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Accounting

Accounting

I want to talk about how to keep track of the money in a company. That is called accounting and we’re going start with the basics of accounting.

Accounting is keeping track of the money in a company. It’s critical to keep good books and CPA for a business, no matter how small it is. I’m not going to lay out exactly how to do that, but I am going to discuss a few important principals.

The first important principal is every financial transaction of a company needs to be recorded. This process has been made much easier with the advent of accounting software. For most startups, Quickbooks will do in the beginning. As the company grows, the choice of accounting software will become more complicated, but by then you will have hired a financial team that can make those choices.

The recording of financial transactions is not an art. It is a science and a well understood science. It revolves around the twin concepts of a “chart of accounts” and “double entry accounting.” Let’s start with the chart of accounts.

The accounting books of a company start with a chart of accounts. There are two kinds of accounts; income/expense accounts and asset/liability accounts. The chart of accounts includes all of them. Income and expense accounts represent money coming into and out of a business. Asset and liability accounts represent money that is contained in the business or owed by the business.

Advertising revenue that you receive from Google Adsense would be an income account. The salary expense of a developer you hire would be an expense account. Your cash in your bank account would be an asset account. The money you owe on your company credit card would be called “accounts payable” and would be a liability.

When you initially set up your chart of accounts, the balance in each and every account is zero. As you start entering financial transactions in your accounting software, the balances of the accounts goes up or possibly down.

The concept of double entry accounting is important to understand. Each financial transaction has two sides to it and you need both of them to record the transaction. Let’s go back to that Adsense revenue example. You receive a check in the mail from Google. You deposit the check at the bank. The accounting double entry is you record an increase in the cash asset account on the balance sheet and a corresponding equal increase in the advertising revenue account. When you pay the credit card bill, you would record a decrease in the cash asset account on the balance sheet and a decrease in the “accounts payable” account on the balance sheet.

These accounting entries can get very complicated with many accounts involved in a single recorded transaction, but no matter how complicated the entries get the two sides of the financial transaction always have to add up to the same amount. The entry must balance out. That is the science of accounting.

Since the objective of this blog is not to turn you all into accountants, I’ll stop there, but I hope everyone understands what a chart of accounts and an accounting entry is now.

Once you have a chart of accounts and have recorded financial transactions in it, you can produce reports. These reports are simply the balances in various accounts or alternatively the changes in the balances over a period of time.

The next three posts are going to be about the three most common reports;

  • the profit and loss statement which is a report of the changes in the income and expense accounts over a certain period of time (month and year being the most common)
  • the balance sheet which is a report of the balances all all asset and liability accounts at a certain point in time
  • the cash flow statement which is report of the changes in all of the accounts (income/expense and asset/liability) in order to determine how much cash the business is producing or consuming over a certain period of time (month and year being the most common)

If you have a company, you must have financial records for it. And they must be accurate and up to date. I do not recommend doing this yourself. I recommend hiring a part-time bookkeeper to maintain your financial records at the start. A good one will save you all sorts of headaches. As your company grows, eventually you will need a full time accounting person, then several, and at some point your finance organization could be quite large.

There is always a temptation to skimp on this part of the business. It’s not a core part of most businesses and is often not valued by tech entrepreneurs. But please don’t skimp on this. Do it right and well. And hire good people to do the accounting work for your company. It will pay huge dividends in the long run.

The Profit And Loss Statement

Today we are going to talk about one of the most important things in business, the profit and loss statement (also known as the P&L).

Picking up from the accounting post last week, there are two kinds of accounting entries; those that describe money coming into and out of your business, and money that is contained in your business. The P&L deals with the first category.

A profit and loss statement is a report of the changes in the income and expense accounts over a set period of time. The most common periods of time are months, quarters, and years, although you can produce a P&L report for any period.

Here is a profit and loss statement for the past four years for Google. I got it from their annual report (10k). I know it is too small on this page to read, but if you click on the image, it will load much larger in a new tab.

Google p&l

The top line of profit and loss statements is revenue (that’s why you’ll often hear revenue referred to as “the top line”). Revenue is the total amount of money you’ve earned coming into your business over a set period of time. It is NOT the total amount of cash coming into your business. Cash can come into your business for a variety of reasons, like financings, advance payments for services to be rendered in the future, payments of invoices sent months ago.

There is a very important, but highly technical, concept called revenue recognition. Revenue recognition determines how much revenue you will put on your accounting statements in a specific time period. For a startup company, revenue recognition is not normally difficult. If you sell something, your revenue is the price at which you sold the item and it is recognized in the period in which the item was sold. If you sell advertising, revenue is the price at which you sold the advertising and it is recognized in the period in which the advertising actually ran on your media property. If you provide a subscription service, your revenue in any period will be the amount of the subscription that was provided in that period.

This leads to another important concept called “accrual accounting.” When many people start keeping books, they simply record cash received for services rendered as revenue. And they record the bills they pay as expenses. This is called “cash accounting” and is the way most of us keep our personal books and records. But a business is not supposed to keep books this way. It is supposed to use the concept of accrual accounting.

Let’s say you hire a contract developer to build your iPhone app. And your deal with him is you’ll pay him $30,000 to deliver it to you. And let’s say it takes him three months to build it. At the end of the three months you pay him the $30,000. In cash accounting, in month three you would record an expense of $30,000. But in accrual accounting, each month you’d record an expense of $10,000 and because you aren’t actually paying the developer the cash yet, you charge the $10,000 each month to a balance sheet account called Accrued Expenses. Then when you pay the bill, you don’t touch the P&L, its simply a balance sheet entry that reduces Cash and reduces Accrued Expenses by $30,000.

The point of accrual accounting is to perfectly match the revenues and expenses to the time period in which they actually happen, not when the payments are made or received.

With that in mind, let’s look at the second part of the P&L, the expense section. In the Google P&L above, expenses are broken out into several categories; cost of revenues, R&D, sales and marketing, and general and administration. You’ll note that in 2005, there was also a contribution to the Google Foundation, but that only happened once, in 2005.

The presentation Google uses is quite common. One difference you will often see is the cost of revenues applied directly against the revenues and a calculation of a net amount of revenues minus cost of revenues, which is called gross margin. I prefer that gross margin be broken out as it is a really important number. Some businesses have very high costs of revenue and very low gross margins. And example would be a retailer, particularly a low price retailer. The gross margins of a discount retailer could be as low as 25%.

Google’s gross margin in 2009 was roughly $14.9bn (revenue of $23.7bn minus cost of revenues of $8.8bn). The way gross margin is most often shown is as a percent of revenues so in 2009 Google’s gross margin was 63% (14.9bn divided by 23.7). I prefer to invest in high gross margin businesses because they have a lot of money left after making a sale to pay for the other costs of the business, thereby providing resources to grow the business without needing more financing. It is also much easier to get a high gross margin business profitable.

The other reason to break out “cost of revenues” is that it will most likely increase with revenues whereas the other expenses may not. The non cost of revenues expenses are sometimes referred to as “overhead”. They are the costs of operating the business even if you have no revenue. They are also sometimes referred to as the “fixed costs” of the business. But in a startup, they are hardly fixed. These expenses, in Google’s categorization scheme, are R&D, sales and marketing, and general/admin. In layman’s terms, they are the costs of making the product, the costs of selling the product, and the cost of running the business.

