JHB Philosophy 101

This week, Jeff Becker steps up to the podium.  Jeff and I go back a lot of years.  In this post he shares his experiences running businesses.  Jeff is truly of the business owner mold.  Take it away Jeff...

******************************************************************************

Frank had suggested that I write a piece for his blog a few years ago. However, I was still licking my wounds from having lost a 15 year old company that I had grown from 1.5 million per year into a 28 million dollar a year company. I simply hadn’t spent enough time reflecting on what I did wrong and what I did right. I now think it would be helpful to some to put my thoughts down in writing.

I started my construction company at the age of 28. My confidence came from having personal experience in actually doing the work and feeling as though I understood the technical side as well as the physical side of construction means and methods. So doing the work was the easy part. The piece of the puzzle I had to learn on the fly, was the business side.

MY APPROACH TO BUSINESS

My company travelled the entire United States as well as a few overseas jobs. I was always meeting other business owners in new places and those business owners were 60 year old men who were always happy to engage in conversations about business challenges and experiences. I think they found it interesting that I didn’t want to make small talk. I still don’t understand why so many people waste time by thinking their time is better spent talking about sports or the latest reality show when there is so much to glean from other owners when you get a brief moment of their time. Most business owners don’t want to be buddies, so trying to find “personal” common ground, is a waste of time more often than not. If there is common ground, it will happen without any effort. This approach really helped me tremendously as I tried to navigate and learn business. After all, work was the common ground that landed me in front of them in the first place. The rest happens or doesn’t happen. The relationship grows when working through challenges together. You will find this approach throughout this piece.

Another base belief I have, is that money is only made on the actual performance of the work. So if you believe that money is made by the office, this article is not for you. My entire 15 years was a constant struggle to create efficiencies that eliminated or reduce office personnel needed. I did this with as many as 6 and as few as 2 people. Other entities in my trade were using many more than I was. Becoming paperless is the key.

So after the first year, I realized I needed to know more about accounting. I felt powerless and the CPA I had was a specialist in filing IRS extensions. I was cash strapped and had no idea how to really budget my year when all I was getting each year, was what I called an end of the year “Oh Shit”! This is how I found Frank.

PICKING A CPA

I was really becoming a computer nerd. More on that later. I was using Peachtree at the time and so I felt it would be smart to find a CPA that actually knew my accounting package. Frank was on the Peachtree software support list. He was providing bookkeeper training and I didn’t see any other CPA at the time doing this.  Since I had a bookkeeper, I pulled the trigger and our relationship commenced. Frank and I later learned that we had common ground and that we both had visions concerning our two trades. Through that process, we continued to teach each other and pontificate about how we were trying to manage our businesses. Although Frank and I never just “went out to have a beer”, we did however have many personal conversations that I think pointed to the fact that we could. So, lesson 1, always find a competent CPA that you respect. How do you find that? Talk business first and make the conversation as much about your business as theirs. How the other party runs their business will tell you a lot about how they view yours. It also educates them about yours, so they can better help you organize yours. Make sure you know what you want to track, how you want to track it, and eventually how you want to see it on paper. Most CPA’s don’t care, and don’t know how to run your business. Don’t ask them! However they really can help you organize your information, so you can file taxes correctly. Over the years, Frank has only made one mistake and one joint mistake. Both times he did what was right and we both shared in our portions of the issues. The fact that Frank and I still do business, must mean he feels the same. Did I mention that I always felt that we “Could” go out and have a beer together? Make sure you are like minded.

PICKING A LAWYER

I was in a trade where it was more like the “Wild West” back in the 80’s. It was run by a generation that worked out more problems without the need for lawyers. Millions of dollars were worked out on a bar napkin or a simple hand shake. Of course lawyers were a part of forming a contract document, but law suits were really a last resort and marked the end of doing business with the other party. The moment you sued, the relationship was done forever and any friends they had, you lost as well. So it was always in everyone’s best interest to work things out, even if it cost you money in the short term. This was a very good learning exercise. I quickly became focused on developing a clear and concise bid document. Spelling out what items we would perform, really helped weed out the customers that really didn’t understand the job that they wanted built. Avoiding a customer that doesn’t understand what they want, will save you a lot of money, time, and energy by not working for them. I have only used a lawyer for litigation twice in 15 years. Once in Pittsburgh over $15,000….he was a crook and another against an insurance company that wouldn’t pay for a 1.5 million dollar machine that got dumped on a Tennessee interstate. 

