Welcome to AJSH & Co.

Blog Banner
20141203053605

Financial statements analysis

Financial statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company. Financial statements reflect the financial effects of business transactions and events on the company.

Statement of financial position, also known as the Balance Sheet, presents the financial position of an entity at a given date. It is comprised of the following

  • Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery, etc)
  • Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc)
  • Equity: What the business owes to its owners. Equity therefore represents the difference between the assets and liabilities.

 

Income statement, also known as the Profit and Loss Statement, reports the company’s financial performance in terms of net profit or loss over a specified period. Income statement is composed of the following :

  •  Income: What the business has earned over a period (e.g. sales revenue, dividend income, etc)
  •  Expense: The cost incurred by the business over a period (e.g. salaries and wages, rental charges, etc)

Net profit or loss is arrived by deducting expenses from income.

 

Cash flow statement, presents the movement in cash and bank balances over a period.

  • Operating Activities: Represents the cash flow from primary activities of a business.
  •  Investing Activities: Represents cash flow from the purchase and sale of assets other than inventories (e.g. purchase of a factory plant)
  • Financing Activities: Represents cash flow generated or spent on raising and repaying share capital and debt together with the payments of interest and dividends.

 

Statement of Changes in Equity, also known as the Statement of Retained Earnings, details the movement in owners’ equity over a period. It is derived from the following components:

  •  Net Profit or loss during the period as reported in the income statement
  •  Share capital issued or repaid during the period
  •  Dividend payments
  •  Gains or losses recognized directly in equity (e.g. revaluation surpluses)
  •  Effects of a change in accounting policy or correction of accounting error

 

Financial statements are used by so many different types of people from investors, to creditors, managers and even employees. These statements are proven useful tools that provide valuable information about a business enabling the user of the statements to make the most appropriate business decisions.

financial-planning

Financial Planning process

Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of a company.

Capital requirements  will depend upon factors like cost of current and fixed assets, promotional expenses and long- range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements. The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt- equity ratio- both short-term and long- term. Framing financial policies with regards to cash control, lending, borrowings, etc. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.

Financial planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern. This ensures effective and adequate financial and investment policies.

The importance of Financial planning

  • Adequate funds have to be ensured.
  • Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
  • Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
  • Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
  • Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
  • Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability an d profitability in concern.

 

The financial planning professional informs the client about the financial planning process, the services the financial planning professional offers, and the financial planning professional’s competencies and experience. The financial planning professional and the client determine whether the services offered by the financial planning professional and his or her competencies meet the needs of the client. The financial planning professional considers his or her skills, knowledge and experience in providing the services requested or likely to be required by the client. The financial planning professional determines if he or she has, and discloses, any conflict of interest. The financial planning professional and the client agree on the services to be provided.

 

shutterstock_73256980

Things to consider before company formation

Before you begin to set up your company you need to decide what your business will be about. Market research is essential, to know whether your business idea is viable and whether you can make it a success. You can get this information by setting up focus groups and surveys, as well as by analysing data online or pay professionals to do this for you.

Especially important when it comes to gaining finance for your company your business plan is also a great way of analysing your company’s success.

Things to include in your  business  plan :

  •      Where you are now, what you want to do , what you want to achieve , your unique selling points and your business structure.
  •     List the roles of directors, the company secretary, management team and current employee positions, identifying the people who will fill them as well as possible future posts.
  •     Where will you be based, transport and distribution methods and any legal, regulatory or insurance obligations.
  •     Market need and highlight customers and key competitors. Take a look at market size and current trends.

Highlight your pricing and how you will promote your product or service, as well as the channels you’ll use for sales,  lay out your financial projections including sales and cash flow and any funding that is needed.

Before you start your company it’s worth learning a few of the basics like Bookkeeping and finance, Marketing including setting up and managing your website, Sales techniques, Procurement, including choosing your preferred suppliers, Your legal, regulatory and insurance obligations.

Completing a company formation may lead to many routes of finance. There are many options for finance for your company. Combined with knowledge and passion, specialisation can lead to a truly superior business that people are happy to recommend. If you know what you’re doing and you’re passionate about it this will shine through and your customers will know it. The best businesses are run by people who are experts in their area and really care.

There’s a lot of work involved and things to consider when starting a company, but once you’ve got everything in place it can be quick and easy to register as a limited company and start trading. Choose Experienced Chartered Accountants to guide you  in the process of company formation.

accounting-services-ajsh

Why do you need accounting services?

Bookkeeping is necessary in every business whether it is a small or large scale business. As a small business owner, following basic accounting principles is essential for success, record-keeping and financial analysis is key to not only monitoring your expenses, but to discovering new avenues of growth. In addition, it ensures you stay responsible for tax obligations to the government and to your employees.

