There are four major types of accountants and/or bookkeepers:
An accountant sets up the bookkeeping system, monitors it and interprets the results. The accountant knows how to design a system that benefits the business but also captures clear and accurate information in a way that is not burdensome to the bookkeeper.
Bookkeepers perform some or all steps of the accounting cycle. A full-charge bookkeeper knows how to perform all the steps, and a clerical bookkeeper usually specializes in one or more steps and can also specialize in one area of operations, such as accounts payable (AP), accounts receivable (AR) or payroll.
Data entry clerks enter the data into the accounting system, but they generally do not understand how the data affects the company’s financial statements. Data entry clerks specialize in speed and accuracy.
The lists below outline the minimum knowledge an accountant or bookkeeper should have.
Qualifications of an accountant
Qualifications of a full-charge bookkeeper
Qualifications of an AP or AR clerical bookkeeper
Qualifications of a payroll bookkeeper
Here is the US Department of Labor Fact Sheet on the subject.
Using my intern as an example, he began his unpaid internship with my company by first learning about my business model and client pricing strategies. At that time, I was beginning to use Asana for monthly recurring client tasks. He learned the Asana software by helping set up the taks. He then began learning the QuickBooks accounting software by my training him directly and by him completing data entry and bank reconciliation tasks on his own. He and I reviewed his work, and I gave him feedback and notes. After he mastered these tasks, I trained him on exporting QuickBooks data into Excel reports I designed especially for each client. Although he used Excel extensively in school, he said he learned a lot of new things about Excel during that training.
While all this was going on, he performed scanning and filing tasks. I paid him for these tasks because they did not meet the criteria above. Because my intern has now learned the tasks in which he was trained, if he continues to do these tasks for me, I will have to pay him. Our relationship no longer meets all six of the criteria above. My next step is to help him obtain an internship at a local CPA firm.
Another important point related to interns is to make sure to classify paid interns correctly with regards to the employee vs. independent contractor rules. The fact that a worker is an intern does not automatically qualify her as an employee or independent contractor. The same rules apply relative to degree of control and independence.
]]>Starting and owning a business produces a special high and invites you to believe crazy things your ego says. To keep the high going and feed the beast that is the ego, you start buying things you don’t need.
# 2 Your Ostrich Borrows Too Much Money
Not being able to pay the bills hurts. On so many levels. If you can’t pay the bills, the problem is not that you can’t get funding. The problem is that your expenses are more than your revenues. Borrowing money is easier than fixing the revenue/expense issue. It’s a band aid for something that’s hemorrhaging. Don’t stick your head in the sand. Face the revenue and expense problem and tweak it.
We all know there is an appropriate time and place for leverage. But leveraging your business is a tightrope act and that means you have to know something about walking a tightrope. A profitable business will fail if its debt repayments use up the profit. I’ve seen it happen too many times. Don’t go the easy route. It rarely pays off.
# 3 Your Scaredy Cat Won’t Fire Bad Employees
Bad employees can bring a business to its knees, and fast. They waste materials and resources and make enemies of your customers. With today’s social media, you can’t afford bad customer service. Are you letting bad employees hold your business hostage because you feel sorry for them, they are related to you or you just can’t deal with firing them? Do you keep counter-productive employees because you don’t want to do their work yourself until you find a replacement?
I find many business owners feel powerless and at the mercy of their employees. You own the business. You are the boss. It’s hard to remember this if you’ve worked for someone else for 20 years before you started your business. Good and excellent people are available to work in your business. But if you believe they don’t exist, you will never find them. You may need to pay a bit over market to find and keep good employees, but your money could not be better spent.
# 4 Your Miser Won’t Pay Decent Wages
Finding and keeping excellent employees will usually cost you more than what the market says to pay them. Remember the “market” price is usually the minimum or an average. If you want above-average people, you have to pay above-average wages or provide above-average working conditions. Don’t expect to have an excellent business while treating and paying your employees at minimum standards.
