Accounting Procedures: Don't Pay an Avoidable Price
Do you remember that old commercial that says “pay now or pay later?” Surprisingly, this quote also pertains to accounting policies and procedures for any size business. Occasionally, I come across new clients who have not allocated the proper amount of time, effort, and money to their bookkeeping systems. One new client told me “I’ve got a Master’s Degree, I can do QuickBooks.” She input the entire year’s transactions incorrectly, and it took us a long time to correct her books.
A very interesting observation I have had is that it takes three times the amount of effort and cost to correct an accounting transaction on the books than it takes to record that accounting transaction correctly the first time. That is why the purpose of this article is to get the business owners to understand and commit to setting up their accounting policies and procedures correctly, and to see that those policies and procedures are consistently applied.
I often recommend to my new and existing clients to allow us to come in and review the books -- just one month’s activity (preferably the first month of the fiscal year) -- to make sure that proper accounting policies and procedures are set up and implemented. This is to ensure that if any corrections need to be made, we correct the problem in the first month and then all months following will be correctly inputted. Although there are costs involved to set it up correctly, those costs are far less than the cost to correct an entire year of accounting errors.
This typically happens when accounting policies and procedures are not set up. I recommend that you do it right and do it right the first time, thereby saving a lot of time, effort, money, and frustration. I also recommend that accounting policies and procedures be formalized in writing and that these policies and procedures anticipate any problem areas and explain in detail what to do to avoid errors.
Our job at Stanislawski & Company, Inc. is to keep you focused on making profit, not bookkeeping corrections, and to prevent you from getting frustrated. It’s our recommendation that you “pay” a little now so that you won’t be forced to “pay” a lot later.