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MEASURING THE RETURNON INVESTMENT OFMY BUSINESS

2| Measuring the Return on Investment of my business|

INTRODUCTIONAccounting is the complete and organized recording of monetary transactions revolving around a business. An important part of any business or organization is, arguably, the money that comes in and the money that goes out.

A strong company can attribute some of its success to its accounting. Without accounting, it would be hard to keep track of your business’s finances and profitability, and you might not know exactly how much money is coming in or going out


2. DAILY TASKS

3. WEEKLY TASKS

4. MONTHLY TASKS

5. ANNUAL TASKS

7. DOs IN ACCOUNTING

8. DON’Ts IN ACCOUNTING

10. HOW CAN WE HELP

11. YOUR CHECKLIST

1. ACCOUNTING CYCLE

6. YOUR PROFITABILITY IS ESSENTIAL TO..

9. CONSEQUENCES OF UNETHICAL ACCOUNTING PRACTICES


ACCOUNTING IS A KEY TO..

Generate an accurate budget within the plan

Record your trades suitably

Review your outcomesfrequently

Continuously retain good

records

The accounting cycle for a small business begins with establishing the chart of accounts for that business and ends with closing the books for that business at the end of the accounting time period. The accounting cycle is a series of steps that the firm takes every accounting time period in order to take account of its financial transactions.

Ledger

Trial Balance

Financial Statements

SourceDocuments

Journals

ACCOUNTING CYCLE

ACCOUNTING CYCLE 1ACCOUNTING CYCLE


ACCOUNTING CYCLE

A Source Document in an accounting transaction that givesevidence that the transaction has occurred and should be recorded as soon as possible. Examples are canceled checks, invoices, purchase orders etc.

When a small business makes a financial transaction, they make a journal entry in their accounting journal.There are actually two entries made - one is a debit and the other is a credit.

The general ledger is the main accounting record for your business. All of the business’s financial transactions are taken from the general accounting journal and recorded in the general ledger in a summary form.

The next step is to prepare a trial balance. A trial balance is the process of totaling the debits and credits from the general ledger to make sure they balance for the accounting period in question.

The final steps in the accounting cycle is the preparation of the financial statements. The information from the accounting journal and the general ledger is used to develop the income statement of retained earnings, balance sheet, and statement of cash flows, respectively.


DAILY TASKS / WEEKLY TASKS

. Record Transactions

Record every transaction in the legitimate account every day or weekly depending on the volume. Despite recording transactions manually, you can also use bookkeeping product like QuickBooks. You should outweigh the cost over the benefits and control.

. Document & File Receipts

Keep duplicates of every receipt sent, the sum money receipts (cash, check as well as Visa deposits). Furthermore the sum money instalments (cash, check, credit card statements, etc.) and invoices.

. Review Projected Cash Flow

Dealing with your cash flow is critical, particularly in the first year of your business. Determining what amount of money you will require for the coming weeks/months will help you save enough cash to pay bills, including your representatives and suppliers.

Check Cash Position

Since the fuel for your business is cash, running empty would be something you never want. Always begin your day by checking how much cash you have in hand.

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3 WEEKLY TASKS

DAILY TASKS


. Review and Approve Full-Year Financial Reports

Cautiously evaluate the full-year financial reports of your business, make sure they are accurate and then hand them over to your accountant.

. A typical annual report contains the following sections:

• Letter from the CEO• Highlights of the past year• Goals and plans for the next year• Financial statements (balance sheet, income statement, cash flow statement, and statement of shareholder’s equity)• Footnotes• Summary of corporate information• Analysis and conclusions• Report by independent auditors

. Balance Your Business Check Book

In the same way that you accommodate your personal checking account, you will need to know that your cash trade entries of the business are accurate every month and that your correct cash position is working.

. Review Actual (Profit & Loss) Income Statement

The profit and loss statement informs you how much you have earned andspent. Compare it against your every month budget.

MONTHLY TASKS / ANNUAL TASKS

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MONTHLY TASKS

ANNUAL TASKS


Commercial companies are required to submit their audited annual reports for review and analysis in accordance with Bahrain’s commercial companies law, decree law no. (21) of 2001 and revised decree law (50) of 2014.

1. Annual report submission, review & analysis.

Type of Company

Single Person Company (B.S.C)

Single Person Company B.S.C (c)

With limitedliability (W.L.L)

Segregated Portfolio Company (S.P.C)

Foreign company branch

Within 6 months of the company’s financial year end.





