Are your books and financials a mess?
“It’s a mess!” A statement that accountants hear from business owners regarding their bookkeeing and financials on a regular basis. What is important to recognize is when to seek professional help. If you are reading this article it is likely because you are thinking you may be in need of assistance with your companies bookkeeping.
It’s time to fix the mess!
How to Know You Have a Mess?
Determining if you have a mess is the easy part. Chances are you are already well aware of the mess. If not, these are some common indicators.
• Thinking of talking to your accountant makes you want to cry
• You have a stack of papers and receipts on your desk, unorganized
• You can’t pull a Profit and Loss statement on demand
• You use a practice management system or invoice system, but it has no integration with an accounting system
• You are doing double-entry of transactions
The list goes on and on, but for most business owners with a mess, this is your reality. You’re looking backward, playing catch-up and never have a true sense of where you stand financially.
Prioritize Fixing the Mess
As stated above, many of you are aware of the mess, but aren’t exactly motivated to fix it because of one of three reasons:
- You believe that’s just how it is and have accepted it.
2. You believe it’s too hard or expensive to fix things and would rather not deal with it.
- The negative outcome of messy bookkeeping and accounting hasn’t caught up with your business yet. But it will and you don’t want your business to suffer because you hesitated cleaning up your bookkeeping.
What are the Risks of poor bookkeeping practices?
The longer you wait to fix things the more it costs you! What risks are you putting your business in?
- It is costing you money?
It is not uncommon for accountants to find unpaid invoices. If books are not properly reconciled and up to date, things will fall through the cracks and you will lose money.
It also costs money at tax time when you aren’t able to get strategic advice and you spend money on getting the mess cleaned up.
- It is costing you time
This is the most obvious, but when you have a mess, you spend more time chasing paper, entering data and trying to figure things out. You are not an accountant and spending valuable time doing work that you are not qualified to do it frustrating and inefficient.
- Your business is suffering
When your bookkeeping is a mess, you don’t have the ability to see margins or understand what part of the business is performing well. This lack of insight puts you at a huge disadvantage because you aren’t able to make informed decisions with hiring, marketing or anything else to build the business.
Fixing the Mess
With the above reasons in mind, let’s hope you’ve committed and said, “I’m tired of this mess, I’m ready to get it fixed. What do I do now?”
The reason so many small businesses currently have a mess for bookkeeping is 99% of them never got started correctly. This only compounds over time and creates a mess that most business owners are not equipped to handle.
The first step in getting on the right track is to stop and start over. You need a new system with a clean slate and to start rebuilding the transactions. How to get that setup will be covered in the next points.
To complete proper bookkeeping, you need accounting software to setup and document all transactions. It is highly recommended that you seek an accountant or bookkeeper to help you set up your accounting system so that it is user friendly, easy for you to understand and that works for you. It is also strongly recommended that the accountant or bookkeeper you hire to do this important job is an expert in the software you chose for your bookkeeping needs.
It is during this set up period that you should set up your chart of accounts. If you wisely chose to hire and accountant to set up your accounting system for you, he or she will guide you through this process. If you do this on your own understand that the chart of accounts is the structure of your businesses accounts where you can book transactions to the proper accounts.
Once you are setup properly, meaning you are in accounting software, your bank accounts are integrated and you have a chart of accounts, you are way ahead of the game.
Now the goal is to regularly reconcile transactions so your financials are up to date and helpful.
This is often where it becomes problematic for business owners. They often find they do not have the time to do this type of work as they are busy actually running the day to day operations of the business. This is when things start to get messy and lost.
It is critical to make a decision. Do you hire someone to do the books in house, or do you outsource your accounting functions?
Don’t let your discomfort with bookkeeping and financial reporting be the reason your company loses money.
Get the help you need
Even though the steps of fixing your mess are manageable for some business owners, at some point, it’s good to recognize your time is not best spent reconciling transactions.
It is more cost effective and efficient to find someone who can do the setup for you, integrate your systems and who will reconcile transactions regularly and send you financial reports.
If you’d like help, Thinkbooks specializes in turning bookkeeping messes into beautiful, simple accounting systems.