Bookkeeping for Smarties

Every year thousands, if not millions, of people start or run small businesses. The goal for each is to make money, but unfortunately the odds are that most will not – most will fail.

There are many reasons for their failure, but not making a profit is certainly one of the main ones.

The key to staying on top of your financial situation is good bookkeeping, but this is not everyone’s forte.

Below are some timeless tips for being successful with your bookkeeping.

Bank Accounts

I have seen this happen many times. I am reviewing bank transactions and have found one or several that I need to ask the owner about. In the course of the discussion, I find that the transaction isn’t even for the business; it’s the owner’s personal purchase.

There are a number of wrongs with this. 

  • The IRS frowns upon you commingling business expenses with personal expenses.
  • You need to keep the appearance of running your business professionally.
  • It makes it difficult to sort through the expenses and determine the true profitability of the business.
  • It can deplete a business’ cash that could be used for more worthwhile expenditures.

Even if you are a sole proprietor, open up a checking account and credit card to use only for only your business.  Make it a rule to never, ever use these for personal expenses, even if temporary or a short loan.

Record all Income and Expenses

This becomes easy when you have dedicated bank accounts and credit cards for your business. If you pay for all of your expenses with a business check or your business credit card, you have a system for capturing all of your expenses. You also need to deposit your income (cash, checks, credit card payments from customers) directly into your business checking account and not your personal account. 

Then, you simply reconcile your accounts, at a minimum, of once a month. In doing so, you will need to categorize your expenses and income. We will talk about how to make this process easier in the applications section below.

A Process for Getting Paid

It doesn’t do you much good to sell a million dollars of products and services if you don’t get paid for them.

The best method is to collect payment up front, but some customers will not want to do that. It is up to you if you want to offer customers terms of say net 30 (customer can pay you up to 30 days after your invoice date).

Not all customers will pay; however, even if you give them time, so you need a written collection policy to address those times. You need it in writing so that your customers know you’re serious about collecting payment and what you’ll do if they don’t pay.

Decide what you want to do when the invoice is past due: call, write, send a lawyer letter, or send to a collection agency.

You may want to run your policy by a lawyer to verify everything you’re doing complies with local laws.


Ah taxes – a necessary evil.  Everyone knows about income taxes, but there’s also payroll taxes (federal, state, social security, unemployment, workers comp), sales taxes, and use taxes.

There are a few things to keep in mind with taxes.

One is to note when each of them are due. If you want to run your business professionally, you need to pay your taxes and file on time. Plus the government doesn’t want to wait until the due date to receive their money. They want you to send in estimated taxes at regular intervals and only true those totals up when you file. There are stiff penalties for failing to do this.

Two is to have the money available to pay your taxes.  It won’t do much good if you file your tax returns, but you don’t have the money to pay what is due.  Set these amounts aside (ideally in their own checking account that you don’t touch), so that when you file your returns the money is there.

Business Structure

Your business legal structure can vary over time.  When you’re first starting, you can run it as a sole proprietor and then convert to an LLC or corporate structure later on.

There can be great legal and monetary reasons for doing so right away. Consult with an attorney up front to find out which makes the most sense, saves you money and limits your liability.

Cash is King

Cash is arguably the most important part of your business finances.

Cash is needed to pay your bills, taxes, payroll, payoff loans and allow you to eat.

Managing cash is not always easy.

Frequently, you can look at your checkbook and see that you don’t have enough to pay this week’s bills, or that you have payroll coming up next week and your biggest customer has decided to not pay you.

This is where the importance of having a budget and a forecast comes in. With these in place, you can plan ahead for what will be needed and see in advance where you’ll be in trouble if you don’t have the money. Are you going to need a credit line? Do you need to find a cheaper place to work out of?  Should you delay purchasing that new delivery van?

One of the most valuable financial statements is the cash flow statement and it is seldom used by business owners. It summarizes how your cash total changed during a time frame and where that change came from.

Stay in control of your cash and you increase the likelihood of your staying in business.

Review Monthly Financial Statements

The three main financial statements are the income statement, balance sheet and cash flow statement. You should review these monthly and understand them.

Income Statement

This report measures how you are doing with your revenue and expenses for a given period of time.  Depending on your business, this could be a very simple report or very complex. The key is to know what to focus on, so you are not overwhelmed.

Revenue – Is this better than expected (budget/forecast), better than last year, do you have new customers, did you lose customers, are these sales resulting from high returns, credits, promos, productive sales reps?  You can see it’s much more than “Hey, I sold $10,000 last month!”

Expenses – Which categories require my attention?  Where am I spending too much? What programs haven’t I implemented this year? How did we go over budget without my approval? Are these expenses worth it?

Profit – What’s my margin? Am I bringing in enough to cover my bills and future needs?  Am I achieving a high enough return on my investment?

Balance Sheet

The balance sheet looks at your assets (what you own), your liabilities (what you owe) and equity (what’s leftover). It’s for a specific point in time (usually for the end of the month or year). You can tell at a glance what is the net worth of your business, and if you compare it to last year, you can tell if you’re improving or not.

The statement is used to measure things like return on equity, return on assets, and debt to equity.

At the end of the year, you can decide what to do with your profits by either distributing them to the owner(s) and employees, or retaining them in the business.

Cash Flow Statement

This was discussed up in the Cash is King section above.


Many business owners don’t know there is a difference between these two job categories.

CPA – A CPA is a degreed accountant that has been licensed in their state. They passed an exam to prove their accounting and business law knowledge. You should use a CPA for your income tax filings. You can also use them for bookkeeping tasks, but you may be spending more than if you had these completed by a bookkeeper.

