Author: Jennifer Brazer

Poor Management Team – A Standard Startup Error

A frail management team is An unfathomably common issue in the startup of any business. Feeble management groups commit errors in various areas:

• They frequently fail to build a correct strategy. Making a product that no one needs to purchase is a sign that the management neglected to do the necessary work to gather and refine ideas before and during development.
• They are generally poor at execution, which causes issues with the products not being produced accurately or on time. Furthermore, the go-to-market execution will be inadequately actualized.
• They will assemble vulnerable groups beneath them. There is a well-demonstrated saying: A players employ A players, and B players get to enlist C players (as B players would prefer not to work for other B players). So, whatever is left of the organization will be fizzled out in months.

Running Out of Cash – A key Startup Consideration

New companies fail to identify in the startup phase because of their lack of finance. A key component for the CEO to consider is to see how much money is left once the startup is launched and whether that will take the organization to a breakthrough that can prompt adequate financing with a positive cash flow. An efficient bookkeeping system is a must to ensure this.

Breakthroughs for Raising Cash

The valuations of a startup don’t change abruptly over time. Because you are in the second year of business since its inception, it does not imply that you are worth more cash. An organization must accomplish specific key turning points to achieve an expansion in valuation. In the case of a software organization, these might look like something as follows (these are not hard and fast standards):

• Progress from seed round valuation: the objective is to eliminate some fundamental risk components.
• If the product is completed, but there isn’t yet any client approval, valuation won’t likely build much. The client approval part is significantly more vital.
• The product is already in its delivery stage, and clients have made prepayments for it and are giving positive feedback.
• Product/Market fit issues typical with a first release (a few missing highlights that were most required in many sales situations, etc.) have generally been wiped out. These are early signs reflecting that the business is beginning to decline.
• The business model is recognized and endorsed. It is now known how to procure clients, and it has been demonstrated that this procedure can be scaled. The cost of gaining clients is acceptably low, and unmistakably, the business can be productive as an adaptation from every client surpasses this cost.
• The business has scaled well yet needs extra finance to speed up development. This capital can be extended globally to accelerate development in highly dynamic market conditions or support working capital needs as the business develops. Efficient bookkeeping strategies are needed to sustain such financing issues.

What Goes Wrong?

What often goes wrong in the startup causes an organization to come up short on money and unfit to raise more because management neglected to accomplish the future milestones before the money ran out. Commonly, it is possible to raise finance by debt-servicing methods. However, the risks would be too significant in the long run. Not placing due emphasis on bookkeeping methods can lead to such an outcome.

When to Hit the Accelerator Pedal

One of the CEO’s most imperative jobs is managing the accelerator pedal. At the beginning of the business, while the product is being created and the strategy refined, the pedal should be set softly to save money. There is no point in enlisting numerous marketing individuals if the organization still completes the product to the point where it meets the market requirements. This is a widespread error and will bring about a quick failure and loads of frustration.

Product Problems

Another reason organizations fail is neglecting to build a product that meets the market requirement. This can be because of execution or a strategic issue, such as an inability to accomplish Product/Market fit.

More often than not, the first product that a startup brings to market will most likely not meet market requirements. It will take a couple of modifications to get the product/market fit right in the best cases. In the most undesirable scenarios, the item will be off the track and require an entire reexamination. On the off chance that this happens, it is a good sign of a group that didn’t take the necessary steps to get out and have their ideas validated with clients during and before development.

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.

Many organizations and business owners face fraud yearly due to their employees or business partners. New entrepreneur startups and small businesses are more vulnerable. The risk of fraud has increased due to the advancement of technology and the progressive development of the world into a global village.

The increased awareness of technological developments and complex organizational structures requires corporations to incorporate internal anti-fraud approaches to combat fraud. According to 2014 research reports by Global Nation, organizations face a 5 % loss due to fraud each year, of which internal employees committed 85 % of severe fraud cases. Organizations should develop multi-layered fraud prevention strategies while keeping these statistics in view.

Organizations and businesses should do the following ten things when they suspect fraud.

Be Calm and Don’t Panic

Fraud is scary, and you will likely want to panic and react abruptly when you suspect fraud at your organization. You may terminate the fraudster on the spot or meet them head-on for confrontation. But these are harmful rather than good for the organization. Don’t react when you are emotional or angry. Prepare a plan, investigate, and do what benefits the organization. Make strategies and policies to handle fraud before it happens.

React Logically

It is not preferable to overreact or have no reaction at all to a suspect. If you don’t react and take it easy, the perpetrator will think they can do anything. Childish behavior toward fraud will worsen, and the perpetrator will commit fraud without fear of consequences. Always take action when you suspect fraud but react logically.

Be Careful

If you suspect fraud, don’t declare it until you have evidence. If you react without evidence, the fraudsters become alert. The fraudster will try to hide and destroy evidence if they know they are being exposed and you are watching them. After suspecting something is wrong, don’t make it obvious. Investigate carefully. Otherwise, you will not be able to get any evidence.

Back up Financial Data

Always maintain backup data of your organization’s financial dealings. Save on hard copies or hard drives. Get a copy of a hard drive of your suspect discreetly. Preserve all records of transactions, emails, payroll, and bookkeeping. Perpetrators often utilize this information, primarily bookkeeping records, to commit fraud.

