The Blog Of TL Wall Accounting

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Archive for February, 2013

4 Reasons Businesses Need To Track Their Money

Some months ago we wrote in this space about the art of bookkeeping, offering some tips on how businesses might make the practice easier to do. We didn’t go into why it’s important to do, and we’re going to rectify that now with 4 reasons why it’s important, since we gave 4 tips the first time around.

1. You need to know if you have enough money to do what you need to do. Forget having enough money to go on vacation for the moment. If you don’t have enough money to cover your expenses from month to month, your business will be in trouble. Unfortunately, none of us is the federal government, which means we can only spend whatever money we happen to have. Without budgeting, you might find yourself buying something, only to realize that you needed that money for something else.

2. You need to know where the bulk of your money is coming from so you know where to concentrate your efforts. If most of your money is coming from certain products or services, it would be smarter to try to get more clients for those things and put other things on hold for awhile. This of course touches upon the Pareto Principle, and yet it seems to be true for so many things.

3. You need to know where the bulk of your money is going. Tracking expenses is never fun, but it’s the only way you know if you’re spending too much money on the wrong things, or if something might be amiss. I had a client who was spending a lot of money on a supply item that wasn’t crucial to the business. He found that his employees were ordering this item and either using it for purposes it wasn’t designed for or taking it home for their personal use. Yearly it was a lot of money going out the door that, once it was pointed out to him, was an immediate savings to his company once he shut it down.

4. You need to know where your business stands financially. You can’t plan for the future if you don’t know where you are now. If you need special certifications that have to be paid for, you need to plan for that. If you need to pay quarterly taxes you might need to plan for that. If you have employees you pay weekly or bi-weekly, you need to plan for that. Knowledge is power and safety, and if tools or people like accountants are available for you, it’s smart to use them to your advantage.

Increasing Income

In our previous post we talked about the importance of decreasing debt. Now we’re going to talk about the importance of increasing income.

Most of the time when you hear about businesses trying to get control of their finances, you only read about them laying off workers, cutting back on benefits, or raising prices. In our post on debt, we talked about ways you could save money.

Nothing works if all you try to do is cut and slash expenses. Even the federal government realizes that at some point you have to raise revenue; that’s what taxes do. For individuals or small businesses, it’s not as simple as raising prices, or even going in and asking for a raise. If you think about a raise, how much does a 3% raise help you when food costs have gone up 5%, insurance has gone up 10%, etc?

This means that you have to think about ways to increase your income. There’s not a single person in the world that needs money who wouldn’t want this to happen, and yet very few people take a shot at it. I’m going to help you out by offering some ideas on how you might be able to not only increase your income, but maybe even find a new career at the same time:

* Set up a website and sell stuff. This can seem scary but most of the time you can find low cost ways to get started. There are also known systems where, if you follow them to the letter, you can find ways to generate an income. It’s not easy, and it does take work, but it can be done. Think about it this way; once you get it set up properly, you might be able to make anywhere from $100 to $500 a month in the right field, and you make money at all times of the day. Just don’t be scammed by anyone who tells you that you’ll be making thousands in a few months; that almost never, NEVER, happens.

* Figure out what your knowledge base is and then figure out how and whom to market it to. In The Millionaire Messenger by Brendan Burchard, he talks about how everyone has a skill and has something to share with others who are willing to pay for it if you can figure out how to reach them.

* If you have a hobby you’re good at, you can make money at it. Have you been to a craft show and seen creations made by other people? Have you gone to a seminar of any kind where the person is talking about something they did or figured out how to do better than others, such as grow the biggest roses, train dogs to get the mail, or fly robotic helicopters? There are always people interested in the same thing you are and if you’ve mastered even one small piece of it, someone will be willing to pay you for it.

* Get a part time job. When all else fails or you can’t think of anything, this is always a viable option. Even a minimum wage job at 20 hours a week would give you an extra $145 a week, or almost $600 a month in extra cash. That’s a car payment, more food, the movies, or just paying off debt quicker, either for a short or long period of time. If you make more, even better. Yeah, there will be taxes to deal with, but less with a part time job.

These are just some ideas to think about, but it’s important that you do think about these ideas if you want to pay off bills or have more money for other things.