One of my clients is a home remodeler. When he first started his business, he hired a bookkeeper friend to maintain his business financials. This bookkeeper friend provided less than stellar service, however, and that is when this client found and hired me.He wanted me to begin by reviewing all of the previous bookkeeper’s work, including paperwork and the actual QuickBooks company file. Two problems immediately surfaced:
- QuickBooks was not being utilized properly even in its most basic functions, which resulted in reports that were not relevant or correct.
- The actual paperwork was not being processed and maintained in an efficient manner.
I began by storing the client’s QuickBooks Desktop company file on a server platform where both he and I could access the file at any time. I then created actual customer profiles in QuickBooks, complete with addresses and salesperson information (the person who secured the contract). This enabled my client to determine and track the success of each salesperson at any given time, as well as determine the success of geographic regions by zip code. I also set up a basic invoicing and customer payment system in the QuickBooks file along with an efficient means of entering all bank activity on a continuous basis.
The client and I then worked together to establish both a job costing system and a class-by-job-type (windows, siding, roofing, etc.) system so that he could determine the job profitability by client as well as job type. I trained the client and staff so that they could efficiently maintain the job folder system on site. I ensure that all bank activity matches all job costs and revenues per folder and that all job costs and revenues are accounted for.
Another client of mine found me to review his books after parting with a previous bookkeeper. His industry is similar to the last case study in that he also had various job types that took weeks or months to complete. His concern, however, was not with maintaining a job costing system, but with the recognition of open vs. closed jobs for tax filing purposes.
The previous bookkeeper made mistakes that resulted in an over-inflation of revenues due to two factors:
- Customer payments allocated to Undeposited Funds were not being properly matched to bank deposits. This led that bookkeeper to make stop-gap type entries, which resulted in doubled revenues for certain jobs in some cases.
- The previous bookkeeper fully recognized pre-payments by customers (upon receipt) for jobs that had not yet been completed and were still open.
I began by determining the proper reconciliations for all bank accounts to ensure that the closing balances on reconciliation reports matched the bank statement balances. I then went on to rectify the issues with the Undeposited Funds account. I reviewed all the outstanding deposits in Undeposited Funds and compared them with all the deposits in the client’s bank accounts. I looked up each customer check payment image to endure the accuracy of the recorded deposits in QuickBooks and properly allocated the deposited funds while rectifying the stop-gap entries made by the previous bookkeeper. I was eventually able to clear out the Undeposited Funds account in my client’s QuickBooks Online file.
My final task was to establish a system of setting up a deferred income account to book all customer pre-payments until jobs were closed and then convert these payments into revenues, and train the client on how to maintain this system.
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