Rehiring

Be mindful and prepare to hire new personnel. Termination is the minimum consequence of fraud detection. Managers and executives are often so involved in fraud that filling the new position can be challenging. Prepare yourself for such challenges.

Defend Your Reputation

Fraud damages the image and reputation of the organization in front of the public, customers, partners, and donors. Try to react calmly and defend your reputation. Resume the trust of partners and customers by assuring them that the organization has taken corrective measures.

Don’t Save Money

Financial loss due to fraud is recoverable, but the reputation is not recoverable. Hire a certified fraud examiner to make policies for fraud prevention and detection. Your organization may try to save money by not hiring a certified fraud examiner but will suffer a lot after an incident of fraud. Realize that money is not everything. What matters more is the hard-earned reputation, which fraud can easily damage.

Set an Example

Set an example by handling fraudsters with tight hands. Otherwise, you may encourage others to commit fraud in the future. After fraud, the penalties recommended are a civil lawsuit, termination, and criminal prosecution. Impose all three penalties severely, if possible. Moreover, the employees will see zero tolerance for fraud in your organization and face severe consequences if they go there.

Get Help

Don’t try to handle fraud alone because it involves accounting and legal issues. Call a certified fraud examiner for help. Furthermore, they know where to get evidence and how to explain it to the legal system.

Make Positive Changes

Learn from an incident of fraud and prepare the policy for detection and prevention of fraud in the future.

Conclusion

Overall, fraud in business can result in significant financial loss, wastage of time, and a ruined reputation. Fraud should be handled when suspected.

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.

Loan amortization means paying off your balance over time through regular payments distributed over a certain period. The term is generally associated with paying off loans. However, amortization has broader applications in accounting terms and can be applied to various balances.

Each monthly payment for your home or auto loan may appear the same. However, it never is and is made up of several parts, which change over time. As you reduce your loan balance, also referred to as loan principal, the interest rates, which are initially very high, come down gradually, resulting in lesser monthly interest payments.

Loan amortization for long-term loans would generally include high interest costs at the start. As more and more amount goes into your principal over time, the cost drops significantly. The period is specified before the amortization process and is designed to ultimately pay off the debt within the specified period.

Showcasing the True Cost of Borrowing

An amortization table will highlight every payment you must make to pay off the debt. The table highlights a starting balance, an ending balance, a fixed payment amount you have to make each month, a principal amount calculated by subtracting the ending balance of each month from the starting balance, and the interest payments that would decline every month.

Instead of focusing on monthly payments because they will remain the same, a loan amortization table can help you calculate the exact amount of interest that needs to be paid. Typically, people base their decisions on the amount of the monthly payment.

However, the actual cost of borrowing is more accurately determined through interest costs, usually stretched over a long period. Therefore, to evaluate the actual costs associated with a loan, you must always consult an amortization table.

Loan Amortization Helps in Decision Making

Deciding which loan to choose can be tricky, as assessing each lender’s terms can be challenging. Interest rates or shortening the payment span can significantly influence the amount you can pay. There are also ways to skip interest charges on loans if you make early payments.

 It will always pay off if you decide on factual information instead of going with a good offer. Amortization of the loan ensures you are offered detailed information on every payment to plan accordingly. Loan amortization makes decision-making a lot easier.

How to Amortize Loans

There are many ways to create amortization tables. You can build one or use an online calculator to create one easily. The online option is more convenient and reliable for loans over a long period. Figuring out how the table works is simple math.

The payment is centered on the amount of the loan, the interest rate, and how many years the loan lasts. Those three ingredients affect how much you pay each month and how much total interest you’ll pay. As you lower the interest rate, the payments will also decrease.

Stretching out the loan over a longer duration would lower the payments. However, you end up paying more interest. All values work in response to one another.

Types of Loan Amortization

Auto Loans

Auto loans are usually five years or shorter and are often paid through fixed payments. Because the loan is not a tremendous amount of money compared to other types of loans, buyers prefer to pay them in equal payments without stretching them out and raising the interest costs.

Home Loans and Mortgages

This loan is spanned over extended periods, such as 15 or 30 years. People generally tend to refinance these types of loans at some point.

Personal Loans

Credit unions, banks, and online lenders offer personal loans at fixed interest rates to be paid back within a specific period. A loan amortization must be done for all personal loans to ensure you can plan for future payments.

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.

The retail industry has been challenging and dynamic for many years. Retailers constantly face various obstacles, such as economic downturns and changing consumer preferences. However, the industry has undergone significant changes in recent years. This makes it even more challenging. The rise of e-commerce giants like Amazon has revolutionized the market. Therefore, this has led to a shift in consumer behavior. People increasingly prefer to shop online, often at the expense of traditional brick-and-mortar stores. 

Moreover, the COVID-19 pandemic has further transformed the retail landscape. Many businesses are forced to close their doors temporarily or permanently due to lockdowns and social distancing measures. As a result, consumers have become even more reliant on online shopping. This has accelerated the growth of e-commerce and posed a significant threat to physical stores.

In such a rapidly changing environment, retailers struggle to keep up with the competition. They find it hard to adapt to the industry’s new realities. Moreover, they need to find new and innovative ways to reach consumers. Enhance the customer experience and remain relevant in an increasingly digital world.

