While we hope and search for free things, nothing can ever truly be free. As the old adage goes, “You’ve gotta spend money to make money.” When starting and running a small business, staying on top of your finances is absolutely essential. There is no shortage of varying accounting software, ranging in price from top to bottom. And while a few claim to be “free,” there are hidden charges, upselling tactics, and frustrating pop ups designed to fund their businesses. Your time is valuable; as we’ve all heard, time is money. Since your time is money, these free services are actually costing you. Using the right accounting software can also save you time, nearly an hour a day. Accounting software doesn’t have to break the bank, and there is real value in finding the correct paid service for your needs and comfort level.

Free Accounting Software

Accounting software can be pricey, ranging from $9 to $999 per user, per month.  By 2026, the global market for accounting software will be valued at $11.8 billion. Many accounting software companies promote either a free option in their suite of products or a lite version of their software. In either scenario, the end game is the same. These free options are designed to operate at a lower standard, and upsell you into other services. In a lite version of a software, you will be subject to continuous pop-ups to purchase the full version, while also lacking the functionality you need. With standalone free services, money-making options can often be hidden to you. Services may charge for credit card transactions, payroll, or other services. In a small business, profit margins can be minute. These small 2.9% fees can be the difference between your profit and being in the red. Long term, there is no guarantee that these services will stay free. A business needs revenue to function. By choosing a correct paid service now, and budgeting for that expense, you save yourself in the future from an unexpected change or cost. When comparing these options, they always leave out one or more important functions you will need. From limiting your accounts to device availability, these are functions you don’t want to compromise. Most small business owners have multiple accounts. Some of these free services might limit you to only one account, causing confusion and frustration when you try to reconcile. Creating your own spreadsheets might seem appealing, but they lack advanced features you need. Other free services might prohibit you to only one device. When you’re on the go, it’s helpful to have access to your accounts on any device necessary.

Protection

There is added protection when using paid versions of software. In your initial setup process, finances can be overwhelming. You could find yourself paying 2-3x the software price on a consulting firm or CPA to simply get the software rolling.  Free versions do not offer the customer support of paid services. They are not backed by professionals to assist you, nor do they have the experience this knowledge provides. Big E-Z, for example, has checks and balances in place to prevent you from going down a wrong path with your accounting. Through years of trial and error, we’ve worked through kinks and bugs to make your life simpler. With AI on the rise, technology poses to replace nearly 94% of accountants and auditors (Source: Accounting Today). Being ahead of this trend, and working with educated professionals now, only poses to aid the longevity of your small business.

Accounting Expenses

On average, American small businesses spend between $1000-$5000 a year on accounting expenses. These overhead costs are a necessary expense that cannot be overlooked. With well-kept records, you save both time and money. Nearly 75% of accounting firms charge extra for poorly kept records. Being ahead of the curve will serve you greatly long term. Saving yourself time and frustration only leads to benefit your business, as your mental state can affect other areas within your business. Most small business owners are spending 40+ hours on tax preparation. With the appropriate software, support, and records, you can find yourself with more time to dedicate to what really matters in your business: generating income.

Big E-Z Accounting Software

At Big E-Z, we have spent years streamlining to create a highly efficient bookkeeping software. With decades of bookkeeping experience, we know the ins and outs of these frustrating systems. We have worked tirelessly, with the help of CPAs, to make sure this software is the best it can be for you. Our flat yearly rate is set in place to help you maximize your profits and aid in removing stress from your life and with fewer bells, whistles, and popups. We offer a free consultation in initial setup, just one point of our top-tier customer service.

Our Low Cost Accounting Software is E-Z to Use

Use Big E-Z’s efficient spreadsheet template and the power of Google Sheets to collaborate with your clients. It’s the perfect solution that allows you to save money and provide excellent financial reporting too. Streamlined to save you time and make you more profitable. You will find the Google Sheets spreadsheet format is very familiar to you; importing is a breeze and seeing your client’s data in rows and columns all on one page really speeds up the categorization process (see our Sample Company Documents). It’s so E-Z to tell if you are in balance. Also we have three ways to spot and correct entry errors, and you’ll love the automatic reports (see our Reports video).

What is the Big E-Z System?

