Unlocking Accounting Advantages for Your Small Business Finances

QuickBooks is a powerful accounting tool, but many business owners are not maximizing its features and benefits. On this week’s episode of The Playbook, host Mark Collier, business consultant for the UGA Small Business Development Center, sits down with fellow UGA SBDC associate, Steve Newton. Newton is a certified QuickBooks pro and today, he shares how businesses can best leverage the power of QuickBooks.

Transcription:

Mark Collier:
Welcome into The Playbook, Steve.

Steve Newton:
Thank you, Mark. Thanks for having me here today.

Mark Collier:
All right, man. I get a lot of clients that, we both do, who some of them do their own accounting, some don’t. But, I think most of them can benefit from QuickBooks. So, let’s start with the basics.

Steve Newton:
Absolutely.

Mark Collier:
How big does your business need to be before you’re ready to start considering purchasing QuickBooks?

Steve Newton:
Well, the thing about QuickBooks is they have a product available for just about everybody.

Mark Collier:
Okay.

Steve Newton:
So, whether you’re a Lyft driver, an Uber driver all the way up to a mid-sized corporation, then they probably have a product that’s right for you. But it’s just like any other tool that a small business owner uses. If you’re a carpenter, you need to know how to use a level and a drill.

Mark Collier:
Yes you do.

Steve Newton:
How to use it right. Same with QuickBooks. If you go out and buy QuickBooks off the shelf, then you need to make sure that you know how to use it, so you don’t get yourself in trouble. You don’t want to build an unlevel house. So you want to make sure your business is level with the QuickBooks. So, let’s say there’s a QuickBooks version available for just about anybody. And then it’s a function of which one best fits you? And the key to that is, Mark … The big important point for folks is it’s a tool and you have to learn how to use it. If you don’t learn how to use it right, you’re not going to get the results you want.

Mark Collier:
All right. That makes sense. So, are there any initial considerations? Or, what should a business owner consider before looking to buy a quick QuickBooks program?

Steve Newton:
The first thing, I think, any small business owner needs to know when they’re looking at buying QuickBooks or starting with QuickBooks is, how much do you already know about bookkeeping and finance? Because, there’s really three different levels to bookkeeping, accounting and finance. The first level is bookkeeping. That’s simply the process of, am I keeping a good track record of all of my transactions? Whether you’re a point of sale, whether you’re retail, whether you’re a HVAC person, whether you’re a baker, whether you’re an artist, whatever it is, you want to make sure that you keep track of all of your transactions. That’s the first step. And once you capture that information, then it’s a lot easier to put it into QuickBooks.

Steve Newton:
QuickBooks is a bookkeeping system, not an accounting system. And people get those two things confused, because what you want to do with QuickBooks is keep track of all those transactions. Make sure that, if you have sales, that they’re recorded. Or if you have transfers into your checking account, it’s recorded as a transfer, not as income. And QuickBooks can help you make sure that you keep those transactions correct.

Steve Newton:
Like I say, at what point do I need to be using QuickBooks? The first thing is to maybe access UGA BDC’s resources or any other resources out there. Look at some of our classes. Mark, as you know, UGA SPDC teaches a lot of QuickBooks classes. We do online and in person. And there’s a lot of information on YouTube and available through QuickBooks itself. So, the most important thing a small business owner needs to do is learn the tool. And also, then learn what the terms of financing, finance and accounting means. Things like chartered accounts, cost of goods sold, overhead expenses, and how those transactions then flow to your financial statements.

Mark Collier:
Now that makes perfect sense. So, there’s a little bit of education process involved.

Steve Newton:
Absolutely.

Mark Collier:
But, as you said earlier, QuickBooks is a tool. So, you take that education, you combine it with the tool and it becomes a powerful resource-

Steve Newton:
… useful to you. That’s right. That’s right.

Mark Collier:
So, a common question, you and I both get from business owners is, “I have QuickBooks, but it’s not right. How can I get it straightened out?”

Steve Newton:
That is one of our biggest problems or biggest challenges we have with small business owners that come to us and ask for help. And, they’ve bought QuickBooks off the shelf. They bought it online. They start using it, they start invoicing. They may even give it to their accountant to determine how much taxes they owe. And, if they do that, then they need to make sure that information is correct, because they’re going to pay taxes based on what the accountant pulls out of QuickBooks.

Mark Collier:
Correct. Yeah.

