Monthly Archives: June 2015

Small Business Partnership Pros and Cons

partnershipPartners can be both a blessing and a curse.

Many small business owners swear that without their partners they never would have gotten where they are today. Others are certain that going solo was the right decision, and a partner would just have slowed them down.

Here we try and highlight both sides of the argument for you to come to your own conclusion about what is going to work best for you:

Pros of having a Partner:

  • You can keep each other motivated on the hard days
  • There is someone else you can trust to watch things when you are away
  • Often skills you don’t have they will have, and vice versa
  • Someone else to contribute capital, credit, collateral to the business
  • A good partnership can get started faster than a single person
  • There is someone else to bounce new ideas off
  • It isn’t lonely at work, or at the top

Cons of having a Partner:

  • It takes longer to be able to pay yourself what you deserve, since you are splitting the profits
  • You can’t do everything the way you want
  • There is the constant concern that the partnership will become unequal or unfair
  • You may eventually want to go in different directions or at different speeds
  • You will be personally liable for decisions your partner makes unless you form a corporation or LLC
  • Most decisions take longer since you have to talk them over first
  • Employees can be let go but a partner you are stuck with unless you actually buy them out

To be sure, there are pluses and minuses to having a partner that you have to carefully consider. If you need a partner because they the capital or credit you lack, then you may have to live with it until you are in a better position yourself to go solo.

Or you may really need a partner to help keep you on track and motivated to continue even when it gets tough.

If you do take on a partner, and I can’t stress this enough, then you need to have a rock solid partnership agreement in place BEFORE you do anything else.

If I had a dollar for every business partnership that didn’t work out and ended badly, I’d have infinity dollars and counting.

And your partnership agreement must spell out in very clear black and white no possibility for misunderstanding how the partnership can be broken up or how one partner can leave- that includes how you value the company, what they can take with them, how they will be paid out for their share- everything.

If your partnership agreement was nothing BUT how the partnership ends you would be ahead of 90% of other partnerships. Don’t make the mistake of thinking you are the exception because you are family or you’ve known each other for years or you are married or anything else- do this or really regret it later.

Either way, as long as you know what you are getting, and giving up, by having a partner, then the decision should be easy.

Common QuickBooks Bookkeeping Problems & How to Find Them

quickbooks bookkeeping problems

Sometimes people know their books are wrong but they aren’t sure what is wrong. Other times, people have no idea there is a problem because they don’t know what they don’t know.

If you know for sure your books have problems, then use the chart below to see what kind of problem(s) you are having and what the solution is likely to be.

If you already know your books have some issues, or even if you think your books are rock solid, I still suggest printing out the reports discussed and going through the accounts to make sure. As I’ve said other places, 98% of the books we see have at least one problem, so the chances are yours do, too. Maybe not, but it doesn’t hurt to check so if you are doing clean up you can make sure you get everything at once.

If you aren’t sure what your problem is, but you think you might have one, then the best way to spot it is to go to the reports menu, select the Profit and Loss Standard report and select a time range that covers the last twelve months by month (or as long as you’ve been in business if less), and print it out.

Then print out a Balance Sheet report, with an ending date of the last day of the most recent month that has passed.

Then, in a nutshell- look for stuff that looks wrong:

On the P&L, look for:

  • Negative income amounts (aside from refund or discount accounts)
  • Negative expense amounts
  • Amounts that are way higher or lower than you think they should be
  • Accounts with contents you aren’t sure of
  • Amounts that are loan payments
  • Amounts that are sales tax payments
  • Amounts that are credit card payments
  • Amounts that are payments to the owners or investors
  • Anything that says payroll that wasn’t an actual paycheck

These are all red flags that things have gone wrong.

On the Balance Sheet, check if you see:

  • A bank balance that is negative or way off what it should be
  • Accounts receivable balances that are more than you are actually owed
  • An inventory amount that isn’t really the value of your inventory
  • Asset accounts that don’t match the value of your actual assets
  • Depreciation or Amortization that is MORE than the value of your assets
  • Loan balances that are wrong (or missing)
  • Accounts payable balances that are more than you really owe
  • An opening balance equity account
  • Any other number that looks wrong – you don’t know what it is, or a negative number

If you spot one or more of these, there is a very good chance you are making one or several of the mistakes outlined below. Time to get busy working through these!

Go down the list. If you are doing it correctly, you don’t need to worry about it. If there is an issue, mark it so you can come back to it. When you come back to it, make sure you understand how to correct it, and go as far back in your books as needed to fix it. It is easy to keep the books in order once they are organized, but until they are fixed, they are never going to give you usable or accurate information.

Problem Symptom Fix
Not Reconciling Your Accounts Your balances don’t match reality and are way off Get a good starting balance and then match entries to statement
Not Doing Sales Tax Correctly Over or under balance owed compared to your POS report Use built-in sales tax tracking correctly
Bad Chart of Accounts Identical expenses going in different places each month Clean up Chart of Accounts to make it easy to use right
Doing Loans Wrong Only payments showing, no split for interest expense, no loan balance Use loan accounts and reconcile with statements to split into two parts
Missing Credit Card Expenses Overstated profit, payments to credit card but no detail Set up credit card account, reconcile expenses and payments
Screwed up Invoicing Customer balances not right, income overstated Learn to receive payments and deposit funds correctly
Forgetting 1099s 1099s not filed because 1099 vendors not tracked Get a W-9 from each eligible vendor and track in QB from start
Asset Accounts Wrong Missing assets, missing deductions for expenses treated as assets Understand how to use asset accounts and what goes in them
Equity Accounts Wrong No equity or equity treated as expense Understand how to use equity accounts and who they are for
Getting Behind, Doing it all Yourself Books not started or way behind or way wrong Get help, get them caught up and fixed, delegate!