# 5 Your Racecar Driver Can’t Put on the Brakes
Uncontrolled growth is a recipe for crash and burn. Sometimes you have to say “no” to speed if you cannot manage the growth. Slow and steady wins the race. Find your excitement in other areas of the business, not in gambling it away while going for the big score.
# 6 Your Free Spirit Won’t Stop To Look at the Numbers
There is no way you will make the best decisions for your business if you don’t look at the financial numbers. If it’s something you hate doing, hire a bookkeeper or business coach to make you sit down once or twice a month and study the numbers and percentages. Don’t be the business owner who has to close the doors next week and had no idea the end was at hand.
# 7 Your Grasshopper Has No Plan B
What is your Plan B for the hard times? Your plan B can be cash reserves or your ability to work for someone else to bring in extra income. For example, if you have a bookkeeping business, can you get temporary work with a CPA firm or find work through a temporary employment agency? Have a Plan B and don’t wait too long to use it.
# 8 Your Star-Crossed Lover Refuses to Pivot
You have a love-affair with your current product or service, and it’s hard to let it go. But if no one wants it or can afford it, you have to move on and innovate. Remember, you are an entrepreneur! ”Pivot” is a term from the book, “The Lean Startup” by Eric Ries. In simple terms, “pivot” means to change what you’re selling because what you’re trying to sell is not getting sold! I’ve seen builders and architects do this over the past few years. Their pivot was to combine their current knowledge with the new knowledge (and trend) of “green building,” then consult existing property owners (residential and commercial) in lowering energy use or incorporating green technology into remodels.
# 9 Your Child Mistakes Cash Flow For Cash Stick
If you are inexperienced in managing cash, you may not understand how much things cost. You see $250K in annual sales running through your bank account, and the inexperienced cash manager in you mistakes cash flow for cash stick (profit). After eight years, I’m still amazed at how much it costs to run a business. To an inexperienced owner, $100K seems bottomless. How could it ever run out? Always assume you have less money than you do.
# 10 Your Hippie Is Afraid to Make Money
The “bottom line” is not what matters all of the time, but if you want to stay in business, it does matter most of the time. Making money often gets a bad rap because of the way some people go about it. If you don’t make money, you and your employees will be out of a job. And how is that helping anyone? Revenue is important, profit is important, and how you earn both is important. Use your business to change the world, but make a profit so you can keep changing it!
]]>If you are using your personal PayPal account for business, STOP!
Open up a business bank account and attach a new PayPal business account to it.
When using accounting software, set your business PayPal account up as a bank account. When purchases are made using Paypal and Paypal transferred funds from your business account to fund the purchase, do this:
To record the expense/purchase: Enter the purchase in the PayPal account check register.
To record the transfer of funds to fund the purchase: Enter the transfer of money from the checking account to the PayPal account as a bank transfer.
The result is that you do not enter the PaypPal purchase in your bank account check register, although your bank statement may indicate the vendor paid. When your bank account funds your PayPal account, this is a transfer. The vendor was actually paid by your PayPal account.
When receiving revenue via your PayPal account, do not transfer funds to your bank account then recognize that transfer amount as revenue. Your revenue was the actual amount you charged for your product or service – before PayPal fees.
To record a sale to a customer: Enter a deposit that is split into two lines – 1) recognize revenue at the gross sale price and 2) recognize the PayPal fee as a negative in the deposit entry screen and post to an expense account such as “Merchant Fees.”
Do Not Use PayPal as a Savings Account
PayPal is not a bank and therefore is not insured by the FDIC. The FDIC is a US government corporation operating as an independent agency that provides deposit insurance. It guarantees the safety of a depositor’s account in member banks up to $250K. Should PayPal go out of business or get sued, your funds may not be safe. Be diligent about transferring excess funds in your PayPal account to your bank account.
If you have a steady revenue stream coming into your PayPal account, one suggestion is to obtain a PayPal debit card and use it for business expenses instead of a bank account debit card. This way your PayPal excess funds are used. If there are no funds in your PayPal account, then your bank account will be used to fund the purchase.
