tip 4 of 10: Review your books monthly
Updated: Jan 8
Welcome to the fourth installment of the Top 10 Tips for Financial Success blog series, where we hit the books to better manage your books!
Whether you're a small business or a solopreneur, these 10 tips are vital to your bottom line!
Remember a few weeks ago when I talked about procrastination, and how waiting to get your books done can actually cost you money? Well, the same principle applies to reviewing your books: delaying looking at your books, or worse, waiting until it's an emergency to review them will cost you money.
Okay, Beth, I solemnly swear to review my books each month. But what am I looking for?
Overall, you need to pay attention to your expenses versus your income. You may think you're raking in the dough based on the sales you made last month, but unless you have your expenses under control, the numbers will tell a different story.
You know the phrase, "death by a thousand cuts"? The idea that little things add up over time? That's what business expenses can be like if you're not careful.
And just to show you how easy it is for expenses to take over, I'll give you a real-life example: ME.
I thought I was doing great, using a bunch of software programs that are super cheap to help streamline my business. $10 a month here for this and $12.99 a month for that. I thought, "Awesome, I'm not spending a lot of money."
My profit and loss statement told a different story. Turns out, I was spending hundreds of dollars a month on software.
When I started looking through my software report, I realized there were items I didn't use anymore, or only used for a month, or (and this is embarrassing) ones I didn't use anymore AT ALL or had no recollection of signing up to use! In one case, I actually canceled a service and I was still being charged!
So by taking 30 minutes, I managed to save myself a chunk of money. Imagine if I hadn't looked? I'd be losing so much more.
So make sure you are reviewing your bank statements, make sure you are looking at what each one of those transactions is, and if you have a bookkeeper make sure they are using a chart of accounts that provides you with the information you need to look at.
Here's another example. I have a client who never checked his books, never checked his statements, never looked at anything. He hired us because he just wanted someone to take care of it all.
Unfortunately, he also commingled, which of course made things much more difficult. We started working on his books around Christmas time, which is when I noticed an $8,000 charge from a jewelry store. At first, this made sense to me; he's a high net worth individual, he has a girlfriend, and it's the holidays. He likely bought her a gift.
But something didn't sit right with me, so I mentioned the charge. He was dumbfounded. "What are you talking about? I didn't buy anything at the jewelry store." We looked into it, talked to his bank and it turned out it was fraud. He was lucky; we were able to get all of that money back.
The Bottom Line
Now, you and I are probably going to notice $8,000 missing from our bank account, but what if you're talking about $100? I might not catch that if I'm not looking at my numbers and really understanding where each of my charges is going. So get in the habit and scrutinize your books each month, and don't let it go longer if you have a bookkeeper. Make sure they are providing you with reports that are helpful to you each month.
Not sure where to begin with reviewing your books? Contact Beth Blaney & Associates, and we'll set you up for success.
At Beth Blaney and Associates, we help clients create new and better financial habits that support their business and their lives. Connect with us at email@example.com to schedule a "Bookkeeping Clean Up and Evaluation!" today! We look at your books in their current state and offer suggestions to build a stronger financial foundation for your business.