One of the most common things people push back on for business owning is finances. Accounting can seem like some kind of wizardry that us “muggles” will never understand and should be left alone. It’s true that I don’t entirely understand how everything comes out so nicely in a balance sheet or income statement but for the most part, what you need to know is your Profit/Loss. How much came in, how much went out, how much is left. When your business is starting, you can probably do this yourself. You just have to be diligent about using your business bank account for business only and then tracking everything at least monthly. I won’t say it’s easy but it is simple. As things grow, it can get more complicated. A good bookkeeper is an extremely valuable resource for a business owner. You still have to check and make sure everything makes sense to you but having someone track these things can be one of your best investments especially if, like me, you are not good at details.
What you should be spending your time on is WHY do your books look the way they do. If they look great, why is that. Industry standard for your business is a 30% profit margin and you’re hitting 35%. Awesome! Why? Your prices might be on the high side but your service is so good no one cares. Maybe you’re still doing a lot of work yourself that you’ll eventually have to hire out. Maybe you’re not paying enough. If the last one is true, rethink it. A healthy profit margin is great but if you can’t keep your employees (and you won’t if they find out they’re being underpaid) it won’t take long for that margin to tank and your headache to become never ending. Maybe your profit margin is low (either by averages or your goals). Why? Are your expenses out of control? Did something happen this month that doesn’t usually happen? Can you fix your expenses or is it time to think about a price increase?
Problems can be obvious or they can be sneaky. If you can’t identify it, find someone who can. A consultant, a friend, maybe your bookkeepter? It can be hard to see what’s going on from inside the problem. A second set of eyes will make a world of difference. They might not even see it but as you try to explain the problem to them, the root cause is suddenly clear. Whatever you do, don’t ignore it. If someone walked up to you right now and said how’s your month look, you should be able to give them an idea. And you should know what last month looked like and how this year compares to last year. Putting your head in the sand only hurts you and your business.