It was 25 degrees COLD out this morning as I was driving home from serving snacks & smiles to our food insecure & homeless friends. That might not seem cold to you, but we live in Texas, so we consider that RIDICULOUSLY cold. :)
I'd only been outside for an hour, but I couldn't wait to get into our warm home. I glanced down at the dashboard and saw the dreaded "oil change" light. Again. Not today. Too cold. Can't remember when it first came on, but I decided to skip the oil change again. I mean, who has time for that? What does oil really do for your car? I never understand what the mechanic tells me when I do take it in. Oh, and money. I have to pay for it & don't want to.
Do you have the same feelings when you see your oil change light come on? #askingforafriend
As I considered why I was putting off my oil change again, I had an "a-ha" moment. THIS is why business finances & bookkeeping get avoided by so many business owners! All the same reasons about time, money, not understanding why it matters. Completely makes sense to me now!
I googled what happens if I don't have my oil changed. YIKES - eventually my car engine can be completely ruined. There is definitely a reason for that fairly simple maintenance. Well, guess what?! Your business can actually SAVE MONEY by having accurate bookkeeping. Yep - SAVE MONEY! Not having proper bookkeeping can have a pretty bad ooutcome for your business too.
I talked about this recently on this video podcast, but also am explaining it in writing here.
How will my business SAVE money with better bookkeeping? Let me count the ways... (sorry, Shakespeare reference!) Here are just a few:
TAXES - Who wants to pay more taxes than necessary? Right. None of us. Bookkeeping allows us to:
Record ALL our transactions. Accurate bookkeeping will capture ALL the transactions into & out of your accounts. Relying on our memories to put in all the expenses will usually lead to us forgetting some of our expenses. Without all our business's expenses recorded, the result is higher taxable income.
Properly record money spent in the correct categories. Different expenses require different tax deductions. For example, you may have purchased a car for your business. That's an asset - but it also is deducted over time as a non-cash expense called depreciation. If you just have it classified as an asset, you will miss that deduction. This is just one of many examples. Having things properly recorded will allow your tax advisor to capture all the deductions your business is eligible for.
COLLECTIONS & PAYMENTS - When your accounting is up to date, you will know which customers still owe you as well as which credit card payments failed this month that you need to follow up on. You also will know when your vendors need to be paid so you don't incur late charges. Both these will result in more cash in your bank account.
HAVE THE CASH YOU NEED TO RUN YOUR BUSINESS WELL - At some point, many businesses need an influx of cash to continue or scale. In most cases, you'll seek this from a bank as small business loan or line of credit. You may also be looking for an investor for your business. A box of receipts will NOT suffice for bankers or investors. You'll need your accounting to be complete and to provide up to date financial statements to qualify.
TIME IS MONEY! You'll have to get your accounting together for taxes each year. When bookkeeping isn't taken care of regularly, you'll find yourself having to spend extra time locating the information for the whole year and digging through months of old records. Time is our most valuable resource. You could be using it to serve your next client (generating revenue) or looking back through six months of credit card charges trying to remember what you bought. If you buy for your business using your credit card as often as I do, you definitely don't want to try to remember what each was for months later! By taking care to have your bookkeeping up to date monthly, you'll save money by spending your time on income generating activities rather than extra time working on finding & remembering.
STRESS - The stress we have over not KNOWING where we are financially is a lot. The reason I hear most often for not having accurate bookkeeping is just not wanting to see what the numbers say. Peace of mind is worth money. Even if the numbers aren't what you wish they were, by seeing them, we can CHANGE them for the better!
Which leads me to my FAVORITE BENEFIT of BETTER BOOKKEEPING....
STRATEGY TO IMPROVE YOUR BUSINES OPERATIONS - As a business coach & profitability strategist, this is where I really want to emphasize the big benefit to accurate bookkeeping. With books in order, we can do analysis to discover all types of things to help your business including:
How much should you price your products for? Are you pricing by gut instinct? Or using your competitor's prices to decide your own prices? With bookkeeping, you can actually price your products using a formula of direct costs for each product plus an allocation of indirect costs, taxes and PROFIT! Imagine not hoping, but KNOWING that every sale was profitable!
