There is a multitude of different types of classifications that can be used whenever a person wants to set up a business. But the main difference between them is the varying degree of liability that they each have. Some will defer any legal action or debt onto the main owner or shareholder. Others act as separate “beings” that can hold assets in their name without any fallback to another person.

The main reason that so many types of businesses are available is that it gives business owners flexibility to modify and create different structures that best fit their needs. Sometimes, this means separating everything out into different holding companies though. That way, if any problems arise with the main entity, most of the assets will not be affected because they are owned by a separate entity.

But while this creative business planning works very effectively, it also creates a unique set of challenges regarding how to manage all the entities. So to help, the following is a list of five tips to try out:

Multiple-Entity Cash-flow Sheets

Multiple-entity companies have the ability to transfer funds between each other through the use of loans. This is advantageous because if the funds in one of them get tight, they can simply borrow some from a more profitable entity. However, handling all of the transactions can be very confusing. So each entity should have its own separate cash-flow statement and another one that is tied together with all of the other entities. This will act as a checks and balances system to make sure that all of the transactions are accurately recorded.

Connective Accounting Software

By law, each entity must have its own separate set of books. This prevents fraud and the avoidance of paying taxes. But when a company has several sets of books to maintain, this complicates the process because most types of accounting software doesn't connect the various entities together. To solve this problem, it is best to invest in financial consolidation software.

Multiple Account Monitors

Most of the entities that a business sets up act as holding companies. That means, their main job is to hold on to a key set of assets. One might be used for all the buildings. And another one could hold all the vehicles. Then, the main company simply rents out the assets from the holding company. To keep everything straight, it is crucial that more than one set of eyes reviews everything regularly. So many companies assign some of the entities to different accountants that they employ. Still, they must collaborate on all their work regularly.

Regular Review Points

A multiple-entity business should perform regular self-audits to check over all their transactions. The timing of the audits should be based on a period that falls before the closing date though. For example, most businesses close their books on the last day of the month. So they may want to set up an audit of the entire month's transactions a day or two before this. The period prior to the closing date can't be too far in advance because some of the transactions will be left out of the review. And if there are any problems with them, they can't be changed after the closing date.

Minimization of Transactions

Whenever possible, a business should avoid overusing their holding companies. This will reduce the amount of paperwork that they each have. It can also prevent the likeliness of an audit from the tax department because a holding company isn't supposed to be very profitable. If there are too many loans and payments going through it, it will appear to have a higher cash-flow than what is supposed to be reported.

In conclusion, a multiple-entity business is a unique way to protect assets and reduce liability. But it also increases the workload of the accounting staff that has to monitor all of the transactions between the entities. So it is helpful to use special software and cash-flow statements to monitor them all as separate entities while still being able to see how they tie together as a whole. Whenever possible, the transactions of holding companies should be limited too. And lastly, don't forget to do regular reviews of all the accounting work to make sure that it stays accurate.

The current business world focuses mostly on making profits. Indeed, a survey shows that any running business without average profit can strive not for long. Knowing that profit is one of the fundamental factors in any business, here are two questions for you: how can you tell your business is generating profit or achieving its set target? What is revenue recognition? Well, revenue is one of the scales used to measure whether you have achieved your business goal or not. Revenue mainly energies the accomplishment of most businesses, as it is a means of creating profits and increasing fairness. For this purpose, managing proper revenue recognition is paramount.

Revenue recognition in various cases can be simple. Consider a producer that vends a non-warranty merchandise to a client. In this case, revenue recognition process ends when all four of the common revenue recognition measures are in place. For example, the value determined, the assemblage is apparent, there is convincing proof of an arrangement, and delivery has happened.

However, revenue recognition can get complicated once the above principles do not apply; which, is usually due to the kind of business that enterprises operate. For example, some of the more complicated businesses include technology, real estate, media and entertainment, construction and healthcare.

Here are several tips to consider to recognize your revenue better.

Tip 1: Apply and follow the matching policies and recognition rules.

Matching policies and recognition rules are a fundamental tip to set as your starting point. Frequently, many businesses will either spend money on manufacturing goods before selling or get paid for goods not yet delivered. This might create a problem in the absence of matching principles and recognition rules as the income statement will be affected. To avoid this error, you are advised to follow matching policies and recognition rules set for your business. By tying earnings and expenditures to the end of transactions and other cash producing errands, the income statement will summarize all that took place during the accounting process.

Also, the matching principle, together with revenue recognition, purposes to collect revenues and expenditures in the precise accounting retro. It permits an enhanced calculation of the income statement, which displays the revenues and expenses for an accounting epoch or how much was consumed to receive the period's revenue.

Tip 2: Check the shipping terms

Shipping terms come in when the customer ask for delivery of goods; but possession of merchandise delivered is not instant. In this case, two shipping term usually applies: "FOB Destination" and "FOB Shipping Point." In FOB destination the revenue is earned when the goods reach the customer while in FOB shipping point the revenue is made when the producer releases the goods to the client.

Tip 3: Follow-up

Schnurr one day stated that inspection teams should question whether there are different opinions on the business on how to devise the average revenue recognition, and if so, how an organization and the accountant decided that the firm's approach was suitable. You should follow up and ask your business team management for answers in case of any changes in revenue earned. You should ask the management whether they have different views on how to standardize revenue earned in your company. They should apply appropriate measures that will lead to a proper revenue recognition method that is friendly to your business.

Tip 4: final challenge results

Challenging doubtful results is very crucial as it can reveal many hidden mistakes in an income statement. Schnurr suggested that assessment committees question accountants on conclusions that do not seem to redirect the core business of the firm. Consequently, the accountants should be able to account for all revenue recorded in the income statement sheet. Challenging final results will lead to official revenue recognition of your business.

Tip 5: board information calculation

If a business cannot practically evaluate the sum of impending returns and has enormously high rates of returns on trades, they should recognize revenues only when the right of return terminates. Those businesses that can evaluate some impending returns and have a moderately small return frequency can recognize revenues at the point of sale but must subtract projected future returns.

Tip 6: Assess resources

You should be able to assess and evaluate resources that incurred in the production of goods and delivery of goods. Schnurr advised assessment teams to contemplate whether sufficient resources are devoted to scrutinizing the effect of the new average revenue because the significant change could alter income statement.