Entrepreneurs are truly creative, especially when it comes to setting up a small business accounting system. If I had a nickel for every time I heard “it only takes me ten minutes to do this, so I’d rather do it myself,” well… I wouldn’t be writing this blog post. The reality is ten minutes here and ten minutes there add up to consume scarce productive time needed to drive the business that generates sales and profits. Your small business accounting system’s purpose is to account for what’s happened, in addition to helping plan for what may happen.
The sad irony is that accounting for small businesses looks like this:
1. You have a revelation that it is time to step up to a small business accounting system because ads say it’s so easy to use… anyone can do it. After all, you’re making a “huge” investment of less than $500 every three years (or roughly $50 per month for online versions).
2. You figure that since you made the investment, and since most small business accounting software has an easy setup feature, that whatever happens during setup must be what’s in your best interests. The reality is a resounding no. While accounting is a concrete field, how an accounting system is set up is based on you, your small business, your industry, and your expectations. This is not part of the typical default screen.
3. After setting up your small business accounting system and accepting defaults, you now start to plug along with transactions. You start entering checks, invoices, payments, bills, time, inventory, etc. You print reports and see that there is information all over the place. The checking account doesn’t look right, inventory keeps increasing although you’re selling products, your bills look like they’re unpaid, although you paid them, and the list goes on and on. The next thing you know, the ten minutes here and there leads to your small business accounting system being nothing more than a glorified checkbook with a patchwork of workarounds.
4. After all is said and done, you spent time and money for what? A small business accounting system that has the potential of giving you what you need, but is giving you nothing instead. Now you contact your CPA to clean up the mess, spend all the money you thought you were saving (and then some), more time passes, and you’re stuck with the same system and same problems with new transactions going forward. What’s the solution?
Your chart of accounts and a little bit of training. The chart of accounts drives your entire accounting system and if it is not tailored for you and your business, the results are useless. The chart of accounts can accumulate information in a manner that you’re comfortable with.
A little bit of training refers to the fact that you will use a small percentage of the functionality of your small business accounting system, so let’s focus on this.
Aligning your chart of accounts and training puts you back in control of your small business, as well as give you a better understanding of knowing how you’re doing.
For more information, please visit www.mokercpa.com