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The 3 Important Accounting Considerations for a SaaS Company

The 3 Important Accounting Considerations for a SaaS Company

Business models of companies that offer software as a service (SaaS) vary greatly from those  of other businesses. It’s important, for smaller or new companies to understand the important aspects of such a business, so that they may start off on the right track. Here are some of the important aspects of a SaaS company that require consideration:

Churn Rate

Churn rate is one of the most important factors in the growth of a SaaS company. Churn rate is the annual percentage of such customers who discontinue their subscription. Owing to the meaning that it holds, churn rate is also known as the rate of attrition. When you talk about the growth of any company, the basic principle remains the same. Companies grow when they attract new customers and increase profit margins. Similar is the case with SaaS companies. That’s the reason why the percentage of new customers, in any given year, needs to be greater than the churn rate for a SaaS company to grow. If it doesn’t, then it points towards the fact there are some business issues that the management might need to address. The consideration of the churn rate can do wonders for the decision making of a SaaS company, if used correctly, and can be of utmost importance in matters like the pricing of subscriptions.

Deferred Revenue

Most companies follow the accrual basis of accounting, right? Well, according to the accrual basis of accounting: revenue is supposed to be recorded as soon as it has been earned and not when it is received. What this means is that the figure of revenue for a SaaS company, for any given month, will be the sum total of the total income EXPECTED from the subscriptions, in the simplest of terms. But is there a possibility for a scenario when a subscriber doesn’t pay the subscription charges for any given month? Yes, it can. Under such a scenario, the monthly subscription of the client will show up in the SaaS Company’s revenue, when actually it hasn’t been received. What this means is that there is a high chance for a SaaS company’s revenue to be overstated. Therefore, it’s important for the management to consider the figure for deferred revenue, as well, when making business decisions.

Marketing Expenses

It’s also important for a SaaS company to consider its marketing expenses, owing to the importance of marketing to the overall model of the business. A SaaS Company might have hundreds of applications and software for customers to benefit from, but it won’t get any subscriptions unless the customers know about it, right? When you talk about marketing expenses, in general, it is important for a business to always keep them under check. SaaS companies need to remember, before spending extravagantly on marketing campaigns, that marketing expenses are as good as useless if they don’t translate into more subscriptions.

These are some of the important accounting considerations for a SaaS company. However, they form only the tip of the iceberg. If you’re looking for in depth advice, however, the experts at SKB Accounting would love to be of assistance!

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The Important Accounting Needs for a Wholesale Business

The Important Accounting Needs for a Wholesale Business

The formats of financial statements are, pretty much, standardized for most types of businesses. However, when it comes to the importance of different accounting heads for different kinds of businesses, it’s a different story altogether. What this means is that what might be an important consideration for one kind of business might not even matter for another. Here are some of the important accounting heads and considerations for a wholesale business:

Volume of Sales

One of the most important accounting heads, for a wholesale business, is the volume of sales. Why is that the case? Well, when you talk about a wholesale business, the backbone of the generated revenue (and profits) lies in the volume of the goods sold. It’s because the difference between the cost of the goods and the price at which they are sold, in the case of a wholesale business, is not as significant as it might be in other modes of business. Keeping an eye, therefore, on the volumes of the categories of goods sold is important, when it comes to making the relevant business decisions.

Commission

Commission is the percentage of profits from sales that is given to the designated sales teams responsible for the sales, both inside and outside the agency. When you talk about a business, the business would obviously wish for the amount of proceeds paid as commission to be minimal, right? The amount of commission paid out to the sales teams varies according to category of goods under consideration. If the goods under consideration already have a thriving market, then the commission paid out to the sales team would understandably be lower, right?

Discounts

Discounts are something that wholesale businesses are on the lookout for…always! If everything else is held constant, wholesale businesses tend to lean towards such brands and suppliers that offer them discounts on their products. The utility of these discounts to wholesale businesses is more than the mere saving of a little cash. If you think about it, if wholesale businesses get discounts on their purchases, they’ll be able to forward those discounts to their customers. This, in turn, will make the wholesale business standout among its competitors, which will benefit the overall business.

Marketing and Selling Expense

When you talk about the marketing and selling expenses, a wholesale business would prefer them to be as low as possible. Why? Well, because it will ultimately come out from the commission that the wholesale business receives for the selling of goods. If, for example, the marketing and selling expense per item, under a category of goods, exceeds the commission received for the sale of that item, then it means that the business would have been better off if it hadn’t sold that good in the first place, right? When making the decision on what to sell and what not to sell, marketing and selling expense should play an important role.