Bookkeeper – A bookkeeper may or may not be a CPA or have an accounting degree. They typically perform accounting tasks like bank reconciliations, payroll, pay bills, collect on open invoices… Most bookkeepers are not tax experts, so you will most likely use your CPA for that task and use your bookkeeper for everything else.


The right software applications can make your accounting and bookkeeping more efficient and are well-worth the expense.  Here’s some applications you should consider:

Quickbooks Online – Quickbooks is used by more small businesses than any other bookkeeping software. The monthly fee is small and your software will stay updated. You will have less difficulty finding someone to help you if you use QBO, since it so popular. Another advantage to using the online version is your bookkeeper can work remotely allowing you to outsource these tasks rather than hiring an employee. If you do this with the proper controls, you don’t have to worry about what they can do.

Billbeez/Hubdoc – These applications can help you pay bills online, grab invoices/receipts and send the transactions to QBO for processing.

Expensify/Wave Receipts – These programs can capture your receipts, as you obtain them, and send them to your QBO.

MileIQ – If you use your vehicle for your business, this app helps you keep track of your mileage for tax purposes.


Make a decision to be among the minority of small businesses that will succeed. Run your business professionally by following good accounting practices, such as those suggested above.

If you need help with these tasks, consider outsourcing it to a professional with experience for a small fixed monthly fee.

Remove the Frustrations of Bookkeeping


Ask a group of business owners what part of owning a business do they like the least and most will say bookkeeping.

If you’re like me, if you don’t like doing something, you either don’t do it or you delay it as long as possible.

But…if you do that with bookkeeping, you can get yourself into some serious trouble.

What to do, what to do…

Start with the why

The process of bookkeeping is to generate financial records that show the health of the business – good or bad. You may not like bookkeeping, but I’m sure you want to know how your business is doing.

  • Am I making money?
  • Do I make enough money to hire a helper?
  • Are my customers paying me and on time?
  • What inventory is not selling?
  • Are my prices too high/low?
  • Did I do better this July than last July?
  • Do I have enough cash to pay my taxes next month?

Like anything, when you focus on the good aspects, you’ll dislike it less.

Here’s My Income Statement, now what?

Many owners spend countless hours signing checks, approving payroll, balancing their bank account and printing a financial statement only to never review it or understand what it is telling them (or the balance sheet or cash flow statement).

Some of the line items on the statements are non-material and can be ignored, but many are crucial to understanding how you are doing and what is doing well and what needs your attention.

It’s Cram Time

I can remember more than once, being assigned homework to prepare a large report in school. The teacher gave me months to do the work, but did I get started right away? No, I waited till the last week, or last day and stressed and pounded out the work to make the deadline.

As mentioned in the intro, tasks that are not enjoyable are frequently delayed as long as possible. But that can make them even more annoying and prone to errors.

Breaking up bookkeeping tasks into small daily tasks, minimizes the stress and errors and makes it less annoying than doing it all at once.

Using Quickbooks Online

Do you still use a checkbook and Excel to do your bookkeeping?

Quickbooks is an inexpensive monthly expense, and having the online version means you can do your bookkeeping at home, at the cabin, or anywhere?  Maybe you don’t want to take work home with you, but maybe a change of scenery is just what you need to relax and get it done.

Quickbooks also does many of the checks and balances for you like making sure entries are balanced, which accounts are reconciled, importing bank transactions for you. This makes the monthly expense pay for itself with time saved.

Delegate the Task

Okay, so I’ve given you several ways to remove some of the frustration of doing bookkeeping, but for some there’s still enough pain remaining.

When you realize how little money it costs to have this done for you, you will wonder why you didn’t farm it out sooner.

Hiring a bookkeeper or outsourcing one, will enable you to:

  • Focus on other things with your business (things more enjoyable and profitable)
  • Have your bookkeeper explain the financial statements to you in one hour for the whole month
  • Speed up putting together what you need for your tax returns

If you’ve been thinking about outsourcing your bookkeeping to someone else, why not contact me to start the conversation? It’s not too late to have me help you get your financials ready to send to your tax accountant for your 2019 taxes.

6 Things to Check When Hiring a Bookkeeper

i need a bookkeeper

Many owners of a small business have reluctance to hire a bookkeeper. Some of the reasons include:

  1. We can’t afford one
  2. I don’t want any employees
  3. I don’t trust anyone else with my money
  4. I enjoy managing the money myself

While these can be valid points for a business just starting out, at some point it makes sense to either hire a bookkeeper or outsource this function so that the owner can focus on more profitable activities or tasks they know more about and leave bookkeeping to an expert.

But…how do you know what to look for in a bookkeeper to give you that peace of mind?

Below are the key areas to ask candidates when considering them for your business.

What to Look for in a Bookkeeper?

Background Check

Will your bookkeeper allow you to do a background check on them? If not, I’d recommend walking away from them, if not running away from them. A background check would reveal many things, like prior arrests for embezzlement that would warn you not to use them.


Do they have current or prior clients that have provided (or will) references on their bookkeeping services? This is one of the best checks for you. A bookkeeper can have all the credentials in the world, but if they take care of their clients what good are they to you? Ideally, you would have at least one reference from a business that is similar to yours. But, this isn’t necessary.


What credentials does this bookkeeper have?  Do they have a degree in accounting? Are they certified in the programs you use, like Quickbooks? Are they certified in bookkeeping?  Are these posted on their website? You want some evidence that this person has the ability to perform your bookkeeping tasks. Ideally, your bookkeeper has all of these credentials posted on their website for your review. They are typically found on the home or about pages down at the bottom.


Do they have experience in your industry? If not, it may not be a deal breaker. A lot of the tasks for bookkeeping are similar across business types. But if you have a choice between two people and one has done bookkeeping for the exact industry you’re in, choose that person (all else being equal).

