Embarrassment and Learning

Next time something irks you, step back and look at it in a different way. Next time someone tries to make you feel like you messed up, instead of defending yourself, stop and wonder – well, what if I did mess up? What if that is a possibility?

A scientist, or, perhaps, a scientist without special interest in proving one hypothesis over another, should actually be intrigued by mistakes. If you are going for a grade or a grant, though, it can be disappointing to fail. But if you are just a child, experiencing gravity or entropy or chaos, it can be pretty fascinating.

Freud pointed to embarrassing things as the beginning of the solution. If someone could just fess up to something embarrassing, it might help.

Don’t let being embarrassed about something stop you from learning that thing.

The Best Teacher

It is hard to find a good teacher. Good teachers have flavors, like chocolate cookies. They have laughter. They sometimes have comfort and they sometimes they do not have comfort, like a strenuous soccer coach. Sometimes they have tears. Sometimes when someone does something that actually helps, the tension you have been holding in yourself releases like a rubber band coming out of shock.

Even though people learn a lot on their own, blossoming in neglect, given time to explore on their own without being interrupted by helicopters and micro-managers, even so, good teachers are nice to have. Self-learners, if you really prod, will smile fondly when talking about some strange person or conversation or somebody’s way of approaching a problem that made an impression on them and caused them to stop and think about something they wouldn’t have otherwise thought about.

But what do you do if you really want to learn something but you just can’t master it? When you go to the library and take out books on a subject and are so excited and interested but your eyes droop and boredom and pain set in when you start reading. And everyone raves about the author or the approach but you just don’t get it. And you stumble year after year with a subject that you wish you learned in school but you aren’t in school anymore. Where do you find a teacher?

Unfortunately, odds are against you that you will find a good teacher, especially when you aren’t in  school. Even when you are in school the odds are against you.

You are going to have to cobble together a teacher from the assortment of people and media around you. The IRS agent who audits you will teach you things; consider the penalty you pay to be a tuition. The boss who humiliates you by reminding you constantly of your mistakes; realize that you are gaining more out of the humiliation than your boss is – after all they have to suffer the fact that they hired the wrong person; you, on the other hand, are growing in your knowledge. The random conversation you overhear that exactly explains some concept you have failed to learn over the years from dry books – here is your chance to jump in and get some back-and-forth dialogue going.

The best teacher, absent a good teacher, is persistence. It is hard to find a good teacher.

Necessity and Invention

Necessity -> Invention. Are these two really correlated? If so, then why do people find it unusual when someone overcomes terrible difficulties. Shouldn’t terrible difficulties always result in the invention of a solution?

But if the norm is that most people do not overcome terrible difficulties, then where did the saying (necessity is the mother of invention) come from?

Necessity sure can be a great motivator. But not always. It can’t be motivating when a person doesn’t realize their necessity. Immersed in their situation, shaped by it, pickled by it, they may not think anything is wrong. Or maybe they do feel something is wrong, feeling despair, guilt, terror, rage, jealousy, masochism, amusement, self-pride at their own endurance, but don’t conceive of the possibility that there is something different that they can do.

If you study Darwin, perhaps mistakes are the mother of invention. A nondeliberate evolution, the result of random errors. Penicillin discovered in a dirty laboratory, caused by accident, not the planned variables.

Perhaps boredom is the mother of invention. Or happiness.

I think invention is the mother of invention. Every now and then you simply have an inventor. One who doesn’t mind a mistake or two (hmm, what if we take these byproducts of failure and find a use for them). And what happens is that the inventor will, partly motivated by the sheer joy of it, poke and prod and research and build and rebuild until they have a solution, for which they hopefully will one day have a problem.

And here is where teachers come in. Teachers take these pure products of joy, these inventions, and they force students to memorize them. Here is the kicker – you can’t memorize an invention. Invention means exploring the unknown, not memorizing the known. And the students are paralyzed with fear of forgetting a step, of misremembering the components, of placing the wrong shape in the wrong hole, the wrong number, the wrong rule at the wrong time.

If you don’t want to micromanage someone, you have to let them become an inventor. You have to say, here are some problems – wait, scratch that, reverse – here are some knickknacks – go play with them. We can give them the problems later. It is no accident that kittens spend their early life playing before they grow up and hunt. Or perhaps it is an accident. A fun accident of genetics that instilled the instinct to play before the necessity to hunt.

You can invent all the Excel templates you want. But don’t expect anyone to have an easy time learning to use the template that you invented. Until you teach someone how to invent their own Excel template, you don’t do any good by giving the template to anyone.

But how do you teach someone to invent something? Do you put them into that paralyzed state of the student trying to memorize one step and then another? Or do you tell them to just go out and discover?

Give them something to play with. Tell them – once a month, I want you to build a report out of this raw data. The data can be retrieved from that mainframe over there. You will ask that mainframe just for the data for these investors, for this time frame. Once you have that data, you will filter, calculate, present the data, you will show details of certain aspects of the data, you will find out if sums of data meet certain criteria, you will find out whom to pay what portion according to these rules.