A wholesale business can be lucrative, no doubt, but that doesn’t mean that there’s no need for some expert accounting advice. If you are in need of some expert advice, then SKB Accounting has got you covered!

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Best Accounting Software for Your eCommerce Business

Best Accounting Software for Your eCommerce Business

Gone are the days when businesses needed to have big accounting departments to cater to all of their accounting needs manually. In the contemporary age, there are a number of good accounting software programs available for businesses to make use of. Here are the ones that will yield the best possible results for an eCommerce business:

QuickBooks Online

There aren’t many eCommerce businesses that would not know what QuickBooks has got to offer. The accounting software has been around for a long time, but the company is continuously making efforts for the purpose of making improvements and positive modifications to the software program. Over the course of time, QuickBooks has grown into a reliable bookkeeping and accounting software, owing to how it can be used as a cost-effective and reliable accounting system for eCommerce businesses.

QuickBooks not only allows its users to navigate easily but be able to perform tasks at the push of a button as well. What this means is that the software offers a unique mix of simplicity and effectiveness, which in an important requirement for the accounting software of any kind of business to have. On top of that, QuickBooks can be fully integrated to mobile phones, meaning that you can, truly, take care of your accounting needs on the go!

Xero

The Xero accounting software program is a worthy tool for the accounting department of any eCommerce business to have. It is because Xero has got a lot of eCommerce accounting procedures on offer for its clients, meaning that it is nothing short of perfect for small and medium sized online businesses alike. On top of that, Xero comes with complete customer support, which can be nothing short of a blessing for the smaller businesses. Everyone will be able to get the best bang for their money.

Xero has got the capacity to deal with all kinds of bookkeeping needs which an eCommerce business might have, ranging from the reconciliation of your bank balance to the generation of invoices.

Sage

The third name that comes to mind, when you speak of the best accounting software for eCommerce businesses, is that of Sage. Having been in the industry for more than three decades, Sage prides itself on providing accounting software packages that are capable of dealing with all kinds of needs, regardless of the kind of business. One of the major reasons why some of the eCommerce businesses choose to go with Sage lies in how Sage offers, perhaps, the most user-friendly experience possible.

With the Sage accounting software, eCommerce businesses are able to not only manage their expenses and income easily but generate helpful reports for the purpose of decision making as well.

It is a fact that the need of the accounting software for eCommerce businesses cannot be denied, nowadays. However, choosing the right accounting software, in accordance with the requirements of your individual business, can be difficult nonetheless. Bearing that in mind, it is advisable for you to make use of the experts at SKB Accounting so that the choice you make is the best for business!

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The Hidden Costs Small Businesses Have Got To Deal With

The Hidden Costs Small Businesses Have Got To Deal With

Dealing with costs is part and parcel of running a business. However, businesses should know that not all costs are visible, meaning that there are a number of small costs that might appear to be harmless on paper but affect the prospects of the business negatively, over the course of time.

Here is an account of such hidden business costs:

Permits and Licenses

When they say that governments try their best to cut the throats of their citizens, you might be tempted to believe that the statement is a bit too harsh. However, when you consider that businesses need a number of permits and licenses before they can, even, hope to begin operations, you have got to say that the government appears to have its hands on the throats of the businessmen, at least.

When you consider that these licenses and permits are, rarely, onetime expenses—considering how they need to be renewed after a certain duration—you have got to say that the costs will start to mount without you even knowing, fully, of it.

Maintenance

Businesses require regular maintenance, in a number of departments, if they are to continue their operations. While the costs of the bigger and major equipment, for example, is already accounted for in the annual budget; it is the smaller maintenance costs that tend to build up, until they become too much to handle.

This means that it is imperative for businesses to keep ALL maintenance costs into consideration, when forming the budget, so that they can know, for sure, that everything has been accounted for. When it comes to costs, businesses need to remember that it is NEVER good to be taken by surprise!

Equipment

Businesses require equipment for their operations, right? Well, the kind of equipment that a business has got is an important consideration as well. Businesses are, obviously, recommended to have state-of-the-art equipment so that they are able to make use of the latest technology, in their business operations. However, that doesn’t mean that businesses should start splashing cash around, just because they are looking to upgrade the equipment.

It is essential for businesses to remember that equipment related upgrades should only be made if the business ACTUALLY needs it, and not just because the newer equipment looks “cool”. Spend a bit too much on equipment and you will soon find your business to be in a liquidity crunch.

When you take it all into perspective, you have got to say that businesses need to decrease their costs, as much as possible, if they are to boost their earnings, right? These costs—hidden or visible—can be steep no doubt, but there are ways in which they can be taken care of in the least expensive manner.

