Every business has a story to tell. However, our businesses seem to speak a language we do not understand. The key to translating your company’s story is understanding its language. Warren Buffet said it best, “Accounting is the language of business.” What is accounting; what does it mean? Accounting is the process of recording and understanding your financial data. Simply put, understanding your business’ language is understanding what all the data in your financial records mean. But how do you know what your business is saying to you?
A company’s “books,” the coming and going of its finances, is what a company uses to communicate its health. Accounting is the process of translating all those numbers into a coherent story for the business owner and shareholders.
If a company’s books are so important, why is this the first thing put on the back burner or avoided altogether? Why are the books an afterthought only hastily thrown together during tax time? The answer is numbers and recordkeeping are intimidating. Especially if when you finish this “chore,” you do not know what all those numbers mean. Business owners usually are not taught which numbers matter, why they matter, or what they mean.
What are some of the most critical numbers in your business, and where do you find them?
- Profit & Loss Statement
- Income/ Revenue – the amount of money coming into your company.
- Expenses – the amount of money your business spends.
- Net Profit – The amount of income minus the amount of expenses.
- Balance Sheet
- Assets – the amount of money and items your company owns.
- Liabilities – the amount your company owes to others.
- Equity – the amount your company owes to you (the owner(s)).
- Cash Flow Statement – how money moves through your business.
Understanding your numbers will help you make strategic decisions with your money to help increase your profit. Maintaining and regularly updating your bookkeeping is the best way to keep your finger on the pulse of your company. When your bookkeeping becomes messy, untended, or outdated, it costs you time, effort, and money.
What are some ways to make your bookkeeping easier and ensure it stays up to date?
- Use accounting software. There are several excellent options on the market at various price points and features.
- Set aside time to input and categorize all your financial transactions into your system regularly.
- Find a system to manage your receipts. Make notes on them when needed, and make sure to store them securely.
- Keep your personal and business finances separate. Comingling these funds can make bookkeeping difficult and is frowned upon by the IRS, placing your company at risk.
- Create easily repeatable processes and document them to refer to later.
- Outsource your bookkeeping to a professional. If you find it hard to make the time overwhelming, or you avoid doing your bookkeeping, consider outsourcing the process to a professional that can help. Outsourcing will save you time and money, allow you to get back to what you love, and still provide accurate records. Many accounting and bookkeeping professionals can also help you understand what all those numbers and reports mean and translate them into the story your business is telling you.
When you pay attention to your financials and understand the story your business is telling, you will have the confidence to make great business decisions.
If you are ready to take the next step and outsource the translation of your company’s story, reach out to the bookkeeping specialists at PMB Capital Solutions, and see how we can help you grow. Call us at (704) 397-3193 or fill out our inquiry form online. You can also email us at firstname.lastname@example.org.