What happens when you know you have expenses that are not entered in to QuickBbooks yet, and, its time to produce financials (end of month, end of period, end of quarter, end of year) and yet there are some costs missing. How do you fill in the gap?
It might be that a vendor invoice has been lost or there is a confusion over the precise amount. It could be that the power company reads your meter on the 10th of the month, so there are 20 days of electricity costs that are not on the books. It could be that your financial planner was spending time revising your portfolio, but he has not sent you his bill for the month. It could be that your four week cycle ends in mid month. How do you split part of a bill in one period and part in the next cycle?
This is when you begin making accruals. They do not have to be to the penny. Accruals are estimates based on the best available facts. For the electricity bill, you would look at the most recent bill and use that to estimate what you would pay for another 20 days (to the end of your accounting month, in this example).
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Small business owners excel in a DIY mode: Do anything and everything you can do yourself and don’t pay for anything new until you absolutely must. It’s especially tough to rationalize hiring financial help like a full-time or even an outsourced accountant or bookkeeper.
With so-called “user-friendly” financial software like QuickBooks available, many business owners believe that they can maintain their financial data records and books on their own, even as they struggle with finding more time for the business and stress whether they are doing the bookkeeping correctly.
Deciding about “hiring an out-source accounting team is something I struggle with all the time,” chuckles Matthew Marsh, president of Catalyst House client Lead Research Group, a Web and broadcast leads-generation and marketing company in Huntington Beach, CA. While Marsh finds basic QuickBooks relatively easy, it takes him away from working on his growing company (Lead Research Group has been named to the INC-500 fastest growing private companies – see: CES Client Named #23 on INC-500 List). Meanwhile, his company’s accounting and tax planning have become increasingly complex in the years since he and partner Ryan Rasmussen founded their national marketing company.
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Often times small company owners and managers gauge their business results by their checking account. But if you’ve been in business for awhile, you already know that cash rarely equals income or profit.
And even if you know what your company income is, do you really know how to read your cash flow and financial reports?
For most small business owners who are scrambling to generate more cash flow from their operations, they assume that more, bigger, faster is the solution. And that’s like going to your local garage for a car motor that is not firing on all cylinders and your mechanic puts more air in the tires. Sure, that is one solution for one problem (your tire pressure is low) but it doesn’t solve the problem you have.
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Recently we looked at a new client’s balance sheet and saw that there were way too many accounts that gave rise to issues based on our understanding about his company. We realized that he perhaps didn’t fully appreciate the importance of his balance sheet and how to read it.
It is crucial as a business owner or someone preparing a report for the company’s management, that you comprehend what the numbers on the balance sheet are revealing.
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The business accounting field is one of the slowest sectors to seize upon advantages of the emerging technologies. And many company owners are skeptical about having their finances managed in the cloud.*
Yaritza Delorenzo
*See the highly-rated eDashboard Solution
“Even in-house accounting systems are not invincible to damages or catastrophes. But technology has changed the business process of many industries for the better, including accounting, and there are many benefits to cloud bookkeeping,” blogs Yaritza Delorenzo.
Yaritza Delorenzo’s five reasons for cloud bookkeeping
1. Savings of 50% or more in operating costs allows more time devoted to strategic functions. For example, more time could be devoted to implementing new accounting rules, including production of new reports in a timely fashion.
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Doug Sleeter Chunkified
Kacee Johnson, at her Cloud9 Real Time Blog, recently summarized a talk by accounting tech guru Doug Sleeter.
Sleeter makes some excellent points about the future of Cloud Accounting, the breathtaking pace of new add-ons that enhance QuickBooks and other accounting applications, and whether you and your firm have what it takes to be ‘Lego Masters,’ those artists who excel at building beautiful and complex Lego art by selecting pieces from thousands of shapes, sizes, colors and textures, and assembling them using the right connections – a great analogy for how accountants will succeed with clients in the new ‘chunkified’ world of cloud-based accounting.
The main premise of Sleeter’s talk was that clients don’t just desire to be served, but rather they want and need to be lead masterfully into the new paradigm. And what is this brave new world for accounting clients? Sleeter says that these are some of the primary attributes -
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