Saturday, March 23rd, 2019

Money Management – Trouble-shooting Tips (Part 2)

By Ellen Rohr on Feb 23 2012 • Filed under Money

Money Management: Trouble Shooting Tips (Part 2)In my previous post, I introduced the idea of getting a better handle on your finances. In this post, I continue with a list of tips that will help you figure out how spot and correct mistakes in your financial reporting.

Run a transaction register report and look for the debits and credits.

Different accounting programs call this report by different names. Look for the detail trial balance or the General Ledger journal to find the “guts” of every transaction. Double entry accounting is based on the universal law of “what goes around comes around.” If something goes up, something else goes up or goes down by that amount. Debits and credits are the mechanics in the accounting system that cause the dollar amounts to go up and down, and the Balance Sheet to stay in balance. There are debits and credits behind every data entry screen. You can also affect accounts directly by creating a Journal Entry. I attached a “cheat sheet” of Debit and Credit rules. I reference this several times a week.

Look for before-and-after differences.

If you are not sure of what is happening at a particular data entry point, try this:

  • Run the Balance Sheet and Income Statement.
  • Enter ONE transaction. Run the Balance Sheet and Income Statement again and see if you can see where the dollar amounts ended up. (Make sure no one else is in the accounting system while you do this.)
  • This is a street smart way to discover the “set up” behind the data entry screen.

To recode, delete or reverse a transaction?

It depends on your accounting program. With a basic off-the-shelf program like QuickBooks, MYOB or Peachtree, you can drill down to the transaction that needs to be fixed and recode it. Or, you can delete the transaction entirely and try again. With a more sophisticated industry-specific program like Successware, Ergos, etc. you may have to enter a transaction that reverses your original transaction and then re-enter the transaction properly.

Be careful with your initial company set up.

That’s where a lot of the behind the scenes accounting is created. If you are entering Service Sales and the dollar amount is showing up as Service Agreement Sales there may be an “item” or other set up instruction that is sending the information to the wrong sales account. Go to Company Set Up or the Items list and do some investigating. Figure out the default debits and credits and which accounts are affected. Update the “set up” and see if that fixes the problem.

Get bossy with your software support team.

Call for help as you need it. If you don’t understand what they are telling you to do, ask again for a clearer explanation. If they want to fix something for you, sit in as they do the correction so you can “follow the flow” of the debits and credits and learn from the experience. The more you know about your particular accounting software the less intimidated you will be by the accounting processes.

Be assertive with your CPA or tax preparer.

At the end of each quarter, take the time to make sure that your financials agree with the financial information your CPA is sending to Uncle Sam. Work together to enter the year-end Journal Entries needed to bring your accounting system up to accurate.

Learn to trust your intuition.

As your understanding of double entry accounting increases, trust your gut feeling that a dollar amount is wrong or “weird.” So often, I help someone fix a “Slinky knot” and they respond, “I thought that might be the problem!” If you have that thought, follow it and see what you uncover.

If it is your responsibility to get the financial “Slinky knot” untangled, take a deep breath and know this: You can do it. You may need some help. This accounting stuff is just not that hard once you learn the lingo and accounting basics. One of the smartest Financial Managers I know is working with an 8th grade education.

Once you get a handle on them, you can delegate the accounting tasks. It is a blessing to have done the accounting yourself because you will never be held hostage by your bookkeeper (or “girl in the office.”) You can coach someone to be even better than you were at the basic accounting tasks. And you will understand the Balance Sheet and Income Statement so much better for the experience.

Momma knows best…

My son, Max, is taking a beginning accounting class this semester. Already, he is bogged down with fancy, once-in-a-blue moon, accounting test questions. It would be so much better if his professor took this time to teach his students how to set up a simple accounting program for a business they may actually run someday. It would be so cool if he showed them how to assemble and FIX the financial reports, addressing just the basic transactions:

•    Entering Sales
•    Applying Customer Payments
•    Making the Deposit
•    Entering Bills
•    Paying Bills
•    Entering Payroll
•    Reconciling the bank accounts

That covers about 90% of all the data entry. If those things were done properly, your financials would be pretty solid. I suggest you, dear Office Manager, work with your team to create written procedures for those transactions. You probably need an accountant to help you with the fancier transactions, like:

•    Entering a new vehicle or other asset
•    Recording the sale of a vehicle or other asset
•    Regular Depreciation expense
•    Beginning Balances for a new company
•    Year End adjustments to reflect your Tax Return information

So, why bother teaching how to do those kinds of transactions in beginning accounting classes? I suppose the accounting teacher is just showing off? What about teaching readily USEFUL accounting information? Sigh.

And, it would be really cool if the teacher showed the kids how to READ the Balance Sheet and Income Statement. Taught them how to USE the information to create a winning Selling Price strategy. Taught them how to set Goals with a simple Budget. Showed them how to KNOW when you have become a millionaire. Accounting is the score keeping in the great game of business. Kids of all ages like games and like to keep score. Why not make it…FUN?


See Also: Money Management: Trouble-Shooting Tips (Part 1)


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