Do business owners need to understand accounting?
Never be ignorant of an aspect of your business
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 their personal and the team goals.
Without getting involved in your finances, you have no way to monitor the effectiveness of your operation. 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 your business’ standing in minutes. Including non-financial data will allow you to obtain a quick but thorough understanding of which aspects of your business need attention.
How often should you check your finances?
Sometimes bookkeeping and accounting jobs might fall to the bottom of your priorities list, as there’s such a myriad of other things demanding your 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 specialises in advisory services. They’ll be there to help you strategise your next moves so you can keep your cash flow – and revenue – looking healthy.
What information should you be tracking?
You need to have a look at the way your business operates and choose some key aspects to measure. Depending on your industry, these 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 must understand your finances to make the best decisions about the future. That doesn’t mean you have to learn it all or fulfil that role. It is much better to work in collaboration with an advisor – they are a sounding board too.