HELP!

Is my Bookkeeper Any Good?

As a small business owner, managing your finances is a critical aspect of running a successful operation. Amidst the myriad of tasks that demand your attention, entrusting your financial records to a capable bookkeeper is paramount. However, for those with limited accounting knowledge, deciphering whether your bookkeeper is truly proficient can be a daunting task.

Here is a fun fact. There are no licensing or educational requirements to be a bookkeeper. Literally anyone can claim to be one. There are certifications that bookkeepers can obtain, although most bookkeepers I know are not certified and the certifications are not required to practice in any state. There are software certifications, like Quickbooks Online Advanced Certified ProAdvisor, but this certification (and others like it) guarantee advanced knowledge of the software, not the accounting principals behind it.

In our experience here at The Numbers Agency, we have a steady stream of incoming clients who are running from bad bookkeeping experiences. These business owners have been working with someone they thought was a qualified bookkeeper, only to find out (sometimes too late) that their bookkeeper had made serious errors in their books. We’ve taken several clients on that required heavy clean-up and in some cases, amendments to prior years’ tax returns. We understand the frustration and distrust these business owners feel and we believe it is our duty to restore sanity to their business finances.

The Consequences of Bad Bookkeeping

The consequences of a bookkeeper not doing a good job can have significant implications for your small business. Here are some potential consequences:

• Financial Mismanagement:
  Inaccurate or incomplete financial records can lead to mismanagement of funds, resulting in cash flow problems, incorrect financial decisions, and potential financial losses.
• Compliance Issues:
  Incorrectly filed taxes, missing documentation, or failure to adhere to accounting regulations can result in compliance issues with tax authorities or regulatory bodies, leading to penalties, fines, or legal consequences.
• Loss of Financial Control:
  Without accurate financial records, you may lose visibility and control over your business's financial health, making it challenging to track expenses, monitor profitability, or make informed strategic decisions.
• Poor Business Performance:
  Inaccurate financial reporting can distort your business's performance metrics, making it difficult to assess profitability, identify areas for improvement, or secure financing from investors or lenders.
• Damaged Reputation:
  Financial inaccuracies or inconsistencies can erode trust and credibility with stakeholders, including investors, lenders, suppliers, and customers, potentially damaging your business's reputation and relationships.
• Increased Costs:
  Correcting mistakes made by a bookkeeper can be time-consuming and costly, requiring additional resources to rectify errors, reconcile accounts, or hire external experts for financial audits or reviews.
• Missed Opportunities:
  Inaccurate financial reporting can obscure insights into your business's performance, leading to missed opportunities for growth, cost-saving measures, or strategic investments.
• Strained Relationships:
  Poor communication, missed deadlines, or recurring mistakes by a bookkeeper can strain your relationship with them, leading to frustration, distrust, and potentially the need to find a new bookkeeper, which incurs additional time and costs.
• Legal Ramifications:
  Severe financial mismanagement or non-compliance with accounting regulations can result in legal consequences, including lawsuits, litigation, or regulatory investigations, which can be detrimental to your business's financial stability and reputation.undefined

The consequences of a bookkeeper not doing a good job extend far beyond financial inaccuracies. It's crucial to address any concerns promptly and ensure that your bookkeeper is capable of effectively managing your financial records to avoid these potential consequences.

I think we can all agree that a bad bookkeeper can have devastating results. But how do you know if your bookkeeper is doing a good job? How do you find mistakes and errors? Many business owners find themselves ill-equipped to manage their own bookkeeping, it’s why they hired a bookkeeper in the first place! So, let’s dive into a few strategies to check their work for accuracy and completion.

