Three Reasons Accounting is Important for Entrepreneurs – What You NEED to Know!

Accounting; I know, the word alone can make you cringe. For anyone who considers themselves not a “numbers person”, accounting can feel overwhelming and impossible, and it may even debilitate you from starting or elevating your business.

This is how I feel about marketing. I think - can’t I just hire someone? I am good at what I do and that is where I want to spend my time. Let someone else take care of that so I can focus on this - what I’m good at and growing my business!

Of course as with anything, you absolutely can hire someone to take care of your accounting needs. HOWEVER, whether you consider yourself a numbers person or not, in order to be empowered within your business, run it successfully and create profit, you do need to understand your business finances! Yes, even if you have a bookkeeper. Plus, if you are a startup you may need to keep your costs down, which is much easier to do if you know how to track and evaluate them.

Here are three simple reasons accounting is important for you as an Entrepreneur:

You will know your business’s profitability

Many of my clients often have an idea how much money they are bringing in but are not keeping track of what they are spending; therefore, they have no idea of the cost to operate their business and what their bottom line is. How can you know if you are actually making money if you don’t know how much you are spending? You can’t. All businesses have expenses, and since profit equals revenue minus expenses, it is very much in your interest to have your thumb on the pulse of your spending. If you are keeping track of your money, coming in and going out, you will know if you are losing money or making money. You want to know this information sooner rather than later, so you can strategize accordingly to optimize your business. This brings me to my next important point.

You will make better business decisions

Knowing your expenses is not only going to tell you how much profit you are making, but it is also going to help you make better business decisions. Your numbers tell a story and can help lead you down the path of profitability. Let them guide you to keep your focus on what is making money and re-direct or exclude what is not making money. If you are not making money then you can re-assess the price of your service. Is it too low? Or are your expenses too high? Is there somewhere you can reduce your cost? You need your accounting information organized and up-to-date to be able to evaluate your business profitability, and when you do start to grow your business, accounting information will help direct you where you need to go.

You will position yourself to make predictions

Understanding your accounting is important when you are spending money up front, like buying inventory, to generate your revenue. Do you have enough cash flow for your next purchase? Accounting knowledge can assist you in making predictions for your next inventory purchase, as well as guide you when marketing your next product or service. Predictions can also be used to generate your next month’s or next year’s profit. Predictions will really come in handy when you are wanting to budget your next year’s income, which is always a good practice, so you can stay focused on your goal and keep in line with how much you are spending. Predictions also will be important if you are ever looking to borrow money, as lenders will want to assess whether your business is financially sound.

Remember, in order to run a successful and profitable company, measuring costs and relating them to ALL activity is the key to making solid progress in your business. Also – and how can you forget …entrepreneurs must keep all business records for tax and legal purposes.

If you found this article helpful, you will enjoy this useful FREE GIFT – Accounting & Setting up for Success! 3 Simple Steps I have prepared for you.