Why your company needs a CEO and CFO

When talking about the difference between CEOs (chief executive officer) and CFOs (chief financial officer), it’s often about the details. A lot of times it is harder for a CEO to catch smaller details.

Now, in their defense, they are coming up with strategic methods to sustain the growth and well being of the company, which includes everything from administration to sales. That in itself is a huge job, which is why they are the CEO.

CFOs report directly to the CEO and typically handle any financial happenings within the company. Their responsibilities include tracking revenue and expenses, analyzing financial data, and looking at the markets. Also a huge job, but the two jobs are very different.

The CEOs job is to see the big picture. Which means they can sometimes miss the importance of smaller details. For instance, it may not occur to the CEO to keep receipts. And believe me, the IRS wants receipts. They will not just take statements.

Those smaller financial details that really add up in the end are where the CFO shines. CFOs generally have a better understanding of details because they oversee budgets and expenses and also play a role in filing taxes.

For them, the i’s have to be dotted and the t’s must be crossed. The main responsibility they hold is the stability of the finances and implementing financial strategies to grow the company.

A CEO should generally have some knowledge of those details to understand the bigger picture of the business. And a CFO should look at the broader picture to better understand the details. A successful business needs both perspectives.

Although different, both a CEO and CFO carry the responsibility to maintain and improve the company. It reminds me of a leadership quote by Peter F. Drucker: “Management is doing things right, leadership is doing the right things.”

Both the CEO and CFO perform critical functions that require working in synergy to create a thriving and financially solid company.

I messed up, now what?

Most business owners have had that moment when they realize they messed up, whether it’s a small oversight or a big issue.

My title here is “accounting crisis manager” so believe me, I see this a lot. You are not alone- everyone makes mistakes. It’s how we recover that is important.

There is no shame in making mistakes. We just need to take a deep breath and switch gears into recovery mode to move onward and upward.

One issue I see quite often that can get businesses in financial trouble is not outsourcing the work or outsourcing the work to the wrong people. In other words, just because your cousin can handle checks doesn’t mean you need to give them the job. On the other hand, if you have a professional bookkeeper, you should trust them to do their job but still maintain oversight.

People tend to feel a sense of shame for not understanding every part of their business. Just remember that to build a successful business, you will need to lean on other people. When an owner gets busy, and they will, shortcuts tend to be taken. This is where I see clients get into trouble, and it’s why outsourcing is so important.

Businesses can go through ups and downs for numerous reasons. Recessions, decreased demand of the products, and high unemployment rates can all affect the company’s revenue.
If you’ve hit tough times financially, some of these steps could help you bounce back.

  • Charge more for the product
  • Add fees, especially in service industry
  • Sell any assets you are no longer using
  • Reduce expenses
  • Get advice from a professional
  • Keep moving forward
  • Be flexible

I don’t mean to sound like a pessimist, but you really do want to plan for the worst as a business owner. It’s important to understand that potential loss and disaster are looming, and the better you prepare, the faster you will bounce back.

You can prepare and help strengthen your business with these steps.

  • Take a complete inventory of your business regularly
  • Ensure bookkeeping is up to date and correct
  • Back up your data and use up-to-date software

Remind yourself that those who have experienced great success have also experienced great failure, too. Find a solid and trusting support system, plan your course of action, and be prepared to build yourself and the business up again.

Helpful steps when starting a new business

When starting a new business, many questions arise. One I often hear is, "Where do I start?"

Well, start with giving yourself a pat on the back. You are braving the entrepreneur world, and that alone is a lot to be proud of! But going back to the question... where do you start?

Picking a name for your business can be not only fun, but also a way to reach the consumer. Pick a name that is direct and that appeals to the market.

If you want to be taken seriously in the business world, you will need to start with getting a tax ID number. This first step will establish the company and help guide the future of your business.

It's also important to decide what kind of business you are. This can always change as your business demands it, but think about where you are now and where you want to be in five years. Are you a sole proprietor or do you plan to partner with another person? Are you the only employee, or do you plan to hire a team?