If you find problems and you can’t figure out how to fix them, or you would rather hand off the task or you just want to make sure it is done right, then give us a call– we’d be happy to give you a fixed price quote on what it will cost to get it all cleaned up for you.

Bookkeeping Infographic

I thought the article I wrote on how to pick a bookkeeping service came out really well, but it was over 3,500 words. Not everyone is that excited about bookkeeping (not sure why not? 🙂 ) so this seemed like a good opportunity to try creating an infographic. Here are the results:

How_to_Pick_a_Bookkeeping_Service

Although the bullet point text is a bit small, the main points are certainly clear the red crossed out circle vs the green hearts make the point pretty well as to what is good and what isn’t (hopefully!). And anyone who really wants to read it can of course access the full size image just by clicking on it.

The idea of course is to make something people want to share or post on their own sites to get some link love as well as some traffic back while of course providing actual value that makes it worth posting in the first place.

Would you like to post this on your site? We would certainly appreciate it! Here is the embed code:

<p><strong>Please include attribution to CapForge.com with this graphic.</strong><br /><br /><a href='http://capforge.com/bookkeeping-infographic/'><img src='http://capforge.com/wp-content/uploads/2015/06/How_to_Pick_a_Bookkeeping_Service.jpg' alt='How to Pick a Bookkeeping Service' width='540px' border='0' /></a></p>

26 Business Blogs You Should Be Reading Now

There is no shortage of blogs out there, but time IS short and you don’t want to waste your time reading stuff that isn’t going to benefit you. Here is a list of business blogs in no particular order that I think are worth the time and that may not be on your radar yet:


ScreenShot008Are you working on selling a product that would like to see in stores, magazines and blogs and find out how to make a much bigger splash with it than you are currently getting? Then check out Launch Grow Joy and learn from the wisdom of someone who has done it already and teaches others to do it every day. Aside from the blog there is also a podcast and even if you aren’t on the exact course this blog is aimed at there is a ton of good general information and inspiring stories here to give you plenty of reasons to keep on stopping by.


ScreenShot009If you are working as part of the freelance economy, or that is just one source of revenue for you, check out the Freelance Guerrilla blog. The best part about this blog is that it doesn’t just report exaggerated tales of success from unnamed sources but it provides real world stories about how to survive and thrive working for yourself providing skills and services to others as a freelancer. A service business is the fastest, lowest cost way to break into entrepreneurship and it can turn into serious money seriously fast if you do it right and do it smart. This is the blog to read if you are going down this path or even just considering it.


Although Blogtrepreneur sounds like it might be just for bloggers really the site is packed with all kinds of business advice that goes far and wide beyond just topics of interest to those running blogs. The founders Matthew and Adam Toren are brothers, serial entrepreneurs, investors, and mentors. For nearly 20 years, Matthew and Adam have provided instruction in management concepts, marketing, and finance to emerging and distressed small businesses. There are a ton of posts and the site has a huge backlog of information that is definitely worth checking out and checking in with on a regular basis.


ScreenShot007Are you working on launching something right now? The check out the Epic Launch Blog– this one is filled with inspiration as well as practical advice for all aspects of launching a new business that has all the right ingredients for success. There are tons of posts and many of them really dig deep to cover all sides of a question. Poke around and read the articles that apply (they’ve got posts going back to 2009!) and see what else you can learn. Chances are if you have a question about business you’ll find an answer here.


I love travel and I love being aScreenShot006n entrepreneur but I really haven’t done them together- and certainly not the way The Suitcase Entrepreneur is doing it! Natalie has been traveling the world working from wherever she finds herself without the usual constraints of an office, staff or regular work hours! If you are looking for a how to guide on being location independent, or just want to learn more about structuring something that could offer you that option down the road, then learn it from someone who has already done it!


ScreenShot005If you want an informative all around blog with an interesting voice check out Small-Bizsense. Run by Kim “The Chick Geek”, Small Business Sense shares small business ideas, tips and resources for independent Entrepreneurs and Small Business owners. I like their monthly roundup posts that often point to great posts I wouldn’t have otherwise seen and there are lots of list posts in between covering everything from productivity tips to top five business podcasts.


ScreenShot004How about this for an inspiring title: Eventual Millionaire! Maybe you are already there, but either way, you are going to learn a ton from the successful entrepreneur interviews website owner Jaime Tardy posts for your education. The interviewees are successful entrepreneurs who are sharing their ups and downs and secrets to success in their time with Jaime. She also has her own inspiring story about getting out of debt and quitting a job she hated to move on to do something she loves. It is a great site to visit for a regular dose of knowledge and inspiration!