Big E-Z is a complete double-entry system with checks and balances designed for entities that operate on a cash basis. Bookkeepers use it for write-up, after-the-fact client accounting. Big E-Z Accounting for Google Sheets Add-on allows real-time collaboration with your client.

You can take advantage of this limited-time offer to have your client’s books up and running in 3 days. It’s all part of the stellar support we provide!

Ideal for All Your Small Business and Nonprofit Clients

This will best fit your small service-type business and nonprofit clients. Most of these entities will use an outside payroll service or are self-employed.

It is also for those who don’t have large inventories or print batches of checks, and it works for entities whether they follow a fiscal or calendar year. It’s a simple, streamlined, and affordable alternative to QuickBooks.

Stellar Customer Support for Over 30 Years

Big E-Z is known for stellar U.S.-based support and helping clients get set up and obtain organized accounting records. Extensive resources like our user guide, knowledge base, videos are included.

Your Clients Will Thank You Later

Want to discuss how we can help you in more detail? Schedule a Zoom meeting for a demo or try it Free for 14 days. Your clients will thank you later!

Tip #1: Start Early in the Morning

Start early in the morning when you are fresh. If you are working late at night when you are tired, you are more apt to make mistakes.

Tip #2: Keep a Steady Pace

Key your entries at a slow and steady pace. Trying to enter data too fast can lead to errors. Also, by switching around tabs too quickly, the program may not have enough time to protect the newly-opened sheet and at times will leave a cell unprotected for a split second.

Tip #3: Double Check as You Go

Common sense tells us to double check our work. Review your entries as you go. Look for signs that something is amiss. Take a look at the totals with a critical eye. The totals should make sense to you. If you knew your sales were about $100M for the month but your income statement says $10M you know something is wrong and need to check into this further.

Tip #4: Check for Transposition Errors

Transposition errors happen frequently and are caused by inadvertently switching two adjacent numbers.  For example if you enter the number as 528 instead of 582. Divide the amount you are off by 9 to determine if you made a transposition error. In this example you would be off by 54, and 54 is divisible by 9. Voila – you found the error!

Tip #5: Reconcile Every Month

Reconcile your checkbook each month. You should compare the entries you make on your books with what the bank shows and note any discrepancies. If you are still getting paper statements, ask your bank for statements that cut off at the end of the month instead of the middle. This will make the reconciliation process much easier.

Tip #6: Select a Program That Is Easy to Correct in the First Place

You’ve come to the right place. Our Big E-Z Accounting for Google Sheets has a built-in feature to help you find and correct errors. If you forget to categorize some transactions they will show up on the Uncategorized List, and if you make an error transferring between accounts the system will provide you with a list of errors on the Transfer List.

Hoping you find these time-saving tips helpful since your time is very valuable.

In This Article

• What is Direct Connect?
• Why not use Direct Connect?
• What are the advantages of Direct Connect
• Conclusion

Connecting your banks to your financial management software through Direct Connect bank feeds may seem convenient and secure at first glance, but the reality can often be disappointing. Security concerns, privacy concerns, and unpredictable outages routinely plague this technology, to the point that it may be time to return to a more manual approach.

What is Direct Connect?

Direct Connect, also known as “automated bank feeds” or just “bank feeds,” is a feature offered by many financial management programs that allows them to automatically import data from customers’ bank accounts.

Some popular users of the Direct Connect protocol are Mint (a budgeting and finance tracking web application), Quicken (a desktop application with similar features), QuickBooks (like Quicken but for small businesses), Personal Capital (financial management software focused on investments) and YNAB (“You need a budget”—also for individual finance tracking). These applications and many others use Direct Connect as the default way to get data from your banks. They often import account balances as well as transaction information on a regular basis.

Why Not Use Direct Connect?

Here, we’ll look at three main drawbacks to Direct Connect that we believe are seldom pointed out to customers.

Security Concerns

Using automated bank feeds involves sharing your bank login credentials with your third-party accounting software. The accounting software can then access your account(s) at will. That essentially means that if it ever gets compromised, your bank account(s) will be compromised as well. Ideally, the accounting software would have “read-only” access to your bank details, but often it requires full account access—theoretically, it could move money and make transactions in your account.

On top of that, the protocol that banks use to connect to accounting software is less secure than what they use for their customers. The accounting software often isn’t required to do multi-factor authentication, even when the bank does use that standard for ordinary customer login. You can read more about these issues in Your Bank’s Digital Side Door.

