Because I am increasingly doing consulting for small- and – medium-sized companies, and the very first thing that I ask for when we begin is basic financial information.
I enquire first for a profit and loss statement.Firm after company, particularly solos, can not provide me with an up-to-date P&L. Is a tragedy.It goes far beyond issues such as making decisions between accrual-based and cash-based systems.
Paid statements are in a heap with outstanding invoices. Nobody knows what’s paid and what is not. Nothing was delivered to the bookkeeper in ages . The heap of bills hasn’t been entered in an Accounts System or some other bookkeeping system. Cheques are concealed in the heap and have not been deposited. The heap is concealed in a drawer so that you don’t need to consider doing it.
A number of these undeposited cheques are out of date. Client statements–not yet delivered–are in a folder beneath the heap. The copier people will not come support the machine since their bill is 90 days overdue.
I would expect to find this mess in businesses which are losing money. I am not surprised when a small business owner is in denial about going broke and hides the documents from himself so that he does not need to manage the matter. That is pretty ordinary but not terribly successful behaviour. I am also seeing this mess in companies which are earning money. I am seeing it in lucrative small businesses. That is crazy. You can not manage this sort of mess. You will need to keep the accounting situation in check.More importantly, it isn’t feasible to run a company without fundamental financial information.
How do you tell how you are doing in case you do not have the numbers? It isn’t good enough to conduct your company based on if there are funds in your bank accounts. You will need to understand what’s happening.There’s absolutely no business function more readily outsourced than accounting and accounting. Historically, most small businesses have used an external accountant to prepare tax returns. Many companies utilize bookkeeping services.
If you are enjoying the game without understanding the score, then it is time to package up your receipts and tests and everything else and send them to somebody who can assist.
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