What A Value-added Bookkeeping System Looks Like
by Pankaj Kumar |October 26, 2017
Many small business owners that I talk with complain that their bookkeeping system does not add value to their business. You should be able to use your bookkeeping as a tool to make key business decisions. Most owners blame their bookkeeper for the shortcomings of their bookkeeping system. They claim that their bookkeeper isn't good or doesn't care enough, which definitely could be true. More likely though is that the owner hasn't clearly communicated what they want from their bookkeeping system. Setting goals and clearly communicating them with your bookkeeper is a crucial part of developing the right system. Here are four traits of what a bookkeeping system looks like that adds value :-
- Accurate and Regularly Updated
A bookkeeping system has to be updated regularly and accurately in order for it to add value to the business. Business owners often complain to us that their bookkeeping is behind. Additionally when they do get reports they are inaccurate due to mistakes made by the bookkeeper in coding. Common mistakes include general coding errors such coding assets as an expense, using the wrong expense accounts, and not booking the correct principal and interest to business loans. Your bookkeeper may require some QuickBooks and bookkeeping training in order to get the proper system and bookkeeping basics in place. Getting behind in your bookkeeping leads to you running your business blind causing you to be unaware of how you are actually doing. The foundation of accurate bookkeeping is to ensure you are reconciling all of your accounts on a regular basis. Bookkeepers often reconcile the bank accounts but skip other important accounts that need to be reconciled like credit cards, loans, lines of credit and payroll liabilities.
- Regular Financial Reporting
It is important to incorporate regular financial reporting into your small business. You need to decide what reports are important for you to see and how often you need to see them. Then communicate that information to your bookkeeper and hold them accountable to producing the reports by your deadline. Have your bookkeeper produce a set of memorized QuickBooks reports for you so that you can access them as needed. Maybe you will need a separate group for daily, weekly or monthly reports. Make sure that you are getting the accurate financial reporting that you need in order to help you grow your business. Financial reporting is only helpful if it is based on accurate information going back to my first point above.
- Unique and Useful Information
Your bookkeeping needs to provide you with unique information, not just your basic reports. While profit & loss reports and balance sheets are helpful there is much more to financial reporting than just the basics. You should create some custom reports that you find useful and memorize them for easy access. One of my go to reports is a profit and loss for the year displayed in columns by month. To get this report run a profit and loss, select this fiscal year in the dates dropdown and select month in the columns dropdown. Then start playing with customizing the report with percentages of rows and columns.
Also, don't be afraid to ask for more from your bookkeeper. I get excited when a client says, "I wish QuickBooks could do (fill in the blank)." You should ask for your biggest desires from your bookkeeping system. If you can dream it and we can produce it think of the value we are adding to your bookkeeping system. For example, some things I track in QuickBooks are sources of income and all of our employee hours including non-billable hours. Having this information at my fingertips has enabled me to make our marketing and lead generation tactics more scientific based on actual data.
- Creates Opportunities
Your bookkeeping system should create opportunities for you to grow. When we identify an opportunity through a client's financial data, we refer to them as ah-ha moments for the client. Ah-ha moments are what we live for as small business bookkeepers. When you actually care about the bookkeeping and your clients' needs you can come up with some pretty creative bookkeeping scenarios. If you can manipulate your bookkeeping system in a manner that creates and identifies opportunities you certainly have a value-added system.
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