Real Talk. Most people do not wake up in the morning and exclaim, “Alas, the sun hath risen, a new day breaks! Bookkeeping awaits this day!" Notice I said “most.” There are outliers, they are known as… nerds (like me). But back to the point, accounting is not usually the pinnacle of your day/week. In fact, most entrepreneurs I have talked to expressed their disdain for accounting. If there is so much dislike for this… why do we do it? Must be important right?
So the question I want to ask is: should you care about the accounting in your business?
Short answer. Yes.
Long answer. Yes you should.
Why, you ask? Great question. First let’s provide a quick definition of accounting. Accounting is basically the measurement and communication of a business’s financial activity. So accounting is not just for tax purposes… although that is an important reason to do it. I like to think of accounting as the vitals of a company. The accounting numbers show how healthy or unhealthy your business is. By knowing the health of the organization, you can make more effective business decisions. In contrast to this, think of your own personal health. Doctors (or you yourself) can make effective decisions about your health if they know certain vitals. The same concept applies to businesses!
These financial numbers can help you make effective business decisions. In fact, that is one of the primary reasons for accounting. The accounting can help you determine which areas are profitable, what expenses to cut, and when to feed the dog (just seeing if you were still paying attention). There are a plethora of uses for these numbers that can help your business thrive.
For real examples of some entrepreneurs who should have cared, check out this NY Times article. http://www.nytimes.com/2011/08/04/business/smallbusiness/a-few-accounting-essentials-are-crucial-for-survival.html?pagewanted=all&_r=0