets to Intangibles.  IFRS-IAS 2 ‘Inventory’, IFRS - IAS 38 ‘Intangible Assets’, US GAAP - ASC 350 ‘Intangibles, Goodwill and other’ Fair Value Measurement: Exploring the definition of fair value under both IFRS 13 and US GAAP ASC 820, the fair value is “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”.  With different exchanges quoting different prices, it is important to maintain a consistent approach with regards to pricing the source of your coin and crypto assets where the greatest volume is being traded.  Additionally, because markets never close, it is advisable to use the same time for pricing assets. Tax Considerations: Calculating Capital Gains/Losses: Calculating capital gains or losses by various methods, such as FIFO, WAC, LIFO, and HIFO, to determine cost basis as standard. Finance managers monitor digital asset unrealized gains/losses for informed investments and risk management. Calculating capital gains or losses is crucial for tax considerations, allowing the offset of tax liabilities with capital losses. Realized gains, determined by subtracting the acquisition cost from the fair market value at sale, are typically relevant for tax reporting. Use Form 1099-B to the IRS when a customer has earned $600 or more of coin and cryptocurrency income. It is likely that all exchanges will be required to send Form 1099-DA starting in 2026. Form 8949 is the tax form that is used to report the sales and disposals of capital assets, including coin and cryptocurrency. Not every coin and cryptocurrency transaction are subject to tax! You do not trigger a taxable event when you: Hold coin and cryptocurrency Buy coin and cryptocurrency with fiat currency and hold it Transfer coin and crypto from one wallet you own to another wallet you own Use coin and cryptocurrency as collateral for a loan IRC Section 6050I requires that any person engaged in a trade or business that receives cash in excess of $10,000 in a single transaction or in related transactions must file Form 8300 , Report of Cash Payments Over $10,000 Received in a Trade or Business The IRS can track Coin and Crypto transactions using Chain analysis contractors who analyze the blockchain and crack down on tax fraud. Accounting Methods: In the app market you can use the Gilded app . This app will Sync Bitcoin, Ethereum, and coin and cryptocurrency transactions (Income, Expenses, Fees) to QuickBooks Online and is SOC II compliant ( SOC 2 Type 2 Compliance: Essential Guide for Organization ) . Coin and Crypto Tax Ledger is also available to track coin and crypto, Defi, NFT transactions, integrating with several tax reporting software manufacturers. These transactions will be in the form of Journal Entries which, in my opinion provide very little useful data to the Coin and Crypto holders. Before Proceeding Please read: The Importance of Establishing and Following Consistent Accounting Procedures: Fraud Prevention Otherwise, or in addition, like typical banking, you can (1) Set up a Coin or Crypto-bank account as a bank asset to track coin or crypto-value. Bank  acco unts (exchanges) like checking, and wallet income (cash/coin on hand) like savings or petty cash, on the balance sheet. Use location distinction on transactions to specify the specific exchange/wallet and class to distinguish coin or crypto type. **currently QuickBooks Online only supports Bitcoin xPub via Blockpath app (2) Intangible inventory product and service items are setup as current assets, to track coin and crypto quantities, mapped to a Chart of Accounts Income Coin or Crypto Asset and COGS Coin or Crypto. (3) Create estimates, purchase orders, bills (cash, or A/P purchase, yielding/staking-Defi liability) with corresponding bill payment, along with invoices (cash or A/R inventory asset staking/yielding-Defi lending) with corresponding invoice payments to track income, deposits, expenses, withdrawals to fiat (cash on hand wallet), transfers and exchange trades. QuickBooks Online will track the coin and crypto-inventory COGS and value on a FIFO valuation basis on your Income Statement when coin inventory quantities move, by bill or invoice (buy/sell). (4) Reconcile the asset coin or crypto-bank account on the "measurement date & time" using the market capitalization rate (or lesser-known FD Market Rate) to determine fair value reconciliation beginning and ending balance. After entering any fee expenses, changes in value will be recognized as: (Bank Value Gain/Loss RECON ADJ to Income Statement Coin & Crypto Gain/Loss) Note: You can use Excel Spreadsheets (Spreadsheet Sync) to track market capitalization rates beginning and ending balances on "measurement dates" and later use this information to chart changes in the market capitalization rates of your coin & crypto, providing you with valuable data analysis. This method of accounting