Behind The Books

As a bookkeeper, I understand that business owners want to know the value that I can bring to them and their company. A lot of business owners feel that they can record their own books and I completely understand. No one wants to pay someone for something they can do themselves, right? Well, even though I wasn't a business owner at the time, I was an office manager from 2004-2017 and I sure wish I knew more about bookkeeping back then!

You might have heard the phrase "you learn from your mistakes". Am I right? It's true with our personal lives and our business lives. For those thirteen years, I did accounts payable, accounts receivable, payroll, filed and paid sales tax and payroll taxes, inventory management, ordering, data entry, and reconciling. Whew! That was a lot! I felt like I was doing everything right; however, looking back now, when I think about the P&L and Balance Sheet, I feel like I could have understood what I was looking at to help me understand bookkeeping better.

I didn't know the process of bookkeeping. I didn't know that Assets = Liabilities + Equity (which is the Balance Sheet). I didn't even know what equity was! I couldn't wrap my head around debits and credits. Now I understand what accounts have a normal debit balance and what has a normal credit balance. I understand double entry accounting. I understand that revenue increases owner's equity and expenses decrease it. I understand that if you make a payment to a credit card, it decreases an asset, for example your checking account, but it also decreases the liability, the credit card.

Now, when I look at a P&L and Balance Sheet, I understand that the P&L is Revenue - Expenses = Net Income or Net Loss. But, it's a little bit more complicated then that. You have Cost of Goods Sold, Other Income, and different expenses sub-accounts (for example operating expenses, depreciation expenses and payroll expenses) to consider. Then you have the Balance Sheet, which I mentioned earlier is the accounting equation. When I was taking the bookkeeping certification course through the NACPB, they taught me about the Statement of Owner's Equity. In QBO, this is on the Balance Sheet in the Equity section. Here you have a beginning balance, any compensations or draws made by the owner, and the net income or net loss from the P&L. QBO calculates all of this for you! Don't even get me started on Liabilities. You have Current Liabilities, such as payroll taxes or short term credit cards or loans to pay. Then there's Long Term Liabilities, such as mortgages. And Assets are even divided into sections between Current, like Cash and Accounts Receivable, and Fixed, like Equipment. All three statements are related to each other. And during my learning, I had to do everything by hand!

I could go on and on, but I don't want to bore you. I'm sure you are already bored and moved on, but hopefully not! Hopefully, you understand to have a good bookkeeper, they need to understand bookkeeping. Before, I admit, I did more data entry. Now, I understand behind the books and is that's what a bookkeeper and business owner should know in order for their books to be accurate and understand just how well their business really is doing! And I feel that is great value that I can bring to any business owner as their bookkeeper!

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