Gone are the days when you could get away with throwing everything in a shoebox and dropping it off to an accountant the night before your tax returns are due.
To beat the odds of business failure you need to have fully up-to-date financial information.
This way, you can make important business decisions while there is still time to do something about it.
Tracking money rarely feels urgent day-to-day, it only becomes urgent when there is a problem.
Bounced checks, not enough funds for payroll, or long overdue accounts receivable are examples of common problems in a small business.These challenges can be caused from lack of current financial data.
“Businesses always have problems. Numbers tell you where the problems are, and how worried you should be.”
Jack Stack (the Great Game of Business)
The way you set up your books, specifically your chart of accounts, will determine if the information you collect is valuable or not.
Take the time to think about what you need to measure and review. For example, if it is important to know which of your products is the most profitable, then you need to separate your individual products sales and their associated costs so that you can get that data.
Sound confusing? You are right, it can be hard. Especially if you struggle with math, paperwork or numbers. On the other hand, not accurately tracking your money as a small business owner is harder.
It is just one of those things that comes with owner a business.
Having accurate up to date books gives you information, and information is power. It allows you to make sound business decisions quickly. I encourage you to do what ever it takes right now to put yourself in control of your business finances.
It starts with tracking your money, all of it, on time, all the time, no matter what.
What do you need to record?
If you don’t have an accountant that you love and trust completely, then now is the best time to start shopping for one. Tax season is just around the corner, when they may be too busy to be interviewed.
Be sure you are comfortable asking potentially “stupid” questions until their responses are fully understood by you. Hiring an accountant requires the same care as hiring an employee, take your time and be comfortable with the decision.
One last question, should you be doing your own bookkeeping?
It depends on (1) if you like doing it, (2) if it is the best use of your time, and (3) you are able to do it accurately and keep things fully up to date at all times.
Financial records, when fully up to date, are the road map to profitability. The data collected gives us insight into how we can best run our companies.
Reach out if you need help organizing your business finances. We have a few good resources to recommend that we know and trust.
Have a great week,
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