Using the Envelope Budgeting Method in a small Business?
November 18, 2014 5:23 AM Subscribe
I'd like a general sanity check on our plans for setting up multiple bank accounts in an effort to bring some organization, structure, automation and discipline to the movement of funds in the small business I'm working with.
Rather than having one revenue account and one accounts payable account, we're planning on splitting these up along the following lines (based roughly on the 'envelope method', in case you're familiar with that concept):
One revenue account per source (one per sales person, plus additional accounts for interest and other incidental sources of revenue). Each sales person deposits payments s/he collects into her/his specific revenue account. This allows us to easily calculate commissions, and it also gives us a running total of what each sales person is contributing to the bottom line.
One accounts payable account for each of profits, contingency, each sales person, manufacturing, labor and general expenses. We might split these up into even more accounts in the future (e.g. accounts for major sub categories, like materials, marketing, rent, taxes, equipment and vehicles, etc.).
One main expense account, plus one expense account per individual in the business who needs one.
The idea is to perform a weekly 'sweep' of the deposit accounts into the various accounts payable and expense accounts, using percentages that we've determined based on an analysis of the numbers for 2013 and YTD 2014. These percentages are adjustable on a weekly basis, and we'd also have the ability to move money between accounts payable accounts in order to cover shortfalls and or disburse sums that accrue in various accounts payable accounts as we (hopefully) cut some costs in some of those areas.
I've worked up a spreadsheet that just requires me to enter the previous week's deposits for each revenue account. I can enter some optional incidental figures, and I can either copy and paste percentages from the previous week, or else I can set percentages manually (or some combination of the two). Either way, it takes me around half an hour to enter data for a full week, and the spreadsheet spits out the amounts that I'd need to transfer into all of the various accounts payable and expense accounts (i.e. the envelopes).
I've been 'phantom' running these numbers for almost three months, just to make sure our percentages are in line with reality, and they look very good, so far (although they tend to be on the conservative side in every area other than profits, which is how I would prefer to start out). It's also given us a level of detailed insight into weekly and monthly operations that we've never had before.
Our bank has some pretty powerful online banking tools, such as a multi-transfer interface that would make performing the actual transfers relatively quick and painless. We also have overdraft protection on all of the accounts payable accounts to cover any temporary / unexpected shortfalls. We also plan to model this setup in our accounting software (we're using Xero).
Does this sound overly complicated / like a bad idea?
Part of the reasoning behind it is to free the owner from having to perform these calculations in his head all the time by bringing some organization and automation to the process. He would also like to get away from the habits of personally micro-managing accounts and treating various accounts as his private piggy banks. Lastly, moving things around in this manner should help us keep a running record of the percentages of revenue that are going out into various cost categories, whether profits, labor, manufacturing, sales costs or other expenses.
Rather than having one revenue account and one accounts payable account, we're planning on splitting these up along the following lines (based roughly on the 'envelope method', in case you're familiar with that concept):
One revenue account per source (one per sales person, plus additional accounts for interest and other incidental sources of revenue). Each sales person deposits payments s/he collects into her/his specific revenue account. This allows us to easily calculate commissions, and it also gives us a running total of what each sales person is contributing to the bottom line.
One accounts payable account for each of profits, contingency, each sales person, manufacturing, labor and general expenses. We might split these up into even more accounts in the future (e.g. accounts for major sub categories, like materials, marketing, rent, taxes, equipment and vehicles, etc.).
One main expense account, plus one expense account per individual in the business who needs one.
The idea is to perform a weekly 'sweep' of the deposit accounts into the various accounts payable and expense accounts, using percentages that we've determined based on an analysis of the numbers for 2013 and YTD 2014. These percentages are adjustable on a weekly basis, and we'd also have the ability to move money between accounts payable accounts in order to cover shortfalls and or disburse sums that accrue in various accounts payable accounts as we (hopefully) cut some costs in some of those areas.
