Essential Business Knowledge

As Jim Rohn said, “When I started my business, I was running it. Now what? It’s running me.” For a lot of business owners, even without the bookkeeping being on their task list, they still feel like the business is running them. If this describes you, you know that this is a solvable problem, but the IRS is not going to help you. In fact, it’s the requirements that the tax agencies put on business owners for the purpose of collecting taxes that can be incredibly scary, frustrating and overwhelming. 

Many business owners find the IRS filing systems and their requirements to be very challenging because the tax and regulatory rules are set up in a way to maximize the amount of revenue that can be collected from you, which limits the growth of your business. Usually, if you overpay, maybe they won’t mention it. But if you underpay, they’ll threaten you to collect. There are certain IRS expense categories that you’re required to keep track of and total up once a year. Rent, payroll and supplies make up the bulk of it, but there are actually 10 to 12 main categories that they give you to choose from and one box for total revenue. 

This is primarily what bookkeepers do. We’re experts in getting transactions into the right bucket. But, that doesn’t take care of what the owners need to know to effectively drive decision making in the business on a day to day basis, does it? The IRS’ numbers and what you need to know as an owner are such a mismatch, you can’t possibly determine what it costs to acquire a new customer by looking at the total annual advertising expense. That’s just not enough information for you to really know how successful you are. 

A restaurant can’t adequately calculate the total cost for the dinner menu just from the costs of goods, but that’s really the only box the IRS gives you. They don’t care if your employee cost is rising, or how much you paid for lumber. They just need to know the amount of profit you earned, so they can collect your taxes. But we actually need to know more than that. As business owners, we need to know a lot more, if we’re going to make those daily and monthly strategic decisions. This is why you have to have a great bookkeeper.