Small business bookkeeping freedom is here! In our series of articles, we’ll show you, step by step how to set up a bookkeeping system that is easy to understand and easy to maintain. It will also save you a lot of money with your accountant when you file your taxes at the end of the year.
Understanding what small business bookkeeping is and why it matters is the first step.
Bookkeeping is the discipline of capturing the money that enters and exits your business. If you keep track of these things, you will know the health of your company at any point in time.
At the most basic level, bookkeeping entries capture the financial transactions that take place as a result of all the business activities required to run the company.
Bookkeeping may not be a glamorous activity, but it is mission critical.
You must know how much revenue you’ve brought in and how much money you’ve spent. You also need to know what you’ve spent that money on. If not, you are not managing your risk and you are missing big opportunities. I know you know, but doing something about it is another thing.
Remember, you can’t manage what you don’t measure.
Basic Bookkeeping helps you measure what really matters. It will help you anticipate problems before they become crises. So often small business owners complain they don’t have enough money. The problem is they don’t know how much they need. Small business bookkeeping captures what is happening in the business so you can make better decisions on where to invest your time and money you do have.
Decisionmaking
Every single day you make management decisions to navigate your business. Here are some examples:
*Should you buy that new computer now?
*Can you afford that on-line marketing campaign?
*What kind of expenses does the business have?
*When do those expenses show up during the year?
*How have those expenses changed over time?
*Where IS the money going?
*How much are your clients contributing to the income of the business?
If you are just relying on your gut, at some point you’re going to have a bad case of indigestion!
When I ran my first small business, I felt like I had a hole in my checking account. Every day, there were expenses I hadn’t expected.
At first, I wasn’t keeping track of expenses because they seemed small enough. But those small expenses added up quickly. Soon it became clear if we didn’t control those costs, especially in the start up phase of the business, we would run out of money.
Do you remember the Dot Com bubble? There were a lot of great ideas that never survived. It wasn’t because the market didn’t care; it was because these companies ran out of money. That is, their expenses were far higher than revenues for an extended period of time. That is the definition of bankruptcy.
You don’t want your business to become a statistic. We’re here to help you prevent that from happening.
Read our next tip on how your banker and your suppliers view small business bookkeeping. We’ll also show you how a regular discipline of accurate small business bookkeeping can really help you reduce your cost of doing business long term.
In Your Corner
Dawn Fotopulos
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The information is true for small business owners. planning for the funds is the only way that can help in attaining the maximum from the minimum.
Please tell your friends about Open Line Thursdays that starts tomorrow, July 15th. We’re taking any small business question that comes to mind. We’ve got a GREAT group of experts standing by. You can post your question at the end of this blogpost. I’ll see it and make sure you get a response. Very cool.
Open Line Thursdays. Woohooooo!
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