I recently began working with a company that has been in business for several years. They reached the point where they could no longer “do it all” and found me through my CraigsList ad. Their accountant recommended they begin using QuickBooks to make things simpler – and it will, just not without a little help.
Before you move to QuickBooks or any accounting software, you should think about the process before you proceed.
Start by having a discussion or making a list of your company’s goals. And not just the short-term goal of getting your books in order; include the longer-term goal for your company – where you want to be in 3, 5, 10 years and how do you plan to get there.
Here are a few questions (in no particular order) to get you started:
– Do you want to increase your company’s income or are you happy where you are and just want to keep it steady?
– Can your position be replaced? If the answer is yes, are you getting regularly paid for the value of that position?
– Are you working with the client base that makes your happy?
– Does your existing client invoicing system work?
– Will you be adding to your labor force?
– Are you in a location that works or will be expanding/moving?
– Will you need to add/replace existing company vehicles or technology (computers, phones, etc.)
– Does your existing reporting structure work – timesheet reporting, receipt tracking, vendor bill reporting?
– Are you regularly lending the company funds? If you are not taking a regular paycheck, the answer is “yes”.
– Do you know how much a project earns?
– Should you hire administrative support?
– Should you change your marketing strategy?
– Do you want to keep doing what you are doing?
With a view of your goals, you can structure your books to make sure you get accurate snapshots of the health of your company. In many cases, using the Income/Cost of Goods & Services/Expense structure will let you stay on top of the profit of your services (Gross Profit) giving you a clear separation between the cost to provide the service you sell (labor, materials, subcontractor expenses), from what it cost to run your business (accounting, marketing, rent, office supplies, utilities).
With that structure in mind, you can create a budget to anticipate your needs. Knowing the Gross Profit of your company (above the line) will quickly show you if you have what you need in place to support the other expenses (below the line).
Using the budget as a template for your expected reporting needs it’s time to take a look at the software.
A good double-entry bookkeeping software does what it says it will. It can help organize your business and give you a great view of where things stand. If you subscribe to QuickBooks Online or use the current QuickBooks desktop versions you can download your bank and credit card information directly into the software instead of typing it in. And it works well – As long as you know what to do with the data.
“Out of the box” there are some great templates in place and that can get you started. But do you understand how the Chart of Accounts, Profit & Loss and Balance Sheet can help you run your company? Do you have to use the items that they specify? What if you need to add another item? How do you make sure your downloaded transactions go to the right account? What is the right account?
It can be frustrating but don’t let that stop you. If you don’t understand how it works, it’s not you. You just need to sit down with bookkeeper or accountant who can walk you through it.
But don’t settle. This is your business and oftentimes, the way you support yourself and your family and invest in your future. This is a big deal. Make sure the person you hire to help you understands what you need to be comfortable with the process and can work with you to meet your goals.
Be prepared to have someone seeing your “messy house” then let the cleanup begin.
It is so very worth it.