Once the person knows they have to create such a thing on their own, they may confess they have no familiarity with the tools, in which case, show them. Show them how you retrieve something from the mainframe. Show them the way you limit the query to just these investors and this time frame. Show them how to type in a formula. Show them cool ways to present the data. Show them ways to drill in on detail for data, and ways to see if criteria are met. Maybe you do it once to show them these tools exist. But then you wait for them to ask. Because they won’t absorb it until they ask.

If simply telling someone to “go out and discover” ways to accomplish such things doesn’t work, then maybe you are dealing with people who are not inclined to explore or initiate. They need instructions line by line, step by step. If so, it is a big responsibility to supply those things to them. This is why most companies follow something called “Best Practices.” The goal of these Best Practices is to allow as much production as possible, as much morale, as much utilization of resources and development of people as possible.

Most people already know (that vague jealousy, remember) that there is something different that other people can do. But they need to know that there is something different that they themselves are capable of doing. Best Practices are designed to provide an environment that tempt people to explore. Such practices can be as simple of having two monitors at a computer, so a person can have a wider work surface, or subsidizing a staff member’s education costs. It could be giving feedback on someone’s work, so the person knows if they got 100% correct, or if they have a blind spot they didn’t realize. It could be subscribing to a research database. It could be allowing cross-training. It could be having a suggestion box.

Best Practices can be as complex as having a change-management process whereby problems and solutions are brainstormed and solutions are implemented with the understanding that implementation requires effort, repetition, feedback and patience while the kinks get ironed out and the vulnerabilities are discovered, and that it requires the input, support and understanding of a team, and that it might fail and that’s part of the process, but that the people involved need to feel empowered to fix things that fail and to not give up.

These are the things that by consensus companies have discovered to be most conducive to having a workforce that is capable of inventing and/or producing. Of course there may be better ways. I think that a better term may be “Recommended Practices.”

Here are some of my “Recommended Practices” regarding inventing an Excel template:

  • Color code cells with formulas blue – so other people don’t overwrite them. You can highlight all formulas on the home menu at once by clicking Find & Select -> Formulas (or by hitting control+g and choosing special -> formulas). Once they are highlighted, you can color all the cells with formulas blue with one click.
  • People will still overwrite formulas with hard-coded values, even when the cells are colored blue. Figure out a solution to this. I do not recommend password protecting the cells, because I find it insulting to the user or to the next creator, and is contrary to the intention of allowing people to understand and invent. So far the only solution I have found is to create a macro that makes a cell bright pink when it is supposed to have a formula but instead now has a hard-coded value. Since macros are often disabled by default, there must be a better solution – please let me know it.
  • Color code cells intended for input yellow – so other people know cells that can be overwritten or the blanks that should be filled in
  • Label columns
  • If you are filling in text fields, only one concept should be shown in each cell. For example, if the column header is “PAID?” a yes or X is easier for the user to glance at than “they paid $800, but paid late, and with cash, and in two installments, and they are still short by $100.” If the info is that vital, make separate columns: open balance // due date // pmt 1 amount paid // pmt 1 date paid // pmt 1 method // pmt 2 amount paid // pmt 2 date paid // pmt 2 method. Most likely such info is just noise, so if you are filling in such data, try to simplify the amount of info you provide, so the user can hide the columns that are extra inapplicable data.
  • As much as possible, do not hard code numbers in formulas. Instead, have all formulas be functions of other cells – so others can see the components of the formula labeled in their own cells, in case the components need to be changed. If the cell references are too confusing for people to follow the logic of, consider using name references instead (it may be easier for someone to understand a formula that says FUTAwages * FUTApercent then to read a formula that says AE21 * BH7). There may be some drawbacks to using name references, so weigh the pros and cons. It may be hard for others to edit your template if they do not know how to work with name references. Also since name reference are absolute references, the formulas do not adjust when dragged across cells, which may call for some tedious editing. The ultimate goal is to allow people to understand which values are being used in a formula, and where those values are coming from, which can be nicely accomplished with name references.
  • If possible, break formulas down into sub functions on separate lines, like in school when you were told to “show your work” – so other people understand the process. Label your reasoning on each line (for example: first line: beginning inventory. Second line: plus purchases. Third line: less sales. Fourth line: ending inventory). Sometimes this is not feasible, since intermediate lines get in the way of charts or make it impossible to do calculations on rows of contiguous data. In such cases, consider if the data can be pulled from another tab or location on the worksheet where the formula is broken out.
  • In general, do not obfuscate. The template may be one that you yourself only use once a year. Assume you will be pulling it out having totally forgotten how to use it. Leave yourself some hints, or better yet, spend the extra time in making the template so clear and simple to use that you can see immediately how it works.
  • Learn the purpose of filters. Learn the purpose of subtotals. Learn the purpose of pivot tables. A pivot table will filter and subtotal for you, however sometimes a simple subtotal or filter will be faster and more useful than getting all fancy with a pivot table.
  • Learn how to make an IF( ) function, and a nested IF( ) function. Learn similar logical functions such as AND( ) and OR( ).
  • Learn the joys of conditional formatting. Also learn that applying a filter may do a better job of drawing your attention to items of certain values.
  • Learn how use the various lookup functions. Learn their limitations and what functions to use to overcome these limitations (for example, VLOOKUP requires that the value you want to retrieve is in a column that is to the right of the column with the value you are supplying – learn what to do if you must retrieve a value on the left side instead of the right).
  • Learn how to copy->paste values in case you ever need to work with a bunch of data as their value instead of as their formulas. This can be useful for some actions such as concatenating cells and then wanting to show the result as new numbers, or new dates, or new beings unto their own right.
  • Ask the internet if a function for a certain task exists. You will be amazed at the number of functions that exist.
  • Learn about functions and add-ins specific to your field. They are too numerous and diverse to list.
  • Learn how to use the Formula tab to trace and evaluate the values of cells in a formula and troubleshoot errors.
  • Find a coworker who can show you stuff, watch a YouTube tutorial, use the tutorials built into Excel itself (for example, Excel 2016 has a “Take a Tour” in its Open Template screen), read an online tutorial, take a course, pay for a webinar, buy or borrow (love your library) a manual, whatever it takes to learn Excel.