Accounting closely monitors your accounts receivable to illustrate trends or behaviours in your customer base. It can also cut down on the costs you incur by pursuing late payers. Establishing a detailed budget to help discover inefficiencies within your operations. Sudden changes in vendor costs or sales revenues can alert you to important industry changes. Understanding your financial position in order to spot problem areas that could interfere with loans earmarked for expansion.

Taxes are unavoidable. Depending where you operate and the nature of your business, the IRS has very specific requirements about the documentation you’re required to file. Submitting improper or inaccurate documentation can get you into trouble, and it can be extremely costly in terms of fees and penalties. Preparing the required tax documentation has its benefits though, and it can give you vital information about the health of your business. Monthly or quarterly financial statements, cash flow statements, and asset and income statements can provide a clearer picture of your business than your bank balance. Understanding IRS requirements and how you can make them work for you can give you a deeper understanding of your company’s financial health.

As your accounting strategy, review your company’s financial goals. Whether you are a solo entrepreneur or you employ a staff, your survival hinges on clearly stated financial objectives. You may be in business to reap as much profit as you can, or you may be interested in sharing a product or service that you believe in. Either way, one of the most common reasons small business fail is because cash flow runs dry. To prevent this disaster, your business should implement policies for efficient record-keeping and a sound financial strategy.

A qualified accountant can assist in numerous ways outside of managing day-to-day finances like advising on how best to structure a company before it’s formed, consulting on the financial details of your business plan, identifying potential cost savings in operations, managing payroll, developing a financial safety net, liaising with the IRS in the event of an audit.

The financial implications of business ownership are extensive, yet critical to a company’s success. Having a dependable, efficient accounting service can free up your time to focus on the things you love about your business.

trademark-690

How to Register a Trademark in India

When an outsider looks for startup business, the first thing they notice is the trademark. A trademark is  the identity of a business lies. It is the name and symbol under which a business undertakes its trade and commerce, which represents the company.

In India, trademarks are regulated by the Trade Marks Act of 1999. The Act aims to provide registration and better protection towards trademarks while preventing the use of fraudulent marks.

 

How to Choose a “Good” Trademark?

  • The mark(s) should be easy to remember.
  • It should be short and easy to spell and write.
  • It may be aesthetically appealing.
  • It should not ideally be descriptive in its nature.
  • It can be fanciful and coined, to avoid confusion.

 

APPLE/ASUS/DELL/HP/LENOVO” for computers are an example of a non-descriptive and arbitrary mark, which makes for good trademarks.

KODAK” for cameras is a coined term; that also makes a good trademark.

MICROSOFT” for software, “LAKME/AMWAY/AVON” for makeup, are all good examples.

 

How to Apply For a Trademark?

  • Conduct a trademark search that will let you know if there are similar trademarks that are already registered.
  • Apply for a trademark registration. You can do this by yourself through the Government website, or get a lawyer to do it for you. The procedure of application is laid down in the Trade Marks Act, 1999.
  • An application number is allotted for every pending registration, which can be tracked on the website.
  • If the application is accepted, it will be published in the Trademark Journal. If there are no oppositions, your trademark will be registered to you. However, if there are oppositions, there will be a hearing in the Trademark Hearing Office to decide on the final registration of the mark.

 

Benefits of Registering Your Trademark

  • A registered trademark identifies and advertises the good/service.
  • It protects the commercial goodwill of the trader/owner of the trademark.
  • It protects consumers from buying forged or inferior goods.
  • In the case of an infringement of a registered trademark, the owner has the option of civil and criminal remedies. In the case of an unregistered trademark, the only remedy available to the owner is the option of filing a suit of passing off.

 

In India, it is not compulsory to register a trademark. However, there are certain obvious benefits of registration of the same. The benefits are enumerated as above:

llp-vs-partnership-firm-1050x600

What is LLP in India?

In India a business organization can take many forms such a LLP (Limited Liability Partnership), Private Limited Company, Public Company etc. On 7th January 2009 with assent of the President the Limited Liability Partnership Act, 2008 came into effect. LLP has been a successful business vehicle since then as it combines the benefits of a partnership with that of a limited liability company, making it a lucrative option for start-ups. It keeps personal wealth of partners safe and on the other hand it helps leverage the benefits of a partnership.

In Limited Liability Partnership a partner is not bound by other partner’s acts; it can be due to negligence, misconduct etc. In other words, LLP can also be defined as a corporate entity which combines professional as well as entrepreneur behavior to operate in effective, efficient and flexible manner by providing benefit of limited liability and larger financial resources.

