By the Book: Accurate Bookkeeping Will Build Your Business

Fabian O'ConnorInsights

In our business — and for your business — it’s important do things by the book. As in keeping excellent books. At its core, bookkeeping is the gateway to smart business planning.

Take the case of small business owners. Whey they start off, their first and quite reasonable priority is to bring money in the door so they can keep that door open and feed their family. As the owner of several small businesses, I know this terrain quite well! A new business owner is ready to drop everything to service a client, or to make sure that they’ve delivered what was promised on time and of the highest quality. This approach works in the early stages, but as the business grows and aims for sustainability, it needs overall controls and excellent bookkeeping. Without them, business owners do a disservice to themselves and their enterprises.

Why is this the case? Because a loosely managed business will grow only to the extent of the founder’s energy — it’ll never succeed beyond it. The limits are all about the bad habits formed from day one. I have encountered this countless times. Far too often, a founder is driven but has tremendous difficulty ceding control. They just keep rolling along and doing the same thing day after day.

The question I have for such a business owner is, “Are you growing the way you should be?”

A key part of the solution is excellent bookkeeping. Comprehensive, weekly reports that are reviewed and analyzed help small business owners make better decisions. Analyzing real financial data gets you out of the mindset of working for the client and into working for yourself.

This does not mean, obviously, that the service level or quality of deliverables is reduced — but it engenders different and better thinking and better question-asking. Big-picture questions: Should I be doing things differently? Now that I know I can make a living doing this business, what’s my quality of life going to be?

This kind of reporting gives a business owner the ability to strategize where they want to go. To that end, they’ll develop a better business plan that includes an exit strategy. Where are they going to be in 20 years? Where do they want to be?

To all the small business owners out there, I say this: Sit down with your CPA, and set up regular reporting and regular time to review reports. You may say you don’t have the time to do this. Nonsense. You have the time to do whatever you define as important. Understanding your business’s performance is the most important thing you can do if you intend to build value.

I’ve had many clients say they are stuck at a certain plateau and can’t seem to grow from there. The most successful clients are the ones who go step by step. With the aid of good record keeping, we can help them build from $1 million to $1.2 million, from $1.2 million to $1.4 million, and so forth. Good bookkeeping means they are better able to locate discretionary cash so they can hire additional personnel, or acquire another company, or whatever they need to meet their goals.

Truly good bookkeeping is key to it all. It’s foundational.