Privacy Concerns

It goes without saying that once you connect your banks to your accounting software, that software can view everything that happens in your bank account. That’s sure to include some information that you’d rather not share, such as personally identifiable information. When your accounting software has access to this, it increases the risk of that information getting leaked or stolen someday.

Service Failures

Perhaps the most relevant downside of automated bank feeds is the occasional unexpected failures to import the data from your bank. On any given day, you could log in to your financial software and find that it hasn’t pulled in the latest data, and you’re unable to trigger a fresh import.

Because automated bank feeds happen “behind the scenes” between two institutions, there’s very little you can do as a user to “fix” a broken or blocked connection. That’s why you can find many support posts all over the Internet of users asking what to do to fix their connections.

This situation can be especially frustrating. You often won’t know why the outage occurred, nor when it will be fixed. You’ll have to wait for a support rep at the bank, or the accounting software, or both, to resolve the issue.

What are the Advantages of Direct Connect?
While the drawbacks of Direct Connect are kind of hidden, the advantages are more obvious: your data is imported without any work needed on your end, and it’s very accurate.

It should be noted, however, that the alternative to Direct Connect is not entering every transaction by hand. That would indeed be labor-intensive and prone to mistakes. Rather, most banks offer file-based import which is a process where you download a document from your bank, upload it to your accounting software, and then the software interprets the information in that document. It benefits from the accuracy of automation, and it doesn’t give your accounting software login access to your bank. It also doesn’t take long at all, especially if you only need to refresh your data monthly (which is often recommended).

Conclusion

It might be time to ditch Direct Connect bank feeds. They may appear to be a convenient and secure way to bring your financial data into your accounting software, but there are significant drawbacks to this technology that you should consider before you use it. Security concerns, privacy concerns, and service outages are a few of the issues that could come up. On top of all this, some financial institutions actually charge additional fees for the privilege of using Direct Connect!

These drawbacks may make it worth considering a more manual approach to managing your finances, such as file-based import.

File-based import is available in Big E-Z accounting software. After you set up and label the data columns the first time, you can import subsequent documents with ease.

No Two Clients Are the Same

There are probably 100 different ways to keep your books, as you are probably aware. We provide 3 simple, affordable ways for the do-it-yourself type who wants to save money: online, desktop, and paper ledger system. We find that some users are just more comfortable with the spreadsheet format; seeing their data in rows and columns all on one page instead of viewing page by page of transactions (see our Sample Company Documents). Clients find it very easy to tell if they are in balance and to correct entry errors, and love the automatic reports produced without having to know accounting. (see our Reports video).

What is the Big E-Z System?

Big E-Z is a complete double-entry system with checks and balances designed for users that operate on a cash basis. It is also for those who don’t need to track large inventories or print batches of checks, and it works for entities whether they follow a fiscal or calendar year. It’s a simple and affordable alternative to QuickBooks, FreshBooks, Wave Accounting, Xero, etc.

Online – Big E-Z Accounting for Google Sheets is an Add-on to Google Sheets and allows real-time collaboration with your client (if the sheet is shared with you). Your clients can take advantage of this limited time offer to be up and running in 3 days or they can use it Free for 1 year. It’s all part of the stellar support we provide!

Desktop – Big E-Z Books is a stand-alone Windows based system that doesn’t require the client to have Excel installed. Clients can export reports and email to you to prepare their tax returns.

Paper Ledger Sheets – Big E-Z Bookkeeping has been around for over 30 years and some clients still swear by it. Ideal for the client that prefers a paper system.

Ideal for Small Business and Nonprofits

The clients who use this program are small service-type businesses and nonprofits. Most of these entities will use an outside payroll service or are self-employed. Your clients will still rely on you for tax preparation and the other accounting services you provide. Big E-Z just offers a simple tool to bridge the gap between you and your client’s records.

Stellar Customer Support for Over 30 Years

Big E-Z is known for stellar support and helping clients get set up and obtain organized accounting records. All staff is U.S. based and have bookkeeping knowledge.

Your Clients Will Thank You Later

Want to discuss how we can help you and your clients in more detail? Schedule a Zoom meeting for a demo or try it Free for 14 days. Your clients will thank you later!

