Part 2 of 4 of the “Bookkeeping Fundamentals” Mini-Series
Welcome to Part 2 of our Bookkeeping Fundamentals mini-series. In Part 1, we walked through the biggest challenges construction and trade business owners face when it comes to their books and why those issues show up again and again.
If you missed Part 1, you can read it here: Bookkeeping Fundamentals: Accounting Challenges
Luma Accounting, headquartered in Portland, Oregon, provides bookkeeping, accounting, and job costing support for small businesses across the U.S., and through that work we’ve seen a common theme: once owners understand the challenges, they’re ready for clarity. Now that we’ve covered the frustrations, we can move into the good news; what “great books” actually look like, why they matter, and how they become the foundation for clear, confident decision-making.
How to Get Great Books (and what “great” means)
While our presentation was created with the trades in mind, the rest of what we covered applies to all businesses. “Great books” may seem like a pipe dream for many business owners but here is how Luma Accounting defines them and – best of all – explains how to get them.
“Great books” aren’t fancy or complicated. They’re simply:
- Accurate
- Up-to-date
- Tax ready
- Bank/loan ready
When your books are all four of the above, they stop being a source of confusion and start becoming a source of confidence.
With great books, you:
- Know which customers owe you money
- Know how much you owe vendors/subs
- See which jobs/services/items are profitable… and which aren’t
- Make proactive decisions instead of reacting to surprises
- Are ready for tax deadlines (without the panic)
- Can apply for loans or lines of credit as soon as you need them
And because your numbers are finally telling the truth, you’ll start to see exactly when it’s time to:
- Raise your prices
- Find a cheaper supplier
- Reduce overhead
- Revamp your estimating/sales process
That’s when business owners really light up – when their books shift from “something to dread” to “something that helps me make smart business decisions.”
Here are the six simple tips that every business owner can implement right away:
- Keep personal out of it. Business and personal don’t mix – not in your bank account and not in your books.
- Categorize correctly. Garbage in, garbage out. Make sure income and expenses land where they belong.
- Update weekly. Waiting until tax time is too late. A few minutes each week keeps your reports current.
- Make your reports meaningful. If your reports don’t make sense to you, they’re not doing their job.
- Use job costing. For construction/trades businesses, it’s the single most powerful way to know where you’re making or losing money.
- Consider hiring a professional. Friends and family want to be helpful, but if they’re not very experienced, you may be basing decisions on the wrong data. Sometimes, the best investment you can make is in an expert who has seen it all before.
Businesses that take these steps will be rewarded with a treasure trove of data that is accurate and up-to-date. And then you’re ready for the next step: How to Read Your Reports!
Serving small businesses across the U.S., we consistently see the same transformation when owners finally gain financial clarity through great books.
Now that you know what great books look like, the next step is understanding how to read the reports they produce (without falling asleep).
Ready to Get Great Books?
Need bookkeeping, accounting, or job costing help for your Portland or U.S.-based business? Fill out our get started form for a free consultation.