Engagement Letter

Will they prepare an engagement letter that clearly states what services they will perform, what is needed from you as the client, fees…? Knowing and agreeing to everything up front prevents misunderstandings down the road. This letter also shows you how flexible the bookkeeper is. Will they perform extra services later on, will they meet over Skype, will they explain the financials or just hand them over to you.

Open Conversation

Are they willing to discuss your needs in person or over the phone? If so, do they sound like they value you and understand your needs?  Do they sound professional? Can they answer your bookkeeping-specific questions, so you can test their knowledge? Do you get along with them? Is this a relationship that will work for you?


Hiring or outsourcing your bookkeeping can be one of the best things to do for your business and yourself. Take the time up front to make sure you on board the right person. You’ll save yourself a lot of time and effort and grief down the road, if you do.

If you’d like to talk to me about working together, I do have room for one more client. Please click the button below to find out more.

Need Help With Your Bookkeeping?

  • Are you working long hours performing tasks for your business you don’t enjoy or don’t have the time or experience to handle them correctly?
  • Do you not have the money or desire to hire a full-time bookkeeper?
  • Are you tired of the complexity of the finances for your business and want a professional to explain it to you?
  • Are you behind with your books and fearful of upcoming tax deadlines?

If you answer “yes” to any of these questions, you owe it to yourself to add a qualified professional bookkeeper to your team. Select the button below to start a conversation with no obligations.

11 Ways to Get Customers to Pay Their Bills On Time

Get Customers to Pay On Time

Cash is the life blood of any small business.

So one of the keys to a successful business is proper cash management, by delaying payment as long as possible and collecting payments as soon as possible.

It’s usually easier for an owner to delay payments then to collect, so in this post we’ll discuss the latter.

When you sell your products and services you can collect payments two ways; upfront or bill your customers and collect later. It’s to your benefit to collect upfront and to the customer’s benefit to pay later. So, how do you decide which to do?


Obviously, the worst case is you never get paid and you’ve already given the customer their product or fully performed the service for them. Other cases are the customer pays months later, partially pays, pays after you sue them, or pays and then posts all over social media about how awful you are.

Listed below are many of the time-tested techniques for getting paid and getting paid quickly. Whichever methods you employ, write them down so you have a standard collection process that you can easily send a customer or include on your invoices or statements.

11 Ways to Improve Collections

Bill month to month (great for recurring services)

If your customer has a monthly service, or you send them a product on a routine basis, set them up with recurring payments. Most credit card providers allow you to set up recurring payments for the same amount and same time of the month, so that you don’t have to bill the customer and collect; it’s done for you.

Require a Deposit

Require your customer pay a portion of their total bill up front. This way even if they decide not to pay the remaining portion, you are not out the whole amount.

COD – Pay Full Amount Up Front

Even better than a deposit, have the customer pay the whole amount up front. You won’t be able to recognize the revenue until you’ve provided the service or product, but you’ve eliminated the collection process.

Customer Pays Your Costs Up Front

A variation of the deposit is to have the customer pay your cost of the product or service up front. You won’t make any money if they refuse to pay the remainder, but you haven’t lost anything either.

Establish a Cancellation or Refund Policy

Develop your own, or copy someone else’s policy and paste it on your invoices, statements, contracts…

Create Payment Terms

If you don’t have payment terms, customers will assume just about anything. I wouldn’t go any longer than 30 days. Give them a small discount (like 1% or 2%) if they pay within 10 days. Indicate the invoice due date and payment term right on the invoice and statements. Communicate this to your customers before they purchase. 

Write a Collection Process

Start with what happens if they were given 30 days to pay and now it’s 45 days since the invoice date. What happens? Do you call them, cut off their credit, send a letter, call your lawyer…? Have a process for 45 days, 60 days, 90 days…up to 180 days. Write it down so you don’t forget it. Regularly review your customer accounts and age them into these same buckets to make your process easier. After the balance is over 180 days old, consider either sending the amount to a collection agency or writing it off to bad debt expense.

Charge Interest or Late Fees

Charging your customer if they pay late, either with a late fee or interest can be a good way to entice them to pay on time.  It is also a good negotiating tactic, as you can choose to waive these if they pay.

Making Paying Easy

Most people, and many businesses, pay their bills online now. Giving your customers the option to do this can make it easier to pay the invoice, and therefore they will be more apt to pay you.  Quickbooks has the ability to add a “pay” button on the invoice that you can email your customers allowing them to pay the invoice right from the invoice itself.

Show You Care

Show you care by listening and solving issues – Many times a customer is not paying you because they have an issue with the product or service. Call them and discuss any issues they have. By showing you care to resolve their issues, you may help with them being willing to pay (or partially pay) knowing you will make it right.

Credit Checks/References

Do some due diligence up front on your customers by doing a credit check or a credit reference. This is great if your customers want terms and their purchases are large. Knowing they have paid well in the past, suggest that they will pay well in the future.


A business needs cash to survive. It doesn’t do any good to generate a sale only to have it go unpaid.

The tips above are proven strategies that assist a business in getting paid on time for their products and services.

Need Help With Your Bookkeeping?

  • Are you working long hours performing tasks for your business you don’t enjoy or don’t have the time or experience to handle them correctly?
  • Do you not have the money or desire to hire a full-time bookkeeper?
  • Are you tired of the complexity of the finances for your business and want a professional to explain it to you?
  • Are you behind with your books and fearful of upcoming tax deadlines?

If you answer “yes” to any of these questions, you owe it to yourself to add a qualified professional bookkeeper to your team. Select the button below to start a conversation with no obligations.

How to Simplify Your Bookkeeping (for the non-accountant)

simplify bookkeeping

It is a well-known fact that most small businesses fail, many in the first year. The main reason they fail is they lose money. Unless you’re a billion dollar venture-funded corporation, you won’t survive long losing money.

