You can’t grow a business on shoe box accounting.
If you are like me, you probably started out in your business doing “shoe box” accounting. Some of you may still be doing it. That is where you put all your receipts, invoices and checks into a “shoe box” and take it to someone to “straighten it out” at the end of the month or end of the quarter. For those of you that really hate the numbers part of the business, you probably wait until April 14 and then take it to the “tax man” or “tax lady.”
Lose the Shoebox and Look Ahead
Let me suggest to you that doing what I have just described is a big DON’T when you are starting a business or at any time in your business life. The next door neighbor who does some year-end tax work to earn extra money is not the person to be interviewing to be your accountant.
It is important to always be looking into the future of your business and associate yourself with professionals who can help get you there, and an accounting firm is no different. It is extremely important that you employ a firm or person who, when doing your books on a regular basis, understands something about your service business. You are worrying about getting new customers, and you need someone reliable that can provide accurate understandable numbers about how you are doing.
Take “Off the Shelf” Off the Table
So many of the people that are doing accounting work today use “off the shelf” software that many times is not designed for our type of business. They use terms like “cost of goods sold” and “merchandise sold this month.” Ours is a labor business, and we deal in payroll, and sometimes it is hard to get that message across to them. They want us to change our business to adapt to their software instead of them adapting to our business. DON’T LET THEM TALK YOU INTO DOING IT.
Finding a Qualified Accountant
When interviewing a potential accountant, it is important to get the right answers to the following questions:
Do they have extensive experience with SERVICE type companies?
Are they willing to work with a chart of accounts consistent with our industry, not a standard “off the shelf” one?
Will they willingly provide percentages on the statements, year-to-date numbers, and comparisons to last year’s numbers?
How soon can they produce the monthly statements? You should have them no later than 7 business days after you provide the needed information.
Will they file all quarterly state, local and federal government reports, and year-end W-2’s etc.?
How willing are they to review the statement with you each month and “provide you an education” on what they mean?
Bringing the Bookkeeping In-House
Eventually you will, if you haven’t already, purchase an industry-specific software package and have your own in-house bookkeeper or accountant, but these are important questions to have the right answers to when you are beginning or are an emerging company.
I cannot over emphasize the importance of having accurate and timely financial information at all times in your company. I don’t care how good you are at stripping and re-coating a VCT floor or if you are the industry expert at shampooing carpet in your city. If you don’t have the ACCURATE TIMELY financial data to support what you are doing, you won’t be doing it for long.
It is pretty safe to say that more companies fail in business because they don’t pay attention to the numbers than because sales aren’t increasing or they can’t provide quality work. All the business in the world does you no good if you are losing money doing it, and so many contractors are losing money doing it but don’t know it until it is too late. Don’t be one of those companies.
There is a lesson to be learned here, whether you are just starting out or are struggling to figure out what is going on: I’m working harder and harder, and I have no money; the harder I work, the broker I get.
Again let me say, don’t let it happen to you.
Dick Ollek is the owner of Consultants in Cleaning, providing consulting to companies that want to realize profitable sales growth and improve staffing and administrative procedures.