8221 Brecksville Rd, STE 205 Brecksville, OH 44141
First Things First W e all read it: Putting first things first is Habit No. 3 of Stephen Covey’s book“7 Habits of Highly Effective People.” But do we really put first things first? Do we do the most important things first in life? Are we clear about priorities, and do we act on them? And if we have a business, are we aware of our priorities in it? I recently talked to a business owner who was complaining about not knowing where all her money went every month. She expressed that, in spite of the rapid growth of her business to half a million dollars a year, she felt that her costs grew even faster, and she was afraid of finding out howmuch she’ll owe Uncle Sam this tax season. I asked if she has current financials that we can look at, and I almost fell offmy chair when she toldme that she has NO bookkeeping or financials AT ALL! Half a million dollars in sales and no books at all, not even half-baked ones. No QBO, no Excel, no paper records, not even some notes on a cocktail napkin! She admitted that last tax-time she sent a couple of figures to her tax preparer, and that was all. There is a saying in business that goes something like this:“Sales cover a lot of sins.”It means that if you are able to just keep selling your services or products to generate adequate cash flow, you can get away with flaws in your processes or customer service. And yes, I have to admit that for a while, you can even get away with having no books! You can get away with having no clue about your numbers, costs, your profitability, or the lack thereof. But make nomistake about it: NOBODY EVER BUILT A SUSTAINABLY PROFITABLE BUSINESSWITHOUT HAVINGGOOD BOOKS ANDKNOWINGTHEIR NUMBERS! Side note: Email me if you want my definition of“good books.”And no, it does not include going with the sample chart of accounts Intuit gave you five years ago or logging into your QBO once a quarter. The person I mentioned above expressed tome that she felt she couldn’t afford to hire a bookkeeper or to take a QBO bootcamp that we offer. When I suggested a tax-saving strategy that would If you knowme at all, you knowwhere this story is going, don’t you?
Do You Have an Expensive Hobby or a Business?
save her $11,250 a year —an amount that wouldmore than pay for a bookkeeper —she declined to listen, citing current cash flow deficiencies.
First things first: I always tell people that the best reason to have good books is not your fear of the IRS, but so you canmake better business decisions. You need to be able tomake course corrections today, not 18 months fromnow
when you finally get your tax returns back from your CPA.
Successful entrepreneurs would agree that a lot of light bulbs go onwhen your numbers are finally not only in your head, but on paper and in front of you, in black andwhite.
That’s when you finally realize that some of your products cost you more tomake than what you charge for them. That’s when you spot that a certain staffmember’sW-2 is higher than what they produce for the business. That’s when you finally understand where the leaks are and why in the world you can’t afford what you really want, despite spending 100 hours a week at work and agonizing about your business even in your sleep. I’mnot saying that having good books will solve all your problems and will make you profitable. But please believeme that, without them, you only have an expensive hobby, not a business.
The good news is that it does not have to be that way, and help is just a phone call away to put first things first.
Happy NewYear! Now let’s get to work.
P.S. Join our Facebook Lives onmost Thursdays at 4 p.m. EST, where we discuss finances, marketing, and business, and answer your questions. Search for us at @ConciergeCPAs.
–Borbala Banto, CPA
1 (440) 340-1030
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