The most interesting line in the P&L to me is the next one, “Income From Operations” also known as “Operating Income.” Income From Operations is equal to revenue minus expenses. If “Income From Operations” is a positive number, then your base business is profitable. If it is a negative number, you are losing money. This is a critical number because if you are making money, you can grow your business without needing help from anyone else. Your business is sustainable. If you are not making money, you will need to finance your business in some way to keep it going. Your business is unsustainable on its own.

The line items after “Income From Operations” are the additional expenses that aren’t directly related to your core business. They include interest income (from your cash balances), interest expense (from any debt the business has), and taxes owed (federal, state, local, and possibly international). These expenses are important because they are real costs of the business. But I don’t pay as much attention to them because interest income and expense can be changed by making changes to the balance sheet and taxes are generally only paid when a business is profitable. When you deduct the interest and taxes from Income From Operations, you get to the final number on the P&L, called Net Income.

I started this post off by saying that the P&L is “one of the most important things in business.” I am serious about that. Every business needs to look at its P&L regularly and I am a big fan of sharing the P&L with the entire company. It is a simple snapshot of the health of a business.

I like to look at a “trended P&L” most of all. The Google P&L that I showed above is a “trended P&L” in that it shows the trends in revenues, expenses, and profits over five years. For startup companies, I prefer to look at a trended P&L of monthly statements, usually over a twelve month period. That presentation shows how revenues are increasing (hopefully) and how expenses are increasing (hopefully less than revenues). The trended monthly P&L is a great way to look at a business and see what is going on financially.

I’ll end this post with a nod to everyone who commented last week that numbers don’t tell you everything about a business. That is very true. A P&L can only tell you so much about a business. It won’t tell you if the product is good and getting better. It won’t tell you how the morale of the company is. It won’t tell you if the management team is executing well. And it won’t tell you if the company has the right long term strategy. Actually it will tell you all of that but after it is too late to do anything about it. So as important as the P&L is, it is only one data point you can use in analyzing a business. It’s a good place to start. But you have to get beyond the numbers if you really want to know what is going on.

The Balance Sheet

The Balance Sheet shows how much capital you have built up in your business.

If you go back to my post on Accounting, you will recall that there are two kinds of accounts in a company’s chart of accounts; revenue and expense accounts and asset and liability accounts.

Last week we talked about the Profit and Loss statement which is a report of the revenue and expense accounts.

The Balance Sheet is a report of the asset and liability accounts. Assets are things you own in your business, like cash, capital equipment, and money that is owed to you for products and services you have delivered to customers. Liabilities are obligations of the business, like bills you have yet to pay, money you have borrowed from a bank or investors.

Here is Google’s balance sheet as of 12/31/2009:

Google balance sheet

Let’s start from the top and work our way down.

The top line, cash, is the single most important item on the balance sheet. Cash is the fuel of a business. If you run out of cash, you are in big trouble unless there is a “filling station” nearby that is willing to fund your business. Alan Shugart, founder of Seagate and a few other disk drive companies, famously said “cash is more important than your mother.” That’s how important cash is and you never want to get into a situation where you run out of it.

The second line, short term investments, is basically additional cash. Most startups won’t have this line item on their balance sheet. But when you are Google and are sitting on $24bn of cash and short term investments, it makes sense to invest some of your cash in “short term instruments”. Hopefully for Google and its shareholders, these investments are safe, liquid, and are at very minimal risk of loss.

The next line is “accounts receivable”. Google calls it “net receivables’ because they are netting out money some of their partners owe them. I don’t really know why they are doing it that way. But for most companies, this line item is called Accounts Receivable and it is the total amount of money owed to the business for products and services that have been delivered but have not been collected. It’s the money your customers owe your business. If this number gets really big relative to revenues (for example if it  represents more than three months of revenues) then you know something is wrong with the business. We’ll talk more about that in an upcoming post about financial statement analysis.

I’m only going to cover the big line items in this balance sheet. So the next line item to look at is called Total Current Assets. That’s the amount of assets that you can turn into cash fairly quickly. It is often considered a measure of the “liquidity of the business.”

The next set of assets are “long term assets” that cannot be turned into cash easily. I’ll mention three of them.  Long Term Investments are probably Google’s minority investments in venture stage companies and other such things. The most important long term asset is “Property Plant and Equipment” which is the cost of your capital equipment. For the companies we typically invest in, this number is not large unless they rack their own servers. Google of course does just that and has spent $4.8bn to date (net of depreciation) on its “factory”. Depreciation is the annual cost of writing down the value of your property plant and equipment. It appears as a line in the profit and loss statement. The final long term asset I’ll mention is Goodwill. This is a hard one to explain. But I’ll try. When you purchase a business, like YouTube, for more than it’s “book value” you must record the difference as Goodwill.  Google has paid up for a bunch of businesses, like YouTube and Doubleclick, and it’s Goodwill is a large number, currently $4.9bn. If you think that the value of any of the businesses you have acquired has gone down, you can write off some or all of that Goodwill. That will create a large one time expense on your profit and loss statement.

After cash, I believe the liability section of the balance sheet is the most important section. It shows the businesses’ debts. And the other thing that can put you out of business aside from running out of cash is inability to pay your debts. That is called bankruptcy. Of course, running out of cash is one reason you may not be able to pay your debts. But many companies go bankrupt with huge amounts of cash on their books. So it is critical to understand a company’s debts.

The main current liabilities are accounts payable and accrued expenses. Since we don’t see any accrued expenses on Google’s balance sheet I assume they are lumping the two together under accounts payable. They are closely related. Both represent expenses of the business that have yet to be paid. The difference is that accounts payable are for bills the company receives from other businesses. And accrued expenses are accounting entries a company makes in anticipation of being billed. A good example of an accounts payable is a legal bill you have not paid. A good example of an accrued expense is employee benefits that you have not yet been billed for that you accrue for each month.

If you compare Current Liabilities to Current Assets, you’ll get a sense of how tight a company is operating. Google’s current assets are $29bn and its current liabilities are $2.7bn. It’s good to be Google, they are not sweating it. Many of our portfolio companies operate with these numbers close to equal. They are sweating it.

Non current liabilities are mostly long term debt of the business. The amount of debt is interesting for sure. If it is very large compared to the total assets of the business its a reason to be concerned. But its even more important to dig into the term of the long term debt and find out when it is coming due and other important factors. You won’t find that on the balance sheet. You’ll need to get the footnotes of the financial statements to do that. Again, we’ll talk more about that in a future post on financial statement analysis.

The next section of the balance sheet is called Stockholders Equity. This includes two categories of “equity”. The first is the amount that equity investors, from VCs to public shareholders, have invested in the business. The second is the amount of earnings that have been retained in the business over the years. I’m not entirely sure how Google breaks out the two on it’s balance sheet so we’ll just talk about the total for now. Google’s total stockholders equity is $36bn. That is also called the “book value” of the business.

