When you start a small business, generally, you are full of energy and willing to put in the hours to make it work, but do not have a lot of money to spend on the venture. What’s more, even if you have a budget, you should be very careful about how you spend it, in order for your business to take off without being burdened by unnecessary expenses.
There are many ways to get started with your new business without breaking the banks. First of all, many ideas barely require any capital. If you are starting to sell your services for example, you should mostly need a laptop and an online presence. Creating a website to showcase your offer to the world should be one of your very first steps when you decide to go in business. There are many sites that will offer free templates based on the kind of business you are starting, and will get you self hosted for under a hundred dollars per year. You need your customers to be able to find you, even though they don’t know you exist yet. Your website should have a contact number and email on each page, and sum up all the information you would like to find if you were looking for a similar business. Restaurant? we need a menu, pricing, and opening hours. Counseling practice? We need your area of expertise, and a calendar to book your slots online.
You should make it as easy as possible for people to hire you. So the next logical step is to have a way for people to pay for your services in just a few clicks. Using the same website providers, you can usually integrate an easy payment platform for a little premium. Some of them will even be free, and charge you based on the revenue you get. No income, no fees.
The next thing that is really worth spending money on when you start your small business is accounting services. You want to make sure you are doing everything by the book, and if you don’t understand accounting, you should leave that to a professional. Think about it. Who wants to spend hours trying to figure out all the intricate tax laws, when for a few hundred dollars, an accountant will file your return and allow you to sleep soundly at night? Just by showing you all the tax deductions you probably hadn’t thought about claiming, the tax professional should pay for itself.
When you made your business plan, you probably thought about all the expenses you would have before your business becomes profitable. Whether you are using your own funds or small business loans, you want to spend as little money as possible, while having an impact on the growth of your small business. Do you need a huge office? Maybe a coworking space will do, and then you can rent a meeting room if and when you need to meet with your clients. Or you could go to them at the beginning, which might be received as a sign you really care!
Yes, you do need to spend money to make money most of the time. But by being very conscious about the best use for your starting capital, you will leave more breathing room in your budget for unexpected expenses. These will happen for sure, and can break your business! It is wise to allocate part of your seed money to unplanned spending, as well as spending as little as possible where it doesn’t really make a difference.
Revenue Recognition Audit
Revenue Recognition is a process that depicts how sales transactions are recorded by a company in financial statements. While recording revenue, companies are mandated to comply with Generally Accepted Accounting Principles (GAAP). As per GAAP, in order to book a sale as revenue, the revenue should be recognized initially. Consequently, for a revenue to get recognized, it should be Earned and Realizable Revenue.
Revenue Recognition Audit reviews the accounting techniques of revenue recognition that are adopted by a company. This audit thus assures that the recorded information is compliant with National Accounting Standards which stand mandatory for a firm.
Processes involved in Revenue Recognition Audit:
For a successful Revenue Recognition Auditing process, Planning is a key element. This process thus initiates with analyses of revenue recognition policies and techniques of a company. Thus ensuring the company’s compliance with the desired accounting procedures. After satisfying their doubts, the auditing comes to the second level that involves the analyses of contracts of that year. Material Contracts are then separated from the lot. The Auditors invest their time to test whether those contracts are recognized aptly. Along with this, they ensure that the financial statement contains receivable and deferred accounts. Besides reviewing the Material Contracts, Auditors also pay heed to the one which is not material to ensure that even they recognize the revenue aptly.
Important Aspects of Revenue Recognition Audit:
Reviewing the General Ledger:
When an Auditor analyzes a General Ledger it provides them with a lot of substantive shreds of evidence and thus initiates lesser procedural tests. General Ledger is reviewed to have knowledge as to how the sales are recorded in that particular firm. The information that concerns Revenue Recognition Audit includes the sold goods, the date when it was delivered and the mode of payment used to do so. Revenue Recognition Audit ensures that the General Ledger is in accordance with the actual sale transactions of the firm. While auditing, even the Revenue Recognition Policies of a company can also be considered.
Analysing the Financial Statements:
For a detailed overview of the company’s finances auditors look out for financial statement of an organization. Then a comparison follows between General Ledger and the statement deduced, to look out for dissimilarity that exists. Auditors are well acknowledged about the importance of financial statement; as the stakeholders evaluate a firm by the information provided by that.
Combating Risks in Receivable Accounts:
Accounts of high-profit sales of a firm can be studied by an auditor in Receivable Accounts. The information mentioned by them is cross-checked by the auditors with the original sale invoices. Primary risk that exists is that the net receivables might be overstated, because either receivable have been overstated, or the allowance for uncollectible accounts has been understated. Revenue Recognition Audit ensures that the company’s account balance mentioned is legitimate.
Accrued/Deferred Revenue:
While recording revenue, firms may incorporate accrual or deferrals. Auditors stay skeptical regarding accruals and deferrals to ensure that the real transactions are mentioned and do not contain wrong invoices.
What are the Prerequisites for an auditor?
An Auditor is required to have complete knowledge of complications prevailing in revenue recognition’s auditing and accounting. Active participation of employees should be fostered by the auditors for smooth auditing.
Internal control in an organization is a continuous process to collect, analyze and update information during an audit. Thus mandating internal control; as the responsibility of an auditor. An Auditor then evaluates the appropriateness of finances.
Before initiating Auditing, Auditors should meet with management and the accounting staff to have an idea of the timing of the auditing process.