Understanding Inventory Management: An Accountant’s Perspective

Understanding-inventory-managementPrior to my current role in software implementation, I worked as a bookkeeper while getting a degree in Accounting. After graduation, I really had a passion for cost accounting and wanted to work with businesses to help get their inventory and processes under control. Now, I work with many small to mid-sized businesses to implement inventory management software to enhance their day-to-day operations. Having both knowledge and background in accounting and inventory management software gives me a uniquely integrated way of viewing business operations.

What are common methods of tracking inventory?

Different businesses may use different systems to manage their inventory including: pen and paper, Excel spreadsheets, QuickBooks® software, and inventory management software.

Pen and paper, as well as spreadsheets, are considered manual methods of tracking inventory. This is because the user(s) must update any changes to inventory levels — such as added inventory from purchases or sold items — by hand.

QuickBooks software and inventory management software are automated methods of tracking inventory. By using a software system, inventory is updated by the software to reflect any changes to inventory levels including any changes from purchases and sales.

To learn more about inventory systems, check out this article that discusses the different types of inventory systems.

What is QuickBooks software?

QuickBooks is a small to mid-sized business accounting software that also dabbles in inventory.

It is easy to learn and use, so it’s great for small to mid-sized businesses that may not have an accountant on staff to keep track of finances. It’s still a valuable program to have for a business with an accountant on staff because of its useful features such as financial reporting and tax calculations.

QuickBooks also has inventory management capabilities. However, since its main focus is on financial management and reporting, it’s not as functional as inventory management software, which is specifically equipped for inventory management.

What is inventory management software?

Inventory management software is a software package that allows you to not only transact all of your inventory processes but it also allows you to keep track of all transactions. All inventory data is in one place (the software system database) and also linked to what those processes were for, as well as the customers and vendors associated with each purchase or sale.

You’ll have the complete history for your product, which goes through a general ledger as it would for cost accounting, using cost of goods sold and inventory asset accounts. It’s mostly based on accrual accounting, not cash accounting, because of tracking accrued liabilities.

What is the difference between QuickBooks and inventory management software?

There are a lot of differences, but to be simplistic about it, QuickBooks doesn’t have the internal controls that inventory management software does, nor does it have the full functionality offered by inventory management software. This means more complex features and functionality such as lot and serial number control, landed cost, and inventory valuation and costing (just to name a few) are better suited for inventory management software.

For instance, Acctivate inventory management software has all available cost methods. With Acctivate, you also have the choice between each item on how you track it. Users can choose to track lot or serial numbered items with Actual cost, other items with Average cost, and the remaining items with FIFO, LIFO, or Standard cost. It all depends on what makes sense for your business. Additionally, any change in Acctivate is prospective, not retrospective, so it will not affect any past transactions. This is not the case in programs like QuickBooks.

Here’s the good news: you are able to utilize both the power of QuickBooks and inventory management software. That’s because some inventory management software integrate directly with QuickBooks, meaning that QuickBooks and the inventory management software systems essentially “talk” to each other by synchronizing data and information from one program to another.

For instance, when you post a transaction in Acctivate, the financial records are sent to and saved in QuickBooks. Then, when it’s tax season and/or it’s time for an accountant to review your finances, all the financial information from your inventory, purchasing, and sales history is ready in QuickBooks. So you can have the best of both worlds — financial management with QuickBooks and inventory control with inventory management software.

You can learn more about QuickBooks and inventory management software integration here.

Who is the right fit for inventory management software?

Inventory management software can benefit any and all businesses, and is an affordable investment for small to mid-sized businesses. Inventory management software is a vital investment for businesses because of the importance of keeping inventory values and records organized, as well as the time, money, and effort saved with the features available.

Some examples of businesses that would benefit the most from using inventory management software include wholesale, manufacturing, and distribution businesses. However, any business wanting to run a tight ship with finances and their supply chain, as well as those wanting to integrate and keep track of omnichannel inventory (such as in-store and web store inventory) are also great candidates for inventory management software.

L StineAbout the Author: Lauren Stine is the Manager of Implementation for Acctivate Inventory Management Software. Armed with a Bachelor’s Degree in Accounting, Stine’s extensive knowledge and background allow her to finely blend accounting expertise with technical skills and support. She has been working directly with customers to train them on Acctivate Inventory Management Software since 2012.

