Every fiscal year-end, business owners around the world take a look at their financial reports and, while some are pleasantly surprised that they did well, many are disappointed that they didn’t actually do as well as they thought and hoped for. Many small business owners blame their lack of business success on the economy and it is true, the current economy certainly does not make it easy to succeed. In this economic climate, business owners cannot just “hope” that they will be able to make ends meet at the end of the month. If a small business is going to succeed in a slow economy, the small business owner must first understand their financial situation.
A business owner is responsible for many aspects of running the business and it’s difficult to do it all independently. When small business owners try to take care of each and every task associated with their business, their personal life suffers and the part of the business they are passionate about suffers., On top of that, they can end up doing a mediocre job, and give up entirely on completing the accounting functions they could have easily offloaded to a competent bookkeeper. A person going into business on their own has a passion for the goods or services they go into business to provide. Many small business owners don’t really have the time or desire to manage their bookkeeping and many overlook the vital importance of tracking and understanding their cash flow. (I encourage you to read my post: “The Importance of a Cash Flow” for further detail.)
If you find yourself in this situation, find a good bookkeeper that will help you enter your monthly financial information into financial software, such as QuickBooks. Then take the time to review your Profit and Loss Statement and your Cash Flow Projection. It’s important that you understand what these reports are telling you about your business. A good bookkeeper can help you use this information to make informed decisions that will enable you to understand your overall financial picture, increase revenue, and control your expenses throughout the year; not just at year-end.
Many of my clients started out taking care of their own bookkeeping but found that they didn’t take the time to do a complete job. Month after month their bank and credit card statements were not reconciled. They hoped to get caught up but accounts became overdrawn and cash was always tight. Many hoped that in a month or two, their sales would pick up. Unfortunately, hope is not a concrete plan that will identify and implement the changes needed to increase sales and improve the bottom line.
Near the end of the year, I regularly receive phone calls from business owners that realize they need help. They tell me their bookkeeping needs to be completed in order to prepare their taxes. Many just want to get ”caught-up” with minimal hours spent entering the information. I understand the desire to keep the expense of bookkeeping down. However, I think too many small business owners make the mistake of underestimating the importance of updating their bookkeeping and cash flow projections each month. When a small business owner keeps their accounting records updated, they have access to financial reports that will allow them to be proactive in making sure their revenue is steady and enables them to take advantage of additional opportunities as they arise. If you are determined to deal with all of your accounting responsibilities on your own, I encourage you to take whatever steps necessary to ensure that you are dealing with these tasks thoroughly and competently. (I recommend a number of books on the ‘Additional Resources’ page of this website that many readers have found to be helpful.) Every small business owner should have access to an accurate cash flow projection (see my free excel cash flow template for an example.) If you don’t feel confident that you can create a cash flow projection and keep it updated on a monthly basis, you should strongly consider hiring a bookkeeper who can do it for you.
What should a good bookkeeper do for you?
A good bookkeeper should be easy to work with and should also be your advocate in business. This person should be proactive in asking for information that will enable them to update your financial reports. You should receive monthly financial statements and they should be available to review them with you.
If you have a good rapport with your bookkeeper you will not be afraid to work with them.