If you hire someone to handle your books, how do you know they're actually doing a good job?
That's harder to answer than it sounds.
Most business owners aren't going to open QuickBooks every month and check their bookkeeper's work. That's one of the reasons you hired someone. Your bank balance may look right. Your tax return got filed. Maybe you get a Profit and Loss Statement every month.
I'd still want to know what's happening behind those reports.
Here are some of the things I'd look at.
How often should my bookkeeper reconcile my accounts?
One of the first things I'd check is whether your bank and credit card accounts are being reconciled every month.
Reconciliation means comparing what's recorded in QuickBooks with what actually happened on your bank or credit card statement. If QuickBooks shows one balance and the bank shows another, someone needs to find out why.
But here's something business owners don't always realize.
An account can reconcile and still contain mistakes.
A $500 purchase can match the bank statement perfectly and still be posted to the wrong expense account. A loan payment can clear the bank but be recorded incorrectly. A deposit can match the bank while being treated as income when it shouldn't be.
So yes, I want to see reconciled accounts. I also want to know someone is looking at what those transactions actually are.
What should my bookkeeper check on my balance sheet?
I'd look at the balance sheet next.
Business owners tend to pay much more attention to the Profit and Loss Statement. I understand why. That's where you see sales, expenses and profit.
The balance sheet can tell you a lot about the bookkeeping, though.
Are there old checks that have been sitting there for months? Does a loan balance stay the same even though you're making payments? Is money piling up in Undeposited Funds? Does Opening Balance Equity still have a balance? Are there strange negative numbers where they don't make sense?
One odd balance doesn't prove your books are wrong. There might be a perfectly good reason for it.
I want someone to notice it and ask why.
What should a bookkeeper do every month?
I'd want to know when your books are actually finished for the month.
There's a big difference between entering transactions and closing the books.
When I think of a monthly close, I'm thinking about getting the month's activity entered, reconciling the accounts, answering open questions, checking the financial statements and fixing anything that looks off.
You should have some idea when that happens.
If you're halfway through October and nobody can tell you if August is finished, I'd ask some questions.
A regular monthly process also gives you a point in time when you can look at the numbers and know the bookkeeping has been worked through.
Should my bookkeeper be asking me questions?
Yes. I think they should.
This one surprises people.
Some business owners think the best bookkeeper is the one who handles everything without bothering them. I don't see it that way.
Sometimes a transaction is obvious. Sometimes it isn't.
Maybe there's a $1,200 payment and I can't tell if it was equipment, a repair or something personal. Maybe money moved between accounts and I need to know if it was a transfer or money you put into the business. Maybe a deposit hit the bank and I can't tell if it was sales, loan proceeds or something else.
I'd rather ask than guess.
If your bookkeeper never asks you anything, I'd want to know how they're getting the answers.
How often should I receive financial statements?
For a lot of small businesses, that means receiving a Profit and Loss Statement and Balance Sheet every month.
Some businesses need more. Accounts receivable, accounts payable or other reports might come into play depending on how the business runs.
I don't think sending a huge stack of reports proves anything. I'd rather see a few reports that are accurate and that you can actually understand.
And if something looks strange, you should be able to ask about it.
You also shouldn't have to chase someone down every few months just to find out how your business performed.
What do Uncategorized Income, Suspense and Undeposited Funds mean?
I pay attention to accounts such as:
Uncategorized Income
Uncategorized Expense
Suspense
Clearing
Undeposited Funds
Opening Balance Equity
Seeing one of those names in QuickBooks doesn't mean your bookkeeper did something wrong.
"Temporary accounts shouldn't become a storage closet."
Some of them have a real purpose. A clearing account, for example, may be part of the way transactions
move through the books.
What I don't like seeing is a balance that keeps growing month after month because nobody went back to figure out what belongs there.
Temporary accounts shouldn't become a storage closet.
If something has been sitting there for months, I'd ask what it is and why it's still there.
Should my bookkeeper understand my industry?
I think they should understand how your business works.
That doesn't mean they have to know every detail on day one. They do need to understand where your money comes from, where it goes and what makes your business different.
Restaurants are a good example.
A restaurant may have POS sales, merchant deposits, gift cards, tips, third-party delivery services, payroll, sales tax, inventory and cost of goods sold all moving through the books.
If you don't understand how those pieces connect, the financial statements can look completely normal while some of the numbers are wrong.
The same thing happens in other industries. A construction company doesn't run like a marketing agency. An online retailer doesn't run like a medical practice.
Your bookkeeping should match the business you actually have.
What happens when my bookkeeper finds a mistake?
Something eventually will go wrong.
A transaction gets duplicated. An integration sends something over incorrectly. A bank feed does something strange. An old bookkeeping problem suddenly shows up.
That doesn't scare me.
What concerns me is seeing the same problem carried from one month to the next because nobody dealt with it.
A good bookkeeper should notice problems, look into them, explain them when needed and fix them when there's something to fix.
And yes, a good bookkeeper can make mistakes. I can make mistakes. Anyone working with hundreds or thousands of transactions can.
I'd pay more attention to what happens after the mistake is found.
Was it caught? Was it fixed? Did someone figure out why it happened? If you needed to know about it, did they tell you?
That's the kind of thing I'd look at.
Can I ask my bookkeeper questions without feeling stupid?
You should be able to.
You should be able to say, "I don't understand this."
You should be able to ask why you made a profit but don't see that money sitting in the bank.
You should be able to ask why a number changed.
You should even be able to say, "I think I messed this up."
I've worked around business owners long enough to know that people can feel embarrassed about their books. Maybe they're behind. Maybe they don't understand accounting. Maybe they've been avoiding something because they didn't know what to do.
I don't think shame helps anybody fix a set of books.
You hired someone to help you with this part of your business. You should be able to ask questions about your own money.
Can QuickBooks be reconciled and still be wrong?
Yes.
A transaction can match the bank statement perfectly and still be posted to the wrong account.
Reconciliation tells you that the activity recorded in QuickBooks matches the activity on the bank or credit card statement. It doesn't tell you that every transaction was categorized correctly, that a loan was recorded correctly, or that every balance on the balance sheet makes sense.
That's why I look beyond the reconciliation screen.
How can I check my bookkeeper's work if I'm not an accountant?
You don't need to redo the bookkeeping yourself.
I'd start with a few questions:
When were my bank and credit card accounts last reconciled?
When was last month's bookkeeping finished?
Are there any transactions you're waiting on me to answer?
Is there anything on my balance sheet that needs attention?
Is there anything in my books right now that you think I should know about?
I especially like that last one.
Ask it and see what they say.
You don't need to know accounting terminology to have a good conversation about your own books.
What if I still don't know if my QuickBooks is right?
A lot of business owners can't point to one specific problem. They just have a feeling that they'd like someone else to look.
I understand that.
That's one reason I'm currently offering a complimentary Basic QuickBooks Diagnostic Review for QuickBooks Online users.
I'll check your QuickBooks file for common inconsistencies and areas that may need attention, then I'll tell you what I find in plain language.
I'm not going into it assuming your current bookkeeper did something wrong. There's no obligation to become a TrueCount Services client.
You may find out everything looks pretty good.
You may find something that needs another look.
Either way, you'll know more about what's sitting inside your QuickBooks than you did before.