ScreenShot003If you are working in a small town or a rural area then there is a blog just for you! It’s called Small Biz Survival and it focuses on the unique challenges facing business owners who live where the populations are small and the access to many resources other might t ake for granted are not available or hard to come by. The good news is that small towns have their own unique advantages and you can be successful if you can apply the right way of thinking to the situation you are facing. Of course, many of these lessons will apply to any small business and so I would make the stop here to check out the articles no matter your geographic location as what you find will very likely be a gem you can use!


ScreenShot016If you are thinking about joining the ranks of the work from home crowd then check out the posts at SparkPlugging. This site is all about the work at home entrepreneur and the specific business issues, ideas and inspirations they deal with. Theses days with so much of the work world accessible online almost every business owner is at least a partial work from home entrepreneur anyway so there is going to be something here for just about everyone.


If you are going more of the VC route with your startup then check out Startup Professionals Musings. This blog focuses on finding business ideas, mentors, raising capital and networking. The posts are long and deep and go into tons of detail. They are written by Martin Zwilling, CEO & Founder of Startup Professionals, Inc.; Advisory Board Member for multiple startups; ATIF Angels Selection Committee; Entrepreneur in Residence at ASU and Thunderbird School of Global Management. I am amazed that he posts as often as he does for as much as he writes but that is just another reason to make this a frequent stop on your reading list.


The Secrets of EnScreenShot003trepeneurship offers a general overview of the world of small business and offers lots of practical hands on tips to make the new owner or aspiring entrepreneur more business savvy. They post regularly and cover a wide range of topics.


The Right Stripes is a website for women launching startups. A quick review of their posts though pretty quickly demonstrate these are topics any entrepreneur is going to benefit from reading. They post regularly and cover a wide variety of topics and although some do address issues specific to women I wouldn’t let that stop anyone from making it a regular stop on your blog reading tour.


The 500bScreenShot004 is a another general business website featuring entreprenuer success stories and general business how to lessons. In their words “The 500B is a resource for entrepreneurs with tips, business insights, how to’s and more.” Although the posting isn’t super frequent the quality of the posts is top notch.


TreplifeDad is a business blScreenShot005og for “parent entrepreneurs” featuring general business and entrepeneur articles to helps with all aspects of business building and with a special emphasis on the challenges faced by parents who are also business owners. As the father of two kids myself, I get it. Gone are the days of it being all about me and what I want to accomplish- I’ve got a balancing act to do now- and I love it!


For a blog on marketing help you should check out Ginger Bread. Although there are some more general articles most of the content centers around online marketing help for business owners- things like SEO, email marketing, content marketing and using social media effectively. These are all topics no business owner in any industry can ignore these days and the posts are both regular and actionable so definitely worth a browse through.


If you have anScreenShot006 online store or are thinking about starting one or adding one then look no further than the memorably named My Wife Quit Her Job. This blog offers practical behind the curtain information on what works and what doesn’t in e-commerce based on real life examples taken from their own store. The website also offers tons of free lessons as well as paid options for training for those who want to dig deeper. If you are hoping to quit your job and open an online store, you need to reading this!


Head over to SmallBizDaily for a great collection of all kinds of business articles. The posts run the gamut from management help to business trends and everything in between. The site is updated constantly and the posts make great quick reads from a variety of area experts. The site is run by Rieva Lesonsky who, prior to co-founding GrowBiz Media in 2008, was SVP/Editorial Director of Entrepreneur Magazine. I use to see her name and read her column there all the time back when I was just an entrepreneurial sprout myself.


The Grasshopper Blog is put out by the people who provide the phone service and is owned by the company Citrix which makes all kinScreenShot007ds of cool software most of us use but may not realize. The articles on their blog are often interesting and they post a few times a week about general business topics. Although they are doing it as a service to draw traffic to their core business they are nevertheless putting out quality content I would suggest dropping in your news feed or bookmarking for regular check ins to see what they have been posting lately.


If you are lookingScreenShot008 for ideas on creating your mission, your company vision or your general business goals, check out The Thriving Small Business Blog by Patricia Lotich, the founder of TSB.  Patricia is an MBA and a Certified Manager of Quality and Organizational Excellence through the American Society for Quality which facilitates the prestigious Malcolm Baldrige National Quality Award. She writes the articles on the blog and they are gold if you are looking for help in focusing and building your business’ organization and direction. She also offers consulting if you want to get one on one help or really have someone to help you with your road map and hold you accountable for your success.


ScreenShot010Are you thinking about a franchise or do you already own one? Check out the Franchise King’s blog for tons of great tips. Even if you don’t own a franchise if you are thinking about getting into a business where franchises will be your competitors then you should check out what they are doing and gather as much information as you can. If you are going into business using this model then you definitely want to go in with your eyes open as the are as many downsides as there are upsides to franchise ownership and you don’t want to land on on the wrong side. There is also plenty of good advice that applies to business owners in general and people planning to buy a non franchise business. Business is business and everyone can learn something from the king!


Unless you plan to be solo forever (which is an option, but a limiting one in many ways) you are going to need to hire someone. That is no easy task and the cost of bad hires is significant. Before you go down that road check out the Growth Everywhere blog. The website focuses on smart hiring from the entrepreneur and growing a business perspective (as opposed the the HR perspective) and helps you figure out how to do it right from the start. They aren’t just about hiring though- Growth Everywhere is a blog on business and personal growth. On Mondays we interview world-class entrepreneurs and pull out actionable insights to help you grow. Check it out and listen to the podcast as well.


