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The Bookkeeper's Notes, Issue #010 Bookkeeping System Debate
June 18, 2012
Welcome to this issue of The Bookkeeper's Notes newsletter focusing on good bookkeeping practices ... and sorry it's late this month. I inadvertently set it to go out in July by mistake. :0(
If you are a regular site visitor, you know that Bookkeeping-Essentials.com is committed to educating and providing support to ... work from home business owners. I sincerely hope you find this newsletter useful and practical.
If you like this e-zine, feel free to forward it to a friend. You'd be doing me a huge, huge favour. If a friend did forward this to you and you like what you have read, please subscribe by visiting my site.
In this issue, I thought I'd chat about an topic a subscriber requested ... what is the most important bookkeeping task - accounts receivable, accounts payable, meeting payroll, compliance taxes or ...
Under feature products, I chat again about Gabrielle Fontaine's Virtual Bookkeeper's Guide for self-employed freelance bookkeepers.
In New Pages, Additions and Revisions ... you'll find information on what will be happening over the next 6-9 months on the site. The Bookkeeper's Directory is still on the backburner at this time. I am dropping Focus on Payroll while the site is transitioning to the new software upgrade.
This newsletter gives you access to the links of a handful of web pages that are password protected … my newsletter subscribers have exclusive access to these bookkeeping lists and procedures. You will need The Insider's Pass (a password) to access them, which you will find in the second to last section of the newsletter.
For work from home business owners doing their own books, you may find this service useful … a general review of your ledger. This service is for those who want assurance they are on the right track. I'll perform a high level review of your general ledger to see if there are any obvious problems. You may choose to have me walk you through the problems and how to correct them. If you are interested, send me a message on my contact form.
I also work with self-employed Canadian bookkeepers just getting into the business to answer their questions by phone conference. Feel free to get in touch with me. It requires purchasing prepaid hour(s) of time (one hour minimum).
The picture I chose to share with you this issue was taken by Holly Keyowski at Stuart Lake two or three years ago. Can't you just hear Fred saying "Ethel, did you see that?!"
Spring was late this year but summer is just now around the corner along with BBQ season. As it was a warm winter with little snow here, I lost a few perennials and parts of my lawn died. The ice also did some damage to my dock ... which in all truthfulness is near the end of its life.
It is my sincere hope that the information I provide on Bookkeeping-Essentials.com, and in this newsletter, will help you learn good bookkeeping practices to manage your business finances easily and more efficiently. It can be tough coming up with ideas on what to write about. If there is something you'd like me to cover, please drop me a line.
To your success! ... and, of course, thank you for subscribing to this e-zine.
Until next time,
Laura (aka Lake) :0)
P.S. I would like to remind you there is a difference between information and advice. The general information provided in this e-zine or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using my site content for any reason whatsoever.
In This Issue ...
How To Take Your Practice VirtualGabrielle Fontaine, PB has created an excellent program that shows you how to get started as a virtual freelance bookkeeper and/or begin marketing your services online.
I attended her recent webinar on The Freelance Bookkeeper Success Forumula where she discussed the 7 biggest roadblocks to success. At the end of the webinar she announced a new membership program for both new and experienced freelance bookkeepers.
It is a monthly training / coaching / mastermind type of group. The membership is very reasonable. If you do decide to join me by signing up, please let Gabrielle know I referred you. I'm really looking forward to the monthly sessions.
Now back to Gabrielle's guide ...
What Will You Learn In The Training Classes
This program doesn't teach how to do bookkeeping ... but it does demonstrate how to setup your internal business systems. You receive access to a Members Only area where you will find:
I attended the training classes last summer. I'm a big fan of Gabrielle Fontaine's webinars and her superb presentation skills. She cuts through all the information that's out there and presents the material in a concise, uncomplicated fashion.
As with all products purchased through Bookkeeping Essentials, I earn a small commission each time YOU purchase a product through the links in this newsletter or throughout the site. It's an extra step that allows me to continue to provide free resources to visitors just like YOU.Take a full 60 Days to put the “Insider’s Guide to Your Own Virtual Bookkeeping Business” to the test. If this program doesn’t show you exactly how to find your first virtual bookkeeping client in 30 days or less… if it doesn’t take you by the hand and show you step-by-step how to set up your business with confidence… or if it fails to help you charge profitable fees for your virtual bookkeeping services… then you will receive a full refund, no questions, no quibble!
Click on the seal to read to enroll today.
In the Forum - Ask a Free Bookkeeping is OpenAsk a Free Bookkeeping Question reopened June 16, 2012.
I started up this free service again with a few changes. It may now take up to two weeks before a response is published. I am also going to be more selective in which questions are responded to ... that's because many of the questions being asked can already be found on the website.
