What Every Business Needs to Know Right Now About Bookkeeping for Profitability

What is a PBC?

When people talk about incorporating, there are all kinds of choices that you can make about incorporating. And we are a B corporation. We have a B corporation designation on top of a C corporation. And that means, in addition to profits, that we can have a mission that drives our business. So we can be held accountable for our mission alongside any other corporations that are driven by profits.

And that’s the main thing that we often get mad at corporations for – is that profits completely drive them. Well, this is to change that. You can have your mission and be driven by your mission and be held accountable to that – not just money.

PBC stands for Public Benefit Company.

We are accountable for supporting women business owners with financial services – both accounting and education. That’s our mission.

What do we need to be paying attention to regarding bookkeeping, profitability, and money in general?

There are a couple of big things that are coming out.

At this moment, there are taxes. There are also the PPP loans, EIDL, and all of this money centered around the pandemic. And there’s a ton to know. So, we’re not going to spend all the time going through this stuff.

But what’s important to understand is that these things are available and that there’s a ton of stuff and support available – if you can get to it. You need to have your financials together and know whether you’re profitable and whether you’ve made money or lost money over the last 14-15 months.

A lot of folks have to scramble because they don’t have their financials together. They don’t know what’s going on. They’re not sure whether they’re profitable. And that makes a huge difference in knowing if you can apply for a loan or a PPP. Do you know what’s going on? Can you make these decisions? Do you know whether you can repay a loan if you’ve got one? So, all of that stuff is all wrapped up in – are your financials together? Do you know what’s happening?

“This is really significant. We have all this government money, at least in the United States, that’s pouring in, and it’s important to talk to your financial advisor, financial planner, accountant, or bookkeeper because they all have pieces of this puzzle. We as business owners should really be on top of our numbers so that when these opportunities come up, or these challenges come up, we can make decisions from an informed place.”

Why is financial clarity so important?

If you look at the difference between folks who do their numbers at the end of the year and folks who do their numbers consistently, the difference is information.

Do you have enough information to make accurate business decisions right now? So, people come to us, and they’re often like, “Well, we want projections. We want a budget.” And they want all this stuff. But you can’t do that if you’re not tracking your numbers.

I can’t give you projections for the next year if we don’t know what’s happened this last year or the last couple of years. The more information we have, the more we can plan. We need to know whether that class you taught or the thing you did was actually profitable and whether you should run it again – especially for people running multiple service lines.

It’s really common that they just don’t know if one of their service lines is not turning a profit. And it’s okay if you’re doing some kind of loss leader, where you’re having to take a hit on this and make money on the back end. But you need to know whether that’s true and whether that back end is making money.

Yes, it’s so important to know if our back end is making money.

“Oftentimes, we have a lot of different things going on, and we might be looking at the numbers overall. But we’re not necessarily looking at each piece and how it plays into that. And if we want to decide to say this will be a loss leader so that I can make money over here – without tracking those numbers – we can’t make those informed decisions.”

Why do businesses fail when they are scaling?

There are a couple of things that get in the way of scaling.

One is people try to scale too fast, and they don’t have enough revenue. And that sort of topples their business over. So, one place to look for that is pricing. Most business owners, especially women business owners, need to raise their prices.

When you come to us, we start looking at these things. We want to make sure that you’re clearly pricing things in a way that’s going to work for you. And that as you scale, that it’s going to continue to work for you. So, if you find out suddenly that you’re going to have to pay a bunch of staff people to do something that just you were doing, it changes your profitability metrics.

Scaling takes some planning. And I know that people are like, “Let’s scale really fast!” But slowing down a bit and making sure that your planning is in place and your financials are in place, and that you can continue to check them and continue to “true” your planning to your actuals. And so that you have not just, “Oh, yes, this should go in this direction.” – but on month three, is that still happening? How far off are you from your planning? And do you need to make any course corrections? Because you don’t want to wait six, eight, or 12 months down the road and find out your $100,000 short because we didn’t notice that we have this cost overrun or we haven’t been doing “X,” that we would otherwise normally be doing.

“Your plan needs checkpoints. It’s not a matter of what you will make through the year but more frequently than that. What are your numbers for month one? Month two? And know that it’s not always an even split. I think that’s a common mistake to just say, if we have 12 months, we divide by 12. But as you’re scaling, it might be hitting a small milestone in the next month, a little bit further along.”

The big thing is, if you’re unsure in any way, get some help. And that really is the thing that can make the difference. Having a thinking partner who says, “Oh, I’ve seen hundreds of these businesses, I know what I’m looking at, and have you considered this, that, or the other thing?” That’s important, so you don’t have to guess. You can ask for help. When it comes to money, please ask for help. Because otherwise, you may get down the line and wish that you would have done this six months ago or have asked for help a year ago – and found that you would have been much further down the line.

3 Action Steps

  1. Understand that money and support are available to businesses – if you have your financial information in order.
  2. Maintain financial clarity so that you can make informed decisions about your business.
  3. Seek assistance with your financial information as this may not be your area of expertise.

Connect with Briana Cavanaugh on LinkedIn or at blissyourmoney.com to receive Brianna’s “7 Ways Your Bookkeeper Can Help You Get – And Stay – Profitable.”

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