There is no business today of any size that doesn’t use some technology. The smarter you use it the more efficient you can be and the more easily you can compete and wiScreenShot011n in your field. Therefore, it makes sense that you should be reading the SmallBizTechnology blog. These guys are focused on regular business owners and how they can make the best use of technology to leverage their time and talents to the greatest advantage. Like they say on their website: “Smallbiztechnology.com writes about technology solutions that increase efficiency, saves money or increases the revenue of a small business. This is what makes us excited. Period.” I am a big believer is using technology to make life easier and I love being able to show clients how we can do things way easier than they are used to or than the last person was doing it. It’s an easy win for us and it makes the client’s life easier so everyone is happy.


ScreenShot012You can’t put entrepreneurs in a box but you can certainly read the Entrepreneurs in a Box blog! This blog is about, in their words “This blog is for people interested in starting a new business, or interested in increasing performances of current business, or interested in increasing business potential energy of their business…” And what is “business potential energy”? A term the blog owner has coined based on his own research and experience- pretty cool! This site is updated often and is definitely worth a visit for all kinds of interesting posts on a range of business topics.


ScreenShot013Looking for a collection of business articles by entrepreneurs for entrepreneurs? Stop by Success Harbor and take a look a their collection of posts that will give you all kinds of insights and actionable tips you can use to help grow and improve your enterprise. The website is run by George Meszarozs, who I’ve actually met before at one of his Trustegrity networking events. He is the CEO of Webene, a web design and marketing firm. He has interviewed over 150 entrepreneurs and writes about a lot of different topics for entrepreneurs from how to start a business to strategy, branding, marketing, startups, and web design and development. Nice job on the website, George!


If blogging is your thing, or if like me having a blog is just part of your overall business marketing strategy then check out Shade of Info by Andrew Warner. He writes about building your audience, increasing conversions, targeting the right reader and everything else you need to know to have a highly successful blog. Of course, virtually all of these same principles apply to marketing in general- know your audience, build your client base, target your ideal customer, etc. So I would say this is going to make good reading for a whole lot of people who could put the ideas to work in their own businesses.


ScreenShot014What is the Frugal Entrepreneur? In the words of the owner, “I decided that I wanted to create a place where other frugal entrepreneurs and small business owners could find the small business tips, tools, and resources they need to help them run their businesses.” You will also finds lots of good general business articles and resources in addition to all the free document templates that were the original inspiration for the site. The reality is most new business owners are watching every dollar and can’t afford to spend frivolously, a fact which this website appreciates and works to remedy.

How to Choose a Quality Bookkeeping Service in 3 Easy Steps

bookkeeping service choiceThere are lots of people and firms who provide bookkeeping services but they are not all created equal. The problem is you can’t test them all out and figure out which ones are good and which aren’t- you have to commit to one and go with it for awhile and even then you may not realize you’ve picked a lemon until months down the road.

So this guide is going to give you three simple steps to evaluate any bookkeeper and pick the best option. Here’s what you look at:

Step One: Evaluate the Price

What?? Price? Am I really telling you that one of the things you should judge a professional service by is price? Well, yes. Because first of all, let’s face it- no one wants to pay a dime more than they have to for a quality service. I am the same way- I don’t want to pay $400 when I could have gotten the equivalent for $200 and the only difference between the two choices was paying an extra $200 for nothing.

So, price definitely matters. But there is a smart way to look at price and then there is just being cheap, which almost always costs more in the long run. Here is how to evaluate bookkeeping prices:

Avoid Hourly Rates

There are a lot of problems with hourly rates for bookkeeping, so right off the bat if you’ve got someone who wants to give you an hourly quote, you can cross them off your list. Let me tell you the reasons for this (unless you don’t care, in which case you can skip on down!)

First, with an hourly quote you never know how much you are going to be paying. I see clients all the time whose bookkeeping started out being three hours, then after a few months it was four and then pretty soon it was six hours a month- but their volume of business was essentially flat. So why did the hours keep changing? Who knows? But you will have no say in the matter.

Second, you and your bookkeeper are working at cross purposes. They make more money by taking more time on your books and you want them done fast. They are incentivized to make things more complicated, although they will often tell you things like “this is how it HAS to be done” to explain their convoluted mess.

avoid hourly bookkeepingSome of the worst books I’ve ever seen have been done by hourly bookkeepers who took five steps to do something that should have been done in one.

Plus, what if they are slow typers? What if they make a lot of mistakes and they have to go back and fix them? Is that time billable to you?

Third, why CAN’T they tell you how long your books will take? Is it their first time? Are they planning to charge you for the time it takes to ask you for things and the time they wait for them? If they are that unsure about your books that they don’t know how long it will take I’d be worried. If they want to be able to tack on extra fees just because you had a little more business this month does that also mean they will charge less in the slow months? Doubtful.

Fourth, hourly rates are a terrible way to judge how well a job will be done. Some people think bookkeeping should only cost $10-$12 an hour. They are confusing this with data entry. Data entry is just typing stuff in but bookkeeping requires knowing what to type where. I can make a fast hot mess of your books if all I do is type stuff in willy nilly.

For example, if you and I agree that $80 a month for doing your books is fair, does it matter if it takes me one hour or four? If I do a great job, give you quality service and everything you asked for then why does the hourly rate matter? The best bet is to pay for results, not time and then you know exactly what you are getting.