For more information, articles, and resources on inventory management, check out Acctivate’s blog or contact a specialist at 817-870-1311.

CapForge Partners with Quickpay Funding

They started as a client but have now also become a partner. They provide factoring services, which is a handy way to manage cash flow when you have invoices coming in but not the cash they represent.

Here’s the press release that explains it:

Quickpay Funding, LLC and CapForge Bookkeeping Pros Announce Strategic Partnership to Help Small Businesses

New Agreements brings additional benefits to Small Business Owners in key industries needing flexible working capital and professional bookkeeping services.

San Diego, CA — (ReleaseWire) — 01/05/2016 — Quickpay Funding, LLC http://quickpayfunding.com and CapForge, Inc. http://capforge.com announced today a Partnership Agreement to cross-market services to small businesses throughout the country. This relationship further expands Quickpay Funding’s value proposition for small business owners in Transportation, Distribution, Produce, Services, Marine, Energy, Cross Border Trade, and other industries. Quickpay Funding clients will benefit greatly by having access to CapForge professional bookkeeping services and QuickBooks expertise nationwide. Quickpay Funding will offer CapForge bookkeeping services to their clientele at a special rate, saving them time and money on an important and time consuming task for all small business owners – bookkeeping, reconciling entries, and balancing their books. By working together, CapForge gains access to Quickpay Funding marketing resources, marketing campaigns, and fast-growing clientele.

Quickpay Funding is very proud to formalize this strategic partnership with CapForge, Matt Remuzzi, and his professional support team. “We have been working closely with CapForge for some time and realized the awesome help and support that they provide to small business owners nationwide.” says Quickpay Funding President and CEO Juan G. Estrada. “Year end is the perfect time to offer these services to our clients. We understand the need for our clients to have their books in order, reconcile financial entries, and prepare for tax time. As CapForge grows their presence, our focus on many fast growing segments can help support that growth. We see excellent benefits for our clients and mutual synergies by working with CapForge. They are a perfect business partner and support our value proposition. We believe in offering industry leading products and services to our clients and CapForge is certainly an industry leader in their business. There are many ways that we see us working together and partnering up to bundle financial solutions and professional bookkeeping support to small businesses throughout the country.”

About CapForge, Inc.
CapForge, Inc. is a well-established professional bookkeeping services company in business since 2000. CapForge is based in San Diego and serves clients in many industries throughout the country. Matt Remuzzi, President & CEO, has a BA and MBA, various bookkeeping certifications, and has been a Quickbooks Pro Advisor for years. CapForge has a team of professionals ready to help any small company with their bookkeeping and financial entries. Matt wrote an eBook on Quickbooks that is published through Amazon.com “QuickBooks Bookkeeping: The 10 Most Common Mistakes Everyone Makes and How to Fix Them”) http://capforge.com. CapForge is launching a valuable and informative podcast series on January 4th, 2016 called “Entrepreneur Talk, covering success stories, lessons, and tips for business owners and startups.” See their website at http://capforge.com for more information.

About QUICKPAY FUNDING, LLC
Quickpay Funding, LLC was founded to provide small- and medium-sized businesses with the funds they need to grow and succeed. The company’s driving mission is to offer specialized factoring products, best-in-class customer service, and timely credit decisions. More information can be found on their website http://quickpayfunding.com.

New CapForge Compare and Contrast Advertising Plan

Bookkeeping Any Questions

This seemed like a fun way to explain our business to potential new clients. Visually, using a metaphor that hopefully makes our value proposition clear and entices the viewer to pursue more information.

Plus, it just seemed kind of fun! And no seals were harmed in the making of this ad, so it’s really win-win-win (us, our clients, the seals).

Let me know what you think! 🙂

How to never fill out a paper form again: Gen Y business owners’ secret formula revealed!

This is a Guest Post by Michael G Pullman of FranchiseeConnect.com, 2 August 2015

payroll systemsIn my work with franchisees and small business owners I’ve found the businesses that run the smoothest have completely eliminated paper forms from their payroll process. With a good online system for requesting leave and tracking staff details you can save a good portion of your admin staff’s (or your) time – I’ve seen 80% reductions in the amount of admin time for payroll.

