Accurate bookkeeping is essential for a business’s success in California. We go through some tips below.
There are too many things to do when you start a business or become the new owner of an existing business.
There is one essential and straightforward task to do. This task involves tracking and recording the business’s sales and expenses.
High-quality financial statements are Critical.
My observation is that there are two reasons why a business owner in California often overlooks this critical aspect of operating a business.
The first reason is that many business owners dislike the task of recording and tracking all sales.
It seems obvious.
- Step one is for customers to pay for their goods or services on a daily or semi-daily basis.
- Step two is ensuring the money gets to the bank as a deposit.
- Step three is writing checks to pay bills and operating expenses. Critically, this means that all details are kept in the business’s checkbook.
- Step four is to wait for the end of the month, or whenever the owner chooses, to go online and reconcile the deposits and expenses against the bank statements.
- Step five is to create a Profit and Loss Statement.
Because each month sees a reconciliation of the business accounts, the sixth and final step is to file an annual tax return with the IRS. If you live in California, it also includes a state tax return with the Franchise Tax Board.
Bookkeeping is Not an Easy Task
The second reason is that not all business owners can perform bookkeeping accurately in California.
Making the right entries in the correct boxes, handling debits and credits, refunds, and journal entries, and then reconciling the bank statement requires 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, combined with knowledgeable people who know how to use it, is readily available.
Most importantly, this financial data provides valuable information to help you better manage 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 you pay your rent on time, pay your employees on time and so it goes on.
Start with Good Habits
There are many things to learn and implement when you own and operate your own business. Humans tend to work from habits.
Establishing the proper habit from the outset will be a significant investment in your business success. This is because poor financial records are one of the top reasons businesses fail.
For more information on valuing and selling a business in California, please visit my webpage under Services.
For more immediate assistance, you are welcome to contact Andrew Rogerson, a certified business broker based in Sacramento, California, who services the entire state. Call Toll-Free at (844) 414-9700 or email him at support@rogersonbusinessservices.com.
Further reading
The Uncertainty Principle when Selling or Buying a California Business