the value of bookkeeping
Many business owners don’t see the value of bookkeeping and see it as a necessary evil that needs to be done once a quarter to calculate their GST and BAS obligations. Some detest it so much that they leave it for as long as possible then become stressed about it.
Most business owners think that they can’t afford to engage a bookkeeper because they are too costly and the business owner or their partner can do it.
Some business owners think they have to do everything! However they don’t take into account the time they are spending doing this stressful job when they could be making money doing what they love doing.
Crucial Numbers
Chances are that if the bookkeeping isn’t done on a regular basis the business owner will not know some of their crucial numbers – such as the turnover for the last week, month or quarter or year to date; their cost of sales, weekly salary cost, gross profit, gross profit percentage or net profit – some don’t even know how much money they have in their account or how much their outstanding debtors are. Some of these numbers give an indication of how well the business is doing or if there are issues that need to be addressed.
Invoicing
If the invoicing is not done on a regular basis, the debtors won’t pay, which means the business owner can not pay their bills. Not paying their bills in turn leads to increasing debt which leads to more stress. To stop this vicious circle is to take control and be more in control by having up to date information. Would you continue to do more work for the customer who has not paid his bill for the last two months or longer?
Paperwork
If the paperwork side of the business is getting to you – delegate it to someone who enjoys doing just that – organising and reorganising someone else’s business. If the paperwork is in a mess the business owner will not be in control.
Good bookkeepers can sort out the mess put processes in place, have more up to date information readily available and can add value to the business by producing up to date reports, prepare ratios, budgets and cash flow projections.
Business owners who know their numbers are more in control and can make more informed decisions. They understand the impact of larger expenses on their business.
If they are not in control there is also a good chance they don’t prepare budgets and probably see budgets like diets – restrictive, a list of things they can’t have in stead of a lifestyle change. How many times have you heard the saying – “Sorry it’s not in the budget!” Budgets and cash flow forecasting are not meant to be restrictive; it should be used as a planning tool. In many cases there are expenses that directly relate to sales and the sales efforts such as advertising, cost of sales and in some cases salaries and wages. Other expenses are fixed and have no relation to sales – such as rent.
Cash Flow
Using the budget or cash flow tool can show you when to expect an increase in sales as a result of the additional advertising efforts. This will help the business owner to prepare and plan to take the business to the next level whether is it by employing that next employee (or in many cases the first employee) or moving to larger premises or investing in new equipment.
They need to understand what the impact will be on their cash flow, and to make sure they have the cash flow to support those expenses. Having this kind of information available makes it easier to approach the financiers for loans. Financiers are more likely to lend money to the business owner who knows his numbers, who has control over his business (and paperwork) and knows how he is going to grow the business.
Are you just crunching the numbers to prepare that BAS statement or are you looking at this with new eyes and seeing opportunities?
