Kickstart Your Year with 5 Essential Bookkeeping Strategies
Introduction
As a small business owner, the last thing you need is one more task on your to-do list. Your days are likely jam-packed, and you are likely juggling countless responsibilities. Unfortunately, bookkeeping often gets pushed to the bottom of the pile. This happens even though an organization’s health rests primarily on its finances. Clean financial data indicates good health, improves decision-making and helps fuel future growth.
Here are five strategies to get your books in shape for the new year. Due to their simplicity, you may be tempted to pass over them. Still, they are foundational pieces that, if not overlooked, can help you kickstart your year confidently and clearly.
Review the Previous Year
The best indicator of your future is taking a look back at your past. Adopting new strategies are crucial, but shotgunning it with random changes isn’t necessarily the best plan. Start with analyzing your income statements and balance sheets to recognize trends. It’s best to look at the entire year broken into month increments (see example). Understanding the factors contributing to your best-performing months will clarify your company’s strengths and weaknesses. You can also take this time to review your best-performing services or products; you might be surprised at what the data shows. This exercise will also detect zones of unwarranted spending and waste, allowing you to minimize future losses. You’ll also want to revisit your tax returns. Did you have any unpleasant surprises last year? Improving your tax strategies can reveal missed deductions and reduce your liability. It’s easiest to do this by having a dedicated tax reserve account. Another opportunity as you head into the new year is the potential to raise your prices. Inflation is a contributing factor to the demise of many small businesses. Healthy companies often increase prices every quarter (depending on the industry), keeping their profit margins buoyed against the rising costs of labor, goods, and other expenses.
Don’t be discouraged by what these metrics reveal. No business is perfect, and you can’t improve what you aren’t aware of. Reviewing the previous year allows you to recognize financial missteps, such as overspending, underpricing, or delayed invoicing. This data can be your greatest asset if you can translate it into actionable tasks to bring about change.
Organize Your Financial Records
Running a business out of a shoe box has never led to successful outcomes, yet unfortunately, it’s the default method for many small businesses. Piles of receipts begging to be misplaced, multiple accounts that could be streamlined into one or two, and a lack of general processes lead to missed sales, tax filing nightmares, and unnecessary stress. Organized records can help prepare you for tax season, a loan application, or a surprise audit. Clear, accessible books also give you easy access to a snapshot of business health that’s best reviewed often. Start by gathering all financial documents, such as invoices, receipts, bank statements, and payroll records. Decide on a storage system that works best for you, whether physical folders, a digital filing system, or a combination of both. If you go digital, make sure you’re backing up your data. Cloud-based accounting tools like QuickBooks are game changers for financial management. They automate data entry, provide real-time updates, and make sharing records with your accountant or bookkeeper easy. Many offer integrations with payment systems and banking platforms giving you a few less things to worry about. With mobile technology, your books are as close as your back pocket.
Create a Budget for the Year Ahead
Operating your business without a budget is a bit like playing a bad game of pin the tail on the donkey. You're 100% blind, you’re spinning in circles, and you end up with surprising outcomes. The difference is it’s your tail on the line. You need a financial roadmap for the year ahead. A budget allows you to allocate resources where you need them most, control spending, and keep you on track to meet your financial goals. Astoundingly, only 39% of small businesses take the time to create a financial budget. A solid budget can soften the blow of unexpected expenses and reduce your financial stress. Keeping your previous year in mind, pay attention to trends in income and spending to make some educated guesses for the upcoming year. Remember factors like seasonal fluctuations, market changes, and planned business growth. Past performance is a goldmine of insights. Did you overspend on particular categories? Were there unexpected expenses that you can anticipate this year? Adjust your budget to account for these patterns, ensuring a more accurate and actionable financial plan.
Plan for Growth and Investment
Growth is the number one goal for most small business owners, but it takes more than a few framed inspirational quotes on the office wall to get there. Look at your data, including profit margins, sales trends, and operational costs. Use this information to find areas where growth would be most beneficial, whether adding new products and services or stretching to new markets. Once you have these targets in mind, create a specific budget to support them. For example:
Marketing: Carve out funds for digital marketing campaigns, SEO efforts, or social media ads to find new customers.
Hiring: Budget to recruit and onboard new employees. Make sure to include salaries, benefits, and training.
New Products or Services: When growing your product, don’t forget to include the cost of production, research, or acquiring new resources.
Beware of the concept of “growing broke.” It’s a bit of a teeter-totter to make sure you’re balancing current liabilities with future potential. Shoot for the moon, but make sure you can keep the lights on. You need a financial safety net. Set aside funds for unexpected expenses that will inevitably pop up during expansion. Having a contingency plan can boost your confidence in going all in on some of these initiatives.
Every growth strategy should have measurable goals. Whether it is expanding sales, getting new customers, or being more efficient, track your return on investment (ROI) to figure out whether your efforts are delivering results. Tweak your strategy as needed to maximize returns.
Choose the Right Bookkeeper for Your Business
As a small business owner, time is arguably your most valuable asset. Hiring a professional bookkeeper allows you to focus on growing your business rather than getting lost in the weeds in areas you lack confidence. Bookkeepers make sure your financial records are accurate, up-to-date, and compliant with regulations, reducing the risk of mistakes or penalties. If you aren’t sure if you should hire a bookkeeper, see our previous Article 5 Signs It’s To Delegate Your Bookkeeping Tasks.
Effective bookkeeping is more than just tracking numbers—it's setting your business up for success. Imagine starting the year with clarity and confidence, being organized, creating a budget, and planning for growth. With taking stock of the previous year’s performance and hiring a professional bookkeeper, you can rest easy knowing your finances are in expert hands. This ultimately frees you to focus on what you do best: running and growing your business.
At Good Bookkeeping, we understand the unique challenges that small businesses face. We’ve been small business owners for 25 years. We’ve created the company we wished we had when we got started. Our tailored bookkeeping solutions will simplify your financial management, save time, and help you make informed decisions. Ready to take your bookkeeping to the next level? Let us handle the details so you can concentrate on achieving your goals.
Contact us today to learn how we can help your business thrive!
