One of the most frustrating parts of running a successful business is bookkeeping. Small to medium size business owners will find themselves trying to juggle many aspects of their business. And while they have managed to do an “okay” job, they soon realize as the business grows; they will be unable to be a jack of all trades.
It’s July 1, 2019, Johnathan owns and operates a successful food truck business. In fact, he’s thinking about purchasing another truck, and staff to keep up with the demand. The problem: Johnathan has failed to hire an accountant to assist him in establishing a productive bookkeeping system. While Johnathan’s sales are growing, his energy and focus are all over the place shifted into several directions.
The year is halfway through and his financial records are either missing, non-existent or disorganized. While he has recorded his figures of income and outgoing expenses, he has failed to exercise proper financial control, and now he’s faced with anxiety about the lack of clarity concerning his business’ finances and next steps.
Yes, operating a business is an impressive accomplishment, but it is essential to recognize that bookkeeping is a vital part of a business in order to monitor income and expenses as well as prepare for tax time. So, whether you have a small or large business, to make a profit, you must take reasonably accurate estimates of your sales income, determine your costs precisely, and manage both effectively. Simply put; you need to establish a practice of financial organization, and if that is not your skill set; hire someone who does.
What is financial control?
Bookkeeping requires recording the figures: income and expenditure, receipts and payments, assets and liabilities, etc. When you use the numbers as a basis for effective financial control, you stay abreast of your financial position and make steps to resolve any problems before they become large ones.
Set Financial Objectives Make it a priority each year to set targets and prepare a budget that will move you toward achieving your sales goals. If you have investors, their concern will be the rate of return on investment. If you've invested your own money, you may be expecting smaller returns initially and higher returns over a more extended period.
Keep Accurate Records
A reliable accounting system is critical for adequate financial control. Make sure that you maintain accurate records of sales, invoices, cash receipts, and expenses. Run reports with this information to identify negative and positive trends, which in the end will help you to revise your forecasts and plans.
Conduct Monthly Status Checks
Bring the account balance up to date and perform a bank account reconciliation every month.
Evaluate the Numbers
Focus on a few key issues, such as revenue growth, profit, and cash flow, and choose a manageable number of appropriate financial targets.
Bottom Line: A carefully-considered and well-developed budget and forecast will strengthen control of operating costs and have a substantial influence on the total profitability of your business.
Essential Accounting Consultants is a full-service virtual CPA firm specializing in celebrity professional accounting, tax crisis resolution and debt settlement, business consulting, business management and structuring, comprehensive business administrative and payroll services, accounting/bookkeeping, strategic tax planning, audit/evaluation of financial statements, individual and business tax preparation, and expat tax services.
*About the Author: Robin Boyd, President / CEO of Essential Accounting Consultants / Entertainment Accountant Specialist. She connects with Entrepreneurs, Home-based business owners, and Entertainers across the country to consult and help them plan / prepare their income tax returns.