Who Likes Accounting?

Jan 13, 2020 by Roger Scherping

Assets equal Liabilities plus Owners Equity. Debits equal credits. Sales minus cost of goods sold equals gross margin.

Have I lost you yet?

One of the reasons people dread the idea of doing financial projections is that they don’t like accounting. No, wait. They REALLLY don’t like accounting. They think that accounting is so esoteric and so complicated that they couldn’t possibly understand it -- like nuclear physics or the theory of relativity. When I was a CFO, I tried to explain financial statement to my peers, but as soon as I showed them a balance sheet, they just backed away from my desk, help up both hands and said, “Don’t bother. I can’t understand accounting.”

Undeterred, I said, “Just listen. You know what inventory is, right? You know that receivables are the money that our customers owe us, right?” Warily, they replied that they did, and their resistance dropped just slightly. So then I explained how we bought inventory which appeared here, and then we billed the jobs and the money we were owed appeared here. The amount that we sold appeared here, the profit we generated appeared here. By that point they had stopped looking at me funny, and they were cautiously pulling the financial statements toward them for a closer look. Over time I got them to understand the basic information included in our company’s financial statements.

Is Accounting Difficult?
There is nothing difficult about accounting. It’s not complicated or esoteric. Anyone can learn it. There are lots of books, videos, and classes that will teach you accounting if you’re willing to take the time and make the effort.

Of course, not everyone – in fact, most people – don’t have the inclination to learn accounting. That’s different. That’s in the way we’re wired. Some people like numbers more than others. Some like the orderliness of columns of numbers that add up and get excited when the analysis balances! Those are the people that become bookkeepers and accountants.

There is no reason that a small business owner should need to become an accountant. The small business owner has more important things to do than the detail work that helps a company determine where it is at financially. They need to be working instead on the next sale, or finding the next new product, or ensuring that the job gets completed on time and the customer is happy.

How Does a Small Business Owner Do a Projection?
So how does a small business owner do their own financial projections if they aren’t accountants? Online articles tell you that you need to create or find a spreadsheet to do your projection, but projection spreadsheets are difficult for most small business owner to use. Also, without a solid accounting background it’s difficult for the small business owner to understand the accounting theory that underlies a financial projection.

Well, we created ProjectionSmart to solve both of those problems. First, we’ve eliminated the need for a spreadsheet. In fact, we’ve automated the spreadsheet. All you need to do is enter your data into ProjectionSmart. We DO understand accounting, and we’ll take care of all of the calculations and all of the accounting theory. We take your data and turn it into a full set of financial projections.

Second, we’ve eliminated the need for you to understand accounting. We don’t ask you any accounting questions. None. We just ask you questions about your business that you as the business owner will understand. We know that while you don’t know accounting, you do know your business. So we ask: What is your price? How many do you think you’ll sell? Do you plan to purchase any equipment? Do you plan to take any money out of the business? These are questions that you, the small business owner, can answer because it’s your business, and you know what your plans are.

So we take your data, ask a few questions, and then produce for you a set of professional-quality financial projections that you can take to a banker or investor. All you need to do is speak to what you understand, which is your plans for your business, and ProjectionSmart takes care of the rest.

Sad Story of an Entrepreneur
Finally, we said earlier that a small business owner shouldn’t need to be an accountant. Every small business owner, however, should understand the numbers of their business. I’ve held the president role in companies with up to $20 million in sales, and I can tell you that nearly every decision you make as president involves numbers. Being able to understand your numbers is essential to your success.

That’s one of the sweetest unexpected results we’ve seen since we launched ProjectionSmart. By using our tools small business owners really learn to understand the numbers of their business. They understand how changing their prices will impact their bottom line. They understand how large purchases will impact their cash flow. So not only do they get a solid set of financial projections, but they also learn to speak intelligently to a banker about their financial projections because they understand the logic that went into creating those numbers.

A banker told me once about a small business owner who came to give him his latest financial projections. As the banker began to ask him about the numbers, the small business owner just shook his head. He said, “Someone prepared these for me. I really don’t understand them.” Obviously the banker wasn’t impressed. The banker wasn’t convinced that the guy understood the numbers of his business, so he didn’t have confidence to give him a loan.

We’re here to help you succeed. We’d love to hear from you.

Join us at our next workshop on January 18.




 

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