International Financial Reporting Standards, IFRS, are used by companies in over 100 countries, so it is easy to see why the U.S. is following suit. The United States is currently using what is known as Generally Accepted Accounting Principles when filing their financial statements and records. Currently, the SEC is debating how to impose the change in the U.S.  The choice is between making IFRS a gradual adaption and establishing a definite date that companies must be converted by. If there was a gradual adaptation, companies would be given the choice of switching to IFRS from GAAP. This is mostly dependent on the size of the companies. On the other side, companies may continue to use GAAP until a certain date which then will force them to file their financial statements according to IFRS standards. The quick change to IFRS would be beneficial to companies because it would allow them to adapt the new standards quickly and efficiently.

Conversion to IFRS offers many benefits to companies.  The most obvious and beneficial aspect of adopting IFRS is consistency. As stated before, public companies in over 100 countries are using IFRS and Canada is on track to adopting the new system and it seems only logical that the United States do the same. Additionally, if a company has foreign operations, adapting IFRS would give them internally consistency as well. They would be able to make their reporting uniform which can reduce costs because all reporting will be done the same way. This will allow them to streamline their operations, reporting standards, auditing, training, development and company standards. Whether domestic or global, their offices could adapt similar standards and reporting techniques, giving them precise and consistent company records and reporting. If IFRS adaptation is ruled to be optional before a set date, a company can gain a large advantage if they were to adopt the reporting standards early because they would be giving themselves a head start on using and becoming familiar with the system. Also, they would be receiving all the before-mentioned benefits that IFRS has to offer. For first-time converters, there are many choices on how to run their initial application.

It goes without saying that along with benefits come drawbacks. Changing to IFRS from GAAP is not simply a change in accounting procedure. It needs to be a transformation by companies. They need to focus on developing an action plan as well as a clearly defined plan for their future as IFRS users. Since the benefits of using IFRS will allow them easier and better foreign management, there should be a plan involving using these circumstances to their full benefit. There needs to be a strategy for conversion that will allow it to go as smoothly as possible so they can keep interruptions to their daily performance at a minimum. Additionally, because IFRS is different from GAAP, it would be beneficial to companies to hire financial advisors and staff that are knowledgeable in IFRS that will be able to help guide the company through its conversion. Hiring this new staff will increase costs and also makes layoffs and staff cutbacks very possible. Companies will most likely also have to upgrade their technology and computer programs for the change from GAAP. All reports, financial documents, contracts and agreements will have to be revised since they were originally drawn up under GAAP standards.  Finally, companies will incur additional costs from the previously mentioned activities as well as costs for the auditors and advisors needed for the initial conversion. These would most likely only be one-time expenses however.

The eventual conversion from IFRS from GAAP is unavoidable. For companies to be sufficiently prepared for the change, they should plan ahead. It is a good idea for companies to begin their conversion with a plan and a timeline. It has been estimated that total conversion time will be about two years. Also, it was projected that the US should be converted by 2014. That leaves approximately 4 years left for companies to be changed to IFRS. It is crucial that companies begin planning and changing their standards. It is in their interest to start the change over so that they can be up to date and receiving the benefits that conversion has to offer as soon as possible. If companies start planning and acting now, it is entirely possible for the United States to have successfully converted itself to IFRS and be able to join the rest of the world in their accounting procedures.

Many people turn to outsourcing their bookkeeping to others. This is a really good idea for those who don’t have the time, patience, or know how to do it themselves, and turn to qualified people to do it for them. There are many people who have the skills not only to do taxes during this time of year, but also keep records for businesses all year round. Some are individuals who are looking to make some extra cash during tax time, or even permanent year round income, and there are companies that you can turn to for help.There are many different resources online and locally that you can turn to for all of your bookkeeping needs.If you have someone in your company with these kinds of skills, you can use them as well, and there is an abundance of soft ware available that is simple and easy to use.

