Accounting professionals are often considered to be the “trusted adviser”, working in the best interests of their client and helping overcome obstacles to business success. At the very minimum, business owners recognize that they need their accountant to get their taxes done, and that relationship alone requires a level of trust that no typical vendor can boast.
Accounting professionals are also often advocates for certain computer technology and/or software solutions, largely because they are viewed as tools which facilitate a better working relationship between the client and their accountant, and which may improve the quality of information available to both. Recommendations regarding the selection of accounting software packages and solutions to record and report on business activities may be made by the accountant, and those recommendations are often accepted by the business owner based on the belief that the accountant has the necessary understanding of the client business requirements.
Making software and other technology-related recommendations to clients allows the accounting professional to potentially influence the decision of the business owner, the result of which is often that the client ends up using a solution that the accountant is familiar with and can therefore assist with setup, training, and support services. Because the accounting professional simply made a recommendation to the client, there is some safety in the event that the recommendation ends up not working out. If the client purchases the wrong software or equipment, the professional retains a level of distance from the issue because they were not the vendor of the product. Recommendations are made based on the information available, and the accountant’s defense may be that they did not have all the necessary information to make a better recommendation.
But what happens when the accounting professional BECOMES the technology provider to their client? Accounting professionals should strongly consider whether it makes sense for them to be the technology provider to their client, or simply collaborate with the client on a recommended solution. The areas of concern may include operational impacts to the client business and cost, but one main area of concern should be in the client’s perception of their service provider.
As the accountant, the trusted adviser, you benefit from a high level of respect from your client. The client recognizes that you have knowledge that they need and that can help them. You have a high status level with the client.
When the accounting professional becomes the technology provider, however, changes begin to happen with the client’s perception of their once-trusted adviser. Rather than viewing their accountant as the provider of a valuable service, the client may now view their accountant as a technology provider, responsible for the performance and functionality of IT systems. Now relegated to the position of “technician”, the accounting professional must overcome a variety of obstacles, including those specifically and only related to the technology. Difficulties with technology may overshadow the other areas where the professional is involved, and will often become the focus of ongoing discussions. While the accountant may have been trying to improve their overall value proposition with the client, the actual result may be a reduction of confidence and trust. Where once the accountant was a trusted adviser, they are now simply an IT vendor (and a replaceable vendor, at that).
With accountants and their clients now embracing cloud computing models, many accounting professionals are recognizing the potential benefits of private-labeling and reselling cloud-based solutions to their clients. Particularly if a service becomes a key element to the workflow, or is an enabling feature of the accounting service, there are compelling arguments for incorporating the solution into the “package” offered by the accounting professional. Cloud solutions are, however, just another “flavor” of technology, and the same issues regarding reselling should be strongly considered.
Accountants provide a valuable professional service to their clients. While technology and information systems facilitate and enable this relationship, the relationship itself is not fundamentally IT-based. For this reason, professionals should use caution when considering how to involve IT solutions in their service offerings. Delivering a service under the accountant business brand communicates to the client who their service provider is, but it also communicates a level of responsibility that the firm may not be prepared to take on. When the systems are working well, the private-label model may work very well for the firm. But when systems fail, the risk to the professional is not only lost productivity, but a potential loss of faith and trust – and business – from the client.
Question:
How do I determine the Cost of Goods Sold for an item?
Answer:
I tell my clients that Cost of Goods Sold (COGS) is any cost incurred that directly relates to getting the sold goods out the door.
I have them ask the question “Would you have this expense if you hadn’t made the sale?”
Typical examples of COGS are product purchased for resale, subcontractors or vendors you hire specifically for preparing a product for sale, shipping materials like packaging, freight costs of receiving the resale product and shipping the product to your customers, payroll/labor costs of your employees who are directly related to preparing the goods to be sold or shipped out (would you have hired them if you didn’t have the product to sell?).