Requirements and Benefits of a LLP

  • Formation of a LLP requires a minimum of 2 partners and at least one of them shall be an Indian resident. Each partner will only be liable to the extent of its capital in the business unless found to have acted with fraudulent intentions and deceiving purposes to cheat creditors.
  • It is a separate legal entity formed under the LLP Act 2008 therefore It shall now possess the power to sue and be sued. Also, both an individual and a body corporate may become a partner.
  • Duties, rights & share of each partner are governed by an agreement among partners or between the LLP and partners subject to the act. Law gives the freedom to formulate the agreement per choice.
  • There is No minimum capital required to form a LLP, moreover creation of a limited liability partnership is inexpensive as compared to other forms of business.
    When paralleled with regular partnership a LLP is a preferred choice of lenders hence making borrowing easier. Also it has less stringent compliance and regulatory requirements making it easier for the business owners to focus on operations.

 

Disadvantages of a LLP in India

  • A Limited Liability Partnership is not allowed to go public this means that it can not be listed on the stock exchange and is not allowed to raise money from the general public.
  • Actions of any partner related to the LLP will have an impact on it and the entity will be legally held responsible for any liabilities thus created.
    Winding up a LLP can be a tedious and expensive task.
cat-602944_1280

Powerful Ways to Grow Your Business

Running your own business is often hard work, specially till you manage to build momentum and getting things moving smooth.
If you’re ambitious for your business, you won’t want to hang about. So here are nine growth strategies to help you get the most from your time and effort as a business owner or as an entrepreneur.

Before you give in to frustration, here is some advice that can help you to grow your small business successfully.

1. Patience Is Necessary

You’ll need to be patient. Contrary to what you see and hear, there is no such thing as a business becoming an overnight sensation. If you want your business to have a fighting chance, you’ll need to have a great deal of patience.

2. Be Prepared to Work
As a small business owner, you’ll need to work like you’ve never worked before. Instead of people delegating work to you, you’ll be assigning it to everyone else. You’re the one who is in charge now. You are responsible for ensuring that every single aspect of your business is covered.

If this is your first time establishing your own business, you might want to hire a consultant. Also, pay close attention to how other successful small business owners in your area are managing their responsibilities.

3. Find Your Customer Base

No matter where you look, no business can survive without a good customer base. This is the digital age, meaning the majority of your customers are somewhere online. Look for them on social media websites such as Twitter, Facebook, and Instagram.

Don’t underestimate the power of social media. Create a strong brand presence, and work on establishing your authority and credibility.

4. Learn Your Audience

So you know where the customers are, and you are ready to go after them. Before you try to get their attention, make sure you have something beneficial to offer them. Find out what it is they want, and work with your marketing team so you can figure out effective ways to deliver that.

5. Be Mindful About What You Post

Anything that you post online and on social media should be tasteful, engaging, and positive. Don’t go crazy and post irrelevant or insubstantial stuff just to gain visibility. Establishing your business as a good and credible one takes time. When you post information that does not appeal to or relate to your intended audience in any kind of way, you hurt your progress and could lose some of your following.

6. Encourage Your Customers to Share
One way you can get your customers to boost your marketing efforts is to encourage them to share their experiences on social media. Make sure that the platform you use is set up so you can monitor what is posted. It is not possible for you to please all of your customers, so don’t be alarmed if you get bad reviews occasionally. Although you might not want negativity on your social media sites, you should not get in the habit of extreme censorship or you risk your organization’s credibility.

7. Network Everywhere

Everywhere you go is a perfect opportunity for you to network. Even if you are going to the grocery store, you are bound to come across someone who is interested in the products and services you offer. Or you might encounter someone in a position to offer you some useful advice.

Many local businesses have bulletin boards and community areas where business owners like yourself can leave flyers and business cards for people in the local community to find. This method is still an effective way to network, so make sure you take advantage of networking opportunities every chance you get.

8. Research Your Competitors

If you want to know how well your business is doing or if you are covering every aspect of marketing possible, take a look at what your competitors are doing. Watch their commercials and go online to see what deals they are offering.

Research what their customers are saying about them. While you are doing your research, you’ll be able to see what your competitors’ shortcomings are. You’ll also be able to determine what services and products their customer base wants so you can tailor your offerings accordingly.

9. Pay Attention to the Trends

Entrepreneur David Kiger notes the importance of business owners staying focused on trends in their industries. These trends can give entrepreneurs direction and also keep them from using up valuable resources. Think of trends as guidelines for you to follow while you work on growing your business so you can better meet the needs and demands of your customers.

Don’t let inexperience or a lack of time keep you from achieving success with your business. You just have to work harder and longer until you see your dreams becoming more of a reality. Work on improving your strategies and sticking with them long enough to see what works and was doesn’t. Then you can make adjustments as needed to improve your chances for success.