Forming an LLC is a smart decision, regardless of the size or structure of your business. This gives the business a level of protection between your company and your personal assets. Nothing is 100% guaranteed, but it gives you a safety net.
With all of that complete, you should set up a bank account using the tax ID number and the company name. It's important to keep your business finances separate from your personal finances, and an established business checking account is a critical piece.

Also be sure to look into local laws and apply for any required licenses or permits. Commercial insurance is a good idea for most businesses as well, and a requirement for some fields.

The next logical step is everyone's favorite-bookkeeping! In reality this can be difficult and time consuming for many business owners. Quickbooks is a great software for managing business finances. With assets, liabilities, owners equity, income, and expenses being thrown at you, it's a lot to keep straight. Creating categories and sub-categories within your financial software will benefit the company in the long run. Organization is your friend!

Last, but certainly not least, find others who have ventured before you in the business world. Lean on these people, seek advice, find out what mistakes they have made, and what they did right. With an open mind, these people will guide you into the business owner you want to b

When things don’t fit in the box

When tracking your finances, most everything fits in a specific box: cash, balance sheet, inventory, fixed assets, accounts payable, loans, and capital investment. But there are some things that don’t fit in a specific box, like rewards or rebates. And other things can get confusing as to what goes where, like differentiating between business and personal expenses.

Let’s look at a few examples where things can get confusing and try to clarify how you should handle these.

Rewards points

If you receive rewards points via a credit card and apply it to your balance, you’ve reduced your liability, but something still needs to be credited. Since everything should be accounted for in your records, you may want to simply call it miscellaneous income or other income.

If your rewards points take care of 10% of your bill and you don’t account for it somewhere, it will look like you increased your gross margin by 10%. That’s why you should account for everything and keep your expenses what they are.


Rebates that you offer to customers can also be tricky because money is taken off of a regularly priced service or product. The best way to account for a rebate is to input the full amount of the product or service as credit, enter the rebate as debit, and then record the invoice, cash, or check as debit once the customer pays.

Assets and fixed assets

When you buy things like furniture or a computer, it should be labeled as an asset. If you can walk away from a business, take it with you, and sell that item to someone else, it is a fixed asset.

Business expenses

For a business expense, it must be ordinary and necessary, according to the IRS. If you buy a new suit for a work function, that’s a personal expense because you can wear the suit to things outside of work. If you have to buy a uniform that is specifically tailored to you and specifically for the purposes of your job, like a firefighter’s uniform, then it can be a business expense. If you get a shirt embroidered with a company logo, you can deduct the embroidery as a business expense only.

These are just a few of the things that may not easily fit in a box when you’re tracking finances, but there are certainly other unique situations that can occur. If you need help with determining the best way to track things for your business, give us a call.

Are your financials in good order?

Good griefwe're already halfway through the year!

By now, there is adequate data from your business to indicate whether or not you are on track to hit your milestones and goals for the year. You probably have a “gut feel” about things, and the raw data is there, but do you have the financial reports in good form so that you could prove your gut feel to yourself? Or anyone else for that matter?

Reports that justify how you think your business is doing are important for two reasons.

The first, and best, reason for good financial statements is so that you very well understand your own business. I can remember the first time I ran an eye down the accounts and saw total spending for a certain category. “I spent that much on that?!” I really had no idea. It was a normal part of running my business, but seeing the number made me realize the need to rethink the process behind the expense.

Here's the next best reason. Good financial statements are critical to justify your financial accuracy and stability to an outside party. That may be for a bank loan, potential investors, or an auditor.

Relying on bank statements to run your company can lead you astray, sometimes to a disastrous degree. Thinking the bank balance is what you can spend is usually false, because it does not take into consideration what checks are outstanding, and you may spend more than what is actually available.

Or let's say you receive a loan from a friend or family member and deposit the money. Relying solely on bank statements, and without your proper documentation and financial accounting of the loan, the IRS can decide it should be counted as income and should be taxable! You'd then have to produce the loan documents (that would, hopefully, have been drawn up at the time of the loan and not as a result of this problem) to prove the deposited money was not income, and therefore not taxable. The sheer amount of time it would take to communicate and convince an auditor, not to mention the stress of the situation, would have been saved many times over had the loan been recorded correctly at the time. And as one who has seen numerous audits of many kinds, I can tell you that once an error is found, the auditor will dig deeper and harder looking for more, because there usually are.

