No one likes Quickbooks. It’s clunky, costs a few hundred bucks, and never seems to work like you would expect it to. But it’s function is mission critical to your small business. Whether you choose Quickbooks or another accounting app (I’m anxious to try Xero), I cannot stress how important it is to always have an accurate accounting of your finances, as these two examples show.
Necessary to Prove Damages
Example one came to me with a potential BP Claim. In order to file a claim, BP needs to have monthly profit and loss statements from 2007-2011. The business owner hadn’t used accounting software, and was surprised by the need for such detailed reports. Had she been using accounting software, those reports could have easily been generated, saved, and sent to me within an hour.
The second business owner came to me with a potential lawsuit. One of the claims for damages was a loss of future profit. Unfortunately, the business owner had not been using accounting software and could not produce detailed records of revenues and expenses. I explained that the portion of damages he was seeking would be nearly impossible to prove without those records (or costly, since we’d have to hire an accountant). I ultimately decided that I couldn’t take the case. I may have felt otherwise had he had those records.
Unfortunately, both of these business owners were at a disadvantage, simply because of lackadaisical record keeping.
It’s also important to download and file your bank statements. Banks have lured us into this feeling that all our information is accessible at anytime via their website. That’s generally true, but some banks have used this sense of security as a profit center.
The business owner in one of the examples above needed to get bank statements that were all over 2 years old. The bank (Capital One) didn’t provide them on the website, and charges $15 for each statement. He needed 5 years of statements. That’s $900!
I haven’t been following my own advice, and haven’t been saving copies of my bank statements. So this past Saturday, I sat down to go to each bank and download all my available statements (Using Hazel), I automatically organized all 152 statements within Evernote. All I had to do was click download. Let me know in the comments if you’d like me to blog about that process). I learned that not all banks have the same retention policies:
- Discover Card: I’ve always been happy with Discover’s customer service, and they did not disappoint here. Every statement dating back to 2008 was available on their website, for free.
- Chase: Like Discover, every statement for the past few years was available for free download. Chase seems to be a nickle-and-dime bank, so this was a bit of a pleasant surprise.
- Gulf Coast Bank: This local bank only had statements for the past year available for download. I didn’t check to see how much copies of older statements would cost. Hopefully, I’ll never need to get statements older than August, 2012.
- Capital One: Up to 13 months of previous statements are available via the web. Apparently, they charge $15/statement for copies of statements older than that. That seems outrageous, but isn’t a huge deal if you’ve been saving them as you go.
At this point, it should be pretty clear that any business owner keep accurate accounting records, and keep (hopefully digital) copies of their bank statements to support those records. This sounds like plenty of work, and it can be, and if you don’t want to do it yourself, there are plenty of qualified bookkeepers on sites like elance.com and odesk.com ready to get the work done. You may not need those records now, but if (and when) you do, you’ll be happy you’ve kept up with them.