Accounting Interruptus

When you are in the flow, the last thing you want is to be interrupted.

Usually what interrupts you is another person in their own flow, crossing paths, who wants you to switch gears just for a second.

If you don’t help them out, their flow is interrupted.

If you do help them out, your flow is interrupted.

Another thing that interrupts the flow is a slow program or a slow page loading.

Because your mind is working faster than the computer, you don’t want to put on the brakes and wait. So you switch gears to another program, to give the first program time to load. This is called multitasking. It builds up so that end of the day you find yourself trying to close out of fifteen open, half-completed windows, wondering why it takes you hours to wrap up for the night.

A third thing that interrupts the flow is when an important task invisibly (like a thought or a verbal reminder) pops up on your radar. Not wanting to forget, you either drop everything to begin the new project immediately or scramble for a scrap of paper or for the electronic scheduler to write yourself a reminder. The mere act of scrambling interrupts the flow.

If you are a receptionist or the kind of person who gets calls and questions and barrages or demands every half minute, it is likely you will skip steps, close out items incompletely, send off packages with no postage, checks without signatures.

If you are an accountant and do not have a receptionist to take the brunt of your interruptions, or if your receptionist solves their questions by yelling out the problems across the room so that everyone in the room is blinded into roadkill, well…

It is about opportunity cost. Will switching to a different activity benefit myself, the client, the company, or will it cause more things to be left undone? When things are hectic, each decision needs to be weighed. The beauty of multi-tasking is getting more done in the same amount of time. The disasters of multi-tasking are messing up more in the same amount of time.


During tax season, my house gets messy.

Cleaning is like paying bills. If you don’t do it on time, you get penalties and interest.

When not kept in check, the mess spreads.  A sandwich plate with a few crumbs, that would have taken only a few moments of time to rinse off, inherits the slime of dishes packed on top. Unable to find things that have piled up, I overturn the piles and spread the mess further.

The clients that rebel the most against paying their taxes end up paying the most to the government in the long run. Those who do not set aside money for their taxes, year after year are punished with penalties, interest, garnishments, tax liens on credit reports, and more.

I shouldn’t judge if I don’t set aside the time to keep my house clean during tax season, knowing the consequences. To set aside something requires joy, or an understanding and control of chaos, or just plain discipline if all else fails. It is like exercise and healthy diet – fun to some, sensible to others, and an act of force by the rest. Without it, you get sick, overweight, depressed. It isn’t something you can do only sporadically.

What else is paying bills analogous to?

How to Learn Any Bookkeeping Software (Part 2)


The next step, after entering your bank account transactions, is to output some basic reports, to see the effect of your entries.

If you are working in excel, the closest thing you will get to a report is a pivot table. However, you will need to have a structure in mind to guide your creation of the pivot table. If you are not familiar with the concepts behind basic financial reports and how they are supposed to be presented, I recommend that you do not use excel. Instead, use a bookkeeping software that creates the structure for the basic recommended reports.

Here are the two most basic financial reports:

  • The Profit and Loss. This report may be referred to using various names. For our purposes, consider the following to be synonyms: “Profit and Loss Statement,” “Income statement,” “Statement of Revenues and Expenses,” “Statement of Operations.”
  • The Balance Sheet. Again, known by various names, any of which are sufficient for our purposes: “Balance Sheet,” “Statement of Financial Position,” “Statement of Assets, Liabilities and Net Assets.”

The Profit and Loss is the report that is most familiar to people.

However, an accountant will usually spend their initial time looking at and fixing the Balance Sheet, not the Profit and Loss. The reason for this is that the Balance Sheet is a major way to proof the Profit and Loss.

