Cost effective methods
Bookkeeping seems to be a four-letter word for some businesses. It is just all paperwork! Receipts for this...copies for that. Do this is triplicate. AAHHH!! It can seem like such a mess.
Whether you like it or not, your books are probably one of the single most important thing in your business (customers are first, of course). All that paper that you are generating tells a story about your business; it can tell how profitable it has been, how profitable it can be, and if it is done right, it can keep you out of financial trouble.
When we own our business, we tend to get our head space into doing what we do well. If you own a company that makes widgets, then you tend to spend all your day making widgets, and forgetting about "all that paper" that making widgets generates. There is certainly nothing wrong with doing that. After all, isn't make widgets what you are good at?
If you don't take care of the paper backlash, however, then you may find yourself at the end of a very large and deep lake. Worse than that, in a fairly short period of time, you just might find out that you don't know how to swim.
This phenomena is called the "shoebox mentality". It is where you are concentrating so hard on making widgets that you forget to manage your business. You can spend thousands of dollars just getting that paperwork in order.
How do you know how profitable your business is? How do you know how much your costs have increased? Are you truly compliant with Revenue Canada? Is your GST caught up, or do you just *think* it is caught up? How much did you pay in interest and penalties because your paperwork wasn't submitted on time to CRA? Where will you be financially in 6 months? 2 years? 5 years?
It certainly is not uncommon for a good bookkeeper to see clients living off of credit and making decisions from what they feel the business is doing. But all too soon, it can catch up on them.
If you have ever experienced any of these issues, you may not be doing enough with your bookkeeper.
- penalties & interest on late GST and payroll returns to CCRA
- high credit card balances
- low cash flow
- no budget in effect
- worries about meeting payroll committments
- stress or an out-of-control feeling about your business
- shoebox of receipts
- a feeling of dread at tax time
Your bookkeeper should be able to tell you where your cash flow is at, when items are due. They should (without a doubt) be able to give you a cash flow estimate 6 months into the future.
You should always have a budget that you are working with. After all, how do you know how much money you can spend if you don't know how much money you expect to earn?
In all cases, you need to make that paperwork work for you. You need regular reporting from your bookkeeper how your company is doing and how close you are to budget numbers.
After all, didn't you go into business to make money?
