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How Good is Your Bookkeeper?

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How Hard Can It Possibly Be?

OK, confession time! When I was a CPA, CGA student working for one of the Big Four Accounting Firms, I rolled my eyes at the mention of bookkeepers, just like virtually all accountants still do. There are some good reasons for this. First, accountants clean up a lot of big messes just so they can get the tax returns done (and isn’t that why you got your bookkeeping done in the first place?). Second, CPAs went to school for years, needed advanced experience and some serious exams just to get those letters beside their names. Meanwhile, anyone can call themselves a bookkeeper. And aren’t they just entering in receipts? How hard could that be?

Well, I found out exactly how hard it could be when I quit the big firm to go out on my own. I started out strictly as a bookkeeping firm until I finished up my last few school courses I needed to complete my degree. It was then that I realized how complex bookkeeping could be to do it well. My accounting courses helped of course, but they also weren’t anywhere near adequate to prepare me for the differences in these two worlds. I realized I had so much to learn and I am so thankful for the individuals and the bookkeeping community that helped me out along the way.

So, Seriously, What Does a Bookkeeper even do?

When you think of the term bookkeeping, you probably think it is just entering in receipts. Good bookkeeping is all about making sure all your transactions are entered in properly so that you have a proper picture of how your business is doing. If something is entered in incorrectly, you may think you’re doing better or worse than you actually are.

When I first starting taking over clients from other bookkeepers, I assumed we all knew how to do this properly. However, it didn’t take long to realize this wasn’t the case after I under-priced a few large jobs that were a mess due to previous poor bookkeeping. We now make sure we always do a deep dive assessment before on-boarding any new clients.

Deep Dive Assessment – How Good is the Bookkeeper?

So what are we looking for to determine if the previous bookkeeper (or your current bookkeeper) was doing a good job?

  1. Do the prior year’s closing balances agree to the prior year’s tax return?
  2. Have all the banks and credit cards been reconciled to date? The importance of this is coming in a future topic.
  3. Has the prior year/month been locked down to prevent changes?
  4. Are the accounts receivable and accounts payable balances accurate? Do they agree to the financial statements?
  5. Is the retained earnings balance accurate? Were dividends closed out properly?
  6. Has the sales tax module been setup correctly and being used properly? Are the taxes filed up to date? Have special circumstances like meals and entertainment been handled properly?
  7. Have the payroll remittances been reconciled, filed and paid up to date?
  8. Are there any unusual accounts being used? Are the clearing accounts going to 0 each month? Is there a balance in the open equity account (this should always be 0)?
  9. Is the shareholder loan/owner’s draw account setup properly?
  10. For corporations, has the share purchase been recorded.

Get an Assessment Done

For many entrepreneurs, the bookkeeping is a black box. You send the receipts in a shoe box and you get some paperwork back that looks like the bookkeeper did something. You then give this paperwork to your accountant. Your accountant at the year-end fixes the problems before submitting your taxes, but doesn’t tell you and you assume everything is fine. How would you ever know otherwise?

One option is to get an assessment done. We can tell you what is being done well and what needs work. We’ll produce a report and if overall you’re happy with your current bookkeeper, you can give them the report and get them to fix the shortcomings. If you’re not happy with your current bookkeeper, you can either hire us to correct the mistakes and take over the books, or you can take the report to another bookkeeper. There is no obligation to hire us, but we would be more than happy to help you out either way.

If you’re interested you can contact us and request a review.

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