What value does a lawyer have in a business? Well, they sort of do and they sort of don’t. The answer is about 50/50…LOL!! Those of you that own a business get that comment. How I used a lawyer, was as an advisor. Lawyers are very good at telling you both sides of the issue and how it plays out in the courts. Many things can be written, however, if there is no case law concerning the other parties issue, you will most likely win when going to court. I used my lawyer as a researcher. I wanted to hear what case law supported my position and what case law supported theirs. I would then use this new found knowledge in conversation with the other party and plant the seed, that their position wouldn’t exactly be a slam dunk for them. It always resulted in a compromise by both parties and a real savings in time and money. The lawyers always win and cost more money than a simple compromise. So how did pick a lawyer? I point you back to my “approach to business”.

BANKING

The most important lesson I learned was that you can’t just have one banking relationship. Although I did always want one, this is never good for the business. I was financing machines that cost about 1.5 million each and they were specialized. Meaning, there was only 5 companies in the USA that even really used these larger machines. This put my business model in a high risk category regardless of the profits. So the best way to say it is this. Eventually every bank is controlled by the Feds. They have to fit into a federally defined risk assessment model. If you get a “No” from your banker, it may not be you. You obviously have to be able to determine whether or not you need to improve some part of you balance sheet, but a lot of times the bank may not be looking to put YOUR RISK TYPE of business into their loan portfolio. I say move on and find one that is. I still have what I consider my go to banker and he played a very important role in helping me when I met my demise due to the depression. When I got a “No” from him when I was wanting to grow, he sent me to another loan officer that was looking for my type of company and could do a higher risk loan. That is the most important attribute you want in a loan officer. When he can’t help, does he care enough about you to recommend someone that will? Another must have attribute is whether or not they will spend a day and take a tour looking at how your business operates. They need to be asking a lot of “why do you do it that way” kind of questions. This shows interest. I can’t recommend anyone better than Pete Fuge with BB&T. The guy was a great teacher as I learned about banking. I still remember him showing up in a nice suit and wore out construction boots. This let me know that he has done this before and he really wanted to learn what I was up to and eventually needed. He also played a role in telling me “No” and advised that growth wasn’t a good idea, based on what he was seeing in the market. In the end, it was Pete that helped the bank officers realize that I was failing due to the economy and not that the business was being run improperly. I was simply written off and we both took our lumps as businesses that took risk together. Your loan officer has to be your best cheerleader. After all, when the doors shut and they consider your loan, you are not allowed in the room to speak your case directly. Educate your loan officer…dress him up and equip him with flashy pom pom’s….and send him in! Taking nothing personal when it comes to banking.

PICKING AN INSURANCE AGENT

I found this to be one of the funniest experiences. Every agent I ever had, drove up in an older model car and within a year, upgraded to some high end luxury or sports car. The insurance game is a racket. Especially when it comes to workers compensation. I had to fight with the insurance company every time I changed agencies. I never got confirmation of this, but it is my opinion that once you get an agent, the insurance company doesn’t want you to change. As a matter of fact, they won’t quote another agency for fear that the broker is pushing your rates up higher and they don’t want to expose that. They are hoping that the “relationship” can allow them to increase your rates every year and chalk it up to problems with your industry risk. I call bullshit! Every time I forced a change, I saved money! So what I am saying is….make a change. Make your agent be competitive and keep your rates the same. Even if you like the guy…..fire him one time….see if he comes back for your business next year.

