I cannot tell you how many times I’ve personally heard about a bookkeeper stealing money from a business and getting away with it for years! Of course the business owner did not know how this could possibly happen because they were not involved.

This type of story is becoming far too common. Therefore, I wanted to point out some of the warning signs that could potentially indicate that this might be happening to you and your business. This list is not meant to be all-inclusive, but if any of this rings true for you, run – don’t walk – to your nearest CPA.

1. You don’t have access to your accounting system. Why on earth would you give someone full control of your finances without maintaining access yourself so you can review their work from time-to-time? These are your records and, I believe, your company’s property, so don’t let anyone tell you that you cannot have access to your accounting system.
   
2. Your bookkeeper gets defensive when you start asking questions or requesting information. If you ask to see a profit & loss statement, a bank detail report, or any type of banking or financial document and you get an attitude in response, this is a red flag. No one should be so protective of his or her work that you cannot review it. If you are met with such resistance, the reason is probably because your books are a complete mess and the bookkeeper does not want to get fired. This goes back to #1. You should not even have to ask; you should have full access to your records at all times.
   
3. Your bookkeeper does not prepare bank and credit card reconciliations. This is one of the most basic bookkeeping tasks for any business. Why? Because it is your checks-and-balance system. It is the way you know if you have everything in your financial system that should be there – nothing more or less. These reconciliations should be done monthly, and I advise you get copies of them. This shows your cleared and outstanding checks, deposits and all other transactions, providing a great snapshot of your business transactions.
   
4. Your bookkeeper adds adjustments to the reconciliations. The reconciliation is a comparison between your records and those of the bank. Like I said in #3, it is your checks-and-balance. If you see reconciliation adjustments, your bookkeeper is doing something wrong. A bookkeeper should aim to NEVER have an adjustment, because that means he or she did not account for something properly. Instead of giving up and saying, “Oh well, I missed something,” make sure your bookkeeper finds the adjustment and enters it into the system correctly.
   
5. There are crazy descriptions within different transactions. I’ve seen descriptions like, “Opening balance?” before. There is NO reason for a question mark here! Regularly review your transaction descriptions so you really get a sense if your bookkeeper knows what he or she is doing. If you never see any descriptions, you see odd descriptions or there are a lot of journal entries, this should be another red flag.

Stay on top of your business’ financial well-being by requesting monthly reports from your bookkeeper and giving them the once-over sniff test to make sure they do not smell bad. I also recommend you hire both a bookkeeper AND a tax CPA, and that they come from separate firms. This provides yet another checks-and-balance layer. A bookkeeper and a CPA from different firms will wind up checking each others work more thoroughly, and should notify you if they see something awry.

As a business owner, you have the responsibility to look over your bookkeeper’s shoulder from time-to-time. Remember that it is your business and your shirt if something goes wrong.

“I am your CPA. Not your secretary. I will not call your child’s day care for you to see how much you paid them in 2012. Get your own documents. Please.”

“Love it when clients say ‘We dont understand why our friends refund was much larger than ours?’”

“Please don’t ask me where to mail a form when the first page of the PDF was the instruction sheet.”

“Your return probably isn’t simple, so don’t say it is when asking me how much I charge for a 1040.”

“My clients get back $5000 from the Fed and take 6 months to pay me back!”

“Turbo Tax only works if you put the information in correctly…3 years of amended returns, for not answering questions correctly…Love Bounce Back Clients!”

“She can’t be a dependent if she doesn’t live with you, except in the case of a parent.”

“Don’t ask me for advice on how to use tax software and answer their questions. My clients pay me for that type of information.”

“I can’t complete a return quickly if you haven’t been keeping up with your records all year – and I hate bookkeeping as much as you do.”

Remember – you can submit your vent here and you might find it online for all to see!

This is where the dorks unite, because we’ve all had the same basic education and background. If you get a bunch of us in a room together, it doesn’t matter where we went to school – we’ll find something in common about our curriculum or how we got through the exam. Ever wonder what is involved? Here’s the basic background of almost every CPA you know or meet.