Despite these challenges, there is still room for new retail entrepreneurs to succeed. By understanding the latest challenges the retail industry faces and taking steps to overcome them, new entrepreneurs can position themselves for success. However, here are some of the latest challenges the retail industry faces and what new entrepreneurs can do to succeed beyond them.

Challenge #1: Competition from E-commerce Giants

One of the biggest challenges facing the retail industry today is competition from e-commerce giants like Amazon. With a vast selection of products, competitive pricing, and fast shipping, e-commerce has become the preferred shopping method for many consumers. However, this has left brick-and-mortar retailers struggling to compete.

Solution

To succeed in the face of competition from e-commerce giants, new retail entrepreneurs must focus on what they can offer that Amazon can’t. This could be personalized customer service, unique products, or a memorable in-store experience. Furthermore, entrepreneurs can attract customers looking for more than convenience by focusing on what makes their store unique.

Challenge #2: Changing Consumer Preferences

Consumer preferences are constantly changing, and retailers must adapt to keep up. Consumers have become more conscious of their environmental impact in recent years and have started prioritizing sustainability. Furthermore, they also seek more personalized experiences and products that reflect their values.

Solution

To succeed in the face of changing consumer preferences, new retail entrepreneurs need to stay up-to-date on the latest trends and be willing to adapt. This could mean offering sustainable products, creating a personalized shopping experience, or using social media to connect with customers. However, by staying ahead of the curve, entrepreneurs can stay relevant and attract customers who are looking for something new.

Challenge #3: The Impact of COVID-19

The COVID-19 pandemic has had a profound impact on the retail industry. Many stores closed for months, and consumers hesitated to shop in person. Retailers have had to adapt quickly to stay afloat. While some retailers have been able to pivot to e-commerce or offer curbside pickup, others have struggled to survive.

Solution

To succeed in the face of the COVID-19 pandemic, new retail entrepreneurs need to be flexible and adaptable. This could mean offering online ordering and delivery, creating a safe in-store experience, or using social media to connect with customers. By being proactive and responsive to changing conditions, entrepreneurs can position themselves for success even in uncertain times.

Conclusion

In conclusion, the retail industry faces several challenges. But there is still room for new entrepreneurs to succeed. By understanding the latest challenges the sector faces and taking steps to overcome them, new entrepreneurs can position themselves for success. Whether it’s offering personalized customer service, staying ahead of the latest trends, or being flexible in the face of uncertainty, entrepreneurs who are willing to adapt can thrive in the competitive world of retail.

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.

You can schedule how your company’s resources are utilized and track varied costs associated with resources’ usage for a particular project. It involves machine hours, employee hours, inventory goods, and other usages tracked for job progress.

If a job has been running for an extended period, you may transform such costs on the balance sheet to work in the process account. Doing so allows you to analyze the costs and include them in your income statements whenever required.

Work in process is a prompt step that inputs labor and materials and converts them into consummate goods. The balance in the work-in-process account is the total value of semi-completed inventories at the end date of reporting.

Large companies know the significance of calculating work in process to make their inventory perpetual. However, trade businesses, in which a tradesperson employs transitory methods of inventory by taking physical resources of consummate goods into account, can use this formula for determining work in process.

Importance of Calculating Work in Process

The role of calculating work in the process is essential in these manners:

• To make sure that the work is going to make maximum profit
• Understanding of cost structure is enhanced
• To effectively manage employees and projects in a profitable way
• Enabling the company to make informed decisions that are relevant to the business

Rate to Cover Your Payment

You can calculate your rates to recover your payments. If you make a $10,000 net profit in your business in a single year and have yet to take payment, you had better work at KFC, which has a better wage system and fewer worries.

The first step should be determining how much you need because the wage depends on your circumstances. You need to consider every need, including mortgage payments, cost of living, etc. Trade businesses are usually covered by doing paperwork such as generating invoices, bookkeeping entries, bills, etc.

The next step is finding out how many hours you can work. No tradesperson can physically work for 24 hours. However, they need to dedicate more working hours to make maximum profit. If you work 40 hours a week and 2080 a year, you must consider your holidays, sick leave, and official leave. If the holidays account for four weeks and ill and other leaves account for three weeks, 52 weeks will become 45. That means you are working 1800 hours in a single year. This way, you can manage your costs and profits and calculate your work.

 Rate To Cover Your Running Costs

You can calculate this rate to recover your running costs for the trade business. If a tradesman does not charge for a single hour, you still have to pay for power, rent, and vehicle costs. You must begin by analyzing your previous costs because, if you do not, you will not generate profits in your succeeding business.

 Profit Margin

Calculating this would help you get the return you want from your business. You should build a specific percentage of the profit margin for every hour of chargeable time. This margin must go hand in hand with the reasonable time you allocate to this calculation.

In addition, you should compare your charge-out rate to the industry averages to know whether the total rate could be competitive. Do not forget to charge after an hour of work to find appropriate rates. If the rate is lower than the average rate, it will allow you to win in the business. Charging too little is the same as charging too much because it can undermine the confidence of consumers and employees in your industry.

