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Surviving a Recession as a Small Business Owner

The business world is changing faster than ever these days, and that means that recessionary periods can happen without much warning. As a founder, it’s important to have a plan for how you’re going to weather a recessionary storm. Here are a few tips to help you get started. Tip #1: Find Expense Line Items You Can Cut / Outsource The first thing you need to do when a recession hits is to take a close look at your expenses and see where you can cut back. This may mean making some tough decisions, but it’s important to remember that your goal is to keep your business afloat during this difficult time. Every little bit helps, so don’t be afraid to make some tough choices. In order to do this efficiently, you need to ensure your bookkeeping is in order, and the accounting software or accounting app you use is able to provide you with key business metrics to make the right calls. You can also look to outsource some back-office work if it is cheaper to do so, like outsourcing the accounting and finance functions of your business. Tip #2: Prioritize Your Marketing Efforts During a recession, it’s more important than ever to make sure that your marketing efforts are focused and effective. This means Prioritizing the channels that are most likely to generate leads and sales. For example, if you sell products or services online, then your focus should be on digital marketing channels like SEO, social media, and email marketing. However, if you have a brick-and-mortar store, then you’ll need to focus on more traditional channels like print advertisements, direct mail, and local PR. The key is to focus your limited resources on the channels that will generate the most ROI. You might also want to start looking at a couple of very important business metrics: CAC (Customer Acquisition Cost) and ARPU (Average Revenue per User) so you can focus on high ROI strategies. Some accounting tools and apps suitable for a small businesses help you track these metrics automatically. Tip #3: Focus on Your Core Customers During a recession, it’s also important to focus on your core customers—those who are most likely to continue doing business with you even in tough economic times. These are usually your best customers—the ones who have been with you for awhile and who have a history of spending their money with your company. If you can keep them happy and loyal during a recession, then they’ll be more likely to stick with you when times are good again. While no one likes the thought of going through a recession, the reality is that it’s inevitable from time to time. As a founder, it’s important to have a plan for how you’re going to weather the storm, and the right (and cheap) business finance tools, accounting apps and software to help you make quicker, better business decisions. By following the tips above, you can help ensure that your business comes out of the recession in good shape—and maybe even stronger than before!

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How is artificial intelligence (AI) changing the accounting industry?

