Financial Fiasco
Recognizing the Signs of a Bad Bookkeeper
Many of you didn’t venture into the agency world due to a deep love for spreadsheets and financial statements. However, as leaders of marketing agencies, you hold the ultimate responsibility for financial management. This presents a challenge, given your natural inclination towards the creative aspects of your agency, and the limited opportunities in your career to develop financial skills. That’s why many of you have wisely sought external help to keep your books in order. However, I've heard too many horror stories about bad bookkeepers and in the worse cases about financial fraud. As a result, I believe it’s helpful to provide insights on evaluating your bookkeeper’s performance to ensure they are doing a good job.
What Should Your Bookkeeper Be Doing?
Let's take a closer look at their essential responsibilities and the reports they should provide. Consider this list as telltale signs to identify whether your bookkeeper is falling short. While you may not expect them to handle all these responsibilities, these are the expectations you should have of a competent professional.
1. Monthly Bank Reconciliation
First and foremost, your bookkeeper should ensure monthly bank reconciliation, ensuring that all transactions are accurately recorded and classified with your chosen financial software (QuickBooks, Freshbooks, Honeybook, etc) . This process plays a crucial role in identifying discrepancies or errors, guaranteeing the reliability of your financial reporting and analysis.
2. Managing Accounts Payable
Your bookkeeper should provide you with an Accounts Payable (AP) Aging Report, summarizing your bills and invoices by vendor and due date. This report helps you track payment deadlines and identifies which payments have been made, helping you manage your cash flow effectively.
3. Managing Accounts Receivable
Your bookkeeper should provide an Accounts Receivable (AR) Report, giving you insight into when you can expect payments from your customers. This information is crucial for cash flow management.
4. Showing you the Books
Now, here's an important one – access to your books. You should always have access to your financial information and be able to log in and review your files at any time. If your bookkeeper restricts your access, it's a clear sign that it's time to replace them.
5. Payroll Processing
When it comes to payroll processing, it's wise not to disclose individual salaries within the agency to your bookkeeper. They always think they should be paid more once they realize how much other folks are making. However, they should work with your payroll service provider to ensure accurate and timely payroll processing. This collaboration lightens your workload and ensures your employees get paid on time.
6. Monthly Reports
Lastly, your bookkeeper should provide you with monthly reports, including Income Statements (profit and loss), Balance Sheets, and Statement of Cash Flows. These reports are vital for avoiding cash flow problems and making informed decisions about your company's financial health. If you're not receiving these reports promptly, it suggests a lack of prioritization on the part of your bookkeeper. By the 10th of each month, your bookkeeper should be able to provide you with reconciled financial statements for the previous month. In other words, statements for the month of May should be on your desk by June 10th.
Key Takeaway
By understanding these expectations and signs, you can confidently assess your bookkeeper's performance and make informed decisions about their suitability for your agency. Remember, the financial management of your business is a critical aspect of its success, and having a competent bookkeeper by your side is essential.
Great stuff! Bonus points for the bookkeeper that can provide a basic variance analysis comparing month over month and year over year differences.