Paying your own employees can be a little less expensive, but in some cases, even your own people are too busy to do this.What are some of the advantages of outsourcing your bookkeeping? Well for one thing, accounting services are staffed by qualified people who have the latest training and technology to do it properly. It can be more cost effective because of this training, and you need to cut down on your overall costs wherever you can.

How can you find reliable people to help you with your bookkeeping? Just like anything else, you need to shop around for the best rates. While some services may be a little more expensive, in many cases they provide extras like going directly to your business to help you get organized. There are other things you need to take into consideration as well, to make sure that the accounting service is right for you.You need to ask many questions. One of them is if they are qualified to do accounting for your particular business. You need to ask for references, and check these carefully. If they are online, how secure is their accounting software and computers? Are they willing to set up a contract, and how flexible are they in case your needs change?

In as unsure of economic times as the one we’re living in today, it is only natural for people to desire some additional consistency and reliability, principally relating to the business world. In the world of accounting these two factors are imperative in order for firms to perform daily business operations. Due to the ever-changing anatomy of business and the pull towards globalization companies must conform to more internationalized standards than ever before. Companies using the current Generally Accepted Accounting Principles in the United States are being pressed to convert to these international standards set forth by the International Accounting Standard Board by 2014. There are, however, some encumbrances for many corporations to deal with if they are to transfer over to widely used International Financial Reporting Standards. These hindrances may prove to be combative of the potential 2014 mandatory adoption the SEC had set during its meeting in late 2008. As the convergence of the United States GAAP and IFRS continues to progress it will ultimately become essential for U.S. corporations to fully adopt and administer these regulations in order to keep up with the world’s changing economic and business climates.

Much of the reason for the Securities and Exchange Commission to propose a US adoption of IFRS is simply to create a uniform accounting system that can be applied throughout the world. In terms of the 2014 date set for the adoption by US-based corporations, it is merely a tentative date and nothing definitive is on the agenda at this period in time. In its document, Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by US Issuers, the SEC set milestones that they will assess in 2011 in order to establish mandatory adoption date. These milestones include the following: Achieving sufficient improvements to IFRS, enhancing the independence, accountability and funding of the IASB and its Trustee Organization, achieving sufficient progress on the taxonomy for XBRL compatibility, and sufficient improvement in IFRS education and training in the US (“IFRS Reporting: Current Situation and Next Steps”).

This proposed roadmap has not gone by without its share of criticism, however. In her article that highlights the resurgence of the IFRS debate, Maria Leone addresses the main concerns that were given briefly after the 2008 SEC meeting by the premier opponents of the IFRS conversion deadline. Their apprehensions involving the deadline included the following:

Training U.S. accountants and auditors by the proposed 2014 deadline would be     impossible; the SEC would cede its regulatory power to a global regulator; the standard-setter that wrote the rules – the International Accounting Standards Board – would buckle under political pressure; and compared with U.S. generally accepted accounting principles, IFRS is weak and would therefore invite accounting abuse. (Leone)

To go along with the previously mentioned weaknesses is the pure financial aspect of the conversion. Businesses stand to shell out a significant amount of money in order to transfer over to international standards during that first year. Sarah Johnson comments on the initial costs of US business and the SEC’s proposed plan in her article titled “Guessing the Costs of IFRS Conversion”. Sarah states, “In its proposed plan to move all U.S. publicly traded companies to the global standards, the SEC also predicted that the largest U.S. registrants that adopt IFRS early would incur about $32 million in additional costs for their first IFRS-prepared annual reports” (Johnson). She also makes note of comments made by one of the leading global management consulting companies, Accenture, about their take on the degree of difficulty involved in performing the IFRS conversion and its comparison to European conversion. In their statement they mention:

For one, U.S. companies will have to run GAAP and IFRS simultaneously under the SEC’s plan and in order to meet statutory and regulatory requirements outside the SEC’s purview, such as for filings made with the IRS. In addition, the European experience is viewed to have been a bit easier because the countries’ accounting rules were fairly similar to the principles-based IFRS, whereas GAAP is considered more rules-based, or prescriptive. (Johnson)

Some supporters counter these higher priced accusations with the fact that they believe a company who does not adapt to international standards may actually be paying more than one that has adapted to the new set of standards.  There is no doubt that this transition will be an uphill climb but ultimate goal is within reach.