Ever lost a paper form?

Going paperless is a big step but there’s resources out there to help you. With an online system to replace your paper forms you also remove the risk of paper getting lost. How often do you hear a person in the office scrabbling around at their desk, frantically trying to find one piece of paper?

By putting all the forms employees need online in the one place you’ll help staff avoid that last-minute panic before pay day.

Mistakes

I worked with a business just last week who ran what should have been a bi-weekly pay run. Except – they actually ran a pay run every week! Why? They needed run the first pay run to pay the staff, then the second pay run to fix the mistakes! These mistakes came from 3 areas:

  • missing timesheets from out of office staff
  • bad handwriting
  • data entry errors

Out of office staff

Today nearly every business has staff who work out of the office or work from home. Eliminating paper timesheets and paper forms means these staff members don’t have to waste time or mental bandwidth planning how they are going to get back to the office to fill out their paper forms for the week. They can simply fill them out online and submit no matter where they are.

Messy handwriting

Another big advantage of ditching paper forms is the messy handwriting problem. If you ask any staff member who does data entry they would tell you that at least half of your employees were doctors in a past life! Doctor’s handwriting is legendary for being messy since they think and write so fast. Many times payroll staff will receive a timesheet or change of details form and have to ask the person to fill the form out again because they can’t read the details – interrupting both employees’ workflow. Moving forms online eliminates this disruption completely.

Data entry

Data entry is one of the largest time-wasters in business today. Often businesses I work with have 3 or 4 separate systems that don’t talk to each other at all, and employees need to spend hours every week doing data entry to keep these systems in sync. Now many business systems will sync with each other and we can eliminate this wasted time. I’ve seen businesses completely change the information flows by implementing systems like NetSuite.

Options to replace paper forms

There’s many options for replacing paper forms in your payroll process. Here’s 3 that I’ve come across:

  1. Google Forms – with Forms you can create any form in any format you like, and the results will be put in a Google Spreadsheet ready for input into your payroll system. You can access Google Docs if you have a Google account.
  2. While it’s expensive, a fully-loaded payroll system will give you access to online forms and workflows, and might be worth investing in if you consider the savings.
  3. A lightweight bolt-on to your accounting system like Xero’s add ons

A quick note on number 3 – a lot of the major accounting systems have ‘bolt ons’ or ‘add ons’ now which add functionality to your accounting system at a low add-on price. Often the information collected in the add-on flows to the accounting system which reduces data entry.

Put your forms online to save time and money

By placing your paper forms online you’ll save yourself time, save your employees’ time, and reduce mistakes in the payroll process. In my work with franchisees I’ve found this reduces payroll admin time by around 50%, freeing up your admin employees’ time to do higher value business tasks like analysis and reporting – giving you further insights into the business.

For more time saving tips and automations, visit FranchiseeConnect.com’s blog articles and the online radio show – Franchisee Connect Podcast.

Bookkeeping Help: Fixing Your Chart of Accounts

chart of accounts messYou can think of the chart of accounts as your accounting foundation, and a lot of people have foundation problems! The chart of accounts, or COA, is the list of places you can put your money.

The goal for your COA is that it should be as detailed as you need to give you quality information. At the same time, it shouldn’t be bogged down in detail that doesn’t add value but does add to the effort of doing your books. As you may have deduced from that, there is no one size fits all, standard chart of accounts (although sometimes people will claim otherwise).

The chart of accounts is always the first place I look when evaluating a new business client and it tells me a lot in a very quick glance. I can instantly see if the balance sheet account balances are positive or negative, how many accounts there are overall, how they are named, if they use sub-accounts, if they use account numbers and just overall how organized and logical it is.

A well-ordered chart of accounts that makes sense and is logical to anyone looking at it for the first time is a good sign. The messier it gets, the more likely it are there are errors buried in the numbers and problems that need to be accounted for.

Does it feel like your books take forever to do each month? It might be your chart of accounts- the messier it is and the less efficiently it is set up relates directly to the time it takes to get your bookkeeping done. It doesn’t have to be like that!

Since the COA is never going to be cleaner and more correct than when you start the business, this is the best time to ensure it is set up right.

