Editor’s note: this column was written by SBDC Business Advisor Sandy Stelter.
2015 is half over already! Where did the months go? Hopefully, as a business owner, you’ve seen your business grow over the past six months. It’s also a time to start looking at your record keeping for this current year to be prepared for the year’s end when it arrives.
Record keeping is essential in every stage of a business, whether starting, growing, maturing or exiting it. Records tell the story of how a business is doing this month, this year and all the past years. Keeping records helps to identify the trends in the business and hopefully explain what is happening in the operations area.
Inventory records help a business track an important asset, inventory. It is probably one of the largest investments of any business. Record keeping helps to answer questions such as: is inventory moving out the door at the usual rate or has it slowed down? Is it in line with the industry trends? It is common for retailers to “lose” inventory through employee pilferage as well as other losses like spoilage. This can make or break a business. Business owners who regularly track their inventory are more profitable.
This is also a great time to make sure that all of the supporting documentation for purchases of any assets and for business expenses thus far for the year are in order.
Tax season isn’t really that far away. The IRS allows the deduction of business expenses when computing the net profit or loss of taxable income at the end of the business year. Every business owner wants to maximize every possible business deduction and minimize the “tax liability.” It is important to know what expenses are deductible by law.
Getting and staying organized is essential for developing the habits needed for tracking all the details that make up the finances of a business, whether large or small.
Do you have a process for tracking every sale and every expense? If you don’t, now is a great time to develop it. Small companies, especially, need to develop systems and processes so documents don’t get misplaced and needed financial information gets posted properly.
If the business is looking for financing, the lender will be looking for current financials—profit and loss statements, balance sheet and cash flow projections. Financials are built based on the systems in place that ensure that all income and expenses get recorded properly, and then appear appropriately in the financial statements.
The Napa-Sonoma Small Business Development Center can assist business owners in getting organized and understanding the financial statements that must be maintained.
If you are a business owner just getting started in business, check out the Build a Better Business: Business Startup-Orientation at Napa Valley College St. Helena campus on July 9 from noon to 3 p.m. For more information about other SBDC trainings or to register, visit napasonoma.org or call (707) 256-7250.