How it works
Frequently asked questions
For Accountants Only
- If you're a contractor and you bill cost plus, tell your software to calculate these values for you.
- This also applies to vendor discounts that you want to pass through to customers. Always, where possible, let the computer do the work for you.
- If you're a contractor, enter vendor invoices and payroll before billing customers.
- Produce "unbilled cost by job" and "unbilled time by job" reports and use them when billing customers to be sure you haven't overlooked a billable cost or expense.
- If you're a contractor or in a similar business, payroll is an important part of your profitability.
- You can instruct your software to include payroll and related expenses such as payroll taxes in every job.
- If you're a contractor or in a similar business, it may be important for
you to know the profitability of every "job".
- You can produce reports for different jobs by creating an "item list".
Use this for every income or expense item associated with "jobs".
You can now produce profitability reports by job.
- You may want to know how profitable selling product A is versus selling
- You can produce reports on different segments of your business by instructing
your software to use "classes". After assigning classes, use it for every income
or expense item associated with that product. You can now produce profitability
reports by product.
- Have your bookkeeper check all vendor statements against what your books
show is due.
- If there is an error, be it the vendor's or yours, it's much easier to correct
it now rather than later when memories begin to fail.
- Count petty cash personally on an occasional basis.
- Make sure that the total of vouchers and cash equals what your petty cash
fund should be.
- You've gone into business because you like what you're doing and/or you're
good at it.
- Maintaining accurate books and records is a necessary part of any business,
not just for taxing authorities, but to allow you to make timely changes, when
necessary, based on hard facts.
- You don't have to be a bookkeeper to monitor whether yours is performing
efficiently or not.
- Determine whether like items on your "detailed profit and loss statement" are
always in the same category. Examine your "miscellaneous account" to
see whether those items belong in other places. Make sure that your accounts
receivable, accounts payable, and bank reconciliations are up to date.
- Budget at least one year in advance by month and then compare the actual
to the budget on a monthly basis.
- Also compare this month to the same month last year. See where you're over
or under budget and take steps to maximize this bottom line accordingly. Once
this month is over, budget for the same month next year so that you always
have a twelve month budget. You should change the budget whenever facts come
to light that weren't included in your original budget.
- Learn to produce reports...
- such as "profit and loss", "accounts receivable", and "accounts
payable". Study these on a monthly basis at least. If you don't know how
to read them, get help from someone who does. This could be your bookkeeper,
your accountant, or a friend familiar with your software.
- Deposit checks from customers no later than the day after receipt.
- If the customer is "short", you want to make sure the check clears.
- Send statements to all customers...
- with open balances on the first day of every month dated the last day of
the previous month. This isn't just a collection device, but puts customers
on notice that you're on top of things.
- Don't sign petty cash checks unless the vouchers are attached.
- Be sure they all have a payee listed and a reason for the expenditure. Make
it a policy to get receipts whenever possible.
- Initiate a credit policy for past due accounts...
- ... so that you don't continue servicing customers on account who are past
due beyond a certain point. Depending on the type of business you're in, this
should probably be in days past due.
- Check your accounts receivable periodically for past due balances.
- Make sure that collection is being pursued with phone calls and letters.
Prepare 30, 60, and 90 day collection letters.
- Don't sign payroll checks...
- Unless the time card/sheet is attached. Make sure that the hours listed
are the same on the check.
- If you allow your bookkeeper to make "adjusting journal entries"...
- Initial the adjustment before allowing the entry. Make sure you know what
the adjustment is for.
- If you maintain inventory...
- You should personally supervise the taking of any physical inventory.
- Get to meet everyone listed on your payroll.
- One way to do this is to personally give out the pay checks periodically.
- Examine the backs of your checks periodically after they’ve cleared
- Make sure that the endorsement agrees with the payee.
- Examine the monthly bank statement and bank reconciliation.
- Make sure that you recognize every payee.
Who signs your checks?
The answer should be YOU!
As the owner of a business, you should always be the one to sign checks.
- Are the back-up documents attached? (These include the
vendor invoice and, where applicable, the receiving slip.)
- Is the check currently dated?
- Do you know what you are signing for? If you don’t-
don’t sign the check! This will reduce the chances for fraud.
When Hiring a Bookkeeper…
Request a Resume:
- It should list positions held for at least the last five years.
- Look for schooling, particularly as it applies
Talk to References:
- Call their former immediate supervisor
or the owner about job performance and attendance.
- If possible, speak to their accountant to get their perspective
on the performance of the bookkeeper.
“You have worked too hard developing your business to let
it go down the drain because you didn’t do your homework before hiring