I spent 18 years owning and operating construction companies. During that time, I had numerous bookkeepers that were hired. I always looked for the one that was the least amount of money and was able to “keep me on track”. My thought was, “why do I need to incur an extra cost with my bookkeeping?” Well – due to my choices in bookkeepers – I was audited! Oh, and I came out of the audit with a $64,000 bill! When the auditor asked me why things – with my bookkeeping – were done the way it was, all I could do was shrug my shoulders. I thought I was hiring someone that knew what they were doing because they advertised as a bookkeeper.
After that experience, I began to think, “there must be a better way!” Why am I spending so much money on a service that is not producing results? I began to look into the traditional bookkeeping services of data entry, and found these 6 flaws:
- MANUAL DATA ENTERING – for every transaction I make, I was paying someone to sit there and manually type in the information off of that invoice or receipt. The amount of money I spent on my bookkeeping was a direct correlation to how quick the bookkeeper could enter the data.
- LACK OF KNOWLEDGE – when using a bookkeeper, the knowledge I have about my business’ financial situation is limited to the feedback and information that is provided to me by my bookkeeper. Most bookkeepers are men and women that have the ability to data entry but are not educated in tax law or any understanding of business. On the financial aspect, how often does a bookkeeper submit to the business owner a set of financial statements?
- LACK OF CONTROL – if we don’t know the financial state of our company, how do we know how to control our company? Whether it is for GST, PST, or payroll remittance; borrowing money; or accounts payable/receivable purposes – we are subject to the speed, accuracy, and knowledge of our bookkeeper. They are in control of our business’ financial picture.
- INEFFICIENCIES – inefficiencies cost money! I’ve seen so many inefficiencies with traditional bookkeeping from invoicing to year end. One of the biggest is the way information is processed. How much time do you spend gathering receipts or other information, preparing it for the bookkeeper, then getting it to the bookkeeper? How much is your time worth? How much money are you spending paying a bookkeeper and yourself to do the same task? A few examples of inefficiencies with a traditional bookkeeping system that cost companies money include:
- ESTIMATING & INVOICING: I work with companies that were working off an estimating/invoicing program that was different than that of the bookkeeping system. What happens now is you create an estimate (time=money), the customer accepts and you do the work, then you create an invoice (time=money), now you take the invoice and give it to the bookkeeper (time=money), and the bookkeeper enters it into your bookkeeping system (time=money)
- TIME CARDS: anything to do with employees tends to get costly. But the traditional use of time cards and how it affects efficiency is something to be frustrated with.
- REPORTS: Whether you need a financial report for a bank or you are financing a vehicle, it is subject to your bookkeeping system. Did you hand off your receipts to your bookkeeper? Are they up to date on your books? There is the time that you are spending trying to get your reports from your bookkeeper, and time you are paying them to gather those reports.
- ADJUSTING JOURNAL ENTRIES: Do you know what these are? If not, you are among the majority of businesses. So, when your ‘books’ go to the accountant, they make a list of items that were either entered into your books wrong or need to be adjusted to make sense of your financials. I like to refer to this as your “Bookkeeper’s Scorecard”. There is always going to be a few items that appear on adjusting journal entries that are out of the bookkeepers’ control; however, after about five items, it’s your bookkeeper that has messed up! But where this becomes inefficient, is what happens after your accountant has gone through everything – you pay your bookkeeper to correct their own mistakes! Let’s recap – you paid your bookkeeper to make the mistake, paid your accountant to find and note it, then paid your bookkeeper, again, to correct it. I get nauseated just writing it!
- HEMORRHAGING – What do I mean by this? When we have a poor bookkeeping system, we begin to see money leave our company that doesn’t need to. For example, I did a case study back in 2009 on three companies with gross sales under $500,000. The thesis of the case study was: what is affecting the bottom line? What I uncovered was that these companies were hemorrhaging an average of $464/month on interest, penalties, and fees. There is a line on a financial statement that is for these expenses. It is the line that crushes companies! For a $500,000/year company, that was $5,568 a year lost from their bottom line!!! On small companies that is generally the difference between profit and loss! In working with larger companies, I have seen that this just becomes a larger number. Then there is CRA! Late filing fees! Interest! Need I say more? When we know what our company is doing, we can plug the bleeding.
- LACK OF URGENCY – Traditional bookkeeping provides no financial urgency for your business. No urgency produces inefficiency and hemorrhaging. Is your bookkeeper providing the urgency for you to file your GST, PST, or payroll remittance on time? That is the largest hemorrhage in any business. Are they providing the urgency when it comes to you paying your accounts payable on time so you don’t incur interest? How about providing the urgency of having the proper amount in your company to cover payroll next week, so you don’t have to stress out Monday-Thursday?
At TOPP Business Services we have leveraged the latest in technology to provide our clients a cloud-based, Interactive Accounting System at an affordable monthly cost.
We get asked why it is called ‘Interactive Accounting’?
It is because of our 3 A’s: Automation, Accountability, Awareness!
Automation: We have automated the flow of information and documents– giving our clients the ability to focus less on their accounting system & more on their businesses.
Accountability: We have developed an automated system to keep our clients accountable to the everyday tasks of their accounting system. This allows them to focus on their business, without the fear of their busyness costing them money.
Awareness: We provide efficient access to accurate financials anytime, from anywhere! This allows our clients to be aware of what is happening in the now and provides them the ability to plan ahead – instead of looking behind!
If you would like more about our services and how our bookkeeping system works, please visit us online at www.toppbusiness.ca