Author: Sanjeev Chib

Managing your trust bank account can be complex, especially with such large volumes of invoices to keep track of. Which is what makes the Merang TravelOffice such a useful tool for travel companies as it keeps track of and helps you control the cash flowing into and out of trust.

Setting up and using a Trust Bank Account for your business is always a good idea (even if it is not required in your area). The Trust Bank Account will ensure that there is always money available to pay-off suppliers from the cash received from customer sales, and only the difference (i.e. commission) is transferrable to a “General” Bank Account to pay you overheads (i.e. rent, advertising, payroll) etc.

Many of our users have been asking us to provide them with some step-by-step guidelines on what to do with customer deposits and supplier payments. So, below is our step-by-step guide on how to record and reconcile customer deposits and supplier payments using the Merang TravelOffice system. Remember, not all steps need to be performed daily; the reconciliations can be done monthly, quarterly, or annually.

So here goes:

A. Customer Deposits Received:

1. Deposit: When you receive cash from the customer, deposit the cash in your trust bank account (within 3 days per TICO), and make a note of this deposit in your deposit book you obtained from the bank. In your deposit book, record the date you deposited it, the invoice number (from the merang system) and the amount, so that you can later reconcile it.

2. Record: In the merang system, go to the second page of the invoice (“Customer Fare Received” tab), and click on “Add Payment”. Select the method of payment (e.g. cash/cheque), the date the money was received, the amount, and who it was received from.

[Note: If the invoice is already marked as "Complete" or "Accounting", then you can record the amount recieved by logging into the back-office, click on "Accounts Receivable-Customer" (gives a list of invoices for which amounts are still receivable from customers), and record the amount received here.]

3. Reconcile: On a monthly, quarterly, or annual (you decide) basis , you need to reconcile (i.e. match) what is recorded in the merang system to what was deposited in the trust bank account. To do this, simply login to the back-office, click on “Accounts Receivable-Customers”, and then from the left-side menu, click on “Reconcile Cash Receipts”. This will give you a list of all amounts that you had recorded as received from customers, that you need to reconcile to your deposit book/bank statement.

Match the invoice number & amount from merang to what is listed in the deposit book and the bank statement – click on “Reconcile” and record the date the amount was deposited into the trust bank account.

B. Payments Made to Suppliers:

1. Pay and Record: When you pay the supplier, go to the last page of the invoice (“Supplier Payments” tab), and click on “Add Payment”. Select the method of payment (e.g. cash/cheque, or company credit card), the cheque number (if any), date the money was paid, and the amount.

[Note: If the invoice is already marked as "Complete" or "Accounting", then you can record the amount paid by logging into the back-office, click on "Accounts Payable-Supplier" (gives a list of invoices for which payment is due to suppliers), and record the amount paid here.]

2. Reconcile: On a monthly, quarterly, or annual (you decide) basis, you need to reconcile (i.e. match) what is recorded in the merang system to what was paid from the trust bank account. To do this:

a. If amount was paid to supplier by cheque/cash/draft:
Simply login to the back-office, click on “Accounts Payable-Supplier”, and then from the left-side menu, click on “Reconcile Payments”. This will give you a list of all amounts that you had recorded as paid to suppliers, that you need to reconcile to your bank statement.

Match the invoice number & amount from merang to what is listed in your cheque stubs and bank statement – click on “Reconcile” and record the date the amount was withdrawn from the trust bank account (based on the bank statement).

b. If amount was paid to supplier by Credit Card:
Simply login to the back-office, click on “Accounts Payable-Company Credit Card”. This will give you a list of all amounts that you had recorded as paid to suppliers by credit card, that you need to reconcile to your credit card and bank statements.

Match the invoice number & amount from merang to what is listed in your credit card statement, and bank statement – click on “Reconcile” and record the date the amount was withdrawn from the trust bank account to pay the credit card statement.

C. Transferring Commission Amounts from Trust to General Accounts:

Only once the above steps A and B are completed (including reconciling), then you can transfer the amounts from the trust to the general account. To do this, log into the back-office, and click on “Cash – Trust Account”. This will give you a list of all invoices that have been fully reconciled (both the deposit side and the payment side) and the amounts that you can transfer to the general account. Once you have transferred the cash from trust bank account to your general bank account, you can record them as transferred here so that you don’t end up transferring them again.

