And how to use high school maths in real life
Ah, the good old school days, where you’d sit in a stuffy classroom ruling margins and copying maths equations from the blackboard. And while you’re trying to work out what the heck the answer is, you’re mind wanders, ‘Why the hell do I need to learn this – I’ll never use this in real life’…
And for some professions this is true. You can run from maths and never look back – never ever, ever.
But as a business owner, you can’t escape numbers. Numbers are your lifeline. They’re a vital part of your business so you can tell if you’re sinking, swimming, or floating along nicely like a cork.
The great news for number haters is, you can always outsource your bookkeeping to a crazy chick who loves numbers. Yes – me!
I love bookkeeping. I love numbers. I love mathematical rules. And I love how knowing numbers can help my clients make supercharged financial decisions for their business.
So, here’s why bookkeeping is important.
English, Italian, Spanish, Numbers
Numbers have their very own language. And it’s not a language that everyone can speak fluently, but in my opinion, it’s one everyone should learn.
But honestly, you don’t need to fully understand all the intricacies of maths to do your bookkeeping. What you need to learn is how to read your numbers to determine if you’re making a profit and if not, if you’re tracking towards it.
There’s no point trying to run a profitable business if you’ve got no clue what this means for you. I’m not saying you should be making MOUNTAINS of money but aim for whatever goal works for you. What you want to avoid is ending up in a ton of debt because you had no idea what the numbers were telling you.
Business is NOT a game of monopoly with fake money (although taking a shot when you pass a ‘go’ moment in your business is a bit of fun).
When your books are up-to-date, you can jump into your accounting program and quickly make sure you’re on track. If you outsource your books, your bookkeeper will be able to teach you what figures to check and how to become a pro at reading your numbers.
Imagine getting that gold star ‘student of the week’ award for reading numbers (the assembly hall full of jealous kids, proud parents and teachers clapping, the principal handing over the award…).
What are supercharged decisions?
As a bookkeeper, I often see business owners making financial decisions on the fly. They’re procrastinating so checking opt-in sales emails, scrolling through Facebook, Googling…
Marketers and copywriters are a smart bunch. They know just what to say and do to suck you right in. It’s those course promotions, the banners on web pages; the Facebook sponsored posts and the lead pages that seem to speak to the problem you’re facing and offer a solution.
You fall for: a new company car; the latest amazing piece of software that’s going to run your business for you; the course that is going to help you charge more for your services…
Before you buy on impulse, stop to weigh up the costs:
- Less money in your pocket (hopefully with an aim to create more with your purchase)
- Missing out on something else you could have bought that wasn’t spontaneous but well thought out
When you make impulsive decisions without a second thought for your figures or growth plans, you can hit a six, or you can end up feeling like you’ve got a two-day hangover that just won’t quit.
But if you know your numbers, you can make informed decisions like whether you can truly afford that shiny new Roomba to clean up the lunch crumbs that scatter around your office desk.
It’s when you start making buying decisions on what your numbers are telling you (rather than what’s sitting in your account), that you start making supercharged decisions. You’ll keep money in your pocket, and your business will grow as you planned.
How trendy is your business?
Most of us business owners have those moments of belly burn because our sales have slowed down. Your head is spinning with those annoying little voices, ‘What if sales don’t pick up again’, and you’re losing sleep.
Or on the flip side, your sales have gone through the roof so, after a happy dance around your office, you hire more staff and get that fancy stand-up/sit-down desk your peeps have been bragging about. But the sales crash again and those little voices are now swearing like troopers.
Bookkeeping allows you to track the trends in your sales. You can prepare for variations with plenty of time and make informed decisions.
And trust me, making decisions based on knowing your numbers is far better than putting on a staff member which you need to let go or buying a new company car that the repo man comes for.
The sexy parts of your books that you should check out
By keeping your books up-to-date and checking them (ask your bookkeeper what the sexy parts are), you’ll notice a few things:
- Products or services that aren’t performing as well as they used to
- Products or services that aren’t selling as well as others, or are less profitable
- Expense accounts that are much higher than others
- Expense accounts that are higher than what’s normal for you
- Inconsistent miscellaneous expenses
Each of these items should be evaluated on their merit and an action plan made. For example, expenses getting too high should be reviewed to see if there’s a way to pull them down, miscellaneous expenses should be checked to see if these were vital to your business, or maybe you should hold off on the ‘buy now’ button next time you’re tempted.
Products or services that are decreasing in sales or underperforming should be evaluated and an action plan made to revamp these products. You could try things like extra advertising or make that product obsolete.
Your aim should be to make sure every transaction is helping to serve your business.
Keeping the tax man happy
The BIGGEST reason your bookkeeping is so important is that you don’t want the tax man to come knocking.
In Australia, it’s part of the ATO regulations that sales, expenses and GST are tracked and supported by evidence. The easiest way to do this is with great bookkeeping software with books that are kept up to date. Receipts must be stored for proof, and in case of an audit, soft copies are fine, along with those you’ve stored in your accounting program.
Personally, I’d never want to battle the ATO, so I make sure my books are up to scratch and that I comply with every law they lay down.
Over to you
If you’ve got any extra tips you can share about your bookkeeping, please feel free to share. Or even better – what’s your bookkeeping success story? What shiny toy did you buy for your business because you knew you could?
Please feel free to share this with your networks, or with anyone who may be looking for advice on their bookkeeping.