Small Business Accounting For Dummies: No Day Dreaming Allowed
Bookkeeping, learn quick and let?s turn the page and get to something interesting! Can
?t someone else worry about the number ? I really don?t do numbers, I am a welder! All I have to do is make my product well and everything will be OK.Managing cash flow and bookkeeping will ensure integrity in the bookkeeping process. Financial statements will show the reality of the business situation. In the beginning the business owner is wearing many hats, you?re the do-er, manager and the strategist. That?s why bookkeeping is far from your mind. But for the sake of your business it?s a wise choice to have some skills in that area. No one can do a job better than you, because you understand your business and you have a vision for the future of your business.
I have met people in my practice who do not know what general ledger means and frankly do not want to be bothered with bookkeeping side of their business, and at the end of the year ask me ?where is all my money going.? You cannot ignore an integral part of your business and have it stay healthy indefinitely. As in any other part of your life, knowledge is power. Spend some time on learning bookkeeping. It will be an eye opener to see exactly where your money is going.
Knowledge is power; you can?t ignore an integral part of your business and expect it to stay afloat indefinitely. So why not spend some time and learn bookkeeping, how it can help you and how to do it well. Even if you contract it all out at least you will know if it?s being done well by reviewing the general ledger and financials on regular basis. This goes for other aspects of you business. Just like you wouldn?t hand over and electrical project to an employee, you would most likely oversee it, or do it yourself first before handing to someone else. Bookkeeping is the same. It is the heart of your business with out a good set of books one can get lost.
Once you?ve taken the time to master the basics in bookkeeping and creating accurate financial statements ? that?s when the fun begins and you can start to manage your business. You don?t have to wait for bank statements to arrive in the mail; you already know your bank balance and no more surprises at the end of the year when your accountant finishes you taxes.
This document will provide you with basic information to set up your bookkeeping system. Once you?ve learned the basic in how to keep your books, the fun begins when you start to use them to manage your business and help you make good decisions. A good set of books is as good as the documents provided. Its one thing to enter the documents in a software program or manually on a ledger form, but you also need to file and organize your papers so that it is easy to find when needed.
Pricing your product or service is #1. There is a simple equation, you charge more than it costs you, right? So, how about the line of credit that has to be paid back or the labour and overhead bills? What about the trimmer and the lawn mower you put on your American Express card. There is a long list you?re likely forgetting, or if not forgetting, discounting beyond reality. A good set of books will point out and tell you what ought to go into that equation which will make the difference between making a profit or loss.
Running a business profitably is tough, even after you price your product. You have to know how your pricing compares with reality. Compare your product and prices to what the market will bare. Review your business plan often and follow it as closely as possible. Your business plan is your road map to success. Also review your financials regularly and make changes as needed. Pay attention to your changes so you can see things happening soon enough to correct them.
Cash flow, what?s that? Let?s learn from the mistake Stephan make; he didn?t know what cash flow was until it was almost too late. Stephan had an incredible spring and summer starting his drywall contracting business. There was always money in the bank, thanks to customer deposits. But when fall came, business began to slow down and Stephan took a look at his books. He was happy with the profit his business made, but on a second look he revised the profit down to account for a loan payment he forgot was still due. A week later he had to revise it down again for the quarterly HST taxes and the payroll source deduction bill. Stephan also noticed a $3000 error he made in his deposit book by hitting the wrong key on his calculator. Before long Stephan?s profit went down dramatically and he was facing the bank for a line of credit to tie him over the winter months. After the first year Stephan paid off the loan and he learned the most important thing from keeping your books is how to understand and manage cash flow.
You may not need a banker yet, but a banker whom you can trust, will work with you and help you learn about business while your growing your business is very beneficial. When you need to see a banker have your numbers organized on a cash flow sheet and your banker will take you more seriously knowing you have done your homework and you understand your business. Keep your banker informed of your business activities. Develop a meaningful business relationship and they will support you.
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