Selecting Mrs Bookkeeper

Let’s assume that you decided to hire an independent bookkeeper. How should you interview and select such a bookkeeper?

Recruiting in general, whether it is for a bookkeeper or any position, is more of an art than a science, so there is no simple recipe that will ensure that you get the best bookkeeper in the door, but there are criteria that will enable you to mitigate risks. Here’s a short checklist and I’ll cover each item in more details below:

• Professionalism
• QuickBooks knowledge
• Accounting knowledge
• Price
• Availability
• Referencechecks

Professionalism
Why do I start with this criteria? Because it is the single most efficient factor to trim your list of candidates down. If you are reviewing a long list candidates and you test them first on their QuickBooks knowledge, you’ll shrink your list by 50% pretty quickly. If you test them on professionalism first, you’ll shrink the list by 80% right from the get go and you’ll save yourself a lot of time. What do I mean by “professionalism”? That’s the whole package of people skills that the bookkeepers expose to you. How crisp and well written are their emails? How friendly are they on the phone and in-person? How punctual are they to the interview? How well dressed are they? How well do they listen? Did they prepare for the interview by researching your company? A bookkeeper who doesn’t score high on this dimension will cause you problems down the road, because good bookkeeping is not only about the accuracy of the data that you get into QuickBooks. A bookkeeper is a consultant and as such, the bookkeeper needs to know how to adapt to your industry and company, understanding your needs and adapt his/her work to your needs.

QuickBooks knowledge
There is an enormous difference between being knowledgeable in QuickBooks and knowledgeable in accounting. QuickBooks appears simple to use if all you need to do is reconcile bank accounts, but as soon as you start pushing the envelope (job costing, sales tax, inventory management, integration with 3rd party apps, etc…), it’s a whole new ball game. Even if you majored in accounting in college, it won’t help at all. Case in point: most CPAs cannot be called QuickBooks experts. They know how to pull reports out of QuickBooks to prepare your taxes, but the number of CPAs out there who would be able to fix a “broken” QuickBooks file is very small. That’s not their area of expertise.

Accounting knowledge
This one is a no-brainer and you have to test for it. However, you’ll be surprised how few candidates will fail in this dimension, because the accounting knowledge required to keep clean books is actually easy to acquire. This being said, let me stress that this holds true only if all you are looking for is a bookkeeper. If you are expecting your candidate to play a controller or CFO role, it’s a very different story, but then, the job description should not be “bookkeeper”.

Price
Like in any market, you get what you pay for. The lower the cost, the lower the expertise. If you plan on giving your bookkeeper primarily data entry tasks and you will be verifying every detail of his/her work on an on-going basis, you can afford to go lower on the price scale. However, if you expect your bookkeeper to be self-sufficient and you won’t have time to quality control the work, you will be forced to pay more. Keep in mind that the hourly rate is not necessarily a good representation of cost. Jane might charge twice the hourly rate as Joe, but if Jane works twice as fast as Joe and she provides higher quality work, you will end paying Jane less than Joe at the end of the month.

Availability
Supply and demand doesn’t only affect price. It affects availability as well. The better bookkeepers are busier. Make sure that the bookkeeper you hire still has available bandwidth for you and will be able to turn your work around quickly and be responsive to your questions during the week. That’s one of the key differences between independent bookkeepers and firms. When an independent bookkeeper is maxed out, there is no safety valve. You can’t move work around or assign different resources. You just have to wait for your turn.

Check references
Last but not the least, don’t skip on the reference checks. You’re about to give this bookkeeper a lot of sensitive financial information. Better be safe than sorry!

Internal Controls Accounting Principles

The two most common causes of fraud in small businesses are when rogue employees or contractors write checks to themselves or deposit checks to their account instead of the company’s account. Those are very unsophisticated schemes and can easily be detected after the fact, but by the time you detect the fraud, the damage is already done. Very often these individuals go from paycheck to paycheck and spent your money in a hurry. You can’t get the money back. They are broke and you can only “punish” them through termination and prosecution. You get a sense of vindication, but the money is gone.

It is much better to prevent fraud in the first place and for such basic fraud, there are easy tricks. It all starts with what larger companies call “Internal Controls”. Essentially, any financial process that moves money around needs to involve at least 2 individuals checking on each other. When you apply this to a small business, it can be very basic, but still effective.

