Weekly Sunday Thoughts: May 3, 2020 6:41 PM EDT
Providing solid financial services to various freelancers, solopreneurs, and contractors who are making a decent living doing what they love to do is the reason why my company exists. Case in point, I have discussed in previous blog posts the importance of formulating a plan of action for the success of one’s business. In fact, failing to plan in my opinion is a top-five reason why some freelancers, solopreneurs, and contractors’ businesses have failed or why budding entrepreneurs’ are unable to grow their business beyond the point of just being a hobby.
Deciding to venture out on one’s own can be scary and frightening to say the least. Equally scary is failing to build a solid foundation – this starts with maintaining accurate financial records. Treadwell (2017) notes that small business owners who keep accurate financial records are able to make well-informed business decisions and are able to ensure that the budding entrepreneur is paid for his or services.
For instance, construction contractors must keep accurate records of outstanding client receivables; supplier payables; expenses versus generated revenue; etc. Accurate records occur when accounts payable, accounts receivable, owner withdrawals, and other various financial transactions are recorded in a bookkeeping or accounting system on a daily basis that can in turn produce critical financial reports such as producing financials in order to prepare and file the business’ taxes. This certainly requires discipline but ensures that no items are missed or forgotten.
Everyone makes mistakes from time to time; however, big mistakes can be costly for freelancers, solopreneurs, and contractors. Treadwell (2017) outlines how “mistakes can cost businesses money and cause issues with important financial matters, such as paying bills, receiving customer payments, and estimating job costs” (para. 2). These can be mitigated if there is a system to record and reconcile transactions.
Having a solid financial record keeping process ensures that budding entrepreneurs are in a solid position to expand his or her venture through various business loans, business lines of credit or contract opportunities. The bottom line is that banks need to have a clear picture of how the business is performing and its ability to generate revenue.
When it comes to good financial planning, I cannot place enough emphasis on the importance of a solid financial recordkeeping system. Organized business numbers are the true storytellers of business performance as the numbers can help the budding entrepreneur identify successes and weaknesses. By having a financial recording keeping system and in turn reviewing those financial records on a frequent basis, business owners can develop keen strategies that are important for the success of the company’s overall growth; the goal is to always have financial information available.
Closing thoughts: do not get so caught up in the daily running of the business that the equally important financial recording keeping, an essential financial management tool, is overlooked.
– Isaac Davis, Jr., MBA, HIFE CCP, The Small Business Guru
Treadwell, L. (2017, November 21). How to do bookkeeping for construction. Forbes Magazine Online. Retrieved from https://smallbusiness.chron.com/bookkeeping-construction-36534.htm