This is quickly becoming my quote! One sentence to explain it all. From the foundation of bookkeeping in general, measuring and keeping count of all the finances in your company is vital. Not only do you have to keep track of your books, but it's so beneficial at the same time. As with any successful relationship, good communication is the key. Your bookkeeper will need to know from time to time what a certain transaction is for in order to classify it correctly. He or she will need all receipts, invoices and bills sent over. The cloud based software I use makes this so easy by the way. In Xero, you can scan and send all of these things to an email address attached to your Xero account where you can upload them right into the accounting software. Another reason I love Xero! Just snap a pic of your receipt and send it straight from your phone. Now people ask why do I need to keep all receipts? Well, it's not so much that your bookkeeper needs as much as the IRS requires it. Unfortunately, a bank or credit card statement isn't enough.
Having a bookkeeper handling the books also provides "internal control", a safe guard to money being spent. An example being, you have your bookkeeper handle your Accounts Payable and pay bills from your business account. He/she is keeping track of what is owed and when and that there are no duplicate bills being paid out. The bill is entered in Xero and I as your bookkeeper doesn't post it but rather saves it to be approved by you. It's always better to have more than one person overseeing the money being spent.
Once you know what's in your accounts at the end of the month "the measuring", you can start "the managing". At this point, you can be more in control and pro-active rather than reactive. This allows you to plan for the future of your business by saving to grow your profits by reinvesting. This is your livelihood not only for you but for the employees you have. I provide you with monthly statements that tell you where your money came from and where it was spent in detail. Some business owners don't know what all their exact expenses go. It could surprise you of how much A/R you had outstanding or how much your COGS (Cost of Goods Sold) expenses are. Having a better idea of these numbers is where the fine tuning begins. Maybe you could cut your COGS down which would bring in more profit! This is why you started your business after all. To be successful making a living while doing something you enjoy and are good at. Bookkeeping may not be your passion though and some people don't know where to start. If you are in this boat, feel free to contact me so we can start measuring and managing your finances.