Business Failure – Poor Record Keeping

Business Failure – Poor Record Keeping
August 15, 2021 Gary Shotton

One of the main reasons a business can fail is because they do not maintain their financial records. For most entrepreneurs this is not exciting but it is necessary. By Gary Shotton #000493

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Business Failure – Poor Record Keeping

By Gary Shotton

This text is in Extreme Rough draft and will be edited in the near future.

hello my name is Gary Shotton and i’m here as a part of inspiring better business ibb talks i’m going to talk today about failures in business and i’m many times asked whether on radio stations that we’re on or in person or someone comes say why did my business fail what is the problem and i’ve discovered there’s at least 10 or 12 major reasons businesses fail and this is one of those reasons and you may not be in this situation but you could learn from it i believe and i’m asking you uh to consider uh is your business uh on the way to failure and you don’t even know it so today i’m going to talk about the the reason businesses fail could be because there’s not good record keeping oh you know when we talk about record keeping that is not a subject that i am interested in i don’t really care in reality that the records are so good that’s my nature but i had to learn that that there’s an importance of good record keeping a little bit about my life was i was raised on a farm and ranch and the subject matter of the day normally was get out of the house and go to work so we were not and i was not all that excited about book work i i went through high school and even through college with kind of actually mediocre grades it just wasn’t what i like to do i like to be outside doing things i thought and so i was used to physical work no problem i had an attitude that if i worked hard enough i could always make it out i could make a way in life i could make money by working physically and frankly i didn’t have any time i thought for record keeping i mean why would i work all day and then at night when i get home or or i’m i’m off for my regular work why would i do this record keeping well this went on for a while uh when i moved to my new town in uh after uh ten years of working for a oil company where i had a paycheck that’s different i had the paycheck i could manage my money i just didn’t want to record and keep track of what i was spending and so when i came to the new town i started a business with what i had there’s a whole story there and it wasn’t too far along it doesn’t matter what the business was because record keeping is a part of every business and it wasn’t long that in my first year and a half i was just experimenting i didn’t know if this business is what something i wanted to do so the way i did it was just get up whenever i had time go do the work get paid put the money in the bank pay the bills well this is working pretty well i determined then at the end of this schooling that i would go ahead and make this my actual first business ownership and make a run for it it was a moving and storage company see i had moved with a horse trader behind my family car and that’s what i’d use to start this interim experiment just make cash pay my bills i’m going to be done but then i decide let’s go ahead and make this a business well i dug into it with vim vigor and vitality and i’m working hard i’m every day working hard i had a pretty good balance on life because i had a wife and three children i had and i determined that you know the reason for bookkeeping was probably just for taxes and i could just do what i wanted and then at the end of the year somebody had to look at all these records in order to decide whether i owed money and my taxes are not so i let my my my record kept keeping it way behind i wouldn’t look at it monthly it might get months behind in fact there was a time period we had at the end of the calendar year we should have repo reported our taxes and we could do what’s called an extension so i extended i was 18 months behind in filing my taxes and so in that told you that my records were not very good and then i was pretty good with numbers i just wasn’t good with accounting numbers remember i’m an engineer so on that side if it’s designing something i kind of like the numbers but not bookkeeping wow so after a a period of years actually it was actually at the seventh year mark i mean i’m working hard we’re paying most of our bills and we’re getting farther and farther behind and the bank is not willing to loan me any money and i get serious now i have no money to pay my bills and there’s no source of money there’s no bank that’s going to bank me i have a problem and i i came to the conclusion that i had to ask for help i had to ask someone that would guide me and lead me in what i’m teaching you now now keep in mind i don’t have time for an exhaustive complete study i’m just giving you the highlights of of record keeping and the importance of record keeping and you know if you don’t have your numbers you can’t get bigger and if you don’t have your numbers your bank’s not interested if you don’t have your numbers you won’t grow and so i asked for help i paid someone to explain what i’m explaining to you but right now i have a good handle on understanding the numbers i’m talking to you about if the banker called me or i had a reason say hey send me your financial statements i don’t have to ask my accountant although i have an accountant that keeps things right and straight we have other people entering the data but i can look at my my financial statements and i can send them personally within 30 minutes well here’s the financial statements in record keeping the biggies the main thing and again each one of these has time to spend an hour on each one but number one is called your profit and loss statement or your income statement the same thing called a little bit differently and that’s where you’re gonna put down your total income for whatever period for a month every month is a good time look at your total income look at your total expenses and decide whether or not you made any money that that month total income minus total expenses if it’s positive that’s what the money you made is a is a positive if it’s negative you lost money that month and you do that on an ongoing basis and then in our case we file our taxes at the end of the year that’s the sum of all 12 months another very important financial statement is what’s called your balance sheet it comes from knowing your assets uh and your liabilities and your uh equity in your company and they’re added up in a way that that they need to be in order i’ll just leave it that way they need to balance out in a way that the banker has confidence in them and then third is your cash flow i mean that is a big one you could be doing fine you could be making money it looks like but you run out of cash because you caused allowed too many people to delay in paying you or you again didn’t know your numbers and you’re actually losing money so those are the three big ones that you need to work on this is a summary the other one is your job costing i have lessons on just job costing where if you are looking at a job if you’re looking at in my case in that moving business every day i might have done 10 jobs or five jobs or eight jobs and each one of them need to have a fair margin of profit in there that would be used to cover the overhead of the company and also net out an end plus number for each and every job and so if you have a job that you didn’t make money then you had another job that made enough more money that then the sum of the month would be the sum of all of the jobs losses or gains and you want that to be positive again that’s a whole lesson well i like to use examples and in this particular case i don’t have access to a lot of other people’s accounting records i don’t know really what caused them to fail but i see businesses fail and i suspect that they are many of them are because they don’t understand their numbers they’re not having good record keeping i happen to know and enjoy watching a a a reality show called the prophet and this man goes into businesses and he sets down it’s all recorded i think it’s very legitimate and almost every time the business is in failure almost bankrupt all ready to go out of business and this man comes in with his money and they always look down at the records and it always almost every time the owner of that business pretty good size business is almost in shock when he says you are almost bankrupt you are almost ready to go out of business there’s nobody going to help you let me help you it’s an interesting show well i think it’s interesting that when i’m talking about 10 or 12 reasons that businesses go out of business for failure it’s they are the same basic reasons what we call god’s laws for doing business if you know the laws of doing business you’re not you’re not going to break those laws and you’re going to be able to come through and avoid failure in this case due to poor record keeping thanks for being a part of inspiring better business you
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Gary Shotton
Founder | IBBTalks.com
The founder of IBBTalks.com which was formed to "Inspire Better Business."
As an astute businessman, he is passionate about helping others in the business world achieve maximum profits. He has a keen interest in international business. www.InspiringBetterBusiness.com

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