Author: Sanjeev Chib

Here’s the last set of ratios I will discuss in this series on conducting a health check of your company: Profitability ratios. There are various other types of ratios that we have not discussed here that you can also perform, if applicable to your business.

Now let’s look at “Profitability Ratios”.

What does it mean:
Profitability ratios provide a measure of how successful your travel business is in terms of generating commissions relative to sales or resources invested in the business.

Commission Margin Ratio (a.k.a. Gross Margin Ratio) measures how much commission your business is earning relative to the total gross sales of your business.

Commission Margin Ratio = Commission Earned / Gross Sales
(This information is available directly through the Sales Activity report in the Merang TravelOffice system – back-office module)

While this ratio gives you an indication of how much commission (on average across all suppliers) you are earning for each dollar of gross sales you make, it may also indicate how much of a discount you are providing. For example, if on average you earn 8% commission based on your agreements with suppliers, but you find that your commission margin ratio is only 5%, it indicates that you are on average giving a 3% discount on your sales. If in the following year, your ratio goes down to 2%, it indicates that you were forced to increase the amount of discounts – this could have been due to increased competition pressuring you to reduce your commissions even further, or perhaps suppliers are reducing their commission rates. If possible, try to set a target for your ratio, and creatively identify ways of meeting or exceeding this target.

Return on Assets measures how effectively your assets are being utilized to generate profits.

Return on Assets = Net Income / Total Assets

Return on Equity measures the profit earned for each dollar invested into the business by shareholders.

Return on Equity = Net Income / Shareholders Equity

As mentioned, there are various types of ratio analysis that can be performed. In this series, I’ve only focused on those that I felt are more applicable to the small to mid-size travel businesses. Feel free to google this topic on finanical ratios to learn about other types of ratios that we have not covered here.

Also, while these measures are useful in giving your business an overall health check, they do have limitations. As discussed in my last post, you should compare your results to historical values, industry-averages, and/or targets you have set. Factors of your specific business may result in the ratios not being meaningful, and so you should be cautious. But overall, these measures will probably provide a benefit to you and should be used to measure the health of your business on an ongoing basis.

Author: Sanjeev Chib

Let’s get right to it. Previously we wrote about liquidity ratios, which provide good indications on how quickly you are able to pay off short-term debt, and hence how cash rich your company is. Now let’s look at “Asset Turnover Ratios”.

What does it mean:
Asset turnover ratios provide a measure of how efficiently your travel business utilizes its assets. Our focus here will be on Accounts Receivables ratios, which are very useful for travel businesses. Inventory ratios can also be calculated in a similar way, but as most travel businesses don’t carry inventory, we have excluded these.

Receivable Turnover Ratio measures how quickly you collect your accounts receivable. Generally, travel businesses have three sources of amounts receivable; amounts receivable from customers, commissions receivable from suppliers, and amounts receiable from your credit card processor (i.e. settlement). Calculating the Receivable Turnover Ratio on the first two (i.e. customers and suppliers) will provide a useful indication on how quickly you are collecting from these two sources.

For customers:
Receivables Turnover = Annual Credit Sales / Accounts Receivable

For Suppliers:
Receivables Turnover = Annual Gross Sales/ Accounts Receivable

To be useful, for the supplier receivables turnover, it is better to use the annual sales where commission is owing from suppliers – i.e. total gross sales for which the the supplier owes you commission, as opposed to cases where you collect the full amount from the customer and pay the supplier the net cost. However, most systems don’t provide such granular information and therefore getting the amount of “annual commission-owing sales” may not be possible. As an alternate, you could just use “Annual Gross Sales” instead. The idea is to take this measure and compare it against previous years ratios to see if you are getting better or worse.

Collection Period provides similar information to the receivables turnover ratio, but expresses it in number of days it takes to collect the amounts receivable (and therefore, may be more meaningful).

Average Collection Period = 365 / Receivables Turnover

Some points to note when using any of these financial ratios is:
* To be meaningful, you need a reference point against which to compare the result. Therefore, you could compare the results against the previous years for your business, or against other travel businesses. We are currently working on features/reports within the Merang TravelOffice system that will enable you to do both; compare against your historical ratios and compare against the general average ratios combining all our clients in the system (but not against any specific client).

