Does anyone run a small business but not have an accountant?
Hi. I own my own web-store and I can’t figure out how to set prices on my products. I’d like to do it by the book but I can’t figure out exactly what my operating costs are. I have a cost accounting formula to reference to but the formula is very complicated. Also, my costs for my credit card processing account is calculated by percent, so my monthly bill is based on my sales for the month. I can’t figure out how to factor that into operating costs since I don’t have a solid number to work with. I don’t have an accountant so I’ve got to figure this out on my own – it’s tough. The prices that I’ve set already, will definitely cover my operating costs, but I have a feeling that I could price them lower. But how will I know my profits since I don’t have a figure for my operating costs? Should I just work with the prices that I’ve already set? How do you handle your own accounting for your small business? Do you spend hours crunching numbers by the books? What is your solution?
Hi,
I manage accounts of my factory, local trading and export business myself. Although I do retain the service of professional for yearly taxes.
Things get pretty easy if you know basics of accounting.
First of all get accounting software like PeachTree, QuickBook etc.
First of start recording all your expenses.
Categorise the expense in Fixed and Variable Cost.
You can manage the price by following simple formula.
a= Purchase Cost of given product
b= (Fixed Cost of that given month)/ (Total number items to be sold for given month)
c= Variable Cost of Last Month
d= Percentage of variable expense incurred on sale of particular product
e= Profit
A= a+b+c+e
B= A + (A * d/100)
‘B’ would be your selling price. If you want to decrease the selling price, decrease either your profit or variable expense.
For other side of advices, you should 1st answer of your question.
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You definitely need to accountant for all your business activity and transactions! If you do not have an accountant or bookkeeper, you need to do the bookkeeping yourself by saving all your receipts and expense transactions so you can record your fixed and variable costs against your income. If you do not and you get audited by the IRS or CCRA, they may just decide what you made and access you for any taxes that they feel that you owe them, and you will be defenceless! You need to record all your transactions relating to your business activities! Depending on your annual income and the way your business is defined, you may need to hire a public accountant to do your financial statements once a year for your creditors, the government, shareholders, and users of your financial statements (are you a sole proprietorship- by yourself, or a corporation?). I would recommend that if you know nothing about accounting software and taxes, hire a bookkeeper, and administrator, or a public accountant to save you all kinds of hassles and trouble! Have you used Quick Books, Simply Accounting, or other accounting packages? Have you used Excel Spreadsheets before? These are great software packages to get you started. Are you familiar with break even analysis- (price x quantity- costs x quantity to get what's called your gross margin to see if your variable costs are being covered by your revenue from the prices that you have set on your products sold? And, then you need to take this marginal revenue and subtract what are called your fixed costs [like rent, electricity, Internet, salaries, janitorial cleaning services, and so on]. Once you have determined all your inventory costs, fixed costs, and other business costs, after subtracting these costs, you have, hopefully, net income because you need it to continue on in business. This is just a "nutshell" summary of the things you will need to handle while being business- I have over 7 years of experience in accounting, administration, computer IT, and other areas of business. I also went to university for over 7 years to get my BBA while working on the side – trust me, I know a lot about business from both education and experience. Take some accounting courses on the side if you can afford it so you can learn why accounting is important. It sounds like you know a bit about marketing and economics if you know how to set your prices, but you must keep track of all your business transactions so you can weigh your costs against income in order to know how well you are doing!
References :
Hi,
I manage accounts of my factory, local trading and export business myself. Although I do retain the service of professional for yearly taxes.
Things get pretty easy if you know basics of accounting.
First of all get accounting software like PeachTree, QuickBook etc.
First of start recording all your expenses.
Categorise the expense in Fixed and Variable Cost.
You can manage the price by following simple formula.
a= Purchase Cost of given product
b= (Fixed Cost of that given month)/ (Total number items to be sold for given month)
c= Variable Cost of Last Month
d= Percentage of variable expense incurred on sale of particular product
e= Profit
A= a+b+c+e
B= A + (A * d/100)
'B' would be your selling price. If you want to decrease the selling price, decrease either your profit or variable expense.
For other side of advices, you should 1st answer of your question.
References :
If you can work out your average additional cost that needs to be added to the price that you paid to buy in the products, then you can apply that as a markup % to each supplier invoice. Some accounting systems will enable you to apply that markup automaitcally so that you can always see what the total cost per unit is and adjust your prices in order to maintain your net margins. I work for e-conomic and we provide a web-based accounting system that does just this. It costs £27/mth for the base version (£13.50 for small vusinesses) plus £9/mth for the Stock module, which gives this functionality. Support, backups and upgrades are included, so there are no other costs involved. You can also ask us to set up your accountant so that they have free access along side you, then they can log in and answer queries and easily obtain the records they need for what they do – all of which saves time for you and them.
Mark Davies
http://www.e-conomic.co.uk