If you own a small business and want to succeed, you owe it to yourself to pay attention to the numbers. Much can be gleaned from the financials. But if you didn’t major in accounting then your statements may as well have been written by an alien.

Steps to Simplifying Your Bookkeeping

  • Legal Structure – Start by having a lawyer setup your business for the legal structure that works best for you. Many of the steps below are more difficult if this is done later. Some of your bookkeeping entries will be dependent on your legal structure, so get this completed asap.
  • Separate Business From Personal – Now that you have your legal business name setup, you can open up your bank accounts in your business name and apply for a business credit card. This will keep your business transactions separate from your personal transactions. Keeping financial data separate will make it easier to see how your business is doing financially and is a major accounting principle. Many small business owners have difficulty with this step, but it is as easy as don’t use your business accounts for personal expenses. If you need help with this, consult with a CPA or bookkeeper.
  • Record all your business transactions – The easiest way to do this is by having your bank accounts and credit card accounts for your business connect with your accounting software for automatic uploads. This eliminates manual entries and virtually guarantees you’ll post everything to your financial statements, making them accurate.
  • Paying Your Bills – This covers many areas. You need to make sure you don’t overspend by comparing your expenses to a budget or industry standard. You also want to watch the timing of your payments, so that you maximize cash flow and not pay expenses too early or too late. It’s easy to charge everything thinking that eventually you’ll have enough revenue to pay off your credit card balance, but this can land you in trouble. The goal is to pay off your balance each month, but if you must carry a balance because of initial start up costs, set a goal to make more than the minimum payment, thus reducing your debt every month.
  • Collecting From Customers – If you’re lucky, your customers pay you up front for your products or services. But sometimes it’s necessary to allow your customers to pay later. This is great if it generates more revenue and your customers are great at paying on time. But if this isn’t the case, you need to set up a system to handle delinquent payments. It starts with giving your customers payment terms like net 30 (means they must pay the balance due 30 days after the invoice date). If you don’t, you’re telling them they can pay whenever they want, and they will. What if they still don’t pay? Then you need a collection process. Write out how you will handle these situations. For example, after 30 days past due call the customer. After 60 days past due, cut customer off for future purchases. After 90 days past due, send them to a collection agency. After 180 days, write off the account to bad debts expense.
  • When to add Employees – It’s tempting when you start a business to add employees so you don’t have to work 100 hours per week. But if you add people too soon and the revenue doesn’t increase or even drops, you can be in a world of hurt. So when should you add someone? A good rule of thumb is to add $250K of gross profit for every new hire, or take their total cost (wages plus benefits) x four. So, if you currently have a gross profit of $100K with just you, add a second person when you increase your gross profit to $350K.
  • Taxes – With the desire to run a profitable business comes the necessity to pay taxes on those profits. Like a paycheck, the government wants their money when you receive it. So for a business, this usually means paying taxes with estimated quarterly payments and then doing a final payment when the tax return is filed at year end. There are significant penalties and interest for not paying taxes on time and the government has sufficient power to grab that money. So it is important to pay your taxes on time and pay the correct amounts. Your CPA or tax professional can help determine the amount of taxes to pay and how to pay them (frequency and method). A good rule of thumb for most small businesses is to set aside 15% of every dollar of profit for taxes and transfer this money to a dedicated bank account so it can’t be touched. Then, when taxes are due the money is available for payment.
  • What is Good? – When you’re just starting your business and you look at your financials, how do you know whether they are good or not? You can start by comparing them to a budget, to a prior month or year, and to industry norms. Next, look at your largest variations. If you’re losing money is it due to lack of sales or too many expenses? Start there. When you’re just starting, look to allocate your profit as follows (this can be adjusted later): Draws 50%, Operating Expenses 30%, Taxes 15% and 5% Profit. Compare how you’re doing to these totals.
  • Outsource Your Bookkeeping and Taxes – If this all seems way over your head or you simply don’t have the time, consider outsourcing these tasks to a CPA, tax professional or bookkeeper. For a few hundred dollars a month, you can outsource all of your bookkeeping and not have to hire anyone. If these tasks are taking you 80 hours a month to do and you can spend $400 for a bookkeeper, you’ve just opened up all of that time for yourself. If you value your time at say $100/hour, you’ve saved yourself $7600/month (80 hours x $100/hour less $400 bookkeeping fee).
  • Apps to Use – There are many apps (some free) that can simplify your bookkeeping. For bookkeeping the best is QuickBooks Online. This is the industry standard for bookkeeping for small businesses and is done online, so your data is backed up with high level security and available to both you and your CPA/bookkeeper. Cheaper alternatives are Excel (if you have it) or Google Sheets (free) or Wave Accounting (free). Have your CPA or bookkeeper help you set it up for your business with the categories specific to your industry. Much of the work after the financial software is setup is getting the supporting documents you’ll need to justify your numbers. The easiest way is to have an application like Hubdoc grab the documents for you and send them to QBO, or you can take a picture of them with your phone and send to your financial software. QBO and Wave have that ability. Mile IQ is a great free app for your phone to track your business mileage.

Hopefully this was helpful to you with some ideas to simplify your bookkeeping. For most small businesses, it is a good investment to delegate your taxes to a CPA that specializes in small businesses and outsource your bookkeeping to a professional bookkeeper.

If you would like to contact me about handling your bookkeeping for you, please click the button below to get in touch with me and I will schedule a call with you to discuss further.

10 Tips to Easier Bookkeeping

small business

There are numbers people and there are those that would rather step on glass than look at numbers. listed bookkeeping as the #1 source of pain for small business owners.

Anyone who is in pain knows you just want to get rid of it and prevent it from ever happening again…if possible.

