- Set up accounting systems
- Help you understand your business
- Help you secure business information from unauthorized access
- Help you communicate with lenders, investors, and other
Need to learn more? Send me an email: firstname.lastname@example.org
For any business to succeed, the owner needs to know what is going on. An accounting system is important to establish the financial component of that information. A well-designed system provides you with both the information you need and the information to satisfy government reporting requirements.
Because my accounting practice has “grown up” using Macintosh computers, I am familiar with both Macintosh and Windows operating systems. In fact, now I’m running Windows 10 software on my Intel Macintosh, using the Parallels program. Today, there are a number of computer programs suitable for the small business that will provide both sets of information. I am particularly familiar with two of them AccountEdge (formerly MYOB), and QuickBooks. I am a member of both the the AccountEdge Professional Advisors Program and the QuickBooks Pro Advisors.
A checkbook program like Quicken sometimes works for small proprietorships, but the basic versions don’t effectively help you keep track of things like receivables and payables, and the reports are far from standard business reports, especially the balance sheet. Some clients have had me use Excel tables for transactions and Pivot reports in lieu of a proper accounting program; that’s OK for a basic set of books, but has limitations similar to Quicken.
I have found through experience that even accounting novices can learn to operate a well designed accounting program for their own business with a few hours of assistance from me. Typically that involves:
Choosing which accounting program best meets the client’s needs;
Setting up the accounting system (anywhere from 1 to 8 hours, depending on the complexity of the business);
Teaching the owner how to enter information (1-3 hours); and
Providing follow-up consultations by telephone and email (“mid-course corrections”).
I maintain a library of the most recent versions of the accounting programs my clients use. For example:
- Windows 10: 2015, 2017, 2018 I also have older versions, but I’m not sure they work in Windows 10.
- MacOS: 2016
- QuickBooks On Line
AccountEdge is cross-platform capable (that is, you can run it on either Windows or MacOS using the same company file). I work with your file in MacOS. Older versions won’t work with the MacOS I use (currently 10.12, because my SSD hard drive won’t upgrade to 10.13). However, I can upgrade your file to a version that does work and create journal entries you can import into your company file.
AccountEdge is the program I use for my own company accounting.
I don’t recommend this for business accounting, except for a simple proprietorship; but if you do use it I will obtain the version you use to be able to work on it. To create a usable business balance sheet, especially for liabilities and capital, you have to use liability accounts for capital accounts since Quicken doesn’t have them.
I use Quicken 2007 for Mac for my personal accounting. The newer versions don’t have the investment tracking capability that I demand in a personal accounting program. I suppose at some point a newer MacOS will break this and then I’ll have to figure out what to do.
Many of my clients send their data files to me (see the link to send me a file) to make specific changes, or to help them correct errors that they can’t figure out. With a planned “appointment day” I can usually receive the file during the night and have it back by the end of the next day. Others have set up a Virtual Network Connection (VNC) server on their accounting computer. Using a VNC viewer I can access their accounting file directly, and under their direction modify or enter transactions. (It’s necessary to do this under their direction so that when I prepare financial statements for third parties, I can remain independent during the stage of preparing compiled or reviewed financial statements. This doesn’t mean that the client can reproduce what I’m doing, only that they understand what it is I’m accomplishing for them).
By keeping the books in good condition, you can be assured that reports you generate from them will give you current information you can use in running your business. For example, you can keep track of receivables and payables, and the resulting cash flows that are critical to the health of your business.
In order to minimize making errors that could change prior years data and to avoid spelling errors that multiply items and accounts, I strongly urge you to have me be the sole Administrator user on your accounting file, with you being a User with limited privileges. If you attempt to do a transaction that needs Administrator privileges, call or email me; it may be that I can suggest a way to enter the transaction, or, if it is truly a new type of transaction, send the file to me and I’ll create the accounts/items for you. When you don’t set things up like this, I often spend an hour (or many hours more), creating adjustments to bring the records into the position they were in at the end of the prior year before I can even begin to look at this year’s data.
Many clients will consult with me periodically (for example, quarterly) to have me describe what their financial statements mean in terms of business operation. I can use my business background to help clients determine whether a particular expense is too large (or too small!) for their business.
