There are many entrepreneurs who do not see value in bookkeeping systems, or aren't sure about what they can get from accurate and timely financial reporting. There are a couple reasons why this might be, one of which is that the current bookkeeping system hasn't been set up properly, so it is not providing good information. Bad decisions are made when looking at poor information. Some business owners know that financial statements are the roadmap and key to their company's success, and having a solid system will reward them down the road. Taking bookkeeping beyond data entry and filing taxes into a well-oiled machine is what bookkeeping needs to be for today's entrepreneur.
Taking the Current System to a New Level
Fixing the existing bookkeeping system and increasing its accuracy can take a long time. It involves correcting data entries and making sure that transactions have been coded correctly. The reconciliation is one of the most important parts of having clean books, but it's also one of the most time-consuming. It's generaly easiest to outsource this type of accounting work, even if the business would like to continue doing the books themselves afterwards. Generally, the value proposition comes down to a cost-benefit analysis. The amount that an owner's time is worth is far more than the cost of hiring someone else to take the time to complete the reconciliation. After the books are fixed and current, we can begin the next step of finding meaning in the books.
In order to find meaning within the books, there are some minor adjustments that need to be made first.
- Chart of Accounts - Keep the chart of accounts as simple as possible. They should still be reporting things that are meaningful to the owner. Without meaning, the chart is almost useless. Sometimes, we've seen people tailoring charts to their tax return rather than their business needs. The CPA shouldn't have a problem filing the taxes as long as the charts are just kept simple
- Business Mindset - Focus on the needs of the consumers you're attempting to attract, and the customers you already have. Focusing too much on the books can be distracting and when comparing how much it may cost an owner in just the opportunity cost alone can make an outsourced bookkeeper worth the money.
- Reports - The chart of accounts has a purpose when you've created goals for the books. There are different reporting methods that can be helpful, and is ultimately what turns your bookkeeping system into a tool. The information provided from the books is reported, then you're able to make smart financial decisions based from the reporting.
QuickBooks reports should be customized until you have a set of reports that are meaningful to you. Some small business don't pay very much attention to their reports because their bookkeeping is not current or accurate.
Early in the year or at least prior to the 2nd quarter, a budget should be set within QuickBooks. December is a great month to put together a budge for the following year. By this month, you have a pretty good idea of how next year will look. Don't worry about the Christmas season, the sales will happen. Putting together the budget for next year and evaluating budget vs. actual of the current fiscal year can help project what kind of year you will have.
Bookkeeping System Adjustments
Internal audits are important in make sure that the books are being adjusted properly as the business grows. Once a year is probably fine. However, the key to better information is clear and open communication of financial goals with your bookkeeper.
Is your system ready to make you money? Turn your bookkeeping system into a business growth tool. Contact us. If nothing else, we can lead you in the right direction with a free consultation. Or download our eBook below, which can help you get your books together.