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Why the first person I hired was a bookkeeper

11/5/2013

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COMMENTARY
Why the first person I hired was a bookkeeper
​Chris Griffiths
Special to The Globe and Mail
Published Tuesday, Nov. 05 2013, 5:00 AM EST
Last updated Wednesday, Nov. 06 2013, 12:50 PM EST

When my first small business was in its infancy, I was struggling to make ends meet. Marketing my new business and finding customers who would trust their money to a startup wasn’t easy. The bills were piling up.
I started my business as a one-man show, and as I finally started getting some momentum, my first instinct was to hire a bookkeeper.

This isn’t typical. Not at all. But it worked for me, and here’s why: Most entrepreneurs are happy to leave the day to day bookkeeping to an outside firm. Outsourcing this work allows them to focus on their natural skill sets and leave the tedious responsibility of managing invoices and receipts to someone else.

Early on, I couldn’t even afford an outside bookkeeping service, so I did it all myself. While it was time consuming and non-revenue generating, I soon learned the value of having up-to- the-minute financial data on how my business was performing. I was addicted to this information; the sales, margins, overheads and expenses were always in front of me in black and white. These numbers didn’t lie and they gave me a sober view on how I was managing my cash flow and what was driving the profit in my business.

When it came time for me to break free from those bookkeeping tasks, I already knew how certain transactions should be allocated and was accustomed to seeing it all in real time. Switching to an outside service would mean that I’d receive monthly statements, at best. In my opinion, that information was too old to act upon in a meaningful way, so I hired a part-time bookkeeper to come into the office several hours a week. This allowed me to influence how the books were organized, and meant my statements were only a few days old at any given time.

Nowadays, I rarely encounter owners who run their bookkeeping with the same level of detail with which they run the rest of their business. They’ll often get attendance records, production reports, new orders and receivable information every day, while their financials are done once a year, submitted three to six months after year end.

I think they’re missing out. As a matter of fact, I know they’re missing out because, when their margins and expenses are well documented and presented, they inevitably change their priorities.

When I talk to small business owners about the state of their finances, they typically mention about sales and cash flow. Rarely they know where their margins or expenses are relative to last year or this years’ budget – if they’ve budgeted at all.

Furthermore, when I ask entrepreneurs about the current state of their books, they often answer in the future tense. They’ll often mention a big project coming up, the seasonality of their operation or a large receivable coming due. That’s fine, don’t get me wrong. But it speaks to their instincts about what’s about to happen, not how worthwhile or successful their past efforts have been.

While a big project or busy season or large receivable are all meaningful metrics, the truth is that it’s rarely one thing that contributes to a small business’ profitability. It’s normally a hundred little things.

Where’s the best place to find the financial impact of a hundred little opportunities in your business? One place worth looking, for sure, is in your financial statements. So while I was tempted to make my first hire a salesperson, or service technician or production worker, instead I chose a bookkeeper. With real-time profit and loss statements available to me, I was able to make hundreds of intelligent decisions and changes and improvements, all of which contributed to my success.
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I know that spending time with your accountant and bookkeeper is something you normally do out of necessity. However, you may benefit from investing more of your focus into those financial statements, more regularly. You’ll see the positive influence it will have on how you run your business every day.
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To read this article on the web, click here.

Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.
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Organize Your Business Finances to Increase Profitability

1/1/2013

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By Lisa Corcoran, Alternative Financial Services, LLC
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Many small-business owners are intimidated by the prospect of organizing their business finances. Or they simply find the tasks involved to be dreadful, so this vital aspect of their business keeps getting pushed to the back burner. The end result of this avoidance can be a business that has spun out of control or has eased into a phase of low- profit, high-stress misery.

Getting the proverbial handle on your business finances produces innumerable benefits, including:

  • The ability to identify profit centers as well as incomestreams that are losing money
  • The advantage of analyzing historical trends, allowingyou to move in more productive directions
  • Job costing to understand which of your customers and projects are most profitable (your “sweet spots”)
  • Increased likelihood for approval when seeking loans, factoring, or lines of credit
  • Minimized need for crisis management
  • Proper positioning for eventual transfer or sale of yourbusiness
  • Easing of the mental fatigue, which can drain thebusiness owner’s energy
  • Renewed focus on servicing existing clients and courting new customers

Often, the hardest part of this organization process is reaching out for assistance. Turn to a trusted advisor who can help you evaluate your current accounting processes, identify your priorities, and establish a program that will accomplish your goals. Accounting software such as Intuit’s QuickBooks® is available in many versions and can servebusinesses—from one-person firms to multi-location, multi-million-dollar companies. Other software programs are available in both desktop and online versions, so you aresure to find something at your price point that works for you.

Your advisor may address some or all of these important aspects of your business:
  • Accounts receivable – Contract provisions, invoicingprocedures and collection status of outstanding receivables
  • Accounts payable – Aging of payables, paying withinterms to maximize vendor discounts
  • Payroll and timely payment of payroll liabilities
  • Calculation and timely payment of sales and use taxes
  • Evaluation of overhead and operating expenses, andopportunities for cost savings
  • Cost of Goods Sold – Identifying COGS expenses asdistinct from operating expenses
  • Balance-sheet issues – Ensuring that equity positions,assets, and liabilities are recorded correctly
  • Tax planning throughout the year to avoid year-endsurprises

​Organizing your finances is one of the best investments you can make in your business. Without this focus, you are destined to fall short of the fullest potential your hard work warrants.

From The Experts' Corner — Ocean County Business Association

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Organizing your money

6/12/2011

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GETTING AHEAD

Organizing your money

Career began from

part-time job
By Lisa Corcoran
Years ago, when I lived in New York City, I held a part-time job managing the household finances of a wealthy couple who owned several homes. I paid their bills, balanced their checkbooks, and did the bookkeeping for their interior design firm. The work was interesting and gratifying, and it paid well.

