Part two of this troubleshooting series shows that Momma knows best.

Last month we looked at how real-world numbers sometimes need to be fixed. Getting the “weird” accounting to right ultimately gets you to a known financial position. To revisit tips one through four from November’s issue, visit our Archives sectionhere(free site registration is required).

For now, let’s continue the discussion on troubleshooting your accounting software and watching out for discrepancies and common mistakes …

5. 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 find 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.

  • 6. Need 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.

    7. 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.

    8. 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.

    9. 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.

    10. 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 just may need some help.

    Contact me if you feel overwhelmed, and we’ll set up a time to visit on the phone. 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 eighth-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 percent 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:

  • 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 scorekeeping in the great game of business. Kids of all ages like games and like to keep score. Why not make it fun?

    I sent Max this article and a copy of my book, “Where Did the Money Go? - Easy Accounting Basics for the Business Owner Who Hates Numbers.”

    Sometimes Momma knows best.