Pete was a charismatic young and healthy man full of energy. An electrician by trade. Pete was ambitious. His number one passion in life was being an entrepreneur and building something from scratch. And he was good at it too.
After earning his ticket as an electrician, Pete was so excited he could finally start his own company. It turned out to be a great success. 24 months into his business, he had already built up a great client base and hired 2 journeymen and 4 apprentices on his team. The reputation for their work was outstanding and well-respected.
Pete was a jack of all trades and took pride in his skills. He was great at marketing, organized on the job, and delivered outstanding personalized customer service.
However, the one thing Pete could have gotten better at was his procrastination. Pete hated administrative work and kept putting off a task on his to-do list “hire an accountant.”
One day Pete received a letter from the Canada Revenue Agency. He opened it up, and to his surprise, they let him know there was a discrepancy in his payroll remittances, and they wanted to review the last 12 months of pay slips.
That night after work, Pete got to work on compiling the information for the CRA. Hours went by, and Pete had trouble re-calculating CPP and EI. It was now 2 am, and Pete still wasn’t finished. Plus, he had to be on-site at 6 am. Starting to feel flustered, Pete stopped working on the response to CRA and went to bed. The next day he showed up at work tired and exhausted from the lack of sleep the night before. In his exhaustive state of mind, he made a big mistake in some wiring and received a one-star Google review for that job. This was a shocker to Pete since he always had a good experience with his clients.
Time went on, and Pete still hadn’t responded to CRA. Then, two months later, he received another letter in the mail. This letter said that Pete owed the CRA $27,000! Now in shock, Pete scrambled to figure out what was going wrong. It turns out that Pete neglected to calculate the payroll tax correctly. This was devastating for Pete, and his savings were wiped from this debt.
This could have been avoided if Pete hadn’t been such a procrastinator and had hired an accountant and automated his administrative task of payroll.
“If you’re going to run a business and don’t understand accounting, you are already behind the eight ball.” – said Mark Cuban.
What Mark meant was that as an entrepreneur, you must understand the language of business. That language is Accounting. Your primary understanding of debits and credits and the difference between cash flow and net profits is crucial to your success.
Most trade business owners don’t want to learn accounting or have anything to do with crunching numbers. That’s fine. However, somebody has got to do it. Therefore, it would be best if you had an accountant who could speak to you about your numbers so that you understand.
Where do you start?
You start at the same place as you would when building a new home—the foundation. The foundation of your accounting is a proper bookkeeping system. Without bookkeeping, you have no idea how your company is performing.
“I do my own bookkeeping” – we get this statement a lot from our new clients. So why is doing your bookkeeping a terrible idea? You aren’t a bookkeeper. Stick to what you are good at—your trade. You wouldn’t find us trying to wire a home or install a new air conditioner. A do-it-yourself mentality means you are stepping outside of your specialty and making significant mistakes. This leads to the old saying, “garbage in, garbage out.” Your time is your most valuable asset, and best spent growing your business.
You don’t just want any bookkeeper. It would help if you had a specialist who does more than that. It would help if you had someone who would automate your accounting processes and deliver expert advice.
Technology is changing the way we do business, and cloud applications are speeding up how all administrative tasks are performed. You can bet that your competitors are taking advantage of this, and you will be left behind if you fail to adapt. Therefore, you need an accountant who can advise you on what apps to use and how to get them to work together. In our world, we call this a technology stack.
Now that you have a solid foundation
“You can’t manage what you can’t measure.” – says Peter Drucker. With accurate bookkeeping, you can take measurements of where you are now and use that as a stick in the sand. With that, you can envision where you want to go and determine the gap from where you are now to where you want to get to. This is when you work with your accountant to create an action plan on how to get there.
Avoid the 7 most common mistakes business owners make
- They don’t plan
- Don’t know (or understand) their numbers
- Think they can play every role and don’t have the right team at the right time
- Run out of cash
- Lack of systems or failure to upgrade as they grow
- Not knowing their customers, what they want and what they value – trying to be all things to all people
- Ignore culture, core values, and brand
How Argento CPA will help
- Explain your key numbers to success
- Visually explain what small changes to key drivers will do to your profit and cash
- Develop action plans to bridge the gap
- Suggest what apps may be relevant to your plans
- Hold you accountable
- Provide insights and inspiration
- Scale and help you grow your business
- Give you the confidence to act
Contact Argento CPA today and get yourself setup for success from the start!