Bookkeeping is table stakes for all companies. For a growing business, it’s not enough.

Solopreneurs and microbusinesses, from an accounting perspective, have fairly simple operations. There’s not much in the way of receivables or payables to accrue, there’s often no staff to manage, and the number of sales/service lines are usually few and far between.

As such, there’s not much need to dig deeper into the numbers or for rigorous forward-looking planning. Making sure transactions are properly recorded and classified will suffice in most of these businesses.

If your company has grown beyond this level, though, bookkeeping alone will not get you to where you want to go. By its nature, bookkeeping and month-end reporting are backward-looking, and while it’s important to know where you’ve been, this only tells you a part of the story.

To get a grip on the complexity of your business environment, financial planning and analysis (FP&A) is also strongly encouraged. What does FP&A entail?:

• Cash flow forecasting (“Will we have enough money to cover payroll next month?”)
• Scenario planning (“How are we affected if [x] happens?”)
• Annual budgeting and long-term planning (“Where do we want to be in three years and how do we need to allocate resources to make it happen?”)
• Key performance indicators (“Which activities lead to financial success and how well do we do them?”)
• Management dashboards (“Can I see all my important metrics in one place?”)
• Profit forecasts (“How viable is our business model in the coming months and years if we keep doing what we’re doing?”)

While bookkeeping provides the source data for these activities, it cannot tell you on its own where you are going and how to change course, if necessary. A strong FP&A function can mean the difference between achieving your business dreams, or closing up shop.