It can be confusing to distinguish between accounting degrees, and which is best for your career goals. Certified public accountants (CPA) and enrolled agents (EA) are the two well-known degrees for tax professionals. Both are excellent choices; here, we will discuss them in detail.

What is a CPA and an EA?

A certified public accountant (CPA), has passed the CPA exam to be an accounting specialist. They have to take part in state education and also gain work experience to become licensed. One of their main jobs is auditing financial statements. One of the well-known roles of the CPA is tax preparation. They prepare different types of client tax forms, from property taxes to income taxes. They often give advice and strategies to help their clients relieve tax burdens. CPAs can also have roles in consulting, auditing, financial planning, and other accounting services.

An enrolled agent (EA), is a federally certified tax practitioner.  They represent taxpayers before the Internal Revenue Service. They also provide tax consultation services and prepare federal and state tax returns. Unlike CPA, the enrolled agent is regulated on the federal level. To become certified, you must pass the three-part EA exam, which covers all the aspects related to taxation.

CPA vs. EA Costs

A lump-sum amount to complete CPA certification includes application cost, exam costs, ethics, and licensing. These costs do not include the cost to achieve a related degree. Mandatory continuous yearly development also comes with a cost.

Becoming an EA is much less costly. The exam costs are less than that of the CPA, and though they also have yearly courses, those are less costly than the annual education costs of the CPA.

EA vs. CPA Salary

CPAs earn more than EAs. According to Payscale.com, a CPA earns around $40,000 to $140,000 per year. The enrolled agent earns approximately $30,000 to $75,000 per year.

CPAs also have more earning potential down the road. The EAs peak earning is often flattened out as they progress ahead in their career due to the federal attachment. A CPA can also serve as a CFO in a big multinational company that can take a six-figure salary while the only opportunities for EAs are with the IRS.

EA vs. CPA Career Prospects

While enrolled agents mainly focus on tax-related issues, such as tax preparation and tax advisory, CPAs have a greater number of choices in terms of career. They can work for private firms, in the government, or independently.

Enrolled agents can also work for private firms, in the government, or independently. They do have limitations in their career that becoming a CPA eliminates.

If you like working with taxes and manage to keep up to date with the complicated regulations, EA seems to be the ideal choice for you and is less expensive to become than a CPA. It can also allow you to work flexible hours and takes less time to become one.

Becoming a CPA provides a much broader scope of career prospects and also offers better compensation compared to an EA.  There are pluses and minuses to pursuing both careers; you have to decide which one is right for you.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Explosion in Cybercrime

There has been an explosion of cybercrime that has been building over the last three decades. Businesses have been fighting back by investing in cybersecurity. They have updated bookkeeping, accounting, and antivirus software and taken more extreme measures to protect privacy.  The reason for the explosion of cybercrime is simple, profitability. Without security measures, cyber-fraud can be devastating to a business.

The growth of cybercrime has coincided with the development of hacking. A hacker is a highly skilled IT specialist who understands the subtleties of computer data and code. The two types of IT-hackers, “White hat” and “Black hat.” “Black hat” hackers are cybercriminals, while “White Hat” hackers are security specialists that work in cybersecurity.

Cybercriminals create computer viruses and Trojans that can:

• steal access codes to bank accounts
• advertise products or services on the victim’s computer
• illegally use the resources of the infected computer to develop and implement network attacks (also called DDoS attacks)
• blackmail

To protect against cybercriminals, security technology has been designed to prevent computer attacks and access to user data. Multi-level antivirus protection is one of the most effective cybersecurity protections developed. Antivirus software that combines signature method, experiential analysis, and cloud technologies, confidently protect your devices and your data from new sophisticated threats.

 

Some of these complex threats and attacks are:

• Misappropriation and embezzlement of other people’s money or property. This happens when, for example, a bank employee uses his legitimate access to payroll in a computer system, changing the data so that he receives additional funds as a result. Or when he uses his computer to transfer funds from bank accounts to his account. 
• Illegal appropriation, which differs from embezzlement by the fact that the values ​​were not assigned to the criminal, but he, having access to the system, changes the documents, as a result of which he acquires the right to property that should not have belonged to him;
• Industrial espionage, when employees of the enterprise use computers and networks to steal commercial secrets (for example, a recipe for a drink made by a competitor). Theft can also include financial data, confidential client lists, marketing strategies, or other information that can be used to undermine business or obtain a competitive advantage. 
• Plagiarism – theft of copyright materials and their subsequent use as their own. 
• Piracy, i.e., unauthorized copying of copyrighted software, as well as music, movies, books, other works of art, which inflicts losses to the rightful owner of the copyright.
• Theft of personal data when the Internet is used to obtain personal data of the victim, for example, license numbers, credit card numbers, and bank accounts for subsequent fraudulent activities, including obtaining money or other property using personal data.

