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Do You Know What The Numbers Mean?

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Disclaimer:  This started off as part of a weekly roundup but as I was writing the excerpt/summary for it, it took on a life of it’s own. Enjoy ~Joyce~

Quote of the Week:
“I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” from Basics of Accounting Are Crucial for Entrepreneurs – NY Times


It is my philosophy that just because you can do something, that doesn’t mean that you should!  Just because Quickbooks, Peachtree, Xero, and on and on and on… allows you to do the bookkeeping and accounting yourself, it doesn’t necessarily logically follow that you should be doing the bookkeeping and accounting.  


Now, don’t get me wrong.  I am an huge advocate of being self-aware, empowered, doing things for yourself and, extremely important, taking responsibility for the financial health of your business but I’m not an advocate of keeping my valued clients in the dark.  We all have the same 24 hours in each day.  If that time is better served becoming more proficient at your “front-office” stuff… you know the thing that you do, that thing that you provide to your clients/customers… then you should be doing that – instead of the bookkeeping, especially if you’re not at all interested in learning the ins and outs of accounting (because there are just a few of those to learn).      


Food for thought:  if accounting was so easy, why do most accountants attend a 4year college to obtain the knowledge that you presume to buy in a box off of a shelf?  And why is the CPA exam consistently listed as one of the most difficult exams (ahead of the bar exam and some engineering certification exams)?  


Anyway, stick to or pursue what you love.  “Do a job that you love & you’ll never work a day in your life” ~Confucius. 


Agree?  Disagree?  Let me know – I’d love to hear from you.  

 

Common Bookkeeping Mistakes (And Why They Are Mistakes)

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So you started a business and as a solopreneur, you were many hats.  One of those being the hat of the bookkeeper/accountant aka the keeper of the checkbook.  What’s so bad about that…all you have to do it balance your checkbook, right?  WRONG!

I’ve seen it time and time again.  Entrepreneurs skipping the necessary step of hiring a bookkeeper or accountant (or accounting firm) to monitor their business finances in an effort to save money.  What they don’t realize is what they save in the short term is probably costing them much more than in time, effort, and fixing mistakes in the long term (especially when its the tax preparer/CPA that is fixing those mistakes later).

Here are a few common bookkeeping & accounting errors that small business owners make when they go it alone:

Mistake No 1:  Treating sales as revenue before the product or service is delivered.  Why it’s a mistake:  Not only is it contrary to “revenue recognition rules” (ask an accountant what that means or Google it) but..”Great sales in a month that will be delivered to the customer later…can give a company a false sense of profitability”

Mistake No. 2:  Not considering the financial ramifications of a large purchase, such as equipment.   Why this is a problem:  Dipping into your cash reserves can have long-term consequences if you aren’t adequately covered to pay your day to day or month to month fixed expenses (or if something breaks – and something always breaks, right?)  Consider taking out a short-term loan to pay for the large purchase over time or consider leasing the equipment.

Mistake No. 3:  Confusing PROFITS for CASH FLOW.  Why this is a problem:  Business owners need to learn how to read all of their financial statements – instead of depending on one.  Your Income Statement may contain several “non cash” items that my lead you to believe that you have more spending power than you really do.  So it is important to read it in conjunction with your Balance Sheet and your Cash Flow Statement to get a truer picture of the financial health of your organization and evaluate what your spending power really is.

When you started your business, I’m sure you had no idea that you’d have so much to learn and so much to do.  But don’t give up…just like you are good at what you do and have a passion for it, there are tons of professionals out there that are ready and able to exchange expertise with you so that you don’t have to go it alone.

Until next time… Live long and prosper.  (ha…sorry, I was in a groove & that just seemed appropriate).

Don’t forget to post a comment and tell me what you think!

Related Links/Source:
Three Common Accounting Mistakes via Entrepreneur.com

 

Alternatives to QB Online

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Let’s face it, it’s a fast-paced world and you have to explore alternatives to keep up.  In this environment, you can’t afford to be left behind because you are chained to your desk by desktop software applications…Intuit, the makers of Quickbooks, answered the call (sort of) with the web-based version of it’s popular accounting software – Quickbooks Online.

Having web-based products are good for the mobile roadwarrior but bad when you don’t get all the features that you need…

If the online version of Quickbooks doesn’t provide you with all the features that you need, here are a few alternatives that may work for you.

In addition to those alternatives, you may want to look into Quickbooks Hosting – where the desktop version is hosted as a virtual desktop (cloud computing).  Recently, Intuit has endorsed a few providers who, in addition to providing you with hosting, can also “rent” licenses.  To my knowledge, there are five service providers on the “approved” list*… they are:

Disclaimer – this is not meant to be an all inclusive list nor is it meant to be a review or endorsement or any product or service over another.  Do your research – find out what works best for you.  Good luck!  ~Joyce


*List and additional information can be found here.
**Image: Stefano Valle / FreeDigitalPhotos.net

 

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