Remember these are just indicators to get a pulse of the business.

Author: Sanjeev Chib

At this time of year, many small businesses are busy preparing/finalizing their year-end 2008 financial statements for tax purposes, for submissions to other parties (e.g. regulatory bodies), and for some, to measure the state of their companies. Periodically monitoring the health of your business is always a good practice, especially during these recessionary times. It may give you some real insights into your business, help you identify any problem areas and focus and plan for the future.

We’ve put together some key “health check” indicators that you can easily calculate which will enable you to take a pulse of your business, which we will discuss over the next few series of posts. The numbers used in the following calculations can be obtained from your financial statements, and in many cases from the reports you create in the Merang TravelOffice system. This is not an extensive list of all financial ratios available (you can do a google search to get more) but just some basic ones we thought would be useful.

Let’s get started with “Liquidity Ratios”.

What does it mean:
They are a set of calculations (financial metrics) that will give you an indication of your company’s ability to meet short-term debt obligations. Basically, this is done by comparing your company’s ‘liquid’ assets (i.e. cash, or those easily converted to cash, such as short term investments, accounts receivable, and other ‘current assets’) to your short-term (or current) liabilities. This information is available on your balance sheet.

Generally, the higher the value of the ratios means that your company has a larger margin of safety to cover these short-term debt obligations (i.e. the “healthier” you company is). A higher value means that you will be able to pay your short-term debts as they come due. A low value means that you will have a more difficult time paying your short-term debts and meeting the running/operating costs of your business.

We will present here three types of liquidity ratios:current ratio, quick ratio, and cash ratio:

Current Ratio measures the short-term solvency of your business.

Current Ratio = Current Assets / Current Liabilities

Quick Ratio is a measure of your company’s ability to pay short-term debts instantly.

Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
-OR-
Quick Ratio = (Current Assets – Inventory) / Current Liabilities
(as travel businesses probably would not have any inventory, the first calculation is more useful).

Cash Ratio is very similar to the quick ratio, except it only includes cash or cash equivalents (e.g. short-term or marketable investments) in the calculation. It is again a measure of the ability to pay off short-term debts immediately, but is more conservative than the Quick Ratio.

Cash Ratio = (Cash + Marketable Securities) / Current Liabilities

Again, there may be other Liquidity ratios that you could also use. But we hope you find these basic ones useful. Over the next few posts, we will provide some other types of ratios that you may be able to use.

Author: Team Merang

Last year, we had posted details on things to consider for wrapping up the 2007 year. Many of you said that you found this useful, so we are reposting it here again as a refresher.

qComplete all outstanding sales invoices:
During the year, we all get busy focusing on sales, marketing, and other aspects of running our business. While ideally, you have been entering and reviewing sales invoices in the TravelOffice system regularly, you may have fallen behind leaving some invoices still in the “pending” or “review” status that should be “completed”.

In many cases, we have made reference to the Merang TravelOffice system. However, we believe these same ideas/steps may be followed to manage any business and ensure you have a smooth close and can plan your business for the future.

To ensure you maintain complete and accurate accounting records, monitor your receivables/payables, and can start fresh for next year, organize and complete any outstanding invoices for your business. Make sure you review each of these sales invoices to ensure that they are accurately and completely recorded and then mark them as complete if they meet your definition of “completed” invoices.

qReconcile your books:
Why reconcile? Reconciling your records ensures that your accounting records are accurate and complete, help you catch any mistakes or errors, and therefore better control your business. From the back-office module, you can reconcile all amounts received or paid to their source reports or bank statements. Here are some items that you should reconcile:

• Reconcile sales amounts received from your customers and deposited to your bank account (if applicable, these would be the amounts deposited into the Trust Bank Account). If these payments were charged to your customer’s credit/debit card, reconcile the amount received (net of any transaction fees) as per the TravelOffice system against the statements from your “Card Payment Processor”, and to the actual amount deposited into your bank account. This will ensure that you have received all amounts accurately from your card payment processor.
• Reconcile commission amounts received from suppliers to your bank statement (if applicable, these would be amounts deposited to your General Bank Account).
• Reconcile payments made to suppliers (either by cheque or company credit card) to your bank statement (if applicable, these would be amounts paid from the Trust Bank Account).

