The joy that comes with launching a product and completing a contract often comes at the expense of tedious tasks such as bookkeeping for entrepreneurs. Most entrepreneurs will begin their businesses using conventional accounting practices, which may refer to simple spreadsheets or annual income tax returns. However, with growth comes change and traditional ‘tax only’ accounting systems no longer provide appropriate data for day to day operation decisions about future growth of the business (or short-term financial planning). In order for business founders to grow their companies effectively, they need to move towards using comprehensive business reporting systems that give them an accurate, on-going view of the potential future of their business.

Why Traditional Accounting Doesn’t Work Anymore

Standard accounting is typically done after (historically) events have occurred for the purpose of compliance and tax reporting; this type of system does not provide forward-looking information necessary to make strategic growth decisions. If founders rely on old-style accounting information alone, they will be able to ask themselves where they previously were, but have no visibility into the barriers (and/or opportunities) immediately in front of them as they are driving (forward).

Why Small Biz Bookkeeping is the Backbone of All Financial Strategies

The foundation of any high-end financial strategy will always be precise small business bookkeeping practices. The U.S. Small Business Administration states that at least 80% of all small businesses who fail during their first five years are due to mismanaging their money. 

The basis of good bookkeeping is that each transaction is recorded in a correct category; however, when a small business owner looks at a financial report, he/she finds out how well they are doing by seeing the profit and loss, balance sheet, and cash flow projections. A small business owner can see where they need to work on their margins and better utilize their money through proper financial reporting by a professional service provider. 

Linking Sales with Finances

One area that is generally overlooked when it comes to financial well-being is how sales and overhead (fixed) costs link to one another. Many new entrepreneurs hire a virtual sales assistant to help them manage lead generation and keep their customer relationship management (CRM) software updated. By linking your sales data to your financial reports, you can calculate a very exact Customer Acquisition Cost (CAC) for your business.

If you notice that your sales virtual assistant is producing high sales volume but your net profit shows a downward trend in your financial reports, you can quickly determine whether your pricing strategy is correct or whether your operating costs are impeding your profit margins. You can find a strong degree of clarity by going from basic record-keeping to a more sophisticated level of professional-based accounting reporting.

More Informed Decision-Making for Future Growth

According to the U.S. Small Business Association, “financial readiness” is essential in securing business loans or bringing in investors to fund your business. Investors want to view your bank statements and be able to see your professional accounting reporting so they can review your deep understanding of the economics of your unit sales.

By using a professional accounting and bookkeeping service or outsourcing this work to a professional CFO, business founders can reap the benefits of having a very sophisticated level CFO without paying six-figure salaries. You will have access to:

• Projecting Your Cash Flow: Identifying times of the year when cash flow is thin so that you can plan your purchasing and possible hiring based on your cash flow.

• Identifying Your Areas of Profit: Being able to identify which products/services are “cash cows” for you.

• Identifying/Eliminating Your Expenses: Being able to identify recurring charges that can be eliminated and cut your business’s expenses.

Closing Thoughts

Transitioning from basic bookkeeping for small enterprises to advanced financial documentation processes is a major accomplishment in the career path of an entrepreneur. It separates someone who has a ‘job’ from those whose operation is classified as a ‘business’.

With that foundation laid, we are now able to assist businesses with ensuring there is connectivity between what they do on a daily basis and what they plan for the long haul. The effectiveness of our Virtual Sales Assistant combined with expert financial management makes it easy for the entrepreneur to confidently use solid data to make bold decisions about conquering the marketplace.

Schedule a call with our experts, and let’s make your finances simpler, calmer, and a lot easier to manage.