What does an Accountant do?

What is an Accountant?

An accountant has one of the most important roles in any business, whether it’s a large corporation or a small business. Why? Because they keep track and record the flow of money.

Accountants make sure all money transactions are accurate and that all these transactions are legal by following up-to-date guidelines. They can work full-time for a company, or on a contractual basis to do the books or tax returns. They can also work for individuals to help with their financial decisions, tax returns, or other money-related issues.

What does an Accountant do?

Accountants use numbers and financial statements to paint a picture of the health of a company, organization, or individual. By using their skills in math, accounting, law, and finance, they analyze profits and losses. They provide information that investors and business owners need in order to see how a company is doing over a period of time. This information forms the basis of a company’s report and legal filing reports.

Here are some of the duties that an accountant may have:

• Determines payroll requirements; maintains payroll data; prepares and processes monthly payrolls
• Interacts with internal and external auditors in completing audits
• Explains billing invoices and accounting policies to staff, vendors, and clients
• Prepares and reviews budgets, revenue, expenses, payroll entries, invoices, and other accounting documents
• Analyzes and reviews budgets and expenditures for local, state, federal, and private funding, reviews contracts and grants
• Prepares profit and loss statements and monthly closing and cost accounting reports
• Analyzes revenue and expenditure trends and recommends appropriate budget levels, and ensures expenditure control
• Compiles and analyzes financial information to prepare entries to accounts, such as general ledger accounts, and document business transactions
• Supervises the input and handling of financial data and reports for the company’s automated financial systems
• Resolves accounting discrepancies
• Establishes, maintains, and coordinates the implementation of accounting and accounting control procedures
• Recommends, develops and maintains financial data bases, computer software systems, and manual filing systems

 

Responsibilities:

• Prepare asset, liability and capital account entries by compiling and analyzing account information
• Document financial transactions by entering account information
• Recommend financial actions by analyzing accounting option
• Summarize current financial status by collecting information; preparing balance sheet, profit and loss statement and other reports
• Substantiate financial transactions by auditing documents
• Maintain accounting controls by preparing and recommending policies and procedures
• Guide accounting clerical staff by coordinating activities and answering questions
• Reconcile financial discrepancies by collecting and analyzing account information
• Secure financial information by completing database backups
• Verify, allocate, post and reconcile transactions
• Produce error-free accounting reports and present their results
• Analyze financial information and summarise financial status
• Provide technical support and advice on management
• Review and recommend modifications to accounting systems and procedures
• Participate in financial standards setting and in forecast process
• Provide input into department’s goal setting process
• Prepare financial statements and produce budget according to schedule
• Direct internal and external audits to ensure compliance
• Plan, assign and review staff’s work
• Support month-end and year-end close process
• Develop and document business processes and accounting policies to maintain and strengthen internal controls
• Communicate effectively with clients
• Contribute to a strong client relationship through positive interactions with client personnel
• Communicate with Manager and/or Director on work status and client issues that arise

 

Differentiating Managerial Accounting

When looking at traditional financial accounting, managerial accounting differs in a few key ways:

• For public organizations, a variety of reports are released quarterly and annually for stakeholders. Managerial accounting creates additional documents used for internal, strategic decision-making.
• Financial accounting is generally historical, while managerial accounting is about forecasting.
• Managerial accounting tends to lean a bit more on abstraction, utilizing various models to support financial decisions.
• While financial accounting fits the mold expected by stakeholders, managerial accounting is flexible and strives to meet the needs of management exclusively.
• Financial accounting looks at the company holistically, while financial accounting can zoom in at various levels (i.e. product level, division level, etc.)

 

The Role of Financial Accounting

Financial accounting focuses on the tracking and preparation of financial statements for internal management and external stakeholders, such as suppliers, investors, government agencies, owners, and other interest groups. These financial statements are consistent with accounting guidelines and formatting, particularly for publicly traded organizations. This allows individuals unfamiliar with day to day operations to see the overall performance, health, and relative profitability of a given organization.

Characteristics of Financial Accounting

Generally speaking, it is expected by financial accounting standards that an organization maintain the following qualities when submitting financial accounting information:

• Relevance – Financial statements must be applicable to the decisions being made, and presented in a way that allows for distilling useful insights.
• Materiality – The information present must be of the quality that indicates consequence in strategic or legal decisions. This is to say that nothing of materiality should be omitted as well.
• Reliability – All information must be free of error, and reported with pinpoint accuracy.
• Understandability – Clarity and efficiency in presentation is important, as it must be immediately readable and without the possibility of being misinterpreted.
• Comparability – Finally, all presented financial statements should align with current best practices in accounting to ensure that the material presented is validly compared to that of other organizations.

