|Posted on July 25, 2016 at 1:25 PM||comments (7)|
What’s the point of worrying about it?
By: CeCelia Bos; BOS' Optimal Solutions, LLC
Whether we like it or not quality bookkeeping is a key ingredient for a successful business. If a business does not put proper bookkeeping practices into place, they could have business on a downward spiral and not even know it.
It is truly scary the amount of businesses that do not have any bookkeeping methods or have nominal bookkeeping practices. What’s even more scary is that these are the same businesses that can’t, don’t or won’t file taxes because they have no clue what their business did for the year. Or worse yet, miss out on tax savings because their books are not organized in such a way that their accountant can help them maneuver them thru the labyrinth of tax laws.
Many business owners can and will do their own bookkeeping. Others invest in professional bookkeepers which helps prevent making very costly financial mistakes and allows the business owner the ability to have financial statements at their fingertips. A great bookkeeper will meticulously record all of your income and expenditures in a way that nothing is forgotten or categorized incorrectly.
There is a very big difference between accountants and professional bookkeepers. So let’s start with definitions. What is the difference between accounting and bookkeeping?
According to Dictionary.com, accounting is defined as “1. the theory and system of setting up, maintaining, and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. 2. a detailed report of the financial state or transactions of a person or entity: an accounting of the estate. 3. The rendering or submission of such a report.” Bookkeeping is defined as “the work or skill of keeping account books or systematic records of money transactions.”
BusinessDictionary.com defines accounting as “Practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records, performing internal audits, reporting and analyzing financial information to the management, and advising on taxation matters.” And bookkeeping is defined as “Systematic recording of financial aspects of business transactions in appropriate books of account.”
So what does that mean to a business owner. Short answer…You NEED both to be successful. I tell all of my clients a professional bookkeeper provides meticulous records identifying earnings, receipts, payments in a manner that makes their accountants lives easier and gives them the building blocks to provide business owners with proper analysis of their financial situation.
One of the biggest advantages of having a professional bookkeeper handle your bookkeeping, is that it allows you as the business owner easy access to important information you need to guide you in making financial decisions. For example, you make widget “X” but do you know how much the production and sale of that particular product is actually costing you. If you can’t say an emphatic yes to this question, how can you know what to price it at or if you are marketing it correctly.
The second biggest advantage of having a professional bookkeeper is if a business owner determines they need some form of financial assistance. ALL financial institutions require a business owner to prove to them that they are viable business and worthy of taking a risk. This means they want to see financial statements, cash flows, budgets and other financial data. Trust me when I say, this is not something that a business owner wants to have to pull together last minute. And when you are scrambling to collect or obtain information, I guarantee something will be forgotten.
By keeping up with your bookkeeping on a regular basis you are able to not only track the data, you will have a better handle on to continue making your business grow. Avoiding the bookkeeping of your business will cause your business to end up with an avoidable financial disaster.
|Posted on June 30, 2016 at 8:45 AM||comments (1)|
By: CeCelia Bos, Bos’ Optimal Solutions, LLC
It is amazing how many times I have tried to help my clients, friends and family members by providing them with the "how to protect themselves" information based on whatever situation they are currently involved in.
My dream had always been to start BOS' Optimal Solutions and now that I have, I have realized that I am my own worst client. You know the example many reference, the plumbers house has bad plumbing; The carpenter’s house is falling down. Well in my world, the business consultant isn’t following their own advice to protect their business.
How is it as a business consultant I can assist my clients and provide insight in areas of...
• Make sure your contract is drafted correctly, completely and correctly.
o If you’re not sure how to do this, hire someone who is experienced in this area to assist you.
• Make sure you receive payment before you complete the work requested.
o If a client isn’t willing to provide you payment, something is hinky.
• Make sure that you understand completely what the client is looking for.
o Communication is the key! It’s amazing how many times what a client requests aren’t exactly what they want. I actually had to redo a website 3 times before the client finally explained what they were truly looking for. And the best part, she had a complete layout of colors, placement, etc. But, when asked, this information wasn’t provided. If a client gives you carte blanche to do the work…run away very fast! Unless you enjoy redoing your work.
• Make sure you have a budget and business plan that is going to provide you with the necessary guidelines and motivation for moving your business forward.
o This seems so simple and yet is very hard to execute. As a business owner, you know what you want and where you want to go. Having a solid business plan and the proper budgets in place, provides you with the map you need to actually accomplish your goals. And if you take that side street, whether by accident or by choice, you can always find your way back.
• Make sure you are not doing things the hard way. There may be easier methods that you are not aware of.
o Whether we like it or not, we business owners don’t know everything. Shocker, I know. Sometimes, the best advice comes from places you least expect.
* Other business owners in the same industry or similar ones are one of the best sources of answers to the “How do I?” or the “Am I doing this right?”
* It could be a very close friend who can offer a different perspective. I am blessed with one who is exceptionally good at this.
* Or worse yet, your teenager. Mine just got me good when I was explaining a situation and she provided me with alternative that was so simple and yet I was missing it completely.
And fail to do them myself with my own business!
I have been in business for two years and have, unfortunately, had several painful lessons. The upside is that it has allowed me to embrace that even as an entrepreneur I need to remember I am also my first client. This means taking my own advice and learning from the lessons that life has provided. Only then can I, or any person/entrepreneur be successful.
|Posted on June 24, 2016 at 11:50 AM||comments (0)|
Do you want it done or do you want it done right?
