Are You Making These Bookkeeping Mistakes?
Updated: Oct 12, 2021
Falling behind on the Bookkeeping
Avoiding education around your numbers
Poor categorisation of income and expenses
Not setting targets & KPI’s
Not monitoring your numbers monthly & taking action to improve your profit and cash
There is no successful business owner, who doesn’t know and use their numbers.
Your bookkeeping, also known as your accounting records, are like the foundation of your house.
Without a solid foundation, your business is on shaky ground.
Here are five common mistakes we see business owners making around their numbers:
Mistake # 1:
They’re behind on the bookkeeping.
Many business owners who are attempting to do their own bookkeeping fall behind.
The truth is bookkeeping is the last thing on their mind and it’s the one thing that gets left behind.
Week by week, business owners tell themselves, “I’ll do it tomorrow.” but life gets in the way, and before they know it, they’re months or even years behind.
This is a recipe for disaster because it means they have no optics around the profit or cash.
To make themselves feel better, they’ll often focus solely on turnover. And we know that turnover is vanity, profit is sanity, and cash is king.
Getting another sale and ringing that bell may give you a short term hit of feeling like you’re moving ahead, but without up-to-date books, you’re flying blind and you don’t know if your business is profitable or if you’ve fallen into debt.
If you fall behind, engage with a strategic bookkeeper quickly to help you get and stay up to date.
While bookkeeping is a cost, strategic bookkeeping is an investment. And the return you’ll get on your investment far outweighs the fees. Our clients typically get a 5 to 10 times return on their investment.
If you are behind and confused about where to start, book a Strategy call with me personally here.
It is having a lack of understanding of your numbers.
I’ve said it before and I’ll say it again..
“There is no successful business owner who doesn’t know and use their numbers”
You don’t need to be a bookkeeper to acquire numbers knowledge to a level that will help you optimize your business for profit and cash.
Education is one of the 3 big keys to a successful business. The other two are action and accountability.
One of the best ways to improve your numbers knowledge is to engage with a strategic bookkeeper who explains what it all means.
Numbers knowledge is a journey. Start today and reap the rewards in 12 months’ time.
Our clients save and make money month on month by improving their numbers knowledge when they are collaborating with us.
Mistake # 3:
Poor categorization of income and expenses.
You can only improve what you measure, and your numbers need to be set up in a strategic way so that you can measure them. The great news is that it doesn’t take a lot of effort to get your numbers set up strategically.
It’s one thing to have up to date and accurate numbers, it is another to have meaningful numbers. Now this might all sound quite foreign to you, like “accountant speak”, so let me give you an example:
Joe runs a plumbing business. He has a team of seven. 80% of his wages are direct Cost of Sales. That is, wages paid to his plumbers to do the jobs that generate the revenue.
Are you with me so far?
20% of his wages are administration, that is wages for staff who work on the day to day administration and operations of the business. Poor categorization of wages would be to have all the wages lumped into cost of sales.
Strategic categorization of these wages would be to break them up between cost of sales and operational costs. That way, Joe will be able to see the real cost of sales v’s his administration costs.
And then he’ll be able to set and monitor targets using his meaningful numbers.
If you look at our 5 step numbers methodology here
Great categorization of income and expenses sits in numbers strategy and numbers strategy sets you up for numbers targets. This leads us to step 4.
Mistake # 4:
They don’t set any targets or KPIs. They tend to be reactive technicians rather than proactive professionals.
You can’t kick a goal if there are no goalposts
Targets are goals.
To bridge the gap between where you are now (your actual business reality) and where you want to be in the future (your dream lifestyle business) we developed the GAP acronym.
G is for Goals
A Harvard Business Study found that the 3% of graduates from their MBA who had their goals written down, ended up earning ten times as much as the other 97% put together, just ten years after graduation
A is for Action & Accountability
Knowledge isn’t power, knowledge + action is power
And all of us need accountability, someone external to hold you accountable and push you forward
P is for Persistence & perseverance
Persistence is about moving forward every day step by step
Put time aside, every day to work on your business
Put an hour a day in your dairy now, every morning, to do this course and to work, uninterrupted on your business
And persevere, even when it gets hard, keep showing up
There are many terms for targets and these include budgets, goals and KPI’s. Here’s a link to our free game plan to help you start setting your own targets now.
Mistake # 5
They fail to monitor their numbers on a monthly basis and take the action needed to improve their profit and cash.
“Reactive technician vs. proactive professional”
Here again, we see businesses focusing solely on revenue rather than doing the deep work around the numbers needed to optimize for profit and cash.
Are you making any of these mistakes around your numbers and bookkeeping?
The definition of insanity is doing the same thing over and over and expecting different results.
Don’t go insane. Because there are easy steps you can take right now in the direction of your success.
Here are 3 steps you can take today
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