The cool thing about a balance sheet is it has to balance out. Total Assets must equal Total Liabilities plus Stockholders Equity. In Google’s case, total assets are $40.5bn. Total Liabilities are $4.5bn. If you subtract the liabilities from the assets, you get $36bn, which is the amount of stockholders equity.

We’ll talk about cash flow statements next week and the fact that a balance sheet has to balance can be very helpful in analyzing and projecting out the cash flow of a business.

In summary, the Balance Sheet shows the value of all the capital that a business has built up over the years. The most important numbers in it are cash and liabilities. Always pay attention to those numbers. I almost never look at a profit and loss statement without also looking at a balance sheet. They really should be considered together as they are two sides of the same coin.

Cash Flow

The standard form of a cash flow statement is a bit hard to comprehend in my opinion and I don’t think it does a very good job of describing the various aspects of cash flow in a business.

That said, let’s start with the concept of cash flow and we’ll come back to the accounting treatment.

Cash flow is the amount of cash your business either produces or consumes in a given period, typically a month, quarter, or year. You might think that is the same as the profit of the business, but that is not correct for a bunch of reasons.

The profit of a business is the difference between revenues and expenses. If revenues are greater than expenses, your business is producing a profit. If expenses are greater than revenues, your business is producing a loss.

But there are many examples of profitable businesses that consume cash. And there are also examples of unprofitable businesses that produce cash, at least for a period of time.

Here’s why.

As I explained in the Income Statement post, revenues are recognized as they are earned, not necessarily when they are collected. And expenses are recognized as they are incurred, not necessarily when they are paid for. Also, some things you might think of as expenses of a business, like buying servers, are actually posted to the Balance Sheet as property of the business and then depreciated (ie expensed) over time.

So if you have a business with significant hardware requirements, like a hosting business for example, you might be generating a profit on paper but the cash outlays you are making to buy servers may mean your business is cash flow negative.

Another example in the opposite direction would be a software as a service business where your company gets paid a year in advance for your software subscription revenues. You collect the revenue upfront but recognize it over the course of the year. So in the month you collect the revenue from a big customer, you might be cash flow positive, but your Income Statement would show the business operating at a loss.

Cash flow is really easy to calculate. It’s the difference between your cash balance at the start of whatever period you are measuring and the end of that period. Let’s say you start the year with $1mm in cash and end the year with $2mm in cash. Your cash flow for the year is positive by $1mm. If you start the year with $1mm in cash and end the year with no cash, your cash flow for the year is negative by $1mm.

But as you might imagine the accounting version of the cash flow statement is not that simple. Instead of getting into the standard form, which as I said I don’t really like, let’s talk about a simpler form that gets you to mostly the same place.

Let’s say you want to do a cash flow statement for the past year. You start with your Net Income number from your Income Statement for the year. Let’s say that number is $1mm of positive net income.

Then you look at your Balance Sheet from the prior year and the current year. Look at the Current Assets (less cash) at the start of the year and the Current Assets (less cash) at the end of the year. If they have gone up, let’s say by $500,000, then you subtract that number from your Net Income. The reason you subtract the number is your business used some of your cash to increase its current assets. One typical reason for that is your Accounts Receivable went up because your customers are taking longer to pay you.

Then look at your Non-Current Assets at the start of the year and the end of the year. If they have gone up, let’s say by $500k, then you also subtract that number from your Net Income. The reason is your business used some of your cash to increase its Non-Current Assets, most likely Property, Plant, and Equipment (like servers).

At this point, halfway through this simplified cash flow statement, your business that had a Net Income of $1mm produced no cash because $500k of it went to current assets and $500k of it went to non-current assets.

Liabilities work the other way. If they go up, you add the number to Net Income. Let’s start with Current Liabilities such as Accounts Payable (money you owe your suppliers, etc). If that number goes up by $250k over the course of the year, you are effectively using your suppliers to finance your business. Another reason current liabilities could go up is Deferred Revenue went up. That would mean you are effectively using your customers to finance your business (like that software as a service example earlier on in this post).

Then look at Long Term Liabilities. Let’s say they went up by $500k because you borrowed $500k from the bank to purchase the servers that caused your Non-Current Assets to go up by $500k. So add that $500k to Net Income as well.

Now, the simplified cash flow statement is showing $750k of positive cash flow. But we have one more section of the Balance Sheet to deal with, Stockholders Equity. For Stockholders Equity, you need to back out the current year’s net income because we started with that. Once you do that, the main reason Stockholders Equity would go up would be an equity raise. Let’s say you raised $1mm of venture capital during the year and so Stockholder’s Equity went up by $1mm. You’d add that $1mm to Net Income as well.

So, that’s basically it. You start with $1mm of Net Income, subtract $500k of increased current assets, subtract $500k of increased non-current assets, add $250k of increased current liabilities, add $500k of increased long-term liabilities, and add $1mm of increased stockholders equity, and you get positive cash flow of $1.75mm.

Of course, you’ll want to check this against the cash balance at the start of the year and the end of the year to make sure that in fact cash did go up by $1.75mm. If it didn’t, then you have to go back and check your math.

So why would anyone want to do the cash flow statement the long way if you can simply compare cash at the start of the year and the end of the year? The answer is that doing a full-blown cash flow statement tells you a lot about where you are consuming or producing cash. And you can use that information to do something about it.

Let’s say that your cash flow is weak because your accounts receivable are way too high. You can hire a dedicated collections person. You can start cutting off customers who are paying you too late. Or you can do a combination of both. Bringing down accounts receivable is a great way to improve a business’ cash flow.

Let’s say you are spending a boatload on hardware to ramp up your web service’s capacity. And it is bringing your cash flow down. If you are profitable or have good financial backers, you can go to a bank and borrow against those servers. You can match non-current assets to long-term liabilities so that together they don’t impact the cash flow of your business.

Let’s say your current liabilities went down over the past year by $500k. That’s a $500k reduction in your cash flow. Maybe you are paying your bills much more quickly than you did when you started the business and had no cash. You might instruct your accounting team to slow down bill payment a bit and bring it back in line with prior practices. That could help produce better cash flow.

These are but a few examples of the kinds of things you can learn by doing a cash flow statement. It’s simply not enough to look at the Income Statement and the Balance Sheet. You need to understand the third piece of the puzzle to see the business in its entirety.

One last point and I am done with this week’s post. When you are doing projections for future years, I encourage management teams to project the income statement first, then the cash flow statement, and then end up with the balance sheet. You can make assumptions about how the line items in the Income Statement will cause the various Balance Sheet items to change (like Accounts Receivable should be equal to the past three months of revenue) and then lay all that out as a cash flow statement and then take the changes in the various items in the cash flow statement to build the Balance Sheet. I like to do that in monthly form. We’ll talk more about projections next week because I think this is a very important subject for startups and entrepreneurial management teams to wrap their heads around.

 

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Business Trends

I Use QuickBooks – Do I also Need an Accountant?

I Use QuickBooks – Do I also Need an Accountant?

The traditional role of an accountant is changing. In previous years a small business would class a good accountant as one of the fundamental requirements when starting a business. Their support and guidance towards all matters connected with the set up and launch of a business was perceived as essential in order for a small business to be ultimately successful. The perceived importance of the role accountant’s play with small business has been increasingly bought into question as the internet has grown and developed. The advice that accountants used to charge for regarding company formation, company structure and VAT registration is now largely available for free on the internet. Furthermore, the rise in online accounting software has made it easier than ever for a small business to keep their company books in good shape. We wanted to explore why more and more small businesses are choosing to use online accounting software and how this has impacted the traditional role of the accountant.

