Bookkeeping Basics – What to ask your bookkeeper for.

GreenButterflySwirlsAfter you’ve started work with your business there comes a point in time when you realize you need help. The bookkeeper is usually the first person you hire internally to provide services and to ‘officialize’ your business. Much in the same way that receiving your first set of self-created business cards was a rite of passage, having your first bookkeeper enables you to feel as if your start-up is now off and running. Initially, you want to keep costs down and you figure you’ll do some of the work yourself; you’ll let them do the ‘financial stuff’ like reconciling, etc. Or you take the other approach where you hire the most expensive bookkeeper as you want reassurance that you’re doing the best you can for your business. You may or may not have a general idea of bookkeeping, but it doesn’t really matter because you trust the person you’re working with and somehow you’re going to do most of the work yourself, anyway – right?

When you decide to set up your accounting system or hire a bookkeeper, how do you know what you are getting yourself into?

We honestly can’t see that this week and the next week, our business will take up our time and we won’t have enough left over to spend on our bookkeeping tasks – we just trust that it will be taken care of. And then months go by (sometimes years) and then we realize something is just not right. Maybe we don’t know where we stand or how to understand what our bookkeeper is telling us. We miss deadlines with our financials and maybe with our tax filings. It keeps us awake at night. How much are we going to pay in interest, penalties, write-offs that could be incorrect? Maybe it’s just that we can’t get our business financial information straight and we don’t know what to do then.

After 17 years of working with small businesses, I’ve related this common patterned business behavior to new and existing clients upon each initial meeting. I haven’t had a new client in the past 5 years who didn’t walk this path before learning how to overcome this challenge. In his book, The E Myth Revisited, Michael Gerber writes about this same formula. (I believe it’s the greatest book ever written for the small business person!).

After all this time, I’ve found the solution to this is pretty simple. It comes down to the basics, like knowing what you want the end result to be and working backward from there. And the basics include knowing the framework for the bookkeeping aspects of your business. Your bookkeeper can provide you with these basics, but you have to know what to ask for.

How do we do that? Do we need to have bookkeeping experience to run our businesses? Just like we wouldn’t learn how to be a house painter if we hired someone to paint our home, we don’t necessarily need to become a bookkeeper to know our books. What we can do is identify key areas of reporting and ask our bookkeeper to provide these to us. These are the basics. Just like with the house painter, we would be able to physically see the work provided, bookkeeping via QuickBooks can be set up much in the same way.

If you want your bank & credit card accounts reconciled on a monthly basis (which you should!), ask your bookkeeper to print out the Reconciliation Detailed Summary. You can view the report to see what charges were made and if the account is up to date or not. This report will also identify any ‘un-cleared transactions’, which are those transactions that have not yet cleared the bank – these should be recent transactions. If they are not recent, say aged six months, ask your bookkeeper what these are. Each month, ask for a Detailed Profit and Loss Statement and a Summarized Balance Sheet and then make time to go over the reports with your bookkeeper. Ask questions, lots of questions. Believe me; your bookkeeper wants you to ask questions! These three types of reports will strengthen the bond between your business and your books, will reassure you that you accounts are caught up to date and your financial information is accurate.

In April, I’ll be teaching a seminar to go over these key areas and the basic QuickBooks fundamentals, so that you can stay in the know and work together with your bookkeeper to grow your business while building a strong foundation. Hope to see you there!