Inventory Costing

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There are several ways to determine the value of your inventory and each type of valuation has benefits. The most common type used by small businesses is average cost or weighted average costing. This is based on the average cost of identical units. Using the total actual cost of all similar items available for sale divided by the number of units available for sale would result in a weighted average cost per unit. Multiplying the weighted average cost per unit times the number of units unsold gives you the value of your inventory.

First-In, First-Out Costing (FIFO) assumes that the first goods purchased are the first goods sold and therefore that the last goods purchased are the ones remaining in inventory. This system is used frequently because whenever the flow of inventory can be controlled it makes sense that the oldest items are sold first satisfying the accounting convention that inventory should be shown on the balance sheet at the most current cost possible. Also because this method has been used for such a long time, continued use assures consistency for income calculations comparability.

Last-In, First-Out Costing (LIFO) assumes that the most recent purchases are the first to be sold leaving the older items remaining in inventory. One argument for using this method is that it matches the most current cost of items purchased against the current sales revenue. Also when prices are rising net income calculated by this method is smaller than the amount determined from using other methods resulting in a smaller income tax. This would be reversed if pricing were falling.

One other, however uncommon, method is specific identification costing which requires that each item that is sold and each item remaining in inventory is separately identified in respect to it’s purchase cost. This method is not practical for most businesses. Only those businesses that sell items where the cost is relatively high, and sales volume is low and it is easy to identify the cost and sale price of each item separately would find this method useful.

When choosing a method consider the practical issues of how the valuation can be accomplished accurately and with the least amount of effort, and be sure to consult your tax preparer for tax return considerations.

Resources:

MacMillan Associates

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Do You Know?

Copyright 2006 Bookkeeping R Us All Rights Reserved

Do You Know is a new segment of Bookkeeping R Us featuring hints and information for QuickBooks and Microsoft Office Software.
If there is a subject you would like to see or a question answered, please feel free to email me by going to the contact page on this site. I will try to answer any general questions and look forward from hearing from you.

Do You Know that if you are using Quickbooks Pro, or Premier or Enterprise versions you can export data directly from your company file into Excel? Once the data is exported than you can use all of the reporting power of Excel. Just display your report in your company file, click export and select either new or existing workbook. Then QuickBooks launches Excel and displays the report. It’s that easy.

Need help with QuickBooks Installation or setup, call us, your QuickBooks ProAdvisor MacMillan Associates

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Get Organized to be Effective

Copyright 2006 Bookkeeping R Us All Rights Reserved

Do you feel overwhelmed at work? Does there never seem to be enough time to get things done? If so, the primary cause is probably a lack of organization. Taking the time to get organized and staying the course will bring both you and your company rewards. Take a look at your desk right now. Is there stacks of papers to wade through? Is your inbox overflowing? Well today is the first day of the week and it’s as good as time as any to get started. If you take the time now, you will be organized and feeling better about your job by the end of the week.

First of all clear your desk of any unneccessary clutter. And then go get some file folders - if you are fortunate enough to have access to different colors so much the better. Set up a folder for each of the following categories:

Immediate Action Items
End of the Week Action Items
End of the Month Action Items
Reading
Filing

Now sort all the items in your inbox into each folder. Discard any item that does not fall into one of these categories. These are the only folders that should reside on your desktop. The immediate items are items that need to be dealt with on the day they are placed in their folder. All other actions items are to be placed into the End of the Week Folder or End of the Month folder.

Now sort any paperwork sitting on your desk into these folders. Your desktop should be clear and you are ready to work. At the end of each day, take 10 to 15 minutes to sort through any items put into your inbox during the day. Also if you are using a calendar/diary tool such as DayTimer, then list any important tasks that need to be accomplished the following day. Now you have a good idea of what your schedule for tomorrow will be.

Upon arriving at your desk the following day, after checking your email and listening to your voice messages, the first thing to do is to review your lists of items to accomplish for the day and the actions items in your Immediate Action folder. As these are the most important tasks to accomplish attend to them first. Unless there is an emergency, answering your email and voice messages can be done after taking care of the items that need to be addressed today. Select a time that you will either be finished with your list or can take a break from them to answer email and voice messages. And then only answer those messages that were in place when you arrived in the office. You will have the opportunity to address any others later in the day by setting aside a time slot in the afternoon. Emails, telephone calls and other interruptions steal from your productivity. Unless your prime responsibility is contact with customers, vendors or employees then these tasks need to be managed in a way that allow you to perform your responsibilities.

That takes care of your everyday responsibilities, but what about those projects you need to work on? This is where the End of the Week and End of the Month folders come in. Leave enough time in each day to spend working on those projects. What ever you do, do not wait until the deadline is looming. A little done every day will get the project done right and on time. Use your planner to track key points for each project.