The escalation and explosion of cybercrime is a problem that everyone with a computer is vulnerable to. Businesses need to be especially concerned and protect themselves as well as clients connected electronically. Updating bookkeeping, financial, and antivirus software and adding other cybersecurity will ensure the business and individuals never become a victim of cybercrime.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Understanding Overhead Costs Across Various Industries

Overhead costs across industries vary dramatically, from healthcare practices where indirect expenses consume 50-60% of revenue to manufacturing facilities where overhead ratios typically range from 8-25% depending on complexity and scale. Understanding these industry-specific benchmarks is crucial for business owners to evaluate their operational efficiency, set appropriate pricing strategies, and maintain healthy profit margins in an increasingly competitive marketplace.

As the founder of Complete Controller, I’ve witnessed firsthand how misunderstanding overhead costs can make or break a business. Over the past two decades, working with companies across diverse sectors, I’ve seen healthcare practices struggle with 60% overhead ratios while restaurants thrive at 25%, simply because each industry has different operational realities. The Medical Group Management Association found that overhead typically uses up about 60% of practice revenue in healthcare, with staff salary and benefits, liability insurance, medical supplies, and facility needs making up the bulk of these expenses. This comprehensive guide breaks down overhead cost patterns across major industries, providing you with the benchmarks and insights needed to optimize your business’s financial performance.

What are overhead costs across industries, and why do they vary so dramatically?

• Overhead costs across industries represent indirect business expenses that vary from 8% to 60% of revenue, depending on sector-specific operational requirements.
• Healthcare and professional services typically show the highest overhead ratios at 50-60% due to insurance, compliance, and administrative complexity.
• Manufacturing and construction maintain lower overhead percentages (8-25%) with costs concentrated in facilities, equipment, and indirect labor.
• Service industries like restaurants and retail fall in the middle range (15-35%) with overhead focused on location, utilities, and customer-facing operations.
• Understanding industry benchmarks helps businesses evaluate performance, set pricing strategies, and identify cost optimization opportunities.

The Fundamental Nature of Business Overhead Expenses

Business overhead expenses represent the ongoing, indirect costs that keep operations running but don’t directly contribute to revenue generation. These expenses form the operational backbone of any business, encompassing everything from facility rent and utilities to administrative salaries and insurance premiums. Unlike direct costs such as raw materials or production labor, overhead expenses remain relatively constant regardless of production volume or sales fluctuations.

The classification of overhead costs typically falls into three primary categories:

• Fixed overhead costs remain constant regardless of business activity levels, including expenses like rent, insurance premiums, and property taxes
• Variable overhead costs fluctuate with production or sales volume, such as utility usage that increases with manufacturing output
• Semi-variable overhead costs contain both fixed and variable components, exemplified by phone plans with base fees plus usage charges

Understanding fixed and variable cost structures

The proportion of fixed versus variable overhead costs significantly impacts how businesses respond to market fluctuations and scale their operations. Industries with high fixed overhead costs, such as manufacturing with expensive facility leases and equipment depreciation, must maintain minimum production levels to achieve profitability. Manufacturing overhead costs provide an excellent example of complex cost structures, encompassing indirect materials like lubricants and consumables, indirect labor including maintenance and quality control personnel, and indirect expenses such as facility utilities and equipment depreciation.

Effective overhead cost management directly impacts a company’s competitive position and long-term sustainability. Companies with lower overhead ratios can offer more competitive pricing while maintaining healthy profit margins, creating significant market advantages. This principle applies across industries, from retail operations competing on price points to professional services firms bidding for contracts.

Industry-Specific Operating Cost Patterns and Benchmarks

Different industries exhibit distinct overhead cost patterns driven by their unique operational requirements, regulatory environments, and customer service standards. These patterns create industry-specific benchmarks that business owners can use to evaluate their performance and identify optimization opportunities.

Healthcare and medical practices represent one of the highest overhead cost industries, with typical overhead ratios ranging from 50% to 60% of total revenue. Hospital expenses show that total compensation and related expenses now account for 56% of total hospital costs, with advertised salaries for registered nurses growing 26.6% faster than the rate of inflation over the past four years. This high overhead ratio reflects the industry’s complex regulatory requirements, extensive insurance needs, and specialized staffing requirements.

Manufacturing overhead characteristics

Manufacturing industries demonstrate more variable overhead patterns depending on production complexity and automation levels. In Q2 2024, manufacturing sector unit labor costs increased by 3.2%, with hourly compensation rising 5.1% while productivity gains of only 1.8% couldn’t fully offset the compensation increases, leading to overall cost pressures. Traditional manufacturing overhead includes:

• Depreciation on production equipment
• Property taxes on manufacturing facilities
• Utilities for production processes
• Indirect labor costs for maintenance and quality control

Service industries, including restaurants, retail, and professional services, typically maintain overhead ratios between 15% and 35% of revenue. New research shows food costs are 35% of revenue on average for multi-unit restaurants, while overhead costs typically range from 15% to 25%, meaning restaurants must carefully balance both direct and indirect expenses to maintain profitability.