PICKING EMPLOYEES

I love this topic. Much has been written about this topic since I have been in business. HR has really put a strangle hold on the industry. I still can’t get my head around this entity and why it is needed. I guess I can see it for mega large companies that are just selling a widget, but I think I can argue as much for itas I can against it . I have always liked a small business, so I naturally grew larger with a small business approach. Back in 2001 my father and I did a roll up of small engine businesses in Manassas. It was a retail business that I eventually became too busy to be a part of. My father took over that and eventually sold it.

I was very unconventional, because I really like the “Type A” personalities. I guess big businesses eventually run out of Type A’s but I still believe they are stifled more than they simply run out of them. HR is a big factor in my opinion. Anyways, here are my reasons why.

A type A person wants responsibility. They hate control and if they are capable, they will help you get there with little to no supervision. It really simplifies your business. However there are some pitfalls that you have to manage immediately until you determine you are like minded.

#1 Make sure they are not a prima donna. You want a type A that feels responsible for their mistakes. Once you have that, you got it made. If a Type A makes a mistake, they will move heaven and earth to correct that mistake and see it as a learning experience. A type B will most likely be afraid to approach the same issue twice and need a lot of babysitting when it happens again.

#2 Make sure they are the type that wants to find an easier way to perform the work. I am unfortunately prejudiced with the opinion that most people will bitch about a process within a company, but never take the steps to improve it. Even Type A’s. They simply show up every day and chalk it up to it being a part of the job they don’t like. This is where you HAVE to be there, so you can talk about the bad parts of the job and eventually come up with a way to make the bad part become a good part. That was always the leading topic when putting all the type A’s in the same room to brainstorm. This is how I opened the minds of my fellow cavemen and eventually became a paperless company.

#3 You have to make sure that the job you want done is clearly communicated. Otherwise you give the type A, wiggle room to point the finger back at you…..if something goes wrong. If you don’t clearly communicate…and it will happen…you have to take it on the chin and shift to fixing the problem WITH them. After all it is only costing you money if you don’t and you caused the problem by not doing your part.

#4 You ABSOLUTELY have to interface with them every day for a year to make sure you are comfortable that they perform the tasks required to your satisfaction. This is when you communicate how the company is going to interface with clients, other employees, and most importantly organize their work. I never really cared about how they did the work. I learned new ways to do the work from these type A’s sometimes. Having spent the time to discuss the process of doing the work netted us many efficiencies. There is nothing more productive than a bunch of type A people, driving towards the same goal, discussing how to improve what we do. We became a company of inventors as a result. Both sides felt very good about what they were doing because we all had a hand in solving a challenge. I even have a joint patent as a result. It is meaningless now, but I don’t want to get started down that road. It is another learning curve that has no place here.

#5 If you do all of the above correctly…..and you have a business that is growing…..you can now start focusing on having that type A groom a successor. Nine times out of ten, they will pick and groom their successor, much like you. I don’t recommend doing this until you have at least 5 years under your belt. If customers are wanting you to grow, resist it until repeat business demands it consistently. I have seen the 5 year rule play out in many businesses.

So I like Type A’s in leadership roles and from there, I try and find Type A’s that are in hiding amongst the type B’s. I had many that stayed with me for the entire ride. I hope this helps.

PICKING CLIENTS

Never forget that YOUpick your clients! If you work for a problem client, then you have forgotten how to say NO! Bad clients will always cost you time, money, and possibly employees. Make sure your client knows why they need you, how to use you, and appreciates the relationship and what you offer. If you have to have a bad client to make ends meet, start looking for another quickly. This challenge is what pushed me out of Northern VA. There are only so many “Good Clients” in any geographic area. Go find what you are looking for in other places. However, don’t discount what a so called “Bad Client” is telling you. They may be trying to help. So stay opened minded until you figure the relationship out.

 

FINAL THOUGHTS

So I now find myself looking for a new challenge. I have grown a business to a size few achieve. In Northern VA that isn’t so big, however nationally it is. I have purchased and run a retail business during that time, so I know what it is like to be “at Risk” and also how to manage and sell widgets…this I lovingly refer to as “Retail type” businesses. My latest passion/venture is going to market with processes and custom software that streamline and teach small companies how to grow and manage the office and “get it done” processes. Process challenges is what I really excel in. Predicting a depression was not.

