Not enough cash to cover profit at the year end.

[Les]

I too, like Pedros know very little about bookkeeping/accounting.

A family started the business and put a relative in charge of all bookkeeping.

2008/2009 exposed weakness in our purchasing and pricing which almost put us under.

End fiscal 2012 was our first really profitable year but nothing was done to avert the growing bottom line. By the end of the year we had to do fancy footwork to avoid huge tax bills. This of course created equally large cash flow problems. (Our credit line was pulled early 2009)

End fiscal 2013 was even better but again we are in the same mess. (Currently praying for timely AR)

I am in the process of finding a new bookkeeper to replace the relative.

My question is:
How does a company keep this from happening?

Thank you

 

[kirby]

Your problem is not your bookkeeping. I suggest it is lack of adequate planning. Creating a budget causes you to examine the underlying economics of your business. The budget would have exposed the purchasing and pricing errors very early. Also the budget would have predicted that you would have a tax problem in a profitable year. And included in planning besides a budget is a cash flow projection. These are the tools that seem to be lacking in your business.

 

[Les]

I suggest you to outsource your book keeping service. By doing this you can avoid the mess. All the tasks can be completed at ease and with accuracy if you outsource the bookkeeping.

Hi John,
I've heard of outsourcing and cloud but have no idea how it's done. Any tips would be helpful.
tu

 

[Les]

Your problem is not your bookkeeping. I suggest it is lack of adequate planning. Creating a budget causes you to examine the underlying economics of your business. The budget would have exposed the purchasing and pricing errors very early. Also the budget would have predicted that you would have a tax problem in a profitable year. And included in planning besides a budget is a cash flow projection. These are the tools that seem to be lacking in your business.

Hi Kirby,
Like many, (I think), I like the idea of plans/budgets but have never done one personally and know that my company hasn't either.

Can you suggest a good place for me to start? Books? etc.

tu

 

[kirby]

The Small Business Administration website has some basic information on how to create a budget