Analyzing Overhead Costs by Industry Sector

The systematic analysis of overhead costs across different industry sectors reveals distinct patterns that reflect each sector’s operational characteristics and competitive dynamics. Understanding these patterns enables business owners to benchmark their performance against industry standards and identify areas for potential improvement.

Construction industry overhead ratios typically fall between 8% and 15% for most companies, with general contractors targeting the lower end of this range at 12-16% and specialty contractors accepting higher ratios of 15-25%. These ratios reflect the project-based nature of construction work, where overhead costs must be distributed across multiple concurrent projects.

Healthcare industry cost analysis

Healthcare industry overhead analysis reveals significant variations based on practice size, specialty, and organizational structure. The complexity of healthcare overhead costs stems from regulatory compliance requirements, extensive insurance needs, and specialized equipment and supply requirements. Staff salaries and benefits typically represent the largest component of healthcare overhead, often consuming 25-30% of total revenue before considering other indirect expenses.

Technology companies and professional services firms demonstrate overhead patterns that reflect their knowledge-based business models and human capital requirements. Software development companies may allocate overhead costs per employee by dividing total overhead by billable hours and multiplying by individual employee work hours. Professional services firms often maintain higher overhead ratios than manufacturing companies due to their reliance on skilled personnel, office space requirements, and technology infrastructure investments.

Manufacturing Overhead Costs and Complex Production Environments

Manufacturing overhead costs present unique challenges due to the complexity of production processes and the need for accurate cost allocation across multiple products and production lines. These costs encompass all indirect expenses associated with the manufacturing process, from facility maintenance to quality control systems.

The depreciation of manufacturing equipment represents a significant fixed overhead cost that must be carefully managed and allocated. Production facilities typically invest heavily in specialized machinery and equipment, creating substantial depreciation expenses that continue regardless of production volume. Indirect labor costs in manufacturing environments include:

• Maintenance personnel who keep equipment operational
• Supervisors who oversee production processes
• Quality control inspectors who ensure product standards
• Administrative staff who manage production scheduling

Advanced manufacturing cost allocation methods

Activity-based costing (ABC) and time-driven activity-based costing (TDABC) represent sophisticated approaches to manufacturing overhead allocation that provide more accurate cost information than traditional volume-based methods. Manufacturing complexity drivers significantly influence overhead cost levels and allocation requirements. Quality control systems represent essential overhead investments in manufacturing environments, encompassing personnel costs for quality inspectors, testing equipment expenses, and compliance documentation requirements.

Service Industry Overhead Expenses and Customer-Centric Operations

Service industry overhead expenses reflect the customer-centric nature of these businesses and their emphasis on creating positive customer experiences. Unlike manufacturing operations that focus on product creation, service industries must maintain overhead investments that support customer interactions, service delivery, and relationship management.

Restaurant and hospitality businesses exemplify service industry overhead patterns with their focus on location, atmosphere, and customer service quality. The overhead rate formula for restaurants compares these indirect costs to total sales revenue, with successful establishments targeting overhead rates of approximately 20-25%.

Retail industry overhead dynamics

Retail industry overhead costs vary significantly based on store format, merchandise category, and geographic location. Store labor costs represent a major overhead component, with fashion retailers typically experiencing labor costs of 10-20% of sales. Occupancy costs, including rent, property taxes, utilities, maintenance, and security, represent another significant retail overhead category.

Professional services firms face overhead cost structures that reflect their knowledge-based business models and client service requirements. These firms must invest in office space that projects professional competence, technology systems that support client work, and continuing education programs that maintain staff expertise.

Reducing Operational Overhead Expenses Through Strategic Management

Strategic overhead cost management requires a systematic approach that balances cost reduction with operational effectiveness and service quality maintenance. A mid-sized eCommerce platform successfully reduced project management overheads by 30% and improved productivity by 20% by transitioning from traditional Waterfall project management to Agile methodologies. The company implemented Scrum training, appointed certified Scrum Masters, divided projects into manageable sprints, and introduced daily standups to keep teams aligned.

The process of analyzing overhead costs begins with comprehensive expense categorization and trend analysis. Companies must gather detailed data on all indirect expenses, categorize them into fixed, variable, and semi-variable components, and analyze historical spending patterns to identify optimization opportunities. Technology plays a crucial role in this analysis phase, with enterprise resource planning software systems providing the data tracking and analytical capabilities needed for effective overhead management.

