Small businesses owners face a variety of financial challenges, big and small. Recently a client told me, “I’m probably the lowest paid person in this company.”
He wasn’t complaining or even bringing it up as a concern necessarily, yet it was something he felt may be true about his business. I could relate, because at one time it was true for my business as well. You may even feel this way from time to time about your business, or worse, know that it is 100% true! Mike Michalowicz refers to this phenomenon as “Entrepreneurial Poverty” in his book Profit First.
The good news is that this client had already taken the first step toward a solution of this financial dilemma. He admitted that he could use some help with his bookkeeping. We were 100% up to the task. With a solid bookkeeping workflow in place, we will now guide this client. We will develop a solution to reward him appropriately for his hard work, risk, long days, and sleepless nights. We’ll use 3 simple steps and the client’s financial statements. With our help, these financial statements now are timely, accurate and complete. Here are the 3 steps toward a solution:
- Identify the cause
- In this example, we already know the effect – owner is the lowest paid in the company
Timely, accurate and complete financial statements prepared by an experienced bookkeeper can help identify the cause by answering questions like:
- Are bills getting paid faster than customer payments are being received?
- Is money being left on the table?
- Has spending been creeping up with no correlation in revenue increases?
- Is the company overstaffed or labor heavy?
- Is debt becoming burdensome?
- Should more debt be leveraged to add more revenue-generating assets?
Once the cause is identified, we can recommend a solution for the undesired effect. In time, this business owner can stop experiencing Entrepreneurial Poverty and be paid at a rate that reflects his role as the business owner. That’s one financial dilemma solved.