Big E-Z Bookkeeping Co. recently announced the availability of a Google Sheets Add-on. With the new Big E-Z Accounting for Google Sheets, you can turn Google Sheets into a robust accounting system for your small business or nonprofit organization.

An alternative to expensive accounting programs, Big E-Z Accounting lets you:

• Invoice using your Gmail and track payments
• Track expenses
• Reconcile Accounts
• Prepare professional-looking reports like Direct Cash Flow, Balance Sheet, Income Statement
• Import banking transactions via CSV files

Big E-Z founder Michelle Carley spoke about the motivation behind building the Add-on: “With more companies deciding their staff can be remote, we needed to address this and move our legacy product from a single user installed on one computer to a product that allows multiple users to collaborate simultaneously in multiple locations on various operating systems. Google Sheets is a natural solution to achieve this.”

Importing

Many tools, apps, and institutions offer options to export data to CSV files. To streamline this process Big E-Z Accounting has an easy-to-use import feature to help save time and keep financial records up to date.

Usage

Try it free for 14 days. Once installed, the Add-on seamlessly integrates your accounting capabilities with Google Sheets, Drive, and Gmail. To see how the Add-on works, watch this 3-minute tutorial.

Pricing

Pricing includes a free 14-day trial, installation help, and our special offer for 3-day Setup or Use It Free for one year, all for a $249 yearly subscription. Schedule a demo here.

Availability

Big E-Z Accounting for Google Sheets is available now. For more information about this Add-on and to get started, simply visit BigEZ.com.

About Big E-Z Bookkeeping Co.

Woman and veteran-owned, founded in 1989, headquartered in Livonia, Michigan, Big E-Z Bookkeeping Co. has been helping small businesses and organizations keep their accounting records in order with E-Z-to-use accounting products.

It should not be a challenge to keep records for your rental property. A rental property is a simple business to run. With no inventory to track, a small group of employees, and minimal transactions, it should be no problem to keep clear, organized records. With decades of bookkeeping experience, we are here to help you through this so you will be enabled to do it yourself and save money. By following a few simple rules and using the unique features of the Big E-Z Accounting for Google Sheets Add-on, you will find yourself on top of your records in no time.

First, Let’s Start With Some Tried and True Tips

Tip #1: Keep a separate checking account and credit card for your business. It is too difficult to stay organized when you combine personal expenses with your business. Many banks or credit unions offer free checking accounts. Additionally, there are new online banking services with fewer fees and more accessibility. Tip #2: Determine which categories need to be tracked. This is another way in which Big E-Z can help you. By allowing our software to do its job, your records will be crunched down to a dozen or two category totals come tax time. What a breeze, right?

For Income Categories

Depending on the size of your rental, you may have various income streams from different properties or units. Breaking these down into separate categories enables you to track how units are performing against each other.

For Expense Categories

The following list of categories will show you the deductible expenses for your rental property. Since these are so straightforward, there should be no challenge in keeping these records. You can even keep track of subcategories for each property or unit you have, again helping you rate their individual performances. Tip #3: It will save you time (and therefore money) to use a payroll service. Trust me. In all my years I have come across only one client that really had a handle on all the payroll deductions and reports, and knew how to stay out of trouble by filing timely returns. There’s such a learning curve to generating payroll, it is best to let a service do it for you. Then simply record your payroll totals in the system to track totals of taxes withheld and money owed. This will save you headaches and frustration. Don’t be tempted to spend withheld tax money! By putting that money aside until it is due, you save yourself all kinds of trouble with tax authorities. Big E-Z Accounting for Google Sheets Add-on has a Cash Management report to help you see how much money must stay in reserves until needed. Tip #4: Viewing your end-of-month records is the most effective way to check up on your business. You need to see clear, concise records you can understand and trust. Big E-Z has many reports to help you do just that. For example, we offer this exclusive Direct Cash Flow Report which is useful to give you a picture of all money that flows in and out of the organization.  You can match up the Net Cash Flow for the year with the difference in your cash accounts year-to-date. With 12 professional-looking reports, you will be able to clearly see your profits, and determine estimated tax payments, or view overspending within your expenses, and much more.

How Easy Is It To Correct?