Utilizing QuickBooks Online Reports

QuickBooks Online (QBO) is a powerful tool for small businesses to manage their financial records efficiently. As a small business owner, you can leverage various reports within QBO to verify the accuracy of your bookkeeper's reconciliations. Here are some key reports you can run:

Account Reconciliation Report:

• Reconciliations in QBO compare transactions entered into the software against your bank statement, ensuring they align accurately.
• The Reconciliation Report is crucial for verifying that all transactions are properly recorded and reconciled against your bank statements. At the top, it shows a summary of the report that can be compared to the bank statement. It also shows all cleared transactions for the statement period which you can review against the statement for accuracy. The last section shows all of the uncleared transactions for the given period. This helps to ensure that there aren’t uncleared transactions lingering from prior months that may be throwing off your financial reports.
• To access these reports, log into QBO and navigate to Reports. In the search bar, type “Reconciliation Reports” and click the report. In the Account dropdown, select the account you would like to review. Then from the list that populates, select “View Report.”undefined

Reconciliation Discrepancy Report:

• In case of discrepancies in your bank’s beginning balance in QBO, the Reconciliation Discrepancy Report highlights transactions that were changed, added, or deleted after being reconciled. This report aids in identifying and rectifying errors in the reconciliation process.
• To access this report, log into QBO and navigate to Reports. In the search bar, type “Reconciliation Reports” and click the report. In the Account dropdown, select the account you would like to review. Then from the list that populates, look through the “Changes” column. If you see any balances in that column, it means that there were changes made to reconciled transactions. Click the balance to open the report. This report will now show you the changes that were made.

Trial Balance Report:

• The Trial Balance Report provides a snapshot of all accounts and their balances, including bank, credit card, and loan accounts. By comparing the balances of accounts with your corresponding statements, you can ensure that they match, indicating accurate reconciliation.
• To access this report, log into QBO and navigate to Reports. In the search bar, type “Trial Balance” and click the report. You can then adjust the dates at the top for the date range that you wish you to verify and click “Run Report.”

Transaction List by Date Report:

• QBO allows you to generate a Transaction List by Date Report, which displays all transactions within a specific date range. Comparing this report with your bank statement or bank activity can help identify any discrepancies or missing entries that require further investigation.
• To access this report, log into QBO and navigate to Reports. In the search bar, type “Transaction List by Date Report” and click the report. You can then adjust the dates at the top for the date range that you wish you to verify and click “Run Report.” You can also filter the report for specific accounts to see only transactions for a certain bank or credit card account. You can also Group the report by account to see the transactions grouped by account.

Profit & Loss:

• Running your Profit & Loss can also provide insight into the accuracy of the bookkeeping. You are likely already looking at this report regularly, why not drill into the categories to ensure things are being coded accurately.
• To access this report, log into QBO and navigate to Reports. In the search bar, type “Profit and Loss” and click the report. You can then adjust the dates at the top for the date range that you wish you to verify and click “Run Report.” In the Total column, you can click the balance to drill into that category. Review the vendors you find in the categories to ensure that the bookkeeper is coding your transactions consistently and accurately.

Balance Sheet:

• The Balance Sheet holds a wealth of information about your business and the accuracy of your books. Generally reviewing the accounts on the balance sheet can alert you to inaccuracy in the bookkeeping. Take note of your bank and credit card balances, do those look accurate or are there discrepancies with the banks? Are your assets accounted for in the proper location on the report? Do your loan balances look accurate? Any discrepancies in these balances indicate errors in the bookkeeping. Lastly, do you have payroll liabilities or tax liabilities that should be zeroing out periodically. Drill into these balances to make sure that these accounts are functioning as they should be.
• To access this report, log into QBO and navigate to Reports. In the search bar, type “Balance Sheet” and click the report. You can then adjust the dates at the top for the date range that you wish you to verify and click “Run Report.” In the Total column, you can click the balance to drill into that category. Keep in mind that the Balance Sheet is a cumulative report, so it accumulates data from every moment in time prior to the end date. If you run the report for last year, it’s going to show you the balances as of the last day of last year, not simply for one calendar year.

By utilizing these QuickBooks Online reports, you can effectively verify the accuracy of your bookkeeper's reconciliations and ensure that your financial records are up-to-date and error-free. Regularly running these reports and comparing them with your bank statements will help maintain the integrity of your financial data and provide peace of mind regarding your business's financial health.