 Material Costs

When calculating work for charge-out rate, material costs are not included. These costs are separately added to the markup. It can be done in various ways. You can use the wholesale or retail price or the actual price to put the mark upon.

Conclusion

• Be realistic in your business and meet the expectations of your employees
• Understand the cost of the business to generate maximum profits
• Find material and variable costs, including bills, vehicles, overtime, etc.
• Review changes and revise the costs whenever required
• Analyze the cost structure instantaneously and know what other competitive businesses are charging
• Be aware of what the market wants to pay
• Neither look for lower or higher rates than the average but keep them in a sustained manner

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.

The gearing ratio measures the proportion of funds borrowed by a company to equity. It is calculated as the total loan (liabilities of the long and short-term included in this loan) divided by the total equity of the shareholder. This is an important term used in bookkeeping. A specific formula is used to calculate the gearing ratio in bookkeeping.

It is the amount of equity needed to pay outstanding debts. Low gearing is the best option for SMEs because a company with a 10% gearing ratio could pay off debts more quickly, and investors consider it a low-risk company. Also, companies with a high gearing ratio of around 50% or above are considered a greater risk because they could be defaulters or bankrupt if profits decline for small periods or rates of interest increase.

The gearing ratio is one of the most common tools to evaluate the financial fitness of a company. The formula to calculate the gearing ratio in bookkeeping is as follows.

Gearing Ratio Formula = Debt / (Debt + Equity)

Types of Gearing

Financial gearing

Financial gearing includes using debt to fund a business.

The risk is increased by financial gearing, though returns are raised. The debt is a risk for the business. It is a relationship between loan and equity, i.e., how a business is funded.

Operational gearing

This term is used less commonly. It is the relationship between fixed costs and variable costs of the business.

Disadvantages of Higher Gearing Ratio

A higher gearing ratio suggests abundant leverage when an SME is consuming debt to pay for its ongoing operations. In a trade recession, such SMEs may face distress while meeting schedules of their debt and are at risk of bankruptcy. The condition is hazardous when a firm is involved in debt engagement interest rates, which are variable because a sudden rise in rates could lead to serious problems in the payment schedule.

A regulated industry such as utilities is not as affected by this. They have a monopoly in business, and regulatory authorities will increase the rate to cover the gap and ensure their continued survival. Possible requirements by financiers to lessen this problematic situation are restricting agreements that disallow the payment of shares, enforcing extra cash flow into debt repayment, constraining substitute usages of cash, and imposing conditions for shareholders to place additional equity into the firm. Creditors have a similar concern but are commonly incapable of enforcing alterations on the firm’s conduct.

SMEs that require large fixed assets have higher gearing ratios. A company with a low gearing ratio may manage finances conservatively. However, it may indicate that a company is sited in highly cyclical diligence and can’t afford to turn overextended in the aspect of an unavoidable downturn in trades and revenues.

Methods to Reduce Gearing Ratio

In bookkeeping, the value of the gearing ratio of a company can be reduced by the following methods:

Trade shares

If an SME is able to get permission from its board of directors to sell shares, then the revenue received after selling shares could be utilized to pay loans. 

Convert debt

These debts could be converted into shares after negotiating with lenders. 

Decrease working capital 

There are two ways to decrease the working capital: reducing inventory levels and escalating the speed at which receivable accounts are collected. The second is to increase the duration in which accounts payable are required to pay and lengthen the days needed. These methods produce cash, which is used to pay off debts. 

Escalation of profits

Practice all known methods to increase revenues so that more cash is generated, which could be used to pay off loans.

Conclusion

SMEs should maintain a low gearing ratio as it shows that the company is financially stable. This will result in attracting a large number of potential investors or lenders.

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.

Are you looking for a fun, lucrative way to make money in the real estate industry? Look no further than fix-and-flip properties! This strategy involves purchasing a property needing some TLC, making the necessary repairs and renovations, and then selling it for a profit. While it sounds simple enough, many factors should be considered before diving in. But don’t worry, we’ve got you covered! 

In this article, we’ll share valuable insights on generating profits using the fix-and-flip approach. Once you have these tips and tricks, you will quickly be on the path to financial success! Let’s get started!

Here are six essential strategies for making money from fixing and flipping properties.

Research and Analysis

Before you get started, knowing what to expect from the industry is always critical and a good starting point. Conducting thorough research and analysis is the first step in any successful fix-and-flip investment. This includes researching the local real estate market to determine if it is favorable for fix-and-flip investments. You should also conduct a comparative analysis of similar properties in the area to determine the property’s potential resale value after repairs and renovations. This lets you know what to expect from a buying market once your flip hits the market.

Establish Your Budget

Once you have identified a potential property to flip, the next step is to establish your budget. This includes determining the property’s purchase price, the cost of repairs and renovations, and any additional expenses such as holding costs, insurance, and taxes. It is important to establish a budget and stick to it to ensure that you can generate a profit on your investment.

Hire the Right Contractors

Hiring the right contractors is one of the keys to success in fix-and-flip investing. It would help if you found experienced, reliable contractors who can work within your budget and timeline. You should also obtain multiple bids from different contractors to ensure that you are getting a fair price for the work.

