One question I often get from small business owners is whether or not they need to use an accounting (aka a bookkeeping) program. Usually when we first start a business, funds are tight and we can't afford to hire accountants or other professionals.
Do you need a bookkeeping program for your business?
But, using one will make tracking and managing your money so much easier.
My rule of thumb is:
Now that you’ve made the decision to be a full-time entrepreneur, I assume your goal is to make a living, support yourself and thrive. This is a whole new ball game, love. It’s time to Turn Pro (if you haven’t read that book my Steven Pressfield, get in now! It changed my life), develop new habits and establish a frame of mind that your business is just that: a business.
More specifically, it’s a business that needs to be respected, honored and taken seriously.
Otherwise, you run the risk of staying in "this is just a hobby" mode, which will affect the way you present your products and/or services to others.
The first step in Turning Pro is to honor the money that you invest into the business as soon as you make your first purchase. Whether it’s $5 on a package of sparkly pens or $2,000 on a business course, now is the time to sign up for an accounting program so you can start tracking your expenses.
In addition to mindset, there are three "practical" situations in which you’ll want sharp financial records:
- When you want to secure financing. If you are looking to get a loan or funding from an investor, they will want to see comprehensive financial reports that are as accurate as possible. A bookkeeping program allows you to run these reports quickly and demonstrates that you are serious about your business.
- To file quarterly and annual taxes. At some point, you'll want to hire a tax professional . The more difficult it is for them to gather the data from different sources like your Excel, credit card and bank statements, Etsy and PayPal accounts, the more time the work will take them. And that means it will cost you more money to work with them.
- When you’re creating a business plan. Every business needs a business plan, even if you'll be the only one that ever reviews. Plans help you figure out your cash flow and forces you to do market research. A bookkeeping program will help you build out your projections and financial records. Every business has seasons of great cash flow and periods when it’s a tad dry. You’ll need to have this information on hand so you can make key decisions. Financial records are especially helpful when you're ready to expand and offer a new service/product. Expansion requires a significant upfront cost and sometimes it doesn’t make sense if the cash flow won’t be there. Looking at past data will help you create a plan and strategize how to best scale your business.