Artificial Intelligence is the most disruptive technology of our generation. When the concept was conceived, many believed this scientific wonder would not see daylight in our lifetimes at least, and here we are living in the era of AI. Technologies progress fast, but this fast no one could’ve predicted. Today, AI has made its way into a multitude of industries.  “The ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings … such as the ability to reason, discover meaning, generalize, or learn from past experience.”  ~ Definition of Artificial Intelligence by Britannica Every development in computers brings up the question “Will computers replace humans?” However, this question is inevitable when it comes to AI. Creativity and Intelligence, core features that distinguish man from computer, have now been acquired by computers. Technology has always threatened human jobs, be it industrial revolution threatening textile workers and labourers’ livelihoods, or self-driving cars leaving drivers jobless.  But AI, for the first time puts white collar jobs in danger, and it has surely instigated conversations.  Whenever such a situation comes, you have two options: protest or adapt. History shows, protests couldn’t stop a technology, so clearly the better option is to timely adapt. The potent combination of big data and artificial intelligence is set to transform traditional accounting and finance roles.  AI to transform Accounting According to Accenture Consulting, Robotic Process Automation will reduce costs by 80 per cent and the time required to perform tasks by 80 or 90 per cent, with these results not integrating AI in accounting is not an option. This disclosure raised the question “Would AI make accountants redundant?” Up to some extent, this might even be true, though there are different aspects to it.  Professor Moshe Vardi in a webinar on “AI and the future of accountancy” suggested that complete automation can not be expected, however, tasks would be reshuffled, more routine ones being automated while others won’t. He further elaborates that the challenge this brings is the automation of entry-level jobs of accountants, but roles requiring decision-making and judgements seem not to be in threat any time soon.  These developments could either make accountants hopeless of their future, or make them think innovatively. Accountants are known to adapt well to development of technology, as new software, rules and financial practices keep introducing. While others might see it as a threat to their profession, the team of Metric saw it as an opportunity to develop a cloud-based AI-incorporated accounting app. Such softwares and apps have been introduced out of Pakistan for a while now, but Metric is the first one to get fame among small businesses in Pakistan.  How does AI benefit the Accountancy industry? There are a lot of ways AI can help make developments in the way we do accounting today. Some of them being: How does Metric incorporate AI? Accounting software and apps like Metric are currently offering capabilities to automate data entry, and reconciliations, helping eliminate accounting errors and reduce liability to facilitate business owners to move to a more advisory role. Metric app automates routine, repetitive and mundane tasks like data-entry, invoices, bill charges and payrolls for your business. This empowers executives to use actionable data to make business decisions to meet both customer and business demands. The three major problems Metric’s automated accounting solves for business founders are these: The metric app provides the real-time status of financial matters. This has become possible only because AI enables faster processing of documents using natural language processing and computer vision that makes daily reporting possible and inexpensive. This feature helps in timely shifts and pivots if the real-time data suggests unfavourable trends.  Accounting has a strict set of rules and regulations to which every business complies. These include many internal corporate, local, state and federal regulations that must be followed. Metric uses AI-enabled systems that help support auditing and ensure compliance by being able to monitor documents against rules and laws and flag those with issues. AI lets the system sift through loads of data and identify any suspicious or out-of-law activity. This efficiency, speed or accuracy could not have been possible with human workforce.  AI-powered accounting systems that have centralised access to enormous amounts of dispersed data can make client audits manageable and efficient. SInce Metric app makes financial information accessible at all times for its customersThis helps auditors to obtain, organise, synthesise and offer value-added analysis on how to conduct the best audit for a client with optimal financial outcomes. Metric app is able to provide customised business insights to its customers as a result of big data and streamlined auditing. The two most powerful features of AI in accounting are Predictive and Prescriptive analytics. Predictive analytics forecast future outcomes whereas Prescriptive analytics provide raw data to weigh one financial decision against another. These data-backed insights empower businesses to be more productive and profitable.  Double-entry bookkeeping uses multiple accounts to record transactions. Some transactions are supposed to go in accounts payable, while others are assets or liabilities. Artificial intelligence can speed up the matching of purchase orders, packing slips, and invoices. This technology streamlines the process of accounts payable. It can also automate approvals and search duplicate invoices to avoid overpayments. How to deal with the takeover of AI? AI has crept into our daily lives without us really noticing it. From seeing relevant ads, using face unlocks on devices to using Siri and self-driving cars, AI has impacted the tiniest to biggest aspects of our lifestyles. AI is here to stay, and it is poised to disrupt not just how we live our personal lives but how we work and the broader business landscape as we know it.  Artificial intelligence is rapidly becoming a part of more businesses’ daily operations. According to a study by Big Four firm PwC, 72% of business decision-makers say implementing AI lets their employees focus on more meaningful and creative work. Using AI to your benefit is the only

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Why Most CEOs are accountants?