First Year – Basics of financial accounting and management accounting
Second Year – Intermediate accounting I and II (the overachiever schools can do more)
Third Year – Advanced accounting and audit

Now, that is just learning the accounting side of things. We all also had some type of Individual and Corporate Taxation classes (or more). And if that wasn’t enough, we had to understand the basics of business as well – taking Business Law, multiple Economics classes, Management, Statistics, and Strategic Management.

Here are 4 different schools’ curriculum that lay out pretty much the same thing: University of Florida, Oglethorpe University (my alma mater), Clemson University, and University of Georgia. Now, the similarities don’t just stop with our education, the next grueling step after getting our 150 hours of credit is to pass the CPA Exam.

The CPA Exam is managed by the National Association of State Boards of Accountancy (NASBA). It is a uniform exam for certification in the United States. All CPAs have a story about the exam (maybe I’ll share mine one day). We’ve all suffered months of studying to pass the 4 parts. We all had to know a shockingly array of information to get this certification. In fact, I’ve heard several times that the CPA Exam is harder than passing the Bar – but I’m done with these tests so I’ll never personally know!

So, what do we have to know? Here is how the current sections breakdown:

• Auditing & Attestation – planning the engagement, how to determine if a firm is independent in the engagement, understanding the internal control structure and risks involved of businesses, how to consider fraud within the engagement and the possible impact on the financials, different types of procedures (analytical vs substantive) used during the audit process and how they relate to the standards, how to gather evidence to support the financial statement assertions, the standard reports (memorized by paragraph!), the difference between the various accounting and attestation services, and our professional responsibilities involved with all of the above.
• Business Environment & Concepts – understand how businesses are governed and who has what duties (Board vs. Management), economics of the macro and micro-type, business finance, financial modeling, financial ratios, how IT impacts the business in design, structure, security (yes IT!), strategic planning, management report, operational understanding, etc. – Does your brain hurt yet?
• Financial Accounting & Reporting – basic accounting concepts and the theories we all live by – better known as the conceptual framework, understanding the different bases of accounting, how to account and disclose for about any issue that comes up – pensions, inventory, consolidated statements, available for sale investments, revenue recognition, goodwill & impairment, blah, blah, blah, governmental accounting, non-profit accounting, and how those last two are COMPLETELY different than the normal accounting we spent numerous accounting classes learning about.
• Regulation – Ethical and legal responsibilities of being professionals, business law – including understanding public offerings and other SEC related work, Uniform Commercial Code (seriously), Contract law, business structure options, taxation – individual, partnership, corporation, estate and their legislation process and federal procedures.

From my experience, the executives probably spent tens of thousands of dollars on how to ensure the cultures mesh, planning around how the brand will survive or evolve, how to ensure that customers and the public in general don’t lose confidence in the business. That isn’t the type of integration I’m talking about (not to mention what the author of the article was referring to either).

It’s all about the accounting and reporting. No matter the size of your company, you are going to have to figure out how to integrate the books and make sure that your management teams are still able to get the information they need to run their divisions.

Here is our guide to integrating accounting systems:

1. Survey all the financial teams to get an understanding of the systems they use to prepare the financials statements and truly get an in depth understanding of each system.
2. Survey all the executives and management teams to find out what information they receive (or pull from the systems), how often, how they use that information, and come to a consensus of what is needed and what isn’t. (Finance can’t make these decisions by themselves!)
3. Gather all your information and come up with a plan to unify. Determine the system(s) you are going to use, how you are going to get the information in there, how will your teams have to change their processes, etc. This is your initial framework – don’t worry, it’ll change!
4. Bring together several key employees to get their feedback on the initial framework.
5. Go back to the drawing table and start adding more detail to your plan (and change all those bad ideas in #3). The point of more detail is to simplify, not complicate. I’ve seen people change job codes from names to numbers – why? I never got a real reason, but it sure did confuse every single one of us.
6. Start planning how you are going to implement all these changes. Are you going to run concurrent books? Are you going to flip the switch on a certain day? When are you going to deploy the changes? Whatever you decide, make sure you think of the pro’s and con’s either way.
7. Get the support of management before you go live. You’ll never get anywhere without their trust and backing. Trust me – I’ve been there! Management has to be on your side because change is hard for everyone. Things are going to go wrong and if the executives start showing their disappointment, then it’ll just trickle down throughout the entire organization.
8. Train & listen. Remember that all of your employees haven’t been involved in the planning, design, and implementation like you. And, at the same time, you haven’t been doing their job this whole time. While you show them how to do their job in the new system, make sure to listen when they have complaints, concerns, and issues. Be open to changing your plans or procedures if things don’t work right.
9. Continue to adapt. Just like any good organization, a good finance team is always adapting to the changing business environment to better their financial and management reporting. No one gets it perfect the first time.

