Make Your Accounting System Do More Than Count Your Pennies

by Joanna Pineda on March 1, 2011

Counting Change

Counting that makes sense

I was having lunch with a fellow woman business owner when we got to talking about our 2010 revenues.

She said business was up. When I asked here which parts of her business were up, she looked at me quizzically. She said, “I don’t know what you mean, my revenues are up, I don’t break down my revenues, they all just go into Web site revenue.”

Hmmm…. in my opinion, this is an example of an accounting system simply tracking your invoices and expenses.

But whether you’re using QuickBooks, FreshBooks or whatever, your accounting system can and should do more for you. Here’s how:

General Ledger (GL) Codes Are Your Friend.

GL codes allow you to categorize your expenses by type. For example, in my business, I categorize my revenue by type of work: design, programming, hosting, etc.

This way, I always know how much each functional group at Matrix Group is generating in revenue, I can benchmark across teams, I can compare data from year to year and I can determine when it’s time to hire more people.

Slice and Dice Your Revenue and Expense Data.

Every month, I ask the Director of Administration at Matrix Group for various reports and exports. Why? Because I want to look at the activity for the month, year to date and trailing 12 months by: type of revenue, team, client, etc.

I also figure out which of my expenses are going up. This type of insight into my business lets me know which types of projects are most profitable, which team members are kicking b**t, and where I need to watch expenses.

Who is NOT Doing Business With You?

Most financial systems will tell you WHO is not doing business with you, but I believe that it’s equally important to track who is NOT doing business with you.

Year after year, which clients are doing more or less, and which clients have dropped off? Clients who are doing less business with you may be in trouble or they may be unhappy. Clients who are no longer giving you business may have found another partner.

These are missed opportunities if you’re not in the habit of identifying them regularly.

A long time, my accountant said to me, “Joanna, make the categories work for you. The IRS does not care how you categorize your income and expenses.”

So take a look at your GL codes and make your financial system do more than just count your pennies.

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Image: stargonautone via Flickr, Creative Commons

Founder/CEO and self-proclaimed Chief Troublemaker of Matrix Group International, Joanna Pineda is known for her visionary big-picture thinking and drive for excellence. Combining her broad liberal arts background and passion for technology, she started Matrix Group in 1999, today a leading interactive agency. As a trusted advisor, Joanna inspires and motivates her clients and employees alike to simply, “be better” with her mantra being: Do or Do Not. There is no try!

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