At Big E-Z, we have worked tirelessly to make the most user-friendly software available. Many people don’t consider the value of easy correction. Time is money: wasting time in a cumbersome accounting program is wasting money! Instead of wasting hours troubleshooting or searching for solutions, you can instead focus your attention on your business. It doesn’t get much easier than simply entering amounts under a few columns and then categorizing those entries. Big E-Z then generates professional-looking reports for you. There is great power in knowing you are in control and all is running smoothly.

Benefits

• Know your true bank balance at all times
• Track all money in and out, down to the cent
• No money lost on hiring an accountant to do the recordkeeping for you

More Benefits You’ll Receive

• Professional-looking reports
• No time lost or headache come tax time
• Clear records of your business’s value, if and when you decide to sell your business

Try it Free for 14-days

Product pricing includes a Free 14-day trial, installation help, and our special offer for 3-day Setup or Use It Free for one year, all for a $249 yearly subscription. Schedule a tour here. Getting started with Big E-Z is very simple. Customer service is what we are here for. We provide a free consultation to help with set-up after purchasing our software. We truly want to see you succeed. We hope we have inspired you to organize your business records today! Happy Bookkeeping!

While getting on top of your finances can be terrifying, all hope is not lost. The importance of a budget is something we can’t avoid. Recent events have shown us the value of financial longevity. Even when it seems too daunting, the tightest of bank accounts can be stretched with a great budget. Avoiding opening our mail doesn’t make bills disappear. By meeting our finances head on, and creating a plan, we can take charge of our finances and find a more peaceful mindset. While it may seem completely overwhelming, we all have to start somewhere. It is never too late to create new and better habits. As the founder of the Big E-Z Bookkeeping Co., I have developed a number of accounting software tools, taught bookkeeping in local schools and colleges, and have done bookkeeping for many individuals and businesses. I can see bad patterns and also how to fix them. I would like to share some financial pain points and offer solutions.

Anticipation

An emergency fund should be separate from your anticipated expenses, such as new tires for winter or holiday gifts. If you don’t have the ability to pay an unanticipated $1,000 bill, you are not alone. In a poll from bankrate.com, nearly 60% of Americans are unable to find those funds in a savings account. Planning ahead is a key part of a budget. Taking the time weekly to go over your finances can help save you from a headache in a few months. Planning out all your needs, from tires to groceries, is the first step. You can create a spreadsheet of your own, purchase a finance journal, or find a program that suits you. While many people believe the key to a good budget is simply more money, that is not a viable solution for everybody. Living within your means may seem like a challenge but can be easier than you think. Being honest with what you can afford, while making space for your anticipated expenses, will start you on the journey to financial peace of mind.

Avoiding Bank Fees

Overdraft fees have risen in recent years. In 2000, overdraft fees averaged around $20 in the US. According to the survey from bankrate.com, fees have now reached an average of $33. Banks will take home nearly 30 billion in overdraft fees in 2020, up from 11 billion in 2019. Checking your bank account frequently and making sure everything is accurate and up to date will help you avoid these expensive fees. Remember when you spend money on a tip or other charges that can take a few days to make it to your account. Banks can also waive a fee or two for you, if you are polite, especially if it only happens once a year, but that is not a long-term solution for these annoying, repetitive fees. With a tight budget, $35 can make all the difference towards a tank of gas or some groceries in the fridge. Sticking to the budget and staying on top of your finances will protect you from overdraft fees.

Accounting Records

Keeping organized records is very important for your financial well-being, in both the short and long term. Not only will these records keep you safe from fraud or mistakes of any kind, but come tax time, records are necessary. Organized receipts and finances protect you against audits. Big E-Z offers a receipt organizer to help you keep your records neat. Small businesses and nonprofits are particularly vulnerable. While approximately 1 in 220 (<0.5%) people are audited in the US, that figure rises to 1 in 100 (1%) with small businesses. While this can be daunting, there are many ways to protect yourself. Electronic filing, watching your deductions, and keeping clear records are among the top ways to avoid auditing. According to e-file, the IRS’ electronic filing system website, “The error rate for a paper return is 21%. However, the e-filed returns generate an error rate of just one half of one percent.” In other words: A paper return is more than 40 times more likely to contain errors than an electronically filed return. Audits can be pricey with both the IRS fees and the cost of hiring a tax firm to dig you out of a hole. Avoiding this with a solid budget and plan can save you from a nightmare of a situation in the future.

