For many of us, just the thought of financial record keeping, budgets or tax returns, gives a chill up our spine. But the truth is, a lack of proper financial management within an operation can lead to un-informed decision making and your bottom line can take a real hit.
I was recently surprised to meet business people who still use the “shoebox” method of financial management. You know, take one or more shoeboxes, fill them with all of your operation’s receipts, check stubs, and invoices, etc. At the end of the year bring them to your accountant and await your completed tax return. While this method satisfies Uncle Sam, it does nothing to help you track your operation’s profitability, efficiencies, or the true financial picture of your operation. Wouldn’t it be great to know how profitable each business segment really is? If you are like most businesses, you probably have more than one enterprise within your operation. Is one of those entities weighing down your whole operations net profits?
With just a couple clicks of a mouse and easy-to-use accounting software, you can generate information that concerns every aspect of your operation. When it comes to using financial management software, by entering your data once, the ability to analyze data and generate in-depth reporting is limitless. You can personalize your reports, profit centers, accounts, inventories and track data specific to your operation or its entities. I know you’re asking yourself, “Why would I want to use financial management software? My shoebox has fulfilled all of my needs?”
You likely work with a banker, an accountant, consultant, family members, and let’s not forget the government. Like it or not each of these are partners in your operation and reporting to them requires some element of financial record keeping. Financial accounting software can provide unlimited analysis to those members in your operation. For instance:
- When you decide to make a major purchase for your operation, most often that requires a visit with your banker to take out a loan or a draw from your line of credit. You may be your banker’s top client or even dearest friend; you will still be required to produce a financial statement or balance sheet.
- How about that accountant? If you’re currently using the “shoebox accounting” system, at best your accountant can give you the basics: a 1040, or cash accounting information within your general ledger, etc. However, by utilizing a computer and accounting software, you can find out so much more about the elements of your operation.
- Is your operation run by you and members of your family? Nothing can be more rewarding than running a family-owned operation providing everyone is on the same page and in agreement on all aspects of the operation. If you and your family members have a hard time making decisions regarding the operation, chances are there are personal feelings involved in the decision making and the process can be more personal rather than business oriented. When you have your operation’s finances on the computer and you can access current and historical data to analyze where the strengths and weaknesses are within the operation, it will help take the personal element out of the process and sets the tone for better business decision making.
- One of the responsibilities we all have as individuals and business owners is to pay taxes to the government. The federal and state governments require us to file tax returns as well as pay taxes. Depending on where you live, you may also be responsible for paying a local tax. When you have your financial data on the computer, all of the information you need to file a taxtax return is quickly available.
In today’s competitive market, every business owner should have computerizedrecords. Good financial data gives you the competitive edge and the confidence needed to make the best decisions for your operation’s profitability and efficiency. Decisions that will affect your future and that of your family for years to come. Go ahead; recycle the shoebox, the path to sound financial management is but a mouse click away!