Financial background, more precisely accountancy seems to be the starter pack for the perfect CEO portfolio. We say this because one out of every four CEOs is an accountant. The Financial Times Stock Exchange (FTSE) is a British financial organization that specializes in providing index offerings for the global financial markets. A recent survey shows nearly one quarter of FTSE 100 CEOs come from a background in accounting and 55% of all UK CEOs come from a finance background.  The numbers are surprising. No doubt finance is the life blood of a business, but what makes accountants so prone to leadership? When we think of accountants, we picture a person drowned in papers, scrunching numbers, and vigorously pressing buttons on a calculator. We assume accountants are uncreative beings that manage our bookkeeping, handle taxes, prepare invoices, construct financial reports and submit them to the leadership. Turns out we have been majorly underestimating accountants.  Accountants know the ins and outs of a business that enables them to make the most insightful decisions. There are a few skills that accountants inherently possess that makes them the best candidates for an executive role. Let’s see what these qualities are and why are they specific to accountants?  Why are accountants best-suited to the executive roles? 1. Strong Analytical and Financial Skills Starting off with the most obvious skill, accountants have the ability to provide insights from a financially strategic viewpoint. At the end of the day, you want your business to make you rich. Ideas are where it all starts, but smart financial moves are what makes your business profitable. “Being able to translate an idea into a financial impact that would help the bottom line of a business is incredibly important,” ~ Andrew Brushfield, Robert Half Australia director Traditionally, sales and marketing people made the best candidates for executive positions.  However, the global financial crisis in 2008 made the appointment of CEOs with accounting and finance skills vital as businesses have become more risk-averse.  2. Accountants are Innovators The technical accountants tend to be great innovators. Accountants often strive to accelerate the lengthy procedures, automate recurring tasks and increase clientele, such aims lead them to new ways to make their work more efficient.  “If you don’t understand the details of your business, you are going to fail. One of the only ways to get out of a tight box is to invent your way out.” Jeff Bezos Metric – a story of innovation Metric itself is a great example of the innovative mindset of accountants. A team consisting mainly of accountants through their consultation career, recognized the problem of small businesses failing to manage finances due to unavailability of accountants. Accountants have the potential to adapt their practices to suit the modern marketplace. Realising most of these startups and SMEs can’t afford to hire an accountant, they came up with a cheaper yet efficient digital alternative.  The team took the recent shift to mobile devices for research, calculations and operations, as an opportunity. Metric launched an accounting app that automates all financial processes, catering masses that prefer mobile over desktops for professional operations. Metric disrupts the common business models by giving streamlined, cloud-based accounting services for free.  3. Accountants are good with money matters If you research the top skills CEOs must have, you would definitely find risk management, budgeting, financial management, accounting and internal auditing. These are the exact skills finance professionals have learnt during their education and polished throughout their careers. This does not mean a CEO can function without communication skills, teamwork, collaboration or negotiation skills. But these soft skills complement the technical expertise that accountants already master.  4. Accountants are More Adaptable If COVID-19 has taught us one thing, it’s the importance of being able to adapt to change. While most businesses struggled to stay afloat, some greatly prospered changing their business model or services in accordance to the needs of the crisis. Changes in your industry, sector and business can have a profound impact on your strategy, priorities, and decisions. A good CEO should be able to change direction when necessary and adapt their role to the company requirements.  Accounting is a dynamic industry. With the frequent changes in tax laws, financial software and tools, and financial strategies, accountants are bound to quickly adapt to changes. They need to keep up with evolving trends that make them more adaptable to change of all sorts. Experienced accountants remain calm in stressful conditions, having the ability to adapt and determine alternative options to cope with change. 5. Accountants are Good in Decision-making “Decision-making is at the heart of my role. Weighing up data, analyzing consequences, and avoiding mistakes are all part of my job.” ~ Sir Martin Sorrell, the highest-paid CEO in the UK CEOs are on the roll, calling shots, taking risks, negotiating, taking decisions that make and sometimes break businesses. Quality and speedy decisions elevate the productivity of an organization. While taking a decision even in an emergency situation, a CEO must keep in mind the vision and productivity of the company, have the trust of employees, minimize conflict yet be quick. Isn’t this too much to ask?  These emergency decisions greatly affecting the businesses are the daily task of an accountant. Accountants are very experienced at balancing out biases, since they approach their work without bias consistently. Accountants are always consulted on all decisions to better suggest keeping the financial condition in mind. This extensive experience of decision making helps accountants remove the middleman and take up the executive position themselves.  What if you’re not an accountant turned CEO?  If you don’t have an accountancy or even a financial background, are you destined to fail in your business venture? Most definitely not! Even if accountants take up the most executive roles globally, companies without accountant founders or CEOs run equally fine. However, not having an accountant guidance in your business finances is the recipe of disaster.  As mentioned earlier, Metric app is an innovative product by

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Single-entry VS Double-entry Bookkeeping

