Reflections on 20 Years of Do it Yourself Accounting Freakshows…
I have a confession to make…
Sadly, I missed an exceptionally important class on the way to my accounting degree decades ago (when dinosaurs ruled the Earth).
Don’t get me wrong – Miami University (@MiamiUniversity) did an awesome job getting me ready for the world of accounting.
But when it comes to the class on dealing with small business accounting freakshows, I think I overslept for that one.
DIY ACCOUNTING FREAKSHOWS – ACT ONE
This month, I am celebrating the twentieth anniversary of my consulting practice (time flies when you’re having a blast!)
Given that, it’s impossible not to hit the pause button and share some of the problematic (and eye-popping) situations I’ve bumped into in the world of small business accounting during that time.
Let’s get warmed up just a bit…
- Far too many businesses do not run a profit and loss report each month.
They should. Really, they need to.
How else do you know how your business is doing?
There is far more to your profit and loss story than what shows up on the bottom line of your tax return once per year!
- Far too many businesses think reconciliation is only for marriage counselors and doesn’t apply to their business
How else can you explain the fact that so many of them don’t tackle the tasks of reconciling their bank and credit card accounts each month? An absolutely essential task for every small business.
DIY ACCOUNTING FREAKSHOWS – ACT TWO (EEEW….)
Still with me?
Good – the stories only get better!
Let’s talk about…
- The mess businesses make with payroll and sales taxes
Why is it that so many businesses insist on doing their own payroll? Think about it – when it comes to payroll, the expectation is that it has to be 100% right 100% of the time, right? If not, somebody is letting you know something is wrong!
Why would anyone want to take on that responsibility? Outsource it to a third party payroll company – that’s what they should do!
What I’ve actually seen:
- Payroll liabilities of over $50,000 showing due for a business that has payroll of $200,000 per year. Can’t possibly be!
- Sales tax showing due of over $75,000 for a business with just $300,000 of sales per year. Yikes – totally wrong!
- The lack of proper backups of QuickBooks and other critical business data
And here’s how the e-mail starts out – “my computer just crashed. Can you help me get my QuickBooks back? “Sorry to say – no backups? Can’t really help.
And that’s where you hear silent weeping in the background…
DIY ACCOUNTING FREAKSHOWS – ACT THREE (HIDE YOUR EYES!)
- Imagine – taking a look at your bank account in QuickBooks and showing a balance of…
($888,000) – yes, that’s a MINUS $888 thousand dollars!
Seen it. For real.
Did I mention that only a stick of TNT will fix that?
- Or this – you get bold and run your balance sheet. Your eyes scan down the report and see an inventory balance of…
($425,000) – yes, that’s a MINUS $425 thousand of inventory on the shelf.
Seen it. For real.
WHY – OH WHY?
After all this time, I am still not yet able to answer this question…
Why do SO many small businesses find it “ok” to dive into the critical financial management of their businesses with absolutely no (or very little) training on accounting and bookkeeping?
- Is it the advertising for DIY accounting software that makes it seem so simple?
- One of the classic ads from the past – “if you can write a check, you can use our accounting software”. Seems like they forgot a critical word in that ad campaign. They forgot the word “correctly”.
- Is it the unwillingness to admit that they don’t know what they don’t know? Maybe.
- Is it the perception that accurate finances are not a big deal for the business other than on tax day? Can’t say…
JUST. SO. TERRIBLY. SAD.
To be candid, it makes me really sad (wait – I should say really, really sad!) to see so many businesses go down the path of do-it-yourself accounting armed only with a couple of YouTube videos.
It doesn’t have to be that way.
Nor should it be that way…
Take just a moment to consider your business and where you are in your “DIY” accounting journey.
If you’re brave and willing to admit that accounting is not your thing (and you don’t even want to play an accountant on TV), that’s a great start.
Please reach out to your accountant to help get your financial house in better order.
Or consider my “Beyond QuickBooks” program to get the insights you need.
The success of your business depends on it!