What the heck are financial statements and why do YOU need them??

You may be asking yourself, what are financial statements and what do they have to do with me?  The short answer is financial statements tell you how profitable your business is, what you own, what others owe you and how much you owe others.  The three main financial statements are the income statement, balance sheet and cash flow statement.  Let’s break this down even further, statement by statement.   

We will start with the income statement.  The income statement shows how much profit you have made for the period, whether it be the month, quarter or year.  It shows how much revenue you have brought in and how much money you have spent (expenses) for the period.  When revenue is greater, than expenses, you have a net profit.  If your expenses are more than the revenue you have generated for the period, then of course you have a net loss. This is the key in determining whether you’re running a business or a hobby.

The balance sheet shows what you own, what you owe and the equity you have in the company.  The infamous formula in accounting is ASSETS=LIABILITIES +EQUITY.  Assets are what the company owns, including cash and money customers owe you.  Liabilities are what the company owes others such as taxes, loans and amounts due to creditors.  What the company owes its owners is equity, i.e., if the company sells everything it owns (assets) and pays everything it owes (liabilities), whatever is left is equity.  This statement shows the financial position of the company at any given time.

The cashflow binds the income statement and balance sheet together.  It is shows the inflow and outflow of cash and is comprised of three parts: operating activities (money used and received in the ordinary course of business), investing activities (money used and received from buying and selling assets) and financing activities (money used and received from taking out and repaying debt, stock, interest and dividends).  Cash flow starts with net income then adds and subtracts the inflow and outflow of cash to get to the ending cash balance that is reflected on the balance sheet.

Why do you need financial statements?  Financial statements are used to analyze the business to determine its profitability and strength.  If you want to take out a loan from the bank, you need financial statements but they must be certified by a CPA.  Statements can also be used to prepare your annual business tax return.  Financial statements are the windows to the soul of a business.  You can learn a lot about a business from its financial statements.  They show you how the business is operating and how much of a profit you are making.

Do you know how to prepare your financial statements?  Are you looking at them monthly and know how much profit you are making, what you owe and how much others owe you?  I can help.  Click the link below to contact me for help in preparing and analyzing your statements.

“I Can’t Afford It!” Why You Can’t NOT Afford A Bookkeeper

Is your business profitable? Do you know your business inside and out? If I asked you when was the last time you reviewed your expenses, would you say it yesterday, yesteryear or possibly even never? Are you a business owner that only looks at your expenses during tax time? If you’ve answered “no” and “not today” on these questions, then this blog post is just for you.

I’m Kanika Redd of Primary Focus Bookkeeping and my primary focus is bookkeeping for my clients. Now I know, bookkeeping is not as exciting as marketing for your business, but it is just as necessary, if not more important. When I talk to business owners, they tell me how much they spend on marketing and their eyes light up about new ads, and ways to get more business. When I bring up bookkeeping, it’s almost as if I just used a pin to punch the air out of their balloon. I get it. That’s why I created my business so that you don’t have to focus on your books. But one of the main things I hear from business owners is the belief that they can’t afford a bookkeeper. GASP! When I hear this, I know this client needs me more than ever because they probably have no idea what’s going on in their business.

If you’re not making money in your business, it’s technically a hobby. Most people are running a full-time hobby and don’t even know it. That’s why I want to share why it is important to have a bookkeeper on your team and help you to see why you can’t afford NOT to have a bookkeeper if you’re serious about your business.

DO-IT-YOURSELFERS

Some business owners feel they can do it all themselves. I call them the DIYers. They wear 28 different hats and often bookkeeper is hat number 29 and they barely put it on, other than during tax time.   One of the most important things to remember as a business owner is that no business can truly grow to its full potential with only one person.  A photographer needs makeup artists, hair stylists and clothing stylists to have a successful photo shoot.  A chef needs food providers, servers and perhaps a sous chef to make a catered gig a spectacular event.  This is also true on the business side.  Allowing a bookkeeper to handle the books frees up time from recording and classifying transactions so you can focus on the actual business itself.  

CONTROL FREAKS

Many business owners worry about not having control or not being able to see how the business is doing at any given time. These are my favorite because I love to WOW them with software right at their fingertips that shows them at any given time what’s really going on.  So if you’re worried that you won’t know what’s going on or feel like you’re the only one who can do your books, then just know...your business is suffering because unless you’re a bookkeeper, your business is missing out.

BOOKKEEPER BENEFITS

You may not be a DIYer or Control Freak, but you may be thinking that you can’t afford a bookkeeper. Not having a bookkeeper can cost you so much unnecessary time spent on activities that should be delegated and it can cost you MONEY!! One of the biggest benefits of having a bookkeeper is having someone keep up with your books, and analyze your expenses to determine what shifts you need to make. You may be spending more money and not even be aware. Bookkeepers can help you reduce costs and ensure the proper classification of transactions so you can get the maximum tax deductions possible, which can possibly reduce your tax liability.

Once you consider these things, can you really afford NOT to have a bookkeeper?  

No matter what level you are in your business, hiring a bookkeeper is one of the first people you want to add to your team. For the month of February, I’m spreading a bit of love by gifting you a business assessment (session value $147) to determine if you’re leaving any money on the table in your business.  There are only 9 available slots for this session and they are on a first-come, first-serve basis.

Click the link below to claim your free session.

Why Hire A Bookkeeper? Part 1 - Time

"Time is money" - Benjamin Franklin

As the quote says, time is most definitely money.  The time that you spend on the bookkeeping for your business could be used to ensure your business is successful, cultivating clients/patients and making money. Hiring a bookkeeper can save you that precious time and allow you to focus more on your actual business.  A bookkeeper: 

  • Can take most of the daily tasks off your plate;
  • Is more knowledgeable about how to account for those transactions; and
  • Can complete them in less time.

The recording of day-to-day detailed transactions can take up a significant amount of time and is often put off until the last minute.  Entering payments and receipts, setting up vendors and figuring out the right accounts that transactions belong in are all tasks that a bookkeeper can perform so that you can focus on other things.  

A great bookkeeper is an expert in her field and is trained to know how to handle those tricky transactions or where to go to find answers that may exceed your knowledge on the subject. Bookkeepers can also recommend time saving tools such as accounting/reconciliation software and cloud-based document and receipt storage.  Your financial ally, your bookkeeper, can also use her knowledge to analyze your financial position to potentially help reduce expenses which means, you make more money.

As an expert, a great bookkeeper can complete these daily tasks in much less time.  She can make sure everything is up to date so that you know exactly where you stand financially at any given time.  

The bottom line is that most people are in business because they love what they do and to make money.  Hiring a great bookkeeper can allow you more time to do what you love and in turn make more money.  Now who wouldn't want that? 

Next up in the series Why Hire A Bookkeeper...Expertise.