I talk a lot about how to grow your small business. My passion is watching a small businesses grow and become more successful. The success or failure of a business always comes back to the leader. No matter what, the leader of the business is responsible for the end result. Every leader has a different management technique that I feel is based upon education and experience. For example, a person with an accounting background may not run a restaurant in the same manner as someone that primarily has a background in restaurant management. However, completely ignoring the financial aspect of a business is insane, yet I see it happen every day. I think many business managers and owners avoid the financial aspect of a business because it is intimidating to them. They find accounting and financial statements confusing and therefore they try and avoid them. I'm going to show you a few different ways that you can make sense of your bookkeeping and use it as a tool to help run your business.
Cash Flow Tool
Managing cash flow is a concern for just about every small business. As a small business owner you need to stop relying on your online bank balance and start using QuickBooks as a cash flow tool. Simple steps like entering daily sales, posting automatic bill payments and printing checks from QuickBooks will all lead to better cash flow management for your business. You should also reconcile your QuickBooks checking account to your online banking daily balance. If you sort your QuickBooks checking account by cleared status you can see two crucial things that allow you to manage cash flow. You will see your most recently reconciled balance, which should match to the most recent daily ending balance of your online banking checking account. Additionally you should see your "real' bank balance. That would be your QuickBooks checking account balance that takes into consideration all deposits that have not cleared you bank account, but also all payments that have not cleared the bank. By using QuickBooks in this manner you know your actual bank balance at all times and you will have complete control of your cash flow.
Sales & Marketing Tool
How the heck can you use your bookkeeping as a sales and marketing tool? An obvious way is by assigning sales reps to every sale in QuickBooks. In order for this to work you need your invoices to contain the rep field. You can add rep to your invoices by customizing the invoices and you can opt for the field to appear on the screen or to be printed as well. The report that you should use is a sales by rep summary or detail report (Reports/Sales/Sales By Rep Summary or Rep detail). These reports will show you the sales by rep for whatever period you wish to look at. This will allow you to see who is performing well and who is falling behind your expectations. Another marketing metric you can add to QuickBooks is a customer type. I like to use the QuickBooks customer type to identify the source of business. Did the business come from networking, a referral or through inbound marketing? Your sources of new business may vary so you should detail out your customer type list as you see fit. If you follow this process you can use QuickBooks to track your sources of income. Another way to accomplish tracking income sources is to use the QuickBooks class feature. Your bookkeeping sales data can help you to identify trends, which you can use to help you make decisions about how to sell and market more effectively.
Financial Forecasting Tool
Probably the most obvious way to use your bookkeeping system as a tool is to do some financial forecasting. Keeping your bookkeeping updated on a regular basis will lead to timely and accurate financial reporting. If you are not regularly updating your bookkeeping and analyzing your financial reports then you are essentially running your business blind. Having a financial forecast and budget in place before the start of a new year is a critical step that many small business owners simply skip. As a new year starts many business owners find themselves working on year-end bookkeeping rather than growing their business. If your bookkeeping is updated on a regular basis there is no such thing as year-end bookkeeping, in fact year-end bookkeeping should not exist at all! With an updated bookkeeping system you should be able to spend the last month or two of the year working on the coming year's budget and also doing some tax planning. Many business owners wait until the turn of the calendar to look at their tax liability...HUGE MISTAKE! You should be reviewing your financial reports with your CPA prior to the turn of the calendar year to get an estimate of your tax liability. Having a tax review prior to year-end will allow you to make key tax moves before it is too late. A tax review before year-end is one of those things that I consider a must, but also one step I see most business owners skip.
Don't be intimidated by your small business bookkeeping. Get some help and get your bookkeeping system dialed in. Then use your bookkeeping system as a tool to help you run your business and increase your profits.