I've worked up a spreadsheet that just requires me to enter the previous week's deposits for each revenue account. I can enter some optional incidental figures, and I can either copy and paste percentages from the previous week, or else I can set percentages manually (or some combination of the two). Either way, it takes me around half an hour to enter data for a full week, and the spreadsheet spits out the amounts that I'd need to transfer into all of the various accounts payable and expense accounts (i.e. the envelopes).
I've been 'phantom' running these numbers for almost three months, just to make sure our percentages are in line with reality, and they look very good, so far (although they tend to be on the conservative side in every area other than profits, which is how I would prefer to start out). It's also given us a level of detailed insight into weekly and monthly operations that we've never had before.
Our bank has some pretty powerful online banking tools, such as a multi-transfer interface that would make performing the actual transfers relatively quick and painless. We also have overdraft protection on all of the accounts payable accounts to cover any temporary / unexpected shortfalls. We also plan to model this setup in our accounting software (we're using Xero).
Does this sound overly complicated / like a bad idea?
Part of the reasoning behind it is to free the owner from having to perform these calculations in his head all the time by bringing some organization and automation to the process. He would also like to get away from the habits of personally micro-managing accounts and treating various accounts as his private piggy banks. Lastly, moving things around in this manner should help us keep a running record of the percentages of revenue that are going out into various cost categories, whether profits, labor, manufacturing, sales costs or other expenses.
Response by poster: Brockles:
Thanks for your input. I don't want to threadsit, but I would like to try to address some of the concerns you've brought up.
1. Transaction costs = $0. Our bank doesn't charge for transfers initiated online.
2. Account costs = $10/account/month, not enough to be an issue if we're realizing other benefits.
3. Accounting Software = We'll be using Xero, which is somewhat similar to Quickbooks. Also, I'm relatively familiar with Quickbooks and other accounting software packages, but I'm not sure about the tools they have that would give one a running overview of what expense categories funds currently on hand are earmarked for.
4. Amount of work = Approximately one hour per week for me to calculate the figures and make the required transfers. Keep in mind, I have been doing the work for almost 3 months (with the exception of making the transfers), so I'm reasonably confident about this number.
As to what we're hoping to gain from this setup:
1. We want to have a clear overview of which funds are earmarked for which categories of expense, something that's easier to have if the funds are split out into various earmark accounts, rather than all sitting in one account. At the moment, the owner spends a good deal of his time and energy doing these calculations in his head, so he can try to keep track of how much of the money in the main account is earmarked for different expenses (including profits to be paid to him and other stakeholders).
2. We want to keep a clear running total of the %age of revenue that's gone to each expense category. We have some targets that we are pretty certain we can hit, but it hasn't been easy to keep track of where we are on a running basis. Furthermore, the owner will need to be personally involved in hitting some of those targets, and he's been expending too much effort on calculating what goes where over the past year or so to be able to have the level of hands-on involvement in the business that will likely be necessary to take control of those costs.
Annual sales are around $3MM and growing steadily, to give an idea of the scale of operations.
posted by Strumpf Marionette at 6:02 AM on November 18, 2014
Thanks for your input. I don't want to threadsit, but I would like to try to address some of the concerns you've brought up.
1. Transaction costs = $0. Our bank doesn't charge for transfers initiated online.
2. Account costs = $10/account/month, not enough to be an issue if we're realizing other benefits.
3. Accounting Software = We'll be using Xero, which is somewhat similar to Quickbooks. Also, I'm relatively familiar with Quickbooks and other accounting software packages, but I'm not sure about the tools they have that would give one a running overview of what expense categories funds currently on hand are earmarked for.
4. Amount of work = Approximately one hour per week for me to calculate the figures and make the required transfers. Keep in mind, I have been doing the work for almost 3 months (with the exception of making the transfers), so I'm reasonably confident about this number.