“There is a clear trend toward adopting IFRS as the single body of internationally accepted financial reporting standards. In the next few years, thousands of companies will move to IFRS as a primary basis of financial reporting” (Gannon). There are clear and prominent factors that point to the fact that transitioning from US GAAP to IFRS, and including a full blown conversion, is almost now a necessity in the United States.  Whether it is directly or indirectly, most US companies are affiliated with international firms. “Some [US companies] may be required to adopt IFRS to meet the reporting requirements of an international parent or investor company, while others may recognize the need to voluntarily supplement their current financial reporting with IFRS to allow for an accurate comparison with foreign competitors” (Gannon). In addition, there already have been several efforts to unite the US GAAP and IFRS, including IASB’s attempts to publish numerous statements that narrow the gap between the two accounting standards. Along with these aspects US companies that are subsidiaries or own subsidiaries in foreign countries may also be required to use IFRS along with their regular standards. And finally, if a US company maintains foreign investors it is also likely they would need to release information according to IFRS.

From the pressures of foreign companies to domestic inefficiencies the conversion is all but a certainty. It is just a matter of when and how US corporations are going to adapt and stay afloat during this transition period. International Financial Recording Standards will soon be uniting the United States with the rest of the world in creating a new and integrated system for the business and accounting world alike.

Too often business owners make common mistakes that cost time, money, effectiveness, and profitability. Identifying the five most common management mistakes can help you increase your company’s productivity.

1. FOCUS ON YOUR CORE BUSINESS
The single best way to better manage any firm is to focus on the business at hand and on your customers. You are skilled at what you do; that is why you started your business. Typically, as the company grows and the client base increases, owners and managers try to wear too many hats. They become accountant. Network administrator. Office manager. Think back to that first job, the one that inspired you to go out on your own. All your focus was on the client, on your specialized product or service. That inspiration and success is why your business grew. To maximize your potential now, every customer should be treated that way. You cannot do this unless you focus solely on your specialty and leave the accounting, network administration, and office work to other trained professionals.

2. DELEGATE

Delegating non essential jobs will allow you to better manage your time, make you more effective, and increase your profits. You must delegate some responsibilities so that your time can be dedicated to your own area of expertise. The best way to do this is to work with people who are extremely competent at what they do, just as you are at your profession. In many cases it is best to go outside your company to manage details such as payroll, accounting, and bookkeeping. Outsourcing this will save you money.

3. DOWNSIZE  AND CUT COSTS

Cutting payroll saves both time and money and also increases your profitability. Frequently, business owners hire full-time office and accounting staff when they really need someone only 10 or 15 hours a week. Why not just outsource this work? You pay for only what you need, when you need it. Downsizing in this way saves money on costly overhead, while it also makes you more effective and your business more profitable. You save valuable time because you do not need to find busy work, train, or supervise staff. Think of how much more time you can devote to your clients!

4. REDUCE TAXES

No one enjoys paying taxes. Nevertheless, many businesses pay too much in sales and income tax because they try to save money by doing something themselves rather than relying on a trained professional. Cutting payroll will cut your tax liability, and turning to a professional to handle your taxes will make your company stronger and more profitable.

5. AVOID COSTLY ACCOUNTING ERRORS

This is really common sense. Whatever your profession, you are not an accountant by trade. Why waste your time – and money – doing something that is beyond your expertise? Even if you are good with numbers, accounting rules and procedures change constantly. There is no way you can manage your company to the best of your capabilities and keep up with all the new accounting trends, just as your accountant is not knowledgeable about the latest trends in your chosen field. One of the best ways to improve your profitability is to find a good accounting firm that specializes in your industry. After all, you should have an accountant who knows what you do, understands the particular challenges of your chosen field, and speaks the language and vocabulary specific to your business. Doing so will save you the most money and cut costly accounting errors.