Costs that are not directly related to getting the product out the door are considered Expenses or Operating Expenses and include things like your liability insurance premiums, telephones, office supplies, office-related postage and delivery, advertising, clerical payroll, employee benefits and health insurance for the employees and would be considered costs of managing the paperwork for the overall business,
Again, if you would have the expense if you weren’t selling your product or service, it is an expense considered overhead. If you have the expense only because you selling the product or service, it’s COGS.
This is a very simplistic definition and there are certainly areas of disagreement among different people, but if you relate it strictly to your business you should be able to come up with your COGS vs Expenses.
In a nutshell…
Cost of Goods sold is anything and everything that costs you money to buy items for resale, have them delivered to your store to sell, package and label them, import them, fix them or otherwise make them fit to sell.
If it costs you $100 to purchase an item, $5.00 to have each one shipped to your store, it costs $2.50 each in import duty and taxes, $10.00 each to have them inspected by QC, and $5.00 each to fix little problems with each item, your COGS is $122.50.
The “QuickBooks Client Data Review Tool”, introduced and available directly from the Accountant Menu in both the QuickBooks Premier Accountant Edition 2009 and the Enterprise Solutions Accountant Edition 9.0 isn’t just for Accountants – (in my opinion, anyway).
NOTE: This feature is also available in QuickBooks Premier Accountant Editions 2010 and Enterprise Solutions Accountant Edition 10.0.
As a business owner with multiple employee’s working with your company data file, you should have the ability to “know” what these employees are doing and how they are recording the daily transactions of your company.
As a business owner, you too can access an use the QuickBooks “Client Data Review Tool” and take ownership of your company transactions that make up your QuickBooks company file. The QuickBooks Client Data Review Tool can be “enabled” in any version of QuickBooks (Pro, Premier, and Enterprise), something that’s not highly advertised by Intuit, by setting up the also new, External Accountant User.
How to set up the QuickBooks External Accountant User:
Setting up an “External Accountant User” is a easy as logging into QuickBooks in single-user mode as the QuickBooks Administrator. You then access the Company Menu -> Setup Users and Passwords -> Setup Users -> Add User. Create a new username (something like Boss) and password and in the Access for User window choose External Accountant. Now Exit QuickBooks, re-open your company file and log in as the new “Boss” user. You’ll see a “Client Review” button in the top icon bar section.
What Is the Client Data Review Tool and What Does It Allow Me To Do?
Excellant question!
The Client Data Review Tool:
- was designed to help Accountants detect and correct data entry errors
- is most beneficial when used with the “External Accoutant” user
- provides the best troubleshooting information when each of your employees has their own QuickBooks Username and password
- access all Client Data Review Tools & Tasks when working in the actual QuickBooks company data file (.QBW)
- access partial Client Data Review Tools & Tasks when working in an “Accountants Copy” file
- review company data in Cash or Accrual reporting
- easily modify review period
- Client Data Review Tools and Reports are not available in standard QuickBooks reports
- real-time data “refresh” as corrections are made
- track status of individual review steps
- document review notes
Client Data Review Sections & Tasks
Account Balances
- Troubleshoot Account balances
- Open Working Trial Balance
Review List Changes for added, deleted, merged, or edited elements in:
- Chart of Accounts
- Items List
- Fixed Asset Items
- Payroll Items
- Customer List
- Vendor List
Accounts Receivable
- Fix unapplied customer payments and credits
- Clear up Undeposited Funds Accounts
- Review Accounts Receivable Aging Detail Report
Accounts Payable
- Fix unapplied vendor payments and credits
- Evaluate and correct 1099 account mappings
- Review Accounts Payable Aging Detail Report
Sales Tax
- Find incorrectly paid sales tax
- Adjust Sales Tax Payable
Inventory
- Adjust Inventory Quantity/Values on hand
Payroll
- Find incorrectly paid payroll liabilities
- Run payroll check up
- Review Employee Default settings
- Enter After-the-Fact payroll
Bank Reconciliations
- Reconcile accounts
- Locate discrepancies in bank reconciliations
- Review missing checks
Miscellaneous
- Set a closing date and password
- Review QuickBooks Preferences
Now that I’ve provided you with a brief overview of what you can do with the Client Data Review Tool, let’s talk about some specifics.
