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Too Close to the Numbers
Equine Accounting
Wednesday 28th of July 2010 11:00 AM
I have had countless small business owners over the years come to me at their wit’s end after trying to handle the books on their own. A business may start small and the owner buys into the old adage of “keeping the books myself keeps me closer to the numbers”. However, they don’t stop and ask themselves if they have proficient bookkeeping, accounting and tax training for a small business and, more importantly, if they should be allocating their time to this endeavor instead of focusing on their core business. It simply does not make sense from a financial standpoint for owners to spend their time doing tasks that can be outsourced at a lower cost, vs. the owner’s hourly cost, to someone who is trained in small business bookkeeping. Trying to multi-task running a business while trying to stay on top of all the accounting functions can pull an owner in all directions. Wearing too many hats often leads to mistakes and omissions in record keeping. When you are too close to the numbers, it is hard to see the big picture objectively as it’s easy to get caught up in all the details and not spot mistakes. In time, many entrepreneurs realize they cannot handle bookkeeping on their own. They often turn to an office assistant, or a friend, or even Aunt Sally to handle the books. Does this solve their headaches? More often than not, the answer is no! It actually causes the headache to grow larger. In time, the business owner figures out that it was a bad decision, but feels bad firing a friend or family member so the cycle continues. We are working with an equine client now who fell into this trap and it ended up costing them thousands of dollars and trouble with the IRS. You see, they had cash flow problems and their internal bookkeeper/cousin was having the owner sign the checks written to the IRS for payroll taxes, but wasn't mailing them because they were short on cash. She felt guilty about not being able to manage the cash flow, so she just hid the checks. This went on for months. When the IRS came knocking, they owed over $75,000 in taxes. Had the employee not been a relative, they would have terminated her, but since she was a cousin, they kept her employed. Unfortunately, that wasn't the only mistake she had made and eventually her issues caught up to them and the company had to file bankruptcy and close. As you can see, choosing another untrained individual will only cost more in the long run. The bottom line is to hire a qualified and experienced bookkeeper who will properly track your finances accurately the first time, which saves you time, money and headaches in the long run!
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Reconciliation Isn't Just for Relationships
Equine Accounting
Wednesday 21st of July 2010 11:00 AM
We’ve all been told that we need to reconcile our personal bank statements each month, but how many of us actually do it? If your funds are flowing just fine, you might just skip that step and assume that all is well. That assumption can be a huge mistake if you apply that thinking to your equine business as well. Reconciling your monthly statement with your books is a fundamental aspect of bookkeeping. It certainly can be time consuming and fairly tedious, depending on the number of transactions each month. I had one client bring me almost two years worth of unreconciled statements who wanted me to find out what went wrong. After much research, I discovered the error, but the solution was a much more difficult task as the mistake occurred over a year before! Banks do make mistakes, although they would like you to believe otherwise; companies do double-charge whether in error or for unscrupulous reasons; debits continue from businesses even after you have discontinued service; and accounting entries get entered incorrectly from time to time. With the potential for these sorts of errors and overcharges, it is worth the time and effort to hire an experienced bookkeeper who can stay on top of your finances each month.
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Call for Back-up!
Equine Accounting
Wednesday 14th of July 2010 12:00 PM
As powerful and advanced as computers are, they are not infallible. But how many of us rely on them completely for our businesses? We all know things happen – floods, fires, and the spontaneous malfunction or even death of our computers. There is really no excuse for failing to back-up your financial data. Your processes must include regular and routine back-ups of all your bookkeeping activities, whether they are online or on your local hard drive. The last thing you want to happen at the end of the year or at any point for that matter is to lose all your numbers. Losing your financial data means to many businesses not knowing who owes you money, and this will mean in many cases, missing out on getting paid. You may not be able to prevent a disaster or technical malfunction, but you should take precautions to lessen any damage these events could cause. There are many products in the market today that make backing up data virtually effortless, from online back-up services which run whenever your computer is idle to capture any new information you have input to online accounting software which houses your information on their secure servers for retrieval from any computer. Even in this increasingly paperless society, having hard copy print-outs of quarterly and yearly financials are important to have on hand to be ready for any situation. We worked with an equine client who was getting ready to prepare their 2009 taxes when they lost all of their QuickBooks data. It was unrecoverable. They didn't have time to recreate the data file so they hired us. It took us almost 80 hours to put together the information, which cost them about $4800. An offsite backup service can cost as little as $20 per month.
If you lack the confidence to use some of the accounting software packages available or don’t feel technologically savvy, hire an experienced bookkeeper and IT company to take care of it and to maintain your back-up of files. We work with both 411 Technology Solutions and LogicKey and know they will help you devise a back-up and disaster plan that will alleviate your worry. Make backing up your financial data the one thing you don’t have to worry about, as there are sure to be plenty of other things to focus your attention on when running your own business!
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