There are too many things to do when you start a business or become the new owner of an existing business. One of the simplest and most essential things to ignore is tracking and recording the business’s sales and expenses.
It is critical not to ignore quality financial statements.
My observation is that there are two reasons why this critical piece of owning and operating a business gets ignored. The first reason is that a lot of business owners don’t enjoy the task of recording and tracking all sales. It seems obvious. The money comes in and gets put into the bank daily or semi-daily as a deposit. Each month or whenever the owner chooses, they can go online and see the deposits, including the bank balance. As checks are written, they are recorded in the checkbook, and so the information is readily available if and when needed. Besides, a tax return only has to be filed once a year, and as it’s a long way from being needed, it can be looked at closer to that date.
The second reason is that not all business owners can do the bookkeeping accurately. Making the right entries in the right boxes, handling the debits and credits, refunds, and journal entries, and then reconciling the bank statement requires and takes a lot of time.
One of the most essential tasks to help your business succeed is accurate and up-to-date financial statements. Good software with good people who know how to use it is readily available. Most importantly, this financial data is good information to help you better own and operate your business. Information such as knowing your top 20% of your customers so you can thank them, where you are buying all your products and services from so you can negotiate better terms including volume discounts, how much interest you are paying on any bank loans so you can negotiate better terms with another bank if your rent is being paid on time, and so it goes on.
There are many things to learn and implement when you own and operate your own business. Humans tend to work from habits. Getting the proper habit in place when you first start will be a significant investment in your business’s success, as poor financial records are one of the top reasons most businesses fail.
If you would like more information about selling a business, buying a business, buying a franchise, or a related service such as valuing a business, please visit my webpage, Services, and choose the information you would like from the drop-down menu.
For more immediate help, you are welcome to email Andrew Rogerson or call me at 916 570-2674.
