Accounting Practices

For those who have never heard of the terms accounting fraud, just the sound of it means it can't be good. Accounting fraud is when one or more company members deliberately manipulate how sales and expenses are doing in order to make the company look like it is doing well, when in truth it is not.

Some companies may be doing a number of activities which may be considered fraudulent such as failing to list expenses they prepaid or assets that are incidental, they may fail to show asset liability classifictions as well as the collapse of their short term debt and thier long term debt into a single account instead of two seperate accounts.

Other companies may commit accounting fraud by over-recording of thier revenues from sales. This company may even go as far as shipping products to customers who never ordered. When they do this it looks as if they may have made actual sales until the returns start coming in. They may even try a scheme called "channel stuffing" this is where they send large orders of product to dealers that the customer did not order, then they do a side deal for the product with discounts and incentives, which keeps the customer from complaining about the product they did not want. Also businesses have been known to keep from recording returned products until after the end of the year records have closed.

Another act of accounting fraud includes under-recording of the company's expenses especially the expense for depreciation. In some cases the company may not give a complete accounting of the "cost of goods sold" expense account for the period. This makes the overall gross margin a lot higher because the assets still include products that are no longer a part of the inventory because they have been sent out to customers.

In addition, the company may overstate or understate many other accounts as well, however this is accounting fraud. If you are thinking about trying any of these things. Think again, accounting fraud has some pretty steep penalties.

If you have no idea what to do to track how much money your business is bringing in, chances are you dont know if your business is successful. You wont know how well your marketing schemes are working or how much profit you are making. You will need to know more than just how many sales you have made or how much your gross revenue is, you will need to have an idea of what your company's net profit looks like so that you can do whatever it takes to increase this number.

For those who want a successful business, it is important to know what your bottom line is, to do this you will need to have a solid financial plan and keep up with how well you are doing on a monthly basis, then should you find that you are having problems, you will need to be ready to fix them immediately so that your business is always ahead of the game.

Here are just a few tips to ensure that your bottom line is where you want it to be.

• Make sure that you have a solid financial plan. Be sure to estimate how much money (revenue) you think you will bring in on a monthly basis, and also how much money (expenses) you think will be going out every month as well.
  
• Keep in mind that once you lose profits that you can't get them back. Some business owners assume that they can make up losses later, the truth is that you can't. You will need to figure out how to lower your expenses and increase your profits.
  
• You need to be on top of the adjustments that you will need to make to your bottom line immediately. If you are noticing that your revenues are lower that your originally projected, then you need to find ways to increase sales by making changes to your marketing techniques. If you find that costs are extremely high, then take the time to make some cut backs so that you can lower the amount going out and keep more of the money coming in.
  
• Be sure to be frugal about your spending habits, just be sure that if you are taking on new expenses that you know what the chances of making enough money to cover them is in the cards.
  
• Make a monthly evaluation about how your company is doing, focus on the profits you are bringing in and not just the amount of revenues you have coming in. It really doesn't matter if you are bringing in a lot of money, if your expenses are too high, it is going back out the same way it came in. Instead you need to focus on the money that you are able to keep. So spend time being on top of your profits.

When you get yourself a bank account, especially a checking account, you will need to learn how balancing of your checkbook works. This job of balancing your accounts is just one of the terms I mean when I use “personal accounting.”

When the bank send you your statement every month, the first thing you will need to do when you get it is look it over, and if it is online print out a copy so that you can do this quickly. One thing to remember as well, if you are one of those people who are not so good with personal accounting and watching your money, online banking allows you to see what is going on everyday so that if you have trouble you can catch it quickly, before you start bouncing checks.

The reason for balancing a checkbook is to ensure that any additional charges not listed in your check book. Many people like me tend to forget to write down the two dollar fee at the ATM, so if you need to write in additional charges that you did not originally write down, this is when you do it. By balancing your checkbook you will be able to keep a good total that keeps you from writing bad checks.