Why are business owners using online accounting software?

  • Cost – When the accounting and bookkeeping world was inaccessible to owners of small business the large cost burden of having a professional accountant was seen as simply a core running cost of the business. The cost structures of accountants differ widely from per hour, fixed fees for defined work and some even charge by the minute for telephone calls. Whatever the cost structure having an accountant look after all of you small business financial affairs will be a significant burden to your cost and business profits. Basic software for accounting can be available from as little as $50 a month.
  •  Time Schedules – A piece of software can continue working 24 hours a day whereas an accountant has set schedules and opening times. As a small business you will very rarely be working to a 9-5 schedule and therefore having the rigid nature of accountant opening hours can be frustrating. Even more so if a deadline is required that requires an accountants help and you are charged overtime for an accountant working out of hours.
  • Ease of use – Software for accounting has become very user friendly with many products available that do not require the user to have any accounting knowledge at all. This allows tradesman and sole traders to be able to easily to control of their financial affairs.
  • Improved business Performance – There can be real business performance advantages of taking control of the company finances as opposed to outsourcing them.
  • Accountability – An obvious advantage of taking control of you financial affair is that there becomes greater accountability to deliver. Software for accounting allows small business owners to be much closer to the financial affairs than when they are outsourced.
  •  Collaboration – one of the risks out outsourcing all financial management to an accountant is that it stifles people from within the business talking and engaging about disciplined financial management. Taking control of financial affairs internally within the business increases engagement and collaboration across the business to improve the company’s financial performance.

If more businesses are using online accounting software is there a role for traditional accountant?

In short, yes, but in a different capacity to how they have traditionally been deployed. Accountants need to focus less on the bookkeeping and daily accounting of small businesses and focus more on the provision of advice that optimizes business performance. Subject Matter Experts (SME’s) are becoming well versed in the many advantages that exist within doing your own accounting via an easy to use, cost effective software package. That said, many small business owners still have a requirement to discuss future business optimization with a financial planning expert.

Software cannot possibly understand a business’s objectives and work with the owners to produce a strategy to optimize performance. Nor can a software package proactively restructure the company books to save tax as the company grows and develops. Once a small business is established they would benefit from advice from an ‘auditor’ regarding business structures, financial efficiency and tax planning. This annual audit ensures that the business is on the right track for sustainable growth and success.

Software allows small business to complete their day to day accounting enabling the owners to stay close to their financial affairs at a fraction of the price of an accountant. However, a good accountant can engage with the owner about optimizing the business to ensure that the right plan for growth exists. This type of engagement with an accountant can be done as a cost effective fixed fee arrangement which can be easily planned and budgeted for within the company accounts. The answer to whether a small business should have an accountant or accounting software is – they should have both but deployed for different purposes.

Good Practices for Choosing an Accountant

Here are some tips for avoiding common pitfalls and needless headaches in your search for a small business accountant:

  • Determine your needs

    There is no one-size-fits-all method for managing small business finances. Make sure that your accountant specializes in small businesses, and ideally has knowledge of your industry.  Beyond that, you will need to decide what level of support is appropriate and affordable for your business. Enrolled agents, certified public accountants, and tax attorneys bring different skills and charge different rates.

  • Just ask!

    Word of mouth is a good way to find good accountants. Talk to your family, friends, peers, even your attorney for recommendations. You can also inquire with institutions and organizations like the American Institute of Certified Public Accountants*, your state Board of Accountants, or a local Chamber of Commerce.

  • Interview your candidates
    Remember that you are hiring someone that will fulfill your business needs and requirements. Treat it like a job interview that you would give to any potential employee. Ask about:
  • Professional qualifications like their licenses and experience
  • Personnel who will actually do the work, and their response times
  • Fees and charges to make sure they are in line with your budget
  • Specialized services that you may want in the future – for example, audit support
  • Clientele (past and current) so you can gauge their expertise

 

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Business Trends

Ways to find a Good Tax Accountant

Ways to find a Good Tax Accountant

Letting an tax accountant take over your finances makes sense as their experience and knowledge can make your money go further. However, finding a good tax accountant can be tough as you are putting your finances and personal information into their hands, and trusting they will take care of you now, and in the future.

Tax Accountants can work for large businesses or for themselves, get yourself a good one and you should find they save you a lot of money in tax payments, as long as they know what they’re doing. They’ll also be able to assist with various other issues that are important and can’t really be ignored, such as tax, financial planning, business consulting, and more.

When searching for good tax accountants there are various ways you can narrow the field down.

First ask your friends and business associates if they have anyone they can recommend, if they have had the same person for years and are happy with their service then they might also work for you. Also look through the www.google.com  for businesses near you, or for convenience and speed, check online as most companies these days have a web presence and should list their areas of skills, expertise and professional services on their website.

Once you have a list of possibilities, contact them for further information and arrange an interview. Queries should be answered quickly and professionally, if they can’t do this then forget about them and move on. If the company is quite large then find out who will be assigned to you, it’s essential you get on well with your tax accountant as you need to tell them everything regarding your financial issues.

They also have to be aware of your life goals, this involves everything, from your business needs now and in the future to your personal goals and future plans. If your dream is to retire abroad then you need to let them know, being aware of your plans and hopes will mean they have a better understanding of you and can find ways to save you money and give advice based on this information. Someone who takes the time to get to know you will be more proficient at delivering a totally focused and customised service.

Always check out the tax accountant qualifications, they should have a recognised professional qualification, such as the American Institute of  Certified Public Accountants.

It’s advised you choose a firm that have been established for some years. If a company is new it can be more difficult to find out if they are reliable or ask for references. An advantage to choosing a bigger company is that you aren’t reliant on just 1 person, if there is a problem or that person has to be away for an extended period then your finances will still be dealt with.

You tax accountant should have some experience and knowledge in your area of work or interest. There are so many aspects, from self managed funds, investment advice, retirement planning, business management, strategic planning and so on, that it’s nearly impossible to find someone who is knowledgeable about everything. Everyone has different needs and it’s important you find someone who can assist you with yours.

For example, if you need a tax accountant to process your individual tax returns they should be able to ensure you get maximum tax benefits and explore other ways to save money. They are there to help you minimize your tax payments and advice you on other financial matters that will benefit you.

If the tax accountant you have chosen meets all your criteria, is agreeable, gives you advice and information in easy to understand terms, and is ready to answer all your questions, then you should consider signing up for their services.

Look for firms online that are committed to clients and can assist with business, tax and financial planning solutions. Whether you are an individual, a family business, or a small enterprise a good tax accountant can ensure you legally pay the lowest tax possible.

