We live in the information age.
We can ask Google (or Alexa) anything. What gets too little time is fact-checking. Advice is requested in Facebook groups and taken at face value without checking the credentials of those offering the advice. Companies like Intuit and Freshbooks are actively dumbing down accounting. Freshbooks is advertising they are making accounting “approachable,” quite literally undermining the accountants they ask to join their partner program to help sell their products. What hasn’t changed is generally accepted accounting principles, GAAP, which is the rule book all accountants follow. No matter how pretty the screens in Quickbooks, 17Hats, Xero, Dubsado, etc., GAAP is GAAP. Period.
Let’s do some myth busting.
Intuit has renamed the owner draw account to “Owner’s Pay and Personal Expenses.”
Making a habit of using your business account to pay personal expenses not only will result in higher fees from any accounting professional to handle the extra work, the IRS is more likely to determine your business is a hobby. Plan to sell your business? Do you want potential buyers digging through your books to see that you like to shop certain adult stores? (Yes, I had a client do that.) The word “pay” implies paycheck which further suggests W2. Depending on your business structure, owners can’t be on a payroll. During an IRS audit, words and facts matter.
Recording transactions in the bank feed are reconciling your bank account.
This assumption is wrong. Bank feeds are a wonderful convenience and save lots of data entry. However, they are not error proof. The bank feed can break, skip, and bring in multiple copies of a transaction. These errors will result in your financial statements being wrong. As in your income and expenses being wrong which means your tax return is incorrect. You can read more about reconciling your accounts here.
We live in the age of data except that accounting has been left out.
More and more, I’m speaking with business owners who are frustrated they can’t get the information they want from their accounting system beyond a balance sheet and income statement (or profit and loss). There are several reasons for this. First, you need to customize the set up of your software. No, I don’t mean custom programming. Go through each setting in the software and optimize it for you. Add your photo and logo. Make the software yours. The biggest mistake businesses make is not customizing the chart of accounts (some call it categories). Another mistake is not considering how to capture the data you want to report on, namely sales by customer, product, and service. You can’t report on data you don’t record. Worse yet, using tools such as Freshbooks, 17Hats, and Dubsado integrate with almost nothing, making them data islands and leaving you in the dark about how your business is doing. It’s vital that you choose software to run your business that integrates with almost everything else you use, so you can see at a bird’s eye view and close up view how your business is doing. The life of your business depends on it.
We may live in in the age of data, but we also live in the age of misinformation (ok, lies).
No one is an island, but that’s what the dumbing down of everything is supporting. The fact is that we need one another to succeed because we can’t be experts at everything.