Well, I hope this hasn’t been too long winded. If all of this is posted on Frank’s blog, then and only then, will I drop my insecurity of being too long winded. I am hoping Frank doesn’t edit this down to something simpler….like…..he had a great business….but failed!

Good Luck in business,

jeff@jhbecker.com

 

D.C.A.A. Compliance for Beginners

If you are a government contractor, you need to be aware of the Defense Contract Audit Agency (D.C.A.A.)  The D.C.A.A. approves your accounting system for the purposes of offering products and services to the federal government.  They may also audit the results coming from your accounting system for the purposes of determining compliance with Federal Acquisition Regulations (F.A.R.)

If you are new to the government contracting world, get used to acronyms.  Here is another one – D.O.D. (Department of Defense).  The D.C.A.A. has jurisdiction over the accounting for D.O.D. contracts, N.A.S.A. (yes, the space people), and some other agencies.  Making your accounting system D.C.A.A. compliant seems a daunting task, but here are first three steps toward making your accounting system compliant.

First,  your accounting system must segregate direct, indirect costs, and unallowable costs.  Direct costs are the actual costs of performing a contract such as contract labor, contract materials, and potentially travel related to a contract.  For example, if you provide  IT support to a federal agency, the labor costs of the people you have assigned to providing the services is contract labor and thus a direct cost.  The salary you pay to your bookkeeper is not a direct cost, since he / she is not providing services directly under the contract.

However, your bookkeeper’s salary is a perfect example of an indirect cost.  An indirect cost does not directly benefit a contract but supports the execution of a contract.  Telephone, office supplies, payroll taxes, employee benefits, and rent are typically considered indirect costs.

Unallowable costs are costs determined under F.A.R. to not be chargeable as either a direct or indirect cost.  Interest expense and income taxes are considered unallowable costs as well as alcoholic beverages.  No drunken fun allowed on the fed’s dime.

Key to segregating these three types of costs is setting up the chart of accounts in your accounting system properly.  You should group the accounts for your profit and loss statement by these types of costs.  For instance, accounts numbered 5000 through 5999 might be designated as direct costs.  Accounts 6000 – 8999 might be designated as indirect costs and accounts 9000 through 9999 could be used as unallowable costs.

Second, you must account for direct costs by contract.  For instance, if you have five contracts, you must be able to produce reports showing each type of direct cost by contract.  Accounting software typically helps you with this through job costing functionality.  Accounting for federal contractors has much in common with construction contractors in this regard.

Third, you must have a D.C.A.A. compliant time tracking system for labor.  The F.A.R. sets forth a host of timekeeping requirements, which are enforced by the D.C.A.A.  Most off the shelf accounting software packages, like the time tracking in QuickBooks, are not compliant by themselves.  Most require some sort of additional procedures, sometimes manual, to provide D.C.A.A. / F.A.R. compliance.  You can, however, find specialized D.C.A.A. compliant time tracking software that may integrate with your accounting software.

As you can see, understanding the basics of D.C.A.A. compliance for federal contractors isn’t difficult. Compliance requires up front planning when designing your accounting system.  Most small contractors can accomplish this planning in a day or less.  Ask your CPA for help if you don’t feel confident in this area.

Thanks for reading!  As always, please visit the main S&K web site at www.skcpas.com for real tax and accounting advice.  Also, please like the “How to Screw Up Your Small Business” Facebook page.  I post helpful and snarky business hints there daily.

Until next time, let’s do it to them before they do it to us.

Help Your Employees Steal

Some of you were upset with the sundress story from my last post.  As my business partner, Paul, has often said.  My greatest strength is that I tell it like it is.  He also said it's my greatest weakness.  I agree.  In my defense, if I prevented just one person from wearing a sundress to work, I have served humanity well.

Here's a quick test to see if you should be a business owner.  What was your first thought after reading the sundress story?  Was it, "How dare he tell a story about an employee"? Or was your reaction, "His clients had to see her dressed like that"?  If your reaction was the first one, don't mortgage your house, empty your 401(k), and start a business.  You will be making an expensive mistake.

