It’s the scariest time of the year. With Halloween just around the corner, many people are facing their fears, whether it be goblins, ghouls or your kids eating too much sugar. But what you might not be thinking of is accounting. Or, more importantly, the fear that lack of accurate and correct financial data can cause.
Yes, I know numbers can be scary. Trust me, as the non-numbers person in an accounting world, I understand your trepidation. However, without useful data and accurate financials, your company could be in for a world of hurt worse than your “I just ate all the Halloween candy in one sitting” gut ache.
Here are four scenarios we commonly come across and the truth (or trick) behind them:
1. I don’t need accounting staff. I can do it all by myself.
TRICK: You’ve branched out and started your own business. You’re now your own boss and you can do it all! Right? Wrong. We often see companies who attempt to do it all on their own. The result? They have books they don’t understand and end up just entering numbers into a spreadsheet without making sense of them.
The problem with this is two-fold. One, it’s frustrating. When you don’t understand the basic financial state of your organization, let alone how much money you’re making (or losing), it can be hard to run a business. Second, solid financial data is essential in understanding where your business is currently and where you’re hoping to go in the future. Plus, potential creditors, investors and buyers like to see the numbers.
The solution? Hire qualified accounting staff. Ideally, this will be at least two people (possibly more, depending on the size of your organization): A bookkeeper to handle the day-to-day administrative financial functions of your organization and a controller/CFO/senior level financial professional to give you strategic direction and guidance. Don’t have the resources right now to make the hire? Outsource it.
2. My books show I’m profitable, so I must be in good shape right?
TRICK: Just because your books say there’s money coming in, doesn’t mean that you’re in the clear. Cash flow and profit are two different things. You need to keep a watchful eye on your company’s inflows and outflows, as well as your investments, purchases, etc. That’s why it’s important to take a look at your finances more than once a year. Ideally, you should be reviewing your financial statements monthly to ensure you not only understand your current situation, but also potential pitfalls to avoid.
3. I like to benchmark myself to ensure I’m keeping up with my competition.
TREAT: Benchmarking is an excellent way to keep tabs on the health and wellbeing of your company. It can help you assess performance and see how you compare to your peers. Further, it can help you gauge your current status and implement changes to help grow your organization.
Bonus tip (don’t you love getting two pieces of candy?): Not only should you be benchmarking your organization, but you should also be forecasting. This essentially means mapping your future into something banks and potential investors can relate to. Think profitability, growth rate and future capital needs.
4. I only meet with my accountant once a year … at tax time.
TRICK: Yes, it’s essential to see your accountant at tax time. After all, we all have to do taxes. However, by only seeing your accountant once a year, you’re missing out on the other services they can provide, including tax planning, reviewing your financials and helping you plan for the future.
The numbers may scare you and the subject may make you cringe, but a good accountant will help walk you through your financial data and ensure that you have the information you need to make decisions now and in the future for your organization.