So You Bought a Copy of QuickBooks, Now What?
It goes without saying now-a-days that emerging firms do everything they can to stretch their dollar. Just about every startup that I run into informs me that they have installed a copy of QuickBooks, so the finance part of their business is “covered.” When I ask who runs QuickBooks, the inevitable answer is the “receptionist/office manager” or “I do it myself so I know things are right.”
From a dozen years of financial consulting, I have seen far too many companies go far too long without paying management attention to finance, with often fatal results. While QuickBooks is a competent system, it is not a substitute for financial management in your firm and poor input to QuickBooks will inevitably result in inaccurate output and sub-optimal decision-making.
What QuickBooks won’t do for you
Accounting can be pretty simple when the company is just starting out. But problems in a business multiply once there are revenues. Every revenue stage firm must have some form of financial management (i.e. Controller or CFO) to avoid serious compliance and operational issues. Yet I find few companies have taken the steps to shore up this important part of their business. For example, invoices can be issued and paid from QuickBooks but I still find companies that are not collecting sales and use tax because they did not know they had to.
Here is a short list of F&A issues that will not be solved solely by a copy of QuickBooks:
• Tax compliance from Federal through local
• Decision support from an accurate financial model
• Internal control routines that can protect against fraud and waste
• Accurate financial reporting to investors and lenders on a GAAP basis
• Preparation of payroll and provision for employee benefits and retirement plans
• Credit extension and collection of accounts receivable
• Effective management of inventories
• Obtaining appropriate business insurance
• Managing a financial or tax audit
• Managing banking and debt relationships
Starting out on the right foot is essential
Often I have been called into a company to fix issues that would have been simple to solve when the company was much smaller, or worse when something fatal has already occurred and major restructuring or business termination is required. Essentially the business decision required is “pay now or suffer serious unintended consequences down the road.”
I urge each entrepreneur to establish a financial plan for his/her business that includes how the financial function will be managed and what procedures and controls will be needed as the firm grows. Outside resources are frequently required to do this and can include auditors, tax providers, insurance agents, payroll and HR services, general and specialized law firms and interim financial managers.
Rick Kadet is Vice President and Senior CFO Management Consultant with The Brenner Group, where he has engaged with over 50 valley firms as Consulting CFO or financial advisor over an eleven year period. Prior experience to The Brenner Group includes CFO and C level operational positions at Versant Corporation; InfoSpan Corporation;, Cadre Technologies, Inc.; and Sarama Industries. Rick began his career with General Electric Company and is a graduate of Arizona State University.
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