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The first and most significant benefit of understanding how your accounting system works is that, as discussed in my other Note about sales and billing, I would contend that any conscientious business owner would wish to have an extremely detailed knowledge of their fiscal position and projections. The whole point of being in business is to generate profit, often the sole means of the business owner maintaining their lifestyle. Even if your business is just a sideline, the effort which is expended in setting it up and running it must come with a tangible benefit beyond the simple satisfaction of its success, thus generating an income either primary or as a part time venture.
And if a business owner has a very limited grasp of their financial position it does rather undermine the whole point of having your own venture. If an income, with a primary or as a sideline, is the main motivation for running your own business it makes little sense to have limited understanding of this aspect of being a business owner. You might as well just work for somebody else and have them pay you accordingly and leave the headaches of running a business to whoever is writing out your pay-cheque.
This is not just about ensuring that the business does not diverge towards insolvency, but also about how you can get the best returns for the effort you put in. I work with many people and very often able to substantially increase their income with some quite minor adjustments to how they operate, but which they had been completely unaware of due to not understanding how accounting works.
But, let’s say you do understand your bookkeeping, whether or not you have someone else actually manage the books for you, as I do, there is an additional and although slightly less important nonetheless well worth considering advantage of having a solid accounting system. And that is that it can significantly reduce the mental overhead and overload of having your books poorly maintained, leaving you adrift in a sea of paperwork with sleepless nights and unnecessary stress.
Many aspects of maintaining a business are stressful and pressured, and some simply cannot be avoided. So why would anybody want to add to this with additional stress and pressure which can easily be alleviated? Leaving the business owner free to concentrate on more important aspects of starting, growing, and enjoying running a successful venture.
As with my other Note about sales and billing systems, this isn’t really the place to discuss in any great detail exactly how to go about it. Rather it is to bring it to the attention of business owners who may not have considered the benefits and advantages of a streamlined and effective accounting system. The solutions for this are many and varied and it will depend on a huge number of factors as to which might be best for you. But it is my experience working with hundreds of business owners over the last 40 years that many of them see it as quite low on the list of priorities and don’t realise the damage it does to their business, their own well-being, and the advantages which resolving the issue can bring to them pretty much with immediate effect.
So give some thought to how you have your accounting and bookkeeping arrangements set up. You may feel that there is no margin to improve what you have in place. However, again, based on my personal experience, I have met very few business owners who couldn’t make quick and easy improvements to their accounting system and enjoy immediate and noticeable benefits. It generally tends to be around simply not knowing what alternative arrangements are open to them. They are often ploughing a furrow of assuming they’re operating as efficiently as they can without realising what options they actually have available.