Since the time of the interview, I have joined the accounting firm of Piercy, Bowler, Taylor and Kern and I continue to offer the same services through them.
I was recently interviewed on a podcast (online radio show) and wanted to share this with you on my website. You can listen to the podcast below or read the transcript.
In order to build a successful business, you need to make smart decisions. In order to make smart decisions, you need to have proper data to base your decisions on. While you can use your gut to make decisions, having an accurate and reliable data will lead to more successful results.
In this episode, we’re speaking with Jeremy Lott about how to make better business decisions using proper accounting systems.
Jeremy is an accountant and QuickBooks ProAdvisor. He works with business owners that want to be able to use QuickBooks to help them make their most difficult business decisions, increase profit, and improve cash flow.
For more information about how Jeremy can help you, visit Foundationbookkeeping.com
* Note that this blog post is derived from the transcript of the audio discussion. Please excuse any typos or odd wording.
Knowing what decision is right for your business can be challenging. But there are ways in which proper accounting systems can help you make better business decisions that Jeremy shared with us and are discussed below.
Do Not Make These Accounting Mistakes
While you can manage your business based on your gut, it’s definitely not going to lead to better results than you could achieve by having accurate and reliable accounting information available.
- Managing your business finances based on the balance of your bank account does not provide enough insight compared to having all of your accounting data available.
- Another common mistake is having a complex chart of accounts set up in your accounting system that makes your reports too difficult to interpret.
Avoid these common accounting mistakes so your decisions are more dependable.
Create An Accounting System
There are multiple steps to creating an accounting system that you can use to make better business decisions.
Determine what information you need to be able to make decisions in your business. For example, having a profitability reports for each job. If you’re in a service business and are concerned that you may not be generating a profit on all of your jobs, then that could be one potential data point that you could benefit from.
Set-up a chart of accounts – Once you’ve determined what information you need, a chart of accounts needs to be set up to track that information.
- A chart of accounts is basically the categories of income and expenses that you can track within the business.
- It’s important not to complicate the chart of accounts as this will lead to reports that are difficult to interpret.
- By keeping the chart of accounts simple and then using item lists and customer lists to have more detailed information, you end up with an accounting system that has the level of detail you need for certain reports but is not overwhelming for simple reports.
Design The Recurring Reports To Present The Data Effectively
Once you have your chart of accounts, item lists, and customer lists set up, you can design the recurring reports that you need to make business decisions.
- An example report would be a profit and loss statement for a time period.
- Another example would be a profitability report for different service jobs.
If you have reports that contain a lot of data, it may be helpful to pull that information into Microsoft Excel to represent the data graphically.
Keep Your Business Records Up-To-Date
Jeremy mentioned that once you have your accounting system set up, it’s important to keep a routine of entering information into the system.
- By entering your income and expense activity periodically such as weekly, you have near real time access to what’s happening within your business.
- Once that data is in the system, you can periodically pull different reports from the system to understand exactly what’s going on within the business.
Additional Resources and Next Actions
As a next step, we encourage our listeners and readers to visit Jeremy’s website Foundationbookkeeping.com to find out how he can help you get set up an accounting system in your business.