The modern bookkeeper is a strategic partner critical to your operation and is responsible for much more than record keeping.
Bookkeeping is responsible for Compliance – that is the work to satisfy government requirements such as payroll calculations & remittances, WSIB compliance and HST filing. Compliance is a hidden cost center when not properly done. Failure to file and late filings usually incur escalating penalties – in many cases interest and penalties on late payments and filings are non deductible which is basically a double tax! And never mind that a non-compliance may lead to an audit!
Cash flow is the number one limiter to long term business growth. Bigger customers mean bigger bills, bigger investments and longer collection cycles. Unless your business collects and pays immediately, you will have accounts receivable and accounts payable. An accountant can help you set up credit terms to define the correct billing cycle for your company and industry. Your bookkeeper will monitor your accounts receivables to ensure your clients are paying your bills on time – sometimes just a reminder is enough to bring accounts up to date. If clients feel that they can get free credit they will take as long as they can to pay you.
If your suppliers provide you with credit terms, you have accounts payable. Who’s watching your vendors to ensure that you received what was invoiced? Are there control steps to ensure vendor accounts are reconciled? Who can approve invoices for payment and sign cheques?
In a small business, bookkeeping might be their only control. We discovered a fraud in a customer’s accounts by noticing that his employees were re-depositing cheques with a date one year earlier. Normally these cheques would be physically presented or stale dated but by depositing them using their banking apps these employees were able to deposit their cheques twice and the bank did not catch it. Bookkeepers can monitor account activity using the bank statements, they can monitor inventories by counts, they can monitor employee behaviour by walking around.
Bookkeeping provides you with critical and timely information to make decisions. A monthly review of the P&L and Accounts Payable/Receivable provide you with valuable decision-making information. Questions to ask include:
- Did I make money?
- Are we meeting our goals?
- Do I have the cash flow to continue to expand?
- Do we have any credit risks?
We highly recommend the use of monthly plans to set goals and track progress. If you have no idea where you are going, anywhere will do. As a best practice we recommend a monthly review of the company statements from your accounting software as well as a review of the HST, payroll and WSIB payments above.
The proactive business owner will see bookkeeping as not only necessary but essential to the success of the business. We can’t live without it but we can make it a lot better.