Startup founders are so invested in the creativity, growth and smooth running of their businesses that they often lose sight of accountancy technicalities that are limiting their growth. There are different types of accounting for different sizes and industries of companies. The most common bookkeeping techniques are single-entry and double-entry bookkeeping. If your company has the requirements of double-entry yet to keep operating on single-entry, it limits the growth of your business and prevents you from carrying out essential accounting processes.  It might seem like a tough call for non-finance people here, but you don’t need to worry. This article discusses the basic operations of both methods so you can make a well-informed decision for yourself.  To understand the popularly used double-entry bookkeeping, we first need to know what single-entry bookkeeping is. How was it insufficient, that we needed another more complex type of bookkeeping.  Single-Entry Bookkeeping As the name states, in single-entry bookkeeping, there is one entry for each transaction. There usually is one column, where positive values denote incoming cash, while a negative amount is outgoing cash. Single-entry bookkeeping can use separate columns for debit and credit as well. But, one transaction is only entered once in either one of the columns.  Since single-entry bookkeeping only deals with transactions, it operates on cash basis accounting. If you’re not aware of the differences in cash-basis and accrual accounting, take a pause and head over to this article.  A single-entry book records taxable income, tax-deductible expenses and cash. The only details you can see from this bookkeeping are these. Example of Single-entry bookkeeping Date Transaction Revenue Expenses Balance 01/6/Y Starting balance for the day $4,550.00 02/6/Y Electricity bill for the month $150 $4,450.00 03/6/Y Daily product sales $1,050 $4,450.00 03/6/Y Sales Tax  $80 $3,400.00 03/6/Y Ending balance for the day $3,320.00 You can see in the cash record above, that every transaction is mentioned once though in two separate columns. It is not easy to analyze your yearly sales tax or electricity bills from this combined ledger.  While having a record of these transactions is a good first step toward better managing your cash flow, this type of recording doesn’t make clear the impact each transaction has on your business.  Shortcomings of Single-entry bookkeeping This is a simple method but falls short to manage finances for bigger companies.  Is Single-entry bookkeeping adequate for your business? Despite these shortcomings, this simple method is sufficient for a few small companies. In fact, founders with no background in finance or accounting and no resources to hire an accountant, often prefer this system as it’s easier to understand. If your company meets the forthcoming attributes, single-entry bookkeeping would work well for you.  Pubic companies and large-scale companies that need to show their financial position and reports can however not practice this method. This is why, we need a system that counts in assets, liabilities, expenses and income, so we can better evaluate how much customers or suppliers owe the business or how much you owe them. Additionally, it would also provide a clear monthly and yearly analysis of your finances.  Double-entry bookkeeping This system uses both debits and credits to record and manage financial transactions. This system primarily works on this simple equation:  Assets = Liabilities + Owner’s Equity To understand this equation, you should first know these terms: Assets: Anything you own Liabilities: Anything you owe Revenue/income: What your business earns Expenses: The cost of doing business Owner’s equity: Reflects your current ownership level Double-entry bookkeeping keeps this equation balanced. If the two sides of this equation are out of balance, this indicates an error in the books. Such errors lead to decisions based on faulty information. That could cause bounced checks or bank charges.  Steps to practice double-entry bookkeeping  Step 1: Create a chart of accounts for posting your financial transactions. Step 2: Enter all transactions using debits and credits. Step 3: Ensure each entry has two components, a debit entry and a credit entry. Step 4: Check that financial statements are in balance and reflect the accounting equation. Example of double-entry bookkeeping Date Account Debit Credit 01/6/YY Sales revenue $500 $500 01/6/YY Purchase of a computer $1000 $1000 This might seem confusing, but let’s see what’s actually happening here. Double-entry bookkeeping has multiple accounts: Revenue, Cash, Liabilities and Assets. When we record the sales revenue of $500 in the debit column, it increases the balance sheet of “Cash”. And when we enter the same transaction in credit, the income statement account “Revenue” increases. This transaction increases your cash and revenue.  Similarly, the purchase of a computer added to the debit column increases assets (technology expense assets). The same transaction in the credit column decreases the cash account. This transaction increases your business’s technology assets yet decreases your cash.  Debits always increase asset or expense accounts and decrease liability or equity accounts. Credits always decrease asset or expense accounts and increase liability or equity accounts. Benefits of double-entry bookkeeping Now, why would someone want to learn and implement this complex and confusing technique when they have the simple cash edger like option of single-entry bookkeeping. Firstly , for growing and larger businesses that need to provide accurate financial reports, this is a necessity. Some features that make double-entry bookkeeping necessary for all businesses: Feature Single-entry  Double-entry Supports cash accounting ✅ ✅ Supports accrual accounting ❌ ✅ Monitors assets, liabilities, and equity ❌ ✅ GAAP-compliant ❌ ✅ Error checking built-in ❌ ✅ Generates financial statements ❌ ✅ Why go through so much trouble when you have Metric?  You might have understood the basic functioning of double-entry bookkeeping through this article, but if like me you don’t have a financial background, practicing this system yourself itself is a headache. If you try to create a bussiness ledger manually, you would be taking help, referring to account books and internet, and end up wasting a ot of your preciosu time on something that’s a piece of cake for an accountant.  he best way to

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The Essential Guide to understand Revenue Recognition