Similarly, bankers know that bank statements do not tell the whole story, so they would require additional information to even consider making a loan. The income statement would tell them what your revenues and expenses are, and the balance sheet would show assets the company has, as well as what other liabilities you may already owe.

If you're not sure you could come up with financial statements, it could be time to talk with an experienced bookkeeper to help you produce them, or to advise you in setting up a process for you to follow yourself.

Accounting for trade-outs, aka barter

You've heard the saying, "Cash is king!", and no one knows this better than startup and small business owners. Few have money lying around just waiting to be spent on advertising, bookkeeping help, or other services that would free up their time, and allow the actual business to get done. What to do, what to do??

As business owners network and meet other owners in similar positions, the idea of trading out services, aka bartering, almost inevitably comes up. It is certainly a viable option, and I do it myself, but with the following caveat: I always, always get an upfront agreement that we will invoice and pay each other for every job, or monthly billing. Doing so keeps the business transactions at arms' length - the way all business transactions should be - and is essential to accurately determining the financial health of the business, not to mention that it's required by the IRS.

Not accounting for trade-outs/barter is the same as not accounting for revenues and expenses: a sloppy no-no.

There's no magic to recording such transactions. When you receive your trade-out partner's invoice, you record the appropriate expense, and set up a payable. When you send out an invoice, you record the appropriate income, and set up a receivable. IRS guidelines dictate that the value of barter transactions must be a fair market value. In most cases that amount is already known - it's what you and the other party usually charge for such services or goods.

It is possible to accurately record barter without exchanging invoices and checks, but I've found that many of my clients do well to just take care of the basics: receive bills, pay bills, send invoices, deposit payments. Handling barter the same way as all other income and expenses keeps things routine, and they are not overwhelmed with journal entries or "Barter" bank accounts, etc. Let's keep this simple, Sam.

One of the best arguments for this handling of barter transactions is that you have accurate financial statements; your income and your expenses are accurately reflected. Should the time come when you want to switch vendors or service providers, you know exactly what you've been paying, and you'll know what kind of hit your income is going to take.

Another best argument is being in compliance with IRS guidelines. You need to keep a paper trail for all barter transactions and exchanges. For more information, see the IRS document Bartering Produces Taxable Income and Reporting Requirements.

Three financial needs of your startup

For all the excitement that comes with starting a business, there are dull details. You may not want to spend time on them, but the nitty-gritty financial aspects can greatly affect your business, and they’re certainly vital for growing your business.

Addressing these three key items will help you ensure your company is ready to grow, and is less likely to run into speed bumps along the way.

1. Regulatory identification

There are agencies for which you will need identification numbers. The best place to start is with a federal tax ID number, and you’ll need it for several reasons:

  • establish a bank account in the name of the business;
  • register with your Secretary of State;
  • file and pay employee withholding, and payroll taxes; and
  • file income tax, depending on your company’s structure.

There is usually a different number required by state agencies for unemployment taxes, and for state income tax withholding, if applicable.

2. Chart of Accounts

A chart of accounts (CoA) organizes your assets, liabilities, equity, revenues, and expenses. It allows you, and potential lenders and investors, to understand the money moving in and out of your business. And having a good chart of accounts allows you to plan for growth.

I recommend to my startup or relatively new clients that they spend time considering what revenue categories they want to track, as they will influence how best to set up the CoA.

Let’s say you sell, maintain, and service computer hardware and software. Those are broad categories, and may seem adequate to begin with, but I’m willing to bet that before six months is up, you’ll wonder if the revenues are from servers, desktop PCs, laptops, or accessories such as monitors, keyboards, battery backups...well, you get the idea.

If you’ve dumped all the revenue in one account, you’d have to go back and break out that info from other reports; a time-consuming task. But if you have a primary revenue account of Hardware, then sub-accounts labeled Servers, Desktop PCs, Laptops, and Accessories, you would already have that info. You might even want to have further sub-accounts under Accessories labeled Monitors, Keyboard/Mouse, UPS, and so forth. But don’t get carried away!