Technology-enabled overhead optimization

Modern technology solutions offer significant opportunities for overhead cost reduction through process automation and efficiency improvements. Cloud-based software solutions often provide cost-effective alternatives to traditional on-premises systems, reducing both initial capital requirements and ongoing maintenance overhead. Energy efficiency improvements represent another technology-enabled approach to overhead cost reduction:

• LED lighting systems
• Programmable HVAC controls
• Energy management systems
• Automated inventory tracking

Lean management principles focus on eliminating waste, streamlining processes, and optimizing resource utilization to reduce costs without compromising quality or customer satisfaction. Healthcare practices can implement lean principles to optimize staffing levels, reduce administrative waste, and improve patient flow efficiency.

Strategic Financial Management for Business Overhead Control

Effective overhead cost management requires ongoing financial monitoring and strategic decision-making that balances cost control with business growth objectives. Monthly overhead cost analysis should compare actual expenses to budgeted amounts and track overhead ratios relative to revenue trends. Small businesses should typically maintain overhead ratios between 10-30% of revenue, though acceptable ranges vary by industry and business model.

Budget development processes should incorporate overhead cost projections based on business growth plans and market conditions. Companies planning significant expansion must carefully model how overhead costs will scale with revenue growth to ensure profitability maintenance during growth phases.

Final Thoughts

Understanding overhead costs across industries provides the foundation for effective business financial management. From healthcare practices managing 60% overhead ratios to manufacturing facilities optimizing complex cost allocation systems, each industry faces unique challenges and opportunities. The key to success lies in regular monitoring, strategic planning, and continuous improvement efforts that balance cost control with operational excellence.

I encourage you to take action on these insights by conducting a thorough analysis of your own overhead costs and benchmarking them against your industry standards. For personalized guidance on optimizing your overhead expenses and implementing effective cost management strategies, contact the experts at Complete Controller. Our team specializes in helping businesses across all industries achieve financial efficiency while maintaining the operational capabilities needed for sustainable growth.

Frequently Asked Questions About Overhead Costs Across Industries

What percentage of revenue should overhead costs represent for a healthy business?

Overhead cost percentages vary significantly by industry, with healthcare typically running 50-60%, restaurants maintaining 15-25%, and construction companies targeting 8-15%. A healthy overhead ratio depends on your specific industry benchmarks, business model, and growth stage.

How do I calculate my business’s overhead rate accurately?

Calculate your overhead rate by dividing total indirect costs by total revenue and multiplying by 100. Include all indirect expenses like rent, utilities, administrative salaries, insurance, and equipment depreciation, but exclude direct production costs and materials.

Which industries typically have the highest overhead costs, and why?

Healthcare and professional services industries typically maintain the highest overhead costs at 50-60% of revenue due to extensive regulatory compliance requirements, professional liability insurance needs, specialized equipment investments, and highly skilled staffing requirements.

What’s the difference between fixed and variable overhead costs in manufacturing?

Fixed manufacturing overhead remains constant regardless of production volume, including facility rent, equipment depreciation, and property taxes. Variable overhead fluctuates with production levels, such as utilities, indirect materials, and overtime wages for support staff.

How can small businesses reduce overhead costs without sacrificing quality?

Small businesses can reduce overhead through technology automation, energy efficiency improvements, lean management practices, strategic outsourcing of non-core functions, and regular expense audits to eliminate waste while maintaining service quality and operational effectiveness.

Sources

• American Hospital Association. (2024). “Costs of Caring.” www.aha.org/costsofcaring
• CrunchTime. (2023). “Food Costs Eat Up 35% of Revenue on Average for Multi-Unit Restaurants.” www.crunchtime.com/blog/food-costs-eat-up-35-of-revenue-on-average-for-multi-unit-restaurants
• FreshBooks. “How to Calculate Overhead Costs.” www.freshbooks.com/hub/expenses/how-to-calculate-overhead-costs
• Investopedia. “Activity-Based Costing (ABC).” www.investopedia.com/terms/a/activitybasedcosting.asp
• Joist. “Understanding Overhead Costs in Construction.” www.joist.com/blog/understanding-overhead-costs-in-construction
• Medical Group Management Association. (2024). “Practice Operations Report.” www.mgma.com/data/practice-operations-report
• NetSuite. “Guide to Manufacturing Overhead Costs.” www.netsuite.com/portal/resource/articles/accounting/manufacturing-overhead
• Ram, M. (2024). “Success Stories – Overhead Cost Reduction for Better Profits.” mukeshram.livepositively.com/success-stories-overhead-cost-reduction-for-better-profits
• Rivet Health. (2024). “Minimize Private Practice Overhead Costs and Maximize Revenue.” www.rivethealth.com/blog/practice-overhead-expenses-revenue
• TimeTrex. (2024). “Q2 2024 Productivity and Costs Report.” www.timetrex.com/blog/q2-2024-productivity-and-costs-report
• Wikipedia. “Overhead (Business).” en.wikipedia.org/wiki/Overhead_(business)
• Wikipedia. “Lean Manufacturing.” en.wikipedia.org/wiki/Lean_manufacturing

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Reviewed By: Brittany McMillen

Brittany McMillen

Brittany McMillen is a seasoned Marketing Manager with a sharp eye for strategy and storytelling. With a background in digital marketing, brand development, and customer engagement, she brings a results-driven mindset to every project. Brittany specializes in crafting compelling content and optimizing user experiences that convert. When she’s not reviewing content, she’s exploring the latest marketing trends or championing small business success.