If you, too, are looking to reduce the costs associated with your business, as much as possible, the experts at SKB Accounting have got just the tips you need!

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The Key Differences between Standard and Average Costing

The Key Differences between Standard and Average Costing

Among the several methods of costing available for businesses to choose from, standard and average costing are the most popular. However, when choosing between the two, it’s imperative to make some key considerations. Here are a few differences between standard and average costing:

Inventory Valuation

One of the most basic difference between and standard and average costing arises in the valuation of inventory. When it comes to average costing, inventory is valued at a moving average. What this means is that the value of inventory is an average of the different items that comprise the inventory, without taking into account their individual values. Unlike standard costing, average costing doesn’t require any predefined standards for the tracking of inventory and determination of manufacturing costs.

Standard costing, on the other hand, is usually used in such cases when companies follow a perpetual system of inventory, according to which all of its inventory accounts are valued at a standard cost. This standard cost accounts for direct material, direct labor and fixed and variable factory overheads. The actual cost will, obviously, see variances in both price and quantity.

Determination of Profit Margin

Profit margin is the ratio of your gross profit and revenue. As we all know, the calculation of gross profit requires for your Cost of Goods Sold to be subtracted from the revenue. When you talk about average costing, this figure for Cost of Goods Sold is based on an actual costing method. Since the inventory is valued at a moving average, it causes for the figure of Cost of Goods Sold to not deviate much from the actual. This is the reason why the profit margins calculated through standard costing are much more trustable.

Standard costing, on the other hand, determines the profit margin based on the standard valuation of inventory, which is nothing more than a projection. Since the Cost of Goods Sold is based on a projection in standard costing, it means that there’s a probability that the calculated profit margin won’t be as accurate. However, it can be revised by taking all of the averages into account.

Determination of Performance

When it comes to management accounting, standard costing has got an edge over average costing. Why? Well, it’s because it allows for the cost variances to be compared against the standard costs. This provides the management with an opportunity to assess the performance of its products and employees, alike, by determining why certain variances were favorable or unfavorable. This allows for the management to take more informed decisions which benefits the company in the long run. Average costing, however, doesn’t allow an opportunity for such decision taking, owing to how there are no set standards against which the actual costs may be compared.

Both standard and average costing methods have got their own sets of advantages and disadvantages. It’s important, therefore, for businesses to know which of the two would cater to their needs in the best possible manner. The experts at SKB Accounting have got the insight required to advise you not only in the matter of costing method but in the implementation of accounting software also.

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Reasons for Misstatements in the Balance Sheet

Reasons for Misstatements in the Balance Sheet

Balance sheets present a holistic view of the financial standing of a business. However, it is easy for this holistic view to point in the wrong direction, owing to how small misstatements, in this regard, can lead to much larger problems.

Here are some of the common reasons for errors in balance sheets:

Incorrect Classification

When you speak of misstatements in the balance sheet, the most common reason is the incorrect classification of assets and liabilities. For those who don’t already know, assets are all of the passions of the business, as well as any expenses which the business might have paid for in advance. Liabilities, on the other hand, include everything that is owed by the business. Revenue that has not yet been earned is also a liability for the business. Incorrect classifications of assets and liabilities paint such a financial picture of the business that is misleading—at best.

Data Entry Errors

We all know how the latest accounting software programs have simplified accounting, manifold, right? Well, they have opened their doors for misstatements as well. Accounting software programs require users to input data, into the systems, so that reports can be made, meaning that the reports will only be as good as the inputted data. If there is an error, for example, in the data input, then you can be certain of the fact that there will be errors and misstatements in the resulting financial statements as well.

Recording Errors

Speaking of data entry errors, one of the biggest kinds of such errors is omission. There are a number of reasons why a business might fail to record a transaction, with oversight and human errors leading the pact. However, there might be instances when a business deliberately omits information, when it comes to disclosure, thus resulting into a fraud.

Regardless of what the intention of the business’ management might be, it is a fact that if a business failed to record a transaction, it will be reflected in the balance sheet of the business. For instance, if a business failed to record a transaction for expenses or failed to adjust the inventory quantities, you can be certain that the financial statement, in their entirety, will be impacted.

When you speak of errors in the balance sheet, it is a fact that they can significantly impact the decisions of the management as well as provide a false picture of the business’ standing to the stakeholders. Bearing that in mind, it is essential for businesses to take such measures that limit the damage caused by such errors as much as possible.

