Baking a cake involves certain ground rules and reading the recipe involves knowledge of the different sections that make up the recipe, and also knowledge of how to interpret them. We all know how to follow a recipe and I am quite sure that most of us can bake a half decent cake.
So why is it so many people glaze over when you mention the no no word "Double-entry"?
My guess is that baking a cake is something we all grew up with as opposed to lessons on how to handle finances.
I was certainly never taught disciplines like budgeting or bookkeeping at school and reading my company accounts is something I have had to master later in life as a small business owner. I do believe that the key word here is "master", that is, learning the rules that apply in order to be able to read the recipe, or in this case my company accounts.
If you're the type of person that glazes over at the mere mention of the subject matter, then learning this stuff is really not that hard. I didn't necessarily say that the subject matter was exiting but the information that is held in your accounts is so vital to running a successful business.
I learnt a lot from doing the bookkeeping myself early on in our business. I thought I was quite good at understanding accounts beforehand but there is no substitute for hands-on experience. I took a few Sage courses, asked advice from professionals and made sure that our Sage installation was kept up to date.
Looking at the information in our accounts on a monthly basis is something we have done from day one and I do believe that that has steered us clear of disaster many times. Like many others I have had to carry out the unpleasant duties that go with running a business, like getting rid of staff. I do believe I have been able to do this in a timely and responsible manner due to the fact that I knew what was coming.
Knowing the financial state of my business and constantly measuring against budget puts me in a position of power, where I can focus my efforts where they are needed most.
I am a visual person. Looking at graphs rather than numbers is much easier for me to get my head around. We have developed the software package Profit Manager which plugs into the company Sage database and present information to non-accountants in a user-friendly manner.
There is a free community version available, which I hand on heart believe can help many businesses out there. Knowledge about the state and financial health of your company is such a fantastic tool.
Visit http://www.profitmanager.co.uk/ for more information.
Andrew Neville
Business owner
Neville & Rowe Ltd
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