Why Bookkeeping Matters to Growing Your Business

Bookkeeping Matters for Business Owners

Bookkeeping matters – and not only at tax time. If you are working on growing your business, real-time financials are important. Knowing your numbers is critical. Good books are a priority.

Why Bookkeeping Matters for Small Businesses

Bookkeeping helps you answer questions about your business. It also helps you know what questions you should be asking.

  • Are you making money?
  • Are you profitable?
  • Can you afford to hire someone this quarter?
  • Is now really the time to buy another truck?
  • Are you carrying too much inventory?

With good books, come real-time financials. And those financials help you make better business decisions.

But what is bookkeeping, really?

Simplified, bookkeeping is recording and tracking every financial transaction and accurately categorizing those transactions in an organized way. With good bookkeeping, transactions are organized via your Chart of Accounts.

The Chart of Accounts is essentially a list of how you make money, where you spend money, where you keep your money, and to whom you owe money. It includes:

  • bank accounts and credit cards (checking and savings plus accounts like PayPal and Bill.com)
  • assets (cash, receivables, equipment, vehicles, real estate, intellectual property)
  • equity (common/preferred stock, capital contributions, retained earnings)
  • liabilities (debt, payables, salaries (not yet paid), interest owed)
  • revenue (all the different ways your business makes money)
  • expenses (cost of goods/services sold, advertising/marketing, insurance payments, software)

Pro Tip: It’s best to be very detailed in customizing a Chart of Accounts for your business. For example, under the account for software, list out individual subscriptions. Your CRM, Zoom, QuickBooks Online, Dext Prepare (ReceiptBank), etc. You may be surprised that you’re paying for SaaS you don’t use.

Let’s get back to those financials.

When you watch your finances and track them over time (measurement), you see things about your business you may not see if you only look at your books once a year for tax preparation. Things like monthly sales, cash flow, revenue growth, and client acquisition costs may change from month to month. Tracking these changes and recognizing these trends will help you prepare and be prepared. Let’s face it, Mr. Drucker was correct. What gets measured gets managed.

When you keep up with your books, categorize your transactions monthly (if not weekly!), and reconcile your accounts to catch any errors, you have a solid picture of the financial health of your business.

That sounds like a lot of work.

Accounting Technology to the rescue! Cloud-based bookkeeping allows for automation. Automating daily tasks helps to take the grunt work out of bookkeeping. Because nobody loves to do data entry.

Eliminating the need for data entry helps reduce errors and increase efficiency. Automation creates greater accuracy. And it saves time which ultimately saves money. SaaS platforms like GustoMelio, and Dext (a few of our favorites!) are important technology when it comes to automating necessary tasks.

But where and how do I start?

Here is an example of what we recommend to prospective clients in terms of setting up and automating their bookkeeping.

  • Set up QuickBooks Online (QBO.)
  • Configure and integrate Dext Prepare w/ReceiptBank with QBO to add automated paperless document/expense capture.
  • Customize the Chart of Accounts to enhance reporting.
  • Set up an integrated bill payment platform, Melio or Bill.com.
  • Set up Gusto Online Payroll.
  • Configure Dext, QBO, and other tools with rules and machine learning to process and code recurring transactions.

Once you’re set-up, maintain! Here’s what that can look like.

  • Reviewing and categorizing all transactions weekly.
  • Review and process income and expense activity in the QBO bank feeds
  • Monitor and update automation rules and machine learning activity to optimize performance.
  • Reconcile and produce monthly financials.
  • Review open A/R and A/P to monitor cash flow.
  • Year-end reconciliation & close for tax time.

Sounds like fun, right? Oh, no? Just us?

If you haven’t reconciled in a while, or you are still operating with a shoebox and a spreadsheet, give us a call.

Since 2007, HireEffect has been helping organizations across various industries grow their operations. It’s like having a business partner in your back pocket. We are here when you need us. Let us know how we can help.

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