Can bookkeeping software make your life easier? – Yes, it can.

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.


Rental properties

I inherited a 2-family rental property when my grandparents passed away. A lovely financial opportunity complicated by the fact it is in another state with a 14-hour drive.

I have been fortunate to have someone I trust keeping an eye on it so I just have to handle the financial side of things. On paper, when the rent is paid and there are no major repairs, the obvious answer is to keep it. But sometimes there are complications.

I am currently transitioning between tenants and these circumstances are affording me the opportunity to take a good hard look at whether or not it makes sense to keep it or sell it. For now, the repairs are “small” so I am taking the risk for another year.

Keeping track of those expenses has been an interesting task. Fortunately, none meet the IRS requirements as a capital improvement and making sure that the vendor invoices, incidentals and material costs for the repairs & cosmetic updates are clearly identified, allows me to accurately track the costs for each unit.

This is where a bookkeeper might be able to be of assistance. If you own rental properties, being able to know the return on investment for each unit can go a long way in helping you decide where additional investment in those properties makes sense. I’m not talking about whether to replace a roof or keeping the properties up to code, I am thinking about whether replacing an old carpet with laminate flooring, updating the bath or kitchen cabinets or replacing appliances might allow you to increase the rent and still stay within the going rental rates for your area. Being able to run a Profit and Loss or Income Statement per unit allows you a quick overview of each rental unit.

You don’t need to invest in QuickBooks or Quicken to do this although I feel it might make things easier when handing off the information to your accountant. (I am a bookkeeper.) A quick internet search for “Excel rental property” will come up with many predesigned worksheets and templates.

The important thing is to keep track of your income and expenses to avoid surprises at tax time. – ‘cuz there are some surprises that just aren’t fun.


Payroll & Job Costing… I know!

I’ve been thinking a lot about QuickBooks & payroll this week. I love doing payroll. Even with the curse of badly hand-written timesheets it’s just something that makes sense to me and using the Enhanced version of QB payroll so that I have access to the tax forms still allows me to make any corrections to entries via the timesheet & paycheck instead of having to use journal entries or a customized transaction. This makes it so very simple to correct any mis-assigned customers or projects and produces a complete P&L by job. But I am not trying to sell you on using QuickBooks payroll services.

If you are a small business that depends on job costing to keep track of your projects, using QuickBooks payroll is the easiest way to capture your data. Of course, it’s only easy if the process is simple and efficient for your company which is why most of you use an outside payroll service. But if you use time tracking software, like T-Sheets, you can sync your employee’s time directly into your QuickBooks file, even when you don’t use QB payroll services.

But there are other ways to allocate labor expenses.

I provide payroll services to a company I work with. This means that it is separate from their QB file. I record their payroll information in their company’s file the same way I handle it for another company that uses an outside payroll service. I have created items that are assigned to the correct COGS, expense and liability accounts and record the debits from the bank account via a check or bill payment. Specific items are allocated to customers/projects including any payroll expenses that are passed on to their customers.

For this company, the office manager handles the day-to-day bill paying but does not write separate checks so I created memorized bill that assigns one item for the entire gross salary and separate items for the tax deductions or reimbursement additions. They open the memorized transaction then simply enter in the amounts shown on their paystub. This has been set up so there is no delay in the staff getting paid needing only to use the Pay Bills function to print the paychecks.

When I make my office visit, I edit the bill to allocate the job expenses.

I will admit supporting job costing needs with an external payroll service can be a lot of work when there is no established system in place for recording time. For the company where I am their payroll service, I have created an electronic timesheet using Excel that allows the staff to enter start and end times for their daily tasks and record codes that are used to automatically calculate the time and gross costs as well as the FICA and Medicare for the job-costed project. Standardizing this process allows me to quickly update the “paycheck” bill and allocate the time and taxes per project. I simply enter in the hours worked per project or for company’s administrative payroll expenses.

Total hours less job-costed project hours equals company admin hours.

And I check my numbers. If everything has been entered correctly – and the check won’t match the payroll report if it wasn’t – the payroll liabilities account will zero out when the taxes are paid.

But this process doesn’t require extensive QB experience and the job allocation could be handled by the office staff with a clear set of written instructions.

And did you know that you can use QuickBooks time tracking even if you don’t use QuickBooks payroll? If you use an outside service like TSheets, your employees or vendors can track their time and you can sync the information directly into QuickBooks.

So, to conclude: Setting up time job costing can be fun.

You got that. Right?


It’s your business – It’s your life

I have been working with small businesses for my entire work life. And to give you a hint of its longevity; when I started working, computers were only available in large insurance companies in separate raised floor air-conditioned rooms and in the tech world, dinosaurs still roamed the earth.