Identifying and fixing these five problems can help owners of any firm run their company more effectively and efficiently. Finding a competent outsourced accounting solutions provider can dramatically improve overall efficiency and profitability.

As a business owner, there may be times when you need a loan or a line of credit to help purchase new materials or improve a temporary cash flow situation.  Banks will require copies of your financial statements to determine whether or not you are credit worthy.  Here’s what the bank will look for in your statements:

Is Your Business Established?

One of the factors a bank will consider before lending money to a business is how established that business is.  Did you just start your business last month, or have you been operating for the last four years? A business that has successfully been operating for several years will have a better chance of securing funding than a newly born business – most businesses fail within their first year of operation, and are considered high risk by lenders.

A key issue for businesses trying to obtain financing is related to your timing.  If you wait until you are in a cash flow crunch – you lose your negotiating power with the potential lender, and your overall financial position is weaker than if you look for capital before the cash flow situation arises.

How leveraged are you?

Banks will look over your income statement and balance sheet to come up with financial ratios.  They’ll run numbers and generate predictions to see whether or not you have the ability to make loan payments, and how likely you are to continue having the ability to make loan payments in the future.

One of the common tools to asses a business is their debt-to-equity ratio which is simply the total amount of your business debts divided by the equity in the business.  The equity is determined by subtracting all of your debts from your assets.  A quick example:

Assets

Cash                                    $10,000

Inventory                               50,000

Liabilities

Accounts Payable             $40,000

Equity would be $20,000 ($60,000 in assets less the $40,000 in debts) and the debt-to-equity ratio would be 2:1 ($40,000 in debts divided by $20,000 in equity).

Generally speaking, the higher the debt-to-equity ratio, the more risky a business is, but there are many other factors a bank will consider.  One of those is the industry you are in.  Some businesses are by nature more leveraged than others.  It is a good idea to know where your company stands compared to its peers before you request a loan from the bank.

Are You Securing the Loan With Collateral?

When a business wants to take out a loan or line of credit, often they’ll be asked if they have any collateral that the bank can use to borrow against.  This reduces your risk in the eyes of the lenders, since if you fail to keep up with your loan payments the bank has the right to take whatever you used as collateral to recover their money.  Proof of value for items used as collateral will need to be established, and you may find the bank has a different idea of what the potential collateral is worth than you do!

Collateral for loans determines the terms of the deal.  Generally, loans with collateral are viewed as less risky, and therefore have lower interest rates, and have longer repayment terms.  Also, the more long term the collateral, the longer the term of the note, for instance, a real estate loan will have a longer repayment than one secured by accounts receivable.

Some commonly used collateral include:

• real property
• equipment
• accounts receivable
• inventory
• intellectual property

Personal Guarantee for Small Businesses

Many small businesses will be asked to sign a personal guarantee on a business loan.  Your signature indicates that you will be personal responsible for assuming the debts of the business if the business defaults on the loan and is unable to pay back the money.  It reduces the risks to the bank lending the money to a business, because they have another avenue (you) to pursue if the original borrower (the business) does not keep up with payments.  Sometimes the business owner will be asked to assign a portion of their personal assets or property over to the bank in order to secure the business loan.

Cash flow and Profitability

A well established business can sometimes obtain financing if they show a good history of cash flow and profitability.  Banks will determine this information through your financial statements, including your income statement and balance sheet – and will probably want to view at least three years of records.  It is important to consider the impact of the new loan.  Often times, the bank will “pro forma” the financial information you give them to see if the new loan can be serviced by the existing profits of a company.  Many times a business owner will want to consider the profits that will be made with the loan (additional inventory or new equipment), but a bank takes a more conservative approach to see if the historical profits will support the new debt.