Performing Regular Checks on Financial Records

Regularly checking your financial records is essential to ensure accuracy and identify any discrepancies or errors that may arise. Here are some key steps to perform regular checks on your financial records:

• Compare with Receipts and Invoices:
  Match transactions in your accounting software with physical receipts or invoices. Ensure that all expenses and income are accurately recorded and classified. You can do this by using the Transaction report above. Alternatively, you can go to the customer or vendor’s profile in QBO and spot check from there.
• Check for Duplicate Entries:
  Scan your financial records for any duplicate entries or transactions that may have been recorded multiple times. Remove duplicates to maintain accurate financial reporting. You can find duplicates in the Uncleared Transactions section of the Reconciliation Report above. You can also spot check your account registers for errors. To access the account register, login to QBO and navigate to Transactions > Chart of Accounts. Then select the account you want to review and click “View Register.” You can scroll through the register and look for duplicates.
• Monitor Account Reconciliations:
  Keep track of reconciliations for bank accounts, credit cards, and other financial accounts. Ensure that all reconciliations are performed regularly and accurately. Use the Reconciliation Report above to monitor these.
• Verify Payroll Transactions:
  Review payroll transactions to ensure that employee wages, taxes, and deductions are accurately recorded. Confirm that payroll taxes are deposited on time and in compliance with regulations. Reconcile your reports from your payroll company to the records in QBO. If you find discrepancies, more investigation is needed.
• Spot-check Expense Categories:
  Randomly select expense categories and review transactions within those categories. Ensure that expenses are properly categorized and documented. You can do this by running the P&L above and checking the accounts. Alternatively, you can run an “Expenses By Vendor Summary” report and drill into each vendor to ensure consistency.
• Assess Financial Ratios and Trends:
  Analyze key financial ratios and trends, such as profit margins, liquidity ratios, and growth rates. Look for any significant fluctuations or anomalies that may indicate errors or inconsistencies. You know your business. If the books look off, investigate further and ensure that everything is accurate.
• Conduct Internal Audits:
  Periodically conduct internal audits of your financial records to identify areas for improvement and ensure compliance with accounting standards and regulations. We recommend scheduling these audits on a regular basis, at least quarterly, more frequently if you’re working with a new bookkeeper. It’s important for the business owner to be a part of the bookkeeping process. Engagement ensures accuracy and prompt discovery of errors or other issues.
• Seek External Review:
  Consider hiring an external accountant or financial advisor to review your financial records periodically. An independent review can provide valuable insights and help identify any areas for improvement. It’s well worth the money to discover errors early, before they have a chance to snowball into costly clean-ups.

Performing these regular checks on your financial records ensures that your bookkeeper's work is accurate and up-to-date. By maintaining vigilance and attention to detail, you can effectively monitor your business's financial health and mitigate the risk of errors or discrepancies impacting your operations.

Monitoring Timeliness of Financial Reporting

Timeliness is a critical aspect of financial reporting that directly impacts your ability to make informed business decisions and maintain financial health. It can also be a tool to determine the effectiveness of your bookkeeper. Here are steps to effectively monitor the timeliness of financial reporting:

