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Once upon a time, I quit my real job (restaurant manager - good salary, benefits and someone to cover for me when I wasn’t around) and went to work for my husband, Hot Rod.
It was the dumbest decision I have ever made. It was hell. I left my steady paycheck behind and assumed financial responsibility for a sinking-fast plumbing company. I was college educated. I graduated Summa Cum Laude with a BS in business administration.
The BS really stood for my approach to business. I didn’t know what I was doing. I was the rookie bean counter. And I didn’t know my asset from my elbow.
Thank goodness for PM magazine, where I met columnist Frank Blau. I’m grateful for Frank for telling me where my head was and offering to pull it out.
But, boy, I fought it. I did not want to crunch numbers, look at spreadsheets or confront our financial situation. I wanted so badly for a magical bean counter fairy to wave a wand and make millions of dollars appear in our checking account.
“Shouldn’t our accountant handle this?” I fumed. “I don’t have time to figure this out,” I whined. I just didn’t want to deal with the money.
That approach might have worked if we had lots of money. However, we were running out, and digging a deep hole of debt.
But when the pain of the current condition becomes greater than the fear of change, you’ll change. When I finally got fed up with financial worries, I took a deep breath and said, “OK. I’ll do this.”
No one else was going to figure this out for me. It was my responsibility. Hot Rod was doing his part - he worked from dawn until dusk turning wrenches. It would have to be me. I was ready - finally - to go over, under, around or through any obstacle between me and financial understanding.
Once I committed, it took me about a year to develop a firm understanding of the accounting. As I struggled along, Frank and my helpful accountant, Brenda, checked my homework. I tackled my accounting software and labored over debits and credits. I did whole months of data entry all wrong and had to undo and redo them. I once lost 11 months of data when a neighborhood kid stopped by to visit, stepped on the electrical extension strip and turned off the computer. (Computers were more sensitive back then.)
Once I committed, there were serendipitous moments of - fun. Yes, fun! Accounting is like a crossword puzzle; numbers add up and across. If you are “off” somewhere, it is probably you, not the computer or the software. And it is fun to find and fix the glitch in your data entry. I raised my nerd flag and to this day I wave it proudly.
The best part: I finally figured out where we stood financially. I was afraid of knowing. That’s why I fought it for so long. Once we had the data, so many of the emotional issues fell away. We had the score and could make decisions based on the score. No more arguing about working hard enough or being good enough. We could see the problem: We weren’t charging enough. We had to raise our prices. If that meant we would go out of business, so be it. What a relief.
Turns out people pay much higher prices than you think they would. How about that? We made decisions based on the data. I knew where the money went and how to make more of it. Very cool.
Commit Or Quit: How about you? Are you the wife of a plumber? Did you get thrown into the bookkeeping? Are you still kicking and screaming? If so, I encourage you to make a decision right now: Get going or get out.
Are you new to the company and overwhelmed by what the boss is asking of you? You aren’t an accountant and you don’t have much experience with accounting software. He can’t possibly want you to make sense of the mess of numbers, can he?
Why not? Why not you? Commit - or quit. Should you choose to commit and learn basic accounting, you will have a skill set that is in high demand by employers. You also will have the tools you need to manage your family fortune, and maybe start your own business. No bad thing comes from learning business and accounting basics.
Here’s the key for moving from rookie bean counter to rockin’ moneymaker: your commitment. This stuff is not that hard. You can do it. Figuring out what the accounting words mean is more than half the challenge. Basic accounting is a simple, beautiful logical system. You may even learn to love it.
You will need some help. Are you struggling with a bossy, unavailable or uncommunicative accountant right now? Do not put up with a weak financial team. Do not be held hostage. Know there are people out there who love bookkeeping and accounting. Determine to find one to help you. Find an accountant who will teach you how to handle the bookkeeping and will check your homework. Or contact me; I will steer you in the right direction.
Now, where to start ...
