Brandography guest blogger Dan Selner, owner of Perpetual Resources, Inc., provides guidance for business owners on bookkeeping and financial practices.
Bookkeeping is often an overlooked aspect of a business. Many view it as a necessary evil and put off this task as long as possible. However, this attitude can be detrimental to your business. As many as 75% of business owners do not use bookkeeping as a tool to run their business effectively. Rather than engaging with and optimizing bookkeeping to help them run their businesses, many owners only use it to report what has already happened. Often, the business bookkeeping is weeks or months behind with the owner only getting around to doing the books when he or she is not busy (which rarely happens) or when it is tax time and the books must be sent to an accountant. This is what we refer to as “Reactive Bookkeeping”.
Bookkeeping, as mundane as it may appear, is actually the #1 Secret Weapon when it comes to Business Management and Growth. This is the concept of Proactive Bookkeeping. In other words, what gets measured gets managed. Proactive bookkeeping allows us to review recent financial data and make informed decisions on cash-flow projections, income acceleration, and expense reduction techniques to help growth. It is only with accurate and consistent measurement of these and other key indicators that we as business owners can effectively manage and expand our businesses.
Here are five ways to significantly increase your profits with proactive bookkeeping:
1. Make Effective Business Decisions:
If you or someone you have hired does not understand formal bookkeeping practices, this can become a problem. Properly categorized income and expenses allow you to quickly review monthly numbers and make informed business decisions immediately. Whether it’s to cut costs in a particular area or to increase spending on marketing, the numbers tell the story of what brings your company to profitability.
2. Cash Flow Control:
For many small businesses, cash flow is one of the most important aspects of daily operations. Accurate bookkeeping gives you insight on the inflow and outflow of your cash. Frequent cash flow analysis can help reveal and manage costs and make sure your money is being utilized and invested in the most efficient manner for your business.
3. Time to Grow Your Business:
Many business owners try to do bookkeeping themselves or do not have the professional help they need. Although we all know that time is money, many business owners do not put enough value on their time. Leave the tedious and time-consuming task of bookkeeping to the professionals. A bookkeeper will know what to record, how to record it, and most importantly, the accounting changes that affect a business on an ongoing basis. This alone can not only save time, but it also free up more of your time so you can focus on growth and taking your business to the next level. Besides, a bookkeeper can often perform these tasks in less time than it would take you.
4. Save Money in a Potential Audit:
Improper or poor receipt and record keeping is common for businesses. It is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes. It can also provide the necessary documentation in the event that you are audited by the IRS. In case of a potential audit, accurate records of income and expenses could end up saving you thousands of tax dollars in dealings with an IRS auditor.
5. Save Money at Tax Time:
Many business owners spend days or even weeks gathering up their financial information at tax filing time. Having monthly bookkeeping systems in place helps alleviate this tax time headache and anxiety. The only way to reduce taxes is with proper tax planning and documentation, and the only way to have proper tax planning is with accurate books and financial information. As such, accurate books not only allow for tax savings, but can save many business owners from tax time rush and anxiety.
With these tips in mind, take a look at your business and determine how each can benefit you. Now is the time to make some easy changes to upgrade your bookkeeping system and turn that mundane task into your #1 Secret Weapon for Business Management and Success. Have questions or desire additional information? Contact Perpetual Resources, Inc. to discuss your bookkeeping system and find out how we are able to help you.