The Balance Sheet has, as one of its components, the net income.  If your software program allows you to drill in on the line item “Net Income” on the balance sheet, you are in essence creating the Profit & Loss report.

Because a Balance Sheet has to, well, balance, a change in the balance of any one account (a bank balance, a loan balance, or owner’s equity) will affect the balances of the remaining accounts.

The Balance Sheet represents “The Basic Accounting Formula.”

Assets = Liabilities + Equity

Sometimes a Balance Sheet is presented in a side by side manner, to emulate the formula, and to emphasize that debits (which represent increases to asset accounts) are on the left and that credits (which represent increases to liability or equity accounts) are on the right.

(left side) Assets = (right side) Liabilities + Equity:

Note in the example Balance Sheet given above, that there is a negative number in one of the accounts (Current Liabilities). This is where an accountant usually frowns.

A negative number is contrary to what is expected. Sure, it is possible for a liability to be negative (for example, by overpaying a credit card), however, it is more likely that the balance is just plain wrong (why would anyone deliberately overpay a credit card?).

It is for this reason that an accountant usually asks the client for their year-end bank statements, loan statements, credit card statements, year-end inventory count, list of equipment on hand, etc. The accountant then looks at these items and compares them with the Balance Sheet.

Does the credit card company really agree that they owe you a refund for the overpayment? Or did you just forget to record some of your credit card purchases? Drilling in on the line item may uncover something like this:

Which shows that no credit card charges were entered after October 26, 2017. Were there really no credit card purchases after that date? Very unlikely, considering that a payment dated December 3rd indicates there was probably a running balance of at least $4,513.04 in mid-November. More likely the bookkeeper went on holiday and didn’t enter the remaining credit card charges.

Once the bookkeeper does enter the remaining credit card charges for the year, the net income of the company will be affected by the additional expenses.

So the point here is to look at the Balance Sheet. If the Balance Sheet jives with what really is in the bank (factoring in checks and deposits in transit), what inventory and equipment really exists, what really is owed on credit cards and other loans, then it is fine to look at the Profit and Loss. On the other hand, if there are glaring negatives or out-of-the-ballpark figures on the Balance Sheet, then why even look at the Profit and Loss?

Now, this is not an attempt to teach you accounting. It is simply an attempt to get a handle on whether your entries are complete and reasonably accurate. Too often people get caught up in the details and don’t know the consequences of their details. Looking at basic reports and seeing if they reflect reality is the best way to learn whether you have been entering the details correctly.

Using this concept, the concept of looking at reports to see if your entries are correct, you can begin to organically learn accounting concepts. My first bookkeeping software in the late 1990’s was Peachtree, which had a button next to every entry that displayed the transaction in a text window showing what increased on the debit side and what increased on the credit side. It was like a mini report for any transaction that I entered. I had never been formally introduced to the concept of what a debit was and what a credit was, but this was a way to experiment and learn. See if your software has this feature (in QuickBooks there is something similar: if you are in a transaction you can go to the reports menu (or in some of the newer versions of QuickBooks there is a button in the reports tab in the transaction itself):

This should show you the debit and credit for the particular transaction:

If you notice, the Amex account is increasing on the right, since Amex is a liability. The insurance expense is increasing on the left, since an expense is an asset.

Of course, if you have any sense at all, you are not going to accept that an expense is an asset. Wrestle with it a little bit. Come up with arguments for and against it being an asset.

Isn’t insurance like an emergency fund, in a way? It sure is good to have when you need it. Supposedly, all expenses, assuming your goal is to make a profit, all expenses can be thought of as the subproducts and services that go into building and selling your own products to make income.

And when you convince yourself of that, then turn it around and think of examples that don’t fit. My favorite example was from the lecture I was listening to for my CPA Review. The instructor was trying to explain governmental accounting. A government decides to spend money on weapons. Is buying weapons going to bring in more revenue? “Not unless it points those weapons on the taxpayers to force them to pay their taxes.” Similarly, is spending on the elderly and disabled going to bring in more revenue? Are we creating assets with such expenditures? Or are we asking the wrong question. A government is not supposed to be a business, making profit for itself to the detriment of the people for which it is supposed to serve.

Which is why the ultimate definition of a debit and a credit is simply “debits are on the left, credits are on the right.” If assets happen to be on the left, then so be it. And if expenditures happen to be on the left along with assets, then it may or may not mean anything profound. Approach it like a scientist, see the results, experiment. When there is a concept that seems to be hard to accept, try to think about it in various ways.

Another example of a concept that throws newcomers off is that a bank account increases with debits. Pretty much all of us have received  a statement or message from the bank that our bank account has been “credited” with a deposit to it, and has been “debited” by a withdrawal from it. However, in the bookkeeping software, when you look at a deposit to the bank, your own software shows it as a debit, not a credit. And vice versa for a withdrawal.


See how, in the image above, the bookkeeping software indicates Deposits=Debits and Withdrawals=Credits.

