Paper Nightmares

manPaperStacksBack in 2007 I took on a sign company client. It was a small business owned by a retired engineer who had bought the business from a relative, having never owned or run a business of any kind before. The books were several months behind–especially accounts payable. There were stacks of invoices and bills that were not filed or organized in any particular order. Even after I entered them into QuickBooks Desktop for payment, the owner refused to let me or anyone in the office setup any kind of filing system for them, and would not explain why. Because I was doing the books, it quickly became evident to me that the business had serious cash flow problems. The bank account balances were barely enough to cover payroll each week. Furthermore, even after entering all those bills and invoices into QuickBooks, few of them were paid, and most were seriously past due.

At the end of each week I sent the owner updates on what I had completed in relation to the bookkeeping and what information I needed from the owner in order to complete other bookkeeping tasks. All my emails were ignored. (I should note here that the owner was almost never in the office when I went there to work on the books.) After a few months I terminated the relationship. I could not properly do my job if the owner was not going to communicate with me. There is only so much a bookkeeper can do without that communication. Just a short time later, the company went belly up.

It is so important for business owners to know where they stand financially. In order to know this, they must be responsive to bookkeeper and/or accountant requests. They must have a filing system (digital or physical) for all types of documents including invoices, and to understand that bills must be paid on time. And they must keep the books updated so they can effectively make both routine and emergency business decisions.

Even more important, a business owner must be willing to accept when a business is no longer viable and take appropriate action.

Posted in Business Management.