I’ve seen a version of this story many times.
Someone starts a business.
There’s just a handful of people, and someone comes in for a few hours a week to do the bookkeeping.
Madge sits in the corner, diligently keeping everything up to date.
Then the business takes off.
Five employees become 10… then 20.
Turnover hits £1 million… then £2 million… then £3 million.
The company moves offices. It appoints managers. It invests in new technology. It develops new products and enters new markets.
Everything about the business has evolved.
Except…
Madge is still sitting in the corner, chugging away. She’s still doing the job the same way, with the same resources — and very little extra help.
Now, Madge may be an excellent bookkeeper.
The problem is that the business has become significantly more sophisticated, while the way its owners think about finance hasn’t kept pace.
They still see it as something that happens in the background — an administrative necessity that only needs dealing with when the accountant asks for information or the tax bill arrives.
Essentially, they’re not particularly interested in the accounting side of the business. Perhaps they even find it an annoyance.
And I understand why.
Most businesses aren’t started by accountants.
They’re started by engineers, designers, consultants, manufacturers, recruiters and other people who are passionate about what they do.
They don’t wake up in the morning excited to pore over a set of management accounts. They want to do great work, serve their clients and grow their business.
If you feel the same way, it’s perfectly normal.
Now, you probably expect me to tell you that you need to take more of an interest in your accounting.
But that’s not exactly right.
You don’t have to be interested in accounting, nor do you have to become an expert in it.
No one expects you to learn to love spreadsheets, to chase late payers or to take an intricate interest in VAT.
But if you run a business, you do have to be interested in what your numbers are telling you.
Because ultimately, what is a commercial business there to do?
Make money.
Yet strangely, finance is often one of the areas its leaders pay least attention to — until something goes wrong.
So what do you need to know?
You probably know your headline figures — your turnover, profit and how much cash is in the bank.
But knowing the numbers isn’t the same as understanding them.
The really useful information sits underneath them.
Why are your profits at that level?
Which customers, products or services are making you the most money?
Why are your margins changing?
Where is your cash going?
Where are the warning signs?
And where are the opportunities to improve?
That’s when the numbers start to get interesting.
Because you’re no longer talking about accounting. You’re talking about your business.
Over the past couple of emails, I’ve talked about understanding your numbers and about the responsibility we have as accountants to help you understand the financial information we provide.
But there’s another side to that relationship.
We can explain the numbers, highlight the trends and help you understand the implications.
But you have to engage with them.
Ask why.
Ask what changed.
Ask what you’re not seeing.
Ask what might be coming next.
Because ultimately, it’s your business.
You can delegate the background work. Someone else can run the numbers, produce the cash flow report and prepare the monthly management accounts.
But you can’t delegate your understanding of what those numbers mean for your business.
And if you’d like some help understanding what’s really happening behind the headline numbers in your business, that’s exactly what we’re here for.
Simply email garry@insightassociates.co.uk or call us on 01279 647 447 to start the conversation.
Regards
Garry
You might also like: Getting monthly figures is one thing. Understanding what they mean for your business is another. Read So what? to discover why good management accounts should answer far more than “what happened?”.
Read the article: So what? [insightass…ates.co.uk]