Next to it is the bank website which indicates Deposits=Credits and Withdrawals=Debits.

The reason the bank treats your deposits and withdrawals in a backwards fashion is that the money is not their money. It is your money. So when you deposit money into the bank, their liability to you goes up (credit).

Now take the case where the bank loans you money, say, in a credit card.

Their statement will say that the payments are credits and the purchases are debits:

The bank, loaning you money, treats their loan to you as their asset (and assets increase with debits).

If you are anything like me, when I loan money to someone I definitely do not consider it an asset. I consider it a foolish waste of my hard-earned money, knowing that I will never see it again. It may take a while to see why anyone would think of a loan receivable as an asset.

To a bank, they still own the rights to that money and they feel relatively confident that most of their loans will get repaid.

Again, your gut instincts may be fine. How can it be an asset if you know you will never see that money again (when your whining relative guilts you into lending them money, trust me, you will never see it again. It is not an asset). This is what happened in the 2008 recession. All the banks had all these “assets” (after all, when they recorded the transaction and lent the money, their bookkeepers had to debit an asset called “mortgage receivable” to record the loan). By now we know what types of loans these were. They were kiss-your-money good-bye loans that the bank would never see come back. The financial collapse was magnified because the banks kept trying to present these loans as assets.

But I digress. The point is that the banks give you pages out of their company financials. They show you their own statements, where their loans to you are their assets, and your bank accounts with them are their liabilities. You have lent them money when you deposit money into the bank, so it is your asset increasing (as a debit in your own bookkeeping software) and is the bank’s liability increasing (as a credit in the bank’s bookkeeping software).

Just remember. Debits on the left. Credits on the right. And that right and left are relative depending on which direction you are facing.

How to Learn Any Bookkeeping Software (Part I)

Approach all bookkeeping software the same way, no matter the year, make and model of bookkeeping software you have (QuickBooks, Quicken, Accountedge, Peachtree, Microsoft Money, excel templates, etc).

Figure out how to open the right file.

The software is a program that allows you to view and edit a file. The software may be stored in one location (e.g. Program Files) while the file it is opening may be stored in a different location (e.g. My Documents).

The software is a program that theoretically allows you to open an infinite number of files, as long as those files are readable by the program.

For example, Microsoft excel is a program that allows you to open, view and edit excel files. Microsoft excel is also capable of viewing and editing plain text files and some other types of files.

The reason I mention this is because sometimes people get the program itself confused with the file the program is opening.

By convention, no matter what type of program you have, there is a File menu. If you click on the File menu, you will be able to either:

Create a new file


Open an existing file

These choices may be presented in various ways, but the gist is the same:

If you create a new file, be sure to note where it is saved, so that you can open that file again later:

If you have many versions of the file (the file, not the program) saved on your computer or among your team you are liable to get into trouble. This happens when a file gets sent back and forth between people, or when someone sends themselves a copy of the file to work on a different computer or saves copies of a file for other reasons. Often what ends up happening is that nobody knows which is the working file and which file is the rough draft. My solution is to one have only ONE bookkeeping file on your computer. Trash all draft files except the working file. If it turns out that you trashed the wrong file, you can hopefully retrieve it from the trash.

Ok, enough already, by now you have performed the first step: opening the right file.

Once you are in the right file, figure out how to view the check register.

The learning curve in using any bookkeeping software is two-fold:

Understanding where the software hides its menu items

Understanding accounting principles

The reason to go straight for the check register is because this will put learning curve item #2 on hold (a check register is the most instinctively understood thing about accounting, so there are no real principles to learn), leaving only learning curve item #1 to tackle.

A check register looks like some variation on this:

An excel check register may look like this:

The point is, you will know it when you see it. When you are creating a new file for the first time, there will be no check register, or, if the software creates a skeletal structure, there will be an empty register:

In order to find where the program hides the check register, or how to create a bank account register, you have to google the instructions, or browse the help files. Each program is different, and each year companies that sell these software programs “improve” them by changing where the menu items are hidden. So it is up to you to poke around until you find how to create or open a check register. If you are using excel as your bookkeeping software and you don’t know how to create a check register, google the instructions. Somebody is bound to post instructions on any question you have.

Ok, once you have figured out how to get a check register in front of you, you now need to enter your first transaction into the register.

If you are taking over the bookkeeping file from a prior bookkeeper, then there already should be a bunch of transactions entered, and you just continue where the prior bookkeeper left off. This is the easiest scenario, since you can always use the prior bookkeeper’s style of entry as a model to figure out the gist of how to continue entering items.

If you are creating a company file from scratch, and creating a check register from scratch, and the bank account has newly been hatched at the bank, with a beginning balance of zero, then the first transaction will be the deposit into the bank that caused the bank account to be opened. The explanation of this amount could be any one of the following: from “income,” from “bank account xyz,” from “owner’s investment,” or from “loan.” If it is a loan, it is good to be clear whom the loan is from, so as to know whom to pay back (“loan from mafia” versus “loan from parents.”)

