Being a creative small business owner often means keeping tabs on a lot of details at once. There are your clients to consider, your calendar, how and when you can devote time to your craft, growing your business, and so much more. With all that on your mind, there are three questions you should have answers for at all times and all three can be helped with a little bookkeeping. They are:
1. Is your business profitable?
This is what keeps the lights on. Are you able to pay for all of your business and personal bills and have a bit left over to invest in your business? When you review your profits & losses monthly, is there a nice positive number in the profits column? This is what you want to see, and keeping track of it helps you to adjust your business where needed to make sure that you’re continuously profitable over time. For more about profits & losses, read our blog post about cash flow.
2. Do you know what your profit or loss was for the past 12 months?
Are you thinking long term and are you able to forecast for the next year? The more you are aware of your profit or loss for the past year, the more educated your decision making can be. Knowing how much you’ve made or lost can help you determine a path for going forward in relation to what services and products you offer, and at what price. It also helps you determine what does and doesn’t work so you can develop the ideas that do and maybe move away from those that don’t.
3. What does it cost to create the product or service you are selling?
Knowing the costs associated with your business is very important in building a sustainable business, particularly if you sell a product. It can be very easy to get excited about launching a new product, but have you thoroughly plugged in the costs of creating the item, packaging the item, shipping either to clients or shipping costs associated with creating or packaging the item, and keeping an inventory? If you have, you can determine the retail price and make sure your margins are enough to sustain your business. Then, you need to keep track of your expenses to balance your books and make sure you know how much you’re spending vs. making.
Reading monthly reports from your bookkeeper will allow you to have instant knowledge for all of these questions and help you make informed decisions. Hopefully, as we’re wrapping up the year you’re feeling confident you have all this info, but if you need a bit of help sign up for our 5 Day Quarter 4 Challenge – it’s completely free! It will leave you feeling confident heading into tax season, which is a very, very good thing!