What Your CPA Wants You to Know

96. The Price of Bad Bookkeeping: When QuickBooks Goes Wrong

• Carson Sands, CPA & Teran Sands, MBA. • Episode 96

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We tackle the critical but often overlooked task of proper bookkeeping for business owners and share how avoiding common mistakes can save you thousands of dollars and countless headaches. 

• Bad bookkeeping comes in many forms—from procrastination to incorrect QuickBooks entries
• Cleaning up messy books often costs more than starting from scratch
• Hiring an inexperienced bookkeeper can be more costly than doing it yourself or contracting an external accountant
• Monthly bookkeeping creates visibility into your finances and helps avoid tax surprises
• Regular review of financial reports is essential to catch errors before tax filing
• Separate business bank accounts are crucial even for simple businesses using spreadsheet accounting
• Setting regular calendar appointments for bookkeeping helps maintain financial clarity year-round




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Speaker 1:

you have to set aside time for bookkeeping. It's not something that you can just go through the end of December and do it all because you don't have useful books all year.

Speaker 2:

Welcome to what your CPA Wants you To Know.

Speaker 1:

Tax and accounting help can be expensive, so we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.

Speaker 2:

I'm Carson Sands.

Speaker 1:

And I'm Taryn Sands.

Speaker 2:

I'm a CPA with over 10 years of experience helping people start and grow their businesses.

Speaker 1:

And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck and we want to make sure you don't pay more than your fair share.

Speaker 2:

We're here to share everything your CPA wants you to know in a fun and easy to understand way. Let's get started.

Speaker 1:

Let's do it. Today's episode is all about bookkeeping and I know there's nothing like two accountants sitting here telling you how important bookkeeping is. But if you listen to this podcast and you selected this episode, that tells me that you know that it's fairly important and you are going to listen to what we have to say today. But this episode really comes from problems that we've had this tax season. That we'll share so that you don't make the same mistakes, but really it always happens every tax season. We see this over and over again and we try so hard to make sure it doesn't happen, but it just always seems to pop up.

Speaker 1:

So that is just bad bookkeeping. That can mean a lot of things. That can mean not keeping up with your bookkeeping and then getting the tax time and reaching out to us and saying, hey, I'm ready to file my tax return and Carson looks at it and goes, no, you're not, your book hasn't been reconciled or anything. It can also mean doing QuickBooks or something and just not being familiar with it. So whenever you look at your reports, they're just not right because you're clicking things all the time.

Speaker 2:

And that's actually worse than not doing it at all.

Speaker 1:

Absolutely, because it is a way more difficult to go back and just clean up someone's QuickBook mess than it is to just move forward doing it correctly.

Speaker 2:

There's so many times where I know after the fact it would have been easier to start over the books from scratch and just with nothing. But I usually don't know that until I'm already so far deep that it's too late to go back.

Speaker 1:

Right, and there there's so many things to mess up in QuickBooks. But the thing is, if you don't know what you're doing, don't just keep moving forward doing that. Ask questions, either get help from your CPA or Intuit or whatever, but just don't continue down that road.

Speaker 2:

And most of the things you're doing wrong could probably be fixed with one or two hour-long consultations with an expert in QuickBooks or a CPA that could teach you exactly how to do it.

Speaker 1:

And I know when you look at accounting rates and you're like, oh, that's $200 an hour or $300 an hour, whatever your CPA charges, you think, oh, I don't really want to spend that. But so many cases of people not taking the time or wanting to spend the money on that and then turning around and having to spend thousands. We had one of our clients spent I don't know five to ten thousand dollars with QuickBooks and their QuickBooks help, and QuickBooks actually made everything worse and then wouldn't respond. So that's just a scenario. Whenever you know you need help with it, it's just time to make sure that you put that in the budget and get it straightened out, because it will cost you more money in the long run or a ton more time if you're just going to start back over.

Speaker 2:

Yeah, it's scary and I wouldn't hire one of those people that you don't know, that you haven't vetted through a friend or know somebody that's already actually used them, just a random person that QuickBooks gives you. It just means that they're certified in QuickBooks, which is pretty easy to do. It doesn't really mean you know what you're doing necessarily.

Speaker 1:

Now we can't speak for all of those people, but the ones that we've heard from clients. They haven't been good so far. That's all I can say.

Speaker 2:

I've been certified in QuickBooks too, and I do know what I'm doing. But getting that certification isn't really enough to prove that you know what you're doing.

Speaker 1:

Absolutely. And that leads me to my last point. In bad bookkeeping and we see this a lot because we work with large businesses and they get to the point where the business owner can no longer do all of the tasks with accounting and bookkeeping. So that's when they hire someone. Okay, so it's worth paying someone to do all those things in their company, but they hire someone that has no idea what they're doing and then they either create a big mess or they're paying someone to do that job and paying their CPA to help with the bookkeeping.

Speaker 2:

And I know, if you have an in-house person, experienced bookkeepers, people that have been doing this for a while or that have been trained properly, they're expensive and you're like, well, I can't really afford a good bookkeeper, and maybe that's true, but you really can't afford a bad bookkeeper.

