Why is your bookkeeping important? ~An Overview

Why is your bookkeeping important? Imagine this:  there is a picture of your business. It is framed by your financial statements--your income statement, balance sheet, statement of cash flows, and statement of owner's equity make up the four sides of the frame. The frame supports the picture, keeping it from falling off of the wall.

The financial reporting is important because it tells you where your revenue is coming from, and where it is going. Without this information, you as the business owner have no way of influencing these two aspects of your business.

Without a true picture of your financial status, decision-making is possible, but cannot maximize your revenues or manage you expenses to become more profitable. And profitability is what everyone is in business for, right?

So what happens if your bookkeeping is done incorrectly? You can still make decisions, but you may be making the wrong decisions. I recently worked with a company whose labor percentage was consistently showing higher than the budget. Because of this information, the manager made cuts to his labor force. However, the labor percentage was still high, and so more cuts were ordered. This manager had cut his labor force to the point that he did not have enough employees to keep up with the necessary work, and his remaining employees were working themselves into burnout.

Upon reviewing his information, we found that his previous bookkeeper was figuring his labor percentage incorrectly. After all the cuts to his labor force, his REAL labor percentage was much lower than his budget. Because we were able to determine this, he was able to hire more employees to do the necessary work. This offered his company many benefits, including the work being done in a timely fashion, and morale was returned to his employees.

What does your business's picture look like? Is it being sketched by a professional artist doing an exact representation of your business, much like Andy Warhol's "Campbell's Soup" paintings, or is it more like Van Gogh's "Starry Night"?

Vincent van Gogh

Andy Warhol

I welcome your questions and comments? Contact me at Traci@BassProfessionalConsultingLLC.com or (478) 951-9298. You can also get a no-obligation assessment of your needs and initial quote to meet your business needs..