Guarding your stock of blank checks

Many small business owners feel that as long as they are the ones signing checks, all is safe. Not really. Banks do a very bad job at checking signatures. They can be easily forged. The signature is an effective tool to trace back the source of the fraud once the fraud has been detected, but by then, it’s already too late. The better approach is to control who has access to stocks of blank checks and how these blank checks are handed out.

The safest process is to have your bookkeeper prepare the checks in QuickBooks and mark them as “To be printed”. You, the owner, would then do the actual printing. In this scenario, you’re the only one with access to the stock of blank checks.

If you don’t have time to do the printing, you can delegate the printing to the bookkeeper as well, but you would hand-out only the exact number of blank checks needed and you would keep a log of the check numbers that you handed out. Essentially, avoid at all cost to have the blank check in a self-service mode. Checks need to be in a locked drawer with as few people having access to them as possible.

The panacea is to not have blank checks at all and to use online bill payment with rigorous approval workflows, but these techniques are a little bit more involved in term of setup.

Controlling the deposits

Let your bookkeeper or the individual acting as bookkeeper record the deposits in QuickBooks and prepare the deposit slips, but make sure that it is a different person who goes to the bank to make the deposits. Ideally it should be you, but if you don’t have time, separate the roles of preparing the deposits and making the deposits. Whomever makes the physical deposit needs to bring the deposit slip back and immediately hand it off to the person in charge of QuickBooks. This is of course not bullet proof, because the person making the actual deposit could still swap the accounts, but by enforcing the requirement of handing off the deposit slip on the way back to the office, you send a clear signal that this type of fraud will be caught almost in real time.

There are of course much more sophisticated ways of committing fraud, but by implementing the processes above, you will be preventing the two most basic and common fraud schemes. 

New QuickBooks 2012

The newest release of QuickBooks became available for download as of September 26, 2011 and will be available for purchase in stores as of October 9, 2011.

I must say there are some pretty cool new features that will definitely come in handy for your business.

Because Your Time Is Valuable

Remember the interview process when you first setup QuickBooks? In previous versions, the setup process required the completion of 20-40 questions making it really time consuming to get started (and somewhat stressful having to find all the answers). I always skipped and built the file from scratch. Having used QuickBooks since its first versions, I found this faster than answering the questions. They have now made it much simpler by asking only 3-4 questions. It’s straight forward and saves you time. Woo hoo!

A Better Visual

Along with an improved To-Do List, you can now view invoices, bills, and other important to-dos in a calendar view. Instead of pulling a report to view what has already been entered and when it is due, you can easily view it on the calendar. The calendar does not export or import with other calendars.

No Better Relationship

Excel is one of the major competitors to many bookkeeping software programs, but QuickBooks allows you to integrate with it by exporting reports to spreadsheets you can format as you please. QuickBooks now gives you another reason to export current data to an Excel spreadsheet. If you have an Excel sheet that is formatted and customized with fonts and colors, you can update the spreadsheet with QuickBooks data without compromising your formatting. This is one of the 2 features I’m most excited about since I use Excel with QuickBooks extensively.

A Reporting Community

The ability to create customized reports in QuickBooks has always been a great feature. The reports are the reason to even use QuickBooks to do your accounting. If you don’t know how to run reports, using QuickBooks it’s pretty dull and it defeats the purpose. Reports answer your day-to-day management questions, they are the best tool to make decisions and to check on your progress. Now, they offer even more choices with their Contributed Reports Library. QuickBooks now allows other QuickBooks users to upload reports so they can be shared with other users. They verify them prior to distribution, but once approved they become available in the library. Users know their popularity by their rating from other users. Initially, the library will start out with 1,000 reports.

A Future CRM?

In the past QuickBooks had a very simple program called Customer Manager that somewhat integrated with your current QuickBooks file. The program didn’t have success and it was discontinued. From my own experience using it, I was not surprised when it was pulled off the market. It seems QuickBooks has integrated similar CRM features within the dashboard inside your file. This is the 2nd feature I’m most excited about as I have struggled with finding the right CRM program for years. I’m impressed by how close QuickBooks is to becoming an all-in-one CRM integrated with Accounting with new features like the new Lead Center and Document Center.

The Lead Center lets you import current leads, track and follow up with sales leads and when they become a customer, move them in to the customer center. It can’t get any easier than that!

The Document Center is a great organizational tool (especially for tax time) because it allows you to simply drag and drop estimates, receipts, and other files to invoices and customer files. And no need to worry about storage because QuickBooks includes local storage with your purchase.

