Bookkeeping For Smart Business Owners

Sales by Item Summary from QuickBooks Desktop sample company file.

Written by Charley Blewett

Published: June 10, 2024

Jun 10, 2024

Helping Owners Keep an Eye on the Company Financial Picture

Dear Small Business Clients:

Let’s be frank, you know that your company bookkeeping tasks are both critically important and a major time drain.

The obvious reason to stay on top of your financial accounting through bookkeeping, is so you have a painless income tax filing experience. Well, as painless as humanly possible.

If you are still closing out the prior years’ books near your filing deadline, you have diminished your power to plan for profitability. Or make corrections to fix an area showing losses.

But keeping the company books up to date has another important function … providing you, the business owner/manager, information to make intelligent decisions to increase profits. And stay relevant and In Business.

Management Accounting Reports

These are related to but different than the standard 3 financial accounting reports. We gather important information from the Balance Sheet and the P&L Statement to offer a comparison.

They offer varied ratios to review.  Ratios that give you a quick test of your company’s financial health.

To do this takes Financial Data. The data can pinpoint high profit areas as well as loss areas. This in turn helps you become more successful in your business resolution.

4-Areas of accounting to keep current

So, let’s list the important things to keep at the front of your to-do list.

  1. Expenses – Costs of doing business: Keep your receipts and jot down a note if it is not clear what was the purpose of the purchase. For a smooth tax prep experience each year, keep your expense tracking up to date on a weekly basis.
  2. Income – The lifeblood of your business: Match your income checks or cash deposits to a customer. Even if you make a group deposit, note the customer’s invoice. Allowance for each customer to determine what went right and what didn’t for each individual job.
  3. Accounting – Getting the right business information … gleaning valuable financial information from your company’s financial reports.
    1. Fixed Costs: Expenses that remain the same regardless of your sales volume. Loans. Rent/Mortgage. Property tax. Etc.
    2. Variable Costs: Expense that fluctuates with the number of sales you make. Costs of Goods (Services) Sold. Direct labor. Gasoline to the jobsite. Variable Expenses go up with increased sales volume.
    3. Meeting your fixed company expenses … You need to know this information.
    4. And a value for job sales performance. Are you covering labor expenses for each job?
  4. Capital expenditures – Property, Plant, & Equipment: For major purchases of real estate, machinery, and vehicles … consult your business tax adviser to determine if it would be beneficial to use the IRS Section 179 expense option or to use the capitalization and depreciation method. For any major purchases you are considering, it is a good idea to run it by your tax adviser first. Go into major purchases with a plan of cost/benefit analysis.

With these things in mind and part of your daily routines, your accounting team will be able to keep you advised. And with up-to-date books, you will have a clear picture of the results from your business management energy.

Besides the review of your monthly Balance Sheet, P&L, and Cash Flow …

4 Management reports to keep your eye on:

  1. Budgeting & Forecasting: Planning involves creating a budget. Forecasting your yearly operational budget … expected revenue and expenses … is one task that many small business owners overlook. Forecasting your annual expenses and then tracking any variances throughout the year can pinpoint emerging problems. So, you can deal with them before they become a crisis.
    1. Budgeted forecasts versus actual reports … A Review process … Two-Column analysis. Every quarter at the least.
      1. Are Revenues weak? Should you increase marketing expenses?
      2. Do all jobs earn a predicable profit margin? If not, what happened? Can corrections be made?
    2. Minimize Budget Deficits … Identify problem areas to be revised.
    3. Budget Surplus … Profitability.
    4. Identify business goals.
    5. Planning and Strategy through your budget.
  2. Accounts Receivable aging report: Customers that are slow to pay for services rendered means that you do not have that cash available to use for other operational purposes. It’s business … so unless you are offering credit with interest, stay on top of past due customers. Ask for and review this report every month.
  3. The standard financial accounting reports:
    1. The Balance Sheet … Company Assets, Liabilities, & Owner/Shareholder Equity
    2. The income Statement (Profit & Loss report) … Sales revenues and the costs of sales.
    3. The Statement of Cash Flow. How liquid are your operational efforts?
  4. A little more complicated but … Contribution Margin and Gross Profit to calculate Break Even … and other critical short-term financial info to make good management decisions.
    1. Back to your fixed and variable expenses.
    2. Discovering how much revenue is left after paying the variable expenses.
    3. Your Break-Even point for each job. So, you can decide on a profit margin that is in line with your industry and community … competition.

This is just the tip of the iceberg of financial reporting to be a better business manager. If you need more in-depth consultation of managerial reporting of your company’s financial picture of health, please schedule a visit with Manuel to review your options. Our office number is (775) 525-6212

Visit our home page to learn more about C & M Bookkeeping.



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