There are some businesses that cheap out on their bookkeeping.  They do it themselves to save money.  They give it to a staff member who doesn’t really know how to do it.  They depend on an annual review by their tax preparer to see how their business is doing.  They get their sister, brother, wife, mother or cousin to do the books for a pittance.  Bookkeeping, after all, is not a revenue-producing part of the business.  But consider this:  Is your tax preparation bill excessive because of poor bookkeeping?  Are you paying late fees, high interest rates or excess charges because you are not monitoring your business finances?  Do you feel vulnerable to theft because you lack reasonable record-keeping guidelines?  Are you creating unnecessary stress or stealing time from your family to save a few bucks? 

Spend a few pennies and lose a few pounds of stress.  You might be surprised how quickly it can pay for itself.

Well, we know ours, too.  How to properly record the purchase of an asset.  How to verify the bank balance.  How to track credit card transactions and loan balances.  How to file paperwork so you can find it when you need it.  How to avoid needing the paperwork in the first place.  How to make financial statements work for you AND your tax preparer.  How to provide a business owner with a financial snapshot of the business in a way that promotes good business decisions.

The reality is you need more than just a knowledge of your industry and the loyalty of your customers if you want to grow your business.  You need the tools to evaluate the financial health of your business on a regular basis and the information you need to make decisions about where to go next.  But as you grow, it is evident that you can’t wear all the hats.  You delegate or you burn out.  So if what you DON’T know about bookkeeping is getting in the way of success or just distracting you from what you should be doing, give us a call.  We’ll do what we do best and leave you to do the same.

* We train staff.  We can teach an existing employee or a new-hire some bookkeeping basics and how to use Quickbooks (or whatever system you use).  We can work with you and your staff to improve your overall system to make it more efficient and effective.

* We support staff.  We can establish a monthly or quarterly routine where we take a look at your records to ask questions, address concerns, correct errors and even do the monthly reconciliations if you want.

* We supplement staff.  If you want to just have your staff pay the bills and make deposits, we can manage the bulk of the bookkeeping functions for you.  If you are concerned about the privacy of your accounting records, this may be the better option for you.

We will tailor our services to suit where you are, what you need and what you can afford.  We work with do-it-yourselfers who just want a little help.  We work with business owners who believe their time is best spent building their business.  We work with businesses in transition who need to delegate some duties away from the office.  We stand in the bookkeeping gap – whatever your gap might be.  Give us a call today and let’s get you and your staff back to doing what you do best.

I don’t say that to brag.  I say it to encourage you that you, too, can lose that awful dread.  You don’t have to burn the midnight oil trying to get your business records to the accountant before the tax deadline.  We work with you to set up a system that works for you throughout the year.  Then we work with your tax preparer (no, we aren’t trying to get your tax prep business) to find out exactly what they need to prepare your returns.  Most of our clients are relieved to find out the documents going to the accountant fit in a single, thin file folder.  They are also surprised to learn that the tax preparer can usually reduce their tax preparation bill because they don’t have to dig through a pile of papers.  Clients are also empowered by the information they have available to them throughout the year to do some tax planning and anticipate their tax position long before the tax return is done.

So if last tax season left you feeling like you got punked, now is the time to make some changes.  Next year doesn’t have to be a repeat of this year.  You can actually enjoy Spring.  Fly a kite in March.  Maybe even come up with a good April Fool’s joke to play on someone who needs a good laugh.  You don’t have to feel like a fool in April.  Call us today and let’s get started.

Many businesses work off their bank balances to determine where they are.  That’s not a bad way to get a quick snapshot if you are strictly a cash business, but there are serious limits to what you can glean from a bank balance.  Let’s talk about a few of those. 

*Your cash balance doesn’t tell you whether you are getting into debt or not.  Your cash balance could look good because you are using credit cards or a line of credit, which will tank your business if you are not careful.   

*You cash balance doesn’t tell you how much you are owed.  If you don’t monitor your billing and receivables effectively, you may find yourself working for free.

*Your cash balance doesn’t tell you where your money is going.  How much did you spend on cell phones last year?  What is your average utility costs?  How much do payroll taxes add to your overhead?  How much do you spend a month on vehicle fuel and repairs?  If you want to make your business more successful, you have to do more than work harder.  You need to work smarter – and part of that model is monitoring and effectively controlling your expenses.     

If your numbers surprise you at tax time (I owe what?!?) or you are just bothered by walking in the financial dark, give us a call.  We help businesses like yours get their numbers talking – in English.  For as little as $50 to $100 a month, you can find out what your numbers want to tell you.

As common as this story is, the solution is rather simple.  Learn a workable system or pay someone else to deal with it.  You may want to devote a few hours a week and do it yourself or you may prefer to ship your ’shoebox’ off to someone else every month.  For as little as $50 to $100 for monthly bookkeeping, you could be stress-free at tax time.  Give us a call and we will get you out of the shoebox and off the floor.

I get this question frequently. It is usually asked in two contexts. First – are we making or losing money? Second – how are we doing on cash? It is true that Cash is King and knowing what your cash is doing will make or break your business. It is also true that a business can be in serious distress while the owners are unaware because they are using credit to mask the problems with their bottom line.

What to do? As a business owner, you need to learn to read your financial statements. This is helpful even if your business is primarily a cash business.  It is critical if your business controls large assets or uses credit.

