It is absolutely critical to know and understand your business finances to help your business grow successfully and run smoothly.
I learned how important it was to stay current with my business finances while I was running Archway Books, my bookshop chain, across northern England. It took just a couple of minutes each day. For me, that involved cashing up and then recording the totals on my spreadsheet.
Understanding Your Business
Doing this on a regular basis meant I always had a clear picture of how my sales were doing across all of my shops. It allowed me to compare my current figures with the past year, month, or week. It helped with cash flow and allowed me to keep growing my business. It also ensured that my invoices were sent out on time and any late payments were chased down before I supplied more books. Taking those steps, along with accurate bank reconciliations, were the keys to operating my bookshops.
Since I like to work with numbers, it was not a hardship for me to do my own bookkeeping. I realise that is not true for most people. There is a strong possibility that when you set your business up, your focus was not on bookkeeping and that maintaining accurate records was not on the top of your priority list.
Why is it so important?
Like with other important aspects of running a business (such as customer relations, technology, marketing, and sales) good bookkeeping is critical to the smooth operations of a growing business and something that should definitely not be avoided.
There is always the opportunity for you to invest in learning the various aspect that are necessary to ensure good bookkeeping. Bould Bookkeeping will guide you and be there as an adviser as well as a mentor in learning about your finances. However, that can be quite time-consuming. You could also outsource your bookkeeping to a specialist. When you are considering the costs involved in outsourcing bookkeeping or another aspect of your business, it is very important to consider the value it can bring to your business and you, above and beyond the price tag. This can include things like knowing someone is carefully watching your business finances, ensuring that deadlines are met, freeing up your time so you can focus on the things you do best for your business, and having peace of mind without any more sleepless nights.
Bookkeeping has recently become highly automated with extensive choices in reports available that can help you understand your business’s financial position better. But are you getting the most from these reports? Do you know the differences between the Balance Sheet, Statement of Financial Position, and Profit and Loss report? Do you understand how over time your assets depreciate in value? The list goes on and on with all of the financial terms that are used, and the entire process can seem overwhelming.
However, if you keep up with your finances, you will be able to avoid penalties for submitting accounting late and it will help your cash flow as well by having access to accounts that are up to date. I feel this is a very important point. In my personal experience, numerous businesses just have their accountant complete their accounts once per year. However, ideally, your accounts need to be kept in order and checked a lot more frequently, either by your bookkeeper or you. Watching your accounts closely means you can monitor numerous key indicators closely for your business, ranging from your expected turnover to your both your net and gross profit margins so you can plan your cash flow better.
- Detailed recording. A dedicated, thorough bookkeeper will keep up to date detailed records at all times.
- Stay in compliance with the law.
- Instant reporting.
- Easier to plan.
- Better relations with investors and bankers.
- Faster business response times.
- Better tax prediction
- Quicker financial analysis. Lowers accounting costs.
- Easier audits Access to highly detailed balance sheets that can be compared with the statements.