Steve Newton:
So, you want to make sure that’s correct. And usually this problem arises about this time of year or a little later and getting a little bit closer to tax season, when they send their QuickBooks information off to the accountant. They get a notice back from the accountant that they owe $50,000 in taxes. And their head blows off. It’s like, “There’s no way!” Remember, the accountants can only respond to the information that you give them as far as the tax return. So, if the information you give them is not correct, then you need to make sure that your information in QuickBooks is correct.

Steve Newton:
So, how do I get it correct? Most small business owners, when they go to a bookkeeper to say, “Hey, can I get this correct?” Most bookkeepers will say, “I will only work with you going forward. I’m not going to go back and go through all your journal entries and go through all your chartered accounts, go through all your transactions, because that’s very expensive and very time consuming.”

Mark Collier:
Oh, yeah.

Steve Newton:
So, probably best not to do that. A lot of people have to do that, but if you can make sure that you’re using the tool correctly, from the beginning, and you’re confident with it … And, there’s two paths you can go down on that, Mark. You can either take the time to learn how to do it correctly yourself. Or, do what most small business owners do. And that is they go out and they hire a bookkeeper.

Mark Collier:
There you go. There you go.

Steve Newton:
As I alluded to earlier, we teach a lot of QuickBooks classes. And the folks that come through that classes, those business owners that come to the class, they’ll say, “Hey, I’m glad I came. I learned a lot today. I’m going to get somebody else to do my books.” And that’s a good decision for a lot of folks.

Mark Collier:
Absolutely. So, let’s talk about QuickBook features. So, what are some of the main features of the QuickBooks program that make it so powerful for small business owners?

Steve Newton:
Well, it is a very good program. It’s very universal. I think it’s the standard, probably, for most small business owners. There are a lot of other competitors out there and we don’t … As you know, we’re UGA, we don’t promote any one brand or any one product over another, for sure. But, it is such a widely used tool, that’s why we’re so involved with it. There are others out there that you could use. In fact, if you’re a small business owner, maybe under $100,000, maybe a year and you have less than 15 or 20 customers a month, then you might consider starting with Excel and learning that. But, no matter what tool you use, whether it’s QuickBooks, whether it’s Excel or any other tools, you want to understand the basics of finance first. You want to understand what a cashflow statement is? A balance sheet and income statement are, and the differences and how those transactions flow to those statements, irrespective of the type of software you use.

Mark Collier:
Makes perfect sense. So, speaking of software, not all business owners are technologically savvy. So, is QuickBooks, is it user friendly? Is it easy to learn?

Steve Newton:
Well, it is easy to get started on. Right? And as far as learning the process, you start with learning what basic accounting principles are. Again, going back to the cashflow statement, balance sheet and income statement. If you’re not comfortable with those concepts and very clear on what they do, then maybe you start with that first. Make sure you understand what those mean in very clear terms. Know what chartered accounts are, know what cost of goods sold are, overhead expenses, basic items that you have to have some working knowledge on.

Steve Newton:
Prime example recently, I was working with a client who’s an architect. And, these are smart people, they know their business, obviously a very smart individual that’s working in a very technical field. And we were talking about QuickBooks and he was really getting into it. He was really enjoying the concept of QuickBooks and getting in and learning the information. And, finally I looked at him and I said, “Are you an architect or are you a bookkeeper?”

Mark Collier:
That’s a great question.

Steve Newton:
Where do you earn most of your money? And, if he’s taking time away from his true earning stream-

Mark Collier:
That’s right.

Steve Newton:
… and spending it on something that is an expense, then maybe that’s not the best use of his time. If he charges $500 an hour, in extreme conditions, for his services and he can pay somebody $75 an hour to do bookkeeping, then where is his highest and best use of his time?

Mark Collier:
Makes perfect sense.

Steve Newton:
So, we want to make sure that folks are focused on the things that add value to their business the most. Certainly, you want to know where did my income statement come from? Where are my revenue? What’s my cost? What’s my margin? All those things that help you manage your business. And that information has to be correct.

Steve Newton:
The other thing, and this is an adjunct to that question, Mark, is if I use a bookkeeper, or should I use a bookkeeper? What does that mean as far as the impact on my business? And, as a business owner myself, what that does for me is, it gives me another set of eyes on my books and all my transactions, before it goes to the accountant-

Mark Collier:
Makes perfect sense.