Here is a key point business owners understand.  Businesses exist to make money.  While I can't say the sundress cost me money, I can absolutely state the sundress's purpose was not to make money.  At least I hope to God it wasn't.

I gave a talk to a chamber of commerce group about the dangers of employee theft about ten years ago.  I talked about preventing it with segregation of duties and some other absolutely brilliant insights.  Afterwards, a man came up to me and said he didn't have the time to take any of the actions I suggested.  He was a busy guy.  He trusted his bookkeeper implicitly.  That is when I learned the meaning of implicit.  It means stupid.

A few years ago, the bookkeeper for a client scheduled a meeting with me.  She came in and told me that the company owed a substantial amount in unpaid payroll taxes - about $500K.  That shocked me as their bookkeeping records showed nothing of the sort.  Then she told me that instead of paying the IRS, she was taking the money personally.  How did she do that?  She was a signer on the company bank accounts and just transferred $700K or so to her personal bank account, recording the payments as if she were paying the IRS.  The owner trusted her implicitly.

Employee theft happens to almost every business.  Don't be embarrassed about it.  Prevent it from recurring with three simple steps.

First identify your company's vulnerable property.  If you have valuable inventory that is easy to steal, start your list there.  Your bank account always makes the list.  To misquote Billy the Kid, people steal money because that's where the money is.  Your credit card machine could be another opportunity for a thief.

A few years ago, I got a call from a panicked client.  He had gotten a call from his credit card processing company.  They told him that his account had processed an unusual amount of credits in the past week - all to one account.  His bookkeeper had been processing credits against her personal credit balances using the company credit card machine, to the tune of about $40K.  In effect, she transferred, via credit card chargebacks, $40K from the company bank account to pay off her credit cards.

Second, determine who has access to the valuable property on your list.  Your internal bookkeeping staff should always be on the list.  Your warehouse or purchasing manager  should also make the list.

Before we started the CPA firm, I worked as controller for a company that installed telephone systems.  We had a purchasing manager, who was in charge of the warehouse as well as purchasing.  We caught him accepting kickbacks from a company that sold lightbulbs.  He had purchased hundreds of useless lightbulbs and hid them under a compartment in the warehouse ceiling.  He got caught, because the company was broke and I was paying attention to every invoice we got.  We got suspicious at the number of invoices we were getting from the office supply store selling the lightbulbs.  I didn't write that thieves are particularly bright.

Third, enforce segregation of duties.  The person depositing your customer checks should not be the same one applying the payments in your accounting system and making collection calls.  She can steal customer payments and hide the theft, because she has complete and exclusive access to the entire accounts receivable processing cycle.

If you have valuable inventory, mandate a system where inventory is signed out by technicians.  The inventory should be stored in a locked area with no technician access.  A manager should be in charge of issuing the inventory from the controlled access area.

The person printing your checks should not be a signer on your account.  This seems pretty obvious, but I see this all the time.  Also, bank statements should come to you unopened.  Scan the statements for unusual transfers and large checks.

Segregation of duties makes employees collude to steal.  While this doesn't absolutely prevent theft, segregation makes theft exponentially more difficult.  Fortunately, thieves tend not to trust each other, and justifiably so.

Finally, only the people you trust can steal from you, because you don't give people you mistrust the opportunity.  Trust no one implicitly, even your spouse, if he or she works in your business.  A few years back, as the result of a divorce, a client discovered that his bookkeeper wife had put her parents on the company payroll with salaries over $100K annually.  Talk about miserable in-laws?!?  Thanksgiving must have been wonderful in that house.

This week we mourn the injury of RGIII.  I was never able to get insurance on him.  You might remember a post from the beginning of the season where I predicted he would get killed behind the Redskins offensive line.  Their pass protection this year was truly offensive.

