Our accounts are one of the best measures of the performance and health of our business and also one of the best planning tools at our disposal. Yet, so many only scratch the surface when it comes to the running of their accounts and therefore miss out on many of the benefits they provide.
So let’s have a look at some of the key ways you can use your accounts better to really get the most out of them.
Understand what you're looking at
Ask your accountant to walk you through your accounts and perhaps get some training. There's quite a few free courses and lots of helpful information on YouTube.
You don't have to be an expert, you just need to know enough to get to grips with the basics of what your accounts are telling you and how you can use them.
Consider the context
Context is important. Try setting targets to act as a guide as to how well things are going. Setting targets can be something as simple as as working out how much you want to pay yourself and working back from that.
In the context of your targets you can then ask yourself questions such as, are all the figures good? Are they bad? Are they improving?
Believe it or not, accounts actually tell you a bit of a story. So when you look at them, try and relate them to what's going on in your business. It’s really helpful to look at your accounts on a monthly basis and consider the bigger picture, taking into consideration what was going on that month.
Perhaps a big order that came in which affected the figures dramatically? How are the sales looking? Is the money coming in where there are big expenses? Try and relate the numbers to what was going on in your business at the time.
Keep it simple
It's very easy to get caught up in the details.
Sometimes they’re important but, especially at the start, keep it simple and try and look at the big picture.
It's so easy to get caught up in some of the minutiae so to begin with just focus on your sales, what you paid yourself, and what your estimated tax will be.
Be a bit more psychological
Your accounts provide data. Think of the numbers as a friend… not as a nice fluffy one, but one who would tell you the cold hard truth of what's going on in your business. The friend who's going to tell you when you're off track.
Try and be objective and not to think of it as your own business. Perhaps think of it as someone else's business. Would you invest in it? If they asked to borrow some money for a great idea, would you actually go for it, or not? What would you advise someone else if you had no emotional tie to it? This can be really tricky but a very powerful exercise.
Work on forming good habits
Once you’ve got to grips with all this, there’s some good habits to get into when it comes to running your accounts to really master them!
This can be as simple as setting aside 15 minutes a week to go through your accounts and familiarise yourself what’d happening financially within your business rather than leaving for several weeks or even months at a time.
How do you keep on top of your accounts? If there’s anything you’re struggling with, get in touch. I'd be happy to help.