Financial Debt

One of the hardest things to face within a budget is our debt. Americans have a staggering amount of debt. While the student loan debt is nearly epidemic, we have lots of credit card debt as well. The total household debt in the 3rd quarter of 2020 was $14.35 trillion. The average debt varies by generation, but we still see that most Americans are not debt free. Median Credit Debt by Generation in 2020

Generation Z (18-23)	$1,963
Millennials (24-39)	$4,322
Generation X (40-55)	$7,115
Baby Boomers (56-74)	$6,043
Silent Generation (75+)	$3,117

Table from Experian – Article, State of Credit Cards

While credit cards seem like a great way to shop more, it is not wise to treat these cards as free money. Credit cards can be useful in a true emergency. In fact, 16% of Americans would use a credit card for a $1,000 emergency scenario (same bank rate study as above). Your credit score affects many facets of your life. From getting a cell phone to refinancing your house, your credit score is an important factor to watch. Your score can even affect your employment. While they can’t see your actual score, an employer may see certain aspects of your credit report. When we budget, it is important to plan ahead to chip away at our debt so we can make it disappear over time and then hopefully keep it gone. Source: Student Loan Hero – Article Surprising Ways Your Credit Score Affects Your Everyday Life

Big E-Z Accounting Software

Big E-Z is an excellent solution for your budgeting. This accounting software works for small businesses, non-profit organizations, groups, clubs, or even a personal budget. With both the Google Sheets Add-on and the Microsoft PC versions available, there is a perfect fit for anybody. Full customizability, allowing for easy importing of banking transactions, and excellent customer service are just a few of the ways Big E-Z will help you stay on top of your finances. Big E-Z aims to make accounting easier for everybody. While budgeting is a daunting task, the peace of mind from being on top of your finances is worth it.

#1 – Track an Unlimited Number of Income and Expense Categories
You can create an unlimited number of categories and subcategories. This can be very helpful when trying to control costs and keep a handle on spending.

#2 – Track an Unlimited Number of Accounts
You can gather all your accounts into one accounting system for great condensed reports. So now if you have two or more credit card accounts or two or more savings accounts you can keep track of them all in one place.

#3 – Collaboration with Team Members
How many times have you wanted to share your accounting sheets with your team for input or corrections or something else? Or maybe you wanted a certain department to help contribute to the accounting to lessen the load on one individual? Now your entire team can have read/write access or just read access to your accounting sheets.

#4 – Create Invoices and Get Your Open Invoices Paid in A Timely Manner
Create invoices quickly and email them in PDF copies to customers using this new feature. Not only will you have a list of invoices sent but can mark which ones are paid which will create an open invoice list.

#5 – Cash Flow Reporting that Makes Sense
Our new and exclusive Direct Cash Flow report allows you to see exactly where all your cash came in from and where you spent all your money. It ties out perfectly with the beginning and ending cash related accounts.

#6 – Access Your Accounting on Multiple Devices
Now with most any browser and from many devices, you can access and update your accounting. Since Big E-Z Accounting is no longer a Windows Desktop program you will have much more freedom. A Gmail account is required.

#7 – Customization of Sheets, Sorting, Adding Rows, Copy Rows of Data, and Much More
There are too many new details to list on this page. Please see the Features and Comparison pages for more information.

We have designed this online version with your needs in mind. The best part is now you can collaborate with your team online to get things done more efficiently.

See how it works. Sign up for a free 30-minute screen share tour.

Every small business should have a solid accounting or bookkeeping method implemented in order to be successful. The next step in utilizing your well-organized accounting for success is to use the numbers for performance measurement. While reports of different kinds can lend themselves insightful to seeing your business’s operational efficiency and effectiveness, there are other ways to see specifically where your business stands financially. One such way is through the use of financial ratios, which help make sense of your accounting information. Ratios are useful for comparing your current performance to your past performance or to another business within your industry. They are also useful for identifying strengths/gains and weaknesses within your small business. The following ratios are key ratios for small business owners in seeing how their operations stack up and where improvement can be made:

1. Common Size Ratio – To see how much something is of the total

Financial statements provide the big picture of your small business’s finances, but to really dive into how your business is performing, seeing how each account relates to that big picture is important. This is what the Common Size Ratio does, by taking an individual account and seeing what percentage that account is of the total. For example, let’s say we are looking at how much our Savings Account makes up our Total Assets.