Make the Right Repairs and Renovations

When fixing the property, it is important to make the right repairs and renovations. This includes focusing on repairs that will add value to the property, such as updating the kitchen and bathrooms, replacing outdated plumbing and electrical systems, and repairing any structural damage. It is also important to focus on cosmetic improvements such as fresh paint, new flooring, and landscaping to enhance the property’s curb appeal.

Price the Property Correctly

Once all repairs and renovations have been completed, it is important to price the property correctly. This requires considering the current market conditions, the resale value of similar properties in the area, and the total cost of the repairs and renovations. Setting the right price is critical to generating a profit on your investment.

Market the Property Effectively

Finally, it is important to market the property effectively to attract potential buyers. This includes using high-quality photos and videos to showcase the property, creating a compelling listing description, and utilizing social media and other online platforms to reach a wider audience. You may also want to consider hosting an open house or hiring a real estate agent to help you market the property. 

In Conclusion

To summarize, fix-and-flip investing can be a lucrative strategy for generating profit in the real estate industry. However, it requires careful research and analysis, establishing a budget, hiring the right contractors, making the right repairs and renovations, pricing the property correctly, and marketing it effectively. Following these steps can increase your chances of success and profit from your fix-and-flip investment.

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.

Debt is the capital a businessman borrows from an outside source and agrees to return within a particular period, along with a specific proportion of interest. The debt has a very negative impact on the business, but as a matter of fact, most startup businesses have to borrow finances to begin operations. Even well-established business setups have taken up debts. Banks, other companies, friends, and family are the most common sources of debt. The term “Leverage” is also used for debt.

Companies must lend money while making massive purchases like equipment, heavy machinery, etc. Debt is the natural killer of a company. A tiger will eat your company one day if you are not getting rid of debts. Your company’s reputation is ruined, suppliers don’t supply you with credit, and you may not be able to offer salary increments, bonuses, and insurance. You can have an overall drastic effect on the business finances.

Here are a few strategies to get out of these debts.

 Free Cash by Cutting Down Unnecessary Costs

Identify the areas where you are spending unnecessarily and from where you are digging your company into debt. Know the cost of raw materials, labor, rent, etc, and how even a single penny can be saved. Cut down expenses by collecting credit from customers as soon as possible, renting an office at minimum cost, using simple office furniture and phones, etc. The company’s equipment not in use should be sold out. Similarly, scrap should also be sold out instead of dumping. Analyze whether hiring one individual on a salary is more beneficial than giving benefits to two employees.

Re-Examine Your Budgets

An increase in debt means that a company’s budget is ineffective. Reassess your budget and make adjustments accordingly. In the budget, revenue should be more than fixed costs, i.e., utility bills and rent, etc. After allocating money to variable costs like manufacturing, etc., allocate a fixed portion of the budget to pay debts to avoid piling up of loans. Have a detailed discussion on monthly transactions. Bookkeeping will help you to review loss, profit, purchases, and sales.

Manage and Monitor Your Inventory Effectively

Inventory is a major element Where a company spends too much. A few inventory tips should be adopted. Only necessary purchase items. Heavy equipment that can be borrowed on rent should never be purchased. Dead or excess inventory should be avoided. If possible, dead items should be sold out or returned to the supplier.

 Check Interest Rates on Credit Cards

Interest fees on credit cards are a significant expense for companies. It would help to talk to your credit card issuing authority about low interest rates. A credit card issuer may agree on lower rates if you are an old customer and pay on time.

Increase Revenue

Efforts should be made to increase the revenue of the company. Revenue can be increased by using strategies to enhance productivity. These strategies may include staff capacity building and skill development by training and knowledge, introducing new technologies, new marketing strategies to enhance sales, etc. Profits will be improved, which may be used to pay off debts.

 Consolidate Your Debt

This is one of the quickest ways to minimize interest rates. Instead of paying various loans with different interest rates, consolidate them into one with less interest. This will reduce the monthly expenses on loans without affecting credits.

Bring in an Investor

Usually, the investor is not a good option because you must sacrifice a portion of your future profits. But if you are sinking into debt, look for an investor to support your business financially.

Conclusion

It is impossible to get out of debt without adopting the abovementioned strategies. Debt is a threat to your company, and your company needs to work on getting rid of debt as soon as possible.

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.

A Guide to Maximizing Efficiency and Quality

I’m thrilled to share the fascinating world of architecture, an intricate and diverse field. It calls for many skills and expertise to craft exceptional structures that stand the test of time. Each process stage, from the brainstorming phase to the final construction, requires careful planning and execution. One of the most vital elements that contribute to the success of an architecture project is the allocation of labor. I’m delighted to share some of the best practices for optimizing labor allocation in architecture to ensure top-notch efficiency and quality in this article.

Define the Roles and Responsibilities

One of the most crucial factors contributing to this success is having a clear and well-defined understanding of the roles and responsibilities of each team member involved in the project. This includes the architects, engineers, contractors, and other professionals who are critical to the project’s progress. Everyone must be aware of their duties, responsibilities, and expectations related to their work. Doing so allows us to work seamlessly as a team, with every member contributing to achieving the project’s objectives. Let’s work together and make teamwork a seamless experience!