Now or Later?

Memorized Transactions is not a new feature, but one that has been improved. Memorized Transactions can be setup for recurring billing, invoices and estimates. Now you can review and process each transaction individually and also select which transactions to run now or later. You can also set up bi-monthly processing. I’m always so surprised to find clients that have been using QuickBooks for years and have no idea they can memorize transactions they enter over and over again. It saves you tons of time!

No Extra Work

The new Batch Timesheet feature allows you to enter the same timesheet for multiple employees that worked the same hours.

Accountants Versus CPAs

CPA or Certified Public Accountant and Accountant perform almost the same duties. But the fact is that all accountants cannot be Certified Public Accounts whereas all CPA’s are accountants.

An accountant is a person who looks after financial records. An accountant would have good knowledge about owner’s equity, cash flow, chart of accounts and balance sheet and how these are going to affect the business.

An accountant is responsible for the accounting works of an individual or a business firm. It is the accountant’s responsibility to issue financial reports. Accountants need not be certified professionals.

On the other hand, CPA is a professional who is regulated by the state. An accountant can become a CPA only if he passes certain tests conducted by the respective Institutes of a country. Though the requirements to become a certified Public Accountant varies from one state to another, the basic thing is that one has top undergo rigorous tests to qualify to become a certified profession.

When comparing the works of both the professions, an accountant cannot do the work that a Certified Public Accountant can do.

An accountant cannot do the same work as a Certified Public Accountant whereas a CPA can do all work of the accountant. Unlike the Accountant, the Certified Public Accountant has a higher position in the financial and business circles. It is the Certified Public Accounts who are capable of advising on the financial aspects of a company. The CPA are trusted more than an accountant in financial matters. Even if an accountant’s views are valued, the last word is always from a Certified Public Accountant.

More than passing the test, the CPAs have to flow a strict code of ethics. Every two-year, the CPAs should have to complete 80 hours of professional education to keep up the new trends in accounting.

Summary

1. All accountants cannot be Certified Public Accounts whereas all CPA’s are accountants.

2. An accountant cannot do the work that a Certified Public Accountant can do.

3. It is the Certified Public Accounts who are capable of advising on the financial aspects of a company.

4. The CPA are trusted more than an accountant in financial matters.

5. Even if an accountant’s views are valued, the last word is always from a Certified Public Accountant.

6. CPA is a professional who is regulated by the state.

7. It is the Certified Public Accounts who are capable of advising on the financial aspects of a company more than an accountant.

2011 Year End Tax Strategies

With the economy still in the doldrums, this year has not been the greatest year for most individuals.  Unemployment is still high, incomes are lower, retirement savings have declined and many taxpayers are struggling to make ends meet.  The government has provided a variety of tax incentives to help weather the economic storm, and you are urged to take advantage of these special tax benefits as well as other strategies to keep your tax bill as low as possible.  

• State Estimated Tax Payments Although the deadline to make the current year 4th quarter state estimated tax payment is January 15 of the next year for most states, the payment will count as a tax deduction on the federal Schedule A for the current year if that payment is made before the end of December.
• Property Taxes Generally, your property taxes are billed in installments, and thats how most people pay them. However, the tax can be paid all at once, if it provides a greater tax benefit for the current year. 

Caution: The preceding two strategies do not benefit taxpayers who are subject to the alternative minimum tax (AMT), since taxes are not deductible to the extent a taxpayer is subject to the AMT. Taxpayers subject to the AMT might, instead, consider deferring deductible tax payments to the subsequent year.

• Bunch Deductions - If your tax deductions normally fall short of itemizing your deductions, or even if you are able to itemize but only marginally, you may benefit from using the bunching strategy. For more on this technique, read the article Bunching Your Deductions Can Provide Big Tax Benefits.
• Required Minimum Distributions (RMDs) from Retirement Plans If you are in a low or zero tax bracket this year, it may be to your benefit to take a withdrawal more than the minimum. RMDs generally apply to individuals age 70 ½ and older, but even younger retirees who are not yet required to take a distribution may find this strategy beneficial. If you receive Social Security benefits, IRA distributions can sometimes be planned to minimize the taxability of the Social Security income.
• Tax Credit for First Four Years of College - The American Opportunity Credit (AOC) takes the place of the Hope education credit and provides a credit for tuition and certain other expenses of the first four years of college (Hope only applied to the first two years). So even if you used the Hope credit in prior years you may still qualify for the AOC. The credit is 100% of the first $2,000 of qualified expenses and 25% of the next $2,000. 40% of the credit is refundable which means that taxpayers with little or no tax liability can still benefit from the credit. This credit does begin to phase-out for single taxpayers with AGI above $80,000 ($160,000 for joint filers) and no credit is allowed for taxpayers filing married separate.

