Archive for the ‘Management Software’ Category

Four Symptoms Your Accounting System Doesnt Work}

Thursday, September 28th, 2017

Submitted by: Stephen Nelson

Every year about this time, I see too many accounting systems that dont work QuickBooks and PeachTree and Microsoft Small Business Accounting programs that dont do what their small business users want or need.

Sometimes, people know their accounting systems dont work. And they dont care. But, sadly, sometimes, the struggling small business person doesnt even know his or her system isnt workinguntil its too late. Until the business fails because the owners dont realize they arent making money.

Fortunately, perhaps surprisingly, you can usually tell pretty quickly whether an accounting system like QuickBooks, Peachtree Accounting, or Microsoft Small Business Accounting works the way it should. Just look for one or more of the following four symptoms.

Symptom #1: You Dont Know How Much Cash You Have Right Now

Any accounting system, run right, tells you how much money you have in your bank accounts. To the penny. Accordingly, if you cant look at a bank register in your accounting system and see how much money you have, sorry, your system doesnt work.

Symptom #2: You Dont Know How Much Money You Made Last Week, Month or Year

Heres another symptom of things gone bad. With just a few clicks of your mouse, you should be able to produce an accounting report called a profit and loss statement that tells you whether you made money last week, last month, last year, and so on.

A profit and loss statement simply summarizes the revenues and expenses of a business for an interval of time and then shows the difference between these subtotalswhich is your profit or loss.

Now, this instant access to profit and loss information wasnt always the case. In the past, people often waited until the end of the month or even the end of the quarter to send off their financial records to an accountant or bookkeeper. A few hours or a few days later, the bean counter produced a financial statement that showed whether or not the business had made money.

No more. If youre doing your accounting right using something like QuickBooks, you should almost always be able to see whether youre making money or not. And at almost any moment in time. Thats the point.

Symptom #3: You See Goofy Numbers on Your Balance Sheet

The first two symptoms are pretty obvious, I guess, but the third symptom is sometimes more subtle

Turns out you can sometimes produce a profit and loss statement that sort of looks right–even if it sometimes isnt. If you can produce a balance sheet that doesnt have goofy numbers, though, thats more telling. You cant fake a balance sheet. Accordingly, carefully check out your balance sheet report.

A balance sheet lists assets, liabilities and owner funds invested or reinvested. If you dont see goofy numbers on your balance sheet


your profit and loss statement looks right, you accounting system is probably capturing data in the right way.

Goofy balance sheet numbers include things like a big negative bank account balance, clearly incorrect accounts receivable or accounts payable balances, and any other accounts with strange names or balances.

Symptom #4: You Get Lots of Adjusting Journal Entries from Your CPA

Many accountants prepare a handful of end-of-the-year accounting entries for their small business clients. I often do this, for example, when I prepare a small corporations or small partnerships tax returns.

Now dont get me wrong. Preparing a handful of accounting entries is expected. Especially for amounts you cant easily calculatesuch as tax return depreciation.

If, however, your accountant or bookkeeper is making many other adjustments, you should verify that the accountant isnt adjusting accounts at year-end because youre not regularly tracking the account as you go through the year.

Heaven help you, for example, if your poor accountant finds himself or herself adjusting your cash accounts (this means you dont know how much cash you havewhich is of course symptom #1 above) or making large adjustments to any other accounts such as inventory.

Large end-of-year adjustments means your accounting system means just one thing: The books arent up to date with the financial realities of your operation. This lack of up-to-date information, sadly, means you may be flying blind.

About the Author: Seattle CPA Stephen L. Nelson wrote the bestselling book QuickBooks for Dummies. He also edits the

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