The default COA from QuickBooks is a good place to start. You can modify sparingly to fit your business. The bigger and more complex the business, the more complicated your COA can be, although it doesn’t necessarily have to be.

Here are the things we most often see wrong with the chart of accounts:

  • Inconsistent use of account numbers. For the vast majority of small businesses, account numbers are not helpful and actually can slow you down quite a bit. They are a tool for big company accounting – “big” as in over 50 employees and millions in revenue with many different departments and managers, etc. If you do use them, use them using the QuickBooks function for them, not by just typing a number in front of the account name as this is impossible to fix except one at a time. And if you do use them, use an account number on every account, not just most.
  • Old accounts. If you are no longer using an account, make it inactive or hide it. If you never used an account, delete it. There are a few QuickBooks won’t let you delete, but otherwise get rid of it. This is especially true of old bank accounts, credit card accounts or anything else appearing with a balance on the balance sheet. If the account is no longer active in real life, zero it out in QuickBooks and make it inactive.
  • Too specific accounts. Meals and Entertainment is a standard account in most businesses. Some people want to split Meals as one and Entertainment as another- that may make sense for your business. But you never need an account named McDonalds for your restaurant expenses. You can have a vendor named McDonalds and you may eat there twice a day every day, but your account names should not name names.
  • Specific dates. These should not be in your COA. For example, you can have an account called State Taxes but you don’t want one called State Taxes 2014. When are you ever going to use it again? Anything that is going to expire of its own accord, only be used once or twice or is specific rather than generic, is almost always to be avoided.
  • Too granular accounts. Office Supplies is a standard account in most businesses. Some people then create an Office Equipment account, thinking they will use that when they buy a printer or calculator or something. This is already going to potentially trip you up, because where does toner go? It is used with the office equipment, but it isn’t equipment itself, really. Now what if you added Office Expenses, Office Supplies Reimbursement, Office Printing and Office Supplies- Executive. How long would you have to stop and think about where to put an expense every time someone went to Staples? And would all this slicing and dicing actually help you figure anything out that would be useful? Not likely.
  • If you can’t instantly decide into which of two accounts something should go, you probably have too many accounts that are similar. Start merging, renaming and generally scaling back on your inclination to add accounts rather than pick from what you have. Just this one change can make a big difference in how fast you can do your bookkeeping. And the same thing goes for income, not just expenses. If you aren’t gaining any useful info from splitting your income into tons of segments, don’t do it. Especially if you already have the exact same info logged somewhere else. Fewer accounts is generally better.
  • Using accounts incorrectly. If you are keeping track of loans in an equity account, using a bank account for a credit card, tracking expenses with negative income entries or anything else weird, you are going to create headaches for yourself. Each account type works a certain way, and while you can force them to do other things, you are going to end up with very odd looking financial statements and a much higher likelihood of having errors in your books.
  • Relying heavily on miscellaneous accounts. If you are dropping more than 10% of all your entries into uncategorized, miscellaneous or similar types of accounts on your first pass, you aren’t doing it right. There really should be very few transactions that aren’t easy to classify and only those handful should fall into the unknown account. Even 10% is really high – at the end of a year, well under 1% of your total expenses should be in this type of account and really it’s better if none is left unclassified.

Bottom Line Solution:

Go through your chart of accounts with a fine tooth comb. Can you instantly decide what kinds of expenses go into what accounts? If you find places you hesitate, or which could go both ways, you probably just found a place you can consolidate.

If you see any of the issues listed in the bullet points above, be ruthless in simplifying and cutting out things you don’t need.

A well-organized chart of accounts is going to make doing your books faster and more painless. And the opposite is true- the longer and more complicated it is, the harder and slower the books will be to finish.

Take the time now to edit names, merge two or more accounts into one and delete unused or seldom used accounts. Adding more is easy, so start with less and try to only add when there is absolutely no way to put something in any of the existing options. If you do this, your chart of accounts will become a solid foundation for the rest of your accounting.

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>

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!

How to Send a QuickBooks File for Review

One of the fastest and easiest ways for us to provide a free review, evaluate a potential new client and/or to provide a quote for services is for us to take a look at the QuickBooks file currently in use. The question is, how to send it, since these files are often large (depending on how old they are) and saving them isn’t as straight forward as you would think.

