Almost every entrepreneur hates numbers. This is something that most entrepreneurs have in common. Most entrepreneurs go into business to pursue interesting life and work goals and that usually does not include accounting. However, basic accounting skills are necessary for running a successful business. This is a hat that entrepreneurs need to make sure fits, even if they never wear it.
All entrepreneurs should have some basic accounting skills. Basic accounting skills include budgeting, recording business income and expenses, monitoring cash flow from operations, managing accounts receivables and payables, payroll management and financial forecasting for financial projections. Tax preparation is also part of basic accounting skills.
Any entrepreneur can easily get an accurate picture of how his or her business is doing with basic accounting skills. An accurate picture is also important for preparing taxes and longer-range financial planning that will help your business grow.
These basic accounting functions become more complex as your business grows. Many small business owners identify that their top accounting challenge is collecting receivables. Payroll preparation is another arduous task. Many small businesses outsource this function to an accountant. I will discuss outsourcing accounting functions in a follow up article because there are benefits and some detriments in doing so.
Entrepreneurs are usually hyper-focused on developing and launching their product or service and have little time for accounting. However, entrepreneurs should be aware that it gets harder to make informed decisions based on what your numbers are telling you if you don’t understand what you are looking at. As an entrepreneur, developing a fundamental and basic understanding of accounting is a skill that will serve you well going forward. Make sure you also hire a good accountant to help you compile and file your taxes. That will also make your life easier.
About the Author – Christopher M. Basile holds a Master’s in Accounting from Hofstra University, and works as an entrepreneur-advisor in accounting at The Basile Law Firm. P.C.