I'm not one of those second guessing Mike Shanahan for playing him in the playoff game against the Seahawks.  RGIII's superhuman feats during the season seduced his coach into making a bad decision.  As I told everyone during the season, enjoy every game you get to watch RGIII.  With a running quarterback, any game could be his last.  Get well soon!!  Until then, thank Mike Shanahan for being stubborn enough to draft a second franchise quarterback, Kirk Cousins, despite other pressing needs.

As always, thanks for reading, and don't take me so damn seriously.  For real tax and accounting advice, visit our S&K web site at www.skcpas.com.  Also, like the "How to Screw Up Your Small Business" Facebook page.  I post mercifully short tips there every day.  Until next time, let's do it to them before they do it to us.

National Smack a Bookkeeper Week

Special note: I originally wrote this during the second week in March. My emotions were a little raw. So I held it until after tax season to see if I still felt the same way. I do....... Parental Guidance is suggested.

Many of you know March 15^this the tax filing deadline for calendar year corporations. Give yourself a pat on the head if you know that. However, not many people know that the entire week is a national holiday called, National Smack a Bookkeeper Week. President Obama signed this holiday into law to commemorate the criminally inept things bookkeepers do during the busiest week of a CPA's tax season.

Last night I made the mistake of checking my e-mail one last time before I headed home. I was hoping to get messages from a couple of clients that I could finalize their corporate tax returns. Instead I was treated to a message with the happy sounding “K-1 error” in the header. Instead of murdering the nearest person, I kicked a chair across the room instead. That was before I even read the message. I know when I get a message like this, somebody wants me to change a tax return I did a month ago.

We give all of our corporate tax clients draft returns to review before we finalize the returns. Silly me, I think this would be an excellent time for them to question amounts, ask questions, and get satisfied that the amounts on the tax return are correct. In reality, what happens is that too many of them blindly approve the drafts. Then we finalize the returns. This is usually in February. Then in March within a day or so of the filing deadline, they look at their tax returns and say “Oh my God! I can't pay taxes on all that income. The tax returns must be wrong.” Then they want us to answer a dozen idiot questions that don't change their income at all. If they asked these questions back when we were in the draft stage, no problem. Asking the questions on March 14^th or 15^th is a big problem. I have just few hundred things going on those days. The last thing I have time for is revisiting old tax returns. I break some piece of office furniture almost every year on March 14^th. Heavy drug use doesn't seem to curb my behavior. Calculators are my favorite target. When I walk by the calculator display at Staples, I hear them whispering.

I picked up the regrettably unbroken chair and read the message. A bookkeeper for a client was telling me I had made a grievous addition error on a corporate tax return that we had completed and filed a couple weeks earlier. She noted that one of my totals on the return, consisting of five numbers, was incorrect. I kicked the chair again – still not broken.

I know a little fact she doesn't. I didn't add up the five numbers and then enter a total. I entered the total, and our tax program breaks it up into the five individual numbers based on percentage of ownership for the owners. Over the last ten years, probably 200,000 corporate tax returns have been filed with this tax program. Don't you think someone might have noticed this bug before she did?

I added up the five offending numbers on my adding machine. Surprise, surprise Gomer Pyle, the numbers added correctly. Then I did it again – same answer. I was using a little technique, those of us in the biz, call double taping. That is we run two adding machine tapes to see if we get the same number both times. According to my fine Clarion University math training, I know that you should get the same answer both times. Math is funny that way. Apparently bookkeepers don't get the same training. Maybe that is why we are called CPA's – Certified Public Adding machine operators.

The truly amazing thing about her message was that she pointed out exactly what had caused my error. It was a number that we had discussed back when we were preparing the returns. Unfortunately that number was totally irrelevant. She had just mis-added the five amounts – that simple. Of course after finding one grievous criminal error on my part, she proceeded to question a couple other amounts on the tax returns related to alternative minimum tax (AMT). Ask around a bit. If you find a bookkeeper with even a rudimentary understanding of AMT, you will have found the evolutionary missing link between CPA's and bookkeepers. This is the semi-neanderthal, hunch backed bookkeeper who first stood upright to reach the office pencil sharpener. Yes accounting fans – my tax return was correct. A chair had suffered needlessly.

