When you are just starting a business there are a lot of tasks on your plate so your accounting can easily get put on the back burner. I know it did for me when I first started and doing my own taxes was a nightmare. That all changed when I was introduced to our guest on the podcast today who has been my bookkeeper now since 2013! Wow! I am so blessed to have met her and learn so much from her and I am excited for you to get to know Carol too. I featured her as a guest expert in my Corporate Rescue Plan program a few months back and wanted to share the group call with you on today’s podcast.
So let’s dive into today’s podcast and learn more about taking care of our precious money as business owners. Click play below or right click here and save link as to download or subscribe on iTunes here on this link:
If you are enjoying our podcast, please leave us a review on iTunes! It would mean the world. Thank you!
Essential Bookkeeping and Financial Practices to Support Your Small Business
The Definition of Bookkeeping
Bookkeeping is the practice of recording all of your transactions in a systematized way. Recording all of your income coming in and expenses going out. Then, totaling everything at the bottom.
Why Must You Do It?
It is required by law that you file a tax return and you must be able to back up your numbers if you are ever audited. Doing your bookkeeping sets you up for success. You can know the details of your income and expenses and that’s the starting point for planning out what you want to achieve. Knowing your numbers is the starting point for profit planning.
A lot of people dread it and I like to make it a sacred practice. I want to help owners move past what is causing them to not stay on top of their books. This is a pain point for many people who are beating themselves up by it.
Here are the top reasons that you probably aren’t getting your bookkeeping done:
It takes too much time.
You don’t know how to do it right.
You have trouble dealing with your receipts.
You are not good at organizing.
You don’t trust the person that you hire.
You have a fear of someone else seeing your numbers and knowing the truth of your business.
There’s a lot of heavy stuff that can keep you from not looking at their numbers. If it’s not your strong suit, I recommend transforming this by creating a ritual and viewing it as a spiritual practice of loving your money so it will take care of you.
The Fearless Financial Ritual:
Play soothing music. Clean out your workspace. Clear out clutter. Create empty space. Put essential oils on a cloth. Light a candle and do some deep breathing. Have a blessing you say about your business that helps you get into hope and gift of what your business is to the world. How does doing your bookkeeping deliver that?
Give yourself loving support as you do this power move of being a CEO who takes care of your bookkeeping. If it’s hard for you to do, don’t stay in a stuck place.
Take loving care of your business finances so that your finances can take care of you.
Important Elements of a Good Bookkeeping System:
You can use excel, QuickBooks, Xero, a dome book or pen and paper. You can also outsource it to a bookkeeper. You want to pick something that is going to work for you. If you don’t like working on a computer, don’t pick a computerized system. Pick pen and paper if you enjoy doing that. If you know you are not going to do it, then outsource it. Pick what you know will work so that you can stay committed to it.
Document it. Write down who does what and when. Sometimes there is a resistance to it. I want to address this. If you have a list that says print bank statements, turn on the computer and all the stuff when you sit down to do your bookkeeping and you have time on your calendar that you are going to do it every Friday on Financial Fridays. You see it on your calendar, you get your system documented and it cuts through the resistance to doing it because your brain likes the plan.
Add accountability to make sure your bookkeeping doesn’t get behind. Tell someone you are going to do it on a monthly basis and ask them to keep you accountable. It’s easy to do other things that you enjoy more.
What a Bookkeeper Can Do:
Record your income and expenses on a monthly basis from all your systems and receipts.
Provide timely reports to see your profit and loss on a monthly basis.
Organize your finances for your taxes.
Pay your bills and invoice your customers.
A Bookkeeper Won’t Do:
You shouldn’t assume your bookkeeper is going to do financial strategy with you. You can ask him or her though. A bookkeeper isn’t normally going to pay attention to your money and tell you if it’s going good or bad. They aren’t going to do that unless that is part of the services they offer. A bookkeeper is producing information and your tax preparer will take that information and prepare your tax return.
Financial strategy is setting financial goals and comparing your forecast with your actuals. It is about updating the plan as you go on and mapping out action steps and providing accountability for achieving results and your goals. Financial strategy is mapping out how to get to your goals.
You can do financial strategy on your own or with your coach but you can’t do that unless you do your bookkeeping first.
What Not Having a Bookkeeper Might Cost You:
Eventually, you want to outsource this so you can do stuff that is higher value like marketing, driving sales and adding more products or services which are going to bring in more income.
There is also an energy cost. If you are not doing your bookkeeping it will suck your energy. You won’t feel good about it. If you are not feeling good, you might not sleep well. That’s a huge energy drain you could be using to create in your business.
There’s also a cost of not using the information to manage your business. If you don’t have your bookkeeping up to date, you won’t be able to see if you are making a profit or a loss or know where your sales are coming from. You also won’t be able to plan out future revenues and make plans to bring in more sales. Without a bookkeeper, doing your marketing plan will be tough and so will collecting money owed to you or deciding to hire or deliver a new service.
Not having a bookkeeper makes it difficult to look at where your money is going or cut back on expenses or plan to save for taxes or an emergency fund. You’ll want to know how much you have on hand to plan for cash needed for future investments like a new team member or a new website. When you pay attention to your numbers, you can look ahead and plan for emergencies is a stronger position than putting out fires.
Just taking care of your finances will cause your profits to increase.
How to Hire a Bookkeeper:
Ask friends or family members for a referral.
Ask your task preparer if they know anyone.
Look at communities you belong to. You might find someone who has similar values. (That is how Anna and Carol met!)
3 Things to Ask a Bookkeeper:
Can you talk to or email current customers?
What are you going to do for me exactly and can you put it in writing?
What services are you providing in detail and timeframes that it will be done by. What access do you have to your accounting information? How available will he or she be to you? Is this included in your price if you are paying a monthly retainer?
Interview them and check in with yourself.
4 Things to Ask Yourself Before Your Hire a Bookkeeper:
Here are four things to ask yourself to determine if a bookkeeper is a good fit to work with:
1. Does talking with this bookkeeper make you feel stronger or weaker?
2. Do you feel comfortable talking to them and asking them questions?
3. Do you feel like they have the time to speak with you?
4. Do you feel like they care about you?
If no to any of these, keep looking. If you keep looking, you’ll find the right person.
How to Keep an Eye On Your Bookkeeper
You also want to check on them and make sure the work is getting done and that you are protecting yourself:
You don’t want to give control over to one person and assume everything is getting done. It’s so tempting to say you just take care of it especially if you don’t want to really deal with it and look at the numbers. Make sure you stay involved and you look at the reports.
Look at your bank statements and keep an eye on them. Scan it every month. This should keep you in less than 10 minutes. Look at your balance sheet report.