We get so caught up in the day to day. Even I am guilty of not paying attention to my numbers.
Let’s be honest. When I first had the dream of opening a retail store I had big goals in mind. I want to build a brand, have multiple brick and mortar locations and hire a team of dedicated women to work with customers all over the country. I never once thought about who would handle my accounting. Never once.
I am someone that likes paper. Paper copies, file folders and a neat stack of paper receipts is the way to go in my book. So at first it was easy for me to manager my books. Order written, invoice collected, check written and a neat and tidy paper copy of all of the above made and filed in a manila folder by vendor name. It wasn’t long however before I was running my business by what the bank account told me I had available in cash. While that may work for awhile, auto payments and outstanding checks will get in the way and before you know it your simple “accounting” system can turn into a nightmare to keep under control.
Enter in QuickBooks. This should be easy, I thought. I will enter items and run my business from the QuickBooks register. Great in theory but without a proper understanding of how to read a Profit and Loss statement or what on earth a Balance Sheet was, before long I was in the same boat as before, time ticking by, thousands in potential profits being lost. I was buying and I was selling like mad but I didn’t understand how to read my profit margins, how to budget or set financials goals that would increase net profits.
After almost half a decade in business, with multiple locations and a dozen employees on my team I finally began to understand that although I would never love accounting, I needed to understand my numbers. I can still remember where I was sitting when I asked my CPA where all the money was going? I had a six figure business but no real cash to show for it. My then CPA told me “Ciara, just because you buy something for $10 and sell it for $5 doesn’t mean you make $5. You have overhead (what’s that??) and expense that goes into that item. How much did it take to ship it here? How much did it cost for your employees to unbox, steam and tag it? How much went into to marketing that item or your business so someone would come in and actually buy it for $10? At the end of the day what are you allocating to each item to ensure that your make a profit?”. Wow. So that is where all my money was going!
I cannot begin to tell you how empowering it was when over the course of the next few months I made it my mission to understand my numbers better than anyone else in my business. Never again would I be at the mercy of hoping I hired the right accountant, or wishing and praying I could cover the expenses associated with keeping the doors open. I would know my numbers and I would build my business BEST.
There are a variety of fabulous small business tools available like Denise O’Berry’s book Small Business Cash Flow as well as free financial strategy coaching tailored specifically to small business through SCORE.