One thing that has really surprised me since becoming a bookkeeper is how little is known by practice owners, and business owners in general, about bookkeeping and the importance it plays in the success of their practice. Keeping their books becomes a tedious task, like paying the light bill every month. When in fact it should be handled like the tool that it is. Bookkeeping is important...like “don’t leave home without it” important! So to get started I’ve answered a few frequently asked questions I receive about bookkeeping. In the next few months I’ll be posting some really exciting articles (yup, I described bookkeeping articles as exciting!) about starting and maintaining the bookkeeping for your practice. The articles will cover topics such as the biggest bookkeeping mistakes to avoid, what to look for when hiring a great bookkeeper for your practice and much more!
Bookkeeping and accounting...aren’t they basically the same thing? The short answer is no. Both are very important functions in any business and they do work together, but they are totally separate things. Bookkeeping has to do with the daily process of recording financial transactions, while accounting has to do with interpreting and analyzing the financial data. So basically, bookkeepers lay the groundwork for accountants to analyze the financial data of a practice. Bookkeepers record every financial transaction of a practice and prepare the financial statements, and accountants analyze and explain the financial statements. However, this is not taking into account the advisory bookkeeper. What's this you ask? Read on!
Advisory bookkeepers are becoming more common over the traditional bookkeeper here in the United States. While a traditional bookkeeper limits themselves to the task of recording daily financial transactions, an advisory bookkeeper provides value-added services like cash flow projections, budgeting, setting up a business plan and improving business processes. More bang for your buck!
I like short answers so here we go…yes! Here’s why - according to the Small Business Administration, “bad bookkeeping or no bookkeeping system at all” is one of the top reasons why new businesses fail. If you want your practice to grow and stand out in the competitive veterinary market, then you need to keep accurate records of your financial infrastructure. By keeping correct and up-to-date financial records you will be able to:
- track your cash flow
- have a greater understanding of how much progress your practice is making
- monitor what areas within your practice make a profit and which areas have high costs that need to be reduced
- establish patterns of when your costs or income will be higher or lower
Here’s what it boils down to…without bookkeeping you are flying blind! Basing your business decisions on what your bank balance shows is a huge mistake that many practice owner’s commit. Your bank balance doesn’t show the looming liabilities, such as taxes or bills. A veterinarian doesn’t diagnose an animal without looking at the results of tests performed on the animal. By the same token, they also shouldn’t make business decisions for their practice without looking at their financial infrastructure.
According to the small business mentoring organization SCORE, 40% of small business owners said bookkeeping and taxes are the worst part of owning a business. Honestly, I’m surprised that number isn’t higher. Veterinarians, like most small business owners, don’t open their own practice with the dream of spending several hours a week working on their bookkeeping. Yet bookkeeping is so critical to the success and growth of every single practice!
Here are the two main benefits to hiring a bookkeeper. The first is that it frees up your valuable time to actually focus on your veterinary practice. The second, when you hire a bookkeeper you are hiring someone whose profession is bookkeeping. This is their job! They know the correct way to do it and can save you from losing out on tax deductions and other costly bookkeeping mistakes. Aaaah…now there’s a lovely thought….a stress-free tax season.
That right there is reason enough to hire a bookkeeper! If you're ready to take the load of bookkeeping off your shoulders and finally be able to use your books as the financial tools that they should be, send me an email at firstname.lastname@example.org and I'll be happy to get you started.