Accounting integrations or migrations are a lot of work, so you need to be sure to have the right team in place. Sometimes that even means bringing in consultants that understand both the technology and accounting involved. So, are you planning a merger or acquisition this year? Have you considered how your reporting is going to change after the deal is done?

QuickBooks Online launched in 2000. At first (and I’m sure for many years) accountants didn’t like the program for various issues. It is a true Software as a Service program, which means it isn’t loaded on your computer and all the data is stored in the cloud. Intuit has made tons of  improvements to the program over the years and by the time we started using it for our clients in 2010, we found it to be a great tool.

Why have your books in the cloud?
Not only does having your accounting system in the cloud make it easier for your accountant, but it makes it easier for your staff to complete their accounting related tasks.

• You don’t have to network your file and computers together and pay for several different licenses. (QB Online’s subscriptions come with 3 or 5 users and you can add more!)
• There is no need for backing up your file and making sure that backup gets out of your office (in case of fire, theft, or other destruction issue).
• You don’t have to worry about your computer crashing. QB Online has only had a few instances of outages over the past few years and I’m sure that is better than any office’s downtime record.

You have far more flexibility with a cloud version than a desktop version. Now, why have we gone with QuickBooks Online? Because we know they aren’t going anywhere anytime soon (Intuit has had the market share for plenty of products for ages now) and they have the capital and resources to keep making the program better.

With all this being said, we haven’t even started to touch on the cool stuff. Here are the real reasons we love QuickBooks Online:

• You have unlimited time entry users. They have their own separate login and can’t see any of your financial data. But, their time can automatically be linked to invoices later to cut down on data entry.
• You have unlimited report only users, so if your board, tax accountant, or other advisors want to see (not edit) your financial data anytime, anywhere, you can provide them a login for free! 
• You can automatically upload your bank and credit card transactions via a secure direct link to the bank. This cuts down even more data entry time and for those of you who enter in your Amex bill once a month, this provides much quicker reporting!
• You can create your own customized memorized reports and schedule them to be emailed to whoever you want whenever you want. We use this a lot with our clients providing them an AR listing after their books have been updating or sending out weekly profit reports on their jobs – and we don’t have to press the send button each time!
• You can easily email your clients their invoices directly within QuickBooks Online and you can sign-up for their Intuit Payment Network to add a link to that invoice for the client to pay you via an ACH transfer. It costs you only $0.50 per transaction.
• You can prepare job profit & loss statements and compare those amounts to budgets. You can easily create budgets per client and have those show up on your reports so you can track how your jobs are performing compared to your estimates.
• You can track your sales tax payable easily within QuickBooks Online. This is a relatively new feature and it works great! We have to track multiple sales tax rates for a client and only pay the tax to the state once the client has been paid, and QBO now has a quick and easy way to track it all!
• You can easily markup costs and bill them to your clients. QBO allows you to enter a standard markup rate, which can always be adjusted as need be, and with a simple click of a checkbox, the costs can be pulled over to your invoicing screen.