Identify the skills and Expertise

I’m thrilled to inform you that our project is making substantial progress, and we are now moving forward to the next phase, which is to identify the specific skills and expertise required for the project’s success. This involves carefully evaluating and matching the project’s requirements with each team member’s unique skills and experience. Such an approach ensures a seamless and efficient execution of the project. For instance, if we need specialized technical knowledge, we will assign a team member with the necessary experience in that domain. I am confident that this strategy will deliver exceptional results as a team!

Create a Detailed Schedule

Wow, we’re making significant progress! Now that we’ve defined everyone’s roles and skills, our next step is to create a detailed schedule. This schedule will outline all the tasks required to complete our project, including deadlines and which team members are responsible for each task. We must create a realistic schedule that includes room for unexpected delays. With our combined expertise and thoughtful planning, we’re sure to succeed in completing this project on time and with great success!

Establish Effective Communication

Effective communication is crucial for successful labor allocation. Team members should be encouraged to communicate openly and honestly about their progress, challenges, and concerns. Regular meetings should be scheduled to discuss the project’s status and make any necessary adjustments to the labor allocation.

Use Technology to Your Advantage

Technology can be a valuable tool for labor allocation in architecture. Many software programs and tools can help with project management, scheduling, and communication. These tools can help streamline labor allocation and improve efficiency and productivity.

Monitor and Evaluate Performance

Finally, it’s essential to monitor and evaluate the performance of each team member regularly. This involves tracking progress, identifying issues or challenges, and promptly addressing them. Regular evaluations will help ensure that the project is on track and that the labor allocation is effective.

Conclusion 

The precise allocation of labor in architecture projects is paramount for achieving success. Architects must undertake crucial steps to ensure the project runs smoothly and efficiently:

In managing a project, defining clear roles and responsibilities for each team member is essential, ensuring a shared understanding of individual contributions. Identifying the skills and expertise of team members is crucial to assembling a capable workforce capable of delivering desired outcomes. A detailed schedule outlining tasks and deadlines is necessary for effective project management. Establishing communication channels facilitates transparency and prompt resolution of issues. Leveraging technology optimizes processes and boosts efficiency. Monitoring and evaluating performance are ongoing tasks to pinpoint areas for improvement and ensure alignment with project objectives.

By undertaking these steps, architects can maximize efficiency and quality and complete any architecture project successfully.

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.

By: Jennifer Brazer

Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.

Fact Checked By: Brittany McMillen

Tax Return COGS Calculation: Maximize Your Deductions Now!

COGS (Cost of Goods Sold) calculation is essential for tax returns, helping businesses accurately track production costs and maximize legitimate deductions. The formula—Beginning Inventory + Purchases – Ending Inventory—provides the framework for reducing taxable income while maintaining IRS compliance.

During my 20+ years leading Complete Controller, I’ve guided thousands of businesses through strategic COGS optimization, unlocking substantial tax savings. The numbers speak volumes: companies making COGS errors face a 63% higher audit risk, while those implementing proper inventory systems save an average of 9% on annual taxes. In this article, I’ll share proven methods to calculate COGS correctly, identify commonly missed deductions, and implement systems that both satisfy IRS requirements and minimize your tax burden.

What is tax return COGS calculation and how can you maximize your deductions?

• COGS is the direct cost of producing goods sold by a business, calculated using Beginning Inventory + Purchases – Ending Inventory
• Proper COGS calculation directly reduces taxable income by accurately reflecting the true cost of production
• Strategic inventory management and valuation methods significantly impact deduction amounts
• Documentation of all eligible direct and indirect costs ensures audit protection while maximizing legitimate write-offs
• Different business types use specific IRS forms: Schedule C for sole proprietors and Form 1125-A for corporations

Understanding COGS and Its Tax Implications

Cost of Goods Sold represents all direct costs associated with producing goods that a company sells. For tax purposes, COGS is a critical deduction that directly reduces your gross income before calculating taxable profit.

The IRS scrutinizes COGS carefully because it significantly impacts tax liability. In manufacturing and retail businesses, COGS often represents the largest deduction available, making proper calculation essential for both compliance and optimization. Businesses across sectors show dramatically different COGS ratios—from Microsoft’s lean 18.7% to Costco’s substantial 86.1%—reflecting how business models fundamentally shape deduction strategies.

Why COGS matters for your bottom line

COGS deductions create a dollar-for-dollar reduction in taxable income. For businesses operating on tight margins, accurate COGS calculation can mean the difference between profitability and loss.

Consider these impacts:

• A $10,000 error in COGS calculation could cost $2,100+ in unnecessary taxes (at 21% corporate rate)
• Properly documented indirect costs can increase deductions by 15-20%
• Strategic inventory timing can legally shift income between tax years

How to Calculate COGS for Tax Returns – The Essential Formula

The basic COGS formula follows this structure: Beginning Inventory + Purchases – Ending Inventory = COGS. While simple in concept, accurate application requires diligent record-keeping and strategic decisions about inventory valuation.

For example, a quarter with $35,000 beginning inventory, $4,800 in purchases, and $7,400 ending inventory results in $32,400 COGS. This calculation directly reduces taxable income by that amount.