If you are creating a company file from scratch, and if you are entering a checking account that you have had for years, the beginning balance will be the balance on the last day of the prior year. You enter this amount as a deposit, and the explanation of this amount can be “opening balance.”

By now, you will have had all sorts of pop-up messages from the software, asking you to add names and accounts to its names list and accounts list. Humor the software by saying yes to add the names, but do not feel the need to fill out all the details about each name or account. Keep everything as minimal as possible. Do not worry about the effect of choosing the wrong name type or the wrong account type. Mistakes will be inevitable, your goal at this time is to just enter one transaction as best you can.

As an aside, if you really insist on a rule of thumb for a name type, choose “vendor.” And if you insist on a rule of thumb for an account type, choose “expense.” These are the safest choices to make when in doubt. Later, when you understand more about the program, you can at least find where you have created your objects and fish them out and correct them from there.

Ok, once you have figured out how to enter the first transaction, you now need to enter all the remaining transactions.

Watch the running balance in the register, to see if it is reasonably within range of the bank balance that shows up on the bank statement. If the balance drifts away from what the bank shows on the statement, then evaluate why it is at such variance. You may want to copy the bank statement line by line, to get a feel for the software’s ability to mimic the running balance exactly as the bank presents it to be.

As you get more sophisticated with the check register entry, you will find it much more useful to enter checks dated the day you actually write the check, rather than the date the check clears the bank. Realize that this will cause your running balance to differ temporarily with the bank’s running balance during the days that the checks are outstanding, but that the balance will eventually agree after the bank clears all the outstanding checks.

Do not do so much that you get allergic to bookkeeping. Now is a good time to take a break.

Above and Beyond

Above and Beyond

Performance reports. I am not talking exemplary employee performance here. I am talking company performance.

Ok, imagine this. You are trying to get away from the everyday grind of your accounting office, and so you start looking for another job, while not yet quitting. For whatever reason, even working at a gas station seems better than your life at your current accounting office. So there you are one morning, interviewing for a job at a gas station, and after the few minutes of employee initiation, you are given some spreadsheets to work on.

As you sit calculating and pouring over and formulating these spreadsheets, time flies by you, lunch time is not important, you are understanding the numbers and where they are heading and what shape they are taking. Ideas multiply with every new formula you put in place, and you are developing the spreadsheet like a computer programmer, enveloping the system, separating it, searching it, building off triggers, digging into it, breaking through it. The walls of the gas station are a dry husk depending on you to run their numbers, witness the vitality beneath their façade, the variances they are subjected to, the environment they are part of.

When you finally look up, it is only due to the eventual urgency of needing to go to the bathroom. You stumble up from the table, your stiff muscles unfolding, you look around disoriented and ask the nearest team member to show you where to go. You follow him and as the two of you walk through the back room, you see a tiny dingy bathroom off to the side, which the two of you have walked past. He sees your questioning glance and says, “oh no, not that bathroom, I could see that you are working on a whole ‘nother plane, you can use the bathroom over here –“

And you are brought to a whole new section that is undergoing construction, but certainly isn’t tiny, dark, dingy and used. No, this is new, the blue tape still on the base-boards, wood trimming still in stacks, the drywall still bare in some places.

And after you have freshened up in the unfinished bathroom and come out, the team member tells you that you are ready to see a whole ‘nother location for the job, and you get into the passenger seat of his convertible sports car, strap on your seat belt…

… and realize it is 6 o’clock at night and that your accountant employer is expecting you (remember, the accounting office you were trying to get away from). Yes, apparently your boss at the accounting office begins working with staff only after the last of the client appointments of the day, beginning at six at night.  You are not ready to confess that you have been testing the waters of other employments. However, you don’t have your cell phone with you to call and make lame excuses to your boss.

So, you curiously take stock of your situation. Like I said, you have your seat belt on. The warm evening summer breeze is traveling across your face and the car is running happily along the empty beach highway.

You arrive at the beach, and you ask, what is this place? People are hiking the tall dunes, or along the sands or swimming deep along the surf parallel to the shore. This is the place of realization, you are told. You look around and look at the people a little more closely. Even though they are all ages, some extremely elderly, they are all strong, swimming in the surf, walking up the hills. So you start walking steeply up the mountainous dunes, looking out at the beautiful view of the ocean along side. The sand pours off the high dunes in the wind, gets in your eyes, and you continue, realizing you are happy. Even with the sand forcing your eyes closed and your hands to shield your nose and mouth, your legs and lungs battling the exhausting and difficult slope, you are happy.

And that is my description of developing and working on reports. I am talking budget reports, aging reports, compliance reports, break-even analyses, and all the reports that are not the “basic” financial statements.

I am also talking of all the nameless reports that cannot be spit out of any boiler-plate template. This is where your own filters, customizations, excel magic come to life.