Avoid Package Rates

Some flat rate bookkeeping services offer flat rate packages. These offers will say things like “Any Size Business $135/Month” or they will have fixed price gold, silver and bronze packages, etc.

package pricingThis may sound like a good deal, and it is better than paying hourly, but just like with clothes- how often does one size really fit all, or even most?

What you quickly find out with these plans is they fall into one of two things. Either the clients they accept must fit into a very narrow range of parameters of what they will do and what they will get, or else the service will be poor for most clients.

Just ask yourself, how can two businesses, one with only one checking account and a couple dozen transactions a month possibly be paying the same fixed rate as a business with three checking accounts, two credit cards, two loans, payroll and inventory to manage? One, or more likely both of them, are getting screwed. The small business is overpaying and the big business is getting cut rate service in order for the math to work at the low rate they are paying for the service.

The Right Choice: Custom Quoted Flat Rate Pricing

Your outsourced bookkeeping service should be giving you a flat rate custom quote. They should evaluate your situation in detail, work with you to determine what you need and what you want and then provide a flat rate quote that is specific to your exact situation. Yes, it is just that easy.

That is what you should expect and anyone not offering that level of service and price stability for your business is going to be very easy to skip over.

Step Two: Evaluate the Firm

Who you are going to do business with is extremely important. They are going to have access to your financial information and you are going to rely on them to provide financial reports for you that will be the basis of business decisions, tax payments and government records. You don’t want it to get screwed up, lost, forgotten about, left undone or handed off to some unknown third party who may or may not be in the country.

Here’s what to look for and avoid in bookkeeping firms:

Avoid the One Man or One Woman Shop

Nothing against the solopreneur but I get calls every week that go like this: “I had a woman who did my books for the last six months but she stopped answering the phone and I can’t get in touch with her and now we are three months behind.”

The problem with the one person bookkeeping service is that they work from home and are the most subject to inconsistency and sudden disappearance. I’ve heard of clients being dropped because of all the following reasons, and I’m sure there are many more: moved, went back to school, got a full time job, got hired by a client, got divorced, got pregnant, got busted for stealing (oops!), graduated from school, got sick, went traveling, got burned out and just plain left without a trace.

When you hand things off to a single individual you are never sure if they will still be in business next week or next month. They have no rent to make, no payroll and no real ties to continue serving the handful of clients they may have so it is easy for them to drop off the face of the earth.

As a side note, but an important one, the solo bookkeeper is also the one least likely to be up on current technology, have processes and procedures in place, will want to come and work at your location and will not have anyone to check with about questions on accounting topics they may not be totally familiar with to begin with. They are also the least likely to have deep or broad experience in various industries and often no specific education in finance or accounting beyond a working knowledge of QuickBooks.

And they often aren’t even the cheapest option, to offset many of their other downsides! They are the most likely to charge by the hour and because they are trying to make a living off just a few clients either the rates will be high or the hours long, or both, relative to what other options will cost.

Avoid CPA Firms

There is nothing wrong with CPA firms for what they are good at but very few of them are set up well to do bookkeeping. Large firms will have some bookkeepers on staff to help clients whose books are a mess or who don’t have bookkeepers and these people are often good and know what they are doing. The problem is they get billed out by the hour (bad) and at typically really high rates (worse!). Some firms bill between $100 and $150 an hour for their bookkeeping! Sure, the books are done right but at a huge and unnecessary cost!

Small CPA firms are a little less expensive, but their bookkeeping person is often also a tax person, so at tax time you might find your books getting way behind. They may also not be the most up to speed bookkeeper, because they are doing double duty and often it is something they picked up (and many dread) rather than what they trained to do full time. And small CPA firm rates often aren’t much lower than big firm rates and they too almost always charge by the hour.

The other issue with CPA firms that is very often true is that they are not very customer service focused. It can often take a long time to get a call back or a question answered and when you do it sometimes feels like they consider you to be kind of a nuisance. I don’t really understand it, since they are in a service business that most people view as a commodity- you’d think they would be knocking themselves out trying to provide great service but that’s not usually the case.

And when you do have questions you can normally expect to be billed for the time it takes to get an answer.

Avoid Going Offshore

I have had a lot of luck using overseas workers to help me out with projects including writing software code, designing websites, writing articles and doing SEO work. I’ve also had some terrible experiences with using overseas workers for those kinds of projects. Fortunately, none of them have been mission critical and even in the worst cases I wasn’t out much money.

data-entry-operatorsThere are definitely some advantages to using people outside the US to help you with various business tasks, the biggest one being price. If you can explain very clearly what you want and you are patient and you find someone who is also a good honest hard worker looking to do a good job you can get wonderful results.

The drawbacks are equally significant. The number one issue is communication. What you think is obvious or that you have explained clearly often looks like gibberish to the other side- at least that’s what you have to conclude with the results you sometimes get. And trying to clear it up can be an endless stream of back and forth with both sides becoming more frustrated and progress going nowhere. And this assumes you are conversant enough that you can give good direction and provide feedback so they can get what you want done right.

The second big drawback is you have no recourse and no real leverage if anything does go wrong. You may be able to get your money back if you paid via a credit card, but you can’t recover the lost time or the potential data loss or other complications of giving sensitive financial information to someone with no accountability to any legal system.

