Contribution from our SPONSOR ZipBooks authored by Jaren Nichols, Chief Operating Officer at ZipBooks. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.
Is your business growing? Is it healthy? Without sound income statements, those can be uncomfortable questions. But I get it: I haven’t met a business owner yet who launched her business because she wanted to keep pristine accounting records.
At my company, ZipBooks, we’ve built modern accounting and reporting software that I actually love using! Once we released the product, I anointed myself our company’s bookkeeper. But small businesses tend to hurtle ahead — and even with ZipBooks, in the first few years I often found myself embarrassingly behind.
Fortunately, I’ve learned five steps to stay on top of your books and use your financial reports to know what’s going on—and how to help your business grow.
Be a business manager, not just an accountant
Powerful financial reports should be used for more than simply filing taxes. Should you invest more in marketing? Do you have high fixed costs or mostly marginal costs? How has your business changed over the last year?
Your financial reports reflect the health of your business. When done right, they also highlight aspects to change or areas to invest. I recommend first creating a meaningful chart of accounts (sales and expense categories). This is hard to change later, and a good set of accounts will give you rich insights to specific portions of your business. Next, create reports that help you highlight progress and compare against past months and quarters.
With a seamless system set up, your desire to use financial reports to manage effectively will naturally keep you up to date on your books.
Choose the right bank and credit accounts
Yes, you do need to open a business bank account to keep your personal and professional finances separate. You know that. But how many accounts should you have? Here are two questions—if the answers to both are yes, then consider opening a new account:
- Cash received or spent goes through a new person, location, or process
- Reports on each division are helpful for managing
For example, a consolidated report across 3 offices blurs rich, essential information. It’s far easier to create accurate, powerful reports if each office has its own checking account.
Anticipate trust accounting, IOLTA, or other complications
A client trust account requires a different bank account and requires specialized bookkeeping. Work with a CPA or trust accounting expert to check early if your business requires (or will require in the future) special expertise.
Reconcile monthly
When I’m behind, I frequently fear the catch-up work, so I procrastinate it even further! It can turn into a vicious cycle that can be costly and time-consuming to get out of. Accounting is one thing you don’t want to delay: it can cost you real money.
About a year ago, I kicked off nearly identical advertising campaigns on two ad providers. Then, I neglected our bookkeeping. Focusing on other things, I didn’t circle back to update our reports for 8 weeks. I regularly checked the advertising expense on each platform, but after reconciling our sales, I learned that there was a clear winner (spoiler: Google ads worked better for us than Facebook ads). And it was a clear winner after the second week.
If I’d kept on top of my books, I would have known that two weeks in — and saved myself six weeks worth of Facebook advertising expenses.
Build to scale
As a business owner, things don’t get less busy. When you’re starting or redoing something, plan for where your business will be in 6 – 12 months. Whether you identify reports to review regularly, find easy-to-use software, or outsource a professional bookkeeper, assume you’ll have less time than you do now.
At ZipBooks, we’ve built modern accounting software for business owners. With simple, powerful reporting you can check the overall health of your business or jump to the details with a simple click.
Our professional bookkeepers are experts with trust accounting and other specialized needs for lawyers. Feel free to reach out anytime with any accounting and reporting questions. Or, add your personal ZipBooks bookkeeper to your team through Girl Attorney and we’ll give you 10% off—forever.
