Cleaning up your books is likely the last thing on your mind if you’re like many other small business owners. You have bigger fish to fry. Your mind is more likely occupied with your Q4 customer acquisition. Or maybe it’s on philanthropic opportunities. Maybe you’re already thinking about the holidays.
Let me ask you…
Have you ever wondered where your business would be today if 2020 and 2021 were more like 2018 and 2019?
If you knew what would happen in 2020 and 2021 in advance, what would you have done differently to prepare your business?
Could you have been prepared? Did you have the right insights into your profitability? Did you have enough cash in reserve? Were your financials in order so that you could get a loan? Was your company credit-worthy? Were you bankable?
What if this year you could answer “yes” to all those questions?
It is possible.
Cleaning Up Your Books
When it comes to bookkeeping, your main focus in Q4 should be on clean-up – preparation for year-end close. For some tips on that, check this out.
When we get to Q1 – magic can happen. Like with a new year and new goals, your books can be new, too.
Now, we are not talking about starting your books over. We are talking about taking control of your books from the start of the year. Starting the new year off on the right foot, with clean books in the new year, can help you have a better handle on your financials. And that can help you say yes to all of the above.
More Informed Decisions
As a small business owner, it is important to know your numbers, and there are so many reasons why.
In the Goldman Sachs 10,000 Small Businesses program, we are taught to: understand money, metrics, and forecasting, read and interpret financial statements, and know what it means to be bankable so that we can make better business decisions.
Knowing your numbers gives you power: bargaining power, the power of choice, and the power to grow your business.
According to research done by CBInsights, 38% of startups fail because the owner ran out of cash or failed to raise new capital. And that was before the pandemic. So even if you are an established small business, it pays to know where you stand financially.
2023 and Beyond
It can be challenging to make informed financial decisions when your information is incorrect or incomplete. This can hamper your business growth. It is hard to chart your path ahead if you don’t know where you are or where you have been.
That is why you need to start off on the right foot with your books this year. But how do you begin?
By Cleaning Up Your Books.
Once you have reconciled the past year, you can tackle this giant – one bite at a time.
Chart of Accounts
Take some time to look through your Chart of Accounts. Are all of your accounts listed? They should include all of your bank accounts, all your credit cards, and all liabilities, loans, or lines of credit. You also want to make sure you have all sources of income delineated as you wish to report. In other words, add accounts for each line of business or each type of product that you want to track for revenue and profitability. Do the same for the Cost of Goods/Services, and again for expenses.
List all items that you want to include in your financial statements. You can get granular with your categorization, separating different types of insurance or software expenses, for example. Or create an account for spending on different marketing channels.
This level of detail enables reporting that gives you a very clear picture of your finances. You can see if certain lines of business are making a profit or if a particular marketing channel is paying off. It also makes it easier to see if certain things are miscategorized.
Stay tuned for the next bite.
At HireEffect, we provide customized, outsourced solutions for bookkeeping and payroll services that go beyond compliance. In addition, we offer franchise bookkeeping services, recruiting and talent acquisition, HR & talent management. We can do as little or as much as you need and want. Our ultimate objective is to help your business grow by getting you out of the back office and giving you the freedom to focus on customer-facing, revenue-generating activities, and strategic business growth. Contact us today.