In my line of work, I often run into people who say, “My tax preparer does my books.” But is that really enough? What a lot of small business owners don’t realize is that ideally you have two sets of books: tax books and management books.
What’s the difference in tax books and management books?
Your tax preparer is helping you get the best refund back, and that’s great. They’re probably doing a really good job of that. But when it comes to the day-to-day of your business, they’re not as up to speed.
You see your tax preparer once a year, maybe twice (in most cases). They’re preparing your books with an eye toward what the IRS is looking for, and they only touch your business occasionally. In January they can tell the government how your business did, but what about telling you or your investors how your business is doing in March or May? That’s what management books are for.
The key to understanding your business
Management books allow you to keep an eye on what’s happening in your business more than just checking your tax books once or twice a year. A tax professional isn’t usually providing that sort of service.
A professional bookkeeping service like Lionshare will help you keep your accounts straight on a day-to-day level, sure. But that’s only a fraction of the services that you can gain from a bookkeeper who does management books for you.
Since a bookkeeping service requires ongoing and sustained effort with your business, they’re motivated to make sure your business is doing well. Much of what I do doesn’t necessarily fall under “bookkeeping” on a technical level—it’s advisory work and forecasting based on the trends in your finances over the course of the year.
Do you know which of your investments are over performing or under performing? Can you track the trends in your business through each month and year? You probably have at least a little bit of an idea, but contracting a professional who deals with this on a consistent, day-to-day basis will give you a deeper understanding of your business.
In addition, if you want to go out and get financing or private money, it’s absolutely crucial that you have well-kept management books. They don’t want your tax preparation documents. They need to know what your business looks like throughout the year.
It’s not hard for a professional to convert one to the other if needed. But if you don’t have a consistent partner for your business who is working with you throughout the year, you’re missing out on one of the biggest benefits of having a bookkeeper.
Don’t shortchange yourself. Keep your management books, not just tax books, and develop a greater understanding of your business. You’ll be glad you did.