Putting together a financial system.

logoAnyone can record that they bought a tin of paint. Anyone can record that they charged $100 for a health service. But what if you offer more than one service? On someone else’s premises? What if you start to sell items and provide services? What if you bill your materials directly to the customer? Or need to give money to contractors? And sometimes you do this, but sometimes you do that. As soon as you step foot outside of the most simple business model suddenly the standard “out of the box” financial set up that you were confident with doesn’t quite fit.

As business owners we’re responsive to our clients so if they ask us to do something and we can do it we usually do. Then the accounting comes into it….. did I just lose money on that? what category do I put that in? do I have to pay super for that kid who worked over the holidays?

So what do you do?

Wing it?

“Milk is kind of food so I’ll put it down as meals and entertainment?”, “A hammer is an asset, yeah?” “Do I need to make a category for selling therabands?”

It’s a really important part of being a bookkeeper to step back, consider the whole picture of the different parts of a business and work to make a financial reporting system that caters to all of it. I’ve seen bookkeepers get out butcher’s paper and textas to create a visual map of all the different arms of a business or grab their laptop to look up a fancy app. Whatever works. Then there’s calls to the accounting software providers, emails to app developers, time spent umming and ahhing in front of excel spreadsheets.

If you look through the audit log of an accounting software file you can usually see vast amounts of time where the file was open but nothing was being done. Had the bookkeeper gone to a cafe and left their computer on at home? Probably not. They were probably chewing on a pencil, talking to themselves, saying “but what about…..?”

Stress and the ATO

The ATO is often chasing up small business owners who haven’t completed their BAS. Usually this consists of two types of business owners: business owners who are being cavalier and “devil-may-care” about their tax OR business owners who are becoming more stressed, and more paralysed about it everyday. Unfortunately the ATO treats business owners as though they all fall into the first category. Most business owners I’ve met in this situation fall into the second category. They are stressed. They feel like their financial situation is unique and terrible. Being threatened with fines or bankruptcy doesn’t help get the business owner where the ATO would like them to be: profitable and paying tax. The bookkeeper’s first step is to take the heat off. This is quite difficult to do while asking the business owner to collect all their financial documents (one of the main steps the business owner usually really, really does not want to do). It would be so helpful if bookkeepers could get all the information they needed without having to bother the business owner. In the absence of this option the bookkeeper needs to explain to the business owner that the ATO does not want to bankrupt them. The ATO is like any other creditor and wants the business to be profitable so that they do, eventually, get their piece. The ATO just wants to know that the business owner is taking them seriously and dealing with them in good faith. Hiring a bookkeeper and getting started on the process can show the ATO that you are taking their letters seriously and you are doing something about it. Don’t be scared, don’t jump, don’t hide…..the ATO just wants to know you’re listening to them.

Innovation

An accounting software roadshow was on in Melbourne a few days ago and the buzz in the conference rooms of hundreds of accountants and bookkeepers was pretty rowdy. You might be surprised that accountants can be as chatty and schmoozy as a room full of marketing and PR geniuses….they just can’t sustain it for long. So, we were all at our brightest and bubbliest and were looking around at the innovative products on display with a fair degree of optimism.

Most people who went to it came home and wrote blog posts, ear-bashed friends and family and were bursting to get in and bowl over their clients with the technology that would turn their businesses around. However I couldn’t help feeling that a lot of the innovation was actually just catching up to other accounting software (the addition of “quotes” to an accounting software is nothing new) or expanding one product to incorporate more elements so that another product is now obsolete. For example, inventory was now included in a product so you no longer needed an inventory add-on. There were innovations, such as, “now our software product can look up legal forms and precedents as well as send billing straight to the accounting software”. Well, that’s handy, that’s an improvement but for me that’s not truly innovative. I mean, couldn’t the lawyer just have billed through the accounting software?

Innovation, for me, was accounting software going to “the cloud”. The introduction of having an evolving software that did not need yearly updates but could be improved at any time. The introduction of collaboration; being able to work on the same problems at the same time as your accountant for example, while having a dialogue. What freedom to be able to solve problems together, while looking at the actual numbers, from wherever in the world you were!

