One of the most important aspects of running a successful business is having a strong bookkeeping strategy in place. There are many ways to keep books, but it can be difficult to decide which method or combination of methods will work best for your company.
Approaching your bookkeeping deliberately and objectively is key to your success. No matter what methods or tools you use, the choice to consistently manage your books, keep detailed records, and plan for taxes and important financial decisions, helps you to not only protect yourself against stress, financial losses, and penalties, it gives you a greater understanding of the mechanisms that drive your success in each area of your company. Let’s look at some important options for keeping your books and help you develop a bookkeeping strategy that’s perfect for your business.
Why a strong bookkeeping strategy is vital for your success
A strong bookkeeping strategy is vital for any business. Why? Because it establishes a foundation of knowledge that can’t come from anywhere else. The information you gain from keeping your books consistently brings a level of clarity to your decision-making you wouldn’t have otherwise been able to attain.
It sets a precedent for smart spending, better resource management, and long-term decisions based on hard facts and historical data instead of feeling and guesswork. The right strategy also helps you file your taxes accurately and avoid costly errors and multiple audits. Bookkeeping is far too important to your success to ignore or procrastinate on. You deserve the best for your business and so do your customers and professional partners. Better bookkeeping means better business and greater control of your future.
Bookkeeping Options
There are many options when it comes to managing your books. Some business owners prefer to do it all themselves, either the classic way with ledgers and notebooks or with excellent software like QuickBooks Online, Xero, or FreshBooks. Others prefer or simply need, because of the size and complexity of their business, to have a full-time bookkeeper in-house. Still, others like to outsource to a professional team or individual, to ensure thorough bookkeeping that doesn’t miss a single detail. And for many, a hybrid approach, combining a mix of these is best.
Each one carries its own advantages and disadvantages, allowing you to custom-fit the right approach to meet the unique needs of your business. Let’s look now at each one.
The right bookkeeping strategy for me
As we’d mentioned above, there’s no one-size-fits all approach to bookkeeping, to your method of accounting. It depends partially on your business model, your available time and resources, and how you want to organize your staff in the best way possible so you can lead and manage better. There are a variety of methods and tools that can be used, and there are benefits and drawbacks for each. The best choice is the one that works best with your business.
Handling it on Your Own
If you’re hoping to take care of your books completely on your own, there are some things to be aware of. Handling your own bookkeeping forces you to learn a new skill, a very important one at that. You get to tackle the ins and outs of basic accounting, budgeting, resource management, and financial projections. These are all things every good business owner should master.
Taking time yourself to go over financial statements, enter financial data and check on other reports from your accounting software develops a sense of ownership in the financial health of your business. You can go old-school and keep a ledger, logs and notebooks, recording everything in well-organized books. Or, for a more comprehensive and helpful solution, getting familiar with online or software-based programs is a great move.
Still, taking this responsibility upon yourself is often daunting. It means a lot of time spent on accounting tasks and organizing records and less time for other vital management activities. Additionally, because it often isn’t a manager’s primary skill set, they may miss important details, forget to account for something, or lose out on valuable money-saving techniques that professional bookkeepers are trained to spot.
Taking on all the bookkeeping yourself helps you learn new things and get focused on your finances. But it also might tire you out, cause greater stress, and steal from your time and energy. You’ll also need to learn how to navigate your chosen bookkeeping programs. Software takes time to master and you may need to take a few training courses or get some one-on-one coaching to ensure you understand it completely.
Resident Bookkeeper
Keeping an in-house bookkeeper is often an excellent choice for many businesses. With their training, education, and experience, they’ll be solely focused on making sure every aspect of your books are exactly where they need to be. They will organize your finances, keep track of your balance sheet, verify bank statements, prepare you for tax time, create better systems for data and records, and help you make sense of complex or lengthy financial reports to help you make better decisions surrounding budget and resources.
The upsides of a bookkeeper are many. But this option comes with several costs. You’ll have to pay a salary and benefits to a full or part-time employee, along with establishing a dedicated office for this person with the need for furniture, computer hardware and additional tools like copiers, printers, and more.
Outsourcing
One of the best solutions to bookkeeping is outsourcing your needs to an individual or team. This affords you complete bookkeeping support, accurate records, and the knowledge you need to manage your finances more strategically. Professional bookkeeping services bring top-notch industry practices with them, ensuring a consistent level of work day in and day out.
