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Archives for February 2020

Important Accounting Considerations for a Law Firm

Important Accounting Considerations for a Law Firm

We all know how different accounting considerations are important for different modes of businesses, right? However, when you talk about a law firm, the considerations needed to be made might be a bit “too” different from the rest, owing to the nature of the business. Here are some of the important accounting considerations that law firms need to make:

Attorney Hours

One of the most important things that a law firm needs to consider is the time each individual is spending for generating revenue for the business. However, it’s a bit trickier than what you might initially think. The fact of the matter is that the working hours of an attorney are not as easily determined. If you tend to classify the time an attorney spends in their office as “working hours” then you might be mistaken. Why? Well, it’s because an attorney will not bring in revenue simply by sitting inside their office. Rather, the revenue that they bring in will depend, typically, upon the time the attorney spends with their clients. To put it simply: when making decisions factoring attorney hours, a law firm will need to bring other considerations into play as well.

Reimbursements

Most law firms offer reimbursements to their clients in case a case doesn’t go their way. I mean…that’s what makes the law firm seem trustable and competitive, right? However, the fact of the matter is that law firms don’t like reimbursing clients, for obvious reasons. When it comes to reimbursements, the management of law firms needs to keep a close watch on not only the reimbursements made but also the attorney who handles that case. Why is this important? Well, having an attorney who consistently creates a need for reimbursements needs to be held accountable. Such considerations will not only make the law firm more profitable but boost the competitiveness of the attorneys as well.

Attorney Profitability

Ultimately, a law firm will need to consider the profitability that each attorney is bringing in for the law firm. In case the profitability generated by an attorney doesn’t justify the expenses made by the company, over a period of time, then it points towards the fact that there’s a need to consider the future of the attorney with the law firm. The law firm is a business after all, and the purpose of every business is to generate profits, at the end of the day, right? If you think about it, factoring the profitability of an attorney will aid the business in making important business decisions. For example, the growth of attorneys who are extremely profitable will, obviously, be much greater than attorneys who’re not doing as well,. Such a consideration also aids the law firm in deciphering the right set of attorneys that will be catering to the most important clients.

There are countless other accounting considerations that are important for a law firm, if it wishes to maximize its profitability. For expert advice on the matter, you can schedule an appointment with the experts at SKB Accounting.

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The practice of accounting is pretty much standardized, but when it comes to the important indicators for different kinds of businesses, there ought to be a difference, right? What might be an important consideration for one kind of business might be completely irrelevant for another. Keeping that in mind, here are some of the accounting information that might be important for a gym franchise: Revenue Split by Memberships Revenue is important for all businesses, right? However, for most businesses, revenue is a quantitative number which little to do with qualitative information. With gym franchises, on the other hand, revenue serves as a qualitative indicator as well. Why? Well, because gym franchises have a need to understand, exactly, how much of their revenue sources comprises of long-term customers. Such a revenue split is essential for the long-term planning of the gym, especially if there are plans of expansion in place. If a majority of the revenue sources comprises of short term sources, for example, then the business will need to think twice before setting any plans for expansion into action. Retail Sales Most gym franchises are into the retail selling of bodybuilding products—such as muscle supplements—as well. For such gym franchises, the head of retail sales is of utmost importance. The reason is obvious, isn’t it? The retail selling is not the primary offering of a gym franchise, right? Therefore, they’d only be willing to pursue it if it adds to their profits, right? If the retail sales figures remain low for an extended period of time, then the gym franchise would have to consider the abandonment of the retail selling venture altogether. The business doesn’t depend upon it, right? Then what good is putting in that extra focus, effort, and resources in it if it fails to bring in profits? Personal Training Most gym franchises have got a number of packages for their customers to choose from. Some of these packages offer the services of a personal trainer and some don’t. If a majority of the customers opt for such packages that don’t offer the services of a personal trainer, then the franchise seriously needs to consider if it needs to offer the services of a personal trainer, in the first place, or would it be better off by not hiring a personal trainer at all. A cost benefit analysis can be used to effectively answer such questions. Expenses Split by Departments A gym franchise comprises of multiple departments, right? Some of these departments—such as the training department—are profit drivers while departments—such as bookkeeping—are cost drivers. Since the number of cost drivers exceed the number of profit drivers for most kinds of businesses, it’s essential for almost all businesses to keep tabs on their expenses in cost drivers. It’s essential, therefore, for a gym franchise to keep their expenses split by departments always under check, so that all unnecessary expenses may be cut down. This will provide the gym franchises a better control on their cost drivers. If you’re the owner of a gym franchise who is looking for expert advice on how you can maximize the profitability of your business, through emphasis on the right accounting heads, then SKB Accounting has got you covered!

