Do business owners need to understand accounting?

Helen Cockle

Never be ignorant of an aspect of your business - accounting for businesses is key

You don’t know what you don’t know. But your accountant does. They have a responsibility to help you connect to your business finances. Identify the gaps in your knowledge and have your accountant make you a forecast if you haven’t already. You can share this with your team so they understand personal and team goals.

Without getting involved in your finances, you have no way to monitor the effectiveness of your organization. By taking a real interest in this department, you’ll be able to keep track of your payments in and out and check your records are accurate. With the right accounting software, you’ll be able to manage the standing of your company in minutes. Including non-financial data will allow you to obtain a quick but thorough understanding of which aspects of your organization need attention.

How often should (small) business owners check their finances?

Sometimes the process of bookkeeping and accounting might fall to the bottom of a (small) business owner's priorities list, as there’s such a myriad of other things demanding their attention. If you’re delegating your books to one of your staff or even a family member/friend, you must have them maintain your figures either daily or weekly as so much can change in such a short space of time. Look into apps that can automate processes for the bookkeeper, as they’ll make tasks quicker and data secure and accessible.

If your accountant isn’t quite hitting the mark and you feel you need additional help with keeping on top of your numbers, it’s smart to seek out a Management Accountant (aka VCFO) that specializes in advisory services. They’ll be there to help you strategize your next moves so you can keep your cash flow – and revenue – looking healthy.

What information (key performance indicator) should you be tracking - identifying key performance indicators?

You need to have a look at the way your company operates and choose some key aspects to measure. Depending on your industry, a key performance indicator (KPI) will differ. Key Performance Indicators (KPIs) – we prefer to call them Key Predictive Indicators because no business should just review past performance – will set you up well. KPIs are metrics that could see the difference between your business failing or succeeding.

It’s your business, so you as a (small) business owner must understand your finances to improve your decision-making about the future and your bank account. That doesn’t mean you have to learn all about small business accounting or fulfill that role. It is much better to work in collaboration with an advisor – they are a sounding board too.

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