Your Reading folder is for items that have come across your desk that don’t require any action, but you want to read or research. Review the contents of this folder at least once a month, more often if possible, and discard anything that is not pertinent. Any item or article you would like to retain place in your Filing folder.

Select a day and time to file. If done regularly, once a week for example, then it will not take much time. If you leave it until the folder overflows, it will turn into a project.

If you follow this plan and you are still overwhelmed, then it is time to talk with your boss. Make an appointment, come prepared with an explanation of the problem and possible solutions. Continuing to take on more work than you are capable of doing does not make you a hero. It will in fact result in you and your boss being unhappy with your performance.

To Help You Be Organized

Day-timer / Portable Organizer, 6-Ring, 1\” Ring Size Loose Leaf, Black / DTM44336

Day-Timer 88844 Starter, Distressed Cowhide, 3-1/2\”x6-1/2\”, Tan

Fliptop Mouse Pad & Day Planner - Pen Included - (White)

Concord Industries Boston Red Sox Day Planner

Day-Timer Organizer 2000 Deluxe with Rand Mcnally Route Planner

Day Planner for Palm

Leather Day Planner

Los Angeles Angels of Anaheim Tan Leather Day Planner

Concord Industries Houston Astros Day Planner
Organized for Success : Top Executives and CEOs Reveal the Organizing Principles That Helped Them Reach the Top

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You Are The Boss

Copyright 2006 Bookkeeping R Us All Rights Reserved

You Are The Boss

If you are the owner of the company, or head of a department, if you have employees that fall under your direction, than you are the boss. And bosses are not just one of the gang. It is important for you, the company and your employees to have a clear demarcation between you and them. Friendly is one thing, friends is not what the relationship should be between yourself and those who work for you.

In a small company or department this is often a hard line to draw. It is very easy to become close to the people you work with on an every day basis. But it is very important to be clear in your own mind your position and responsibilities to the company. For example, most people will find it very difficult if not impossible to discipline, lay off or fire someone they consider a friend. Reviews and increases in pay are other areas which may become cloudy if relationships are too close. How can you be impartial when reviewing a friend’s work?

And as human nature is prone to be, your employees will expect more of you as a friend than as a boss. Not their fault, we rely on our friends to look out for our best interests even when those interests contradict with the company’s best interests. And when you choose the company over them, there will be problems on both side of the relationship. It is not fair to your employees to have them think of you as their friend when your job is to treat them as employees.

Resources For You:

How to Become a Great Boss: The Rules for Getting and Keeping the Best Employees

Better Than Perfect: How Gifted Bosses And Great Employees Can Lift the Performance of Those Around Them

The Girl\’s Guide to Being a Boss (Without Being a Bitch) : Valuable Lessons, Smart Suggestions, and True Stories for Succeeding as the Chick-in-Charge

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Dealing With The Internal Revenue Service

Copyright 2006 Bookkeeping R Us All Rights Reserved

Dealing with Internal Revenue Service

The mail has arrived and oh, no there is a dreaded letter from the IRS. Don’t panic yet, it maybe something as innocuous as information they think you might need, a question of where to apply a payment you made or even a refund check for an overpayment. But should it be more serious, all is not lost.

What to do should you get a notice of a payment due? First and foremost, make sure you really do owe that payment. The Internal Revenue Service is a very large organization and since they have people working for them, sometimes they make mistakes. So read the notice carefully, check your records to ascertain whether or not you have already paid the amount being requested, and whether the check has cleared.

Sometimes they are looking for a return not received. That doesn’t mean you didn’t file the return, it means they have no record of receiving it. Locate your copy (always, always keep a copy of your dated and signed return). Find the post office receipt that proves you sent in your return. You know that green card that the post office returns to you proving that you mailed something to the IRS on a particular date. Of course that “something” might have been an empty envelope not an envelope with your return enclosed. One thing that could point to the return actually being in the envelope is that a check for payment was sent with the return and the check had cleared your bank account.

If you cannot prove a timely filing than your next step is to contact the agent listed on the letter. You may want to do this yourself, however it is probably a better idea to enlist your accountant’s or tax preparer’s help. These people have the experience to handle these situations in the best light and to your best advantage. If, however, you personally meet with the tax agent, please remember to be polite and upfront. And do not be late for your meeting. Provide the records they ask for, and answer the questions they ask truthfully and directly. Remember they are people too, and if treated with respect they will respond in kind.