By- CeCelia Bos
"Price is what you pay. Value is what you get." - Warren Buffett
Mr. Buffett made this quote during the 2008 annual report of Berkshire Hathaway Inc. While he was referring to the values associated with investments, this is still recognized in several areas of business decision making practices.
It amazes me how many times business owners know they need to get a project done but instead of focusing on the value the person brings to the table they focus on how much it is going to cost them. While all good business owners keep their bottom line in the back of their mind, great business owners understand that getting something done that requires another person to fix, isn’t worth the stress caused, much less the money that had been paid.
Real Life Scenario #1
When I first got started in business I had a client hire me to get his bookkeeping finished for the previous year because the people he had hired to do so, not only didn’t get it complete but didn’t get it completed correctly. Now, keep in mind the following points as we continue:
• He had already paid out almost $1500 for the previous individuals.
• This is the end of February.
• He wanted to file his taxes on time for the previous year.
During our initial conversation he informs me that one person was trying to do the work in QuickBooks Online. Another person got so frustrated with QuickBooks Online they started using spreadsheets. Finally, since business owner didn’t like either, he started using QuickBooks on his desktop. After an hour and half conversation during which we discussed price, best case and worst case scenarios, he signed a contract and provided a down payment so I could get started.
What a mess I found! Because of the missing entries, duplicate entries, triplicate entries and wrong entries it was determined that it would be quicker and more cost effective to recreate the desktop company and completely redo his book work for the year. This included several phone calls for clarifications. Several meetings to obtain additional documentation. Plus, several late nights to get it all done by April 1st so he could have financials he could understand and provide to his accountant for tax preparation purposes.
I turned everything over to this client the end of March with his itemized final bill which included the subtotal for all the work completed, deduction for the down payment previously provided and remaining balance. His reaction, “I’m not going to pay this. I gave you a down payment that should be all it should have cost me. I can hire anyone at $10 an hour to put the numbers in for me.” After I got over my initial shock, I smiled and responded with, “I seem to recall that’s what you did that caused you to need me to fix and redo everything.” I didn’t do any more work with him and the following year, sad to say, he was out of business.
Real Life Scenario #2
I was given a referral of a lady who had been having a family member do her books for the entire time she had been in business. A few days before taxes were supposed to be filed, the accountant contacted her and informed her she needed to “find more expenses” because there was going to be a $15,000.00 tax bill to pay if she didn’t. Needless to say, she was not a happy camper.
I met with this client and we looked at how the books were set up. We looked at the bookkeeping side of the business and discussed what needed to be done to get the business where the owner wanted it to be, get things back on track and how to not have this kind of “surprise” again. In the following year, we reorganized the Chart of Accounts, created a flow to track the receivables and payables and each month we discuss how the business is doing (with a previous year comparison) and what areas need to be watched to make sure there isn’t another tax bill like she had seen in the past. By bringing in someone like myself, the book work that took several hours each week compounded by a lot of frustration, is now done in under 2 hours per week. The reasons behind this is simple, a person was brought in who enjoys doing the bookwork, understands it and can provide the answers the owner wants.
By removing the stress of the bookkeeping, having someone who is able to provide the answers needed to understand the business and giving the owner the ability to focus on what they enjoy doing, the businesses Return On Investment was up 45% that year. The new year tax bill was pretty insignificant in comparison because plans and processes were put into place to help deter the tax ramifications for the increased revenue. But most importantly, the owner was ready for the tax bill instead of being surprised by it.
So why did I tell you these stories? Because one of the areas that most, not all, business owners hate is keeping tracking of their books. When they are ready, they do the smart thing and make the decision to hire someone to keep track of their receivables, payables, provide financials for review and other miscellaneous tasks. Upside, they will have several individuals that “apply” for this opportunity. Downside, how do they determine who is the best? It’s pretty simple, as a business owner you need to determine who gives you the best bang for the buck. In other words, who brings the most value to the table. As an independent contractor it’s amazing how many times I hear the following reasons for not moving forward with a contract.
• That seems awfully expensive.
• I will look at it closer when I get some time.
• We really can’t afford to do this right now.
• I haven’t gotten around to looking at your proposal.
• I found someone who will do it for $12 per hour instead of your hourly rate.
What does this really mean? Most of the time, it means that the business owner doesn’t understand the value that the contractor is able to provide. Most business owners believe bookkeeping is easy and anyone can do it. What isn’t realized, until it’s too late, is that a great bookkeeper brings the owner so much more. Not only do they do the basic entries, but they are able to assist their clients by making sure that the client understands exactly how their business is doing. They provide the business owners with an understanding of what the Profit & Loss, Balance Sheet and Cash Flow are showing. A great bookkeeper will not only set up the books in a way that the client will understand, but will also work with their accountant to make sure that everything is being done in a manner that provides the business owner with the most tax advantageous purposes.
As a business owner, you need to make sure that you are getting the complete value for the price that you are paying. It may seem like a great idea to hire a $10-$15 person to do your books. But if you pay them $1500 for the work they complete and it costs you an additional $750 plus to fix things, were they really worth it?