Few of us like to think about bookkeeping and accounting. Without it though, you’ll find yourself in the dark about how your winery is performing.
Bookkeeping is the backbone of all businesses. To know what’s happening at the most basic financial level, you’ll need to have a great bookkeeping system.
Today, learn why bookkeeping is essential for a small business and how it prepares your business for continued success.
Understand the Who, What, and Why
Accurate and timely bookkeeping lets you know who owes you money, who you owe money to, and how much you own.
Your bookkeeping will allow you to know:
1. Who owes you money,
2. What they owe you, and
3. Why they owe you.
You’ll have receivables if you’re making sales on account. And without good bookkeeping, you won’t know whether you’ve been paid for all of your sales.
Keeping on top of your receivables will help you maintain your cash flow and avoid charging late fees and chasing collections.
Tracking the who, what, and why with bookkeeping helps you with payables too.
You want to know who you owe money to and how much you owe them. Paying your vendors and suppliers on time avoids paying late fees and helps to maintain a strong working relationship. Plus, these vendors could provide trade references when you’re applying for credit with another supplier or a loan from a lender.
Great bookkeeping lets you know how much equity you have in your business.
Your equity is more than just the cash you invest. It’s also the assets, liabilities, and accumulated profits of the business. Equity calculations are important when applying for loans or taking on new investors. If you don’t know how much equity you have in your business, a lender or an investor won’t be comfortable giving you money.
Improve budgeting and planning
Proper bookkeeping is essential for budgeting and cash flow management.
When you keep track of your receivables, you can manage your cash flow better. You want to ensure that money is flowing in on a consistent basis to offset the money that goes out each month. If you let several customers become past due, you’ll need to use other resources, like delaying payments to suppliers or using your own capital, to make up for the cash shortfall.
Keeping on top of your bookkeeping and cash flow will let you budget effectively. Budgeting is an essential process for anyone in the beverage industry. It allows you to allocate money to processes critical for your business’s success and prioritize spending.
Without a solid budget, you will feel like you’re just running in a circle, never knowing if you’re meeting your goals. Investing a little bit of your time now to get your bookkeeping in line to prepare your budget will free up your time and energy.
Elevate analysis and decision making
Great bookkeeping will produce essential reports you’ll need to make decisions for your business.
Although you may be in the winery industry for your love of wine, you’re also in business to make money. You’ll need an income statement, also called a profit and loss statement, to know whether you’re turning a profit. The income statement will show you profit margins and where you’re spending money on overhead expenses.
With a current income statement, you’ll be able to make decisions on whether it’s necessary to cut costs or if you need to grow your sales revenue.
The income statement receives most of the attention of business owners, but the balance sheet is just as important. Here you’ll be able to see everything you own and owe in one place.
This is where you’ll see if you’ve kept on top of collecting on your receivables and how much inventory you have on hand. The balance sheet is also where you’ll see your equity amount.
Streamline Tax Planning and Prep
Do you find yourself scrambling each year to get your company’s financial affairs in order for your tax preparer? Although some last-minute calculations for things like depreciation are common, most of your financial information should be up-to-date at year-end.
Your bookkeeping is essential to preparing your financials for tax time. It will ensure you receive the maximum deductions and credits.
And when your books are organized, you’ll likely receive fewer questions from your tax professional.
Access to accurate financial data will put you on the path to success. And if you need help with your bookkeeping needs, start by asking us how we can help.At Protea, our dedicated and experienced staff are industry experts in the winery industry. Let us help with the day-to-day finances so you can get back to making great wine. Our team works hard to make sure you’re positioned on the right path. Reach out today for an evaluation to learn what Protea can do for your winery.