It is often said founders have to wear more than one hat. If truth be told, as a startup founder you would initially be juggling all hats at once. Successful executives know everything about the business they run especially the finances. Yet, most aspiring entrepreneurs seem to be allergic to accounting and rightfully so. Founders are creative people, they shouldn’t be bothered with boring accounting matters. Honestly, even if it isn’t the most interesting topic when you’re starting a business, the success of your business relies on competent accounting.  No matter what business you run, or what your size is, finance is the lifeblood of your business. While Metric helps you manage every aspect of your business finance and accounting, we still want you to know the basics of accounting. Not only does this equips you to understand your financial reports better, but also empowers you to present your business in a better way.  Today, we’d be diving deep into the concept of revenue recognition. Since this is specific to accrual basis accounting, let us first find out what accrual accounting is.  Accrual vs Cash basis Accounting An accounting method is based on rules that your business must follow when reporting revenues and expenses. Cash basis and accrual basis are the two main accounting methods. The key difference between the cash and accrual methods relates to the timing of revenue and expenses recognition. Both the methods have their benefits and drawbacks.  Cash basis accounting Cash basis accounting recognizes revenue when cash is received and when expenses are paid. To further simplify it, according to this method your revenue is the amount that has already been paid to you, the pending payments and expenses don’t count. The reason solopreneurs choose cash basis accounting is because it’s: Accrual accounting Accrual accounting recognizes both revenue and expenses when earned, not when received or paid. What this means is that, when you have delivered a service or product, the decided payment is already recognized as revenue even if you haven’t received it yet. This method provides a much more accurate summary of your business. How? This example would explain it better.  Accrual Accounting provides a more accurate representation of a company’s finances  You see two profit loss statements in the pictures above. The one on the left uses cash basis accounting thus not received cash is not shown. Thus the net sales appear to be zero while the cost of goods sold is $2000. This statement shows a loss of $4000. This is not an actual loss but the payments are pending.  On the other hand, the picture on right uses accrual accounting. It shows net sales of $12,000 for the cost of goods sold $2000, though the payment is not received yet. This statement shows a net profit of $8000, which is accurate once payment is received. This is how this method shows a more accurate picture of the business finances.  Accrual is considered a better approach for larger companies with more employees. Businesses that extend credit to customers or use credit with their suppliers can attain a more accurate picture of their overall financial health with accrual accounting.  How does Metric simplifies accrual Accounting? The only reason businesses hesitate to use accrual accounting is the time and effort required to track and maintain the records. It requires frequent check-ups, tracking of accounts receivable and payable, detailed bookkeeping and manage prepaid and deferred assets.  Metric does all these tedious tasks for you, and lets you enjoy the perks of accrual accounting. The app lets you see your incoming and outgoing cash on a daily basis keeps a cloud-based real-time dashboard for you to view your financial health, and handles invoices, accounts, bills, payrolls and taxes for its customers. The metric app automates and streamlines the process which reduces errors and staff costs.  What is Revenue Recognition?  Revenue recognition is an aspect of accrual accounting that specifies when and how businesses “recognize” or record their revenue. The revenue recognition principle says that revenue should be recorded when it has been earned, not received. When you provide a product or service to a customer, the amount of the created invoice is recorded in your revenue, this is called revenue earned. When you actually receive the payment, that is the revenue received.  To ensure uniformity in all financial reports, all companies must abide by a defined accrual accounting and revenue recognition practice. However, different countries and industries had their separate set of rules, which created disjointed and fragmented revenue recognition standards. This made it challenging to fairly compare the performance of companies globally. To solve this problem, FASB and IASB created joint regulations called ASC 606 (in the US) and IFRS 15 (internationally), which set a new, shared framework for recognizing revenue across industries and business models. Requirements for Revenue Recognition Model The joint standards outlined in ASC 606 and IFRS 15 require that companies adhere to a five-step revenue recognition model. Set credit terms for your customer. When you make a contract with a customer, prepare the invoice that mentions the service, charges and credit terms. Credit terms indicate the number of days the customer has to pay that invoice. A customer agreeing to those credit terms is obliged to pay within the stated number of days. A contract can be a formal written agreement, as is often the case with service-based businesses, or a receipt for a point-of-sale purchase at a retail store.  There should always be clarity and transparency regarding your performance obligations to the customer. The term “performance obligation” refers to a “distinct” product or service that the seller has agreed to deliver. The exact transaction price for the product or service needs to be finalized and presented to the client before recognizing revenue. Along with the direct charges, the right to return and potential discounts also come under transaction price.  Assign a price to each performance obligation in the contract. Base the prices on relative standalone selling prices like the

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