As to what we're hoping to gain from this setup:
1. We want to have a clear overview of which funds are earmarked for which categories of expense, something that's easier to have if the funds are split out into various earmark accounts, rather than all sitting in one account. At the moment, the owner spends a good deal of his time and energy doing these calculations in his head, so he can try to keep track of how much of the money in the main account is earmarked for different expenses (including profits to be paid to him and other stakeholders).
2. We want to keep a clear running total of the %age of revenue that's gone to each expense category. We have some targets that we are pretty certain we can hit, but it hasn't been easy to keep track of where we are on a running basis. Furthermore, the owner will need to be personally involved in hitting some of those targets, and he's been expending too much effort on calculating what goes where over the past year or so to be able to have the level of hands-on involvement in the business that will likely be necessary to take control of those costs.
Annual sales are around $3MM and growing steadily, to give an idea of the scale of operations.
posted by Strumpf Marionette at 6:02 AM on November 18, 2014
What you're describing happens within accounting software, without the need to move actual money from one account to the next. Earmarked funds are in a budget, revenue tracked gets put into expense categories.
I'd suggest sitting down with an accountant or bookkeeper and explain your plan and have her/him show you how this is done in accounting software, because this plan is going to leave you hanging at least once in awhile with a shortage of funds somewhere, probably when a check to a vendor bounces.
posted by xingcat at 6:12 AM on November 18, 2014 [2 favorites]
I'd suggest sitting down with an accountant or bookkeeper and explain your plan and have her/him show you how this is done in accounting software, because this plan is going to leave you hanging at least once in awhile with a shortage of funds somewhere, probably when a check to a vendor bounces.
posted by xingcat at 6:12 AM on November 18, 2014 [2 favorites]
OK, first of all, the owner needs to stop doing the calculations in his head, no matter what avenue you take. That will fail one day and it will fail hard.
What you are wanting to do is going to be a nightmare for accounting purposes. You'll have dozens of places where mistakes can be made, dozens of accounts that will have to be reconciled...it is not a good idea. Introducing more points of failure into your system is a bad idea. You think you're making less work for yourself but you're not.
What you need is the one-two punch of an accounting software and a very robust excel sheet. All of these calculations you want to do to all of the different accounts? Set them up on a spreadsheet. Move your money around on the spreadsheet. Update your spreadsheet daily, tie the bottom line numbers out to your bank, record the bottom line numbers in your accounting software. Your excel sheet will have the running account totals and your banking practices will be clean and simple.
What you're proposing is madness.
posted by phunniemee at 6:21 AM on November 18, 2014 [4 favorites]
What you are wanting to do is going to be a nightmare for accounting purposes. You'll have dozens of places where mistakes can be made, dozens of accounts that will have to be reconciled...it is not a good idea. Introducing more points of failure into your system is a bad idea. You think you're making less work for yourself but you're not.
What you need is the one-two punch of an accounting software and a very robust excel sheet. All of these calculations you want to do to all of the different accounts? Set them up on a spreadsheet. Move your money around on the spreadsheet. Update your spreadsheet daily, tie the bottom line numbers out to your bank, record the bottom line numbers in your accounting software. Your excel sheet will have the running account totals and your banking practices will be clean and simple.
What you're proposing is madness.
posted by phunniemee at 6:21 AM on November 18, 2014 [4 favorites]
That you're considering this seems like a symptom of some serious dysfunction with the way your organization handles money. #1 I'm not sure this would actually solve your problem (a micromanaging owner) and #2 I suspect it could actually make things worse. If he won't pay attention to a spreadsheet, what's to stop him moving money around between the accounts?
posted by mskyle at 6:27 AM on November 18, 2014 [1 favorite]
posted by mskyle at 6:27 AM on November 18, 2014 [1 favorite]
Response by poster: phunniemee:
I've got the spreadsheet, so we're covered there. I'll dig into Xero to see how we can use it to emulate the same advantages without having too many accounts.
The main goals are to allow the owner to stop spending all of his time and energy obsessing about minute amounts of money in various accounts, keep a better running overview of where revenues are going and help him to realize how much of the money in our accounts at any one time is 'his', as opposed to being earmarked for expenses.