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The most important method of accounting is accrual. Incomes must be considered at the time they were earned. In the meantime, expenses need to be considered at the time when they were incurred, regardless of the cash flow. Accrual accounting is the basis under which the impact of transactions and other events is recognized when they occur (and not when cash and cash equivalents are received or paid). They are reflected in the accounting entries and in the financial statements in the periods to which they relate. Thus, accrual accounting includes all tools developed by accountants for the application of the compliance rule. The method consists of two main methods:

1. Accounting for the accounting of income at the time when they are earned and expenses at the time they are incurred;
2. Adjustment of accounts.

The financial statements prepared on an accrual basis inform users. Not only about past transactions related to the payment and receipt of cash but also about the obligation to pay money in the future, as well as on resources equivalent to cash that will be received in the future. Bookkeeping can also be used in keeping the record of financial statements. The specificity of the accrual method is that income to the profit tax base must be included in the period in which they arise from the documents justifying their occurrence, regardless of the actual payment (or transfer of property as it.)

Maintaining Accounting Records

Most companies use the accrual method to maintain accounting records, in which expenses and revenues are recognized immediately after they occur, without taking into account the time of receipt of funds or payment of expenses. On the other hand, some small enterprises and individual entrepreneurs use the cash accounting method. With the cash method, income is recorded only when the money is received, and costs are recognized only after the payment is made. With the cash method, the determination of profit is based on information on receipt of payment and payment of expenses, and the facts of recognition of profit and expenses are not taken into account. Therefore, the cash basis for accounting does not comply with International Financial Reporting Standards.

Financial statements prepared on the accrual basis provide the user with information not only about past transactions but also about future cash obligations and the resources in the form of funds to be received.

The accrual method and the cash method are used to characterize two ways of accounting for income and expenses used in determining the basis for income tax. The accrual method and the cash method differ from each other. As a circle of taxpayers who are entitled to use one or another method of accounting, and conditions that make it possible to use each of the methods.

Cash Basis and Accrual Basis

The modern economy uses loans more than cash. The accrual method and not the cash method shows all aspects of credit. Investors, creditors, and other decision-makers want to have prompt and detailed information about the company’s future cash flows. The accrual principle provides such information in the Cash Flow Statement as soon as these amounts can be determined with enough accuracy. Accounts receivable and accounts payable indicate future cash receipts and disbursements. In other words, the accrual method helps to predict future cash flows, reflecting economic transactions at the time they occur, and not when the money is received or paid. The accrual method determines how income and expenses are allocated by a period. The rules for recognizing income and expenses must also be based on the assumption of the continuity of the company’s activities.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Every retail business has an unsold inventory that collects over time. In practice, retail functions by selling products, but no retail business operates at 100% efficiency and sells out everything in the inventory. Little do we know that unsold inventory can directly affect the amount you pay for taxes. To put it simply, your taxes depend on how much profit you generate during the year. And the profit you make is a function of inventory purchased and sold out. Hence, inventory has a direct impact on the tax you’d pay. In this article, we have broken down all the details you need to know.

 

Inventory Value- The Retail Method

Every retail business should value inventory at the end of the year. Here’s how to use the retail method of valuing inventory: multiply the unsold inventory with average markup percentage. The retail method of valuing inventory works if you have a consistent markup percentage. Once you have figured out inventory value at the end of the year, subtract the value from the total inventory you have purchased during the year. This gives you the cost of goods sold. Evaluating this is an essential step towards computing your taxes.

 

Inventory and Profits

Your sales make your total revenue. The cost of goods sold is subtracted from total revenue to figure out profit. The taxes you pay are based on this profit. How you will report your profit depends on the kind of business you run and the structure you follow. The corporate structure you follow is based on how your assets are protected.

 

Inventory and Tax

The value of your inventory depends on its purchase cost. Worthless items must not be counted as inventory. The higher the cost of goods sold, the more deductions are made from your total sales revenue, lower your profit and the tax that you will have to pay. 

You get no tax advantage in keeping an inventory that is not needed for running a business. Inventory purchases are not deducted from tax until the inventory becomes useless, is sold, or is removed.  On the other hand, keeping less than necessary inventory does not help in reducing your taxes. Some companies use “just in time inventory” method to conserve cash. By trying to time the inventory with the production process, some companies can save some money and avoid excess facility costs.

