| Wonderful tips, thank you! I have a few questions. > I did my own books up to 250k in sales. After that I got a book keeper and an accountant. At 5 mil in sales I got an accounting firm. It should have happened around 2-3 mil I was going to have an accountant check my work, no matter how many sales I get, but are you talking about having an accountant actually record all of the transactions for you from 250k in sales? As in, you don't work the accounting yourself at all except to check the numbers afterward? If so, why? I feel...uneasy...about not knowing where every dollar is going as it's going. Also, what would matter more? Volume of sales in dollars, or volume of sales in how many sales are made? > Know the difference between your balance sheet and a P & L statement. Let's see if I do. A P & L (profit and loss, correct?) statement is a statement of whether the company is in the red or black, over time. A balance sheet is a snapshot of the assets, equity, and liabilities of the business at a point in time. Am I correct? > understand what a trial balance is This is a new one for me, so I looked it up. From what I understand, it's a sort-of balance sheet to check that the debits and credits match up. I don't really get its purpose in the context of accounting software, though. > Don’t have 300 pages of expense accounts, you should be able to produce a financial snapshot at any of time of 1-2 pages This is a great tip, and also exactly the kind of mistake I would make without someone telling me beforehand. > Quickbooks generally will do everything you need, the invoicing system is nice and can be integrated easily for credit card payments and recurring billing I'm sure this is true, and I would encourage other small business owners to default to this as suggested. But I'm a FOSS freak, and only work on Linux, so I'll stick with GnuCash. Also, I may have found out ways to use Bash and SQLite's command-line interface, with GnuCash's SQLite file format, to script GnuCash, making my use of it immensely powerful. > Banks generally won’t count items older than 60-90 days on your A/R as an asset A/R is Accounts Receivable, right? That's money owed to your business by someone else, correct? If so, thank you for letting me know this tidbit. However, why do banks do this? |
Accountant - you prepare everything, send to accountant prior to tax deadline. They prepare your taxes for you. Most accounting firms have various levels of service, this is the most basic and “unaudited” one. In various scenarios when you have a public company, you would have fully audited services where your accounting firm would go over every detail posted in your accounts, that’s not needed. For an accountant to take your G/L from accounting software and prepare your taxes shouldn’t cost a lot. You do not have an accountant do daily entries, that would be expensive and .. highly unusual. Basically you are your own book keeper.
Typically gross sales matters most, not so much the number of sales and it is because everything you’re doing relates to taxes. If you had 500 errors for sales under $20 it isn’t that big of a deal, if you had 20 errors on sales over $500 it’s a much bigger deal. (This is relative, to show a point, in reality you want every penny to balance with no errors) I kind of got off topic but when you start talking millions an accounting firm with various specialists have a lot more input and help than 1 accountant who is independent can provide and that was my point in my original post.
Profit and loss / balance sheet - I mention this only because I meet high paid E suite executives everyday who don’t clearly understand the difference, it’s just good to know. Here’s a basic overview link .. https://www.indeed.com/career-advice/career-development/bala...
Trial Balance - Accounting software I have seen usually uses this method, it is called the double entry system of accounting. I have never heard of gnu cash, but after a quick google I found you this article which explains the theory. https://lists.gnucash.org/pipermail/gnucash-user/2018-July/0...
You will want to check your trial balance prior to sending to accountant. Don’t waste a lot of time thinking about this right now. In fact overall I don’t want you to get overwhelmed or too far into the weeds on any one topic.
Try and get a basic high level understanding (which you are doing) then get setup and start focusing on your business (not so much accounting, this is what your accountant is for at year end)
Chart of accounts, one more thing - don’t change them during the year. Change them at year end from one year to the next. Eg, you don’t want to explain that from periods 1-8 in week 3 you posted Starbucks to account 5200 but then week 4 of period 8 through period 12 you added account 5203 and started posting there.. it’s just confusing
Software - I understand, in fact I haven’t used quickbooks in years, we switched to a custom ERP that runs on Linux which also does accounting. It is industry specific so no need to mention the name, But it’s no where near as sweet as quickbooks for user friendliness. It does other amazing things for our industry though and can import and export in archaic standards to our vendors and B2B customers that were developed over 20 years ago.
Yes A/R is accounts receivable, and banks just consider the money unrecoverable after a certain period of time. This only applies if you want funding or have an annual review on a business line of credit with the bank. It’s important to remember though if you are coming into such a situation.
Also, good luck! I love entrepreneurs !