Good Accounting System

Matrix Key:  Financial Viability - Profitability - Accounting System

"The company accountant is shy and retiring.  He's shy a quarter of a million dollars.  That's why he's retiring." - Milton Berle

There's a good reason that the cornerstone of the WholeLife Matrix is having a Good Accounting System.  The accounting system is the road map of your business.  Without it your business is basically blindfolded and wandering aimlessly.  All the hard work you put into your product, your employees and your visibility in the market vanish in a heartbeat without a good accounting system. 

The four requirements of a good accounting system are:

1.      The system must be Tracked Daily;

2.      You must have Someone Accountable;

3.      There must be a system of Checks and Balances; and

4.      There must be Capacity for Growth.

Look at your current accounting structure – can you identify each of these requirements in your system?  As the above quote hilariously implies, your accounting system is only as good as the people who run it.  Depending on the size of your business, you might need only one person to manage the accounting system or you might need a whole department.  Make sure you invest in a quality experienced financial accountant.  That's a winning bet for your business' long term health.

Are you ready to win?



Shape Up Your Accounting System

“If winning isn’t everything, then why do they keep score?” – Vince Lombardi, Legendary Head Football Coach, Green Bay Packers

Your accounting system is the eyes and ears of your business. Accounting systems are essential for reporting profits, expenses, sales, income, and more. The trouble is, many small business owners neglect their accounting systems. If you are not regularly managing your accounting system, you may have tremendous exposure to problems you are not even aware of. A good accounting system can be your best business partner, alerting you to issues that need to be addressed and keeping you apprised of your successes.

Just like any business activity, accounting needs to be an action that you schedule in your calendar and spend time on every week. Depending on the size of your business, you may need to hire someone whose full-time job is managing the accounting for your company. You may need only a part-time bookkeeper, or you may need a full accounting staff, dividing responsibilities into payables, receivables, cost and inventory accounting and reporting.

If you run a small business, you may be able to use an accounting service. There are plenty of part-time bookkeepers out there who will visit your business on a weekly basis to keep track of your books and make sure that you are current on paying bills and depositing receivables.

If you do your own bookkeeping, make sure to invest in software that can do a lot of the work for you. QuickBooks is the best example of bookkeeping software that can provide reports such as income statements, balance sheets and general ledgers and have tremendous flexibility to track any number of bank accounts, vendors, transactions, receivables and payables.

It’s important to understand the difference between a bookkeeper and an accountant. A bookkeeper does just that. He or she manages your books, writes checks and deposits money into your bank accounts. The bookkeeper can generate reports that tell you where you stand. A good bookkeeper can analyze those reports and alert you to potential shortfalls or expenses that are out of line. Remember, your accounting system is the most important diagnostic tool you have to analyze the health of your business.

Your accountant, who should be a CPA, will file your taxes, handle any government regulatory filings and produce annual statements with analyses. Your CPA should also be a business analyst who can be straight with you about the financial health of your business. CPA’s can be expensive, which is why if you are a smaller business, you are often fine using a bookkeeper for day to day accounting and save your CPA fees for annual reporting and tax filings.

So if you are still stuffing receipts into coffee cans and scribbling notes in your check register, and the bank statements are piling up in your office, make a commitment today to get your accounting system under control. Once you make the effort to implement a good accounting system, it’s easy to keep up with it, and you will have the information you need to make good decisions about the future of your business.

Are you ready to win?

Keys to Profitability

“Success demands a singleness of purpose.” - Vince Lombardi, Former Coach, Green Bay Packers

Most of the entrepreneurs we work with need to strengthen their relationship with profit. We all know we need profitable businesses. But what does that really mean? In nutshell, income less expenses equals profit. Profit earns you the right to do business. If you don’t earn a profit you will eventually lose the right to do business.

So what are the keys to making a profit?

A good accounting system. Every business must have the systems in place to track the numbers and generate reports. Managers should have access to income and expense information on a daily, weekly, monthly and annual basis.

An estimating/pricing system. You must be able to estimate the amount and cost of material and labor that it will take to produce your product. With an accurate cost accounting system, you can determine your gross profit margin, deduct your expenses, and calculate your net profit. Without an accurate system in place you are just guessing as to your bottom line.

Projections and plans. The plans for sales and expenses provide a road map of where the business is going. Without the projection you are being run by the circumstances. That is a condition for uncertainty. You don’t want the market to determine where your business will wind up. You want to be guided by your own ideas and knowing that you are heading down your chosen path.

Measure for profitability. You have to stay on top of the progress of every department in your company. When things start slipping in production, you need to step in quickly to find a solution. Conduct weekly meetings with your accounting, production, sales, and estimating departments. Develop reports that show each department’s impact on the bottom line. If you are a sole proprietor, you still need to schedule time to measure for profit and make adjustments for things that aren’t working.

Remember, profit is the key to a winning business. To learn more, listen to our radio show on the Keys to Profitability.

Are You Ready to Win?