A large percentage of small businesses don't use their bookkeeping to help them run or grow their business. In fact many small businesses don't even update their bookkeeping enough to use their bookkeeping as a business tool. The bookkeeping for a business is one of those items that often gets pushed to the back burner behind more critical tasks. Many business owners look at their bookkeeping as a means to filing their tax return and that is all. However, successful companies know that maintaining their bookkeeping and using the information to help the business grow is crucial. So how do successful businesses use their bookkeeping to grow?
Tight Deadlines And Consistent Bookkeeping
The first step to any good bookkeeping system is regular updates. If you update your bookkeeping on a consistent basis you can actually use the data. Set expectations of when you want your bookkeeping updated and hold yourself or your bookkeeper accountable to meet those deadlines. Maybe you want updates done once a week, twice a month or just on a monthly basis. No matter what schedule you set just make sure updates are done regularly and consistently. The most important step in your bookkeeping process is reconciling QuickBooks. If you reconcile all of your accounts then you at least know you have entered all of your transactions. Putting things in the right account is up to you and your bookkeeper and may require feedback from your CPA. Remember to reconcile all your accounts not just your bank accounts. You should reconcile bank accounts, credit cards, loans, lines of credit and any other accounts that get a statement with a beginning and ending balance.
Good Financial Reporting
Strong financial reporting for your small business is important to have in place regardless of the size of your business. Taking advantage of the financial reporting that your bookkeeping can provide is the first step in finding value in your bookkeeping system. Good customized QuickBooks reports can provide eye opening moments for business owners. Financial reporting can show a business owner a lot about the health of their business. Is the business meeting or exceeding its goals? Are there any opportunities or areas that can be improved upon?
As a business owner you should communicate clearly to your bookkeeper what customized reports would help you make business decisions. Have your bookkeeper create a set of financial reports tailored specifically to your needs. You should have a set of memorized reports at your fingertips at all times. Analyzing those financial reports on a regular basis can help you keep the business on track to its goals.
QuickBooks As A Tool
QuickBooks can do a lot more than just tracking your day to day bookkeeping; it can also be used as a business tool. We have already discussed the importance of financial reporting and how to use your QuickBooks financial reports to help you run the business. You can also use QuickBooks as a cash flow tool. By keeping your books updated regularly and entering transactions into QuickBooks before they clear your financial institutions you should be able to get a firm handle on cash flow. Printing checks from QuickBooks, entering bills, creating invoices and receiving payments before they are deposited in your bank will help you determine your real cash balance and allow you to manage your cash flow. Cash flow is extremely important for many small businesses so it is crucial to get control of it.
QuickBooks can also be used to identify profitable customers and problem customers. You can use QuickBooks for job costing but you need a good bookkeeper that is knowledgeable and very detail oriented. Creating a bookkeeping system that incorporates job costing and is 100% accurate can be difficult. A clear system of communication needs to be put in place between management, operations and accounting in order for the system to work properly. However, if you use QuickBooks for job costing you can tell which customers are profitable and which need a price increase.
Lastly, your bookkeeping can provide valuable marketing and advertising information. By tracking sources of income in QuickBooks you can tell where your business is coming from. By using classes to represent your sources of income you should be able to identify where every penny you have ever earned has come from. This can be valuable information for your marketing team. Your bookkeeping system can at the very least tell you where your money is coming from. This information on income sources can show you where opportunities may lie in your marketing efforts. If it looks like networking is really bringing in the money but inbound marketing has not performed to your expectations then you can shift your marketing efforts. You should compare your income sources to your advertising expenses as well as employee non-billable time. If you are spending a lot of money or time on a particular marketing task and it is not translating into income it might be time to evaluate your marketing efforts.
Successful companies find ways to use their bookkeeping system to do more for their business than just file taxes. For business owners that don't understand or simply don't like accounting it may take more of an effort from the bookkeeper to show them how to find value in the bookkeeping system. However, a good bookkeeping system can add value to the business and once shown how to use it the business can exceed financially.