Got a Business Bookkeeping System? It's Probably Hurting Your Profits
Let’s stir the pot, shall we? I can already feel the accountants gearing up for battle.
But hear me out. You've been told that good bookkeeping is the foundation of good business finances. You've dutifully set up QuickBooks (or hired someone to do it for you). You get those monthly profit & loss statements. You feel like you're checking all the financial boxes.
But your bookkeeping system might actually be what's keeping you financially stuck.
Plot twist, right?
Now, before you panic or think I'm telling you to ditch your bookkeeper, allow me to explain myself. I'm not saying bookkeeping is bad or unnecessary. It’s absolutely necessary.
What I AM saying is that if bookkeeping is your ONLY financial system, you're essentially trying to drive your business forward by only looking in the rearview mirror.
And I’m sure we can all imagine how that turns out.
Let’s explore the four main problems with relying too heavily on your bookkeeping system for a sense of financial wellness.
Problem #1: The Dangerous Lag Time
Let me paint you a picture of what happens in most businesses:
January happens (you make money, you spend money, life goes on)
February 15th rolls around and your bookkeeper finally gets your January P&L ready
You maybe glance at it, maybe file it away thinking "I should really look at this"
By the time you actually analyze it (if you even do), you're halfway through March
Any insights you gain are about money decisions you made 6-8 weeks ago
You end up with reactive financial management, and it keeps you stuck in patterns that don't serve your business growth.
Think about it: if you realized in mid-March that you overspent on ads in January, what can you actually DO about that? The money's already gone. The pattern's already established.
And who knows what’s happened in the 6 weeks since then before you even realized this was an issue.
You're always playing catch-up instead of getting ahead of your financial decisions.
Problem #2: What Leftovers?
Speaking of that lag time, if you’re managing your money primarily through a bookkkeeping system, you’re likely treating profit like leftovers.
You spend the month running your business, paying expenses, maybe pulling out some money for yourself when things feel "good," and then you wait to see what's left at the end.
Your monthly P&L becomes the big reveal: "Did I make a profit this month? How much can I actually afford to pay myself? Should I have spent less on that new software?"
But by then, it's too late to do anything about it.
Or maybe you're the entrepreneur who already pulled money out throughout the month for your salary and business savings, crossing your fingers that there will be enough left to cover expenses.
You're essentially hoping for the best instead of planning for success.
Both approaches lead to the same frustrating result: less profit than you could have had, or sometimes no profit at all.
When profit is what's "leftover" after everything else, it becomes the casualty of poor planning. Every unplanned expense, every "small" subscription that auto-renews, every impulse business purchase eats into what should have been your profit.
The businesses that consistently generate healthy profits don't wait to see what's left. They plan their profit first and manage everything else around it. (If this concept is new to you, I highly recommend reading about Profit First principles - it's a total game-changer for how you think about business money.)
Your lag-time bookkeeping system can't help you plan profit. It can only tell you what profit you accidentally ended up with.
Problem #3: The “Check the Compliance Box” Trap
When you outsource your bookkeeping (which, by the way, I DO actually recommend when the time is right), it becomes incredibly easy to feel like you're "handling your finances" without actually KNOWING anything about your finances.
You get that monthly report. You see that everything's been categorized and reconciled. Green checkmark, right?
But you have no idea:
How much you can actually afford to spend on that new marketing campaign
Whether you should invest in that business coach or wait a few months
If you're on track to pay yourself consistently this quarter
What your cash flow is going to look like next month
You're checking financial boxes, but you're not making strategic financial decisions. You're outsourcing your financial AWARENESS along with your financial TASKS.
Note: Some of the best accountants and bookkeepers out there have the heart of a teacher and an authentic desire to see their clients win with money. In these cases, they may put forth a stronger effort to keep you in the driver’s seat with your business financials. If you find one of those, cling to them. They are a powerful asset to your team. And the public accounting field needs more professionals like this. But the reason I advocate the way that I do is that this is still an uncommon find in the finance world. And I want you, the business owner, to be equipped to navigate all of this in spite of that.
Problem #4: High-Level Categories That Hide the Real Story
Most bookkeeping systems use fairly broad categories: "Marketing," "Professional Services," "Office Expenses," etc. These are perfect for tax purposes and getting a general sense of where money went.
But they're terrible for actually managing your money proactively.
Let's say your P&L shows you spent $2,400 on "Marketing" last month. Cool. What you actually need to know is:
How much of that was your email marketing tool vs. Facebook ads vs. those social media graphic templates you bought?
