Why Bookkeeping is essential to your business success | A Lisa Newton Blogpost
If you are running your own business, then you’ll be aware that there are three main areas to focus on:
1. Making the widgets (production)
2. Selling the widgets (marketing)
3. Counting the widgets (finance).
Many people are great at the production side of things – doing the product and/or providing the service, because often that’s what made them start the business in the first place… they spotted a gap in the market, saw there was a demand and created a business to fulfil that demand… however, what can really let you down, is not having anyone on your finance team to ensure that the business is actually making a profit, and that you’re putting enough money aside for taxes and other contingencies as and when they’re due.
The difficulty many face is how or where to go, to find a good bookkeeper! Some will approach their accountant to help out with their bookkeeping – and this is actually the worst possible thing that you can do. An accountant is not a bookkeeper. An accountant is likely to charge you over the odds and either send you a very junior member of staff (and charge over the odds), or you’ll end up having to send your books into them, which is time consuming and you’ll then lack control over what is actually going on inside your own business.
What you need, is for someone to come in, on site, to sort out your bookkeeping on a regular basis, in a timely manner, and to explain any notable findings to you, so that you know how your business is doing. Finding out that your business is going down the pan, three months into its demise isn’t very helpful, as that is three months that you’ve been blissfully unaware, and three months of falling behind that you now have to recover from – which may make all the difference between failure and success in this harsh economic climate.
Bookkeeping is essential to your business success because by keeping on top of your books, this means you are tracking and monitoring what is going on. You should know exactly who you owe money to (aged creditors balance), who owes you money (aged debtors balance), and what your profitability for this month, quarter and year is. If you can’t put your hands on these figures, then you are operating on blind faith. It’s like driving down the motorway with ice on your windscreen – not being able to see where you are going, but believing that the road is clear, and that you are not about to have a head on collision.
Finding out at the end of the year, whether or not you’ve made a profit is not the best way to go about things. You should be able to set yourself income targets and profitability targets and know whether or not you are on track to meet them as you go along. If you don’t do this yourself, then who, in your team is doing this for you?
Don’t rely on the honesty of customers to remember to pay you either. If you supply business-to-business on credit, sometimes their records are as bad as yours! In some cases – they’re non-existent, so they have no idea what is going on either!
Don’t just rely on seeing cash in the bank either! If you have a huge tax bill looming, then that could be the tax or VAT money. Or, you may have a supplier debt that you’ve forgotten about – so really, that money doesn’t actually belong to you – it belongs to someone else! So its important to be on top of the numbers so that you know where you are, and to be able to plan ahead effectively.
For further help on bookkeeping contact Boogles at www.Boogles.co.uk – winners of AI (Accountancy International) 2016 Best Bookkeeping Company London award.
020 3371 8894