Why Keeping Top Notch Books is Critical to Business Success
As a bookkeeper, I shudder when I hear a small business owner say things like: “I keep it all in my head” or “I know I should have a business bank account, but right now I’m still using my personal.”
When I overhear this in public, I realize that the best thing to do is mind my own business and go merrily along with my day. Pretty sure my kids and my husband agree with this approach. I just can’t. I invariably end up completely butting into a stranger’s conversation, handing them my card, and being honest by telling them: “Hey, I probably could have helped overhearing, but I was totally eavesdropping and I heard you mention that you run a business and are using your personal bank account for your business. Please stop doing that, and please email me so I can help. It’s totally my jam.”
Keeping accurate books are critical to running a business – and not just for the obvious reasons, like, you know – audits and getting employees W2s correct at the end of the year. (I mention the W2s because, yeah. Wow. I just did some bank recs and found paychecks that cleared the bank, but were voided in their QuickBooks. I can’t even. I mean…Serenity NOW!)
Where was I? OH YES. Accurate bookkeeping!!
Aside from the obvious compliance requirements, there are some other, more subtle reasons that small businesses need to have their books straight.
1. When do you pick up most new customers/clients? I get it dude. You DO have all that in your head. As a business owner myself, I can tell you exactly who owes me, for how much, and if it’s past due, exactly how many days late they might be. But that doesn’t mean I can tell you without looking at QuickBooks Online when we had the biggest influx of new clients over the last 3 years. Even though we don’t do taxes, we know we’ll be the busiest during tax season, helping existing clients get ready for their CPA/EA, and doing special projects for new clients to get all that data entered that they didn’t get done the prior year. But what we didn’t know until we created a report for it, was that we get the majority of our new long term clients AFTER tax season. Now we know what time of year is best for us to do some targeted marketing.
2. What products or services are most profitable? You’re making bank. You’re taking on every new client that comes your way. You’ve got a great collections of products to offer. With which do you make the most money? I have 2 clients that are auto repair shops. One of them has been selling tires since they opened 2 years ago; I’ve been their bookkeeper for about a year. Because they had accurate reporting, when they sat down to do planning, they realized that in order to be competitive with tire stores, they were barely breaking even, and it was keeping them from taking on more profitable repair work…or spending time with their families. They dropped it and worked out a referral program with a locally owned tire shop.
3. What can you afford? This applies to so many things – capital purchases, employees, a new computer, advertising, etc.. If you have no way to dig into the details, then how can you know if you’ll be able to afford that new piece of equipment? Or a new marketing campaign? Last year, we had a client that was at a tipping point – couldn’t take on any more work without hiring someone, but wasn’t sure if they could afford one part time or one full time employee. After I sat down with her and looked her books, we determined that by taking a small cut in her own pay, and making a couple other changes to what she was doing, she was able to hire one part time AND one full time person, and within 7 months she was able to go back to her previous salary.
There are so many other things I could list about why it’s important to have top notch books, but since three is a magic number, I’ll leave it here for now.
Warning: we may be back to revisit this, because over and over, I see small businesses thinking of bookkeeping and accounting as an afterthought and not a priority. This really needs to change, and I feel that just might be my superpower!
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