How much do you really know about your own company’s financials?
Are you able to pull a report at any given moment on the following:
If you are unable to pull an accurate report as needed, I suggest that you are courting disaster. NOT a good system!
- How much your company owes others. — How long you have owed them?
[Your Accounts Payable and aging, loans etc.]
- How much is owed to your company. — How long you have been owed?
[Your Accounts Receivable and aging]
- How much cash is actually in your account. — How much of it is spoken for (i.e. checks written that have not cleared the bank, etc.)?
[Your account balance and reconciliation]
Business owners often tell me one of their key concerns is how little they know about accounting. They seem to think a college degree is needed to even begin to understand it; so, they hire a bookkeeper or other accounting personnel and blindly trust them to handle their books (in other words, the future of their business). When I ask these owners if they are able to run reports from their company’s accounting software to get an accurate picture of their finances, many say they cannot. This can be DANGEROUS, for many reasons!
Operating your company blindly—with poor vision into your accounting systems—is a recipe for ongoing credit problems. Handling large sums of money, especially these days, can be a huge temptation for some. And without proper accountability, you open your business up to possible loss or lawsuits—even financial ruin.
Let me challenge the myth that accounting/bookkeeping is complicated and should only be “left to the professionals.” Good bookkeeping is NOT complicated! It can actually be simple, if you (the owner) would take just a few hours to familiarize yourself with a bookkeeping program such as QuickBooks, or maybe the program your company is currently using. I dare say using an iPhone is more complicated than using QuickBooks.
No, you won’t learn all there is to know about accounting in a few hours. And I’m not saying you should never hire a bookkeeper or seek professional help. But, you can get a good start on understanding the shape of your business on a daily basis. If you wait on a bookkeeper or accounting personnel to generate a report on LAST month’s accounting, you might just discover you are too late in knowing about a serious problem.
We’ve all seen news reports of companies going under or losing thousands of dollars due to their accounting department’s “creative” bookkeeping. This would not happen if an owner had “eyes” for his/her company’s financials.
I talk with owners all across America, and am still surprised at how many do not have a clear picture of their company’s accounting. Some say they are intimidated by bookkeepers/accountants, and feel ill-equipped to question their figures. When asking their accounting personnel for reports, they’re often told, “I can’t give you one right now, I haven’t paid the bills.” or “I haven’t sent out invoices yet.” or “I haven’t done the deposits.”
Caution! The next thing an owner should ask is, “WHY?” Then insist on an answer. It’s your company!
Many companies don’t send out customer invoices or enter vendor bills and other pertinent information on a daily basis—which should be done. WHY isn’t it? Because there is NO SYSTEM for doing that!
Of all the departments in a business, Accounting is the last one that should operate using the “loosy-goosy” method, but many bookkeepers and accounting personnel work just that way. They do what should be priority tasks whenever they feel like it, or when an accounting-challenged owner gets upset when he’s told the bank account is “running low on cash.” Then everyone goes into crisis mode.
Certain bookkeeping should be done on a daily basis in a systemized way. This gives you CLEAR VISION—having an accurate and up-to-date snapshot of your company's financial health—for making good business decisions.
Many bookkeeping offices look as if an F-3 tornado passed through, leaving clutter and piles of un-entered vendor bills, jobs not invoiced or sent out, and packing slips not married to bills. Old, not-yet-filed invoices, etc. are stacked high, right next to new business. Sound familiar?
To make sure your company’s financial reports are current, you MUST have ALL customer invoices and ALL vendor bills entered DAILY into your accounting program, along with a balance of cash in the bank and a list of checks written that have not cleared the bank.
I strongly suggest that, as the owner, you have a way to go online and get your bank balance anytime you need that information.How do you turn the above items that an owner needs to do/know into a system to ensure it happens?
You need a written Daily Routine Checklist
for each of your bookkeeper/accounting personnel that is signed and turned into you or a manager each day—no exceptions. A Daily Routine Checklist is a system that works! They have been employed in our businesses, and many of our clients’ companies, for more than 15 years.
Below are some PROMPTS that needed to be included on bookkeeper or accounting personnel DAILY ROUTINE CHECKLISTS to ensure certain tasks are being completed daily, weekly, monthly and even yearly:Daily
__ Customer Invoices (ALL) mailed and entered into accounting software.
__ Customer Payments (ALL) entered into accounting software.
__ Vendor Bills (ALL) entered into accounting software.
The prompts below could be done weekly or even monthly, once you are assured your finances are current and in good order:Weekly or Monthly
__ Profit & Loss (P&L) report printed and given to owner.
__ Accounts Payable report printed and given to owner.
__ Accounts Receivable report printed and given to owner.
__ P&L report printed for general manager.
__ Bank statement reconciled (This could be done weekly).
We have many more prompts on our accounting personnel’s Daily Routine Checklists to ensure the best practices are followed, that tasks are being completed, and that paperwork is not piling or backing up. These checklists can help take the danger out of your accounting and ensure that your bookkeeping office remains clutter-free.
Did I mention? — Great systems work!