I ask that everyone please use the customized search boxes found throughout the site to see if your question has been asked and answered previously. If you find a question that is close but doesn't quite answer your question, please ask your question through the comments section on that topic rather than start a new question. The reason for change is some search engines penalize a site if there is too much duplicate information.
... OR if you would like me to personally answer a bookkeeping question for you, my Ask A Private Bookkeeping Question service is still available. My fee is $75 per question.
For Information Purposes:
People who submit their questions through my contact form, need to answer "Yes" to the question, "May I publish your comments?", to allow me to respond to your question in the forum ... or you need to purchase a private question. If neither of these options have been utilized, I do apologize but your question will remain unanswered.
People who post a question in the forum without including their email address, you need to know you may miss the response I give in the event I reclassify your post to an existing forum posting with the same or similar topic.
A reminder that this is NOT a tax site. Questions related to personal (not relating to tax form T2125) or specific tax advice, as opposed to bookkeeping questions for small business owners who work from their home, will not be posted. Please seek out a tax professional in your area to assist you or visit taxtips.ca. The owner of the site is a retired CGA.
Focus On Bookkeeping - Prioritizing Your Bookkeeping TasksI received a request from Dianne in late April asking me to write a newsletter article on the priortizing of bookkeeping tasks. She was having a debate with someone who is not a bookkeeper about what is the most important part of bookkeeping.
The non-bookkeeper believes Accounts Receivable (AR) is the most important task. Dianne believes AR is important but not more than anything else. She feels a balance between AR and Accounts Payable (AP) ... like scales or Yin/Yang ... is critical. Her thoughts are a full cycle bookkeeper needs to balance their attention between the two functions.
This is an interesting debate. From a small business owner's perspective, accounts receivable is extremely important (or it should be) as cash flow is what keeps the doors to the busines open. Without cash flow, a profitable business can go bankrupt during a cash squeeze.
In my chat on cash flow, I list one of the ways to improve your cash flow is to work your accounts receivable and improve your AR turnover rate. A low AR turnover rate indicates problems that need to be addressed. Read more about this in operating ratios.
If you want to learn how to manage your accounts receivable, see Ask the Business Lawyer below for a guide Nina Kaufam, Esq. developed specifically for small business to address this common business problem. (I am an affiliate and will receive a small commission if you make a purchase through this site.)
I agree that accounts receivable is an important bookkeeping function that requires consistent, ongoing attention ... however the point of ensuring AR collections are performed is so you have cash to ... pay your bills. If you don't pay your bills on a timely basis, a small business owner is going to have a really tough time servicing their customers.
As Dianne says, "Owners want to make money and see the bucks rolling in. Conversely, employees just want to get paid. They don’t care about all the extra costs of doing business or what an extra sticky note pad costs the company. Receptionists just want the bills paid so they don’t have to screen the collection calls. And so on and so on. What is the point of a bookkeeper focusing 24/7 on getting the customers to pay if hydro shuts down the lights cause the bill isn’t paid?"
I'm a big believer that one of the methods small business owners should use to manage their cash flow is through the timing of their accounts payables.
In my opinion, rather than not pay a bill or pay it late, make regular partial payments by the payment due date to keep your credit rating intact.
I attended a talk by a collection specialist in May. He said they would prefer to work with the business owner to come up with a payment schedule they could manage rather than have to file a report with the credit rating agencies flagging your account as a poor credit risk.
So ... I'm going to have to agree with Dianne that both AR and AP are important bookkeeping tasks. I think every small business owner should create and maintain a cash flow forecast as a way to balance the two functions. (Follow the cash flow link above to learn how to do this.)
Depending on the type of business you are in, the cash flow forecast could be updated daily, weekly or monthly ... but keeping it up-to-date is essential in any economy where cash is always king.
As a business owner, at the very least, you need to develop a really intimate relationship with your aged AR and AP reports. If you don't know what these are, talk to your bookkeeper - for some business owners, this may require having a conversation with yourself ;0) - and request these two reports as part of your financial package ... your bookkeeper does provide you with a financial reporting package, right? If not, you really do need a new bookkeeper.
The relationship between AR and AP is kind of a chicken and egg thing. A business can be not profitable and stay open if cash flow is deficient ... money has to be coming in so the bills can be paid. Profitable businesses can go under if they have a prolonged cash flow crunch.
While it is essential that accounts receivable be worked so the cash comes in to pay the bills, perhaps a review of customer credit procedures should be undertaken. Should new customers or delinquent customers be required to have a "security" deposit if they want credit or should all customers be made to prepay?
Sometimes you have to do something different to get a different result.
Improve Your Cash Flow
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