Speaker 1:

No, a bad bookkeeper has cost our clients so so much money.

Speaker 2:

So if you can't find somebody good or you can't afford somebody good, do it yourself is one option, and I would rather you hire someone to do something else you do so that you can focus on the books. It will help keep your mind on the business finances, which is important, and at least you know you'll be doing your best, and you can't say the same thing for every employee you hire. The next thing is you could get an external accountant. That's going to be cheaper than hiring someone full-time to be a bookkeeper, and that could be through your CPA firm. Some CPA firms do bookkeeping or it could just be a professional bookkeeper, but that contracts and they would only be. You know they have multiple clients and you would be one of them, but you know that would be another option as well, and that's going to be cheaper than hiring somebody in-house, for sure.

Speaker 1:

And if you vet them prior to hiring them on, then that will, in the long term, be so much cheaper.

Speaker 2:

Right. So don't just hire somebody just to do bookkeeping, unless you have a really big company and you can afford somebody like $60,000, $70,000 a year minimum If you're paying them $40,000, they're not.

Speaker 1:

That's not it. It's not going to work. And if you bring someone in we've seen this a lot where they're like, yeah, I've done some QuickBooks, I can learn it. You don't want that. It never ends well.

Speaker 2:

Or if you have a great administrative assistant secretary whatever you want to say and they do all these things great, and you're like you know what? I'm just going to assign this to her. She has room in her schedule for that. No, do not do that, please, Because they want to say yes, they want to please you and keep their job and they're going to just start guessing, that's what happens every time.

Speaker 1:

That's not their job.

Speaker 2:

They're not a bookkeeper, even if you say don't be afraid to reach out to me or to the CPA, they won't. They won't reach out, They'll just guess it's going to be bad. Just do it yourself.

Speaker 1:

Yeah, we've seen so many clients paying a salary to someone and then we jump on the phone with them for one of these meetings and realize they know nothing. So really really vet any bookkeeper that you hire to do your bookkeeping and then. So right now we're obviously talking mostly about doing QuickBooks or any other sort of software that's bookkeeping. And last year it's been about six months we started a monthly accounting membership and that's where all of the business owners in that they are doing their own bookkeeping. But the good thing is, once a month they jump on the phone with Carson and they go through the QuickBooks. He can look on QuickBooks online very easily. Make sure they're doing it right, make sure they're getting those reconciliations done. If they have an asset that needs to be entered or something a little bit more complicated than just the monthly reconciliations, he's there to help.

Speaker 2:

Right and those meetings. You know they change and evolve over time. In the beginning sometimes it is very basic QuickBooks training, not for everyone. Some people already have that part down. But some people were teaching how to categorize. I'm helping them set up rules for QuickBooks so that some things are automatically categorized and teaching them how to reconcile. And then it starts transitioning into higher level tax planning and tax projections and, of course, overviews of their entire financial setup to see which aspects of their business are making the money and which aspects of their business are not making the money. And sometimes they're surprised by the numbers and they realize that they don't even like doing this thing, but they thought they needed to and it's not even making them any money. So you never know what you might find when you're able to look at it from a higher perspective. But that's not possible unless you have good numbers to work with.

Speaker 1:

Exactly, you have to have good bookkeeping to make good business decisions, so that's so important and we know it's not always in everyone's budget. So that's why, in this episode, we're talking about the different options that you have, and we've been doing the monthly membership for six months. It's been amazing so much good feedback and we weren't really going to talk about it in this episode, but we're going to open up a few more spots. So if you are interested, you know, feel free to message us about it. We can give you more information on that, but we're going to open up a few more because we have really loved working with clients this way and it's provided them so much value.

Speaker 2:

Well, it takes all the surprises out. You know, they know exactly what they're going to owe in taxes. Their books are already ready as soon as. But they said, you know, it's kind of like getting a personal trainer.

Speaker 1:

They're only going to do it because you have someone there waiting for you, so it's really helped them stay on top of everything, and it's sometimes people need that. As a business owner, if you're the one that's doing your books which for the most part, that's what we recommend for our level of clients this is a good way to just make sure you have that monthly date with your CPA and make sure that you're doing what you should be doing for your book.

Speaker 2:

But, unlike a personal trainer, we're not going to give you a hard time If you show up one month and you didn't categorize everything in QuickBooks and we need to knock some of that out before we dig into other things. Look, we're not going to beat you over the head about that. We'll help you with that too. You know we don't think it's the most useful use of our time once we've trained. You had to do that part. But you know we're happy to do whatever we can to help.

Speaker 1:

I know some people set aside that time just so they will categorize, and that's fine too If that's the way that you want. Cover in this episode is just, you have to set aside time for bookkeeping. It's not something that you can just go through the end of December and do it all because you don't have useful books all year. So I guess you can do that and a lot of people try to do that, but why does somebody not want to do that?

Speaker 2:

Oh, there's so many reasons. The worst one is taxes. You might find out in December that you made a lot of money and you spent it all and now you owe taxes and you're not prepared to pay those taxes. So knowing that you're profitable through the year and how profitable you are can really help you go. Okay, I need to set aside this much money for taxes before I spend any of it.