 

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Business Trends

Warning Signs it’s Time to Change Your Accountant

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CPA

Warning Signs it’s Time to Change Your Accountant

Are you considering firing your current Accountant in favor of a new one? If so, you’re probably not sure if you’re overreacting or if you have just cause. The following warning signs will help you decide if it is time for you to change accountants: Your accountant does not return your phone calls in a timely manner, if at all.The bottom line here is you have hired your accountant to work for you. If he/she is not returning your telephone calls, or waits until you’ve left several messages before calling you back, take this seriously. A few incidents here and there are not something to worry about, as your accountant likely has many other clients and may not be in the office for days at a time. However, if not returning phone calls are the normal state of affairs, you will want to set up an appointment to discuss your concerns.

Your accountant is never in the office.

This could mean he or she is very busy and out with other clients the majority of the time. It could also mean they do not take their business, or your business, very seriously. Regardless, if you have a difficult time connecting with your accountant, it may be time to look for someone who has more time in their schedule to see to your needs.

Your accountant never delivers your financial statements or income taxes or other forms to you on time.

This is not a good scenario! You have hired your accountant to be on top of the financial aspects of your business. If they are not able to get your forms to you on time, you need to first ask yourself if it is your fault. If you are late getting them the material they need, then it probably has little to do with them, but if they have everything they require from you with ample time – and are still consistently late, you will probably want to consider changing accountants.

Your accountant does not take the time to discuss your financial reports with you.

This is your business. You have the right to understand your financial reports, and if your accountant is unwilling to schedule the time to go over them with you, this is a warning sign you shouldn’t ignore. Think of it this way if you don’t understand your reports, then you can’t feel confident that the IRS is getting correct information. It is essential to your peace of mind, and to your business, that you understand all of your financial reports.

The staff member accountant assigned to your account does not seem competent.

If staff is unable to answer your questions, or if you seem to know more about the accounting aspects of your business than they do, you should request a different person to handle your accounts. If this is unable to be done, you may want to consider switching accountants.

You begin to receive a lot of IRS notices in the mail.

This is a serious warning sign. If the IRS is sending you repeated notices, then your business’s financial affairs are not being taken care of correctly. Too many of these notices, and your business will be red-flagged by the IRS, which could lead to years of issues every time a form is filed. Speak with your accountant and demand to know what the problem is. If you are unsatisfied with the answers, it is time to search for a new accountant.

Trust your instincts.

Often overlooked, but it shouldn’t be. If your instincts are telling you something isn’t right, pay attention.

With any of the above warning signs, it is always best to speak with your accountant about the issues at hand first. Sometimes, you may gain a clearer understanding and then feel more comfortable, but if you don’t, you need to move on. Changing accountants isn’t easy, but if it is the right decision, then it is absolutely what you must do.

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Business Trends

Do I Need an Accountant or CPA?

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CPA

Do I Need an Miami Accountant or CPA?

If you’re like most Americans you probably have a good handle on completing your income taxes on your own. Over the years it has become incredibly easy for anyone with a computer thanks to TurboTax to sit down and go through their tax documents instead of hiring a CPA, enter information as the software asks questions, and then even file your return instantly online. For those of you with relatively simple tax circumstances, this is the ideal way to go. The software is inexpensive, most of the questions asked can be easily answered in an hour or two, and there’s very little opportunity for error. It sure beats the days of sitting down with paper forms and spending a few days doing your taxes by hand!

But what about those with slightly more complex financial situations? Sure, there are more robust versions of tax software available such as TurboTax’s Home & Business, Property Manager, and so on. These solutions go into greater depth to help you account for less traditional sources of income and expenses. With more complex finances comes more time and money required to get through the tax filing process, not to mention more room for error. So, at what point does it become cost-effective to make the move from doing your own taxes with the help of software to hiring an CPA?

A CPA Clients Personal Tax Story

As soon as he was on his own he began using tax software to do his own taxes. He used TurboTax software and it did a great job. For a few years during college his finances were so simple and his income and deductions were so trivial that he could spend under $50 and just about an hour and get his taxes done. Those were the good ol’ days. As time went on his finances started to get a little more complicated. For a few years he was a member of an LLC in addition to working part-time. This created a few unique scenarios that made doing his taxes a little more complicated, yet he was still comfortable in handling it on his own. As the years went on he moved on to where his wife and him just had regular salary jobs, no house, no kids, no odd circumstances, so doing my taxes again became as easy as sitting down at the computer for an hour and plugging in a few numbers.

Then, things started to change as he started to dabble in freelance work and other self-employment ventures. The first few years were easy because it was more of a hobby and the income and expenses generated from the freelance work were trivial. As time went on, more sources of income started coming in, and additional expenses started adding up, his tax returns became more of a nightmare. Sure, the software could still handle it, but he was spending more time tracking down documents, receipts, and trying to find deductions because the tax bill at the end of the year was growing significantly. One year after putting in all of his data the tax software said he owed the IRS nearly $4,000. That’s impossible, he thought. They had as much taken out of our paychecks as possible through work, he was paying estimated quarterly taxes, and was itemizing deductions so that they could deduct as much as possible. There had to be a glitch in the software so he plugged the numbers in over and over for about a week straight only to come to the same result.

With that, he knew it was time to seek professional help. They asked around with some friends and co-workers about CPAs that specialize in small businesses accounting and self-employed taxpayers, and he made a few calls around and interviewed a few of them. they eventually found one not too far down the road and their name came up a few different times from the people they asked. So, he set up an appointment. After sitting down with the CPA for about an hour discussing our situation, looking over some numbers, and doing some calculations I knew he could help me. A few days later he was thrilled when I called him stating that he now only owed somewhere in the neighborhood of $2,500. Wow, that phone call and meeting just saved him about $1,500. Sure, the cost of having my taxes done increased compared to doing it myself, but at around $200 it was some of the best money I ever spent.

When Should You Consider Hiring an CPA For Your Taxes?

He shared his story just to give you one scenario where making the move to hire a professional CPA can be a good decision. He’s a pretty savvy guy when it comes to finances, but he admit that he did not do a great deal with taxes on a daily basis. He thought he had enough knowledge with the assistance of tax preparation software to get the job done right, but clearly someone who does this stuff for a living can still do it better than he can. While it was the right decision for him, it may or may not be the right decision for you.

To start off, he wants to make one thing clear. There is a difference between an CPA and just a tax preparer. As tax season kicks into gear in a few months you’ll begin to see advertisements pop up with tax preparers in your area who will do your taxes for you at a cost. Keep in mind that when dealing with one of these places you probably aren’t going to get a full-blown accountant or CPA. Instead, you’ll likely have someone who is qualified to handle returns, but they will likely do little more than ask you the same questions that software you buy on your own does and then plug in the numbers. While it’s nice to get some one-on-one time with someone, you also want to keep in mind that this person is more or less just trying to get your taxes done, not assess your financial situation and help you put together tax strategies going forward.So remember, there are accountants that do taxes, and there are people who do taxes that aren’t accountants.

Here are a few scenarios when it might make sense to start looking for professional CPA tax help:

1. You own a business.

Self-employed individuals stand to see the greatest return when hiring an CPA. Running a business presents a lot of unique situations that can have a significant impact on your taxes. Being self-employed also opens the door for a new world of deductions, credits, and retirement account planning that you may not be used to. While you can certainly find this information online, having someone who does this for a living will save you time and maybe even some money. In addition to just helping you find all the available deductions and paying the IRS as little as possible an CPA can be tremendously helpful in working with you to structure your business as best as possible, putting together a plan for the future to help you take advantage of tax breaks in the coming year, and being there for you if you encounter problems down the road.