The Accounting Needs of a Gym Franchise

The practice of accounting is pretty much standardized, but when it comes to the important indicators for different kinds of businesses, there ought to be a difference, right? What might be an important consideration for one kind of business might be completely irrelevant for another. Keeping that in mind, here are some of the accounting information that might be important for a gym franchise:

Revenue Split by Memberships

Revenue is important for all businesses, right? However, for most businesses, revenue is a quantitative number which little to do with qualitative information. With gym franchises, on the other hand, revenue serves as a qualitative indicator as well. Why? Well, because gym franchises have a need to understand, exactly, how much of their revenue sources comprises of long-term customers. Such a revenue split is essential for the long-term planning of the gym, especially if there are plans of expansion in place. If a majority of the revenue sources comprises of short term sources, for example, then the business will need to think twice before setting any plans for expansion into action.

Retail Sales

Most gym franchises are into the retail selling of bodybuilding products—such as muscle supplements—as well. For such gym franchises, the head of retail sales is of utmost importance. The reason is obvious, isn’t it? The retail selling is not the primary offering of a gym franchise, right? Therefore, they’d only be willing to pursue it if it adds to their profits, right? If the retail sales figures remain low for an extended period of time, then the gym franchise would have to consider the abandonment of the retail selling venture altogether. The business doesn’t depend upon it, right? Then what good is putting in that extra focus, effort, and resources in it if it fails to bring in profits?

Personal Training

Most gym franchises have got a number of packages for their customers to choose from. Some of these packages offer the services of a personal trainer and some don’t. If a majority of the customers opt for such packages that don’t offer the services of a personal trainer, then the franchise seriously needs to consider if it needs to offer the services of a personal trainer, in the first place, or would it be better off by not hiring a personal trainer at all. A cost benefit analysis can be used to effectively answer such questions.

Expenses Split by Departments

A gym franchise comprises of multiple departments, right? Some of these departments—such as the training department—are profit drivers while departments—such as bookkeeping—are cost drivers. Since the number of cost drivers exceed the number of profit drivers for most kinds of businesses, it’s essential for almost all businesses to keep tabs on their expenses in cost drivers. It’s essential, therefore, for a gym franchise to keep their expenses split by departments always under check, so that all unnecessary expenses may be cut down. This will provide the gym franchises a better control on their cost drivers.

If you’re the owner of a gym franchise who is looking for expert advice on how you can maximize the profitability of your business, through emphasis on the right accounting heads, then SKB Accounting has got you covered!

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Choosing Between LIFO and FIFO Accounting

Choosing Between LIFO and FIFO Accounting

The two most commonly used techniques for the valuation of inventory are the FIFO and LIFO methods of accounting. The difference between the two is simple, no doubt, but the fact remains that your choice will have serious implications on your business. Bearing this in mind, here is an account of these two methods of inventory valuation and when they should be employed:

FIFO

FIFO stands for “first-in, first-out”. What this means is that when you end up making a sale, you account for the value of inventory that was received first. The company will assume that the items it purchased or manufactured first are the items that it sold first as well. When you take things into perspective, the usage of the FIFO method of accounting appears to offer a more natural approach to doing things, owing to how it presents a straight-line approach for keeping track of inventory and sales. Ultimately, the usage of FIFO accounting simplifies the accounting required for tracking of items in the inventory.

LIFO

LIFO stands for “last-in, first-out”. In contrast to the FIFO method of accounting, LIFO method means to account for the value of inventory that was received last, when you end up making a sale. Or, in other words, the LIFO method of accounting assumes that the most recently received inventory items are the first to have been sold. When you take things into perspective, the LIFO method of accounting appears to give a much more realistic picture of things, considering how companies sell their inventory items shortly after they have been purchased.

Need To Make things Easier? FIFO

As has already been discussed, FIFO helps in making the tracking of your inventory items easier. LIFO, on the other hand, causes a discrepancy in the reported and the actual numbers and prices, owing to how you are working back towards the inventory you had received earlier. What this means is that the accurate prediction of the company’s operating activities will be much more difficult. The case of modeling the company’s inventory activities would be similar.

Need To Reduce Tax? LIFO

When you speak of the LIFO method of accounting, it is quite understandable that it results in a lower tax liability, owing to how the company’s costs are overestimated. For those who don’t know, the company’s costs are estimated because the last purchased item is assumed to be sold first, owing to how the recent purchases usually have higher prices, especially in times of inflation. FIFO accounting, on the other hand, underestimates your cost of goods sold, meaning that your profits are, ultimately, overstated. And you know what overstated profits mean, right? You owe more tax to the state!

When you take the differences into consideration, there are multiple considerations that need to be made, when choosing the best accounting system for your company. This can be a difficult job, which the financial experts at SKB Accounting can make easier, as well as more streamlined, for you!

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