My full-time job was managing commercial office buildings around the country, which I did for 15 years. I enjoyed both of these endeavors. But once I relocated to Montclair and became a mother, it was time to re-evaluate my goals and priorities. I eventually decided to return to my roots at the Jersey Shore and run my own business.

What would I do? I remembered how much I enjoyed my work with the New York couple. I decided to try financial organizing as my full-time job. At first, I reached out to the senior population, thinking they were the perfect market for my services. But surprisingly, it was the business community that responded with great enthusiasm. Many small-business owners, I learned, neglected the financial side of their business because they found it intimidating, confusing or just too time-consuming. As a result, they felt out of control and frustrated, which often affected their bottom line.

Since launching Alternative Financial Services LLC in 2003, I have grown my firm to include two associates. Using Quick Books software, we provide bookkeeping services to a wide range of industries, including construction, creative professionals, retail, wholesale and restaurants. In the personal finance arena, we create household budgets for high net-worth individuals and monitor their ongoing expenses.

​But our role extends far beyond that of bookkeeper. We are teachers and hand holders, helping our clients understand the financial side of their business, even if they're not financially savvy. We often act as a liaison between our clients and their accountants, providing information accountants require to project estimated tax payments, prepare tax returns, and do other accounting work. In addition, we assist clients with insurance audits, prepare refinancing packages, and handle other special projects.
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Lisa L. Corcoran (left), owner of Alternative Financial Services, discusses the business financials of Rizco Design with Debra Rizzi, partner of Rizco Design in Manasquan.
TANYA BREEN/STAFF PHOTOGRAPHER
​Today, 90 percent of our referrals come from accountants and satisfied clients. Many clients have been with us for five or six years. Because of the intimate and confidential nature of our work, which involves peering into the private financial life of each business or individual, we often develop close friendships with our clients. One of our clients even scheduled his open-heart surgery around my monthly visit.

Many clients tell me they have only one regret that they didn't hire us sooner. I love watching the relief on people's faces when they realize a dreaded burden has been lifted off their shoulders, and they are now free to focus on other aspects of their business.

Every now and then, we have to walk av-'ay from a client who is uncooperative or unwilling to fix a "broken" system. We also have terminated clients who are running businesses in ways that make me uncomfortable. These situations are always unpleasant; but they are thankfully rare.

I am passionate about our work and am grateful I could build a rewarding business that leverages my strengths: organization, eye for detail, interpersonal skills, and the desire to "make things right."

Lisa Corcoran is founder and principal of Alternative Financial Services LLC (www.AFS-NJ.com), Berkeley. Getting Ahead runs Sundays. If you are a businesswoman interested in writing about your career, write to Business Editor Dennis P. Carmodv at [email protected]
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FILING INCOME TAXES IS OFTEN A BIG STRUGGLE FOR SMALL BUSINESSES

2/19/2008

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THE ASSOCIATED PRESS
NEW YORK — Income tax ling season is often a trying time for small-business owners, but the Internal Revenue Code is usually not the culprit — tax professionals say it's procrastination and poor record-keeping that causes most of the problems.
The owners who are frantic at tax time are often ones with very small companies and few or no employees, so they do everything themselves. They may have the best of intentions, but they just don't get around to inputting income and expense data into the accounting programs in their PCs because they're so busy working with customers or coming up with new products or services. Or, they never bother to learn tax and accounting basics that are critical for keeping their companies healthy.

There can be painful consequences when owners don't maintain good records and don't have a rudimentary knowledge of tax law. At the very least, they can miss out on important deductions or tax credits, and end up paying the government more than they need to. Much worse is the very real possibility that their neglect leaves them without cash on hand to pay their tax bills.

Computer programs make it easier for an owner to keep a good set of books, but they do require some vigilance.

"They have the electronic thing, but they don't use it enough. They don't keep it up to date," said Stephen Fishman, an attorney in San Francisco who writes books about small business and tax law. "You have to input the nancial information, it won't do it itself."

For the time-pressed or disorganized owner, the solution is to get some help.

"Just outsource the bookkeeping function," said Jerey Berdahl, a certied public accountant with Berdahl & Co. in Center Valley, Pa. "There are a lot of competent bookkeepers out there that you can trust."

Many business owners will shy away from the expense of hiring a bookkeeper or bookkeeping service, although as Berdahl pointed out, it's much cheaper than hiring an accountant. And, if a company's books are in chaos or the owner nds there isn't enough cash to pay the government, the business could be losing more money than it would cost to get some outside help.

Berdahl also suggested an owner hire an outside rm to customize a standard accounting program so it's more suited to a particular small business. The cost shouldn't be exorbitant, probably several hundred dollars.

Owners also need to have some knowledge of tax law — not necessarily as much as a CPA knows, but enough so they don't end up with very big and very unpleasant surprises.

"Just understanding how the tax law works is a big issue for a lot of people," said Joseph Maloney, a certied public accountant with Maloney Reed Scarpitti & Co. LLP in Erie, Pa.

He noted, for example, that many owners are surprised to learn that although they haven't yet been paid for work done or products delivered, they still owe taxes on the income they've earned. In other words, they're being taxed on their receivables, and if they haven't set aside money for that liability, they could be scrambling for cash to pay the government.

Another example from Fishman: "If you're self-employed and you pay estimated tax, if you haven't paid enough you could have a substantial tax bill April 15."

Disorganization and poorly kept books are frequently accompanied by poor cash ow and in turn, not enough money for that tax bill. That's a particularly unnerving proposition given the dicult lending environment right now.
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