A small business has unique problems when it comes to securing business information and assets. If you pay attention to the news, you have undoubtedly seen or read reports of someone accused or convicted of embezzlement; and often the victim is a small business. Rarely is the business able to recover from these losses.
If your business accepts credit cards, you may have had to beef up your security to meet the credit card company requirements. Here are some ways to do that:
For Windows: Some Windows versions (Pro or Enterprise, but NOT Home) have Microsoft’s proprietary Bitlocker security system. If you don’t trust Microsoft (i.e., have they put a backdoor access in the program?) you can get VeraCrypt, free open source software, and create a virtual secure encrypted disk. Because it’s open source, anyone (well, at least those who can read code) can know that there aren’t any backdoors for bad guys to get in. I have used VeraCrypt (and its predecessor TrueCrypt) for years, and once it’s set up it’s pretty automatic.
For Macs: you can use VeraCrypt or create an encrypted disk image using the Disk Utility.
Put all your sensitive information in an encrypted disk. Don’t have the system or program save the password, since that would eliminate the protection, since the disk would mount automatically when you log in. With VeraCrypt, you can even double the security by having a visible disk that contains dummy files and an inner “hidden” disk that contains the real data.
Don’t use default user names and passwords, especially for the Administrator. I’ve seen automatic access attempts using names like “Admin” and “Administrator” and passwords like “123456789, “password, “pswd,” and other basic variations. So use a strong password and a complex user name. When possible, have two accounts, an Administrator account for making system changes and a standard account for everyday use. Unfortunately, in Windows, many programs (like older versions of QuickBooks) require an Administrator account to operate; that compromises security. Search the web for password strength checkers to see how many years it would take for a criminal’s computer to crack your password.
Make sure you have installed internet security programs. Here’s a recommendation when you get a new computer: Don’t connect it to the internet until you have ensured that security programs are installed and operational. When I was first installing Windows on my Mac I didn’t do that and it was immediately bombarded by who knows what stuff. Fortunately, I could merely trash the file and re-do the installation after disconnecting the computer from the internet. The architecture of Mac computers makes them much less subject to viruses, but that doesn’t eliminate the necessity of an anti-virus program.
I’m using PC Pitstop(https://www.pcmatic.com/) for my Windows computer, along with Windows Defender. And advantage of PC Pitstop over some other anti-virus is that it uses a White List approach: that is, if an executable file isn’t in their white list, it is flagged, and you can’t use it, unless you know it’s from a reliable source and you put it in your own white list. For my Mac computers I’m using BitDefender (https://www.bitdefender.com)
Another security issue is preventing embezzlement or theft. I remember years ago when my son Ian was managing a convenience store, he caught employees in cahoots with a vendor stealing product before it even came into the store. A cardinal rule is to trust your employees, but don’t give them the opportunity to abuse that trust. That means doing background checks on new employees, and putting measures in place to minimize problems. For control over money, the most important thing is to do bank reconciliations promptly. Do these yourself or have me do them; don’t have the bookkeeper do them. If the bank provides on-line or paper images of the checks, review them for details (a common scheme is to change the name of a vendor to a dummy company after you sign a check). Be familiar with your regular vendors; do a Dun & Bradstreet check on new vendors.
Lenders and investors often will want more assurance that your business is what you say it is than just accepting the print out of reports from your accounting program. Sometimes you maintain your business records on the income tax basis or cash basis of accounting, but they want “Generally Accepted Accounting Principles” (GAAP). Sometimes, they want descriptive notes so they can better evaluate your business. And sometimes they want financial statements or schedules that your accounting system can’t generate automatically (a Statement of Cash Flows often falls into this category).
Who else might want information about your business? Often this will be the result of a legal encounter of some sort. If you are getting married, you might need this to properly draw up a pre-nuptual agreement; if you are getting divorced, you or your soon-to-be-ex spouse may want it for settlement purposes.