2. Going through a major life change.

If you’ve been plugging alone for the past few years with basically the same financial situation there’s obviously little need to pay someone to do what you’re already comfortable doing. But when you encounter a major life-changing event in the middle of a tax year it could lead to an unpleasant surprise come tax time. Getting married, divorced, changing jobs, having children, receiving an inheritance, preparing to retire, etc. These are the things that can change your financial situation in a heartbeat and if you aren’t prepared it could end up costing you dearly.

3. Real estate or taxable investment dealings.

Do you own a rental property? If so, a CPA will be your best friend. Owning a rental opens up a lot of special tax situations that you’ll surely want to take advantage of and make sure you aren’t making any mistakes. The same thing can go for just buying and selling a home or other real estate. While the laws are pretty straightforward, it’s usually a large transaction in terms of dollars so you want to make sure you’re doing everything properly. Finally, let’s not forget tracking gains and losses on taxable investments. If you buy and sell stocks, bonds, mutual funds, or anything else throughout the year in a taxable account you’re going to have a lot of things to consider. Long-term vs. short-term gains and losses, dividends taxed at a different rate, cost basis, the wash rule, and so on. Sure, you can do this on your own, but how much time will it take and are you sure you’ll catch everything? The time saved by hiring a professional alone may pay for itself.

Don’t Be Afraid to Get Help from a CPA

For people who like to and are proud of doing things themselves it can be difficult to make the decision to seek outside help. Don’t let that get in the way of doing what’s best for your finances. Sure, the majority of people will be just fine doing their own taxes. If that’s you, grab the latest edition of TurboTax or H&R Block At Home. It’s still the easiest and cheapest way to do your taxes. But for those of you who may have finances that are a little more complex, are self-employed, or would otherwise just like to outsource your tax preparation don’t be afraid to get a CPA to help. At most it will probably only cost a couple hundred dollars compared to buying software and e-filing yourself, and chances are you save that much or more on deductions and tax strategies you overlooked by doing it on your own. Whatever you do, make sure you get an early start so you don’t miss the tax filing deadline!

 

Categories
Tax

13 Tips to Finding the Right Tax Preparer Miami Team

13 Tips to Finding the Right Tax Preparer Miami Team

How do you find an Income Tax Preparer Miami Team that is right for you? First, income Tax Preparer Miami are not all the same.

First, not all Tax Preparer Miami are the same.

I previously wrote an article about this last year titled: “Tax Preparer Miami – Are they really all created equal”, and you may be as surprised as other readers about just how much tax return preparation can vary.
In fact, I calculated the average savings I typically find from annual tax savings, reducing professional fees and audit assessments. In total, the average savings are:
– $23,750 Annual tax savings
– $5,000 Audit defense savings
– $10,000 Reduced audit assessment savings
– $50,000 Reduced legal fees
– $3,000 Reduced tax return preparation Miami (average) fees
This is a total average potential savings of $91,750! Your tax preparer does make a difference! How much more could you do with these savings?
Second, the right tax preparer for you depends on what is important to you. Take a minute to answer this question:

WHAT MAKES YOUR INCOME TAX PREPARER MIAMI SUCCESSFUL?

How you answer this question will impact what type of Tax Preparer Miami team you need. I’ve asked these questions to clients, prospects and colleagues. I have compiled the most popular answers and what it means to you as you find the Income tax preparer Miami for your team.

ANSWER #1: Paying the least amount of tax legally
Your Income Tax Preparer Miami team needs to:
– Know the tax law very well and know how to be creative legally.
– Ask you a lot of questions about your situation in order to understand your situation and goals.
– Have a review process where at least one other person reviews your return solely for the purpose of how to reduce your taxes legally.
HERE ARE SEVEN (7) QUESTIONS YOU SHOULD ASK YOUR INCOME TAX PREPARER MIAMI TEAM TO DETERMINE IF IT’S A GOOD FIT:
Q1: Can you tell me about the other (your industry) you service?
A: Your Tax Preparer Miami needs to know how the tax law applies to your situation. Having other clients in your industry or with similar investments indicates that the tax preparer is likely to be familiar with the tax laws that impact you.
Q2: Who will be working on my income tax return?
A: It’s very common (and a good business practice) for income tax preparers in Miami to have staff prepare your tax return. You want to make sure the other people working on your return have the same level of expertise.
Q3: What is your tax return review process?
A: Tax Preparer Miami who are focused on reducing your taxes will have this built into their review process. Usually it involves having another experienced tax preparer review the return solely for the purpose of finding ways to reduce your taxes.
Q4: What would you have done differently on my past tax return?

A: Show the income tax preparer Miami you are interviewing your prior year tax return. Creative income Tax Preparer Miami will be able to give you at least one idea of what you can do to reduce your taxes by looking at your tax return for just a few minutes. If it’s creativity you are after, this is a great question to ask! But don’t expect the income tax preparer Miami to give you all the details right then and there – that’s why you pay them!
Q5: How much can you save me in taxes?
A: While it’s difficult for any income Tax Preparer Miami to answer this in just a few minutes of looking at your past tax return, it is possible for them to know if they can save you taxes after spending 30 minutes with you.

Q6: What deadlines do you impose on clients?
A: This may seem like an odd question for minimizing your taxes but it has a direct impact. If your income tax preparer in Miami allows you to provide your information a week before the tax return is due, it’s very unlikely that the income tax preparer Miami will have the time to focus on your return to truly minimize your taxes. Income Tax preparers in Miami that want to reduce your taxes want your tax return information early and will communicate that to you.
Q7: What recent tax law changes should I be aware of?  A: To minimize your taxes, your tax preparer needs to know the tax law inside and out, which includes the latest changes? Your tax preparer needs to be able to answer this question without hesitation.
ANSWER #2: Minimizing tax return preparation fees your tax preparer needs to:
– Focus on the tax work and recommend someone else for the non-tax work (such as bookkeeping).
– Request tax information in a certain format.
– Require you to input your information online.

HERE ARE TWO (2) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER MIAMI REGARDING MINIMIZING RETURN PREPARATION FEES TO DETERMINE IF IT’S A GOOD FIT:

Q1: What can I do to reduce my tax return preparation fees?
A: To minimize your tax return preparation fees, your tax preparer always needs to have your fees in mind. Ask your tax preparer what you can do to reduce your fees. If you don’t get at least 2 suggestions, your tax preparer probably isn’t thinking about how to keep your fees low.
Common suggestions include:
– Have someone other than the tax preparer do your bookkeeping. I am always skeptical when a tax preparer does the bookkeeping. First, they either charge an arm and leg or if they reduce their rates to accommodate you, it means they don’t spend their time entirely on tax issues, which could indicate their tax skills aren’t up to par.
– Organize your information. Don’t bring your tax preparer a shoebox! A tax preparer that is really focused on keeping your fees down will have forms, spreadsheets and other tools available for you to use to organize your tax return information.
– Enter your information online. Many tax preparers now require clients to input their information online. Accurately entered information can help reduce fees. Caution: Information that is entered inaccurately can increase your fees!
Q2: What is your fee structure?
A: Your tax preparer needs to be able to answer this question with confidence. Any wavering could indicate that the tax preparer knows the fees are too high for you but just doesn’t want to tell you. Unfortunately in these situations, you find out too late!
ANSWER #3: Reducing audit risk your tax preparer needs to:
– Know the tax law very well and how to properly report your activity.
– Understand the IRS’s current “hot buttons” or “red flags.”
– Offer an audit defense plan.

