Is Your Bank Balance Telling the Whole Story?

by Mary Cross

If you're a small business owner, you've probably had moments when you've found yourself wondering...

• We're busier than ever... so why are things still so tight?

• Are we actually making a profit?

• Can we afford to hire someone?

If you've asked yourself any of these questions, you're certainly not alone.

Running a small business is demanding. Most owners wear a lot of different hats—serving customers, scheduling appointments, ordering supplies, paying bills, answering emails, and trying to find time for family and life outside of work. One of the things many business owners discover is that being busy doesn't always mean the business is as profitable.

As Your Business Grows, So Do the Questions

As your business grows, the questions become less about simply getting through the day and more about understanding what the numbers are telling you.

You may begin asking questions like these:

• Why doesn't the bank balance reflect how busy we've been?

• Where does the money seem to go?

• Which services or products are the most profitable?

• Are customers paying on time?

• Is now the right time to purchase new equipment?

These are good questions. In fact, they're some of the most important questions a business owner can ask. Reliable financial information can help answer those questions with greater confidence.

The Unexpected Cash Flow Surprise

Sometimes everything seems to be going well until a larger expense comes due.

• Quarterly taxes

• Insurance renewals

• Equipment repairs

• Annual software subscriptions

• Payroll

Suddenly, you're wondering,

"I thought we had enough money."

Often, nothing unusual has happened. Without clear financial information, those expenses can be difficult to anticipate before they arrive.

Your Bank Balance Only Tells Part of the Story

Most business owners naturally look at their bank balance to see how things are going.

After all, that's the money they can see.

But a bank balance only tells part of the story.

Accurate bookkeeping provides information that a bank balance simply can't.

It can help answer questions such as:

• Is the business consistently profitable?

• Are expenses increasing faster than revenue?

• Which services or products contribute the most to your bottom line?

• Can the business comfortably cover upcoming expenses?

• Is the business financially ready for its next step?

Having reliable financial information doesn't make decisions for you, but it can help you make informed decisions with greater confidence.

Bookkeeping Is About More Than Tax Season

Many business owners think about bookkeeping only when tax season arrives.

In reality, bookkeeping isn't just about tax season. Throughout the year, it provides information that can help you better understand your business and make informed decisions.

Whether you're planning for growth, preparing for an unexpected expense, or simply wanting a clearer understanding of your business, reliable financial information can provide both clarity and peace of mind.

Running a business takes dedication, hard work, and a willingness to solve new challenges every day. Having reliable financial information doesn't remove those challenges, but it can help you approach them with greater confidence and a clearer understanding of where your business stands.

Still wondering why two businesses with similar bank balances can be in very different financial positions?

In my next article, "You Can't Judge a Book by Its Cover...or a Business by Its Bank Balance," I walk through a simple example that shows why a bank balance is only one piece of the financial picture.