There are a few things you can do in advance to make sure any future IRS dealings go more smoothly. Of course the first is to make sure you follow the rules. And one of those rules is to keep clear, complete, and accurate records. Remember the article about “shoebox clients”. It is the business people that don’t take the necessary steps to keep a good set of books that get in the most trouble. If you think hiring a bookkeeper or bookkeeping service is expensive, wait until you try to go through an audit with unorganized financial records.

Resources to help you get organized:

MacMillan Associates

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The Deadline Looms

Copyright 2006 Bookkeeping R Us All Rights Reserved

Well it is April 7th and if you are like most United States taxpayers your federal and state income taxes returns are due to be postmarked no later than the 15th, just a few short days away. Are you in a panic yet? Well, the good news, if there is to be any, is that you get a little break this year because the 15th falls on a Saturday so you have untill the following Monday, the 17th to file your returns. Also, if your return is being filed in Massachusetts you have one more day added on because the state of Massachusetts celebrates Patriot’s Day as a state holiday with all banks, and federal and state government offices closed. This affects all filers who file returns normally due on the 15th who reside in Massachusetts, Maine, New Hampshire, New York, Vermont and the District of Columbia regardless of where your tax return is mailed. And should you be one of unfortunate residents of the Gulf Coast who was affected by Hurricane Katrina, you are eligible to extend your filing until August 28th. You can do this by filing Form 4868 by your normal due date. Go to IRS.gov for more details.

So the deadline has come and gone, will you be in this pickle next year? Does your tax preparer refer to you as one of her or his “shoebox clients” because you show up with a bag or box full of receipts? Are you a last minute filer? If so, then you could be at risk for extra preparation fees, a substantial delay in your refund or even interest and penalties from the IRS. If your preparer has to wade through a pile of receipts to do your return I doubt they are going to charge you their standard fees, you will be charged for the extra time involved in sorting through and interpreting those receipts. If you are a last minute filer then your preparer will most likely file an extension for you, an extra charge for that also. And if your records are not clear there is a very good chance that deductions you are entitled to will be missed. Also you are missing out on what is a very important service your preparer can do for you – advance tax planning. And should you have a refund coming, then you have loaned the government interest free your money for whatever time it takes to get your refund check, which, by the way, will be slower in coming filing in April versus filing in February. And if you owe money to the government you may be charged interest and/or penalties, and the longer you wait to pay, the higher the fees will be. It is not too late to get things in order for this year.

So what is the plan? Get organized and quickly, we are already over 3 months into the year, you have no time to waste. If you wait much longer, it will seem an insurmountable task to catch up. And it’s not that hard. Do you own a computer? If so you are practically there. There are so many inexpensive, easy to use software programs on the market. If you know how to write a check, you can use one of these. And if you do on-line banking, most banks are set up to download your bank records into these programs. All you have to do once a month is click on the down load button, open up your file, and assign your checks, deposits, etc. to the categories in the program. The programs come with categories all set up so you don’t even have to have accounting knowledge. And when the year is over, the file can be given to your tax preparer and they can easily prepare your return. Heck, give them the file early, and that all important tax planning procedure can happen. How can it get any easier?
Just think, no more sweating out the deadlines, no more bags and boxes, no more dirty looks from your preparer. So, I am challenging you to take the plunge, you will thank me for it next April.

Recommended Resources:

MacMillan Associates
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Choosing the Best Software for Your Business

Copyright 2006 Bookkeeping R Us All Rights Reserved

With so many products to choose from where do you begin? With you, your employees and of course your business. The very first step is to make a list (and yes, write it down) of what you expect to gain from this purchase. Gain vs costs including costs of training and the associated costs of yours and employees’ time is a very important comparision to make. Some considerations you may want to think about are:

1. What types of information do I need the software to track?
2. What types of reports do I need, showing what data, in what format?
3. Are there particular functions my company can not do without?
4. Who will be using the program? And how many people will be using the program?
5. How comfortable are you and your employees using software and computers in general?
6. Are there programs that you are already familiar with - do you want to consider a program with a similiar format?
7. How much time do I have to devote to the research, installation and training of a new program?
8. Will I need to invest in new computers, server equipment, operating systems, etc?
9. What is my budget for the program, installation, set-up, data transfer if needed, training and any new equipment?

Once you have answered these questions you have a starting point for your research. At this time you can go ahead and do the research yourself, however it could save you some time and maybe a costly mistake to bring in a professional, someone who is familiar with what software packages are available and what they can do for your business. They should also be able to offer you services such as installation, set-up, perhaps data transfer if you are moving from one package to another, and on-going training and support.
By having the answers to the above questions you will be able to clearly define your needs and requirements thus saving time and money. Whatever you do, do not take shortcuts in making such a critical business decision. The right choice will be a great investment, the wrong could be a nightmare.

Recommended Resources:

MacMillan Associates

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