How to avoid failing in business

Bookkeeping dates back to 4000 BC and is an essential function of a successful business. Warren Buffett says  “… you have to understand the nuances of accounting, it’s the language of business and it’s an imperfect language”.  It’s imperfect because it needs to be translated into reports, which results in goals, and tasks being set.  Your business is like a screaming baby, you have to look at the signs to understand what it needs.  A bookkeeper records and categorizes transactions for those reports, and those reports tell you what the business needs. That’s why it’s still around after thousands of years, nobody’s figured out a way to replace it.

Owners can only be in fantasyland about their true profits until their savings runs out or their credit is used up.  That’s when reality hits, and it hurts.  The answer for the majority is in the details, in the Key Performance Indicators like cost of acquisition and cost of sale, operating margin, and efficiency ratio, which experts agree are universal indicators of success.  The result is that most owners don’t know their margins or exactly how much they are profiting.  More importantly, they don’t know the answers to the top questions all owners need to be asking.  Those questions would normally originate from the financial planning and analysis department, which small companies don’t have.  The two most common professionals working with business owners in this field are accountants and bookkeepers.

At some point, a business that is getting traction grows big enough that someone must be brought in to help with the record keeping.  A business owner must delegate some tasks to grow, so they can focus on drumming up sales or doing work they’ve already been paid for, but who can be trusted to care as much as you do? While 9/10 accountants are giving more financial advice than in the past, due to their high cost, they are more commonly used only to prepare taxes at the end of the year, leaving bookkeepers doing the day to day record keeping, payroll, and state tax reporting.

53% of college grads are underemployed or unemployed and 70% of college grads have degrees they can’t apply in the workforce. This is one reason why the self-employment lifestyle is gaining ground. These days, the word startup is so common that people consider starting up their own business as a viable alternative to self employment. Unfortunately, less than half of startups survive 5 years. Don’t be a statistic, do the books, do them right, and use the data to help you succeed.