Steve Newton:
… to make sure it’s correct. And they catch a lot of things I wouldn’t catch.

Mark Collier:
Okay. Oftentimes, and I hear this from clients, and you probably do too. They use the terms “bookkeeping” and “accounting” synonymously.

Steve Newton:
Mm-hmm.

Mark Collier:
But, there is a difference between those two terms.

Steve Newton:
Absolutely.

Mark Collier:
Detail it for me.

Steve Newton:
Sure. Well, as we were talking about a little bit earlier, bookkeeping is just the process of all your transactions in good order. Whether you have a sale or an expense, transactions between accounts, credit cards, where do you put all that information? And how do you organize it?

Mark Collier:
So, it doesn’t matter whether it’s on a yellow notebook pad or an Excel spreadsheet, as long as you-

Steve Newton:
Or in QuickBooks.

Mark Collier:
… properly document it?

Steve Newton:
That’s right. That’s right. As you know where it came from, where it goes and where it belongs in your financial transactions or your financial statements. What we find a lot with small business owners at tax season in particular is, accountants have to go back in and do a lot of journal entries to make corrections and it takes a lot of time. So, you get it right, correct. Either you do it, you as the business owner spend time making sure it’s correct, or you hire somebody outside of your organization to do it. Look at it as a third party review and then it’s ready for the accountant. In my situation that’s what I did for many years. I had a bookkeeper that came in once a month. They looked over the transactions, they prepared all the reports and then handed it off to the accountant during tax seasons. And they knew, they worked hand in hand, so I was paying $100 an hour for the bookkeeper, instead of $300 for a CPA.

Mark Collier:
Well, that makes sense, as you said earlier, to have that second set or third set of eyes looking at those numbers, just to make sure you’re getting them right.

Steve Newton:
Absolutely. Absolutely.

Mark Collier:
So, how can businesses best integrate a QuickBooks program into their existing accounting system?

Steve Newton:
Well, I think that there’s three things every small business owner probably needs. They need an accountant, they need a bookkeeper and they need an attorney. And if you don’t have enough money to afford those, then you definitely need to think about your ability to be in business. Because, those are the areas that can get you in the most trouble.

Mark Collier:
Absolutely.

Steve Newton:
If you don’t have good legal advice, we don’t have good tax advice. We run into this frequently that people, not sure where they stand on any of those categories. They get into contracts, they get into tax obligations. We’re just not sure where they belong.

Mark Collier:
It makes perfect sense. I think the most successful business owners are the ones that harness the power of their resource experts and folks to help them.

Steve Newton:
Absolutely. Small business owners are just vigilantly independent.

Mark Collier:
Yes, they are. Yes, they are.

Steve Newton:
That’s the reason they like small business ownership in so many instances. So, the thing that we have a hard time getting them to do is let go of things. Let go of this task.

Mark Collier:
Absolutely.

Steve Newton:
Let somebody else do it that has that level of expertise. That’s going to make you a stronger business owner.

Mark Collier:
Absolutely. It’s back to what you said earlier, about what is the highest and best use of your time?

Steve Newton:
Mm-hmm.

Mark Collier:
And for most business owners, it’s not doing the accounting and the bookkeeping. It’s not.

Steve Newton:
To do every task. And, those are some of the things we talk about in a lot of our courses that we teach, Mark. Like grow smart and start smart.

Mark Collier:
There you go. So as I say, can QuickBooks replace your traditional bookkeeper? Have we hit that level of technology yet?

Steve Newton:
Absolutely it can. But, somebody’s got to be the bookkeeper. QuickBooks still requires somebody to enter the transactions.

Mark Collier:
Absolutely.

Steve Newton:
To create the reports, make sure they’re correct, audit the records and balance the books every month. And, if you don’t do those fundamental things, then if you as a business owner, don’t have someone in your organization willing to do that, that’s also, maybe, doing other tasks … Maybe bookkeeping isn’t their primary task. Then, we need to think about, “Okay, how am I going to have accurate, complete, up-to-date bookkeeping records? How are we going to accomplish that? Am I going to do it? Or am I going to hire somebody else to do it? Either way, it’s an obligation. It’s a commitment of your time or somebody else’s time to make that happen.

Mark Collier:
All right. Steve Newton, business consultant in my DeKalb UGS BDC office. I want to thank you for taking the time to come in today and just detailing the benefits and features of a very powerful program that small business owners can use.


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