Business owners aren't always good bookkeepers...

Failing to keep financial track of your business on a monthly basis is another financial reason that many businesses fail.   It is important to do your books every month when you are in business.  This is a function that many small business owners wait too long to seek help with or overestimate their ability to complete.  You can’t make good financial decisions without knowing the state of your finances.  Learn more in this week’s blog.

Small business owners have a reputation as poor record keepers.  The perception is that they will come in the day before their taxes are due with a grocery bag full of receipts that need to be put together to create financial statements for a tax return.

While that may be an exaggeration, some small business owners still use the Money-In-The-Bank method of tracking their finances.  This is where everything is OK as long as there is a positive balance in your bank account.  If you have a really small business and can keep everything in your head, this may work for a while.  But none of us are as good at Multi-Tasking as we think we are.  The truth is that you can only focus on one thing at a time.  You may get proficient at quickly switching between items, but I guarantee you that while you are looking at one item, you are missing something on the second item.

In a busy small business, the owner has many things to take care of.  While taking care of customers, where your focus should be, you may miss something in your finances.  It could be a billing that you need to send out to a customer.  It could be a payment to an important supplier for some materials you need on an upcoming job.  Regardless of what it is, you are going to have to scramble to try to fix the situation when it arises, if you can.

Alternatively, if you have the time and ability to do your own books, you are going to have to be very disciplined about keeping your records current.  One way to approach this is to have a specific time every week that you block off for doing your books.  Don’t allow yourself (or one of your staff), to book anything in that time slot.  Treat the time as an important appointment.  Don’t be late and don’t put it off.  But keep in mind that the time you take to do your recordkeeping won’t be available for doing anything else.  This could be expensive time for you.

A better solution might be to find a good bookkeeper to help you with your records.  You don’t have to have a CPA for this, just someone who is proficient at keeping your records.  You don’t have to turn control of your checkbook over to them, although you may have them prepare checks for you to review and sign before they go out.  This is a better use of your time, keeping you on top of the important financial aspects of the business but not using your time to do the detail work that can easily be done by someone who is not responsible for the success of the business, like you are!

Paying a good bookkeeper is money well spent.  It keeps you in touch with your finances.  It can give you a second set of eyes to help you spot missing billings and invoices that need to be paid.  In conjunction with a well prepared budget, you will be able to anticipate and remember items that only need to be paid annually or on some other schedule that is not monthly.

Whether you prepare your books yourself or use a bookkeeper, you will make better decisions when you have accurate information to make the decision.  You will know when you have payments coming up that you need cash for.  You will know when you have extra operating cash for making a purchase for the business.

If you want to win the game, you have to keep score.  Preparing your books regularly is your score board.  Develop the habit or hire someone so you know how your finances are doing!

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God Bless your week!