Why Every Business Owner Should Understand The Finances Of A Home Based Business
by Patricia Lemieux-Lewis
Bookkeeping knowledge is essential to the home based business owner. Understanding the financial aspects of the business allows that owner to truly understand where the money is coming from, how it is really being spent and what is left over for business investment and profit. Learning "The Books" is really not hard. The fear of numbers disappears when business owners realize that most bookkeeping work does itself when you learn "where" to put the numbers.
Many home based business owners outsource the bookkeeping for their business, an additional expense of doing business I might add, that cuts into the profit of the business, unnecessarily. All the receipts, sales slips and any other business related information is put in the "shoe box", handed over to an accountant with the directions: "Sort this stuff out." And the owner hopes that everything needed is in the box. The accountant returns the information, sorted out to the best of his/her ability and reports the business results as good, bad or close the doors. The accountant knows little or nothing about your business and strictly uses numbers to tell the story. This is where bookkeeping knowledge and financial understanding aid the home based business owner.
The home based business owner who has bookkeeping knowledge and financial understanding, doing "the books" knows the event or situation that created a given transaction. For instance, a large amount was spent on computer equipment when sales were down and cash was tight so credit had to be used. The accountant sees the numbers, thinks to him/herself "that was a stupid move" and reports what they see. The small or home based business owner, on the other hand, knows that the main server for the business was broken beyond repair and that business as usual would cease without the new computer equipment. Although it does not change the ending effects on the numbers, it does provide a reasonable explanation for it.
Learning the bookkeeping also teaches the home based business owner the trends` of a given area of business. As the statements are being prepared trends begin to appear such as what months sales are the best. Knowing the financial aspects of the business actually helps the owner know the business better and make better decisions regarding the business.
Bookkeeping is essential to the small or home based business owner. It provides:
Understanding that information aids home based business owner to make better business decisions in regards to the business in general and also with any plans for future growth as numbers do reveal quite the story.
Being a financial reporting accountant for more than 20 years and always aspiring to teach, I have written a bookkeeping manual, done in simple terms with pictures and color coding to teach the home based business owner how to handle their own financial reporting needs. To read more articles and get more information, click the following link General Bookkeeping Made Easy.
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