I have met enough business owners who don’t know what their actual profit is to know that this topic is critical.
Why do I need a bookkeeper or bookkeeping software?
- Track Profit and Loss – Especially if you have just started your business, you need to keep on top of how much you are spending and how much you are making. Expenses can add up very quickly, and seeing a report of it on a monthly basis can keep you in check and help you to understand why your bank account is dwindling at an astonishing rate. It also helps to compare your monthly report to a proposed budget. This is helpful not only for new businesses but established ones as well. Looking at where the business has gone over budget can identify areas that need to be addressed before they get even more out of control.
- For potential funding – It’s highly unlikely that an investor or a bank will provide you with funds if you don’t have some kind of financial report to give them.
- Filing Taxes – At tax time, the preparer who is filing your taxes will definitely need some financial report from you to be able to file your taxes. If you use an accountant, then they will have to prepare your reports before they can prepare your taxes as well.
- Making strategic decisions – Sometimes you can think you are doing well because you are generating so much revenue, so you decide to expand. However, once the monthly report comes out, you realize that the cost incurred to generate more revenue actually resulted in a loss. Or you might think that you have enough money left over to give your employees a raise or purchase new equipment. Without a report to tell you exactly what the business is generating, it is difficult to make a decision on what to do and how much can be spent.
- Hire a bookkeeper or an accountant. Your input will typically only consist of allowing them access your bank/credit card accounts or providing them with monthly transactions downloaded from your bank/credit card. The initial setup with them may require that you provide categorizations for transactions that will recur, and on an ongoing basis, you will also need to provide categories from time to time for unfamiliar charges/vendors.
- Purchase bookkeeping software. I have used QuickBooks Desktop for several years now and have found it to be very good. There are several other software products available like Go Daddy Bookkeeping, which is web based. QuickBooks also has a web-based version of their software, but when I tried it a few years ago, I found that I preferred the functionality of their desktop software.
Regardless of which software or bookkeeper you choose, this service is critical for keeping your business on track and ensuring that you remain viable, or at the minimum, see how high the cliff that you are about to fall off is!