Any thoughts on the deposits side, with the idea of having multiple deposit accounts, or is that also asking for trouble? We've already been using that setup for a while, and that makes it very easy to calculate commissions and keep track of who's contributing what to the bottom line.
posted by Strumpf Marionette at 6:32 AM on November 18, 2014
I've got the spreadsheet, so we're covered there. I'll dig into Xero to see how we can use it to emulate the same advantages without having too many accounts.
The main goals are to allow the owner to stop spending all of his time and energy obsessing about minute amounts of money in various accounts, keep a better running overview of where revenues are going and help him to realize how much of the money in our accounts at any one time is 'his', as opposed to being earmarked for expenses.
Any thoughts on the deposits side, with the idea of having multiple deposit accounts, or is that also asking for trouble? We've already been using that setup for a while, and that makes it very easy to calculate commissions and keep track of who's contributing what to the bottom line.
posted by Strumpf Marionette at 6:32 AM on November 18, 2014
Response by poster: mskyle:
You may be right. The plan he's communicated to me and other stakeholders is that he wishes to divorce himself totally from the funds-transferring process, other than taking a look at the weekly report I prepare for him.
He wants me to be the only one in the organization who moves any funds around. There's no guarantee that he'd be able to stick to that plan, though, so you have a point.
I think the dysfunction stems from the owner having built the business from a one-man operation to a reasonably successful operation (with significant growth in the past few years) that earns a decent amount of profit. He's simply not been able to adjust his money management practices from what worked as a one-man operation to what would work for a significantly larger operation. It's leading to paralysis and overload, as he's still trying to run all of the numbers in his head.
posted by Strumpf Marionette at 6:36 AM on November 18, 2014
You may be right. The plan he's communicated to me and other stakeholders is that he wishes to divorce himself totally from the funds-transferring process, other than taking a look at the weekly report I prepare for him.
He wants me to be the only one in the organization who moves any funds around. There's no guarantee that he'd be able to stick to that plan, though, so you have a point.
I think the dysfunction stems from the owner having built the business from a one-man operation to a reasonably successful operation (with significant growth in the past few years) that earns a decent amount of profit. He's simply not been able to adjust his money management practices from what worked as a one-man operation to what would work for a significantly larger operation. It's leading to paralysis and overload, as he's still trying to run all of the numbers in his head.
posted by Strumpf Marionette at 6:36 AM on November 18, 2014
I'm relatively familiar with Quickbooks and other accounting software packages, but I'm not sure about the tools they have that would give one a running overview of what expense categories funds currently on hand are earmarked for.
As long as each transfer is one transaction, and coded within the accounting software, it is essentially 'within a separate account'. You run a report on that code and it shows you what you need. It already does everything you need (or if it doesn't, an excel spreadsheet will take care of it).
The point is that the accounting software will negate the actual physical need for different accounts as the codes create virtual accounts. Reporting on a code or project or supplier/employee will give you your 'account balance' - it gives you all the perceived advantages of separate accounts without any of the effort of having to maintain and move around money between physical accounts.
He's simply not been able to adjust his money management practices from what worked as a one-man operation to what would work for a significantly larger operation.
This is the actual problem. You need to stop trying to automate what he is used to doing and just run it like a larger company would. If you can get him to back off and get used to the new reporting until he trusts it you will be fine, but I think it is an 'upwardly managing' issue that is pushing you into this very unusual (and unnecessary) complexity of lots of accounts.
posted by Brockles at 6:39 AM on November 18, 2014 [4 favorites]
As long as each transfer is one transaction, and coded within the accounting software, it is essentially 'within a separate account'. You run a report on that code and it shows you what you need. It already does everything you need (or if it doesn't, an excel spreadsheet will take care of it).
