I am a fan of a great software out there called QuickBooks by Intuit. It is the software that 80% of small business in this country use to track their finances.
While QuickBooks makes life easy for the small business owner to prepare sales invoices, receive the payment, and other daily accounting tasks, if you don't know what you are doing, then you may actually have a bigger problem on your hands -your books!
Unless you really understand debits, credits, and how they all relate to each other and how QuickBooks uses them, then you MAY be causing a bigger problem that your tax person will need to work with at the end of the year, which will cause you to spend more money than you need to at tax time.
When people tell me they use QuickBooks for their small business, I am happy for them. That means they at least have a good start. Then I ask them if they really know how to use it. Some smile and nod, others give me the blank "deer in the headlights" stare.
Please, if you are a small business owner, be sure you fully understand how the software works. If you don't want to hire a professional bookkeeper, at least hire someone to get you set up and then show you how to use the tools you have.
Tuesday, May 11, 2010
Tuesday, May 4, 2010
What exactly are liabilities, anyway?
Told you I'd come back to this one! You are a small business owner. You are the best at what you do. You have passion for what you do. Yet, you aren't quite sure what people are talking about when you hear the word, "liability". That's something your CPA will handle at tax time, right? Well yes, but no. You need to understand how to handle them prior to then.
Very simply put, a liability is something you owe. Things like business loans, car loans, bills you owe to vendors, and even the sales tax you collect for the city and state. Liabilities are listed second on your balance sheet. Together with the equity you have in your business they total your assets. There are 2 types of liabilites.
Current liabilities. These are those items that are due paid within a year, such as the sales tax paid to the state or local government that you have collected from your customers, and the payroll taxes you collect for the government from your employees' paychecks, as well as the bills you owe vendors for supplies or services.
Long-term liabilities. These are the items that are due payable in more than a year. An example would be the portion of a loan that is due more than a year from now. For example, if you have a 5 year loan, you might show the next 12 months on the current part of the liabilities section of your balance sheet, while the remaining 4 years will reside on the long-term portion of your balance sheet liability section.
Told you I'd come back to this one! You are a small business owner. You are the best at what you do. You have passion for what you do. Yet, you aren't quite sure what people are talking about when you hear the word, "liability". That's something your CPA will handle at tax time, right? Well yes, but no. You need to understand how to handle them prior to then.
Very simply put, a liability is something you owe. Things like business loans, car loans, bills you owe to vendors, and even the sales tax you collect for the city and state. Liabilities are listed second on your balance sheet. Together with the equity you have in your business they total your assets. There are 2 types of liabilites.
Current liabilities. These are those items that are due paid within a year, such as the sales tax paid to the state or local government that you have collected from your customers, and the payroll taxes you collect for the government from your employees' paychecks, as well as the bills you owe vendors for supplies or services.
Long-term liabilities. These are the items that are due payable in more than a year. An example would be the portion of a loan that is due more than a year from now. For example, if you have a 5 year loan, you might show the next 12 months on the current part of the liabilities section of your balance sheet, while the remaining 4 years will reside on the long-term portion of your balance sheet liability section.
Monday, April 26, 2010
The third leg - Accounting!
You are a small business owner. You know you need to spend time, effort, and money marketing your service or product. You know you need to spend time, effort, and money producing your product or servicing your customers. Great. But there is a third item many business owners don't like to think about. That missing link is the ACCOUNTING function.
Think of any business, regardless of size, as a 3-legged stool. One leg is marketing. One leg is production/service. What is the third leg that balances the stool? Accounting.
Without the accounting function, most businesses will fail. While you may want to keep your profits to yourself or your shareholders, it really isn't the best idea if you want to take off and soar with your business. You really will benefit with someone reviewing and letting you know where you stand profit-wise at least monthly. If you don't know where you are now, how do you know how to get to your goals? A road map showing where you want to be is great when you are driving. But first, you need to know where you are so you can choose the best route. The same goes for your small business.
