Saturday, 19 September, 2020

New business: why accounting should be a priority


New business: why accounting should be a priority

Many businesses, when they are there at the beginning of their life, have to deal with a series of decisions, a series of hires, services, bureaucracies, contracts, everything is very expensive and there is a very strong trend, very clear for the entrepreneur to want to save in all services there at the beginning. And one of the services that are normally hired based on the economy, is the accountant’s service or the company’s accounting, after all, the business is small, not very complex, we don’t need to hire such a complex service, right? That’s where a lot of entrepreneur is wrong, why? That’s where that deaf-mute relationship is born between entrepreneur and accountant.

Because the entrepreneur doesn’t understand accounting, hire an office for the lowest price available on the market, this accounting office doesn’t understand anything about the business and will prepare a standard accounting, based on what the firm does for other entrepreneurs who also hire a simpler service, and what is born of this relationship is poor quality accounting information, that is, that report that is sent to you, that the accountant says: “Sign at the end” and is returned to him or filed somewhere only for accountability and tax purposes. In practice, what are we wasting? Wasting valuable information of values that correspond to the company’s value or the evolution of the market value of your business, price evolution of what would be the negotiable share of your business, for example, do you want to market part of your company’s capital with an angel investor, with an investor that brings resources to be able to expand your activity, only with very transparent, very precise numbers that you will be able to make this negotiation.

Without numbers, there is no way for someone to evaluate your business. For example: If you don’t have clear accounting, you will not have a well-prepared budget, a clear budget, you don’t know where you’re going. So you have no way to anticipate, there is no way to foresee problems that will happen. Clear accounting gives us a condition to manage the business routine more accurately. It is not that you will have to follow more the numbers every day, it’s not that you will have to validate your budget almost daily. You will need to dedicate time to your business, but the more accurate the information, the easier it will be to remove key elements, indicators that will show if the business is on the right track or if you’re losing track. Learn also about

Who can prepare these numbers for you? Preferably, your accountant, one who has the technique, who masters all the tools in order to have a good reading of your company. If instead of hiring the simplest service that the accountant has at his disposal, you hire a more consultative service, maybe with a quarterly meeting with him to fine-tune some things, you will have more accurate information of what your company is in financial terms. With this more accurate information, it will be easier to calculate some indicators or even your accountant can prepare for you a management report of the main indicators, to know, for example, if the company’s debt is increasing, if the cash level is falling, if you’re losing inventory efficiency, for example, anticipating a problem that would certainly happen in 3 or 4 months. With a good reading of the numbers, you have more efficient management. I usually say that running a company without good financial reports it’s like flying an airplane without a control panel: A plane flies, it takes off, it lands, but with the wear of the parts, the passengers, the pilot or commander, much larger than it would be on an instrument flight, with radars, with a very high precision.

You can be efficient and have less suffering in your company’s history, mainly, wasting less time. Have you ever heard that entrepreneur story a lot of time trying to solve the financial cucumbers, negotiations with bank, with creditors, why do you have to solve this week’s lack of cash? This entrepreneur is not listening to your consumer, is failing to pay attention to routine problems of your team, the flow, the logistics of your business to resolve financial issues that could be avoided with better management. Value the numbers, when making a decision, do the math, do the investment appraisal whether or not it is worth expanding a line of business, expand to a branch, open a business in a new square. These are situations that often do not pay, but that many entrepreneurs advance because they simply have to occupy the market, have to weaken the competitor, you have to increase your market share.

From a marketing perspective, commercial point of view, perfect, but if your routine is to make decisions influenced by market share, influenced by market share, it’s like that worker who starts his routine doing some overtime at the beginning of the career, and become a workaholic, that is, it loses health, it loses efficiency. An efficient business, yes, from time to time you will have an analysis that indicates to sell a certain product line, result in losses on that product line.

You can consciously identify an opportunity to increase its market there, increase your service and use a portion of your marketing budget to cover that inefficiency, as long as it is conscious. This cannot be the rule in your business. So the secret to good business: Reliable numbers, well prepared reports, a closer relationship to your accountant that, mainly, for a small business, can play the role of manager or chief financial officer so that you have the valuable information in your hand. It is the basis for you to develop other financial skills much more interesting on the floor of your business coach. May you be very successful in business.

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