A Trouble-Free Accounting / Bookkeeping Department

Now and then I got requests from business owners to tech-support their staff or to clean up their QuickBooks files.

The problem is: bookkeeping needs to be done REGULARLY. Mistakes tend to involve tons of entries spanned months or years. It takes a HUGE effort to pull a derailed train back to the right track. Some mistakes were so curiously "creative" and I wondered "How in the world did one do that?" It took a lot of brainpower to uncover the problems and to make them right. Sometimes I have to stop when it was “good enough!”

Once I left, the problems started building up again.

It was a HUGE unnecessary pain. There was no way to run a business that way.

I normally declined the job. 

I wanted to fix the problems only ONCE. 

Then, my team and I should OWN the full accounting department!
It will be a smooth sail from then on. 

*   *   *

When we hire a builder / contractor, we hire one who is licensed. 

By passing the exam, the builder proved that he has certain level of skill.

Bookkeepers do not have licensing requirement. Hence, it is a Wild Wild West.

Why would you pick a bookkeeper who was a chef, an artist, or a photographer?
Because you LIKE them? They have DONE it for years? 

What if they do not even know that they have been screwing up for years?

Bookkeeping is about DEFINING the transactions and RECORDING them correctly based on Accounting Principles.

Try these. These were real situations I encountered:

1) The mother of a business owner repaid her son $100,000 for money advanced throughout the year in managing her apartment buildings. What was it? (The office manager recorded it as Income.)
Answer: It was a reduction of Loan Receivable from the mom.
If left as income as it was, the owner can be expected to pay 25% federal tax plus 10% California tax!

2) A business owner paid $10,000 personal Federal taxes with the company's money.
What was it if it was an S-Corp?
Answer: It was a personal expense. S-Corp shareholder was allowed to take distributions hence it was a Shareholder's Distribution.

What was it if it was a C-Corp?
Answer: No distribution for C-Corp shareholder. He must pay back. Hence, it was a LOAN.

The REAL value of bookkeepers is: we help you figure out the useful REPORTS you need; such as JOBS reports for contractors. We put in NUTS-and-BOLTS; i.e. SET-UP so that the daily tasks are easy TO DO. And at the end of the month, you get GOOD Reports.

To be trouble-free with accounting / bookkeeping, hire a bookkeeper with an ACCOUNTING degree, not the low-skilled office admins.

Online? No, Quickbooks DESKTOP instead!

Quote from Warren Buffett: "You have to think for yourself. It always amazes me how high IQ people mindlessly imitate. I never get good ideas talking to other people."

On investors' behavior, Buffett drew analogy from lemmings; the small rodents found in Arctic. Lemmings experienced frequent population booms and busts. Probably due to population boom, at certain times, the lemmings would get into massive migrations. They swam frantically en-mass in circles until they drown from exhaustion -- the behavior of investors in so many cycles of booms and busts over the past many decades.

Online Accounting software is red hot now.
Quickbooks Online. Xero. Cloud.

The users probably thought that data really lives on the cloud UP THERE.

The data actually lives on EARTH, on some remote servers situated somewhere on EARTH.
AND each and every single piece of data, made up of bytes of 1s and 0s, is transferred over the cable to the remote servers located somewhere on earth.

Each piece of DATA that forms the REPORTS you see, are retrieved from the remote servers somewhere, and reassembled back to your screen by browser. Some of the data were stored in cache for faster retrieval. They resulted from earlier computing. You have to clear the cache to get updated reports. And the reports load -- ONE webpage at A time. And the webpages don't print right, unless they are "printer-friendly". i.e. formatted for print. If you want to see multiple reports, you have to open a new tab for each report.

Well. If you have gig business, Online probably will do.

But, if you have a REAL business, and you have 3 major functions to cover (operations, marketing and finance), I would advise you to stay with Quickbooks DESKTOP, for it is ROBUST.
(b.t.w. what does it mean ROBUST?)

Adam Sterling in his recent seminar on Startup Laws at Nasdaq Entrepreneurial Center said; "INNOVATE! When it come to products or services. Stay BORING, when it comes to LAWS (for you don't want to break laws)."

I can add Accounting / Finance to the "stay boring" category, too, for you want your financial reports done right according to the accounting standards. And the reports are understandable by bankers or investors who will give you MONEY. 

Your CPA or Your Bookkeeper ?

I am taking a 10-Saturday Small Business program at Golden Gate University. It is FREE thanks to the generosity of Chevron (Yeah!). And comes with free breakfast!

The first half of the class is a break-out session. We get in a group of 5. Each of us has some times to talk over our stuff and listen to feedback. 5 weeks into that, I got 2 good ideas: use "boomerang for Gmail" to schedule outgoing emails, and connect with Construction Lawyers since I do bookkeeping for contractors.

The Richest Man in Babylon states that one should entrust wealth (i.e. loan) to only people who are skilled in their work. A man who acquired a sudden fortune tends to draw requests for help or investing ideas from friends / families. The book cautions us against both temptations because money is hard to come by. Only when the borrower was skilled in what he did and the preservation of principal was guaranteed should you lend.

I told my recent scare of misreading a team member's email. I thought he was quitting. I realized how important he was compared to my client(s). (Who said clients are always right?)

A team member of mine is a CPA who has been with IRS for 18 years and now working with a CPA firm for 15 years. She could not understand. I told her we work closely with business owners. We go to their site weekly, bi-weekly or monthly. We BOND with the owners. I even drew an analogy of a babysitting business where the babysitters stay with the babies whole day long. Hence she bonds with the baby and the families. If she quit, it is hard to replace her.

The CPA said that I needed to let my clients know that I was the boss. And I can send newsletters to touch base with the clients.

… I was SHOCK that I could not make a CPA understand how the bookkeepers work and our relationship with the clients.

I decided to tell the business owners direct:

1) The CPA saw only the FINANCIAL STATEMENTS a few times a year. They made a few period-end adjustments which made the reports look good at the end-of-the-year. The adjustments do not fix monthly numbers. So, if you try to do a month-to-month or this-month-vs.-this-month-last-year comparison, the numbers are not right.

2) The CPA does not deal with nut-and-bolt (i.e. set-up issues) and daily processing stuff such as invoices and vendors’ bills. The bookkeepers do. The bookkeepers are EXPERTS on those. Your CPAs are NOT.

3) You do OPERATIONS every day. Bookkeeping is the 3rd leg of your business (besides Operations and Marketing) which also needs to be done REGULARLY. If you care to bill and collect money for your sweat, and pay your employees and vendors on-time to keep them happy, then, please DEFER the bookkeeping stuff to your BOOKKEEPER.

Steve Jobs said; "Hire the BEST person you can, and get out of their ways (so that they can do the works.) You want to do that.