Following best practices for bookkeeping is critical for your company’s long-term success. But with many newer ventures choosing to handle their own record-keeping activities, business owners who find themselves increasingly caught up in the day-to-day needs of their organizations often fail to recognize when they’ve outgrown their accounting approach.
So it may be time to ask yourself: is your bookkeeping holding your business back?
Why Organized Books Support Business Growth
Maintaining positive cash flow while also turning a profit is never easy - but disorganized, unreconciled, unbalanced books only make the job that much more difficult. Moreover, sustainable business growth is only possible when your accounts are up to date and in order.
Not only do accurate financial records contribute to more profitable decisions, but streamlining your bookkeeping processes by adopting digital tools, outsourcing to a professional - or both – will help keep your business compliant with tax laws and governmental regulations.
Let’s consider a few of the ways that outdated bookkeeping practices could be preventing you from achieving greater success with your business. Are you:
- Frequently paying bills late, neglecting to collect on customer invoices when you should, or failing to make the most of potential tax deductions and credits?
- Having difficulty finding the resources - or making the right choices – when it comes to expanding your marketing, or hiring more staff?
- Missing out on valuable business opportunities because you’re not financially prepared to take advantage of them?
It’s only by being in a position to accurately assess your company’s past and current financial performance that you’ll be able to forecast and plan for your future. Clean, precise bookkeeping records are essential for generating the financial statements that lead to better-informed projections and strategies.
Cash Flow: Timing is Everything
One of the key ways that inadequate bookkeeping practices tend to hold businesses back is by disrupting their financial balance.
Timing is everything where positive cash flow is concerned. And if you’re effectively running your business blind because your books are in disarray, you’re going to be hard-pressed to a) make sure you have more money coming in than going out, and b) project your business cash flow going forward.
Consistently running at a deficit also puts you at greater risk of landing in an unsustainable scenario where your business:
- accumulates debt,
- borrows funds to help manage its debt load, then
- eventually amasses even greater liability when it’s unable to meet those additional debt payments
Lack of adequate cash is still one of the biggest reasons why many small businesses fail. Are your accounting records and statements solid enough to show you how your income is faring against your expenses?
Financial Knowledge is Power
If you want to jump-start your sales income, there are several options available to you. You can:
- increase your prices,
- aim for larger individual sales, or
- expand your customer base
Each of these routes can prove successful, depending on circumstances. But given that boosting prices carries the risk of reducing your competitive advantage – and increasing transaction amounts through upselling can frustrate employees and irritate clients - acquiring more customers is often the most effective way to increase your company’s revenue.
While expanding your client base may mean an additional investment of time and money, accounts that accurately reflect your financial situation will show you exactly where you stand in terms of whether - and how easily - you can afford to up your marketing game or take on more help.
They’ll also put you in a better position to:
- project how increasing your revenue is likely to impact your business, and
- determine your debt capacity should an infusion of capital be required to support your new advertising or hiring goals
Remember: knowledge – especially financial knowledge - is power when it comes to making informed decisions that help ramp up your business performance.
Aim for a Business That Thrives
It’s not uncommon for reactive organizations – those that devote most of their resources to dealing with inefficiencies – to fail to thrive. Companies that take a proactive stance, on the other hand, are not only more effective at dealing with challenges in many cases, they’re better at seizing opportunities as they arise.
While growth initiatives vary by industry and individual, preparing for greater success may mean:
- Exploring product development, carrying more inventory, or expanding your services,
- Moving to larger business premises, opening an additional office, or choosing to franchise,
- Increasing your workforce or providing more opportunities for professional development,
- Acquiring a related business or service partner
Regardless of what your evolving vision looks like, however, know that every goal worth pursuing relies on an accurate set of books to yield real-time financial information. When your business boasts an efficient, organized accounting system, you’ll have a much better chance of engaging in the kind of practical planning that keeps prosperous companies moving forward.
Photo Credit: Canva