 |
| Financial |
 Reading
Between the Numbers -The Importance of Understanding Your Financials By Debbie Patterson, owner of Odessey Business Services As small business owners, most of us are doing it on our own in order to make more money and to have control over how our company is run. We wear all of the hats needed to get our name out: doing the work, keeping the books, paying the bills, issuing invoices and everything else involved in keeping the business running. In other words, we are the marketing agent, the bookkeeper, the collection agent, the secretary and the chief financial officer. With all those hats to wear, it is no surprise that we are not completely knowledgeable in every area, except of course for the one that prompted us to start this business in the first place. Often when a new business is started, we don’t really worry about anything except doing whatever we can to keep our doors open tomorrow, next week and next month. The books are often cast aside - temporarily at first - in order to concentrate on the part of the business that we know best. However, knowing and understanding our financial situation is critical to keeping the business running. This temporary lapse in bookkeeping can easily become a monthly vow to ‘get to it tomorrow’, and finally results in a huge disorganized mess by tax time inclusive of the unexpected news from your tax preparer that they prepared your taxes without that box of receipts in your closet that you forgot about. This is not to say that you should have a accounting degree to start a business, but everyone embarking on the self-employment route should understand the basics of setting up and maintaining a set of books, as well as how to interpret the company’s financials at any given time. Finding the time to do the books and having detailed accounting knowledge is probably not at the top of your list of things to do. That’s where a professional bookkeeper or accountant can be one of your greatest assets, however, you should take a vested interest in your accounts beyond jobing them out. The knowledge that you have hired a competent professional who is working in your best interests is important. Finding out that the person you’ve trusted to handle your finances has not provided the services that you have expected can be a devastating blow. Everyone starting their own company should take the time to educate themselves in basic accounting skills, to the same extent that they spend time determining their target market and which services they should concentrate on providing. If your company has reached the point where you need to decide whether or not to expand, or if you can’t figure out where all of your money is going, a detailed set of financials can help you make a decision on how to proceed. If your company is your only source of income and there comes a time when you need to get a mortgage or line of credit in order to expand, the bank will ask for an updated set of financials. It would be in your best interest to know how to present your unique personal financial situation based on the financials that are provided by the professional you’ve hired. Who knows your company better than you? Besides, good books and records show potential creditors that you know what is going on with your business. There are many programs available that can provide you with the basic skills needed to become comfortable with the financial aspect of owning a business. Professional bookkeepers and accountants can provide consultation as to the best approach needed for your business. If you are definitely not interested in the number crunching, then at least find someone you know who can refer you to someone that they know and trust with their financials. The professional you entrust with your company’s books should be willing to answer any questions that you may have about your company and be willing to explain why they have done what they have done. Don’t be afraid to ‘ask a dumb question’ that you will learn from or that will give you peace of mind. The most important part of your financials is getting them done. If not by you, then by someone you trust with your company. Debbie Patterson is the owner operator of Odessey Business Services, specializing in income tax. Visit her website: www.odesseybusiness.com for more tax tips or contact her directly at 403.816.5098 |