HERE ARE FOUR (4) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER MIAMI IN REGARDS TO REDUCING AUDIT RISK TO DETERMINE IF IT’S A GOOD FIT:

Q1: How many audits have you been through and what triggered the audit?
A: The most important part of this question is what triggered the audit. If it was triggered by how something was reported, then that may be something the tax preparer had control over (and may be a bad sign for you).
Q2: What was the outcome of the audits you have been through?
A: A return can be randomly selected for audit or selected because of a certain activity (even though it was reported correctly). So it’s important to understand the outcome of the audits. Was additional tax assessed or were there no changes? Additional tax may indicate that something was not reported properly.
Q3: Do you offer an audit defense plan?
A: Tax preparers that are confident in their work will offer an “insurance” program that covers their professional fees to handle your audit if your return is selected for audit.
Q4: What is your tax return review process?
A: Although tax returns can be selected randomly for audit, many are selected due to how items are reported on the tax return. Tax preparers who are focused on reducing audit risk will have a review process that includes another tax preparer reviewing your return solely for accuracy of reporting.
Be selective with the tax preparer you put on your team. The average savings I find for my clients is over $90,000! Your tax preparer makes a difference!

 

Categories
Medicare

ZPIC Audits- Do I need a CPA?

ZPIC Audits- Do I need a CPA?

It depends? If your CPA a Medicare Cost Report expert? If the answer is yes, he or she probably prepared your annual Medicare Cost Report or Medicaid Cost Report and getting them involved as as soon as possible is a good idea during ZPIC Audits.Wow what a feeling!!

I have talked to potential clients as they are actually having chest pains and snacking on nitro tabs or spray as they describe this over the phone to me, they have been to the hospital already and continue to have the pains weeks later. ZPIC Audits are is indeed very stressful.

You have just been selected  for a ZPIC Audits amongst an elite group of many who during the last 36 months have submitted via your billing, OASIS, Service Utilization, et al.. to the folks at CMS, created a data profile and pattern, which has been confirmed by the computers as 90% or greater chance it contains errors allowing them to recover several million dollars from you. (More of that another time)

The data is so compelling that it leaves CMS no other option than to validate what your doing. Via a post payment review.

So you have a letter.
CMS is fishing for money.
No denial of payment has been made as of yet.
A lawyer will do what at this point?
A consultant will do what at this point?
What can I the agency owner do for FREE, The answer is an amazing amount, and most owners properly coached need very little intervention until the midpoint of the process.
It is actually more important to build a financial rainy day fund at this point than spend like a sailor.

Everything that needs to be done at this point can be done by you, auditing of the census and the charts to look for the data patterns that triggered this fiasco, and the documentation patterns that will be denied, and perform a sample extrapolation from your global universe of claims to validate and assess your liabilities.

ZPIC Audits rather simple low-level activities.

So we now know that if you’re the recipient of this type of probe there will be financial losses at some point in time. Certainly not until charts are reviewed, as the law does not allow for the debit of money, until charts are approved and or denied.

So calm down take a deep breath this is not the end of the world, but ZPIC Audits it will not go away either. Some of you will need to go to the gym and work it out, others will resort to a few drinks whilst others will bury their head in the sand.

I have actually been in agencies that did not “get it” even though the pattern or trend was imminently clear to me. Too often owners and administrators really do not know the home health Conditions of Participation and documentation requirements for billing. What generally occurs is that the owner or administrator delegates “auditing” to a nurse or group of nurses who may understand basic documentation requirements but who also are very familiar with the clinical staff and often equally familiar with patients. They frequently “read between the lines” when auditing – and if in addition they do not know the requirements for skilled care they are likely to miss the point. Some documentation issues can be at least partially mitigated if identified and addressed appropriately. A ZPIC auditor will not read between the lines. The major areas of concern will of course be the agency’s understanding of what is required for adequate documentation of therapy provided, REASONABLE goal setting and skilled nursing “observation and assessment”. (Hello, now we even have separate billing codes to distinguish the types of care provided – how’s that for an audit edit set up?). Also there are many agencies who use “managment and observation” as a reason to recertify 85% of their patients often for multiple episodes without documentation of significant clinical issues requiring skilled nursing. Many agencies believe that one or two aberrant blood pressures with no change in medications or other treatment constitute the need for ongoing “observation and assessment”.

Maybe it is too soon to call an attorney when the letter arrives but if there is any chance of lessening the impact an ZPIC Audits may have – they must make sure they understand the rules if they are going to adequately respond to the audit requests yourself.

 

Categories
Medicare

How to Start a Home Health Business in Florida

How to Start a Home Health Business in Florida

Home health businesses (HHA) provide health care to home-bound seniors and the disabled. Home health aides, nursing assistants, registered nurses and directors play a vital role in assisting the home-bound population. Since the elderly and disabled are vulnerable, states such as Florida have rigorous licensing requirements for home health business. But if you are motivated, caring and have strong financial backing, you may succeed in the home health care business.

Instructions on How to Start a Home Health Business

    • How to Start a Home Health Business, Find a location first. According to the Florida Agency for Health Care Administration (AHCA), a home health care business can’t be located in a private residence and the building must be zoned for a business.
    • Write a business plan. AHCA requires one for licensure, which must detail employee and consumer recruitment, services provided and a financial plan approved by a Certified Professional Accountant (CPA). The AHCA also requires enough money or credit to fund the agency for its first three months.
    • Buy malpractice and liability insurance. For each service provided, the AHCA requires $250,000 of coverage.
    • Hire an administrator, alternate administrator, director of nursing and financial officer. Before you can submit an application, these positions must be filled by persons who meet AHCA’s standards. For more information on these requirements, see the Resources section.
    • Submit a completed application to the AHCA. The application must include background checks for both owners and employees, an affidavit of good moral character and evidence that vital personnel met the state’s standards. For an application and in-depth explanation of the requirements, see the Resources section.
    • Hire nurses and home health aides who meet federal Medicare and Medicaid training requirements. Both Medicare and Medicaid are federally-funded health programs for the poor, disabled and elderly. Most people who use home health services are insured under these programs. For more information on training requirements and becoming a Medicare or Medicaid provider, see the Resources section.

 

Categories
Accounting

What is a CPA?

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CPA

What is a CPA?

A Certified Public Accountant Miami or CPA Miami is a special type of accountant. Officially it’s the title of someone in the United States, who has passed the Uniform Certified Public Accounting Examination and has met some additional state education and experience requirements to get this certification. This test is grueling and requires upwards of 150 hours of special education and Accountant Miami complies and reports it’s CPE to the Florida Board of Accountancy.