Once you have completed all necessary sales invoices, and reconciled the amounts received and paid to your bank statements, you can:

• If applicable, record any transfers made from the trust bank account to the general bank account in the TravelOffice system.
• Generate the Sales-Related Journal Entries and post them to your General Ledger.

qOrganize all expense receipts:
Hopefully, you already maintain separate folders to store receipts for your various expenses (such as rent, utilities, telephone, payroll, and internet). In order to save us time in tabulating all the various expenses, we also maintain a separate Excel file where we record these various expenses on a monthly basis. Within this Excel file, we maintain a separate tab for each type of expense and at the end of the month/year we simply take the totals and post it into our General Ledger system. We find that this works very well for smaller size organizations. If you would like a template copy of our Excel file, please send us a quick e-mail at info [at] merang.com and we will be happy to send it you.

In addition to these expenses, there may be other expense items such as depreciation or other write-offs of assets that you should also consider. You need to maintain accurate records of your fixed assets and properly calculate and depreciate these assets. Also, consider writing-off any receivable amounts that may not be collectible. From a tax perspective, these expenses may offset your income and help reduce your total tax owing. Therefore, proper planning can help you save money. However, do keep in mind that there may be differences in the calculation of these expenses for tax purposes versus for accounting purposes. You may need to check with your accountant for further details.

q Monitor the health of your business:
While you should be monitoring your business on an ongoing basis, this is a good time as any to take stock of your business. Through the TravelOffice system, you can generate various management reports to monitor sales activity, who owes you, and who you owe. You should also generate your financial statements (i.e. Balance Sheet, Income Statement, and Cash Flow Statement) and review these, after all journal entries have been posted.

There are various financial ratios (such as liquidity ratios, current ratios, debt-equity ratios etc.) and analysis that can be generated based on the information in these financial statements and reports that will provide you insights into the health of your business. We will very shortly be providing some more details on various “health check” ratios you can use to monitor the health of your business.

Monitoring the health of your business at this stage will help you plan and prepare better for 2009. You should also analyse other customer and marketing statistics of your business that will help you better focus your marketing efforts in 2009.

Author: Team Merang

Although our user guides provide details on creating invoices, we’ve found that many of our travel business users don’t have a lot of time to go through the guides, and need a quick short-cut way to create the invoices (especially when training new staff), to get them started quickly.

So here goes. We’ve put together a simple 10 step process to creating an invoice. We hope this will help you and your staff create invoices quickly:

1. Login to the invoicing module.
 
2. Click on the “Create a New Customer Invoice” button. This will open a blank invoice screen.
 
3. Enter the departure date and return date. Then, enter the customer details (first name, last name, address and phone number) and click on the “Create” button. This will save the customer profile into the customer database and you will get a confirmation window. Close it. (Note: If the customer is an existing customer, do a search to pull up the customer record)
 
4. Next, scroll to the bottom of the invoice and click on “Save Invoice”. This will generate a new invoice number and save all the details to the new invoice.
 
5. Click on “Add Travel Product” in the itinerary details section, and the Travel Products window opens. You must select the supplier here (and if it does not appear on the list, click on the + icon and add it; @agents: you may need to ask your manager to do this). Click on Save Product. Then complete the “Customer Fare” and “Supplier Net Cost” pages. (You must click on the “Calculate Totals” or “Calculate Net Cost” buttons respectively on these pages). Click on the save button in each page to save the information. Close the window when complete.
 
6. Complete the remainder of the information in this first page of the invoice and click on the “Save invoice” button.
 
7. Click on the “Customer Fare Received” tab on the top of the invoice to go to the second page. Click on “Add Payment” to record the customer payment received.
 
8. The “Supplier Net Cost” tab (third page of invoice) is for information purposes. Click on the “Supplier Payments” tab on the top of the invoice to go to the fourth page of the invoice. Click on “Add Payment” to record how you paid the supplier.
 
9. To e-mail the invoice, click on “E-mail – Customer”. A box opens and you can enter the customer’s e-mail, and your e-mail to get a copy. Click on the “E-mail Invoice” button to send the invoice. To print the invoice, click on “Print Invoice” which opens the invoice as a MS Word document.
 
10. Finally, click on the “Booking Details” tab to return to the first page of the invoice. Change the status to “Complete” and click on “Save Invoice” to save it.

