Common Bookkeeping Mistakes (And Why They Are Mistakes)

So you started a business and as a solopreneur, you were many hats.  One of those being the hat of the bookkeeper/accountant aka the keeper of the checkbook.  What’s so bad about that…all you have to do it balance your checkbook, right?  WRONG!

I’ve seen it time and time again.  Entrepreneurs skipping the necessary step of hiring a bookkeeper or accountant (or accounting firm) to monitor their business finances in an effort to save money.  What they don’t realize is what they save in the short term is probably costing them much more than in time, effort, and fixing mistakes in the long term (especially when its the tax preparer/CPA that is fixing those mistakes later).

Here are a few common bookkeeping & accounting errors that small business owners make when they go it alone:

Mistake No 1:  Treating sales as revenue before the product or service is delivered.  Why it’s a mistake:  Not only is it contrary to “revenue recognition rules” (ask an accountant what that means or Google it) but..”Great sales in a month that will be delivered to the customer later…can give a company a false sense of profitability”

Mistake No. 2:  Not considering the financial ramifications of a large purchase, such as equipment.   Why this is a problem:  Dipping into your cash reserves can have long-term consequences if you aren’t adequately covered to pay your day to day or month to month fixed expenses (or if something breaks – and something always breaks, right?)  Consider taking out a short-term loan to pay for the large purchase over time or consider leasing the equipment.

Mistake No. 3:  Confusing PROFITS for CASH FLOW.  Why this is a problem:  Business owners need to learn how to read all of their financial statements – instead of depending on one.  Your Income Statement may contain several “non cash” items that my lead you to believe that you have more spending power than you really do.  So it is important to read it in conjunction with your Balance Sheet and your Cash Flow Statement to get a truer picture of the financial health of your organization and evaluate what your spending power really is.

When you started your business, I’m sure you had no idea that you’d have so much to learn and so much to do.  But don’t give up…just like you are good at what you do and have a passion for it, there are tons of professionals out there that are ready and able to exchange expertise with you so that you don’t have to go it alone.

Until next time… Live long and prosper.  (ha…sorry, I was in a groove & that just seemed appropriate).

Don’t forget to post a comment and tell me what you think!

Related Links/Source:
Three Common Accounting Mistakes via Entrepreneur.com

 

Leverage: Use It To Your Advantage

If you’ve heard of Virtual Assistants and understand the concept, then Virtual Bookkeeping/Virtual Accounting is not too far from that.  The main difference is the area of specialization – instead of administrative tasks, the tasks outsourced are of a bookkeeping and accounting nature.

Who should care about virtualization?  YOU, Mr & Ms Small Business Owner.  Why should you care?  LEVERAGE.  Outsourcing to a service provider can give you the leverage, the leg up that you need and help put you on equal footing with bigger companies.  Think about it, big businesses have been doing it for years (leveraging and centralizing their resources).  Big businesses may have satellite locations all over the state, all over the country, all over the world but they have a centralized location that handles certain “global” business functions such as marketing, advertising, and accounting at the “corporate office”.

So what’s the difference between outsourcing (small business) and centralization (big business)?  To be honest, if you give it some thought and consideration, there isn’t much difference at all – except the numbers – the number of people employed and the dollars available to spend.  How can you leverage and use this big business model of operations to your advantage as a small business owner?  Use economies of scale.  Think about it…it’s less expensive to share an accounting department with other small business owners than it is to create, manage and maintain one in-house.   When you hire a virtual bookkeeping and accounting service provider, that’s exactly what you’re doing – sharing an accounting department with other small businesses.  And, let’s take it one step further – in most cases, hiring a service that will function as an ENTIRE department is less expensive than employing ONE bookkeeper!  Providing you with MORE experienced professions for LESS money…more bang for your buck, talk about LEVERAGE.  Don’t believe me?  Give me a call and I’ll SHOW you the numbers…

Agree?  Disagree?  Have questions?  Post a comment…I look forward to hearing from you and reading your comments.

Image Credit: Filomena Scalise/FreeDigitalPhotos.net

 

BullsEye Piggyback

Now I’m sure that title created an interesting visual…let me get to what I’m talking about.  How it happened and played out was almost like watching a movie… a constant, continuous confirmation that I’m doing what is right for me and right for my business.