How many bookkeepers does it take to screw in a light bulb? No one knows. They are all still closing the books back in 1985. To be fair, how many Frank Stitely's does it take to screw in a light bulb? Just one – with a credit card and a phone call to a real man.

Here is a frequent conversation thread with a bookkeeper.

Me: “Are the books ready for me to begin preparing the tax returns?”

Her: “Yes”

Two days later....

Me: “I spent a little time on this, and a whole lot of stuff is missing.”

Her: “Yes, I haven't entered the credit card transactions for the year. I thought you could get started in the mean time.”

Me: “No thanks, I'll pass. I don't really feel like starting all over again in two weeks once all the numbers change.”

Here's another of my bookkeepers' greatest hits...

Her: “I don't know where you got that number on the tax return.”

Me: “I took it from the sheet you gave me.”

Her: “It's wrong.”

Me: “Was there a reason you gave me a wrong amount?”

Her: “I wasn't focused on that number at the time.”

One more just to celebrate the holiday... This one happens in October as we are running up against the absolute final filing deadline.

Her: “Here is the information for the tax return. The numbers are all screwed up.”

Me: “Why are the numbers all screwed up? Haven't you been working on them for 20 months now?”

Her: “I'm not really finished but I know the deadline is coming.”

Me: “Don't you think it might be a good idea for me to work with good numbers?”

This is just a brief sample off the top of my head as I sit in Ruby Tuesday's munching on rabbit food. Tax season just creates so much material. I lied- here's a final one to keep in spirit with the holiday.

Me: “I tried opening your QuickBooks data. I need a password.”

Her: “I don't want you changing my data.”

Me: “Last year I made twenty-seven entries to correct your numbers. What are the odds, the number will be zero this year? I'll put my money on the Redskins winning the Super Bowl instead.”

You might justifiably ask why bookkeepers get bad attitudes. Obnoxiousness becomes a defense mechanism to hide ignorance. As you can see above, it doesn't work well with me. I can tolerate lack of knowledge if it comes with a sincere desire to improve. However, when the lack of knowledge comes wrapped in a nasty attitude, I find a way to remove the offending party.

I'm greasing the skids for a bookkeeper now. Every time her boss, the owner, tries to make a decision to grow the business, she tells him everything he does always fails. She does this to protect her salary. She's making nearly six figures – way too much for what she does. Taking on any business risk is unacceptable to her regardless of the potential payoff for the owner. I can only imagine being married to her – waking up every morning to someone telling me anything I do that day will fail. Trust me, she's on her way out the door now. I'm good at this. I can be Tony Soprano. She better have gills. She'll sleep with the fishes soon.

OK, you think I've been a little harsh. Tax season does that to me. I promise you a future installment where I show you how to find a truly excellent bookkeeper. They are out there, but they can be tough to find. You'll have to kiss a lot of frogs, but a princess is out there somewhere. If she happens to look like Jennifer Aniston, I get to kiss her first.

Now that tax season is over, on Sunday morning I find myself alone in the house with no one for company except for Jack Russell terrier, Sidney. Whooo hooo!!! To celebrate, I am running naked through the house farting and picking my nose. Sidney is joining me except, for obvious reasons, she can't pick her nose. Instead she's licking herself in places I can't dream of reaching.

Thanks for reading! For real tax and accounting advice, please visit our real S&K web site www.skcpas.com.

A good bookkeeper story!!

Thanks to everyone who expressed concern about my mental health. The therapy is helping. The white coats say I can leave soon if I don’t get into any more fights. I told John Hinckley that Jodie Foster wasn’t worth shooting a president over. Jennifer Aniston, maybe….. Next time, I might write about my close personal relationship with Jennifer, except for that unfair restraining order thing.


I have busted up bookkeepers pretty well lately. I would be less than fair if I didn’t tell a couple of stories about bookkeepers / company accountants who have surprised me in a positive way.

