Why we believe professional bookkeepers are a business’s most undervalued advisors.
  
Every successful small business depends on trusted financial information.
Before the tax return is prepared...
Before a banker reviews a loan request...
Before an attorney is consulted...

Someone has already organized the financial information that makes good business decisions possible.
That someone is usually the bookkeeper.

For decades, professional bookkeepers have provided one of the most important services in small business. Think about how deeply they are involved in their client’s business…

• They see the numbers every week.
• They organize financial information.
• They maintain accuracy.
• They recognize patterns.
• They notice when receivables begin to slow.
• They see payroll increase.
• They notice margins beginning to tighten.
• They often recognize financial stress long before anyone else does.

 
 
And, as critical and helpful that information has always been, today the need for a professional bookkeeper has expanded even more. For years, bookkeeping has been described as a back-office function. We strongly believe that description no longer reflects reality.


The reason is simple:
Winning in business is more complex… and difficult than ever. Business owners need more than financial records. They need financial understanding.

And that is why the professional bookkeeper occupies one of the most valuable positions in a small business…    Increasingly, they are the person business owners trust most with their financial information and the person they already speak with every week.
 
The Trust Advantage
A business owner may meet with their CPA periodically.
They may speak with their banker when financing is needed.
They may contact an attorney when a specific issue arises.
But the professional bookkeeper is often the person closest to the daily financial activity of the business.
They see the transactions.
They see the trends.
They recognize changes.
They often know when something is improving and when something may be heading in the wrong direction before anyone else.

That level of experience and wisdom is a tremendous asset.

The Questions Are Changing
Today's business owners are asking deeper questions:

"Why is there never enough cash in the bank?"
"Are we actually profitable?... If so, why doesn’t it feel like it?”
"Can we afford to hire another employee?"
"Why does increased sales not seem to create more money?"
"What should we be doing differently?"

Those are important business questions and they deserve thoughtful answers...

And while those anwers may be out of the scope of work for a bookkeeping practice (and they certainly don't charge clients for helping them through those issues), no advisor can answer those questions without relying on the detailed and high quality work your bookkeep  routinely supplies.
  
All of this is why we believe the bookkeeping profession has earned a stronger voice and deserves a more credit and respect for their role in any small business success.

​Every week, I speak with business owners who ask me pretty much the same thing:
"Ted, we have a pile of money coming in all the time... so why does it feel like we're always broke?"

Fair question.   
My answer surprises a lot of people…
“It’s not how much comes in that matters… It’s when”
Time is actually more critical to your success... and your survival than money is.
If your collections are out of alignment with your payables... You will experience Cash Poverty.

And that's when even sharp business owners get forced into making the mistake of borrowing funds to "catch up" on bills which is virtually always a deadly slippery slope.

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Example:
You sell a project for a price you know will create a profit. Then you complete the job and everything went well and without any major problems. Great. You made the profit you were expecting!… On “paper” that is.

Your financials, specifically your Profit & Loss statement is that “paper” because it measures among other things, profitability.  So to the naked eye, it appears the project was close to perfect...

But there’s an invisible problem… Profit doesn’t pay your bills or your payroll or anything else for that matter. That’s why I wrote that goofy post a few weeks ago that asked, “Can I Take My P&L to Publix?”

Here’s what really happened…
Imagine you finished a $100,000 project. A project that you know cost you $90,000 to complete, which will leave you a profit of $10,000 or 10% net operating profit (NOP). Nice.
 
Your bookkeeper posted the sale in QuickBooks along with all the  invoices you paid related to materials for that project, the payroll for the people who did the work and in the background and QuickBooks also kept track of your normal business expenses during the timeframe that project was in progress. Things like office staff payroll, your paychecks, equipment payments, fuel, insurance, insurance and insurance payments…
And now that the job is complete, if you opened the “reports” section in QuickBooks and looked at the P&L for the project, it supports that expected profit.    So far so good.
 
Except, your customer won't pay for another 45 days.

• Meanwhile, you've already paid for payroll.
• You've already paid for most of the materials.
• You've bought fuel.
• You've repaired equipment.
• You've paid insurance.
• You've paid payroll taxes.
• You've written checks for rent and utilities.

So you made money... on paper. However, in reality...
You don't have enough cash to comfortably get through the month.
 
I've watched profitable companies close their doors for one simple reason:
They ran out of cash before they ran out of work.
That's why I tell every business owner this:

Cash, not profit is the oxygen that keeps your business alive.
Profit is the score. But even when the Buc’s win a game on Sunday, the players still need their paychecks… their cash... if they want to stop at Publix on the way home to buy the kids Popcorn Chicken.
Now, you can survive a while without making a profit.
But you cannot survive very long without cash.
That's why successful owners don't just ask:
"How much did we take in this week or even how much profit did we make?"
They ask:
"How much cash will be in the bank on Friday?"

That one question changes everything.

The important distinction between those questions is the word “Friday”. Because a day is a unit that measures time. And time is a measure of speed....
The principle is, profit without speed is as dangerous as no profit at all…   because it can have the same effect on your business.

Get your financial brain focused on time...
What we want to be looking for is not just payments… it’s Payment Velocity. That is how you keep yourself from feeling like you’re broke all the time. And Payment Velocity is something that must be discussed before the project is started and monitored all the way through it.

Additionally, you must have a process in place that deals with slow payers... and there must be someone in your office who is trained and well suited to handle those situations. That person is worth their weight in gold... literally.
 
Of course, you can still come up short on a Friday afternoon if you have a customer who simply doesn't pay on time at the last minute. So it’s actually not enough to know what’s going to be left in the bank on Friday this week...
 
You’ll want to know the answer to that question six or eight weeks in advance, so you’ll have time to adjust if someone pays late.
If you wait until Thursday afternoon...   You're out of options.
That’s why it’s critical to have a cash forecasting tool to keep you ahead of trouble.
We’ll get into that next week.

So, until next Friday... keep your eye on the cash.
Or even better...
Remember... profit is important. Cash is essential. See you next Friday.
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