29 Feb How Poor Financial Data Can Hold Your Business Back
Is Your Business’s Financial Data Accurate?
For small business owners unfamiliar with accounting, it can be difficult to judge how well their accountant or administrative assistant is gathering data. It’s easy to be intimidated by the task or to see it as unnecessary to a business’s growth.
Accurate financial data serves two main purposes. The main and most obvious one is to keep your business out of the red. But the second (often overlooked) purpose is to leverage that data to make important financial decisions, like purchases, budget cuts, and securing loans. This is where the accuracy of your financial data is imperative. Many entrepreneurs consider ensuring pinpoint accuracy an unnecessary task, but it can significantly affect your business.
What Good Financial Records Do for Your Business
A basic recordkeeping system will track the flow of revenue through your business, including how much you’re spending, how much you’re making, and if you face any potential dangers in the future. This information, if kept accurately, can be used in a variety of ways:
- Tracking debts, creditors, and expenses to keep you up to date on payments
- Applying for loans and other type of funding
- Saving time and money on accounting and other finance-related tasks
- Accurately calculating and paying your taxes while finding credits and tax breaks
- Ensuring compliance with payroll laws and tax codes
- Finding discrepancies or inefficiencies within the business that are costing you money; for example, irresponsible purchasing decisions
Clearly, using financial data for these kinds of information can save your business a great deal of time and money and help you make future decisions. Taking the time now to measure and improve the accuracy of your financial data will give you a substantial ROI.
Bookkeeping 101: Learning the Basics
Good bookkeeping starts with a strong foundation of basic habits. At its bare minimum, your financial analysis should tell you:
- How much money is lost or made in a given fiscal period
- If your business model is financially sound and will continue to be
- What potential problems you may face in the short and long term
Acquiring this information can be done with a few simple bookkeeping tasks. On a daily/weekly basis, you should be recording transactions in a spreadsheet or bookkeeping software. This includes billing customers, paying vendors, and other cash flow.
You should also be documenting and storing receipts for expenses on a regular basis. Expenses should be broken up into vendor and business expenses and overhead expenses, like payroll. Lastly, you need a system in place for reviewing and tracking unpaid bills. These very basic tasks set the foundation for good bookkeeping habits.
Growing Bookkeeping Tasks Alongside Your Business
As your business grows, bookkeeping will naturally become more time-consuming and complex. Ensuring accuracy will become more difficult, but also more important. At this stage, many small businesses choose to use a bookkeeping service. Most help companies keep accurate records, but they also help entrepreneurs leverage that information. For many business owners, it’s worth the investment to know their financial records are safe, accurate, and easily accessed when important financial decisions need to be made.
Contractor in Charge offers a wealth of bookkeeping and accounting services that make your work life easier. Find out how to put your company “In Charge” – schedule a call with us to get a free quote!