Small Business Bookkeeping Tips : #1
Your Bookkeeper Needs You
Are you a small business owner employing an office
administrator to do the bookkeeping? Do you think she’s great because
everything she says about the books sounds just like she knows what
she’s doing and at least you don’t have to? Reality check….
…just because your bookkeeper knows more than you about bookkeeping, doesn’t necessarily mean it’s being done right.
need to take an active interest in the financial aspects of your
business. Don’t sit back and leave it all to the bookkeeper. It’s not
fair to them and your business could end up in dire financial strife.
The basic activity of bookkeeping is ensuring that all the financial transactions are coded to the correct account on the chart of accounts. Choosing the right account is wholly dependent on what each transaction is.
Transactions coded to the wrong account will cause your accounts and reports to be wrong…
…reports that you would take to the bank to get that all important loan that you are sure can be paid off based on the information provided by your trusted bookkeeper.
Bookkeepers need to have a complete understanding of where in the accounts to put each transaction.
1. Does a clocking-in machine go to wages & salaries?
2. Does the purchase of a vehicle go to vehicle expenses?
3. Do the payments against a loan go into the loan expense account?
These are just some of the things a bookkeeper needs to know how to handle.
(See the answers at the bottom of this section)
A specialist in accounts such as a professional consultant bookkeeper can do a full review and advise you of any errors. If you have any concerns about what your bookkeeper is doing, find one of these specialists and get them to check out your accounts.
If you are concerned about upsetting your bookkeeper when you do this, you can say that you are investigating ways of improving the business.
If the specialist comes back to you with a raft of errors, does this now mean you have to fire your bookkeeper?
No! Unless they are deliberately crooking the books to steal your money, you should consider sending your bookkeeper on some courses to increase their skills.
Perhaps even a couple of one on one sessions with the specialist mentioned above will get your bookkeeper on track.
Training your employees is a deductible business expense – good news eh!
Another way to approach this issue is by getting your employed
bookkeeper/office administrator to do the day to day bookkeeping
entries, and then outsourcing the preparation of the monthly reports to a
The professional will be able to review
the accounts ensuring all has been entered correctly (they have their
ways and means of doing this) and then produce reports and explain to
you how your business is doing financially.
Doing this on a monthly basis will keep things in good order, right up to date and keep you well informed.
A clocking-in machine is an equipment purchase – only payroll payments go to wages & salaries.
A new vehicle goes to the vehicle asset account, not expense account.
A loan payment is split - principal payments to the loan liability account, and interest payments to the interest expense account.