 

Get your sheets right. Record everything

The significance of creating sheets is evident because it produces accountability. The primary purpose of any business is to earn profits. A measurable way for businesses to regulate the financial and economic profitability of an investment project is the capital budgeting process and keeping their records straight. The processes involved in the capital budgeting process are:

• To develop and formulate strategic goals.
• To find out innovative investment projects.
• To evaluate and forecast future cash flows.
• To facilitate the transfer of information.
• To Monitor and Control the Expenditures 
• To make a decision

 A balance sheet is used to account for the financial position such as liabilities, amount of assets, and the stockholders’ equity of an accounting unit at a specific point in time.

 

The income statement can be explained by the statement of the earnings, statement of the income, or statement of the procedures. It pertains to the accountant’s key evaluation of the progress of a business, proceeds fewer costs throughout the accounting time.

 

The statement of cash flows splits cash inflows and outflows (receipts and payments) into three basic groups of cash flows in a business- cash flows from investing, operating, and financing events. The name of the entity, the title of the report, and the unit of measure used in the statement is classified through the heading. This statement is similar to the income statement; it includes a particular period that is the accounting period.

Consult a Specialist

Consult a specialist who can guide you in the best way you can reduce paying additional taxes. A consultant will help you decide the right method for organizing assets and managing inventory.

 

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Retail loss prevention has been considered one of the main aspects in recent times that require the attention of concerned authorities so that offices can be protected. As one of the major enterprise functions, the term ‘retail loss prevention’ means that retailers of all segments can save their big business accordingly. According to the Global Retail Theft Barometer, inventory shrinkage leads to around $42 billion on an annual basis for the retailers of the United States. Besides this, it amounts to almost 1.5% of the sale.

Shrinking margins and increased competitive pressures are faced by retailers, along with the emerging limited partnership (LP) threats from the cyber-fraud and organized retail crime. In the recent retail loss, professionals of loss prevention are considered more accountable for the opportunity to impact the business positively. In the meantime, they must do face the increasingly tight resources’ constraints.

Identifying Grounds for Shrinkage & Deploying Countermeasures

Before a retailer could deal with shrinkage and combat it, it should first consider the main causes and then prioritize about return on the investment. The primary cause of shrinkage is the theft, both from non-employees and employees alike. On the other hand, other reasons include ineffective inventory management, pricing mistakes, accounting and process errors, supplier and vendor fraud. In the United States, theft is considered by far the major cause of retail loss and shrinkage. With the greatest loss single source being theft from the dishonest employees, that accounted for more than $18 billion in retail losses or overall 42.9 percent of total retail losses.

On the other hand, with the shrinkage, the retailers are quite differently affected, and a business needs to determine and audit the most significant needs carefully. For example, bookkeeping errors and theft are considered some of the huge opportunities for improvement with both department stores and discounters. However, the attention of discounters must be internal, while the department stores will serve appropriately to focus externally.

On the contrary, the home improvement stores are considered as having more for gaining from the non-crime retail losses and other curing administrative losses other than theft. Certainly, execution is not considered as simple as it seems. The three steps to reducing retail shrinkage for minimizing the loss prevention risk include training staff, integration of the inventory management systems, and activation of the loss prevention modules on platforms of retail analytics.

Training Staff

An appropriate and effective trained staff could return the immediate dividends, besides the much retail loss exposure in relation to the human element. Firstly, the importance of training employees and eliminating theft should be communicated on not only how to respond in the best possible manner, but also how to predict the threats of shoplifting. Secondly, policies, processes, and practices must be installed that enable the employees to know the fact that they are kept under scrutiny. Lastly, fully discipline/prosecute and investigate all the cases, developing the ongoing operations a new normal aspect to deal with the business.

Integration of Inventory Management Systems

A specific combination of software and hardware that allows a retailer to track the deliveries, orders, and inventory levels in an accurate manner when tied to sales of POS systems is known as the Inventory Management System. Besides this, the integration of this system would help in the efforts of preventing the loss. It would also develop an efficient process of the supply chain, freeing up the old working capital, and lowering costs of inventory carrying.

Activation of loss Prevention Modules

A retail loss prevention model’s activation would help the business to expand the abilities to find solutions. Moreover, it would assist in replacing the limited partnership, single-point solutions, and reduce both the operational and capital expenses, which lead to an increased ROI. Also, the limited partnership innovative modules include the POS exception reporting, advanced video management, in-store dwells around the high value or high-risk merchandise, and monitoring of the security event. The experts of a limited partnership are allowed to act efficiently and quickly according to the built-in platform, removing the need for the purchase of costly data and time consuming along with the case investigation.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

It’s not a difficult task to save and manage money if a person is determined to do so. Anyone can start saving and managing money, no matter what their financial situation is. Saving money has a lot to do with the routine and habits of an individual. It also doesn’t mean that a person has to cut off all their entertainment habits at once. Everything happens gradually, you need to stay persistent. These steps will help you to save and manage your money:

 

Make a Grocery List:

Make a proper list of your needs. Making a list helps a person in remembering the items that are needed. There’s a difference in what a person needs and what they want. Make sure to write down all necessary grocery list items every month. Cut snacks from this list because they are unnecessary and unhealthy for an individual. After writing down everything, calculate the amount required for it.