 

Signs You’re A Bad Accountant

Let us be clear before I get into this list. It’s just my view. It’s not about efficiency vs inefficiency, nor about old-style vs new-style and it’s certainly not about qualified vs unqualified.

You may think some of the qualities listed below are obvious – but you may also be surprised how easy it is to fall into the related traps.

what do bad accountants do?

1 – They misrepresent their qualifications

Why should anyone trust an accountant who claims to be qualified when they are not, or who claims to be a member of a body to which they do not belong.

What about those who claim that membership of a particular group or body constitutes a qualification even though membership does not depend on a period of study or exams?

2 – They claim to have more experience than they do

Again this speaks to the issue of trust. There is a big difference, in my mind, between those accountants who offer a wide range of services knowing that they will outsource some work, compared with those who pretend to be more experienced than they are.

Some accountants may feel insecure about their limited experience; others have the confidence to be open, honest and truthful.

3 – They are unaware of what they don’t know

This is more a consequence of ‘unconscious incompetence’. If an accountant doesn’t know what they don’t know, they won’t know when to stop and get a second opinion before telling a client what to do or when predicting the outcome of their dispute with HMRC.

This is dangerous and often leads to protracted negotiations with the accountant trying to resolve things the way they predicted even though a specialist would have known better from the outset.

How does anyone know what they don’t know? It’s more a question of getting a good balance between:

• Confidence that we have a good broad range of knowledge on a specific topic, and keeping uptodate so we can expect to be aware of recent changes, and
• Simply assuming that we know everything and failing to attempt to keep up-to-speed on recent developments

4 – They wing it

There’s a difference between following your gut and guessing how to resolve a client’s issue. Past experiences will invariably impact the advice that accountants give clients. The mistake comes when an accountant recognises that their experiences to date are insufficient but that they will extrapolate and give definitive advice anyway, without checking up first and without any caveats.

5 – They condone tax evasion

This may be more challenging than it seems. It includes knowingly allowing clients to exclude cash takings from their books and to claim tax relief for non-business related (personal) expenditure.

6 – They falsify documents

This came up a lot when I used to present talks on ‘How to avoid professional negligence claims (or worse)’. I outlined some of the implications of the Forgery and Counterfeiting Act 1981.

Among the offences this Act addresses is making a false instrument (eg a document) with the objective of inducing a third party (eg HMRC) to accept it is genuine so that they will do something (or not do something) to their own or to somebody else’s prejudice.

This would include, for example, backdating the minutes of client company Board Meetings to ‘evidence’ the authority for dividends already paid.

What are the common mistakes happen during payroll process?

A smooth payroll process in your organization is like oxygen—when it’s there, you hardly notice it; when it’s missing, you can’t think about anything else. That makes payroll one of the least appreciated yet most important functions within a business. Payroll, when done well, can keep employees satisfied and help your organization stay safe from legal consequences. On the other hand, when payroll mistakes crop up, their impact can ripple across an entire company.

Fortunately, all of the most common payroll errors are easily avoidable with education, proper planning, and the right tools. To learn about these payroll mistakes and how to avoid or fix them, read on.

Most Common Payroll Mistakes

With a process as complex as payroll, there are numerous places where organizations can make mistakes. Here are some of the most common payroll errors to watch for in your company.

Misclassifying Employees

The Fair Labor Standards Act (FLSA) provides benefits and protections, like overtime pay and minimum wage, for most employees under the law. Independent contractors, however, are not afforded these same protections. Likewise, exempt and nonexempt employees also have different legal rights. Some organizations slip up and misclassify their employees as independent contractors or as exempt.

Not only can misclassification deny an employee some important benefits and wages, it may also mean the government misses out on valuable tax dollars. If left unchecked, the resulting underpayment or overpayment can turn into a costly payroll error.

Miscalculating Pay

With overtime, commissions, deductions, PTO, and more, payroll admins have a lot to keep track of when it comes to calculating pay. For overtime wages, the general rule is 1.5 times an employee’s regular wage for any time worked beyond 40 hours in a workweek. However, your state may have different policies regarding overtime; your organization should always comply with the law that is more generous for the employee.

