Does accounting in your business contribute to the goals and vision you have for your business?
My guess is: probably not.
For most small businesses, accounting is a necessary evil—like going to the DMV—that we endure and wish would just go away.
Unfortunately, when you look at accounting as a necessary evil, you are missing out on one of the greatest potential X-factors for growth in your business—but it’s not your fault.
Most entrepreneurs are told all the wrong things about accounting
The reason you probably hate your accounting system is three-fold:
Focus on compliance, not growth
You have a business with real goals. Typically, entrepreneurs love to grow and build. But what does your CPA or bookkeeper talk about when they work with you? Not your goals.
The typical CPA/Entrepreneur relationship is centered around correcting mistakes, looking backward and keeping you “in bounds.”
It’s no wonder this process is like pulling teeth. Why would a business owner, who is thinking about doubling revenues feel excited to discuss a receipt from two months ago?
2. Tedious number crunching
The other barrier to having a meaningful accounting system is that to get the financial information together requires uploading bank statements, tracking receipts, and digging out reports from a variety of systems.
Even hiring a bookkeeper, the entrepreneur is often sucked into many of the details and is unable to stay at the strategic level of the business, wasting valuable hours on tedious activity.
3. Looking backward
Every entrepreneur I know is forward-focused. We look six months to three years out, planning for the future and the big ambitious dreams for the company.
But what does accounting do? It’s always looking backward: Finding mistakes from the past. Reviewing data from months ago. Reporting on information that has already happened.
“Here are your reports.”
“Here’s how you did and what you could have done differently.”
Many entrepreneurs are getting their financial reports well after the fact, and when they get them it’s a balance sheet and profit and loss statement of historical data without much context connecting to the business’ goals.
That can be frustrating because you can’t change it now. And by the time you make adjustments another month has gone by and sometimes nothing has changed.
The entrepreneur-centric accounting system
The problem with accounting for small businesses is the focus on compliance and getting taxes done, but not on the goals of the entrepreneur.
So let’s talk about how to fix it. What does an entrepreneur-centric financial system look like?
An entrepreneur-centric accounting system leverages automation and technology to make the data-entry and bookkeeping process simple and fast.
With the right tools and integrations, the entrepreneur should never be caught looking in the past and digging for small details.
The right system will bring the data together in real time to keep you focused on the things you care about most.
Then, when that happens the financial information presented to the entrepreneur should be aligned with goals. Your cash flow, revenue targets, staff growth and business specific metrics should be tied to KPIs (key performance indicators) and tracked relentlessly to ensure the business is on target.
The biggest problem with the typical approach to accounting is it leaves you—the entrepreneur—as a passenger along for the ride in your own business. Instead of proactively driving where you want the business to go, you are looking back, reacting to what has already happened.
You should have a forward looking forecast, 12 months in advance mapped to exactly where you want to be in 12 months.
When you look forward with financials this starts to get fun (seriously!). You can reverse-engineer where you want to be and adjust numbers in the future to determine what impact decisions would have.
You become a better decision-maker, more confident and informed about how your business works and you will hit your targets a lot more often.
You’ll be a step ahead of potential problems and multiple steps ahead of your competition that’s still looking in the rear-view mirror.
Micky Deming is a partner and director of business development at Kahuna Accounting, a virtual entrepreneurial accounting firm and Infusionsoft Certified Partner serving small businesses all over the U.S. Kahuna was named Xero’s Accounting Partner of the Year in 2016 and has a network of partnerships to connect entrepreneurs to the best possible financial system for their growth. To get a free accounting recommendation, fill out their two-minute discovery form here: http://kahunaaccounting.com/discovery/