Bookkeeping—yuck! Why should you even consider reading an article about bookkeeping? I’ll tell you why: Because ignoring your bookkeeping is the No. 1 mistake you can make to harm your business.
At Outright, we see that most online sellers associate bookkeeping with preparing for taxes. You keep your books up to date so you can file your taxes and not get audited or arrested for tax evasion. This mindset is dangerous. It leaves you feeling like bookkeeping is a boring chore that needs to be done a certain way to be perfect.
And what happens if bookkeeping becomes a chore? You either ignore it, hoping it will go away, or you spend hours a week keeping extensive records in Excel, and forgetting the big picture about how the bookkeeping can serve the greater purpose of being a guide for running your business better.
Yet, bookkeeping is the No. 1 thing you can do to help your business. It doesn’t need to be tedious and, no, it doesn’t need to take a lot of time. All you need is the information about what money is coming into your business, and what money is going out. Imagine the proud feeling you will get when you see your business’ financial report showing a profit. Hang that on your fridge, right next to your kid’s report card.It’s important to understand your money flow. It’s what will drive your business forward, and will be the catalyst for decision making
Here are four things you can learn by keeping track of the money:
Are you making as much as you think you are making? Taking a look at how much you are bringing in and how much is going out (also called a Profit and Loss Statement) will tell you what you are really making. You might be surprised at what you find.
Are you making as much as you want to be making? The same Profit and Loss Statement will show you whether you are achieving your goals for your business, and will help you set goals for where you want to be. It’s a great way to hold yourself accountable when you are working on your own.
How can you increase your sales? You can see if certain marketplaces are performing better than others for you. You can see if a certain marketing effort made a difference or not. Just having that information can help you make valuable, game-changing decisions for your business.
How can you reduce your expenses? You may be very surprised to see where your money is going. Once you know, you can find ways to reduce your costs-perhaps you can ask a supplier to lower their prices. Or, if you are spending a lot of money on gas when sourcing, perhaps you can save money by sourcing products closer to home.
It’s important to understand your money flow. It’s what will drive your business forward, and will be the catalyst for decision making.
In our next article, we’ll cover the ways in which bookkeeping can be simple using free tools, such as Outright, so you don’t need to spend your valuable time to get the insights you need to improve your business.