How Bookkeeping Can Help Your Business Be More Profitable
A lot of people tend to think of bookkeeping as a necessary evil. The IRS requires you to file a tax return, and bookkeeping is essential for doing your taxes. Ipso facto columbo Oreo (that’s a Bones reference if you didn’t catch it), bookkeeping is only necessary because of the IRS.
I so humbly beg to differ.
Not only is bookkeeping not a necessary evil, it can actually help your business be more profitable. How? Two main ways:
It makes you look at your expenses
It gives you lots of data about your income
Let’s expand on those a bit.
Bookkeeping helps stop spending leaks
As you do your bookkeeping, you are confronted with each an every expense your business incurs. This forces you to continually take inventory of what you’re spending. I’m a big techie and love me some software, so I’m constantly tempted by new and shiny services. Because, you know, it’s only $19 a month! That’s not so bad. Except, yeah, that’s almost $230/year. And those $19/month subscriptions add up. Fast.
When you do your books on a regular basis, it gives you an opportunity to do a bit of a gut check. Maybe you see that $19 charge come through on your credit card an realize you haven’t used the software in months. Time to cancel that subscription. (On the other hand, it’s quite possible you see the charge come through and thank your lucky stars because it saves you so much time and effort and helps your business run smoothly.)
Those small expenses add up, and over time, it’s possible you’ll be adding a decent amount to your bottom line simply by stopping any knucklehead spending.
Bookkeeping helps you hone in on your income streams
Keeping your books up-to-date, and more importantly, running and actually looking at your profit and loss statement, can absolutely help you increase the money you bring into your business.
Let’s say you offer two different services: 1:1 custom graphic design work, and a group course teaching people design basics for their own websites. You see you earned $1500 last month from the custom work, and $2000 from the course.
Off hand you may say, “oh, the course is bringing in more money, I should put more effort into it.”
Which could, in fact, be the right move for you. But don’t assume that just because something is currently bringing in more money means it’s the right path to go down. Money isn’t the only variable we need to look at.
Consider:
How much time/energy/brain space it takes to produce each service or product
How much time/energy/brain space it takes to market each service or product
How much enjoyment, fulfillment, flow, and connection you get out of producing and marketing each service or product.
In the above example:
Maybe the course requires you to constantly be marketing, creating content, popping into a Facebook group, and dealing with administrative tasks, which drains your energy and leaves you tired.
Maybe the 1:1 custom work lights you up and you get a kick out of really getting to know and connect with your clients.
Maybe your custom design clients love you so much and tell so many people about you that they basically do your marketing for you and you can build your business solely on referrals.
If any (or all) of those things are true, it’s worth considering ramping up your 1:1 projects and making moves to shutter your course.
To be sure, I’m not saying that doing your bookkeeping is magically going to land more money in your pocket. That would be silly.
But what it does do is keep your business finances front and center so you consistently are taking your business’s pulse and making smart decisions.
(You know, instead of sticking your head in the sand and operating in a vacuum. No one wants that. Because vacuums are loud and full of lint and dust bunnies. (I crack myself up!!))