• Establish Reporting Deadlines:
  Set clear and realistic deadlines for financial reporting, including the preparation and submission of key financial statements such as balance sheets, income statements, and cash flow statements. We typically produce out financial statements by the 15th of each month, depending on the closing date of statements and the responsiveness of the client.
• Communicate Expectations:
  Clearly communicate reporting expectations to your bookkeeper, outlining the frequency and timing of financial reporting tasks. Emphasize the importance of meeting deadlines to ensure timely decision-making and compliance with regulatory requirements.
• Track Reporting Schedule:
  Maintain a reporting schedule or calendar that outlines key reporting dates and deadlines. Regularly update and monitor the schedule to ensure that reporting tasks are completed on time. This will help you track whether or not the bookkeeper is meeting the deadlines or not. Oftentimes, we schedule regular calls to discuss the financials with our clients, which acts as our reporting schedule.
• Monitor Progress:
  Regularly monitor the progress of financial reporting tasks to ensure that they are on track and aligned with established deadlines. Use project management tools or software to track tasks and deadlines effectively.
• Address Delays Promptly:
  If delays in financial reporting occur, address them promptly with your bookkeeper. Identify the root cause of the delay and work together to implement corrective actions to prevent future delays.
• Provide Support and Resources:
  Ensure that your bookkeeper has access to the necessary resources, tools, and support to facilitate timely financial reporting. This may include providing access to accounting software, payroll reports, bank statements or other supporting documentation. Work with the bookkeeper to empower them to obtain these resources on their own so that you don’t become the bottleneck in the process.
• Monitor Compliance Requirements:
  Stay informed about regulatory requirements and deadlines related to financial reporting, such as tax filing deadlines and compliance with accounting standards. Ensure that your bookkeeper is aware of these requirements and complies with them accordingly. Be the squeaky wheel if need be to make sure these deadlines are met, they are non-negotiable and if the bookkeeper is not meeting these deadlines, it may be time to move on.
• Evaluate Performance:
  Evaluate the performance of your bookkeeper based on their ability to meet reporting deadlines consistently. Recognize and acknowledge timely reporting efforts, and provide constructive feedback if improvements are needed.
• Review Reporting Processes:
  Periodically review financial reporting processes and workflows to identify opportunities for streamlining and improving efficiency. Simplifying processes can help expedite financial reporting and reduce the risk of delays. The bookkeeper should be able to provide insight for streamlining these processes, work with them to achieve maximum efficiency.
• Celebrate Achievements:
  Celebrate achievements and milestones related to timely financial reporting to foster a culture of accountability and performance excellence within your organization. Acknowledge and reward efforts to meet reporting deadlines consistently.

By monitoring the timeliness of financial reporting and implementing proactive measures to address any delays, you can ensure that financial information is available when needed to support decision-making and drive business success.

Ensuring Effective Communication with Your Bookkeeper

Effective communication is essential for maintaining a productive and successful relationship with your bookkeeper. Clear communication ensures that expectations are understood, issues are addressed promptly, and financial information is accurately conveyed.

This is too common a complaint that we receive when consulting with new clients: “I could never get ahold of my bookkeeper, they never answered their phone.” or “It would take her days to respond to my emails!” These kinds of communication breakdowns leave a business owner like you feeling abandoned and often worried about the integrity of the financials. Communication and transparency is key to making everyone feel safe and secure, especially when it comes to financial matters.

Here are key strategies to ensure effective communication with your bookkeeper:

