Whatever your chosen profession – attorney, doctor, or service provider – you chose it based on your strengths, which I am going to guess, did not include a love of numbers. Nor did a beautiful illustrated finance how-to manual come from the IRS after filing for your federal ID number (wouldn’t that be something?). Since 2001, I have worked with many business owners where the majority of them had overcomplicated their bookkeeping processes, all at similar pain points. They were at the point of taking no action, even avoidance of filing necessary tax returns. Here are the stuck points business owners encounter when it comes to the finance system of their business that creates overwhelm and complicates the bookkeeping process.
Learn a Foreign Language
Every industry has jargon that is as common to them, just like slang words or dialects in foreign languages. Most times we forget that not everyone understands our “slang”. This is very common when talking with accounting professionals (or IT professionals – or teenagers). The key is to speak up when this happens and ask for clarity. You aren’t any less of a business owner by not having a firm understanding of this jargon. You just need to find the right guide – a provider that will take the time to prepare you with education and guide you through your financial journey.
Don’t let the jargon stop you. At it’s simplest form, bookkeeping is the art of tracking your business finances – what comes in and what goes out. With the right tool and an open-minded accounting professional, you have the power to adjust your account names and customize your management reports. The more you understand the reports, the more you can use them to take action.
Find the Right Tool
Not all tools are created equal. Just because your tax professional or bookkeeper suggests one does not mean it will be the right tool for you and your business. You have to remember the jargon piece – a bookkeeper will recommend a tool that matches their level of knowledge, uses their jargon, and that they have experience using. The recommendation is all about them and not about YOU. Don’t fret, there is a tool that will work for you and your needs.
If your gross receipts are over $60k, yes, pull on your big kid pants and get yourself a tool. The days of using a spreadsheet and not keeping all your receipts are over. Not automating your recordkeeping will cost you money. ADI Team recommends, and uses, browser based solutions. QBO or Xero: they both are easy to share with your team, automate recordkeeping, and can be accessible on multiple devices. As with any major change, resistance will come up. The key is to pay attention to and learn from your push back. The end result might mean that YOU won’t be the one recording your activity in the tool.
Firm Foundation = Success
The majority of business owners we talk to tend to question whether or not they set-up their accounting tool correctly. In fact, they are often convinced that what they have done is incorrect. Most of them were told by someone in their world that they needed to use an accounting tool (most likely it was QuickBooks). Then the accounting tool “walked” you through a set-up process. Well, if you hadn’t brushed up on your accounting speak, setting up a tool that seemed like it was giving directions in a foreign language was probably a little confusing.
A tool that is set-up incorrectly is costing you money. It can be missing expenses, recording too much in income, and even costing more in your tax preparation fees. This can be resolved by hiring a consultant to help with initial set-up and create a process. Or hiring a bookkeeper to tighten up your accounting BEFORE you send you items to your tax professional.
There is NO Accounting Fairy
Sorry to destroy your illusions, but there is no accounting fairy that will magically enter your activity when you aren’t looking. As with any task that we don’t like to do: the larger the pile, the least likely we will tackle it.
Create a regular habit of addressing your finance needs. Set up time in your schedule, and don’t waiver on that action. For example, work on business finances every Monday. Some people find it helpful to split up that time – so maybe one hour per day by using a variety of mobile devices to record your activity will work better for you. There is a fine balance of regularly keeping your hands in the mix to track your goals and keep finances flowing, and obsession. Take some time to sit down with a consultant or your tax professional to find the balance that is required.
ADI Team hint – If you are already looking at a pile, it is easier if you outsource the “catch-up” rather than drag yourself through it. Once it is up-to-date and the tool is all shiny and bright, it will be much easier to create that habit of keeping things current.
Embrace the Power of the Numbers
You are happy with your tax professional. You took the time to get some support setting up an accounting tool that works for your needs. You even have established a habit of keeping your recordkeeping up to date. Congratulations – all great first steps. Have you really looked at and evaluated your data? Have you worked with your tax professional to create a tax estimate? Using your finance data is the final step that business owners overcomplicate. Remember, you are great at your chosen industry but working with your numbers, maybe not so much. So no excuse, you need to call in some support here.
Work with a profit consultant to create a budget and track key target numbers. Review your activity and find costs to cut or confirm overhead and profit margin to verify pricing. Take the time to analyze your numbers, because it is the scorecard of your business. Businesses that ignore this last step tend to be super surprised when their tax professional gives them their tax liability. At this point, it is too late to go back into the prior year and change your fate.
The bookkeeping process can be simplified, often all it takes is a little support or consulting with a tax professional, system specialist, bookkeeper, or profit consultant. Take the time to find a consultant that will meet you at your knowledge level and customize your reports to match. Consider how outsourcing your bookkeeping will result in a team member that is focused on all of the five items above, allowing you to leverage your time and focus on what you do best. With the proper guidance, understanding, and attitude, bookkeeping can be very simple.
“Experience is simply the name we give to our mistakes” – Oscar Wilde