Which expenses were planned and which were impulse purchases?
What's your actual monthly marketing budget and are you sticking to it?
Which marketing investments are you planning to continue and which were one-time experiments?
The high-level view doesn't give you the granular insights you need to make better decisions going forward.
The CEO vs. Bookkeeper Mindset Shift
Your bookkeeper's job and your job as CEO are two completely different things.
(Even if you’re currently your own bookkeeper, THAT hat vs. your CEO hat are completely different.)
Your bookkeeper/bookkeeping system keeps track of what happened.
It’s largely about recording transactions accurately for tax purposes, categorizing everything correctly, reconciling accounts so everything balances, and preparing reports that show your [high-level, past] business performance.
That’s all important stuff.
But you, as CEO, decide what WILL happen with your money before it happens.
You plan your cash flow proactively, make strategic spending decisions aligned with your goals, and ensure you're building a financially sustainable business.
These require completely different systems and completely different approaches.
Beyond this, your Profit & Loss (P&L) Statement can only capture so much. It tells you how much you earned (income), how much you spent (expenses), and what, if anything, was left over (profit or loss).
An accountant can look at these numbers and spot trends and outliers, flag areas of concern based on variations from past performance or percentages out of the total, and maybe even recommend some ways to improve these numbers if they have enough context about your business.
But where do they get that context? You.
Your accountant’s analysis can really only be as good as the information they get from you about your own business.
Which means that you, the CEO, must still bear the responsibility of knowing the bigger picture strategy behind your business. You, the CEO, should be able to take the numbers that were given to you and apply them to the context of your circumstances that only YOU know.
To an accountant, the numbers may be shifting away from the norm. But to the CEO, the business is evolving and restructuring to better align with their values.
To a P&L, the spending might have increased in one area. But to the CEO, that spending represents an intentional investment into a different future.
Even if you’re doing your own books right now, you are not just a bookkeeper. You are the CEO, and you need to embrace and train yourself to manage your business’s financials like a CEO (not an accountant).
Eventually, the accounting stuff will probably be someone else’s job. (Or it’ll become so routine and semi-automated that it mostly slips into the background anyway.)
But you will always, for as long as you own your business, have to be able to think like the CEO.
What You Need Instead (The Two-System Solution)
If you want to stop feeling financially reactive and start making confident money decisions, you need TWO systems:
System #1: Compliant Bookkeeping - Yes, after all this, I will still tell you to have a bookkeeping system. This is still important. It tracks what happened, keeps you tax-compliant, and shows you business performance after the fact. Keep this. You need it.
System #2: Proactive Money Management - But THIS is what most entrepreneurs are missing. Your system for planning what you'll do with money BEFORE you earn it and making intentional decisions about every dollar that comes into your business.
System #2 is what transforms you from someone who "hopes the numbers work out" to someone who confidently knows exactly where their business stands financially at any given moment. (I teach my comprehensive approach to proactive money management in my course, Cash Flow Strongholds. Check it out!)
Your Next Steps
If you're reading this thinking, "Yikes, I’m so guilty of all of this," don't panic. You're definitely not alone, and this is totally fixable.
Start with these three things:
Don't abandon your bookkeeping system - you still need it for taxes and compliance
Start planning your money proactively - you can get started for free with the simple spreadsheet resources in my CFO Starter Kit, or learn my comprehensive and in-depth approach in Cash Flow Strongholds
Get involved in your financial decision-making - even if someone else does your data entry, YOU need to know where you stand and what you can afford
The goal isn't to become a "numbers person" or to spend hours every week on financial tasks. The goal is to shift from reacting to what already happened to proactively directing what happens next.
Because what I've learned after years of working with entrepreneurs: the businesses that thrive aren’t the ones with the top-notch bookkeeping systems. They're the businesses whose owners know how to manage their money intentionally, in real-time, without waiting for someone else to tell them what they can afford.
Your business deserves that level of financial intentionality. And honestly? So do you.
Ready to build the proactive money management system your business actually needs?
My Nova GPT can help you identify exactly where to start based on your unique business situation.
Think of it as your financial breakthrough assessment – designed to cut through the overwhelm and show you the simplest, highest-impact actions you can take right now.
P.S. - If this post made you realize you've been playing financial catch-up in your business, I see you. It's not your fault that no one taught us the difference between record-keeping and money management. But now that you know, you get to choose a different approach. Your future financially confident self will thank you.
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