When Your Business Outgrows the Way You Used to Do Things
There are a lot of things that make perfect sense when you're starting a business.
You do your own invoicing.
You answer every phone call.
You keep track of customers in a spreadsheet.
Maybe your spouse handles payroll.
And maybe a friend or relative who knows a little about QuickBooks does your bookkeeping.
There is nothing wrong with any of that.
In fact, when the business is small, keeping things simple is usually a good idea.
But then the business grows.
You have more customers. More transactions. More employees. More bills. More money moving through the business.
And eventually, some of the things that worked when you were getting started don't work quite as well anymore.
That's not necessarily a problem. It may be a sign that your business has grown.
The Business Changed. Did Your Systems Change With It?
One of the strange things about business growth is that it usually happens gradually.
You don't wake up one morning and suddenly have a completely different company.
You add a few customers.
Then an employee.
Then another service.
Revenue increases.
There are more bills to pay and more invoices to collect.
Little by little, the business becomes more complicated.
But the systems behind the business don't always grow at the same pace.
The spreadsheet you created three years ago is still there.
The owner is still approving everything.
The same person who helped with the books when there were 50 transactions a month is now trying to keep up with 500.
That's when something that used to be perfectly reasonable can start creating problems.
Bookkeeping Is a Great Example
This happens all the time with bookkeeping.
When a business is small, the bookkeeping needs may be pretty straightforward.
Categorize transactions.
Reconcile the bank account.
Send a few invoices.
Pay some bills.
Run a Profit & Loss statement.
Someone with basic bookkeeping experience may be perfectly capable of handling it.
But as the business grows, the questions usually get more complicated.
Now you want to know:
Why did profit decrease even though sales increased?
Why is there less cash in the bank when the Profit & Loss shows a profit?
Which customers still owe us money?
Can we afford another employee?
Are our margins getting better or worse?
How much should the owner be taking out of the business?
Which part of the business is actually making money?
Are there problems in the numbers we're not seeing?
At that point, you're asking for more than bookkeeping.
You're asking the financial information to help you run the business.
That's an important transition.
Signs You May Be Outgrowing Your Bookkeeping
You don't need to change accountants or bookkeepers simply because your revenue crossed some arbitrary number.
A $1 million business can have relatively simple books.
A $300,000 business can be surprisingly complicated.
The better question is whether your current bookkeeping process still gives you what you need.
There are a few signs that it might not.
You don't completely trust the numbers
You get financial statements, but you're never quite sure they're right.
There are old balances sitting on the Balance Sheet.
Accounts don't reconcile consistently.
Transactions pile up in QuickBooks.
Or you find yourself saying:
"I know QuickBooks says that, but..."
That's usually worth investigating.
You get reports but don't know what they mean
Having a Profit & Loss statement isn't the same thing as having useful financial information.
If you receive reports every month but can't use them to answer basic questions about profitability, cash flow or the health of the business, the process may need to evolve.
The books are always behind
When bookkeeping consistently happens weeks or months later, the numbers become historical information instead of management information.
Finding out in August that something started going wrong in April isn't nearly as useful as seeing it in May.
The owner is still the system
This one goes beyond bookkeeping.
If every process still depends on the owner remembering something, approving something, checking something or fixing something, growth eventually gets difficult.
A growing business needs systems that work without everything living inside the owner's head.
You're making bigger decisions
Hiring an employee when you have $20,000 of revenue is different from hiring one when you have $800,000.
The decisions become bigger.
So do the consequences of getting them wrong.
As the stakes increase, better financial information becomes more valuable.
This Isn't Really About Bookkeeping
Bookkeeping is just one of the easiest places to see this happen.
The same issue can show up everywhere.
You may outgrow your payroll process.
Your scheduling system.
Your CRM.
Your pricing.
Your insurance coverage.
Your inventory process.
Your marketing.
Your organizational structure.
Even the way you spend your own time.
Something doesn't have to be bad for you to outgrow it.
That's an important distinction.
The question isn't:
"Was this a mistake?"
The better question is:
"Is this still the right way to do it for the business we have today?"
Those are very different questions.
Growth Changes What “Good Enough” Looks Like
A system can be completely appropriate at one stage of a business and completely inadequate at another.
That doesn't mean you need expensive software, complicated processes and a team of consultants every time revenue increases.
Usually, simpler is still better.
But the definition of simple changes.
A good system should make the business easier to understand and easier to operate.
If the system itself is creating confusion, delays, duplicated work or uncertainty, it may no longer be serving the business.
One Question Worth Asking
Every once in a while, look at the way your business operates and ask:
Are we still doing this because it's the best way to do it — or because it's the way we've always done it?
Start with your bookkeeping if you want.
Then look at payroll.
Billing.
Collections.
Software.
Pricing.
Vendors.
Employee responsibilities.
And your own responsibilities.
You probably won't need to change everything.
You may not need to change anything.
But you might find one or two processes that made perfect sense for the business you had three years ago and don't make nearly as much sense for the business you have today.
That's not something to be embarrassed about.
Quite the opposite.
Outgrowing the way you used to do things is often one of the clearest signs that the business itself has grown.