Deciphering the Tangled Webs We Weave

“With great power comes great responsibility”
 

In addition to providing motivation for arachnid-impersonating superheroes, these words are also appropriate for business owners.  You are responsible for providing for yourself and your family by consistently selling high quality and desirable goods or services.  Perhaps you also have employees that depend on your ability to keep their paychecks coming each week.  Heavy is the head that wears the crown.  

But the average entrepreneur is more than up for the challenge.  In many cases, their business’ main operation is supplemented with side ventures as different opportunities arise.  Diversification provides a safety net should one piece of the business hit a lull.  And it is common practice to lump all of the income streams and expenses together for a holistic look at the company’s performance.  While this ten thousand foot view is definitely important, the real insight into your operations is only available if you can assess each facet of your business separately.   

Let’s use a landscaping company as an example.  One aspect of their businesses is designing a client’s yard, planting flowers, trees and shrubs and installing edgers.  They also have clients who pay them monthly to mow their lawn and maintain the plants.  Many of them, because the opportunity is there and we need to stay busy during the winter, also plow driveways and parking lots when the snow flies.  

Looking at results of all of these efforts lumped together, one can make a fairly solid assessment on how the company is performing overall.  However, how can we tell if all the pieces are profitable in their own right?  Perhaps the profit on the landscaping jobs are shrouding the fact the lawn care and snow plowing are actually losing money.  If we had that insight, would we consider increasing the rates being charged for these services?  Hire less expensive employees?  Or maybe change nothing as the low fees lead to landscaping sales down the road.

 
I argue that the devil is in the details. A well-established financial record keeping system allows for any level of detail that can provide the insight you need into your business.  QuickBooks has features called classes and locations that are designed to do this specifically.  The shrewd bookkeeper partners with the owner to develop a robust understanding of all aspects of the business and uses this knowledge to establish and maintain the financial records.  This detailed information is then leveraged to create informative and actionable reporting for the small business CEO. 

Another example where financial classifications are invaluable is with property owners.  This can easily allow the owner to know which holdings are performing well and which need their attention.  Nearly every business can benefit from enhanced reporting.  Nonprofits that have donations and a resale store outlet?  Check.  HVAC contractors that have equipment sales and routine maintenance clients?  You betcha.  Car dealers that sell vehicles, generate warranty income, and have a service department?  Golden!

The moral here is to not settle for generic, one-size-fits-all financial reporting.  If you have a diversified business, you should seek out a bookkeeper who can compile dynamic reports tailored to you.  Furthermore, you should ensure that your financial partner walks you through the information and translates it to drive a useful and relevant discussion of the state of your business.  

By adding this amazing tool to your utility belt, you will be in a superhero-like position to conquer all of your responsibilities like never before!