]]>Outsourcing the accounting functions of your business saves payroll expense, overhead expense and frees up your valuable time. The expenses for an employee-bookkeeper include wages, paid time off, payroll taxes, unemployment taxes, worker compensation insurance, and benefits. In addition, you must provide work space, office furniture, office supplies, software and computers. The average business owner spends five or more hours per week managing bookkeeping personnel. By outsourcing your accounting functions, you receive services from a degreed professional at a fraction of the cost.
It is a common misconception that an owner will lose control if they outsource bookkeeping. In a properly designed system, only the owner decides what bills will be paid, makes management decisions and signs checks.
It’s understood that a business should focus its resources on tasks that add value to the customer relationship and revenue stream. If you maintain good books or sloppy books, chances are your customers will never know. Yet books that do not reflect the true shape of your business provide no clue to managing your business. Not knowing where you are making or losing money places you out of control. Cash flow is not a problem, it is a symptom of other problems.
If there is a company that can do it better, faster and cheaper than you, then why waste your resources on the non-revenue producing function of accounting? By outsourcing these functions to One Source Accounting that regards these as its core competency, you now have the ability to become more profitable, more efficient and far more competitive by focusing on the tasks that are most important to your business.
]]>I started my business 12 years ago when I had a “face-boot” moment. (The expression is “face-palm,” but my moment was more like a boot to the face.)
Working as a staff accountant for a CPA firm, my production was about 50 clients per month. Within a year, I was completing 100+ clients per month, but there were no bonuses or pay raises. It didn’t take long to realize that if I owned the business, I would have personally profited from the additional 50 clients. I would have reaped the cash rewards of going down the learning curve and putting into place processes that improved my efficiency. It was a no-brainer. I quit my job and opened One Source Accounting.
I live and work in Gainesville FL, moving here when I was nine years old. I attended a local community college after high school, but dropped out at 19 and pursued a career in Gainesville as a mortgage loan processor.
At 24 (year 1990), I believed I needed a college degree in order to earn the living I wanted.
I chose to get my degree in accounting because it was safe. I needed something safe. I craved something safe. My father was an entrepreneur who constantly put our family at risk financially. My childhood and teen years were tinged with coming home from school with our electricity cut off, no working telephone, moving from place to place due to foreclosure or eviction, listening to my parents constantly argue about money and extreme embarrassment when Dad asked family members to borrow money in the middle of holiday celebrations.
At 29, I graduated from the University of Florida with a Master of Accounting degree, specializing in audit. I knew I never wanted to touch a tax return. While pursuing this degree, I planned on joining a large accounting firm upon graduation. That was my ticket to financial safety - join a big company and climb the corporate ladder.
However, in my last year of college, I was in a unique place in my emotional life. I was vegan, protesting for animal rights, overpowering rooms with patchouli and annoying everyone who wasn’t living my lifestyle. As I began interviewing with the large accounting firms, I knew I would never fit in. In 1995, I graduated with a Master of Accounting degree and accepted a bookkeeping job in Gainesville with a construction company earning $20,800/year.
I found myself over-degreed for Gainesville and struggling with how I was going to be true to myself while still fitting into a business culture that would pay me a lot of money. I kept changing jobs to increase my salary because that’s what you have to do in a small town. There were no corporate ladders in Gainesville. I knew I could move to another city where salaries were higher, but that was more of the same - chasing jobs for more money. I wanted something better, but I couldn’t yet define it.
Finally, in 2005, computer technology was common and accessible, and I knew I could start a business with just a laptop. And this is also the year in which I had my face-boot moment. I was no longer afraid to take risks or be self-employed. I had grown up enough and had time to look back at what Dad did wrong. I realized he quit every time things got tough and had too many martini lunches. I also studied every employer I worked for and noticed what they did right and what they did wrong. I was fascinated by those who owned a business and watched them like a hawk. I realized I was a risk taker but also knew I was not my Dad. I had personal stability and the work ethic to turn risks into returns.
