If Accounting only becomes Important at Tax Time ~Your Small Business . . .
Will not make it to the “5 Year Mark!”
Does this sound harsh? I hope so! I cannot tell you how many small business entrepreneurs put a kibosh on the numbers. They think things will just work out.
Not so! I have been a Quickbooks Pro Advisor and am currently a Quickbooks Bookkeeper for many small businesses. Getting information out of some owners is like pulling teeth.
Let me give you a few examples:
- Accounting is not a strength of the Business Owner. Running a business, producing products or services is there forte.
- Self Funding. Many small businesses start because of a successful hobby. These entrepreneurs self fund their business. They understand that keeping track of the accounting is key, but it focuses them on producing that product or service, not tracking the income and expenses.
- Business owner decides they will just use Quickbooks (or some other accounting software) themselves, but they soon find out that Quickbooks isn’t a WYSIWYG type of software. They try to figure it out ~ but they have a business to run. So accounting gets put on the back burner.
- Business owner thinks they can’t hire a bookkeeper, they aren’t making enough from their business to pay for one.
- Business owner throws all receipts in a big envelop or box. They figure they will just hand that to the CPA along with bank statements.
“Why is accounting such an undervalued process in the eyes of the Small Business Owner?”
It’s because they have not taken the time to think things out and set goals for themselves. They may get inundated with orders, (which is a good thing) but their lack of accounting processes will only hinder them and cost them in the long run.
I have been using Quickbooks for 30+ years. Accounting has always been a skill-set that I do very well. It isn’t a passion of mine, which is why it isn’t my main business service, but it allows me to help the Small Business Entrepreneur in an area they need.
I had to sit back and really figure out what the problem is. This isn’t a hit and miss issue. When it comes time to submit a Profit and Loss report or a Balance Sheet for the current year, you can’t just wave your magic wand and produce the reports.
Here are some tips that will help you get on track:
- At the very beginning, hire a bookkeeper ~ if you want to use Quickbooks, then hire a Quickbooks bookkeeper. Verify their references, their skill set, how long they have been in business.
- Information they need; bank statements, credit card statements, cash receipts, sales receipts. Is inventory involved, or quotes given? How about monthly invoices? Any payroll? 1099 Contractors?
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- Decide what is more convenient for you. Instead of having them come into your office, you could subscribe to Quickbooks Online, and you both can update the software as often as you like.
- Be careful at syncing your bank account with Quickbooks Online. While this is a prominent feature, it is a 2-step process. Once you sync the bank account with the online version, every time you login to Quickbooks Online, the software goes out and pulls in all transactions that have cleared the bank.
- However, those transactions do not automatically appear in your check register. You have to either add the new transaction, or match the transaction to a record already entered.
- These transactions may not always be accurate in the category the bank uses versus the category you use for a particular transaction. There is a way to view each transaction that has come in from the bank before you add it to the register — eliminating the need to change the transaction after it has entered the register and cleared.
- The bank may have a transaction like: “Venmo Payment” then the amount listed. Either you received a payment via Venmo or you paid for something via Venmo. When I have a transaction that I do not know the category to, I use the “Ask My Accountant” category. I then run a report for “Ask My Accountant” and give it to the business owner. They need to identify each transaction in question.
Bottom line. The Bookkeeper cannot wave a magic wand and produce the information needed for your business. The more explanations you can give, the more you communicate how your business functions, the better the accounting will be. Banks want to see a “Profit and Loss” report, or a “Balance Sheet”, if you are considering a bank loan.
Just because you are in business, doesn’t automatically give your credit report a boost. If you are an LLC or Sole Proprietor, the credit report reflects your personal credit scores. Set aside a time to answer your Bookkeepers questions. Take an active role in your accounting side of the business.