Author: Team Merang

You may have noticed something different with the TravelOffice system. Last week we successfully upgraded everyone to version 4.0. This upgrade was a significant enhancement in the evolution of the TravelOffice system, with the migration to a much more powerful database and the introduction of other design and feature enhancements. The following is a quick summary of what’s new or enhanced with the new version:

1.   Move to a more powerful database (MySQL): As part of our commitment to continuously improving our technology, we have successfully migrated all of our customers’ databases to a much more powerful and robust database (MySQL). This new database will enhance the TravelOffice system performance and help us plan for future expansions.

2.  Better Invoice Design and Options: You may have noticed some changes in the look-and-feel of the invoices. We’ve designed the new invoices with more consistent colours and fonts, and a cleaner more efficient design.

In addition, we have introduced a second more modern design layout. For customers that do not already have a customized invoice, you can view a sample of the two invoice designs and choose which design to use for your agency. You can also change and upload your own agency logo directly to the TravelOffice system, which will be reflected in the invoices and reports. To make either of these changes, here’s what you need to do:

• Login to the “Back-office Management” module.
• From the dashboard, click on “Manage Profiles” in the left-side menu.
• To change your invoice and report logos: Click on “Company Profile”, and click on “edit” besides the company location you wish to modify. In the “Company Profile” window that opens, select your logo file on your computer (by clicking on the “Browse…” button) and then click on the “Upload Logo” button.
• To change your invoice design: Click on the “Invoice Profile” option in the left side menu. For the company location you wish to modify, click on “Edit”. This will open up a new window with details of the invoice profile for that company location. In the “Invoice Profile” window, select an invoice theme, and click on the “Edit Profile” button to save the details. 

Over time, we hope to introduce other invoice designs for you to select from.

3.  Sales Report for Prior Years: You can now generate the “Monthly Sales Activity” report for prior years. Before, you could only generate the report for the previous year only (e.g. for 2007 only). Now, you can go further back in time.

4.  Second Billing Address for Suppliers: You now have the option of including a second address for suppliers, such as a billing address which may be different from the mailing address.

5.  Change Agent Status: Sometimes agents leave. In order to de-activate the agent, so that they cannot login to the system, edit the “Agent Profile” from the “Manage Profiles” section and change the agent’s status from “Active” to “De-Active (Closed)” status. If you need to re-activate the agent at a later date, simply change the status back to “Active”.

6.  Agent payroll where commissions not received: Some of our customers needed us to highlight agent commissions owing where the company had not yet received their commission from the supplier. Now, when you display the list of agent commissions owing from the “Payroll” section in the “Back-Office Management” module, invoices in the list for which the supplier commission has not yet been received will be highlighted in red.

7.  Insurance Product Net Cost: We have added two new fields in the Supplier Net Cost section when adding an Insurance Product. You can now enter the “Exchange Rate” and “Other Charges” when calculating the net cost of insurance products.

8.  Overall Design and Feel: We enhanced the design and colours of many pages, with a cleaner look and easy to understand input field labels.

Our design and development team and advisors have been working diligently through the past couple of months to bring these changes to you. We would also like to thank our numerous customers who brought us their ideas and requirements which were incorporated into this version. We’re excited with the new development and would love your feedback on the updates.

Author: Team Merang

Some users have asked about how to change or update information on the invoices. This would depend on the status of the invoices, as summarized below:

1. For invoices in “Pending” or “Review” status: 
As these invoices have not yet been transferred to the back-office module, you can edit them directly, without any impact to the back-office accounting:

• Login to the invoice module, search for the invoice and click ‘edit’ to make changes to the invoice.
• To make changes to the products or insurance items, once the invoice opens (under the first ‘Booking Details’ tab), scroll down to where the “product” and “insurance” section. You can click on ‘edit’ besides any product or insurance item, which will open the product or insurance window. Make the changes/upgrades to the product or insurance item, including the customer fare or supplier net cost information, and click on the “Save Product” or “Save Insurance” button.
• Remember to always click on “Save Invoice” when making changes.