These are the reports that are meant to be mulled over, for ideas to be teased out of, for plans to be sprung from. If you ever want to feel the beauty of bookkeeping and accounting, if you ever want time to fly by without noticing it, if you ever want to solve a problem, illustrate an idea, follow a theoretical, identify an anomaly, then create a report, and play with it.

I know some are looking back to their school days and the word report has a nasty taste. Or they are thinking of a report that someone ordered them to create out of fluff, to give the illusion of profits or potential. True enough, these reports are painful and time moves slowly during their creation.

A real report is a path to a realization. It is an attempt to explore questions that have moving parts to them. A real report shows how variables affect and compare with other variables. A real report has triggers that sound alarms or perform new functions when thresholds are reached, and that presents results clearly. A real report is a fun thing to create.

In and Out

There is an old story that goes like this:

Two Skunks

Once there were two skunks, In and Out.

When In was in, Out was out,

and when Out was in, In was out.

One day Out was in, and In was out.

So Mother Skunk told Out:

“Out, go out and bring In in.”

So Out went out and brought In in.

“How did you find In so fast?” asked Mother Skunk.

“It was easy,” Out said: “Instinct.”

I liked that story when I was a kid, it had a lilt to it. I liked that when In was In, Out was out, and vice versa. I liked that there was a surprise ending, and that it had to do with stinking.

And still, as an adult, I like the in-and-out concept. It explains the balance sheet. It explains debits and credits. When something comes In, it had to have come Out of something else. And vice versa. The whole system of double-entry accounting revolves around this concept. Things don’t just come out of nowhere, or go nowhere. If you are handed a set of financials with holes regarding where things came from or where they went, something stinks.

Many client simply use spreadsheets, or paper and pencil, which is a single-entry accounting system. Or they treat their accounting software as if it is a single-entry accounting system, and don’t understand why you insist on looking at their balance sheet.

Well, at some point in your life, you are going to have to explain this concept. Most likely you won’t speak directly about debits and credits, but you allude to their existence when you point to the client’s financials and ask for an explanation for a negative account balance, or ask how they came up with enough money to pay their mortgage if they made no income.

Some clients lose track of where things have gone “into” and so when later it is time to take the things “out” they take them out of the wrong place, leaving unresolved accounts open. They enter their credit card transactions into their credit card register, and then when they pay their credit card, they enter the credit card payment as an itemized list of new expenses, rather than a satisfaction of the debt. Or maybe they enter a receivable on their balance sheet and then leave the receivable open after the money has come in. Or they show up with a handful of receipts and tell you to enter them to reimburse themselves, not realizing those expenses were already entered. Or they won’t track their credit card transactions at all, thinking that such transactions “don’t count.”

You would be surprised to find out how many people do not know the names of their investors, what amounts they received, what the pay-back terms are, or why the information would be important to someone.

Just don’t be surprised when a client says, “why do you need a balance sheet? Isn’t the profit and loss all that you need?” And no matter how you try to explain that the balance sheet “proofs” the profit and loss, or that the balance sheet contains the profit and loss plus so much more – they still don’t see why you like the balance sheet so much better than the profit and loss.

The balance sheet is kind of like the checks and balances of a government, whose function it is to give some transparency to the functions of government, and to expose lies and pretenses and the over-extension of power. It gives a trained observer the ability to see if things “add up,” and to ask questions.

It is a marketing problem, truly, to market the balance sheet as an important financial document. Is there anyone who can come up with a good way to market it? A slogan, perhaps, with all the fashionable associations? How about, “keep your company stink free with this amazing, eco-balanced sheet.” How about, “Don’t hold the stink in, correct it with this balancing, clinically tested sheet.” How about, “Keep out the Denmark rot with this authentic, centuries-old invention of the balance-proofed sheet.” Or “follow your instincts with this sexy see-all balance sheet.” I want to hear people squeal with excitement and giggle when asked to produce a balance sheet. I want them to laugh with recognition when it is pointed out to them that something stinks.

Answering the Sphinx

“…it is the one riddle you do not know, not the thousand you do know, that will destroy you.” *

There are many legends of riddles with life or death consequences. The Sphinx in Greek literature. Gollum in Lord of the Rings. The Bridge Keeper in Monty Python and the Holy Grail.

Life is full of mysteries. Did this recipe fail because I followed it correctly or did it fail because I followed it incorrectly? If I followed it correctly did it fail because my taste buds are different than the author’s, or did it fail because there was a typo in it? If I followed it incorrectly, did I do so because I am a terrible cook, or did I just omit a step? If I omitted a step is it because I am too unorganized to be able to follow any recipe, or does it just require familiarity? Was the altitude too high? Was there an implied technique that wasn’t spelled out? Did I use an expired ingredient? Was my oven too hot?

