Good bookkeeping can be life changing.
Seriously. If done well, bookkeeping can be the catalyst for major change within your business. Since your business is one of your life’s big projects, these are major changes in your life too.
It’s likely you’ve never heard an accountant say that before. It’s possible you’ve never heard anyone say that before.
The reason: bookkeeping has been largely misunderstood and hugely undervalued.
Historically, ‘doing the books’ was considered a necessary evil, merely a means to an end (and the end was an equally dreaded annual tax return).
Actually, good bookkeeping is your best tool for making smart decisions. And we’re not just saying that because we’re accountants and we love what we do. Without it, it’s hard to determine whether you’re truly making a profit, what you need to do to get more cash into the business, or whether you have enough money for the next big thing.
You’ll notice the emphasis is on ‘good’ bookkeeping. Where good bookkeeping guides you to move forward, poor bookkeeping leaves you standing still, unsure of whether the next decision could make or break your business.
We’re going to dive into what good bookkeeping is, and why getting a good bookkeeper is key.
“I’m getting bookkeeping, and it’s not particularly life changing…”
In our first meeting with creative agency owners, we often gauge one of two things:
- You’ve never been shown the true value of bookkeeping or what it really is. As far as you know, it’s just data entry for the sake of pleasing HMRC.
- You already know something is missing from the financial information you’re getting. You understand you need more than just a number crunching, but you’re not sure what.
Bookkeeping in essence is the recording of your business’s financial data. It does involve data entry, and whilst it’s vital that data is up to date and entered regularly, good bookkeeping is less about entering the data itself, and more about what we do with it – how we apply what we know about your business finances, in order to make changes in your agency.
Bookkeeping forms the building blocks of anything else you want to do financially. From recording bank transactions to unpaid invoices, it builds the financial picture of your business one piece at a time.
To understand how life changing it can be for you, we encourage you to think about bookkeeping in tangible terms. Yes, bookkeeping is vital for accounts, tax returns, mortgage and loan applications and all of that (important) stuff. But it’s also vital for knowing:
- How much to pay yourself (listing this one at the top because it’s so often neglected when it doesn’t have to be!)
- Whether you can go for a bigger office
- Whether you’re able to take on that next employee
- What to have saved for upcoming tax and big bills so it’s not a surprise
- How much you can invest in new training, new software, improving your service
If your data isn’t right and isn’t up to date, then you can’t make fully informed decisions about any of these things.
So what are you missing? What’s stopping your bookkeeping from being life changing?
You’re not using the smartest technology for bookkeeping
In our experience, most owners of creative agencies are pretty tech savvy and forward thinking when it comes to digital innovation. So, you and I both know it all starts here. The way that bookkeeping is carried out will determine how accurate and up to date the data is. It’s a no brainer to use the best technology available to make the ‘data entry’ side of bookkeeping easy.
You need a system that supports your bookkeeper and you. A system that’s available to access wherever you are and whatever you’re doing, is easy to collaborate with and can efficiently link to your data sources.
If you know us at all you know we’re talking about Xero here! We have a load of information on our tech page about Xero and why we use it and recommend it for all businesses.
Regular updates to your books via Xero means you can check in anytime and see your financial position. No waiting for months of data to be processed, it’s all there waiting for you. We carry out daily bookkeeping for our clients for this reason.
We want the business owners we work with to feel empowered to make an informed decision whenever they need to. No hanging around. No missed opportunities.
You’re getting the data, but you’re not being told what it means to you or how it applies to your decisions
It’s one thing to have the financial data, but if you don’t know what to do with it, you’ll find you’re no better off than you were without it. Imagine you’re an athlete. For an athlete, the difference between winning and losing can be milliseconds. Getting the data on how you’re performing in training is vital, but if you don’t get the performance analysis, coaching and nutritional advice with it, you don’t know how to improve or how what factors helped you achieve the time you made.
The difference between failure and success in business isn’t so fine grained, but the same goes. There are ways in which to use your key numbers to either help or hinder your success – and if you’re not being given good advice, you’re missing out on the most important part of the bookkeeping process.
The data must be presented in a way that can be easily accessed and understood by you, the business owner.
Find a great bookkeeper who understands you
Great bookkeepers are worth their weight in gold! Finding someone you can work with, who understands your business and knows how to accurately find and record its data is key.
Five questions to ask to decide if a bookkeeper is right for you:
- Do they know your industry and the challenges you face?
- Do they explain things in a way you understand?
- Do they use (and encourage) the best technology for your business finances?
- Will their service be regular enough that you can make decisions on the fly?
- Do they believe bookkeeping can be transformative or are they just doing data entry?
I hope this was helpful to get you thinking about the impact your current bookkeeping is having on your business. We have a team of bookkeepers who work on Xero all day, every day supporting business owners with daily bookkeeping. If this is something you’d like to understand more about, take a little look at our ‘switch’ page.