Poor time tracking capabilities can also contribute to miscalculated pay. If your company doesn’t have a reliable way to track employee hours or paid time off, then your chances of making a payroll overpayment or underpayment mistake skyrocket. Mistakes like these will result in a payroll correction.

What is a Payroll Correction?

A payroll correction is required when adjustments need to be made to amounts paid. Poor payroll organization, like forgetting to account for vacation days, can cause the need for money to be added or subtracted from the original amount.

How Long Does a Company Have to Fix a Payroll Error?

While legal time frames differ depending on the state, the short answer is that errors should be paid promptly. Fixing shortages in payroll as soon as possible should help you avoid any penalties. Labor laws require full payment for work completed and most companies will either add the missing pay to the next pay period or cut a check between pay periods.

 

Poor record keeping and data entry.

Mismatching names and Social Security numbers is so common that the Social Security Administration has even established a special verification phone number. Numerous data entry mistakes, including poor records of employee hours, cost companies millions of dollars annually and can result in government penalties.

Not properly handling garnishments, levies, or child support. Employees may owe money by way of a court order to other parties. This means whoever is handling payroll will be responsible for sending the payment to the appropriate recipient.

 

Ignoring the Importance of Mobile Security

Like computer security, mobile security is also vital to protecting your data. Have a clear policy set for mobile access that lets employees know what information and which applications are okay to share and access on their mobile devices.

Putting Off Installing Anti-Virus Software

You can also protect important online data by installing anti-virus software. Common anti-virus software, such as Norton or McAfee, should be installed on all company computers (Quickbooks). Additionally, procedures should be put in place to make sure this software is always up to date.

 

Bad bookkeeping

You have to integrate payroll into your books. After all, it has a direct impact on your cash flow. Knowing how much money you have available at any given time tells you how much you can invest in your business and your employees. Don’t want to deal with it? Get a good bookkeeper or hire an accountant.

We hope this helps you dodge any major payroll problems that might come your way. For state-specific guidance, visit your state labor office’s website.

Falling behind on tax payments and filings

Again, taxes. Depending on the amount of payroll taxes you collect, your tax deposits may be due monthly (most common), biweekly, or even the next day. If your state or city collects income taxes too, check with them to confirm due dates. Late payments may come with penalties and accrue interest, so follow submission guidelines and get your payments in on time!

Also, make sure you plan ahead and register your business well before taxes are due. Get federal, state, and local payroll tax identification numbers, as applicable, so you can pay the government and submit filings on time.

 

Administrative Staff

Many businesses, especially smaller ones, still carry out their payroll process in-house and manually. Often, the payroll staff is overworked. A manual payroll system typically requires a great deal of paperwork and a manual process also creates an administrative burden for your HR staff. Errors in data entry, for example, can create payment issues and the misapplication of rules. Being understaffed leads to mistakes.

Payroll Documents

A common problem is one of simply keeping all of your important payroll and employee records and information organized in an effective and accurate manner. Sometimes it is simply a matter of work flow: not keeping files and documents in a central location or creating uniform filing processes. A typical issue is storing and organizing paper checks, for example.

The Importance of Tax Planning During the Year

What is Tax Planning?

Tax planning is a way to find out how much money you are paying on tax and also a way to help minimise the tax liability (the amount owed to tax authorities) through the use of allowances, deductions, exclusions and exemptions. Tax planning can be used in a number of ways; for example for retirement, businesses, Wills, and properties.

Types of Tax Planning

There are a few different types of tax planning that are useful for individual people, companies and organisations. Some of the tax plans include; short term tax plans, long term tax plans, permissive tax plans and purposive tax plans. The short term planning allows you to reduce taxes at the end of the income year. Long term plans allow you to plan at the end of the beginning or end of the year, permissive tax plans are permissible under different law provisions. The purposive tax plan gives you the chance to make different investments.

How It Works

When you start tax planning, you can find many guides online and you can also speak to financial advisors and solicitors to help get you started and give you all the important information that you will need to know. For example, each person has an inheritance tax allowance up to £325,000 with anything over the threshold being charged at 40%. So, if an estate was valued at £400,000, only £75,000 of that would be taxed. Since the majority of people won’t leave an estate over this amount, most feel they don’t need to know about inheritance tax. However, actively considering it and your future can help you to avoid any nasty surprises later on.

Taking tax-efficient decisions

There’s more to tax than investments. It affects every single aspect of your life—from salaries and income sources to expenditure to financial decisions. And this is a key aspect of tax planning—it helps you make decisions that lower your tax burden.