Speaker 1:

Absolutely. You need to know your profit. You need to know it for taxes, you need to know it for making good business decisions. If you're getting a loan, you're going to need that. You need it for so many reasons, so staying on top of it. A good way to do that is to put it in your calendar, either weekly or monthly. It just really depends on how much activity is going on in your business.

Speaker 2:

And that is a big one. You know financing. It seems like a small thing, but you send the bank your profit and loss and balance sheet. Well, you're trying to get a new loan from them. You already have an existing loan from them on your balance sheet and they see that it doesn't match their records for how much you're supposed to owe. Well then, how confident do you think they're going to be in your other numbers? Because the one number they know for sure they can confirm is wrong.

Speaker 1:

Absolutely, and that's something I think people fail to do. A lot is to review their books, because you're likely going to be able to look at it and say this is not correct compared to your CPA, we have no idea how much revenue you had for the year. So, that being said, sometimes in tax season actually a lot of times this happens somebody sends over their P&L and they don't really look at it. I guess they don't see that they had this much in revenue, which means they made this much in profit, and then, whenever the tax return is done, they look at that and they're like oh no, I didn't have this much in profit. So always, always, always, look at those reports, because that would give you an indication if something was being done wrong in your books and there is an error, because for some reason, people just do not look at those reports.

Speaker 2:

Right and you know we can fix that stuff and it's not like we file it before they get a chance to look at it. But it's expensive to fix it. It can be if it's very time consuming and it can give you a heart attack. When I'm like, oh OK, well, you owe this much money and yeah, of course, if they're an existing client, then I would recognize before I even sent them the return. I wouldn't give them a heart attack. I'd be like, uh, you know, this says you made a million dollars and the most you've ever made in the last five years was a hundred thousand. So are you sure there's not a mistake in there? But it does happen a lot of times with new clients and I'm like, oh well, they just, they just did awesome, great Good, they made so much money.

Speaker 1:

Congratulations to them and they're like I don makes you spend a lot more money because your CPA is preparing the tax return all over again.

Speaker 2:

Right.

Speaker 1:

If it's a simple fix. Obviously you know we don't. We do updates all the time, like if something needs to be updated but not like that. I mean that's all new numbers, everything's wrong. You have to go back and go through what changes Basically?

Speaker 2:

like you did the tax return twice.

Speaker 1:

Yeah, and so you're paying for two tax returns, so that's also a costly mistake.

Speaker 1:

So make sure that everything looks great before sending it over, and for that to happen, you just have to focus on your bookkeeping all year long, not just in December.

Speaker 1:

So this episode mostly we're just chatting about QuickBooks, because most people use QuickBooks, but I did want to mention that if you're not using QuickBooks and you're using like an Excel spreadsheet or something like that, which is completely fine we do have a lot of clients that are sole proprietorships or something, that have simple businesses and they use a spreadsheet, and we love that. The only thing is that a lot of times they're missing a lot of expenses because they're mixing their business expenses and their personal expenses together. So they missed one step of the bookkeeping, and that very important step is to open a bank account for your business so that when they're making that spreadsheet, they're looking at that bank account. They're not looking at their personal Wells Fargo bank account and going scroll, scroll. Oh, this was business, oh, this was business. That is going to mean that you miss a lot of expenses that were business because you are combining the two.

Speaker 2:

Oh yeah, it's so easy to overlook it. If you have just a business account, then you can just go. Okay, I have to go down every single transaction in the bank account and I need to say what it was for. But it was definitely for business, but what you know, which expense account was it? Or whatever. But yeah, like Taryn's talking about, if you are just operating out of your personal account, you know, technically there's no rules against that, but you are going to miss expenses because you're kind of sort of picking up the things you think maybe are business expenses and you catch most of the big ones, but you know there's going to be usually a couple thousand dollars worth of expenses at least that you've missed.

Speaker 1:

Well, and when people are operating like that, they're just not really treating it as a business. So I imagine you know they probably have a credit card that they put some things on Maybe they're earning points or miles for flights and things like that. So then they forget to check the credit card. So maybe there were some big purchases on that and it's just very messy. It's so easy to open a free banking account and put all of your business income and expenses in there, which also makes it easy. If for some reason in July you didn't get to the bookkeeping, you didn't update your spreadsheet, you can easily do two months and once if you have to. Let's be honest, that's probably going to happen at some point.

Speaker 1:

So, let's just make it easy on yourself. So if you're listening to this and that's you here is your reminder just to go open a business bank account or regular bank account, whatever, to separate the two so that all of your income and expenses for the business, even if you don't really consider it a true full-time business, are separated.

Speaker 2:

Well, I think that's about all y'all can handle on the bookkeeping. We don't want to get y'all too excited. You might not be able to sleep tonight.

Speaker 1:

Or get nightmares about bad bookkeeping costing you money Right.

Speaker 2:

So, anyway, we hope that you liked this episode and if you have any accounting questions or you want to see what some of our resources are to help you with your business, we do have those on our website whatyourcpawantsyoutoknowcom.

Speaker 1:

And until next time. Thank you so much for listening to.

Speaker 2:

What your CPA?

Speaker 1:

Wants you to Know. Podcast you.