is transparent, provides valuable reporting insight and follows the basics of financial accounting principles. *If the coin or crypto platform has Excel data for your coin or crypto, with your balances, transactions, fees and ongoing capital gains earnings (ie..interest earned), the information can be imported to the QuickBooks Online Coin or Crypto bank account. Item Setup: Intangible Inventory Asset set up in Products and Services, for each Crypto-Coin would follow these rules: Intangible Inventory (Inventory Asset=Intangible Coin or Crypto Name, Income=Sale of Coin or Crypto Income, Expenses=Cost of Goods Sold: Coin or Crypto) Cost basis is required for Income Statement COGS Calculations. Use Excel Spreadsheet Sync to update most current price and cost (fair value) be sure you do not overwrite the quantities on hand . (For Crypto: use measurement date and time) Update frequently, or as required for reconciliation and Income Statement reporting. COGS will calculate from the Products and Services list "first in purchase cost" if a new bill with the latest cost (paid or unpaid) is not entered in the system and attached to an invoice. Sell Transactions: Customer/Client: Use platforms such as Coinbase, Cashapp, Biance, FTX When to Sell? Enter an Invoice to include a line ITEM for Intangible Inventory coin or crypto Name (Income=Sale of Coin or Crypto Income) and Category line item for additional fees (can be setup in Products and Services (COS). Use for Crypto inventory asset credit (reduce inventory, increase COGS) disposition, ( staking/yielding-Defi lending) Class will represent the Coin or Crypto Name. Reports can be filtered to show Class, Customer and Location. NEXT > Receive payment and deposit to the Coin or Crypto Wallet (Cash/Coin on Hand), Crypto Bank Account, Cash, Other Balance Sheet Account or Fiat Currency. Two ways to Request Exchange Payment for Billable Expenses (Coin or Crypto): (1) Invoice directly from an estimate, with already marked up items you are requesting payment or exchange for. If this is the case, when the billable Coin or Crypto is a buy transaction, the field for the client is entered on the bill or expense as they appear in the bank feed, but they are NOT marked up, only marked billable. These will then appear on the Unbilled Charges to be invoiced. When earned revenue is realized directly from the estimate/invoice, the markup is already calculated and the difference on the Income Statement is the estimated Sale of Coin or Crypto Income  and associated Cost of Goods Sold: Coin or Crypto = Gross Profit/Net Income. (2) If you are entering invoices directly from a bill or expense, marked billable and marked up to a client, the invoice will reflect on the Income Statement as Sale of Coin or Crypto Income and associated Cost of Goods Sold: Coin or Crypto , with markup as a separate income line item. This process creates a GAAP compliant transaction. You can also invoice with other bills and expenses as needed. If time is billable, make timesheets billable so you can add them to invoices. Turn this feature, and the Markup feature on in Accounts and Settings. Consult local jurisdictions for sales or other tax requirements. NEXT > Receive payment to the Coin or Crypto Wallet (Cash/Coin on Hand), Crypto Bank Account, Cash, Other Balance Sheet Account or Fiat Currency. Buy Transactions: Coin or Crypto Bills and Expenses: Payee/Vendor: Intangible Inventory 'Coin or Crypto Name' Buy Price: Establishes Fair Market Value on buy date of the Coin or Crypto Inventory Item Enter fees as an expense category line item mapped to the Income Statement (or set up a product and service item) Enter Coin or Crypto Inventory as the item: Intangible Inventory Coin or Crypto Name NEXT > Pay Crypto Bills and Expenses with the Crypto Wallet (Cash/Coin On Hand), Crypto Bank Account, Cash, Other Account or Fiat Currency. QuickBooks Online provides multi-currency in accounts and settings under multicurrency. Currently QuickBooks Online only supports Bitcoin xPub via Blockpath app Obtaining Clean Data for Cost Basis Calculations: Highlighting the importance of reviewing transaction fees, gas fees and timestamping of transactions when maintaining a ledger of digital asset transactions.    