When you run a business, bookkeeping is the minimum.

PHOTO CREDIT: PAUL DOWNEY

PHOTO CREDIT: PAUL DOWNEY

Bookkeeping is compliance work. The IRS wants you to comply by having good books and records to substantiate the amounts you put on your business tax return. Banks want you to comply to loan covenants if you have a bank loan with them.

To run a business doing more than the minimum is required. Bookkeeping only for compliance purposes is a mistake. You have to do that anyways.

To grow your business, you need to understanding the numbers behind your business. You need to use your numbers to develop business insight. To this end, bookkeeping is just the starting point. You need to move beyond bookkeeping.

You need to dive into the financial statements and understand the relationship between the different statements: Profit & Loss, Balance Sheet, and Cash Flow.

You need to understand that the statement of cash flow is the most important financial statement for a business because it tells you the source and use of your cash. You need to understand that the balance sheet is the second most important financial statement because it tells you about your future cash inflows and outflows. The last financial statement that you need to look at is the profit & loss statement.

As a business owner, it's part of your job to deeply understand the financial statements and the story that your company is telling you through the financial statements. You'll have to roll up your sleeves and dive in or get your accountant to help you uncover they story.

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