• Establish Open Channels of Communication:
  Establish open and accessible channels of communication with your bookkeeper, such as email, phone calls, or project management tools. Ensure that both parties feel comfortable reaching out to discuss financial matters or ask questions.
• Define Communication Protocols:
  Define communication protocols outlining the frequency and method of communication between you and your bookkeeper. Clarify expectations regarding response times and availability for meetings or updates. Ensure that both parties agree to the preferred communications. If a business owner prefers phone calls, but the bookkeeper communicates better via email, it may not be the best match.
• Schedule Regular Check-ins:
  Schedule regular check-in meetings or calls with your bookkeeper to review financial performance, address any concerns, and provide feedback. These meetings foster a proactive approach to financial management and ensure alignment on goals and priorities. These meetings should be fairly frequently, maybe even daily or weekly, in the beginning of a new engagement (depending on the complexity and needs of the business). Once trust has been established, these check-ins can be reduced based on the needs of the business.
• Provide Clear Instructions:
  Clearly communicate instructions and expectations for financial tasks or projects assigned to your bookkeeper. Provide detailed information and context to ensure that they understand the scope and requirements of the task. In addition to the instructions, provide them with all of the necessary documentation or materials from your business to complete the tasks. Not doing so will set them up for failure and leave you both frustrated.
• Encourage Two-way Communication:
  Encourage two-way communication by actively seeking input and feedback from your bookkeeper. Create a collaborative environment where they feel comfortable sharing insights, suggestions, or concerns related to financial matters. If the communication is only flowing one direction in the form of a business owner only asking for financials, but never responding to insights or concerns, this can create a very unenjoyable experience for the bookkeeper and the relationship may suffer.
• Be Responsive:
  Be responsive to communication from your bookkeeper, promptly addressing any inquiries or requests for information. Timely responses facilitate efficient workflow and prevent delays in financial reporting or decision-making. Keep in mind, if your bookkeeper’s requests go unanswered, you are essentially setting up a backlog of work that will need to get done when you do respond. This can result in heavy delays proportionate to the delay in response time.
• Listen and Address Concerns:
  Actively listen to your bookkeeper's concerns, questions, or suggestions regarding financial matters. Address any issues or challenges they encounter promptly and provide support or guidance as needed. A great bookkeeper will identify concerns and then approach you with solutions to those concerns. Remain open to suggestions as their experience may carry a lot of value in these situations.
• Provide Clear Feedback:
  Provide clear and constructive feedback to your bookkeeper on their performance and work quality. Acknowledge their strengths and successes while also addressing areas for improvement in a respectful and supportive manner.
• Document Communication:
  Document all communication with your bookkeeper, including meeting notes, emails, and phone call summaries. This documentation serves as a reference point for future discussions and ensures accountability on both sides. We love emails and written communications as it creates an indelible record for both parties. However, at times, meeting recordings and notes may have to suffice and both parties should be keeping records.
• Address Communication Challenges:
  Address any communication challenges or misunderstandings proactively. If communication breakdowns occur, take steps to identify the root cause and implement solutions to improve communication effectiveness. Don’t hesitate to express your concerns and let these issues pile on. Prompt action can help save the relationship and a whole lot of frustration in the process.

By prioritizing effective communication with your bookkeeper, you can foster a collaborative and productive working relationship that supports your business's financial goals and objectives. Clear communication ensures that financial information is accurately conveyed, issues are addressed promptly, and financial management is conducted efficiently.

Addressing Errors In the Bookkeeping

After you’ve performed your own spot-checks and review of the books, you may find some errors in the bookkeeping. It’s important to remain calm and approach the situation with a cool head. Blowing up on a bookkeeper over a mis-categorized transaction is not going to win you any favors. Even if the error is more serious in nature, keep in mind that you attract more bears with honey than vinegar.

• Schedule a Meeting:
  Schedule a meeting or discussion with your bookkeeper to address your concerns about suspected mistakes. I say suspected, because as business owners, often times we aren’t the experts when it comes to financial matters and accounting. Provide them with the opportunity to explain any discrepancies and share their perspective on the issue.
• Provide Evidence:
  Present your bookkeeper with evidence of suspected mistakes, including supporting documentation and detailed explanations of the errors or discrepancies you've identified. Coming to the table with examples and documentation of the suspected errors will help the bookkeeper locate and address them. Vague accusations will very likely not result in the desired repairs.
• Encourage Transparency:
  Encourage your bookkeeper to be transparent and forthcoming about any mistakes or errors they may have made. Create a supportive environment where they feel comfortable discussing issues openly and seeking assistance if needed. At The Numbers Agency, we always own our mistakes. If your bookkeeper is making a lot of excuses or pointing the finger in blame, let them know that the cause of the mistake is not as important as fixing it and ensuring it doesn’t continue.
• Collaborate on Solutions:
  Collaborate with your bookkeeper to identify and implement solutions to address the identified mistakes. Discuss potential corrective actions and agree on a plan to rectify errors and prevent similar issues in the future. Encourage your bookkeeper to bring solutions to the table in these discussions rather than excuses.
• Document Discussions:
  Document all discussions and communications with your bookkeeper regarding suspected mistakes, including meeting notes, emails, and phone call summaries. This documentation serves as a record of your efforts to address the issue and ensures accountability.
• Implement Corrective Actions:
  Implement corrective actions to address the identified mistakes and prevent similar issues from occurring in the future. This may include updating procedures, providing additional training, or improving controls and checks in your financial processes.
• Monitor Progress:
  Monitor the progress of corrective actions and follow up with your bookkeeper regularly to ensure that they are implemented effectively. Provide support and guidance as needed to facilitate the resolution of issues.
• Evaluate Results:
  Evaluate the results of corrective actions and assess whether the identified mistakes have been addressed satisfactorily. Review financial records and reports to verify the accuracy and integrity of your financial data following the implementation of corrective measures.
• Provide Feedback:
  Provide feedback to your bookkeeper on the effectiveness of corrective actions and their performance in addressing the identified mistakes. Acknowledge their efforts in resolving issues and provide constructive feedback to support continuous improvement.
• Engage External Review:
  If you encounter challenges in addressing identified mistakes or suspect serious misconduct by your bookkeeper, consider seeking assistance from external professionals, such as a different bookkeeper, accounting consultants, forensic accountants, or legal advisors. Engage these experts to conduct a thorough review of your financial records and identify any issues or discrepancies that may require further investigation or resolution. External experts can provide objective insights and recommendations to address complex financial matters.
• Address Legal Concerns:
  If you suspect fraudulent activities or serious misconduct by your bookkeeper, seek legal advice to address potential legal implications and protect your business's interests. Legal advisors can provide guidance on legal recourse and potential courses of action to address the situation.
• Document Findings:
  Document all findings related to suspected mistakes and actions taken to address the issues, including communications with external professionals and legal advisors. This documentation serves as a record of your efforts to address the issue and ensures accountability.