Fees Imposed by centralized wallets are: Fees Imposed by centralized wallets Default Time Zones for popular block explorers and centralized exchanges: Default Time Zones for popular block explorers and centralized exchanges: The process and data format may vary. Always refer to the platform's documentation for accurate information. Disclosure for Coin and Crypto Assets: On December 13, 2023, the FASB issued ASU 2023-08 Conclusion: Given that existing standards require a principles-based approach, it is crucial to stay informed about evolving regulations and emerging best practices for accurate and transparent financial reporting. Whether you're a bookkeeper, accountant, investor, or financial professional, navigating the dynamic terrain of coin and crypto assets accounting requires a proactive and informed approach, ensuring alignment with jurisdiction-specific guidelines. As the coin and crypto industry continues to evolve, staying abreast of regulatory changes remains paramount for individuals and organizations to uphold the highest standards of financial reporting. What You Actually Get When You Buy Bitcoin, Steven Ehrlich Forbes Staff, Director of FDA; Editor, Forbes Crypto Asset & Blockchain Advisor. See also: Investopedia Simulator Crypto See also: Forbes Digital Assets See Also: Warren Buffett Revealed To Be Quietly Making Bank From Bitcoin And Crypto Amid Price Swings See also: JP Morgan Chase Opinion Market capitalization is a measure of the total value of a coin and cryptocurrency in circulation and is calculated by multiplying the current market price per unit of the coin and cryptocurrency by the total circulating supply. The formula for calculating market capitalization is: Market Capitalization=Current Price × Circulating Supply Here's a breakdown of the components: Current Price:  This is the current market price of one unit of the coin or cryptocurrency, usually quoted in a specific fiat currency like US dollars (USD) or Bitcoin (BTC). Circulating Supply:  This represents the total number of units of the coin and cryptocurrency that are currently available and circulating in the market. It excludes tokens that are locked, reserved, or not yet mined. What is a good market cap in coin and crypto? Large-Cap: Coin and Cryptocurrencies with a market cap above $10 billion . For example, Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and USDC. They are considered more stable. Mid-Cap: Coin and Cryptocurrencies with a market cap between $1 billion and $10 billion See also: IRS: Crypto Currency Income Tax Question See also: Virtual Currency Tax Compliance Enforcement Can Be Improved *If you have any questions or concerns about this method of coin and crypto accounting don't hesitate to Contact Bookkeeping Business Online

When it comes to billing for services, particularly in industries like construction, consulting, and IT, two common methods are cost-plus billing and time and materials billing. Both have their advantages and disadvantages, and choosing the right method can significantly impact project management, client relationships, and financial outcomes. In this post, we'll explore the key differences between these two billing methods to help you make an informed decision. Cost-Plus Billing Definition: Cost-plus billing, also known as cost-plus pricing, involves charging the client for the actual cost of the project plus a fixed percentage or fee as profit. This method ensures that all expenses are covered, and the contractor or service provider earns a predetermined markup percentage for all materials and labor. as they are expended. Components: Direct Costs:  These include labor, materials, and equipment directly used in the project. (COGS) Indirect Costs:  These are overhead expenses that are not directly tied to the project but are necessary for its completion, such as office rent and administrative salaries and are typically covered by the predetermined percentage or fixed fee. Profit Margin:  A predetermined percentage or fixed fee is added to the actual bills and expenses as they are incurred to ensure profitability. Advantages: Transparency:  Clients can see a detailed breakdown of costs, which can build trust. Flexibility:  Allows for adjustments in scope and changes during the project without renegotiating the entire contract. Each expense is directly marked up as the project progresses. Reduced Risk:  Protects contractors from unforeseen expenses, or an increase in material costs over and above the original estimate, as all costs are reimbursed by the client. Disadvantages: Complexity:  Requires detailed tracking and documentation of all billable costs and income, which can be time-consuming. Receipts can now be uploaded directly to the accounting software, easing this burden for contractors. Potential for Cost Overruns:  Clients may be concerned about the final cost being higher than expected due to change orders or inefficiencies. Not to exceed clauses are common in these forms of contracts. Time and Materials Billing (Milestone Billing) Definition: Time and materials (T&M) billing involve charging the client based on the time spent on the project and the materials used plus a predetermine profit margin . Components: Labor Costs:  Charges based on the hourly rates of the workers or professionals involved plus predetermined profit/markup, usually a percentage of the total job Material Costs:  The actual cost of