I am not saying there are no good offshore solutions for accounting or that US based firms are all perfect. But for a small firm the hassle of trying to overcome the communications issue and the risk of dealing with someone with no legal recourse is going to be way beyond the benefit of any minor cost savings you might realize.

The Right Choice: A Dedicated Bookkeeping Services Firm With Great Reviews

The best choice is a US based firm that specializes in outsourced bookkeeping and is staffed by a group of experienced and knowledgeable bookkeepers. That way, you can be much more certain your work will be done consistently each month, the communication will be easy and you have options and recourse if anything ever does go wrong. It also means the business is a lot likely to still be in business and taking care of you six months from now, a year from now and so on.

It also means they are going to answer the phone when you call and respond to emails (they better! or cross them off the list) in a timely manner- the same day usually.  By choosing a firm it also means you are more likely to find they have experience with your kind of business and are familiar with your industry. They will have the size needed to be able to invest in the latest technology, continuing education and the tools needed to do a great job with your books.

You also want a firm that has happy clients! Ideally one where the clients have posted reviews and are willingly promoting and referring the business to their colleagues and friends. You want to see a growing list of glowing reviews which means the firm is taking good care of its current clients and adding to the group on a continual basis. This is the best indication you’ve found the right firm for your business as well.

Step Three: Evaluate the Process

The final piece of the puzzle is how well the process is going to work for you. Not every method is going to be a good fit for every business and some firms don’t have much (or any) flexibility in the way they do things. Here’s what to look for:

Avoid Someone Who Wants to Come to Your Office

This is the old school style of bookkeeping and it’s not good for a few reasons.

First, it is always slower to work in someone else’s office because very often the one the bookkeeper gets it the slow computer with the weird keyboard and the small monitor and the wonky internet connection. You are paying more for this you just may not realize it.

unwanted-guestsSecond, pretty soon either the bookkeeper or you is going to have to reschedule and then who pays for the lost time and change of plans? And the work doesn’t get done.

Third, someone who is willing to come and sit in your office is most likely a solo bookkeeper and most likely charges by the hour, which are already both bad signs.

Fourth, someone in your office who does your books is a lot more able to steal than someone off site with no access to check stock or live account passwords, live checks, etc.

If you want someone who does the books but also answers the phone, makes coffee, does some filing and cuts checks in the office then outsourced bookkeeping might not be the right fit. But consider this- the person who will do those things is very often also not well trained or familiar with bookkeeping.

What you might want to consider instead- and we’ve had a lot of success with this approach- is we can train the in office person to do a few of the tasks that are hard to take off site and then we do the rest of the skilled bookkeeping as we normally would. This gives you the best of both worlds- the in office tasks are handled and you get high quality professional bookkeeping on a consistent basis for a great price.

Then if the office person changes, moves, gets fired, whatever- the books are still consistent and no time is lost. The new person, when they get found, simply gets trained the same way and the books still get done the same way. And, you have an outside third party reviewing the books who can spot any red flag activity that an in house person can conceal if they are both handling the funds and doing the books.

Avoid Someone Who Wants You to Scan or Mail All Receipts

avoid scanning receiptsI’m not sure why some firms or individuals are still doing this but it doesn’t make a lot of sense- and it certainly creates a lot of work for you!

Individual transactions are entered in the books, but they almost always come from the bank and credit card statements, not the paper receipts you get as you go through your day. You should keep those in a file, yes, but your bookkeeper does not need them to do their job. If you spend cash, then yes, the bookkeeper needs the details on what it was spent on, but that is a far cry from send me everything.

There are much better, simpler and easier ways to transfer information that make it super easy on the client to hand off what’s needed. If your potential bookkeeper doesn’t know how to do that, skip over them immediately!

Avoid Anyone Who Won’t Let You Have or Access Your Own QuickBooks File

I’ve had numerous clients over the year who have wanted to switch to us and then found out their current bookkeeper either won’t give them their file or won’t give them access to their online account. In some cases we were able to work around it and in some cases they lost a lot of historical information they had paid for and should have owned!

If your bookkeeper is trying to keep you as a client by holding your information hostage you have found a true loser! Ask up front if you can have the file any time you want it (assuming it doesn’t already reside on your computer) or if they are using an online account make sure you are going to be the master administrator. Accept nothing less. After all, you are paying them to create the data- you should own it.

Avoid Anyone Using Non Standard Bookkeeping Software

Proadvisor-badgesThe lion’s share of small business bookkeeping service today is done on Intuit’s QuickBooks. This software has its quirks, and it isn’t always perfect, but it is far and away the market leader. That means that when you go to have your taxes done, the tax person is going to expect to see QuickBooks. So will your bank. And so will most of the people who work in your office if they’ve had other office jobs.

QuickBooks comes in desktop versions and online versions. A bookkeeping firm should be able to handle either and from any year from the present back to about 2012. Beyond that they should be telling you to upgrade. If your bookkeeper tells you the 2006 version of QuickBooks is just fine, they should get tossed out immediately. Software ages poorly and using anything that old is a recipe for disaster. The fact that they don’t know that is worrying.

Xero is coming up in the world and while I don’t like it as much as QuickBooks, it is an acceptable substitute. Your CPA won’t know how to use it most likely, but they can work from the reports.

