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I’ve been exposed to the corporate environment for over ten years, and only recently joined 118Accounting – a cloud accounting start-up. 

Many people say that they are not numbers people or that they just didn’t understand the numbers. “Leave it to the bean counters”, they said. What really stands out to me is the number of directors/executives and department heads that have the same philosophy. There are a few critical elements to running a successful business/business unit/department, and one of them is the “numbers”. For a corporate, this mindset may not have an immediate or major impact, because there is a finance department and financial manager/Director. For an entrepreneur who does not have the luxury of access to a finance director – it would surely be catastrophic to ignore your finances.  

Don’t let historical experiences shape your business.  

For most of us, there is an underlying reason why we are averse to certain subjects in school that have carried forward into our adult lives. For me, it was history and for many small business owners, it was accounting or mathematics. A bad teacher or a bad grade has created a mental block. Deal with the block, get your head out of the sand and focus on your finances – you cannot afford not to!  Don’t let a lack of financial literacy sink your dreams, take control of your finances and grow your business, and insights in doing so.  

Being an accountant and understanding your business finances are two different things! 

The good news – you don’t need to be a numbers person to understand your business finances, but you do need to understand your business’s finances to be a successful businessperson.  

An accountant will organise and summarise your financial and non-financial transactions (data) according to principles and rules governing the accounting profession. In many ways, this can be confusing and technical for the small business owner.  

For the entrepreneur, understanding your business finances is less about the technicalities and more about reality. These are some of the challenges that an entrepreneur faces daily, which can often cause stress at work and even at home. Not knowing is frustrating and causes indecision, which inevitably will lead to bad decisions. Just having visibility of the below items will put you in a position to make some meaningful decisions.   

• Knowing how much cash is available 
• Knowing how much, and who owes you money 
• Knowing how much, and who you owe money to 

At a very basic level of financial literacy, you can now 

• Have a better understanding and view of your cashflow 
  • Track your daily and monthly expenses 
  • Have a view of what your weekly and monthly commitments are 
  • Have a view of how much cash should be coming in   

Bridging the gap and taking control 

I’m not saying that your accountant is not useful to you, but you do need to know which information adds the most value to your business, and where to get it from. Can you generate this information yourself, or do you need your accountant to give it to you? There is no quick fix to financial literacy, and like anything else that’s worth doing, it takes time and effort. But it is possible and certainly worth it.  As your business grows, so will your knowledge on your business’s finances.  

Follow this blog over the next few weeks where I will be covering some of the steps to follow to build your financial literacy, and strengthen your businesses finance control:  

• Get off spreadsheets, and into the cloud! 
  • Pitfalls of accounting in spreadsheets and shoebox accounting 
  • Benefits of having accurate records 
  • Costs vs. benefits 

• Keeping track of your finances 
  • Defining a weekly and Monthly accounting process 
  • Tools that make accounting for entrepreneurs and SME’s easier 

• Setting up a basic accounting package 
  • How easy Xero really is! 
  • What you want and what you need 
  • What you put in is what you get out (GIGO)