Paying Bills and Rent:

Make sure to write down the total amount of bills and rent. It will help in staying focused on your spending. Writing it all down will provide clarity for in the long term. You should also write down all the other items you spend money on in order to make a budget if you aren’t having any money to save each month.

Exclude Extra Entertainment:

Cutting entertainment can be gradual, it doesn’t have to happen all at once. The expectation is not to cut out all entertainment but to reduce it to increase finances and productivity. Make sure to take breaks from entertainment to think about your goals. This will help you to stay productive and focused.

Calculate the Amount That’s Left:

After paying all the bills and buying groceries calculate what remains. This can be used for transportation costs and some entertainment. Be sure to save before you spend the leftover amount on entertainment. If you find you have little to save or spend on entertainment you must analyze where you can save money.  Saving money should come before entertainment or luxuries so you may have to find ways to cut back to save.

Have an Optimistic Approach:

Changing routines and spending habits takes time and can be difficult. Staying persistent, focused, and positive should be the priority. Keep motivating yourself. Listen to music that motivates you. Watch motivating videos. Meditate. Write down positive thoughts and goals. Whatever method you use the idea is to stay optimistic while working towards your goals.

 

The overall goal is to have savings. This is needed for emergencies, future large purchases, and to cover job loss. If you follow these tips, you will find that you are building savings in no time, and saving money will become second nature.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Introduction

Since the automation of healthcare records, many facilities have taken automation to the back office in accounts payable (AP). The manual system is costly and time-consuming, bringing automation to the forefront as a solution. Healthcare facilities have unceasingly endured essential products being required for supply lines. Such constant orders result in numerous purchase orders and invoices for payable accounts.

What is Accounts Payable Automation?

The Accounts Payable (AP) process includes purchase orders and payment invoices. The AP system generates invoices and bookkeeping entries electronically rather than manually. Electronic production allows healthcare facilities to deliver purchase orders to suppliers and receive invoices from them electronically, boosting the process of working within the healthcare organization. However, automating the account payable process does not abandon the need for paperwork because some orders require manual handling.

Why Use Accounts Payable Automation?

Until a facility sees the negative impact of paper handling, it may not see the use of automating the AP process. One incentive is that suppliers often offer deep discounts for fast invoice payments. While some facilities may hesitate to automate their AP because they consider paper-handling error-free, most will learn automation can also be. Suppliers may not be automated, so continuing manual accounts payable is necessary. Still, once a supplier can see the accuracy and speed of the automated system, they, too, will be on board. Healthcare facilities and suppliers must communicate and decide to automate the process together. The automated AP system is faster, requires less workforce to facilitate, and is highly accurate. The only drawback is that both the facility and the supplier have to be automated to use it between them.

Implementation Steps

The healthcare organization must take the following steps to successfully implement AP automation.

• Recruit a highly capable project manager to run the automated AP process. The manager will efficiently control all its aspects and have the ultimate authority to make decisions regarding its smooth running.
• Avoid spending too much time between departments’ training and allowing them to go live for working because this will lessen their interest in utilizing the AP process.
• Strive to perform both processes, i.e., automated and current production procedures, to evaluate which method is less hassled and more productive.
• The Project Manager should develop a networking department to handle a large number of suppliers to handle electronic purchase orders. Moreover, the networking department must oversee in-house capabilities to ensure that all the departments are interconnected with the AP process.
• The Project Manager must have a separate IT department to manage the software required to run the AP process. The software should input received invoices generated electronically into automated accounts payable software. Also, the software must produce regular reports of AP staff to review invoices before they are approved. The AP department must also review the working of employees involved in running the AP process.

 

AP as an Increasing Priority

The lack of seeing the AP process as an organizational priority is one of the most significant problems for its implementation. Accounts payable departments must consider the process as an important priority. Most healthcare facilities can afford to use the electronic system, but there is a need to change the perception of the staff handling the AP process. The facility will see positive profit from this technological investment and see growing revenue on an annual basis.

Conclusion

Awareness of automating payments is increasing among hospital administrations for potential savings and future profits. The evidence-based decision-making process in the supply chain is essential for automation solutions, and there is a fundamental opportunity for healthcare facilities to take advantage of such an automated technology. Healthcare administrations that are craving quick solutions to their payment procedure must ponder the use of AP automation and its benefits.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Hospitals and medical facilities often have a complicated billing process for their patients. Aside from the costs of healthcare, this process can cause a delay in a patient paying their bill on time or at all.  Hospitals and healthcare agencies are considering this problem and working to resolve this issue as soon as possible.