materials used in the project plus predetermined profit/markup, usually a percentage of the total job. Additional Expenses:  Any other costs incurred during the project (direct or indirect expenses), or subcontractor fees plus profit/markup, usually a percentage of the total job. Advantages: Simplicity:  Easy to understand and implement, especially for smaller projects or those with clear project scopes. Flexibility:  Allows for adjustments in project scope and requirements without renegotiating the contract. *Use Change Orders Transparency:  Clients can see exactly what they are paying for in terms of hours worked and materials used. The total contract amount is estimated and approved prior to the start of a project. Automation: The project accounting and scheduling can be automated according to an approved estimate of stages or job phases (e.g., foundation, framing, interior finish), and payment is released upon the completion and approval of each stage or job phase.  Cash flow is more predictable. Pro's and Con's: Pros:  Provides clear, specific milestones and detailed contract language, aligning payments with project job phases. Easing the burden of cash flow inefficiencies. Cons:   May not be suitable for projects with uncertain scope or frequent changes . Choosing the Right Billing Method: Cost-Plus Billing vs. Time and Materials Billing The choice between cost-plus billing and time and materials billing largely depends on the nature of the project, the client's preferences, and the contractor's business model. Here are some considerations to help you decide: Project Scope:  For projects with an uncertain or evolving scopes, cost-plus billing may allow more flexibility . For projects with a well-defined scope and clear cost estimate time and materials billing can provide the necessary conformity. Client Relationship:  Consider the level of trust and communication with the client. Cost-plus billing requires detailed cost tracking and reporting, which may be more transparent for some clients but a burden to the contractor when the payment of invoices is delayed. T&M billing is straightforward and may be preferred by clients for its simplicity and pre-communicated job details. Risk Management:  Assess the potential risks and uncertainties of the project. Cost-plus billing can mitigate financial risks for the contractor while increasing the risk and uncertainty for the client. T&M billing can offer more predictable planning, and budget control for the client's and contactor's. A brief example: Time and Materials:  You agree to pay for the parts and materials and the contractor's hourly rate, plus a flat fee for overhead, usually expressed as a percentage margin of the total contract. Cost-Plus:  You pay the contractors hourly rate and the cost of the parts and materials plus an agreed upon markup percentage as expended for the project. Conclusion Both cost-plus billing and time and materials billing have their unique advantages and challenges. By understanding the differences and carefully considering the nature of your project, you can choose the billing method that best suits your needs and ensures a successful outcome. Clear communication with your client and detailed documentation of costs and time will always be essential, regardless of the billing method chosen. Also See: Revenue Deferral (Revenue Recognition): A Step-by-Step Guide for Project Managers Cost-Plus Billing vs. Time and Materials Billing: Key Differences

Efficient financial management is a cornerstone of business success, and one essential metric that aids in evaluating operational efficiency is the Operating Ratio (OPEX). This key performance indicator provides valuable insights into how well a company is managing its operating expenses relative to its net sales. Let's delve into the definition of Operating Ratio and the formula used for its calculation. Understanding Operating Ratio (OPEX): Operating Ratio, often referred to as OPEX, is a financial metric that measures the efficiency of a company's operations by analyzing the proportion of operating expenses in relation to its net sales. Operating Expenses (OPEX) refer to the costs directly tied to the day-to-day operations of a business. These are the recurring expenses necessary to keep the business running smoothly. Calculation Formula: The Operating Ratio is calculated using the following formula: If you are using excel to calculate OPEX, use the format cell as a percent feature rather than the *100 Operating Ratio (OPEX) = (operating expenses)/ ( net  income) * 100 = OPEX ratio meaning the company spends X amount of its net income (net profit) on its total operating expenses. See an example of Samsung Electronics Co. LTD vs Apple Inc. Some companies may calculate OPEX from Gross Income ( as does QBO ) resulting in lower ratios and can be