No matter what decisions you are trying to make for your business you will need to be able to make decisions based on current clean financial statements. Without having financial statements to look at you won’t know how much you want to ask for a loan, how to cut expenses or increase income, and many other decisions. You need to be able to look back at your income and expenses over at least the last year to plan for the future. If you have not been keeping up on your bookkeeping or if you don’t understand how to read financial statements you may need to hire help. Be sure to find professional and trustworthy sources. Here’s a few things to think about when looking for help:
- Look at reviews – how many reviews are there and what do they say? How long ago was the most recent review written? Are the reviews from actual clients or do they look like paid reviews?
- Find out how long they have been doing their job. Did they just start working as a bookkeeper, financial planner, business advisor, etc. when the crisis started or have they been in business for many years?
- If the services are free ask yourself why? There are many services like the Small Business Development Center that always provide free services because they have funding sources such as grants or the government. Currently there are people offering “free” services, but they find ways to charge you in the future or when hire them there are fees that they do not advertise, but are in the “fine print”.
- If services are discounted or you don’t have to pay right now, find out for sure when payments will start, what the non-discounted rate is, and how long the discount will last.
- Lastly, find out how communication will be handled. Right now especially, you want to be able to call, email, or text and receive a response right away. You may not hire someone locally, but there are so many ways to keep in touch now so distance shouldn’t matter. Also, will you be dealing with the same personal or couple of people or will it be someone new each time you contact them?
If you are looking to clean up your financial statements yourself, here are some things to look at:
On your Balance Sheet:
- Are all of the bank accounts on your balance sheet current accounts and are they all reconciled up to the end of last month?
- Are all of your assets listed? If not ask your accountant what assets are listed on your taxes and ask if they can enter them into your bookkeeping software
- Is depreciation of your assets listed? Again, if not ask your accountant for help
- Is your Accounts Receivable balance correct? (You will not have this if you do not bill customers for payments at a later date)
- Are all of your credit cards and loans listed? And are they reconciled?
On your Profit & Loss:
- Do you have your income separated out into the different categories of your business? For example if you are a coffee shop do you have a separate income account at least for coffee, other beverages, food, and merchandise?
- Do your cost of good sold categories match your income categories? For example do you have a COGS accounts for coffee, other beverages, food, and merchandise? Do you also have any front of the house staff lifted under cost of good sold? This includes any wait staff, retail counter workers, installers, and basically anyone who directly creates income for your business.
- Are your expense categories detailed enough to see what you are spending your money on? You want to be able to see the key categories that you are spending the most money on.
Once you have your financial statements in order and you understand what they mean, you can start planning for your business and how you will get through the next few months. If you need help getting your financial statements in order please feel free to contact me.