By following these steps, you can effectively identify and address mistakes made by your bookkeeper, ensuring the accuracy and integrity of your financial records and safeguarding the financial health of your business.

Taking Action if Expectations Aren’t Met

If you find that your bookkeeper isn't meeting your expectations or making mistakes that impact your business's financial health, it's essential to take appropriate action. Here are steps to address the situation effectively:

• Explore Additional Training:
  If performance issues persist, consider providing additional training or professional development opportunities for your bookkeeper. This may include enrolling them in accounting courses or workshops to enhance their skills. Obviously, this would only be used for an employee of the company. For outsourced individuals or companies, they are responsible for their own training.
• Review Workload and Responsibilities:
  Evaluate your bookkeeper's workload and responsibilities to ensure they are manageable and realistic. Consider redistributing tasks or adjusting workflows to alleviate any undue stress or pressure. Maybe focus on the things that your bookkeeper does really well, and bring on extra support to help manage the tasks that are overwhelming them.
• Seek External Assistance:
  If performance issues persist despite efforts to address them internally, consider seeking external assistance from accounting consultants, financial advisors, or staffing agencies specializing in bookkeeping services.
• Terminate if Necessary:
  If performance issues persist despite efforts to address them, and termination becomes necessary as a last resort, handle the termination process with sensitivity and professionalism. Follow established procedures as laid out in your employment agreement or in your contract with the bookkeeping company. If the termination is not amicable, make sure to remove all access to bookkeeping software and any banking or other credentials the bookkeeper may have immediately upon termination to avoid any retaliatory behavior.

By taking proactive steps to address performance issues with your bookkeeper, you can improve communication, foster collaboration, and work towards resolving any issues effectively. If necessary, consider alternative solutions or termination as a last resort to ensure the financial health and success of your business.

Bookkeeping can be a daunting task for many small business owners to oversee. But do not underestimate its vital importance in keeping your financials accurate and timely. By implementing the strategies outlined in this blog, you will have the tools you need to oversee the job and address any mistakes or performance issues that may arise.

If you encounter performance issues with your bookkeeper, communicate your concerns directly, collaborate on solutions, and provide support and feedback to help them improve. Consider alternative solutions such as additional training or external assistance if necessary, and be prepared to terminate as a last resort if performance issues persist.

If you find yourself concerned about your books and aren’t sure what to do, give us a call. We have considerable experience dealing with these concerns and our mission is to get your books fixed and re-instill your trust in bookkeeping. Lastly, if you’ve read this far, come on back next week for our blog on How To Hire a GREAT Bookkeeper?, you might need one!

Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial advice. Consult with a qualified professional for personalized guidance tailored to your specific situation.