The art of the bookkeeper.
The Art of the Bookkeeper.
Our last article talked about bookkeeping versus accountancy.
Having re-read it, I thought I would make a few more personal comments. Bookkeeping services can be either carried out inside your Company, or we can do it for you. The point at which you swap from one to the other is really decided by size of the business – how much you buy and sell.
If you are keeping an out-sourced bookkeeper busy for more than a couple of days a week and you are still growing, it could be time to bring it inhouse. You will want your accountant to help with the transition and when hiring, remember that the bookkeeper you hire might not have the experience to do everything that needs doing. In short, make sure you have a transition period.
That being said the bookkeeper, in my opinion, rules. The instant feedback you get can be great. It can also be a bit like having a smart meter in your house. You end up a bit too focused on the thing and end up turning off lights at the expense of living! Remember that you need to set a strategy and be aware of the numbers generated week on week, but stick to the strategy.
Where it is truly great to have a bookkeeper is when you have them looking at the stuff that you decide matters. Busy, successful business owners like yourself try lots of stuff – lets call them projects. And having figures at your finger tips that measure return on your investment can be great. If all your Bookkeeper does is record costs and sales, you are wasting an inhouse resource.
We have, over the years, built some triggers that make us look closer and raise risks with clients. Relying too heavily on a bookkeeper to do this may mean you miss opportunities or risks. That being said and forgive me if you are one of the minority that pays attention to monthly management accounts, you need to control the numbers your bookkeeper is focused on. I’m going to call these ‘key metrics’ – things you actually really care about.
Being completely honest this is cashflow and profit. There is a theory that expenses grow to consume all of the money a business earns. This is best seen in the book ‘Profit First’ by Mike Michalowicz. He gives a great framework to run a business that should really suit a business with an inhouse Bookkeeper. The traditional method that a bookkeeper will be drawn towards will tend to support the old school sales-expenses=profit. Mike believes, and I think he is right, that the emphasis should be fairly and squarely on profit…your profit should be thought of as part of the expense of doing business. Otherwise, why bother?
https://www.mikemichalowicz.com/books/
So, here’s a few simple things you should be doing.
- Measure your monthly costs and sales
- Attribute them to projects
- Track the VAT return figures quarter on quarter – sales, expenses and VAT as it’s a good measure of how well you are doing
- Look at the profit generated
- Check the costs and sales of every project you do
- Review you company profit and loss in the companies ninth month of trading
- Discuss this with your accountant and plan
- Look at the top one or two costs every month and see if there is any way you can trim them
For a busy business with the kind of people I see running them, the third biggest mistake they make is trying to get cheap accountancy and bookkeeping. The second is unconsciously focusing on turnover and artificial measure of profit. Artificial, as in theoretical calculations from the professional discipline of bookkeeping and accountancy. Find a way to get your bookkeeper to give you numbers that let you get paid. Well and often. That’s it.
The first biggest mistake?
You are going to have to wait.
