Are your records up to date?
A business is a living, growing entity that is constantly changing. In order to keep it healthy, you have to pay attention to what’s happening on a regular basis. If you save your receipts until the end of the year, you may not know there’s a problem until it’s too late.
If a client doesn’t give me their tax information until the very last minute, even if I have some useful insight to give, the client has spent the first 6 months of 2019 using old information from the 2018 year-end.
If you keep your records up to date, you can deal with an issue a lot sooner – whether it’s a positive one like you’re having a great year and you know you’ll have to pay more tax or a negative one like your expenses are much higher than last year, but your income isn’t growing to match.
The $64,000 Question
You have to figure out based on the nature of your business, whether it makes sense to look at sales and expenses from month to month, quarter to quarter or annually.
For instance, we look at how many personal tax returns we prepared in 2019 compared to the number we did in 2018. Month to month is not a helpful metric for us. May revenues are going to be considerably lower than April, but that’s not a cause for concern.
What numbers matter?
It’s a personalized answer and question, but often we find people just throw their hands in the air and don’t want to know what’s going on, which is like someone who’s driving somewhere new but doesn’t want to read a map.
Good bookkeeping software will produce the reports that provide the information you need. However, one issue some of our clients have is that they don’t understand what they’re looking at or what they’re looking for – that’s a good time to reach out.
People think that with the right tools they can become a bookkeeper, but this is a trap. The software is user friendly but while you should easily be able to sync Quickbooks Online with a bank account, it doesn’t always work the way it should.
What bookkeeping tool should I use?
For our clients, Quickbooks Online is a perfectly good system, but there are a number of different options. It’s important that you are comfortable using the software because it’s something you’re going to be using far more often than we are. What you want to avoid using (unless your business is very small) is an Excel spreadsheet.
If keeping track of the numbers is something you tend to procrastinate, it may be worth hiring a bookkeeper.
A good bookkeeper can keep track of what’s happening and may even save you money in the long run because they know what we need. We’re happy to provide referrals to bookkeepers.
Many times people speak to their accountants once a year about the taxes, but you should know more about your business going forward. We try to excel as a firm to have these discussions and help keep our clients’ businesses running smoothly.