As the saying goes, "failing to plan is planning to fail". This is never more true than in the world of small businesses. Looking back on the year, there may be many obvious mistakes that have prevented your company from seeing its full potential. In the coming year, there are several crucial steps that will ensure manageable and profitable growth for your small business.
1. End of Year Tax Planning from the Get-Go
For many small business owners, the only purpose of end-of-year bookkeeping is to get your taxes in line. But you're missing out on a lot of value, which we will get into in just a moment.
Many small businesses find that their bookkeeping is always behind. For one reason or another bookkeeping always gets pushed to the back burner. Before you know it you are so far behind on your bookkeeping that you don't even know where to begin. When your bookkeeping is behind you are literally running your business blind. You have no idea where your business is at financially and worse you don't know where you are going. It is really hard to find value in something that is not updated.
If you're scrambling to get your bookkeeping in order at the end of the year, then there's a problem. You should be planning for end-of-year bookkeeping all year long.
Following a process for handling accounts receivable, accounts payable, asset reviews, and book reconciliation will allow you to calculate financial reports each quarter that will allow you to set realistic growth plans.
A good bookkeeper will design a customized bookkeeping system to meet both your needs and budget.
Pro Tip: To get started on your year-end financial planning, follow this checklist which covers the basics of getting your books ready for review by a bookkeeper.
2. Start Outsourcing Your Bookkeeping
Bookkeeping is not sexy.
We don't particularly find the data entry portion of bookkeeping attractive, but we love the value that good bookkeeping can put out.
As a small business owner you have bookkeeping needs. You either handle the bookkeeping yourself, hire an internal person, get a friend to help or outsource your bookkeeping. If you are a very small business there is a high probability that you don't need a full-time bookkeeper. You most likely just need someone to update your books a few times a month.
Here's the key...
The best solution to avoid making mistakes in your bookkeeping is pretty simple - don't do it.
Find a professional to help you accomplish your bookkeeping. You can, and should, still stay involved in the bookkeeping process.
You don't have to do your bookkeeping but you do have to understand it. Find a way to get value out of your bookkeeping.
If your small business uses QuickBooks (which we highly recommend) then you may want to look for a Certified QuickBooks ProAdvisor.
Remember lots of people do bookkeeping, you probably know several people that you are associated with. However, not everyone does bookkeeping well.
3. Financial Forecasting
One of the most important benefits you can get from an outsourced bookkeeping service is financial forecasting.
Find a way to get your bookkeeping updated on a regular basis. If you have a bookkeeper or outsourced bookkeeping service hold them accountable to meeting your deadlines.
Set clear guidelines and deadlines for each bookkeeping task. Make sure that you are not only receiving information on time, but that the information is accurate.
Use this information to set predictions for financial growth. Use those financial predictions to make smart business decisions.
Don't run your business blind!
Work with your bookkeeper to make better financial decisions for things like:
- Cash Flow
- Revenue vs. Expenses
- Profit and Loss
- Disaster Planning
- Hiring & Downsizing
- Opening New Locations
Financial forecasting is the greatest tool you probably didn't even know you had. You don't have to take big risks with your business if you have a clear financial plan and a forecast to predict whether big financial moves are warranted. The key to financial planning is having a reliable bookkeeper that can manage your books and work with you to understand your goals.
Related Article: Why Your Financial Forecast Is Your Most Valuable Business Tool
4. Learn from the Year Before
If your bookkeeping system does nothing to help you with your business then it is really hard to see any value in keeping the books current.
Your bookkeeping system needs to provide you with unique information that is useful to you in moving the business forward towards its goals.
Your bookkeeping should be a tool that you can use to aid you in making key business decisions.
Once you do find a bookkeeper that you want to work with you need to clearly communicate your expectations. If you expect your books closed by the 10th of each month then let your bookkeeper know. If you need certain reports on a weekly basis then your bookkeeper needs to know that.
After you have clearly communicated your expectations on what you expect delivered, how you want it and when you want it then you need to hold your bookkeeper accountable to meet or exceed your expectations. If your bookkeeper is under delivering then you need to find a bookkeeper that can meet your needs. Don't let your books fall behind every year.
- Turn your bookkeeping system into a valuable tool. First, clean up your bookkeeping system and bring it current.
- Next you need to figure out a way to find value in your business bookkeeping.
- Communicate with your bookkeeper to let them know what is important to you. Customize your bookkeeping system to satisfy those needs.
- Then hold your bookkeeper accountable to keeping your system current and use it to help you grow the business.
It isn't wrong of you to want a better bookkeeping system. In fact you should always be pushing your bookkeeping system to perform better than it currently does. Always ask your bookkeeper to raise the bar and build a better system.
Related Article: Turn Your Bookkeeping Into A Kick-Ass Business Tool
5. Have an Exit Strategy
You should always have an exit strategy - even if you never plan to sell. An exit strategy sets your business up for success.
Sometimes an exit strategy involves a merger or restructuring. The intention of an exit is to have an overall valuation of your company.
It motivates you to keep your business organized and with an overall growth goal in place. This also shows you where your business could stand to improve. If something doesn't look good from a selling stand point, then it certainly isn't ideal from a growth perspective.
Develop an exit strategy whether you plan to sell or not. If sometime down the line, your business is at a place where selling looks like a good option, you will have all your ducks in a row and ready to go. It works with a small business growth planning concept and will keep you on a clear path for the year ahead.
Is your small business bookkeeping being handled the way you want?
[Original post date: 10/13/2014] Comments in the comment section may be dated before the revised publish date of this article.