Heck, how does bookkeeping helps business? Well, one of the most important outcomes of having up to date bookkeeping and financial records is knowing where your money comes from and where it is going!
Maybe you don’t agree. Do you think it’s a fait accompli, it can’t be changed once it’s either come in or gone out so what’s the point in dwelling on it? Is it just going to make you feel bad? Knowing that you spent $33 on 100 Etsy listings that took hours of time without making any sales. Or you subscribed to an annual plan to save money but then didn’t use the thing as much as you’d thought. Or you purchased $240 worth of envelopes and then changed the size of your products and now they no longer fit.
I agree, there is no changing what has gone before but I want to take a second to point out a few things
- you don’t HAVE to use this information to beat yourself up, judge your mistakes and determine you don’t know how to run a business
- there are lessons in this information to help you run a better business going forward
- although the future doesn’t follow the exact patterns of the past, it is helpful in planning and forecasting
- how do you expect to change what happens in future if you keep doing the same thing? The same inputs generally equal the same outputs… Are you happy with the outputs?
Set Aside the Judgement
If you made a decision based on the best available information at the time then there is no need to be mean to yourself about something that didn’t turn out as you’d expected. Plus it’s not exactly a nice workplace if your boss (aka you) is harsh and mean to your employee (aka you).
Adopt the attitude of interest and curiosity and reflect on what didn’t work out with that perspective. Also reflect on what did work out and celebrate those successes.
Learn the Lessons
Reflect on how could you avoid making a similar mistake in the future, how you can expand what did work and how you could improve what almost worked. Maybe you need to be more cautious, maybe you need to be less cautious! How have things changed from last year, six months ago and last month?
There are two sets of things to look for when thinking about lessons. Firstly specific actions, events or things that occurred as a one off and are mostly self-contained. Secondly at trends, what is going up or down or changing and can you identify why that is happening.
What does this look like. You purchased 1000 paper bags for markets not knowing markets were going to be cancelled. If you based this purchase on your 2019 markets it wasn’t a poor decision just unfortunate timing. Can you get creative with using those bags? Or can you just hold onto them for when markets are back on the agenda?
Looking at trends, maybe the number of orders you are receiving online has increased BUT the average value has dropped. You’re only sending mostly single items when previously you were sending two or three things in a single order. What factors might be impacting this? If you want to go back to multiple items in a single order, can you make it more attractive for customers? Because packing three products into one parcel is generally more efficient that three separate parcels on three different days.
Looking to the Future aka Forecasting
Knowing your Later subscription, new Office subscription and product insurance are all due on the same date. That’s super helpful in being able to manage your cash. Knowing that you sell more product B in November than product A. That is going to be super helpful in knowing where you should focus your making time once you’ve checked your inventory. And knowing that based on your expenses last year and the new equipment you need to make $12,000 before you’ll earn a profit this financial year. That’s really helpful in planning how much tax you think you’ll need to pay and how many sales a week you should be targeting.
There are so many places where bookkeeping helps business to move forward and grow your profitability and turnover.
BUT you need to be across that data, it needs to be timely and accurate and reliable. PLUS you need to be able to understand it and then apply it to your business and the current circumstances.
Bookkeeping isn’t just about being compliant with the law, it really can help your business!
Watch the Video
https://youtu.be/JxbCVqLZbPoPin for Later
