Strategic bookkeeping is structuring your accounting and books to deliver the information you need to sustain profitable growth. It’s not about having the extra bells and whistles or having the latest software. Instead, it’s about staying organized, implementing the proper resources and tools, and evolving your bookkeeping to meet the ever-changing needs of your business.
What is Strategic about Bookkeeping?
Strategic bookkeeping can be thought of as evolutionary, in a way. As your business grows, the depth of your accounting, financial tracking, and bookkeeping must grow too. When a business is new, it may only require the basic tracking of profit/loss statements and deductions primarily for tax purposes. As you add employees and your business grows, your accounting needs evolve with it providing the financial information you need to make informed business decisions.
Every business should have a strategic plan that identifies their vision for the future and defines goals that keep them on track. Strategy driven accounting systems and processes allow you to capture the information you need to measure progress towards those goals, identify opportunities and get early indicators of problems. Accurate, strategic accounting also allows businesses to compare themselves to others in the industry to set benchmarks, control expenses and accelerate growth.
Why Should You Use Strategic Bookkeeping?
As the business grows, the business owner needs to evolve into a CEO, working strategically on the business instead of in the business. They are no longer able to have their hands in every process and know every number off hand, they need to develop a system that filters up the important information. Defining the financial information that is critical to your business growth and having systems in place to capture that information, evaluate progress and focus the CEOs attention where it is needed.
Having your financial information presented in a simple yet strategic way provides the hard numbers you need to put your strategic plan into action while getting everyone in the organization on the same page. Strategic bookkeeping allows you to create reports that help management make informed decisions about where the company is headed with its finances and resources.
When you are ready to get strategic about how your books are kept, the first step is structure your accounting systems and records so they deliver precisely the information you need to monitor your business. Well organized books allows you to track important metrics such as gross profit per customer or service offering and to calculate key ratios such as Gross Margin, Operating Margin or Return on Investment (ROI) alongside traditional financial measures like cash flow and profit. Your books need to provide insight into which products and services are performing well and which aren’t—so you can make informed decisions about where to focus resources moving forward.
In today’s business world, the ability to make smart financial decisions is critical to success. Bookkeeping is one of the first tasks business owners outsource; they hire a bookkeeper, hand over the information and forget about it. Strategically that makes sense, a good bookkeeper can free up a lot of your time. However, bookkeepers often are not trained accountants; they process transactions but don’t have the experience needed to review the financial information and identify measures to monitor the business. A fractional CFO can help guide your bookkeeper to provide financial information to support the business’s long-term goals.
The American Institute of Certified Public Accountants agrees, saying that “strategic bookkeeping can be a valuable tool for businesses of all sizes.” For a small business, this not only means keeping track of expenses and revenue so you can know what’s coming in and going out but analyzing that information to identify trends and benchmark your businesses against others in your industry.
As we all learned at the outset of the pandemic, cash is king – cash flow issues are more likely to shutter a business than lack of profitability. According to SCORE, 82% of businesses fail due to cash flow issues. You may think cash has nothing to do with bookkeeping but having strategically designed books allows you to set up a system to monitor cash. You will need to know how much money you have on hand, identify funds earmarked for future services (client deposits), project future sales (revenue), identify how much money you will spend to earn that revenue (cost of goods sold) and the day-to-day cost of running your business (overhead). Creating a 12-week cash flow project, helps you plan for normal business fluctuations and respond to unexpected events.
The good news is there are steps to ensure that your accounting is in line with your business goals, and a good fractional CFO can help make it happen. They’ll be able to help you determine what kind of reporting needs to happen for you to reach your goals—and then work out the details so that those reports are happening automatically.
Let’s Get Started
ClariFI business solutions starts every engagement with a Financial Clarity Review. We do a deep dive into your financial systems and processes to see if they are set up to deliver you good financial information. Without this information, you are running your company blind.
Strategic bookkeeping is a critical tool for business owners who want to make wise, informed financial decisions. It involves having a financial expert looking at the big picture and helping you make decisions that will benefit the business in the short term and help it grow and succeed in the long term. If you’re ready to get strategic about your bookkeeping, ClariFI Business Solutions can support you in the transition. ClariFI Business Solutions is passionate about helping business owners grow more successful businesses through understanding and optimizing their finances. Contact ClariFI here to get the support you need.