The point is that the accounting software will negate the actual physical need for different accounts as the codes create virtual accounts. Reporting on a code or project or supplier/employee will give you your 'account balance' - it gives you all the perceived advantages of separate accounts without any of the effort of having to maintain and move around money between physical accounts.
He's simply not been able to adjust his money management practices from what worked as a one-man operation to what would work for a significantly larger operation.
This is the actual problem. You need to stop trying to automate what he is used to doing and just run it like a larger company would. If you can get him to back off and get used to the new reporting until he trusts it you will be fine, but I think it is an 'upwardly managing' issue that is pushing you into this very unusual (and unnecessary) complexity of lots of accounts.
posted by Brockles at 6:39 AM on November 18, 2014 [4 favorites]
He's simply not been able to adjust his money management practices from what worked as a one-man operation to what would work for a significantly larger operation.
This is a very common problem for companies that grow from sole proprietorships/single-person businesses to larger companies. You may want to also look into some books about growing family businesses (it may not be a family business, but the growing pains are the same) to see how to scale up. It's generally in this growing process that companies thrive or fail, so doing it the right way from the beginning will do you much more good than trying to keep working the way he did when he was a one-man band.
posted by xingcat at 6:54 AM on November 18, 2014 [1 favorite]
This is a very common problem for companies that grow from sole proprietorships/single-person businesses to larger companies. You may want to also look into some books about growing family businesses (it may not be a family business, but the growing pains are the same) to see how to scale up. It's generally in this growing process that companies thrive or fail, so doing it the right way from the beginning will do you much more good than trying to keep working the way he did when he was a one-man band.
posted by xingcat at 6:54 AM on November 18, 2014 [1 favorite]
This is a terrible idea that will have some unexpected but terrible consequences (probably when you, the only person who understands it, gets sick or goes on vacation or changes jobs). This is exactly what properly configured accounting software will do -- by properly configured I mean by an accountant.
posted by jeather at 6:58 AM on November 18, 2014 [1 favorite]
posted by jeather at 6:58 AM on November 18, 2014 [1 favorite]
Why don't you look into the YNAB community, they're doing exactly that (only in software) and much nicer than Quickbooks (if you're looking for "envelopes") - look through the tutorials - there's PACE their consulting for small businesses, which might also be something to look into. But YNAB (which I use for my own business) should work.
posted by mathiu at 7:10 AM on November 18, 2014
posted by mathiu at 7:10 AM on November 18, 2014
Gosh, I would hate to be the CPA that does your taxes. Accounting software like a "big" company is what you need, along with: 1) a QuickBooks class for you, and 2) a QuickBooks coach until you get things transferred and running smoothly. Your CPA will love you for it.
Reports in QB will give the owner all the information he wants and more. And - importantly for you - you can set him up to be able to view any of the data while restricting him from making any changes.
Google "founder's syndrome" for lots of relevant information about how other companies/organizations have made the transition.
posted by summerstorm at 7:47 AM on November 18, 2014 [2 favorites]
Reports in QB will give the owner all the information he wants and more. And - importantly for you - you can set him up to be able to view any of the data while restricting him from making any changes.
Google "founder's syndrome" for lots of relevant information about how other companies/organizations have made the transition.
posted by summerstorm at 7:47 AM on November 18, 2014 [2 favorites]
Response by poster: Follow Up:
I'm sold on the idea that we need to minimize the number of accounts payable accounts, but I'd still like some input on the idea of having multiple deposit accounts.
The way this works for us now is that we set up one deposit account per sales person (we've been doing it this way for a while). Each sales person collects the payments for the jobs s/he sells, and is able to deposit those payments (whether in cash [at the bank] or by check or credit card [both via mobile apps]) into her/his dedicated deposit account. Each salesperson only has deposit access to her/his account. This makes it super easy for us to associate each deposit with the sales person who made it, which, in turn, makes it easy for us to calculate commissions.
Also a bad idea, or maybe not so bad? We've been doing it like this for well over a year.
posted by Strumpf Marionette at 7:49 AM on November 18, 2014
I'm sold on the idea that we need to minimize the number of accounts payable accounts, but I'd still like some input on the idea of having multiple deposit accounts.