And you won’t want to overlook the labor revenues of installing, maintaining, and servicing that equipment. It’s a good idea to break those out, too. If you find you spend a lot of time servicing your equipment, there may be a business opportunity to sell preventive maintenance agreements, and that margin may be better than emergency servicing.

Expense categories need similar consideration. If you dump all insurance expenses in one account, and you see an upward trend in that account balance over time, how will you know, without digging back through your files, if it’s because general liability rates or workers comp rates have gone up?

Finally, you can speculate what might happen when you need to grow. How will your chart of accounts change when you have more expenses? How will your financial situation change when you add a new revenue stream?

3. Fixed assets

Fixed assets are your company’s tangible long-term assets. We’re talking about land, buildings, equipment, and furniture. If you account for fixed assets now, you’ll have a mechanism in place for when your business grows and acquires more fixed assets, or divests of them.

Another reason to record your fixed assets is that another business may value them when they consider purchasing your businesses. Many startups today have an exit plan, a plan to sell their business once it grows to a certain degree. Buyers will value your fixed assets because they may want to use those assets for themselves.

Want somebody to help you with the more boring parts of growing a business?

We help business of all sizes navigate any potential financial roadblocks so that their owners can focus on the more fun parts of building a business. If you’d like bookkeeping assistance, let’s talk.

QuickBooks: Online or Desktop?

You know your business needs better than anyone, but how do you determine what version of QuickBooks would be most beneficial?

Reading comparisons of QuickBooks Online and QuickBooks Desktop (for Windows) is where you might start, and it will give you an idea of the features of each. But I believe the place to start is by evaluating the needs of your business. After all, how will you know which meets your needs, if you’ve not nailed down what those needs are?

Evaluating these elements and their importance to your business needs can help you make the choice.

Side note: QuickBooks Online and QuickBooks Desktop are really two different products. QBO isn’t a web-enabled version of QB Desktop; the two have different database structures, and two approaches to solving problems. It’s easy to find bookkeepers and accountants with strong opinions, and that’s generally due having used Desktop for years and finding QBO so unfamiliar.

Another side note: QuickBooks is currently available for Mac, but 2016 is its last version, and will be supported until 2019.

Access for users and your accountant

The obvious advantage of the online version of QuickBooks is the real-time access for users, and this can be especially valuable to ‘out and about’ users who give estimates or invoices on the spot. This advantage extends to use on any device with internet access. Additionally, your accountant can have access without the need to create and send an Accountant’s Copy.

Industry-specific features

The Desktop versions have a long list of features not available in QBO, many having to do with inventory, fixed assets, and industry-specific reporting. With the exception of a professional services-only company, the inventory and asset features quickly make Desktop the version of choice. But for any type of business, the Excel exporting is much easier in Desktop.


While there is an upfront cost to QuickBooks Desktop, it’s important to realize that you’ll pay that amount and more with QuickBooks Online. Monthly subscriptions add up, whereas you’ll only pay once for the desktop version of this software. For many, that one-time price is worth having to install software on a desktop.

Each business is different and has different needs for an accounting software to meet. If you’d like to talk with someone about choosing the right version of QuickBooks for your business needs, give us a call.

Cash accounting vs. accrual accounting

When managing your business’ money, you will use one of two accounting methods-cash or accrual. The difference between the two is all about the timing of when your company accounts for expenses and revenue. Let’s take a look:

Cash method

The cash method of accounting is all about, well, cash. Reports are based on the dates that cash is paid out or received.

For example, if you pay March rent on March 1st, and you pay April’s rent on March 31st, your reports will indicate excessive rent expenses in March, and no rent expense in April, based on the dates of the checks. If you only look at your business’s financial reports annually (say it ain’t so!), then these monthly ups and downs may not matter.

The cash method is simple. It is also familiar, since most individuals and families look at their own finances in this light. For freelancers and sole proprietorships, the cash method is generally adequate, and tax returns for these entities are usually filed on a cash basis. So the pros are its simplicity and familiarity.

The con side is the aforementioned ups and downs. Expenses such as rent are constant, and any one month’s reports are most accurate when all such costs are accounted for. Ups and downs in a business are more commonly due to volume or seasonality, and varying routine costs can cloud the picture your financial reports are trying to show you.