I’ve put together my top ten tips for making bookkeeping easier.  These are tips that the small business owner can do themselves or outsource to a bookkeeper or CPA.

  • 1

    Automate – What some people find boring and tedious, others find comfortable and calming. Much of tediousness is due to manual processes that can now be eliminated with modern technology.

    Manual entries can be replaced with bank feeds, automatic uploads of payroll entries, recurring entries, electronic payments…

    If you’re still doing your bookkeeping with a lot of manual entries, you owe it to yourself to investigate switching over to an application like QuickBooks Online or have a bookkeeper/CPA help you implement systems to save you time and headaches. Eliminating manual entries also cuts down on the chance for data entry errors.

  • 2

    Outsource Your Bookkeeping – Are you thinking that you just don’t have the time or interest to do your bookkeeping yourself?

    Then strongly consider outsourcing it to a bookkeeper or CPA. Usually, a CPA is going to charge you more, but you can certainly price shop.

    With technology the way it is today, you don’t even need to hire someone in your hometown.  You can hire a bookkeeper from anywhere in the world. By keeping your books in the cloud, you can access them from your computer at the same time your CPA or bookkeeper are working on them and they will be backed up.

  • 3

    Review Financials MonthlyYou may dread having to set up a monthly appointment in your schedule to go over your books, but when you do so, you stay on top of the financial side of your business and you save yourself from the daunting task of having to look at your numbers only at tax time or yearend.

    By reviewing the financials monthly, you can become aware of a new trend (good or bad) and react quickly.

  • 4

    Keep Personal and Business SeparatedNot only does commingling your finances make your bookkeeping more difficult, but it makes your business look amateur.

    If you’re ever audited by the IRS, having your bank accounts being used for both business and personal items will make it look like you’re not serious with your business. In some cases, the IRS can think your business is just a hobby. 

    Keep your business bank accounts and credit cards for business items only. Use things like salary or draws to take money out of your business and use that money for personal items in a separate account or credit card(s).

  • 5

    Put Aside Money for Taxes, Payroll, Profit – The last thing you want to do is have it come time to pay your taxes and you don’t have any money to pay for them.

    Set up a separate bank account for taxes and transfer money to this account every month for your estimated taxes. Do the same for payroll and set aside some for profit as well. This will force you to watch your spending.

  • 6

    DocumentationBusiness expenses are costs incurred in the ordinary course of business. These are deductible, but you need to be able to back those amounts up with supporting documentation, such as invoices, receipts, payroll documents…

    This can be tedious and it helps to automate this. If you use financial software like Quickbooks Online, you can attach these documents directly to your expenses electronically, where they are backed up in the cloud and always available.

    You can use applications, like Hubdoc, to pull these documents for you and match them up to your bank feeds.

  • 7

    Compare Actual Expenses to Budgeted AmountsBudgets bring up bad feelings as they can be difficult to prepare and adhere to.

    But the main point of them is to change behavior. By doing a comparison of actual amounts to a budgeted amount, you can quickly see if you are overspending in an area.

    You don’t need to worry about the categories where you over a small amount. Just focus on those that are way over budget.

    It also helps to look at those that are way under budget. If your rent expense is under budget, you may have forgotten to pay this month’s rent. Or if office supplies are way under budget, are you going to have a huge bill coming up that you need to be aware of?

  • 8

    Money Tied Up in AR or Inventory Answer this question. Where would you rather have your cash?  In a bank account? Or in a product on a shelf in the warehouse?  Or in your customer’s bank account?

    Accounts receivable and inventory are typical sink holes for a business’ cash. The faster you can turn these amounts into cash, the better for you. Review these amounts monthly and look for old items that need your effort or should be written off.

  • 9

    DeadlinesBeing late to the dentist is one thing, but missing your tax filing or payroll can land you in serious trouble.

    Know your important deadlines and adhere to those schedules strictly. Need help in those areas?  Hire or outsource this to a competent bookkeeper or CPA.

  • 10

    Know Your Cash FlowCash is king, but one of the least used financial statements is the Statement of Cash Flows.

    If you knew your cash declined during the month of June, would you know off the top of your head where that decrease came from?  Probably not.

    There are usually too many transactions involving cash to weed through. Using the Statement of Cash Flows, you can quickly see where cash was generated and where it was used.

    If you’re not familiar with this statement, be sure to have you bookkeeper or CPA show it to you and how to use it.

By following these ten tips, it will make your bookkeeping less stressful and easier as time goes by. I know what you’re saying, “these are not easy to implement and I don’t have time to do them.” For most small business owners the answer is to delegate those tasks to someone who is competent, so they can focus on running their business, increasing sales, satisfying customers…

If you’re interested in having me handle these tasks for you, press the button below to contact me. We can talk about your business and determine if we are a good fit for each other. For as little as a few hundred dollars a month, you can have a professional bookkeeper process your finances for you and take all that worry and time away from you.

Basic Bookkeeping for Contractors

Are you busy?

Being a general contractor can be overwhelming at times. But you don’t want to be so busy that you lose sight of your business and how well you are doing, right?

If I could only tell you about three numbers to help you with that, what would they be?

Here you go:


As a contractor, you want to know how each of your projects is doing and how well  your business is doing in total. Your revenue is your contract/quote price to your customer(s) plus/minus all of your change orders.

You have your own method for determining how much you want to charge for a project. It could be labor hours plus materials, per square foot, fixed price, or add up the total of your subcontractor payments plus a profit/markup.


You have two kinds of expenses running your contracting business; direct costs and indirect costs.

Your direct costs are expenses that are known to be related to a particular project; you wouldn’t have that expense if you didn’t have that project. Examples are materials used on the job, labor on that job, trash removal from that job site…

Indirect costs are expenses are not related specifically to a project. These are like the rent for your office, utilities for your office, gas for your truck…

So what is your gross profit/margin?