So what are financial statements? There are three commonly used financial reports that provide a snapshot of your business at any given point in time. One of the most management-friendly reports is called the Statement of Cash Flows. Other reports that are typically referred to as financial statements are the Balance Sheet (sometimes referred to as a Statement of Assets and Liabilities) and Income Statement (commonly referred to as a Profit & Loss or P&L).

Let’s start with the P&L, since it is the most commonly requested and read report among the three. The P&L provides a snapshot of revenues and expenses over a given period of time. This is the report that will give you a fairly good idea (with most businesses) where you will be when it’s time to file taxes. It is a critical tool in evaluating the success of your short-term efforts and gives you the all-powerful Bottom Line everyone wants to see. It shows you where you may be overspending, where your revenue is primarily coming from, and ultimately if you are making good decisions about how you make your money. If your P&L is not giving you that information, you need to change your chart of accounts to a format that makes sense to you as an owner and manager.  Although a P&L can help an owner keep track of expenses, it does not accurately reflect the cash activity in a business.  There are three reasons for this.

• First, a P&L will often contain expenses that are not yet paid. Payroll taxes and anything purchased on terms will be shown whether paid or not. Interest being accrued on a loan or credit card is also an example.
• Second, a P&L will often contain expenses that are not really cash outlays. The most common non-cash expense is depreciation. If you are tracking inventory, you are expensing it as you sell it, which means the cash used to purchase the inventory probably affected a different period. There are other accrued or unrealized gains and losses that may show up as well.
• Third, there are cash outlays that are not reflected on the P&L at all. The most common are payments of principal on loans, increases in inventory, and major asset purchases.

Many owners and managers try to treat their P&L like a Statement of Cash Flows. That’s like using a butter knife to tighten a screw. It may work in a pinch, but you really would rather have the right tool for the job if you have lots of screws to tighten. The bigger your business grows, the more efficient and effective your reports need to be and the more skilled you need to be in reading them quickly and decisively.

The most misunderstood report is the Balance Sheet. Many business owners have little use for it, but it is a critical element in understanding the long-term position of your company. Certainly, business owners want to know how much cash they have in the bank. Then there are other assets that are in various states of liquidity. The second section of the Balance Sheet shows Liabilities. This is your debt load and may include highly liquid debt like Accounts Payable and move through credit cards and lines of credit until finally reaching your least liquid debt – long-term liabilities. Finally, the Equity section reflects the difference between assets and liabilities over the life of the company – which basically means the value of the company in accounting terms. One reality that frustrates some business owners is that financial statements show assets at their original value and liabilities at their current balance. As a general rule, accounting practices don’t leave much room for increasing assets for appreciation value or decreasing debts for future expected adjustments. When dealing with outside parties, you can always supplement your financials with a report reflecting the current market value of your assets or any other relevant information that would help the reader get a better financial picture of your company.

Liquidity is important when evaluating your Balance Sheet. If most of your assets are tied up in real estate and equipment while the bulk of your debt is highly liquid Accounts Payable, you can imagine what a banker would think of that situation. You are going to run out of cash and have to liquidate your assets unless the revenue flows in to cover the debt. That is not a pretty picture for a banker to see. Alternately, if your debt is mostly long-term, like a mortgage on your building, but your assets are moderately liquid such as Accounts Receivable or Inventory, an investor will consider your risk tolerance as higher because you have the ability to weather economic storms and cover your losses. Your Balance Sheet is how outside parties determine your long-term probability of survival and success.  Your goal as a business owner is to educate yourself about what bankers and others see when they look at your financials.  It is not only good for your business credit, it is critical to your business success.  Looking through the eyes of an investor or banker gives you a different perspective about what makes your business viable for the future.  Getting that education gives you the ability to see the big picture for your company.

Lastly is the Statement of Cash Flows. Many people have never heard of it, but it reflects the most commonly requested information managers want to see. They just don’t know there is such a tool at their disposal. Unlike the P&L, the Statement of Cash Flows will provide a clearer understanding of where your money is going and where it is coming from. It will show you if most of the cash used during the month came from revenue or from loans. It will tell you if your cash was used to reduce a debt, purchase an asset or cover a loss. The Statement starts with your opening cash balance then summarizes the cash activity for the period, with the final line reflecting your ending cash balance. You may want to consider how a Statement of Cash Flows might assist you in your management decisions. 

I hope this information is helpful.  Get in touch with us at Rockwateraccounting.com if you want more information about how we can help you get your financial statements working for you.

The benefits to Virtual Bookkeeping are endless. Here are a few:

• You don’t have to have additional physical space for someone to work.
• You don’t need an additional computer or workstation.
• Your records become almost completely electronic and are therefore more easily retrieved, more easily backed up and more economical to maintain.
• Services can be performed at any time of the day and with little or no interruption to your schedule.
• In many cases, setting up Virtual Bookkeeping allows you additional access to your records because you can log in to your system from anywhere to look at your records or update information.

Virtual Bookkeeping, like the vast array of other virtual services offered today, is just one more way to keep your business running smoothly while minimizing your overhead costs. ’More for less’ is the mantra for every business and Rock Water Accounting can provide just that with Virtual Bookkeeping Services.

We listen to your goals and preferences, we make recommendations and discuss service options with you. We offer tailored accounting solutions for your small business. Make the changes today that will help you reach your goals tomorrow. Call now for a free consult to discuss how our services can contribute to your success.