The Accounting F Factor

This post has been kindly contributed by Kate Groom of Starfish Consulting.  Connect with Kate via her website.

Owning a business can be a great way to gain control of your financial future, but the business controls us if it isn’t performing as we’d like it to.

Many business owners give up control of their business when they stop (or perhaps never start) looking at their results. Lack of money confidence often leaves the accounts as the unused key to greater rewards.

Having conversations about profit is not always easy. Unfortunately – and unnecessarily – lots of people are afraid of their accounts and become defensive when faced with a conversation about performance.

For this reason, I was excited to hear that the goal of a participant at a recent workshop was to become friends with their accounts.

So how can we do this? Here are some tips:

  • Have goals for sales, expense and profit. This gives something to review against and helps keep focus on where you are heading.
  • Review results regularly – once a quarter or once a month, depending on your business. This helps you get familiar with the process and the numbers and to see patterns.
  • Get an understanding of financial basics: what is breakeven, why profit and cash are not the same (and your bank balance is not how much you have to spend), why no one wins when your accounts don’t show the operating results of your business, how to plan for investment and growth.
  • Use questions that direct attention to ‘How can we?’ and ‘What next?’ rather than focusing on what happened.

Over time, building familiarity and understanding will take away the fear factor and help make accounts a powerful ally!