The Troubleshooting Account Balances task will allow you to review any changes made to prior period dated data, including:
- “freeze” your prior period reviewed balances. The next time you review the file your stored balanced from the prior period will be stored and compared to the balances that currently reside in your QuickBooks file
- view Last Review balances and Balances that currently exist in QuickBooks
- Itemize in debit/credit format the “differences” detected between your Last Review balances and the current balances
- view a Transaction Change Report, listing those changes since the last review period. Drill down to the specific transaction(s) that create the difference
- if the Client Data Review Tool finds a difference, a “recommended” journal entry is displayed to restore your original balances. This eliminates the “guesswork” while allowing you to choose whether or not the suggested journal entry actually gets posted or not
- modify the display view to “Only show accounts with different balances”
Track Changes to QuickBooks Lists.
I cant tell you how many times we discover something “missing” in our QuickBooks lists, only to discover that Ben or I had changed “something”. With this Tool in the Client Data Review you can track changes, including added, deleted, merged, and edited elements in your
- Chart of Accounts
- Items List
- Fixed Asset Items
- Payroll Items
- Customers
- Vendors
Fix unapplied customer payments and credits.
Use this tool to detect if a credit memo or a “receive payment” transaction was created but not applied to the original open invoice, and then use the *Fix Unapplied Customer Payments & Credits “clean-up” tool to apply the open credit or unapplied payment to the open invoice.
Clear Up Undeposited Funds.
Used to correct balances in the Undeposited Funds account caused by creating a “Receive Payment” entry and not properly including that payment in a “Make Deposits” form.
The Client Data Review Tool displays a very simple window of all customer payments that are stored in the Undeposited Funds account and any Make Deposits transactions that were recorded and assigned to the customer(s) in question.
You can then quickly associate the Receive Payment transaction with the corresponding Make Deposits entry, and the result is that the customer payment is no longer included in the Undeposited Funds account and the overstatement in the account used in the Make Deposits form is reversed in one simple click of the mouse.
Fix Unapplied Vendor Payments & Credits
*Used to detect and correct instances of when a Vendor Bill is created but later a Write Checks form is used to pay the vendor.
A simple window is displayed allowing you to assign the Write Checks form to the corresponding open vendor bill, removing the open vendor bill from the Accounts Payable report.
Find Incorrectly Paid Sales Tax
Use the Client Data Review tool to run a report displaying “Incorrectly Recorded Sales Tax Payable Payments” by check or journal entry. If entries are found, you then make the necessary correcting entries by
- voiding the original check and re-creating the payment through the Pay Sales Tax function
- create a Sales Tax Adjustment
Find Incorrectly Paid Payroll Liabilities.
Use the Client Data Review Tool to run a report displaying “Payroll Liabilities Paid by Regular Check” report. These are entries that paid payroll liabilities that were not created using the Pay Liabilities form. You can then make the correcting entries by:
- voiding the original Check form and re-creating the payment through the Pay Scheduled Liabilities option
- use the Adjust Payroll Liabilities option to create the correcting adjustment
Marking A Review as Complete
After you have finished reviewing the entire data file; or even completed a portion of the tasks that are available in the Client Data Review Tool, for a specific time period you can mark your review as “complete”. Marking a review as complete will do the following:
- transfer your reviewed balances to the Last Review Balances column in the Troubleshooting Account Balances task
- when starting a new review, you can open the prior review or continue to a brand new review period
- print a report of the review
All of these tasks and items are equally important to the business owner as they are to the accountant who prepares your taxes, at least they are in my opinion.
Oh, one other thing that I want to mention, when using the Client Data Review you can access the Audit Trail and filter the Audit Trail Report to show only transactions added, deleted, merged, or otherwise modified by a specific user.
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