Let me give you a little background. QuickBooks Online has been around since December 2000, the desktop version of QuickBooks has been around since 1992 (the DOS version and the windows version came out in 1993), and the first ProAdvisor certification was released in 1999. It took just 7 years for the first certification to come out, but 12 years for Intuit to release it’s QuickBooks Online Certification for ProAdvisors.

The truth is that the desktop version of QuickBooks is different than QuickBooks Online. There are tons of similarities, but the differences are enough to make a Certified QuickBooks ProAdvisor struggle in QuickBooks Online. I think this is why a lot of ProAdvisors dislike the system (a dirty little secret that I try to explain to most prospects). Also, it has taken QuickBooks Online a long time to get to where it is today and most of those disappointed ProAdvisors haven’t tried it for a few years.

In the past, ProAdvisors could say they were experts in QuickBooks Online, but they couldn’t prove it. Now, those of us that are advocates for the system can be proud to display the badge on our site. Unlike some other certifications from different groups (AICPA and others), we don’t just pay for the right to call ourselves Certified QuickBooks Online ProAdvisor. Here are the steps we have to go through to become certified.

First, you have to become a ProAdvisor. This is the part where you do have to pay, but we are paying for value – NOT the certifications. Becoming a ProAdvisor gives you access to software, training, marketing, etc. It is a program where you are given a great deal of value in exchange for a fee. You can NOT say that you are certified until you pass one of their exams and you can only say you are certified in a product once you pass that exam.

The current available certifications from Intuit’s ProAdvisor program are the 2012 QuickBooks Certification, 2013 QuickBooks Certification, QuickBooks Enterprise Solutions Certification, QuickBooks Point of Sale Certification, QuickBooks Advanced Certification, and the new QuickBooks Online 2013 Certification.

Wrong!! The most common misconception facing my industry is that CPA is equal to tax person. Whenever I introduce myself as a CPA, they usually say “Oh good, I need help with my taxes.” Then, I have to quickly (and politely) tell them that I don’t do taxes.

I don’t blame anyone for equating CPA to taxes. Everyone has to deal with taxes – one of the two things we all have in common, right? And, guess who does do work on taxes – CPAs! But, what most don’t know is that this is only one part of our skill set and a lot of us (like me) specialize in something else. (And don’t remember much from our tax classes! – Sorry Dr. Jim Turner)

In this three part series, I’m going to try to break the down misconception and tell you more about what a CPA is, our basic knowledge set, and all the different things we can do with the certification.

First, let’s cover what a CPA stands for. CPA is short for Certified Public Accountant. We are here to protect the Public. But, from what?

In truth, you only need a CPA to issue audited financial statements for a company (or another assurance service – like review or compilation). We protect the public from a company issuing materially incorrect financial statements. Why does this matter?  The public makes investing and financing decisions based on those financial statements, and it is our job to assure them as a third-party that we have tested these numbers and they are correct (within a certain materiality threshold).

So, it isn’t that CPAs are protecting the public from taxes, it is actually all about ensuring the financial statements are accurate. But, since our education spends so much time behind learning how to do accounting and prepare financial statements, it leads my profession into many different avenues beyond just auditing, like preparing taxes.

Now that you know what a CPA is, look out for our next post in our three-part series as to what basic knowledge every CPA has.

Healthy doesn’t mean lack of disease!  It’s so much more than that.  Buck shared with us a spectrum and I want you to visualize this.  Think about a scale from -10 to +10.  The more negative you are, the more diseased you are versus the more positive you are, the more healthy you are.  Most people think if they are without disease then they are in the positive range, but Buck’s point is that being without disease just gets you to zero.  You’re even, but not more.

Let’s relate this to your business and your books.  Since the books tell the story of your business, they are the vitals we check to diagnose your health.  If your books are in disarray, then your business is diseased.  It is my belief that you can’t do more until you are even.  You can’t get truly healthy and reach your business’s potential without getting to zero first.