Anything else is a big red flag. If your bookkeeper wants to use Quicken, Excel, Microsoft Money, Peachtree or something else to do your books, watch out.

The Right Choice: A Painless Tech-Forward Process for Two Way Information Flow

In my opinion it is part of the bookkeeping service job to make getting information from the client and giving it back to them as painless and non intrusive as possible. For each client we evaluate what is needed and how best we can access it and we get that set up right away so we can then focus on doing the job without constantly bothering the client for information or asking them to send over more and more paperwork.

If the process can’t be simply explained and if it isn’t set up to work seamlessly then you probably haven’t found the right provider yet.

Conclusion: The Right Bookkeeping Service Firm

To recap the discussion, the right bookkeeping firm is going to be easy to identify by looking at these three things:

  1. The price is right- a custom quoted fixed flat rate that is a great price for quality results with the deliverables clearly spelled out in writing and provided on a consistent and timely basis
  2. The firm is right- a dedicated bookkeeping business with a tech savvy staff of experts who make the process painless and are super customer service oriented
  3. The process is right- it fits your needs and delivers a high quality result with minimal interference to your running your business

Of course I am biased, but I think we’ve done a great job at CapForge Bookkeeping meeting all of the above requirements. I’d be thrilled if you gave us a call so we can discuss your needs and give you a custom quote (naturally!) for your bookkeeping work!

The Bottom Line in Buying a Business- Five Crucial Questions to Answer Before You Make a Deal

e_stepsBuying a business can be a very good way to get into your own business.

The advantages are obvious- you get instant cash flow, customers and a way of doing business that is already well established.

The tricky part is finding a business for sale that isn’t going to be a major headache or complete money pit, which is the reason many of them are for sale in the first place.

The key is to separate the few good ones from the many bad ones, and it all comes down to some simple points to evaluate. If you can get the right answer to these questions, you are well on your way to buying a business you can make into a solid success.

Here are the five things you must find out before you make any deals:

How is the business really doing?

It is all well and good to get basic financial information from the seller, but you need to dig a lot deeper than that to really understand if the rosy picture in the financial statements they showed you are really a good reflection of how the business is actually doing. If you don’t know enough about this to judge for yourself, then by all means get help.

First, if cash is part of the equation, be very skeptical. They may tell you they are making a killing off the books, but if there is no way for you to verify this, then there is no reason to believe it. It may be true, but you’ll never know for sure. Likewise, if they are making a lot of payments in cash under the table, then you have to be very skeptical about their real profits. They may not be telling you about all kinds of other expenses they have which aren’t leaving a paper trail.

Less obvious but just as costly is the fact that if you run the business right- according to the law, it will cost you a lot more in taxes, insurance, overtime, etc. than what it is costing them to run it illegally- meaning your profits will be commensurately lower.

The best defense against this problem is to get their tax returns, and compare them with what they are actually telling you. And don’t just take the tax returns they hand you (if they aren’t willing to show you this during the due diligence period, then you should be very nervous about their honesty), get their permission to request a copy of the returns be sent to you by the IRS. That way you know it is what they actually filed, not just what they cooked up in their own fake version of Turbotax or printed reports from their fake QuickBooks bookkeeping to pull the wool over your eyes.

Also be sure to get as many years back as you can- at least three. Don’t just take the last twelve months. And request that they give you a month by month report, not just a year end summary. A lot of bad stuff can be hidden by a good couple months at the end. Request a cash flow statement as well as a balance sheet, in addition to the income statement. Just because they are showing profits doesn’t mean the business is actually making money, or even solvent.

Be clear you understand exactly what they are adding back and what they are calling personal expenses, and make sure they can back up their claims with receipts or other documentation.

If you are going to be investing a big chunk of your money, hard work and hopes and dreams into buying a business, you want to know exactly what you are getting. The numbers have a lot of information to tell you, and it is your right and in your best interest to examine them thoroughly, and ask questions about anything you don’t understand, or anything at all. How forthcoming they are will speak volumes in itself.

Can you run this business?

Most sellers, during the show and tell process, will take pains to explain how easy their job is and how there is “nothing to it”. That is true for very few businesses- nearly all have “tricks of the trade” and some literally take years to master.

If you aren’t familiar with the business you are buying into, make sure you have a very good understanding of the actual day to day aspects of the job, how much time and effort the owner spends on the business, and whether they have any special skills, licenses, relationships or other knowledge you will need in order to be able to duplicate their successes.

See if you can spend some time observing the owner at work before you close the deal, so you can see exactly what goes on. If this isn’t possible, then try and contact an industry trade group, or talk to some owners of similar businesses outside the area you would be competing in and ask them what the business is like and what kinds of things you will need to know.

The main point here is to make sure the business won’t suffer while you get up to speed in learning how to run it, since you may run out of time and customers before you know enough to make it pay if the learning cycle is particularly long or complex.

Can you improve this business?

If the answer to this is no, then you should probably keep looking. There are lots of businesses where the current owner is overpaying for services, not making any effort to market the business, has been experiencing declining sales due to poor customer service, or some other easily fixable malady.

There are also plenty of businesses where you can grab more sales quickly by expanding the product line, the store hours, adding an online component, or using any one or more of dozens of ways to grow the business.

