I was dealing with a client who owned and operated a small business selling promotional wear and casual clothing. She mentioned on numerous occasions that she was very involved in volunteering at the public school as well. Her emphasis in the business during the day was on sales, so she spent the majority of her time sourcing new revenue streams and purchasing more product lines to sell in her store. Since she was so busy, she neglected her bookkeeping chores and unfortunately did not pay her payables and government remittances on time.
Here are the traits of typical entrepreneurs:
Many are more interested in who is coming in the front door of their business and less interested in knowing what was going into their bank account.
Many business owners collect all their receipts and store them in a box to give to their accountant to figure out at the end of their fiscal year.
Some decide to buy a sophisticated software program but are unable to figure out how to operate the system so it is wasted money.
Each one of those has its own set of problems; so let’s look at them one at a time.
Yes, revenue drives the business; but at the end of the day, it is profits that make the world go round. As an owner, you have to know where every penny is going. You need money in your bank account to pay taxes, pay bills, pay staff, and most importantly pay yourself.
If you leave your bookkeeping until the end of the year, it is going to cost you a lot more money to have the financial records of your company compiled than if you stay on top of it day and day out. Accountants are expensive. They’ll have tons of questions and you’ll have to answer them. Building financial statements from the contents of a shoe box is not the most practical or profitable way to go. You are going to be paying out a lot in fees. Plus you want to know every day where you stand.
Accounting software programs like QuickBooks and Simply Accounting are programs that take a long time to learn. Unless you are prepared to take more than a few night courses you’ll never really understand how to use them. When you make an entry in one of these programs all sorts of things happen as all different accounts are affected. Make a wrong entry and look out.
Not having accurate information available in a timely fashion leads to decisions that are not based on accurate numbers. How can you decide to buy more products if you don’t know where the money is coming from? Maybe the pricing on your products is incorrect because you don’t know what your Costs of Goods Sold are.
The only way to solve these problems is: to be your own bookkeeper and do it on a regular basis or hire a bookkeeper and communicate with them on a consistent basis.
This way you will know what money is coming in and what money is going out and you will have the accurate information when you need it.
Where do you start? You need to:
- Track your revenues
- Track your expenses
- Set up a schedule for your government remittances
- Review your credit card and bank statements on a monthly basis.
- Set up your payroll whether you are a sole proprietor or if you have employees
** With these simple things in place you will be able to manage your business and at the end of the year email your financial summary to your accountant so he or she can generate tax returns for both you and your business and do so quickly and at a lower cost than expected.
Each business is different, but the principles are the same. You collect revenue from sales and pay out money to suppliers, staff and the government. If you do things properly, you will run a good business that will make you money.
Bookkeeping is just another task that you as a business owner have to be responsible for and be happy about it. It is what will make you more successful; because it is an activity that can dramatically affect your bottom line and at the end of the day it has been, is, and always will be, about the money!