2. For invoices in “Complete” status:
Although these invoices are “complete” you can change the status back to “pending” or “review” and then follow the steps in (1) above. To change the invoice status:

• Login to the invoice module, search for the invoice and click ‘edit’.
• Once the invoice opens, you will notice that it is in a read-only format, except for the Invoice Status field (a drop-down field), which you can change.
• Change the status to either “pending” or “review”, and click the “Save Invoice” button.
• After the status is changed, follow the steps in (1) above to change or update information in the invoice.

 3. For invoices in “Accounting” status:
As these invoices are now in the back-office accounting stage, no changes are permitted from the invoice module (to preserve the integrity of the invoices). However, you can still make any edits/updates to these invoices, but only through the back-office module. To do this:

• Login to the back-office module (you must be assigned a user role of “Administrator” or “Accountant” to do this. For agents, please check with the office “Administrator” or “Accountant” to make this change).
• Once logged into the back-office module, click on “Invoice Management from the left-side menu.
• Search for the invoice and click on ‘edit’ to edit the invoice.
• Make changes, as normal, to the invoice.

(Please note: if you need to record a refunded amount to these invoices, you can add a payment, and put a negative (“-”) sign before the amount to record the amount refunded).

If you have any specific questions about a certain invoice, do drop us a note and we will walk you through it.

Author: Sanjeev Chib

Part I: 

I’ve always known, in the back of my mind, why I started the business and where I see the business going. But I never truly formalized it and wrote it down. This is probably true of many business owners. Many have argued that having a written down vision and mission statement (and yes, there is also confusion on what these mean) is a waste of time and we should just “get on with it” and run the business.  

Back in the 80’s (last century), large corporations were dishing out millions to high-priced consultants just to come up with brilliant vision and mission statements for their company. This fad appeared to have fizzled out quickly. Why? Perhaps because developing a strong vision and mission (for your business or yourself) that will inspire and motivate others is truly a personal journey and requires a personal reflection into your passions and inspirations. Something high-priced consultants would never be able to achieve. Developing a vision and mission statement for simply the sake of developing a vision or mission statement is pointless. 

So Why Bother? 

I came across this quote recently:

“When you are inspired by some great purpose, some extraordinary project, all your thoughts break their bonds; your mind transcends limitation, your consciousness expands in every direction, and you find yourself in a new, great and wonderful world. Dormant forces, faculties, and talents become alive, and you discover yourself to be a greater person by far than you ever dreamed yourself to be.”

- Patanjali (First to Third Century B.C.) 

Although written over 2000 years ago, I believe these words still ring true today, in both business and your personal lives. It reminds me of the old Jerry Maguire movie where Jerry woke up in the middle of the night, inspired, and wrote out a long mission statement. He titled it “The things we think and do not say”. 

That got me thinking. As I said, I’ve always known, in the back of my mind, why I started the business and where I see the business going. But this doesn’t allow me to communicate the message, the purpose of the business and our values to the rest of the team, our partners, or to our clients. 

Whether you are a one-person travel company, or have a large number of agents, I believe that having a formal vision and mission for your travel business (or any other business) should give you a long-term purpose and help inspire and drive you and your staff to stretch and grow. The vision and mission should bring a common purpose that you and your staff believe in, motivating and inspiring them in their daily lives. The vision and mission give you a means to measure the success of your business against.  So I sat down to try and formalize our vision and mission. 

Passions and Inspirations:

Does your vision have to be huge to be worthy? Absolutely not! However, I believe that your vision and mission should be driven from your passions and inspirations. This may not be as easy as it seems. Should this be an individual exercise or done as a team (if you have one), capturing the passions and inspirations of the entire team and translating that into your company’s vision and mission statement. I don’t have the answer as to which is a better approach (let me know your thoughts), but in our case, I decided to go it alone.  

What worked for me was to take some quiet time away from any disruptions. I went to a place where I could play some quiet background music and have no disruptions from phone calls, e-mails, or family. This time allowed me to reflect deeply into what mattered to me the most. I reflected on two ideas (which I found on the Franklin Covey website), which made me think about what drove me and made me happy: 

• I thought back to a moment in my life when I truly felt really excited about life. I reflected on what I was doing at that moment, who I was with, what I was feeling, and most importantly, why I felt excited.
• I asked myself, straight from my heart, if I could never fail, what would I do? 

Of course, the answers to these are very personal. But from this, I was able to identify the elements that drove me and made me happy. My passions and inspirations. And through this, I found a clearer vision for the business. I then set out to formalize my vision and mission statements. 

