I am guessing that many entrepreneurs prefer to farm out their bookkeeping and focus on core business. This is after all the mantra of bookkeepers united. In the course of operating several businesses I have always used the services of an accounting office and so probably should you. My first business was in the building maintenance industry and my company at the time served both commercial and residential customers. There were quite a few account receivables as well as cyclic changes in cash flow from daily transactions. Although Quick Books and other financial software weren’t yet available, the premise of the Double Entry Accounting was the same as it is today.
There was always so much to do with writing proposals, billing clients, making deposits, paying suppliers paying taxes, recording deposits, and so on and so forth. At the end of each month I would simply stuff all of the paper records of those transactions into envelops marked “Revenues” and “Expenses” and leave it to my bookkeeper to untangle and record what account those items belonged to. Sound familiar? I never once had a bookkeeper complain since they were being paid by the hour to sort it all out. There really isn't any incentive for the independent accounting office to train you to optimize your recordkeeping.
All of my articles are written for owners and leaders. Your plan is to scale your business up and so part of that is building the strong foundation that is required to support growth is a cornerstone of financial literacy. Above we see the quick and dirty way to organize your revenue and expense transactions.
There are a few problems with such an approach. First is that expenses, like all expenditures, accumulate over time. That $300.00 bookkeeping fee turns into $3,600 over a year’s time and $72,000 in twenty years’ time. This will be amplified if you add a larger payroll and more transactions as your business grows. Now if you are anything like I was, you are probably thinking “yeah, but I am just one person and having bookkeeper helps me to keep my sanity.” It is a bit more work up front but the central theme of the training provided in this series of articles is to build the right guiding structure to support your growth.
I get that bookkeeping is busy work, (just ask any of the six bookkeeper and two CPA’s who've worked for me over the years), but money is the lifeblood of every busy and that makes bookkeeping either a blood bank or waste receptacle.
There is no reason that you should do all of those tasks yourself, and if you are below, say a million in revenues, you probably cannot afford to hire someone in house and remain competitive in the market place unless you are willing to take a pay cut. And that, by the way, is the only thing I am going to mention in this entire article that you should find incomprehensible.
So here is what you can do to lower accounting costs: Tighten up your end of the game! Rather than just write a label on a receipt when you have expenditure, take the next step and staple all of the dated receipts together for the day. Count up your cash each day to the last penny. Compare what your paid invoices say to your Actual Cash Drawer. Design a form that has the following heading “Daily Cash Drawer” in one column put all the denominations for your bills and coins and write how many pieces you have of each denomination. I included such a form below.
You need to have spaces for Todays Date and a place to write the Ending Balance space for yesterday’s drawer; make sure you note: prior day so you don’t confuse yourself later. Make a space for checks received. Next you will need three short columns: Credit Card Sales before tax, Tax Collected, and Total Credit Card Sales.
Similarly you need three more columns for cash received if you accept cash in the course of doing business.
You also need a space for refunds and itemized cash out receipts. Refunds must be made in the manner payment was tendered. If payment was given in cash, the refund must be in cash as well. Credit card transactions are not to refunded in cash.
I also suggest making spaces for several lines for that last item since there will be days where you need to make several expenditures.
Next, note your Cash Deposits and Check Deposits, and finally, make note of your Ending Balance of your Cash Drawer (cash only).
Your new paper worksheet will help to make reconciliation of your bank statement and accounting program much easier and faster for your bookkeeper. It only takes about ten minutes of your time each day to accomplish this task. It is easier to find a missing receipt on the day it was lost than it is to try and think what it was thirty days later.
Moreover, this activity should save you fifty percent or more on your accounting/ bookkeeping costs. Transactions are easier to track when you need to revisit them. It is also a great loss prevention control and good cash control narrows the opportunity for employee theft. Finally, this activity will help you to rethink some of what might be frivolous spending or what you might do about a velocity change in your revenue stream.
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