Important: The AOC is only applicable to tax years 2009 through 2012. Without Congressional action, 2012 is the final year for this more lucrative education credit.

• Energy-Efficient Home Improvements Homeowners who have or will make certain energy-efficient improvements to their existing homes may qualify for energy credits up to 10% of the cost (credit limited to a lifetime maximum of $500 taking into account credit claimed in prior years). This credit applies to the following qualified energy efficient improvements: exterior windows and skylights, exterior doors, metal and asphalt roofs, heating systems, air-conditioning systems and insulation. With many contractors without work this could be an opportune time to negotiate reasonable prices and make those home modifications, but the work must be completed before year-end if you want the credit. Without Congressional action, this credit expires at the end of 2011.
• Roth IRA Conversions If your taxable income is low or a negative amount for the year, it may be appropriate to convert some or all of your taxable traditional IRA to a Roth IRA for little or no tax cost. Taxpayers are able to convert funds in regular IRAs (as well as qualified retirement plans) to Roth IRAs regardless of their income level.
• Review Estimated Tax Payments and Withholding Ensure they are sufficient to meet the safe-harbor payment amounts so as to avoid underpayment penalties.
• IRA and Self-Employed Retirement Plan Contributions The primary purpose of these plans is to provide for your future retirement and whenever you are eligible and financially able, you should always contribute as much as possible. Contributions also provide a tax deduction when they are made to Self-employed plans and to most traditional IRAs. The benefit derived from this tax deduction is based upon your tax bracket. (Some contributions to traditional IRAs may not be deductible if you also participate in another retirement plan, depending on your income level.) Those individuals who simply prefer the Roth option, but are barred from making Roth contributions because their income exceeds the AGI phase out limitations, might consider making a non-deductible traditional IRA contribution and then converting it to a Roth IRA since as of 2010 there are no income limitations on conversions.
• Establish a Retirement Plan If you do not already have a retirement plan and you are considering one, there are several options. Some, such as Keogh or 401(k) plans, must be set up before the years end. If you are an owner-only business, you should review the article Owner-Only Businesses Should Consider a Solo 401(k) Plan, which provides great benefits for business owners with no employees other than their spouse.
• Capital Loss Carryovers If you have carryover capital losses remember you can only claim a maximum $3,000 net capital loss on your return and the remainder carries over to the subsequent year. However, you may have some gains you can take to offset the carryover. (If you sell at a gain but wish to repurchase stock in the same company, note that the wash sale rules dont applythey only apply to losses so you will not need to wait 30 days to make the repurchase.) For long-term planning, it is important to keep in mind that the current lower capital gains rates of 0% and 15% are only available through 2012. After that, without Congressional intervention, the rates return to the pre-2003 levels of 10% and 20%. 
• Non-Cash Charitable Donations If you itemize your deductions and your garage and closets contain never-used items, you might consider donating those items to charity before year-end to increase your deductions. To claim a deduction for donated clothing and household goods, they must be in good condition or better, and the donations must be substantiated by a written receipt that includes the name of the charity, dates and location of the donation and a reasonably detailed description of the property donated. A receipt is not required where the value is less than $250 and it is impractical to obtain one (for example, when items are left at an unattended drop site). If, instead, you decide to sell some of the property, the income is generally tax free provided you sell each item for less than your cost or basis in the property.
• Deduct IRA Losses If a traditional IRA account that includes non-deductible contributions declines in value and the value of all of your IRA accounts combined is less than the sum of your non-deductible contributions, you can take a loss by withdrawing from (closing) all your IRA accounts. However, this loss is beneficial only if you itemize your deductions and the loss, along with your other miscellaneous deductions, exceeds 2% of your income (AGI) for the year.

The foregoing are frequently encountered tax strategies that can be employed by most, but by no means all, taxpayers. Please call this office if have questions regarding these issue or others or would like to engage in some year-end tax planning. If you have a substantial increase or decrease in income this year it may be wise to schedule an appointment before the holidays to strategize.