For example, let’s say you have to choose between two investment options. A tax planner helps you choose the best option while keeping in mind both returns as well as tax efficiency. Another example is ensuring your income is structured in the most tax-efficient way.

Tax audit and filing

The last key aspect of tax planning is the actual tax filing. This is when you take into account all aspects of your finance—income, expenses, debt, and investments—and then calculate your tax liability. Then, there’s all paperwork and documentation involved in paying your tax and filling your tax returns.

What makes tax planning important

Taxes are one of life’s certainties, and no one likes giving up some of their hard-earned cash. With proper tax preparation, however, it’s possible to pay less in taxes or receive a larger refund at the end of the year. While paying taxes is inevitable, there are several ways to diminish your tax burden and end each year with more money. Proper tax planning makes it easier to build your personal finances and afford the things you want.

Additionally, by anticipating taxes when you create your financial plan, it’s possible to significantly boost how much money you will have in retirement. Many elements of tax planning are quite simple, but it’s always worth speaking with a professional at a local bank who can offer additional guidance on how to successfully work within the tax system.

A tool for retirement

Saving for retirement is difficult under any circumstances, and it can be even harder to set money aside after taxes. Luckily, many retirement savings options allow you to set money aside without paying taxes on that income. Once that money has been placed in a separate account, it can gain value based on interest or investments. You will not be charged taxes on that money until you remove it from the retirement account. By that time, it’s likely you’ll be in a lower tax bracket and need to pay significantly less, according

.

Take a long-term approach

Tax planning offers short and long-term benefits, but you’ll want to take a long view of your financial situation to maximize savings. If you anticipate an increase or decline in your income during the next few years, start catering your financial plan to the upcoming shifts ahead of time, according to CNBC. Figure out if it’s best to pay taxes on that increased income right now, or if you should try and put it all into tax-deferred accounts that may incur taxes later on.

Consider every part of your financial life

Taxes affect so many parts of your life that you may forget different ways to save. If you fail to consider the tax implications of a big financial decision, you could end up wasting a lot of money. The tax laws surrounding home sales can be particularly painful for uninformed buyers and sellers,  For example, people can get an exemption on capital gains taxes on a home sale if they file jointly with a spouse.

This can result in massive savings for couples, but far too many people fail to consider this factor when they list their home. By speaking with a financial professional before taking any financial action, you can prevent yourself from accidentally missing out on significant tax exemptions.

Go itemized or standard

Whenever you file your taxes, you have the option between taking the standard deduction given to all filers or creating a custom deduction by listing your expenses for the year. Either option can offer better savings, depending on your financial situation, so you’ll want to evaluate exactly how your financial life changed during the past 12 months. With proper tax planning, you can make your financial life much easier and pocket additional money along the way.

Objectives of Tax Planning

Minimal Litigation: There is always friction between the collector and the payer of tax. In such a situation, it is important that the compliance regarding tax payment is followed and used properly so that friction is minimum.

Productivity: Among the most important objectives of tax planning is channelization of taxable income to various investment plans.

Reduction of Tax Liability: As a tax payer, you can save the maximum amount from payable tax amount by using a proper arrangement of your enterprise working as per the required laws.

Healthy Growth of Economy: The growth in an economy depends largely upon the growth of its citizens. Tax planning estimates generation of white money that is in free flow.

Economic Stability: Stability is supplemented when the tax planning behind a business is proper.

How to get tax planning right

It is easy to get DIY tax planning wrong, especially with the regulatory goalposts changing all the time. Expatriates have the added complication of having to deal with the tax rules of more than one country at a time when global tax scrutiny is at its highest. Getting it wrong can not only lead to an unwelcome and unexpected tax bill for you or your heirs, you could end up facing a tax investigation.

It is important to make sure your tax planning is not done in isolation or as an afterthought – it should be a fundamental part of your investment, pensions, estate planning and overall wealth management approach. Be sure to schedule regular reviews so you can adjust your arrangements to keep up with any life changes or tax reforms that may affect you, including new opportunities.

For the best results, talk to an adviser with in-depth understanding of cross-border taxation, including how the local tax regime interacts with UK rules. As well as offering peace of mind that your tax and wider financial planning is compliant in your country of residence, they can ensure it meets your income needs and goals in the most tax-efficient way today, without burdening your family with unnecessary tax headaches in the future.