Now, I’m not meaning the old, “Oh yeah, the accountant deals with all of that”. That’s a recipe for disaster, no matter how competent or amazing your accountant it.
Because accountants are trained to be accountants and compliance officers. True story. And what does this mean?
It means that no-one knows your business as well as what you do. And it also means that it isn’t their job to advise you on whether you’re about to have a good month or a bad month. They will generally be reading your profit and loss, making sure the boxes are ticked and their job is done. And you can’t expect them to do anything other than that, because it’s not what they are trained to do!
So what is it exactly that you need to know?
It is beyond important, that you know your work in progress numbers monthly… not yearly if you are in construction or a trade where client payments are in stages and your invoices on that job are consistently coming in.
Ever heard of the builder that went broke? (Yep, we all have). Generally this is because he thinks that the big lump sums of money in his bank is his – and not his suppliers and he spends it. And this is because….
HE OR SHE DON’T KNOW THEIR NUMBERS!
You need to know the basics – How to read a profit and loss statement.
You will also need a budget in place, not only professionally but personally.
If you don’t know how to do this, and many people don’t, ask your accountant to show you. In relation to work in progress, this can also be shown to you by your accountant. And if your accountant tells you that you don’t need to know work in progress monthly, send them to me and I will explain that you DO! Going into business is the easy part. The hardest part is keeping control of every single aspect of your business. However, if you can only grasp but one or two major things in business to succeed, your numbers is one of them… and your sales process is equally as important. More about that in my next blog!