compared to the amount a company spends to produce Gross Sales Revenue (Total Income) . It's important to determine the method a company uses to calculate OPEX when determining ROI As an Example of the difference in calculations: Calculating OPEX Either way these numbers can be used to calculate Markup % from your COGS and will assist in managing your taxable Net Profits Calculating Markup of COGS from OPEX Breaking Down the Formula: Operating or Indirect Expenses: These include costs directly associated with the day-to-day operations of the business, such as rent, utilities, salaries, research and development, et.... (calculate less depreciation) COS/COGS or Direct Expenses: These are costs directly associated with gross sales (production), including the raw materials, direct service labor, manufacturing overhead (factory utilities, equipment depreciation), or freight-in and packaging directly tied to inventory purchased for resale. Net Sales Revenue (Net Income): This represents the total income generated by the company from its primary business activities, after COGS and expenses. Gross Sales Revenue (Total Income): All income received before any COGS or Expense are deducted. Gross Profit (Gross Margin): All income received after COGS have been deducted. Net Profit (Net Margin): All income received after Indirect Overhead Expenses and COGS have been deducted. Interpreting the Results: Low to Medium Operating Ratio: A lower OPEX indicates that a company is managing its operating expenses efficiently, leaving more room for profit generation. It suggests effective cost control and streamlines operations. High Operating Ratio: Conversely, a higher OPEX percentage implies that a significant portion of net sales is being consumed by operating expenses. This may indicate a need for cost-cutting measures or improved operational efficiency. Importance of Operating Ratio: Performance Benchmark: OPEX serves as a benchmark for comparing a company's operational efficiency over time or against industry standards. It helps in identifying areas for improvement. Investor Insight: Investors often use the Operating Ratio to gauge a company's financial health. A lower ratio may make the company more attractive to investors. Operational Efficiency: By analyzing the OPEX, businesses can pinpoint inefficiencies in their day-to-day operations and take corrective actions to enhance overall efficiency. An important distinction to know: Revenue (Total Income):  Revenue, also known as gross revenue, gross sales or total income, refers to the total amount of money generated by a business from its primary activities, such as selling goods or services. It represents the total inflow of funds before any deductions. Revenue is typically reported as the top line on a company's income statement. Net Sales (Net Profit):  Net sales, sometimes referred to as sales revenue, net revenue, or net profit, is the revenue generated by a company after deducting all expenses and COGS from gross sales. It represents the actual amount of revenue earned by the company from its total income and COGS activities. Net sales provide a more accurate picture of the revenue realized from sales transactions. Other Revenue (Other Income):  This includes revenue from secondary activities, and investments. Drawback of the operating ratio is its disregard for debt. A number of organizations accumulate a huge amount of debt. This usually translates to paying high interest expenses, which are never included in the figures used to work out the operating ratio and markup. In the world of finance, Operating Ratio is a vital tool that provides a snapshot of a company's operational efficiency. By understanding the definition and calculation formula, businesses can leverage the Operating Ratio to make informed decisions, streamline operations, and ultimately pave the way for sustained financial success. OPEX

In the realm of legal practice, managing client funds ethically and in compliance with regulatory requirements is paramount.  The Interest on Lawyers' Trust Accounts (IOLTA) system plays a crucial role in ensuring that client funds held in trust generate interest, with the proceeds contributing to legal aid programs. This guide provides lawyers with a comprehensive overview of IOLTA Trust accounting. Covering essential steps from setting up the IOLTA Trust Bank account to navigating deferred revenue and earned revenue transitions, this guide aims to assist legal professionals in maintaining accurate and compliant financial records. By following the principles of GAAP accrual accounting and adhering to state-specific regulations, lawyers can confidently navigate the intricacies of IOLTA Trust accounting while reinforcing their commitment to transparency and client financial protection. See IOLTA Litigation Summary for details.