Deadline of Submission to MOICT Who Must Sign the Annual Report

Chairman AND another board member.

Chairman AND another board member.

One Director OR more depending on situation

Owner or authorized person

One Director OR more depending on situation

Companies which are required by law to submit audited annual reports and the deadline for submission:

ANNUAL TASKS


1. Audited annual reports issued by audit firms which are registered and licensed to operate in Kingdom of Bahrain. These audit firms must be licensed by MOICT to practice audit activities.

2. Audited annual reports from overseas audit firms which meet the following conditions:

• The audit firm must be licensed in the country where the annual report was issued.

• The audited annual report must be authenticated by appropriate authorities.

• The audited annual report must be prepared in accordance with International Financial Reporting Standards.

2. Acceptable sources of Annual reports:

ANNUAL TASKS


The audited annual report must:

• Be issued from an audit firm licensed by MOICT.

• Be prepared in accordance with International Financial Reporting Standards.

• Include an auditor’s opinion.

• Be stamped by the audit firm or signed by an auditor who is registered at MOICT.

• Be signed by a chairman or director (depending on company type). For S.P.C, the owner or authorized person signature is sufficient.

• Include the company name, commercial registration number, issuance date of report, financial year end of the company, and the board of directors.

• Include a director report (except S.P.C).

• Include all active branches of the company.

• Be the final signed copy from the auditor.

3. Conditions for accepting a submitted audited annual report:

ANNUAL TASKS


• When a company changes its legal form to one of the types of companies mentioned above, the company will be required to submit an audited annual report after a year of the legal form change.

• When an application for establishing a foreign company branch is received, or when application is received for establishing a local company where a foreign company is a shareholder. In these two cases, a recent audited annual report of the parent company must be submitted if a year has elapsed since the inception of the parent company.

• When a company submits an application to amend its capital, the annual report will be requested by the MOIC (Ministry of Industry and Commerce).

If the company is new.

If it is the first financial year of the company.

If it is the first financial year of a company after changing it legal form to a type of company required by law to submit annual report.

If the company legal form is not required by law to submit an audited report.

5. Cases where unaudited annual reports and Statements of Financial Positions are accepted:

4. Cases that entailssubmitting an annual report:

ANNUAL TASKS


6. Cash flow statements

The cash flow statement is usually divided into three sections.

“A cash flow statement is one of the crucial financial statements used to measure a business’s financial situation. It tracks the inflow and outflow of cash. Understanding a business’s cash flow is vital to guarantee a positive cash position is sustained.”

Operating

• Cash flow for day-to-day operations• Examples: Customer revenue, tax payments,interest, supplies purchased

Investing

• Cash flow generated from or consumed by assets• Examples: Sale of a vehicle or purchase of a building

Financing

• Cash flow in from selling stocks or bonds, or borrowing• Cash flow out from purchasing stock back, paying outdividends, and repaying borrowed money

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ANNUAL TASKS


BALANCE SHEET EQUATION

The balance sheet reflects the most basic financial equation:

Assets – Liabilities = Equity

“A balance sheet is important because it provides the owner a snapshot of what they own, the balances they owe and how much their business is worth.”

• Assets are anything that the business owns. Some examples: cash, office equipment, vehicles, tools, real estate, buildings, and land. Bills that are prepaid (such as monthly insurance premiums) are also considered an asset, as are accounts receivable (money that others owe to you).

• Liabilities are anything the business owes to others, including banks and suppliers. Money which a company owes as a result of its ongoing trading are generally called accounts payable.

• Equity is often a measure of what the business is worth. It is the combination of profits and money invested in or withdrawn from the company by its owners.

7. Balance sheet statements

Understanding the balance sheet can help you make more informed decisions for your business. If you can analyze how the balance sheet connects to other financial statements, you can increase your cash inflows & profitability.

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ANNUAL TASKS


8. Income statements

“An income statement is a financial statement that reports a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.”

• Revenue is what the business earned from the sale of goods and services during this period.

• Expenses are bills (phone and Internet bill, insurance, payroll, advertising, etc.) incurred during this period.

• Net income or loss is the net financial result of the business efforts during that period. It must be added to the Equity portion of the balance sheet, which we will discuss in a moment.

The income statement equation typically looks like this:

Revenue - Expenses= Net Income (or Loss)

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ANNUAL TASKS


FORMULA

Return on investment is calculated using the following formula:

ROI = NET Operating Income

Average Operating Assets

. Net operating income (NOI) is simply the annual income generated by an income-producing property after taking into account all income collected from operations, and deducting all expenses incurred from operations.

