The first thing to think about when thinking about your business books is: what do you want them to do? What is your desired outcome for your books? This type of thinking applies whether you’re starting your books from scratch or whether you’ve been in business for years.
It’s what “thinking strategically” looks like and there are two main tracks.
1. The “rear view mirror” approach (aka financial accounting).
If your goal for your books is to have numbers to turn over to your tax preparer at the end of the year, then Mint.com or Freshbooks.com should work just fine for you. They are “off the shelf,” canned systems for you to track your income and expenses with the IRS tax forms in mind.
This is what I call “looking in the rear-view mirror.” Your books will show you where you have been. This is the bare, doggone minimum you need to stay in business and comply with tax laws. This is basic bookkeeping and it is the foundation, the bedrock of your business operations.
And while I don’t recommend it for so many reasons, it is possible to do your books but once a year to get this done. Somebody’s even written a book about it!
2. The “windshield” approach (aka managerial accounting).
If your goal is to see how you are doing as a business, if you’re making money, which customers and services are making money and which ones aren’t, then QuickBooks for Mac or Windows is the program for you. Designing and customizing the format of the reports is the key to giving you the information you need to make plans. Monthly reports give you the feedback you need to take the pulse of your business and make strategic decisions.
Successful businesses have a plan and they work that plan. Doing your books on a monthly basis is the frequency needed here to get the information you need in a timely manner. The key here is to turn the unrelated bits of data into a clear pattern of information that you then can use to make decisions.
The truth is that your business needs both these points of view to be viable and sustainable. Trouble is that lots of businesses just do the “rear view mirror” one for tax compliance purposes. Running a business requires so much more and only the “windshield” approach combined with the “rear view mirror” is going to get you there.
Where on the road are you in your business? Are you tooling down the highway or stuck in the garage? Let me know. Post a comment. Ask a question. Would love to hear from you.