Since I became bookkeeper I have worked with very small businesses; frequently 1 person owners or “mom & pop” shops, and I have come in as a contractor to lend a hand with the books and quite frequently – all things admin.

This is something I think about a lot. You have decided to start a business. It is because you are fortunate enough to earn a living doing what you love, or you are simply happiest when you are the boss. Regardless of the reason; it is all yours. And this, to me, is where it gets interesting. I am often surprised by how many owners I have spoken to who try to Do It All –  well past the time when assistance or delegation is needed to let them, and their company, grow.

More times than I should be able to say, I have spoken to owners who ask me for a bit of help with their bookkeeping. In almost every case, their partner/spouse is handling the books. When I ask if this is something they want to do, about 50% of the time, I get a quizzical look from the owner as a reply. And I see this as part of the reason they need that bit of help.

It is an understandable decision to have your partner participate in the dream, especially if they don’t work outside of the home full-time. It starts off seeming like a simple ask. After all, you are just starting your company and there aren’t that many transactions in any given week, right? And if you have worked with your accountant (you have an accountant – don’t you) setting up your bookkeeping system to make the data entry a simple task, then it shouldn’t take up much time each week.

Or do you do everything yourself? This should work for the same reason I mentioned in my previous paragraph. If you have set aside 10% if your work week for administrative tasks, you should be able to keep up with things for a while.

However, if you are in the contracting trades, you know how difficult it can be to manage your projects from your office even if you have someone in the field. Or if you own a store or restaurant, how often have you needed to step in if an employee can’t come to work? You can find yourself leaving the office during your designated admin time, so you think that you can take care if it on the weekend or after dinner or the day your place is closed. And you can – but what about your life?

This is just a reminder: You need a life. The work/life balance thing (yeah, yeah, yeah, blah, blah, blah) is important. If you are happy working 7 days a week and you feel everything is in balance, go for it.

Just keep this other thing in mind – it’s your business.

Do you have plans for it to grow? If the thing you love is the administrative side (and I am including marketing here)  – hold onto that when you are looking at expansion. Hire the folks that will successfully do the things you aren’t best at. If you love working in the field, love working with your hands, love contact with people – hold on to that. This will keep the joy in your life. Hand off the administrative tasks and it doesn’t have to be all at once. If you take a hard look at these functions, they can be outsourced in pieces.

As I am a bookkeeper, this is the 1st item I believe should be outsourced. A good bookkeeper can seem like a large expense but they should be able to perform these specific tasks, quicker and more efficiently than you or an untrained admin. They can know what to look for if seems like you aren’t making enough money, help you restructure your chart of accounts to break out your cost of goods & services gross profit and determine if you are charging enough, show you where you are leaving money on the table and keep everything in shape to make the end-of-year handover to your accountant an easy one.

The owner of one of my first contracted jobs told me something that has always stuck. She owned a store that was open 6.5 days a week. She said that hiring a bookkeeper 1 day a week freed up 2 days in her week allowing her to expand her business and give her back a day off.

And don’t forget, the cost is a business expense.

Just a thought.

QuickBooks Items – I love these things.

In my history as a bookkeeper I have not yet worked with an accountant that likes a dense Chart of Accounts. As the owner, you may want to know exactly what marketing campaign made money or widget sold well but your accountant most likely won’t care about that level of detail.

This is where items rule! Think about the way you sell your services or products. If you are a general contractor, you may sell carpentry, plumbing, HVAC services and definitely want to know how and where those funds are spent and income is earned. If you are a florist, tracking the types of flowers, plants or arrangements you sell will go a long way in tracking trends. And don’t forget those widgets…

But from an accounting perspective, do you need to know more than your income and expenses? Yes, there is a need for individual expenses and I am certainly not saying that all you need is a 2 line Chart of Accounts but does the person handling your data entry in Quickbooks need to remember the exact income or expense account number/name? The answer is no.

By using items linked to the individual income/cost of goods/expense accounts, you can collect as much detail as you desire without the need to over complicate your Chart of Accounts.

And it makes it a much easier way to handle all of those receipts. Whether we like it or not, the best way to defend an IRS audit is a receipt showing an accurate record of your purchase. Why not used pre-printed stickers with the QB item to apply to these receipts.

If you have field staff that make company purchases, they can turn in their receipts with correct item already noted. With pre-printed labels, no more handwriting questions.

Think of the time and cost you will save when your data entry person is able to quickly enter the data without the need to know a lot about your business and this means if that data entry person has been you, the owner, you can hand that responsibility over to your office support staff (you have an admin, right?) knowing that the details won’t get lost and focus on growing your company.

And if your bookkeeper does all of your data entry, think about how much faster the entries can be made when you hand over tagged receipts.

Just a thought.