Do You Know How Much Money You Made Last Month?

We work hard as entrepreneurs. This is a fact! There are many spokes in the entrepreneurial wheel but after the dusts settles do you take stock of what you are making in your business month to month? As a bookkeeper, I encounter many clients who manage their business using spreadsheets and pen and paper. This might feel comforting and easy but it isn’t the best way to manage your business finances and it won’t give you a good glimpse into how much money you are making in your business. The best way to do this is to get your business finances into electronic format using an accounting software system like Quickbooks Online.

My spreadsheet and my bank account tell me all I need to know which is how much money I have in the bank to spend.

I hear this a lot too and again these methods might give you some information but it won’t give you the complete picture. The best way to know how much money you made last month in your business is to do the following:

1. Do your bookkeeping regularly using an accounting package.

2. Reconcile your accounts each month and make sure they agree to your statements.

3. Pull your financial reports like your balance sheet, income statement and your statement of cashflows.

By using the methods above you will be more informed about how your business is doing and it will give you the knowledge and tools to be able to plan for a successful future.

Keep IT Sunny!

Welcome To The Month Of October!

Autumn is here along with all the fun activities and delicious food that comes with this time of year.

As we continue to wind down for the year we will look at how we can tie up loose ends for year-end and get ready for the year ahead. If you didn’t have a chance to check out my post from last week about tax planning for the end of the year take a look here.

There are only a few months left to hit those targeted business goals and get your books in shape for the new year. I want you to end this year on a relaxing positive note.

Keep It Sunny!

How To Increase Profits & Lower The Taxable Income For Your Business

I will start off by saying that I am NOT a tax professional. I am just having a friendly conversation with you business owner to business owner.

:)

We all have one thing in common. We want to make money in our business doing the things that we love to do. Statistics show that not everyone is making money in their business and worse yet many small businesses go out of business within their first year of operations. “According to data from the U.S. Bureau of Labor Statistics, about 20 percent of small businesses fail within their first year. By the end of their fifth year, roughly 50 percent of small businesses fail. After 10 years, the survival rate drops to approximately 35 percent.”

What is happened?

What is one of the common denominators that lead to the death of a business?

The most common issue that leads to small business failure is money woes. “Owners of failing companies are less in tune with how much revenue is generated by sales of products or services. This disconnect leads to funding shortfalls that quickly put a small business out of operation.”

What is one of the simplest solutions?

Keep your books up to date. It can be easier said than done I know that’s what you are thinking. You are also probably thinking that your already so busy running your business that as long as you know what is in your checking account then that’s all you need. This is not the best way to manage your business operations. Yes, you can take a peek at your checking account to see how much money is available to pay bills or withdraw cash but it won’t give you the information below:

• How much revenue did you bring in for the services or products you sold within a given time period?

• Were there any fraudulent charges by a vendor?

• Do you know which customer invoices are outstanding?

• Do you know which vendor payables are outstanding?

• Cashflow management

• Budgeting

• How much equity do you have currently within your business?

• Are you making a profit?

• Are you spending too much on unnecessary items?

The list could go on but you are getting the picture about how important it is to keep your books up to date.

Tax Time Preparation

Another great reason to keep your books up to date is to make sure you are taking the right deductions which can lower your taxable income. According to Inc.com and tax and business attorney Barbara Weltman, “"The tax law specifically requires certain records in order to take deductions," Weltman says. "Without these records, legitimate expenditures may not be deductible." Here is a short list of what is needed:

• A system for tracking your income and expenses

• A system for capturing receipts for purchases

• A policy for certain types of record keeping such as mileage and car expenses

In short, by having a good bookkeeping process in place you will be able to pull your financial reports which will give you the overall health of your business. You will be able to see if you are profitable or not. Additionally, you will be able to take advantage of any deductions that are available and lower your taxable income. In short, just looking at your checking account won’t give you all the information you need to run your business effectively.

So are you currently using a system for bookkeeping or are you just winging it? Share your feedback in the comments below.

Keep It Sunny!