Ledgerble Blog

The Idea Behind Ledgerble: An Introduction

Tue, 16 Feb 2010 00:00:00 +0000

Unsurprisingly, most small business owners don't like accounting. When you get up in the morning, there are dozens of things you could be doing—and keeping your books up to date is rarely an exciting prospect. The arcane and complicated terminology all seem needlessly complex, and let's face it, people will often just put it off.

Ledgerble is not our first business. In fact, we have been small business owners ourselves for almost 9 years now. So we know full well what a pain accounting can be, that's why we created Ledgerble in the first place.

Of course, the advantages of providing software online as a service are many, and we don't need to go into them here. But while others have made online accounting programs, I think many of them miss the point. The hard part about small business accounting was not the access or delivery method—putting something like QuickBooks in your browser isn't going to make it easier. What we really need is a fresh approach to how small companies manage their finances. We need a clean slate. We need to make things simple.

The vast majority of small companies, those 1 to 3 person operations, have very simple accounting needs. Most don't need complicated features. They just need to keep track of the money coming in, and the money coming out. They need to be able to see, at a glance, the financial health of their company. They need to keep on top of who owes them money, and to whom they owe money to. They need the data available for tax time.

The idea of Ledgerble is just that. We need to make things simple, easier. Less complicated. A company with 500 employees will have very complex accounting needs. A company with 5 employees probably won't. And that's where we see Ledgerble fitting in.

That's not to say that Ledgerble won't grow and evolve along with our customers. We have many advanced features currently in development, some of which we will share on the blog over the coming weeks. But the focus of these features is and always will be simplicity. We have the opportunity to reinvent an entire segment of this industry, and to use the power and extensibility the web provides to change how small businesses manage their finances. To make things easier, so you can focus on what you do best.

New In Ledgerble: Quick Add

Tue, 16 Feb 2010 00:00:00 +0000

Do you really need to create a whole invoice for that stapler you just bought? Or the $5 parking to go to that meeting?

We have just added the quick-add feature, available for both income and expenses. Instead of creating a whole invoice, with quick-add all you have to do is:

Select the date. Today is the default.
Enter the customer or vendor. If you have not done business with that person or company before, just type in their name. A new contact will be created on-the-fly.
Category: Travel? Office Supplies?
The amount of the purchase or sale.
Sales tax, if any.

And hit save. Ledgerble will create all the entries in the background, and the new item will appear in the list of invoices below, without even having to reload the page. You can add another one in right away if you like. All without having to enter line items, due dates, or worry about invoice numbering.

Of course, some invoices can be complicated, and the full invoice screen is still just a click away. But the quick-add feature can save you tons of time for those quick, one-off sales or purchases.

Importance of Keeping your books

Tue, 15 Sep 2009 00:00:00 +0000

What are some of the best things about owning a business, the freedom, keeping your own hours, the money if the business does well. Now if you ask a lot of people what the worst part of any business is they'll tell you it's the administrative part especially the accounting.

It does not have to be, one way for it to be more fun is to look at it less as a waste of time but as something that adds value to your company, to view it not as something you have to do for government reporting, or your accountant but for you to know where everything is going in your company and how you're doing at any given time. Keeping the books is extremely important be it for yourself, your family your partners or anyone else that might become involved at any time. Whether you bring in a new partner or want to sell out or pass the company on to someone in your family it is important not to give them a nightmare in the making.

There are ways to make it less painful

1. Do not slack, do it daily or weekly depending on the number of transactions, you'll find yourself spending 10 mins per period as opposed to 2 days every three months.

2. If it's too much for you hire someone that will make sure it gets done on time and it can be done fairly cheaply if you get a student

3. Think of the good things that will come out of it while you do it (you might get deductions, you will not get fined, you won't go to jail etc)

4. Use a Business Accounting Software that will help you make sure everything is organized the proper way in the right categories.

Income Statement Made Easy

Tue, 18 Aug 2009 00:00:00 +0000

The income statement or as it is otherwise known the profit and loss statement is basically how much money your company made in a given period of time. It contains some valuable information such as your sales, your expenses, and your net income or profit.

So the income statement usually starts with a first line being the sales. If you have different kind of sales for example two types of activities and would like to define them you could have two lines for sales such as printing, and webdesign. Or if you have received interest as a source of income you would enter it here as well. The next line is if you have any cost of goods sold. So if you are in a manufacturing business, or a jewelry maker, or anything where you buy some material and re-sell it that is when you will have cost of goods sold. Subtracting the Cost of Goods Sold from the sales will give you the gross profit figure.

Next come the expenses that are not directly associated to the sales like the Cost of Goods Sold such as Marketing, utilities, car payments, gas, phone bills, etc

Below that you have the sum of all the expenses incurred in the period you are doing an income statement for.

The difference between the Gross profit and the total of the expenses is the final line of your income statement the Net Income.

That's it your income statement is basically how much profit your company have made at any given period in time.

What is an asset for a small business?

Mon, 17 Aug 2009 00:00:00 +0000

Often times small business owners ask me, do i rally need to depreciate anything ? what is an asset ? I thought they were only used for big corporation i just work out of home do I have any assets? Simply put an asset is anything you or your company owns that is worth money. So it is the cash you have in your bank account to the buildings your company owns should you happen to be so lucky.

What confuses a lot of first time business owners that tackle their own bookkeeping whether they use a software or do it with the pen and paper method is how to categorize what they buy, what is a straight expense and what can be categorized as an asset?

Unfortunately there is no straight answer to this question, for some people an asset is going to be something that cost 400 dollars while for others an asset is going to be a car or a truck. As a rule of thumb an asset is something that will remain in your business for quite a while and has some sort of resale value. So the obvious ones are computers, cars, tools, equipment etc,

The difference between an asset and an expense and how it affects your account is as follows.