It’s your revenue less your direct costs.  Your left with the profit/margin on your project. This is usually expressed both as a dollar amount and as a percent of revenue.


This number comes when you subtract your “indirect costs” from your Gross Profit/Margin. In other words, this is a summary of all your projects and the overhead to run your business to give you your overall profitability.


All three of these numbers are important and you don’t want to look at just one of these without the other two as filters.

For example, if you look at just your revenue number, you may think your business is doing great because your revenue is up over last year or your budget. But if your direct costs are out of control, you may have individual projects where you are actually losing money.

Or, you look at all your projects and you’re making money on all of them.  Great, right?

Well, what if your overhead costs from running your contracting business are unusually high this year?  If so, all of the profits from your projects will be wiped out by your overhead.

A good income statement for your business can disclose all three of these numbers for you and show individual projects and in total.

If you don’t currently have such a report or would like help with the bookkeeping of your contracting business, please contact me and we can discuss your needs.

Here at Consultant Bookkeeper LLC, I have experience working with general contractors. That is a real benefit to you, as that frees you up from having to train someone how your business works.

Bookkeeping Checklist for the Yearend

Bookkeeping Checklist

Bookkeeping Checklist

The end of the calendar year can be busy. There are the holidays, gift buying, parties, picking up people at the airport, dinners and just taking some time off.

But, it’s easy to forget that the end of year means finalizing your finances, especially if you are a small business owner and your fiscal year-end is the same as the calendar year-end.

So in this post, I’m going to run through a checklist of items to cover or have someone perform for you, so you are set for the new year, closing out the old year and tax time.

  • 1

    Inventory Time – Do you carry inventory in your business?  If so, you will need an accurate tabulation of what you are physically carrying, even if you have electronic records.  It’s possible through errors or theft that the physical totals won’t agree to your accounting records.  Taking the time to physically count what is on hand gives you the ability to compare to your records and make the adjustments so everything is in agreement.  Do this now so you don’t have to do this on New Year’s Eve.

  • 2Account Reconciliations – Like your inventory, you want your account totals to agree to your supporting documentation.  For example, does your book balance for your bank account agree with the bank’s total?  If not, do you know what the difference(s) are?  All of your balance sheet line items should have account recs to support the totals. Another example is your accounts receivable. If your total on the balance sheet is $10,000 what unpaid invoices are out there that total to the $10,000?  How old are they?  Should they be written off?  Having trouble finding a receipt for that expense?  Consider getting yourself an app for your phone so you can snap a quick photo for later retrieval, or have your bookkeeper start using software like Receipt Bank to help with this documentation.
  • 3

    Financial Statements – are your monthly financial statements up to date?  If not, when was the last time they were prepared?  Were they reviewed by your CPA? Have you recognized all of your revenue and expenses?  Have you accrued for expenses that have occurred but not paid? You will need updated and reviewed financials for your taxes, so if you are way behind in preparing these consider hiring outside help.

  • 4Payroll – The end of the year brings a lot of extra work in the payroll area.  There are bonuses, profit sharing, raises, annual reviews, W-2’s, health insurance renewals for the upcoming year.
  • 5Quarterly Taxes – December is also the end of the fourth quarter for most businesses and you’ll like need to prepare and submit quarterly payroll taxes, and sales and use taxes.
  • 6Vendor 1099s – Did you pay a person or business more than $600 during the year?  If so, you many need to send them a 1099 by January 31.  It is not always easy to determine if a person or business needs to be sent a 1099. Consult with a bookkeeper or CPA if you are not sure.
  • 7Filing – If you will be having your CPA review your financials and prepare your taxes, are your papers organized in nice categories?  Do you have files for the new year to avoid confusion.
  • 8Budget – Once you know how you did during the current year, what do you want to do next year? Do you have plans for revenue growth, employee hires, asset purchases, where will the money come from?
  • 9Schedule a Meeting with Your Bookkeeper or CPA – Don’t wait too long for this, especially if you don’t have one in-house or on retainer.  Year-end is extremely busy for people in those professions. Scheduling an appointment or outsourcing your bookkeeping now will keep you from scrambling to find one who is available and competent.
  • 10

    Presentations – Does your business present the end of the year results to its employees? If so, what information do you want to present, who will prepare it, what format will you use? Do you have last year’s powerpoint slides that you can update with the current year results?

How do you feel after reviewing the list above?  

Calm and relaxed because you have everything covered?  Good for you.  You are a planner or likely have been through the pain before of not being ready and decided never to do that again.

Or are you even more stressed? Well, the good news is you still have some time, so don’t ruin your holidays. If you don’t think you will have enough time, resources or skill to do it all, consider hiring or outsourcing additional help.

Right now, I have openings for two additional clients and for a holiday bonus I am offering the first two months free if you sign up by December 31. I hope to hear from you.

Happy Holidays.

Contact Me For a Quote

3 QuickBooks Reports You Must Use (and what to look for)

3 must use quickbook reports

Ever pop into QuickBooks and it looks like the blackboard of your high school algebra class?

Numbers literally everywhere.

I know I know…you are a busy busy business owner and you want to get to the gold; the important information that tells you how you are doing.

That is the beauty of reports. They take all of your financial records and summarize them for you; typically in a one-page format, organized and ready for your review.

Running them is easy. I will show you how to run the three most important reports. However understanding them is an art, but I will show you what to look for.

Let’s get started.


The first report is the Profit and Loss Comparison. I like to run an income statement that compares your current results to either a budget or the prior year. Areas that need your attention jump right out at you and areas you’re excelling in provide reasons to celebrate or bestow praise on your employees.

If you don’t see this report when you click on the Reports button on your navigation bar (found on the left side of QuickBooks), Go to the “All Reports” tab and then click on the reports for “Business Overview”.