The Financial Audit: If I were a “betting” woman, I would bet $1,000 that the current state of your financials is a slinky-knot mess. When I work with my clients, I start by doing a financial audit. This lets me and my clients know the current financial situation and what needs to be addressed to get to a known financial position (KFP). Here’s how to do the financial audit:
1. Run a balance sheet and year-to-date income statement dated the last day of your last fiscal year.
2. Compare the balance sheet balances to the balance sheet section of your tax return. As of the last day of your fiscal year, your accounting system balance sheet should match up to the balance sheet on your tax return. Most of the time, your accountant will make year-end adjustments (for depreciation or to record the purchase or sale of an asset). It’s up to you to adjust your financials to reflect those changes. If you don’t match up - assets, liabilities and equity - make a note of it on your financial audit spreadsheet.
3. Go through the most current balance sheet and income statement, too. Next to each account, indicate if the account is OK or needs to be fixed. If you don’t know if that account is accurate, just put a question mark next to it. This financial audit serves as your “punchlist” for getting to KFP.
For example, do you balance your checking account every month? Can you reconcile your checking account in your accounting program? If so, terrific. Mark the checking account “OK.” If not, put a question mark next to the account on the financial audit.
Bit by bit, you can work with your accountant to nail down the accounts. As the owner, you are responsible for the accuracy of the financial reports. If they aren’t up to date and accurate, how do you make sound decisions? KFP is the place to be!
Do you need an industry-specific accounting program? Maybe. If you have less than five employees, probably not.
As you grow, you may want to look into a system with customer service and dispatching features. Global positioning systems and real-time inventory modules also are of service to larger companies. Here is my advice: Only move up to an industry-specific program when you are at KFP with a basic accounting system. This makes it easier to nail down KFP with the new program.
Also, a computer program will not make you more profitable. High tech or low tech, you have to charge more than it costs to make a profit.
The Chart Of Accounts: Work with your Bean Team to create, refine and streamline your chart of accounts. The chart of accounts is the complete listing of all the accounts in the company. It is the framework that supports the entire accounting system.
While your accountant’s input is desired, don’t craft your chart of accounts with the primary goal of simplifying your tax reporting. Your accountant has a tax software program that makes it easy for him or her to do your taxes. If your chart of accounts aligns with that program, it makes it simple to plug and play for Uncle Sam. However, direct your accountant to accommodate a chart of accounts that reflects your business and gives you the data you need to make better, faster more profitable decisions.
Keep it simple. If you are not going to use the detail to make a decision, don’t bother tracking it on a day-to-day basis.
You can always use a columnar pad and a pencil to track additional information. Just because you have an accounting program doesn’t mean you have to use it for everything.
Payroll: When I do a financial audit, payroll is usually out of whack. Why? Because it is a complicated transaction. Work with your accountant to find and fix payroll data entry errors. Do not mess around with your payroll requirements for Uncle Sam. Follow the rules. Make your deposits. If you need to revise previous reporting, work closely with your accountant to get in compliance.
You need a sound, simple procedure for payroll. I recommend using a payroll service, like ADP or Paychex. Then, enter the journal entry for payroll in your accounting program. I am happy to send you a generic payroll procedure and example for you and your accountant to customize for your company.
Change Your Ways To Change The Outcome: Once you start operating from KFP, you might notice that you are not making any money. You might notice that you have a boatload of debt. Well, the only way to make more money is to charge more than it costs. Once you know, you can change.
Change your selling price. Change your operating systems. Notice the effect those changes have on your financial position. Put a budget together and compare actual to budgeted financial performance - on a weekly basis. Once you know the score, you can play the game to win.
Once upon a time, I made a dumb decision to go to work for my husband. I took over the roll of bean counter and I was humbled. Looking back from where I am now, it was the best thing I’ve ever done. Laying claim to my financial stewardship has helped me create a business, a career and a fortune. And, it is wonderful to help other rookie bean counters lay claim to the power of financial management.
By the way, I delegate the bookkeeping now. But I still keep an eye on my company, Hot Rod’s company and the Rohr family fortune. I review the financial quick checks on a weekly basis and comb through the balance sheets and income statements once a month. All of this takes a total of about three hours a month. And because I know how to keep score, I can spot a mistake. I work with my bean counters and they help me stay at KFP. I keep track of the money - and keep making more of it.
If you’ve got the energy, the commitment, the “fizz,” then all you need is information and experience. You can do this. And you will be well served by this set of skills. It’s time for you to play in the big leagues. May 2007 be your breakout year.
Dear rookie bean counter, I see you creating a fortune.