Accounting: Not Just for Bean Counters Anymore
Let me start this letter by telling you that I was a CPA and CFO. After building and running the company for the past five years, I am convinced that in addition to having a decent idea, the entrepreneurs who really succeed also have a firm understanding of three things: how to identify and serve a market, how to sell and market to their customers, and how to hire and motivate people who can grow their business. While accounting is how you keep score in business, being an accounting expert is not necessary for success.
That said, you can’t run a business and be ignorant of accounting basics either. By now you have probably heard the analogy that running a business without knowing the numbers is like running a baseball team without knowing the stats for each player. The good news is that you don’t have to be an expert in order to produce all of the information you need to make better decisions. All it takes to get meaningful numbers are the following:
- Recording transactions accurately and in a timely fashion
- Getting a professional (e.g., bookkeeper or accountant) to make “adjusting entries” every month so that your books are correct and reflect accounting principles
- Producing monthly financial statements and other key reports. Note: If the first two steps are done, this step is as simple as a few clicks of the mouse in your accounting program.
By the way, I have seen $5 million businesses with awful accounting practices and sub-$1 million businesses with fantastic practices. While size doesn’t matter, there is a correlation between better-run companies and better accounting practices. And while a better-run company is not the sole driver for success, it is a big factor.
So while you might find the subject matter somewhat dry, I encourage you to check out our special section on accounting and taxes. Leaving the number crunching to the experts (your accountant) is a good practice; not being aware of your business’s score is not.