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Do you need basic income and expense tracking? You may not even need a bookkeeper. Many banks have developed very basic expense tracking and spending reports. For example, Wells Fargo, Chase, AMEX, and many more all have the ability to categorize your expenses for you so that you can simply provide these reports to your accountant at the end of the year. AI and automation are the future. What makes this feature, especially convenient is as a business owner, you are (or you should be) checking your bank account daily – at the very least. So you are already logged in, now it takes just a couple of minutes (if not seconds) to categorize your new transactions in order to monitor your spending.
Sounds great, what’s the catch or drawback?
The answer is simple. There is no catch or drawback if you are a freelancer and do not hire any outside labor. This feature provides small businesses the opportunity to book their expenses without hiring a bookkeeper to do this for them.
When would this option not work for my business?
This option would not be beneficial once you reach a certain level within your business. For example, if you need to hire outside labor or employee, you may need a bookkeeper. Without a bookkeeper, you cannot track these expenses for end-of-year 1099ing. If you are tracking different revenue streams, you are unable to monitor/ track individual charges, have sales tax, deal with PO’s, need job costing, or are looking at possible future investors for your business.
The 3 Biggest Causes of Failure of a Small Business
- Failure to collect all the money (A/R + Cash Controls). When you are running a business, you have limited time to invoice your clients, let alone follow up on past due invoices, which can create insufficient cash flow. Some businesses have even admitted to not billing for their services simply because they do not have the time + forget to do so. That is LOST INCOME! Then taking the time to follow up with + collect payment from the invoices you have sent out, takes a lot of time and consistency. Without having a team or process in place to manage invoicing and collections, businesses risk losing money + not having a consistent inflow of cash.
- Failure to manage the inventory (physical + capital). Inventory is an asset, and assets can be defined as an economic resource that can be used to generate economic inflows in the future. If you are not aware of your businesses assets and how to use them properly, you can find your business failing. Ineffective use of inventory can also be an identifier of a bigger problem – slow sales, ineffective marketing, or having an obsolete item. Inventory management is an important aspect of any effective accounting team in that it is their responsibility to monitor and track the balances in these accounts + make the business owner aware or changes that merit action.
Failure to manage the business based on how much money is in the bank (financial reports). Any accounting team that is efficient, effective, and transparent will send business owners their financial reports on a quarterly basis – at the very minimum. Many business owners will admit to not reviewing their financial reports until the end of the year, which is a HUGE mistake. Having quarterly (or more frequent) financial reporting provided to you provides you an insight into where your business is and where your business is going. This is MAJOR. You get to see your financial future AND you are given the option to change that roadmap, but only if you review your financial reports. Monitoring your bank balance is important, but is meaningless if you do not review your financial reports. For Example: You check your bank balance and see you have $100.00 and naturally begin to worry. But, you have not reviewed your financial reports. If you did, you may notice that you have a large A/R balance. So, you have the choice to look into why you have this large balance, make corrections as necessary or implement processes/a team to make sure you’re A/R balance never gets that high and that your bank balance does not get that low.