The Books Are Done… Are You Looking at Them?

Sep 1

Written By Denise Kirk

‍ ‍There’s a conversation we have with business owners that often starts something like this.

‍ ‍“My bookkeeping is all up to date.”

‍ ‍Great.

‍ “What are the numbers telling you?”

‍That’s usually where things get a little quieter.

‍ The bookkeeping is done. The bank is reconciled. GST has been filed and everything is ready for year-end.

‍ But when was the last time you actually looked at the numbers?

‍ ‍Because getting the books done is important.

‍ ‍Understanding what they’re telling you is where they start becoming useful. ‍

“I Know We’re Making Money. I Just Don’t Know Where It’s Going.”

This one comes up a lot.

Sales are good. Customers are paying. Bills are getting paid. The business is busy.

But somehow there never seems to be as much money left in the bank as you expected.

The first reaction is often:

“Maybe we need more sales.”

Maybe.

But before we start looking for more work, let’s figure out what’s happening with the work you already have. ‍

Pull up the last three months and look for what changed. ‍

Maybe payroll increased. Material costs could be higher. Repairs may have jumped or there may be more debt payments going out every month. Sometimes it’s owner withdrawals, GST waiting to be paid, or a handful of expenses that have slowly crept up without anyone really noticing. ‍

We don’t need to analyze every line.

Find the number that changed the most.

‍Then ask:

“Why?”

Sometimes one number starts a much bigger conversation about what is happening inside the business.

‍ ‍

“Okay…But My Books Aren’t Exactly Up To Date.”

That’s a different conversation.

And usually the business owner already knows it. ‍

“I might be a little behind.”

Okay.

What was the last month that was completely finished?

Sometimes the answer is June.

Sometimes it’s January.

‍ Sometimes we get:

‍“Does opening the bank statements count?”

‍ No judgment.

‍ We just found our starting point.

‍ ‍Being six months or even a year behind can feel like one enormous bookkeeping problem.

‍ It isn’t.

‍We start with the last completed month and work forward. We make sure the bank and credit card statements are there, find out where the reconciliations stopped, check that payroll and GST filings are current, and identify what information is missing.

The first job isn’t to catch everything up. ‍

It’s to figure out where the catch-up begins. ‍

Once we know that, we have a plan instead of a pile.

“We’re Caught Up Now. How Do We Make Sure This Doesn’t Happen Again?”

Now we’re having a different conversation.

Getting twelve months of bookkeeping caught up solves one problem.

It doesn’t necessarily solve what caused it.

‍So we start asking what happened.

‍Maybe bookkeeping was something you were going to do on weekends…and then the weekends disappeared.

‍Maybe employees weren’t submitting receipts.

‍Maybe paperwork wasn’t getting to the right person or questions weren’t being answered, which meant the bookkeeping couldn’t move forward.

‍Or maybe the business simply grew beyond the system that used to work.

‍That happens.

‍A process that worked perfectly well when you had three employees, one bank account and a handful of customers may struggle when you have ten employees, multiple credit cards, equipment financing and considerably more transactions.

‍Before we move on, there’s one question worth asking:

‍“What was the first thing that stopped happening?”

That’s often where the new process needs to start.

Getting caught up fixes yesterday.

‍Fixing the process helps keep you from having exactly the same conversation next year. ‍

“My Bookkeeper Does The Books. I Really Don’t Look At Them.”

We hear this one too.

‍And technically, everything may be fine.

‍The transactions are entered, the bank reconciles, GST is filed and the accountant gets what they need at year-end.

‍But there’s a lot of useful business information sitting in those books.

‍Let’s pull up the Profit & Loss Statement.

‍You don’t have to become an accountant.

‍You don’t even have to understand every line.

‍Start with what surprises you.

‍Maybe wages are up considerably but sales barely changed.

‍Maybe vehicle expenses suddenly look much higher.

Maybe subcontracting has increased or you just had your best sales month ever…but somehow made less money.

Those are the numbers worth stopping at.

‍Because the question isn’t really, “What does this line on my Profit & Loss mean?”

‍The better question is:

‍“What changed in my business that caused this number to change?”

‍ Now we’re talking about the business, not the accounting.

“Head Office Already Gives Me Reports.”

Franchise owners have another version of this conversation.

‍The franchisor may already give you plenty of information — sales reports, location comparisons, royalty calculations, marketing fees and performance benchmarks.

‍So the question is fair:

‍“Why do I need my own bookkeeping?”

‍Because head office and the business owner aren’t necessarily asking the same questions.

‍The franchisor needs to know how the location is performing within the franchise system.

‍You need to know how the business is performing for you.

‍Your location has its own payroll, financing, staffing issues, debt, expenses and cash flow.

‍One of the more useful things you can do is put your latest franchisor report beside your own Profit & Loss Statement.

‍Then ask:

‍“What does head office need to know — and what do I need to know?”

There will probably be some overlap.

But there may also be a few things in your own financial statements that change the way you look at the business.

This Is Where The Numbers Start Looking Forward

Eventually the conversation changes again.

Instead of:

“What happened last month?”

We start hearing:

“Can I afford another employee?”

“We need another truck. Should we finance it?”

“Sales are up. Why is cash still tight?”

“We’ve been offered a big contract. Can we actually afford to take it on?” ‍

Now we’re not talking about bookkeeping for the sake of bookkeeping.

We’re using the information in the books to work through a decision.‍

If you’re thinking about hiring, we can look at what that employee will really cost and what needs to happen in the business to support them.

If another truck is on the table, we can look at what financing does to monthly cash flow rather than simply asking whether the business can qualify for the loan.

And if a large customer comes along, the conversation may be less about how much revenue they’ll bring and more about how long you’ll be carrying the payroll, materials and other costs before that customer actually pays you.

This is where having someone look at the numbers with you can become valuable. That’s really what Fractional CFO support can look like in a smaller business. ‍

Not because a small business suddenly needs a CFO sitting in an office looking at spreadsheets all day.

Sometimes you simply need someone to look at the numbers with you and ask: ‍

“What happens if we do this?” ‍

Before You Make The Next Big Decision…

Think about the biggest decision you’re likely to make in your business over the next six months.

It could be hiring someone, buying equipment, taking on a larger customer, expanding, borrowing money or taking more money out of the business personally.

Before you decide, write down one question: ‍

“What would I want to know before I say yes?”

Then look at your financial information.

Can you answer it? ‍

If you can, great.

If you can’t, that tells you something too.

Maybe the bookkeeping needs to be more current. Maybe cash flow needs a closer look. Maybe you need a budget or forecast.

Or maybe you simply need to sit down with someone and work through the numbers. ‍