 The magazine of the Melbourne PC User Group Accountant-Client; a love-hate relationship Viv Martin martinvg@melbpc.org.au |
So, you have a computer, you're in small business and, rightly or wrongly, you feel that your accountant is "overservicing" (a polite word for "ripping you off!") Advertisements and journalists expound the brilliant features of Quicken and convince you that you do not have to be an accountant or even a bookkeeper to track your finances.
Mistake! The prime reason for buying Quicken (or any other bookkeeping package) should be to take control of your own finances. To advise you of your impending tax situation, most accountants prepare client figures to end of March to view the trend. With good profits, the advice may be to increase superannuation contributions, or something else, to minimise taxation. Conversely, losses may dictate that tighter financial controls are required. If you are proficient in how you present the results you may save some of your accountants fees. Without a proper understanding of the accountant's needs, the accountant may have to redo your books and wind up charging you more than before!
A favoured manual bookkeeping system is the multicolumn dissection ledger where clients record the date of the transaction, cheque number, payee and the amount of money involved. Deposits of monies received are treated similarly. Another major mistake is usually made here in that clients often do not understand or can distinguish between operating expenses and capital expenditure! Indeed, drawings of a personal nature are mixed in here even to the extent of disguising them as wages! Depending on the nature of the business - sole trader, partnership, company or trust - tax is payable one way or the other. Unless you understand the role of the bank account and debit and credit bookkeeping, the multicolumn dissection ledger is not double-entry bookkeeping!
Another area that causes problems and misunderstandings is bank reconciliation. It is not simply a matter of looking at each cheque and deposit to see if the bank agrees with what you have in your ledger. Consider also the treatment of outstanding cheques at the end of a financial period (especially when transferring from say, a manual system to Quicken), direct debits (e.g., bank charges) or credits, with no "double-counting".
Some clients believe that no cash in the bank, or an overdraft, is indicative of no tax to pay! Nothing to do with it! Outgoings could include a reduction of a loan or an existing overdraft, purchases of depreciable plant or equipment or, even more extreme, land or buildings. Capital expenditure of this nature is "expensed" by depreciation over a number of years, not in the year in which the money was paid.
Quicken users will argue that they don't have to worry about the Assets or Liability accounts because their accountant looks after that! Obviously they're not looking for that magical reduction in their accountants' fees. If you are trying to run a Balance Sheet, try this test in the reports: compare the "Profit" in the Profit & Loss with the "Equity" in the Balance Sheet. Are they the same? If they are, congratulations; if they're not, why not and do you know what your problem is? While you're at it, try this test also: in the Profit & Loss report look for the word "Other." Not there? Congratulations again! Oh, it is there; do you know how to fix that problem?
Some computer users have told me outright of purchasing other packages because Quicken could not do this or that. With Quicken selling for around $75 and, in recent times for as little as $49, it is to be hoped that $200-$400 packages offer considerably more features but for ease of use Quicken must surely be the best?
Quicken uses layman's terms and not accounting terms; it does not use Debit or Credit but Paid, Received or Deposit and this has deceived some accountants into believing that Quicken is not a double-entry system. The accounting profession also has misgivings about Quicken's forgiving nature. Like a well-known white board, if you make a mistake with Quicken, simply alter it or delete it! Although Quicken itself does not generate Invoices (QuickInvoice & QuickBooks do), Quicken can track Debtors and Creditors, despite what one journalist wrote.
Finally, make friends with your accountant. He's there to minimise your taxation. He should be your confidant; anything to do with monies received or monies spent, tell him. You're paying for advice, why not take it? And when the taxman calls (was it Mark Twain that said) when you can't remember what you said, tell the truth!
Reprinted from the July 1995 issue of PC Update, the magazine of Melbourne PC User Group, Australia