Mastering the components of COGS

Each element of the COGS formula requires specific documentation and valuation methods:

Beginning Inventory:

• Must match prior year’s ending inventory value
• Requires consistent valuation method year-over-year
• Needs physical count verification and reconciliation

Purchases:

• Includes raw materials, components, and finished goods
• Encompasses freight-in, duties, and import fees
• Covers direct labor for production in manufacturing

Ending Inventory:

• Requires physical counting or cycle counting systems
• Must use the same valuation method as beginning inventory
• Needs adjustment for damaged, obsolete or unsaleable items

A small retailer without item-level tracking successfully calculated $450 COGS using FIFO, maintaining full IRS compliance while simplifying their record-keeping requirements.

Tax Optimization Strategies to Boost COGS Deductions

Strategic inventory management directly impacts your tax position. The manufacturing sector demonstrated this by reducing COGS ratios from 68.9% to 66.8% through automation, creating both operational efficiency and tax advantages.

The inventory valuation method you select significantly affects COGS calculations:

Inventory Method	Tax Impact	Best For
FIFO (First In, First Out)	Lower COGS when costs decline	Growing businesses in stable markets
LIFO (Last In, First Out)	Higher COGS when costs increase	Businesses facing inflation
Weighted Average	Moderate COGS with minimal fluctuation	High-volume inventory businesses
Specific Identification	Precise COGS tied to exact items	Luxury goods and unique products

Once you select a method, consistency is mandatory. The IRS requires special permission to change methods, making your initial choice particularly important.

Identifying overlooked COGS components

Many businesses miss legitimate COGS components, particularly indirect costs that the IRS allows under uniform capitalization rules:

1. Storage costs for inventory and raw materials
2. Quality control and inspection expenses
3. Production facility utilities and maintenance
4. Purchasing department expenses
5. Material handling and internal transportation

Including these costs can substantially increase deductions while maintaining full compliance with tax regulations.

IRS Compliance Essentials: Forms, Rules, and Required Documentation

The IRS recovered a staggering $1.1 billion from businesses with COGS reporting inaccuracies, highlighting the critical importance of proper documentation and form selection.

Different business structures use specific forms for COGS reporting:

• Sole Proprietors: Report on Schedule C, Part III
• Partnerships/S Corps: Use Form 1125-A
• C Corporations: Report on Form 1125-A with Form 1120

Beyond form selection, businesses must comply with the IRS rotational movement of inventory verification and documentation. This requires maintaining records that support:

• Inventory counts and adjustments
• Cost allocation methodologies
• Uniform capitalization calculations
• Consistency in accounting methods

A mid-sized manufacturer implemented cogwheel mechanics in their accounting processes, reducing tax liability by 12% while strengthening their documentation for potential audits.

Uniform capitalization rules and section 263A

For manufacturers and larger retailers, Section 263A uniform capitalization rules require including indirect costs in inventory valuation. These rules affect:

• Which expenses qualify for COGS treatment
• How overhead gets allocated to production
• Documentation requirements for mixed-use facilities
• Treatment of administrative costs related to production

Businesses with over $26 million in gross receipts face stricter requirements, including potential application of the simplified production method or simplified resale method for allocating costs.

Common COGS Calculation Mistakes – And How to Avoid Them

COGS errors trigger IRS scrutiny, with 63% of small businesses making calculation mistakes facing audits. The most frequent errors include:

• Inconsistent inventory valuation methods
  • Switching between FIFO and LIFO without IRS approval
  • Using different methods for financial vs. tax reporting
• Missing indirect cost allocation
  • Failing to include eligible overhead in COGS
  • Improper allocation of mixed-use facility expenses
• Inventory count inaccuracies
  • Neglecting year-end physical inventory verification
  • Failing to adjust for damaged or obsolete items
• Timing errors in purchase recognition
  • Mismatching purchases with the periods they belong in
  • Incorrectly handling goods in transit at year-end
• Documentation deficiencies
  • Insufficient records to support inventory valuations
  • Missing supplier invoices and production cost documentation

Prevention requires systematic approaches including quarterly inventory reconciliations, consistent application of accounting methods, and thorough documentation of all COGS components.

How to Transition Your Business to COGS-Driven Tax Planning

Implementing strategic COGS management requires a systematic approach. The manufacturing industry proved this by improving COGS ratio by 2.1% through automation, demonstrating how operational changes drive tax advantages.

Implementing a 5-step optimization framework

• Audit Current Practices
  • Review existing inventory and COGS processes
  • Identify documentation gaps and compliance risks
  • Benchmark against industry standards
• Select Optimal Inventory Methods
  • Analyze which valuation method benefits your cost structure
  • Consider how how cogs work in your specific industry
  • Document methodology selection for IRS substantiation
• Implement Tracking Systems
  • Deploy inventory management software
  • Establish procedures for cost allocation
  • Create audit trails for all COGS components
• Train Staff on Requirements
  • Educate team on proper documentation
  • Define roles and responsibilities
  • Establish review procedures
• Schedule Regular Reviews
  • Conduct quarterly reconciliations
  • Perform year-end physical inventory counts
  • Update procedures as tax laws change

This framework helps businesses identify all eligible gear teeth in their COGS machinery, ensuring maximum legitimate deductions while maintaining audit readiness.

