Ending The Year With Blunders
December 28, 2011
“A daily routine built on good habits and disciplines separates the most successful among us from everyone else. The routine is exceptionally powerful.”
I know it’s holiday week, but unlike employees, I know that business owners are constantly looking to “sharpen their saw”, and you’re probably working this week–like me. So, like the people who work for me, I WILL be taking some time off this week, but I wanted to give you a quick management “shot in the arm” before I do. But first, allow this brief announcement… ———————-No More 2011 Tax-Planning Openings Available If you are still wanting to get a meeting during 2011, send me an email, or call us (606-678-4372), and we’ll add you to the “Priority Notification List” if an opening becomes available, last-minute. ———————-
Now, that aside, this is the time of year when we begin to start seeing the “books” (er, shoeboxes sometimes) of certain business owners.
Often, we’re called upon to clean up a big fat mess — made either by another accountant, a part-time bookkeeper in over their head, or (shudder) the business owner themselves!
So, as a sort of public service announcement, I’ve pulled together the six most common blunders that we see — but am also prefacing it with a bald-faced plea: for the love of Pete — if you are having cashflow, bookkeeping or financial issues in your business, let us make them go away for you! The start of the new year is the perfect time to implement a new bookkeeping solution, after all. And we can help. Especially if any of this is familiar to you…
Mark Clark’s “Real World” Business Strategy 4 Common Accounting Mistakes Made By Local Businesses
As I mentioned above, these mistakes are common enough that we could fix many of them in our sleep (well, that’s not *exactly* true…). And, sadly, they’re usually created by either inexperience on the part of the bookkeeper involved, OR by lack of communication from the business owner. I already mentioned a good solution to the first issue, above, but the second source of the problem could, in fact, be YOU! Either way, here are the most common mistakes we see around here at Team Clark…
1. Tracking Expenses Wrongly – Many business owners pay for expenses out of their own personal funds. And it’s no surprise that they often don’t keep accurate records of these expenses. Change that! Here’s why: The IRS frowns at the co-mingling of business and personal funds and the best way to protect yourself in the event of an IRS audit is to avoid doing it in the first place. That aside, you need to maintain effective communication between the bookkeeper and the rest of the team, be it yourself, or other staff. Essentially, your bookkeeper needs to make sure that everything is coded properly, or you’ll be in some hot water.
2. Employee Misclassifications – Many businesses have a combination of independent contractors and employees. And this is an area in which the IRS has been increasingly ruthless, as they search about for sources of revenue (i.e. penalties and additional taxes!). Here’s the relevant IRS guidance on it: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html Use it!
3. No Internal Cash Controls – Your business should have a monetary “line in the sand” on a monthly basis, the crossing of which should set off little alarms. These can range from the sophisticated (multiple trigger points and consequences) to the very rudimentary act of budgeting for each month. But the main point is that your ACCOUNTING system should show you the way on this, on a monthly basis.
4. Backdating Too Much – Sure, it’s painful to have to reconcile and keep every expense entered on a monthly basis — which is why so many business owners don’t keep up with it (even when they’ve “outsourced” the task to a part-timer).
The problem with playing continual catch-up is that problems AND opportunities are spotted too late. For example, say you think one of your service or product lines is the most profitable … but circumstances have changed (whether expenses or other cost factors), and now a different item is most profitable.
Well, if you’ve been pushing for what you *thought* was most profitable for six months and only now realize that you should have been pursuing a different strategy, that’s a bunch of time and money wasted. In short, get a professional to help you with this stuff. [Ahem] We’re here to help.