April 13, 2016
With tax day here in the US rapidly approaching, I spent last Friday making sure my first quarter business books were in order before sending the file to my accountant. Believe it or not, it’s actually one of the tasks I most enjoy as a small business owner. Before you look at me like I have two heads, let me explain…
The task of entering in and reviewing, line item by line item, both revenue and expenses for the quarter is one that eats up about half a day – that’s no small investment of time when, as entrepreneurs, it seems like we never have enough time to get done what we need to.
But the act of going through each line item helps me see what is happening in my business in a way that the day-to-day operating of the business doesn’t. Taking some time to look back at the last quarter, I’m able to get a much better picture of where my revenue is coming from. That helps me make better strategic decisions about where to take the business next. Similarly, I can read trends from my revenue stream and that helps me better predict what I can anticipate in the future.
It’s the expense side that I really love delving into though. In my perfect world, being an entrepreneur would be all about making money without spending any. Unfortunately, no one has managed to do that just yet but it’s something I spend a lot of time contemplating. I look at each and every expense item and weigh the expense against what it provides for the business or for me as the entrepreneur. I start by looking at the business necessitates (such as web hosting and phone bills) to see whether I can either lower those costs or get more/better service for the price I’m currently paying. I also evaluate whether the service I have for these items is sufficient for where I want to take the business next – perhaps I actually need to be paying more to receive more.
I also take the time to look at my marketing expenses and, as applicable, compare that to what I budgeted and what I spent for previous quarters. If my marketing expenses exceeded prior quarters or what I budgeted, did I hit my marketing goals? If not, what did I learn from that and where can I make adjustments to my marketing strategy?
Lastly, I also look for extraneous expenses. These usually fall into the category of things I may have purchased that I simply don’t use as much as I thought I would. This was the big one that jumped out at my this quarter. I found two business apps that apparently are on annual renewal that I don’t use at all. In fact, as embarrassing as it is to admit this, one of them I’d completely forgotten about and the other one I just hadn’t gotten around to canceling. When those two expenses jumped out at me though and I saw how much I was losing, I quickly got online and canceled those ASAP – saving myself about $250 in the process. Now $250 may not be the end of the world when you’re looking at your annual expense budget, but that’s $250 that I can put to better use elsewhere in the business!
I’d love to know if you do your own bookkeeping (or if you take the time to review your bookkeeper’s work) and, if so, what you’ve learned or discovered.