The way this works for us now is that we set up one deposit account per sales person (we've been doing it this way for a while). Each sales person collects the payments for the jobs s/he sells, and is able to deposit those payments (whether in cash [at the bank] or by check or credit card [both via mobile apps]) into her/his dedicated deposit account. Each salesperson only has deposit access to her/his account. This makes it super easy for us to associate each deposit with the sales person who made it, which, in turn, makes it easy for us to calculate commissions.
Also a bad idea, or maybe not so bad? We've been doing it like this for well over a year.
posted by Strumpf Marionette at 7:49 AM on November 18, 2014
Answering generally: Nthing that set up correctly, Xero should be able to do all the tracking/reporting you need it to do, and that calculations can be done in a spreadsheet. Do you have a good chart of accounts set up? Are you familiar with Xero's tracking feature?
If you're not happy with Xero's budgeting feature (I don't love it), YNAB is a great choice for envelope budgeting. There are small businesses that use YNAB exclusively, but you can also use it as a budgeting adjunct to Xero.
posted by moira at 7:06 PM on November 18, 2014 [1 favorite]
If you're not happy with Xero's budgeting feature (I don't love it), YNAB is a great choice for envelope budgeting. There are small businesses that use YNAB exclusively, but you can also use it as a budgeting adjunct to Xero.
posted by moira at 7:06 PM on November 18, 2014 [1 favorite]
Response by poster: moira:
Thanks for the follow-up w/r/t Xero and YNAB. I dug a little deeper into Xero's (and Quickbooks') budgeting capabilities yesterday, and also took a quick look at YNAB. Part of that included looking more closely at Xero's tracking features (and Quickbooks' corollary). It seems to me that neither Quickbooks nor Xero has the kind of budgeting features we'd like to see. I'll look more closely at YNAB, and we may just consider continuing to use the budgeting spreadsheet I've already been running the past 3 months.
We do have what I believe to be a reasonably good chart of accounts set up in Xero.
Another Follow-Up:
Going back to my original question, we are considering splitting the business out into multiple units / cost centers / perhaps even multiple separate companies for various reasons.
We have a manufacturing unit, a construction unit, a sales unit and a marketing / strategy /management unit. There's very little reason for any of these units to have anything more than the most basic level of interaction with each other. We're already moving toward geographically separating the units and cutting down on unnecessary interactions between them.
We have a rather simple business model in which we sell, make and install two kinds of widgets. Sales sells a job with X Widget As and Y Widget Bs. Sales gets a fixed commission on each widget sold. Sales turns in an order to manufacturing for X Widget As and Y Widget Bs, and manufacturing is paid a set amount for each widget produced. Sales also turns in an order to construction to install the widgets, and construction is paid a set amount for each widget installed. The marketing / strategy and management unit collects the customer payments, compensates the various units for their production and takes what's left as profit. That's a slight simplification, but I think it paints a reasonable picture of our operation.
The multiple accounts payable setup I mentioned in my original post is intended to continue our transition in this direction, and I'm still not 100% convinced it's a bad way to go about it. I'll sit down with our CPA and discuss it with him in more detail before we move forward, though.
posted by Strumpf Marionette at 5:47 AM on November 19, 2014
Thanks for the follow-up w/r/t Xero and YNAB. I dug a little deeper into Xero's (and Quickbooks') budgeting capabilities yesterday, and also took a quick look at YNAB. Part of that included looking more closely at Xero's tracking features (and Quickbooks' corollary). It seems to me that neither Quickbooks nor Xero has the kind of budgeting features we'd like to see. I'll look more closely at YNAB, and we may just consider continuing to use the budgeting spreadsheet I've already been running the past 3 months.
We do have what I believe to be a reasonably good chart of accounts set up in Xero.
