you decide just to blow off this requirement – after all, you got into business so that you could throw off the shackles of bureaucracy – you might get away with your omission. But if the Internal Revenue Service (IRS) examines your return and you ignored Section 446, the IRS gets to do your accounting the way it wants. And the IRS way means that you pay more in taxes and that you also pay taxes earlier than you would have otherwise.
Here’s the second reason for maintaining an accounting system. I sort of go out on an editorial limb, but I’m going to do it anyway. My strong belief – backed by more than three decades of business experience and close-hand observations of several hundred business clients – is that you can’t successfully manage your business without a decent accounting system. Success requires accurately measuring profits or losses and reasonably estimating your financial condition.
This second reason makes sense, right? If your friend Kenneth doesn’t know when he’s making money, which products or services are profitable, and which customers are worth keeping (and which aren’t), does he really have a chance?
I don’t think he does.
To summarize, your business must have a decent accounting system, no matter how you feel about accounting and regardless of how time-consuming and expensive such a system is or becomes. The law requires you to have such an accounting system. And successful business management depends on such an accounting system.
What QuickBooks does
Go on to the next question that you and I need to discuss: What does QuickBooks do to help you maintain an accounting system that measures profits and losses and other stuff like that?
QuickBooks truly makes business accounting easy by providing windows that you use to record common business transactions. For example, QuickBooks has a window (you know, a Windows window that appears on your monitor’s screen) that looks like a check. To record a check you write, you fill in the blanks of the window with bits of information, such as the date, amount, and person or business you’re paying.
QuickBooks also has a handful of other windows that you use in a similar fashion. For example, QuickBooks supplies an invoice window that looks like an invoice you might use to bill a customer or client. You fill in the invoice window’s blanks by recording invoice information, such as the name of the client or customer, invoice amount, and date by which you want to be paid.
And here’s the neat thing about these check and invoice windows: When you record business transactions by filling in the blanks shown onscreen, you collect the information that QuickBooks needs to prepare the reports that summarize your profits or losses and your financial situation.
For example, if you record two invoices (for $10,000 each) to show amounts that you billed your customers, and then you record three checks (for $4,000 each) to record your advertising, rent, and supplies expenses, QuickBooks can (with two or three mouse clicks from you) prepare a report that shows your profit, as shown in Table 1-1.
Table 1-1 A Profit and Loss Report
Your accounting with QuickBooks can be just as simple as I describe in the previous paragraphs. In other words, if you record just a handful of business transactions by using the correct QuickBooks windows, you can begin to prepare reports like the one shown in Table 1-1. Such reports can be used to calculate profits or (ugh) losses for last week, last month, or last year. Such reports can also be used to calculate profits and losses for particular customers and products.
I know I’m kind of harsh in the first part of this chapter – bringing up that stuff about the IRS and business failure – but this accounting stuff is neat! (For the record, that’s the only exclamation point I use in this chapter.) Good accounting gives you a way to manage your business for profitability. And obviously, all sorts of good and wonderful things stem from operating your business profitably: a materially comfortable life for you and your employees; financial cushioning to get you through the tough patches; and profits that can be reinvested in your business, in other businesses, and in community charities.
Let me also mention a couple other darn handy things that QuickBooks (and other accounting systems, too) do for you, the overworked business owner or bookkeeper:
✔ Forms: QuickBooks produces, or prints, forms, such as checks or invoices, by using the information you enter into those check windows and invoice windows that I mention earlier. So that’s neat. And a true timesaver. (See Chapter 4.)
✔ Electronic banking and billing: QuickBooks transmits and retrieves some financial transaction information electronically. For example, QuickBooks can email your invoices to customers and clients. (That can save you both time and money.) And QuickBooks can share bank accounting information with most major banks, making it easy to make payments and transfer funds electronically. (See Chapter 13.)
What Explains QuickBooks’ Popularity?
No question about it – you need a good accounting system if you’re in business. But you know what? That fact doesn’t explain why QuickBooks is so popular or why you should use QuickBooks. (I ignore for one moment that you probably already purchased QuickBooks.) Therefore, let me suggest to you three reasons why QuickBooks is an excellent choice to use as the foundation of your accounting system:
✔ Ease of use: QuickBooks historically has been the easiest or one of the easiest accounting software programs to use. Why? The whole just-enter-transaction-information-into-windows-that-resemble-forms thing (which I talk about earlier) makes the data entry a breeze. Most businesspeople already know how to fill in the blanks on these forms. That means that most people – that probably includes you, too – know almost everything they need to know to collect the information that they need to do their books with QuickBooks. Over time, other software programs have tended to become more QuickBooks-like in their ease of use. The folks at Intuit have truly figured out how to make and keep accounting easy.
✔ Expense: QuickBooks, especially compared with the hardcore accounting packages that accountants love, is pretty darn inexpensive. Different versions have different prices, but for a ballpark figure, you can get an excellent accounting software solution for a few hundred bucks. Not to go all grandfatherly on you or anything, but when I was a young CPA, inexpensive accounting software packages often cost several thousand dollars. And it was almost easy to spend tens of thousands of dollars.
✔ Ubiquity: The ubiquity issue relates to the ease of use of QuickBooks and the cheap price that Intuit charges for QuickBooks. But oddly enough, the ubiquity of QuickBooks becomes its own benefit, too. For example, you’ll find it very easy to find a bookkeeper who knows QuickBooks. And if you can’t, you can hire someone who doesn’t know QuickBooks and then send that individual to a QuickBooks class at the local community