When you run it, you specify a date range to use. The most common are the current month-to-date and the current year-to-date. So if it is currently June 12, run the May 1 to May 31 and the January 1 to May 31 reports, since June is not over yet.

Below is an example from a test company showing the revenue section.

You can quickly see at the bottom that this company’s income is up 25.86% for the year. By scrolling through the list of the different categories of income you can see what the major contributors were; such as Design Income, Landscaping Services, Services, Fountains and Lighting and Services.

You can also see that categories like Plants and Soil and Pest Control Services were down compared to last year.

By reviewing this statement every month, you can get a jump on the trouble areas. In the example above, maybe they were not pushing their pest control services enough or maybe it was causing them to spend less time on their more profitable categories.

The same techniques can be used to review expenses. Here’s an example from the expense section.

Ideally expenses should grow at the same rate or slower than the revenue. So in this example, since revenue grew at 25%, expenses could also grow by 25% without causing an issue on their profits, but in this case expenses “decreased” by 40%.

It looks like job materials were down from the prior year from either fewer of these types of jobs, or better buying.

Here’s another example:

Expenses here are down 21.89% and were mainly due to professional costs for the first year of business. This was offset by higher equipment repairs from a (hopefully) one-time machine breakdown.

Here’s one last example:

Miscellaneous expenses are generally frowned upon. They give no clear direction on what they relate to. In this case, expenses in this category are way up over the prior year and should be looked at in more detail to see if they can be reclassed to a better account.


The balance sheet is another of the big three.

This one can also be intimidating. But if you break it down into sections, it is not too bad.

The first section is assets.

Think of these items as things your business owns, that are material and have future economic benefit. Materiality is different for each business, but for the small businesses I deal with, this is usually greater than $500. Assets can be current (held for less than one year) or long-term (held for more than one year).

As an example, something like a notebook is a thing your business owns and maybe it could be used for several years (not likely) but since it only cost $2 you would expense it rather than treat it as an asset. However a truck purchased for the business for $25,000 would be both material and used for several years, so it would be treated as an asset.

The most common items are: cash, investments, balances your customers owe you (accounts receivable), inventory (items purchased to resell) and furniture and equipment. There are others, but these are the most common.

Here’s an example:

Here we see that this sample business has total assets of $40,000 and this is a significant increase from the prior year.

The first thing to notice is that there was a nice increase in the bank accounts. This business is doing a better job of managing their cash flow then they were a year ago. If the cash accounts get too high, management will need to consider whether to invest this money where it can return more than a bank account.

The second point is that accounts receivables are down from last year. This could be due to several reasons: sales are down (not in this case), better collecting of customer balances due or changes in credit terms (requiring payment upfront).

Lastly, the business purchased a truck for $25,000 in the current year. Since it is material and will benefit the business for several years, it is treated as a long-term asset.

The next section is liabilities.

The next section is liabilities, which represents future outlays of cash, or what the business owes.

The most common items are: accounts payable (what the business owes vendors for products or services), taxes payable, accrued payroll and loans.

Like assets, liabilities can be short-term (less than one year) and long-term (over one year).

The most common ways to analyze this section is through a combination of comparing to a prior period (last month, a year ago) or using metrics, which we’ll talk about shortly.

Here’s an example from a sample company.

At first glance, what stands out is that debt is way up from a year ago, but that is because the business purchased a new truck and paid for it with a new loan.

Current liabilities are actually down compared to a year ago and is mainly in the credit card category where many start up expenses were paid for a year ago. 

A common metric to use is to look at the current ratio or current assets divided by current liabilities. This shows the business’ ability to pay for liabilities that will need to be paid for in the coming year with assets that are relatively liquid. 

For this company, the current ratio is 2.31 ($15,000 / $6500) and compares favorably to last year’s ratio of 1.28. The goal is to keep this number in the 1.2 to 2.0 range. Since this business is over 2.0, they should consider moving some of their assets into investments that pay a better return.

Another common metric is the debt to equity ratio which we’ll look at in the next section.

The last section is equities.

Think of equity as what is leftover of your assets after the debt is taken out.

The most common components are owner contributions (like stock), current profits or losses and prior earnings that have been reinvested in the company (retained earnings).

Below is the equity section from our sample company.

The equity total has increased by $6000 due to this year’s profits.

You can see that last year’s profits of $2500 were all plowed back into the company’s retained earnings.

A common metric to review is the debt to equity ratio. This is also important if you are trying to secure more debt, as the lender will want to see this number. A good ratio is to have the ratio be less than 1.0.

For this sample company, the debt to equity ratio is very high at 3.71 and this is about equal to last year’s 3.6 (also high). Management needs to generate more profits and use these to payoff its existing debt.


The last report is also one of the BIG 3 financial statements but it is seldom used or understood by most small business owners.

The cash flow statement shows how a business’ cash changed between two periods and then it shows how this change happened; where did the increase in cash from and where did the cash go.

Since cash is a vital asset to a business’ health, managing cash is important and this report can help you do that.

Let’s take a look at another example. The information on a cash flow statement comes from the balance sheet. Below is a sample balance sheet that compares the totals from this year to the totals from a year ago and shows the difference.

At the top of the balance, we see the two cash accounts called checking and savings. These two accounts increased by $3,817.47 over the year.  Where did that extra cash come from? Well, that is what our cash flow statement will tell us.

If you look in the assets section towards the top, you can see that they increased by $13,495 from the purchase of a truck. Increases in an asset use cash. You need to pay for the truck and that will take cash.

Similarly, accounts receivable increased by $15,688.49. That is money owed by the customers that is unpaid. Think of like lending your customers money to pay for the goods or services they purchased. It is cash being taken out of the business.