So I’ve put together a guide for transferring files to us for review, depending on the type of QuickBooks you are using. Each one has a slightly different process.

I also specifically excluded options like sharing through Dropbox or Google Drive. Not because those aren’t great options, but I would be writing this forever if I covered all the possibilities. Let’s just say if you know another way to get us the file (like using a dropbox link share) then great! If not, the methods below will work just fine.

QuickBooks Online Users:
After you log on, click on the sprocket symbol in the upper right next to the company name. From the
menu that appears, choose Manage Users. This will open a new window. Under the regular users is a section
to “Invite Accountant”. Enter our email there: info@capforge.com and click Send. That will allow us to log
on and review. You can uninvite us if you like once the review is complete (or any time you want really!)

QuickBooks PC Desktop Users (2012 and Newer):
Under the file menu go to Accountant’s Copy -> Client Activities -> Send to Accountant. A window with some info
will pop up, click Next. Choose “End of Last Month” as the dividing date, and click Next.
Enter capforge@gmail.com (Important- info@capforge.com won’t work here) as the Accountant email and include your email,
click Next. Enter Capforge1 twice as the transfer password, click Next. This will send us a copy of the file (if you also have a
password for your file, please send it to us in a separate email).

Once it has sent, go to Accountant’s Copy -> Client Activities -> Remove Restrictions and click OK and Yes.
This will remove the “Accountant Changes Pending” notice. Note- this option requires an internet connection. If it doesn’t
work, please use the directions for 2011 and Older files.

QuickBooks for MAC Users:
Under file go to Create Backup for Windows. Save the file. Then send the file to us as an email attachment (if you also have a password for your file, please send it to us in a separate email). If the file is too large to send as an email, go to free.mailbigfile.com and follow the steps to send a file using their service. Send
it to info@capforge.com. The service is free, secure and requires no registration.

QuickBooks PC Desktop Users (2011 and older):
Under the file menu at the top, select Create Copy and select portable copy. Save the file. Then send the file to us as an
email attachment (if you also have a password for your file, please send it to us in a separate email). If the file is too
large to send as an email, go to free.mailbigfile.com and follow the steps to send a file using their service.
Send it to info@capforge.com. The service is free, secure and requires no registration.

Still have questions? Let us know and we can help.

Handling Sales Tax in QuickBooks

The majority of states charge their shoppers sales tax and so it is the business owner’s responsibility to collect it for qualifying transactions. The collecting part usually isn’t hard. But it can be a bit of an issue after that!

Sales tax is a little bit of a tricky concept in accounting because although you get the money and you handle the money and you deal with the money- it isn’t yours. So you need to account for it as though it isn’t.

The problem is the sales tax funds are mingled right in with your funds and it all looks the same. If you are creating invoices and collecting sales tax that way then it is easier to keep it straight by making the appropriate items taxable and then just making sure when you pay your sales tax you are reducing the sales tax liability account. There are lots of lessons on how to do this correctly online.

But what if you are collecting sales tax as part of credit card or cash sales- like in a restaurant? When you see the deposits in the bank, some of that money is really sales tax but QuickBooks doesn’t know that.

In this case, you first need to create a sales tax liability account. Then, at the end of the month or the week or whatever period you are working on, you need to make a journal entry to move whatever portion of your sales is sales tax into your sales tax liability account and out of sales.

For example, suppose your restaurant shows you have $10,000 in deposits into your bank account for the week. You check your POS report and it shows you had $10,500 in sales and of that total $525 was sales tax. So now in QuickBooks, you move $525 from sales income (were deposits normally go) to sales tax liability. Now QuickBooks will show you only have $9475 in sales for the week. The sales tax is gone- not as an expense (sales tax is not your money so it can’t be an expense!) and won’t artificially inflate your sales.

When you pay your sales tax bill, you write the check against the sales tax liability account so your balance goes back down.

The main things you don’t want to do are A) include sales tax as part of your sales, or B) include sales tax as part of your expenses.

You may be thinking- if I include it in sales AND as an expense- won’t it just wash out? Yes, but that isn’t the right way to do it and if you are in a place where you pay any local or state taxes (many, many places) on a revenue basis you are now overpaying because your revenue is being inflated by sales tax that isn’t really revenue at all.