Which is your most profitable product or service? As a coach, you might be offering 1:1 coaching, group coaching and also an online course. With accurate bookkeeping, you can analyze the profitability of these different services to see the profitability of each. You may use this information to tweak your offerings or even add or eliminate services.
When should you order more inventory so that you have what you need when you need it and don't have to pay expedited shipping? Or worse, not have the materials available and have to let a customer down or turn one away.
Plan your cash! Cash flow is the number one issue facing small businesses. It's not enough to be profitable; we also have to have cash AT THE RIGHT TIME to run our business. Imagine the peace of mind you will have by KNOWING that you have a plan to project your cash flow. (This is so important that we did a specific training on just that. Watch it here and download a plug & play cash flow spreadsheet here that you can use for your own business.)
I literally could go on and on and on and on with this one benefit. Using data is the strategy that successful businesses employ to achieve their goals. I love partnering with business owners to ensure you move from feelings of chaos, overwhelm and frustration to ones of confidence as you take control of the trajectory of your business.
I know a lot of us dread bookkeeping like I avoid oil changes, but I hope this list has helped you see not only the ways you can SAVE money with better bookkeeping, but how your business can actually run better and more profitably too. AND how knowing this information will help you take control of your business so you can achieve your financial and quality of life goals too.
How can I implement better bookkeeping?
DIY - You absolutely can do this yourself! You can do this as simply as with paper & pen or take it up a notch and use a spreadsheet or accounting software. Many entrepreneurs and business owners take care of the bookkeeping themselves.
Google and YouTube have a lot of information available. You can teach yourself almost everything for free using the internet! Just be sure your source is a reputable one. I see way too much misinformation out there & it makes me sad.
Pick up a basic accounting book. There are so many to choose from, and it doesn't have to be hard.
Looking for other small business owners as well as more accounting/financial trainings, tips and strategies? Maybe you want people you can collaborate with, get feedback from, or just know you're not alone in this journey.... If that's you, I invite you to join us in our FREE Facebook group: Small Business Finance SIMPLIFIED.
TRAIN/HIRE AN EMPLOYEE to do your accounting. There may be someone on your staff that loves numbers or would love to learn! You may also want an accountant on staff. There is a lot that person can offer your business beyond just the basics.
OUTSOURCE the work to a FRACTIONAL CFO. Many accounting firms, including ours offer these services. The benefit of fractional CFO services is that you don't have the obligation to learn it yourself or hire a full time employee, but you can afford CFO level strategic expertise instead of someone with less experience. Our firm, Victory Advisory Services, specializes in helping small business owners understand the money side of their business using everyday words & analogies. We offer bookkeeping along with strategy to business owners. Knowing what happened (bookkeeping) is important, but I want to ensure my clients are also planning for how to achieve their goals.
If you're overwhelmed by the DIY option and want professional "done for you" services, book a complimentary consultation to discuss Victory Advisory Services helping you. We are a virtual firm so we can connect with you wherever you are. We love partnering with our clients! Your success is our goal!
I hope this inspired & encouraged you to get your oil changed when the light comes on (I'm going to do that this week-end myself!) and ALSO to SAVE money for your business by COMMITTING to BETTER BOOKKEEPING!
I'd love to hear how these steps work for you or know what other questions you have. Comment below, connect with me on Facebook, LinkedIn, or Instagram, join our Facebook community, or email me. If you haven't already joined our free private Facebook group, why not? Join us! I love to meet new people!
Cheering you on!
Joyfully,
Christie
Christie Varner, a 25-year CPA, is passionate about helping YOU, small business owner, gain confidence & take control of your business finances so that you can achieve your financial goals without sacrificing your happiness.
When she's not empowering business owners, she's eating Tex Mex, drinking coffee, playing with her Havanese dog, Max, or learning something (and will teach others soon!) from Google, YouTube or a book!
She'd love to connect with you so reach out & say hi!