For me, that was a leap, the rest are updates.

There is, of course, nothing wrong with improvements, and incremental change is an absolute necessity. As well, there is always a time for consolidation and ironing-out of little niggles.

Sometimes products are so good that tweaking is all that’s left to do.

But gosh I love a game-changer.

Communication

I’ll tell you a secret: I can be a control freak sometimes. At least when I’m spending money. Recently I bought car insurance online. My research was thorough, comparing prices and the inconveniences or terrible misfortunes that would be covered.

After this fairly mundane task I was surprised to receive a phone call telling me I needed a “health check” on my insurance. I assured the hapless customer service representative that I’d only purchased the insurance a few days prior and had no need to change it yet.

They insisted that they needed to provide me detailed information on the insurance I’d just purchased. My question was “why wasn’t this included on the website or literature that was sent to me?” They repeated that the information was very important and explained the fine print of the product they had sold me.

Then they asked me to verify my personal identification details. “Hang on, you called me! So why do I need to prove who I am?” Besides, how could this be sensitive information they were about to give out?

So after the phone call and my refusal to verify my details (however I had expressed my curiosity about the fine print that couldn’t be put in writing) I gave my feedback in the survey that followed. It wasn’t wholly positive.

Now I am receiving more phone calls and voice mails to follow up my answers to the phone survey about the customer service I received that I didn’t want.

This isn’t how I wanted a small task to be completed. I just wanted to buy insurance online. I wanted the fine print in writing as it’s how I receive information best and I would be able to refer back to it when it was needed as opposed to memorising the conditions in preparation for something that could happen anytime during an entire year. Also I didn’t want a hard sell, or even people questioning my decision to not get roadside assistance.

Can’t businesses respect how customers want to be contacted? If a customer asks a question on a business’s social media page can’t it be answered there instead of being told to email their tech department? Or if a business is called by a customer the response “have a look on our website” could be off-putting to the less tech savvy. Must customers who don’t want to be on social media sign up to Facebook etc. in order to access up to date information on a business? Why can’t the business’s website be kept up to date?

Recently I saw a contact page on a website which offered the business address, opening hours, phone number, a built in contact form, an email address, the business’s Facebook and twitter accounts and the business owner’s LinkedIn. It was refreshing. The conventional wisdom is that this approach will confuse customers and offer too many options so they’ll head over to a competitor who offers merely a phone number. But maybe, just maybe, you have a strange and antisocial customer who’d like to send you a private message on your LinkedIn late at night 🙂

Bring a bookkeeper in

Cash flow problems cause most small business failures.

Often a business owner is so caught up in the day to day running of the business and is so actively “working” that they find it hard to also be “monitoring” their business.

Some business owners procrastinate reviewing their finances until the end of the financial year when it is too late to do anything other than a tax autopsy.

Luckily most businesses see their bookkeeper more frequently than their accountant and this allows for independent, knowledgeable insight into how the business is going and what improvements could be made.

Your bookkeeper provides clear reports to show you what is working and what isn’t. Your bookkeeper also tracks how the money is flowing, which, if your business is your livelihood, is utterly crucial.

Don’t leave your business up to chance. Don’t let simple cash flow issues bring down you down.

Bring a bookkeeper in.

8 reasons why you might NOT need a bookkeeper

  1. You’re so rich it doesn’t matter if none of your customers ever pay their invoices.
  2. You and your friends like to get together to talk about the amazing features on the Intuit accounting software and compare notes about new plug-ins being added to Xero. This makes for some crazy Saturday nights.
  3. Your favourite days of the year are the days when the federal budget and the state budget papers are released. Christmas and your birthday right there.
  4. The sight of a set of well filed documents elicits a sigh of satisfaction.
  5. Two words: Bank Reconciliations. When you get to the end of them and all the numbers balance you very nearly glow.
  6. You have a family member with no experience and no knowledge of legislation who is willing to give it a shot.
  7. You don’t mind paying fines to the Australian Taxation Office. In fact you think the ATO doesn’t get nearly as much money as it deserves.
  8. You have way too much time on your hands.