Invoicing Process

The invoicing process includes sending a detailed billing statement to the patient and the recipient making payments based on the details on the invoice. Given that the invoice is part of the payment requirement, there is an apparent interaction between payment systems and the invoicing process. However, it is important to know that an invoice is not a bank document. The invoicing process is tied to the payment system, and banks can provide additional services, such as processing, sending out invoices, and financing the supply chain. In addition to this, the process of issuing an invoice is an important step in paying the bills of the hospital. It initiates the process of payment between the medical clinic or hospitals and the patient. The impact of technology is of great importance in promoting the continuous efforts of companies to reduce the number of paper documents. The process of invoice does not usually contain many documents or paperwork; therefore, it can make the process of payment easy and painless. However, it can make the process of payment easy for both the hospital and the patients.

Ideas for Prompt and Painless Payment

Some techniques can be used for painless and prompt payments. Many successful businesses and organizations use these techniques.

Invoice Immediately

Patients will be more likely to make payments if they receive their bill immediately. This quick payment can also be guaranteed if the process to pay is straightforward and user-friendly. Sending invoices through the phone is a new and effective technique that is being used by many hospitals and medical clinics for painless and prompt payment. The patients are instantly sent the invoice through text, and they can pay the bill through their phone. This quick billing and payment process can also be done through email.

Sending Clean Invoices

An invoice must contain correct and detailed information for the patient. This should include the complete description of medicines, treatment, and other billed services and their costs. Often patients are reluctant to make a payment if they cannot understand their bill or it has errors. This will also benefit the bookkeeping process of both the patient and the healthcare facility.

Discount Plans for Patients

Discount plans can encourage patients to pay upfront or to commit to a scheduled automated payment. The idea is that if a patient pays in full or commits to an automated payment schedule, they will receive discounts.  Discount plans are not just a benefit to the patient; healthcare facilities often do not receive payment because a patient cannot afford it, and eventually, the facility will write it off as a loss. Discount plans will keep the patient’s credit clear, and though it will be at a discount, the facility will not have a loss.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Owning your own business requires you to wear many hats. One of those hats would be bookkeeping. While it is not necessary to know everything about bookkeeping, you should know the basics. One such area would be the cost of goods sold. The cost of goods sold is the expenses that go into the goods before the sale. There are different costs associated with the goods that are sold by a business. The goods pass through several processes before the sale, and each procedure carries certain costs. Meanwhile, the calculation cost of goods sold is the part of the company’s bookkeeping that helps a business determine the amount of costs incurred from the start to the final sale.

There are considerations when calculating the costs. The formula will give you the total cost accurately if followed correctly. It is stocked at the beginning of the period plus purchases during the period minus stocks at the end of the period. It means that stock at the ending of a financial period is subtracted from purchases made during the fiscal period and the stock that was already available with the firm.

In addition to the above, if there are no stock items that a business house has in store at any given time and that it intends to sell or use to make a product or render a service. At the beginning or end of the year, the cost of goods sold is also called the cost of sales.

Furthermore, the cost of goods sold by a commercial enterprise includes only purchases, including transportation costs, customs, and various non-refundable taxes. This reveals that the cost of goods sold does not include the cost of purchases only. Still, it also consists of the costs that are expensed on the transportation of goods. The costs that are expensed over the transport include shipment costs, fuels, logistic costs, which are added to the cost of goods sold. The cost of goods sold also consists of the materials that a firm acquires to produce those goods.

On the other hand, if there are stocks at the beginning or end of the year, the cost of the goods sold is also called the cost of sales. The main reason for considering the beginning and ending stocks as a cost is that they have been purchased and maintained by the company. 
One of the most essential functions is the role of inventory in determining the cost of goods sold. The inventory has been given the name of stock in the beginning and stock at the ending of the period. At the same time, the purchased stock is added to the stock that was available at the beginning of the period. It is also said to be the cost of sales. 

Moreover, the cost of goods sold carries a notion of gross profit. The excess of the operating expenses of a financial year on the gross profit margin can be an excess of the turnover on the cost of the goods sold. The calculation made as follows:

Likewise, operating profit and excess of operating revenue over the cost of goods sold for a given period is determined without reference to operating expenses, other income and expenses, and taxes. When it comes to a manufacturing company, the composition of the cost of goods sold is also called the cost of sales. Moreover, the calculation of the cost of goods sold by a business is more complicated, as demonstrated. Hence, it can be said that a company should have a better understanding of the process of calculating the costs of goods sold to identify what cost has been incurred on each business activity. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.