Most business owners and managers view their bookkeeping as drudgery. A necessary evil to comply with Taxation law. But as with all things in life and business the way we view our situation, our attitude to things, determines our peace of mind. What if you were to view your record keeping as a friendly guide, someone that kept you informed about your performance and showed you areas that you could improve and thus dramatically increase your profit. Do you think you would be more enthusiastic about keeping your figures up to date?
We often experience a massive tidal wave of business people rushing into their accountants’ offices at the last minute in panic because their tax return is due. Unfortunately a large number of these businesses still come in with the ‘shoebox’ full of receipts and invoices. For these people it means significantly higher accounting fees for the year and being put to the end of the queue while others with proper bookkeeping systems take priority. If this is not incentive enough to take a different approach to your record keeping there are other significant benefits to working out a budget and controlling our finances with it.
Your budget or cash flow forecast is your company’s course through the future and is an indication on how your business will perform over the next 12 months. Basically, you are estimating how much income you will generate, what your likely expenses will be and when they will occur and in this you must include your GST activity. You are now in a good position to arrange major expenses to occur when the business can afford them. You can evaluate your cash flow to maximise your efficiency by considering how you control your debtors or pay your creditors and thus minimise your overdraft needs and not end up with horrible surprises!
When you have produced this very valuable document, you have an essential aid which will keep your business on track and successful. It is not a document to be filed away, it is a working tool. This is where your record keeping comes in. During the year, you must be in the habit of keeping your cashbook up to date so that when your Business Activity Statement becomes due you are ready. Then periodically, at the end of each month, you can compare your actual results with your budget forecast. Challenge any variations and, if necessary, make changes to the remaining part of the budget so that you can continue to use it as a success tool.
You need to set aside a couple of hours from your busy schedule and hide yourself away somewhere and actually produce this budget. Look at how your business performed last year, income and expenditure wise. Consider what will affect your business this year and write it all down. Even if you have never done it before, give it a go. You will discover any lean periods before they happen and you will be surprised and excited by how successful you are going to be! Believe me, the little effort now is really worth it.
So let’s change our attitude to bookkeeping, see it as a worthwhile control to build our business and future prosperity and keep those shoeboxes for those expensive shoes we can now afford.
For those who need some help with your book-keeping we have created a wonderful excel & numbers template Cashbook Catalyst the simple and complete way to keep absolute control of your business finances. To make it easy we have included many formulas in the spread sheets. All you need to do is add your figures from your invoices regularly. We’ve even created a FREE lite version of Cashbook Catalyst so you can try it out for yourself!
Whilst this version is customised for Australia we are happy to customise a version for your needs.