How To Get Your Business into Shape from A Bookkeeper’s Perspective
Let’s face it… there’s no special formula for a successful business, but there are some things that make it a lot easier for a business to become successful. One way you can increase your odds is by making sure your business’s finances are in shape! No, I’m not talking crunches or hip thrusts… I’m talking about keeping your debt ratios low and increasing cash flow when you can. If you are a small business and are not sure if your business is in shape, this blog is for you!
What does it mean if my business is in shape, and why does it matter?
From my standpoint as a bookkeeper, keeping track of your finances and making sure you are using correct data to make financial decisions is an important aspect of business. Shaping up your business is getting everything organized, shaving off access mess, and using the methods of record keeping that best suit your situation. This way you will better understand where your business sits and can make the right determinations based on what you know.
How do I know if my business is in shape?
One thing I look for in a healthy business is that the expenses month to month don’t drastically change, if your future expenses are easily accounted for, you will be able to plan your cash flow more accurately. Another is whether your revenue is steadily growing each month or quarter. There is an additional risk associated with revenue that is all over the place high and low each month. So, if you can show a steady and strong rise in revenue, the healthier your business can be. Along with revenue, are you consistently retaining clients or acquiring new clients on a regular basis? Healthy businesses have streamlined onboarding processes and have a consistent stream of clients. One important indicator of your business’s health are your profit margins, are there any places you can decrease your cost of goods sold or increase your income? Some businesses find they cannot cut expenses but are able to increase prices to make more room for profit. Do you have a high debt to income ratio? Healthy businesses can demonstrate a good balance between their debt and income. These are just a few ways you can get a gauge on where their business sits.
How can I keep my business healthy?
It is critically important that you understand your numbers and have at least an idea of where important numbers are lying. If your bookkeeper is just sending your monthly reports each month and you are just filing them or worse deleting them, I challenge you to ask your bookkeeper to go through the reports with you. Don’t be afraid to ask questions, and if your bookkeeper/accountant doesn’t know how to walk you through your Balance Sheet, or your Profit & Loss report, find a new bookkeeper! Once you have at least a basic understanding of what your numbers should be at, you should keep in touch with your bookkeeper to make sure the two of you work together in growing your business.
I challenge you to put your finances first.
Call your bookkeeper now to kickstart your journey to getting your business in shape, look at your numbers, and find areas that need some work. There are always ways to improve your finances, and businesses that roll with the punches are the businesses that can last through anything!