By Robert Usher, Business Consultant
Before you know it, January will be here. As the new year approaches, many people will start talking about changes they will make in the coming year. They will exercise more often. They will watch less TV, and read more books. They will spend more time with family. Many business owners make these same type of ‘commitments’ regarding their operations, often with the same results for actual implementation.
The main reason small businesses fail is a lack of planning. Sometimes this ‘lack’ has to do with undercapitalization of the business. Other times it relates to an inadequate marketing plan. One way to combat both of these situations is to develop a solid business plan and financial projections for the business, and then consistently revise the plan and projections throughout the year.
As a business owner, there is often one major hurdle you face in creating these documents: you don’t have a firm grasp on the numbers. In other words, you rely too much on other people to tell you how your business is doing after the fact, instead of being able to determine this for yourself as you go. If you have that shoebox, file cabinet drawer or manila folder where all of your receipts and deposit slips end up until they are transported to your accountant to be magically transformed into a financial document, then you may be guilty on this count. Often there is a three-month gap between when your month closes, and you get the document from your accountant. This is too long of a timeframe, however, if you will need to make any changes or corrections in your business activities based on that document.
Here are a few things that the Inland Empire SBDC would recommend you do to take more control over your numbers:
- Bring the accounting process ‘in-house’ by using QuickBooks. You probably started your business because you are an expert in your field, or you offer a product in which you firmly believe. Nobody expects a business owner to be an accountant. What you will find, however, is that most business owners can easily input the daily transactions of their business into a computerized accounting system. Although the resulting figures and statements won’t be perfect and suitable for filing your business tax returns, they will provide you the opportunity to gauge your business’ performance in ‘real-time’. To assist you in bringing your process ‘in-house’, the Inland Empire SBDC offers a beginning and advanced QuickBooks workshop, and has a certified QuickBooks ProAdvisor on staff.
- Understand your financials. Getting the data into a computerized accounting system is a major step in the right direction. Once the data is in, then you will need to be able to read or interpret the financial statements that come out of the system. For example, you need to know the difference between Gross Profit and Net Income. Comparing your performance to others in your industry would also be a good idea. To get assistance in understanding your business figures, simply set up a consulting session with one of the Inland Empire SBDC’s Business Consultant.
By doing these things, you should be able to make decisions for your business as you go.
The time to make these changes, however, is now. Do not wait until the beginning of 2015 to learn how to use QuickBooks or about financial statements. Utilize the remainder of 2014 to get better acquainted with these processes, so that you can start off the new year implementing them. All services of the Inland Empire SBDC are offered free of charge, so no need to worry about them affecting your holiday budget!
Robert Usher is a Business Consultant with the Inland Empire SBDC. He meets with clients in Eastvale, Chino, Ontario, Rancho Cucamonga, and Upland. To schedule a no-cost appointment with Mr. Usher, please contact the Inland Empire SBDC at (909) 983-5005.