Foreword

Statement #1

Fiction: I have an accountant who prepares my taxes and/or financial statements.  That is all I need, isn’t it? 

Fact:  Accountants can only use the information they get from the small business.  If businesses use an outside accountant to prepare taxes or financial statements, they may want to meet with them each month and go over the financial statements. They need to understand each expense and each balance sheet account to catch any possible errors or omissions.  They need to understand how their business is doing financially, that all tax liabilities are paid and current, and answer questions for the accountant.

The accountant cannot make management decisions.  They can make recommendations, but the business owner makes the day-to-day decisions. 

Statement #2

Fiction: I needed a new piece of equipment or working capital and I used the sales tax money this month but that is okay, I will catch up next month.

The facts are:
1. Once a business has gotten behind on any tax (even one month behind), it is very hard to catch up through regular business operations and cashflow.
2. Sales taxes are collected from the customer for a 3rd party and the money does not belong to the business.  Using those funds is theft.  One has a fiduciary responsibility to collect and submit as required. 

Statement #3

Fiction:  Payroll taxes are due but I don’t have the cash.  I’ll just pay them next month.

Fact:  Again, it is important to know that when one withholds money from an employee’s check, one becomes responsible for making sure their taxes are paid.  The money is not part of business cashflow.  It is money one took from one person to pay to the IRS.  Failure to submit payroll taxes is fraud and results in significant penalty payments.

Statement #4

Fiction:  I am just not good at math.  I don’t really understand all of this and just don’t have time to learn.

Fact:  Maybe a business owner does not have time to learn.  Maybe doing all of the bookkeeping isn’t the best or most effective use of their time.  This does not relieve them of their responsibility.  They need to hire a good in-house bookkeeper or external accounting firm and put strong management systems in place to assure good communication and management.

Fact:  Bookkeeping isn’t about math.  It is about keeping good financial records and having a good system.  Even if one is not comfortable with computers, one can set up a manual method of handling sales and expenses on paper.
 
Statement #5

Fiction:  I just don’t have time.  I am too busy with the day-to-day work.

Fact:  Good bookkeeping will actually save time and avoid crises in the future. It is an investment one makes in ones business.

So take control, put systems in place and you will:

• Be empowered to manage your business proactively for growth
• Sleep better at night
• Enjoy owning and operating your business

Article Written by:
Cynthia M. Norwood, Esq
Managing Director – West Tennessee
www.altconsulting.org/docs/Bookkeeping_August_2006.doc