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This lent: repent your messing with accounts and get sorted

There is a lot to be said for an owner manager who has the courage of conviction of setting up their own business. A lot of business owners will describe the initial sense of excitement as they work on implementing their usually long held dream of working for themselves.

As the potential financial rewards accrue to the owner the long hours that may be required don’t deter. Quite quickly it can become a non-stop whirlwind where you are trying to generate sales, meet new potential customers, write proposals, deliver products or a service and issue invoices. And let’s not forget – get paid for your endeavours.

You will definitely be busy and have a feel good factor from that sense of importance as you make executive decisions and sort out problems all in the name of your business. At the end of each day and each month you will testify on the hours that you have put in and how busy you have been.

However how have you actually performed in terms of earnings? For all the running and racing has it been worth it and have you actually made any money? Are you better off now than when you were on PAYE?  That’s where your accounts come in. Accounts show your results in black and white in a cold, unemotional way.

Benefits for a non-accountant owner in understanding your accounts:

  • Better and quicker decisions can be made in the operation of the business
  • You know which product or service is making you money
  • You can make more informed decisions when it comes to doing deals
  • Operating with certainty as to whether you are getting close to your goals
  • Confident and professional approach should permeate your business
  • You will have better cash management
  • You are not operating in a haze of delusion
  • You don’t look like an imbecile in front of your bank manager a la Dragons Den

Problems where the owner manager doesn’t understand accounts so well can lead to:

  • Poor business decisions made on the hoof
  • Operating blind on no more then a wing and a prayer
  • Loss making products or services  not identified in time
  • Business will appear to staff and customers unprofessional
  • Cashflow problems

Unnecessary stress which feeds into performance of business and in some cases personal relationships which can lead into a black vortex of personal pain and misery (in some cases)

The Beauty of Accounts

Accounts should represent your intuitive expectation of the performance of the business. If they do that’s great as they show that the owner manger understands his income and associated costs.

If they don’t, then the accounts once understood can show the owner manager the true picture and where the discrepancy in understanding arises. If an owner expected a larger profit then that shown or just a profit instead of the actual loss the expenses the accounts show may not have been fully taken into account when it came to pricing product.

If the owner waits a full year before becoming aware of this they may be in a very serious negative situation whereas the quicker they become aware of this and make the appropriate actions they can change things for the better.

With the required skills however they can operate in the confidence and knowledge that the figures are adding up which gives certainty to decision making process and at least a semblance of structure to the business which will remove one less worry. Time to get sorted.

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This post is part of the SugarTone: Sweet Business Blogging Contest.

Patrick is a qualified Chartered Accountant and a qualified Financial Advisor, he is also a member of the Institute of Taxation Ireland.

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  • Fantastic post Una. I’m sure this will open the eyes of many business owners.
    It took us some good time understand our pricing structure (not because it’s complex but because it was time consuming putting all the service quality bricks in the right place) and also “quality Vs premium”.
    As you suggested, we figured it out as you suggested: analising our competitors but especially leading companies in the same field abroad. This was crucial for us. An good exercise that I recommend to every business owner…

  • Anonymous

    Don’t forget to get an understanding of your prospects budget as well.
    The best pricing model in the world won’ get you far unless they have a budget to match.

  • Hi Una. Excellent post as always. Competitor analysis plus review of our value proposition has given us our pricing model for when we launch.

  • Anonymous

    Many thanks to all for your contribution and retweets. Keep them coming. Add some of your own experiences.

  • Una, add this post to your others and you are now starting to develop a really comprehensive series. I’d love to hear your opinion but pricing is one area where I believe many businesses get it wrong? I can think on one example of a start up that priced its product way too cheaply at the start in an effort to gain some market share (Ireland) This strategy worked for a period of time but eventually came back to bite the company hard, as the lack the margin didn’t allow them to reinvest in the biz so as to support lots of new customers. The damage that was done to their reputation was unfixable in the short-term.

  • Anonymous

    Great post Patrick,
    Many of us business owners shy away from the cold hard facts and look at our business through rose tinted glasses. So the need to find an accountant that you connect with, trust and meet regularly is vital.

  • Well, I’m an accountant that is also running a business. Until about 7 years ago I was “just” an accountant but then I moved over to the dark side and am now doing sales as well. Culminating in also running I remember the easy way it was to be prudent but also now recognise the client’s view when given the hard facts. I completely agree that everything has to be calculated and shown so they know where they stand. Progression can start from there. I hope everyone does take heed and get a good accountant to help in their endevours as they are very worthwhile – I know from both ends of the equation.

  • Anonymous

    It can be tough to take a look at one’s accounts because there’s a fear that it will take the romance out of the business. It’s funny how we assume that the information will always be negative. There are times when our instincts are spot on and we get it right. However, you can’t run your business on instinct forever. At some point, you have to add in data to see if you’re in synch with your business vision and plan.

  • Hi Patrick, it’s my opinion that you cannot take a good small business decision unless you are tuned in financially. Ignoring the situation will merely lead bad decision making, Thanks for the reminder! Niall

  • you are singing my song patrick! well done

  • Great article about the financial side of business. Thanks!

  • Patrick

    Thanks guys for your positive comments for my tentative foray into blogging.

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