29 Jul How to Prevent Business by Bank Account Disease
“Business by Bank Account Disease” (BBBAD) can kill even the most successful business. Like a deadly sickness, it comes on slowly and silently. Its symptoms often go undetected until it’s too late for treatment. However, there is hope.
What is Business by Bank Account Disease?
BBBAD occurs when a bank account is used to define a company’s financial strategy. A business owner might check his online bank account balance regularly and use the available summary as a tool to measure his business’s profitability. While a “high balance = good day, low balance = bad day” mentality makes logical sense, it is not the correct way to check your company’s pulse.
How do companies contract BBBAD?
By using your company’s most recent bank account balance to determine whether or not your business is thriving, you’re forgetting that financial strategy is a “big picture” methodology. While your bank account statement might be accurate right now, it’s really only a snapshot of the money you have immediate access to and this amount can change very easily. A statement does not reflect checks that have yet to be deposited or bills that need to be paid. It cannot predict a company’s future success or its failure.
How can I prevent BBBAD?
BBBAD can be prevented in a number of ways, the first of which is pretty simple: Resist the urge to inspect your company’s bank account every day. While we encourage you to stay on top of your business’s financials, checking your online balance can cause more anxiety than it’s worth. However, if you feel you must check your balance, limit yourself to once a week, keeping in mind that it may not be an accurate representation of where you are for the month.
Trust your financials. A reconciled set of financial books will give you an accurate picture of how you are truly doing on a month by month basis. Learn to read your Profit and Loss Statement and Balance Sheet and start a habit of reviewing multiple months for a given time. Find out what benchmarks to use for your industry and compare your results with the industry at large.
Hiring a professional bookkeeping company like Two Roads to manage your business financial reporting is another great way to prevent BBBAD. Your bookkeeper can give you a complete update of how your business is faring through monthly progress reports, comparing the current month to the previous month and the previous year. Monthly progress reports will help you set goals, track them, and determine what shape your business is in and if you need to make adjustments. A professional bookkeeper will use this information to help you make solid business decisions, so you can reach or exceed your financial goals with confidence.
Two Roads is a professional bookkeeping firm in Knoxville, Tennessee that provides quality bookkeeping and accounting services to businesses in and out-of-state. For more information on how we can help you prevent BBBAD and improve your company’s financial outlook, contact us at 865-212-0063.