. Average operating assets are cash, prepaid expenses, accounts receivable, inventory, and fixed assets.

. A high ROI means the investment’s gains compare favorably to its cost.

9. Return on investment

In the context of management accounting, return on investment (ROI) is a metric used to measure performance return on average operating assets.

ANNUAL TASKS


Conveying needed profits and stay solvent.

Creating up-to-date business choices to reach the required profitability and cash flow.

Attaining a vision of whether the business’s sales and returns have improved over time.

Aid in representing a company’s return on investment, risk, financial flexibility and functioning abilities.

YOUR PROFITABILITY IS ESSENTIAL TO..6

YOUR PROFITABILITY IS ESSENTIAL TO


DOs IN ACCOUNTING

• Acquire basic accounting knowledge.

• Recruit and retain an accountant aware of your business.

• Determine what accounting software program works best for your business.

• At the start, prepare your own bookkeeping to advance information regarding your accounting.

• Set up inventory procedures and internal panels to safeguard against dishonesty.

• Settle your bank account at least once a month when your bank statement is established.

• Preserve and update your cash flow control spreadsheet regularly.

• Plot to outsource your payroll and payroll reporting to a payroll service provider.

• Formulate financial statements monthly.

• Preserve your business records discrete from your personal records.

DOs IN ACCOUNTING

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DON’T IN ACCOUNTING

× Delegate the right to sign checks to anyone.

× Use money suspended for payroll taxes or sales taxes for other purposes.

× Combine personal assets with your business assets.

× Delegate cash flow projections.

× Be hopeful in sales projections or conventional in expense projections.

× Depend on verbal agreements on any important matter including purchases.

× Wage an invoice without matching it to your purchase order.

× Delegate your relationship with your lending sources.

× Delay to create credit sources until you have a need for financing.

× Seeking guidance from your accountant and lawyer on significant financial matters.

DON’Ts IN ACCOUNTING

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OUTCOMES OF ACCOUNTING

CONSEQUENCES OF UNETHICALACCOUNTING PRACTICES9Misappropriation of Assets – A business owner might think he’s only using his own assets when he takes his business goods for personal use, such as a ream of copy or food at the end of the night, but his employees might see things differently.

Criminal Penalties – If company’s management is unethical to the point of financial fraud, the company could be subject to criminal penalties. Further, investors of the company may be able to sue the company and its owners for damages. Small-business owners should exercise caution, as not understanding accounting practices and standards is not a defense for fraudulent reporting.

Loss of Reputation – If small business owners are managing their business in an unethical manner, word will eventually get out. This is especially true for small businesses in tight-knit communities. In general, customers would rather shop at businesses that operate ethically, take care of their employees and support their communities. If your company does not operate ethically, this can affect the willingness of customers and suppliers to conduct business with you. Over time, this may destroy your business.

Loss of Human Capital – Many good employees do not want to work for a company that is unethical. Accounting professional standards require that accounting work is performed ethically and with integrity. If you pressure company accountants to behave unethically, these accountants can’t uphold the standards of their profession, and they might risk loss of their license or credentials. Reputable accountants will not work for an employer who expects unethical behavior.


HOW CAN WE HELP / YOUR CHECKLIST

1• Assess your cash

2• Note trades

3• Invoice consumers

4• Reimburse your invoices

5• Wage your employees

6• Record transactions

7• Evaluate your cash flow

8• Review your inventory

9• Check your financial statement

1. Get Certified in Accounting with Tamkeen Professional Certification Scheme

2. The Professional Certifications Scheme provides applicants with financial support to attain one of many internationally recognized professional certifications. Each certificate has its own support cap as well as payment structure. Students can request to add certifications which are currently not under the scheme and Tamkeen will evaluate this request.

3. Mohasaba is an Accounting and Auditing Scheme under the Business Development program, where Tamkeen offers a two years support grant as per the below:

- Pre-Startups and Start-ups (Operational for up to 2 years) = 100% Accounting & Auditing support

- Start-up (Operational for 2-4 years) and Scale-up = 50% Accounting & Auditing support

- Mature Enterprises = 50% Auditing Only support

HOW CAN WE HELP

YOUR CHECKLIST

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Tamkeen Customer Service Centers • Seef Mall Seef District• Sitra Mall • Enma Mall • Bait Al Tijjar

CONTACT US

Tamkeenbahrainwww.tamkeen.bh

1738 3333

support @tamkeen.bh