Small Business Owners should always be aware of their TME? What the heck does that mean?
In my parlance, TME stands for Time, Money and Energy.
From my vantage point, these are the three scarce resources that we bring to our business in order to be successful.
TME can also be a prism through which we use for making decisions. Decisions such as whether or not to do our own Accounting, or decisions about how to market our business and so on.
Once you have an awareness of your own TME, you can consider such questions as does it make sense to spend a lot of Time and Energy in order to save a little Money?
From my own perspective, I tend to regard my Time as being most precious, because that is the one thing I cannot get back.
Saturday, October 25, 2008
Beware of Bargains in Parachutes, Brain Surgery and Accounting Services
Aren't you tired of paying high prices for CPA and other Accounting services?
Isn't it tempting to just buy QuickBooks and let some low cost Bookkeeper or Accountant enter your data in for you? After all, what could go wrong? I mean the software practically does all the Accounting by itself, right?
Well, not exactly. Properly setup and monitored, QuickBooks does allow people with lower level Accounting skills, keep a set of books without too many errors.
Improperly setup and not monitored, you can create a set of Accounting records that are for all intents and purposes, totally unuseable.
Based on my experience, what I have observed is that the most expensive Bookkeepers and Accountants are those that charge the lowest rate per hour. What you save on the front end, you more than lose on the back end with messed up payroll taxes, sales & B&O taxes and financial statements. Also, don't forget the cost of having to pay someone else to come in and fix the problems.
So how do you avoid this situation?
If you are using QuickBooks, make sure that they are a Certified ProAdvisor. That will demonstate that they have been tested on the basic knowledge of the program.
Also, ask them to explain to you how Items are used in QuickBooks.( I will cover Items in a later post). If they don't understand Items, then they don't understand QuickBooks, no matter what else they may tell you.
Isn't it tempting to just buy QuickBooks and let some low cost Bookkeeper or Accountant enter your data in for you? After all, what could go wrong? I mean the software practically does all the Accounting by itself, right?
Well, not exactly. Properly setup and monitored, QuickBooks does allow people with lower level Accounting skills, keep a set of books without too many errors.
Improperly setup and not monitored, you can create a set of Accounting records that are for all intents and purposes, totally unuseable.
Based on my experience, what I have observed is that the most expensive Bookkeepers and Accountants are those that charge the lowest rate per hour. What you save on the front end, you more than lose on the back end with messed up payroll taxes, sales & B&O taxes and financial statements. Also, don't forget the cost of having to pay someone else to come in and fix the problems.
So how do you avoid this situation?
If you are using QuickBooks, make sure that they are a Certified ProAdvisor. That will demonstate that they have been tested on the basic knowledge of the program.
Also, ask them to explain to you how Items are used in QuickBooks.( I will cover Items in a later post). If they don't understand Items, then they don't understand QuickBooks, no matter what else they may tell you.
Back Up - The Company You Save May Be Your Own
Are you regularly backing up your company data?
If you are, are you also backing up your data to an offsite secure location?
I have a CPA friend named Virgil. One day, one of his clients called him and said:
"Virgil, we had a break-in last night and the thieves stole our computer."
Virgil said, "Well you have backups for your data, right?"
Then his client said: "Yes, but unfortunately, they stole that too."
It is critical that you back up your data and it is even more critical that you store at least one copy offsite. You can always reinstall your programs, but your company data is the life blood of your business.
If you only store your company backups in your office, you are at risk for loss by flood, fire, earthquake and theft. Trying to then recreate your data can be a real challenge to say the least.
So how do you back up offsite? I would recommend the following links:
http://www.carbonite.com/
http://mozy.com/
http://books.smartvault.com/
If you use QuickBooks, you can subscribe to an Online Backup within the software.
Finally, I am very conservative when it comes to data. I would have more than one backup.
For example, I would backup to an online site, backup to an external hard drive and also to a
jump drive that I would password protect. I would keep that jump drive on my key chain.
The chance of those redundant backups all failing at the same time is fairly remote. You also want to periodically test those backups just to make sure that the data is being backed up.
The hassle of backing up is nothing compared to the hassle of having to manually re-enter in your data.
If you are, are you also backing up your data to an offsite secure location?
I have a CPA friend named Virgil. One day, one of his clients called him and said:
"Virgil, we had a break-in last night and the thieves stole our computer."
Virgil said, "Well you have backups for your data, right?"
Then his client said: "Yes, but unfortunately, they stole that too."
It is critical that you back up your data and it is even more critical that you store at least one copy offsite. You can always reinstall your programs, but your company data is the life blood of your business.
If you only store your company backups in your office, you are at risk for loss by flood, fire, earthquake and theft. Trying to then recreate your data can be a real challenge to say the least.
So how do you back up offsite? I would recommend the following links:
http://www.carbonite.com/
http://mozy.com/
http://books.smartvault.com/
If you use QuickBooks, you can subscribe to an Online Backup within the software.
Finally, I am very conservative when it comes to data. I would have more than one backup.
For example, I would backup to an online site, backup to an external hard drive and also to a
jump drive that I would password protect. I would keep that jump drive on my key chain.
The chance of those redundant backups all failing at the same time is fairly remote. You also want to periodically test those backups just to make sure that the data is being backed up.
The hassle of backing up is nothing compared to the hassle of having to manually re-enter in your data.
Thursday, October 23, 2008
Warning - Acccounting Software Can Be Hazardous To Your Company's Health
Wouldn't it be great if you could buy a $200-$300 piece of Accounting software and all you had to do was make entries and your Accounting would magically be correct?