Dealing with output gone wrong is endemic to computer programming. The uncertainty starts with the instructions – were the instructions I was trying to follow wrong, incomplete, required other techniques that weren’t spelled out, etc. If you are lucky enough to be able to find a second set of instructions written by someone else, you can compare the two. However, instructions for computer programs, like recipes, have a creative element to it – it is unlikely that two instructions will tackle the beast in exactly the same way, and so a straight comparison allowing you to find a typo in the instructions will be unlikely. It is easier for you to find a typo in your own program, rather than in the instructions. However, to find a typo in your own program requires self-confidence. It is not because you are a terrible cook. It is not because you have an innate character flaw like being disorganized. It is something you can do, if you just approach it methodically.

Some mysteries are unanswerable. Just today as I was folding laundry in the peace and quiet of my own room, suddenly there was an awful noise outside my room. A ruckus was running down the hall.  It collided against my closed door, fought the door knob and exploded into my room, where it immediately tripped and overturned the laundry basket. There it stood, one knee in a laundry basket, the other leg trying to bring itself and the basket upright, an undomesticated six-year old girl. And out of the mouth of this beast came the question, “are flies real?”

Many thoughts immediately ran through my mind at once. Why was my silence broken. Microbiology and basic life forms. Metaphysics and the nature of reality. Life in general, philosophy, and can a six-year understand these subjects (yes) and then immediately the corollary, will a six-year old stay still long enough to listen to a discourse on these subjects (no).

And so my answer was, “I don’t know. What do you think?”

To which the beast answered, in a beast-like fashion, “because the Evil One wanted something nice,” and untangled itself from the clothes and plastic woof and warp of the basket, and ran back from whence it came.

Leaving me with another set of many thoughts simultaneously running through my mind. Flies are for birds, and birds are not evil, flies are necessary in the food chain, why does she associate flies with evil, and where did she learn that word, evil, I have never used it, let alone the Evil One, is it just a normal disgust of flies, and since when does one answer a metaphysical question with religion? And what kind of religion frightens little children with images of the Evil One? And, it must be TV, and is she watching too much TV, and by golly what kind of connections is she making between real life and TV life, and the surrealism of it all, and is it preventing her from seeing nature for the purity and beauty that it is.

In retrospect, maybe she saw a reference to Lord of the Flies, and she has been watching Goosebumps non-stop today.

Which brings me back to life’s mysteries. You will be asked questions you cannot answer. In the legend of the Sphinx, most travelers simply avoided the path that led to the Sphinx in the first place. The first instinct when “enjoying the quiet” is to reject any interruption as an annoyance. When concentrating on the path at hand, questions are distracting. Why would Oedipus purposely seek out a Sphinx’s questions, knowing he could be made a fool, as in killed? Whether or not to interrupt your path by answering some monster’s riddle is a matter of priorities. Is it beneficial to you to help the monster (assuming the monster really desires the answer and is not just asking the question with the intent of putting you in an awkward spot) or is it better to kill or avoid monsters? Is it beneficial to the office to answer the incessant questions of your staff and clients?

And if you answer yes, what do you do when you get to the one riddle you do not know, the one that will destroy you, or at least your self image? Just remember, it is not because you are a terrible cook. It is not because you have an innate character flaw like being disorganized. It is something you can do.

If you just approach it methodically.

Take the most common email I get everyday, “I got a notice from the IRS. Why do I owe taxes? Are there any other taxes that I owe?”

To which a set of thoughts run through my head. What year. What form number. Is it really the IRS (lots of clients use government agencies names interchangeably). Is it for the person as an individual, or is it for their corporation. And even after I request and get a copy of the notice, there is the second half of the question – “are there any other taxes that I owe?” For me to answer that question requires me to pull government transcripts for the client as an individual, the client as a corporation, every year, every government agency, every likely type of tax (income tax, payroll tax, sales tax, city tax, property tax, what have you). However, it can be done. It just has to be approached methodically.

A good methodical approach to open questions, such as “is my tax return ready?” and “what should I do next?” is to use a checklist. To really know if a tax return is good enough to send a draft to the client to look over, and if there is any missing information or items that need to be asked of the client, use a checklist. I recommend the book The Checklist Manifesto: How to Get Things Right. Sure, I made fun of the book when I first saw its cover (the concept of stressing just one single simple concept). However, I still read it. It actually was an enjoyable read, discussing the evolution of certain famous checklists, and it disciplined me into making and using efficient checklists.

The challenge of creating a checklist is that the creation of a checklist requires real expertise. Sometimes if you are lucky enough to subscribe to a research database you can find a pre-made checklist. Otherwise you will need to compile one yourself by researching laws, instructions, commentaries, asking experts and remembering all mistakes you have made in the past leading up to your own hard-won knowledge. Because a checklist is often just a list of mistakes and omissions to find.

Of course, a checklist probably won’t help with those strange questions, like “are flies real?” where you don’t know why you are being asked a certain question. In such a case, instead of answering with your wealth of knowledge, ask yourself the more basic question behind the question. Why is this person asking this question?  Ask the question back to the person, and see what their own answer is.  If you understand where a person is coming from, you can build on their grasp of the world (or perhaps they will answer themselves and run back from whence they came).

*The Riddle-Master of Hed.