Because I don’t have children, I can say this: Owning my business is the best thing I have ever done in my life. It has taught me more about myself, others and the world around me than any church pew, self-help book or therapy session. It’s changed my politics (I no longer overpower a room with Patchouli) and has given me the courage to tackle personal life challenges instead of playing the victim.
When I started One Source Accounting, it was to earn more money. I had no “why.” But once I experienced the liberation and self-awareness owning a business brought to my life, I wanted to help others on the same journey. Believe it or not, I fell in love with accounting while in college. That’s why I still do it. I specialize in helping small “Mom and Pop” businesses and tech startups with accounting and payroll.
I love being part of the support team for these businesses, and I experience a lot of “emotional ownership” while they are clients.
In my teens and twenties, I was not exposed to a person, a demographic or a cultural movement that demonstrated the entrepreneurship model and its wonderful possibilities. It wasn’t until I was 38 years old that technology ripped the gatekeepers from their posts allowing me to start an accounting business with just a laptop. And it wasn’t until 5 years after I started my business that the tech startup revolution brought amazing tools, information and motivation to accounting and entrepreneurship.
I am lucky to have witnessed the before and after. I think it gives me an uncommon sense of gratitude and particular thrill to own my business in this space and time because I can remember when none of this was possible.
]]>I bristle when business owners look to QuickBooks as a surrogate accountant. It’s software. Nothing more.
Paradoxically, Intuit’s marketing strategy of implying that anyone – no matter their accounting acumen – can purchase and successfully use QuickBooks serves to empower and sabotage their customers at the same time. Final result? It’s a wash, at best.
How do you know if need supervision while using QuickBooks? It’s simple. If you don’t know what accounts on the Balance Sheet and Profit and Loss Statements are debited and credited each time you click “Save and Close,’ you need supervision.
Still not convinced?
You just might need supervision when using QuickBooks if
1. You have a balance in your Undeposited Funds account. This should always be zero.
2. You can’t get your bank reconciliation “difference” to zero, so you click reconcile anyway letting QuickBooks post the unreconciled amount to “Reconciliation Discrepancies.”
3. You set up “Items’ to use in your customer invoices and make them “inventory” items instead of “non-inventory” or “service” items. Inventory is a complicated way to go in QuickBooks and should not be used unless you understand the concept of putting the inventory on the Balance Sheet then bringing it down to Cost of Goods Sold on the Profit & Loss once it’s sold.
4. You create expense accounts using vendor names or income accounts using customer names. Run a Profit & Loss report and look at the names of the accounts.
5. You create payees using the type “Other” because the person you’re paying doesn’t seem to be a “Vendor.”
6. You created a bank account for your personal checking account because you need a place to record your owner contributions and/or distributions.
7. You have sub-accounts in your chart of accounts, but you post transactions to the heading accounts.
8. You use the “items” tab instead of the “expense” tab when entering a bill for the purchase of resell products from a vendor. (See # 3 above.)
9. You aren’t using the Credit Card account type and credit card module to track your company credit cards.
10. You use the online banking transaction download feature and download your deposits into your check register before you enter them as customer payments (see #1 above). This is an issue only if you create customer invoices.
11. You make a large purchase on credit (such as Dell or Best Buy) and only enter the payments into QuickBooks, posting the entire payment to an expense account. The cost of the equipment has to be entered as does the creditor’s finance charges each month.
12. You enter a bill in QuickBooks upon receipt of a vendor invoice. Then, when you pay the vendor, you don’t use the Accounts Payable module. Instead, you pay the bill by writing a check in QuickBooks, coding that check to an expense account. Now your expense is entered twice and your Accounts Payable is still “unpaid.”
And the last reason you just might need supervision using QuickBooks
13. You pull a Profit and Loss report, look at the numbers and think to yourself, “This doesn’t look right.”
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