The State of Your Books =
The State of Your Business
Call it the Attack of the Hack Bookkeeper.
A business owner hires a bookkeeper at a less-than-competitive salary. The bookkeeper’s skills might be mediocre, but the business owner figures that’s good enough. How much could go wrong with simple bookkeeping?
Plenty. Bad bookkeeping has serious consequences. They include:
* Inaccurate reports: the business owner can’t really understand the company’s financial position;
* Decreased cash flow and an inability to forecast: management can’t predict future results or anticipate problems;
* Unnecessary time dealing with problems resulting from errors in the books: time sorting through a mess could have been spent on more profitable endeavors like additional sales or better yet- vacation.
* Wasted resources: CPA’s or specialists who need to come in and fix the books. Those folks cost money, often four to five times what the bookkeeper is paid hourly.
Your business is only as sound as its financials, and the bookkeeper is a key professional whose work influences the rest of the business. To ensure you’ve picked well for this important position, look for a bookkeeper who:
* Has strong communications skills. Being good with numbers isn’t enough to make a great bookkeeper. The best in the field can explain why they’ve posted entries a certain way beyond “that’s the way we’ve always done it.” He or she is willing to make phone calls and get questions answered to keep the books organized.
To take a small example, if your business gets a statement from a vendor that you’re past due with a payment, but never received the first invoice, a great bookkeeper will find out why so the slip doesn’t occur again.
* Hates errors. Every accounting entry requires both a debit and a credit. This means there’s a possibility of two mistakes. Multiply that by the number of entries a bookkeeper will make for a successful business, and the possibility for error is huge.
One stumble can have long-lasting ramifications. If a bookkeeper accidentally records payroll tax expense as a payroll tax liability (the account used to show taxes payable to the government) that’s a big blunder in the balance sheet. None of us is perfect, but some bookkeepers are a little too nonchalant about making mistakes.
* Makes an effort to understand all the facts. A client once asked Lucrum Consulting to work with their bookkeeper, who was confused about how to post transactions from a law firm’s trust account. The bookkeeper had no details about what the transactions were and was afraid to ask questions about what happened or who the payees were. A great bookkeeper will be confident and bold enough to say, “I don’t understand this. Explain it to me so I can be sure I’m recording it correctly.”
* Has a sense of urgency about getting things done right, on time. Checks that are entered twice. Checks that are wrongly entered. Checks not voided, still outstanding six months after they were issued.
We’ve seen all this and more when we’ve been called for a consultation. In one case, the business owners’ cash balance wasn’t close to what they actually had in the bank; by about $30,000.
* Takes ownership. You want someone who takes pride in his or her work and stands behind it. There are bookkeepers who don’t see what they do as a professional career or think their job is limited to writing checks and entering deposits. Avoid them.
If you’re looking for a bookkeeper or want to discuss upgrading your bookkeeping services, please call us. We welcome the chance to see how we might help you.