Two Part Episode – Part 1 – The Client’s Toolkit
Hello and welcome to this two-part episode on the ‘Client’s Toolkit’ and the ‘Bookkeepers Toolkit’. Now that as I record this, only another week left to tax season, and it’s winding down for me, even though it’s crunch time for the accountants. My tax season starts in November and goes to around April 5th. I’m just glad that I can get back to the important things in life – regular bookkeeping and recording these podcast episodes for all of you. (and of course, all the other things that life has to offer) And if that sounds corny, I apologize – but it's really the truth! I’m Paul Rosenblum.
Now that tax season is winding down (at least in the United States— (I feel for my Canadian bookkeeper friend – she’s still in the middle of it!) --- it’s time to reset – not only for bookkeepers and accountants, but for clients as well.
Every tax season, I always get a year worth of bookkeeping to do for several clients or new clients not in December or Jan., but in the middle of March with an April 15th filing deadline and the deadline of April 1st to get the finished product to the tax preparer. And I know I shouldn’t, but I always say yes. And Everything always gets done. This is the self-employed mentality – never saying ‘No’ to more work.
However, with tax season winding down, this is the time that clients as well as bookkeepers and tax preparers re-set. Rethinking your software needs, rethinking business goals, rethinking the possibility of changing tax preparers, even re-thinking changing bookkeepers (NOOOO) !
Something that is not thought about, though, is how to start preparing for the next tax season, or for your tax filing, 6 months from now, if you are on extension. Hence, the Client Checklist or ‘Toolbox’, as I call it.
One of the most common problems that I have with new clients is having them understand the ‘process’. The books don’t do themselves --- It’s not just income and expenses -- there is work involved in creating books that will stand up to a possible audit. So, the first Tool in our ‘Client Toolbox’ is:
- Knowing what is expected of YOU, the client and following the process that the bookkeeper sets up. Understanding the most efficient way of passing along information to your bookkeeper will help in the year-long process of getting accurate books on time to be filed before the day of the deadline. I have spoken about a bookkeeper creating a relationship with their clients (in episode 14) – it works the other way around as well. The client has to try to get to know how the bookkeeper works, as the bookkeeper is understanding more and more about your small business. Every bookkeeper works a little differently. As you probably know, my method is to enter every transaction into the software, and then send a list of transactions in an Excel format to the client with all of the transactions that I couldn’t categorize. I do this at the end of every month entered. I create a column in the spreadsheet for the client to add their comments. I also will put a memo in any transaction that I think would or could be eligible for a 1099 at the end of the tax year. I would like to get the W9 forms as soon as possible, so it can be entered well before Jan. of the next calendar year. And I would like a response in a timely manner from the client so that I can finish that month’s books without going back months from then to make adjustments. This, for some clients, feels funny to take the lead of the bookkeeper who you are paying for a service when most small business owners are used to supervising their own workers themselves. It’s a “180” and I can understand how some business owners won’t feel comfortable with this. However, when you see a doctor, you follow their lead, and few people question what medicines doctors prescribe or treatments they administer. If you don’t like your bookkeeper’s system, and they aren’t willing to negotiate, remember, there are other bookkeepers out there waiting to speak to you.
- Don’t talk down to your bookkeeper. I’m putting this in the client’s toolkit because the information about you and your company that the bookkeeper has is and should be very important for you to keep private. I use this word a lot in this podcast but have a good ‘relationship ‘with your bookkeeper. If there is a problem, make a change before it gets worse. Remember, unless you hire a bookkeeper to work at your office and you are supervising them, then they are self-employed and run their own companies and prepare the books for several clients with their own system. I have had people tell me to ‘not forget’ to enter a loan, or a vehicle that they purchased and make sure that ‘they are in the books. ‘
- This next one is a tricky one. Tell your bookkeeper everything that is going on with the company. The good, the bad, and the ugly. Bookkeepers do not go to audits at the IRS and bookkeepers are not signing the tax return. Yes, if you are doing something that is not complying with the law, the bookkeeper might just walk away from you as a client. That’s always a possibility. However, if you tell your bookkeeper what you are doing and why you are doing it, there might be an acceptable way of fixing it so that you are complying with the tax law, but only if your bookkeeper knows the situation and is versed somewhat in the tax law. I have had clients tell me about things that they are doing that were not right, but with a couple of minor changes, we can become compliant. If your bookkeeper isn’t well versed in particular tax laws, then have that conversation directly with your tax preparer.
- I know it feels funny for some people but-- Give your bookkeeper access to your bank account and credit card accounts. I’ve said it before -- If you can’t trust your bookkeeper, who can you trust? With everything that I have said about downloading bank and credit card transactions automatically, unless you have bank and credit card statements, you won’t 100% know if you are missing transactions that did not download. If you don’t trust your bookkeeper enough to do that, then you might need to switch bookkeepers.
- I’m not happy that I have to include this one in our list, but – Pay your bookkeeper in a timely manner. If you get behind in paying your bookkeeper, they really don’t have to do your bookkeeping. There is no legal fiduciary agreement between you and the bookkeeper in most cases. I am very patient with people – but when they get to 5 months behind in paying my monthly invoices, I stop doing their bookkeeping. Many times, only at the end of the year, do I hear from them, asking me where their books are and if they are ready for tax preparation. When I tell them that they are not and the reason being since they owe me for 5 or 6 months of invoices, they either pay me pretty quickly, or they make a large payment thinking that the payment will start the work up again. (By the way, it won’t).
- Personal Expenses/Business Expenses It is your responsibility to separate your business expenses from your personal expenses by using a dedicated bank account and a dedicated credit card for business purposes. If a mistake happens and you use the wrong credit card, mistakes happen, or if you are somewhere that they wont take an Amex card that you use for your business, and they only take VISA (which is your personal card), these are the exceptions. Even if you have a sole proprietorship, and your bank won’t give you a business checking account, you should open up a separate personal checking account for your business. If you don’t do that, you would be giving more information to the bookkeeper than they have to know (I know where some of my clients buy their underwear among other personal things!) TMI!!! That information will go with me when I go -- permanently!
It's all about relationships. You, as a client, have to feel comfortable with the personality of the bookkeeper, the methodology that the bookkeeper uses, and the amount of trust in that particular bookkeeper. A well-trained bookkeeper is a different kind of worker (W-2 payroll) or subcontractor than most others. And I have said many times before, there are really good bookkeepers, really poor bookkeepers, and everything in-between. The more that you, as a business owner, know about bookkeeping and taxes, the more you can catch mistakes, or careless errors that a bookkeeper might make. I’m all for delegating responsibilities if you are a business owner, but bookkeeping is an exception. As a business owner, you should be part of the process, not an onlooker of it.
Next time – Part 2 – The Bookkeepers Toolkit.
Until then, I continue to be -- Paul Rosenblum