Sally is the internal bookkeeper for Ralph’s manufacturing company. Sally is a pretty young lady in her early twenties. That was the source of my initial problem with her. Sally took over the job from Shirley, who left to concentrate on the accounting for a company Ralph also owned. Shirley and I had, and still have, a great working relationship. Both of us know what she does well and what areas she leaves for me to clean up. Sally reported to Shirley for a couple of years as an accounts receivable clerk. What that meant in reality was that she did low level grunt work in the accounting department. Go get this, go get that, make the coffee stuff. She prepared some customer invoices and posted customer payments. None of this is rocket science. I had very little interaction with Sally, since I concentrate on the general ledger and financial statements. To me, she was just pretty wallpaper.

Shirley moved to her new job in January. This was not exactly a prime time to switch internal accountants. The year processing was not complete yet. Shirley was available to assist in the year end closing, but her priority was her new job. I was stuck with Sally. During tax season, that didn’t make me happy. By now, you probably know that when I am not happy, I am not a nice person. I am an accounting diva.

Sally got some training from Shirley in working with the general ledger and financial statements, but working with financial statements for the first time isn’t something you learn in a couple of two hour sessions. If I understand correctly, people go to college for four years to try and learn this. Damn few people actually get it that quickly. Sally’s first attempts at closing the company’s books for the year were a mess. The year end financial statements were an absolute abomination. January and February are part of tax season, and I didn’t have the time or inclination to resurrect a set of books that were in decent shape before Sally got the job. I sent a number of borderline nasty e-mails to Ralph. Ok, they were nasty. I won’t lie.

To me Sally was just a cute chick, who was out of her league. Pretty equated with stupid. By now, I am sensing that you have stereotyped me as the typical male chauvinist. Now you have upset me. You are correct, but I am upset nonetheless. Anyway, I should have had the good sense to know better. I am married to a very pretty woman with a master’s degree who works as a computer security engineer. Pretty doesn’t equate with stupid. Instead of working with Sally, I became an obstacle to her getting her job done. I was busy accumulating evidence of her incompetence and relaying it to Ralph. I am not proud of this, but it is what I did.

While I was busy trying to make sense of the company’s books to prepare the income tax returns, a totally unexpected thing happened. As the months went by, I was too busy to pay attention to anything that was happening with the Company’s books in the new year. Finally, in May, I had the tax returns completed for the prior year. I really struggled. After I had sent the tax returns to Ralph, he asked me to take a look at the March financial statements Sally had prepared. Of course, I was really enthusiastic about that task. I would rather spend quality time alone in a bar bathroom with Ben Roethlisberger.

However, when I actually took a look at the March financial statements, they looked pretty accurate. One of the ways I can immediately get a quick evaluation of the quality of financial statements is to look at the balance sheet. Earlier, I gave you the keys to the accounting kingdom. I look at the balance sheet and see if it looks like it could possibly match the amounts in the real world. For instance, I look for debit balances in accounts that should always have credit balances. The March financial statements were perfect, but they easily surpassed what I expected from Sally. Over the period of a couple months, I saw the April and May financial statements prepared by Sally. April was better than March and May was even better than April.

Sally had discovered the keys to the accounting kingdom on her own. She had done this, not just without my help, but in spite of me. Sally had real accounting talent. She began to quiz me about how I reconciled some of the financial statement accounts. Now only did she ask the questions, she absorbed the answers. Not only did she absorb the answers, but she applied the techniques I showed her to other accounts. I was shocked. In fact you could say I was wr….. I just can’t use that word. Ok, I was wrong, absolutely and stupidly wrong. I was at least smart enough at this point to bet on the fastest horse in the race, which wasn’t me. When I next visited the company, I pulled Ralph aside and told him I had been wrong about Sally. I told him I thought she was outstanding. Ralph already knew that. He had seen her talent when she was just an accounting clerk. He knew she was smart enough to take on a difficult job and succeed. Picture me wearing egg all over my face. I could have been the mayor of moron city. I promise to write a thousand times, “I will not equate looks with intelligence.” I will not equate looks with intelligence. Only 998 more times to go. Then we can move on to the next topic. I am certain you have the time to wait…..