Some good habits yield immediate and obvious benefits. Brushing your teeth gives you fresh breath, washing your clothes gives you something clean to wear. Good financial recordkeeping gives you… um… well… the lack of a potential headache later on? Yes–that’s true. The old adage, “An ounce of prevention is worth a pound of cure” is not just true for the health of your body.
But keeping good records does more than just save you cents on aspirin. It makes good business sense too. It’s actually a power move that puts you in charge of your money and helps you spend it when and where you want to.
Good bookkeeping is simply the tracking of income and expenses, including payroll, and it provides a method for easy receipt retrieval.
With accurate numbers in hand, you can:
- Easily identify your top revenue generators – and see what makes those goods or services profitable for you.
- Sleuth your profit margins to maximize growth. Do you need to adjust your pricing? Reduce costs in less profitable areas?
- Spot trends. What times of the year can you expect more income? This simple insight will help you plan annual expenses and major investments.
- Learn your spending habits: How much is discretionary vs. required? Use this information to build a budget based on your reality. A budget should guide and support your day-to-day decisions, not feel like a prison cell.
How you keep your books is up to you. You may choose to organize your layout so it matches the type of forms you fill out at tax time. Your records may be handwritten into a ledger of some sort, entered into a spreadsheet, or tracked via an accounting application that’s tied to your bank account.
If you feel overwhelmed or have yet to identify a system that works for you, a professional bookkeeper can help. (You know where to find me. ?) But no matter what, keeping good books is about more than avoiding a headache at tax time. It empowers you to take control of your business and ensure a healthy future.