Top 10 Reasons Businesses Fail: Number 3 – Poor Accounting
Hopefully everyone had a good Sunday off. We are down to the last three reasons that businesses fail.
Putting a budget together is only good if you have a way to monitor it. How do you know if your budget numbers are on track based on your sales projection? No one can easily keep track of it manually. With all of the technological advancements available today, the cost of an accounting system is inexpensive and affordable for businesses of all sizes. The old days of manual ledgers or entering information into excel spreadsheets are long gone, although many owners still do it. This is time consuming and just plain wasteful.
We are QuickBooks Pro Advisors, so obviously, we are partial to that software program, but there are many others available. QuickBooks can help you monitor all of the things going on in your business. It has hundreds of reports you can run in many different configurations. If I ask most business owners how much money they have in sales right now, they can’t tell me and can’t even readily put their hand on the information. Profit & Loss statements can tell you this number, but are just the beginning. How much is your business worth on paper? Look to your balance sheet (this of course doesn’t include Goodwill if you wanted to sell your business). Who is your best vendor? Look to your transactions by vendor list. Who is your best customer? Look to a customer detail list. How much cash should you have in the bank in 6 months? Look to a cash flow projection report. How are you doing with your budget? Look to a budget vs. actual report. The program is so advanced that it can adjust how much you should be spending in an expense area based on how much income you are actually projected to do, versus how much your budget predicted you would do. All the answers you need can be at your fingertips.
If you don’t use an accounting program now, you should consider purchasing one. But you should also take steps to learn how to properly use the program. A recent study showed that most QuickBooks owners use only 15% of the program’s capability. It doesn’t do any good to have the system available if you are not going to use it fully. One of the options to consider is taking a class. Our company for instance offers a low cost, one day training session on how to properly use QuickBooks. It’s fine to teach yourself how to input information with the tutorial that’s available with the program, but a class (well, ours at least, can’t answer for other companies) will teach you the accounting theories behind classifying expenses properly as well as other important theories.
But, you don’t have to necessarily buy a program and use it yourself. Many accounting firms offer monthly accounting services for a fee. These services are usually a lot less expensive than having an in house bookkeeper. Our company for instance offers companies with 50 transactions or less monthly accounting for a fee of $150. You can then have all of the basic reports, as well as any specific reports that you would like at no additional charges. Even if you are a larger company, that does 500 transactions a month, you can still have the accounting done for $400. This is still a huge cost savings.
If you are looking for any piece of information, can you go to one place to quickly access it? If you have an accounting program and are using it correctly, you can.
Written By Ameen Walker