Ask any accountant and they’ll spout off the balance sheet equation (Assets = Liabilities + Owner’s Equity).Â Ask most everyone else, and they’ll either look at you blankly or have a hard time remembering what goes where in that equation.Â It’s simple, really, if you just picture it.
Unfortunately, I’ve worked with many business owners who were victims of embezzlement prior to my engagement with them.Â It’s really not all that uncommon.Â Why?Â Because we want to trust our employees.
I’m not saying your employees aren’t trustworthy; I don’t know them.Â What I can tell you is that’s always the story I hear.Â “I thought I could trust her”, “we’ve been friends forever, I can’t believe he did that to me”, “she worked for a bank! I thought I could trust her”.Â I’ve heard all of those from owners who were cheated by that “trusted employee”.
I don’t want to scare you and I don’t want you to lose faith in your employees.Â I want you to set up some simple internal controls, so you don’t ever have to question your employee’s trustworthiness.
I really don’t want to be a banker and I’m guessing you don’t either. The harsh reality is that any business with accounts receivable is acting as a banker.
With the current economy and banking situation, itâ€™s important to realize that you are a bankerâ€¦and you should act like one. In times when banks are failing and loan sources are drying up, your clients will be leaning on you more heavily to act as their banker. Itâ€™s critical to be careful when lending your money to your clients.
Fortunately, you can take steps to discourage the use of your cash by your clients. You need to put together a credit policy that is fair to your clients and consistent with your industry, but has enough teeth in it to protect your business. If you have employees administering the policy, you’ll want to make sure that the policy is clear and you have an escalation path for potential exceptions to the policy.
The 2009 versions of QuickBooks are due out soon and the mac version gets an upgrade this year too. Unfortunately, they didn’t include networking (multi-user) in this release. I’ve been working in both the pc and mac versions lately and it’s quite frustating that the mac version lacks a lot of the features of the pc version. Some of that is changing with this release.
Here is the list of changes noted by Intuit:
We made some big improvements in QuickBooks 2009 for Mac. The new version is much closer to functional parity with QuickBooks Pro 2009.
——————————————————————————– New look and feel with “SuperNavigator” Homepage Makes it easier to manage your business.
Makes full use of new Mac features like Spotlight and Coverview.
——————————————————————————– Key business information all in one place
More visibility into the performance of your business with a new dashboard.
On one screen, you can see an income and expense graph, customer balances, and reminders
——————————————————————————– IMPROVED! Online Banking
Save time on data entry and increase the accuracy of financial records by securely downloading bank and credit card transactions directly into QuickBooks.
I’m getting divorced….from a client.Â When I begin working with a new client, we get engaged with an official engagement letter.Â Occasionally, I have to get divorced.Â Its happening today.Â It’s the first time in a long time that I’ve had bite the bullet and send out the divorce decree.
I’m a firm believer that every client is not a good client.Â As such, I take time to make sure I feel good about the clients I work with.Â It’s all about fit.Â So, I interview new clients as much as they interview me.Â I want to be a partner with them and I can only partner with people and businesses that I feel are the best fit with my skill and personality.
I’m a pretty good interviewer, but sometimes things just don’t work out.Â In this instance, it is a payment problem.Â As my hubby points out, they aren’t a client if they aren’t paying you.Â He’s right, of course.Â The problem in this situation is I’ve let it go on far too long. The reason?Â I like the owner.Â He’s a good guy; he means well; he wants to pay me.Â But, you know what?Â I’ve risked as much as I can afford to risk on good intentions.Â
I am no stranger to businesses with cash flow problems. The lack of cash to pay the bills is pretty common among small businesses.Â It’s no secret why it happens… promises haven’t been kept by customers, you expected sales that didn’t materialize, you expected funding that didn’t come in, the list goes on.Â What I find most often is business owners don’t know what to do when it happens to them.Â Here’s my advice:
1) Figure out what went wrong and take steps to fix the problem or at least limit the impact.Â This is easier said than done and you might need some outside advice to help you figure it out.Â Here are some things every business should do:
Review your budget vs actual report – is anything out of line?Â (If you don’t have a budget, you need to get one.Â Budgets help you keep things under control and see when they aren’t)
Review your trends – Look at your operating cash flow ratio, debt to equity, etc.Â What’s the trend?Â Is this a one month blip or has your problem been brewing for a while?Â (note, your financials must be accurate or your ratios mean nothing)
Build a cash flow report.Â I like to use 2 cash flow reports.Â The first is a high level cash flow that turns the budget into a cash flow forecast so you can see potential problems with your budget and figure out how to make your plans work well in advance.Â The 2nd is the one you’ll need immediately.Â It’s a very tactical report that details out what you’re expecting in receivables over the next 4 to 8 weeks (as far out as you can accurately predict) and the bills you’ll need to pay.
I’ve gotten so used to asking and answering the “what are we solving for” question that I didn’t realize it has become a part of my every day approach.Â Today, my son got a new toy that needs to be registered online with the code that came with it.Â Once online, he can play games.Â He left his new beloved toy at the shop and became very distraught…he wanted it NOW, not when Dad returns in 3 hours from the shop!
My husband began with “you should have said something before we were home”.Â I quickly interrupted the argument and asked my son..”why do you need the toy now?” (aka: what are you solving for?).Â He responded, as I knew he would, I want to play with it online.Â PERFECT.Â Now we know what we’re solving for, let’s solve the true problem.Â It’s not that you need the toy, it’s the ability to play online.Â Let’s see if there’s another solution that solves your problem.Â How about this…Dad can call you with the code when he gets back to the shop.Â You won’t have the physical toy, but you can still get online.Â Needless to say, he was very happy with the solution.
I use this approach with my clients all the time.Â It’s very easy to get stuck on the way you logically think a problem should be solved and become frustrated when there are roadblocks.Â The next time you hit a roadblock, take a step back and ask the very simple question: “what am I solving for?”.Â