I notice I usually get called or asked for help once things have gotten a little overwhelming for whoever started their new business… which means I have some things to untangle and figure out financially. It is generally more expensive for my clients when I have to backtrack and fix problems than it would have been to set things up correctly and train them on their inputting and organization initially.
I ask all new clients: how many accounts do you have for your business? And they usually say 2 or 3. But often when I sort out the receipts, I find 5, or 10 or 12 extra accounts (sometimes loans or credit cards) belonging or used by the business. Why is this such a big deal?
Think of it as if you own a large building and you hire a security guard. In the case of your business, your accountant is your security guard. You want them to provide you with accurate and timely data and to as much as reasonably possible, help prevent or detect quickly bank errors, fraud or theft. So you hire your “security guard” and you tell them you have two doors to watch.
He shows up for his first shift and finds out the building is huge and there are 17 doors on all sides. So he talks to you and says, you know, I quoted you and I planned on two doors. Now I have to charge more, but if you can lock 15 of the doors; I can keep your price the same and we can just go forward.” and you say ok, but you don’t lock the doors and there is an extra underground tunnel you didn’t tell him about too. You get robbed. He’s a great security guard but the building had too many entrances for one person and he didn’t know about all of them.
Extra accounts are sometimes unavoidable. But the less you have, the less you or your accountant need to “guard”. It is clutter, easy to lose track of unauthorized charges, and tougher to pass an audit with multiple accounts. A fairly large business can have 3 or less bank accounts and 2 or less credit cards and function just fine. A smaller business should try for 2 bank accounts and one credit card max. Only one bank account is even better.
Less. Is. More.
I’ll never complain about extra work, but I do want my clients to do well. And having to pay extra because they have set their business up in a complicated way is not doing as well as they could be.
So my recommendation to everyone just starting up out there. Hire an accountant to help you in the beginning to learn the software and set up the chart of accounts for you. You will save money, this is much cheaper than paying them to fix mistakes later or paying extra in taxes because of errors in your books.
And consolidate those accounts. As much as you can. Get in the habit of using your designated accounts for only business and transfer money as withdrawals to your personal as needed. Then make your personal purchases from your personal account after you transfer. Your information will be more accurate, your bookkeeping bills will be less and believe it or not, your accountant will probably thank you. Because we generally want the best for you too!
Laura Fleig
July 6, 2020
