By Niki Tudge
Keeping and maintaining accurate and timely business books is always an important function of owning your own business but this responsibility becomes especially critical during challenging times for several reasons. Operating your business without accurate GAAP financial records (Generally Accepted Accounting Principles – all modern financial bookkeeping software uses these principles or the UK equivalent) is like being in the middle of the wilderness without a map (or GPS):
1. What you measure is what you can improve so knowing what your income is and where it is coming from will help identify where you should be concentrating or improving your focus. Knowledge of the sources of your income will also help you plan for the future and anticipate changes. Likewise, expenses have a tendency to creep up on us. A hard look at your expenses may reveal redundant or unneeded services or expenses that can be deferred. Now is the time to tighten up on expenses but remember don’t cut off your nose to spite your face when it comes to expenses. The economy will improve and you want to still be in business when that happens. History has shown us that the most successful businesses continued to market in down times so they were in a position to reap the benefits when things improved.
2. Cash is KING during unstable economic times and accurate accounting is the only way to meaningfully analyze your cash flow. One of the keys to surviving any financial challenge is to keep sufficient cash on hand so that you can wait out the economic downturn. Make sure that you don’t over-commit your cash. You can do this by trimming expenses, defer capital expenditures and maximizing income by, for example, identifying unfulfilled needs of your customers or uncovering an under-served segment of your community. Remember, if you want to stay afloat, stay liquid.
3. If you want to take advantage of loans and/or grants it is likely the first thing you will be asked for are your financials. Nothing expedites a loan/grant process faster than accurate, up-to-date books. Likewise, if State or Federal programs offer small business compensation you will need to prove the impact on your business and your income. You can only do this through books maintained to accepted standards. Don’t forget, if you are an employee of your company you may qualify for other benefits.
4. Check with your accountant. Capital losses from natural disasters can often offset income well into the future. The losses we incurred from Hurricane Michael will be deducted from our income for many years. How are these losses tracked? By keeping and maintaining accurate financial records.
5. Don’t delete customers who have canceled services. If you use ‘Cash Basis’ reporting, which most are, invoice amounts are not reflected on your P&L and won’t be until payment is actually collected. This is different from sales receipts which should only be used as payment is taken and sales receipts are immediately reflected on your P&L. If you want to track the ‘lost’ revenue from customers who cancel the best way to do that so that you don’t cause inaccuracies in your company financials is to 1. Create a QB Class (short for classification – from menu: List/Class List/New or just type the class name into the class field) called ‘Cancelled due to COVID-19” or whatever other meaningful name you would like to use. Then if a customer, who you have already issued an invoice to, cancels, simply go into his/her invoice and choose your ‘Cancelled due to COVID-19’ from the class list. If you are not currently using the class field on invoices/expenses this field will be blank. If you are currently using classifications simply change the current class designation to your new classification denoting cancellation. Now you can readily generate a report on cancellations by simply modify one of your Customer Reports and then saving (Memorizing) that report for future use.
About the Author
Niki Tudge PCBC-A AABP-CDBT AAPB – CDT is founder and president of the Pet Professional Guild, The DogSmith, a national dog training and pet care license, and DogNostics Career Center, and president of Doggone Safe. She has business degrees from Oxford Brookes University, UK and has achieved her DipABT and DipCBST. Recently, she has published People Training Skills for Pet Professionals – Your essential guide to engaging, educating and empowering your human clients, Training Big for Small Businesses, and A Kid’s Comprehensive Guide to Speaking Dog, and co-authored Pet Training and Behavior Consulting: A Model for Raising the Bar to Protect Professionals, Pets and their People.