In the next part, I will share with you what I came up with in terms of our vision and mission statements.  

Author: Team Merang

We’re into the final home stretch of 2007, and along with our best wishes for this Holiday Season, we thought we could offer some year-end ideas to help you wrap-up 2007 and plan for 2008. In many cases, we have made reference to the TravelOffice system. However, we believe these same ideas/steps may be followed to manage any business and ensure you have a smooth close and can plan your business for the future. 

q       Complete all outstanding sales invoices:
During the year, we all get busy focusing on sales, marketing, and other aspects of running our business. While ideally, you have been entering and reviewing sales invoices in the TravelOffice system regularly, you may have fallen behind leaving some invoices still in the “pending” or “review” status that should be “completed”.  

To ensure you maintain complete and accurate accounting records, monitor your receivables/payables, and can start fresh for next year, organize and complete any outstanding invoices for your business. Make sure you review each of these sales invoices to ensure that they are accurately and completely recorded and then mark them as complete if they meet your definition of “completed” invoices. 

q       Reconcile your books:
Why reconcile? Reconciling your records ensures that your accounting records are accurate and complete, help you catch any mistakes or errors, and therefore better control your business. From the back-office module, you can reconcile all amounts received or paid to their source reports or bank statements. Here are some items that you should reconcile: 

• Reconcile sales amounts received from your customers and deposited to your bank account (if applicable, these would be the amounts deposited into the Trust Bank Account).  If these payments were charged to your customer’s credit/debit card, reconcile the amount received (net of any transaction fees) as per the TravelOffice system against the statements from your “Card Payment Processor”, and to the actual amount deposited into your bank account. This will ensure that you have received all amounts accurately from your card payment processor. 
• Reconcile commission amounts received from suppliers to your bank statement (if applicable, these would be amounts deposited to your General Bank Account). 
• Reconcile payments made to suppliers (either by cheque or company credit card) to your bank statement (if applicable, these would be amounts paid from the Trust Bank Account). 

Once you have completed all necessary sales invoices, and reconciled the amounts received and paid to your bank statements, you can:

• If applicable, record any transfers made from the trust bank account to the general bank account in the TravelOffice system.
• Generate the Sales-Related Journal Entries and post them to your General Ledger. 

q       Organize all expense receipts:
Hopefully, you already maintain separate folders to store receipts for your various expenses (such as rent, utilities, telephone, payroll, and internet). In order to save us time in tabulating all the various expenses, we also maintain a separate Excel file where we record these various expenses on a monthly basis. Within this Excel file, we maintain a separate tab for each type of expense and at the end of the month/year we simply take the totals and post it into our General Ledger system. We find that this works very well for smaller size organizations. If you would like a template copy of our Excel file, please send us a quick e-mail at info [at] merang.com and we will be happy to send it you. 

In addition to these expenses, there may be other expense items such as depreciation or other write-offs of assets that you should also consider. You need to maintain accurate records of your fixed assets and properly calculate and depreciate these assets. Also, consider writing-off any receivable amounts that may not be collectible. From a tax perspective, these expenses may offset your income and help reduce your total tax owing. Therefore, proper planning can help you save money. However, do keep in mind that there may be differences in the calculation of these expenses for tax purposes versus for accounting purposes. You may need to check with your accountant for further details. 

q       Monitor the health of your business:
While you should be monitoring your business on an ongoing basis, this is a good time as any to take stock of your business. Through the TravelOffice system, you can generate various management reports to monitor sales activity, who owes you, and who you owe. You should also generate your financial statements (i.e. Balance Sheet, Income Statement, and Cash Flow Statement) and review these, after all journal entries have been posted.  

There are various financial ratios (such as liquidity ratios, current ratios, debt-equity ratios etc.) and analysis that can be generated based on the information in these financial statements and reports that will provide you insights into the health of your business. In future postings, we will provide you with further details of these various ratios and analysis and interpret what they mean. A quick Google search will also take you to various online calculators that will calculate them for you. 

Monitoring the health of your business at this stage will help you plan and prepare better for 2008. You should also analyse other customer and marketing statistics of your business that will help you better focus your marketing efforts in 2008. 

From the Team at Merang, we hope the year to come will be full of personal accomplishments and great success for you and your company.