What to do about bookkeeping?

We seem to be in the midst of a business bookkeeping crisis but until now, I haven’t taken the time to consider why that might be. A CPE course for CPAs that I took this week points out that the most common progression of career advancement in my field is: 1) Bookkeeping, 2) Accounting, 3) Consulting, and 4) Advisory. The starting point of bookkeeping as an entry role seems to be unchallenged.

In my case, however, it was exactly the opposite. By the time I was through business school I had launched an early generation SEC Registered Investment Advisory firm based on the computerized trading technology of that 1980s era. Then after leaving a Wall Street firm in the late 1980s I moved into a compensation and benefits planning field for business owners that was the focus of my legal education in the 1990s. I sold that business in 2010. I took the CPA exam about a decade ago and accepted my first bookkeeping engagement for a nonprofit organization only a few years ago primarily as a service to that community. Since then, I’ve run into one bookkeeping crisis after another. I wish that I didn’t have to deal with these issues, but I do.

Good bookkeeping is the foundational starting point of financial management for all businesses. As a practical matter, the main introduction I have with bookkeeping work now is when there is a technology integration issue or when we notice a defect that affects other aspects of running the business. Those incidents are increasing rapidly. The number of clients with serious bookkeeping problems is now at an alarming level. The fact that most do not recognize the crisis or the risk only raises my concern.

One chief operating officer of a publicly reporting company offhandedly told me with week “our books are always wrong” without considering the implications of that statement. I can coach them to make improvements. But is this the best approach? I’d like to see them use an independent outside bookkeeper who is accountable for their work. But I doubt they will approve the necessary budget for that.

In another case last week a bookkeeper told me that she was put in that position without any training and that it terrified her. Almost on a daily basis I see social media discussions about bookkeeping g indicating that the write does not have an understanding pf the core concepts of bookkeeping g and general accounting.

I am convinced that the majority of small business owners and nonprofit leaders could not even summarize and communicate their minimum legal bookkeeping responsibilities. Or could they identify key deficiencies and connect those with the most serious problems that could result (ranging from theft and fraud to tax problems to full disqualification of their business).

What to do? Some accountants outsource this work. Some accounting firms achieved growth and financial gains by outsourcing this work, often to people in other countries. I have resisted over data security and legal concerns. I’ve used U.S. based remote bookkeepers but find those relationships do not last more than a year. Will technology advance quickly enough to relieve the burden? I don’t think so. We will continue to need qualified personal oversight of bookkeeping.

Overall, I expect this to continue to be one of the largest challenges of my career ahead.