On the other side of the balance sheet under the liabilities section, we see that the notes payable section increased by $25,000 during the year due to a long-term loan taken to finance the truck and some other needs in the business. The lender is giving cash to the business, resulting in an increase in cash for the business.

Lastly, in the equity section, we note that the business has net income, so far, of $997.75 which increases the business’ cash.

Make sense?

Now, the cash flow statement summarizes all of those balance sheet accounts on one report and groups them into sections; cash from operations, cash from investing and cash from financing. This enables management to see where the increase/decrease in cash came from very easily.

Here is the resulting cash flow statement.

The top section shows the net cash from operations. This was a “decrease” of cash totaling $7,687.53.

The second section show cash from investments. This also was a decrease from the $13,495 used to buy the truck.

The third section shows cash from financing, or an increase of $25,000 to cash.

If you total all three of these sections up, you get $3,817.47 which exactly matches the increase in the cash accounts.











So, when looking at this statement is the increase in cash a good thing?

The increase came from a long-term loan. As long as the business is sufficiently profitable that it can pay its expenses and payoff the loan and the loan helps it do that, than yes the loan was a good thing.

The money that is tied up in accounts receivables could be a concern, especially if these balances are becoming old and possibly noncollectable. This would be a great discussion point between management and the accountant/CFO. 


So, there are the three reports I recommend all business owners review each month. Ideally, have key management and the head of accounting sit and discuss the material items.  This could be just two people.

If you’re in need of a professional bookkeeper to prepare these statements for you and discuss them with you, I do have two openings right now and would love to discuss over the phone with you.  Click HERE to connect to my contact page to set up a date and time with me.

Do I Need a Bookkeeper for My Small Business?

do i need a bookkeeper

I know. Running your own business can eat up all of your time.

If you have a small business, you are probably doing everything from sales/marketing, customer service, and balancing the books.

At what point do you delegate some of those tasks?

For example, do you need a bookkeeper for your business?

Here are nine reasons for hiring a bookkeeper. At the end of this post, all nine reasons are summarized in one graphic.

1. How Much is Your Free Time Worth?

This is a worthwhile exercise for many tasks in your life.

Figure out what an hour of your time is worth. It could be as easy as taking your annual earnings divided by 2000 (40 hours x 50 weeks) or a subjective number like what is that hour worth to you? I’ve had weeks where I wouldn’t take $1000 to give up an hour with my daughters.

Now, if you have a choice of having someone mow your lawn, clean your house or doing it yourself, you can compare the cost of hiring someone to your hourly rate.

As a result, if an hour of your time is worth $300 per hour and you can hire a bookkeeper for a whole month for that same amount then why not turn it over to them?

2. Delegate When You Lack Knowledge

I once bought a drawing program and spent probably 40 hours learning how to use it for a graphic I needed. It looked horrible.

I contacted someone on Fiverr and received a beautiful graphic for a price cheaper than the software I bought, and that didn’t include all the other hours I spent using it or going online to look up how to use it.

Lesson learned: let someone else handle what you don’t (or want to) know.

3. Eliminate tasks you don’t enjoy

Hey, not everyone enjoys working with numbers like I do.

If you dread trying to balance your bank account balance to what the bank shows or trying to determine why the balance your top customer shows as outstanding against what they show, why not turn that pain over to someone who can do it for you?

4. Give Your Financials a Second Look

When it comes to financials, isn’t it nice to have someone else double-checking the accuracy so you don’t have to worry when you do your taxes, wonder if you have enough money to meet next week’s payroll or if you’re spending too much on office supplies?

What price would you put on that peace of mind? Compare that to the cost of hiring a bookkeeper.

5. Focus on Your Company Growth and Customers

Let me ask you a question.

If you had 20 hours to spend on your business, what do you think would bring you more to your bottom line over time?

Saving a few hundred dollars a month by doing your bookkeeping tasks yourself, or spending those 20 hours drumming up new business or talking with your current customers?

The latter right?

New business should by far bring in more money than the amount you’ll saving on bookkeeping.

6. Accurate Bill Payments

How do you make sure your bills are paid on time and not duplicated, or not paid too early? Who gets a 1099?

Many things can go wrong with your bill payments. You can forget to pay your vendors, pay them late, pay them too early or pay them too much or too little.

Any of these mistakes can jeopardize your credit, your vendor relationship, cut you off from future purchases or leave you without enough cash to manage the rest of your business.

A good bookkeeper can do all of this management for you.

7. Timely collections of the Money Owed By Your Customers

I remember having a paper route as a kid and dreading having to ring the doorbell to collect the customer’s payment.

Most people don’t like doing this. If you don’t like it, or if you don’t have time, let a bookkeeper do it for you so your business will have its cash in your bank and not in your customer’s bank.

8. Turn Over Payroll to an Expert

Payroll is one of those tasks you must delegate to someone who knows what they are doing.

Bookkeepers can either do the whole process for you or coordinate with a payroll service to have it done for the business.

There are too many rules, regulations, tax changes, and potential for errors to make this an area to skimp and save on.​

9. Scared of Doing Tax Returns?

Income tax filings are best left to a CPA, but bookkeepers can help by preparing supporting documentation needed by the CPA and by preparing and filing other tax returns like sales and use taxes.

These are returns that most states require to be filed monthly or quarterly and many bookkeepers can do them for you at a rate much lower than your CPA would charge.

SUMMARY – Do you need a bookkeeper?

From the time and money savings, to the focus on expertise and greater cash flow, a bookkeeper makes good sense for your business.

Would You Like to Work with Me?

For a limited time, I do have an opening for another client in my bookkeeping business. If you’re interested in talking to me so you can enjoy some or all of the benefits listed above, please click the link to my contact form

Contact Me!

List of reasons you need a bookkeeper