If you buy a lot of Ink Cartridges, paper, pens and other miscellaneous from your local staples for a total of 350 dollars you will expense that 350 dollars the day you made your purchase. That amount will be deducted from your income right away and will count towards the current period. In turn you will have to pay less income tax for the current period.

If however you buy a 600 dollars computer and classify it as an asset, nothing gets deducted of your net income. And your computer will go in the books as an asset worth 600 dollars. As time goes by your computer will be worth less and less, that is what depreciation is the value lost by your computer over time. So in this example we'll say that the computer will have a 4 year life and that it depreciates by 150 dollars yearly. So the computer will create an expense of 150 dollars every year. Thus reducing your net income over time.

Accrual accounting vs Cash accounting

Thu, 13 Aug 2009 00:00:00 +0000

So you're entering your Data into Ledgerble, and I am sure you, like myself wonder, how come I have to enter an invoice first, then once it's paid go back to the same invoice and record a payment, why don't I do it all in one step and only enter stuff once I get paid or once they are paid for?

Well I am sure most of you have heard the word accrual before, and that's the reason. Most businesses and accountants and governments, want to go with accrual recording. Basically that income or expenses are recorded in the books the day they are earned or incurred. The reason behind that is that in theory, accrual reporting gives a better view of your business. Let's say for example that you landed a $12,000 dollars contract and received a deposit of $4,000, and that in order to complete it you had to spend $4,500, if you are using the cash method then you would show a loss of $500 dollars.

The cash method only takes into accountant the cash spent and the cash earned, so it would ignore completely that you have another $8,000 to be paid to you and that you have in fact made a healthy profit of $8,500 for the current period.

Does that mean that cash is always different than accrual ? Not necessarily. If a business makes all it's sales in cash and pays all it's expenses the second they are incurred. Then there will not be a big time difference and both methods will reflect the same thing.

Does ledgerble allow you to run cash accounting ? yes it does all you need to do is mark your invoices as paid and your expenses as paid every time you enter them. We however do not recommend it, especially if you ever need to report to a government agency.

The Balance Sheet Made Easy

Mon, 27 Jul 2009 00:00:00 +0000

If you're looking at this page, chances are you have tried to tackle accounting for your small business and did not succeed. You were probably put off by one of the numerous things that are annoying about accounting, from the wording they use, to the over complication of just about everything.

Well it's not that hard so keep the faith. Today I'm going to explain one of the most important accounting reports in English the balance sheet.

The balance sheet is actually very easy once you know what it is, and it becomes almost fun to read. This report can basically be explained with one line.

Assets - Liabilities = shareholders equity

Assets are what you or your company owns.
Liabilities are what you or your company owes.
Shareholders equity is where the terminology starts getting confusing I will get back to that later.

Assets

The assets are pretty much anything that you could sell today if you where really in need of fast cash, (keep in mind assets include Cash). They are arranged on the balance sheet from most liquid to less liquid, so it starts with Cash and works its way down to the less liquid stuff you own such as furniture, etc. As far as Ledgerble is concerned you can rearrange the various elements of the balance sheet the way you want it or prefer it to be displayed, as what is liquid varies greatly from one business to the other.

So to summarize, Assets are basically everything that you or your company owns that's it, nothing more, nothing less.

Liabilities

Liabilities is what you or your company owes. It can be stuff that the company owes you (if you spent from your personal account and are waiting to get the money back) or bills that you still haven't paid. This is also arranged from more liquid to less liquid or since we're talking about things you owe, from most pressing to less pressing. Ideally you would want your liabilities to always be lower than your assets.

Shareholders Equity

That leaves us with the shareholder's equity. which is basically a very fancy term for what the company is worth. To explain this better let's take a very simplistic example of a (service) company that has just been paid $10,000 dollars. The company has no tools, no inventory, nothing apart from this money for that job it just did (could be a street performer).

The company owes $500 dollars for rental of the place where it performed.

In that case the assets are the $10,000 in cash that have just been paid, and the liabilities what is owed is the $500 dollars that still has to be paid to the venue.

The total value of that company as of right now (we're imagining a world without taxes yay) is $9,500 and that is the shareholders equity.

I think kids would understand accounting if it was explained to them the right way.

Debunking The Accounting Myths

Tue, 21 Jul 2009 00:00:00 +0000

My first accounting professor - Prof. Freddie Valliant - taught me in my first summer at University. He was a white guy with a strong Jamaican accent. He is probably the only person on earth who could make accounting "fun". Yes, I said fun and I stand by it. His class was always memorable as he ran us through the basics of accounting. When someone would ask him why does it work this way or why do we use such fancy names he would simply reply "so that accountants can feel good about themselves".

Any accounting class I took after that showed me how spot on he was. It was nightmarish and made me happy that I wasn't majoring in accounting but in Finance. I personally have always wondered why there are so many rules, why there are so many different ways to classify money you spend, why small businesses have to pay so much and spend so much effort to basically report how much money they made last year. I mean if someone lines up 10 small business owners (and I'm talking 3 employees or less) and asks them how much money they made that day or that month, they'll probably know off the top of their head. They'll also know how much they spent and what their biggest expenses are.

Yet complying with the various reporting criteria is another issue. According to the USBA, very small firms with fewer than 20 employees annually spend 45% more per employee than larger firms to comply with federal regulations. Does that seem right to you?

With only 31% of newly established businesses surviving past 6 years isn't it time that some of the accounting myths get debunked and a simplified reporting method be created for micro businesses?