Business 101: 5 Signs You Need a New Bookkeeper

Trust is key when outsourcing your bookkeeping. With stories of theft and fraud, it can be a little stressful to know who to trust, especially working in a remote environment. Below are five warning signs that may signal a problem with the relationship you have created.  Be empowered and address them head on.

Warning Sign 1: No Access to your Accounting System

Recently we spoke with a business owner whose tax professional moved the clients accounting data to their internal server and the business owner had been asking for access for more than two months.  Or the business owner who outsources not only the recordkeeping of their activity but also the storage, which requires them to ask and wait patiently for their bookkeeper to provide reports.

With today’s technology there is simply no reason to give up control and access of your accounting data.  You can share access with your bookkeeper using hosted services or browser-based solutions. There is simply no excuse for you to not be able to access and look through those records at any time. Even if you prefer to not look at your data often, having the ability to do so is crucial. If at anytime you feel like your records are hard to access or are being held hostage by your bookkeeper, this is a red flag.

Warning Sign 2: A Defensive or Elusive Bookkeeper

One of the traits of a good bookkeeper is their attention to detail.  When in overwhelm, this same trait turns into perfectionism which triggers the bookkeeper to shut down.  They can become elusive and even defensive. Their personality, behavior, and confidence in their skill drive this response.  Main thing to consider is if this personality and communication style works for you, or not.  If you are experiencing attitude and it triggers you, it is definitely time to find a new solution.

A confident consultant will come to the relationship with a communication plan and process.  What will be delivered when.  How best to make a request.  Even discuss options for preferred communication methods.

ADI Pro Tip: For less drama and stress, the ADI Accounting Team recommends taking time to learn how to identify and adjust your communication style to meet your team members and clients at their level.  Choose a personality test for yourself first.  Get to know it, how it relates to your style, and how your team can use that knowledge to communicate better with you.  Once you buy-in then your team will be more likely to find the info beneficial.

Warning Sign 3: Lack of Reconciliations

With the change in technology we are encountering more instances where bank accounts (including credit card and loan) are not being reconciled.  There is equal parts relying too much on technology and just plain ol’ avoidance.  The bank feed work 98% of the time.  The other 2% is only caught when you reconcile the accounts on a regular basis.

As the owner, this is the check-and-balance system for your company and how you know if you have everything entered into your bookkeeping tool. ADI Team recommends monthly reconciliations as a requirement, not an option.  Either get in the tool and know how to verify if a reconciliation has been done, or request a PDF as proof.

Warning Sign 4: Added Reconciliation Adjustments

QuickBooks and QuickBooks Online will allow you to force a reconciliation by entering the difference into an account called Reconciliation Discrepancies.  Seeing this type of account on your Profit & Loss is a HUGE red flag.  This signals a bookkeeper that is not detail oriented.  Sure, you also don’t want them to waste time searching for $.02 for hours.  A detail oriented bookkeeper won’t be able to help themselves.

The only way to identify this warning is to review your reports.  Review it in summary format using the Profit & Loss statements and the detail report called General Ledger.  Ask questions and be knowledgeable about your own data. Other accounts that the ADI Team recommends having little to zero activity – Other Income, Other Expense, Miscellaneous, Ask My Accountant and Open Balance Equity (Balance Sheet).

Warning Sign 5: Inconsistency Coding

Understanding the Chart of Account for your business is not only important for you, the owner.  It is also crucial that your bookkeeper has a firm understanding as well.  When there is an inconsistency in coding the business activity it affects the management reports.  An inexperienced bookkeeper may have items classified in the wrong accounts or inconsistently coded in multiple accounts.  Lack of reconciliation and coding inconsistency tend to go together, so if you find one the other will follow. The end result may result in unnecessary processing fees from your tax professional or even affect your tax liability, not to mention your sanity.

Moving Forward

  1. Choose an accounting tool that allows you and your financial team access: anytime, anywhere, and with levels of security access. The ADI Team prefers a browser-based solution like Xero or QBO.
  2. Confirm the accounting process your bookkeeper will follow each month and add which management reports you want to see and how you’ll exchange that data. We use a virtual file cabinet (SmartVault) to exchange data.
  3. Take the time monthly to review your accounting data and reports. Ask questions. Make sure you are in the know and are aware of what is going on. Seek additional reports, when necessary, that are customized to your knowledge-base.

ADI Pro Tip: It is best to find a bookkeeper with good communication skills, who is willing to follow-up regularly, and who is transparent in all their actions.


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