An outside party such as an outsourced bookkeeper is the just person to provide that information to you. I have no personal interest in your business, and will be able to objectively give you information about your business, such as helping to create budgets, and doing analysis so that you do know where you are at the end of each month. Knowing this information now will allow you to steer your business toward your goals by making adjustments now, rather than wondering what happened at the end of the year when you can't reach those goals.
Think of any business, regardless of size, as a 3-legged stool. One leg is marketing. One leg is production/service. What is the third leg that balances the stool? Accounting.
Without the accounting function, most businesses will fail. While you may want to keep your profits to yourself or your shareholders, it really isn't the best idea if you want to take off and soar with your business. You really will benefit with someone reviewing and letting you know where you stand profit-wise at least monthly. If you don't know where you are now, how do you know how to get to your goals? A road map showing where you want to be is great when you are driving. But first, you need to know where you are so you can choose the best route. The same goes for your small business.
An outside party such as an outsourced bookkeeper is the just person to provide that information to you. I have no personal interest in your business, and will be able to objectively give you information about your business, such as helping to create budgets, and doing analysis so that you do know where you are at the end of each month. Knowing this information now will allow you to steer your business toward your goals by making adjustments now, rather than wondering what happened at the end of the year when you can't reach those goals.
Sunday, April 18, 2010
What exactly are assets, anyway?
You are a small business owner. You are the best at what you do. You have passion for what you do. Yet, you aren't quite sure what people are talking about when you hear the word "asset". That's something your CPA will handle at tax time, right?
Very simply put, as asset is something you own. Things like your computer, printer, bank accounts, machinery or equipment for your business, and furniture in your office, if you have one. They are typically listed first on your balance sheet. Assets must equal the sum of liabilities and equity. I'll tell you about those items another time. There are two basic types of assets.
Very simply put, as asset is something you own. Things like your computer, printer, bank accounts, machinery or equipment for your business, and furniture in your office, if you have one. They are typically listed first on your balance sheet. Assets must equal the sum of liabilities and equity. I'll tell you about those items another time. There are two basic types of assets.
- Current Assets. These are those items that can easily be liquidated into cash within a one year period. Bank accounts, customer accounts receivable, inventory, and petty cash are examples.
- Fixed Assets. These items are typically more expensive items that you purchase to run or manage your business. Examples include furniture, equipment, machinery, vehicles, buildings, land, and leasehold improvements.
Tuesday, April 13, 2010
5 Things To Look For In A Bookkeeper
Let's face it. No one wants to spend their hard-earned profits on a bookkeeper. After all, you'll eventually get around to all your paperwork, right? When you do finally decide to take the necessary leap and choose a bookkeeper for your small business, keep these things in mind:
- Free consultation. Any bookkeeper should be willing to meet with you initially free of charge. This is your opportunity to meet and develop a rapport with me. I always try to get to know my prospective client's needs and expectations during this meeting. It saves time and misunderstanding in the future.
- Personality. This is HUGE. Be sure you can work with me. I also need to believe that I can work with you. I will get to know the ins and outs of your business' financial situation. What you forget to tell me, I will eventually learn. We have to have a certain level of trust with each other. The first accountant you meet with may not be the right person for you and your small business situation. This should be a long term relationship, not a "do business now and we are done" relationship.
- Services. Do the services I provide mesh with what you are looking for in a bookkeeper? What are the accounting needs of the client? Can I provide what the client is looking for? I'm not going to tell you I can do something for you that is out of my realm. Some bookkeepers may do just that to land the client.
- Timeliness. Some small business bookkeepers may be too busy to get your work done in a timely manner. Do you have monthly tax deadlines? Payroll that must be sent in so employees are paid? Does it really help you to know your profit for March in July? How do you make the necessary changes to manage your business around adversity or the market conditions and grow if the information you are getting is 3 or 4 months behind?
- Follow-Through. Does your bookkeeper do as s/he says? I never make a promise I can't keep. It is so important to keep my clients happy and be honest with them. If I say I will be somewhere at a certain time, I do what it takes to be there. If I will be late due to traffic or some other unforeseen circumstance, I call and let the client know I am running late and how much. Then I offer to reschedule if that is necessary. The same rules apply for a telephone conference.
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