Here are some the basic tasks needed to get your books to zero:

• You reconcile your bank and credit cards monthly
• You can foresee your cash flow for the next 30 days
• You are accurately recording transactions in the right categories (asset vs. expense, revenue vs. deposit, etc)
• You can run either an A/P aging or an A/R aging and get an accurate picture of money that you owe or that is owed to you

Once you get to a state without disease, then you can start getting really healthy.  This is the fun part of our jobs at Iconis Group – helping business owners really maximize their potential.  We can start creating strategies on how we are are going to reach those goals and determine how we are going to measure success.

So, here is my question to you – How healthy are your books?  Are you comfortable that they are accurate and the information you get from them is timely?  If not, it might be time to dedicate your resources to getting them and your business really healthy.

1. All of your employees are paid by 1099. #scarybooks
   
2. Your journal entries have memos with “unsure” “best guess” or “who the hell knows”. #scarybooks
3. You have years of unbilled time in your accounting system. #scarybooks
4. You have payroll but not payroll expenses on your Profit and Loss statement. #scarybooks
5. Your invoices don’t have your company name on them. #scarybooks -> personally seen that recently!
6. Your revenue accounts include those for different locations or product lines. #scarybooks
7. You have AR open from over a year ago. #scarybooks
8. Your Profit and Loss statement is 3 pages or more. #scarybooks
9. You don’t reconcile your bank accounts because it just takes too long. #scarybooks
10. You backup your accounting system to a floppy disk. #scarybooks
    followed by: @thakurster: And keep all your files in a trapper keeper:) 
11. Your accounting system is dos based.#scarybooks
    followed by: @kaseybayne: Noooo!!!
12. You use a dot matrix to print your accounting records, like invoices, purchase orders, etc #scarybooks
13. @kaseybayne: my favourite: “oh, I don’t use the internet”. Or, better still – carbon copy paper (oh goodness). #scarybooks
14. Your staff hands out the credit card statement from sometime last year to code the transactions. #scarybooks
15. You have a mortgage account in your current assets portion of the balance sheet.#scarybooks
16. Your transactions don’t include vendor/customer names or descriptions.#scarybooks
17. You have no idea how much cash you have and just cross your fingers when sending out bill payments. #scarybooks
18. Your business doesn’t have a bank register to track all checks including outstanding ones. #scarybooks
19. You have a business credit card, but no liability account setup on your balance sheet.#scarybooks
20. Your AP Aging includes a vendor called “space holder”. #scarybooks
21. You have a sales tax liability balance but have never filed a sales tax return.#scarybooks
22. You forgot your password to your accounting system – 3 yrs ago. #scarybooks
23. @ShawnHooper: Your filing system is a shredder. #scarybooks
24. Your books are actual books of ledger paper.#scarybooks
25. You don’t how much it costs to employee your employees (aka your burden) or can’t easily calculate it. #scarybooks
26. You spend $5k at year end for your tax guy to make your books legible for the tax return.#scarybooks
27. You have a bunch of negative balances in your cost of sales accounts. #scarybooks
28. Your invoices are prepared in Word or some other Word processing system. #scarybooks
29. @ShawnHooper: You entered all your estimates as invoices. Show massive sales tax owing to the government. #scarybooks
30. Your 2013 budget will be created by the time you file your 2013 tax return – or later.#scarybooks
31. Your AR Aging shows $30k outstanding, but it should really be $300k. #scarybooks
32. @ShawnHooper: Expenses filed as “Miscellaneous” #scarybooks
33. You have a loan account on your Profit & Loss statement. #scarybooks
34. You have a negative cash balance on your balance sheet but have had a great balance at the bank for months. #scarybooks
35. You have someone manually enter your credit card transactions every month.#scarybooks
36. You have a long list of unreconciled transactions from previous years on your reconciliation report. #scarybooks
37. Your balance sheet doesn’t balance.#scarybooks
38. You have accounts on your Profit and Loss statement that says things like “office depot” or “Amex”. #scarybooks
39. Do you have a large balance in your undeposited funds account but having nothing to deposit? #scarybooks

We’d love to hear from you! Do you have any #scarybooks examples that you’d like to share? Do you see any of these examples in your business and want to know how to fix them, leave a comment below.