A good understanding of your business finances is one of the key elements of growing a healthy and successful business.
Running my own chain of bookshops, Archway Books, taught me the important lesson of keeping my business finances under control. It didn't take me more than a few minutes every day. I only had to cash up and to add these figures to spreadsheets.
This basic thing turned into a habit allowed me to know how sales were going across my shops at any given time. I could compare the numbers with the previous day, week or year. This helped me manage my cash flow more effectively and take my business to the next level. In addition, I ensured all my invoices to clients were sent out at the right time and late payments were closely chased up before delivering those clients more orders. All these actions, combined with effective back reconciliation resulted in the smooth operation of my bookshops.
I love crunching numbers, so handling my own bookkeeping was rather a pleasure than a chore. I can understand that most people shy away from numbers. If you are like most of these people, chances are you set up your business without the specific intention to keep accurate records of your financial transactions.
Why Does Bookkeeping Matter so Much?
As with other key areas of running a business (sales, marketing, IT), accurate bookkeeping is vital to the smooth running of a growing business
. This means you shouldn't overlook it.
Learning the basics of effective bookkeeping isn't hard, even though it requires a good amount of your time. The alternative is to outsource it to a third-party specialist, such as Bould Bookkeeping
. When you factor in the costs that come with the decision of outsourcing a part of your activity, you should consider the added value to you and to your business. For example, gaining the peace of mind that your bookkeeping is in good hands, as well as the fact of freeing up your time to focus on developing your business or on improving the relationships with your clients could value more than the physical cost of hiring a specialist to take care of your bookkeeping. By not having to put up with this, you can work towards keeping your deadlines and delivering the top-notch services your customers expect and deserve.
Modern-time bookkeeping relies on automation and the choice of reports is truly overwhelming. You can generate Profit and Loss reports, Statements of Financial Position, Balance Sheets and many other such documents that can allow you to understand the financial position of your business. Do you understand the deep meaning of these reports? Are you aware of the way your assets depreciate over time? These are only a few of the financial terms that might leave you dazzled and confused.
Nevertheless, by keeping accurate track of your finances, you can ensure you don't pay any late submission penalties
. In addition, you can improve your cash flow by keeping tabs on your up to date accounts. I feel this is something that can make a huge difference to the success of a business. I know many business owners complete their accounts on yearly basis by their accountant. While using an accountant is a great thing, not checking your finances more often than once a year is a big mistake. Keeping a close eye on the movement of money allows you to monitor a wide array of key factors that have a direct influence on your profit margins. The ability to assess your expected turnover is a valuable tool for planning your cash flow in a better way. This is what healthy businesses do.