Last week I did a post about selecting a target market (Hit The BullsEye), then I read a blog post/article about Charging More Than The Other Guy, then I had a conversation with a “virtual co-worker” that circled around both of those things.  In brief, we were talking about a third party, a friend of hers, that is a bit all over the place when it comes to their side hustle.  Let me tell you what I mean – said third party is a Jill of All Trades.  She is a “fundraiser”, “event planner”, “marketing consultant”, “graphic designer”, “sales consultant”… and that’s just the the stuff that I remember.

Now I don’t profess to be a marketing expert… but I’ve been in business long enough and I’ve read enough articles, blogs, and books to know that people don’t take you seriously when you are all over the place.  When you are all over the place, you don’t get (consistent) business or referral business because the person who would have referred business to you doesn’t know what the heck you do… nor are they convinced that you do any one thing well enough to warrant them sticking their neck out on the line to provide you with the referral.  And when you’re all over the place, you can only charge “novice” prices.  If you’re charging novice prices… well, you can figure out the rest.

By the end of the conversation with my virtual co-worker, we had both turned the spotlight off of the third party and began to focus on ourselves.  *scratching head*  So that got me to thinking, is my business all over the place?  Am I presenting a “Jill of All Trades/Master of None” persona when it comes to my service offers?

I’m sure I’m not the only one in the blogasphere who’s had a business related identity crisis.  Have you had a similar issue?  How did you handle it?  Help me out here!  Tell me all about it…

 

Cloud Computing – Are You Ready?

What exactly IS cloud computing?  As I understand it and in it’s simplest terms, it’s remote software hosting.  If you’ve created and stored a document or presentation using Google Docs, then you’ve been exposed to a version of “the cloud”.

Why is this important?  As a SME (small/medium enterprise), why should you care?  Well, to be honest – it kinda levels the playing field, making it so that the small guys can play with the big boys – at least when it comes to IT.  By using remote software hosting/utilizing the cloud, SME’s can do things they couldn’t afford to do before – such as – allowing their employees & contractors to telecommute.

Allowing and encouraging telecommuting is just the beginning of the snowball effect that the cloud can bring.  Telecommuting can lead to not only outsourcing your IT functions but now that your staff (employees & contractors) spend less time in the office, they can share space… if they share space, you need less space.  Instead of providing 1 desk/1 office space per person, you may be able to cut back to 1 desk/1office space for every TWO or THREE staff members (referred to as “office hoteling”).  So in addition to saving on the capital expenditures on IT… converting those to operating costs, you can also save on the overhead costs of office space, computers, telephones, etc.  How big the snowball gets is up to you.

Enough about the other benefits…back to the cloud itself.  Here are some IT benefits to The Cloud…

  • Reduced Costs –  instead of buying all the hardware/software yourself, you pay a provider incrementally (monthly, quarterly, yearly) – therefore lowering the “cost of entry”
  • State of the Art Hardware/Off-Site Backup
  • Increased Mobility – staff is no longer tied to the office or their desks
  • Greater Flexibility & Security – SME businesses don’t necessarily have the most secure internal infrastructures when it comes to IT; with the use of the Cloud, these same businesses can reach and exceed compliance & industry security standards
  • Automation & Shift IT Focus – Using the Cloud, the SME no longer has to focus on server updates, maintenance, backup issues or software updates.
Are you ready for The Cloud?  The choice is yours… but I’m ready to take the leap.  And I taking my clients with me … even if I have to drag them there, kicking and screaming!

 

Alternatives to QB Online

Let’s face it, it’s a fast-paced world and you have to explore alternatives to keep up.  In this environment, you can’t afford to be left behind because you are chained to your desk by desktop software applications…Intuit, the makers of Quickbooks, answered the call (sort of) with the web-based version of it’s popular accounting software – Quickbooks Online.

Having web-based products are good for the mobile roadwarrior but bad when you don’t get all the features that you need…

If the online version of Quickbooks doesn’t provide you with all the features that you need, here are a few alternatives that may work for you.

In addition to those alternatives, you may want to look into Quickbooks Hosting – where the desktop version is hosted as a virtual desktop (cloud computing).  Recently, Intuit has endorsed a few providers who, in addition to providing you with hosting, can also “rent” licenses.  To my knowledge, there are five service providers on the “approved” list*… they are:

Disclaimer – this is not meant to be an all inclusive list nor is it meant to be a review or endorsement or any product or service over another.  Do your research – find out what works best for you.  Good luck!  ~Joyce


*List and additional information can be found here.
**Image: Stefano Valle / FreeDigitalPhotos.net

 

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