There are a lot of bad bookkeepers out there, no doubt about it. We often get calls from distressed business owners who just lost their bookkeeper and they are worried. Once we get involved with the bookkeeping, we often find that the bookkeeper leaving (voluntarily or not) is the best thing that ever happened to the business. Here are a few signs that your bookkeeper might just plain suck at their job.
They Are Always Behind On The Books
How frustrating is it when you ask your bookkeeper for a report or some crucial piece of information and they can't provide you with an answer? Maybe they truly don't know the answer or they are stressed about their workload. The bottom line is that they are behind on the books. Many bookkeepers lack the motivation to get better at their jobs. They have no reason for wanting to be more efficient.
One thing you should do to make sure your bookkeeper keeps up is to clearly communicate your expectations to them. If you need to see an accurate profit and loss by the 5th of the month, make sure your bookkeeper knows that. If you need bills entered every Wednesday and the checking account balanced to the most recent daily balance, let your bookkeeper know.
They Never Approach You With Ideas
Your bookkeeper should be bringing ideas to the table to improve your business. A bookkeeper probably knows more about the financial state of a business than the owner does. A small business bookkeeper is so heavily involved with the day-to-day financial transactions that they have a certain intimacy with the books that others might not have. Your bookkeeper does not have to rely on feelings regarding where money is coming from or going to, they know. If you are unsatisfied with your profits you can either cut expenses or increase sales; and your bookkeeper knows in which area you have been screwing up. If your bookkeeper doesn't approach you with ideas on ways to improve your business you should ask them... their answer might surprise you.
Your CPA Bill Seems High
So many new clients complain about outrageously high CPA bills. Sometimes, a CPA bill can be high because you are asking your CPA to do bookkeeping work. If you don't have a bookkeeping system in place and just hand your CPA a box of receipts, you will have a very high CPA bill. Other times, a high CPA bill is due to poor bookkeeping. If your CPA is given a set of books that is unorganized and unbalanced, then they have to review the information to get everything in line. That is work your bookkeeper should be doing. You need to open the communication up between your bookkeeper and your CPA so that they understand their roles.
Another thing to consider is doing a semi-annual CPA review. This will allow your CPA to work with your bookkeeper to get the proper bookkeeping procedures in place. The end result will be a more organized bookkeeping system, which should drive those CPA bills back down to more reasonable levels.
You're Not Sure They Know What They Are Doing
I actually had a guy say this on the phone last week regarding his bookkeeping, "Well, I had a gal doing it, but I'm not sure she knew what she was doing." If you are questioning whether your bookkeeper knows what they are doing, then the chances are pretty good that they don't know what they are doing. It is a good idea to audit your bookkeeper every now and again. By staying involved in your bookkeeping process, you will not only reduce the chance of bookkeeper theft, but you will also see if you bookkeeper knows what the heck they are doing.
You Bounce Checks
I hate when people write checks that bounce on me and I honestly don't think I have ever bounced a check in my life. If you have bounced a check or two, that's fine, but if you are constantly bouncing checks, ask your bookkeeper why. If they can't tell you why, I feel that's unacceptable. We have had clients bounce checks, but we can usually explain why. Maybe they hand-wrote a check to themselves for an owner distribution for a significant amount of money but didn't tell us about it. In that case, I can explain why they bounced a check and it has nothing to do with poor bookkeeping. Your bookkeeper should be using QuickBooks as a cash flow tool to help you understand where your bank balance is currently at, but also where it will be a few days from now based upon upcoming transactions that have not yet cleared the bank.
They Don't Respond To Their Email In A Timely Manner
If you are using an outsourced bookkeeping service or a part-time bookkeeper, it is frustrating when they don't answer their email or return phone calls. If you notice a long lag in response time from your bookkeeper to your email inquiries, you should ask them why. Maybe they have too many clients, maybe you are not important to them, or maybe they just are not responsive to email. As a business owner, when you have questions about your bookkeeping, it is important that you get a timely response to your inquiries.
They Have No Input On Your Financial Reports
Your bookkeeper should be giving you feedback on your financial reports. At the very least, they should have some comments on your P&L and balance sheet. Like I said earlier in this post, your bookkeeper has a deep intimacy with your business financials that can only be obtained by handling the books day in and day out. With that deep knowledge of your books, they should be able to give you some sort of feedback on your financial reports.
They Don't Know What Reconciliation Means
Ask your bookkeeper what reconciliation means. If they give you a blank stare or say, "I don't know," fire them. Enough said.
They Don't Understand Cash vs Accrual
It blows my mind how many bookkeepers don't understand a basic concept like the difference between cash and accrual basis accounting. Your bookkeeper should not only know the difference between cash and accrual basis, but they should actually understand it. They should also know which method your business uses. If you don't know which method you use, you should in inquire with your CPA. Your bookkeeper should be providing you with reports that are consistent with your accounting method.
Your QuickBooks Undeposited Funds Window Has Lots Of Old Transactions
If you use QuickBooks, you are probably familiar with the QuickBooks undeposited funds feature. If you open up your record deposits window and have to scroll through a lot of transactions, it means one of two things.
1. You are crushing business and have a ton of intransit deposits, or
2. Your bookkeeper is blowing it.
More often than not, a bookkeeper or business owner will not handle the invoicing/payment/record deposit flow correctly in QuickBooks. If the accounts receivable process is not handled correctly in QuickBooks, it can result in overstated income and inaccurate financial data. If you are looking at a lot of undeposited funds in your QuickBooks record deposits window, you might want to find out why.
They Don't Understand A Balance Sheet
Many bookkeepers underestimate how important a balance sheet is. Many bookkeepers are able to spit out the well-known equation: assets = liabilities + stockholders equity. However, many people may not know what that equation means. A good way to think of the balance sheet is a snapshot of the financial health of a business at a specific point in time. Many business owners and bookkeepers put a lot of stress on the profit & loss statement. However, the P&L can be quite misleading. Learn to analyze your balance sheet and add it to your normal small business financial reporting routine.
If your bookkeeper or outsourced bookkeeping services provider is showing any of these signs, it may be time to consider looking at some other options.
Have you had a bad bookkeeper? Are there any signs of a bad bookkeeper that I missed?