When you are unhappy with the profitability of your small business where do you start to try and fix the problem? Do you go to sales and ask them why they aren't selling? Do you go to your management and ask them what the problem is? Do you look at your most recent financial statements and try and figure the problem out yourself? Why don't you go to your bookkeeper and ask them why profits are off? More often than not your bookkeeper may know and understand the financial aspects of your business better than you do. Asking your bookkeeper why profits are down may be the best decision you ever made, here's why.
Although your bookkeeper should act like a business parnter, most likely your bookkeeper is not an actual partner of your business. Thus, your bookkeeper will give you feedback that is not influenced by how it affects them personally and financially. Take advantage of this 3rd party unbiased opinion by asking your bookkeeper tough questions. Your questions may even make them uncomfortable and that is ok; it means you are getting down to the crux of the problem. Remember, don't take offense if you get an answer that is painful; your bookkeeper is just trying to be honest and help.
Your day to day bookkeeper should have a deep intimacy with your bookkeeping system and the financial state of your business in general. By seeing and recording all of the day to day transactions that occur in a business you get to know the business very well. In addition, you also get a general sense of where money is coming from, but also where it is going. These feelings about the financial state of the business are further strengthened by the financial reporting of the business. Believe me your bookkeeper knows the good and bad things that are going on in your business before you the owner does. Your bookkeeper knows when you are spending too much on meals, entertainment and traveling. It's hard for you as an owner to identify those things as a problem. You see them as good things for your business. Prospecting and trying to bring in new business by taking potential clients to dinner. Also, beefing up the meals and entertainment account can be downright fun right? Everything is good in small doses. All that spending may lead to lower profits. Your bookkeeper may also see drops in sales before you even sense the potential problem. It's one thing to have a feeling about the financial state of your business, it's another to see it happen and confirm it with numbers. Being involved with the day to day bookkeeping puts your bookkeeper in a unique position to keep you on the right track financially.
The truth and nothing but the truth
The financial truth about your business can hurt. If you are not a business owner that can handle constructive criticism then you are probably not a great business owner. With all of my years of experience as a small business bookkeeper here is what I have learned: many business owners are not great at handling the finances of their business. It's tough to be critical of yourself as an owner, but I feel it is absolutely necessary. I find that many small business owners are careless with their spending. They make poor decisions like paying interest on depreciating assets and paying unnecessary bank fees. While these may seem like minor, nitpicky things they do add up over time. I also think that the general business owner doesn't spend enough time selling. They make excuses like they don't have time and that they are too busy or that they don't have the money. There are a million excuses you can make about why you don't want to do something, but it takes a true business person to make a business successful. A business owner that cares and is passionate about their business will make it successful no matter what the financial or time commitments are.
The next time that you look at your bottom line and you are disappointed you might want to start with a conversation with your bookkeeper. If they don't have any insight into the problem or give you some lame response like "I'm just a bookkeeper" then you might want to look for a new bookkeeper.