The importance of knowing, and indeed understanding, your business finances is fundamental in helping your business run smoothly and grow successfully.

I learnt the valuable lesson of keeping on top of my business finances while running my chain of bookshops, Archway Books, across the north of England. It only took a few minutes every day; in my case cashing up, and adding the totals to spreadsheets. However by doing this I always knew how my sales were going across my shops. I could compare these figures with the previous week, month or year, and it helped with my cash flow and pushing the business forward. At the same time, I ensured invoices were sent out in a timely manner and late payments chased up before supplying more books. These steps, combined with accurate bank reconciliation, were key to running the bookshops.

As I enjoy working with numbers, completing my own bookkeeping was not a hardship. I realise for most people that is not the case. It is highly likely that when you set up your business, your focus was elsewhere in relation to bookkeeping, and that keeping accurate records was low down on your list of priorities.

Why is it important?

As with other important areas of running your business (like sales, marketing, technology, and customer relations) good bookkeeping is essential to the smooth running of an expanding business and should not be avoided.

You can always invest in learning all the aspects needed to ensure effective bookkeeping, though this can be time consuming, or you can consider outsourcing to a specialist. When considering the costs of outsourcing a part of your business such as bookkeeping, it is important to think about the value that could bring to you and your business, over and above the physical cost. Peace of mind with no more sleepless nights for instance; freeing up more time to focus on doing what you do best in your business; deadlines covered; and knowing someone is keeping a watchful eye on your business finances.

Recently bookkeeping has become massively automated and the choice of reports is extensive, which can help you to better understand the financial position of your business. But are you making the most of these reports? Are you familiar with a Profit and Loss report, as opposed to a Statement of Financial Position, or Balance Sheet which shows you where your business is at financially at any point in time? Do you understand how the value of your assets depreciates over time? The list goes on with financial terms and the whole process can seem daunting. However by keeping on top of your finances, you can both avoid penalties for late accounting submissions and also help your cash flow by knowing and having access to up to date accounts. This point, I feel is so important. In my experience, many businesses leave their accounts to be completed once a year by their accountant. Ideally however, your finances must be checked and kept in order much more often than that, either by you or your bookkeeper. Keeping a close eye on your accounts mean that you can closely monitor many key indicators for your business from your profit margins, both gross and net to your expected turnover to plan better for cash flow.

Good bookkeeping is vital. Do you know your business numbers?

Contact