Margins by sector (US) refers to the profit margins or profitability levels that are typical or common within specific industry sectors. Profit margins are essential metrics that indicate the percentage of revenue a company retains as earnings after covering its costs. Different industries have distinct characteristics, cost structures, and competitive landscapes, leading to variations in profit margins. See also: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html   It's important to note that these are general trends, and individual companies within each sector may exhibit variations in their margins based on their business models, strategies, and market positioning. Additionally, external factors such as economic conditions, regulatory changes, and global events can impact margins across all sectors. Margins by Sector (US)

Revenue recognition is a crucial aspect of financial reporting that directly impacts a company's financial statements and performance metrics. The Financial Accounting Standards Board (FASB) introduced Accounting Standards Codification (ASC) 606 to establish a comprehensive framework for revenue recognition. ASC 606 provides a standardized approach to recognizing revenue from customer contracts across various industries. In this blog post, we will delve into the five essential steps of ASC 606 revenue recognition. Step 1: Identify the Contract with the Customer The first step in applying ASC 606 is to identify the contract(s) with a customer. A contract is an agreement between two or more parties that creates enforceable rights and obligations. It could be written, verbal, or implied by customary business practices. Companies need to assess whether the contract meets specific criteria outlined in ASC 606, such as the parties' approval, identification of rights regarding the goods or services to be transferred, payment terms, and the probability of collecting consideration. (Accounting Procedure: Project Cost Estimate Begin Date "acceptance") Step 2: Identify the Performance Obligations in the Contract Once a contract is identified, the next step is to determine the performance obligations within that contract. A performance obligation is a promise to transfer a distinct good or service to the customer. Companies must carefully evaluate the contract terms to identify separate performance obligations that represent distinct units of account. If a promise is not distinct, it should be combined with other promises until a distinct performance obligation is identified. (Accounting Procedure: Determine Deferred Revenue Job Phase(s) Start Dates and Sales Earned Revenue End Dates) Step 3: Determine the Transaction Price The transaction price is the amount of consideration a company expects to receive in exchange for transferring goods or services to a customer. Determining the transaction price involves considering variable consideration, non-cash consideration, and the time value of money. Companies may need to use estimation techniques, such as expected value or most likely amount, to account for uncertainty in variable consideration. It's important to update the transaction price if there are changes in the contract that affect the amount of consideration. (Accounting Procedure: Determine Price and Markup/Margin of the Products and Services Items + applicable taxes included on the approved Estimate to Purchase Orders) Step 4: Allocate the Transaction Price to the Performance Obligations Once the transaction price is determined, it needs to be allocated to the identified performance obligations in the contract. This allocation is based on the standalone selling prices of each distinct good or service promised in the contract. In cases where standalone selling prices are not directly observable, companies may use estimation methods to allocate the transaction price fairly. The objective is to attribute the consideration to the performance obligations in a manner that reflects the amount the entity expects to receive in exchange for satisfying each obligation. (Accounting Procedure: Estimate to Invoice PLUS Deposit-Retainer amount LESS items and amounts being deferred + *applicable tax) Step 5: Recognize Revenue when or as the Entity Satisfies a Performance Obligation The final step is to recognize revenue when the entity satisfies a performance obligation. This occurs when control of a good or service is transferred to the customer, either over time or at a point in time. The timing of revenue recognition depends on various factors, such as the nature of the performance obligation, the transfer of control criteria, and the terms of the contract. Companies need to assess these factors to determine when revenue should be recognized. (Accounting Procedure: Sales Invoice(s) PLUS items and amounts previously deferred LESS Deposit-Retainer Deferred End Date)----Earn revenue to the Income Statement (with associated COGS (Bills) and Direct expenses for GAAP compliance and ASC 606 recognition) ASC 606 provides a systematic and comprehensive framework for revenue recognition, ensuring consistency and comparability across different industries. By following these five essential steps, companies can navigate the complexities of revenue recognition, enhance financial transparency, and comply with accounting standards. Staying informed about ASC 606 is crucial for financial professionals and organizations seeking to maintain accurate and reliable financial reporting. See Also: Demystifying Revenue Deferral: A Step-by-Step Guide See Also: Navigating Revenue Recognition: A Brief Guide to ASC 606 Compliance Understanding ASC 606 Revenue Recognition: Five Essential Steps