Many business owners think that by hiring a bookkeeper they are covered when it comes to accounting and financial management. This is a MYTH. An experience with a new client illustrates this point.
The client called me because he felt he didn’t have control over his business. He didn’t know what his numbers were, didn’t know how profitable each of his services were and how profitable individual jobs were. The bookkeeper set him up on Quickbooks but did not configure it in a way that would produce useful information. Nor did she record transactions in a way that insured useful information could be obtained. In addition, the bookkeeper did not know how to produce financial statements following accepted accounting principles. My client has a situation where he invoices his customers for half the job up front and then produces progress bills thereafter. Projects sometimes take two to four months to complete. His current system recognized all of the revenue up front rather than as it was earned (as work was performed). The income statement showed wild swings in revenue that did not reflect the company’s effort and did not match the expenses incurred to produce revenue.
The best use of a bookkeeper is in conjunction with an outsourced CFO. The CFO provides the direction and experience needed to effectively manage a business’s finances. The bookkeeper provides the day-to-day administrative skills to run an accounting department.