While it is true that accounting errors are, at times, unavoidable owing to the large volume of financial data; it does not, at all, means that the management should not take such measures that can take care of such errors before they have a chance of causing mayhem. If your business would like advice, in this regard, the experts at SKB Accounting would love to be of assistance!

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The Accounting Needs of Small Businesses

The Accounting Needs of Small Businesses

Have you recently gotten your small business setup underway. If the answer is yes, then you should know that your accounting department will be of utmost importance. Bearing that in mind, here are some of the accounting needs that your small business will have to contend with:

A Bank Account

One of the first things that you need to do to get the accounting department of your small business on track, is open up a bank account, owing to your need of having a place to stash your business income. It is advisable for you to have a separate bank account for your business, so that you are easily able to distinguish the wealth of your business from your own wealth. While we are at it, it is important to note that sole proprietors are not bound by law to have separate bank accounts but the owners of Limited Liability Companies are. However, it is recommended for your business to have a separate bank account, regardless of the form and structure.

Developing a Bookkeeping System

Once you have got a bank account in place, it is time for you to get the accounting department of your small business rolling. However, before you can get down to it, it is essential for you to develop a system of bookkeeping that your business will follow. If you own a sole proprietorship, then there are a number of flexibilities that have been allowed for you to make use of for the purpose of benefiting your business.
For instance, you will need to choose the best accounting software for the use of your business, depending upon its needs. On top of that, you will also need to make decisions relating to the method of accounting that will be used within your business.

The Tracking of Expenses

When you speak of small businesses, it is nothing short of a fact that they have got to continuously battle with the lack of funds, especially in their initial years of operation. What this means is that businesses not only need to cut down their expenses, as much as possible, but keep tabs on them as well, considering how controlling expenses will be next to impossible if a business is unable to track them.
Having said that, there are certain kinds of expenses which a small business has got to keep a keen eye on, especially when you consider how the business might be getting coaxed out of money in their name. For instance, if you see an employee traveling in the name of business, a lot, it is advisable for you to check just how “business related” their adventures really are.
When you take it all into perspective, you realize that the considerations discussed form only the tip of the iceberg when it comes to the accounting needs of a small business. In order to get an in-depth understanding of how the accounting of your business is supposed to be carried out, your questions are always welcomed by the experts at SKB Accounting!

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Importance of Business Integration for Growth

Importance of Business Integration for Growth

When you speak of business growth in the contemporary world, there are certain internal factors which have become exceedingly important, with the passage of time. Among these; business integration has grown in importance very rapidly. Here are some of the reasons why business integration is important for the growth of a business:

Communication

One of the major benefits of business integration is in the streamlining of the sphere of communication. Businesses that are well-integrated offer streamlined communication between all of the involved parties and participants. Regardless of how different the operations of these participants might be, a well integrated business will ensure that everyone is able to get their word in, especially when it matters. A better means of communication will ensure that the sharing of information becomes dramatically easier and cheaper, meaning that the probability of bad decisions will be considerably reduced, especially due to the lack of access to information.

Available Resources

When you speak of business integration, it is a fact that it allows businesses to make the most of the resources that are at their disposal. It is because business integration lets companies leverage their employees and resources in such a way that they are able to extract the maximum possible utility from them. It has been proven that integrated organizations don’t waste the potential of their employees by assigning jobs that are meaningless or repetitive. On top of that, organizations can also benefit by integrating with companies such as PayPal and Amazon, all for the purpose of getting the most out of their resources and potential.

Productivity

We all know how organizations wish to increase their productivity as much as possible, right? Well, this end can be achieved if organizations take the route of business integration. Businesses that are integrated reduce the need for data duplication so that it may be used at different places, for different purposes. With the need for duplication reduced, employees can focus on the issues that really matter. On top of that, integration with PayPal, for instance, will reduce the need for a business to focus on its system of payments.

Growth

Having a business integration setup in place ensures that all of the data for businesses is hoarded at a singular location so that it might be accessed and made use of easily, by everyone relevant. The simplistic nature of the sharing of information adds to the growth of the organization, owing to how problems will then be solved in a few clicks, as compared to accessing different systems, which would need to be done otherwise.

When you put everything into perspective, the importance of business integration cannot be denied. Businesses not only need to be internally integrated but integrated with companies such as Amazon and PayPal as well, if they are to grow in the contemporary world. Bearing this in mind, the experts of SKB Accounting are best equipped to take care of all of the needs you might have in this regard!

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SKB Accounting

We provide accounting / bookkeeping services to our clients to ensure organizational efficiency resulting in measurable performance improvements. Our advanced technology, seamless process and a team of highly skilled people, reflect our passion

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