Also, this is precisely what they do: focus on your books. With in-house bookkeepers, there is often a tendency to take on additional responsibilities, from answering phones and dealing with customer concerns, to placing orders and fielding certain employee matters. With an outside contracted bookkeeper, you’ll get someone entirely dedicated to the work of keeping your finances in order.
Outsourcing gives you a complete bookkeeping solution without having to pay additional benefits or putting together an office for an in-house department. Outsourced bookkeepers will also work with you to improve your level of organization, preparedness and financial knowledge, which helps you avoid penalties, save money on taxes, and give you the tools needed for better budgeting.
Hybrid
Often, companies find that a combination of methods works best for them. A business owner may take care of some things themselves, while keeping an in-house employee part-time, to take care of basic bookkeeping, data entry, and organization. Then, they may contract an outsourced bookkeeper to help with larger, more complex projects, taxes, and making sense of financial reports.
How to leverage your bookkeeping strategy toward greater success
One of the best things about consistent bookkeeping isn’t merely its tendency toward greater organization and records-keeping, but its ability to enable you to make more strategic financial decisions. Better bookkeeping means a greater understanding of your resources, of each department’s expenses and performance. It gives you not only a micro but a macro view of performance over months and years. This kind of information doesn’t simply help you stay current and save on taxes, it provides you with the information needed to make more specific, more informed choices about the direction of your company. Better bookkeeping lays the foundation for innovation and growth to flourish.
Too many companies don’t get deliberate enough about their bookkeeping. They’re constantly playing catch-up, entering financial data late, procrastinating on updates and financial reviews, not tracking their expenses consistently, and leaving one of the most important parts of their business to an afterthought.
Great bookkeeping isn’t simply a maintenance practice. It is a key component of your ability to manage with clarity, and to move your business into its next stages of growth. It should be one of your top priorities. The companies that budget well, stay organized, keep great records and study their financials inside and out, have a much easier time spotting problems, discovering strengths that could be capitalized on, seeing opportunities that might be available to them, and simply managing their overall business financials with greater success.
The right bookkeeping strategy allows you to worry less and spend that energy on core principles of management, like leading, innovating, product development, and customer experience.
Conclusion
A strong bookkeeping strategy can help your business run smoother. It can also help you identify important trends so you can make better decisions. But with so many options, how do you know which bookkeeping strategy is for you?
The key to finding the right bookkeeping strategy for your business is understanding your needs. A good place to start is in talking with an experienced bookkeeper and with business owners you trust who have implemented a strong bookkeeping strategy that is yielding positive results for them. This can help you identify gaps in your current strategy and find the right solution for your business.
Think about what matters most to you, whether handling some aspects yourself is ideal or perhaps contracting someone to take over to free up your time for other aspects of business. No matter what you choose, it’s important that you take bookkeeping seriously, that your finances become one of your top priorities. After a short while, you’ll see the evidence piling up that confirms how valuable an asset great financial management can be.
Sound Accounts is your ideal small business bookkeeping partner. For years, we’ve been helping businesses of all kinds find their way out of confusion and into clarity by managing their books so they can manage their business. Contact us today to make a positive change in your company’s bookkeeping strategy.
Check out our frequently asked questions and answers below for quick information about bookkeeping strategies.
FAQ
Why is having a focused bookkeeping strategy important?
Being deliberate about bookkeeping is one of the strongest things you’ll ever do for your business. It keeps your budget in view, helps you understand how each department is performing and where they can improve, lets you spot possible weak spots early on, gives you a deeper view of profitability and expenses, and equips you with the information you need to make decisions that have the potential to drive your business forward.
How do I know which strategy is best for me?
Whether it’s handling all your own bookkeeping yourself, keeping a full or part-time in-house bookkeeper, outsourcing to a great individual or team, or mixing these for a hybrid approach, make sure to choose a method that removes, instead of adds, stress to your life. Choose a strategy that gives you a clear interpretation of your financial data continually, so you can make business decisions with greater confidence. Choose a strategy that provides the maximum level of tangible benefits while remaining affordable enough to justify any costs involved. Other factors that go into this decision are the type of business involved, number of employees, and your available time and resources. You can discuss bookkeeping possibilities with an experienced bookkeeper, accountant, and other business owners.
What happens if I don’t have a clear bookkeeping strategy?
Leaving your bookkeeping to an afterthought, full of procrastination, disorganization, and inconsistency leaves you vulnerable to poor performance, waste, tax penalties, audits, miss opportunities and investments, and the eventual failure of your business. Missing this key step can take a great business idea and give it over to a bad business plan. It’s not something you ever want to ignore, but one of the most vital components of your business.
