Many successful entrepreneurs view the accounting function in their business as an important investment. I know what you are thinking. Of course he is going to say that, he does accounting! Don’t take my word for it. Take a poll of some of the most successful entrepreneurs you know and ask how they value the accounting function in their business. I guarantee most will tell you it is extremely important. Why is so important and how can it help you grow? I’m glad you asked…
1) More Informed Decisions
If you are making money, you are in business. If you stop making money, you will be out of business. At the end of the day, the financial health of your business determines whether you will succeed or fail. Given that, don’t you think it is rather important to have a strong financial understanding of everything that is happening in your business?
Having a strong accounting function can provide this level of information. Having that information at your fingertips at all times will help you to make better decisions that will positively effect the financial health of your business. Your business is like a car driving down the road. You need to make sure the car is running properly and that you are focused on the road. You don’t close your eyes when you drive right? Make sure you are keeping your eyes open when you are running your business. Having a strong accounting function can help you with that.
2) Proactive vs. Reactive
Simply reacting to what’s happening in your business can be a scary thing. Not knowing what’s coming can lead to making poor decisions. If you have your accounting under control, you will be able to plan ahead and be proactive. Proactive companies grow more than reactive companies. Plain and simple.
3) Do You Need Financing?
Have you ever tried to get a loan or raise capital for your business only to get denied because your records were a mess? Or maybe the bank was looking for something specific, but you did not meet the criteria? If you have a strong accounting function, getting a loan or raising capital becomes significantly easier. Now, you still need to have a decent business but having poor financials will immediately limit your chances. You can also be planning ahead if you know what the bank wants to see. But the only way to do that is to monitor your financial situation closely and adjust accordingly.
4) Future Costs
Many times, bad accounting can lead to increased costs in the future. Trying to clean up the books for the past 3 years will probably end up being more expensive then if you had someone doing it all along. And to top it off, you could have had financials in front of you every month! Also, if your books are a mess, your tax preparation fees are going to be higher. If you can present cleaner books to your tax accountant, you should be able to negotiate a lower fee.
5) Selling Your Business
For most business owners, selling their business someday is a huge part of their retirement plan. Wouldn’t you want to maximize that asset and ultimately your payout? I can tell you from talking with friends in the Mergers and Acquisition space that a bad accounting department will deter buyers from buying the business or lowering their price. You do not want to deal with that headache after all the blood, sweat and tears you have poured into your business. Do yourself a favor and get things right now, so that you can maximize your profit when you exit.
Conclusion
Bottom line is, if you want to maximize the growth of your business, you need a strong accounting function.
How has your accounting function helped grow your business?