Yeah, that would be great!
Unfortunately, the dirty little secret is that Accounting software in and of itself will not necessarily do the Accounting thinking for you. The reality is that Accounting software can
help you make more creative and more complicated mistakes more efficiently.
All Accounting software does is automate certain manual bookeeping processes. For example,
with QuickBooks, you can use items to make journal entries. However, you have to map the items to the correct GL Accounts, otherwise, you will have a first class mess on your hands.
As I mentioned in a earlier post, it is in your best interest to have a basic understanding of Accounting. The benefits of this knowledge are :
1. You can spot when your Financial Statements don't make sense.
2. You will have a much better understanding of how your business is doing.
3. You will have a much more productive relationship with your Accountant, because now you can focus on who are your best customers and what are your most profitable products and services.
Remember that no one is going to care about the success of your business more than you. The more you understand about Accounting and how it applies to your business, the greater your chances of financial success.
Yeah, that would be great!
Unfortunately, the dirty little secret is that Accounting software in and of itself will not necessarily do the Accounting thinking for you. The reality is that Accounting software can
help you make more creative and more complicated mistakes more efficiently.
All Accounting software does is automate certain manual bookeeping processes. For example,
with QuickBooks, you can use items to make journal entries. However, you have to map the items to the correct GL Accounts, otherwise, you will have a first class mess on your hands.
As I mentioned in a earlier post, it is in your best interest to have a basic understanding of Accounting. The benefits of this knowledge are :
1. You can spot when your Financial Statements don't make sense.
2. You will have a much better understanding of how your business is doing.
3. You will have a much more productive relationship with your Accountant, because now you can focus on who are your best customers and what are your most profitable products and services.
Remember that no one is going to care about the success of your business more than you. The more you understand about Accounting and how it applies to your business, the greater your chances of financial success.
Accounting (Oh No!!)
How many of you find Accounting to be the most fascinating thing you have ever studied?
How many of you would rather have a root canal without Novocain instead of studying Accounting?
The unpleasant fact is that if you want to give your business the best chance of being successful,
you need to have a basic understanding of Accounting.
I can take a look at a client's Balance Sheet and in about 2 seconds tell if there are major problems. In order to do this, you have to understand what a normal Balance Sheet looks like. This means, like it or not, you have to have a basic understanding of Accounting.
For example, I had one client that was writing off invoices, in other words, reducing income.
However, instead of writing the amount off to an expense account, he was writing it off to a bank account on QuickBooks. The result was that he had created a fictious bank balance of over $10,000 on his Balance Sheet.
I had another client who had mapped half of his expenses to Accounts Payable, thus he probably over paid his income taxes, because he understated his expenses.
Remember, no one is going to care more about your business than you. Make sure that you protect yourself by having a basic understanding of Accounting.
As a resource, although the title is very unflattering, I recommend the book "The Complete Idiot's Guide to Accounting", second edition by Lita Epstein, MBA and Shellie L. Moore, CPA
How many of you would rather have a root canal without Novocain instead of studying Accounting?
The unpleasant fact is that if you want to give your business the best chance of being successful,
you need to have a basic understanding of Accounting.
I can take a look at a client's Balance Sheet and in about 2 seconds tell if there are major problems. In order to do this, you have to understand what a normal Balance Sheet looks like. This means, like it or not, you have to have a basic understanding of Accounting.
For example, I had one client that was writing off invoices, in other words, reducing income.
However, instead of writing the amount off to an expense account, he was writing it off to a bank account on QuickBooks. The result was that he had created a fictious bank balance of over $10,000 on his Balance Sheet.
I had another client who had mapped half of his expenses to Accounts Payable, thus he probably over paid his income taxes, because he understated his expenses.
Remember, no one is going to care more about your business than you. Make sure that you protect yourself by having a basic understanding of Accounting.
As a resource, although the title is very unflattering, I recommend the book "The Complete Idiot's Guide to Accounting", second edition by Lita Epstein, MBA and Shellie L. Moore, CPA
Why Do You Want to Have Your Own Business?
Why do you want to be your own boss? Have you been reading those magazines at the newstand that make it seem like anyone can make tons of money by working at home?
Have you recently been "dehired" from your corporate position and the thought of looking for another job makes you very anxious?
When looking for a job, are you tired of being told "come back when you are younger"?
Whatever the reason, it is important to know, because you will need to keep this motivation first and foremost in your mind and in your gut, because no matter what anyone tells you, it is very difficult to have your own business. You really have to want to be self employed- especially during tough times. You are the one who has to provide the motivation to keep you going.
In other words, you really have to have a burning desire to be your own boss, otherwise, you are better off looking for a job.
Have you recently been "dehired" from your corporate position and the thought of looking for another job makes you very anxious?
When looking for a job, are you tired of being told "come back when you are younger"?
Whatever the reason, it is important to know, because you will need to keep this motivation first and foremost in your mind and in your gut, because no matter what anyone tells you, it is very difficult to have your own business. You really have to want to be self employed- especially during tough times. You are the one who has to provide the motivation to keep you going.
In other words, you really have to have a burning desire to be your own boss, otherwise, you are better off looking for a job.
Introduction
My name is Dennis Thompson and this is the first time I have ever tried blogging. My goal with this blog is to share with you what I have learned about Accounting software and other issues that directly affect Small Business Owners.
I encourage feedback from everyone. I hope that we can all learn from each other.
I encourage feedback from everyone. I hope that we can all learn from each other.
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