But what does this mean to you as a small business owner in Miami. Do you need a Miami CPA or will a regular Miami Accountant or even a Miami Bookkeeper be sufficient for your business?

Most people use the term CPA and accountant interchangeably but there is a very big difference. The CPA designation carries a lot of weight within the financial community and certainly within the accounting profession.

Services Provided By Accountant Miami:

In public accounting, those accounting services provided to a business on a contract basis, a CPA attests (to a financial audit) and gives assurances that financial statements are reasonable and accurate and adhere to generally accepted accounting principles (GAAP). They also attest to the reasonableness of disclosures and that statements are free from “material misstatement”.

As a Miami Auditor, a CPA is required by professional standards and Federal and State laws to maintain independence from the entity for which they are conducting a financial audit and review, often called a Financial Audit.

Our Miami Consulting Service, advises companies on acceptable business practices and making recommendations on financial management. Typically these consultants do not work as auditors for a company at the same time they are acting as consultants.

As part of the certification, our Miami Accountants must complete 40 hours of continuing professional education (CPE) every year to keep up with the new rules and regulations in the financial, accounting, and business world. This is proof of the high level of expectations of the accounting profession for a Certified Public Accountant in Miami.

Our Certified Public Accountant in Miami belongs to the Florida Institute of Certified Public Accountants (FICPA) and American Institute of Certified Public Accountants (AICPA) with the goal of keeping up to date with the accounting community and taking continuing education classes. Of course tax laws change frequently and our Miami Accountants will spend time staying abreast of changes in financial areas. As a member of a local association they have access to the latest thinking and rules in the accounting area.

Why You Need A CPA

If for no other reason than Tax Planning it’s good to have the advice of a Tax Accountant. And as far as business management and financial advice access to a good Accountant in Miami is very desirable.

But does that mean you need a CPA?

In general you can assume that anyone who has taken the time to get certified as a CPA, and maintain that certification, is at the upper levels of the skill set, our Miami Accountants certainly are. It’s a clear credibility booster to be a CPA. If your business can afford the best than our CPA in Miami are worth the money.

But does that mean they are better than a typical accountant. Of course not. But it does indicate a level of commitment that is worth considering. Certainly if legal proceedings are required, the assurance of a CPA will hold more weight than a typical accountant. Again much depends on the reputation of the CPA in the community as well. Certainly an audit by a CPA has an implied level of credibility. Not to mention a non CPA cannot perform financial audits by law.

Our Miami CPA Firm does much more than financial audits these days. We provide consulting and overall financial planning not only for small and large businesses but also for estate planning, investments, and strategic planning.

So if you want to run your business at the highest level you certainly want to consider hiring a Certified Public Accountant like the ones at Accountant Miami.

 

Categories
Medicare

How to File a Medicare Cost Report

How to File a Medicare Cost Report

CMS and AHCA require Home Health Agencies (HHA), Hospice, Hospitals, and Renal Facilities to file an annual Medicare Cost Report and or Medicaid Cost Report.

GENERAL INSTRUCTIONS

Federal/State program administered through the State of Florida Agency for Health Care Administration (AHCA). Each provider participating in the Medicaid or Medicare program shall submit a uniform Medicaid Cost Report and or Medicare Cost Report and related documents required by the Florida Title XIX Long-Term Care Reimbursement Plan (Plan). For Medicaid Cost Report and or Medicare Cost Report periods ending on or after December 31, 2003, cost reports must be filed using “SEXTANT”, the October 2003 Electronic Cost Report (ECR); the October 2003 Chart of Accounts; and instructions provided by AHCA. Further, this Medicaid Cost Report and or Medicare Cost Report must be filed within the timeframe specified in the Plan. All required schedules MUST be completed or marked N/A. Note that Schedules I, J and J-2 are only required for providers on cost or payback reimbursement.

Limited amounts of supplemental supporting documentation can be added to the Notes Schedule provided within the ECR. Additional supporting documentation or attachments may be mailed to the address provided below. All additional information and documentation, whether on the Notes Schedule or mailed separately, must be referenced to the applicable cost report schedule.

The provider of the Medicaid Cost Report and or the Medicare Cost Report home office cost report must each stand-alone. Do not indicate, “see home office cost report” on any schedule in lieu of completing the schedule.

All schedules must be completed with all applicable information each year. Do not reference a prior year report as containing the information requested in lieu of completing the schedule in the current year cost report.

In addition to submitting the ECR as per the instructions in Appendix B, one hard copy of the cost report, the certification page, supplemental schedules and attachments, and accountant’s compilation reports must to be sent to:

Agency for Health Care Administration

Audit Services 2727 Mahan Drive, Mail Stop 21

Tallahassee, Florida 32308

The recognized Medicaid Cost Report Medicare Cost Report will be determined by utilizing the accrual method of accounting in accordance with generally accepted accounting principles (GAAP) as established by the American Institute of Certified Public Accountants (AICPA), the methods of reimbursement in accordance with Medicare (Title XVIII) Principles of Cost Reimbursement, the Centers for Medicare and Medicaid Services Provider Reimbursement Manual (CMS Pub. 15-1) except as modified by the Florida Title XIX Long-Term Care Reimbursement Plan, and State of Florida Administrative Code.

INPUTTING COST REPORT DATA

The input worksheet is where the bulk of the cost report data will be entered. Enter text using proper case; please do not use all capital letters. Enter whole numbers only unless the input number is a percentage. Enter a percentage in decimal form (i.e. input .047635 for 4.7635%). Debits are entered as positive numbers and credits are entered as negative numbers unless otherwise specified.

Patient days input fields cannot be left blank; these include In-House Patient Days; Reserved Bed Days; Holding Bed Days; and Skilled, Intermediate I, and Intermediate II Medicaid Days. When appropriate it is required that zero be entered.

Other input worksheets that require the input of data are designated with a “(W)” on the worksheet tab (such as, Cover (W), B (W), K (W) or L (W), etc). “See attached” is not considered valid for Electronic Cost Reporting purposes.

Input areas have cells with a light yellow background. When a choice is required, a brown background is used with a dropdown box. Clicking on the arrow to the right of the dropdown box allows for an appropriate selection to be made. (Appropriate selections must be made from the dropdown box to avoid a validation error).

When data is entered on the input worksheet, the appropriate schedule changes can be reviewed by clicking on the schedule tab. Many schedules have validity checks built into the system. In some instances, an error message may appear on the applicable schedule to the right side of the row being checked. In other circumstances, validation checks are a part of the applicable schedule.

When data input is completed for the entire Cost Report, the “VALIDATE” tab should be referenced to locate any remaining exceptions noted. Sextant currently checks for more than 190 different potential exceptions to the Medicaid Cost Report or Medicare Cost Report.

Certification Page:

The Provider may use the “optional Medicaid Cost Report or Medicare Cost Report identifier” for internal tracking purposes. If the cost report is prepared in house choose “yes” in the dropdown box; otherwise, choose “no” in the dropdown box.

Enter the name of CPA (or CPA firm) responsible for preparation of the cost report.

Enter the CPA (or CPA firm) license number. If not a Florida CPA identify the state of licensure.

Please contact us for a complete how to guide on how to prepare a Medicaid Cost Report or Medicaid Cost Report