Besides the traditional financial statements, I can also prepare Financial Forecasts to help you plan your business, raise capital, or get a business loan. I design Financial Forecasts on a spreadsheet program so that it produces output in financial statement form, self consistent throughout. I help you define your assumptions, and incorporate them into the spreadsheet. It can start with fairly basic assumptions, and can be refined and expanded as necessary to include detailed calculations.
CPAs offer four levels of assurance regarding financial statements and forecasts:
Preparation of financial statements
This is a brand-new (2014) service that CPAs can provide their clients. For many small businesses this may be all that’s needed; only if you, your bank, or another user of your financial statements require or desire a Compilation (or higher level of service) would you engage me for the higher service. You need to sign an engagement letter in which you request this level of service. The financial statements need to include a legend along the lines of “No assurance is provided on these financial statements.” If you want my name associated with the financial statements, I can issue a disclaimer along the following lines:
The accompanying financial statements of XYZ Company as of and for the year ended December 31, 20XX, were not subjected to an audit, review, or compilation engagement by me and I do not express an opinion, a conclusion, nor provide any assurance on them.
(Statements on Standards for Accounting and Review Services, §70.A14, Issued by the Accounting and Review Services Committee Copyright 2016, American Institute of Certified Public Accountants, Inc.)
In a compilation service, as with the Preparation Service, I do not provide assurance of any sort (one might wonder why anyone would want to accept this). The basic report I prepare is along the following lines:
Management (owners) is (are) responsible for the accompanying financial statements of XYZ Company, which comprise [description of financial statements] in accordance with accounting principles generally accepted in the United States of America [or another special purpose framework]. I have performed this compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. I did not audit or review the financial statements nor was I required to perform any procedures to verify the accuracy or completeness of the information provided by management. I do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements.
(Statements on Standards for Accounting and Review Services, §80.A48, Issued by the Accounting and Review Services Committee Copyright 2016, American Institute of Certified Public Accountants, Inc.)
There can be circumstances where the report is expanded to include other information. Examples are: management elects to omit disclosures (notes describing accounting methods and other matters), I might not be independent with respect to the client (though under new guidance I can now list the reasons I am not independent), and there might be significant departures from the basis of accounting used for the financial statements.
In a review I provide limited assurance. I perform two types of activities in addition to the procedures I follow in a compilation:
* I will ask appropriate managers and owners about business, financial and accounting matters that relate to the financial statements and accompanying notes. Part of this includes having them write me a “representation letter” that acknowledges the information they have given me.
* I will perform limited tests of the accounting records, mostly of an analytical nature. These include comparison of financial statements with prior periods and anticipated results (budgets), and studying the relationship between elements of the financial statements (ratios, trend analysis, reasonableness tests).
These two types of activities fall far short of the work required to perform an audit. A review report will look something like this (notice how it “looks” different from a compilation report):
INDEPENDENT ACCOUNTANT’S REVIEW REPORT
I have reviewed the accompanying [description of financial statements]. A review includes primarily applying analytical procedures to management’s (owners’) financial data and making inquiries of company management (owners). A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America [or other special purpose framework]; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement whether due to fraud or error.
My responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. Those standards require me to perform procedures to obtain limited assurance as a basis for reporting whether I am aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America [or other special purpose framework]. I believe that the results of my procedures provide a reasonable basis for my conclusion.
Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America [or other special purpose framework].
(Statement 21 on Standards for Accounting and Review Services, Issued by the Accounting and Review Services Committee Copyright 2014, American Institute of Certified Public Accountants, Inc.)
Performing an audit of financial statements is the one activity that requires licensing as a Certified Public Accountant. Everything else that we do can legally be done by others, although terminology might vary. Performing an audit is also one thing I do not do, since I do not have enough experience to competently perform audits. In the rare situation where an audit is needed, I refer my client to another CPA firm that is much better qualified than I to do this type of work. For comparison, here is what a basic audit report looks like:
INDEPENDENT AUDITOR’S REPORT
Report on the Financial Statements.
We have audited the [description of financial statements].
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error..
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements..
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of X Company as of [dates], and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
(AICPA Professional Standards, Vol. 1, AU Section 700.A58, Copyright 2013, American Institute of Certified Public Accountants, Inc.)
This page was last updated on August 17, 2018.