The problem comes when you are looking at a business that is already maxed out. This may be due to intense competition, a limited market, or a capacity limitation or some other reason that would be very expensive or impossible to fix. If you can’t grow the business then chances are what you will actually face is a steady decline.

How fast it happens depends on the reason for the limit, but in any case a business that can’t grow is one to avoid, as it will quickly eat up more and more profits until it becomes a money loser, and then not only will you not be making any money, but you won’t be able to sell it, either.

Make sure, before you buy any business, you have a plan in place to grow the business, and you are sure that the changes you will put into place will definitely have a positive effect on the sales and bottom line. For example, if you plan to add a new sales rep, make sure there are customers for him to call on, and that they will be receptive to hearing the pitch. If you can’t figure out any way to grow the sales, then your best bet is to walk away from the business- quickly.

Is anything going to happen that is going to fundamentally change this business?

This is hard to know, but it requires investigation because it can make a crucial difference in your success or failure.

What are some things that could change? Your main supplier could be changing their terms, or pricing, or be about to stop carrying your products altogether. The facility could be across the street from what is about to become a nuclear waste plant, or a major highway could be coming through that would completely destroy the drive by traffic business. A huge competitor could be planning to move in down the street, or the industry itself could be about to undergo a big change.

If you are getting into a business you already know well, this is less likely to catch you off guard, though there could still be problems relevant to the specific business you aren’t aware of which will cause trouble. If you nothing about the new business, you could really be in for a shock.

The best defense against these kinds of issues is to talk with as many related people as possible. Talk to other tenants in the building, talk to the sales reps for your biggest vendors about the industry, talk to any competitors who will chat with you, and talk to some customers. Make sure you understand where the business is going, and any potential pitfalls that are coming up along the way.

This isn’t something you will ever completely cover, but often just some basic research will uncover problems if they exist. You owe it to yourself to ask around before you buy, and avoid anything that looks like it could be big trouble down the road.

Why is this business really for sale?

The issue is that despite what they may say, very often the real reason they are selling has to do with one of the reasons listed above. If you find out why they want out, you will be much closer to knowing how the business is really doing, and whether it is something you want to take on, or if it is best left alone.

These five things are ones you should delve into after a business has passed the basic level of interest. While they don’t take a long time, it does require some time and effort on your part to research, so you don’t want to go to this level of detail with all the businesses you look at, only the ones that show initial promise.

If you can satisfactorily answer the above questions about the business you are looking at buying, you can feel confident you are getting in on a good buy. If any of the above issues make you feel nervous or uncertain, it is probably best to pass on it and continue the search.

As always, if you run into questions during your search, or want a second opinion on what you’ve found, send us your question and get a quick, expert answer to your dilemma. That’s what we’re here for, after all!

The Value of Recruiting an Advisory Board When Running a Business

A board of advisers may sounds more like something you would find at a big company, but it makes a lot of sense for a startup and small businesses, too.

No matter who you are or how much experience you may already have in a particular business or industry, it never hurts to have some outside people who are familiar with your business and situation to lean on when you have important decisions to make.

If you are brand new to the business you are getting into, then that is doubly true.

I frequently check in with my trusted advisers whenever I am considering something new, looking for a quick logic check or struggling with a decision for my bookkeeping business or for any of the other side business projects I am involved with and I always appreciate their insight even if I don’t exactly follow their advice.

A board of advisers is an informal group of people who know you and your business and meet on a regular basis, and also one on one, to help you guide your business, make decisions, grow and network the business, and generally help keep you out of trouble.

Ideally, the members are made up of at least some people who know you well and aren’t afraid to give you an honest assessment of things, and some people who know the business or industry well, and can help keep you from making mistakes or having to reinvent the wheel to get things done.

Here are some things a good board of advisers can help you do:

  • Raise money and make introductions to investors and lenders
  • Introduce you to vendors and help you get better terms
  • Introduce you to key sales reps and distributors
  • Provide advice on pricing, sales and marketing strategies
  • Help you gain market exposure and make introductions to potential customers
  • Advise you on hiring, managing and growing staff
  • Provide references to service providers including accountants, lawyers and tax professionals
  • Mediate disagreements between partners
  • Offer additional credibility to the business

Not every adviser will be able to do all these things, but hopefully between them you will cover most of these topics.

A good number of advisers is between 4-8. More and it becomes unwieldy, fewer and chances are you will be missing out on some key knowledge areas. Compensating advisers can be anything from a quarterly dinner to gift certificates to an hourly consulting fee, or nothing at all. It depends on the size of your business and the specific amount of work and time you are requesting from them.

The best place to find advisers is at industry related events, industry associations, entrepreneur events, and friends in the business. Try to get a good mix, and don’t be afraid to pull in someone who is somewhat out of the box- a marketing professor from a local college, for example. Don’t just grab a bunch of your friends, unless they all happen to be business experts and are willing to overlook your friendship and give you real feedback!

It takes very little effort to approach someone and ask if they would be interested, and the feedback and help you will get will very likely repay the effort it took to recruit them many times over.

You are obviously not under any obligation to take the advice they give you, but it is often very helpful to have the informed opinion of people outside your immediate situation to help you accurately assess things and come to the best conclusion.

Take a few minutes and start a list of who would be your ideal advisers. Then, go out and make some contacts and see if you can recruit some. It will only benefit you in the long run.