Capturing Expenses Without Accounting
Small firms don’t need accounting.
Your accountant doesn’t agree with me.
He’s wrong unless your firm has over 20 members.
The problem with accounting is that it requires brain-surgery-precision for a task that doesn’t much matter. When you stop to think about the time, effort, and aggravation that accounting requires; and what benefit you receive in return; something is fundamentally wrong. Basically you can’t afford to do accounting until you are large enough and complex enough to afford a bookkeeping employee.
I know this because my six-person firm used accounting for most of our existence and got almost no benefit from the tens of thousands of dollars per year that we spent on accounting. Why did we do it?
Ignorance. I thought I had to. I mistook AIA publications as applying to me. They don't. They apply to much larger firms than I ever had.
About 93% of architectural firms are smaller than 20 people. They can't afford accounting. They can only afford bookkeeping.
So what is the difference?
Here are my definitions.
Accounting is a method of capturing all the financial transactions of a business with an accuracy of one cent.
Bookkeeping is a method of capturing all the financial transactions of a business. Period.
I don’t think very many firms need to know ’to the penny’ how every transaction adds up. Personally I think that knowing your profitability to within $100 is just fine. Why? Because it all depends on time sheets for accuracy and NOBOBY has perfectly accurate time sheets. Even if you are really trying.
I am not going to belabor this point. I know I am oversimplifying things. Either I am striking a chord with you or I’m not. You are only keeping track of your money because of the requirement to pay taxes. Without that requirement, you would only be watching the balance in your bank account, plus just enough record-keeping to know what projects and people are responsible for the size of that bank account. Anything more than that is not justifiable - except for the need to pay taxes.
It’s an 80/20 proposition. Bookkeeping is the 80% that you want. Accounting is the 20% that you need. Perversely, the accounting will take 80% of your time. Let an accountant do the accounting.
Here’s the alternative. And it is pretty painless. You can collect expenses as a side benefit of using MyCorbu to collect time. MyCorbu pays for itself just for timekeeping. Using MyCorbu to collect expenses saves you even more time by getting you out of the accounting business.
Here’s how to capture your expenses (and income).
MyCorbu is already designed to capture reimbursable expenses for you. Mileage, too. For other expenses, just navigate to this Bookkeeping page, shown above, and click the 'Add Expense" button. Fill in the form. Done.
Income works the same way. This is so easy that I suggest that you take care of the entries as they arrive by email or snail mail.
When you capture mileage for a project, two transactions are created to assist you in reimbursing the staff member and in invoicing your client. The mileage rate and markup for your client are calculated based on your settings for this project. Reimbursable Expenses work similar.
The Big Advantage to having this tool part of your timekeeping system is that any time that you want to check on the status of finances, it is just a click or two away. Here's the Status Report.
The Status that is reported is two-fold, your financial status overall and your status project-by-project. (I hope your projects do better than my Architekwiki projects.)
Expense Category is collected when you enter an expense (income) so that your reports are ready for shipping off to your accountant whenever you want their input.
Many other features are found by looking at the buttons in the top image above.
MyCorbu aspires to being the new standard bookkeeping tool for architects. To get a better sense of the 'money features', you can explore the HELP articles that explain them (with many screenshots). I think you will be surprised how inexpensive a subscription is.
You can sign up for an account here. OR Take a Test Drive here.
By logging in your expenses along with your time you capture a major part of your firm’s financial information. MyCorbu's reporting features can tell you where you stand whenever you want to know. Easily. Quickly.
And at tax time just export your data for your accountant, or make them a User, and let them collect what they need.
If you would like articles like this delivered to you by email, Sign Up here.
Follow on Twitter @Architekwiki
Comments are closed.
Your use of Architekwiki is implicit agreement with the
© 2012-2022 Architekwiki