We would take our Savings Account divided by our Total Assets and multiply it by 100 to obtain the percentage that the Savings Account is of Total Assets. Now let’s add some numbers to get a good picture of how this could be useful.

As shown above in the balance sheet generated in Big E-Z Accounting Software for Google Sheets Add-on, our Savings Account of $11,150 makes up 44% of Total Assets of $25,389. Comparing this information to prior years and to others within the industry can prove useful in seeing where your small business stands in relation to itself or to its competitors from an account level on any account on the balance sheet or income statement.

2. Current Ratio – To see how your business can meet its current debt with its current resources

This ratio is meant to show you as a small business owner your current financial situation. Calculating current assets against current liabilities can show you what your business has in assets against what it owes, with a ratio higher than 1 being ideal. For every $1 of current debt, how many dollars of current assets do you have to cover your debt in case of emergency? This ratio is calculated as follows:

In the example above generated by Big E-Z Accounting Software for Google Sheets Add-on, current assets consist of the following accounts: Cash, Checking, Merchant, Other Receivables, Inventory, and Prepaid Expenses. Using Big E-Z’s data, the current ratio of this sample company is calculated below:

Ideally, a ratio of 2-1 would be a healthy position for your small business to be in, as that would indicate that you have twice as many current assets as current liabilities. In the example generated by the data provided by Big E-Z Accounting Software for Google Sheets Add-on, the current ratio for the sample company is 2.35, which indicates that for every dollar of debt that the company owes, they have $2.35 in assets to cover their debt, which is an extremely healthy position for a company to be in. The use of this ratio can bring insight as to how your current financial position compares to your past financial position. Additionally, you can also compare this ratio against your industry’s standard to see where your small business stands in accordance.

3. Quick Ratio – To look deeper into your company’s financial position

Similar to the current ratio, the quick ratio looks to see if your small business would be able to meet its current financial obligations with what it has, in case something was to happen to your business. However, this ratio gives a better picture of this by only including current assets that are easily converted to cash (liquidatable). This ratio is shown below:

A healthy quick ratio is 1.0 or more, which means that for every dollar of debt you have, you should have at least one dollar of assets that can quickly be converted to cash to cover the debt.  In the example generated by the data provided by Big E-Z Accounting for Google Sheets Add-on, the current ratio is 2.01, which indicates that for every dollar of debt that the sample company owes, they have $2.01 of assets that can easily and quickly be converted to cash, in the case of an emergency. The use of this ratio would be the same as to why you should use the current ratio, only more narrowed in on the urgency factor.

4. Net Profit Margin – To determine how profitable your business really is

There are several ratios that can be used to look at the profitability of your small business, but perhaps one of the most helpful ratios is the Net Profit Margin ratio, which takes into account all expenses that are incurred within a given period and shows your overall net income as a percentage of total revenues within the same period. This ratio is demonstrated below:

Now let’s add some numbers and see the results of this ratio and what insight it can give:

In the example in this Income Statement generated by Big E-Z Accounting for Google Sheets Add-on, we can see that net income is derived from subtracting all expenses from revenue/income. Sales of $44,950 are recorded and total expenses of $35,392 are recorded. The net profit margin of this particular Income Statement data is shown below:

Net profit margin is one of the most important indicators of a company’s financial health. It helps management decide whether enough profit is being generated from its company’s sales and also whether operating and overhead costs are being contained.  In the example generated by the data provided by Big E-Z Accounting for Google Sheets Add-on, after all the expenses have been accounted for, the overall profitability of the sample company is 21.26% of total revenue, which is a relatively high profit margin, though the industry in which your company is in can dictate an ideal profit margin.

Here are a few more important comparisons to make

Comparing your current year to your prior year is very important. You’ll want to make note of any increase or decrease in income or expense balances. It should make sense to you. For example, a big decrease in sales might mean something was classified incorrectly. Another ratio you might use is Gross Profit Percent. You would take Sales – Cost of Goods Sold = Gross Profit And don’t forget to look at all profit and loss items as a percent of sales. For example, Salaries & Wages / Sales, then compare to prior periods or industry average.

How Do You Compare?

Take a look at how you compare with other similar organizations.

About the Author

Sabrina Fitzgerald is a summer intern on track to obtain her Masters of Science in Accounting at Eastern Michigan University.