Knowing your business finances
Four Ways in 4 Weeks to Save Time and Money in Business
End of Month Activity – Week 4
In my experience, many business owners people don’t even look at their business finances on a monthly basis. Without a regular review, business owners cannot possibly understand their financial picture.
Then I have clients who are reviewing their reports weekly. Most of my restaurateurs look at the day’s receipts on a daily basis through an app on their phone.
Without a regular business finance review process, you might miss auto-payments for a service or advertising that you don’t recall and have an auto renewal on a subscription. One of my clients had their web hosting and domain names through a company that was on auto-renew and suddenly there were almost $1000 of fees on the company’s PayPal account. Small fees can add up – one client had about 15 items that were recurring fees totaling $300 a month of unused services.
Another reason for a business finance review besides staying on top of your profit margins and bottom line is to make sure items have been recorded correctly. Anyone can make a mistake in data entry. A number or account can easily be mis-keyed. It won’t necessarily affect the bottom line but it may affect your taxes.
End of Month Business Finance Process: (for you, your staff person or bookkeeper)
- Reconcile your checking, savings and credit card accounts. As you do this, check to see if there are any payments you were not expecting.
- Make sure everything is filed away so that the mess does not escalate again.
- Tie up any loose ends for the month.
- Review your Profit and Loss Monthly and Year to Date Reports as compared to the previous year.
- Also, when you run the report, have it give you a column that shows each line item as a percentage of income.
- Look for anything questionable on the reports to see if there is a data entry problem.
- Educate yourself on how the business is doing based on what your reports tell you.
If you are using a bookkeeper:
Give your bookkeeper all of your documents regularly at one time. It takes time to stop and write notes about missing information or questions about documents that are unclear and then communicate with you for answers. The fewer problems that your bookkeeper has, the faster they will be able to get through your work and the lower your bill.
Pay for only the services that you need. Hiring even a terrific bookkeeper does not mean they have to do all of your bookkeeping. Maybe you can reconcile your own bank account but need help filling out your sales tax return. Maybe you want to pay your own bills and have the bookkeeper enter the checks you have written. Maybe you will do your own customer invoicing, collections, and bank deposits but you want to keep a database of customer information. You will be able to afford more help as your business grows.
Communication is key. You need to be clear on your expectations and what information you would like to see. A good bookkeeper does not charge clients per phone call. This keeps you in the loop and helps you understand how each of your decisions affects your bottom line.
At ITB, our #1 priority is to give you the tools that you need to run your business in a format that you understand. If you don’t understand your financial statements we can give you other reports that are more meaningful to you. If you have a question that we can help you with, call, email, text, smoke signal our team!!
First off let me just say that ALL businesses need good affordable bookkeeping services. Most business owners just starting out are trying to cut costs and spend as little money as possible. I know all about this because I am a small business owner just like many of you!