Another Follow-Up:
Going back to my original question, we are considering splitting the business out into multiple units / cost centers / perhaps even multiple separate companies for various reasons.
We have a manufacturing unit, a construction unit, a sales unit and a marketing / strategy /management unit. There's very little reason for any of these units to have anything more than the most basic level of interaction with each other. We're already moving toward geographically separating the units and cutting down on unnecessary interactions between them.
We have a rather simple business model in which we sell, make and install two kinds of widgets. Sales sells a job with X Widget As and Y Widget Bs. Sales gets a fixed commission on each widget sold. Sales turns in an order to manufacturing for X Widget As and Y Widget Bs, and manufacturing is paid a set amount for each widget produced. Sales also turns in an order to construction to install the widgets, and construction is paid a set amount for each widget installed. The marketing / strategy and management unit collects the customer payments, compensates the various units for their production and takes what's left as profit. That's a slight simplification, but I think it paints a reasonable picture of our operation.
The multiple accounts payable setup I mentioned in my original post is intended to continue our transition in this direction, and I'm still not 100% convinced it's a bad way to go about it. I'll sit down with our CPA and discuss it with him in more detail before we move forward, though.
posted by Strumpf Marionette at 5:47 AM on November 19, 2014
It seems to me that neither Quickbooks nor Xero has the kind of budgeting features we'd like to see.
It may not replace your spreadsheet entirely (the percentages may not be possible to automate), but it WILL absolutely replace any need for multiple accounts. Using customers/staff/suppliers in imaginative ways can give you the granularity you want in quickbooks, that's for sure.
There is absolutely no requirement or advantage to having the money in separate *physical* locations, because the existing structure of quickbooks allows you to do all that virtually. So all the advantages of physical accounts but none of the disadvantages (and time moving stuff around).
I think you need a quickbooks-familiar CPA. That's probably your best bet.
posted by Brockles at 6:40 PM on November 19, 2014
It may not replace your spreadsheet entirely (the percentages may not be possible to automate), but it WILL absolutely replace any need for multiple accounts. Using customers/staff/suppliers in imaginative ways can give you the granularity you want in quickbooks, that's for sure.
There is absolutely no requirement or advantage to having the money in separate *physical* locations, because the existing structure of quickbooks allows you to do all that virtually. So all the advantages of physical accounts but none of the disadvantages (and time moving stuff around).
I think you need a quickbooks-familiar CPA. That's probably your best bet.
posted by Brockles at 6:40 PM on November 19, 2014
I'm not clear on how you are doing things right now, but I would suggest that if your current setup isn't addressing your need for different cost centers, your chart of accounts could use some modification. It's possible I'm missing something, so these links may not be useful to you, but in case they help: here is an example chart of accounts with expenses split into a few cost categories; here is an example with more basic info and setup.
Once you have things grouped and coded in a way that works for your company, you can run very useful custom reports that show you exactly the info you need. If numbers are the primary reason for looking into multiple accounts/companies, there's really no need if your software is made to work for you. Doing otherwise would turn into a messy time-drain, fast.
posted by moira at 10:09 PM on November 19, 2014
Once you have things grouped and coded in a way that works for your company, you can run very useful custom reports that show you exactly the info you need. If numbers are the primary reason for looking into multiple accounts/companies, there's really no need if your software is made to work for you. Doing otherwise would turn into a messy time-drain, fast.
posted by moira at 10:09 PM on November 19, 2014
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Unless I am missing something, doing this with individual bank accounts is crazy - you're paying to have these accounts and have to keep moving money around constantly (so transaction costs? Account costs)? instead of tracking this like every other company does in the accounting software. Quickbooks costs about the same as 2-3 bank accounts so why not do it in that?
I guess I am not seeing any reason (expressed in the question or inherent in the solution) that an accounting software isn't the answer. I use Quickbooks for my business (which is just me and several customers) and it's really easy (I have no accounting background).
posted by Brockles at 5:33 AM on November 18, 2014 [4 favorites]