Leveraging technology for COGS optimization

Modern cloud accounting systems streamline COGS tracking with features that enhance both accuracy and optimization:

• Real-time inventory management
• Automated cost allocation
• Digital document storage for substantiation
• Integration with point-of-sale systems
• Customizable reporting for tax planning

Understanding various types of cogs in machinery of financial reporting helps businesses implement systems that maximize efficiency and tax benefits simultaneously.

The Strategic Value of Professional COGS Management

Beyond compliance, strategic COGS management creates substantial competitive advantages. Companies implementing professional systems routinely identify 15-20% in additional legitimate deductions.

Benefits extend beyond tax savings to include:

• Improved cash flow forecasting
• Enhanced pricing strategy
• Better production planning
• Reduced inventory carrying costs
• Strengthened audit defense

In my experience working with businesses across industries, the most successful companies view COGS not just as a tax requirement but as a strategic opportunity to improve overall financial performance.

Final Thoughts: Maximizing Your COGS Deductions

Proper COGS calculation represents one of your most powerful tax optimization tools. By following IRS guidelines while strategically managing inventory and production costs, you can simultaneously reduce tax liability and improve business operations.

The companies that thrive financially approach COGS as both a compliance requirement and a business optimization opportunity. They implement systems that capture all eligible costs, maintain proper documentation, and adapt to changing business conditions.

Ready to optimize your COGS calculations and maximize legitimate tax deductions? Contact the Complete Controller team for expert guidance on implementing tax-efficient inventory and production cost systems. Our experienced professionals will help you identify overlooked deductions while ensuring your business remains fully compliant with all IRS requirements.

FAQ

What items can be included in COGS for tax deductions?

COGS includes direct costs like raw materials, direct labor, machine parts, and production supplies. Many businesses can also include indirect costs like storage, purchasing department expenses, and factory overhead. Service businesses generally cannot claim COGS except for materials directly used in service delivery.

How do different inventory valuation methods affect my taxes?

FIFO typically results in lower COGS during inflation (higher taxes), while LIFO produces higher COGS (lower taxes) in the same conditions. Weighted average provides more stable COGS across periods. Your industry, inventory turnover, and price volatility should guide your selection, but once chosen, changing methods requires IRS approval.

What documentation do I need to support COGS deductions during an audit?

You need inventory counts (beginning and ending), purchase invoices, production cost records, allocation methodology documentation, and proof of physical inventory verification. For manufacturing, additional records should show labor costs, overhead allocation, and application of uniform capitalization rules.

Can service businesses claim COGS on tax returns?

Pure service businesses typically cannot claim COGS, but service businesses that provide materials as part of their service can include the cost of those materials. For example, a landscaper can include plants and materials, while a consultant generally cannot claim COGS unless they produce tangible products for clients.

How often should I review my COGS calculation method?

Review your COGS methodology annually before tax filing season, with quarterly inventory reconciliations to catch errors early. Major business changes (new product lines, manufacturing process changes, significant cost fluctuations) should trigger immediate reviews. However, remember that changing valuation methods requires IRS approval.

Sources

• Balboa Capital. (2023). “Cost of Goods Sold: A Complete Guide.” www.balboacapital.com/blog/cost-of-goods-sold/
• Bench Accounting. (Dec. 11, 2023). “How to Calculate Cost of Goods Sold.” www.bench.co/blog/accounting/cost-of-goods-sold
• Claimyr. (Apr. 11, 2025). “How to calculate COGS deduction for small business…” claimyr.com/government-services/irs/How-to-calculate-COGS-deduction-for-small-business-when-I-dont-know-which-specific-inventory-items-sold/2025-04-11
• Complete Controller. (Feb. 27, 2024). “Tax Return COGS Calculation.” www.completecontroller.com/tax-return-cogs-calculation/
• FasterCapital. (2023). “A Comparison Of The Average COGS Ratios Across Different Sectors.” fastercapital.com/topics/a-comparison-of-the-average-cogs-ratios-across-different-sectors.html
• FasterCapital. (2023). “Case Studies On Successful COGS Management.” fastercapital.com/topics/case-studies-on-successful-cogs-management.html
• Internal Revenue Service. (Sept. 11, 2024). “About Form 1125-A, Cost of Goods Sold.” www.irs.gov/forms-pubs/about-form-1125-a
• Irvine Bookkeeping. (Jan. 15, 2025). “Avoid These Common Tax Issues When Reporting Cost of Goods Sold.” www.irvinebookkeeping.com/post/avoid-these-common-tax-issues-when-reporting-cost-of-goods-sold
• NetSuite. (Nov. 3, 2024). “Cost of Goods Sold (COGS): What It Is & How to Calculate.” www.netsuite.com/portal/resource/articles/financial-management/cost-of-goods-sold-cogs.shtml
• QuickBooks. (Sept. 9, 2022). “How Do You Find Cost of Goods for Tax Purposes?” Intuit. quickbooks.intuit.com/learn-support/en-us/taxes/how-do-you-find-cost-of-goods-for-tax-purposes/00/1138448
• TaxSlayer Pro. (Apr. 4, 2023). “Form 1125-A – Cost of Goods Sold.” support.taxslayerpro.com
• TIGTA. (Oct. 15, 2024). “Major Management Challenges Facing the IRS in FY 2025.” www.tigta.gov/sites/default/files/reports/2024-10/managementfy2025.pdf

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.