Accrual method

Accrual accounting is based on when expenses are incurred and when income is earned, regardless of when checks are written or deposits made. It’s a bit more complex than cash basis accounting, but provides a much better view of what’s going on in your company. This method applies the matching principle, which matches revenue with expenses in the correct time period.

Let’s say you pay a year’s worth of general liability insurance. Recording that on an accrual basis means that you show only 1/12th as an expense that month, and the remainder is shown on the balance sheet as Prepaid Expense. At the end of each of the following 11 months, a closing entry is made to show another 1/12th of expense. At the end of 12 months, you’ve shown all 12 months’ worth of insurance expense, and the Prepaid Expense has been reduced to $0.

This is the most common accounting method used by businesses. One of the main benefits is that you can get a more immediate, realistic understanding of income and expenses over a longer period of time. Put more simply, you don’t earn all your revenue in one month, so why record all of your insurance expense in one month?

While accrual accounting does not tie exactly to how much money is in the bank, you can reconcile back to that number. And in so doing, you see what outstanding checks and deposits have yet to clear the bank - a very good thing to know and keep in mind.

So what’s best for you?

Cash basis is great for startups because of its ease, and management can focus on planning and doing. However, it’s best to ask some basic questions before deciding:

  • Will the books be audited?
  • Do you need to obtain bank financing?
  • Will the company go public?

If ‘Yes’ is the answer to any of these, accrual basis would be the best way to go. External parties need more information that just how much money is in the bank.

Not sure which accounting method works best for you? Just want to rest assured that your bookkeeping is done accurately? Give us a call so we can have a conversation about your business’ needs.

Save time with QuickBooks keyboard shortcuts

Hands typingWhenever I can do something on the keyboard without reaching for the mouse, I do. Mouse work slows me down, and when I have a lot of QuickBooks work to do, the seconds add up!

While there are some things only a mouse can accomplish, there are several shortcuts that I use regularly to keep me in the flow. Here are some of the shortcuts that I use most frequently with QuickBooks (the Windows desktop version).

If you find you have a lot of entries to make, these shortcuts can help you complete them in less time.

Find your QuickBooks version’s License or Product numbers

Press the F2 key to see a plethora of information: file size, file location, numbers of vendors, customers, and more. The information you find with this shortcut can be especially helpful when you’re troubleshooting a problem.

Find a transaction

Ctrl-F opens the Find Window. If you are working with a specific transaction, like invoices, Ctrl-F will open a window that searches them.

If you’re looking for a dollar amount, but you aren’t sure what transaction it may be, click anywhere on the home page (yes, you will need the mouse for that part!) and then press Ctrl-F. On the Advanced tab (Alt-A), enter the amount and hit Enter. All results for that dollar amount are displayed, and you can sort from most recent to older ones.

Insert a line in a transaction

Go to the line in front of the place you want to insert a line, and press Ctrl-Insert. Need to delete a line instead? Select it and press Ctrl-Delete. Note: this shortcut adds a line within a transaction, not a line at the bottom.

Quickly move through the fields of a transaction

Use the Tab key to efficiently move through a transaction’s fields. This can help you make sure you’re covering all your bases. You could use this in a number of ways.

  • Tabbing off the name field will populate certain fields, depending on how you set up your vendors and customers. (Tip: take time to set up vendors and customers, and avoid using “Quick Add” for that purpose; that will pay you back in time saved for many transactions to come.)
  • Tabbing will prevent you from inadvertently skipping over the date field (so you’ll avoid recording a transaction in the wrong period).
  • You can be sure you haven’t skipped any important fields, because using the Tab key takes you through them all.

Bypass “Save & Close” and “Save & New” buttons

Using Alt-S will save the current transaction, and Alt-N will save the transaction and move you on to the next one.

Or, if you’ve set the default appropriately (Edit > Preferences > General > Pressing Enter moves between fields-Uncheck), simply hitting return will do a “Save & New.” Talk about quick!

Want to find more QuickBooks keyboard shortcuts? The Sleeter Group published a comprehensive list of keyboard shortcuts for QuickBooks. I encourage you to check out that list.

Do you have any favorite keyboard shortcuts that you use? If so, please share them below!